Castleman v. Stryker

213 P. 436, 107 Or. 48, 1923 Ore. LEXIS 138

• Court: Oregon Supreme Court
• Decided: March 13, 1923
• Status: Published

Opinion

RAND, J.

1. Obviously tbe pleader, by these averments, intended to allege that tbe sum of $12,750, which tbe defendants allege they bad been induced to pay to tbe plaintiff for all of tbe property, was an aggregate of different amounts which tbe defendants bad paid separately for tbe different items of property purchased. That is to say, that tbe defendants paid $1,000 for tbe goodwill of tbe business, $500 for the peanut machine, $500 for tbe soda fountain and $100 for tbe glass shelving and gum cases, and that these amounts, when added to tbe amounts paid for tbe remainder of tbe property, aggregated tbe sum of $12,750. But, whether tbe allegation is that tbe defendants were induced by tbe alleged representations to pay $12,750 as a lump sum for all of tbe property purchased, or that said sum of $12,750 was an aggregate made up of various sums separately agreed to be paid for tbe various articles themselves, it appears, from the proof offered by the defendants in their own behalf, that the sale of the property was made under a written contract, and from this contract, and from the testimony offered by them, it is established that none of the things referred to were sold separately, but that everything was sold as a whole, and that the sum of $12,750 agreed to be paid was not an aggregate of charges for separate items, but was a lump sum which the defendants had agreed to pay for the property as a whole. That being so, before the defendants could recover damages on account of any alleged false or fraudulent representation, they were bound to establish that the whole property purchased by them was not worth the sum of $12,750 at the time and place of purchase, because, if the property was worth that sum or more, they could sustain no legal damage even though the alleged representations were false and fraudulent.

2. This is so because fraud without damage is not sufficient to support an action. Before an action can be maintained to recover damages on account of any representation, however false and fraudulent the same may be, it must be established that the person to whom the representation was made has been misled to his prejudice. However, if it be established that the fraud operated to the prejudice of the party to a slight extent only, it is sufficient, as fraud gives a cause of action if it leads to any sort of damage: Kerr on Fraud and Mistake (5 ed.), p. 67.

In this case the defendants wholly failed to establish that the property purchased was not worth the sum of $12,750. They offered no testimony tending to show the value of the property as a whole, nor is there any testimony in the record from which the value of the property can be ascertained or determined. It was for this reason that the trial court rightly sustained plaintiff’s motion for a directed verdict.

However, it is not necessary to base our decision upon this point alone. It appears from defendants’ testimony that the defendant H. F. Stryker was an experienced druggist; that he had owned and conducted four different drug-stores before buying the drug-store from plaintiff; that one of these was conducted by him in the City of Portland; that he had been in and around the store for a considerable period of time before purchasing it and was familiar with plaintiff’s business and with the goods and property purchased; that all of the property was delivered and transferred to him on March 5, 1919; that he carried on the business of conducting the store for five and one-half months thereafter, and then sold and delivered the property in question to a third party for the sum of $11,100, and that during all of this time he had never made any objection or complaint about any of the matters or things alleged in the answer, and never did make any such complaint or objection until after he had been sued upon the notes in this action. Although Stryker went into the possession of the drugstore on March 5, 1919, and continued the business for five and one-half months thereafter, he admitted that while so owning and conducting the store, on May 25, 1919, he told plaintiff’s wife that “he was very much pleased with his purchase, that the business was keeping up well, and was everything that Mr. Castleman had represented.”

3. The drug-store in question was located on the corner of Killingsworth and Albina Avenues, in the City of Portland, where the defendant H. P. Stryker admits that he had owned and conducted a drug-store before purchasing the one from plaintiff. ‘ He should therefore have been as familiar with the kind and character of the business and property he was purchasing and with its value as the plaintiff himself was, and under the rule of caveat emptor he was bound to take care to determine for himself the value of the property he was about to purchase, and knowing the value, he should not have been misled by any representation that the plaintiff might make. As the parties were on an even footing, dealing with each other at arm’s-length, and there was no relation of trust or confidence between them, a mere assertion of value by the seller or a disparagement of value by the purchaser, although erroneous or false, is not actionable.

Where parties to a contract stand on an equal footing and have an equal means of knowledge, and there is no relation of trust or confidence between them, fraud cannot be predicated on a representation as to value. Value is largely a matter of judgment and estimation upon which men may differ; hence, representations of value, as a general rule, are not material: 12 E. C. L., p. 281. The author of Kerr on Fraud and Mistake, at page 55, states the rule as follows:

“As, on the one hand, mere assertions of value by the vendor of property are not fraudulent in law, though erroneous or false; so, on the other hand, a disparagement of property by a purchaser is not a fraud. ’ ’

In this state the law is settled that—

“A purchaser must use reasonable care for his own protection and should not rely blindly upon statements made by a seller; and between parties dealing at arm’s-length where no fiduciary relation exists and no device or artifice is used to prevent an investigation, it is the general rule that a purchaser must make use of his means of knowledge, and failing to do so, he cannot recover on the ground that he was misled by the seller.” Reimers v. Brennan, 84 Or. 53 (164 Pac. 552), and authorities there cited; McCabe v. Kelleher, 90 Or. 45 (175 Pac. 608).

4. Under the facts disclosed by the evidence in this case, the plaintiff and the defendant H. F. Stryker, while negotiating for the sale of the drug-store, were dealing at arm’s-length, and were standing on an equal footing. There was no relation of trust or confidence between them. No device or artifice was used to prevent the defendant from making a full and complete investigation of the matters and things referred to in the answer. There are cases where the seller or purchaser may put upon the other the responsibility of informing him correctly as to the market value or as to any other fact known to him affecting the value of the property, and while, in such a case, the party is not bound to answer, yet, if he does answer, he is bound to speak the truth, and if his answer is untrue and prejudice results therefrom, it is fraud: Kerr on Fraud and Mistake, p. 55. But the case made here by the defendants is not that kind of a case, and it does not fall within that rule for the reasons above stated. These representations of value were nothing more than the mere expression of an opinion, or what is often referred to as “puffing,” “dealer.’s talk,” or “seller’s statements,” and the defendants had no right to rely upon them. Therefore they were not material representations, and fraud cannot be predicated thereon.

“Mere general commendations of property sought to be sold, commonly known as trade talk, dealer’s talk, seller’s statements, or puffing, do not amount to actionable misrepresentations where the parties deal at arm’s-length, and have equal means of information and are equally qualified to judge of the value of the property sold. This rule is based on the universal practice of the seller to recommend the article or thing offered for sale and to employ more or less extravagant language in connection therewith. The law does not hold him to a strict accountability for those vague commendations of his wares which manifestly are open to difference of opinion, and which do not imply untrue assertions concerning matters of direct observation; nor has the buyer any right to rely on such statements. It has even been held that such talk will not render the seller liable in damages although he acts in bad faith.” 12 E. C. L., p. 250.

5. In support of the charge made in the answer, that the plaintiff falsely and fraudulently represented to the defendant H. F. Stryker before and at the time of the sale that the store was earning a salary of $250 per month and $500 in addition thereto, and that the peanut machine was earning not less than $2.50 per day, the defendants offered no testimony except that of the defendant H. F. Stryker. He testified that after he had acquired the store the amount of his sales was less than the amount of the sales the plaintiff represented the store and the peanut machine had earned. The contract óf sale did not, in terms or by implication, warrant that the store or the machine would earn any amount whatever. The representation alleged was a representation of a past occurrence, and the testimony offered was of a subsequent occurrence. Between the two there could be no legitimate relation. To prove that these representations were false, it was necessary for the defendants to show that the sales made by the plaintiff were less than what the plaintiff had represented them to be. The amount of the sales subsequently made by the defendants was not competent to prove this fact. The allegation is that the plaintiff made a statement of the amount which he himself had earned, not that he warranted what the defendants would earn. The representation alleged was collateral to and entirely independent of the contract. Not being an integral part of the contract, nor of the essence of it, it could not amount to a warranty. As there was no warranty of the amount the defendants would earn, evidence of what they did earn was immaterial.

Nor was there any evidence in any way tending to support the allegations relating to the lease. It appears that at the time of the transfer of the store, the plaintiff had mislaid his lease, hut that it was subsequently found and assigned, and that the defendants had possession of the store under the lease for the period of five and one-half months, and upon their sale of the store, transferred such possession to the purchaser.

None of the provisions of the uniform sales law govern the questions involved here, as that act did not go into effect until after this purchase and sale had been consummated.

If the evidence offered by the defendants shows any fraud in this transaction, it. discloses that it was the defendant H. F. Stryker, and not the plaintiff, whose acts were dishonest and fraudulent. It is not disputed that the gross sales of this drug-store during the year 1918, the year before the plaintiff purchased it, amounted to more than $52,000, and that plaintiff’s net income therefrom during that year was over $7,000. Plaintiff transferred this property to the defendants upon defendants’ payment of $9,000 in cash, and their undertaking to pay the notes sued on. Stryker, having actually paid out only $9,000, conducted the store for five and one-half months and received whatever income was realized therefrom, and then sold and disposed of it for the sum of $11,100, which sum he has converted to his own use except $569 thereof that he has since paid on one of the notes. He thus received from the sale $1,500 more than the amount he actually paid and only $1,650 less than the entire amount that he had agreed to pay. He also received the entire income from the store during the time he was conducting it. He now seeks, upon the flimsiest of testimony, to recover, over and above the amount of the notes, $5,000 for alleged misrepresentations, all of which he has failed to establish.

6. Where a party alleges that a contract was obtained from him by fraud, the onus probandi, or burden of proving the fraud, lies on him, and whether the facts as proved amount to a fraud is a question for the court, as well in an action at law as in a suit in equity. Fraud must be proved as alleged, and the burden of proving it always rests upon the party alleging it. Fraud may be established either by direct or positive proof of fraud or by circumstantial evidence, but whether one or the other, the proof establising the fraud must be clear, satisfactory and convincing:] Buck v. Columbia Agricultural Co., 106 Or. 531 (212 Pac. 801), just decided.

“The law in no case presumes fraud. The presumption is always in favor of innocence and not of guilt. In no doubtful matter does the court lean to the conclusion of fraud. Fraud is not to be assumed on doubtful evidence. The facts constituting the fraud must be clearly and conclusively established. Circumstances or mere suspicion will not warrant the conclusion of fraud. The proof must be such as to create belief and not merely suspicion. If the case made out is consistent with fair dealing and honesty, the charge of fraud fails.” Kerr on Fraud and Mistake (5 ed.), p. 477.

In this case, as the right to relief rested upon fraud alone, the question of whether there was sufficient proof of fraud to satisfy the requirements of the law was a question of law for the court. As the answer admitted the execution of the notes sued on and as the right of the defendants to relief against their liability on the notes rested upon fraud alone, it became the duty of the trial court, upon defendants’ failure to establish fraud, as alleged, to direct a verdict as was done in favor of the plaintiff for the amount which was admitted by the answer to be unpaid on the notes, and to give judgment accordingly.

For these reasons the judgment appealed from is affirmed.

Affirmed. Motion for Damages on Affirmance Denied.

McBride, C. J., and Burnett and Harris, JJ., concur.