Payne v. Beard

HOOK, Circuit Judge. This is a suit by Horace L. and Mima Payne, husband and wife, against L. B. and R. B. Beard, to cancel two deeds through which L. B. Beard claims title to 80 acres of land in Muskogee county, Okl. The plaintiffs lived at Nevada, Mo. The defendants were partners in the real estate business at Muskogee, Old., and were plaintiffs’ agents for the safe of the land at the net price of $2,200. They reported having made a sale to one Lambert, a brother-in-law of R. B. Beard, at the price fixed, but before the purchase money was paid, and before plaintiffs’ deed to Lambert was delivered, L. B. Beard raised the money and took a deed from Lambert to himself, without plaintiffs’ knowledge or consent. The petition sufficiently presents two grounds of complaint: Eirst, that defendants during their agency fraudulently suppressed information of recent oil developments and transactions in the near vicinity of the land, affecting substantially and favorably its market value; and, second, that irrespective of actual fraud L. B. Beard was at the time disqualified to buy without plaintiffs’ knowledge and consent, because when he did so the sale to Lambert was not so- far complete that he (Beard) -was discharged from his duties and obligations as their agent. On final hearing the trial court held with defendants on both grounds, and the plaintiffs appealed. The first ground of complaint may be passed without decision. Upon the second the trial court applied Robertson v. Chapman, 152 U. S. 673, 14 Sup. Ct. 741, 38 L. Ed. 592, and Hermann v. Hall, 133 C. C. A. 619, 217 Fed. 947. These cases recognize the rule that an agent to sell property cannot become the purchaser without the knowledge and consent of his principal, and that if he does so under the cover of the name of another person he may be compelled, at the election of the principal seasonably exercised, to Surrender it, and that this is so regardless of injury to the principal or the agent’s actual fraud by suppressing information in his possession or misrepresenting the condition or value of the property.' In the two cases mentioned it was held that the facts [249] did not fall within the general rule above stated. In Robertson v. Chapman it clearly appeared that, before the agent bought from the purchaser, the sale to the latter had been so far consummated that it was not in the power of either party, principal or purchaser, to rescind it, and that the “'agency for the sale of the property had, in every material sense, terminated.” This and the fact that the subsequent sale to the agent was bona fide, and not the carrying out of a device or prearrangemeut during the agency, were the ruling features of that decision. And in Hermann v. flail it appeared that the sale by the agent to a bona fide purchaser had been “so far completed that it could have been enforced by either the vendor or the vendee,” and further that “the agency of the defendant [the agent] thereupon, in all material respects, terminated.” The reason of these cases is plain. But, on the other hand, if the sale by the agent has not been substantially consummated because of noncompliance with an essential legal requirement, or because of some matter of agreement between him and his customer, the agency and the disqualification of the agent still remain. The 'agent cannot catch the title while it is in the air. His right to purchase begins when he is as free to deal with his principal as the rest of the world, and there is no longer the temptation between duty and self-interest. Until that time arrives it is his duty faithfully to communicate to his principal every important development affecting the value of the property and the attitude of the prospective purchaser. What are the controlling facts here? On May 16, 1915, the defendants, as plaintiffs’ agents, offered the land to Lambert for $2,200, the net price fixed. Lambert said he would take it, and gave R. B. Beard his check for $200, on which was written “Part payment on Payne 80 in 14—14—16.” He also said that when the deed came and the title was approved he would pay the balance. May 17th defendants wrote plaintiffs, saying they had sold the land to Lambert. They inclosed a deed for execution, which they suggested should be sent through a bank for collection. May 18th plaintiffs executed the deed and sent it to a bank in Muskogee, to be delivered to Lambert upon his payment to the bank for them of $2,200, net. On the same day they wrote defendants what they had done. May 19th Lambert was advised of the arrival of the deed. The trial court found from oral testimony that Lambert then said to R. B. Beard that he had probably acted a little hastily in buying, and asked Beard if he could not sell the land for him to somebody else, to let him out even and save the $200, but said, if he could not, he would take it. As we will presently note, this does not fully accord with another explanation given of Lambert’s attitude. The next day, May 20th, L. B. Beard decided to buy the land himself. A deed from Lambert to him was prepared May 21st, and on the same day lie made a written application to a mortgage loan company for a loan of $1,000 on the land, reciting that he had bought it the day before for $2,200. The money sought was to be used by L. B. Beard in buying the iand; the balance of $1,200 was otherwise raised by him. Lambert’s deed to L. B. Beard was executed May 24lh, and the latter deposited it in the bank, with plaintiffs’ deed, until the abstract of title was examined, the title approved, and the purchase price raised and paid. All this was concluded May 25th, and the deeds were delivered [250] to' L. B. Beard. R. B. Beard, who had possession of the $200 check, returned it to Lambert, who destroyed it. In reply to a letter from one .of the plaintiffs, L. B. Beard wrote June 11th that he had bought the property; also that, if Lambert “had taken the land, it would have been necessary for me to personally guarantee it to be a good proposition, and I decided to take it and turn it again to some one.” In their answer defendants averred that, after plaintiffs’ deed arrived at the bank in Muskogee, Lambert, the grantee, “had become uncertain and doubtful in his mind as to the desirability of his purchasing such land, and requested of these defendants certain guaranties respecting the value thereof, which these defendants were unwilling to give, and that said Clarence Lambert desired and requested these defendants to> take said property off his hands.” The Oklahoma statute of frauds (section 941, R. L. 1910) provides that an agreement for the sale of real property shall be invalid unless some note or memorandum thereof be in writing and signed by the party to be charged, or his agent. It is clear that when L. B. Beard acted in his own behalf the transaction had not progressed to 'the point where its completion could have been enforced against Lambert. Aside from his check, not a particle of writing passed between him and the plaintiffs’ agents, and even the giving of the check rested at the trial in parol. It cannot be seriously contended that the check was sufficient by itself to bind him. See Halsell v. Renfrow, 14 Okl. 674, 78 Pac. 118, 2 Ann. Cas. 286; Id., 202 U. S. 287, 26 Sup. Ct. 610, 50 L. Ed. 1032, 6 Ann. Cas. 189. A binding obligation of a purchaser to buy is tested by determining what he could be compelled to> do when in an adversary, defensive attitude. Until the agent has found and bound a purchaser, it is obvious that his agency has not, “in every material sense, terminated.” If the purchaser is at liberty to rescind, as Lambert was, a most important part of the agent’s service remains undone. To allow him to cast aside his agency for his personal interest at such a juncture, and to support his conduct by oral evidence of the purchaser’s willingness to buy, would open the door to the very evils that the rule of disqualification was designed to prevent. The correspondence between plaintiffs and defendants and the sending of the deed to the bank are not important in this connection. Lambert was not a participant in either; they were not writings or memoranda by him, and they imposed on him no obligation. It should remain in mind that defendants were not Lambert’s agents, or mere impartial go-betweens. The correspondence established defendants’ agency for the plaintiffs and its terms, as to which there was no issue. The sending of the deed to the bank merely constituted the bank a collection agent of the plaintiffs. It was not an escrow, under a stipulation or agreement to which Lambert was a party. When the facts are placed in their proper categories, and then considered, we think the case is like Moore v. Petty, 68 C. C. A. 306, 135 Fed. 668, in all essential particulars. See, also, Tyler v. Sanborn, 128 Ill. 136, 21 N. E. 193, 4 L. R. A. 218, 15 Am. St Rep. 97. We think the plaintiffs acted seasonably and that there was no rati'fication. It is true that they made unavailing efforts to secure an interest in the property before rescinding the sale, but they were the nat [251] ural result of an uncertainty as to legal rights and caused no prejudice or disadvantage to defendants. The decree is reversed, and the cause is remanded, for the entry of a decree in favor of the plaintiffs, and for further proceedings accordingly.