Mackenzie v. Seeberger, 731.

• Decision Date: 24 August 1896
• Docket Number: 731.
• Citation: 76 F. 108
• Parties: MACKENZIE v. SEEBERGER.
• Court: U.S. Court of Appeals — Eighth Circuit

76 F. 108

MACKENZIE v. SEEBERGER.

No. 731.

United States Court of Appeals, Eighth Circuit.

August 24, 1896

O. H Dean (L. C. Krauthoff was with him on the brief), for plaintiff in error.

Frank H. Scott (J. McD. Trimble, Charles A. Braley, John H Hamline, and Frank C. Lord were with him on the brief), for defendant in error.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

SANBORN Circuit Judge.

This writ of error was sued out to reverse a verdict and judgment against James Mackenzie, the plaintiff in error, upon his promissory note. Charles D. Seeberger, the defendant in error, filed in the court below the usual petition for a recovery of the amount due upon this note. Mackenzie answered that the note was without consideration, and was obtained by the deceit and fraud of the defendant in error; that he had already been induced by the same fraud to pay him $3,250 that he did not owe him; and he prayed for a judgment against Seeberger for this amount. He alleged that in October, 1887 the defendant in error was negotiating with one Charles H Smyth and one R. Preston Chew for the purchase of section 10 and the N.W. 1/4 of section 14 in township 38, range 28, being 784 acres of land, for $129,300, and a farm in Ohio that was not worth more than $3,000 and that he subsequently consummated the trade on that basis; that while he was negotiating for this purchase, and before he had made it, he represented to the plaintiff in error that he was bargaining for the purchase of section 10 for $129,300, and that the incidental expenses of the purchase were $700, so that section 10 would cost $130,000, and then solicited the plaintiff in error to 'come in on the ground floor,' and contribute one-half of this purchase money, and take one-half of the section; that thereupon, in reliance upon these representations, he associated one Hawkins with himself, and they contributed one-half of the $130,000, $30,000 in cash and $35,000 in their notes, and received conveyances of the E. 1/2 of section 10 therefor; that the N.W. 1/4 of section 14 was as valuable as section 10, and Seeberger, by the trade which he made, in fact paid only $108,000 for section 10, but the plaintiff in error did not learn that the quarter section in 14 and the Ohio farm were in the trade until after he had paid all his notes, except that in suit, which was for $2,250, and was one of the notes which he gave as a contribution towards the purchase price of the property. It was upon this statement of facts that he claimed that he had already paid to the defendant in error $3,250 more than his one-fourth of the purchase price of section 10, and that the note in suit was without consideration. The defendant in error replied to this answer that the note in suit was given for a part of the purchase price of section 10; that the Ohio farm belonged to his wife, and that he did negotiate an exchange of that farm for the quarter section of 14 in his trade for section 10, but that the quarter section was conveyed to a trustee for his wife in exchange for her farm, and that he had no interest in it except such as he might have by virtue of his marital rights; that section 10 did cost him $130,000; and that one-half of this, or $65,000, was the amount for which he sold the E. 1/2 of that section to Mackenzie and Hawkins. He denied all the other allegations of the answer.

At the trial, there was testimony that the plaintiff in error did, and that he did not, know the terms of the trade between Seeberger and Smyth and Chew before he bought the E. 1/2 of section 10. There was conflicting testimony as to the value of the Ohio farm. The lowest estimate of its value was $4,000, while the consideration recited in the deed of it to Smyth and Chew was $12,000. The following facts were established: In the early part of August, 1887, the defendant in error had obtained from Smyth and Chew the option to buy section 10 and the N.W. 1/4 of section 14 from them, for $129,300 and the Ohio farm. On August 27, 1887, he accepted the option, and made written contracts to purchase the property on that basis. Before these contracts were made, he had offered to sell to the plaintiff in error an undivided half of section 10, for $100,000. On September 15, 1887, the plaintiff in error and one Nesbitt accepted this offer, and made a written contract with the defendant in error to purchase the undivided half of section 10 for $100,000. Nesbitt failed to get the money to perform his part of the contract, and it was abandoned. On October 8, 1887, Isaac E. Adams, who was the authorized agent of the defendant in error to do so, wrote in this way to the plaintiff in error: 'As I told you this morning, Mr. Seeberger could now carry through the purchase on the original terms, but, in view of our after determination to let you 'come in on the ground floor,' he makes the following new proposition: To sell you an undivided one-half interest in section 10 for $65,000, or exactly what it costs him. He is to take care of the remaining property. Selling at these rates, he would desire $25,000 cash. He would take $22,500 in shape of a mortgage secured by the half section, payable on or before one, two, or three years, with interest at 6 per cent. per annum, with clauses providing for a release upon part payment, etc. The remaining $17,500 of the purchase price he would arrange in any way which might be satisfactory to you, or he would like to let it remain in the property as his undivided pro rata interest in said half section.'

Mackenzie did not accept this proposition, but on October 11, 1887, wrote Seeberger that he had a friend who would join him in the purchase of the half section, provided he would separate it from the other half, and sell it to him on the terms stated in Adams' letter. Negotiations continued between them until some time in November, 1887, when Seeberger sold and caused to be conveyed to Mackenzie and his friend Hawkins the E. 1/2 of section 10, for $65,000. Each of these purchasers paid him $15,000 in cash, and each of them gave his individual notes for $17,500, for his share of the purchase. The terms of payment for the purchase made by Mackenzie and his friend differed materially from the terms of payment of the $129,300 required of Seeberger in his contracts of purchase from Smyth and Chew.

Upon this state of facts, the court below charged the jury that the effect of the plea in Mackenzie's answer was, not that Seeberger had made a contract with Smyth and Chew for the purchase of the land, but that he was merely negotiating therefor, when, in October, 1887, he solicited the plaintiff in error to join with him in making the purchase, to take one-half of section 10, and to contribute his ratable proportion of the purchase price. It charged them that the gist of Mackenzie's grievance was that Seeberger had conducted the negotiations with Smyth and Chew on their joint account, and had, by deceit, induced him to contribute more than his proportionate share of the purchase money paid for the lands bought of them. The court continued in this way:

'The theory of this issue is that, if the plaintiff thus undertook to make this purchase on the joint account of himself and the defendant, it established a fiduciary or trust relation between the parties, and the law would expect of Seeberger good faith and common morality in disclosing to the defendant, his co-purchaser and confiding associate, the true amount of the purchase money agreed to be paid, and to give him an equal share in all the property so purchased. Whereas, if the transaction was that Seeberger had already in October, 1887, contracted with Chew and Smyth in his own right and for his and others' benefit other than the defendant, and so, having such contract, he proposed to sell one-half of section 10 to the defendant, and the defendant accepted such offer, that established a relation simply of vendor and vendee between them, and not a fiduciary relation like that in the case presented in the defendant's answer.'

An exception was taken to the last paragraph of this quotation. The criticism of it is that it proceeds upon the erroneous theory that the fiduciary relation between Seeberger and Mackenzie must have existed at or before the time when Seeberger made his contracts with Smyth and Chew. Perhaps it would be a conclusive answer to this objection to say that the court was treating an issue tendered by the answer of the plaintiff in error, which alleged, as the court charged (and that without objection or exception on his part), that the fiduciary relation arose in this case, not after Seeberger had made his contracts for the purchase of the land, but while he was merely negotiating therefor. There could be no error in clearly presenting the issue which the plaintiff in error had tendered by his answer. A more satisfactory answer to this objection, however, is that, if we throw the pleading out of view, there is really nothing in the paragraph criticised, to the effect that the fiduciary relation between these parties might not be established as well after the contracts of purchase were made by Seeberger as before. The conclusion of a contract of purchase, and the subsequent sale by the purchaser of a portion of the property he has bought to another, creates no fiduciary relation between the parties to the second sale. Every vendor who sells land he has lately purchased does not thereby make himself the agent or the partner of his vendee to complete his own purchase. Something more is necessary to establish this trust relation. The charge of the court here was no more than the statement of this axiomatic proposition. It was that if one who has made a contract of purchase of land proposes to sell a portion of it to a third party,...