Court Opinion

ID: 7108743
Source: CourtListenerOpinion
Date Created: 2022-07-24 12:23:55.25761+00
Date Added: 2024-06-11T16:13:39.878088
License: Public Domain

KobinsoN, O. J.
*7271 *726— On the fourteenth day of January, 1890, the plaintiff, then being the owner of all the lots and blocks included in the plat of West End, an addition to the city of Des MAines, conveyed all of that property, excepting one block, to J. H. Snoke, as trustee for a partnership known as thel West End Syndicate.1 The partnership was 'composed of A. W. 0. Weeks, K.. G-. Scott, and J. N. Neiman; and the conveyance was made in fulfillment of prior contracts. To secure a part of the purchase price, Snoke, as trustee for the *727partnership, made and delivered to the plaintiff notes to the amount of forty-seven thousand seven hundred and thirty-six dollars and eighty-four cents, and, to secure their payment, executed to the plaintiff a mortgage on the property he had conveyed. In February of the same year, Snoke, as trustee, entered into ten contracts in writing with the defendant, by each of which the trustee agreed to hold in trust for the defendant the undivided 1-150 part of the property which had been conveyed to the trustee, for the sum of one thousand dollars, of which a part was to be paid at the time the .contracts were signed, and the remainder thereafter, in four equal annual installments, with interest thereon at the rate of six per cent, per annum. In July, 1890, the members of the partnership incorporated under the name previously used, and all the property of the firm, including the contracts with the defendant, became vested in the corporation. ■ *In the year 1893, interest on the notes made to the plaintiff by the trustee was due and unpaid, and, to secure an extension of time, the syndicate transferred to the plaintiff, to be held by him as collateral security, the contracts with the defendant. The petition alleges that there is due on the notes made to the plaintiff the sum of fifty-two thousand five hundred and eighty-eight dollars and forty-six cents and interest; that there is due on the contracts entered into by the defendant the sum of twelve thousand dollar’s. Judgment for‘that amount with interest and an attorney’s fee, is demanded against him. The answer of the defendant pleads payment on the contracts to the aggregate amount of seven thousand nine hundred and fifty-seven dollars and six cents, and alleges that the contracts were obtained by fraud; that a large portion of the mortgaged property was sold, and the proceeds, which should have been used in paying the claims of the plaintiff, were appropriated by Weeks, Scott, and Neiman to their own use; that Weeks retired from the combination in the *728year 1891, and in June, 1892, one Jakaway.was elected secretary, and that he, Scott, and Neiman sold large portions of the mortgaged property, and collected large sums of money on the sales, all of which they fraudulently failed to pay on the claims of the plaintiff, and converted to their own use; that the plaintiff took the contracts in suit with knowledge of the fraudulent practices stated; that the consideration for the contracts has failed, by reason of the abandonment of the trust vested in Snoke, and the claims of the syndicate to own the mortgaged property. The answer further alleges that the plaintiff knowingly permitted Scott, Neiman, and Jakaway to sell a large portion of the mortgaged property, and fraudulently appropriate the proceeds thereof, to- the amount of about twenty thousand dollars, to their own use, without making any payment on the mortgage debt, and that in consequence the, plaintiff is estopped to claim anything on the contracts in suit, to the extent of the injury sustained by. the defendant; that the mortgaged property is of the value of fifty-five thousand dollars, and plaintiff has commenced an action to foreclose his mortgage, and should not be permitted to maintain this action until he shall have exhausted the mortgaged property, and then only for a proportional share of the unsatisfied remainder for the payment of which the defendant shall be found liable. In an amendment to his answer the defendant avers that the transfer of the contracts to the plaintiff wat unauthorized by the syndicate, and that the partnership is unable to carry out its agreement with the defendant to hold the interests for which the contracts provide in trust for him, by reason' of a mortgage on the property, including those interests, for more than it is worth, in consequence of which the consideration for the contracts has failed. The verdict and judgment were for the amount apparently due on the contracts and unpaid.
*7292 *728I. The defendant offered in evidence a letter written by Scott to E. Jakaway & Boyd in June, 1888; but an *729objection to it was sustained, and of tbat ruling tbe defendant complains. Tbe letter referred to negotiations with Neiman, but expressed tbe opinion of tbe writer tbat bis offer was not sufficiently favorable, and suggested tbat an attempt be made to interest tbe defendant in tbe matter. It is stated tbat, if tbe defendant was, induced to come up, “we will stay right by bim bere, and get bim to carry it in tbe way we offered it to Neiman;” also, “Get your man bere, and we will fix bim.” We understand tbe matter referred to in tbe letter was tbe purchase from tbe plaintiff of tbe land which was subsequently platted as West End addition, a contract for which, entered into by Weeks and Scott with tbe plaintiff, was then outstanding. It is urged tbat tbe letter tends to sustain tbe claim of tbe defendant tbat a conspiracy to defraud bim was entered into by tbe members of the West End Syndicate, and tbat what was done was in pursuance of tbat conspiracy. We do not think tbe letter tends to sustain tbat claim. We have quoted but a small part of it, but, taken as a whole, tbe letter shows tbat tbe writer believed tbe proposed venture would be a profitable one for the defendant and tbe others concerned, and tbat tbe terms on which Neiman offered, to take an interest were regarded as exorbitant. Tbe letter bad no relation to tbe conditions which existed when Cory entered into tbe contracts in suit. Neiman bad then been received as a partner in tbe syndicate,- and tbe transaction with tbe defendant was not tbe one proposed in tbe letter. We conclude tbat tbe letter was properly excluded.
3 II. Tbe agreed price for which tbe plaintiff sold tbe land in question' to tbe syndicate was about fifty thousand dollars. Tbe defendant went onto tbe land with Scott before purchasing, and testified in regard to what was done, and tbe conversation between them, as follows: “He showed me around. He said it cost eight hundred dollars an acre, and it was a one hundred and twenty-acre tract. I said tbat would make ninety-six thousand dol*730lars. He said: ‘Yes; but we propose syndicating it for $100,000, and we are going to plat it in lots.’ I remarked 1 did not think I should want to pay over $400 an acre for it. He said' I would have to be educated to prices of land in Des Moines, and I said: ‘I expected; probably might have made a wild guess on that, but did not exactly know how that would be.’ He then cited me to a piece of land west of it held at one thousand dollars an acre, a tract east at one thousand five hundred dollars an acre, and the lots to the north were selling for three hundred dollars to five hundred dollars per lot. He said the indebtedness back was forty-seven thousand dollars, and the rest of the ninety-six thousand dollars had been paid. He said: ‘We expect to make fifty one thousand dollar time contracts, and the rest we will keep for what we have put in on this; we would keep them for the money we had already put in, and the rest would buy those time contracts.’ He stated to me that after it was in shape for sale the lots would range from $150 to $1,000, and would be reasonably worth $350 on an average. He went on to state that there would be 800 lots at $300, which would malee $240,000, and he thought we would get more than that out of it. " * * * I took five contracts with him. * * * He said that, on account of our friendly relations, he would let me have these shares, and would let myself and one other gentleman (Calvin) in on the ground floor. Said we were to have shares cheaper, — for less money. I was to send him $1,000 for five contracts. I was to get them at $800 apiece by sending up my $1,000. At this time, and at the time of executing the contracts, I believed what Mr. Scott said to me. I had known Mr. Scott for some years, and had confidence fin him.” The five contracts referred to were taken, but at a later time in the same year Scott told the defendant that the valuation of the property had been increased fifty thousand dollars, and proposed that he take five additional shares. The defendant consented to do so, and the five contracts were surrendered and *731tbe ones in suit were entered, into. Credit for two thousand five hundred dollars was given him on account of the increased valuation of the property. The larger part of what Scott said to the defendant to induce him to take the first five contracts was in the nature of expressions of opinion or purpose. The statement respecting the debt for which the land was held was substantially true.//The only state-4 ment purporting to be of fact which is shown to have been false is that relating to the cost of the land. Would that statement have authorized the jury to find for the defendant? It was. said in Hemmer v. Cooper, 8 Allen, 334, that “the representations of a vendor of real estate, to the vendee, as to the price he paid for it, are to be regarded in the same light as representations respecting its value. A purchaser ought not to rely upon them; for it is settled that even when they are false, and uttered with a view to.deceive, they furnish no ground of action.” That rule was followed in Cooper v. Lovering, 106 Mass. 77, and it is the rule of Tuck v. Downing, 76 Ill. 71, and Banta v. Palmer, 47 Ill. 99. In Holbrook v. Connor, 60 Me. 578, it was said: “The statement of the vendor that he paid a certain price for the land, if true, can be no more than an indication of his opinion of its value; and when we consider the various motives which may, and often do, actuate men in making their purchases, and especially when it is done for speculation, it is • but the slightest proof of such opinion.” As a general rule, a vendee has no right to'rely upon the statements of the vendor respecting the value of the property sold, but must act upon his own judgment, or seek information for himself. But to that rule there are exceptions. It was said in Simar v. Canaday, 53 N. Y. 306, that, where statements as to value are mere matters of opinion and belief, no liability is created by uttering them, but that such statements “may be, under certain circumstances, affirmations of fact. When known to the utterer to be untrue, if made with the intention of misleading the vendee, if he does rely upon them, and is *732misled to bis injury, they avoid tbe contract.” Tbe fraud wbicb vitiates a contract must be material, affecting tbe very essence of tbe contract; but ordinarily, “if tbe fraud be sucb that, bad it not been practiced, tbe contract would not bave been made, then'it is material to it.” 2 Parsons Contract, 770. See, also1, 2 Pomeroy Equity Jurisprudence, section 878, and notes. That rule was applied in Smith v. Countryman, 30 N. Y. 656, wbicb was an action upon a contract for tbe sale of. bops. It was beld that a false representation made by tbe vendee as to- tbe price at wbicb be bad purchased bops of another person, which was relied upon by tbe vendor, and induced him to enter into tbe contract of sale, was material, and constituted a defense to an action on tbe contract. This rule appears to> us to be in harmony with reason and tbe principles of justice. Tbe price at which property actually sells in tbe open market is very satisfactory evidence of its value at tbe time of the sale. We cannot assent to tbe proposition that tbe statement of a vendor that be paid a specified price for tbe property be sells is a mere expression of opinion, upon wbicb tbe purchaser has no right to rely. On tbe contrary, we think it is a statement of fact; and if tbe purchaser, without knowing, or having reason to know what price was paid, relies upon tbe false statement, to bis injury, be is entitled to relief. Tbe cases of Teachout v. Van Hoesen, 76 Iowa, 113; Iler v. Griswold, 83 Iowa, 442, and Coles v. Kennedy, 81 Iowa, 360, although not precisely in point, tend to sustain our conclusion. See French v. Ryan, 104 Mich. 625 (62 N. W. Rep. 1016) ; Moon v. MaKinstry, 107 Mich. 668 (65 N. W. Rep. 546), and Woolen Co. v. Smalley, 111 Mich. 321 (69 N. W. Rep. 722). In this case no confidential relations existed between 5 tbe defendant and Scott, but they had been acquainted with each other for several years; and, if tbe testimony of tbe defendant be true; Scott took advantage of their acquaintance and friendly relations,’ and the confidence wbicb tbe defendant had in him, to accomplish the sale. *733Tbe land bad been purchased but a short time before, and, if - the defendant believed that the price paid for it was ninety-six thousand dollars, his belief would naturally have had great influence in causing him to make the purchase. Therefore, whether Scott made the statement respecting the price paid which is attributed to him, and, if he did, the probable weight it had in effecting the sale, were questions for the determination of the jury, and the court erred in directing a verdict for the plaintiff.
6 III. It is insisted that the conveyance by the partnership to the corporation of the property in which the contracts purported to give the defendant an interest has made it impossible for the partnership to meet the requirements of the contracts; hence, that there is a. failure of consideration. Each of the contracts provides that the trustee and his successors are to hold the land in. trust for the benefit and use of all persons having a beneficial interest therein-. The syndicate acquired the title impressed with that trust, and the contracts gave to the plaintiff notice of it. The defendant has not lost any right by the transfer, and the consideration of the contracts has not failed in consequence of it.
7 IV. It is contended that the transfer of the property in question was- in violation of the trust imposed by the contracts in suit, was without consideration, and is void. The contracts contemplated a possible change in the trusteeship; the plan of having title to the lapd conveyed to and by a trustee was adopted by the partnership as a convenient method of transacting its business; and the incorporation of the syndicate, and the transfer of the property to it, did not in any manner affect the rights of the defendant under his contracts. They provided that the trustee might execute conveyances of the property in behalf of his beneficiaries, on the order of the board of directors. We do not find that any provision of the contracts has been *734yiolated by tbe transfers made, and the interests of the parties and objects sought to be accomplished furnished a sufficient consideration.
8 Y. It is claimed that the plaintiff should not be permitted to maintain this action, for the reason that it is in the nature of an action for the specific performance of the contracts, and the plaintiff does not show that he is ready and able to perform what the contracts require of the trustee. The rights of the defendant were acquired subject to the incumbrance on the property in favor of the plaintiff. The contracts refer to that incumbrance. They require the defendant to pay his pro rata share of the cost of grading and improving the property to which they refer, and contain other provisions, but do not provide for a conveyance of the property contracted for, when the required payments shall have been made. The record fails to show any valid objection to the transfer of the contracts to the plaintiff, or to a recovery by him of the amount due thereon in this action. Much is said in argument in regard to the mutual, reciprocal, and dependent provisions of the contracts, and the right of the defendant to insist upon the performance of them; but the appellant has failed to call our attention to any requirement which should he performed by the plaintiff as a consideration precedent to his right to recover. What is said on that point is couched in vague and general terms. The contracts are in some respects peculiar and unusual, but we do not think their meaning and effect,, so far as they are involved in this case, are doubtful. That the contracts were entered into is not denied, and there is no dispute in regard to the payments which have been made on them. For the error pointed out, the judgment of the district COUrt ÍS REVERSED.