Hart v. Adair

• Decision Date: 20 August 1917
• Docket Number: 2686.
• Citation: 244 F. 897
• Parties: HART et al. v. ADAIR et al. W. C. HARDING LAND CO. v. HART et al.
• Court: U.S. Court of Appeals — Ninth Circuit

244 F. 897

HART et al. v. ADAIR et al.

W. C. HARDING LAND CO. v. HART et al.

No. 2686.

United States Court of Appeals, Ninth Circuit.

August 20, 1917

Glenn D. Hart and his wife brought a suit against the Harding Land Company, a corporation, and the individual defendants, Adair and others, for the rescission of three contracts for the sale and conveyance of three 10-acre tracts within a larger tract of land, and for the recovery of the installments of purchase money paid under the contracts. The individual defendants had purchased the larger tract, consisting of 461 acres, had made a cash payment thereon, and had given a mortgage to secure deferred payments. They entered into a contract with the Harding Land Company for the subdivision and sale of the land. The contract provided that the minimum price per acre to be charged to purchasers should be $200 that the first '$13,061 of sale contracts' should be placed in escrow for the original owners of the land; that the next '$10,000 of contracts' should become the property of the individual defendants; and that the balance realized should be equally divided between those defendants and the Land Company. The Land Company was to bear all expenses of the sales, and to receive a commission of 17 1/2 per cent., to be deducted from the first cash received. The Harding Company proposed to plant orchards on the land, and the individual defendants stipulated that they should not be held responsible in any way for the Land Company's contracts for planting and care of trees, and they were to receive no benefit from the added price to be put on the land through such planting and care. The tracts were to be sold under the name of the Land Company, but the deeds were to be given by the individual defendants.

The tract was subdivided by the Land Company, and in the year 1910 lots Nos. 19 and 18 were sold to Hart and his wife respectively. Lot 17 was sold to Ella Peterson. These sales were made under an agreement on the part of the Land Company to plant the land with certain kinds of trees, and to cultivate the same for a period of 3 years. The plaintiffs alleged that they and Ella Peterson were induced to purchase the lands by certain fraudulent representations on the part of the Land Company, the representations being set forth in detail, and they alleged that Ella Peterson had transferred to the plaintiff Mrs. Hart all of her rights under her contract of purchase. The court below found that the evidence sustained the allegations of the complaint as to the fraudulent representations, and entered a decree of rescission on behalf of the plaintiffs, and adjudged that they recover from the Land Company the money advanced by them on account of their contracts of purchase; that the contract of Ella Peterson be rescinded, and that the money paid by her be recovered by Mrs. Hart; but adjudged that the individual defendants did not participate in the fraud, and are not answerable for the moneys so paid to the Land Company. From that portion of the decree discharging the individual defendants from liability, the plaintiffs have appealed. From the portion decreeing the rescission of the contracts and the return of the purchase money to the plaintiffs, the Land Company has appealed. Both appeals are presented in one record.

E. A Lundburg, of Portland, Or., for appellants Hart.

O. P Coshow, of Roseburg, Or., for appellant W. C. Harding Land Co.

B. L. Eddy, of Roseburg, Or., for appellees Adair and others.

Before GILBERT, ROSS, and HUNT, Circuit Judges.

GILBERT Circuit Judge (after stating the facts as above).

We find no error in that portion of the decree which discharges the individual defendants from liability for the moneys due the plaintiffs from the Land Company. It is contended that they are liable on the ground that the Land Company was their agent. We think that the Land Company was not the agent of the owners in dealing with purchasers of the land. The owners were not parties to any contract which the Land Company made with the purchasers. They stipulated that every contract made by the Land Company for sale of any of the land should be made in its own name. The Land Company was to survey, plat, and plant the land, and sell it at its own expense. The owners were not to be responsible for any of the expense of planting or cultivating fruit trees. This is not a case of a broker negotiating sales as the agent of the owner. The Land Company was acting and selling in its own name. It had a contract which enabled it to deal with the property as its own. It is true that restrictions were placed on its power to sell, but this was only for the protection of the owners. It had no power to bind the owners by any representations of the quality of the land, or by promises of future improvement thereof. 'An agent with restricted power to sell a tract of land at a given price has no power to bind his principal by any representations as to the quantity or quality of the land. ' National Iron Armor Co. v. Bruner, 19 N.J.Eq. 331; Samson v. Beale, 27 Wash. 557, 68 P. 180; Mayo v. Wahlgreen, 9 Colo.App. 506, 50 P. 40; Tucker v. Gibson, 80 Kan. 90, 101 P. 633; Kern v. Feller, 70 Or. 140, 140 P. 735.

Nor can we sustain the Land Company's contention that the evidence does not support the finding of the court below that the plaintiffs and their assignor were induced to enter into the contracts of purchase by means of false and fraudulent representations. The Land Company made these contracts with the plaintiffs and their assignor by agents in Dakota and Colorado. The agents represented to them that the land was worth $350 an acre; that it was choice orchard land; that it had been examined by an expert orchardist; that the soil was a sandy loam, and easily cultivated; that it was well drained and needed no irrigation; and they exhibited to them literature containing glowing representations of the profits to be realized on raising fruit on the lands, and assured them that is was unnecessary for them to come to Oregon to see the land; that they could rely upon the statements of the agents and the representations of the company, and that the expense of a trip to Oregon would be useless. There was evidence that the plaintiffs and their assignor, relying on these statements, entered into the contracts and made payments thereon. There is abundance of evidence that these representations were false and fraudulent, and, although the evidence is conflicting, the case is clearly one for the application of the rule that the finding of the court of first instance, who saw and heard the witnesses, will not be disturbed on appeal.

The Land Company contends that the plaintiffs should have been denied relief in equity for the reason that they and their assignor ratified the contracts of purchase; citing Grymes v. Sanders, 93 U.S. 55, 23 L.Ed. 798, in which it was held that, where a party desires to rescind upon the ground of mistake or fraud, he must, upon the discovery of the facts, at once announce his purpose and adhere to it, and that, if he be silent and continues to treat the property as his own, he will be held to have waived the objection.

To this it is to be said, first, that in order to avail itself of the defense of ratification it was necessary for the Land Company to plead it. 9 C.J. 1246, Sec. 181; Northern Pac. R. Co. v. Kindred (C.C.) 14 F. 77. In its answer it pleaded no such defense, and even if it should be held that the evidence, which was admitted without objection tending to show ratification, might be sufficient to have authorized the court below to pass upon that question, it still does not appear that the question was ever brought to the court's attention. Nor is it now suggested by any of the Land Company's assignments of error.

The purpose of our rule 11 (208 F. vii, 124 C.C.A. vii) is to permit us to notice palpable error not assigned, where the failure to consider it would result in injustice. Central Improvement Co. v. Cambria Steel Co., 201 F. 811, 120 C.C.A. 121; New York Life Ins. Co. v. Rankin, 162 F. 103, 89 C.C.A. 103; United States v. Bernays, 158 F. 792, 86 C.C.A. 52; Baltimore & O.R. Co. v. McCune, 174 F. 991, 98 C.C.A. 561; and P. P. Mast & Co. v. Superior Drill Co., 154 F. 45, 83 C.C.A. 157, a case in which the court said: The object of the rule 'is to prevent the miscarriage of justice from oversight. ' It will hardly be contended that the alleged error is plain, or that our failure to take notice of it will result in a miscarriage of justice.

But notwithstanding the absence of an assignment, we have examined the record, and we find it insufficient to show ratification. It is the Land Company's contention that in July, 1912, two years after they entered into the contracts, Hart and his wife acquired knowledge of the condition of the land, and that thereafter Hart's conduct was such as to show that he recognized the validity of the contract, he being his wife's agent. But the proof does not show that in 1912 either Hart or his wife acquired definite knowledge of the fraud that had been practiced upon them. In July of that year, in company with the secretary of the Land Company, they saw the land for the first time. Their testimony is that...