Maitland v. Traver

SEAMAN, Circuit Judge (after stating the facts as above). The verdict and judgment against Maitland, the plaintiff in error and defendant below, award recovery upon his written agreement to pay Traver, plaintiff below, $25,000 on or before four years from its date. Although the agreement is dated February 7, 1903, the testimony of the parties is conflicting as to the actual date of making and delivery, whether in February or in December, 1903, but this difference between them bears only on the credibility of their respective versions of the transaction as submitted to the jury and settled by the verdict. The agreement (promissory note) recites, as the consideration thereof, “the — 435 — sale, transfer and assignment to me by Wilber H. Traver of all his right and claim to receive fifty thousand shares of the capital stock of the Penobscot Mining Company of South Dakota, as evidenced by'an instrument of transfer, bearing even date herewith, executed” by Traver; and the instrument referred to, dated February 7, 1903, and signed by Traver, was produced by Maitland at the trial and appears in evidence. It describes the 50,000 shares of stock, thereby sold, assigned, etc., as “coming to me from the said Alexander Maitland under and by virtue of a certain contract dated February 2, 1903, between the said Maitland on the one part and myself and one Frank R. Byrns on the other part,” and further states: “I do hereby release, acquit and forever hold free and harmless the said Maitland from any and all claims and demands of whatsoever kind and nature arising out of and by virtue of said contract.” Both of these instruments were prepared in Chicago by Maitland’s attorney, and execution and delivery by Traver of the transfer and release passing title to all interests in the premises which had accrued or were to accrue in favor of Traver are undisputed facts; and it is conceded that no payment has been made by Maitland on his agreement. ■ [1] The contentions for reversal rest entirely on allege4 error in rulings of the trial court excluding testimony offered as matter of defense, under a “notice of special defense” filed on behalf of the defendant. This notice is a form of pleading certain defenses, in actions upon notes and other instruments for payment of money or property, authorized by statute in Illinois, as between the original parties. Sections 9 and 10, c. 98, Hurd’s Rev. Stat. 1905. Vide R. S.‘ 1845, p. 385, §§ 10, 11. It is settled by decisions of the Supreme Court of the state that the defenses which may thus be set up are: (1) That the instrument was made without any valuable consideration; (2) that the consideration has wholly faile4; (3) that there has been “a part failure of the consideration”; and (4) that “fraud and circumvention have been used in obtaining” the instrument. Sims v. Klein, 1 Ill. (Breese), 302, 303; Taft v. Myerscough, 197 Ill. 600, 603, 604, 64 N. E. 711. Thus the issue for review is limited to the inquiry whether testimony was expressly offered on behalf of the defendant and rejected by the court, which would tend to prove one or more of the above-mentioned defenses- embraced in the notice. In reference to the notice of' special defense, we believe the utmost import of the various specifications of matters the “defendant will give in evidence and insist in his defense” may be summarized in these propositions: (1) That the agreement in suit was induced and obtained by “fraud and circumvention” and through “conspiracy” on the part of the plaintiff and his associates. (2) That the plaintiff was not entitled to any of the shares of stock purporting, to be transferred to the defendant, and consideration for the agreement “has wholly failed'.” (3) That prior to such agreement, and early in the year 1902, the defendant had been induced by frau4ulent representations and conspiracy on the part of the plaintiff and his associates to purchase gold-mining — 436 — properties (named) in South Dakota, had taken titles thereto, and invested upwards of $500,000 in and about their development, without success or reimbursement in any'manner. (4) That a purported corporation, Penobscot Mining Company, had been organized by Maitland, Traver, and one Byrns (to take over the mining properties when transferred by Maitland), with $500,000 of capital stock, whereof $300,000 was to be “treasury stock,” which Traver represented and agreed would be sold by him to outside parties and the proceeds applied to reimburse Maitland’s investment, and the remaining $200,000 to be issued to the incorporators 'after Maitland had been reimbursed, $100,000 to Maitland and $50,000 each to Traver and Byrns; and that the agreement of Traver to sell the treasury stock for reimbursement of: Maitland was in full force entirely unperformed and entered into the agreement in suit and was relied upon to give value to the transfer, but remains wholly unperformed, so that the transfer is worthless. (5) That the mining properties so purchased by the defendant have shown no evidence of value, and whether they contain ore of value “is as yet unknown.” At the trial, the defendant Maitland testified at considerable length, detailing the circumstances of his purchases of the South Dakota gold-mining properties and of his investments for erection of a mill and development of the mines, together with representations and agreements on the part of the plaintiff and his associates which had induced him to make such purchases and investments; the court having overruled at that stage the objections raised to such testimony. [2] It expressly appears therefrom: That all purchases were made from outside parties and his entire investments made long prior to the transaction in controversy, with titles preserved in him; that operations had been carried on throughout the year 1902 under his control, direction, and expense; that the corporation organized to take over the properties, with capital stock provided for as described in the notice of defense, had proceeded no farther than to place the stock in the hands of Maitland, to hold until it was disposed of as the parties had stipulated; that Traver had agreed to sell the treasury stock to outside parties for proceeds to be applied for reimbursements of Maitland; that Traver and Byrns stipulated in writing that Maitland was to be reimbursed for his cash investments “before there is to be any payments in the form of dividends or otherwise, to the promotion stock interests”; that Maitland had become dissatisfied with the status of affairs, and early in February, 1903, on his return with Traver from a visit to the mines, negotiations occurred between them for purchase by Maitland of Traver’s claim of interest in the properties; and that such negotiations were continued in Chicago and resulted in the agreement in suit. Upon this showing on the part of the defendant of the state of facts under which the agreement was concluded, the trial court became satisfied that the negotiations and transaction were' separated from and independent of the prior transactions and investments, in time,- purpose, and consideration; that the defense predicated thereon was inadmissible; and, ruling in conformity with that view, the above-men — 437 — tioned testimony was excluded from submission to the jury, together with various tenders of proof in further support of the defense so predicated. . The defendant, however, was permitted to testify and testified in reference to the circumstances and conversations between the parties leading up to and attending the execution of the agreement in suit, including therein his version of an agreement by parol between them that the note was not to be, paid when due unless Maitland (thepromissor) “had previously received his money, or words to that effect,” which version was denied by the plaintiff’s testimony; and the court, assuming that an issue of fact arose in respect of this alleged oral understanding, submitted it to the jury for determination, and their verdict was adverse to such contention. Whether this testimony was admissible, in any view, to affect the instruments so executed by both parties may best be considered under the other branch of the defense. Thus the contract terms for payment of $25,000, if not otherwise conclusive, are settled by the verdict; and it is likewise settled, both by evidence and verdict, that the entire consideration entering therein was purchase and release of the promotion share of Traver in the venture (including his Retirement from the corporation), which interest appeared, by written agreement between the parties, as 50,000 shares, or one-fourth of the “promotion stock,” to be effective only when Maitland had been reimbursed for his investments. Its value was plainly understood by both parties to be problematical, contingent on developments of the mjnes, as referred to in. the notice of defense, and it'is equally clear that the purchase and release was treated and regarded by both as a valuable and sufficient consideration for the note, and that the benefits thereof were so accepted and retained by the defendant for his purpose of reorganizing a corporation to take over the mines, as disclosed by his testimony. In the absence of evidence, either produced or expressly offered, tending to prove that execution of their agreement was obtained by “fraud and circumvention” on the part of the plaintiff (as the notice of defense repeatedly states the “defendant will give in evidence and insist in his defense”), we are of opinion that the testimony and offers of testimony in support of the averments of fraudulent representations and conduct in the transactions of the previous year were rightly excluded by the trial court. The bill of exceptions shows neither testimony nor offers of testimony tending to support the charge of fraud entering into the agreement; and it is conceded in the brief, submitted on behalf of the defendant (plaintiff in error), that such defense failed for want of proof. Nevertheless, it is contended that the testimony so excluded was admissible as tending to support the remaining defense set up under the statute, namely, that the consideration for the agreement “has wholly failed.” The theory upon which this contention is urged by counsel is stated in their argument in two propositions, in substance as follows: (1) That the prior representations of Traver, both of “his ability to sell stock” and of purchasers “he had secured” to take stock, “had a direct bearing on the value of- Traver’s right to — 438 — promotion stock, which he was to receive only after he had sold the so-called treasüry stock,” and the fraud as to the value of the stock “constitutes failure of consideration.” (2) That the note in suit “was one step only in a conspiracy entered into * * * to defraud Maitland through this mining scheme,” and the representations which induced his prior investments in the properties, as the earlier “steps taken in pursuance of this design are admissible as being part of the same general transaction.” If neither of these claims is tenable, it is obvious that error is not well assigned, and we are of opinion that both are not only fallacious and beside the issue presented by the suit, but that both are inconsistent with the conceded facts, and the second proposition is not within any tender of proof at the trial. The testimony of the defendant had established (as before stated) that the representations referred to were made and the object consummated by the investments of Maitland in the mining properties, together with the provision for the promotion shares of Traver and Byrns in the corporation upon conditions stated, all apart from and long prior to the negotiations which resulted in the present contract for release of Traver’s interest and participation in the venture. With this last transaction between these parties so separated from the alleged representations, both in character and event, its independence therefrom was in effect conceded by counsel for the defendant at the trial, in answer to an inquiry by the court, namely, that it was not claimed to have been within the contemplation of either party when the representations were made'and acted upon. So, whatever may have been the bearing and force of these representations in the original transactions, as stated in the notice, we believe them to be irrelevant and without force for defense against the new contract, differing entirely in purpose and effect from the prior transactions, described, in the notice as intended, induced, and accomplished through such representations. Recurring to the notice of defense, its charges of fraud and conspiracy rest wholly on the representations there specified as inducing his investments in the property, and no doubt is entertainable that most of such representations are mere expressions of opinion and promises which do not amount to actionable fraud under the averments. F.or the purposes of this inquiry, however, we lay aside the question whether any of the representations stated support these charges, and proceed on the assumption that one or more thereof may be sufficient to that end, in reference alone to the original transactions. The testimony and offers of testimony which were excluded, with the possible exception of two offers to be separately considered, are predicated alone on the' charges of fraud in the prior transactions, and we believe such rejection was required pursuant to the elementary rule of evidence against the reception of irrelevant matter to defeat or affect the independent cdntract. It is undoubted, of course, that competent evidence would be admissible to prove that any of these prior representations entered into and became part of the consideration for this contract by express agreement of the parties, thus making it a — 439 — new representation or promise for the new purpose, but the original representations have no force in that direction, as we understand to be the contention in each of the above propositions. The last-mentioned view, that the prior representation must be renewed to become effective for the new purpose, appears to have received some measure of recognition in framing the defense, in the attempt to prove the agreement by parol, that payment of the note was conditioned upon the performance by Traver of his pre-existing promise to sell the treasury stock for reimbursement of Maitland’s investment. While that version of the transaction was submitted to the jury and settled adversely, it is contended that the defendant became entitled, through such testimony, to submission as well of the prior representations and agreement referred to, so that error was committed in its exclusion. We believe it to be sufficient to remark, in answer to this proposition, that the consideration for- the note was distinctly stated in writing, in both instruments, and, no “fraud or circumvention” entering into the execution (as conceded), extrinsic testimony to change their terms or effect was inadmissible, under any theory of the issues. The record shows two offers of proof, above referred to as possible exceptions from the theory of the other offers, which were so urgently pressed at the trial that we have reserved them for special mention, although not impressed with either tender as' presenting a meritorious question: (1) One of these offers was “to show that said mining properties have never paid, and have been shut down for upwards of five years, and are without value as mining properties or for any other purpose.” On objection interposed that this was “a variance from the notice of defense,” an amendment of the notice was allowed to conform thereto, but the offer was nevertheless rightly overruled as irrelevant. Laying aside its obvious inconsistency with the prior averments and testimony, it was both conceded and settled by the undisputed evidence that both parties entered into the contract in suit, equally well informed as to developments of ore in the mines, and that their producing value was “entirely problematical,” and without concealment or fraud entering into such contract, so that liability for performance could not be affected by the proposed proof of their present value or want of value. (2) The other offer was thus stated: “To prove and show that at the time of the execution” of the instruments “the plaintiff owned no stock in the Penobscot Mining Company,” had “no right to the stock,” and the note given therefor “was entirely without consideration.” For support of this offer, however, counsel relies upon the prior agreement between the parties postponing title to the stock until the treasury stock had been sold for reimbursement of Maitland, so 'that the foregoing ruling against its admissibility is applicable aliké to this offer. As the entire interest of Traver in the undertaking was obtained in conformity with the mutual purpose of the bargain, with full understanding of its character, and no fraud, concealment, or mistake entered into the contract, under well-recognized general principles any failure of ultimate benefit or title through the purchase does not constitute failure of consideration to relieve from — 440 — liability upon the contract, and such is the settled rule as well in Illinois. Kerney v. Gardner, 27 Ill. 162, 168; Cobb v. Heron, 180 Ill. 49, 54, 54 N. E. 189. This principle is aptly stated by Chief Justice Mitchell, in Ingalls v. Miller, 121 Ind. 188, 22 N. E. 995: “That one who, with all the facts before him, and without fraud, oppression, or imposition, decides his own case against himself cannot afterwards appeal to the courts to reverse his own decision.” We are of opinion, therefore, that error is not well assigned for reversal, and the judgment of the district court is affirmed.