Haswell v. Standring , 152 Iowa 291 ( 1911 )

Sherwin, O. J.

The plaintiff is a resident of the state of New York. In 1898 he purchased the land in controversy through John H. Standring, who was then the cashier of the First State Bank of Corwith, Iowa, under an agreement with Standring that plaintiff was to furnish the purchase money, and that Standring was to look after the land, guarantee the plaintiff six percent on the purchase price out of the rents while he held the land, and have one-half of the advance when the land was sold. The plaintiff took the title in his own name, and the deed was duly recorded. January 9, 1902, John IT. Standring made a contract in his own name with the defendants 'George Schumacher and David Huntley for the sale of said land to them for $6,800, to be paid as follows: $500 in cash, which was paid at that time, and the remainder on March 15, 1902, on delivery of a warranty deed and an abstract showing good title. On the 1st day of March, 1902, there was recorded in the office of the recorder of Kossuth County a warranty deed in the usual form, purporting to have been made by the plaintiff and his wife, on the 18th day of February, 1902, and conveying the land in question to L. S. Standring. This deed was a forgery, and the plaintiff had no knowledge of it until a short time before this suit was commenced. March 7, 1902, L. S. Standring made a deed conveying the property to George Schumacher and David Huntley, and on the 14th day of March, 1902, the deed was delivered to said purchasers, and they then paid the remainder of the purchase price and took possession. As the purchase price was paid, John -H. Standring immediately deposited it to his individual credit in the bank o'f which he was the cashier. The plaintiff was never advised of this pretended sale to Schumacher and Huntley, nor did he ever receive any part of the purchase price paid by them. Standring accounted to the plaintiff for rent of the same land for 1902. January 16, 1903, he wrote the plaintiff that he had an offer of $35 per acre for the land, and stated that $500 would be paid in cash, $1,000 on the 1st day of May, 1,000 on the 1st of September, and the remainder in five years, with the privilege of paying multiples of $100 on any interest day. On the 21st of January, 1903, Standring again wrote the plaintiff concerning the offer he claimed to have received for the land, and said: “And then another reason why I think you should sell now is the lands in this vicinity are rather low and the county surveyors are now laying out a big ditch that will run through this land and the cost- of the ditch will be assessed up against the adjoining land in proportion to the benefits derived. It is not so much the cost in 'the ease ■of your land, but it is having a ditch run right across it which will hurt the sale of it. The party making the offer is an adjoining landowner and it will not make so much difference to -him.” The plaintiff finally concluded to sell on the terms stated by Standring and so advised him. On the 19th of March, 1903, Standring sent the plaintiff a draft for $500 as the first payment tinder the contract. Up to that time Standring had not given the plaintiff the name of the purchaser, and on the 25th of the same month plaintiff wrote him, asking for his name and residence. Standring also sent the plaintiff $1,000 about the 13th of May, 1903, and $1,000,about the 1st of September, .1903; both of said remittances purporting to be payments on the contract authorized by the plaintiff. September 1, 1903, plaintiff forwarded a deed to the land, in which Andrew Howie was named- as the grantee, and in a few days thereafter he received from Standring a note of $3,100, payable to John L. Haswell, dated September 1, 1903, due September 1, 1908, purporting to have been executed by Andrew Howie, and a mortgage on the land in question, purporting to secure said note and to be executed by said Howie. The mortgage appeared to have been duly recorded in Kossuth County on September 5, 1903. The purported contract with and sale to Howie was false from beginning to end. Howie did not purchase, nor did he agree to purchase, the land. He did not pay any money to Standring, nor did he execute the note and mortgage which Standring' sent to the plaintiff. The plaintiff’s deed of the land was not delivered to Howie, nor to any one else, and the purported recording of the mortgage sent to plaintiff was false. Interest coupons were attached to the Howie note, and as they purported to become due the plaintiff sent them to Standring for colUction. Standring remitted the interest promptly for four years, and the first knowledge that the plaintiff had that his transactions with the bank or Standring were not all right was conveyed to him in a letter from Standring himself written at Minneapolis, Minn., November 17, 1907, after he had absconded, in which he told plaintiff that the First State Bank of Corwith had closed, that he was a fugitive, and that the mortgages received by the plaintiff from him were forgeries.

agent: reíationship of trust and confidence. , The defendants contend that the plaintiff ratified the sale of the land to them, and is estopped from now claiming it.- They say that but one sale of the land was made, and that was made to Schumacher and Huntley on contract, and that when the plaintiff . . _ . received from Standring the remittance of CJ $500, in March, 1903, he was advised that it was a part of the purchase price of the land, and by retaining the money he ratified the sale. It is also said that when the principal receives' from his agent the proceeds of an unauthorized act he can not ignorantly or purposely shut his eyes to the means of information within his reach, and thereby avail himself of the benefits of the transaction and later repudiate it, and that Standring’s letter of March 19, 1903, accompanying the remittance of $500, put the plaintiff on inquiry as to whom the land was sold. It is true that a principal will not be permitted to ignorantly or purposely close his eyes to the nature of his'agent’s acts and thereby escape the consequences of a ratification thereof, but this rule has no place in this case. The letter containing the remittance Was written on the 19th of March, and could not have reached the plaintiff in New York earlier than the 21st or 22d of the month, and on the 25th of the same month the plaintiff wrote Standring asking him for the name of the purchaser. Just when the plaintiff received this information is not definitely shown by the record, but we do not consider the matter of controlling importance. There was nothing unusual in the transaction, nor was there anything which should have aroused the suspicion of the plaintiff and started an independent inquiry on his part. The relation of principal and agent is essentially one of trust and confidence, and the plaintiff might rely upon the faithfulness of his agent, until advised in some way that he was not worthy of the confidence. In other words, the plaintiff was not bound to presume that his agent would try to defraud him. In respect to the entire Howie transaction, the plaintiff had the right to rely upon the fidelity of Standring, and he was not negligent in not making an independent investigation for the discovery of possible fraud on the part of Standring. Faust v. Hosford, 119 Iowa, 101.

2' tfonEóf agents’ It is very evident that the plaintiff did not ratify the sale to Schumacher and Huntley. He knew absolutely nothing of that transaction until after November, 1907. It was a cash sale for $6,800, while the pretended sale to Howie was for $5,600, $3,100 of which was deferred and secured by a pretended mortgage back on the land. When the plaintiff received the purported payments from Standring, he supposed, and had every reason for so supposing, that they had been made on the sale that he had authorized Standring -to make more than a year after the sale to Schumacher and Huntley on the strength of the forged deed. Standring had no authority to make a sale to Schumacher and Huntley, nor to any one else at that time, and the plaintiff can only be bound by his subsequent ratification of the unauthorized act, and it is the rule that such ratification must be clear and express, or be implied from circumstances equally clear and undisputed. Waughtal v. Kane, 108 Iowa, 268.

a , . 3. Same: knowlagents’^ acts: presumption. It is not claimed that the plaintiff had actual knowledge of the sale to Schumacher and Huntley. The claim is that he could have ascertained the facts relative thereto, and hence is bound. The contention is not sound. Had plaintiff gone to the records of Kossuth County after the forged deed to L. S. Standring had been recorded, he would undoubtedly have discovered the fraud of his agent, but he was under no legal or moral obligation to do so under the facts in this case. It is a well-settled rule that knowledge of the terms and conditions of an unauthorized contract, entered into by an agent, is not to be presunied from the fact that the principal had a reasonable opportunity to acquire such knowledge. Milling Co. v. Hughes, 8 Kan. App. 514 (56 Pac. 143) ; Bank of Phoenix v. Brown, 9 Ariz. 311 (83 Pac. 362). In Combs and Others v. Scott, 12 Allen, 493, the Supreme Court of Massachusetts, speaking through Chief Justice Bigelow, said:

Ratification of a past and completed transaction, into which an agent has entered without authority, is a purely voluntary act on the part of the principal. No legal obligation rests upon him to sanction or adopt it. No duty requires him to make inquiries concerning it. Where there is no legal obligation or duty to do an act, there can be no negligence in an omission to perform it. The true doctrine is well settled by a learned text-writer. ‘If I make a contract in the name of a person who has not given me an authority, he will be under no obligation to ratify it, nor will he lie bound to the performance of it.5 1 Livermore on Agency, 44. See, also, Paley on Agency, 171, note 0. Whoever, therefore, seeks to procure and rely on a ratification is bound to show that it was made under such circumstances as in law to be binding on the principal, especially to see to it that all material facts were made known to him. The burden of making inquiries and of ascertaining the truth is not cast on him who is under no legal obligation to assume a responsibility, but rests on the party who- is endeavoring' to obtain a benefit or advantage for himself. This is not only just, but it is practicable. The needful information or knowledge, is always within the reach of him who is either party or privy to a transaction which he seeks to have ratified, rather than on him who did not authorize it, ■ and to the details of which he may be a stranger. We do not mean to say that a person can be wilfully ignorant or purposely shut his eyes to means of information within his own possession and control, and thereby escape the consequences of a ratification of unauthorized acts into which he has deliberately entered; but our opinion is that ratification of am-affticedent act of an agent which was unauthorized ^ean not be held valid and binding where the person sought to be charged had misapprehended or mistaken material facts, although he may have wholly omitted to make inquiries of other persons concerning them, and his ignorance and misapprehension might have been enlightened and corrected by the use of diligence o,ti his part to ascertain them.

See, also, Mitchell v. Squire, 128 Iowa, 269; Russ v. Hansen, 119 Iowa, 375; Britt v. Gordon, 132 Iowa, 431. That Standring’s knowledge of his fraudulent transaction can not be imputed to the plaintiff is well settled. Britt v. Gordon, supra. Another fact which should not be forgotten is this: That Standring in dealing with the defendants did not purport to act as the agent of the plaintiff. So far as the record shows, the plaintiff’s name was never mentioned in the transaction, and the reason for this is that the record title stood in the name of J. L. Standring. The forged deed froni Haswell to J. L. Standring had been recorded, and as that made a record title apparently perfect in said Standring there was no occasion to use Has-well’s name. Gn the .contrary, there was every reason why he should not purport to act as the agent of Haswell; for, had he attempted to make the sale as such agent, his forgery would probably have been discovered at once.

4' essentiaf^iements. The defendants also contend that the plaintiff and Standring owned the land as partners, and that Standring’s sale thereof to the defendants was a valid sale and binding on his copartner, the plaintiff. The evidence does not sustain the appellants’ claim, . i however. Under the rule in this state, the mere showing of profits does not create a partnership. An essential element of the relation is the obligation to share losses also. Winter v. Pipher, 96 Iowa, 17; Johnson Bros. v. Carter & Co., 120 Iowa, 355. It is not necessary that there be an express agreement to share the losses of the venture. Such an agreement may be inferred from other provisions of the contract, “the nature of the business, and tie relation of tie parties to tie business to be transacted.” Richards v. Grinnell, 63 Iowa, 44. Tie contract between tie plaintiff and Standring was tiat tie latter should buy land for tie plaintiff, guarantee tie plaintiff interest on tie money ie so invested, and iave one-ialf of tie net profit wien tie land was sold. In tiis case, tie evidence shows tiat tie annual rent from tie land about paid tie plaintiff six percent interest on iis original investment, and tie taxes on the land, so tiat Standring was entitled, under tie contract, to one-ialf of tie amount it sold for above tie original price. There is nothing in tie contract, or in the nature of tie particular transaction, tending even to show an agreement to share losses. Winter v. Pipher, supra, and Porter v. Curtis et al., 96 Iowa, 539, are directly in point and decisive of tiis question.

5. Principal and agent: fraud in sale of titie* relief111** Tie plaintiff received from Standring $2,500 in cash, which Standring said iad been paid by Howie on tie purchase price of tie land, and notes and a mortgage securing tie same for $3,100, representing tie . „ . . ,. remamer o± the purchase price. Under the a a C0ntract between tie plaintiff and Standring,' tie latter was to iave one-ialf of tie advance wien tie land was sold. The pretended sale to Howie was for $1,600 more- than plaintiff iad paid for tie land, and, as tie rents plaintiff iad received therefrom gave him six percent on iis original investment, Standring was entitled to $800 under their contract, and tiis amount tie plaintiff returned to Standring. In iis pleadings, tie plaintiff offered to return tie money received, if it was found equitable for him to do so, and the trial court held tiat he should return tie amount ie had received on tie sale, less "the $800 that iad been returned to Standring. Tie plaintiff appeals from tiis finding, because it is not shown tiat any part of tie money sent to him was the money paid by tie defendants, and states tiat Standring and tie bank owed him over $20,000 independent of tie transaction in question. It is probably true that tbe plaintiff did not receive any part of the money paid to Standring by tbe defendants. Standring deposited this money in tbe Bank of Oorwith to bis own credit more than a year before any payment was made to plaintiff, and it is conclusively shown that be was then using for bis individual purposes more money than be bad on deposit. But, notwithstanding this condition, we 'are of tbe opinion that the plaintiff can not justly complain of tbe order. He was and is offering to do equity, and it would not be equitable to permit him to keep money which be supposed came from tbe sale of bis land, and at tbe same time have tbe land. Bor tbe purpose of doing equity, tbe money may be treated as belonging to tbe defendants.

A majority of tbe court is also of the opinion that tbe plaintiff can not justly complain if still further relief is here granted tbe defendants. Tbe plaintiff was willing to sell tbe land for $5,600, and supposed be bad made a sale thereof for that amount. Tbe defendants were also acting in perfect good faith and without any knowledge of Standring’s rascality in general or in this particular transaction. Both parties were innocent of wrongdoing or of carelessness, and yet both were tbe victims of Standring’s wrong. If, therefore, a result can be reached which will give tbe plaintiff all that be wanted or expected from tbe land in question, and at tbe same time give tbe defendants tbe advantage of tbe price fixed by tbe plaintiff himself, it will as nearly reach an equitable result as can be Hone without violating well established rules. In other words, if tbe plaintiff receives all that be could possibly have received for bis land, bad a sale in fact been made to Howie, be will suffer no actual loss, and tbe defendants may be saved something by reason of tbe advance in tbe value of the land since their supposed purchase. It is our .conclusion that tbe defendants may, if they so elect to do, within sixty days from tbe date of filing this opinion, pay the plaintiff the sum of $3,100, with interest thereon at the rate of six percent per annum from September 1, 1907, the plaintiff having received interest to said date, and that upon the payment of such sum the plaintiff shall retain the sum paid on the land by Standring and execute a deed to the defendants, conveying title to the land. If the plaintiff shall refuse to accept said sum and execute a •proper conveyance as herein required, the money may be deposited with the clerk of the district court, for the use and benefit of the plaintiff, and a deed may be made, by a commissioner appointed by the court, or the title shall be quieted in defendants by decree, as they may elect. If the defendants shall neglect or refuse to perform the conditions herein required of them, the decree of the district court shall stand affirmed. — Modified and affirm&d on conditions, and remanded for decree in harmony herewith.