Schwarz v. Wendell. difficulty of examining cases of this nature, from the infirmity of human testimony, the difficulty of sifting the motives of parties-courts of equity have established a general rule, that no transaction between parties so situated shall stand, if the cestui que trust wishes to set it aside. Courts say that this is the only principle which will save the weaker party from becoming the victim of overreaching, or artful, or designing men. It is a principle founded on reason, and sound sense, and good policy. 1 Story Com. on Eq. 307, 310, 316, et seq.; 10 Ves. R. 394; 6 Ves. R. 268; 9 Ves. R. 244, 295; 2 Sch. & Lefr. [*285] 500, 665; 1 Cox Ca. 119; Talb. Ca. *111; 2 Bro. R. 427; 10 Eng. Cond. Ch. R. 190; 8 Eng. Cond. Ch. R. 312. A variety of cases have been decided, and relief afforded in equity, where, from the nature of the transaction, and the situation of the parties, fraud or imposition might be presumed. See, for instance, 8 Cow. R. 370; 3 P. Wms. R. 139. The above cases, with many others, establish the doctrine beyond a question, that, in cases where the parties stand in the confidential relations of attorney and client, guardian and ward, trustee and cestui que trust, they shall not bargain with each other, and, if they do, the cestui que trust, the ward, or the client, shall, if they please, set aside the sale, and be restored to the rights which they formerly possessed. Courts of equity adopt the broad and sound principle, that, where these relations exist between the parties, they cannot deal with each other on equal terms. The confidence which is reposed, the means of influence which one party holds, gives him so much the advantage, that it is dangerous, and may be ruinous to the other, to suffer them to contract. And it is so difficult to weigh this influence, to investigate these cases, and ascertain whether any advantage has been taken, that courts have adopted a rule, which puts the sting of disability into the contract. The parties should not deal with each other. It matters not how fair the transaction, it cannot stand. The Court will not inquire into this point. This is fully established by the above cases. Although in the various cases, various Schwarz v. Wendell. reasons are assigned for the principle, yet, in all the principle is established. And, in several, it is broadly laid down that, where these confidential relations exist, the parties cannot deal on equal terms, and therefore they shall not deal at all *III. But in this case, were there no such rela- [*286] tions existing, the transaction is such that this Court ought not to permit it to stand. It is such an one as shocks the conscience. The advantage taken is so great, that it is, upon its face, an outrage upon honor and common honesty. To procure money upon my note to buy land for me, and to receive as a compensation half the profits when sold, and then pay the note out of my money, and compel me to pay $4,000 for half the profits, in advance, is upon the face of it, an outrageous transaction; and we are fully persuaded that, if there were no other feature in it, this Court would say that the advantage taken, is so monstrous, that it cannot be sustained. It falls directly within the class of cases where the Court will set aside the trade for inadequacy of consideration. 2 Bro. R. 179; 7 Ves. R. 30; 8 Ves. R. 133; 9 Ves. R. 234; 10 Ves. R. 470, 292, 209; 14 Ves. R. 28; 13 Ves. R. 95; 3 Ves. & B. 187; 2 Sch. & Lefr. 395; Sugd. on Vend. 226. IV. It may be argued that here too much time has been permitted to elapse, and that we come in too late. But this is not so. We have, in a case of this nature, the right to file our bill at any time when the note is sought to be enforced against us. How could we know that Wendell had sold it? And if he had not sold it, could he enforce it against us; and might we not file our bill whenever he should seek to enforce it? Besides, he has got a security from us, which it is unconscientious that he should retain. Mrs. Schwarz was not, until recently, before filing her bill, acquainted with her legal rights. It is sufficient that, whenever she does become acquainted with her rights, she seeks to redress them. Simple lapse of time will not bar her rights in a case of this nature, unless with a full knowledge of her rights, she confirms the trade. 12 Ves. *R. 374; 5 Pet. [*287] Schwarz v. Wendell. Cond. R. 150; Cooper Eq. 146; 5 Ves. R. 678; 11 Ves. R. 226; 9 Ves. R 292; 2 Ves. R. 272, & note; 14 Ves. R. 91; 2 Atk. R. 119. V. The only question, then, is, whether the plea and answer contain a bar to this inquiry, or whether this transaction may not yet, notwithstanding the matters in the plea and answer alleged, be made right in this Court. The plea is not sufficient, and, if sufficient, constitutes no defense to this suit. It is not sufficient, because it does not aver that the account, which was stated, is a true and just account. This is necessary, though the bill do not impeach the account for fraud or error. 3 J. C. R. 388; 1 Beames Pl. 230; 3 Atk. R. 70; Cooper Pl. 279; Mitford Pl. 260; 4 Paige R. 195. Another reason is, that the plea does not put in issue the matter charged in the bill, nor deny the constructive fraud alleged, nor the imposition. The plea should deny the facts which constitute our ground for redress and relief. 4 Paige R. 196; 3 Paige R. 277; 2 Atk. R. 119. As to the covenant of indemnity, we say, first, that it has no application at all to this case, from its very terms, and if it can only operate as a release, and is subject to the same objections on the account stated, or the note,- that it was unfairly obtained,—it would be pleading one part of an unjust settlement to cover up and prevent the investigation of all the antecedent frauds. Story Eq. Pl. 613, &c.; Mitf. Pl. 261; 2 Sch. & Lefr. 721; 6 Madd. R. 62; 2 Sim. & Stu. 279; 3 Paige R. 277. Neither the plea nor the answer denies what we set up as an equitable ground of relief. They simply assert that the account which was rendered was just and true, and was acquiesced in, &c. Now, as we have shown, this is not enough, unless [*288] he denies the circumstance which we allege, to wit, the transaction relative to the Erie property, by which Wendell makes at least $4,000 out of his cestui que trust, which was allowed in the settlement, and makes the settlement unjust. And we may read the answer, admitting this fact, to show that the account rendered, which included this charge of $4,000 for Schwarz v. Wendell. profits in that transaction, was not a just account, notwithstanding Wendell's assertion that it was just and true. This Court is to say whether it was just, upon the facts before it. Mitf. Pl. 299; 4 Paige R. 178; 2 Paige R. 574. Goodwin & Collins, for defendant. 1. The answer, (except as to the covenant set forth in the plea, which is proved by the testimony of Stewart,) is responsive to the bill, and is evidence. It is evidence as to all contained in it responsive to the bill, whether it be the stating, charging, or interrogating part of it. All the allegations so responsive are to be taken as true, unless contradicted by two witnesses, or one witness and pregnant circumstances. 3 Barb. & Harr. Eq. Dig. 383; 2 Pet. Cond. R. 285; 3 id. 417, 424; 1 Wend. R. 583; 3 Paige R. 557; 1 Cow. R. 711; 4 Paige R. 368. This rule has been established in practice as long as there has been a Court of Chancery in Michigan, and is not now an open question. The rule contended for by the complainants, as laid down in the cases cited by Counsel, does not exclude the answer, or any part of it. It is that where "new and distinct matters are set up in avoidance," and there is a replication, those matters must be proved. None of the matters set forth in the answer are new and distinct matters. They are part and parcel of the transactions upon which the complainants seek relief, and of which they have called for a discovery. The case in 3 Mass. R. 278, is to this effect, and no more. See also *2 McCord Ch. R. 90, 101, 102, 344, 350; Recks v. [*289] Postlethwaite, Coop. Ch. Ca. 161; 14 J. R. 63, 73; 8 Cow. R. 394; Green v. Vandman, 2 Blackf. R. 324. Even the strict rule of the Southern cases cited, does not support the complainant's case. The rule, in these, as stated, is “that the answer is not evidence when it asserts a right affirmatively, in opposition to the plaintiff's demand." But they agree that everything stated in the answer, responsive as to the creation of the original liability charged, must be taken Schwarz v. Wendell. together. But where the original liability is once admitted by the answer, there is no escape from it but by proof." 2 Cow. & H. notes to Phil. Ev. 268. Upon this rule, all of the answer is evidence in the case. The bill seeks relief from a note, upon a variety of facts alleged to show a want of consideration, imposition and fraud. The answer denies that any such gounds of relief do, or ever did exist, and gives a full history of the transactions referred to, showing there were none. The "liability charged," is repelled from beginning to end. II. This is not a case of a purchase of trust property by a trustee, nor do the cases on this subject apply to it. It is contended that the trustee, while the relation exists, cannot buy of the cestui que trust the trust property. This is not such a case, and if it were, the position is not true. The cestui Ique trust is, in equity, the owner of the trust property, and may alien, demise, and dispose of it, and even when a feme covert, encumber it for her husband's debts, and may sell and dispose of it to the trustee, by a fair bargain, clear of fraud and imposition. 1 Madd. Ch. 113, 453, 456; 2 Kent. Com. 162; 7 J. R. 548; 6 Ves. R. 625; 9 Ves. R. 246; 12 Ves. R. 373; 3 Meriv. R. 208; Newl. on Cont. 453; 1 Cruise Dig. 500. III. It is insisted, on the part of the complainants, that the purchase made by defendant, of the Erie property, [*290] *was with trust funds of Mrs. Schwarz; and that the trustee cannot use the trust funds to make profit for himself. If the facts were so, yet, if it were done with the agreement of the cestui que trust, and a consideration is rendered for it, labor and service being performed therefor, it is not perceived why such an agreement, fairly made, cannot be sustained; and, more especially, why a subsequent settlement of such an agreement performed, should not be sustained. But it is not true that trust funds of Mrs. S. were used for the purchase of the Erie property; it was not understood or agreed that they should be so used, nor were they so used. The agreement between Schwarz and Wendell was, that the purchase of the Erie property should be made by Wendell, with |