Guaranty Trust Co. v. Dinwiddie

Mr. Justice Burnett delivered the opinion of the court. The fraud relied upon by the defendant consisted in the representations made to him by one Frank J. Kilpatrick, as stated in his answer. It appears without dispute that R. F. Kilpatrick was the treasurer of the coal company, and by its authority had charge of the business of marketing its bonds. Frank J. Kilpatrick was his father, and they officed in the same place in New York City. It is contended by the plaintiff tha.t the latter was not in any way connected with the company and had no authority to represent it. The testimony of the defendant is clear and explicit in support of his answer about the representations which induced him to subscribe, and there is abundant evidence to take to the jury the matter of their falsity. In this branch of the case the crucial question is whether the plaintiff, as assignee of the coal company, is bound by the statements of Frank J. Kilpatrick. The son, a witness decidedly hostile to the defendant, testified that the father knew about the company and its property; that he had access to the papers of the son, who either gave to his parent or the latter took [658] with his consent the subscription paper which the defendant signed. 1-3. "We note in passing that the contract involved is not a negotiable instrument so as to free it from defenses against an innocent holder. It being non-negotiable, the assignee takes no greater nor better rights than existed in the hands of the original holder, the assignor. We remember also that this is not an action to enforce against the company a contract made through its alleged agent, where it would be a legal platitude to say that the party seeking to recover from a defendant on a compact made with the latter’s agent must prove the agency. This principle, however, is not by the mark in this case. Here the plaintiff, as successor in interest of the coal company, has undertaken to recover upon an agreement not made directly by its predecessor, but through someone else who assumed to act for it. The plaintiff affirms the contract, and is not resisting its enforcement. It is without dispute that the transaction was accomplished in the city of New York, while the properties of the coal company were in the State of Tennessee, and that Prank J. Kilpatrick was the only person with whom the defendant talked concerning any of the matters involved. It is manifest that the elder Kilpatrick was not acting for himself; for the contract which resulted was in the name of the coal company, on the one hand, and the defendant, on the other. He was not acting for the defendant either, for the latter was present in person and conducted the negotiations for himself. The elder Kilpatrick occupied a position adverse to the defendant. He assumed to represent the other party in the affair. Without him it would not have happened, and the plaintiff would have nothing to sue upon here. It may be granted, for it is beyond question, that he had [659] no actual authority to represent the coal company in the first instance; yet the fact remains that the convention upon which the plaintiff relies was the result solely of the negotiations between Kilpatrick and the defendant. The son declared as a witness that his father knew of the conditions of the company and its affairs. It is unchallenged that the representations were not according to the fact. Considering that the property in question was in a distant state, and that the defendant was without opportunity to examine for himself without journeying' thither, the exaggerated representations of the elder Kilpatrick constituted fraud within the meaning of Boelk v. Nolan, 56 Or. 229 (107 Pac. 689). The deceit thus practiced constituted an inherent infirmity in the resulting contract. It attends it throughout its course, and, the instrument being non-negotiable, the defense based upon the covin may be urged against anyone seeking to enforce the terms of the document against the defendant. Although without actual knowledge of the fraudulent conduct of the negotiator, anyone relying upon the agreement must take it with the good and the bad. He cannot appropriate what is favorable and ignore its defects. He must take the transaction as a whole, and not by piecemeal. The doctrine is clearly and succinctly stated by Mr. Justice Bean in Wilson v. McCarthy, 66 Or. 498 (134 Pac. 1189). Other authorities supporting the principle are Busch v. Wilcox, 82 Mich. 336 (47 N. W. 328, 21 Am. St. Rep. 563); Anderson v. Scott, 70 N. H. 350 (47 Atl. 607); Williamson v. Tyson, 105 Ala. 644 (17 South. 336). Complaint is made on this branch of the case that the court refused to instruct the jury to the effect that they could not consider representations made by Kilpatrick unless they should find that he was the agent [660] of the coal company or that the latter ratified his acts after knowledge that he was acting for it, and, further, that no act is capable of artification which is not performed by an agent as agent in behalf of the principal. These instructions would have been applicable if the defendant had been seeking to enforce against the coal company a contract made by him with Kilpatrick as its representative. The reverse of such a proposition is the one upon which the case is founded. Here the effort of the company’s assignee is to enforce a stipulation not made directly by the assignor, but by the elder Kilpatrick acting in its behalf, so that the compact must be taken all together, and. not in part only. 4. It is further contended that the plaintiff made no objections to the tender, and must be held to have waived the same. This argument worked out to its logical conclusion would dispense with any fraud or other infirmity of the original agreement. Tender presupposes a valid executory contract of which the tender is an offer of performance. Without such a basis it would be a vain transaction binding no one to offer to do anything. The fallacy of the plaintiff’s contention on this point is apparent when we consider for illustration that, if by the actual fraud of the coal company the defendant had been induced really to part with his money in return for worthless bonds, the mere fact that they were in due form and had been delivered to him would not preclude him from recovering what he had paid. Tender refers to manner of performance, and does not dispense with ability to perform nor cover up the fraud inducing the execution of the contract the plaintiff would enforce. Neither does compliance with the letter obviate breach in the substance. Sayre v. Mohney, 30 Or. 238 (47 Pac. 197), was a case where the plaintiff had tendered a deed [661] fair upon its face as_ fulfillment of her contract to sell land to the defendants, who without making objections to the terms of the instrument, as, indeed, they could not, refused to pay the note given for the balance of the purchase price. For all that, however, they were allowed to defend the action brought to recover the amount of the note on the ground that the plaintiff had no title to part of the land included in the contract. 5. Again, it was urged that the court erred in allowing the jury to be informed of the bankruptcy of the coal. company occurring prior to the tender of the bonds. In this connection it is beyond controversy that the bonds were not a first lien upon the property of the company. In that sense at least they did not comply with the terms of the offer of first mortgage bonds. Owing to the bankruptcy of the coal company and the settlement of its estate in the manner alluded to in the pleadings, these bonds ceased to be its obligation. They had become inert, and a tender of them by whomsoever made would no longer comply with the terms of the contract sought to be enforced. It would be like tendering the carcass of a dead horse in performance of an executory contract for his sale made while he yet lived. The court was right in its instructions and we find no error in its record. The judgment is affirmed. Affirmed. Mr. Chief Justice Moore, Mr. Justice Bean and Mr. Justice Harris concur.