Court Opinion

ID: 6692525
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:39:29.921075+00
Date Added: 2024-06-11T08:37:10.048056
License: Public Domain

BURCH, J.
James Howard is an Indian. In 1919 the government issued to him a patent in fee covering a half section of land in Corson county, S. D. He afterwards sold this land to the Hagen Realty Company for $10,000, receiving $1,000 of the purchase price in cash and a $9,000 mortgage on the land. By some means (referred toby appellant as legerdemain), the Hagen Realty Company obtained an assignment of this mortgage and then placed two mortgages on the property, one to F. M. Grobel for $3,000 and one to the First National Bank of Mobridge for $1,211.50, and transferred the property by deed to August F. Hagen. Howard, claiming to have been cheated out of his $9,000 mortgage, employed W. M. Potts, an attorney of Mobridge, to commence and conduct necessary legal proceedings to protect his rights and obtain redress. Potts commenced an action against the Hagen Realty Company, August F. Hagen, F. M. Grobel, and the First National Bank. The Hagen Realty Company disclaimed interest. August F. Ha-gen answered, claiming ownership in fee, and the two mortgagees answered, claiming default, and asked for foreclosure of their *470mortgages. This litigation was settled, resulting in a reconveyance of the land by Hagen, subject to all liens, and, in addition, a deed to a quarter of land subject to liens, the equity being valued in the settlement at $500. The Hagen Realty Company was insolvent. The propriety of the settlement of the litigation is not questioned, and there appears to have been no dissatisfaction with Potts’ set-, tlement. Under the contract of employment, Potts was to receive as his fee 50 per cent of the recovery, so that, upon termination of the litigation, Potts and his client, Howard, became joint owners of the equities in the two tracts of land. For some time ineffectual efforts were made to sell the equities. Then P'otts made a deal with Howard whereby he became the owner of Howard’s share. Shortly theerafter Potts sold the land at a price which netted him a considerable profit. Howard became dissatisfied with his dealings with Potts. Howard was declared an incompetent, a guardian was appointed for him, and his guardian, Paul C. Hanson, brings this action, claiming fraud and deceit in the contract of employment, and also in the contract of sale of his equities to Potts. The trial court found in favor of Potts on the contract of employment and against him on the contract of sale. Potts appeals from the judgment and an order denying his motion for a new trial.
There is no appeal from the finding of the court that the contract of employment was fair, so it must be accepted as a fact that Potts fairly and without fraud became a joint owner .of the equities in the two tracts of land with Howard. We must therefore confine this case to the transaction whereby Potts became the owner of Howard’s interest in the land. If that was legitimate and fair, Howard has no cause for complaint.
The principal question before us is the sufficiency of the evidence to support the findings of the learned trial judge. At the time Howard employed Potts he had no' money. Anticipated expenses and costs of the litigation to be instituted were advanced by the Indian agent out of funds belonging to Howard’s minor child. After the termination of the litigation, and when Howard and Potts hadi become joint owners of the property recovered in the litigation, an effort was made to- sell the property. The effort was unsuccessful, and there is nothing in the evidence to indicate that the effort to sell was not in good faith, except the bare fact that Potts was able to make an advantageous sale shortly after *471acquiring Howard’s interest. Of this we will speak later. Conceding for the time 'being that the effort to sell was in good faith, and that no sale could be made more advantageous to Howard than the sale he made to Potts, then Howard was not injured by the transaction, and no unfair advantage was taken of him. We find no evidence that any one was willing to pay more than Pdtts did pay. In fact, there is no evidence of any market value or that the equities could be sold to any one. Potts was not obliged to' buy at any price. It is obvious, however, that, if nothing was done, the equities would soon be destroyed by the mortgages then in process of foreclosure, and would be lost to both Howard and Potts. Unless the mortgages were paid or redemption made, there would soon be no equity left in favor of the fee owners. Howard having no money to protect his equity, and Potts being under no obligation to do so, and there being no market for the equities, Howard’s interest was valueless, unless, pending the final foreclosure of the equity of redemption, a purchaser could be found. Whether or not a purchaser could be found was problematical. Under such circumstances, there is no indication of lack of business acumen in selling to his associate, who was willing to give him $600. If this was all that Potts would give, and no one else would give more, then that was all Howard’s equity was worth for immediate sale. No matter what the future value might be, there could be no fraud, unless Howard was fraudulently induced to sacrifice his interest by an immediate sale.
We turn our attention to the conduct of Mr. Potts in the negotiations. Whether or not the relationship of attorney and client existed at the time of the sale we do- not decide. We shall assume that the disposition of the property acquired as a result of the litigation is so intimately connected with the relationship of attorney and 'client existing during the litigation as to require on the part of the attorney the utmost good faith. We shall assume that it was his duty to give his client any information he had -up to the time of the transaction in respect to the value of the property, any prospect of its sale, or any facts which might be pertinent to enable his client to act wisely. On this assumption, what are the facts? Did Potts say or do anything to influence his client improperly, or did he suppress any information that his client ought to have had? Potts says his client wanted to sell, but that he ad*472vised him to hold on. It is not hard to believe that a man without money, an Indian, would be anxious to- make a sale. A shrewd business man might be anxious to sell property of this character which might shortly become wholly worthless. If Potts was paying all the property was worth, there would be no temptation to unfairly induce the sale. It might be necessary for him to- buy in order to carry on and protect his own interest and get rid of a restless joint owner who could advance no money or in any way aid if redemption became necessary. There could be no wrong in buying out such an associate in order to obtain a free hand in dealing with priorities that threatened the holdings of both. Potts bound himself to the payment of $600 for Howard’s share. The evidence shows that the equity in the quarter section was received on the basis of $500, and nothing shows that it was ever worth more.
As to the half section, efforts had been made to sell it at $20 an acre cash. The incumbrances actually paid by Potts against the half section as found by the court amounted to $5,682.27, which would leave an equity on the basis of $20 an acre less than $718, which, added to the supposed equity of $500 in the quarter section, would be only $1,218. Potts owned half of this, so it would look as if he had paid all the property was apparently worth, and more than any one else had ever offered to pay. Much is made of a letter written by Potts to E. D. Mossman, Indian agent, to- obtain the consent of the agent to the deal in which Potts had stated the incumbrances to be $6,162.35, some $480 more than the amount found by the court. But one item to make up this excess is set out as “Estimated expenses, sale of property, $320.00.” This item, of course, was not included in the court’s finding as to amount of incumbrance. It is not an incumbrance, and is not stated to be in the letter to Miossman. It could not be misleading as itemized, and certainly was an item that might properly influence the agent in considering his approval. It was not improper to- tell him what the cost of making a sale to a third party was likely to be. After Potts became the owner, he was able for cash to obtain some small concessions on the incumbrances-. But this is no concern to Howard. We see nothing in the letter to Mossman indicative of fraud. The status of Howard in reference to the Indian office was at the time that of a competent Indian. The agent had nothing to do with approving the deal. Apparently the agent was advised as evidence *473of good faith and to protect Potts from accusations of taking advantage of an ignorant Indian client. If a sort of superimposed agency resulted, there is no evidence that Mossman would have refused to> approve the deal if he had been advised of the exact amount of the concession that could be obtained for cash. He would not have been justified in refusing his approval on that ground. The reductions could not be had without payment, and Howard was in no position to purchase the reductions.
The circumstance that probably is responsible for this action and gives rise to the suspicion that the deal was unfair is the fact that shortly after Potts acquired the property he was able to sell the half section at $28 an acre. If he had a deal at this price pending at the time, or a prospect of a good sale which would net Howard more than $600 without an outlay of cash impossible for Howard to meet, he should have disclosed the facts and advised and assisted his client in obtaining the added value. But there is no evidence that Potts did know. The sale was made to- a stranger, and Potts claims to have been as much surprised at his luck as any one. We find no evidence of fraud, though we apply to this case the strict rule of fair dealing between attorney and client. His client had been well trimmed before he was employed. As the result of his labors, two thin equities were received, which he bought on a long chance and realized on by pure luck.
The judgment and order appealed from are reversed.
POLLEN and SHERWOOD, JJ., concur.
MISER, C., sitting in place of CAMPBELL, J., disqualified.
BROWN, P. J., dissents.