Swanson v. Sims

Lead Opinion

GIDEON, J.

It is alleged that the defendant, together with four others, entered into a contract with plaintiff for the sale of all the stock in a Utah corporation known as the Liberty Theater Company for a consideration mentioned, which consideration was paid. It is further alleged that the said theater company was the owner of and conducted two moving picture shows in Salt Lake City, Utah, known as the American and Liberty theaters; that among other provisions in the contract defendant, with his associates, agreed, each for himself, that they would not, directly or indirectly, or through any corporation, be in any manner interested in, or promote the organization, operation, or management of any moving picture theater in Salt Lake City for a period of five years from July 1, 1915. It is also alleged that the defendant, at the date of the complaint, was, and prior thereto had been, as manager, operating the Isis Theater, was interested in such theater, and was promoting a corporation for the erection of a building on the site where said Isis Theater is located with the object of carrying on and conducting therein a moving picture show; that the same would be a competitor of the American and Liberty Theaters, and would be to the injury of plaintiff as the owner of the stock of the Liberty Theater Company. An order restraining the defendant from in any way violating the provisions of the contract is prayed for.

The defendant answered, admitting the execution of the contract; that he is acting manager of the Isis Theater located in Salt Lake City, and also that he is promoting a corporation which has for its object the erection of a new building on the site of the Isis 'Theater, for the purpose of conducting therein a moving picture show. As a further defense, and by way of counterclaim, the defendant alleged that prior to July 1, 1915, the date of the execution of the contract, the parties to that contract, including plaintiff and defendant, had orally agreed, as a result of numerous consultations, upon the terms of a contract for the sale of all the stock of the Liberty Theater Company; that said agreement, as orally made, did not contain any mention of or reference to the provision wherein it was provided that defendant and the other parties to that agreement would not in any way engage in or be connected with the ownership or operation of any moving picture show within Salt Lake City during five years; that when the parties met on July 1, 1915, to execute said contract, then for the first time, the written contract embodying the provision herein-before mentioned was submitted to defendant; that upon the submission of said written form of contract to defendant for his signature he refused to sign the same unless the prohibition aforesaid was eliminated therefrom; that thereupon plaintiff requested defendant to sign the contract as written, and agreed and stated that he, the defendant, would not be held to or bound by said provision, and that he, the plaintiff, would furnish defendant with a written agreement, statement, or letter to that effect; that, relying on such statement by plaintiff, and not otherwise, defendant attached his name to the contract. ‘The counterclaim farther states that said agreement or promise on the part of plaintiff was fraudulent, and was made to induce defendant to sign the contract containing the aforesaid objectionable and prohibitory clause; that defendant never at any time agreed to such provision, and that such alleged agreement or provision in said contract was never at any time any part of the consideration passing between the parties.

Trial was had and findings made in favor of the plaintiff. Judgment was entered, restraining defendant from in any way violating the terms of the contract as set out in the pleadings. From that judgment defendant appeals to this court.

A bill of exceptions, embodying the testimony taken and the proceedings had at the trial of this cause, was, upon motion of plaintiff’s counsel, stricken from the record on appeal, and the matter is now before this court on the judgment roll only. From the judgment roll it appears that no reply or answer was ever made to the counterclaim.

Before considering the merits of the appeal, it is necessary to determine one or two preliminary matters and some objections made by respondent. As stated, no reply or answer, as appears from the judgment. roll, was made to the counterclaim. The appeal was perfected and the record 1 filed in this court on June 15, 1917. On November 7, 1917, respondent’s counsel appeared before the district court of Salt Lake county (from which court the case had, prior thereto, been brought to this court on appeal, and the bill of exceptions stricken on respondent’s motion as aforesaid), and obtained an order from that court permitting counsel to file with the clerk of that court a reply denying the allegations of the counterclaim. The language of the order is:

“The motion of the plaintiff, ¥m. H. Swanson, to enter upon the record that a reply was filed in the above-entitled cause at $ie time of the trial thereof and to file nunc pro tunc, having been heretofore argued and submitted to the court and taken under advisement, and the court having considered and being now fully advised in the premises, it is ordered that the motion of the plaintiff to enter upon the record that a reply was filed be, and it is hereby, denied; but the motion of the plaintiff to file a reply at this time nunc pro tunc be, and the same is hereby, granted.”

That order, with the reply, is certified to this court by the district court, and respondent now asks that it may be considered on this appeal as a part of the judgment roll. Counsel claims the right to have such reply considered under rule No. 5 of this court (33 Utah vii, 97 Pac. vii), which so far as material here, is:

“For the purpose of correcting any error or defect in the transcript either party may suggest the same in writing to this court, specifying such error or defect, and obtain an order that the proper clerk certify the whole or part of the record, as may be required.”

It affirmatively appears from the foregoing order of the district court that the reply now sought to be made a part of the judgment roll was not in existence, and consequently was no part of the record at the time the appeal was perfected. In other words, it is attempting to get before this court proceedings of the district court had months after the appeal was perfected, and which never existed until such order of the district court was made. The object of such rule is to make the record in this court state the facts as they were at the date of appeal, and not to incorporate therein something that did not exist at that time. The reply cannot be considered in determining this appeal.

Respondent contends that under the assignment of errors as made there is nothing before this court for review. The first assignment assails the finding of the court wherein it is found that defendant agreed that he would not, either directly or indirectly, be interested in or connected with the 2 management of any moving picture theater in Salt Lake City for a period of five years. The second assignment .strikes practically at the same matter, in that it is therein alleged that the court erred in finding that defendant had violated the contract by engaging in the moving picture business in Salt Lake City within five years from the date of the contract. The third assignment is that the court erred in finding that the contract, as written, was a binding and subsisting contract. Other assignments cover substantially the same objections. It is true that the assignments state that the objections are made because the findings complained of are “not supported by the evidence.” It is also asserted that the conclusions are contrary to law. Respondent argues that, inasmuch as the evidence is not before this court, it cannot determine whether the findings are supported by the evidence or not. The record, consisting of the judgment roll, is before the court, and if that is not sufficient to support the findings complained of, then such findings are not supported by any evidence. And if the admissions in the record do not support the court’s conclusions, of necessity, such conclusions are contrary to law. This objection cannot prevail.

Proceeding now to the merits. No reply having been made to the allegations in the counterclaim, they stand admitted. In addition it appears from the judgment roll that a jury was. impaneled in the trial of the action, and some fourteen special interrogatories were submitted to that jury. 3 The answers made by the jury to each and all of the interrogatories were to the effect that the allegations of the counterclaim were supported by the evidence, and were to the effect that the allegations of the counterclaim were supported by the evidence, and were true. We must assume, not having the evidence before us, that there was ample testimony submitted to the jury to authorize such findings. It appears from the findings that this particular clause or provision of the contract now under consideration was never discussed, considered, or agreed to, by the parties in the oral negotiations; that it was for the first time submitted to defendant at the time of the execution of the contract; that defendant refused to sign the contract without the prohibitory clause being eliminated, and that thereupon plaintiff stated to him that the same should not be considered binding; that, relying upon that statement, defendant attached his name to the contract ; that plaintiff gave such assurance to defendant with the intention not to abide by or keep the same. The court rejected the findings of the jury, and refused to consider any testimony offered by defendant in support of the allegations of the counterclaim, on the theory that the same was not admissible because tending to vary the terms of a written contract. It was the contention of appellant in the district court, and is in this court, that the allegations of the counterclaim and the findings of the jury do not tend to vary or contradict the terms of the written contract, but, on the contrary, show that no such contract as claimed by respondent was ever in existence, and that possession of the contract as executed by defendant was given plaintiff on condition that the provision of the contract now under consideration should not be binding on defendant. Such are the allegations of the counterclaim which stand admitted, and such are the findings of the jury to whom special interrogatories were submitted.

That the admission, as here, of facts, as indicated, or that evidence may be heard to establish such facts, and, when proven, the existence of such facts will defeat a recovery upon a written contract, is, we think, clearly established by the authorities. Not in any way tending to vary or 4 contradict the terms of a written contract, but to prevent the enforcement of a contract that never, as a matter of fact, existed, and to prevent, as alleged in the counterclaim, and as found by the jury, enforcement of a contract the signature to which was procured by fraud and deceit. Bradburry v. White, 4 Greenl. (Me.) 391; Wiltse v. Fifield, 143 Iowa, 332, 121 N. W. 1086; Burke v. Dulaney, 153 U. S. 228, 14 Sup. Ct. 816, 38 L. Ed. 698; 17 Cyc. 692, 694. To the same effect are the decisions of this court in the recent cases of Smith v. Brown, 50 Utah, 27, 165 Pac. 469, and Martineau v. Hanson, 47 Utah, 549, 155 Pac. 432. It is true that in the decisions last cited the right to introduce parol testimony to show that the notes were conditionally delivered was, under a statute. authorizing such defense, but while that is so, that statute is merely declaratory of the general rule of law which existed prior to its enactment. It may be said that the contract in question was not delivered upon condition. Yet the facts show that it was executed and delivered on the condition and under the express promise that the particular provision of the contract in question should not be binding upon defendant, and that the contract, so far as he was concerned, was not complete, but was to be completed by respondent causing a writing to be executed, which would eliminate that particular provision from the contract so far as respondent is concerned.

Respondent further urges that any holding by this court contrary to the rulings of the district court will be in the face of its prior decisions, and especially the recent case of Smith v. Cannady, 45 Utah, 521, 147 Pac. 210. No contention was made in that case that the written contract was anything except what the parties intended it to be, or that it did not express the intention of the parties at the time. In addition, the court, in reversing the case and in holding that the lower court erred, gave as one of its chief reasons that "there are neither allegations nor proof of fraud, deceit, or misrepresentations which affect the execution or legal existence or binding force of the assignment. ’ ’ Neither is there any contention in Vance v. Heath, 42 Utah, 148, 129 Pac. 365, cited by respondent, that the contract there in question was obtained through deceit or false promises or representations. The rulings in those cases arc not applicable to the facts as disclosed by the record in the case at bar.

In addition, even though we were constrained to hold that the court did not err in excluding the testimony on the ground that it tended to vary or contradict the terms of the written contract between the parties, still the plaintiff would not be entitled to the relief sought in this action under the 5 admitted facts, or under the facts alleged if proven, because restraining or enjoining the violation of a contract, which in this case is, in effect, decreasing a specific performance of the same, is not a matter of right, but is a matter of discretion in a court of equity. In Huntington v. Rogers, 9 Ohio St. at page 516, it is said:

“A specific performance of a contract of sale rests in the sound legal discretion of the court, in view of all the circumstances of the case. It is not a matter of right, but of grace; and the defendant will succeed in procuring the dismissal of the bill if he can convince the court that the exercise of their jurisdiction will be inequitable under the circumstances. 2 Leading Cases in Equity, vol. 2, pt. 1, Section 517, ami cases there cited. 'There are a few eases in which equity will insist on the maxim that he who seeks equity must do it with more rigor than in those of suits for specific performance.’ Id. 550. And it makes no difference whether the circumstances which render the claim for specific performance, when made, inequitable arose prior or subsequent to the date of the contract sought to be enforced. Perkins v. Wright, 3 Har. & McH. [Md.] 326. In either ease, a court of equity will leave the parties to their remedies at law.”

On this same subject, Mr. Justice Cooley, in Chambers v. Livermore, 15 Mich. at page 388, says:

'' Specific performance, even of a binding contract, is not a matter of right; and a court of equity will refuse it, and turn the complainant over to his remedy at law, if not clearly satisfied that it embodies the real understanding of the parties.”

See, also, Quinn v. Roath, 37 Conn. 16.

Plaintiff is seeking the aid of a court of equity to enforce a contract, which, under the admissions as contained in the pleadings, as well as the findings of the jury, he procured by fraud and deceit. A court of equity is a court of conscience, and any one appealing to or asking the aid of 6 such court should come into it with clean hands. As indicated, we must assume that the allegations of the counterclaim are true for the reasons stated. Such being admitted, it would be inequitable and unjust to specifically enforce this contract as against defendant for the reason that it affirmatively appears that the contract was executed upon verbal promises and assurances that that provision would not be enforced and was not to be binding on defendant.

It follows that the court erred in its findings of fact and' in its conclusions and judgment. The cause is therefore reversed and remanded to the district court of Salt Lake County, with directions to that court to make findings of fact and conclusions of law in accordance with the views herein expressed, and to enter judgment dismissing the bill; appellant to recover costs.

FRICK, C. J., and McCARTY, CORFMAN, and THURMAN, JJ., concur.

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Rehearing

ON Petition for Rehearing.

GIDEON, J.

Respondent has filed a petition for rehearing in which it is strenuously insisted that the court erred in holding that, as there is no reply made to the allegations of the counterclaim appearing in the judgment roll, this court was wrong in accepting the allegations as admitted facts. Respondent 7 contends that, inasmuch as the plaintiff went to trial without a reply to the counterclaim, a reply was therefore waived, and numerous authorities are cited in support of that contention. That question or contention is presented for the first time in the petition for rehearing. Appeal was perfected and transcript filed in this court on June 19, 1917. Thereafter, the abstract was filed, and the appellant filed his brief on-October 17th. The case was argued on October 18th and submitted, and the respondent was then given time to file his brief. Thereafter, on October 20th, the respondent’s motion to strike the bill of exceptions was granted, and that left the appeal to be heard and determined upon the judgment roll. On November 10th respondent appeared in this court, and presented a certificate from the clerk of the district court, indicating that on the 7th day of November, 1917, counsel had obtained an order from the district court in which respondent was authorized to file a reply nunc pro tunc to the counterclaim, and that was submitted to this court on November 10th, based upon a motion to make the reply part of the judgment roll. Thereafter, on November 14th, respondent, within the time allowed, filed his brief. In the brief, counsel challenged the sufficiency of the assignments, but his chief argument and principal contention was that the counterclaim did not state facts sufficient to entitle the defendant to any relief, either affirmatively or as a defense. The case was considered upon the points presented in the argument, and this court held adversely to respondent’s contention. Nowhere in his brief or in the oral argument was there any intimation or contention that the appellant had waived a reply to the allegations of the counterclaim. On the contrary, it was, at least by inference, admitted that if this court did not permit the filing of the reply allowed by the district court on November 7th, the case would be considered upon the admitted facts as contained in the counterclaim, and counsel proceeded to argue and have the case determined upon those questions. Now, for the first time, we are presented with a new theory. Counsel ought to at least be consistent. We considered the questions argued by counsel, and decided the case on the theory contended for by him, and he will not now be permitted to present to this court a new theory or contention which was neither in the record as it was before this court nor in the arguments made. Under the circumstances we do not feel called upon to pass upon the question as to whether appellant might not or did not waive the filing of reply.

In addition, as we view the case, after all it is immaterial whether a reply be deemed to have been waived or not. The jury impaneled by the court found the facts in favor of the counterclaim. The court below, when rendering its findings, did not pass upon the facts at all as found by 8 the jury, but erroneously assumed that the evidence offered by the defendant was incompetent because it tended to vary and contradict a written contract. If the court had found in favor of the respondent on the evidence, and had found facts not in accord with the jury’s findings, then a different question would be presented to this court. But the court’s ruling excluding the testimony left the jury’s findings intact and unimpeached, and in legal effect adopted such findings as being supported by the evidence, if such evidence was admissible.

It is further insisted that the opinion of the court in effect holds that the verdict of a jury in an equity case is final and binding upon the chancellor.. No such statement is contained in the opinion; neither can such conclusion be fairly made from the opinion as written. What we did hold 9 and do hold is that the facts as stated in the counterclaim, and which were treated as admitted by counsel in his argument, if the reply was not permitted to be filed, were sufficient as matters of law to prevent a recovery on the part of the plaintiff. Had the court sought to disregard the findings of the jury as not agreeing with his conclusions of what the testimony established, it is needless to say that the court was in no sense bound by the jury’s findings, and could have made such findings as the court thought the testimony warranted.

In the counterclaim in question it is alleged that the defendant was induced to place his name to the contract, sought to be enforced, by the false and fraudulent representations of the plaintiff, respondent, and which false and fraudulent representations were made with the intent and 10 purpose of inducing defendant to sign the contract. The jury’s findings support those allegations. It has been considered an elementary proposition that fraud vitiated all contracts when established, and that any one induced to make a contract by false representations could be relieved from the burden thereof by a court of equity. Such in short is the holding of this court in its opinion in this case. That principle of law has been usually recognized by all courts and text-writers, and we do not feel disposed to depart from a rule founded, as it is, upon ordinary common honesty.

The petition for rehearing is denied.

FRICK, C. J., and McCARTY, CORFMAN, and THURMAN, JJ., concur.

Case Details

Case Name: Swanson v. Sims

Court Name: Utah Supreme Court

Date Published: Dec 21, 1917

Citation: 170 P. 774

Docket Number: No. 3094

Court Abbreviation: Utah