Case Name: J. J. Theusen, Appellee, v. W. R. Bryan, Defendant, John R. Stewart, Peter D. Moeler, James Porter and Reinbeck State Bank, Appellants
Court: Iowa Supreme Court
Jurisdiction: Iowa
Decision Date: 1901-04-12
Citations: 113 Iowa 496
Docket Number: 
Parties: J. J. Theusen, Appellee, v. W. R. Bryan, Defendant, John R. Stewart, Peter D. Moeler, James Porter and Reinbeck State Bank, Appellants.
Judges: 
Reporter: Iowa Reports
Volume: 113
Pages: 496–504

Head Matter:
J. J. Theusen, Appellee, v. W. R. Bryan, Defendant, John R. Stewart, Peter D. Moeler, James Porter and Reinbeck State Bank, Appellants.
1 2 3 6Fraudulent Purchase: actionable fraud of third person: What is not. A partnership, without interest in his business, permitted a buyer of live stock to make his shipments in its name. Drafts in favor of the firm, drawn against such ship ments were deposited in a bank at Reinbeck to the credit of the buyer. The buyer issued his own checks in payment of what he bought. This bank paid such checks, charged them to the buyer’s account and then sent them to said firm. The buyer also issued checks upon a bank at Hudson and it paid these on the promise of one member, of said firm that it would save this bank from loss. The Hudson bank forwarded the raid checks to the Reinbeck bank, which charged them to the account of the buyer and remitted to the Hudson bank. Plaintiff and his assignor sold stock to the buyer, receiving, in payment, checks upon the Hudson bank. Before it received these checks the said firm and the Reinbeck bank notified it to refuse payment, which was done. Part of the stock bought was shipped to a commission firm in Chicago in the name of said partnership. It applied the proceeds to a debt due from the partnership on prior deals. For the rest of the stock bought the buyer made a bill of sale to the Reinbeck bank to pay his own debt. This stock was sold - in the name of said partnership and the proceeds applied on the buyer’s debt to said bank. Held, fraud being the only issue, and the buyer having purchased with intent to pay, the seller could not recover of said partnership the value of what was sold, though the firm stopped payment of said checks with intent to cheat the sellers, with the knowledge that they had not been paid. What the firm did was no more than a breach of contract and its intent to gain an advantage by stopping payment does not constitute a fraud.
7 Charge and plea. The question of liability had the partnership directed the buyer to purchase with intent to defraud the seller should not have been submitted, because not made in the pleadings.
4 Instructions and evidence. An instruction that if A. directed B. to purchase goods with intent to cheat, and thereafter received the proceeds, and if B. “bought the goods because of this direetion, and would not have bought them” but for this direction, then the jury might find fraud, etc., is erroneous, where there was no evidence that B. would not have bought the goods but for this direction, or that he acted thereon in buying them.
5 Election of Remedies: suit on contract and rescission. Where plaintiff sued to recover the price of goods, claiming there was a valid contract for the sale, and that defendants guaranteed to pay the buyer’s checks therefor, this was an election of remedies, estopping plaintiff to claim that a subsequent action to recover of defendants for fraud in the purchase was a rescission of the contract.
Appeal from Grundy District Court. — Hon. F. C. Platt, Judge.
Friday, April 12, 1901.
Action to recover the value of certain live stock sold and delivered by plaintiff and one Moag to defendant W. R. Bryan. There was a trial to a jury, resulting in a verdict and judgment for plaintiff against defendants Stewart, Moeler, and Porter, and they appeal.
Reversed.
R. J. Williamson and Boies & Boies for appellants.
Mullan & Pichett, J. C. Bcoit, H. C. Hemenway, and A. Grundy for appellee.

Opinion:
Deemer, J.-
Prior to the transactions complained of in this case, defendant Bryan and one Morrison were engaged in the business of buying and shipping live stock under the firm name of Bryan & Morrison. This firm had contracted a large indebtedness to Ingwerson & Smith, commission men in the city of Chicago, and at the time of the dissolution of the firm was practically insolvent. Bryan, however, desired to continue in business, and, in order to avoid trouble on account of his indebtedness to the Chicago commission house, made his shipments of stock in the name of Stewart, Moeler & Ca, a co-partnership doing a lumber, coal,, and grain business in the town of Reinbeck. Drafts in favor of this firm were drawn against shipments of stock bought by Bryan, but the drafts were deposited in the Reinbeck bank to the credit of Bryan. Bryan commenced using the name of Stewart, Moeler & Co. without their consent, but they afterwards ratified the same, and must be held bound thereby. This firm had no interest in Bryan's business. They simply acted as his bankers. When Bryan purchased live stock he issued checks in his own name in payment therefor. The bank paid the checks, and after charging the amount to Bryan's account, sent them to Stetwart, Moeler & Co. Bryan also purchased live stock in the vicinity of Hudson, at which place the firm of Stewart, Moeler & Co. also did business, and they both issued checks on the Hudson Savings Bank. This bank paid both kinds of checks on the promise of one of the members of the firm of Stewart, Moeler & Go. that they would reimburse the bank for any loss it might sustain in the payment of the checks. The Hudson bank forwarded all these checks paid by it to the bank at Beinbeck, and the Bryan checks were charged to Bryan's account, and the amount thereof remitted to the Hudson bank, from time to time, as they were presented. Plaintiff and his assignor, Moag, sold stock, the value of which they seek to recover in this action, to Bryan, and received his checks on the Hudson bank in payment thereof. The property was delivered and the checks were issued during banking hours on the 15th day of January, 1895. Instead of presenting their checks for payment to the Hudson bank, plaintiff and Moag on the sixteenth day of January, 1895, deposited them with a bank at Cedar Falls for collection, and on the same day this bank forwarded them to the Hudson bank for payment. In the meantime, and on the morning' of Hk sixteenth day of January, and before the receipt of the checks by the Hudson bank, tbe Beinbeck bank and Stewart, Moeler & Co. notified the'Hudson bank to refuse payment of all Bryan's checks. The hogs purchased from plaintiff, Theusen, were placed with other hogs in the yards at Hudson; and the cattle purchased from Moag, plaintiff's assignor, were shipped to Chicago in the name of Stewart, Moeler & Co., to Ingwerson Bros. & Smith. At that time the indebtedness due this commission firm on account of prior deals in the name of Stewart, Moeler & Co. was something over $1,500, and the proceeds of the cattle so shipped were applied on this indebtedness. Bryan was also indebted at this time to the Beinbeck bank, and on tire sixteenth day of January, 1895, made a bill of sale to the bank covering tbe hogs purchased of plaintiff and other property, to secure the indebtedness. These hogs were thereupon shipped in the name of Stewart, Moeler & Co., on a contract of sale theretofore made by Bryan to a concern in Marshalltown, Iowa, and the proceeds were remitted to Stewart, Moeler & Co., and the amount placed to the credit of Bryan on his account with the bank. The action is to recover the value of the hogs and cattle sold, from each and all of the defendants. Plaintiff voluntarily dismissed the action as to Bryan, and at the trial the jury was instructed to find a verdict for defendant the Keinbeek bank.
The petition charges a contract liability for the stock on defendants Stewart, Moeler & Co., and also seeks to recover the value thereof from said firm because of fraud. The contract liability is bottomed on the alleged promise of said defendants to guaranty or pay the checks drawn by Bryan on the Hudson bank, and the claim for torts on allegations that, with intent to defraud plaintiff and Moag, defendants Stewart, Moeler & Co. gave notice to the Hudson bank not to pay Bryan's cheek; that when they gave this notice they knew the live stock purchased by Bryan had not been paid for, and that at that time they had obtained from Bryan a bill of sale covering all his property to secure the amount due the bank, and that at said time the stock had been shipped in the name of Stewart, Moeler & Co., as before indicated; that, with full knowledge of the dishonor of Bryan's checks for the stock, Stewart, Moeler & Co. appropriated the proceeds of the stock for which payment had not been made to their own use and benefit, and that all defendants except Bryan repudiated responsibility for the checks issued in payment for the stock, and conspired and confederated together to cheat and defraud the plaintiff and his assignor by applying the proceeds of said stock on an indebtedness of Bryan's knowing that the stock had not been paid for, and in violation of their agreement to honor the checks and furnish Bryan money with which to meet the checks issued by him. The issue of fraud was the only one submitted by tbe court. Tbe chief evidence of the alleged fraud consists of a certain declaration said to have been ¿made by Stewart, after the transaction complained of occurred, to the effect that his firm had concluded to close up the business, and had so informed Bryan; that Bryan said he had a part of a car load of cattle purchased from Moag, and had spoken'to Theusen about his hogs, and that he (Bryan) was advised by Stewart to go and buy the stock, make shipment, and dose up the business, and that he knew the cattle were not paid for when he gave Bryan the advice. In the further discussion of the case, it must be borne in mind that Bryan purchased the stock from plaintiff and his assignor, giving his checks therefor on the Hudson bank; that he (Bryan) made no misrepresentation at the time of the sale; and that, so far as shown, there was no intent on the part of Bryan not to pay for the stock at the time he purchased. It should also be remembered that Stewart, Moeler & Co. were bankers for Bryan, and not principals in the transaction, and that the case was submitted solely on the issue of. fraud. Bearing on that issue, the court gave the following, among other, instructions, to-wit: "That the plaintiff might recover" in the event the jury found: "Second. That the defendants Stewart, Moeler & Co. stopped the payment of tire checks given by Bryan to plaintiff and Moag in payment for the live stock in question with intent to cheat and defraud the former owners thereof, and to appropriate or convert such stock, or the proceeds thereof, to their own use or benefit, with intent to defraud or cheat the former owners or sellers of said stock." This was manifestly erroneous, for the reason that if Bryan purchased the property in good faith, and with intent to pay therefor, the mere fact that defendants stopped payment of the checks would not constitute fraud. At most, it would be nothing more than a breach of contract. The intent of the defendants to gain an advantage by stopping the payments of the checks did not constitute a fraud. Starr v. Stevenson, 91 Iowa, 684; Van Vechlen v. Smith, 59 Iowa, 173 ; Dorris v. Miller, 105 Iowa, 569. This same error was repeated in the fifth, and also in the fourteenth, instruction.
In the third instruction given by the court the jury was instructed, in substance, that if Stewart directed Bryan to purchase the stock with intent to cheat and defraud, and thereafter his firm received the proceeds, and if Bryan bought the stock because of this direction, and would not have bought it but for this direction, then it might find fraud, etc. This instruction was erroneous, because there was no evidence to show that Bryan would not have bought the stock but for this direction, and no evidence that he acted thereon in purchasing the property.
II. Neither plaintiff nor his assigner sold his stock by reason of" any misrepresentations made to him by the defendant Bryan, unless it be that at the time he purchased he (Bryan) did not intend to pay for the goods. No such intent is charged in the petition, however, and the case was not tried on that theory. Stewart, Moeler & Co. were not principals in the transaction, and neither plaintiff nor his assignor sold the goods relying on them for their pay. There has been no rescission of the contract as to Bryan, unless the bringing of this action be a rescission; and this cannot be true, for it appears that prior to the bringing of this suit plaintiff commenced an action to recover the purchase price of the cattle, claiming that there was a valid contract for the sale, and that defendants promised and guaranteed to pay Bryan's checks issued for the purchase price. This was such an election of remedies as estops plaintiff from claiming that this action is a recission. Elm Creek Elevator Co. v. Union Pac. Ry. Co., 97 Iowa, 719; Klocow v. Patten, 93 Iowa, 432; Elliott v. Insurance Co., 109 Iowa, 39.
We are asked to decide the question as to whether or not there is any contract liability on the part of the defendants. As the matter is not properly before us, we do not pronounce thereon. The record does not call for a decision of the question, and we leave it until it properly arises.
It is a little difficult to understand the theory on which plaintiff seeks to recover. In one part of his petition he alleges a sale of the live stock to Bryan, and charges that the fraud on the part of the defendants Stewart, IVIoeler & Co. consisted in notifying the Hudson bank not to pay the checks drawn for the purchase price thereof, and in taking the bill of sale of the property. Indeed, this seems to be the only fraud charged. If we are right in our analysis of the petition, it is clear that no actionable fraud is charged. The sale, as between plaintiff and his assignor and Bryan, was valid, and the mere fact that defendant induced the bank not to pay the cheeks, or that they received the proceeds of the cattle bought, would not constitute a fraud, no matter what their intent. To induce another to break his contract is not an actionable wrong unless accompanied by malice, and, even when so accompanied, there is much conflict in the cases regarding the right to recover.
Nothing further need! be said on this proposition, and no reference need be made at this time to the conflicting cases mentioned. As we read the petition, Bryan is not charged with an intent to defraud, and defendants' liability seems to be predicated on the proposition that they are fraudulent transferees of the property purchased. There could not, of course, be a valid sale to Bryan, and a recovery from his' transferees, because they took title to the property with fraudulent intent. Fraud never consists in mere intent. Starr v. Stevenson, supra. The court charged the jury, in effect, that if Stewart, or Stewart, IVIoeler & Co., directed Bryan to purchase the stock in question with intent to defraud plaintiff and his assignor, then it would be justified in finding for plaintiff. We find no allegation in the petition to justify such a charge, and, in the absence of such allegations, the instruction was erroneous. What we bave said fully indicates our views of tbe law of tbe case as presented by tbe pleadings, and it follows that defendants' motion to direct a verdict for them on tbe issue of fraud, filed at tbe conclusion of tbe evidence, should bave been sustained. We do not overlook tbe case of Fitzsimmons v. Joslin, 21 Vt. 129, cited in appellee's brief. Conceding it to announce correct rules of law, tbey are not applicable to tbe case made by tbe pleadings. Bor tbe errors pointed out, the judgment is reversed.