N.Y. Brokerage Co. v. Wharton

• Citation: 143 Iowa 61,119 N.W. 969
• Parties: NEW YORK BROKERAGE CO. v. WHARTON ET AL.
• Decision Date: 09 March 1909
• Court: United States State Supreme Court of Iowa

143 Iowa 61

119 N.W. 969

NEW YORK BROKERAGE CO.

v.WHARTON ET AL.

Supreme Court of Iowa.

March 9, 1909.

Appeal from District Court, Keokuk County; W. G. Clements, Judge.

This is an action for specific performance. There was a decree for the plaintiff. Defendants appeal. Reversed.Talley & Hamilton and J. C. Beem, for appellants.

Stockman & Hamilton, W. R. Lewis, and T. C. Lego, for appellee.

EVANS, C. J.

Plaintiff brings this action for a specific performance of a written contract, purporting to be entered into between the plaintiff and the defendants (who are husband and wife) on August 3, 1906. The plaintiff was the owner of a stock of goods at What Cheer. The defendant W. C. Wharton was the owner of a farm of 280 acres in Missouri, incumbered by a mortgage of $4,000. The defendant Ellen Wharton was the owner of 40 acres, being the homestead of the defendants in Keokuk county, which was incumbered by a mortgage of $1,500. By the contract in question the defendants agreed to sell the farms referred to to plaintiff at an agreed valuation of $11,000 for the 280 acres and $3,600 for the 40 acres, making the net value of defendants' equity in said farms at $9,100; and the plaintiff agreed to purchase said farms, and to pay therefor by transfer of the stock of the goods in question, to be taken by the defendants “at invoice price.” In pursuance of such contract, the parties entered upon an attempted invoice of the stock of goods, and so continued for a couple of days until a controversy arose between them, which resulted in the defendants abandoning all further attempt at invoicing and abandoning the contract. The merits of this controversy we will consider later in the opinion. The plaintiff procured the invoicing to be completed, tendered such invoice and the keys to the defendants, and brought this action. The amount of such invoice is something over $12,600. The contract between the parties required the defendants to take the whole stock and pay for the difference, if any, over and above the $9,100. The defense is both negative and affirmative. Under their general denial the defendants contend that the plaintiff never performed, nor offered to perform, nor was it able to perform, the contract on its own part. Affirmatively they aver that they were deceived by the false representations of the plaintiff, and were induced thereby to enter into the contract. These alleged false representations related chiefly to (1) the ownership of the goods; and (2) the quantity of goods in stock. They also contend that the final abandonment of the contract was by the mutual assent of both parties. The trial court entered a decree ordering specific performance. The decree made some qualifications upon the contract, which we will note later herein. We have gone through the evidence with much care and we are unable to concur in the conclusions of the trial court. On the contrary, we are impressed with the superabundance of reasons appearing in the record why specific performance should not be ordered.

1. The defendants were farmers and were without practical experience in the mercantile business. The plaintiff was represented in the transaction and in the litigation that followed wholly by one L. Urdangen, who was a man of practical mercantile experience, and who had the management of the stock of goods in question. There is no reasonable doubt under the evidence but that he represented to the defendants the quantity of the goods to be much less than it, in fact, was. In the negotiations it was deemed important by the defendants that they should have a margin in their favor of several hundred dollars in order that they might pay certain debts owing by them. This was stated by them to Urdangen. Urdangen assumed knowledge of the approximate amount of goods in stock. He estimated that the margin in favor of the defendants would be from $1,100 to $1,500. His final assurance was that it could not be less than $600. He stated that the stock would not run less than $7,000 nor more than $8,500. We are satisfied that the defendants relied upon his assurance, and that he knew it. Under the invoice as finally made out, the defendants would be required to pay the plaintiff $3,500, which they would be wholly unable to do. This stock was made up of remnants of old bankrupt stocks shipped in from different places. Judicial notice does not require the aid of much practical observation to believe that the defendants could never realize enough out of the stock to pay the balance found against them. For the purpose of this case, it is immaterial whether Urdangen knew of the falsity of his representation or not. Wilcox v. University, 32 Iowa, 367;Mohler v. Carder, 73 Iowa, 582, 35 N. W. 647;Weise v. Grove, 123 Iowa, 585, 99 N. W. 191. We are unable, however, to read this record without reaching the conclusion that Urdangen did know the falsity of his assurance. He was a man of practical experience in his line, and was in possession of the stock, and presumably knew approximately what there was in it. We think the form of the contract itself was a ruse and a false token. It provided that, if the goods invoiced less than $8,000, then the plaintiff was to be relieved of the purchase of the 40 acres. This provision was incorporated apparently for the benefit of the plaintiff. If Urdangen knew, as we find that he did, that the stock would not invoice less than $8,000, there was no occasion for incorporating such provision in the contract, except to confirm the impression upon the minds of the defendants that there was such a possibility. This form of contract has become too familiar to the courts of late years. Its operation is always uniform. Too seldom do the parties to it deal on equal terms; too often, as here, the victim of the transaction finds himself confronted by his own agent as an adverse witness. It is also claimed by the defendants that a large number of drawers which were represented to be empty when they looked over the stock prior to the purchase were found at the time of the invoice to be full of goods. We think this complaint is fairly sustained.

2. As already indicated, the business with the defendants was transacted by L. Urdangen alone. Defendants did not know that any other person had any interest in the goods. They claim that Urdangen stated to them that he owned the goods, and that he had no partner. All his conversations in the negotiations preceding the contract would indicate nothing else than that he was acting in his own behalf. We think the circumstances corroborate the testimony on behalf of the defendants that he did represent himself as the owner of the goods. There is no reasonable doubt but what the defendants so believed. It is true that the contract was signed “New York Brokerage Company,” but, in view of his previous statements, the defendants were justified in believing that he was doing business under that name. On the trial Urdangen testified that the New York Brokerage Company was a partnership composed of Ida Urdangen and Liebsohn Bros., of Grundy Center, and that he himself was the “manager.” This being true, Urdangen was not a party to the contract at all. The real parties to the contract were persons never disclosed to the defendants. It is argued that this was not a material fact, and that misrepresentation with reference to it furnishes no ground of complaint. We think otherwise. It is the right of a party to a contract to know with whom he deals unless he consents to deal with an agent in behalf of an undisclosed principal. He has a right to rely upon representations made as to the identity of the other party to the contract, and, if deceived by such representations, he has a right to rescind. Ellsworth v. Randall, 78 Iowa, 141, 42 N. W. 629, 16 Am. St. Rep. 425;...