Brief Fact Summary.
Lucy S. Jackson (Plaintiff) sought to rescind a deed conveying land to her brother, Benjamin J. Seymour (Defendant), claiming that he induced her to sell the land to him for $275 when, unbeknownst to her, there was valuable timber on the land worth $3,200 to $5,000.
Synopsis of Rule of Law.
. Mere failure or want of consideration will not ordinarily invalidate an executed contract. However, where inadequacy of price is such to shock the conscience equity is alert to seize upon the slightest circumstance indicative of fraud, either actual or constructive.
Constructive fraud is the breach of a legal or equitable duty which, irrespective of moral guilt, is declared by law to be fraudulent because of its tendency to deceive others or violate confidence.View Full Point of Law
The Plaintiff claimed that she relied on her brother’s representations that the land was worthless, except for pasture land, when he was aware that it contained valuable timber and profited from it considerably after acquiring the land. Plaintiff alleged that Defendant’s statements inducing her to sell the land were “false and fraudulently made,” and she sought rescission of the deed and the Defendant’s profit from the timber.
At the time the offer was made, the Plaintiff had approached the Defendant in need of money and desiring to sell the land. The Defendant denied knowing about the timber before purchasing the land, denied all charges of fraud, and admitted he had realized the sum of $2,353.42, but denied Plaintiff’s right to rescind the deed or have him account for the gain.
The trial court found that Plaintiff’s allegations of actual fraud had not been sustained, but took on advisement whether there was constructive fraud as a result of the confidential relationship between the siblings. The Plaintiff’s filed an amended bill too late, and the court denied her relief.
Was Plaintiff entitled to relief?
Yes. Reversed and remanded.
· The Plaintiff was entitled to equitable relief for constructive fraud, and that relief was within the scope of her original bill. The lower court should have entered a decree granting rescission of the conveyance and restoring the parties to status quo as far as practicable.
· The Plaintiff was entitled to incidental relief of the fair stumpage value of the timber removed from the land, with interest, plus the fair rental value of the property from the time the Defendant was in possession. The Defendant was entitled to a return of his purchase price, plus interest, and repayment for taxes paid by him, with interest.
· The fact that the Defendant cut and sold the timber shortly after purchasing the land for ten times what he had paid showed the “gross and shocking inadequacy of the price paid.” To permit the transaction to stand would have resulted in a constructive fraud upon the rights of the Plaintiff.
The Court considered that the Defendant was a successful business man, and the Plaintiff a widow in need of money. The Plaintiff trusted her brother, the Defendant, and it would have been inequitable to allow the transaction to stand.