Case Name: Kern v. Middleton
Court: Supreme Court of Pennsylvania
Jurisdiction: Pennsylvania
Decision Date: 1889-02-04
Citations: 2 Monag. 687
Docket Number: No 203
Parties: Kern v. Middleton.
Judges: 
Reporter: Cases in the Supreme Court of Pennsylvania; being those cases not designated to be reported
Volume: 2
Pages: 687–694

Head Matter:
Kern v. Middleton.
The evidence to set aside a deed must be clear, precise and indubitable.
The evidence that the defendant, in an action of equitable ejectment, was not a bona fide purchaser for value without notice of fraud, held insufficient to submit to the jury, in a case where the vendor sold to the first vendee who paid in bonds which were alleged to be fraudulently misrepresented, and the vendee sold to the defendant, who was his father-in-law.
The evidence of agency between the vendee and defendant was also held insufficient to submit to the jury.
Jan. 24, 1889.
Error, No 203, July T., 1888, to C. P. No 1, Phila. Co., to review a judgment on a verdict in ejectment by Walter R. Kern against Louis M. Simpson and Edwin Middleton, at Sept. T., 1886, No. 384.
Simpson filed a disclaimer of title. An action by Kern against Simpson individually for deceit is reported in 126 Pa. 42.
The evidence was to the following effect, on the trial, before Allison, P. J.:
On Jan. 7, 1884, Simpson was negotiating with Kern’s agent, Hall, for the lot in dispute. Simpson wrote down and signed an offer, to be submitted to Kern, as follows:
“ $6,000. First Mortgage six per cent. Bankers & Merchants’ Telegraph bonds, for lot Spring Garden, West of 37th St., 50 x 120 and back strip. To be accepted this week.”
“ 187 Broadway, New York.”
Kern subsequently accepted the offer and gave the papers relating to the title to Simpson, who applied to the Real Estate Title Co. for an insurance of the title and obtained their certificate approving the title about Jan. 25. On Jan. 27, Simpson offered to sell the lot to Middleton, his father-in-law, for $5,000 cash, showing him the certificate, and Middleton agreed to buy. Simpson suggested that he might need the money in New York during the week, and Middleton agreed to give it to him there. They met in New York and the money was paid Jan. 30. With this money Simpson redeemed eight out of forty of the general mortgage bonds of $1,000 each of the Bankers & Merchants’ Telegraph Co., previously pledged by Simpson to Dimock & Co. for a loan of $27,500, with which to buy a controlling interest in the stock of the Lehigh Telegraph Co. Simpson, therefore, obtained these eight bonds for $5,000, or $625 for each $1,000 bond. On Feb. 1st, or 2nd, the deed from Kern to Simpson for the entire property was delivered, and six of the eight bonds, received by Simpson from Dimock & Co., delivered to Kern by Simpson, under the agreement of Jan. 7, 1884. Simpson thus received for his six bonds a lot he agreed to sell for $5,000, or $833.33 for each bond; and the two which he had left he sold for 81 per cent., or $1,620.
Middleton was told by Simpson, when he agreed to sell the lot, that his clerk would draw the deed without charge, and that he would instruct the Real Estate Title Co. to change the application for insurance of title and have the policy issued to Middleton instead of to Simpson, Middleton paying for the insurance. Upon a survey, part of the L-shaped lot was found to have an encroachment of a neighbor’s fence of some ten feet, and Middleton declined to accept title to that part of the lot, and the company to insure it, until Simpson had the fence removed, which caused the conveyance to be made in two deeds, one Feb. 4, for all of the lot except the part in dispute, and the other April 26, for the balance, by which time Simpson had succeeded in having the fence removed from the lot covered by the last conveyance. The consideration recited in the first deed was $6,000, in the second deed $1,000. A receipt for $5,000, the actual consideration, given by Simpson to Middleton when the money was paid, was destroyed after the twro above mentioned deeds were delivered.
The plaintiff contended he had been deceived as to the character of the bonds given him. The Bankers and Merchants’ Telegraph Co. was a corporation of the state of New York, building or about to build lines in other states, and had issued its first mortgage covering all of its property, except a small part of a line in the city of New York, with accompanying bonds, to the amount of $10,000,000, which were known as general mortgage bonds. There were then also local corporations of the same name in New Jersey, Pennsylvania, Delaware, Maryland and the District of Columbia, owning a telegraph line from the city of New York to Washington, through those states, upon which line those companies had previously issued a mortgage for $300,000, with accompanying bonds, which the company always called divisional bonds, but, from the local status of the line and corporation here, were spoken of on the street and in the board as first mortgage bonds. The parent corporation of New York leased this line from these other companies, and held, therefore, as its property, leases of that line, which was subject to the $300,000 mortgage. The bonds of the $300,000 mortgage sold in the market for about 98 per cent. The bonds of the $10,000,000 mortgage were not on the market. In the spring of 1884, the bonds of the Bankers & Merchants’ Telegraph Co. of New York were selling at 81 yi- In August the company failed and its bonds became worthless.
The plaintiff contended that Simpson represented by his written offer that the bonds were the divisional bonds of the $300,000 issue, and not the general mortgage bonds of the $10,000,000 issue.
Kern testified on the trial that, after he 'discovered that the bonds he received were not the first mortgage bonds of The Bankers & Merchants’ Telegraph Co., but were bonds issued under a later mortgage and which were now worthless, he thereupon went to Simpson’s office and said : “ Mr. Simpson, these are not the bonds you agreed to give me; I find they are of a different issue and I prefer to have the lot or the bonds agreed upon. He said, that is so, but those bonds were better than the first mortgage bonds, for they cover the entire franchise, the entire plant of the company. It was too late to return the lot, he had parted with it.”
Richard W. Brophly, a witness for defendant, testified that, at this and another interview, Kern said to Simpson that “ they were not the bonds that he thought they were when he took them, but that it made no difference, or no matter,” something to that effect. The witness said he did not remember that Simpson said anything in reply to Kern’s remark. Simpson corroborated Brophly.
It also appeared in evidence that when Simpson gave Hall the written offer, he gave, in addition, a letter from Dimmick, president of the company, which Hall gave to Kern. Simpson testified that the letter stated that these bonds were a part of the $10,000,000 issue of bonds, and that they had no present market value; they were not listed, but were destined to become a good investment security. Kern testified that he never opened the letter, that he inquired of Mr. Maris, who was former president of the company. Maris testified that he did not remember anybody coming to his office to inquire about the bonds. He further testified that he never heard the general mortgage spoken of as the first mortgage.
Middleton testified that he had no knowledge of the circumstances under which Simpson had purchased the lot.
The plaintiff made the following offer: “ I offer to prove by this witness, Mrs. Minna Schmidt, in connection with testimony already offered by me, namely, the papers and evidence of Chas. F. Hall, together with the papers of the Real Estate Title Co., that she saw Louis M. Simpson, before the date and execution of the last deed to Mr. Middleton, come on the lot in controversy, and move back the fence to the line which he said was the correct line between the two properties, and put on it notices to not deposit ashes or prevent trespassers from coming on it.” [1] The purpose of the offer was to prove that Simpson was, up to that time, acting as agent of Middleton. Objected to and excluded. Exception.
Plaintiff further offered to prove that the first mortgage bonds of the Bankers & Merchants’ Telegraph Co: were of value, and what their value was at the time of the trial in the court below. [2] Objected to and excluded. Exception.
Plaintiff asked Simpson, on cross-examination, the following question:' “ Q. You had sold this property to your father-in-law before the deed was made to you. Why did you not have the deed made direct from Kern to your father-in-law ? ” Objected to. The Court: It is wholly immaterial and I sustain the objection. Exception. [3]
Plaintiff asked Middleton, on cross-examination, the following question : “ Q. You held the title to the property adjoining this lot, did you not.” Objected to, objection sustained, exception. [4]
Defendant made the following offer : “ Mr. Crawford : I offer the evidence of Andrew J. Baldwin, in this commission, for the purpose of proving the value of these bonds between January and April, 1884, the time of this transaction — actual sales, giving their dates.” Objected to because it does not prove market value. Objection overruled. Exception. [5]
Counsel for defendant then asked the court to instruct the jury to find for the defendant.
The court below reviewed the testimony, and charged the jury, in part, as follows, by Allison, P. J.:
“ The supreme court has settled the doctrine that, in questions of this character, the judge trying the case must deal with it about as a chancellor would deal with it if it were an application to revoke, or set aside, or declare null and void, a deed that had been obtained upon the ground of fraud. If this were an equity proceeding, what would the chancellor do with this testimony as it stands before me now in this case, the application in equity being to revoke the deed on the ground that it had been obtained by fraudulent misrepresentations? That is the aspect in which the case stands, and in which I am bound to look at this testimony to pass upon the question as to whether I should, or should not, instruct the jury according to the prayer of the defendant.....A verdict for the plaintiff is sought to be obtained, under the case as it now stands, to take this property out of the hands of Mr. Middleton and give it back to Mr. Kern. Upon this evidence, there not being a scintilla of testimony, in my judgment, to bring any allegation of fraud, or pretense of fraud, home to Middleton, and the evidence showing that he had given a full and bona fide consideration for that property, as it was agreed upon between himself and Mr. Simpson, I do not think I would be warranted in allowing this case to go to the jury, believing there is no evidence in the case upon which the jury could find a verdict, finding this transaction, as between Mr. Simpson and Kern, was a fraudulent transaction, and much less finding that that fraud was known to Middleton, and was participated in by him, so as to invalidate the transaction as between himself and Simpson, or as the purchaser of the lot for the consideration which he says he gave for it.”
The plaintiff presented the following points, which were refused:
“ 1. If you find that the plaintiff has proved that the title to the premises in dispute was obtained from him by a fraud practiced on plaintiff by the defendant Simpson, then the burden of proof is upon the defendant, Edwin Middleton, to show that he is a bona fide owner of the title to said property from the defendant Simpson, for a valuable consideration, and without any notice of the fraudulent nature of the transaction on the part of the defendant Simpson.”
“ 2. If you find that the defendant Simpson obtained from the plaintiff the title in question in this suit, by a fraudulent misrepresentation to the plaintiff, of the character of the consideration moving from the defendant Simpson to the plaintiff, and if you also find that the defendant Middleton is not a bona fide transferee of said title from said Simpson for value and without notice of such fraud, then your verdict should be for the plaintiff.”
“ 3. In order to be a bona fide transferee of said title for value, from the defendant Simpson, without notice of the fraudulent character of the transaction, if any, on the part of the defendant Simpson, the title to said premises must not have been obtained by Middleton from the plaintiff through the defendant Simpson, or otherwise, by a fraud knowingly practiced upon said plaintiff in obtaining said title, or without any consideration moving from the defendant Middleton, for said title.”
“ 4. If you find that the defendant Simpson was acting as the agent of the defendant Middleton, in procuring the transfer of the title from Kern to the defendant Simpson, and thence to Middleton, and also find that, during the time when said defendant Simpson was so acting as the agent of and on behalf of the defendant Middle ton, in the course of the same transaction, the defendant Simpson procured the conveyance of the premises in question from the plaintiff by a fraud practiced on plaintiff, then your verdict should be for the plaintiff.”
“5. If you find that the defendant Simpson was acting as the agent for and on behalf of the defendant Middleton, and if you find that, during the course of this very transaction, the defendant Simpson had knowledge that any fraud had been practiced on plaintiff to induce him to transfer said title to said Simpson, then the knowledge of said fraud by Simpson in the course of the very transaction would be notice thereof to the defendant Middleton, and your verdict should be for the plaintiff.”
Verdict for defendant, in accordance with the instructions of the court, and judgment thereon, whereupon the plaintiff took this writ.
The assignments of error specified the action of the court, 1, 2, in overruling the first and second offers of evidence, quoting the offers but not the bills of exception; 3, 4, in disallowing the plaintiff’s questions, as above, quoting the bills of exception; 5, in allowing defendant’s offer, as above, quoting the bill of exception, but not the evidence; 6, in directing the jury to find for the defendant; 7-11, in refusing plaintiff’s points, quoting them.
Hood Gilpin, with him LeonardR. Fetcher, for plaintiff in error.
As the jury were directed to find a verdict for the defendant, we must assume that the plaintiff’s evidence is true; we must also assume the truth of every fact which may be fairly inferred therefrom: Bigley v. Jones, 114 Pa. 515.
From Simpson’s written offer, the value of the bonds, and his confession to Kern afterwards, it is evident that fraud was intended. The contract was voidable on the ground of fraud: Pearsoll v. Chapin, 44 Pa. 9; Hazards. Irwin, 18 Pick. 102; Edwardsv. McClay, 1 Coop. 308; Phipps v. Buckman, 30 Pa. 401; Small v. Atwood, 1 Young, 407; s. c. 6 C. & F. 232. The question of fraud should have been submitted to the jury.
In Bigley v. Jones, above, and Miles v. Lewis, 19 W. N. C. 262, cases of equitable ejectment, the supreme court decided the testimony was for the jury, though the trial judge treated the cases exactly as this was treated. See, also, Bracken v. Miller, 4 W. & S. 102; Reed’s Ap., 34 Pa. 209; Houseman v. Building Association, 81 Pa. 256.
The payment of the money by Middleton to Simpson before Simpson acquired title, did not make Middleton a bona fide holder. Middleton bargained with Simpson for the title he was to acquire, and the title which Simpson got afterwards from Kern, being voidable as against plaintiff, defendant takes nothing more than Simpson had to give, stands in' Simpson’s place and is subject to the rights of plaintiff.
Feb. 4, 1889.
The destruction of the receipt for the $5,000 and the substitution for it of the untruthful receipts in the two deeds from Simpson to defendant, was an attempt to conceal the real nature of the transaction. The burden of proof was upon defendant to prove that he was a bona fide holder of the lot for value: Lowe v. Dalrymple, 117 Pa. 564. See also Bredin v. Bredin, 3 Pa. 81; Gibbs v, Neely, 7 Watts, 305 ; Rogers v. Hall, 4 Watts, 361; Drakers v. Temple, 41 Pa. 234; Confer v. McNeal, 74 Pa. 112; MacKinley v. McGregor, 3 Wh. 397; Brinks v. Heise, 84 Pa. 246; McDowell v. Rissell, 37 Pa. 164; Crawford v. Ritter, 1 Penny. 33.
The question of agency should have been submitted to the jury, for if there was a fraudulent misrepresentation or concealment by Simpson to Kern, by which Kern was defrauded, in the same transaction in which Simpson was acting at the same time as the agent for Middleton, then notice to Simpson is notice to Middleton, and Middleton is not a bona fide holder without notice. The evidence was that, from Jan. 29 to April 26, Simpson was acting for Middleton in seeing that he got a good title, preparing the deeds,' and getting a policy of insurance, the same as is done by every conveyancer in passing titles.
George L. Crawford, with him George M. Dallas and Robert H. McGrath, for defendant in error.
Under all the circumstances of the case, the allegation by Kern of Simpson’s' admission could not sustain a verdict, against the direct testimony of two witnesses and Kern’s admission of the receipt of the letter, much less in an equitable ejectment in which the trial judge sits as a chancellor.
The facts relied upon to create an agency between Simpson and Middleton are not sufficient for that purpose.
Nor is fraud inferable from the details of the sale from Simpson to Middleton. It is not enough to charge fraud and prove in support of it slight circumstances of suspicion only, but it must be clearly proved : Morton v. Weaver, 99 Pa. 47. Circumstances to be expected if there were a fraudulent purpose, if equally consistent with an innocent purpose, do not singly or collectively justify an inference of fraud : Mead v. Conroe, 113 Pa. 220.
As to the first assignment of error: Simpson was still legal owner of the lot, and as vendor bound to remove the fence. That fact proved no agency.
The plaintiff has not printed the deposition complained of in the fifth assignment of error, and this court cannot, of course, pass upon the specification without seeing the objected testimony.

Opinion:
Per Curiam,
This writ of ejectment must be regarded as the equivalent of a bill in equity to rescind, and , is governed by the same principles. The contract has been fully executed, the deed delivered, and the purchase-money or consideration paid. In such case, it is not sufficient to show that there was some evidence of fraud, by means of which the plaintiff was overreached in the transaction; nor is it perhaps a question of the weight of the evidence. A chancellor will not rescind an executed contract merely because the scales incline slightly in favor of the plaintiff; the preponderance must be so great as to satisfy his conscience that the alleged fraud has been committed. The evidence to set aside a deed must be clear, precise and indubitable. This has been said so often that we may well be excused citing the cases.
The evidence in the case, so far from measuring up to this standard, is vague and unsatisfactory. It was so slight that the learned and careful judge of the court below declined to submit it to the jury. It is true the bonds accepted by the plaintiff did not prove as valuable as he perhaps expected, and he may have made a bad bargain in exchanging his land for them, but we see no such fraud in the transaction as entitles him to rescind.
We need not discuss the rulings of the court below upon the plaintiff's points. The plaintiff had no facts to which his points could attach themselves.
Judgment affirmed.