Submitted February 12th, 1932.
Decided May 16th, 1932.
1. Equity does not interfere to set aside a transaction merely because a party made an unwise deal.
2. Representations by a seller as to the value of his property are not usually a basis for a claim of fraud. Value is a matter of opinion.
3. There is not fraud or such overreaching in the transaction involved in this case as would have justified a cancellation or reduction of the purchase-money mortgage, even if application had been made to this court promptly.
4. Defendant mortgagor managed the property for more than four years before this suit for foreclosure was brought. Almost from the beginning she became aware of the exact income from and value of the property in question. She paid interest and installments of principal on the mortgage for over three years. Defendant is guilty of laches and may not now set up fraud in the transaction.
5. Defendant's delay in asserting her claim, together with payments made by her after she learned the true situation, operated as a waiver and as a ratification of the transaction.
On appeal from a decree of the court of chancery advised by Vice-Chancellor Bigelow, who filed the following opinion:
"This is a bill for the foreclosure of a purchase-money mortgage. The defendant, Mrs. Hadley, resists foreclosure and asks for the cancellation of the bond and mortgage, on the ground that the sale out of which the mortgage grew was tainted by fraudulent and false representations on the part of the complainant. The alleged representations were that the property was worth $450,000, that it would produce an income of $3,000 and that taxes were about $3,000.
"Mrs. Hadley found before she took title or executed the mortgage, that taxes were about $4,500. The correct amount was disclosed when the parties met for the purpose of passing title; the exact taxes were used as a basis for figuring the settlement. In spite of this knowledge Mrs. Hadley proceeded to close the deal.
"As to the representations in respect to income, Mrs. Hadley's testimony was not very clear. But as I understood her, Mr. Schmulling, for the Garden Realty Corporation, said that he was offering the property to her at a bargain price, and in explanation of his willingness to do so, that he was not able to make a success of this property; but that if it were properly managed it would bring in an income of $3,000, and that Mrs. Hadley had the ability to manage the property successfully. She also testified that before taking title she checked the income figures given her by Mr. Schmulling and found them wrong. I do not think that Mr. Schmulling represented to her that the actual income was at the rate of $3,000 a year or that Mrs. Hadley so understood. Furthermore the only proof of the actual income from the property is Mrs. Hadley's testimony that after she took title there was no income and the further evidence that the gross rentals the preceding year were $36,332.
"The transaction under consideration was an exchange of properties. The figures $415,000 and $250,000 were used to represent the values of the properties which Mrs. Hadley was buying and selling. Both amounts were grossly excessive. Mr. Schmulling knew it and Mrs. Hadley suspected it. She testified that she lost confidence in him to some extent when he said his property was worth $415,000. This was early in the negotiations. The difference between $415,000 and $250,000 is $165,000, and this was the basis on which the exchange was made. I think the actual difference in values was about $125,000; say $150,000 for Mrs. Hadley's property and $275,000 for complainant's property. Assuming that I am correct in this, Mrs. Hadley had the worst of the bargain by $40,000. Such a discrepancy is not a ground for setting aside the transaction. Equity does not interfere merely because a party makes an unwise deal. Representations by a seller as to the value of his property are not usually a basis for a claim of fraud. Robertson v. Criterion Construction Co., 6 N.J. Mis. R. 91; 140 Atl. Rep. 574. Value is a matter of opinion.
"I have not overlooked that Mrs. Hadley at the time of the transaction was a woman seventy years old. She is, however, a woman of intelligence and education in full possession of her faculties. She had had more than ordinary experience in real estate and mortgages. She was accustomed to dealing with lawyers and real estate agents. She knew that the safe course was to seek the advice of experts, but she preferred to rely upon her own judgment.
"I do not find in the transaction fraud or such overreaching as would have justified a cancellation or reduction of the mortgage, even if application had been made to the court promptly — but the defendant was not prompt. She took up the management of the property when it was transferred to her in January, 1926, and became immediately aware of the exact state of the income. She put the property into the hands of real estate agents for sale and must have learned within a year that it was not worth anywhere near $415,000. She paid interest and installments of principal on the mortgage as late as August 1st, 1929. She never attempted to assert her rights growing from the alleged fraud until February 3d 1930, when she filed her answer and counter-claim in this suit. This was more than four years after she took title to the property. Meanwhile, in November, 1929, Mr. Schmulling, who negotiated the transaction for the complainant, had died and so the complainant has been deprived of the benefit of his evidence. These laches of defendant bar her counter-claim. Her delay in asserting her claim, together with the payments made by her after she learned the true situation, operated as a waiver and as a ratification of the transaction. Mortgage and Investment Company of New Jersey v. Romel Realty Co., 106 N.J. Eq. 185.
"There should be a decree for complainant. It will carry costs and the counsel fee usually allowed in uncontested foreclosures."
Mr. M. Lester Lynch, for the appellant.
Mr. Matthew J. Tackella, for the respondent.
The decree appealed from will be affirmed, for the reasons expressed in the opinion filed in the court below by Vice-Chancellor Bigelow.
For affirmance — THE CHIEF-JUSTICE, TRENCHARD, PARKER, CAMPBELL, LLOYD, CASE, BODINE, DONGES, VAN BUSKIRK, KAYS, HETFIELD, DEAR, WELLS, KERNEY, JJ. 14.
For reversal — None.