Ditton v. Ed. Purcell
| Decision Date | 26 July 1911 |
| Parties | W. R. DITTON v. ED. PURCELL |
| Court | North Dakota Supreme Court |
Appeal from District Court, Grand Forks county; Templeton, Judge.
Action by W. R. Ditton against Ed Purcell. From a judgment for plaintiff, defendant appeals.
Affirmed.
George A. Bangs, for appellant.
Ostensible ownership acquired by fraud, until rescission, is an ownership that can pass title to a bona fide purchaser for value without notice. 24 Am. & Eng. Enc. Law, 2d ed 1165-1166; 4 Am. & Eng. Enc. Law, Supp. 2d ed. 751; 5 Am. & Eng. Enc. Law, Supp. 2d ed. 1715; Cochran v Stewart, 57 Minn. 499, 59 N.W. 543; Michigan C. R Co. v. Phillips, 60 Ill. 190; Young v. Bradley, 68 Ill. 553; Comer v. Cunningham, 77 N.Y. 391, 33 Am. Dec. 626; Parker v. Baxter, 19 Hun, 410; Tetrault v. O'Connor, 8 N.D. 15, 76 N.W. 225; Hoffman v. Noble, 6 Met. 68, 39 Am. Dec. 711; Shufeldt v. Pease, 16 Wis. 659; White v Dodge, 187 Mass. 449, 73 N.E. 549; Gardner v. Beacon Trust Co. 190 Mass. 27, 2 L.R.A.(N.S.) 767, 112 Am. St. Rep. 303, 76 N.E. 455, 5 A. & E. Ann. Cas. 581; Rowley v. Bigelow, 12 Pick. 306, 23 Am. Dec. 607.
Scott Rex, for respondent.
The sale was void, or at least voidable, and could be rescinded. Chicago, B. & N. R. Co. v. L. T. Sowle Elevator Co. 44 Minn. 224, 9 L.R.A. 263, 46 N.W. 342, 560; Amer v. Hightower, 70 Cal. 440, 11 P. 697; Lee v. Simmons, 65 Wis. 523, 27 N.W. 174; Alexander v. Swackhamer, 105 Ind. 81, 55 Am. Rep. 180, 4 N.E. 433, 5 N.E. 908; Carter, R. & Co. v. Cream of Wheat Co. 73 Minn. 315, 76 N.W. 55; Third Nat. Bank v. Stillwater Gas Co. 36 Minn. 75, 30 N.W. 440; Rev. Codes, 1905, § 5711.
Appellant was not a good-faith purchaser of the horses. Chicago, B. & N. R. Co. v. L. T. Sowle Elevator Co. 44 Minn. 224, 9 L.R.A. 263, 46 N.W. 342, 560; Tetrault v. O'Connor, 8 N.D. 15, 76 N.W. 225; Cochran v. Stewart, 21 Minn. 436; Cochran v. Stewart, 57 Minn. 499, 59 N.W. 543; Freeman v. Kraemer, 63 Minn. 242, 65 N.W. 455; Globe Mill Co. v. Minneapolis Elevator Co. 44 Minn. 153, 46 N.W. 306; Johnson-Brinkman Commission Co. v. Central Bank, 116 Mo. 558, 38 Am. St. Rep. 615, 22 S.W. 813, 23 Am. & Eng. Enc. Law, 1137, 1166, 1169; Wendling Lumber Co. v. Glenwood Lumber Co. 153 Cal. 411, 95 P. 1029.
Burden of proof to show good faith was on the purchaser. Starr Bros. v. Stevenson, 91 Iowa 684, 60 N.W. 217; Whitaker Iron Co. v. Preston Nat. Bank, 101 Mich. 146, 59 N.W. 395.
Defendant, Purcell, and one Murphy, attended plaintiff's auction sale at which plaintiff's team was struck off to Murphy on his bid of $ 302. At the close of the sale, defendant and Murphy secured possession of the horses, and were about to drive away with the team without settling for it, when plaintiff again took possession of the horses. Plaintiff had some time previously gone through bankruptcy, and Murphy attended the sale and bid in the horses evidently intending to secure possession of them and afterwards, on settlement, pay for them in whole or in part by turning in plaintiff's promissory notes, collection of which notes was barred by the bankruptcy proceedings. Plaintiff, anticipating this, told Murphy in defendant's hearing that "you don't get those horses until you settle for them; them old notes don't go at all; you have either got to pay the cash for the horses or put on gilt-edged security." Murphy then gave his check to plaintiff for the full amount of the purchase price, running to plaintiff as payee. Thereupon, plaintiff delivered the horses to Murphy in Purcell's presence, and the two rode away leading the horses behind, taking them to the defendant's home. Purcell testifies that he surmised that Murphy had some of Ditton's old notes at the time the horses were taken from him and replaced in the barn, before Murphy gave the check. Purcell had known Murphy twelve years. Murphy was working for one Bennett at the time.
That night Purcell and his neighbor Lundberg had a talk about Murphy's paying for the horses, in which Lundberg told Purcell that he "didn't see how Murphy could get out of paying for the team because he gave his check for it," to which Purcell replied that "he didn't know whether it was a check; he thought it was only an order," or that in substances. Lundberg immediately related this to one McGilliveray, who communicated the statement to plaintiff the morning after the sale. Plaintiff, on the day after the sale, presented the check to the bank and payment was refused. The night of the sale Murphy had told the cashier of the bank not to send the check in until he, Murphy, got over, and the next morning Murphy came to Gilby and was in the bank when the check was presented for payment and dishonored, following which an offer was made by Murphy and the banker to settle the matter if plaintiff would discount the price of the horses $ 75 or $ 100, which plaintiff refused to do. Murphy then attempted to turn in the old notes of respondent, barred by bankruptcy proceedings, but to this plaintiff would not consent, and, no settlement being arrived at, plaintiff returned to Murphy the worthless check given the day before in settlement. Murphy explained to the banker that in giving the check "he considered that he was giving an order," "that it was an order until such time as he could come in and make settlement." He had left the old notes before this with the bank.
Defendant claims to own the horses; testified that he bought the horses paying for them the second day after the sale by a check to Bennett, with whom Murphy had previously arranged by telephone that such payment would be made; that he paid Bennett $ 230 for the team, of which payment Murphy received the benefit. Eight days after the sale, plaintiff informed defendant that he refused to recognize any rights of Murphy under the sale, and demanded the horses; to which defendant replied that "he expected that, as Murphy told him not to give them up, to stand pat." Defendant explains this by testifying that as soon as he found out there was trouble about his deal with Murphy, that he told Murphy that he wanted him to stand back of the deal or give him his money. Murphy agreed to stand back of the deal, and told him to "stand pat." Defendant was present at the sale and knew what Murphy had bid for the team. Defendant alleges that he had no notice of any rights of the plaintiff in the deal at the time of his purchase, or that plaintiff claimed any interest in the horses.
It is apparent from the testimony that the sale to defendant by Murphy, and the arrangement for payment by Purcell to Bennett of the $ 230 for the team, were made on or before the night following the auction sale. It also appears that, although defendant denies any knowledge of any rights of Ditton in the team, yet, if the testimony of Lundberg be true, Purcell must have known the check received by plaintiff on the sale as payment was either bogus or, as defendant terms it, "only an order." The facts occurring the day after the sale verified defendant's statement as to the check being but an order, and harmonize with Murphy's statement to the bank that he considered it but an order with the settlement to follow, in which he, Murphy, should obtain a discount from the purchase price bid or force Ditton to accept in part payment some of his old notes barred by bankruptcy. Where did Purcell get his advance knowledge that the check was but an order, except from Murphy? The auction sale commenced after dinner, and that same night defendant is in possession of the horses under his claim of good-faith purchase. So, within a few hours at most of the time of the purchase of the horses at auction sale, Purcell is evidently familiar with Murphy's scheme to defraud plaintiff, commenced at the auction and consummated by nonpayment the next day. With this knowledge defendant paid his money for the team two days afterwards. In spite of this defendant now contends that the ostensible ownership of the horses was conferred upon Murphy by the delivery of the horses in defendant's presence to Murphy; and that defendant, relying upon the title of the horses being in Murphy, purchased them of Murphy in good faith, and without notice of any claim or right of plaintiff in the horses, and that the loss, if any, should fall upon plaintiff; that plaintiff failed to rescind the sale within a reasonable time after discovery of the fraud, and is precluded thereby from recovery.
The acts of Murphy were clearly a fraud upon the plaintiff. Murphy bid in the horses with no intent to pay the amount of the bid. He intended to turn in the old notes of Ditton on the purchase price; he had previously made arrangements with the bank to do this, as is shown by his leaving the old notes with the bank, evidently that they might be in readiness if their payment was obtained in settlement. He gave the check intending it not as payment, as plaintiff believed it to be but rather as the means of bringing plaintiff to the bank, where such a settlement could be forced and something realized on the notes otherwise uncollectable. By such deceit he obtained possession of the team without paying any value for them, and with the present intent not to pay the purchase price. A purchase with such intent is a fraud on the seller under all authorities, because of which the seller may, if he so elects within a reasonable time, rescind the sale and recover the property so obtained by the fraud of the buyer; but until such rescission, the voidable sale remains such with voidable title in the purchaser. Mechem, Sales, §§ 148, 889, 891, 892, 901, 907; Donaldson v. Farwell, 93 U.S. 631, 23 L.Ed. 993, and note; Fechheimer v. Baum, 2 L.R.A. 153, and note (37 F. 167); Morrow Shoe Mfg. Co. v. New England Shoe Co. 24 L.R.A. 417, 6 C.C.A. 508, 18 U.S. App. 256...
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