Court Opinion

ID: 3850546
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:29:54.410439+00
Date Added: 2024-06-11T14:14:34.897526
License: Public Domain

This case comes up on an affidavit of defense raising questions of law, which is in the nature of a demurrer. The facts and inferences therefrom must be taken as *Page 24 
true. Davis, the plaintiff, knew the Ellsworth Coal Company wanted to buy additional coal lands and sell part of its holdings. He knew he could buy the land Ellsworth wanted and that its land could be resold advantageously. He lacked the money necessary to handle the deal. Having had business relations with Hillman, the defendant, he submitted the matter to him. It was agreed between them that Hillman was to secure the money and plaintiff was to furnish all the services in the negotiations, closing the deals and all matters in connection therewith. The land received from Ellsworth was to be sold and they were to divide equally the profits realized on the sale. The title to this land was to be in Hillman's name. The bargain was faithfully carried out up to the point of reselling these lands and dividing the probable profits of $400,000. Here is where the red line indelibly marks the transaction. When Hillman found title to the land securely lodged in him, he "fraudulently conveyed said coal land to Hillman Gas Coal Company, a corporation in which the defendant was then and there largely interested, for the consideration of one dollar." The inference is manifest. It was to deprive the plaintiff of his share of the gain. Hillman knew the small minority interest in the company prevented its being a sale to himself under the cloak of corporate entity, and that no matter what the real transaction was if the consideration was named as a dollar, no profit could be claimed, though he unblushingly admits that the land in the market was worth $400,000 more than had been paid for it. When he is asked to give plaintiff what was due him, he says, "No, the statute of frauds will not permit him to get any part of it," and the majority opinion in this case sustains that view. All these facts and inferences therefrom must be taken as true; that is the story and the plaintiff is cast out by what I believe to be a misapplication of the statute. No further action may be instituted as the claim is barred by the statute of limitations. This is the last of repeated efforts to secure justice. *Page 25 
The statute of frauds is directed at the form certain contracts must assume to be binding in law; notwithstanding the statute, the contract exists even if it is not clothed with the necessary form: Hertzog v. Hertzog, 34 Pa. 418. The penalty for failure to observe the law is that no action can be brought to enforce it until the omission is made good, or unless the facts fall within one or two recognized exceptions. The one we are interested in is the doctrine of performance, long since announced in England as controlling a given state of facts and universally held in this country as the law. When the parol contract has been performed, or partly performed, the statute is no longer available as a rule of evidence to defeat the action. As has been stated, the statute has no longer any office to perform: Brown v. Farmers' Trust  Loan Co.,22 N.E. 952.
This suit, therefore, is not for an interest in land but is for loss of profits, based on the breach of a valid contract, whereby one of the parties, through fraud, so disposed of the profits, that, while they could not be distributed as such, his personal estate benefited by the maneuver, while the plaintiff was to be denied, for all time, any share in them.
In the words of Mr. Justice MERCUR in Benjamin v. Zell,100 Pa. 33, 36, where the facts were similar to these, it is "not for consideration money which he agreed to pay for title which he acquired to the land; but for profits which he afterwards acquired for a sale thereof. The obligation to pay the claim in no manner affected the title which he acquired and held." And in Howell v. Kelly, 149 Pa. 473, 475, it was held that an interest in contingent profits, arising from a sale of real estate, to be made thereafter, does not amount to an interest in the land itself, within the meaning of the statute of frauds. This rule is not limited to cases of partnership: see Everhart's App., 106 Pa. 349. In McBride v. Western Pennsylvania Co., 263 Pa. 345, there was no suggestion that the agreement was for the creation of a *Page 26 
partnership, and yet the decision of the court was based upon the same principle.
But it is said that, although the contract would not be within the statute if a sale had been made and profits realized, still there can be no recovery in this case because the defendant did not actually realize a profit from the transfer of the land. The cases cited above are distinguished on the ground that the principle stated applies only where the agreement has been executed, and a sale made. The majority opinion suggests that in Everhart's App., supra, recovery was specifically denied as to lands which had not been sold, quoting from Benjamin v. Zell, supra. We need not discuss this, and may assume, for the purposes of this case that the defendant could have retained the land in question as long as he desired to do so, yet I believe that the facts averred in the statement give the plaintiff a right to recover. Here we have a very different, and a stronger case. Here the defendant has done something more than merely repudiate his contract. He has, in bad faith, transferred the property for a nominal consideration to a corporation, of which he owns the controlling interest, thereby making performance of his agreement with this plaintiff impossible. In my opinion the case turns upon this point. Conceding (as I said above, for the purpose of argument) that the defendant could have retained the title, and even that he could have given it away, nevertheless he becomes liable in this case because the conveyance was made fraudulently (as the jury might well have found under the pleadings) for the purpose of preventing the plaintiff from receiving his share of profits which might be realized upon a sale of the land. The case is analogous to that of an attorney, employed under a contingent fee contract, whose client settles the case without his knowledge or consent. It is clear that the attorney may recover: Thole v. Martino, 56 Pa. Super. 371. *Page 27 
The majority opinion says that the word "fraudulently" in the plaintiff's statement is a conclusion of law, which is not to be taken as admitted on demurrer, and that the mere conveyance for a nominal consideration, in violation of the contract, is not fraud. If "fraudulently" is to be construed as asserting only a conclusion of law, the words "with intent to defraud" if they had been used, would have constituted an allegation of fact, and hence, to turn a man out of court because of the use of the former expression instead of the latter, would be an inexcusable and unnecessary relegation to the days of strict pleading, when a man's rights were determined by his ability (or that of his attorney) to guess the correct word.
The majority opinion states that to allow a recovery on this contract would be equivalent to granting specific performance of the promise to sell, citing Breniman v. Breniman, 281 Pa. 304. My answer to this is that defendant has specifically performed his promise by conveying the land to the corporation, but in performing this promise he has fraudulently deprived plaintiff of his profits as charged in the bill.
In any event, appellant is entitled, upon the authority of Hertzog v. Hertzog's Adm'r, supra, relied upon by the majority opinion, to recover in a suit upon the contract, the damages directly resulting from the breach, such as his expenses in negotiating the deals between the Ellsworth Co. and the defendant, and the value of his services. This right cannot be affected by the mere fact that the statement of the amount of his claim is based upon the wrong measure of damages. That is a question of law, to be determined by the court in submitting the case to the jury. No advantage can be gained by forcing him to bring a new action based upon exactly the same facts but stating a different sum as the amount of his damages. For this reason, the affidavit of defense should have been overruled, and the case should have been tried before a jury. *Page 28 
Under the admitted facts, the sale to the Hillman Coal Company was a sale to a third party and the profit would be the difference between the market value and the cost. The fact that this value is added to his stock is an immaterial circumstance. It goes directly to him and is for his benefit.
In the scheme employed, Hillman, by his majority control in the corporation to which he sold, retains his grip on the land, though the title is secure in the corporation. He not only benefits from increment in value, but, through the long drawn out process of mining it will doubly return to him through the sale of coal. Is it possible that our powers, equitable or otherwise, are so supine and helpless that they cannot prevent such overreaching or restore an injured person to his rights? The court should say to him that, under his own admission, he has received profits which, in this case, would be the difference between the fair market value when sold, and the cost at which it was purchased, including the necessary expenses.
In the recital of facts in the statement of claim it sets forth that, "On October 19, 1920, . . . . . . defendant repudiated the parol contract." This was before the deed from Hillman to the coal company. There is not a single line in that paragraph or anywhere in the statement of claim that damages were claimed as of that date, or any date before the performance of the parol contract, evidenced by the deed from Hillman to the coal company. On the contrary, this is precisely what the statement says: "Afterwards, on November 4, 1920, the defendant wrongfully and fraudulently conveyed said coal land. . . . . . The said coal land in the latter part of October and November 1920, was of the . . . . . . market value of . . . . . . $400,000 and upwards above the cost price. . . . . . Wherefore the plaintiff avers the defendant is justly indebted to him in the sum of one-half of the profit, $200,000," with interest from October 18, 1920. This action was begun some time after November 4th, and the claim *Page 29 
for damages or profit was squarely predicated on the allegation above recited that took place in November. He may or may not be entitled to interest from October 18, 1920, but that will not control his claim definitely fixed by the sixteenth, seventeenth and eighteenth paragraphs wherein the sum is first mentioned and that as of the date of sale. Furthermore, while it is important that a claim be well stated under such allegation of fraud as is contended for in the pleadings in this case, courts should not be over zealous to permit technical errors, if this can be considered one, to prevail against a jury's determination of the facts.
I would reverse the judgment of the court below and send the case to the jury.