Knowlton v. Schultz
| Decision Date | 24 April 1897 |
| Citation | 71 N.W. 550,6 N.D. 417 |
| Court | North Dakota Supreme Court |
Appeal from District Court, Ransom County; Lauder, J.
Action by David W. Knowlton against Helmuth Schultz and Martha Schultz. Judgment for defendants, and plaintiff appeals.
Modified.
Judgment rendered in favor of the plaintiff for the full amount due for principal and interest, being $ 71.75, with interest.
P. H Rourke, for appellant.
J. E Robinson, for respondents.
The object of this action was to foreclose two mortgages on personal property. One mortgage was given to secure a note for $ 225, and the other to secure this note and another note for $ 71.75. It is undisputed that the notes and mortgages were in fact signed and delivered by defendants to one Austin, he being the payee named in such notes, and the person described in the mortgages as mortgagee. The plaintiff is a purchaser of such notes and mortgages. The defense interposed with respect to the $ 225 note is that Austin obtained it from the defendants through fraudulent representations. He had been retained to defend for them an ejectment suit, and the case having been tried, and the trial having resulted in a decision favorable to the defendants herein, he presented to them his bill for services. It is undisputed that he was to have from $ 200 to $ 300 for his services, and more, not exceeding $ 400, if he succeeded in getting for them a clear title, as it is expressed by one of the defendants in his testimony. The case shows that, to obtain from them the $ 225 note, he assured them that their title was perfect; that there was going to be no more of the case. Certain payments have been made to Austin by the defendants, but whether they are sufficient to fully liquidate their obligation to him, on the theory that he has not secured for them a clear title, is not very material. It is apparent from the evidence that Austin had been paid $ 165 on account of his bill for services in the ejectment case when he presented to defendants the account for which the $ 225 note was given. The defendant Helmuth Schultz so testifies, and plaintiff offers no rebutting evidence on the point. Austin could easily have explained for what this $ 165 was paid if it was not paid for services in the ejectment suit. That this sum was paid on account of such services would seem clear from the fact that the item in the bill presented when the $ 225 note was given is for $ 235, just the sum necessary to make up the $ 400 that Austin was to have if he obtained a perfect title for defendants. The fact that Austin had in this bill charged such a sum as he would have been entitled to receive, in addition to the amount already paid, only in the event of his having obtained a clear title for defendants, tends to confirm their evidence that he made the false statement to which we have referred. The item of $ 235 was larger by $ 100 than Austin was entitled to charge, unless he obtained such a clear title for them. All this he must have known they were well aware of. As said before, it appears to be uncontroverted that, when Austin presented his bill, the defendants promptly said that it was too much. It is evident that Austin regarded their statement as true from the standpoint of his not having secured for them such a decision in the case as would preclude further litigation of the question of their title, for he replied, in answer to their claim that the charge was excessive, that the judgment which he had obtained for them was just as good as a warranty deed. When defendants stated to him that they had heard that there was going to be a new trial, he answered that that was not true; that there was not going to be a new trial, and there was not going to be anything more of it. When confronted with the claim that the bill was excessive, there remained for Austin only one of two courses to pursue,--either to reduce it $ 100, or state that the facts warranted him in making the larger claim. Not having reduced the bill, it is a fair inference that he must have made just such a statement as is testified to by defendants, and the fact that they then signed the note tends to confirm their evidence in this respect. It is by no means clear that defendants are liable to Austin or to plaintiff, assuming that the purchase of the note carried to him Austin's claim against defendants for any sum whatever aside from the amount of the $ 71 note to be hereinafter referred to. Austin, under the contract, had an absolute right to charge only $ 200, he not having secured a perfect title. Whether he could collect more than $ 200 up to the amount of $ 300 would depend on the question of the reasonableness of the charge, the amount between $ 200 and $ 300 not being distinctly agreed upon. That Austin has been paid $ 200 is shown by the evidence. It may be that in another action the liability of the defendants for a sum not exceeding in all $ 300 can be established. There is no evidence here warranting a finding that defendants are liable for more than $ 200. Nor is this the action in which to litigate that question. The note having been obtained by fraud, the fraud tainted the whole instrument, and destroyed it entirely. Whatever cause of action may have existed prior to the execution of the note is, of course, unaffected by it. But such cause of action, if any, is not within the issues of this case. That the statement of Austin to the defendants was false cannot admit of doubt. However much confidence he may have had that the defeated litigants would go no further with the case, he was bound to know as a lawyer that the judgment was not final. As a lawyer, he knew that no judgment is final as soon as it is entered. The action was still pending and the defeated suitor had a legal right to move for a new trial, and to challenge the judgment on appeal. Austin made a positive statement that the case was ended, knowing that he had no positive knowledge on the subject. This, under our statute, is as much a fraud as a statement of fact, knowing it to be false. Rev. Codes, § 3848. Indeed, he knew it to be false in law. He certainly must have known that there was a possibility of future litigation, however sanguine he may have been that the case would end then and there. The defendants trusted to his knowledge as a lawyer on the question whether the suit was disposed of so as to preclude all possibility of further action in the case. In this regard they were deceived; and, whatever justification Austin may have had in morals, the law is clear that he committed a legal fraud upon the defendants by his false statement. It is perhaps not wholly irrelevant to this case to state that, as a matter of fact, a new trial has been granted in the action of ejectment, and that on the second trial the defendants therein (who are the defendants here) were defeated. Just such a possible result Austin, as a lawyer, must have anticipated when he assured the defendants that the judgment was just as good as a warranty deed, and that there was going to be no more of the case. If ever the utmost good faith should be exacted, it is when the relation of attorney and client exists. The defendants relied implicitly upon the statement of their attorney, and he deceived them in a manner that enabled him to perpetrate a fraud upon them. It is true that Austin was not sworn upon the trial, and that the evidence comes from the defendants alone. But the plaintiff was informed by the answer that this defense would be relied on, and the failure of Austin to testify on this point, although his deposition was taken on another feature of the case, is strong evidence that the charges of fraud in the answer are true. Moreover, Austin's attempt to place the note in the hands of a bona fide purchaser only four days before it fell due, to cut off all defense, is...
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