11 U.S. 366
7 Cranch 366
3 L.Ed. 373
LEE
v.
MUNROE & THORNTON.
February 4, 1813
Absent. JOHNSON, J. and TODD, J.
THIS was an appeal from the decree of the Circuit Court for the district of Columbia, in a suit in Chancery, brought by Lee against Thomas Munroe, superintendant of the city of Washington, and William Thornton, the survivor of the late board of commissioners for that city. The object of the bill was to obtain a discount of 3,000 dollars upon a judgment, which Munroe, as superintendant, had obtained against Lee upon his bond. The ground upon which this set-off was claimed, was this. Morris and Nicholson were indebted to Lee in that sum by promissory notes, and offered payment in certain city lots, the title whereof was in the commissioners of the city. Morris and Nicholson having paid money in advance to the commissioners, were, as they supposed, entitled to demand from them the conveyance of the lots in question, under existing contracts between the commissioners and themselves. Whereupon Lee applied to the commissioners to know of them whether they would convey the lots to him, upon the order of Morris and Nicholson. This they promised to do, and made an entry of it in their journal. Lee then agreed with Morris and Nicholson to receive the lots in payment, and upon receiving their order to the commissioners to convey them to him, gave up to Morris and Nicholson their notes for 3,000 dollars, which were the evidence of the debt. On presenting this order to the commissioners, they refused to convey the lots, unless he would pay them the purchase-money due thereon to them from Morris and Nicholson, alleging that the balance was against Morris and Nicholson in their account with the commissioners. Morris and Nicholson shortly afterwards became insolvent.
C. LEE, for the Appellant.
This case cannot be distinguished from that of a mortgagee, who knowing another person is about to lend money upon the mortgaged premises, informs him that his mortgage is satisfied. If it be not, he shall be postponed to the 2d mortgagee. 2 Vern. 554. Ibbottson v. Rhodes. 1 P. Wms. 394. Mocatta v. Murgatroyd. 4 Dall. Levy v. Bank U. S.
The Commissioners were acting within the scope of their authority. It was their business to keep the accounts with Morris and Nicholson, and to know the balance; it was also their business to convey the lots. It is immaterial what was the real state of accounts at the time. They acted at their peril.
The question is, who shall bear the loss? Not he who was in no fault, but he whose duty it was to know the truth, and who by his negligence has brought this loss upon the Plaintiff.
JONES, contra.
This case does not depend upon the principle of first and second mortgagee. The bill does not seek relief personally against the superintendent, or the surviving commissioner, but is intended to charge the public with this loss. The commissioners were public officers; they had no interest in the business. It was a simple mistake of a fact on their part, which cannot bind the U. States. It is an attempt to set off unliquidated damages incurred by these public officers against a judgment debt.
Feb. 26th.
LIVINGSTON, J. delivered the opinion of the Court as follows: This is a bill seeking relief against public officers nominally, but against the United States in fact, for a mistake of the former in a representation made by them to the Appellant, by which it is alleged, that he has sustained a loss, for the redress of which in damages this suit is brought. It has been contended in this case, that the Defendants having, in their public character as commissioners of the city of Washington, misinformed the Plaintiff as to the state of the accounts between them and Morris and Nicholson, and thereby induced him to relinquish a demand which he had against the latter, he is now entitled to have discounted from a judgment, which they have obtained against him for the use of the United States, a sum equal to the principal and interest of the debt which he lost by the confidence which he placed in them; and this is supposed to be like the case of a party, who being about to lend money on real estate, applies to one who holds a prior mortgage to ascertain whether he has any incumbrance on it. There is no doubt, in such a case, that if the person making the application discloses that he is about lending money on the estate, he will be preferred to the first mortgagee, should the latter deny his having a mortgage, or assert that it is satisfied; and it seems agreeable to the dictates of reason and good conscience, that his claim should be postponed to that of a person whose confidence was inspired by the misrepresentation of one, who was acting for himself, and every way competent to inform him of the truth. But in all the cases which have been decided on this principle, the fraud, for such it is supposed to be, has been practised by a party who has himself an interest in the subject-matter of inquiry, who cannot well be mistaken, and whose conduct therefore ought to be conclusive on him, when the rights of third persons come in question. It is, however, not known to the Court, that the same rule of decision has been extended so as to affect the interests of principals, and particularly of the public, in consequence of similar mistakes made by an agent, nor is it reasonable that such extension should take place, unless it most manifestly appear that the agent was acting within the scope of his authority, and was empowered, in his capacity of agent, to make the declaration or representation which is relied on as the ground of relief. In the present case, the Defendants were employed and authorized by the public to sell and make contracts for the sale of certain lands lying within this district. In pursuance of these powers, they had made contracts with Morris and Nicholson, who having advanced a considerable sum of money, were in the habit of directing the Defendants from time to time, to convey certain of the lots which they had contracted for, to the persons named in such orders. The commissioners supposing that Morris and Nicholson had not yet received titles to land equal in value to the sum which they had advanced, told the Plaintiff that if he would obtain an order from them for certain lots, they should be conveyed to him. But in a day or two after, they discover that Morris and Nicholson had already received deeds for lots to the whole amount of the sum which they had advanced, and give notice of this fact to the Plaintiff, offering however to convey to him the lots in question, on his paying for them at the rate expressed in their contract with Morris and Nicholson. The Court will not inquire whether the Plaintiff really suffered any injury from the confidence which he placed in the commissioners, or whether he lost his remedy against Morris and Nicholson, (of which very serious doubts may well be entertained) but a majority of the Judges are of opinion, that the communication made by the commissioners to the plaintiff, was altogether gratuitous, and that not being within the sphere of their official duties, the United States cannot be injured by it, and that the Defendants could not, without rendering themselves personally liable to the public, have made a title to the Plaintiff after a discovery of the mistake which they had made, but on the terms proposed by them; or in other words, that the United States could not, by any declaration of the commissioners proceeding from a mistake, lose the lien which was secured to them by the contract with Morris and Nicholson, for the stipulated price of this property. If the commissioners acted fraudulently, which is not pretended, they may be personally liable in damages to the Plaintiff; but if it were a mistake, and such it is represented to be, the Court has already said that the interests of the United States cannot, and ought not, to be affected by it. Were it otherwise, an officer entrusted with the sales of public lands, or empowered to make contracts for such sales, might by inadvertence, or incautiously giving information to others, destroy the lien of his principals on very valuable and large tracts of real estate, and even produce alienations of them without any consideration whatever being received. It is better that an individual should now and then suffer by such mistakes, than to introduce a rule against an abuse, of which, by improper collusions, it would by very difficult for the public to protect itself. It is the opinion of this Court, that the decree of the Circuit Court be affirmed.
Last modified: October 2, 2009