187 F. 177 | N.D.W. Va. | 1911
I have very carefully considered the matters involved in this controversy which have been exhaustively and ably argued by counsel. The referee has filed an elaborate opinion in support of the ruling made by him, in which the facts are set forth. As I purpose to file- this opinion as part hereof, I will not restate the facts. I am convinced that I must sustain the conclusions arrived at by the referee, for these reasons:
That Gebhart, after full knowledge of the facts and after lie had repudiated the contract, paid this draft and charged it on his books to Miley, very clearly establishes him a creditor of Miley as to this 83,000, nothing more and nothing less. 1 le and Carr could not enter into a legal contract whereby, in effect, Gebliart could pay 83,000 to Carr on Miley’s purchase price, charge it to and recover it: back from Miley, at the same time repudiate Miley's contract, whereby Carr would still have the property with all of Miley’s improvements thereon, and, when Carr sold it to some one else, get back the $3,000 a second time as well as one-fourth of the surplus over and above Miley’s contract price of $12,000 that Carr might realize from such sale. Jf Carr had been misled by Miley’s representations as to his agency, when Gebhart came forward and repudiated the contract, the right and proper thing to have done would have been to call in Miley, restore to him the protested draft for $3,000, cancel the contract with him, and secure repossession of the property.
Other reasons for the conclusions reached are set forth in the referee’s opinion attached hereto.
Get order be entered affirming in all respects the decree entered by the referee,
NOTH. — The opinion oí James D. Butt, referee, is as follows:
Briefly stated, the facts in this case are as follows: On the 20th day of April, 1910. II. K. Can- and wife entered into a written agreement, under seal, with John IÍ. Miley, agent, agreeing to sell to the said Miley agent the Mul
On the 3d day of, October, 1910, after proper and admitted notices to all of the creditors, including H. S. Carr, the vendor under the agreement of April 20, 1910, the said trustee filed a petition with the referee praying an order directing him to sell at public auction the said “Mullen Hotel property” and all the other real estate mentioned in the agreement of April 20, 1910, for the benefit of the estate of John R. Bliley, bankrupt. AVhereupon, the said H. S. Carr filed a petition with the referee, setting put facts from which he claimed “that the agreement of April 20, 1910, had been procured by misrepresentation and fraud on the part of said Jno. R. Bliley, agent,” and prayed that the petition of the said trustee be dismissed. Upon these two petitions, together with the testimony presented and oral argument of counsel and briefs submitted, the referee heard and considered the case, and on the 19th day of October, 1910, entered an order sustaining the petition of the trustee and directing him to make sale of the property as set out in his petition, all of which appears at full length in the order and certificate for review. The jurisdiction of the referee to hear and determine all the questions raised by the petitioners was not denied, and therefore all parties are in a court of equity, and, in accordance with the procedure of such courts, will be granted or denied relief. In re Rochford, 124 Fed. 182, 59 C. C. A. 388; A., T. & S. R. R. Co. v. Hurley, 153 Fed. 503, 82 C. C. A. 453, affirmed in 213 U. S. 126, 29 Sup. Ct. 466, 53 L. Ed. 729; In re Elletson Co. (D. C.) 174 Fed. 859; Coal Land Case v. Ruffner Bros., 21 Am. Bankr. Rep. 474, 165 Fed. 881, 91 C. C. A. 559 (4th Circuit).
AVhere an executory contract of a bankrupt comes to his trustee, it is for the latter to determine what, if any, action he will take thereunder. If he is of opinion to enforce it will be of benefit to the creditors, he may take such action as he thinks the situation warrants. 1-Ie may enforce it specifically, or he may invoke the aid of the court in subjecting the interest of the bankrupt therein and “reduce the same to money.” Mound Mines Co. v. Hawthorne, 173 Fed. 882, 97 C. C. A. 394. (In this case specific performance was decreed in favor of the trustee.) “Trustees in bankruptcy can assume an executory contract of the bankrupt and dispose of it for the benefit of the estate, and take such action under it as they may deem for the best interest of the estate.” A., T. & S. F. R. Co. v. Hurley, 153 Fed. 503, 82 C. C. A. 453, affirmed 213 U. S. 126, 29 Sup. Ct. 466, 53 L. Ed. 729. In this ease the trustee in his petition avers that it is for the best interest of the creditors to have the property in question sold and the proceeds applied for the benefit of the creditors. Bir. Carr in his petition does not deny the execution of the agreement to sell the Blullen Hotel property to Jno-. R. Bliley, agent, which is dated April 20, 1910, and that he placed said Miley in possession thereunder, and that said Bliley was in possession of it when he was adjudicated a bankrupt, and that Bliley had placed thereon valuable and permanent improvements, but rather seeks to avoid the agreement solely upon the grounds that it was procured from him by misrepresentation and fraud practiced by said Bliley. He does not ask a performance of the agreement by the
At this point it may be well to advert to the fact that the petition in this case of Mr. Carr prays for no specific relief; and query, whether under a prayer for general relief the complainant in this case could obtain any relief other than for the amount of his debt as set forth in his petition. It is conceded that in many jurisdictions courts of equity are very liberal in granting relief under a prayer for “general relief,” but the equity procedure of federal courts is very largely controlled by fixed rules, and rule 21 of equity rules says: “That the prayer of the bill shall ask the special relief to which the plaintiff" supposes himself entitled, and shall also contain a prayer for general relief.” Under the averments of this petition, a mere dismissal of the petition of the trustee would not he “consistent with the case if made out,” {for it would place the subject-matter of the controversy in no one). Walden v. Badly, 14 Pet. 156, 10 L. Ed. 393 ; Hobson v. McArthur, 16 Pet. 182, 10 L. Ed. 930. From the foregoing it seems the petitioner in this case might well bo denied any relief except for the amount of his debt, if proven. “A court of equity is always reluctant to rescind, and will give relief only when the clearest and strongest equity imperatively demands it.” Grymes v. Sanders, 93 U. S. 55, 23 L. Ed. 798. “The rules of law relating to specific performance, and those applied to the rescission of contracts, although not Identically the same, have a near affinity to each other.” Boyce’s Ex’r v. Grundy, 3 Pet. 210, 7 L. Ed. 655. and it may therefore be deemed advisable to discuss some of the rules of equity applicable to specific performance. “Whore a bill seeks relief on the ground of fraud, it should point out and state particular acis of fraud in a clear and precise manner and with an averment of their injurious result.” Fletcher’s Equity Pleading and Practice, p. 331. “When there is an inconsistency between an averment in a hill and .a written instrument attached thereto as an exhibit, the latter must prevail.” Lockhead v. Berkeley Springs Waterworks Co., 40 W. Va. 553, 21 S. E. 1031. “Repugnancy between the averments of a bill and exhibit attached thereto renders the bill subject to demurrer.” Little v. Snedocar, 52 Ala. 167.
The petition of Carr avers that he made the agreement of April 20, 3930, with John R. Miley, agent for W. A. Gebliart. when, in fact, the agreement states that it was made with John It. Miley, agent. If the exhibit with its recitals is to prevail, then the statement of misrepresentation relative to Miley being the agent of W. A. Gebhart are not averments of fraud, hence the petitioner has not complied .with the rules of equity pleading which requires him to state in his petition “facts in a clear and precise maimer which would entitle him to relief.” It is admitted that II. S. Carr, the party of the first part, under the agreement of April 20, 3910, drew up the same, and, being lawyer of ability and great experience, it must be presumed that he wrote into that agreement all that the parties thereto intended, and it would therefore seem that, when he failed to insert in the agreement the name of W. A. Gebhart as principal, the contracting parties did not so Intend. “Any declarations made at the time, relative to the property, if not incorporated in the written contract, are presumed to have been abandoned by the parties as forming no part of it.” Turner v. Navigation Co., 17 N. C. 236. The agreement between the parties in this case was reduced to writing many days ■after it; was made, and the courts have held “that reducing an agreement to
It does secan, therefore, that the petitioner under the averments of his petition has not stated a case which entitles him to relief in a court of equity. Hut. ignoring what seems to he the fatal defect of the petii ion, would the com duct of the parties and the testimony show that Air. Carr would be entitled to the relief he asked? Air. Carr has been a practicing lawyer since 1806. is a man of great experience as a business man, acid he was the vendor. He drew up the agreement, and it must be presumed that he wrote into it everything that, he considered material and for his own benefit, but it is found from an inspection of the agreement of April 20, 1910, that he omitted to mention the name of IV. A. Gebhart; furthermore, when the draft for the $3,000, being the first payment under the agreement, was given to him, by John It. Miley, agent, he accepted tiio same, and nowhere in his testimony does he state that this was a mistake or oversight on his part, and from this it is but fair to presume that he did not consider what Air. Miley said relative to .W. A. Gebhart as being at all material, and this presumption is perfectly reasonable when it is recalled what Air. Carr, in his testimony, says on that point. In substance lie says: That, when Miley came to him to make the deal, he (Carr) wanted to make inquiry for whom the purchase was being made: but that he (Miley) was very indefinite, and did not seem inclined to say who it was for. “Carr named several parties, and Miley said it was for some one living out Of the state — said he was acting for W. A. Gebhart. I don’t know liow he expressed it exactly. I asked him whether lie was authorized by IV. A. Gebhart to purchase the property. He told me that he would talk the matter over with Air. Gebhart — would purchase if he could get it at a fair price, words to that effect.” This conversation took place several days before the agreement was drawn np and signed. From this it will be seen that Miley was evasive and noncommittal to such an extent as to put Carr on his guard and inquiry if he considered Gebhart’s connection with the matter ns material and as an inducement for his action. He knew that for years Gebhart had been giving Aliley financial aid in his business affairs in Hardy county, and all he seemed to care about was Geblmrt’s financial standing, and for that purpose alone he made inquiry of the bank at Aloorelield. This language of Air. Aliley to Air. Carr is not what the courts define to be a “misrepresentation of the material fact,” as an inducement for one to act upon, but rather as an opinion or “deal talk.” “Afore dealing talk” does not amount to misrepresentation. Reynolds v. Palmer (C. C.) 21 Fed. 433. “Equity will not relieve against, misrepresentation which is a, matter of opinion and open to the inquiry and examination of both parties.” Buckner v. Street (C. C.) 15 Fed. 305.
So from Mr. Carr’s testimony on that point it does not appear that Aliley ever made statements that would convince him or any intelligent man that ho (Aliley) was acting as the agent for \V. A. Gebhart in procuring the agreement of April 20, 1910; and take the testimony of Air. Carr in its entirety and it absolutely fails to show that he has not received all the benefits under it which he might have received liad he made the same with any person. He was paid the first payment of $3,000 and holds a perfectly good lien (if he can establish it) for $9,000, the balance of the purchase price. lie fixed his own price on the property at 812,000, and said in his testimony that it was fair, so nothing said by Air. Aliley could have caused him the loss of a dollar. The property in question lias been appraised at $14,500, and the testimony tends to show that it will bring more if put up at public sale. That being true, of what can he complain in a court of equity? It is true that the testimony tends to show that at times subsequent to the making of the agreement Aliley did say that he thought he was buying the property for Gebhart, but that was only a matter of opinion, and for settlement between Gebhart and himself, and in nowise affected Air. Carr. The testimony of both Carr and Aliley is overflowing with inconsistencies, but it must be remembered that Mr. Carr is deeply interested in the present controversy, and Air. Aliley
Mr. E. B. Bonney, a disinterested'witness, testified that Mr. Carr told him that he had sold the Mullen Hotel property to John B. Miley, and did not mention the name of Mr. Gebhart in connection with it. The testimony nowhere shows that Gebhart ever refused to pay the draft which Miley drew on him in favor of Carr to carry out the provision's of the agreement of April 20, 1910, but the testimony does show that on the evening of May 6th, when all parties met in Carr’s office in Moorefield, Gebhart did agree to “take care-of said draft” for Miley if he (Miley) would furnish him (Gebhart) with a statement of the live stock account between them. The very next day hedld furnish that statement drawn up for him by Mr. Carr, and in it Miley recognized that he owed Gebhart the $3,000. Mr. Carr states that he never-showed this statement to Mr. Gebhart, and has utterly failed to give satisfactory reasons for so doing. Mr. Gebhart’s brother knew that this statement had been furnished by Miley, and that Carr had it, and it is but fair to say that Mr. W. A. Gebhart saw it and knew its contents. So it appears that Mr. Miley did all they asked of him in order “to take care of the $3,000 draft.”' All the statements of Mr. Carr and Mr. Gebhart that the $3,000 draft was paid by Gebhart to Carr for the purpose of “permitting Miley to remain in the hotel until the statement of the stock account should be furnished by Miley” is so unreasonable and unconscionable as not to merit consideration in a court of equity, especially so when it is recalled that the stock account was furnished by Miley the next day, thus asking the court to believe that $3,000 was paid and accepted that a man might remain for 24 hours in a hotel property, the rental value of which is shown to be $100 per month. These statements, though sworn to, are so absurd and unconscionable that well might the maxim of “falsus in uno, falsus in omnibus,” be applied to-their entire testimony in this case.
When Carr and Gebhart, entered into the agreement of May 20th (dated May 7th) to get this property away from Miiey, sell it, and divide the proceeds among themselves, they both knew that Miiey was insolvent; that they had on the 1st day of May, 1910, put Mm in possession of the same under a contract of sale; that the public must have known the facts, and from which and upon the strength of said possession Miiey must have been able to get further and enlarged credit; that from, their view of the case he was holding the same by fraud, still they permitted Mm to remain in possession and •control of the same without giving the public any notice of wliat they considered changed relations between the parties, entered into an agreement in which they claimed that they, and not Miiey, owned the property, failed to place the agreement on record, and permitted this state of affairs to exist until in August, 1910, but a very short time before Miiey was adjudicated a bankrupt. It might well be said that they were guilty of a fraud on the -creditors of Bliley during that period. This seems to be the view taken of such transactions in Moore v. Tearney, 62 W. Va. 75, 57 S. E. 263, where it is said “that one who puts it in the power of another to commit fraud must take the consequences.” Neslin v. Wells, 104 U. S. 428, 26 L. Ed. 802. In the case of A., T. & S. R. R. Co. v. Hurley, supra, it is said that “in bankruptcy proceedings courts of equity wid act on broad equitable lines with a view of recognizing and enforcing the rights of all parties claiming an interest in the estate,” and, applying these principles to the present case, the petitioner must show by clear, positive, and conclusive testimony that he is entitled to the relief which lie asks. His testimony is vague, indefinite, and contradictory, whilst the testimony offered to rebut his contention is fair, reasonable, and comes from disinterested witnesses, and on the merits has failed to prove the averments of his petition. On the question of proof in such cases in the Maxwell Land Grant Case, 121 U. S. 325, at pages 380 and 381, 7 Sup. Ct. 1015, at page 1028, 30 L. Ed. 949, the court says; “Canceling a contract is an exercise of the most extraordinary power of a court of equity, and cannot be exercised on a mere preponderance of evidence. The evidence must be clear and unequivocal and convincing, which does not leave the issue in doubt.”
For the reasons herein stated, the referee is of opinion that the petitioner, H. S. Carr, is not entitled to the relief which he asks in Ms petition.
For other cases see same topic & § number in Dec. & Am. Digs. 1907 to date, & Rep’r Indexes