Gose v. Brooks

In January, 1920, appellants, Gose and Lancaster, sued the appellee, Brooks, for the recovery of certain live stock fully described in their petition. Brooks defended upon the ground that he was lienholder in possession under the terms of a mortgage given by one who called himself J. R. Jordan, and who at the time claimed to own the stock. The facts, about which there is little or no controversy, are substantially as follows:

On January 1, 1920, a young man representing himself as J. R. Jordan, and a nephew of J. R. Jordan, of Arcadia, La., appeared in Paris, Tex., as a purchaser of mules for shipment. He applied to the appellee, Brooks, who was at the time the owner of a wagon yard at Paris, for information concerning dealers in large mules. Brooks referred him to several parties, among whom were the appellants, who resided at Honey Grove, in Fannin county. On the day following Jordan visited Honey Grove and contracted for the purchase of nine large mules from the appellants. The purchase price was $2,900, to be paid in cash. The mules were to be delivered at Paris. The transaction on the part of the appellants was conducted by Gose. The young man represented to Gose that his name was J. R. Jordan; that he was a nephew of another J. R. Jordan of Arcadia, La.; that they two had formed a partnership for the purpose of purchasing mules, and this purchase was for the firm. After the terms had been agreed upon, Jordan offered the following draft in payment:

"January 2, 1920.

"Pay to the order of The First National Bank of Honey Grove, Texas, Twenty-Nine Hundred Dollars, for value received, and charge the same to account of _____. With exchange. Eight mules and one horse. [Signed] J. R. Jordan.

"To First National Bank, Arcadia, La."

Before accepting the draft Gose requested the cashier of the Honey Grove Bank to ascertain by wire if the draft would be paid by the Louisiana bank. The cashier then sent the following message:

"First National Bank, Arcadia, Louisiana: Will you pay J. R. Jordan's draft for twenty-nine hundred dollars?"

Later in the day the following reply was received:

"J. R. Jordan's draft for twenty-nine hundred dollars will be paid."

Upon receiving that information Gose sent the mules through the country to Paris. He and Jordan preceded them in a car, and arrived at the wagon yard of the appellee, Brooks, about 30 minutes in advance of the mules. Brooks being absent, arrangements were made with his son, Raymond Brooks, who was in charge, for keeping the mules overnight. When the mules arrived they were turned into a pen and fed. Before separating that night, and while at the wagon yard, Gose sold a horse to Jordan for $100, and took Jordan's check on the Louisiana bank for the amount. Raymond Brooks testified that he was present, and heard Gose and Jordan make the trade about the horse, and also heard them conversing in a way which convinced him that Gose had sold the mules to Jordan. He also testified that he told his father that night about the mules being in the wagon yard, and about what occurred indicating that they had been sold by Gose to Jordan. Brooks did not go to the wagon yard till the following morning. He did not see Gose, but met with Jordan, to whom he sold eight small mules for the sum of $1,400. In payment for these Jordan gave Brooks a draft on the same bank at Arcadia, La. This transaction occurred about 9 o'clock a. m. The mules delivered by Gose were still in the wagon yard. A few minutes after purchasing the mules from Brooks, Jordan asked Brooks for a loan of $1,400, stating he wanted to buy more mules, but that the people around there would not take a check on a Louisiana bank. He agreed to give Brooks a lien on the mules purchased from Gose to secure payment. This was satisfactory to Brooks, and the loan was made. No note was taken, nor was any written mortgage executed. It was verbally agreed between them that Brooks should hold possession of the mules till the loan was repaid. Brooks testified that he thought Jordan had purchased the mules from Gose and that he had a right to mortgage them. He relied upon the information received from his son about what occurred between Jordan and Gose the previous night at the wagon yard. It later developed that this young man who represented himself to be J. R. Jordan, a nephew of J. R. Jordan, of Arcadia, La., was an impostor. After the conversation with Brooks at the bank when the loan was made the man disappeared and has never been heard from since. Neither of the appellants knew anything about the transactions between Brooks and Jordan till later. The checks and drafts given by Jordan for the purchase money of the mules were pronounced forgeries by the Louisiana bank and returned unpaid. There was a J. R. Jordan, a responsible dealer in mules, who resided at Arcadia, La., and whose credit was good at the Louisiana bank for the amount of the drafts at the time they were drawn, but that J. R. Jordan knew nothing of the young man who had passed as his nephew. After discovering the fraud, Gose and Lancaster immediately claimed the mules and attempted to regain possession of them. Brooks resisted their claims upon the ground that he was an innocent mortgagee for value, in possession, and was entitled to be protected as such. Gose and Lancaster instituted this suit, and procured a writ of sequestration, which was levied upon the mules. These were replevied by Brooks, and later an agreement in writing between the parties was entered into by which the sum of $1,800 was deposited by the appellants in court, to be disposed of in the final judgment, in order that the mules might be turned over to them. It was also agreed that during the time the mules were in Brooks' possession he expended $225 for feed and care of them.

The case was tried before the court, and at the request of the parties he filed findings of fact which are substantially the same as those above stated. In order to determine the grounds upon which he based his judgment, we quote the following from his conclusions:

"At the time the defendant loaned the $1,400.00 aforesaid to the said Jordan he had no notice of the fraud, forgery, or swindling transaction by which the said Jordan had obtained possession of the plaintiffs' property, and that he occupied the position of an innocent purchaser without notice of the want of title in J. R. Jordan, or want of any actual power or right to mortgage or dispose of said property. * * * From the foregoing facts I conclude that the plaintiff Gose, by his words and actions, clothed the said J. R. Jordan with apparent title to the property in controversy, and apparent authority to deal with it as his own, and that the plaintiffs are estopped, as against the defendant, from questioning the title of the said J. R. Jordan to said property and his apparent authority to dispose of it."

Judgment was rendered in favor of Brooks upon the agreement above referred to for the sum of $1,625, that being the amount of his loan and the cost of feeding the stock.

It is apparent from this record that all of the parties to this controversy were the victims of an imposture, and that the loan made by Brooks must be lost by him or the appellants. In the absence of any material conflict in the evidence, the rights of the parties can be determined by an inquiry into the appropriate rules of law. If in the dealings between Gose and the stranger, who will be referred to as Jordan, the title to the mules did not pass with the delivery of possession, then the appellants remained the legal owners, and may reclaim their property, free from the incumbrance held by Brooks, unless they so conducted themselves as to create an estoppel against the assertion of that title. In transactions of this character the rule is thus stated:

"An owner who is induced by fraud to part with the possession, and not the title, of his goods, may recover them even from one who has paid value for them without notice of his right. But, if he be so induced to sell his personal property to another, by proving the fraud, he may recover of the vendee, and of any one holding under him, save a bona fide purchaser for a valuable consideration." Rohrbough v. Leopold, 68 Tex. 254,4 S.W. 460; Hall Brown v. Brown, 82 Tex. 472, 17 S.W. 715; 23 R.C.L. pp. 1300-02, and cases cited in the notes.

The author of the last-mentioned work thus states the rule based upon the cases he cites:

"Where there is a mistake on the part of the seller as to the identity of the buyer, as where the buyer is an impostor, even though there is such a delivery of the subject-matter of the sale as would ordinarily transfer the title, it is generally held that no title passes, and the seller may recover the goods from a bona fide purchaser of the buyer; whereas if the sale was only voidable, as in case of a sale induced by the fraud of the buyer, it could not be avoided as against a bona fide purchaser from the buyer. But where the impostor appears personally before the buyer, though he represents himself to be another person and buys goods on credit, it has been said that there is a sale voidable merely for fraud, as the seller could not have supposed he was selling to any one other than the person present, and it would seem to follow, if this is true, that the impostor, in case the goods are delivered to him, could transfer a good title to a bona fide purchaser. And it has been expressly held that the title to property sold and delivered to one who fraudulently misrepresents his identity and executes his note for the purchase price passes out of the seller so that he cannot maintain detinue for the property against a purchaser from the impostor."

If this were a case in which the sale had been completed and the vendors were seeking a rescission of the contract and a recovery of both title and possession upon the ground of fraud, the rights of the parties would be materially different. In such an event a fraudulent vendee holding the title and possession would have the legal right to dispose of the property, and one who purchased from him for value and without notice of the fraud would be protected. The first question then is, did the legal title to the mules pass from the appellants at the time they delivered the possession to this man passing as Jordan?

The sale was for a cash consideration, but no cash was paid. The forged draft was not a payment, and its acceptance by Gose did not, under the circumstances, alter the character of the transaction. National Bank v. C., B. N. Ry. Co., 44 Minn. 224, 46 N.W. 342, 560, 9 L.R.A. 263, 20 Am. St. Rep. 566; Kempner v. Vaughn, 174 S.W. 695; Johnson-Brinkman Commission Co. v. Central Bank, 116 Mo. 558, 22 S.W. 813,38 Am. St. Rep. 615. The evidence shows that the draft was to be sent for collection direct to the Louisiana bank, and was not to take the circuitous route usually adopted by banks in such dealings. Hence one of the elements of a completed cash sale was lacking — the payment of the consideration. The finding of the trial court that the draft given to Gose was a forgery is, in effect, a finding that the drawer was not J. R. Jordan, and that he had no authority to sign the name of J. R. Jordan to the draft. If Gose intended for the legal title to pass with the possession it was upon the condition that the draft was genuine and would be paid upon presentation. It is clear that, had he known the truth, he would not have parted with the possession of the mules. The possession was secured from him by a fraud which amounted to a felony. Again, if any title passed, or was intended to pass, it was to the party for whom the purchase was ostensibly made, J. R. Jordan, of Arcadia, or the firm of which he was the responsible member. The impostor did not claim to be more than a partner, or representative, of the real Jordan. But that J. R. Jordan never made any claim to the property, nor did he have any connection with the transaction with Brooks. If the draft was a forgery, the drawer not the party he represented himself to be, and with no authority to purchase for the party in whose name he was pretending to deal, it would be difficult to imagine a situation which furnishes a stronger reason for treating the attempted purchase and sale as a nullity. In his findings of fact and conclusions of law the trial court uses the expression "apparent title" in a manner which indicated that he was of the opinion that the legal title did not pass to Jordan. That inference is strengthened by the further fact that he based his judgment in favor of Brooks upon estoppel alone. A majority of the court are therefore of the opinion that because of the fraud, and the conditions under which it was committed, no title passed to Jordan from appellants, and Jordan had no right to incumber the property with a lien. It follows that, unless for some reason they are estopped, the appellants now have the right to reclaim their property free from the incumbrance. These views are, we think, supported by the following decisions: Allexander v. Swackhamer,105 Ind. 81, 4 N.E. 433, 5 N.E. 908, 55 Am. St. Rep. 180; Peters Box Lbr. Co. v. Lesh, 119 Ind. 98, 20 N.E. 291, 12 Am. St. Rep. 367; School Sisters of Notre Dame v. Kusnitt, 125 Md. 323, 93 A. 928, L.R.A. 1916D, 792; Mechem on Sales, p. 740.

The next question is, was the honorable trial court correct in holding that the appellants are estopped from claiming the mules? One who depends upon an equitable estoppel to defeat the claim of the true owner has the burden of proving all the facts required to establish that defense. Bowen v. Lansing Wagon Works, 91 Tex. 385, 43 S.W. 872. A purchaser relying upon estoppel must not only show that he paid a valuable consideration, but that he had no notice of the superior claim of the party holding the title. If in this case the evidence lacks the fulness essential to make that defense complete, the consequences of the omission must fall upon the appellee alone. The rule of estoppel is founded upon the principle of justice, and is applied only in order to prevent the perpetration of a wrong. It assumes guilt in one party and innocence in the other. Where both parties are equally innocent, there is no good reason why the true owner should not claim that which is legally his. It is true an owner may at times lose without having committed any offense, but in such cases his loss is justified by other equitable rules, not that of estoppel. In order to support the judgment in this case, the facts must warrant the conclusion that the true owners of the mules were guilty of some culpable conduct which misled Brooks as to the true status of the title. It must appear that they did something with the intention of misleading him, or were guilty of some form of negligence calculated to produce a deception. Westbrook v. Guderian et al., 3 Tex. Civ. App. 406, 22 S.W. 59, and cases therein referred to. In the case cited Justice Key has pushed the defense of estoppel to the utmost limits to which it may be safely carried for the purpose of protecting an innocent purchaser without impairing the rights of an equally innocent owner, But even in that case he predicated the estoppel upon the ground that there had been culpable negligence on the part of the one estopped. There is no pretense in this case that Gose did any act, or made any declarations, for the purpose of leading Brooks to believe that a sale of the mules had been completed, or that the trade was upon terms and conditions different from those which actually existed. The evidence shows that Gose had no reason to believe that Brooks might be called upon for a loan by Jordan, or that Brooks would do anything upon the faith of a sale having been made.

We come, then, to the question, was Gose, who conducted the dealings with Jordan, in delivering the possession of the mules, guilty of negligence calculated to mislead Brooks as to the true state of the title? It is contended that Gose by that act clothed Jordan with all the appearance of a good title, and impliedly invited third parties to deal with him as the owner of the mules. It has been held that one who by his voluntary act delivers possesion of personal property to another with the intention of conveying the title also, cannot set up a fraud on the part of his vendee against the claim of an innocent purchaser from the latter. However, an examination of those cases will show in each a state of facts materially different from those disclosed by this record. In most, if not in all, of them, the original vendor knew the identity of the fraudulent vendee, and intended to vest him with the power to dispose of the property. The fraud consisted of some act, or representation, which would make the transaction voidable only, and not absolutely void. It also appeared in those cases that the party invoking the estoppel did not have an opportunity equal to that of the party estopped to know of the probability of a fraud having been perpetrated. In this case Gose was deceived as to the identity of the man with whom he dealt. He did not in fact sell to this man individually, but to J. R. Jordan, of Arcadia, to whom he looked for the cash payment. Gose, therefore, never intended for the title to vest otherwise than in one whom he thought was the real purchaser. Brooks knew that this man was a stranger in that community and that he was unknown to Gose. He also knew that the impostor was pretending to buy for J. R. Jordan, of Arcadia, and was in possession of facts indicating that the latter was paying for mules with drafts drawn in the name of J. R. Jordan upon the Arcadia bank. In short, Brooks knew as much about the stranger, his business and methods, as did Gose. He also had an equal opportunity to ascertain whether or not he was an impostor. Gose had belivered the mules to this man as the agent, or the representative, of the real J. R. Jordan, or of the firm. Brooks was bound to take notice of that character of delivery. He then had no warrant for dealing with the stranger in any other capacity than as such agent or representative. Suppose the transaction between Gose and the stranger be treated as only a voidable contract, and that the real J. R. Jordan might have paid the purchase price and claimed the mules; could Brooks in that event assert a valid lien against Jordan? The money loaned by Brooks was for the private benefit of the pretender, who had no legal right to pledge the firm property as security for its repayment. There is nothing in this record which would estop the real J. R. Jordan from impeaching the validity of that lien had he elected to affirm the purchase made ostensibly for his benefit. It is true the Louisiana Jordan could not accept the benefits of the unauthorized agency without ratifying what the agent did in acquiring the property, but the loan made by Brooks was no part of the transaction with Gose. That grew out of a separate contract, and was expressly for a different purpose. The real Jordan could not be bound by that act unless he held the impostor out as his agent. That he had not done. If, when the sale is treated as a completed one, Brooks cannot sustain the validity of his lien, then for a stronger reason he must fail when the transaction upon which the sale depended was void because of the fraud. We therefore conclude that, in delivering possession of the mules to the impostor, Gose acted under a deception resulting from a fraud, and was not guilty of any culpable negligence. We are of the opinion that the appellants are entitled to the possession of the mules free from the incumbrance asserted by Brooks.

It appears from the record that the judgment in this case included $225 due Brooks for feeding and caring for the stock during the time they were in his possession. He is clearly entitled to the payment of that sum as a condition upon which the mules should be delivered to the appellants. The judgment will therefore be reformed and his recovery limited to that amount. Judgment will also be here rendered in favor of the appellants for all costs both of this court and the court below.