The Provident Loan Trust Company v. McIntosh

• Decision Date: 06 February 1904
• Docket Number: 13,468
• Citation: 68 Kan. 452,75 P. 498
• Parties: THE PROVIDENT LOAN TRUST COMPANY v. GORDON MCINTOSH et al
• Court: Kansas Supreme Court

75 P. 498

68 Kan. 452

THE PROVIDENT LOAN TRUST COMPANY v. GORDON MCINTOSH et al

No. 13,468

Supreme Court of Kansas

February 6, 1904

Decided January, 1904.

Error from Geary district court; O. L. MOORE, judge.

SYLLABUS

SYLLABUS BY THE COURT.

1. FRAUD--Conditions Precedent to Relief. Relief on the ground of fraud will not be granted to one who does not seek it promptly after discovery of the fraud, and who, with knowledge of the fraud, retains the fruits of the transaction it induced.

2. FRAUD--False Representations. Relief will not be granted on account of false representations not shown to have been relied on as an inducement to conduct resulting in injury.

3. CONVEYANCE--Contract of Sale Without Disclosing Title. A man having an interest in land, and having such control of its title that he may require a conveyance of it may rightfully make a contract in his own name to convey it by a warranty deed, without disclosing the actual state of the title to the purchaser.

4. CONVEYANCE--Recovery of Consideration Without Rescission. Money paid upon a contract induced by fraud cannot be recovered unless the contract may be rescinded; and a rescission will not be decreed to one who was himself in default at the time of the dereliction of which he complains.

5. NEW TRIAL--Not Granted Because Theories Presented Were Inconsistent. A party accepting all the issues tendered by the petition, and defending the case at the trial against all the theories presented, will not be granted a new trial because such theories are inconsistent with one another.

Humphrey & Humphrey, for plaintiff in error.

Taylor & Brown, and Roark & Roark, for defendants in error.

BURCH J. All the Justices concurring.

OPINION

BURCH, J.:

The plaintiffs brought an action to recover from the defendant, the Provident Loan Trust Company, money they had paid to it under a contract for the purchase of real estate. They founded their action upon fraud in the formation of the contract and subsequent acts of the defendant, whereby it voluntarily deprived itself of the power to convey to them the land. The defense was that the contract was free from fraud in its inception, and that the defendant was ready, able and willing to perform, but that the plaintiffs were in default; and the answer alleged that if plaintiffs ever had any cause of action it was barred by the statute of limitations. The plaintiffs prayed for damages, while the defendant prayed for the balance due upon the contract, and for a decree of forfeiture if it should not be performed within a time to be fixed by the court. Upon the trial, the court, upon request, made findings of fact and conclusions of law, and rendered judgment for the plaintiffs. The defendant prosecutes error in this court.

Such of the findings of the court as are necessary to a decision of the case, briefly summarized, disclose the following facts: Prior to 1893 Henrietta M. Shaw, of Cooperstown, N. Y., held a mortgage on the land in controversy, which was foreclosed and the property bid in by the defendant. In November, 1893, the defendant conveyed the land to. Henrietta M. Shaw by warranty deed, but took from her a contract whereby the company took charge of the land for a year, to rent if possible, and to sell as soon as might be, and apply the proceeds to the payment of taxes and insurance and the principal and interest of Henrietta M. Shaw's mortgage debt, any surplus to be retained by the defendant in payment of what was termed its equity and services. This contract was not recorded, and plaintiffs had no knowledge of it until it was pleaded. On August 16, 1894, the plaintiffs purchased the land, paying part of the purchase-money in cash and agreeing to pay the balance in instalments, and executed the contract in suit as evidence of the terms and conditions of sale. The only reference to the ownership of the land or the source or character of title to be conveyed which the contract contained was in these words:

"Said party of the first part hereby agrees to sell, and by warranty deed to convey, to the said parties of the second part, the following described property, to wit."

By the language of the contract, time was made of the essence of its terms, and forfeiture was made the penalty for a default.

After the execution of the contract plaintiffs placed the land in the hands of the defendant to rent, and the land was rented for three years, beginning September, 1894, at an average rental of $ 150 per annum, which rents were credited on the plaintiffs' account for the purchase of the land and used for the payment of taxes. During these three years plaintiffs made additional payments on the contract from their own funds, amounting altogether to $ 341. In a letter of January 21, 1897, the defendant rendered a statement and made a report of the rents for the year 1896. On February 7, 1898, an agent of the plaintiffs wrote the president of the defendant company a letter, containing the following language:

"Your favor of the 26th ult. duly received. You speak of rent of McIntosh farm for 1897, $ 110. Mr. McIntosh understood the farm was rented at same price as for the year 1896, viz., $ 150. In the year, $ 100 was paid cash and $ 50 allowed for a well. . . . In your letter of January 27, 1897 (to Daniel Evans), you say, 'We certainly do not want Mr. McIntosh to lose on this investment,' etc., and you say this in connection with the $ 400 proposition. Now, as but a year has elapsed, during which time you have had the $ 110 rent to apply on the interest and taxes, and you double the amount now exacted to $ 800, I think you have made a mistake or else you are ready to see Mr. McIntosh lose on the investment. Will you please advise me, and oblige."

On February 2, 1897, an agent of the plaintiffs wrote the president of the defendant company acknowledging that there was then due defendant on the contract and growing out of it $ 329.29, and suggesting a compromise plan for carrying out the contract as to a part of the land. Portions of the letter of February 7, 1898, confessed inability to carry out the contract and offered a plan whereby the plaintiffs might obtain title to eighty acres of the land.

In March, 1898, the defendant made a settlement with Henrietta M. Shaw, releasing any claim it had upon the land in controversy. On March 12, 1898, Henrietta M. Shaw conveyed the land by warranty deed to George C. Eaton, which deed was recorded March 5, 1899. Before the commencement of suit one eighty acres of the land had been conveyed by Eaton to Henry Lichtenhan, and the other eighty acres of it to Alice M. Nickells, who had mortgaged her portion for $ 500. Suit was commenced June 25, 1900.

Plaintiffs purchased the land after a representation. by an officer of the defendant company that the rental value of the land was $ 500 per year. This representation was false and was known to be so by the party making it. Plaintiffs were ignorant of its falsity, relied on its truthfulness, and were induced by it to make the purchase.

Concerning the allegations respecting the state of the title to the land the court found as follows:

"At the time he made the contract McIntosh believed that the land he was buying was the property of the Provident Loan Trust Company, and at all times prior to February 25, 1898, he still believed the property was the property of the Provident Loan Trust Company.

"From the terms and averments and covenants of the contract, the plaintiff had reason to and did believe that at the time of the execution of the contract the Provident Loan Trust Company was the owner of the legal and equitable title to the land in controversy."

Following the last statement is another, which, however, is a conclusion of law and not a finding of fact. It reads:

"And the failure of the officers and agents of said company to reveal the name of the party who was to hold the legal title to the land in trust for plaintiffs, until plaintiffs should pay the balance of the purchase-price, was a fraud upon the plaintiffs which would avoid the contract, when discovered by the plaintiffs."

In conclusion, the court said:

"The plaintiffs learned of the fraudulent representations as to the rental value of the land more than two years before the commencing of the action, and their action to rescind the contract upon that ground is barred by the statute of limitations.

"I therefore reached the conclusion in this case that the plaintiffs are entitled to recover the purchase-money which they paid upon this contract from the Provident Loan Trust Company, because of the fraudulent representations and concealments in relation to the title to the land, and because, at the time of the commencement of this action, the defendant, the Provident Loan Trust Company, had voluntarily placed it beyond its power to perform the conditions of the contract by making a conveyance of the same to the plaintiffs."

Since the defendant was a non-resident corporation, it could not make the defense of the statute of limitations. (Williams v. Railway Co., ante, p. 17, 74 P. 600.) Therefore, the refusal of the court to grant relief to the plaintiffs on that ground was erroneous. But the error cannot redound to the advantage of the plaintiffs, since the findings of fact affirmatively show that the plaintiffs were altogether without the pale of equity when assailing the contract on account of misrepresentations concerning the rental value of the land. Since the average rental of the land for 1894, 1895 and 1896 was but $ 150 per annum, the total amount received for the three years could not equal the represented income for one year. Therefore, whenever plaintiffs received their first year's rent, they knew that the representations had failed. If t...