Jones v. Draper. subject only to the expert approval of Thomas as to the operating condition and production of the lease, the amount of commission is increased from $3,000 to $6,500. Not only that, but the basis of the commission instead of being the usage of the business, as Jones was informed, was changed to contract. In any case, such increase of commission and change in the nature of the claim for it, would be "circumstances naturally affecting the action of the agent." These plaintiffs may have been content for Thomas to receive $3,000 commission fixed by usage or custom on oil sales, when on the eve of the approval of the property by Thomas, they would be unwilling that he should by contract with defendant have the commission raised to $6,500. They are entitled under the rule to be informed of the change in the commission arrangement. They were not so informed, and the change in the arrangement, if not concealed, was not disclosed. The failure to disclose was a "fraud in law" upon plaintiffs, and on account of it, upon plaintiffs' election and prompt action, the contract will be declared void. Mechem, Agency Sec. 798, and cases there cited. Plaintiffs did not know of this change of commission until this action was brought, and so no claim of want of promptness can be sustained. 2. As to fraudulent misrepresentation, Hendricks admits at one place in his testimony that he misrepresented (page 112). At one place, a moment later (pages 113-114), he says that "they asked me. what it was doing and I told them I had run two hundred barrel tanks," but did not tell them what it was then doing. This subterfuge cannot be allowed. It is perfectly evident that Jones and Wilson wanted to know what the lease was then doing; Hendricks knew this and yet he framed his answer so that while true in fact it would be understood by the parties asking the question in a sense in which it was not true. "No one can evade the force of the impression which he knows another received from his words and conduct, and which he meant him. to receive, by resorting to the literal meaning of his language alone." Mizner v. Kussell, 29 Mich. 229. Again, Draper knew on the same day that both Jones and Wilson were there to ascertain the then production of the lease. This was September 16, 1902. On that day Draper had a statement of the oil run during the whole month of August in his possession. This would show an average daily production of fifty-three sixteen hundredths barrels. He had also a statement of the production for the first half of August. This showed a daily production of eighty-nine barrels. He showed the latter to the parties. They, desiring a whole month's statement, instead of producing the one he had, he ordered another Wood County. from Lima. Under these circumstances it is manifest that both Jones and Wilson would have the right to conclude that the August runs averaging fifty-three and sixteen hundredths barrels was a fair statement of the daily production on September 16. Yet Draper then knew and Hendricks knew and their employe, the pumper, knew that the average daily run for the first half of September was only seventeen and sixty-five hundredths barrels. Having given this statement for August, it is perfectly evident from all the testimony that Draper proceeded thereafter to operate the lease in a manner in which it would be rendered impossible to know what the entire production of all the wells was. The wells were not all pumped at any one time, nor any of them pumped regularly. It is clear too that Jones and Bowler both believed that the wells would do and were doing more than forty barrels and that Draper knew they believed this, and he was bound to know that from his August statement they believed this. "Allowing the other party to proceed upon an erroneous belief to which one's acts have contributed is active concealment tantamount to misrepresentation." Wald's Pollock, Contracts 515, citing cases. The facts of the transaction at Wood & Miller's law office, too, fasten the effect of misrepresentation upon Draper. The admission too by Draper, that he pointed out a plan in the central area where a line of wells could be drilled, seems to us to account for the belief entertained by the parties and known by Draper to be so entertained by them, that that area was then undrilled. We think that there can be no serious question in this case that Draper made statements of existing matters, in the respects charged. that were material to the transaction and that were false in substance and in fact; that plaintiffs did not know their falsity, but relied upon their truth and thereby sustained damage. The sole remaining question is whether plaintiffs had the right to so rely. If they did not have such right to rely, it is because (1), having undertaken to make an inspection and examination they were bound to prosecute it to the end; or (2), they were not anthorized to rely upon the statements and representations of defendant; but were bound under the circumstances to inspect and investigate for themselves. Plaintiffs did go to the lease to see the property. The only one of them all who knew anything of the oil business was Wilson. He says he went as agent for Foster, not here a party. Defendant contends that he was agent for both Foster and Lawall. Since, after Wil Jones v. Draper. son's examination, Foster did not and Lawall did not invest in the property, we are of opinion that Wilson represented Foster alone. Now, no one could determine by visiting the lease and seeing the wells what the production of the lease with all the wells pumping was, or would be; in other words, what the aggregate capacity of all the wells then was. The opportunity for an independent investigation was not open to plaintiffs from an inspection on the ground. The furnishing of pipe line statements was within the control of defendant and not within the unaided reach of plaintiffs. From these facts it seems clear that plaintiffs were not compelled to continue an investigation begun, or to begin an investigation, without reference to or any reliance upon the statements of defendant; and this is more particularly the case when, as here, it seems that the opportunity for a full investigation by plaintiffs was interfered with, obstructed and rendered impossible by the active intervention of defendant. It is not to be forgotten that defendant pressed this transaction to a close before all the wells were even equipped, much less pumped, and that the newest well, the "sand well," was not pumped for want of power after defendant had tested it and knew its capacity. (See Cottrill v. Krum, 100 Mo. 397 [13 S. W. Rep. 753; 18 Am. St. Rep. 549]; Lahay v. Bank, 15 Colo. 339 [25 Pac. Rep. 704; 22 Am. St. Rep. 407]; Roberts v. French, 153 Mass. 60 [26 N. E. Rep. 416; 10 L. R. A. 656; 25 Am. St. Rep. 611]; Smith v. Smith, 134 N. Y. 62 [31 N. E. Rep. 258; 30 Am. St. Rep. 617]; Wilson v. Carpenter, 91 Va. 183 [21 S. E. Rep. 243; 50 Am. St. Rep. 824]; Mead v. Bunn, 32 N. Y. 275-280; McClellan v. Scott, 24 Wis. 81-87; Matlock v. Todd, 19 Ind. 130, as to the right to rely upon representations of defendant in the absence of plaintiff's actual knowledge or unobstructed opportunity for investigation.) If an inspection was prevented or its completeness defeated by the acts, arts or words of the seller, the reliance of the purchaser upon the statements of the seller, the reliance of the purchaser upon the statements of the seller without such investigation or after an incomplete one would be justified. Roseman v. Canovan, 43 Cal. 110, 111; Swimm v. Bush, 23 Mich. 99; Webster v. Bailey, 31 Mich. 36; Starkweather v. Benjamin, 32 Mich. 305; Fisher v. Mellen, 103 Mass. 503 (as to exent of a patent right); 1 Bigelow, Fraud 532. We have no doubt in this case as to plaintiff's right to rely. If the letter of October 3, from Jones to Draper is considered as evidence of an intent on the part of Jones to defraud his associate purchasers, then Jones' knowledge, if any, that the capacity of this lease was less than forty barrels is not notice to his partners. Wood County. "When one member of a firm is committing or consenting to the commission of fraud upon his copartners, notice on his part is not notice to them." Williamson v. Barbour, 9 Ch. D. 505; 2 Pomeroy, Eq. Jurisp. Secs. 674 and 675. After Thomas entered into the contract or stipulation of November, with Draper, the former's undisclosed information was not notice to plaintiffs. National Life Ins. Co. v. Minch, 53 N. Y. 144; Atlantic Nat. Bank v. Harris, 118 Mass. 147; Dillaway v. Butler, 135 Mass. 479; Innerarity v. Bank, 139 Mass. 332 [1 N. E. Rep. 282; 52 Am. Rep. 710]. Moreover after November 1, at least, the knowledge, as well as the declarations of Thomas as far as this action in concerned, became the knowledge and declarations of Draper, for here a special trust and confidence was reposed in Thomas by plaintiff's as Draper well knew. Laidlaw v. Organ, 15 U. S. (2 Wheat.) 178, 195; Evans v. Bicknell, 6 Ves. Jr. 174, 182; 1 Fonblanque, Equity b-1; c-2, 5, 8. If the said letter of October 3 did not relate to an intended fraud on Jones' partners, then it is not evidence that Jones knew what the lease was producing except that he did not know it was producing nearly one hundred barrels. In the latter case assuming, as we believe that Jones relied upon defendant's statements and so relied upon a production of forty barrels and the other matters stated, all the plaintiffs are entitled each in his own right to maintain this action. If, however, Jones undertook to defraud the other purchasers in the transaction, the result is not different. The cash paid did not belong to Jones in whole or part. Stockholders had paid it relying upon the corporation's ownership of this property, and Draper and Thomas knew this, and on November 8 used the fact to close the transaction. The fund should be restored as against Draper and without regard to whether Jones had wrongfully assisted to place it in Draper's hands. The notes signed are executory contracts, and Jones could plead his own fraud known to Draper as a defense to them on suit brought against him by Draper. In pari delicto, melior est conditio possidentis. So even as against Jones, Draper would have no right to retain the money or enforce the notes, if Bowler and Lawall, or either, were sought to be defrauded by Jones. True by the cancellation of the notes in such case Jones may escape liability. "But equity will not refuse to aid his innocent copurchasers because of a fraud committed on them by him. If their rights cannot be secured without to some extent relieving him, the innocent must not suffer." Yeoman v. Lasley, 40 Ohio St. 190-203. The substantive facts warrant full relief to plaintiffs and there is nothing in the procedure in the action to prevent it. Jones v. Draper. The contract of purchase is decreed to be null and void; the conveyance is rescinded; the money paid, with interest at 6 per cent from the date of payment, is ordered to be restored to plaintiffs; the notes described in the petition are ordered to be surrendered up and canceled, and an account is ordered to be taken of the money expended by plaintiffs in putting the lease in a condition necessary to operate, and for the amount so expended in full, together with money expended by plaintiffs in improvements on the lease in so far as said improvements increase the value of the lease as determined on the account to be taken, plaintiffs are decreed to have a lien upon said leases and property. The part of the purchase price paid in cash, together with interest thereon, is also declared to be a lien upon the property. Costs are adjudged against defendant and execution awarded. If possible, parties may agree upon the master to take and state the account; or if not, the court will appoint. Hull and Haynes, JJ., concur. DEEDS-BILLS-DESCENT AND DISTRIBUTION. [Lucas (6th) Circuit Court, November 7, 1904.] Parker, Hull and Haynes, JJ. CHARLES R. LEE, ADMR. V. ELEANORA S. SCOTT ET AL. 1. OPERATIVE WORDS OF CONVEYANCE REQUIRED TO ENGRAFT REVERSION Upon Grant, OR TO CONVEY REMAINDER IN FEE. Where by deed an estate in fee simple is granted, the same cannot be reduced to a life estate by another instrument executed concurrently with such deed, purporting to reserve a fee to the grantor in the deed or to convey a fee to another to vest upon the death of the grantor in the deed, unless such other instrument shall contain appropriate operative words of conveyance of such remainder or reversion. 2. WORD "HEIRS" NECESSARY TO CONVEY FEE SIMPLE, EXCEPT. In Ohio it is necessary as a general rule to use the word, "heirs," in a deed to convey an estate of inheritance. 3. AFTER ACQUIRED REALTY PASSES UNDER RESIDUARY CLAUSES OF WILL. Where testatrix, at the time of making her will, was the owner of a real estate mortgage by assignment, and thereafter, without resorting to foreclosure proceedings, the land encumbered thereby was conveyed by the mortgagor to testatrix in satisfaction of the mortgage debt, such after acquired land passes, under the general residuary clause of the will devising all the rest and residue of the estate, to the devisees therein named. James v. Pruden, 14 Ohio St. 251, approved and followed; Lepley v. Smith, 7 Circ. Dec. 264 (13 R. 189), distinguished. APPEAL. |