firm by William B. Duncan against one Noadiah Marsh for a breach of covenant, and in that suit, under the plea of his subsequent discharge in bankruptcy, the court gave judgment in favor of the defendant, with costs of suit. This suit against Marsh was commenced and prosecuted long after the dissolution of the partnership, and, it was claimed, without their authority, all of them residing beyond the limits of the state of Arkansas. Surget, who had been Marsh's attorney in the inferior court, assumed to himself the power to tax the costs adjudged to the defendant, prepared a description of the property which he chose to have seized in satisfaction of that process, and order. ed the sheriff to levy upon the whole of what he had so described, and under an execution for $39.10 peremptorily ordered the sale of more than 14,000 acres of land, belonging to Byers estimated by witnesses to be worth from forty to seventy thousand dollars, and as the court says: 'And, finally, under a proceeding irregular in its origin, commenced by himself and by him controlled in its consummation, of becoming the purchaser of the property estimated as above, for the sum of $9.131⁄2, and refused after the sale and purchase to accept in redemption of the lands so sacrificed a sum of money tendered to him much more than equal to all the costs or all the expenses incident to the judgment.'

"In reviewing the facts, the court says: "They betray that malus dolus in which the design of the appellant was conceived, which appears to have presided over and regulated the progress of the design from its birth to its consummation, to which design the appellant has tenaciously clung, in the seeming expectation that it was beyond the corrective powers of law or justice.' "The rule as stated by Fry, § 442, is as follows: 'With regard to it as a ground for the setting aside of transactions, the doctrine of the court is that inadequacy of consideration, if only amounting to hardship, even great hardship, is no ground for relieving a man of a contract which he has wittingly and willingly entered into, but that it may be so enormously great as to be a conclusive evidence of fraud, and that it is then a ground for setting aside a transaction affected by it.' Section 443: 'Regarded as a ground of defense to a specific performance, the judgment of the older case was that inadequacy of consideration was a sufficient ground; it being regarded, even where not amounting to evidence of fraud, as a circumstance of hardship which would stay the interposition of the court.' Section 444: 'But it appears to have been established by the decisions of Lord Eldon and Grant, M. R., that mere inadequacy of consideration is no defense to specific performance unless it amount to an evidence of fraud, and so would furnish ground even for canceling the contract.' There follows the citation from Coles v. Trecothick, which has been already referred to.

"It will be necessary now to refer to the testimony to see whether there is such inadequacy of price here as in the words of Lord Eldon 'shocks the conscience and amounts in itself to conclusive and decisive evidence of fraud in the transaction.' Mr. Hertz, who had charge of the operations for the examination of this property, testifies that he had a plat prepared by Simons and Mayrant from the field notes, and this plat was sent on to the plaintiffs for their information. As this plat was prepared long before this litigation arose, and bears intrinsic evidence of considerable care in its preparation, there would seem to be grounds for accepting it as fairly representing the area of rock which the plaintiffs supposed to exist at the time when the contract was consummated by the payment of the purchase money. From this plat it appears that rock was found on 560.2 acres, at an average depth of 8.27 feet, and average thickness of 8.7 inches. In this area was included 126 acres which had already been mined by successive operators, but it appears from the testimony that some rock was still left in this mined area, how much is not definitely stated. The defendant, since the beginning of the hearings in this case, has had a survey made by Mr. Emerson and others, and their testimony is that there are 718.67 acres of phosphate lands, and plats prepared by Mr. Emerson were offered in evidence. These plats were criticised by witnesses for the plaintiffs, as containing no course and distances and no base lines, but it does not seem to be necessary for me to decide as to the relative accuracy of these surveys, inasmuch as Mr. Hertz, claiming to speak with authority as agent for the Bradleys, testified at the

last hearing that the plaintiffs were willing to accept the plat prepared by Simons and Mayrant, and give to the defendant all outside of it; that the plaintiffs did not want anything except what that plat called for; and the counsel for plaintiffs indorsed and reiterated this statement in his argument, so the plaintiff's rights will be limited to the area described in the plat prepared by Simons and Mayrant, that is to say to the 560.2 acres. The preponderance of the testimony is that there is about 500 tons of phosphate rock to the acre, and if we assume that there is the same average upon the 126 acres already mined there would be about 280,000 tons of phosphate rock upon the land, lying at an average depth of about 8.27 feet. A good deal of testimony has been offered as to the value of phosphate rock. The price of rock is fluctuating, and it is difficult to say what is a fair market price. Since the beginning of the hearings in this case there has been a drop in the price, owing, it is said, in part at least, to the discovery of new phosphate deposits in Florida, and it appears that the greater part of the phosphate territory in this state is under the control of two companies, the plaintiffs being one, and the Virginia-Carolina Chemical Company another, and as they are large manufacturers of fertilizers, most of the product appears to be consumed by these two companies. The testimony as to the royalty-that is to say, the price paid to the owners of lands for rock after it is mined-seems also to vary. At the Bolton mines 15 cents a ton is paid. Mr. Pinckney testifies that on the lands mined by him a royalty of 25 cents and 30 cents a ton is paid, with provision for an increase of royalty when the rock sells at a certain price, on a sliding scale. In the 'flush times' of the phosphate business as much as $1 a ton was paid. No direct testimony has been offered as to the value of the rock upon this land as it lies, except that of Mr. Pinckney, who gives it as bis opinion that it is worth 25 cents a ton. If it is worth 25 cents a ton, and there are 280,000 tons, of course it follows that this deposit upon the Middleton lands would be worth $70,000. By the agreement between the parties the right to mine and remove this rock is subject to a timber lease, dated September 17, 1903, which gives to the lessees 15 years from date to remove the timber, with the right to five years' additional time upon certain conditions. As the value of growing timber, such as covers part of this land, is likely to increase from year to year, the probabilities are that the lessees will not remove the timber until near the time of the expiration of their lease, and the right to remove the phosphate, being subject to that lease, there is a possibility, a fair probability in fact, that the owners of the phosphate rock may not have the right to remove it for many years to come. It is true that, according to the testimony, a good deal of this land is not covered by timber, but as a great deal of the rock lies at a depth which will require expensive machinery in its excavation, and a provision for railways and washers, it would seem likely, as a business proposition, that the owners would not provide the plant necessary until the time was near at hand when their operations would not be incumbered by the timber lease, which, as already stated, does not expire until September 17, 1923. If that is so, and the plaintiffs should not come into the enjoyment of their purchase until 15 years after the payment of the purchase money, August 30, 1905, the sum of $20,000 already paid would at the legal rate of interest in this state be about doubled.

"It is impossible for me to say with any certainty what the value of this phosphate deposit will be 10 or 15 or 20 years hence. Its value consists in the presence of bone phosphate of lime, which, treated with sulphuric acid, is converted into a commercial fertilizer. For 15 or 20 years the mining of phosphate rock in this state was considered a very profitable industry. This industry was seriously affected by the discovery of phosphate deposits in the state of Florida, and the testimony is that the Florida phosphates were of much higher grade than those in this state, and that miners there pay 10 cents a ton royalty. Some years after the discovery of the Florida deposits valuable deposits were found in Tennessee, which at one time it was supposed would seriously affect the value of the South Carolina rock. While it is hoped and believed, and there seems reasonable ground for the hope, that the phosphate rock in South Carolina may always continue to have considerable commercial value, with the vast strides made by

science in the discovery of new material for fertilizers, it is a matter of speculation as to what the value of this rock will be at the time when these plaintiffs will be permitted, under their contract, to utilize it. It appears now that they have made a very good bargain, but it may possibly turn out that what now seems to be immensely valuable may not prove to be so profitable to them. At all events, with the lights before me, I cannot say that there is that gross inadequacy which 'amounts in itself to conclusive and decisive evidence of fraud in the transaction.' There is nothing in the contract or in the circumstances connected with it which raises any presumption of fraud. It does not fall within the class of cases such as McCabe v. Matthews, 155 U. S. [550, 15 Sup. Ct. 190, 39 L. Ed. 256], or Byers v. Surget, 19 How. [303, 15 L. Ed. 670].

"The next question to be considered is whether mere hardship alone, independently of any question of fraud, furnishes ground for refusing specific performance. Fry on Specific Performance, § 426, says: The cases which have been already quoted as showing that the hardship must be judged of at the time of the contract, also illustrate another obvious principle, namely, that where the hardship has been brought upon the defendant by himself it shall not be allowed to furnish any evidence against a specific performance of the contract, at least whenever the thing he has contracted to do is reasonably possible.' Now, the hardship here complained of is that the defendant should be compelled to execute conveyances for property which she sold for $20,000 and which she has since discovered to be worth a great deal more than that. Granted that she did not know at the time that there were 560 acres of her land underlaid with phosphate rock, yet it cannot be denied that means of knowledge were as open to her as to the plaintiffs, more so in fact, for she required the consent of no one to make the examination, while the plaintiffs could not go upon her land for that purpose without her consent. Her husband, under whose advice she acted, was a gentleman of unusual intelligence. He had as good opportunity to form an opinion as to what the land contained as the plaintiffs had, for it is not to be believed that the plaintiffs would have spent over $2,500 in making their examination if they had known beforehand where the rock was and its value, and there being a full, entire, and intelligent consent to the contract at the time it was made, and as related to a subject, the value of which was a matter of speculation, I can find no principle which has the sanction of English or American courts of respectable authority which would justify me in refusing a decree for specific performance. In the Roman law the case is different. The Constitution of Justinian fixed the arbitrary standard of one-half the real price as that which would give the sufferer the right to the interference of the court, and under the French Code a vendor may require rescission of the contract if he suffers injury to the extent of more than seven-twelfths of the price, but such is not the law of England or of any of the United States.

“Fry, § 446, says: "The general rule, that the hardship of a contract is, independently of fraud, a ground for refusing a specific performance, would seem to carry with it the particular rule that inadequacy of consideration, when amounting to hardship, but not to fraud, could yet be a defense, but there appears (notwithstanding an expression of opinion from the bench to the contrary great good sense in refusing to adopt such a rule. To make a contract with an insufficient consideration, incapable of enforcement by the purchasers, would be practically to prevent a man from selling his property at less than its value, however impossible it might be to sell it at its value, however desirous he might be to sell it for the price actually obtained, however desirable it might be for his interest that he should do so, and however unwilling or unable the purchaser might be to purchase at its full value. The rule would, when it did not stop the sale, yet further reduce the amount receivable by the vendor, because the purchaser would in effect indemnify himself for the risk he ran by offering less purchase money than he otherwise would have done. The freedom of contract, including in it the freedom to enter into enforceable contracts, should never be infringed without sufficient cause; but, furthermore, if inadequacy of consideration short of fraud

179 F.-22

were a bar to specific performance, the question would arise as to the amount of inadequacy which should so operate, a question not easy to answer.'

"I think that I have no discretion except to decree specific performance of this contract. While there are expressions in the opinions in many cases that a court of equity will not lend its aid in the enforcement of a contract where hardship or great hardship would result, I have found no well-considered case where relief from such contract has been granted, unless there were some circumstances outside of that of inadequacy which, taken in connection therewith, justified or required the court to withhold its aid. Some such expressions are found in the older cases loosely reported, where all the facts do not appear. The remarks of the Chief Justice in Union Pacific R. R. Co. v. C., R. I. & P. R. Co., 163 U. S. 600 [16 Sup. Ct. 1187, 41 L. Ed. 265], seem apposite: "The jurisdiction of courts of equity to decree the specific performance of agreements is of a very ancient date, and rests on the grounds of inadequacy and incompleteness of the remedy at law. Its exercise prevents the intolerable travesty of justice involved in permitting parties to refuse performance of their contracts at pleasure by electing to pay damages for the breach. It must not be forgotten that in the increasing complexities of modern business equitable remedies have necessarily and steadily been expanded, and no inflexible rule has been permitted to circumscribe them. As has been well said, equity has contrived its remedies so that they should correspond both to the primary rights of the injured party and to the wrong by which that right has been violated, and has always preserved elements of flexibility and expansiveness so that new ones may be invented or old ones modified, in order to meet the requirements of every case, and to satisfy the needs of a progressive social condition, in which new primary rights and duties are constantly arising, and new kinds of wrongs are constantly committed.'

"A few words as to the form of the decree. It should provide for the conveyance of the phosphate rock and phosphate deposit upon the lands containing 560.2 acres, described in the plat of Simons and Mayrant, filed in the cause. As to the location of the right of way for the railway or tramroad and the washer, let the decree direct a conveyance substantially in the form agreed upon between Mr. Von Kolnitz and Mr. H. A. M. Smith. This form of conveyance was produced under subpoena by Mr. Smith, but, upon objection of the defendant, the court reserved the question as to whether it was competent evidence, and upon motion of defendant's counsel the same was sealed and deposited with the clerk. I have not examined it, but as it appears to have been satisfactory to the counsel for plaintiffs, and was prepared by Mr. Smith, a kinsman and counsel of the defendant, and an eminent lawyer, I have no doubt that it makes such provision for the location of the right of way and site for the washer as is consistent with the rights of the defendant.” For the reasons herein stated, the decree of the court below is affirmed.

THORLEY v. PABST BREWING CO.

(Circuit Court of Appeals, Second Circuit. May 2, 1910.)

No. 235.

1. COURTS (8 365*)-FEDERAL COURTS-FOLLOWING STATE DECISIONS. Upon the question of the measure of damages in an action in a federal court for breach of a covenant of quiet enjoyment in a lease, the court is governed by the decisions of the highest court of the state where the property is situated, so far as they determine the question.

[Ed. Note. For other cases, see Courts, Cent. Dig. §§ 950, 955; Dec. Dig. 365.*

State laws as rules of decisions in federal courts, see notes to Wilson v. Perrin, 11 C. C. A. 71; Hill v. Hite, 29 C. C. A. 553.]

For other cases see same topic & § NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes

2 LANDLORD AND TENANT (§ 130*)—EVICTION OF TENANT-MEASURE Of Dam

AGES.

The general rule in New York, established by decision, is that for breach of a covenant for quiet enjoyment in a lease the lessee can recover only nominal damages, with nothing for the value of his lease or for improvements. The only exceptions to such rule which call for compensatory damages are in case of fraud, or that which approximates fraud, on the part of the lessor, or in case of fault, or that which amounts to fault, on his part; and his making of the lease with knowledge that he is without full authority to do so does not amount to a fault, unless the lessee is without such knowledge and is misled.

[Ed. Note.-For other cases, see Landlord and Tenant, Cent. Dig. § 479; Dec. Dig. § 130.*]

In Error to the Circuit Court of the United States for the Southern District of New York.

Action by the Pabst Brewing Company against Charles Thorley to recover damages for an alleged breach of a covenant of quiet enjoyment contained in a lease of certain premises in the city of New York. In the opinion following the parties are designated as in the Circuit Court. Modified and affirmed.

The decision of this court, reversing a judgment sustaining a demurrer to the complaint, is reported in 145 Fed. 117, 76 C. C. A. 87. Leventritt, Cook & Nathan (David Leventritt, William N. Cohen, and I. Maurice Wormser, of counsel), for plaintiff in error.

Mayer & Gilbert (Julius M. Mayer and A. S. Gilbert, of counsel), for defendant in error.

Before LACOMBE, COXE, and NOYES, Circuit Judges.

NOYES, Circuit Judge. The principal contentions of the defendant, based upon his assignments of error, are that the trial court erred: (1) In refusing to submit to the jury the question of the ambiguity in the lease.

(2) In excluding testimony tending to show the intention of the parties in executing the lease.

(3) In charging that the plaintiff was entitled to recover as damages the difference between the rent reserved and the value of the lease for the remainder of the term, together with the value of the improvements.

We have carefully considered the first two contentions of the defendant and are satisfied that the action of the trial court was right in the instructions and rulings complained of. In view, however, of our conclusions with respect to the third contention, we deem it unnecessary to do more than thus state the result of our examination of the others.

The third contention presents the question of the measure of damages in an action for breach of the covenant of quiet enjoyment in the lease. This question must be determined by the law of real estate. And the law of real estate which this court is bound to regard is that established by the course of decisions of the courts of the state in which the land is located-the state of New York. If the law be not settled and established, it will be our right and duty to exercise our

For other cases see same topic & § NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes