Thomas v. Sweet

63 S.W. 787, 111 Ky. 467, 1901 Ky. LEXIS 213

• Court: Court of Appeals of Kentucky
• Decided: June 22, 1901
• Status: Published

Opinions

Opinion of the court by

JUDGE O’REAR

Affirming.

Appellee, a farmer aged about 70 years, living in Mason county, Ky., and a ‘'promotor,-'” named J. Winn Parker, of Weston, Mo., in December, 1895,. entered into a contract by which appellee agreed to exchange' his farm, of some 120 acres, in Mason county, Ivy., -and notes, held by him to the amount of $642.80 and interest against one J. W. Morgan (secured by- lien on land in Mason county), to one E. Sewell, the principal for whom J. Winn Parker assumed to be acting, appellee to receive in exchange for his land and the Morgan notes a tract of land in Taney county, Mo., represented to contain 400 acres, and to have surrendered to him two notes of $150 each, theretofore executed by appellee to Parker, and to receive Parker’s note for $500, due October 15, 1896. Appellee was then living on the farm proposed to be exchanged by him, and he continued to so reside until after the institution of this suit. It appears that Parker had formerly lived in Lewis county, Ky., adjacent to Sweet, and had, in the early part of 1895, been in Kentucky, when he sold to appellee, Sweet, an 80-acre tract of land in Taney county, Mo., taking for it Sweet’s two notes for $150 each, due June, 1896, and June, 1897, respectively (the notes of that amount named above), and a jack at $500, making the consideration for the land $800. In October, 1895, appellee, went to Missouri with Parker, to examine the land, and was shown by-Parker as fine a body of land as one might covet, judging from its description given by appellee. Naturally, appellee was much pleased with his venture, and was an easy mark for the subsequent transactions. Soon Parker again ■appeared in Kentucky, and without much apparent difficulty, induced appellee to execute the pontract first herein named. Parker then set about selling this Kentucky purchase. He visited appellant’s store in Lewis • county, not far distant from the Sweet farm, and negotiations between appellant and Parker ensued, resulting in a tentative trade, ^•'provided the title was all right,” as appellant says, whereby appellant was to buy of Parker' the Sweet farm, land give in exchange therefor a dwelling house and lot and storehouse in the village of Burtonsville, Lewis county, and $800 additional. This was about February 4, 1896. Appellant and Parker then went to and did examine the Sweet farm, which was to appellant’s satisfaction, whereupon he paid Parker $109.50, a check for.$100, and a check for $490, making $690.50 of the $800. The last of these .payments was made February 19, 1896. When appellant went with Parker to examine the Sweet farm, after viewing part of it, they' went to appellee’s residence1 to examine it. Of course, they were invited by appellee to stay for ■dinner, it being near that hour-, and after and at dinner there occurred certain conversations that are relied upon by the parties respectively as constituting estoppel and ' notice. That is, appellant asserts that then appellee told him that he (appellee) had traded his farm to Parker for a farm in the West, and was loud in his praise of his Western acquisition; and also that appellee advised appellant to buy the farm now in dispute — the Sweet farm. On the other hand, appellf e claims that on his initial visit appellant learned of such facts as in law put him upon inquiry and notice, if he did not, indeed, acquire sufficient actual knowledge of the terms of the contract between appellee and Parker, to cut off appellant’s ; claim of being a bona fide purchaser, for value, and innocent, or without notice. From the proof it is made satisfactorily clear that appellee did at that time feel satisfied with his exchange, was anxious to consummate it, and urged appellant to buy this •farm. We-are equally; well satisfied ffom the proof that on that occasion appellant learned of the terms of the contract between appellee and Parker, which included the proviso that appellee was to retain possession of his farm till October 15, 1896, when he was to be paid the $500 cash, receive his two -$150 notes, and receive title and possession to the 400 acres of Taney county, Mo., land; and that, unless these conditions were all performed, the contract between appellee and Parker “was to be null and void.” Neither appellant nor appellee seemed to question Parker’s honesty, and both seem to have been equally and surprisingly credulous in believing his representations. Appellant shows by his testimony that he regarded the transaction between appellee and Parker with strange indifference, — undoubtedly under the belief that he was not legally concerned in it, — >. and for that reason, evidently, failed to take that careful note of its details and conditions evidenced by the character of his testimony; although it is pretty conclusively shown that at some period of the transaction, and within a short time of the date when the possession was due him under the Parker contract, he realized • that appellee was being or had been “swindled,” as he expressed it, but, presumably under the same idea of nonliability, claiming he “was an innocent purchaser.” After- appellant had bought this land from Parker, and had paid him the $590, and conveyed the Lewis county property to Parker’s daughter and her husband (though appellant still retained possession of it), Parker induced appellee to make appellant a deed for his farm in Mason, and to deliver to appellant the Morgan notes. This was on April S, 1896. IThese notes were subsequently surrendered to Morgan in consideration of his conveying appellant the land upon which they were a purchase-money lien, 22.67 acres adjacent to appellee’s farm. Notwithstanding appellee’s deed to appellant, it was understood by appellant that appellee had the right to hold the possession of the farm till October 15, 1896. From the date of this conveyance till within a few days of October 15, 1896, appellee undoubtedly treated the farm as belonging ultimately to appellant, believing that he would, at the date he surrendered his place; receive the possession of the 400-acre plantation in Missouri. Parker even was to .furnish a car to move appellee, his family and chattels, and to come after them; all for a guarantied outlay of not exceeding $25. In March, 1896, Parker delivered to appellee a deed for 400 acres of land, described as being parts of sections 5 and 9, township 21, range 19 W. of the fifth P. M., in Taney county, Mo., with covenants of general warranty and seisin of fee-simple title thereto. In satisfaction of the $500 note due appellee October 15, 1896, and to insure the delivery of the two $150 notes, or, as Parker claims, in full satisfaction of all his obligations to appellee, Parker also conveyed1 appelleel another tract of 80 acres adjoining these other Taney county lands; making, as appellee thought and said, “a square mile of land” that he owned in that fertile region. On April 8, 1896, when the deed was made to appellant above mentioned, appellee and wife gave to Parker a writing called a “certificate,” showing that all liens had been paid on' the Sweet farm, except the mortgage named below, and that appellee had no further claim against it. This paper subsequently came to the hands of appellant. There was a mortgage lien on appellee’s land to a building and loan association for $265.80, which he discharged by giving Parker a horse, a colt, a cow and calf at $130, and land notes lof one Fannin for about $130. This mortgage appellant subsequently paid, and, although the proof is not absolutely convincing, we feel authorized in adopting the chancellor’s view in holding that Parker paid appellant $130 cash and gave him the Fannin notes to reimburse him for that outlay. Some few days .before October 15, when the possession of these respective lands was due to .be rendered, appellee, becoming suspicious all but too late, wrote Parker to meet him at Kansas City, and went out to locate his lands, and have them surveyed, and to take possession. Parker failed.to respond. Appellee went to his house, but he refused to go along to see the land, claiming sickness in his family. Appellee then went to the county seat of Taney county, having his suspicions confirmed en route; and there definitely learned, that there was' no ' such land in existence as that described in his dee'd. Indeed, the facts are township 21 of range 19, Taney county, is but a fractional township, and it has no section 5, and no part of section 9, agreeing with the description in appellee’s deed. In truth, appellee had simply been swindled as to this Missouri land venture. Ee then refused to surrender possession of the Mason county farm to appellant; hence this suit in ejectment by appellant. To the suit appellee pleaded in avoidance of his deed, which was- set up and relied on in the petition: (1) The1 facts constituting the fraud of Parker in the transaction in which appellee agreed to and did convey his land, and that appellant had knowledge and notice of those facts, and therefore took the land subject to appellee’s equities in the premises. (2) It was pleaded that there w'as an entire failure of consideration upon which the conveyance to appellant had been made, and therefore, in equity and conscience, appellant ought not to hold that which he had acquired, but ought to return it- to appellee. A rescission was prayed for in the answer, which was made a counterclaim. Issue being joined On these pleas, a large volume of proof was taken, from which we gather and find the statement of facts above. The cause, on appellee’s motion, having been transferred to and tried in equity, the chancellor decreed a rescission of the conveyances, and adjudged appellant to execute and deliver to appellee a deed conveying both the original farm conveyed him by appellee and the land acquired from Morgan in satisfaction of his purchase-money notes. Hence this appeal.

It is the ciontention of the appellant that he was an innocent purchaser for value, and without notice of Parker’s fraud; that it was the fraud of Parker that was the vicious element in the transaction, and that appellant was as ignorant" and innocent of it as was appellee. Again, he argues that appellee stood by and saw him invest in the land, knowing that he. was doing so, and urged or advised him to make the purchase; that, therefore, he is estopped now to question appellant’s title. He further argues that appellee can not deny the effect of his warranty deed, and can not set up a superior equity to the legal title he has conveyed by his warranty deed. He also argues that there was not a failure, total or partial, of the consideration for the conveyance to him, for he says the consideration for his conveyance moved from appellant (being what he was induced to part with to Parker therefor), and it mattered not in law whether the consideration moved to the grantor or another, it was sufficient if the grantee had parted .with a valuable asset in exchange for the conveyance. . The case has been prepared with much care and skill, and argued with rare ability. To dispose of these questions, it is first necessary that the legal relative positions of these parties be defined, and then constantly borne in mind. The original contract concerning the land in litigation was between appellee, Samuel Sweet, andl E. Se-well; the latter ostensibly represented by his agent, J. Winn Parker, who presumably was authorized throughout to do for his principal what he did. Appellee undertook to convey the land and Morgan notes to Sewell, in consideration that Sewell would convey or cause to be conveyed to appellee title to 400 acres of land in Taney county, Mo., deliver to appellee the $500 note of J. Winn Parker, “Agt.,” due October 15, 1896, and deliver to appellee two $150'notes previously executed by him to Parker, and deliver to appellee the possession of the Missouri land on or before October 15, 1896; appellee to retain possession of his land till then; and, “in case said Parker, as agent, fails to comply with his part of this contract, then the* contract is null and void, and said Sweet is still to have and hold the farm on which he now resides.” This was a title bond, — an ex-ecutory contract, — showing upon what conditions appellee would convey to Sewell the title to the Mason county farm. Appellee did nothing in that which could have misled another dealing with Sewell, or his agent, Parker, with reference to this land, to have believed that Sewell or Parker had any right or title to it, save such as was conditioned upon Sewell’s doing or causing to be done all the things provided to be done for Sweet before the contract to convey by Sweet became enforceable. Sweet continued in possession of the farm, as stated before, not merely as tenant of Sewell, but as owner, subject to the conditions of his contract with Sewell. In this state of things, Sewell’s agent, Parker, proposes to appellant, W. H. Thomas, to sell him the Sweet farm, or rather exchange it for certain property of appellant’s and a certain sum of money additional. This proposition 'being accepted, was. equivalent to Sewell’s transferring to Thomas, Sewell’s equity in the contract of December of 1895, under which he was to acquire Sweet’s farm. Sewell (or Parker, which is the same thing) could not, of course, convey to Thomas a greater-estate in the property than he (Sewell) had, nor could Thomas acquire from Sewell a greater estate than Sewell had. True, appellee, Sweet, might, by such conduct as. should operate upon the- conscience, be estopped to deny that Thomas took a greater title from Sewell than Sewell had to convey; but, independent of the question of estoppel for the present, Thomas merely acquired Sewell’s equity in the property. Thomas paid Sewell’s agent, as consideration for the transfer of that equity, the houses and lots (valued at about $1,100 and about $700 in money. Whether that was an unreasonable price- for the transfer to himi of the equity, or whether it was a wise or unwise transaction for Thomas, can not affect the legal question involved. He bought Sewell’s equity, and paid Parker for it. He then “stood in Sewell’s shoes.” Independent of estoppel, — that is, if Sweet had never been seen by Thomas, and had made no representations whatever to Thomas concerning the matter, — it doubtless would not be argued that Thomas had any higher or better or other right to demand a conveyance of this land than Sewell had. Therefore (still -waiving the question of estoppel for the present) Thomas would only be entitled to a conveyance of the Sweet farm -on the condition that Sweet first received a good title to and full possession of the 400 acres of Missouri land by October 15th, and received $500 cash and the possession of his $300 notes by that date. If, then, there should have been a failure of this consideration (a total failure, — as we find there was), could Thomas have demanded and compelled the execution by Sweet of his part of the contract? If not, why not? Because the courts will not compel the execution or performance of a contract which it is inequit able to enforce. And it would, of course, be inequitable to compel Sweet to give up his farm to his vendee when the latter could not and would not pay him the agreed consideration for it. But it is here argued — and with much earnestness and shill — that the contract ivas executed so far as the conveyance by Sweet was concerned. It is said he' ■had voluntarily executed his part of the contract by making and delivering to Sewell’s assignee a general warranty deed to the land. Appellant argues that -an executed contract can not be rescinded, except in that line of cases where the consideration is a “continuing one;” notably the cases known as “Support Cases,” and illustrated especially in Scott’s Heirs v. Scott, 3 B. Mon., 2, and Cash v. Cash (19 R., 686), (41 S. W., 579). We do not understand that the law recognizes sucha limitation, or admits such an impotence. In a proper case the law will rescind even an executed contract, will restore the parties to their former position, when in good conscience one should not be suffered to maintain the advantage in the executed agreement. Thus, if one pays for an article represented to be of a certain quality, or fit for a certain use, which afterwards develops to be of a different quality, or unfit for the use represented, though the contract is executed, rescission may be had by the injured one where the foundátion of the action is mistake or actual fraud. If one pays for an article under the representation and belief it has an existence, when it has not, though the contract is executed as to the payor, he may have rescission. It is not permitted in conscience that one should retain the consideration and not give the subject of it. Bish Cont., section 70; Robinson v. Bright’s Ex’r, 3 Metc., 30; Bedal v. Stith, 3 T. B. Mon., 290; Lane v. Lane, 106 Ky., 530 (21 R., 9) (50 S. W., 857).

It is further argued for appellant that there could not be a failure of consideration in this case, because it is not necessary that the consideration should move to the grantor in the deed; it is sufficient if it moves from the grantee. The proposition stated is elementary, and not questionable. But we hold that the consideration for the execution of this deed was not Thomas’ conveyances and payments to Parker, but Parker or Sewell’s agreements to convey the Missouri land, and deliver the notes and cash to Sweet. Thomas’ conveyances and payments to Parker were the consideration for the assignment or transfer of Sewell’s equities in the Sweet contract to 'Thomas. Counsel for appellant cite and mainly rely on the case of Morrison v. Clay, Hardin, 430. In that case, Morrison and Mansel entered into a contract with West, who claimed to be the inventor of a machine for cutting and heading nails, for the purchase of said invention, for which machine they agreed to give him $9,375. West was to proceed at once to Washington, and obtain patents for his invention, and make due conveyances thereof to the vendees named. Subsequently the three entered into a contract practically abrogating the first one, and becoming partners in the manufacture of the articles named; but Morrison and Mansel were to pay tworthirds of the original price, and' that in making those payments they were to have credit for certain debts of West settled or to be settled by them with his creditors. Peacock, Wrenshall & Co., for whom Mr. Henry Clay, the appellee in that action, was the agent or attorney, obtained a judgment for a considerable sum of money against West and one Gutherie, Morrison thereupon agreed with Mr. Clay to the settlement of this particular debt, giving him therefor certain obligatory bonds of Morrison to Clay in consideration that Mr. Clay, for his said clients and principals, would release the judgment debt above named, which was accordingly done. Thereafter it was discovered that WTest had perpetrated a fraud on Morrison, in that he was unable to obtain patentsi for his machine on the ground that it was not patentable. Morrison, having executed bond to Clay, as agent aforesaid, for the payment of the sum agreed on to be in satisfaction of the judgment debt of his principal, now sought to be released from these obligations under the facts recited above, arguing that Clay was but the assignee of West, and occupied no better position than West could have occupied under the contract. Mr. Hardin and Mr. Clay, for the defence, contended that Clay was not the assignee of West, but was an original contracting party with Morrison. We quote from the argument of the distinguished counsel in that case: “It is not upon mercantile principles that we claim a right to recover, but upon the1 well-settled principles of the common Ihw that Clay, for Wrenshall, Peacock & Co., gave to Morrison a valuable consideration for these bonds. That consideration was the release of their judgment against West and Gutherie. That release was given, and was made complete, when those bonds were executed.” Again, they said: “Clay never entered into any contract with West on this subject; nor does he claim under West, and can'not, therefore, be affected by any equity which may extend to West.” Chief Justice Edwards, delivering the opinion of the court, held: “The consideration given by Clay was the release .or discharge of the judgment against West and Gutherie, at Morrison’s request; and the consid©ration moving from Morrison to Clay for the release was the execution of the bonds in question.” The court further intimated that, had Clay taken or derived his claim or title through West, he would have taken as assignee, and therefore subject to the defenses to that contract. In our opinion, the case just considered is clearly and easily distinguishable from the case at bar, and, instead of questioning, it virtually admits the principles 'here applied.

The estoppel pleaded must be unavailing to appellant. We can not determine from the record that appellee did or’ said anything prior to the execution of the paper of April 3d that could have misled and did mislead appellant, or that did induce him to part with his money or property to Parker; for it appears that appellant made his conveyances and paid all the money to Parker prior to April 3, 1896. True, he paid the $265 to the building association after that date, but, as we have found above, he received an equivalent consideration for that, the transaction amounting in reality to appellee’s having paid that debt. To constitute an estoppel, appellee must have said or done something calculated to and that did cause appellant to part with his property or money, or change his position to his damage. No such fact is satisfactorily shown by the record, and therefore the plea can not prevail.

We do not deem it necessary to determine what notice attached to Sweet's actual occupancy of the premises when sold to appellant, as we find the sufficient fact that appellant had actual notice of the terms of the Sewell-Sweet contract of December, 1895, before he had parted with any property or money to Parker; and because we find the further fact, and have applied the rule of law, that appellant took under Sewell (or Parker) as vendee of his equity in the said contract of December, 1895, and was thereby conclusively charged with full notice of its terms and conditions in a controversy with Sweet, the other1 party to the contract. It follows from the foregoing that appellant was not “an innocent purchase for value, without notice” of Sweet’s equities.

That one can not deny his own warranty deed, or set up a superior title to the one he has conveyed by such an instrument, is true. But that rule does not apply, of course, where the grantor in such a deed brings his appropriate action to vacate it, and have it cancelled by decree of court, because of fraud in its obtainment, or because of the failure of the consideration upon which it was executed. Appellee’s counterclaim in this action was an appropriate manner, under our practice, of making the direct attack to have the conveyance canceled. The judgment is af firmed.