Schwan v. Kelly

• Decision Date: 06 January 1896
• Docket Number: 193
• Citation: 173 Pa. 65,33 A. 1107
• Parties: Charles Schwan et al., Appellants, v. Joseph M. Kelly and John N. Moore
• Court: Pennsylvania Supreme Court

33 A. 1107

173 Pa. 65

Charles Schwan et al., Appellants, v. Joseph M. Kelly and John N. Moore

No. 193

Supreme Court of Pennsylvania

January 6, 1896

Argued November 1, 1895

Appeal, No. 193, Oct. T., 1895, by plaintiffs, from decree of C.P. No. 2, Allegheny Co., Oct. T., 1894, No. 518, on bill in equity. Reversed.

Bill in equity to rescind a contract for the sale of real estate.

The case was heard on bill and answer, and the court entered a decree dismissing the bill, filing the following opinion:

1 STATEMENT.

The bill was filed to rescind a contract for the purchase of real estate, on the ground of misrepresentation and fraud practiced by the vendor on the vendees, and to require a return of the purchase money paid.

By written agreement, dated February 1, 1893, Joseph M. Kelly agreed to sell to Charles Schwan, John C. Bole, Mattie E Pierce, R. G. Kennedy and S. E. Pool, the seven eighths interest in a tract of land near Latrobe, in Westmoreland county, containing 152 acres, for the consideration of $118,125, to be paid, $1,000 cash; $7,875 on the 1st of March, 1893; $25,000 on the 1st of June, 1893; to assume the payment of the seven eighths of a mortgage of $37,000, -- the seven eighths being $32,375; the balance of purchase money to be secured by bond and mortgage, to be given June 1, 1893 when the deed was to be delivered.

The purchasers paid the $8,875, and transferred portions of their claim to the other parties plaintiff in this bill. It was then agreed by the plaintiffs and the defendant that they would organize a corporation, by the name of the North Latrobe Land Company, which was done. The deed was then made to the corporation and the corporation executed its bond and mortgage to Joseph M. Kelly for the balance of the purchase money, to wit, $70,788.28.

The bill alleges that after the deed and mortgage were executed, the plaintiffs discovered the misrepresentations and fraud practiced by the defendant, but does not give the date of such discovery.

These misrepresentations and fraud consist in statements of the value of the property; of certain negotiations by Kelly, by which roads and railroad advantages would be afforded, and other matters enhancing the value of the property and facilitating the sales of lots, etc., all of which, it is alleged, were false and fraudulent.

After the plaintiffs discovered the alleged frauds they tendered back to Joseph M. Kelly a deed for the land and demanded repayment of the purchase money paid, and that the deed and mortgage be canceled, which tender and demand were refused, but the date of said tender and demand is not given.

The answer denies all the alleged misrepresentations and fraudulent acts or statements. It also sets up as a defense res adjudicata, -- that all the questions raised by this bill were adjudicated by a judgment that Joseph M. Kelly obtained against the corporation on its mortgage.

As this is a purely legal question, which may dispose of the whole case, I thought it better to hear and pass upon this question before proceeding to take testimony generally on the bill and answer.

2. FINDINGS OF FACT.

The corporation paid on account of the purchase, $10,460.38, and on improvements made on the property, $2,139.92.

A scire facias was issued on the mortgage given by the corporation, April 18, 1894. It was not served, and an alias scire facias was issued May 23, 1894, and duly served on the president of the corporation. No defense was interposed and judgment was entered June 19, 1894, for $75,247.93. On that judgment a levari facias was issued on the 19th of June, 1894, and in pursuance of that the sheriff of Westmoreland county sold the property on the 1st of September, 1894, to Joseph M. Kelly and J. W. Moore for $1,000, and this money was distributed to costs and the balance on the plaintiffs' judgment.

The bill was filed September 17, 1894, being seventeen days after the sheriff's sale.

The plaintiffs knew of the alleged false statements and representations before the judgment was obtained, and made no defense to the scire facias or any objection to the sheriff's sale. The bill does not state the date when the plaintiffs found out the alleged false statements and misrepresentations, but during the argument it was admitted that it was before the judgment was obtained on the scire facias.

It is stated in the bill that the property was not worth more than $46,500, as that was the price which the defendant, Kelly, paid for the property within a year prior to the sale to the plaintiffs.

3. CONCLUSIONS OF LAW.

The plaintiffs, individually, are not liable for any of the purchase money to Kelly. By arrangement with them and the defendant the deed was made to the corporation and the corporation gave its bond and mortgage to Kelly for the remaining purchase money. There is, therefore, no personal liability on the part of the plaintiffs for the payment of this purchase money.

As members of the corporation (and from the bill they were all members of the corporation, and the corporation was also made a plaintiff), the plaintiffs here could have interposed a defense on the scire facias, and should have done so. If they were willing to retain the property at its actual value, and fraud had been practiced to secure a higher price, they could have defended on the ground of that fraud and reduced the price to the actual value of the property. Or, if they were unwilling to retain the property they could have defended on the scire facias, filing an affidavit setting forth all the facts, as stated in this bill, and at the same time have filed a bill in equity setting forth the facts and an offer to rescind, and upon such an affidavit filed the court of Westmoreland county would undoubtedly have stayed proceedings on the scire facias until the bill in equity was finally disposed of.

Doing nothing, permitting judgment to be entered on the scire facias without interposing any defense, and permitting the property to be sold on that judgment without any objection or interposing any defense, it is now too late for the plaintiffs to raise the question set forth in this bill. The judgment on that scire facias is an adjudication that the whole amount of the mortgage was due, and the corporation, and, of course, these plaintiffs, as members of the corporation, had no defense.

This is now an effort to get the common pleas of this county to undo all the preceedings in the court of common pleas of Westmoreland county -- to set aside a judgment of that court and a sheriff's sale in pursuance of that judgment. This cannot be done.

That the plaintiffs could and should have defended on the scire facias, and failing to do so cannot set up the same matters in a bill, is a doctrine well settled in this state. It is only necessary to refer to Lewis v. Nenzel, 38 Pa. 222; Heneman v. Pile, 161 Pa. 599; Bierer v. Hurst, 162 Pa. 1. It is also the doctrine in other states: Burt v. Miller, 4 Gray, 114 (Mass.); Kelly v. Doulin, 70 Ill. 385; Barton v. Anderson, 104 Ill. 578.

The plaintiffs, however, contend that they could not have defended on the scire facias without affirming the contract. This is a mistake. They could have affirmed the contract as to the purchase, and defended as to the fraudulent price; or they could have filed a defense repudiating the contract, because of the alleged fraud, offered to rescind and filed a bill for rescission; and if that had been done no doubt the court of Westmoreland county would have stayed proceedings on the scire facias until a decision of the bill in equity.

I am of the opinion that a judgment on the scire facias and a sheriff's sale thereon, before this bill was filed, was a judicial determination that the plaintiffs and the corporation owed the amount of the mortgage, and it is too late for the plaintiffs now to question the validity of the contract. It is res adjudicata of all the matter set up in this bill, and the bill should be dismissed.

Let a decree be drawn accordingly.

4. DECREE.

This cause came on to be heard at January term, 1895, and by direction of the court arguments were heard upon the question of law raised in the answer, by way of plea in bar, as to whether the judgment and sheriff's sale on the purchase money mortgage is res adjudicata and a bar to this suit in equity, and thereupon, upon consideration thereof, it is ordered, adjudged and decreed, that the bill be dismissed at the cost of the complainants.

Error assigned was decree dismissing bill.

The assignments of error are sustained and the order dismissing the bill is reversed and set aside, and the record is remitted to the court of common pleas for further proceedings.

C. M. Thorp and James S. Young, S. U. Trent and A. Leo. Weil with them, for appellants. -- In order that a judgment may constitute a bar to another suit it must be rendered in a proceeding between the same parties or their privies and the point of controversy must be the same in both cases and must be determined on its merits: Hughes v. U.S., 4 Wall. 232.

The defense of set-off is of so extraordinary a nature that the failure to make it would not preclude the defendant from afterwards bringing suit upon it, for the reason that a former judgment is conclusive only as to matters which were in fact necessarily decided, and is not conclusive as to matters which might have been but which were not presented and decided: Laird v. DeSota, 32 F. 652; Packet Co. v. Sickles, 5 Wall. 592; Russell v. Place, 94 U.S. 606; Cromwell v. County of Stock, 94 U.S. 351; Tams v. Lewis, 42 Pa. 402; Shriver v. Eckenrode, 87 Pa. 213; Babcock v. Day, 104 Pa. 4.

P. C Knox, James H. Reed, William F. & Charles S. Wise with him, for appellees. -- All the allegations of fraud which are set up...