Docket No. 373

Decided: Monday, April 18th, 1892

Opinion: 4 Wash. 161 (1892)

Court: Anders1 Court (1889-1892)

Anders

Dunbar

Hoyt

Scott

Stiles

SHOUFE v. GRIFFITHS, 4 Wash. 161; 30 P. 93 (1892).

No. 373.

SUPREME COURT OF WASHINGTON

April 18, 1892, Decided Appeal from Superior Court, King County. Action by John Shoufe and Hugh McCrum, as co-partners, under the name of Shoufe & McCrum, against H. H. Griffiths and M. L. Abbott, doing business under the name of Abbott & Griffiths, William B. Robertson, Minda S. Graff, Hannah Kistenmacher, Alice J. Roberts, G. W. Traverse and Thomas B. Hardin to foreclose a mortgage on the alleged undivided two-thirds interest of Abbott & Griffiths in certain real estate. The mortgage had been executed to George H. Bell and by him assigned to Shoufe & McCrum. Abbott & Griffiths held a bond for a deed from John Krumm and wife conditioned for a conveyance of certain land at the price of $ 5,500, reciting that Abbott & Griffiths had paid the obligors on the date of the bond $ 2,500, that $ 1,300 in money was to be paid at time of conveyance, and two mortgages given by Krumm as security for $ 1,700 to be assumed by the grantees. The actual purchase price was $ 3,550, of which $ 500 was paid at the time of execution of the bond, and the balance to be paid in cash in the sum of $ 1,350, and by the assumption of the mortgages for $ 1,700, on the execution of a deed. Abbott & Griffiths organized a syndicate to purchase the land, composed as follows: M. L. Abbott, H. H. Griffiths, G. W. Traverse and Minda S. Graff, each holding a one-fifth interest, and Alice J. Roberts and Hannah Kistenmacher jointly holding a one-fifth interest. According to the purchase price, alleged by Abbott & Griffiths, it was necessary for the syndicate to contribute $ 3,800 cash. Alice J. Roberts and Hannah Kistenmacher jointly contributed $ 740, and Minda S. Graff and G. W. Traverse each contributed $ 740, thus making the sum contributed by them $ 2,220. As the actual cash required for the purchase, in addition to the assumption of the $ 1,700 of encumbrances, was $ 1,850, they had contributed in excess of the necessary price the sum of $ 470, which was appropriated by Abbott & Griffiths, who were conducting all the negotiations. Abbott & Griffiths had represented that the price agreed upon was $ 5,500, and that they were contributing $ 740 each, which, with $ 100, realized from a sale of a portion of the land and applied on the purchase price, made the sum of $ 3,800. The land was deeded to "H. H. Griffiths and Minda S. Graff, trustees;" thereafter Abbott & Griffiths executed a mortgage to George H. Bell, on one undivided two-fifths of said land, to secure certain notes, which were assigned by Bell to Shoufe & McCrum. From the decree of the superior court of King county, declaring the mortgage no lien upon the property sought to be charged, and finding that the title to said property is in Minda S. Graff an undivided one-third, G. W. Traverse an undivided one-third, Alice J. Roberts and Hannah Kistenmacher an undivided one-third, the plaintiffs appeal.

Court: Judgment affirmed.

Counsel: Tustin, Gearin & Crews, for appellants. Fishback, Hardin & Meek, for respondents.

Judge(s) SCOTT, J. ANDERS, C. J., and HOYT, J., concur. STILES, J., concurs in the result. DUNBAR, J., dissenting.

Opinion By: SCOTT The opinion of the court was delivered by SCOTT, J.--It is contended by the appellants that the land in question was sold to Abbott & Griffiths by Krumm and wife, and was by Abbott & Griffiths sold to the syndicate of which they were members. The fact that the preliminary negotiations for the purchase had been conducted by Abbott & Griffiths, and that the bond given by Krumm and wife ran to them, lends some color to this claim. But from an examination of the whole proof as well as of the syndicate agreement itself, we are led to the conclusion that the purchase was made by the syndicate direct from Krumm and wife, and that this was the understanding of the members of the syndicate as between themselves, and was the fair intendment to be drawn from all their dealings. It clearly appears that the members of the syndicate were to engage in the enterprise upon an equal footing according to the representations of Abbott & Griffiths, and appellants' contention that the facts in this case are not such as will warrant the granting of any relief to the respondents, Graff, Kistenmacher, Roberts and Traverse, is untenable. The fact that the land was worth all that Abbott & Griffiths falsely represented to be the purchase price does not alter the case, for the difference between the actual purchase price paid to Krumm and wife, and the price represented by Abbott & Griffiths to have been paid or agreed upon, resulted in a direct loss to the other members of the syndicate in the proportion paid by each. They could have bought the land just that much cheaper, and their profits in case of a sale for an enhanced price would have been just that much more. It is true that the other members of the syndicate relied upon the representations of Abbott & Griffiths as to the value of the land, but they also relied upon the further fact as they supposed, and were induced to believe, that Abbott & Griffiths were substantiating their representations as to the value of this land by an investment of their own money to the same extent proportionately as that contributed by the other members of the syndicate; and it is not at all likely they would have engaged in the enterprise on the terms they did engage in it had they known the true inwardness of the transaction. While all willful, false representations resulting in loss or damage will not afford a basis for a recovery, the foundation here is sufficient. The aim of the law is to grant relief in all such cases where possible, and the law will not look with favor on a party who flippantly admits having made false representations to another, thereby inducing him to act in a certain way, but who insists there is no remedy. There is a legal distinction, if not a moral one, between the facts of this case and of one where a party in selling a piece of property as his own to one who understands he is buying it from such party, falsely represents that he paid more than he really did pay for it. In this case these respondents were induced to pay the full purchase price for the land, and to allow Abbott & Griffiths a two-fifths interest therein by reason of the representations of Abbott & Griffiths that they were contributing a proportionately equal amount. The respondents aforesaid were induced to pay that much more for their respective interests than they otherwise would have paid. In Crater v. Binninger, 33 N.J.L. 513, a recovery was permitted under very similar circumstances.

Appellants further contend that they stand in the position of bona fide incumbrancers without notice. This does not avail them anything. The most which the mortgage could encumber was an equitable estate in Abbott & Griffiths. The doctrine which protects bona fide purchasers without notice is applicable solely to purchasers of a legal title; and the purchaser of an equitable interest purchases at his peril, and acquires the property burdened with every prior equity charged upon it. Shirras v. Caig, 7 Cranch 34, 3 L. Ed. 260; Vattier v. Hinde, 7 Pet. 252; Boone v. Chiles, 10 Pet. 177. They had notice that Griffiths and Minda S. Graff held the legal title to the land as trustees for the benefit of the syndicate.

It is further urged that these respondents are estopped from asserting their rights in consequence of the declaration of trust made by them which represented Abbott & Griffiths as the owners of a two-fifths interest in the land. But it seems to us that this claim is wanting in several essentials. In the first place, it appears that when this declaration was made the respondents Graff, Kistenmacher, Roberts and Traverse were ignorant of their rights in the premises, which ignorance was not chargeable to their neglect. While the declaration was made and recorded prior to the execution of appellants' mortgage by Abbott & Griffiths, it does not appear that Bell the mortgagee, nor his assignees the appellants, had any knowledge of its existence. If they had no such knowledge they cannot well claim they were misled by its contents. The doctrine of constructive notice cannot be invoked in their favor, and in any event, if they did know of it, or if such representations were made to them personally, it would be necessary for them to show that by reason thereof they were induced to take the mortgage, and there is no such proof in the record. In support of the above propositions see Whitaker v. Williams, 20 Conn. 98; Preston v. Mann, 25 Conn. 118; Danforth v. Adams, 29 Conn. 107; Boggs v. Merced Co., 14 Cal. 279; Davis v. Davis, 26 Cal. 23; Fletcher v. Holmes, 25 Ind. 458; Long v. Anderson, 62 Ind. 537; Greensburgh, etc., Turnpike Co. v. Sidener, 40 Ind. 424. The judgment of the superior court is affirmed.

ANDERS, C. J., and HOYT, J., concur.

STILES, J., concurs in the result.

DUNBAR, J.--I dissent. An examination of all the testimony in this case convinces me that the respondents simply purchased this land from Abbott & Griffiths, and that Abbott & Griffiths were in no sense their agents, and it cannot in my mind be distinguished from the case mentioned by the majority where a party sells land as his own and falsely represents that he paid more than he actually did pay for it. There is no doubt in my mind that there was moral turpitude on the part of the appellants, but the courts should not assume to correct the morals of the citizens of the country any further than the law plainly imposes that duty upon them. I think the judgment should be reversed.