124 Minn. 288 | Minn. | 1914
The action is to rescind an exchange of properties. Plaintiff prevailed and defendants appeal from an order denying their separate motion for -a new trial.
Plaintiff, a young man of 31 years of age with limited business experience, advertised his desire to exchange land for bank stock. Defendant L. H. Amidon, the president, manager, and holder of the majority shares in Florence State Bank of Florence, South Dakota, a bank capitalized at $10,000, responded; and on August 23, 1911, plaintiff, who was living in North Dakota, went down to Florence
It also appears that, when plaintiff acquired the farm in the spring of the year it was in possession of a tenant of the former owner. This tenant remained in possession until the latter part of November, 1911, when plaintiff leased to another who took possession and has ever since occupied the land. On September 23, plaintiff claims he first learned that matters concerning the bank stock had been misrepresented. At once he returned the 46 shares received and demanded a rescission. The defendant L. II. Amidon refusing, this action was immediately begun and lis pendens filed. Because of faulty indexing by the register of deeds plaintiff failed to learn that the son had conveyed until the following summer, when Rebecca T. Amidon was made a party defendant. She claims she paid the $1,-500, the balance of the purchase price, to the son in the spring and summer of 1912 before she knew of this action, but long after filing notice of lis pendens.
The complaint contained allegations of fraud and misrepresentations as to the condition of the bank and the value of the stock, inducing plaintiff to trade. The defense was that none were made; that plaintiff fully investigated for himself and dealt with his eyes open;
Upon the issues the court found, among other matters not necessary to set out, that defendant L. H. Amidon falsely represented that the bank stock was worth $125 per share, that the book value thereof was $107 per share, and that the bank was not indebted in any sum. It is found that plaintiff relied on the representations being true in making the deal, but that these were false to the knowledge of L. H. Amidon. In fact, the bank building representing part of its capital stock was mortgaged for $1,100, the bank was indebted on its promissory note in the sum of $7,000 and the value of its shares of capital stock was greatly less than $107 per share. The .court also found that plaintiff returned the shares he obtained and demanded a reconveyance of the land immediately upon discovering the fraud; that the land, during all the time referred to, was in the actual possession of one John Johnson, Jr., who was, during all said time, plaintiff’s tenant; and that Rebecca T. Amidon did not know of the actual fraudulent misrepresentations made by L. II. Amidon to plaintiff when the land was conveyed to her. The court directed both the deed to L. H. Amidon and the deed from him to Rebecca T. Amidon to be cancelled.
It stands admitted upon the record that the shares returned to L. II. Amidon as well as those he was to transfer have been disposed of by him and are now beyond his control. So that, even conceding technical errors in the admission of testimony, he is hardly in a position to resist rescission. But we believe the court was right in the rulings during the trial with few exceptions, and, as to these, we deem them without prejudice, because the facts to which the testimony related were established beyond controversy by other competent evidence.
We shall, however, notice generally certain alleged erroneous rulings of which appellants complain. The books of the bank and the statements of its condition for some time immediately prior to the trade, and also subsequent, were received over defendants’ objection. The books and statements were properly verified as being kept or issued under the direction of L. II. Amidon. It also appeared that
The appellants are mistaken in the claim that there was no misrepresentation in regard to book value of the stock. Plaintiff testified positively that L. H. Amidou represented the book value to be $107 per sjiare. This' is also shown by Amidon’s written statements. We also conclude from counsel’s contention of failure of proof, made on the oral argument, that he does not bear in mind the distinction between an action to recover damages for deceit and one to rescind because of misrepresentations. In the latter a defendant cannot successfully oppose rescission if he has misrepresented a material fact, relied on by the other party in the trade, by insisting that plaintiff has not proven damage therefrom. Martin v. Hill, 41 Minn. 337, 43 N. W. 337; MacLaren v. Cochran, 44 Minn. 255, 46 N. W. 408; Knappen v. Freeman, 47 Minn. 491, 50 N. W. 533; Nelson v. Carlson, 54 Minn. 90, 55 N. W. 821; Pennington v. Roberge, 122 Minn. 295, 142 N. W. 710.
But the contention is that the representations as to the condition of the bank and the value of the stock were mere trade talle in which a seller may indulge in exaggerated expressions of the value of the property offered for sale, without subjecting himself to actionable fraud. The assurance that the bank was not indebted, when a St. Paul
Objections to certain evidence to prove that plaintiff held possession of the farm by his tenant may have been good, on the ground that the answers called for legal conclusions. But the facts establishing such relationship were otherwise proven by undoubted competent evidence and were really not in dispute.
Upon this record plaintiff is clearly entitled to a rescission, and to restitution of the farm, provided Rebecca T. Amidon is not a good-faith purchaser without notice. She claimed to be such, and we think the burden of proof rested on her in that respect. Minor v. Willoughby & Powers, 3 Minn. 154 (225); Fritz v. Ramspott, 76 Minn. 489, 79 N. W. 520; Errett v. Wheeler, 109 Minn. 157, 123 N. W. 414, 26 L.R.A.(N.S.) 816. The situation is analogous to a negotiable instrument procured by fraud in the hands of an alleged bona fide holder. When fraud in the inception of the instrument is shown, the onus of proof is upon the holder. It is true the court found a consideration, as hereinbefore stated, and that she did not know of the actual fraudulent representations made by
We think the finding that the tenant in possession of the farm was the tenant of plaintiff is amply supported by uncontroverted facts. It was admitted that the crops belonged to plaintiff, so that he was to receive the share going to the landlord under the lease. The grain had perhaps been cut, had not been threshed or divided. In June previous the tenant! had been notified by the original lessor of the sale of the farm, and thereupon plaintiff visited the premises and arrangements were made under which the tenant agreed to look to plaintiff’s agent as representing him as landlord. This was an attornment. In passing, it may be stated that the record is silent as to Bebecca’s knowledge that plaintiff had ever owned the land, or that he had conveyed to her son, or that there was a tenant on the farm, except this, a duplicate of the lease, unassigned, had been handed to plaintiff by the original lessor, and by plaintiff to L. IT. Amidon. It does not appear when this lease and the deed to Bebecca came into her possession. But knowing that this lease by its terms expired on March, 1912, she made no effort to take possession or disturb the possession of plaintiff’s tenant, por did she visit nor inquire about this valuable
It may be urged, however, that even if she had taken notice of the tenant’s possession and inquired of him she would have learned nothing of the facts which went to establish plaintiff’s rights to a rescission. A purchaser is only chargeable with such knowledge as a proper inquiry would furnish. He must act reasonably, however, and cannot stop on the threshold of what would most likely lead to full information. This requires not only an inquiry from the tenant but from his landlord. Deetjen v. Richter, 33 Kan. 410, 6 Pac. 595. “The possession of land by a party, through his tenants, is notice to all the world of his rights in the premises, and without inquiry of him no one can claim to be an innocent purchaser as against him.” Whitaker v. Miller, 83 Ill. 381; Mallett v. Kaehler, 141 Ill. 70, 130 N. E. 549; Dickey v. Lyon, 19 Iowa, 544.
It is true that, when the deed from the son to the mother was made, plaintiff was ignorant of the fraud practised on him, so the contention is near at hand that inquiry from plaintiff would not have divulged the rights upon which he now stands. But we must assume that such inquiry would have disclosed that he was in possession and was to receive the rent in shape of crops; that only a part of the consideration had been received from him; and that, as he testified, the delivery of the deed was conditional upon an examination of the bank by an expert, selected by him, disclosing the representations as to its condition made by L. II. Amidon to be true. She did not inquire of the son how he obtained the land. Charity forbids the thought that one who by misrepresentation and deceit takes advantage of a stranger in a deal would do the same to his own mother. In this case Rebecca T. Amidon simply shut her eyes, trusting perhaps her son to take the proper precautions. A failure to make inquiry may be “regarded as an intentional avoidance of the truth which it would have disclosed.” Betts v. Letcher, 1 S. D. 182, 194, 46 N. W. 193.
Without discussing the other assignments of error we are satis
Order affirmed.
