Kitchen v. Rayburn/Opinion of the Court

It is impossible to separate the receipt which Rayburn gave for the one hundred and nineteen bonds from the arrangement by which he gave up his title to the moiety of the St. Luke lands, and the engagement of Kitchen to secure to him $10,000, the understood value of the lands. They are all parts of one transaction. The assent of Rayburn to a rescission of the contract by which he had become the equitable owner of that moiety, the acceptance of some of the bonds as security for payment of the consideration for the surrender, and the undertaking to invest the remaining bonds in the purchase of land from the trustees of the railroad company, were all induced by the representations of Kitchen, and they were obtained at the same time. The evidence satisfactorily establishes that, having sold an undivided half of the St. Luke lands to Rayburn, and subsequently finding it for his interest to recover the ownership of them, he proposed a repurchase. There appears to have been no difference of opinion respecting the value of the lands and the price to be paid for the proposed surrender of Rayburn's title. Starr, a witness present when the arrangement was spoken of, testifies that Kitchen stated to Rayburn he would give him railroad bonds sufficient to secure him in the sum of $10,000 if he would give up his claim or obligation on him for the lands, and further stated that with the bonds he, Rayburn, could get more land equally good and in a better body or locality. The St. Luke body of lands contained twenty-two hundred acres, of which a moiety had previously been sold by Kitchen to Rayburn, and this witness thought they were worth at least $10 an acre then, that is, when the arrangement was made for the repurchase. To the same effect is the testimony of Rayburn himself. It is that the undivided half of the St. Luke lands were valued by Kitchen at $10,000, and there is no evidence in the case inconsistent with this. Ten thousand dollars, then, was the sum when Kitchen came under obligation to pay to Rayburn for the lands which the latter surrendered by giving up the receipt he had taken for the purchase-money, and by returning the property bond.

Thus far there is little conflict in the evidence. But from this point onward there is more disagreement. The account of the transaction given by Kitchen is that he agreed to give Rayburn, in satisfaction of the debt, railroad bonds of the Cairo and Fulton Railroad Company, enough to pay for a thousand acres of land of the company, then held by trustees, and that he did give him five such bonds for $1000, each amounting with the interest coupons thereon to more than $6000, telling him the trustees might charge him for the land a little more than $5000, but that he would make it up. The remaining bonds, he states, were taken by Rayburn to be invested in lands for Mrs. Kitchen. He does not admit that he authorized the application of any of those remaining bonds to the payment of his debt to Rayburn.

The testimony of Rayburn is that Kitchen not only gave him the five bonds towards the liquidation of the debt, but that he also said if they were not sufficient, he (Rayburn) might use a sufficient number of the others in his possession (meaning those for which the receipt was given) to pay himself for the undivided half of the St. Luke lands, valued at $10,000 by Kitchen himself. If this is true there is an end of the plaintiff's case, for it clearly appears that the bonds could not be used in the entry or purchase of the railroad company's lands, and that the whole of them, one hundred and twenty-four in number, were sold for $10,000, a sum not greater than the agreed value of the St. Luke lands. The plaintiff's bill affirms that sale, and it seeks to follow the proceeds subsequently invested, in part, in the land bought from Timberman.

It is not necessary, however, to determine whether the testimony of Rayburn in this particular is a true account of the transaction. There is another aspect of the case which is controlling. The arrangement between Kitchen and Rayburn, in which the latter surrendered his claim to the St. Luke lands, accepted bonds in payment of the debt due him, and assumed a trust of other bonds, even if it was such as the plaintiffs allege, was fraudulently obtained by Kitchen. He had been president of the railroad company. He knew its condition. He knew that the bonds were almost valueless. He had declared that under certain circumstances they would not be worth more than five cents on the dollar. Having himself a claim upon the company, he had refused to receive the company's bonds in liquidation of the claim at more than $50 each, including unpaid coupons, and he had settled with the company, receiving one hundred and sixty-eight bonds at that rate. Yet, in order to effect his bargain with Rayburn, who was an illiterate man, he represented to him that the bonds were very good; that he (Rayburn) could make the money at any time out of them; that he could enter eleven hundred acres anywhere about Clarkton, Dunklin County, with five of them, paying all expenses; that the lands about Clarkton, known to Rayburn, were railroad lands, and subject to be entered with those bonds at that time. All these representations were false, and were known by Kitchen to be false. Moreover, he was assured that Rayburn had no knowledge upon the subject, and that confidence was resposed upon his statements. It was thus the contracts were obtained. Rayburn gave up his bond for the conveyance of the St. Luke lands, accepted the bonds, and assumed the trust. And it was not until after he had discovered that neither the trustees of the railroad company nor the company itself had any lands about Clarkton, or elsewhere, that could be entered with the bonds, either at five dollars per acre or at any price, that the bonds were almost valueless, and that Kitchen had offered to sell one hundred and sixty-eight similar bonds for $8423, that he sold those transferred and deposited with him for $10,000.

The complainants, then, do not come into court with clean hands. They are seeking the benefit of a contract obtained by their fraud, or by the fraud of Kitchen. Hence they can have no standing in a court of equity. Such a court will not lend its power to assist or protect a fraud. It will not even enforce an unconscionable bargain. In Bein v. Heath it was said to be a principle in chancery 'that he who asks relief must have acted in good faith. The equitable powers of this court can never be exerted in behalf of one who has acted fraudulently, or who by deceit or any unfair means has gained an advantage. To aid a party in such a case would make this court the abettor of iniquity.' For this reason, if for no other, the plaintiffs cannot succeed. They are seeking in a court of equity to derive an advantage from their own wrong.

DECREE AFFIRMED.