Campbell v. Beaman

Opinion by

Orlady, P. J.,

The Sayre and Athens Real Estate Company purchased sixty-five acres of land, and plotted them into 420 lots, to be offered for sale. A number of persons entered into written contracts with the company for the purchase of a lot, all the contracts being similar in form. Eleven of these purchasers brought suits in assumpsit to recover the purchase-money they had paid under these contracts, which in the court below were tried by a judge, without the intervention of a jury. He directed a judgment to be entered in each case in favor of the plaintiff. The defendants bring these appeals, and by an agreement of counsel, all were heard in a single argument. The judgment to be entered in each case will be based on the reasons given in this opinion. The facts are not in controversy, and may be briefly stated as follows:

On April 7, 1903, the defendants formed an association, to be incorporated as The Sayre and Athens Beal Estate Company, for the purpose of holding, purchasing and transferring of real estate. Pursuant thereto, a charter was approved by the governor on that day. On July 1, 1903, an organization was effected; shares of stock were issued to the named defendants and the company engaged in its business operation. On September 30, 1903, a contract in writing, under seal, was entered into with Campbell, this appellee, the material parts of which, for the purpose of this case, are as follows: That the party of the first part (the real estate company) does hereby agree to sell to the second party (Campbell), his heirs, etc., one lot of land, on the tract or plot as surveyed by H. E. Bull, and recorded, etc. The location of said lot to be designated at a meeting of the purchasers of the lots upon said plot, said meeting to be called when sixty per cent, of the purchase-price of all of said lots has been paid, at which time and place the party of the first part agrees to distribute the sum of ten thousand dollars, among the purchasers of said lots., in accordance with a schedule hereto attached. On the reverse side of the contract there was printed a statement, viz: “The sums set opposite the following numbered lots will be paid in cash to the respective purchasers thereof in accordance with the terms of the within agreement.” Following this statement, was a scheduled list of forty-six numbered lots, with amounts set opposite, ranging from $2,000 to $50. The contract further provided “The second party does hereby agree to pay the first party for the lot of land aforesaid, the sum of $200, payable as follows, to wit: $10 upon the execution, of this contract, and the balance in weekly installments of $1 each, until the whole sum is paid with interest, with the privilege of paying before due,” and, “Now if said second party, his heirs or assigns shall pay said purchase-money, together with the interest, as they shall become due, the said first party hereby agrees to make, execute and deliver unto the second party, a good and sufficient warrantee deed for the land aforesaid, etc.” Pursuant to this contract, this plaintiff paid to the company, in amounts ranging from $5 to $10, the aggregate sum of $75, to date of April 15, 1905.

The sixty-five-acre tract purchased by the incorporators, and divided into the 420 lots was encumbered by their arrangement with a purchase-money mortgage which involved the whole property. On October 19,1907, this plaintiff was notified, through a circular letter, issued to holders of lot contracts, by Joseph W. Beeman (the same person who signed the lot contracts, as “President” of the real estate company), viz: “Owing to a slump in the real estate market, coupled with the unwarranted action of one of the stockholders, the company is involved in some difficulty. The Stockholder mentioned has transferred his mortgages against the company to an outsider, who is endeavoring to foreclose. This action has been resisted as contrary to agreement, and the result is still uncertain.” The threatened danger culminated in a sheriff’s sale of the property under foreclosure proceedings, which divested all title of the defendants to the lot in question, so that the terms of the contract could not. be carried out by the vendor company. No further payments were made after this date, and on March 29, 1910, notice of recision of the contract was given to the company, and a formal demand was made for the repayment of the purchase-money that had been paid, with interest thereon. This suit was brought October 6, 1910, and on March 7, 1912, an amendment was rightly allowed by the court, by adding the Athens Realty and Investment Company, a corporation, as a party defendant; and alias summons was issued and service thereof accepted on March 27,1912. The form of action was not changed, and the overlooked partner became in effect a party defendant as from the beginning of the suit. The special defense of the statute of limitations is without merit, as the partial payments of the purchase-money were made in accord with the plan designed by the company, and the right of actioir under the facts as to this particular defendant accrued at the same time as with the others. The record clearly shows that the investment company and D. J. Fanning were identified with the defendants in the creation of the real estate company. The charter of The Sayre and Athens Real Estate Company was not placed on record until March 10, 1910, and the act óf incorporation was not complete until that date. This was long after all the purchase-money claimed in this action had been paid to the company. So manifest a disregard of a statutory requirement, intended for the protection of the incorporators as such, is not within the letter or spirit of the Act of March 15, 1911, P. L. 17, as, “an act, transfer or conveyance of property” to validate and make effectual, such an omission of duty, on the part of the incorporators, to the injury of innocent parties. Such a neglect, cannot be held to have been done in good faith, when in the contract they twice designate their association as “a company” sign and seal it as such, and nowhere suggest that it is a corporation. As stated by Chief Justice Sterbett, in Guckert v. Hacke, 159 Pa. 303, “It is plain, even from a cursory reading of the Act of April 29,1874, P. L. 73, that recording of the certificate fin the office for the recording of deeds, in and for the county where the chief operations are to be carried on’ was intended to be made one of the conditions precedent to corporate existence. That was the last of successive steps required to be taken, and the right to begin the transaction of corporate business was made to depend upon the taking of that step. One of the purposes of the act being exemption from personal liability in the transaction of business, it is obviously material that the public should have notice, and notice by record was accordingly prescribed.” Stephenson v. Dodson, 36 Pa. Superior ct. 343; Pinkerton v. Penna. Traction Co., 193 Pa. 229; Tonge v. Item Publishing Co., 244 Pa. 417; Schmitt v. Potter Trust Co., 61 Pa. Superior Ct. 301; Edwards v. Tracy, 62 Pa. 374. The plaintiff did not deal with the defendants^ a corporation, and the court below found as a fact that this plaintiff was unaware of the fact, that the company was incorporated, or that the investment company was a stockholder therein. Exemption from personal liability did not begin until March 10,1910, when the charter was recorded. The sole cause of trouble was the defendants’ failure to carry to a conclusion their proposition, and when informed of their inability to perform their part of the contract, the plaintiff made his proper demand for the repayment of the purchase-money. The effect of a party’s act in voluntarily disabling himself from performing his contract is the same as if he had repudiated it. In this case all parties treated the contract as rescinded on account of impossibility of performance by the defendants.

We find nothing of a gambling nature in the original contract, and from the facts it is manifest, that it was not intended in the slightest degree to be unlawful or deceptive, or that the defendants knowingly associated themselves in an undertaking of doubtful probity.

However, if this be the wrong view to take of the facts, it is sufficient for this case to refer to Bredin’s App., 92 Pa. 241, and Allebach v. Hunsicker, 132 Pa. 349, to demonstrate the futility of such defense, in contending that the contract was illegal and void as a gambling or void one. The controlling purpose of the company was to sell the plotted lots at $200 per lot, each being treated as of equal value; the exact relation of each lot to the others, was to be determined at a meeting of the purchasers when sixty per cent, of the purchase-price of all the lots had been paid in; the defendants were not to participate in that meeting, and could not have a voice therein. The. prize money was nothing more than a premium or bonus in the hands of a volunteer, for the ascertainment of something by others, over which they had no control. As it takes two parties to make a bargain, so it takes two intentions to make a gambling transaction: MacDonald v. Gessler, 208 Pa. 177. The enterprise failed, not on account of any intention or act of the plaintiff. The only reason suggested, was the failure of the defendant to protect the title, and allowing it to be destroyed under foreclosure proceedings under a mortgage they created. A contract to give a prize or premium is not regarded as immoral or illegal unless prohibited by statute, 6 B. O. L. 779, and is not a gambling contract: 14 A. & E. Enel, of L. 584-614. The mistake in judgment as to prospective values does not even suggest bad faith or illegal practices. The alluring offer to distribute prizes, premiums or a bonus, may have stimulated sales as a puffers promise, but that fund is not sought by this plaintiff. He asks only to be repaid the money he was induced to pay the defendants on the faith of their promise that he would secure title to a lot in the plotted plan. There is no suggestion in the contract of a chance or drawing to determine the number or location of his lot. The plaintiff was entitled to his deed whether or not he might be entitled to the scheduled bonus. The purchasers could organize their meeting and adopt any methods they might decide upon to designate the lot numbers that would be entitled to the premiums. The only duty Of the defendants in such an event, would be to pay the prize money in accordance with the designation made by the lot owners’ meeting.

The statute of limitations does not begin to run until the cause of action has accrued, and in this case no action could be maintained until the admitted notice of the defendant’s default on October 19, 1907. To that date the project was a going concern, and the plaintiff had the right to rely on the defendant’s agreement “to make, execute and deliver a good and sufficient warrantee deed for the land.” Finkbone’s App., 86 Pa. 368; Cook v. Carpenter, 212 Pa. 165; Gardner’s Est., 228 Pa. 282.

For the reasons given herein, the judgment in each appeal is affirmed.