Court Opinion

ID: 9520293
Source: CourtListenerOpinion
Date Created: 2023-08-07 01:35:26.768358+00
Date Added: 2024-06-11T12:45:58.310959
License: Public Domain

*817LUNDBERG, District Judge
(dissenting).
It is with some reluctance that I feel compelled to dissent from and disagree with the result arrived at by the Court majority and with some of the views expressed in the majority opinion. First, I find myself unable to agree that the evidence shows that the defendant’s fraud— whatever it was — goes to the inducement. Rather, I think the evidence shows that after the plaintiffs had executed the instrument involved and left some blank spaces to be filled in by the defendant, the defendant then filled in certain provisions other than those which had been verbally discussed by the parties. It appears to me that the authorities hold that certain legal and equitable consequences follow. See 76 C.J.S. Reformation of Instruments § 29, p. 369 and also 53 C.J. 949, note 63, citing Johnson v. Casserly, 37 N.D. 33, 163 N.W. 539 and M. Sigbert Awes Co. v. Haslam, 37 N.D. 122, 163 N.W. 265. The rule set forth holds that if the fraud is in the inducement, then cancellation may be asked for, but if the fraud is not in the inducement or occurs subsequently, then only reformation may be had. Apparently the underlying theory is that if the fraud was in the inducement then there was no real contract entered into and the Court cannot make something that the parties had not made. But, if the fraud is in matters other than the inducement, then the parties did agree upon a contract and if the instrument signed did not express that agreement, either by reason or mistake or fraud, the remedy is to reform it.
However, there*is another matter more fundamental where I find myself in disagreement which relates to facts appearing in the record even though not pleaded by the parties. The record shows that the lease was made on April 21, 1950, and the action to set it aside was commenced by a complaint dated November 19, 1951 — about nineteen months after the lease had been entered into and about seven months after oil had been discovered in Tioga on April 5, 1951. The lease was recorded on April 28, 1951, nearly seven months before the action was brought. The record further shows that the plaintiffs took no action regarding the alleged fraud of the defendant until they were approached by one Frank Bell and one R. E. Smith in the late fall of 1951, who proposed to take another oil lease on the same lands which had been leased to the defendant. The record then shows, and the plaintiff admits, that he entered into an agreement with these gentlemen under which they were to undertake all the expense and responsibility of breaking defendant’s lease in order that the lease plaintiff gave to them would then be effective. Drafts for several hundred dollars were given by Smith and Bell to the plaintiffs, payable five days after the final judgment of the Court should have held defendant’s lease invalid. The selection of the lawyers and payment of all expenses of litigation were to be made by Smith and Bell. Accordingly, the plaintiffs were coming before the Court as puppets of Smith and Bell.
This state of affairs is recognized in the majority opinion near its conclusion but the matter is dismissed as something that the defendant cannot raise, he being a third party to the obviously champertous agreement made between the plaintiffs and Smith and Bell. I recognize there is such a rule under the authorities cited. This rule however, is subject to another and more fundamental rule that a court of equity, upon its own motion or “sua sponte”, will take cognizance of matters necessary to protect its own integrity and to prevent it from being used in the attainment of illegal or inequitable objectives. See 30 C.J.S. Equity §§ 97, 99, pp. 487, 498-499 and also note 44 on illegality and note 45 on violations of public policy. In application of these doctrines courts of equity have not limited themselves to matters directly involved in the case before it but have gone into matters related to its history and thus connected with it, which is certainly true here. Even disconnected conduct on the part of *818those seeking affirmative relief has been considered under the maxim of “clean hands.” 21 C.J. 185-186. Courts of equity-have always avoided giving effect to unlawful contracts or matters contrary to public policy even remotely related to the matter in hand. Pomeroy’s Equity Jurisp. Section 1276.
Plowever, I do not urge that the rules just referred to should be so applied as to deny to the plaintiffs all relief. On the contrary, I believe that the rules should only be applied insofar as is necessary to effectuate their purpose. In other words, the plaintiffs should be denied that portion of their relief which is tainted with their agreements with Smith and Bell. This can be done by granting them reformation but denying them cancellation and requiring them to do equity by being bound by the contract which they admit they made with the defendant and which they declare they would have been satisfied with had he only inserted the conditions which had been discussed between them. While I look with suspicion on much of plaintiffs’ evidence because of their interest, under the agreement with Smith and Bell for breaking the lease, I recognize that the trial judge, who heard and saw the witnesses, is in the best position to evaluate their testimony and he found that certain provisions, other than those agreed upon, had been inserted in the lease after its execution.
I feel that the plaintiffs are entitled to such relief, in spite of their delay in taking action and in spite of the change of circumstances that have taken place between the time that the lease was made and the action was commenced. To say that this delay was justified by the fact that the defendant had left the State, appears to me to completely ignore the provisions of Section 28-0620, NDRC 1943, for the service of summons by publication. Under existing law the defendant could have been placed in default after forty-five days from the date of the first publication of the summons in an action brought against him. And the provisions of Ch. 32-17, NDRC 1943, would have provided an ample remedy— even if plaintiffs had forgotten defendant’s name and if they were without a copy of the lease they had signed without first reading it. However, if reformation is the remedy granted, the defendant is not prejudiced by plaintiffs’ laches.
Much might be said regarding the “public policy” effects of a decision that appears to point to easy ways of circumventing the statutory prohibitions against bar-ratry, champerty and maintenance in Ch. 12-17, NDRC 1943. With every indication that our oil development is growing it would seem that operations, such as those of Smith and Bell as disclosed in this case, should be discouraged if the courts are not to be flooded with litigation so engendered.
For the reasons and upon the grounds here stated, I am of the opinion that the judgment appealed from should be modified by returning the same to the District Court for reformation in accordance with the facts found to exist and that as so reformed the lease should be held valid.