3. ASSIGNMENTS 100-EFFECT-CLAIMS. Where a public contractor was allowed to present all defenses to claims good as against his predecessor, payment of which he had assumed, he is not harmed by reason of the fact that the city paid the claims and deducted the amounts from the contract price.

[Ed. Note.-For other cases, see Assignments, Cent. Dig. §§ 177, 180; Dec. Dig. 100.]

Department 2. Appeal from Superior Court, Clarke County; R. H. Back, Judge.

Action by William Paul against the City of Vancouver. From a judgment for defendant, plaintiff appeals. Affirmed.

M. M. Connor and Geo. O. Davis, both of Vancouver, for appellant. Geo. B. Simpson, of Vancouver, for respondent.

PARKER, J. The plaintiff, William Paul, seeks recovery of the sum of $500 from the city of Vancouver, which he claims as a balance due him upon a street improvement contract entered into between himself and the city. Trial was had in the superior court, resulting in findings and judgment in favor of the plaintiff for the sum of $27 only, and awarding costs to the city because of tender by it of that sum to the plaintiff. From this disposition of the cause the plaintiff has appealed.

In June, 1911, Rector & Daly entered into a contract with the city for the construction of a street improvement. They executed a bond with sureties to secure the faithful performance of the contract. Thereafter this contract was assigned by Rector & Daly to E. Schelling, with the consent of the city, who proceeded as if he were the original contractor. E. Schelling abandoned the contract before full performance thereof, assigned to appellant, William Paul, all sums due under the contract and left numerous debts incurred in his part performance of the contract unpaid. Thereafter, in September, 1911, appellant entered into a contract with the city agreeing to complete the construction of the improvement according to the original contract, the city agreeing to pay him therefor all sums due and to become due under the original contract. This new contract between appellant and the city contained, among other stipulations, the following:

"Said second party (appellant) hereby further agrees to pay all just claims against said E. Schelling, which are proven, either by the O. K. of the purchaser or a sworn statement of the claimant. Said unpaid claims to be paid 50 per cent. out of the estimate now in the hands of the city clerk as soon as same is turned over to said Wm. Paul and the balance out of the next estimate received."

Appellant executed a bond for the faithful performance of this contract, conditioned as

follows:

"The conditions of the above bond are such that whereas the above bounden Wm. Paul has entered into a contract with the said city, by the terms whereof he undertakes and agrees to take up and complete the unfinished contract of

one E. Schelling, assignee of Rector & Daly, for the improvement of Ninth street in said city, and to pay all creditors of the said E. Schelling for debts contracted in the city of Vancouver, Wash.:

"Now, therefore, if the said principal shall well and truly perform the said contract and shall pay all claims against the said E. Schelling as above set out and all claims for material and labor used on the said street, then this bond shall be null and void, otherwise to remain in full force, virtue, and effect."

The construction of the improvement was thereafter completed by appellant and accepted by the city, when there remained a balance due thereon from the city to appellant of $500, subject, as claimed by the city, to deductions on account of claims against Schelling filed with and paid by the city, amounting to $473, leaving a net balance due appellant of $27 only, which the city tendered to him and which he refused. upon he commenced this action.

There

Prior to the tender several of the creditors

of E. Schelling had filed with the city their claims, duly verified by sworn statement of each claimant, as it was agreed such claims should be proven, by that provision of the contract between appellant and the city above quoted. This the city decided was sufficient to warrant it paying the claims, aggregating $473, and deducting that sum from the balance of $500 due appellant upon his contract. The city set up these claims and the payment thereof by it as an affirmative defense, claiming its right and duty to so pay the claims under the terms of the contract, and claiming to be the owner of the claims as against appellant.

[1-3] The testimony given upon the trial, aside from the sworn statement of each claimant attached to the several claims, we think leads to the conclusion that they are all valid claims of indebtedness incurred by E. Schelling in his part performance of the contract, and that they are such claims as appellant agreed to pay, by the terms of his contract and bond, above quoted. Appellant was heard in the trial of this case upon the merits of these claims as fully as if he were being sued thereon by the claimants themselves. His defense thereto was not impaired in the least by the fact that the city was asserting its ownership of and the justness of the claims as against appellant in its affirmative defense to his claim of balance due upon his contract.

It is contended by counsel for appellant that the city had no right under the contract with appellant to pay the claims, and that it could acquire no right as against him by so doing. It is possible that a technical construction of the contract between appellant and the city would not call for payment of the claims by the city; but that does not argue, as we view the situation, that the city may not have become the owner of the claims by equitable assignment. We are inclined to agree with counsel's contention in so far

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

it for any representation as to the price defendant paid for it is immaterial.

that the city could not, by merely paying | sold it for the sum he represented he could sell these verified claims, impair in the least any defense that appellant might have to any of them. They, of course, were not negotiable

in the sense that defenses thereto could be cut off by assignment, however innocent the assignee might be. We have noticed that appellant was not deprived of any defense he might have to any of the claims. We think the circumstances were such that the city became the owner of all the claims by equitable assignment in any event, and that as such owner it had the right to set them up by way of affirmative defense, but that it took the chances of being able to prove them to be valid claims and also the chance of any defense appellant might have against any of them as against E. Schelling, the same as any assignee thereof would have to take. Since appellant was not deprived of any defense he might have against any of the claims, we are unable to see that he has any cause to complain of the fact that he was called upon to defend against them in the hands of the city instead of in the hands of the original claimants. We think the city was not a mere volunteer in view of its interest in the contract calling for the payment of the claims, in the sense that it could not be regarded as the equitable owner of the claims.

As to the merits of the claims we conclude that the evidence was sufficient to establish them as valid claims for the payment of which appellant was liable under his contract and bond to the original claimants. Being so liable he is now liable to the city, the present owner of the claims.

The judgment is affirmed.

Property, Cent. Dig. §§ 3, 7; Dec. Dig. 3.] [Ed. Note.-For other cases, see Exchange of 4. EXCHANGE OF PROPERTY 8 LIMITATION OF ACTIONS 100-FRAUD - ACTION TO RESCIND-LIMITATION-LACHES.

Such action was barred by limitation, as well as by equitable laches, when plaintiff, after its discovery in November, 1910, did nothing and brought no action until February, 1914.

[Ed. Note.-For other cases, see Exchange of Property, Cent. Dig. §§ 14-18; Dec. Dig. 8; Limitation of Actions, Cent. Dig. 88 323, 480-493; Dec. Dig. 100.] 5. FRAUD -KNOWLEDGE.

13-REPRESENTATIONS-FALSITY

Fraud may consist in the vendor's representing as true that which he does not know to be true, and which is not, in fact, true, but knowledge of the facts stated, and asserted them his representation that he had no personal upon information received from other parties, would not make him liable for any false representations.

[Ed. Note. For other cases, see Fraud, Cent. Dig. §§ 3-5; Dec. Dig. 13.]

6. EXCHANGE OF PROPERTY 3

FRAUDU EVIDENCE RE

LENT REPRESENTATIONS LIANCE ON REPRESENTATIONS. Where a vendor transferring stock in a land company to his purchaser in exchange for land stock and the land owned by the company withmade representations as to the value of the out knowing them to be false, and without any reason to doubt the sources of his information, and the purchaser, without relying thereon, made inquiry as to such matters and purchased upon information so obtained, the vendor was not liable for fraud.

[Ed. Note.-For other cases, see Exchange of Property, Cent. Dig. §§ 3, 7; Dec. Dig. 3.] 7. EXCHANGE OF PROPERTY SION-FRAUD-EVIDENCE.

8

-

RESCIS

Evidence in an action to rescind a sale of plaintiff's land to defendant in consideration of certain shares of stock in a land company, on

MORRIS, C. J., and BAUSMAN, MAIN, the ground of the defendant's fraudulent repreand HOLCOMB, JJ., concur.

sentations as to its value and as to the land owned by the company held to sustain a judgment for defendant.

[Ed. Note.-For other cases, see Exchange of Property, Cent. Dig. §§ 14-18; Dec. Dig. 8.] Department 2. Appeal from Superior Jan. 15, Court, Whitman County; Edward C. Mills, Judge.

TRIAL DE

In an action to rescind a sale of property on the ground of defendant's fraudulent representations, the Supreme Court on appeal must try the cause de novo upon the facts and the law, whether or not the grounds of the trial court's decision were correct or sufficient. [Ed. Note.-For other cases, see Appeal and Error, Cent. Dig. §§ 3645-3648; Dec. Dig. 895.]

2. FRAUD 50-EVIDENCE-PRESUMPTION.

Fraud must not be presumed or conjec

tured.

[Ed. Note.-For other cases, see Fraud, Cent. Dig. §§ 46, 47; Dec. Dig. ~50.]

Action by Frank M. Jarvis and another against Thomas A. Ireland and another. Judgment for defendants, and plaintiffs appeal. Affirmed.

S. P. Domer and Skuse & Morrill, all of Spokane, for appellants. Neill & Burgunder, of Colfax, for respondents.

HOLCOMB, J. Appellants sued to rescind a contract and sale entered into between the husband and respondent, Thomas A. Ireland, on October 25, 1910. Under the contract appellants conveyed a certain lot and a brick block thereon in Chewelah, Wash., In an action to rescind a sale for fraud of and respondents in payment therefor transthe defendant concerning the price paid by him ferred to appellants 5,000 shares of common for stock transferred to plaintiff and of pending cash offers for such stock, where the evidence stock of the Skeena Valley Land Company, showed that defendant could, in good faith, have paid $250 in cash, and assumed a mortgage

3. EXCHANGE OF PROPERTY 3-FRAUD.

of $1,100 on the Chewelah real estate. The grounds for rescission are alleged false and fraudulent representations made by respondent Thomas A. Ireland for the purpose of inducing appellants to enter into the contract and sale and which were so relied upon. The representations of fraud are these: (1) Statements of fact made by respondent Thomas A. Ireland to appellant Frank M. Jarvis concerning the price paid by respondent for the common stock of the Skeena Valley Land Company transferred to appellants and of cash offers made to respondent for the purchase thereof then pending.

(2) That the Skeena Valley Land Company was then and there the owner of approximately 10,000 acres of land in the Skeena river valley, British Columbia, adjacent to the town of Hazelton.

(3) That such lands were first-class, level, agricultural lands, susceptible of cultivation and adapted to the raising of good crops of grain and fruit.

(4) That the 5,000 shares of stock entitled the holder thereof to select from the lands above mentioned and have conveyed to the holder of such stock 517 acres of first-class, level, agricultural land in the Skeena river valley, which were similar to adjoining lands then selling for $50 per acre.

It is further alleged that the lands were over 1,000 miles from where the contract was made, and could not be examined by appellants, and they had no means of ascertaining the truth or falsity of the statements and representations made by respondent, but relied upon the statements so made.

[3] 1. As to the first charge of misrepresentation, on November 23, 1910, Jarvis wrote a letter to Ireland stating, among other things, that one Mahoney, one of the men respondent had referred to as having been willing to buy his stock for about $7,300, had denied it to Jarvis, and that Ireland had placed a value of $7,000 on the stock, and that he did not feel right about it. At the trial Mahoney denied that he had made any such statement to Jarvis, and further stated that in October, 1910, he would have paid Ireland $1.50 per share for his stock, and that he then owned 20,333 shares of the stock. Another witness, one Cornelius, testified in behalf of respondent that he did, in fact, about October 1, 1910, offer $1.50 per share to respondent for his stock, but that respondent wanted $2 per share. Whatever price Ireland may have represented that he paid for his stock became immaterial when it was shown that he could in good faith have sold it for the sum he represented he could have sold it for.

[4] This testimony fully disproves the first charge of misrepresentation; but, if it did not, its discovery in November, 1910, and nonaction by appellant until February, 1914, when this action was commenced, fully bars any action upon that discovery of fraud by the legal limitations as well as by equitable laches.

[5] It is conceded that the rule is that fraud may consist of the vendor representing as true that which he did not know to be true and which was not, in fact, true; but, if the vendor represented to the vendee that he had no personal knowledge of the facts, but asserted them upon information received from other parties, he would not be liable for any false representations. English V. Grinstead, 12 Wash. 670, 42 Pac. 121; Davidson v. Jordan, 47 Cal. 351.

[1, 2] The trial court found for the respondents chiefly upon the grounds of the laches of appellants, based upon the incontrovertible facts disclosed that appellants discovered, if it were true, as early as No vember 23, 1910, that respondent's representation as to cash offers for his stock was 2. The most important particularization of false, and that therefore the statute of lim-fraud is that concerning the location, quality, itations operated as a legal bar to that and value of the Skeena river valley lands; ground of rescission; that appellants knew for they were very remote from the location as early as the early part of 1912, that the of the parties, and it would be assumed that land company did not own the land repre- the vendee had no opportunity then to invessented, but did not then take any steps to tigate them, and might rely upon the express rescind; that at that time the land company representations of the vendor. This false inhad a large sum of money that could have ducement, if made, was the most material, been used in completing the acquisition from and includes the second, and part, at least, the British Columbia government of the lands of the third and fourth charges of misrepfor which the company had purchased op-resentation and fraud. We therefore examtions; that afterwards the secretary and ine the record carefully for the purpose of treasurer of the land company, one Callahan, ascertaining what those representations, if embezzled the funds of the company and ab- any, were. sconded, after which occurrence appellants took steps to rescind. Whether or not the grounds of the court's decision were correct or sufficient, we must now try the cause de novo upon the facts and the law. It is a well-established principle here and elsewhere that fraud must not be presumed nor conjectured. Nath v. Oregon R. & Nav. Co., 72 Wash. 664, 131 Pac. 251; Pierce v. Seattle Electric Co., 78 Wash. 167, 138 Pac. 666.

The case presented is somewhat similar to that of Romaine v. Excelsior, etc., Gas Co., 54 Wash. 41, 103 Pac. 32. We are not disposed to say that the elements of laches exist as completely in this case as in that. Possibly the rights of no "other people" became involved in this case, except the rights of other and subsequent purchasers of stock in the company which appellant aided in controlling after he became a shareholder. Ap

proximately the same time elapsed after Jar- v. Merriam, 32 Minn. 197, 20 N. W. 138;

vis discovered, or should have discovered, the alleged worthlessness of the company, as in the Romaine Case.

Every case for rescission of a contract for actionable fraud depends largely upon the particular facts of the case. In this case we cannot escape the conclusion that the facts and the logical inferences deducible therefrom greatly preponderate in favor of respondents.

Moore v. Scott, 47 Neb. 346, 66 N. W. 441.

In addition to the above circumstances, it is clear, as stated by the trial judge, that Jarvis knew, in the latter part of 1911 or early part of 1912, by reason of his being a director of the company, that the company had only options to purchase the land which it was supposed to own. He also knew that payments of cash of considerable amount and notes to a larger amount had been taken by this corporation for subscriptions to its capital stock, and that it was the intention of the company that the funds thus raised, and to be raised, were to be used in completing the purchase of the lands; yet he took absolutely no steps, as director, to see that these funds were so applied, and took no steps to rescind the contract with respondent at that time nor for a long time thereafter. Long prior to the commencement of this action he attended a stockholders' meeting at which the question was considered whether an offer for the options of the company should be accepted at a price which would have netted him at that time considerably more than he had considered the stock worth when he made the trade, and at that time he voted to refuse to make such sale, evidently relying upon the assets that were from time to time in the hands of the corporation being applied by the officers towards the acquisition of the title to the lands, until such time as the secretary and general manager had absconded and embezzled the funds of the company, and thus made his stock worth considerably less than it would otherwise have been when he brought this action.

[6, 7] As to the representations themselves, the evidence for respondents outweighs that for appellants. After reading the entire evidence carefully, it convinces us that Ireland's representations were not positively made, nor with intentional deceit. We find nothing tending to show that he knew them to be false, or that he did not honestly believe them to be true, or that he had reason to doubt or disbelieve the sources of his information. Ireland was not a promoter of the enterprise. On Jarvis' own showing it is plain that Ireland had never been, or professed to have been, on the land, and therefore had no personal knowledge of it save its very general location, but made his statements upon reports received from others, of which Jarvis well knew. By his own showing also Jarvis telephoned to Callahan, the secretary, general manager, and chief promoter of the company, to come out from Spokane, where he had his place of business, to Hillyard, a suburb, where Jarvis lived, and talked the company's assets and prospects over very fully, and said he believed the statements made by Callahan. He also went to see and consulted with a Mr. Crane to whom Ireland referred him twice, and with Mr. Beck, Mr. Finley, and Mr. Ratcliffe, other stockholders, before he closed the transaction with Ireland. All this fully corroborates Ireland's testimony and that of his witness Chapman that Ireland told Jarvis that he had not seen the land of the company and knew nothing about it (except the general character and climate of the country) other than what Callahan had told him and (No. 12875.) Crane reported in writing to the stockholders, and to go see them and the other stock-(Supreme Court of Washington. Jan. 15, 1916.)

holders mentioned. Hence it is obvious that Jarvis, so far from believing and relying upon the representations of Ireland as to the value of the stock and assets of the company, did not do so, but interviewed other parties, between whom and Ireland not the slightest collusion is shown, to ascertain what value they placed upon the stock of the company and its holdings; and, so far as he made his purchase upon a belief in the existence of certain facts, he acted upon the information he got from others, rather than any he got from Ireland, before he would enter into the transaction. Under such circumstances the vendor is not liable for actionable fraud and deceit. Humphrey

The foregoing reasoning and deductions of Appellants the trial judge are correct. should not recover.

Judgment affirmed.

MORRIS, C. J., and BAUSMAN, MAIN, and PARKER, JJ., concur.

HUBBARD v. JOHNSON et al.

1. CHATTEL MORTGAGES 138 SALE OF PROPERTY BY MORTGAGEE-LIEN OF LABORER-STATUTE.

Rem. & Bal. Code, § 1188, provides that, ed, the laborer shall have a lien upon all crops during the year in which farm labor is performraised on the land, superior to all other liens, including a prior chattel mortgage. Section 1190 requires the claim of lien to be filed with close of the work; section 1190a gives all lienthe county auditor within 40 days after the holders for farm labor the rights secured to lienors on logs as specified in section 1181, proit difficult, uncertain, or impossible to identify viding that any person eloigning or rendering any sawlogs upon which there is a lien, without the express consent of the lienholder, shall be liable for damages to the amount secured by the lien, and that on a showing to the court in the action to enforce the lien the court shall enter a personal judgment against such person

ant.

[Ed. Note. For other cases, see Chattel Mortgages, Cent. Dig. §§ 228-236; Dec. Dig. 138.]

if a party to the action, and that all the dam- ther of the defendants had anything to do ages may be recovered by a civil action against with the removal of the wheat from the such person. Plaintiff performed farm labor in 1912-1913, and in 1913 a lien therefor was ad- field; that upon the same being removed to judicated in his favor, and the grower had it the warehouse, negotiable warehouse receipts put in a public grain warehouse and commingled therefor were caused to be issued by Lonwith other wheat and negotiable warehouse re-neker to the defendants herein, which wareceipts issued to the defendant, mortgagee, who sold the wheat and delivered the receipts to the house receipts were thereafter delivered to purchaser. Held that as its identification as the defendants; that so far as appears from the wheat from the land on which plaintiff had the evidence, the defendants had nothing to labored was made difficult, uncertain, or impossible, he might recover damages of the defend- do with the issuance of the warehouse receipts; that thereafter, and while the wheat was in the warehouse, the defendants sold the wheat to Dement Bros. Company and indorsed and delivered to the purchasers the Jones-Scott Company, both incorporated, and warehouse receipts, which warehouse receipts were negotiable in form; that if the wheat was thereafter removed from the warehouse or from Walla Walla county, or commingled with other wheat, so far as appears from the evidence, neither of the defendants had anything to do with such acts further than the sale of the wheat and the indorsement of the warehouse receipts. Upon these findings the court concluded that the action should be, and it was, dismissed.

2. LIS PENDENS 25-LITIGATION-RIGHTS OF PURCHASER.

A purchaser of real or personal property, pending litigation concerning the title or the validity of a lien thereon, takes the property subject to the rights of the plaintiff as settled by the final decree or judgment.

[Ed. Note. For other cases, see Lis Pendens, Cent. Dig. 88 47-57; Dec. Dig. 25.]

Department 2. Appeal from Superior Court, Walla Walla County; Edward C. Mills, Judge.

Action by Glenn Hubbard against R. H. Johnson and Gardner & Co. Judgment for defendants, and plaintiff appeals. Reversed, and cause remanded, with instructions to enter judgment for plaintiff.

Herbert C. Bryson and John A. Metcalfe, both of Walla Walla, for appellant. Sharpstein, Pedigo, Smith & Sharpstein, of Walla Walla, for respondents.

HOLCOMB, J. Appellant brought this action against the respondents for damages for the eloignment and conversion of a quantity of wheat, consisting of 2,460 sacks, grown by one Lonneker and wife, upon whose crop appellant had performed farm labor between November 1, 1912, and May 31, 1913, and upon which, on June 13, 1913, he filed his claim of lien for his labor, which was adjudicated in his favor on October 29, 1913, by a judgment of the superior court of Walla Walla county. Upon issue being joined in this case and a trial had, the court made findings, in substance, as follows: That on June 12, 1913, plaintiff had a lien by reason of labor performed upon a quantity of wheat consisting of 2,460 sacks, being the same wheat referred to and described in the complaint, which lien was, at the time of the trial of this action, a subsisting valid lien in the sum of $271.96; that the wheat was grown by one August Lonneker upon a farm situated in Walla Walla county near Clyde, and that the defendants had a mortgage upon the crop executed by Lonneker to secure indebtedness due defendants, and, as far as appears from the evidence, neither of the defendants had any knowledge of the pendency of the foreclosure action on lien; that the wheat was harvested by Lonneker and, after being harvested, was moved by him to a public grain warehouse at Clyde, and that nei

[1] 1. The only question presented for consideration upon this appeal is whether respondents are liable to the appellant under section 1181, Rem. & Bal. Code. Section 1188

of the Code is as follows:

farm or land, in tilling the same or in sowing "Any person who shall do labor upon any or harvesting or threshing any grain, as laborer, contractor, or otherwise, or laboring upon, or securing or assisting in securing or housing thereon during the year in which said work any crop or crops sown, raised, or threshed or labor was done, such person shall have a lien upon all such crops as shall have been raised upon all or any of such land, for such work or

labor."

Section 1190 of the Code provides that a claim of lien shall be filed with the auditor of the county within 40 days after the close of the work or labor. Section 1190a of the Code secures to all lienholders for farm labor the same rights and privileges as are secured to holders of liens on logs under the provisions of chapter 7 of the Code. Under that chapter, section 1181 provides:

*

stroy, or who shall render difficult, uncertain "Any person who shall eloign, injure or deor impossible of identification any sawlogs upon which there is a lien as herein provided, without the express consent of the person entitled to such lien shall be liable to the lienholder for the damages to the amount secured by his lien, and it being shown to the court in the civil action to enforce said lien, it shall be the duty of the court to enter a personal judgment * * against the said person, provided he be a party to such action, or the damages may be recovered by a civil action against such person."

*

The trial court seems to have based his conclusion and decision in this case upon the case of Lohman v. Peterson, 87 Wis. 227, 58 N. W. 407. In that case it appeared that, under a statute of Wisconsin, any person who concealed or transported out of the

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