Burlington Lumber Co. v. Evans Lumber Co.

69 N.W. 558, 100 Iowa 469

Opinion

Robinson, J.

The plaintiff is a corporation, engaged in business, at Burlington, Iowa. The defendants are the Evans Lumber Company, a co-partnership, which was engaged in business at Lamoni, Iowa, and John B. Evans and Melville Evans, the members of the co-partnership. During several years prior to the eleventh day of July, 1898, the plaintiff sold to the defendant company bills of lumber. On that date the defendants were somewhat embarrassed financially, and, it is alleged, entered into an agreement of settlement with the plaintiff. A writing was drawn at that time, and signed by the defendant company, which, the plaintiff claims, was as follows: “Lamoni, Iowa, July 11, ’93. For value received, the Evans Lumber Company, of Lamoni, Iowa, does hereby assign and sell to the Burlington Lumber Company, of Burlington, Iowa, the entire stock of lumber, lath, shingles, and all other material known and considered as a part of the lumber yard of the Evans Lumber Company of Lamoni, Iowa, which is situated on lots 15,16,17, and 18, in block No. 9, in the town of Lamoni,-Decatur county, Iowa, at the agreed price of $4,237,74. That the consideration for this transfer and assignment is in part payment of a debt of the Evans Lumber Company to the Burlington Lumber Company, of Burlington, Iowa, which debt is for the sum of $11,565.34, with accrued interest; and it is agreed that the said Burlington Lumber Company is to have immediate possession, ownership, and control of the above-described property, upon the signing of this transfer. It is also agreed and understood that the Evans Lumber Company is to have credit upon the above-mentioned indebtedness to the full [net] value of said property [as realized in tbe ordinary course of business, in tbe sale of said property by tbe Burlington Lumber Company, which sale shall be, as soon as may be, not exceeding one year from this date]. 'The said Evans Lumber Company also sell, assign, and transfer absolutely to the Burlington Lumber Company aforesaid, each and all of the notes, accounts, books of account, and all debts due the said Evans Lumber Company, contracted or growing out of the firm business of said Evans Lumber Company, including specifically all debts as shown by the books of said firm, all of which are, at this time, transferred to the said Burlington Lumber Company. It is specifically agreed, however, that on this item credit shall only be allowed on the principal debt so far as said accounts and notes go at their face value, and loe are liable for the deficiency, if any [as per the net collections of the Burlington Lumber Company therefrom], and this shall not be construed as evidence that the [whole] balance of debt is not now due. All fixtures, office furniture, and property of any and every kind and description, used in and about said premises and business, is included in this transfer. Witness this Julv 11th, 1898. [Signed] Evans Lumber Company, by M. Evans and J. D. Evans.” Eleven days after this instrument was signed the Evans Lumber Company wrote to the plaintiff, and offered to rescind the agreement, on the ground that it was procured by fraud; and made a demand for the return of the property; but the offer was not accepted, nor was the property received on the settlement returned. The plaintiff claims it is entitled to recover of the defendants a balance of four thousand nine hundred and sixty-five dollars and forty-nine cents on account of the sales made to them. The defendants claim that the plaintiff has received the full amount due it in property belonging to the defendants, of the value of nearly thirteen thousand dollars, which the plaintiff took possession of and converted to its own use; that the plaintiff claimed to take possession of the property by virtue of the writing which we have set out, but that the writing was procured through fraud, and is not of any force; that the stock of lumber, accounts, notes, and other property, were, turned over to the plaintiff, and possession thereof taken by it, before the writing was signed; that the plaintiff took possession of the property so delivered, and mingled with it other property of the plaintiff in such a manner that it cannot be identified, and has sold the lumber and collected the notes and accounts, and is liable to the defendants for their value. The plaintiff admits that it took possession of the property in question under the instrument in writing, and denies all the allegations of fraud in regard to it. The amount of the verdict and judgment for the plaintiff was sis hundred and fifty-nine dollars and forty-two cents, besides costs.

I. The appellees testified, as witnesses, that on the day the writing in controversy was signed, they made a verbal agreement with the plaintiff, by which they agreed to turn over their stock of lumber, notes, accounts, and other property in Lamoni, — the notes and accounts at their par value, and the lumber and other property at their invoice value, — to be applied in payment of the claim the plaintiff held against the defendant, and that the lumber, notes, accounts, and other property were turned over according to the agreement; that, after that was done, the parties attempted to reduce the verbal agreement to writing; that the writing in controversy was accordingly prepared by the attorney for the plaintiff, but that he wrongfully inserted therein the words which are in brackets, which were not any part of the agreement; [hat the words which we have italicized were in the agreement as made, but were wrongfully omitted from the writing; that, after it was completed, and before it was signed, the attorney read it to the defendants, pretending to read the italicized words as though they were inserted in the writing where they now appear in the' copy we have set out, and omitting to read the words included in brackets; that the alterations and the reading were fraudulent, for the purpose of deceiving the defendants, and inducing them to sign the writing; that they were unable to read it, and, believing it was correctly read, and that it set out the agreement they had made, they signed it; that, when they discovered the fraud, they at once rescinded the contract, and have ever since refused to be bound by it. The appellant contends that the contract of the parties was reduced to writing, and, therefore, that, until reformed, the writing must control. Ordinarily, when parties enter into a written agreement, all negotiations which led to it will be deemed merged in the writing, and that will be held to express the real contract of the parties, and to control, even though erroneous, until reformed by competent authority. But that rule does not apply to a contract obtained by fraud, and for that reason voidable, which has been rescinded by the party defrauded, nor when, by reason of the fraud, the contract is absolutely void. If a person fix his signature to a writing which he has been fraudulently induced to believe, without fault on his part, is different from what it is, and from what he intended to sign, he is not bound by the writing. “Such a contract is not merely voidable; it is void.” Bishop Cont., section 646. It was said, in Doe v. Clark, 42 Iowa, 123, that “an instrument in writing may be defeated in an action at law as well as in equity,” and the right of the plaintiff to recover at law money received as rent, notwithstanding a fraudulent assignment £>f the lease, was sustained, See, also, % ParsQns Cont., 782; 1 Benjamin, Sales, sections 636, 649. In Carey v. Gunnison, 65 Iowa, 703 (22 N. W. Rep. 934), the plaintiff sought to recover damages for a breach of contract. The defendant alleged that the agreement was entered into through the fraud of the plaintiff, and by mutual mistake. It was held that the defense pleaded could be made at law, and that a reformation of the agreement was not necessary. What was said in regard to a mistake, not in regard to the subject-matter of the contract but in the terms of the writing employed to express it, is not applicable in this case, for the reason that the contract in suit is attacked for fraud, and not on the ground of mutual mistake. The case of Linton v. Fireworks Co. (N. Y.) (28 N. E. Rep. 580), also relied upon by the appellant, did not involve fraud, but a mistake with reference to the language used to express the actual agreement.

In this case the defendants claim that an oral agreement for the transfer of the lumber, notes, accounts, and other property was made, and the possession of the property was transferred to the plaintiff by virtue of that agreement, after which the parties attempted to reduce the agreement which had thus been made and carried into effect to writing, and that, by the fraudulent procurement of an agent of the plaintiff, the defendants were induced to sign a writing which did not represent the real agreement. They did not obtain anything by virtue of it, excepting the right to have credits made on their debt to the plaintiff. The latter obtained all the property which was transferred by the agreement, and hold all which they have not disposed of for their own benefit. The defendants did what they could to rescind bhe agreement as soon as they discovered the fraud alleged, and the plaintiff cannot claim anything from bheir silence, or acquiescence. There was no necessity for a reformation, of the writing, because the defendants do not claim anything under it, and for the further reason that, if their claim in regard to it be true, it is absolutely void, and the verbal agreement remains in force. There is some confusion in the pleadings bn which the cause was tried. They do not specifically allege that the property in question was turned over to the plaintiff by virtue of a verbal agreement made before the written one was signed, but the case was tried on the part of the defendants according to that theory, notwithstanding the fact that it was in conflict with the averments of their answer that the plaintiff took possession of the property under the agreement in writing.

II. The court failed to charge the jury in regard to the verbal agreement, although asked to do so by the plaintiff, but instructed that, if the written contract was found to be fraudulent, the jury should ascertain the reasonable market value of all the property of the defendants of which the plaintiff acquired possession, to deduct therefrom certain items, and from the balance thus found to ascertain the amount due the plaintiff. One of the theories of the defendants was that the plaintiff mingled with the lumber it obtained from the defendants, other lumber, making it impossible to distinguish and separate the property of the defendants, and that a conversion of the property was thus accomplished. There could not have been a conversion if the property was turned over to the plaintiff by virtue of the verbal agreement to which the defendants testified, and in that case the plaintiff would have been liable to account for the par value of the notes and accounts and the invoice value of the lumber. Therefore, the charge of the court was not strictly correct. But it is not claimed that the sums to be allowed for the property, if it was received under the verbal agreement, were less than its reasonable market value, and the plaintiff could not have been prejudiced by the error in the charge. On the contrary, we are satisfied that its effect, if any, was beneficial to the plaintiff.

III. It is insisted that the evidence does not justify the finding that the writing in controversy was fraudulent. It seems to us quite probable that the writing contained some provisions which the parties had not mentioned in the preliminary agreement, and which were not discovered when the writing was read, but that would not have been controlling. We have examined the writing, and the testimony in regard to it, with much care, and, although we should not have .reached the conclusions which the jury did in regard to the alleged fraud, we cannot say that the finding was so far unsupported by the evidence that the verdict should have been set aside. The plaintiff has referred to other questions, including alleged misconduct of counsel; but we do not find in any of them ground for disturbing the judgment of the district court. It is, therefore, affirmed.