Buchhalter v. Rude

• Decision Date: 23 January 1932
• Docket Number: No. 506,507.,506
• Citation: 54 F.2d 834
• Parties: BUCHHALTER v. RUDE. RUDE v. BUCHHALTER et al.
• Court: U.S. Court of Appeals — Tenth Circuit

54 F.2d 834 (1931)

BUCHHALTER v. RUDE.

RUDE v. BUCHHALTER et al.

Nos. 506, 507.

Circuit Court of Appeals, Tenth Circuit.

December 21, 1931.

Rehearing Denied January 23, 1932.

Henry E. Lutz, of Denver, Colo., for appellant Buchhalter.

Ernest Morris and Cass E. Herrington, both of Denver, Colo. (C. E. Wampler and Cass M. Herrington, both of Denver, Colo., on the brief), for appellant Rude.

Before PHILLIPS and McDERMOTT, Circuit Judges, and POLLOCK, District Judge.

McDERMOTT, Circuit Judge.

After a foreclosure sale held in June, 1929, the title to the properties of the Colorado Pulp and Paper Company stood in the names of Rude and Bronstine, joint purchasers at the sale. Rude and Buchhalter were associated in the venture, Rude having applied bonds of the par value of $61,000, exclusive of interest, on the bid at the sale, and Buchhalter having applied bonds and cash to the extent of $53,922. Roughly speaking, Bronstine owned a one-half interest, and Rude and Buchhalter each a one-fourth interest, in the mill. Bronstine was in charge of the operations; Rude and Buchhalter became dissatisfied with his management and wanted to sell their interests to him. Bronstine did not care to buy. In August, 1929, after an acrimonious dispute with Bronstine over the management, Rude and Buchhalter became apprehensive that Bronstine would commence proceedings in partition. They conceived the notion that it would embarrass Bronstine if a fictitious deed of trust was put of record. Their lawyers advised them that nothing could be gained by such a fictitious transaction, as of course was true unless the participants were prepared to follow it up with perjury, and probably not even then. But they persisted in their delusion, and on August 29, 1929, Rude conveyed a one-fourth interest in the mill to Buchhalter for a recited consideration of $75,000. Buchhalter then executed his note to Rude for $67,500, and secured the note by his deed of trust on the one-fourth interest conveyed to him that day. It was conclusively proven that the note and deed of trust were intended to be but scraps of paper as between the parties, and that the sole object of their execution was an unconscionable effort to gain an unfair advantage over Bronstine, their associate in ownership.

Bronstine did not scare; so negotiations were opened to sell their interests to one Binstock. In September, Binstock offered a little cash and a lot of bonds; Rude wanted cash and not bonds for his share; in any event, he wanted whatever cash there was, offering to give Buchhalter time for the balance. Buchhalter would not agree to this unless Binstock would pay more cash, which Binstock would not do. The deal was left in the air, and Rude went to New York, leaving with his attorney deeds and a release of the trust deed to be used in case of a sale. Buchhalter resumed negotiations with Binstock and agreed on terms in October. Buchhalter testifies he advised Rude of the terms over the phone. It was necessary for Rude to deliver the Buchhalter note of August, and a telegram from his attorney advised him that the deal was closed and asked for the note. Rude sent in the note to the Denver National Bank with instructions to deliver upon receipt of $40,000. These instructions could not be complied with, so Rude modified them by instructing the bank to deliver the note to the First National Bank upon a statement from that bank that it would hold the proceeds of the sale to Binstock "until Buchhalter and myself have agreed in writing concerning disposition of said proceeds."

The Binstock deal was closed, and the First National Bank came into possession of the proceeds of the sale, $28,080.56 in cash and $92,500 in bonds. On the afternoon of November 18, 1929, Rude and Buchhalter went to the bank and drew down all of the cash but $100, Rude taking $16,365.34 and Buchhalter $11,615.22. The next day Rude paid $5,000 to the attorneys who had acted for them, so the cash was divided almost equally between them. Block, a disinterested and apparently a fair witness, testifies that on the night of November 18, he assisted Rude and Buchhalter to figure out their respective interests in the bonds in escrow.

So far there is little or no room for dispute as to the facts, and upon these facts Rude and Buchhalter were joint owners of the bonds in escrow, in the proportion that $61,000 bears to $53,922, subject to any accounting as to receipts and disbursements that may be necessary. Rude argues that there was no evidence of any agreement of such joint interest. Their joint interest follows from the facts, and no agreement to that effect is necessary. But here the way divides; Rude swears that while at the bank, on the afternoon of November 18, Buchhalter orally agreed to pay Rude $75,000, and that the bonds in the bank should be held as collateral to secure the oral promise. Buchhalter stoutly denies any such agreement.

Rude then brought this suit in equity, setting out by way of background, the note and trust deed of August, and an oral agreement alleged to have been made at that time by Buchhalter to pay Rude half of the profit which Buchhalter might realize on a sale, not to exceed $7,500; he sets out that such note and trust deed were canceled to effectuate the sale. He then alleges and sues on the oral agreement made at the bank in November, the prayer of the bill being for judgment against Buchhalter for breach of the November agreement and for a foreclosure of the lien on the bonds. Buchhalter categorically and under oath denied any such agreement, and set out specifically and repeatedly their joint interest in the bonds; he alleges that Rude comes into court with unclean hands; he prays that the bill be dismissed "and for such other and further relief as in equity and good conscience the facts warrant." The law firm of Blount, Silverstein & Rosner were made defendants, and answered that they had attached the bonds in a state court for unpaid attorney's fees. The escrow agent, the First National Bank, was made a defendant, and disclaimed any interest except as to a lien for $1,250 on Buchhalter's interest (which we are advised has now been paid), and for costs and attorney's fees. The bank did however pray for "instructions of this court as to the disposition of said cash and bonds."

The court heard evidence at length upon the issue so sharply presented, the existence of the oral agreement sued on, and the cause was submitted. In January, the trial court filed a memorandum opinion, finding the issues of fact against the plaintiff Rude, and directing a dismissal of the bill as to Buchhalter, which was the relief prayed for by Buchhalter. Whereupon defendant Buchhalter filed a request for findings of fact in which he requested that the court find, among other things, that "said Rude, along with said Buchhalter, entered into what may be characterized as a campaign against the said Bronstine"; that a part of this campaign was the execution of the fictitious trust deed in August "in order to impart apparent reality to the transaction so far as Bronstine and associates might be concerned." Buchhalter then, for the first time, made the remarkable request that he be decreed to own all the bonds. The trial court denied these requests; made short and concise findings of his own and dismissed the bill. Both Rude and Buchhalter appeal.

Rude's appeal may be quickly disposed of. His entire case is predicated upon an oral agreement, the evidence concerning which is in sharp conflict. Rude's testimony cannot be buttressed by the fictitious note and trust deed of August, for nothing can be predicated upon such an evil-smelling transaction. That he insisted on a large amount of cash in the early stages of the Binstock deal is a circumstance only, the force of which is dissipated by the fact that he later yielded and surrendered his note without any cash requirements. Rude's story of the oral agreement is inherently improbable, and is in conflict with many circumstances, not the least of which is the fact that he consented that Buchhalter draw down $11,615.22 in cash immediately after the oral agreement that Rude was to get all cash was alleged to have been made, and that he and Buchhalter and Block spent the same night figuring out their respective interests in the bonds. The trial court did not believe Rude's story; we do not believe it; and that ends his appeal.

Buchhalter's appeal stands in somewhat different stead. Buchhalter's answer set out the joint interest of the parties in the escrow; the evidence supported his allegations. But he did not pray for any affirmative relief. The decree gave Buchhalter the relief he asked for at the trial — a dismissal of plaintiff's bill. After the decision of the trial court he asked for additional relief, but relief to which he was not entitled. In this court, Buchhalter's position is that he is entitled to all of the bonds, a remarkable request considering that his sworn answer, his testimony, and the undoubted facts disclose that he does not own all the bonds and never did. As we understand his claim, it is based upon two propositions. First, that Rude and he engaged in an unconscionable campaign against Bronstine; that Rude's hands are therefore unclean, and that by virtue thereof title to the bonds has passed to Buchhalter. The doctrine of unclean hands is a weapon of defense — it is not a muniment of title. And even if it were otherwise, a court of equity would hardly pass title from one unclean pair of hands to another pair which was particeps criminis. His second point is that by electing to claim a lien on all the bonds, Rude has abandoned claim of ownership to any. This discloses a confusion as to the doctrine of election of remedies. Where causes of action are predicated upon different states of fact, there is no election of remedies. The doctrine of election of remedies comes into play only when there are two or more inconsistent remedies...