
    Russell and wife, Appellants, vs. King and others, Respondents.
    
      May 13
    
    June 21, 1926.
    
    
      Fraud: Persons negotiating loan and benefited thereby,, but misrepresenting nothing: Attorney advising loan: Liability.
    
    1. In the absence of conspiracy, one who took no part in negotiations leading up to the lending of money which is claimed to have been fraudulently obtained, and who misrepresented nothing, is not'guilty of fraud although he received part of the money loaned in payment of a debt of the borrower, p. 548.
    
      2. The attorney who negotiated the loan is held, under the evidence, justified in informing the lender that it would be advisable to make the loan in order to secure the return of certain mortgages held by the borrower, whom the attorney represented, and to avoid a larger loss, and is not guilty of fraud, p. 550.
    3. A real-estate agent is not guilty of fraud in a transaction whereby the purchaser of land on contract made a loan to another in order to secure the return of mortgages and the cancellation of the contract, it not appearing that any false representation was made by the agent, p. 550.
    Appeal from a judgment of the county court of Columbia county: A. F. Kellogg, Judge.
    
      Affirmed.
    
    This is an appeal from a judgment in favor of the defendants Jackman, O’Keefe, and Hanley. The plaintiffs appealed.
    This was an action in fraud to recover $3,000 with interest claimed to have been secured by the defendants from the plaintiffs through fraud. The case was tried before the court and a jury. The jury rendered a special verdict, generally- favorable to the plaintiffs, which was set aside by the trial court.
    
      Robert N. Nelson and Carl Christianson, both of Madison, for the appellants.
    
      H. B. Rogers of Portage, for the respondents Jackman and O’Keefe.
    
    
      H. E. Andrews of Portage, for the respondent Hanley.
    
   Crownhart, J.

' A very considerable amount of evidence was taken in this case, but the main facts are 'not much in dispute. They will be briefly summarized.

The defendant Hanley was engaged in the real-estate business at Portage for a number of years, and at the times in question was the agent for the W. E. Stewart Land Company. He had performed some services for the plaintiffs prior to and since the transactions complained of.

The defendant James Jackman, at the times herein mentioned, was the owner and keeper of a garage at Portage, Columbia county.

The defendant John O’Keefe was an attorney at law, living at Portage and engaged in the practice of his profession there for many years.

The defendant Barton B. King was an agent of the W. E. Stewart Land Company, a foreign corporation' dealing in Texas lands. He was at Portage for a time and had an office with the defendant Hanley, but King and Hanley were not in partnership. The Land Company was not served and it was dropped out of the case.

The plaintiff Martha Russell was forty-eight years old, an intelligent woman, possessed of a separate estate of the value of several thousand dollars, which she handled herself. She was the wife of the plaintiff Henry Russell. Henry Russell, with his wife, lived on a small farm at Endeavor, the husband owning the farm. Endeavor is about twelve miles from Portage.

It appears that Henry Russell, in 1919, went to Texas to view the property of the W. E. Stewart Land Company. He was favorably impressed with the prospects, but after he came back he lost interest in the property. Early in 1920 the defendant Hanley suggested to the Russ ells that the Land Company was arranging to take a party to Texas to look over their property, with a view of purchasing, and suggested that they go along. Finally, Mrs. Russell arranged to go with the party, and did go. Hanley did not go, but King went along. While in Texas they viewed certain properties, and King urged Mrs. Russell to buy a parcel of land. She finally consented and purchased twenty-five acres at $450 an acre, and gave King $25 in cash and a check on a Portage bank for $200. She had no money in the bank, but later arranged with Hanley to deposit the money to meet the check, which he did. While in Texas she signed her husband’s name to a land contract covering the purchase of the property, and to three notes amounting to $5,200, under the condition, as she says, that if her husband was not satisfied the deal was to be canceled. She came back from Texas and explained the situation to her husband, who was dissatisfied, and declined to go through with the deal.

Early in April a Mr. Erb, from Minneapolis, representing the Land Company, came to Portage, and he, together with Hanley, went out to Endeavor to see the Russells to urge upon them the carrying out of the contract, with the result that Mrs. Russell came in to Portage the next day to the office of Hanley. There were present the defendants King and Hanley, and Erb, besides Mrs. Russell’s fifteen-year-old boy. Mrs. Russell testified that King, Hanley, and Erb all urged her to carry out the Texas land contract, and threatened to sue her husband if they did not do so. She claims to have been very much agitated over the possibility of suit against her husband, and finally agreed to give a mortgage for $4,500 on a piece of property she owned in Portage, and to assign a mortgage which she held for $700, to cover the $5,200 in notes. The mortgage and assignment were executed in blank and given to Erb, who in turn turned them over to Hanley for safe-keeping, and Hanley placed them in his safe. This was on April 9, 1920. Mrs. Russell did not have the $700 mortgage with her, but she agreed to deliver the mortgage and an insurance policy with it, which she did on the 14th. She did not consult any attorney before executing the mortgage and assignment or before making delivery of the assigned mortgage and insurance policy on the 14th. The mortgages were to be negotiated by Hanley without discount and the proceeds applied to the payment of the notes. Hanley made some effort to sell the mortgages but failed. Later, on July 20th, Mrs. Russell wrote to Hanley to find out what had been done about the sale of the mortgages and the payment of the notes. Hanley replied that he did not have the papers; that they had been taken out of his safe, and that they belonged to the company. It appears that the mortgages and notes had been taken from Hanley’s safe without his knowledge or consent, and he supposed that they had been sent on to the Land Company, but in fact King had taken the mortgages from the safe and had negotiated them as security for his own indebtedness.

King was in bad shape financially and was being pressed by his creditors. He "went to the Russells the next evening after they had received Hanley’s reply about the papérs, and solicited a loan of $2,500 from them upon the promise that he would return to Mrs. Russell her notes and mortgages and secure cancellation of the land contract. The Russells were anxious to get out from under the land contract, as it involved something over $11,000 and it would take all they had to pay for the land. King promised as. security for the- loan to assign his interest in a land contract that he had involving Texas land. This visit of King to the Russells resulted in Mr. Russell going to Portage to make inquiries. He went to see Hanley and inquired what kind of a mess King was in, and Hanley told him that he was in bad straits financially. Russell told him that King wished a loan of $2,500 from Russell, and Hanley replied that he did not know what King had to give for security,— that King owed him money and that he would not trust him. Russell had arranged to see King at the office of Attorney Metzler. Upon calling there he found that Metzler was away and that King had left word to meet him at the defendant O’Keefe’s office. He went to O’Keefe’s office and found King there. All three conferred over the matter in hand, and finally O’Keefe and Hanley retired to another room and conferred. O’Keefe, upon inquiry for advice from Russell, told him that he thought Russell had better make the loan under the circumstances. Russell finally agreed to do so if O’Keefe would secure the loan upon a mortgage of plaintiff’s property. The next day Jackman, in his automobile, drove O’Keefe and King out to the Rus-sells. At that time King wished a loan of $3,000, saying that he could not secure a release of the mortgages of Mrs. Rusisell with less than that amount. Finally, a mortgage and note were made out for $3,000 to the Portage Land & Trust Company, upon which O’Keefe secured $3,000 for King, but O’Keefe used the money to recover the mortgages which Mrs. Russell had given in April and a cancellation of the land contract, which he returned to her, and out of the money he also paid Jackman $1,200, which King owed Jackman and which O’Keefe had* been trying to collect from King as Jackman’s attorney. Prior to this Jack-man had got possession of King’s automobile in payment of his claim, but upon payment of the claim in cash Jackman released the automobile to King. Prior to this time, however, Hanley had been endeavoring to collect a claim against King of some $1,800, and had attached King’s automobile in Jackman’s garage. Upon a release of Jackman’s claim against the automobile, King gave to Hanley a mortgage on the automobile to secure his claim.

When Russell visited O’Keefe in Portage with King and got advice from O’Keefe, he offered to pay O’Keefe, but O’Keefe told him that King would pay him for his services, and O’Keefe never made any claim against the Russells for services.

The foregoing is in substance the claim of the Russells in their testimony. The defendants deny some of these statements and explain others. In open court on the trial the plaintiffs waived any charge of conspiracy against the defendants, and made no claim that the Texas lands which the Russells purchased were not worth the price they agreed to pay. So the real and only claim is the claim of fraud against the defendants.

It is clear there can be no claim of fraud against Jackman. He made no representations to either of the Russells of any kind. He took no part in the negotiations leading up to the loaning of the money to King. He misrepresented nothing.

As to O’Keefe, he made no pretense that he was attorney for the Russells. Russell stated his case to him and asked his advice, knowing, apparently, O’Keefe’s relation to King. King had preceded him to O’Keefe’s office and was in consultation with O’Keefe when Russell came in. He retired from Russell’s presence to consult with O’Keefe while Russell was there. O’Keefe did advise him to make the loan in order that he might not lose a larger amount and that he might get the cancellation of the land contract.

Mr. Russell testified:

“I thought by doing that [making King the loan] we would save the difference between the $3,000 and $4,500; he told us we better if we was going to lose anything we better lose $3,000 than $4,500. Mr. O’Keefe told me that. I took stock in that.”

With reference to employing O’Keefe, Russell testified:

“I offered to pay him when he got through, and he said ' Mr. King would take care of that.”

Further, Mr. Russell testified with reference to the conversation with O’Keefe in his office:

“I had never seen Mr. O’Keefe before. We were both there, I and Mr. King. Mr. King was there when I got there. We asked Mr. O’Keefe about whether it would be advisable for me to loan him this money in order to get back these other notes and mortgages, and Mr. O’Keefe told me that it was the only way we could get them back; they was in his hands and he could do what he pleased with them; they were open notes and he could do with them as he’s a mind to, sell them. The mortgage Mrs. Russell held on the property down here of $700 and the mortgage she gave on the house and lot she has down here of $4,500. The notes she signed down in Texas are the ones I wanted to get back.”

It appears, and did appear to O’Keefe, that King was in a bad way; that he had negotiated these mortgages as security, and in order to return them he had to pay the debt he owed. Not only would the Russells be relieved by the return of their mortgages, but they would also get a cancellation of the land contract, which would release them from the payment of the further sum of over $5,000. We cannot say from this evidence that O’Keefe was not fully justified, even if he had been Russell’s attorney, in giving him that advice. Russell understood the situation well enough. It -was not a question of getting legal advice. It was a question of business judgment, and Russell saw for himself that it was better to lose $3,000 than to lose $5,200 and go on with the Texas land deal, which he could not afford. It seems clear that there is no case against O’Keefe.

Hanley was an agent of the Land Company, doing business on commission. If the Texas land deal went through, he stood to get a commission of three per cent, on the purchase price. But Hanley had nothing to do in getting the Russells into the deal other than his suggestion that they go down to Texas to look over the land. It is said that he stood in a fiduciary relation to the Russells, but it does not appear that his relation to the Russells was at all intimate or that they relied upon him for advice. His only transactions with the Russells were in the handling of two or three small real-estate matters. When Russell went to see Hanley about loaning money to King, it was not claimed that Hanley lent any encouragement to Russell to do so, or made any false representations of any character. The only basis for suspicion against Hanley is that because, out of the money loaned to King, Jackman’s claim on the automobile was released and Hanley was able to get security for his claim against King on the automobile. It does not appear that any arrangement had been made between Hanley, Jackman, and King whereby Hanley was to be paid anything or any security given him in order to induce the loan. At any rate, there is nothing to show that Hanley ever made any false representation to the Russells, and the court was right in dismissing the complaint as to him.

As to the defendant King, it is conceded by all that he was a fraud, and clearly he obtained the money from the Russells by fraud. He had used the mortgages which were for the benefit of the Land Company for his own purposes, and only secured the loan by promising to return the mortgages. His acts were fraudulent in getting possession of the mortgages in the first place, and fraudulent in negotiating the mortgages. He did not appear at the trial. The trial court entered judgment against him for the amount of the loan with interest on his note. The plaintiffs were entitled to a tort judgment, and if that will be of any comfort to them they should have it.

By the Court. — The judgment of the county court is affirmed.  