Phillips v. Mitchell , 68 Okla. 128 ( 1917 )

R.I. Phillips instituted suit in the superior court of Logan county, seeking reformation of a certain deed, executed to him by W.O. Mitchell and Helen E. Mitchell, his wife. Mitchell and wife answered by general denial, and filed a cross-petition, alleging fraud in the procurement of said deed, and prayed damages in the sum of $21,000 against D.M. Phillips, R.I. Phillips, H.E. Diehl, and Otto Meek. Upon motion of plaintiffs this cross-petition was stricken, after which plaintiff therein filed an action in the superior court of Logan county against all of said defendants, setting forth the facts alleged in said cross-petition, and service of summons was had upon R.I. Phillips in Logan county, and upon the other defendants in Oklahoma county. Defendants answered this action by a general denial. Both of said suits were thereafter transferred to the district court of Logan county, and by agreement of the parties consolidated.

This controversy grows out of a transaction between D.M. Phillips and W.O. Mitchell. Phillips, his wife, and son, originally owned all of the stock of the O. K. Bus Carriage Company, which was incorporated for $1,000. In 1909, the capital stock was increased to $60,000, and 594 shares of stock of the new corporation were in the name of D.M. Phillips; his wife held 3 shares, and his son, R.I. Phillips, 3 shares. The par value of the stock was $100 per share. Various shares of such stock passed into the hands of other parties, some of which were obtained by trade or purchase, and some were transferred to certain persons without consideration to be held in trust for D.M. Phillips. In the fall of 1909, D.M. Phillips traded plaintiff W.O. Mitchell 200 shares of said stock for a farm in Logan county, and later traded him 110 shares for other farm lands in Logan county and Oklahoma City property, comprising the residence of Mitchell and wife. As a part consideration for said last-mentioned stock, Mitchell and wife executed to Phillips a note for $1,000 and a mortgage for $3,500 upon certain lands in Oklahoma City, which mortgage secured said $1,000 note, and the sum of $2,500 being the amount of a mortgage against the land conveyed in the second transaction which Mitchell agreed to discharge. The land conveyed in the first transaction was mortgaged in the sum of $7,100, which plaintiff W.O. Mitchell agreed to pay and defendant D.M. Phillips retained as an indemnity 170 shares, of stock in the corporation which was to secure the payment of the entire $1,600. Helen E. Mitchell, the wife of W.O. Mitchell, joined in the conveyance of the real estate and the execution of said mortgage. One of the farms located in Logan county was at the request of defendant D.M. Phillips, conveyed to his son, R.I. Phillips, and the land so conveyed was, by mistake, misdescribed in the deed. W.O. Mitchell assumed the management of the corporation in January, 1910. It having been learned that the property conveyed to R.I. Phillips had been misdescribed, request was made of W.O. Mitchell that he make a new deed with a correct description of the property which he refused to do, giving as a reason therefor that he had been defrauded in the trade with D.M. Phillips. Shortly thereafter the action of R.I. Phillips for reformation of the deed was commenced. At the trial of the consolidated case, the court submitted certain issues to the jury which returned a verdict against D.M. Phillips. H.E. Diehl, and Otto Meek in the sum of $12,000, and in favor of R.I. Phillips. Judgment was rendered correcting the deed as prayed by R.I. Phillips and in favor of plaintiffs in accordance with the verdict of the jury, and it was further decreed that plaintiff W.O. Mitchell be not required to pay to defendant D.M. Phillips nor in his behalf to protect him in his title to the lands conveyed in so far as plaintiff had obligated himself to discharge the incumbrances thereon, and that plaintiff's agreement to pay same should not operate as a set-off against the judgment rendered, and canceling plaintiff's agreement with said defendant to pay said obligations, and also canceling the mortgage for $3,500 even by Mitchell and wife on the Oklahoma City property. The court further found that D.M. Phillips had advanced W.O. Mitchell $1,000 in cash for which he was entitled to credit, and reduced the amount of the money judgment to $11,000, which was entered against defendants D.M. Phillips, H.E. Diehl, and Otto Meek. Motion for new trial having been overruled, said defendants prosecute error.

Defendants first urge that Helen E. Mitchell, wife of W.O. Mitchell, was not a proper party to the suit. She joined in the original petition by her husband to which defendants replied by general denial, and the objection here urged was not raised until after the jury had returned their verdict, and motion for new trial had been overruled. This objection comes too late, because it was not raised by timely motion or in any other way before the trial.

Helen E. Mitchell was the owner of the property described in the mortgage for $3,500, and had a substantial interest in the subject-matter of this litigation. W.O. Mitchell's cause of action was that he had been defrauded of the lands given by him in exchange for the stock of the corporation, and the wife's cause of action was that by reason of the fraud practiced upon her husband she had been induced to execute the mortgage upon her separate property to secure the obligations of her husband. These causes of action are not identical, yet they grow out of the same transaction, and both plaintiffs were defrauded by the same means, and their respective rights were affected by the same acts. One recovery will adjust the rights of both, and one judgment will be a bar to another action by either of the plaintiffs, and hence there is a common interest in the subject-matter of the litigation such as will authorize them to join in one suit, although the injury which is sustained by each may be separate and distinct. Section 4690 of the Revised Laws 1910 enacts that all persons having an interest in the subject of the action and in obtaining the relief demanded may he joined as plaintiffs except as otherwise provided, and section 4738 permits the plaintiffs to unite several causes of action in the same petition where they all arise out of the same transaction or transactions connected with the subject of the action, and affect all the parties to the action except in actions to enforce mortgages or other liens. Simar v. Canaday,53 N.Y. 298, 13 Am. Rep. 526; Montgomery v. McLaury, 143 Cal. 83,76 P. 964.

The next question urged is that all of the defendants except R.I. Phillips were served with summons outside of Logan county, and, its the verdict of the jury was in favor of R.I. Phillips, that the district court of Logan county was without jurisdiction to render judgment against the other defendants. This objection, if it possessed any merit, goes to the jurisdiction of the person of defendants only, which can be waived and was waived because all of said defendants, without Objecting to the jurisdiction of the court over their person, appeared, answered, and went to trial, and the point was not urged until after the verdict was returned, when it was too late. Fitzgerald v. Foster, 11 Okla. 558, 69 P. 878; Whitaker v. Hughes, 14 Okla. 510, 78 P. 383; Appeal of Floyd,31 Okla. 549, 122 P. 516.

At the trial, plaintiff offered the testimony given by two witnesses in a former trial, claiming that said witnesses were beyond the limits of Logan county; one residing in Oklahoma county and another in Dallas, Tex. As a predicate for the admission of this testimony, plaintiff W.O. Mitchell testified that witness Otti lived in Oklahoma City at the time of the first trial, and resided in Dallas, Tex., at the time the testimony was offered; that he had a letter from said witness, mailed at Dallas about two weeks before the trial; that he made no inquiry in Oklahoma City for said witness because he knew witness had left, and had not inquired for him in Logan county. As to the other witness, Feltz, he testified that said witness lived in Oklahoma City, and was not in Tolgan county. The sufficiency of the showing to authorize the introduction of this testimony was a matter within the sound discretion of the trial court, and its ruling will not be disturbed on appeal unless it be made to appear that such discretion was abused. The preliminary proof in this case was sufficient to justify the court in admitting such testimony. Warren v. State,6 Okla. Cr. 1, 115 P. 812, 34 L. R. A. (N. S.) 1121; Edwards v. State, 9 Okla. Cr. 306, 131 P. 956, 44 L. R. A. (N. S.) 701; 2 Wigmore, Ev. par. 1405.

Defendants offered in evidence a statement made by one Braden as to the assets and financial condition of the corporation which was rejected, and error is assigned upon the action of the court in so doing. It appears that, after Mitchell had purchased stock in the corporation, Braden acquired possession of 150 shares of the stock, and had been elected secretary and treasurer. Braden and Mitchell were endeavoring to dispose of their stock, and Braden made said statement to a probate purchaser, which statement presented the financial status of the corporation in rather an optimistic and overdrawn way. Defendants made an effort to connect Mitchell with this statement, and failed, and, while Braden stated that he and Mitchell were trying to sell their stock together, he testified that the statement had been made on his own responsibility, and that Mitchell had not directed him to prepare the same and was not in any way connected with it. The facts show that Mitchell had nothing to do with the statement in any way. He did not authorize nor adopt it, and there was no such association between him and Braden as to warrant the conclusion that Braden was acting as his agent in the preparation of such statement, and its exclusion by the court was entirely proper.

Complaint is made of the conduct of the trial court during the progress of the trial. The alleged misconduct consisted of certain remarks indulged in by the court during a colloquy with defendant's counsel and in certain oral remarks while reading his instructions to the jury. It does not appear that anything said by the court influenced the verdict of the jury, or that any prejudice therefrom resulted to the defendant, and therefore this contention is without merit. And this is true, also, because the court adopted and approved the verdict and himself made findings of fact in accordance therewith.

The defendants insist that, while the action of R.I. Phillips seeking reformation of his deed was an equitable one, the action of plaintiff against the defendants for damages was an action at law, and while the two actions were consolidated and tried together for convenience, they still remained separate, and the first should have been tried as an equitable action and the latter as an action at law. When the parties consented to a consolidation of the two actions, they in fact agreed that the separate actions should be discontinued, and a new and distinct one created from the two so consolidated in which should be included and litigated all of the questions presented by the pleadings in the two former actions. The power and jurisdiction of the court with reference to this new action was the same as if it had been originally brought in the manner in which actions were originally instituted. 4 Enc. P. P. 701.

The distinction between actions at law and suits in equity and the forms of all such actions and suits have been abolished by the Code, and in their places there is but one form of action, which is called a "civil action," and the rules of pleading which formerly prevailed in civil actions have been abolished, and the forms of pleading in courts of record and the rules by which their sufficiency must be determined are those prescribed by the Code. The object of the Legislature in adopting the Code was, not only to abolish the distinctions which formerly existed between actions at law and suits in equity, but also to relieve litigants of the intricate and technical distinctions in common-law rules of pleading, and to provide a plainer, simpler, more speedy, and less cumbersome system of procedure by which their rights might be determined. St. L. S. F. Ry. Co. v. Yount, 30 Okla. 371,120 P. 627.

We have no courts exercising equity jurisdiction separate and apart from jurisdiction in matters which were formerly denominated legal, but the district courts possess jurisdiction to administer in a proper case both kinds of relief, and the rights of the litigants are to be determined from the facts alleged and established at the trial. It seems clear from the whole frame of the petition, and from the relief demanded, that it was the intention of the pleader to set forth all the facts surrounding the transaction and to pray any and every kind of relief to which upon the facts found he might be entitled. This is ordinarily the correct method of pleading under the Code. Hawkins v. Overstreet, 7 Okla. 277, 54 P. 472; St. L. S. F. Ry. Co. v. Yount, supra.

Notwithstanding this great liberality, it sometimes becomes necessary for a party seeking redress to choose between two inconsistent positions, and such defendants contend is the situation here. The doctrine is well settled that one who has been induced by fraud and deceit to part with title to real property, and is seeking relief, has a choice of remedies. He may affirm the contract and sue for damages or he may rescind; but he cannot do both. Wesley et al. v. Diamond et al.,26 Okla. 170, 109 P. 524. Urging this rule of law, defendants contend that plaintiff's cause of action is based upon an affirmance of the contract, and that an award of damages would afford full and complete relief, and that the allegations of the petition are such as to preclude him from equitable relief. When equity has obtained jurisdiction of the controversy on any ground or for any purpose, it will retain such jurisdiction for the purpose of administering complete relief, and doing entire justice with respect to the subject-matter, and to avoid multiplicity of suits. Cook v. Warner, 41 Okla. 781,140 P. 424; Murray et al. v. Speed et al., 54 Okla. 31, 153 P. 181; Galbreath Gas Co. v. Lindsey, 62 Okla. 84, 161 P. 826.

The jurisdiction of equity extends to all actions of fraud except only that limited class of cases in which a judgment for damages affords adequate relief to the injured party, and fraudulent sales or exchanges of land furnish no exception to the rule, and it is not an insuperable objection to such jurisdiction that an award of damages may be had for unless such award affords full and complete relief in order to avoid circuity of action equity may award all the relief appropriate to the case, Montgomery v. McLaury, 143 Cal. 83, 76 P. 964; Bradley v. Bosley, I Bard. Ch. (N.Y.) 125.

This court has held in a long line of cases that, where personal injuries have been suffered for which a liability exists and a release thereof has been fraudulently obtained for a grossly inadequate sum, an action for damages may be maintained without first obtaining a decree to rescind or cancel said release, and that plaintiff may attack such release for fraud in its procurement when it is set up as a defense without returning or tendering back the consideration received by him at the time the release was obtained. St. L. S. F. v. Richards, 28 Okla. 256, 102 P. 92, 23 L. R. A. (N. S.) 1032; St. L. S. F. Ry. Co. v. Nichols, 39 Okla. 522, 136 P. 159; Herndon v. St. L. S. F. Ry. Co., 37 Okla. 256, 128 P. 727; St. L. S. F. Ry. Co. v. Reed, 37 Okla. 350, 132 P. 355; St. L. S. F. Ry. Co. v. Chester, 41 Okla. 369, 138 P. 156.

In Montgomery v. McLaury, 143 Cal. 83, 76 P. 964, which was an action for fraud in an exchange of certain lands, plaintiff was awarded a verdict for damages, and in addition thereto obtained cancellation of a mortgage given to secure a portion of the consideration for the exchange, and it was held that the judgment was proper. Another case supporting this view is Bradley v. Bosley, 1 Barb. Ch. 125. In that case, Chancellor Walworth, after statement of the facts, held that plaintiff was only entitled to be compensated for the difference between the value of the land received by him in exchange and that which he had conveyed with interest on such difference, and held that equity had jurisdiction to give the complainant relief upon the facts of the case. In the opinion it was said:

"Indeed, it may be considered as a settled principle of this court, in all cases of fraud, that if the party who has been defrauded is entitled to come here for any relief arising out of the contract in which he has been defrauded, and where it is necessary for him to allege and establish the fraud in order to obtain such relief he may obtain full relief here, without resorting to a suit at law, although as to the part of the relief claimed he had a perfect remedy in an action at law for damages."

The petition in this case, in connection with the facts found by the court, was sufficient to authorize the court to take jurisdiction of the entire case and determine all the matters in controversy. The evidence sustains the verdict of the jury and the judgment of the court pronounced thereon. It is shown that Phillips was the owner of the O.K. Bus, Baggage Carriage Company, a corporation, capitalized at $1,000; that in the summer of 1909 the capital stock was increased to $60,000, which was distributed among Phillips, Meek, Diehl and others, some claiming to have traded for it and others to be holding in trust for Phillips. Phillips owned the barn in Oklahoma City where the business was being carried on. It was represented to Mitchell that the business was a very profitable one, paying Phillips a rental of $400 per month, making a large profit besides, and that it was the best paying concern in the city, and statements were exhibited to Mitchell, showing large profits. Phillips testified that when he traded some of the stock to Diehl he agreed not to charge any rent for the use of the barns by the corporation for a period of three months, and that he neglected for the three months after the expiration of this period to charge any rent until after the trade with Mitchell, by reason of which no rents appeared in the expense account submitted to Mitchell. After the trade, Phillips removed all the fine, big teams and all the most valuable horses as his individual property. The trial court found that Mitchell had been led to believe that all of the property removed by Phillips was among the assets of the corporation. Mitchell was also induced to believe that Phillips who was experienced in the management of the business only desired to dispose of a part of the stock, and would remain in the active management of the business, and, as a safeguard against being left a minority stockholder it was agreed that Mitchell should have the refusal of enough of the stock to give him a majority in case Phillips should later desire to sell. Within a week or two after the first contract was executed, instead of remaining in charge of the business, as he had promised, Phillips declared an intention of selling, and Mitchell to protect himself purchased the second block of stock. Phillips retained $17,000 worth of Mitchell's stock as indemnity, and after he had removed the property mentioned, and retired from the active management thereof, the business proved a failure, and Phillips purchased all the assets of the business at the receiver's sale at a comparatively small sum, and has at no time in his pleadings or otherwise offered to account for other stock retained by him.

That portion of the decree which held that plaintiff W.O. Mitchell should not be held or required to pay defendant D.M. Phillips, nor for or in his behalf discharge, the incumbrances against the land conveyed to Phillips, was right. Having retained $17,000 of that corporate stock as indemnity against said incumbrances for which he had failed to account, it would have been inequitable for him to keep this stock, and at the same time compel plaintiff to discharge the obligations for which it was retained as indemnity. The amount of the incumbrances which plaintiff agreed to pay amounted to $9,600, and, had this stock possessed the value which Phillips represented it to have, it would have exceeded the amount of such obligations leaving a large balance due plaintiff. But giving it the value placed thereon by the jury, it was still in excess of the total amount of said incumbrances. Had the property retained by Phillips consisted of live stock or merchandise, or any other kind of tangible property, no one would hesitate to say that he should be held to account for it. The principle applicable to the present case is no different, and, keeping in mind the fact that Mitchell only received $14,000 of the $31,000 of stock purchased by him, it was proper for the court, in addition to the damages awarded by the verdict of the jury, which merely represented the difference between the actual value of the stock purchased by Mitchell and that value which Phillips represented it to possess, to charge Phillips with that portion of the stock retained by him; and, the value of such stock at the time of trade being largely in excess of the obligations which Mitchell had undertaken to discharge, there was no error in that portion of the decree which declared that said obligations should not operate as a set-off against the verdict for damages, if such were permitted, the judgment would not award Mitchell all the relief to which he was entitled, nor would any judgment award him the full measure of his relief until an accounting was had for the stock retained by Phillips, and that was what the court did, when he charged Phillips with this stock, and relieved Mitchell of his obligation to pay such incumbrances in so far as defendant was concerned. Defendants did not plead the agreement of Mitchell to discharge said incumbrances as a set-off in the trial court, and upon the original hearing in this court insisted that said matters could not be permitted as a set-off against plaintiff's claim for damages (Brief of Plaintiff in Error, p. 76), and said matters cannot be urged as proper subject for set-off for the first time on appeal, and certainly not upon a rehearing. Section 4745, Rev. Laws 1910; 3 Corp. Jur. 712.

This leaves for consideration that portion of the decree canceling the mortgage for $3,500 given by the Mitchells to R.M. Phillips. This mortgage was given to secure the payment by Mitchell of a part of the incumbrances upon the land traded to Phillips, and we have just held that the court committed no error in canceling Mitchell's agreement in so far as defendant is concerned to discharge said incumbrances, and, under this view of the case, the mortgage should be canceled irrespective of the fact that the property embraced therein was the separate property of Helen E. Mitchell.

The judgment is affirmed. All the Justices concur, except SHARP, C. J., and THACKER and MILEY, JJ., who dissent from that portion of the opinion which affirms the judgment of the trial court canceling Mitchell's obligations to discharge outstanding incumbrances against the land traded to Phillips.