Johnston v. Hawkinson, 11879.

CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)
Writing for the CourtWOODROUGH, JOHNSEN, and VAN VALKENBURGH, Circuit
Citation119 F.2d 110
Docket NumberNo. 11879.,11879.
Decision Date09 May 1941

Philip J. Close, of Kansas City, Mo. (Inghram D. Hook and Harry L. Thomas, both of Kansas City, Mo., on the brief), for appellant.

Maurice J. O'Sullivan, of Kansas City, Mo. (John M. P. Miller, of Kansas City, Mo., on the brief), for appellee.


WOODROUGH, Circuit Judge.

Upon the jury trial of this case in the District Court the defendant moved for directed verdict at the close of the plaintiff's evidence, the court sustained the motion and the action was dismissed on the verdict directed. The plaintiff appeals.

It was alleged in the plaintiff's petition (among other things not now relevant) that by the terms of a written long-term lease of the property known as 1331 Walnut Street in Kansas City, Missouri, attached to the petition, the defendant as lessee became obligated to pay the plaintiff $1600 a year as plaintiff's share of the rent in equal quarterly installments, but that defendant had not made full payments thereon since the 1st day of January 1929; in lieu thereof he had made partial payments so that defendant remained obligated in the sum of $6,100 for which plaintiff prayed judgment with interest and costs. The defendant denied the indebtedness and also pleaded that the plaintiff had asserted the claims set up in the petition for which defendant denied liability and there was a dispute between the parties but that on June 16, 1937, the dispute was settled and compromised. The plaintiff agreed to and did accept from defendant $1,000 in cash and two promissory notes of $500 each, delivered by defendant to plaintiff, and the further consideration of an agreement for reduction of the rent for a two-year period beginning October 1, 1937, to $800 a year payable quarterly, in full compromise and settlement of the claims sued on. The settlement agreement was reduced to writing, duly signed and delivered by plaintiff to defendant and defendant fully performed on his part. To which the plaintiff filed reply alleging that he was induced to sign said release by false statements of defendant which he believed and on which he relied "that an adjustment on the rent called for by the lease was necessary, otherwise he (the defendant) would be forced into bankruptcy and that plaintiff would receive nothing at all * * * that he (the defendant) was about to take bankruptcy, that he was `broke' and that it would be impossible to collect the rent which he owed by suit; that he could not be forced to pay any back rent due and owing except voluntarily; that he would make no payments whatever unless the obligation was reduced, and that the plaintiff would get nothing unless he signed and entered into the agreement on the terms proposed by defendant". That the representations were false, as plaintiff learned at about the time he began the suit, and that in truth defendant was worth in excess of $500,000, which he concealed by carrying cash accounts, securities and real estate in the names of straw and fictitious persons and other parties related to him or subject to his control, and that he had an annual income in excess of $40,000. That the release was void and without consideration and should be set aside and held for naught and that recovery should be awarded as claimed in the petition.

Upon the trial of these issues the plaintiff offered testimony sufficient to establish prima facie that he is the person entitled to recover two-thirds of the rental specified in the lease from defendant and that the amount due him from defendant under the terms of the lease was as alleged in the petition; that plaintiff had demanded the amount from the defendant and that the defendant had not then or ever denied that he owed it, and that there was not in fact any actual dispute between the parties concerning defendant's obligation. Plaintiff also adduced the testimony of Garrett Ellison and Edward Ellison, both men of standing in the community, and his own testimony, to the effect that in response to the demands of the plaintiff the defendant had made the statements and representations substantially as alleged in the plaintiff's reply, and the plaintiff testified that he believed the statements and that he was induced thereby to execute and sign the release (in the form of a letter sent by plaintiff to defendant) pleaded and relied on by defendant.

On the issue raised by the reply as to the falsity of the statements made by defendant in response to the plaintiff's demand for payment of his rent, the plaintiff had the deposition of the defendant taken on April 6, 1940, and offered certain portions thereof as admissions made by defendant against interest and the same were properly received in evidence. Thereafter the defendant on his own behalf offered and the court received in evidence the entire deposition, and although it is not brought up with the record the court stated that either party could read any part he wished. It appears that the question was propounded to defendant, "What was your financial worth as of June, 1937?" and in response the defendant produced his income tax return for 1937, including schedules of assets. The return was the joint return of husband and wife but individual transactions of capital gains and losses by defendant himself were listed on the part of the return appearing in this record as Exhibit B. It shows that during the year he had sold items of his capital assets at the aggregate selling price of $41,528.50. A Mr. Snyder testified for plaintiff that he was in partnership with defendant and that as of June 16, 1937, the assets of the partnership were of the value of $29,000 and that the partnership had no indebtedness on that date. Mr. Roy A. Johnson, secretary of the Swedish American Saving and Loan Association, also testified for the plaintiff that as of June 16, 1937, there was stock of the association of record (insured certificates) standing in the name of defendant in the amount of $24,691.22, withdrawable 100 cents on the dollar.

The motion for directed verdict by the defendant at the close of the plaintiff's evidence was general, but the ground of decision clearly appears in the declaration of the court in connection with its ruling. The court was of the opinion that the plaintiff was precluded from having any recovery because he was estopped by the settlement and release of June 16, 1937. The court stated:

"The petition alleges and the evidence tends to support the allegations of the petition — so far there is no evidence to the contrary and I have no doubt that it was true, that the defendant said to the plaintiff's attorney that he could not pay any more than the amount agreed upon in the settlement and that he was broke, that he was contemplating bankruptcy, that he would go into bankruptcy if an attempt was made to force him to pay the full amount stipulated in the original lease.

"That is what he said. If that was untrue — if the plaintiff had proved that was untrue, that would be fraudulent representation. But what proof is there that anything Mr. Hawkinson said to the plaintiff was untrue?

"I have observed the evidence very carefully and have made inquiries myself in the trial to find out if there has been any showing here that anything Mr. Hawkinson said was not true. He said he was broke. Well, what proof is there that he was not broke? There is proof here that he had $26,000.00, approximately, stock of that value in the Building and Loan Association. There is proof here that he had a half interest in certain partnership assets which amounted to about $29,000.00. A half interest would be about $15,000.00, a little less. There is proof that he had assets of $40,000.00. But you do not show that a man is not broke by showing what his assets are. * * *"

Thus it appears that the court reached the conclusion that the plaintiff's proof that defendant had assets of large value was insufficient to sustain the issue on plaintiff's part because the plaintiff had not also shown that the defendant had no debts offsetting the assets. The court stated, "One can not prove that a statement that I am `broke' is untrue until he proves not only the assets but the liabilities, and there is nothing here to show what Mr. Hawkinson's liabilities were."

Our study of the record has persuaded that in construing the plaintiff's testimony the court failed to accord all reasonable intendments and inferences favorable to plaintiff. We think the inquiry propounded to defendant, "What was your financial worth of June, 1937?" clearly apprised the defendant that the matter inquired of was the matter involved in the lawsuit. He must have known that the question was directed to the allegation of the pleading that he had falsely represented himself to be "broke". When he answered the question as to what he was worth by producing the showing of assets, a fair and reasonable inference would be that such was his worth in the only sense relevant to the issue on trial. If by reason of undertakings or debts his real worth was different from what he disclosed, the facts were peculiarly within his knowledge and he should have made it known. He was not asked what his assets were, but what he was worth. If he meant his response to be only partial, he should have said so. The plaintiff's testimony on the issue was prima facie sufficient to falsify defendant's representation that he was "broke" and the ruling to the contrary was erroneous.

It is contended here for appellee that the trial court's declaration, "There is proof that he (the defendant) had assets of $40,000.00", is not fully borne out and that upon closer analysis of the testimony the amount should be reduced. But the exact amount was not controlling. It sufficed that defendant...

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