Adams-Booth Co. v. Reid

HAWLEY, District Judge (orally). I am of opinion that this court would have been justified in refusing to allow defendants to offer any parol testimony as to the alleged agreement they made with the father. ■ The agreement was not in writing, and by its terms was not to be performed within one year from the making thereof; and the evidence given by the witnesses came within the provision of the statute of frauds, and should have been excluded. Warner v. Railway Co., 164 U. S. 418, 431, 17 Sup. Ct. 147, 41 E. Ed. 495. But it unnecessary to rest this opinion solely upon that ground. Admitting, for the sake of the argument, that there was such a full or part performance of the agreement as would take the case out of the statute, so far as the father was concerned, and that, in a suit by the sons against the father for a specific performance of the agreement, they would, upon similar testimony to that given in this case, be entitled to recover, because the father admitted the agreement, and full compliance therewith, substantially as alleged in the answer of his sons; but in my opinion, the entire testimony, when carefully weighed and duly considered, in the light of all the facts and surrounding conditions and circumstances, is wholly insufficient to constitute a defense against the rights of the plaintiff in this action. The defendants contend that they are entitled to maintain their verbal agreement made with the father, against plaintiff, on the ground that it had actual notice thereof at the time it accepted the mortgage from their .father and mother. Both of the sons were positive that such notice was given, and detailed with great minuteness all that was said and done on that occasion. All the members of the Reid family were present. Mr. Walsh, acting as the agent of the plaintiff, was at the store for the purpose of securing the indebtedness of. P. K. Reid then due and owing to plaintiff, in the sum of $3,500. He requested the father and mother to ex'ecute a mortgage upon the real estate to secure this indebtedness, and the sons testi,fied that they notified Mr. Walsh that they each owned an undivided one-third interest in the real estate, under the verbal agreement made with the father, and that they then and there objected to the giving of the mortgage, and that Walsh said that the execution of the mortgage was a “mere matter of form.” The father testified that he informed Walsh that he only owned one-third of the property, but his testimony must be taken and considered in the light of other testimony given by him. When he was asked why he did not make that defense at the time of the foreclosure suit, he replied that he was never served with any papers, and did not know anything about that suit, and had no opportunity to defend it; and this in the face of the fact that the records in that case, on file in this court, show that both he and his wife were regularly served with process. The testimony shows that the father and mother objected to signing the mortgage unless plaintiff would agree to make a further advance of $1,500, so that they could continue business. This objection was overcome by the promise of Walsh that this would be done, and the note was then [111] given for $5,000, so as to include this advance in addition to the amount of the $3,500 then due; and the mortgage was given to secure this note, and the husband and wife signed the mortgage without further objection. It would serve no useful purpose to detail at any length the testimony of the Reids as to the notice. It is enough to say that it is neither satisfactory nor convincing, and in many respects is unnatural and unreasonable. Is it reasonable to believe that the father, if he had made the agreement with his sons, and given the notice thereof to plaintiff, as alleged in the answer and testified to by the members of the family, would have executed the mortgage upon the entire property? Is it reasonable to believe that, if in fact he only owned one-third of the property, he would, on the same day of the execution of the mortgage, voluntarily have executed the memorandum attached to the mortgage, that “all stone, cut and uncut, now on my ground at Lovelock, ⅜ * ⅜ to be considered as part of the realty, and be included as a part” of the mortgage? Is it reasonable to believe that, having been regularly served with process in the suit to foreclose the mortgage, the father would have allowed the suit to go by default? Is it reasonable to believe that the father on June 7, 1897, would have executed the memorandum of lease hereinbefore set forth, declaring, among other things, that the Adams-Booth Company “are the owners of, and on August 5, 1897, will be entitled to the possession” of, the property described therein ? With reference to the notice, Mr. Walsh, called in rebuttal, testified : That he had no conversation with either of the sons, and could not recollect -whether they were present in the room. That P. K. Reid and his wife objected to the signing of the mortgage unless plaintiff would make a further advance of $1,500; that unless that was done they could not get further goods, or continue their business. “I told them that I felt certain, from the kindly feeling existing by Mr. Adams, that he would carry them for a further amount of goods, and to make this mortgage for five thousand dollars to cover further advances. Then they consented, and signed the mortgage.” Upon his cross-examination by defendants’ counsel, the following questions were asked, and answers given: “Q. Are you positive, Mr. Walsh, that, at the time that you drew the mortgage in Lovelock, that you did not see Paul Keid or Emmett,—those two men here? A. I am not positive; no, sir. Q. Then they might have been there, and you not know it, or not remember it, rather? A. They may, perhaps. Q. Are you positive that they did not protest as against the giving of that mortgage at that time? A. To the best of my knowledge on that, I am positive. Q. You are positive? A. To the best of my knowledge, I am positive. Q. You would not say ‘No,’ would you, and stand to it? A. I would say it to tile best of my honest belief, sir. If it was said, I have no recollection of it whatever. If it had been, I certainly would have taken some steps to have included them, to protect the firm against anything afterward.” The evidence, in its entirety, is insufficient to sustain defendants’ contention. The authorities cited by them do not support their position. Most of them are cases for specific performance, and have no application to the facts of this case. Others are to the effect that [112] purchasers of the property, having absolute and unquestioned knowledge of the execution and full performance of the oral agreement, would .be bound thereby. In all these cases the facts were undisputed, and were clear, positive, ancl direct. In Gardenhire v. White (Term. Ch. App.) 59 S. W. 661, a conveyance from a father to his son was upheld because made for a sufficient consideration before any rights of the father’s judgment creditor had attached to the land. Here the father never executed any deed, and in fact the sons could not demand a deed from him until after the expiration of three years from the time of the agreement. The mortgage was executed by the father within three or four months after the agreement was talked over by the family. It is undoubtedly true that verbal agreements between father and sons of the same general character as testified to in this case have been upheld and sustained against the charge of fraud where the verbal agreement had been fully executed, and a conveyance delivered in pursuance thereof. The crucial test in such cases is “whether the transaction was honest and bona fide.” Van Sickle v. Wells, Fargo & Co. (C. C.) 105 Fed. 16, 24, 25. The books are full of cases upon this subject, and the general principle has been frequently announced that the testimony in support of such agreements must be carefully scrutinized by the courts, and the proofs in regard thereto must be satisfactory, clear, positive, and convincing, in order to justify the court in upholding them. “Wherever this confidential relation is shown to exist, the parties are held to a fuller and stricter proof of the consideration, and of the fairness of the transaction.” Bump, Fraud. Conv. 98, and authorities there cited. It is next claimed by the defendants that the entering into the possession of the real property by the sons before the mortgage was executed was a part performance of their contract with their father, and of itself imparted notice to the plaintiff that they claimed an interest in the property. This contention is made without any foundation. There was no testimony whatever that the defendants entered into possession of the property under such claim. Their own testimony shows that they lived with their father and mother upon the premises in the same relation after the agreement as before. They .exercised no dominion or control over the property. Their father was in possession, and his sons worked for him, and did whatever, they were requested to do; assisting him in the sale of goods, tending bar, hauling rock upon the premises, and dressing the same for building purposes, etc. The sons had no such control over the property as to change the possession of it, or the nature of the father’s occupancy thereof, so as to affect with constructive notice persons wfio had no actual notice. In Townsend v. Little, 109 U. S. 504, 511, 3 Sup. Ct. 357, 27 L. Ed. 1012, the court said: “Constructive notice is defined to be, in its nature, no more than evidence of notice, the presumption of which is so violent that the court will not even allow of its being controverted. Plumb v. Fluitt, 2 Anstr. 482; Kennedy v. Green, 3 Mylne & K. 699. Where possession is relied on as giving constructive notice, .it must be open and unambiguous, and not liable to be misunderstood <jr misconstrued. Ely v. Wilcox, 20 Wis. 523, 91 Am. Dec. 426; Patten v. Moore, 32 N: H. 3⅜2; Biilington’s Lessee v. Welsh, 5 Bin. 129, 6 Am. Dec; [113] 406. It must bo sufficiently distinct and unequivocal, so as to put the purchaser on his guard. Butler v. Stevens, 20 Me. 484; Wright v. Wood, 23 Pa. 120; Bogue v. Williams, 48 Ill. 371. As said by Strong, J., in Meehan t. Williams, 48 Pa. 238, what makes inquiry a duty is such a visible state oí things as is inconsistent with a perfect right in him who proposes to sell. See, also. Holmes v. Stout, 4 N. J. Eq. 402; McMeehan v. Griffing, 3 Pick. 149, 15 Am. Dec. 108; Hanrick v. Thompson, 9 Ala. 409.”, Tested by these rules, it is manifest from all the testimony given in this case that the sons had no such possession of the property as to put plaintiff upon inquiry, or charge it with any constructive notice of their claims. Finally it is claimed that the plaintiff, by drawing a note for $5,000, and accepting a mortgage to secure its payment, when only $3,500 was due, and promising to make an advance to P. K. Reid and wife of $1,500 when requested so to do, and its refusal to make the advance upon request, constitutes a fraud upon the father and mother, which resulted in an injury to the sons, which prevents the plaintiff from any recovery herein. The testimony on this point was substantially to the effect that P. V. Reid did not expect the plaintiff to push him in the matter of the indebtedness, and, if he gave the mortgage, it might affect his credit, and have a tendency to injure his business and leave him without sufficient means to carry on his store, and that he feared the plaintiff would not furnish him any more goods if he gave the mortgage. Mr. Walsh then wanted to know how much he would need to carry on the store until fall, when he expected to be able to make collection from the farmers who were indebted to him. The amount was figured up, and stated to be about $1,500; and then Mr. Walsh promised that such an advance would be made upon request, and the $1,500 was added to the amount of the indebtedness due to plaintiff, and the note and mortgage was given for $5,000. This was satisfactory to Mr. Reid and wife, and they then executed the mortgage. After the execution of the mortgage, P. K. Reid turned over to the bank at Winnemucca, to whom he was indebted in the sum of about $10,000, áll of his goods, and consented to a receiver taking charge thereof, before any demand was made on plaintiff to furnish the $1,500 worth of goods as promised. At the time the mortgage was foreclosed, credit was given for said $1,500 by plaintiff, and the decree was entered only for the sum admitted to be due. The reason given by the plaintiff in declining to send any more goods is contained in a letter as follows: “P. K. Reid, Ksq., Lovelock: ⅞ ⅞ * According to your letter of the 17th, you evidently understood that wo were to render assistance to the bank. Our idea always was to assist you. When wo received the security, it was to cover advances already made you, and to also cover such further advances as we might make to you. The bank people were to carry your a/e as heretofore, with such securities as they then had. Since that time, however, the bank has taken actual possession; and any goods we might furnish would merely strengthen the bank’s position, and be of no assistance to you, and certainly not to us.” From all the facts, it clearly appears that there was no fraud committed, no deception or misrepresentation made on the part of plaintiff, to the injury of the defendants. The objections urged by P. K. Reid and his wife induced the plaintiff to make the promise. The [114] conversation between the parties with reference- to the promise of plaintiff to make a further advance necessarily implied that P. K. Reid, as well as the plaintiff, should “act in good faith.” It was the act of the defendant P. K. Reid in placing all the goods in the store in the possession of the receiver for the bank that furnished the cause for the nonfulfillment of the promise. Even if it could be held that there was any damage to P. K. Reid, he has certainly waived it. His time to speak was afforded him in the foreclosure suit. By his silence and ‘nonappearance in that suit and in this he has waived whatever right or remedy, if any he ever had, to claim that the plaintiff had been guilty of any conduct resulting in any damage to him; and, from my conclusion upon the facts of this case, it is apparent that the sons have no cause of action against the plantiff upon this ground. Graham v. Railroad Co., 102 U. S. 148, 154, 26 E. Ed. 106. Let a decree as prayed for be entered in favor of plaintiff, with costs.