Swan v. Talbot
152 Cal. 142, 94 P. 238, 1907 Cal. LEXIS 321 (1907)
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Rule of Law:
A court of equity may rescind a contract if one party was so intoxicated as to be incapable of understanding the transaction, and the other party took fraudulent advantage of this condition, which can be inferred from a gross inadequacy of consideration.
Facts:
- Plaintiff Swan was a tenant farmer on land owned by defendant Talbot.
- Swan had accumulated valuable personal property, including farming equipment, stock, and crops.
- After discovering his wife was having an affair with Talbot, Swan went on a multi-day drinking binge.
- While severely intoxicated and incapacitated, Swan executed a bill of sale transferring his personal property to Talbot.
- The property transferred was valued at $21,949.86.
- The total consideration from Talbot was $10,604.32, which consisted of canceling a pre-existing debt and a $200 cash payment.
- Witnesses testified that on the day of the transaction, Swan was so drunk he fell in the street, and he later had no memory of signing the document.
- Talbot took possession of the property under the bill of sale.
Procedural Posture:
- Plaintiff Swan sued defendant Talbot in a state trial court, seeking cancellation and rescission of a bill of sale.
- Talbot's request for a jury trial was denied.
- The trial court, sitting without a jury, found in favor of Swan, ordering the bill of sale cancelled.
- Finding it impracticable to restore the personal property, the trial court awarded Swan a monetary judgment of $11,345.54.
- The trial court denied Talbot's motion for a new trial.
- Talbot (appellant) appealed the judgment and the denial of his new trial motion to the state's highest court.
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Issue:
Does a bill of sale warrant rescission in equity when the seller was so intoxicated that he was incapable of transacting business, and the consideration he received was grossly inadequate compared to the value of the property conveyed?
Opinions:
Majority - Henshaw, J.
Yes, a bill of sale warrants rescission under these circumstances. While courts of equity will not typically assist a person to avoid a contract simply because they were intoxicated, they will intervene to prevent fraudulent imposition. Gross inadequacy of consideration is strong evidence of such imposition. Here, Swan's profound intoxication rendered him incapable of contracting intelligently, and the fact that he received less than half the value of his property demonstrates that Talbot took fraudulent advantage of his condition. Therefore, the trial court was correct to set the contract aside. Furthermore, once a court of equity has jurisdiction, it can provide complete relief; thus, it was proper for the court to award a monetary judgment when returning the actual property was impracticable.
Analysis:
This case clarifies the equitable exception to the general rule that intoxication is not a defense to a contract. It establishes that intoxication, when coupled with gross inadequacy of consideration, creates a powerful inference of fraud or undue influence, making the contract rescindable in equity. The decision also reinforces the 'equitable clean-up doctrine,' affirming that once a court of equity properly acquires jurisdiction over a matter, it has the authority to resolve all aspects of the dispute, including awarding monetary damages, to prevent further litigation.
