Riley v. Bell

• Citation: 95 N.W. 170,120 Iowa 618
• Parties: MARTIN RILEY, Appellee, v. J. E. BELL, Appellant
• Decision Date: 25 May 1903
• Court: United States State Supreme Court of Iowa

95 N.W. 170

120 Iowa 618

MARTIN RILEY, Appellee, v. J. E. BELL, Appellant

Supreme Court of Iowa, Des Moines

May 25, 1903

Appeal from Adams District Court.--HON. H. M. TOWNER, Judge.

ON December 1, 1890, G. W. Frank, residing in the state of Nebraska, was the owner of one hundred and twenty acres of land in Adams county, this state, which land he had placed in the hands of the defendant, Bell, then a real estate agent residing at Corning, in said county, for sale. On the date named, Bell negotiated a sale of the land to plaintiff, and a contract in writing was executed and delivered, the material provisions thereof being that the purchase price should be paid in installments, the last one to become due and payable March 1, 1896; that, upon payment being made in full conveyance should be made "in fee simple, clear and free of all incumbrances whatever, by good and sufficient warranty deed." The contract was executed by Frank, in Nebraska and forwarded to defendant, who delivered the same to plaintiff, and thereafter all payments to be applied on the purchase price were made to defendant by plaintiff. The last payment was thus made in August, 1895, and on November 7th following, a warranty deed, in general form, executed by Frank, was delivered by defendant to plaintiff. It appears that at all the times mentioned the lands in question were in fact incumbered by the lien of a valid recorded mortgage held by one Loomis. During the year 1897 proceedings were instituted to foreclose such mortgage, resulting in a judgment and decree of foreclosure, of date March 22, 1899. This plaintiff was made a party defendant to such action, and he appeared and unsuccessfully defended. On April 24, 1899 plaintiff paid said judgment, amounting to $ 2,280.90, and costs, including attorney's fees, $ 136.30. This action is brought to recover of the defendant the aggregate of said sums, and is based upon allegations to the effect that, at the time of the purchase of and payment for said land plaintiff was ignorant concerning the title thereto; that defendant, in response to a request for information as to such title, represented to plaintiff that, of his own personal knowledge, the land was free and clear of all liens and incumbrances whatsoever. And plaintiff says that, relying wholly upon such statement, he purchased and paid for said land without having made a title examination. He further says that the representations so made by defendant were false, and known by him (said defendant) at the time to be so, and were made with intent to cheat, wrong, and defraud plaintiff, and with intent that plaintiff should rely thereon, which he did, to his damage, as stated; that, when he discovered the existence of said mortgage, the said Frank had become and was insolvent, and had no property in this state. The defendant pleads the fact of his agency. He also denies the fraud, deceit, concealment, and misrepresentations alleged, and denies actual knowledge of the existence of the Loomis mortgage at the time when the contract was made. Such other matters appearing in the record as are material to be considered are stated in the opinion. There was a jury trial, verdict and judgment in favor of plaintiff, and defendant appeals.

Affirmed.

Burg Brown, T. M. Stuart, and Maxwell & Maxwell for appellant.

Sullivan & Sullivan and F. C. Okey for appellee.

OPINION

BISHOP, C. J.

It appears from the record that the defendant was for many years a business man at Corning, the seat of Adams county, and well known to plaintiff; that the latter is an aged farmer, having little or no education, and who resides near Corning; that defendant, acting as the agent of Frank, negotiated the sale of the land in question to plaintiff, and at the time thereof such land was incumbered by the lien of the Loomis mortgage; and that at the time of making the contract, and of his payments thereunder, plaintiff had no actual knowledge of the existence of such mortgage. We think it further appears --and the jury found such to be the fact--that, to induce plaintiff to enter into the contract, defendant asserted that he had personal knowledge of the condition of the title to the lands, and that such title was perfect in all respects. The representations made by defendant, as testified to by plaintiff and other witnesses in his behalf, were, in substance, as follows: Pending the negotiations for the sale, plaintiff said: "Mr. Bell, I will buy the land if it is clear of everything. I don't want to buy anything unless it is clear, and I want to buy of you." To which defendant responded: "All right. It is clear of everything. I have looked up the record, and it is clear of everything." Again, at the time the contract was signed, defendant said that he had examined the records, and that the land was clear and free of all incumbrances. This he repeated several times. Being asked about an abstract of title, defendant answered that, if an abstract was furnished, plaintiff would have to pay for the same, whereupon plaintiff said: "All right. I will pay for the abstract, if that is all." To this defendant replied: "Look here. There is no use of your paying for an abstract, because the land is clear, and you are just throwing away that money." Plaintiff says, and the jury accepted his statement as true, that he believed and relied upon the statements so made by defendant, and accordingly did not cause an examination of the title records to be made. As a witness on his own behalf, the defendant denied having knowledge of the existence of the mortgage at the time the contract was made, and denied making the statements attributed to him.

The court, upon its own motion, gave to the jury an instruction as follows: "(5) It is not sufficient to show that the representation was made, and made to induce the sale, and that said statement was in fact untrue. It must further appear that the defendant knew said statement was untrue when he made it, or he must have asserted that he had actual knowledge, or intended to convey the impression that he had actual knowledge, of the truth of the statement made, although conscious that he had no such knowledge. It is admitted that defendant was the agent of Frank, and so acted in the transaction. It is also admitted that plaintiff knew that defendant was acting for Frank, and not for himself. Under these circumstances, a mere assertion or representation concerning the said land would be presumed to be made for and on behalf of the principal, and the agent would not be liable for any such assertion or representation, concerning said land unless, such agent in making such statement, knew at the time he was making it that the statement was false and untrue, or that he made such representation assuming and asserting that he had personal knowledge, when in fact he had not." (The italics are ours.)

To the giving of such instruction the defendant saved an exception, and he now assigns error based thereon. The particular grounds of complaint have reference to the italicized portions of the instruction. It is contended in the first place that the instruction is erroneous in that the representations alleged, conceding the same to have been made, were the representations of the principal, and, under the circumstances presented, he alone became bound thereby. In support of this proposition, counsel invoke the general rule to the effect that where an agent has acted in good faith, and within the limits of his authority, his principal alone is bound by his representations, however false the same may prove to be in point of fact. The force of such rule, as applied to a state of facts coming within the field of its operation, is not to be denied. But it will be observed that the element of good faith is essential to the rule, and it follows, of necessity, that, in a case dominated by bad faith or fraud on the part of the agent himself, the rule can have no application. The rule thus invoked by counsel is confined in its application to such representations, and such only, as may be made by an agent, speaking as such, for and on behalf of his principal. Thus it is that an agent is not chargeable with personal responsibility where it appears that he has acted in good faith within the general scope of his authority, and in making representations has acted simply as the mouthpiece of his principal, and has spoken, therefore, as his principal might have spoken, had he been personally present and acting in the premises. The thought of the instruction under consideration is that bad faith and fraud--that is, a conscious and willful misrepresentation of a fact--are essential to a recovery as against the agent in any event. In effect, therefore, the jury is told that, unless bad faith is made to appear, the plaintiff must fail in his action, and a verdict should accordingly be returned in favor of defendant. Now, that a personal liability may be charged as against an agent where fraud or bad faith on his part is alleged and proven, is well-settled doctrine. Lyon v. Tevis, 8 Iowa 79; Paton v. Lancaster, 38 Iowa 494.

This doctrine is bottomed upon the principle that any person who by himself perpetrates a fraud, or who makes himself a party with others to the commission of a fraud, may be held personally liable for the natural consequences or proximate results flowing therefrom. It follows that one who sustains the relation of agent cannot escape liability for his fraudulent acts, willfully committed while in pursuit of the master's business, by merely pointing out the fact of his agency. Norris v. Kipp, 74 Iowa 444, 38 N.W. 152; Delaney v. Rochereau, 44 Am. Rep. 456; Berghoff v. McDonald, 87 Ind. 549; Hedden v. Griffin, 136 Mass. 229 (49 Am. Rep. 25); Campbell v. Hillman, 61 Am. Dec. 195;...