Gustafson v. Rustemeyer

39 L.R.A. 644, 39 A. 104, 70 Conn. 125, 1898 Conn. LEXIS 1

• Court: Supreme Court of Connecticut
• Decided: January 5, 1898
• Status: Published

Opinions

Torrance, J.

The first question to be considered is whether the court erred in sustaining the demurrer to the counterclaim. The false representation therein set out and relied upon, relates simply to the worth of the Julius street property over and above the incumbrances. It is a mere naked representation of the value of an equity of redemption, and nothing more. The general rule is that a mere naked assertion of value, without more, made between vendor and vendee during negotiations for a sale, though untrue and known to be so by the one who makes it, and relied upon by the other to his hurt, does not constitute an actionable deceit ; and this for the reason that such an assertion, in most cases, is, and is understood to be, the statement of an opinion and not of a fact, and the party to whom it is made has no right to rely upon it; and if he does so his loss, if any occurs, is held to be the result of his own folly. Bigelow on Fraud, 490; Parker v. Moulton, 114 Mass. 99; Morse v. Shaw, 124 id. 59; Homer v. Perkins, ibid. 431; Ellis v. Andrews, 56 ; Chrysler v. Canaday, 90 id. 272; Shanks v. Whitney, 66 Vt. 405, 29 Atl. Rep. 367. See also cases cited in note to Cottrill v. Krum, 100 Mo. 397, in 18 Amer. St. Rep. 556.

There are undoubtedly exceptions to this general rule, arising ont of the special circumstances under which the representation as to mere value is made; as for instance where the one who makes the representation holds a position of trust or confidence towards the other, which gives the latter a right to rely on the representation; or where the seller has or assumes to have special knowledge of the value of the property, and the buyer has no knowledge thereof, and the latter, to the seller’s knowledge, trusts entirely to the seller’s representation; in such cases the seller may justly be held liable for his false representations, because by them the buyer is fraudulently induced to forbear inquiry as to their truth.

A mere false representation as to the value of real estate, knowingly made by the seller to the buyer, is not actionable unless the buyer has been fraudulently induced to forbear inquiry as to its truth; and in that case the means by which he was thus induced to forbear inquiry must be specifically set forth in the pleading. “To such representations the maxim caveat emptor applies. The buyer is not excused from an examination, unless he be fraudulently induced to forbear inquiries which he would otherwise have made. If fraud of this latter description is relied on as an additional ground of action, it must be specifically set forth in the declaration, and cannot be charged in general terms only.” Parker v. Moulton, 114 Mass. 99, 100; Ellis v. Andrews and Chrysler v. Canaday, supra.

Upon the counterclaim as it stands, the defendant’s case falls within the general rule and not within any of the recognized exceptions. If he desired to bring it within any of these exceptions he should have alleged the specific facts which would bring it within one of them; but this he did not do, and for this reason the demurrer was properly sustained.

In his brief the defendant claims, in substance, that the general principles here applied to the statement of facts in the counterclaim, if applied to the facts found, show that the plaintiffs have no cause of action. He says: “ Misrepresentations of the dimensions of the farm in question by the defendant to the plaintiff, even though intentional, cannot lay a foundation for an action upon the facts found by the court.”

If the defendant were at liberty to make this claim here, it might be shown in reply that the facts set up in the counterclaim, and the facts found, differ very materially, and that this difference may be just the difference between a false representation that is actionable and one that is not. But the defendant, under the statute (General Statutes, § 1135), is not at liberty to make this claim here, because he did hot make any claim of this kind in the court below, nor has he made it in his assignments of error. Under the circumstances of tins case we decline to consider this claim.

The defendant claims that the court excluded the evidence of the value of the Julius street property, as compared with the value of the farm, and that it erred in so doing. Although there is some doubt as to whether the court did absolutely and finally rule this evidence out, we will consider the case as if it had so ruled.

The defendant claimed that the measure of damages was the difference between the value of the farm and the value of the property given in exchange for it; while the plaintiffs claimed that it was the difference between the value of the property which the defendant owned and conveyed, and its value if it had been as represented. From the record it is clear that this evidence was offered solely as bearing upon the question of damages, and on the assumption that the rule as to the measure of damages was as claimed by the defendant. In Ms brief the defendant now claims that the evidence was admissible for another purpose, namely as “ tending to show the improbability of his having made the representar tions complained of.” The evidence was undoubtedly admissible for this purpose, and for other purposes; for instance as evidence, but not conclusive, to show from the price paid the value of the farm conveyed to the plaintiffs. Bigelow on Fraud, 627, 628; 3 Sutherland on Damages, 592. But the trouble with this claim is that it was not made in the court below, and cannot be considered now. The question, then, whether the court erred in excluding this evidence, depends on the further question, what is the proper measure of damages in cases of this hind ? A vendee induced to purchase land by false and fraudulent representations, may, acting seasonably, rescind the contract, and after giving or offering to give bach what he received, recover bach the consideration ; or he may retain the land and recover damages, in a proper action, for the deceit. Ives v. Carter, 24 Conn. 392, 403; Krumm v. Beach, 96 N. Y. 398; Vail v. Reynolds, 118 id. 297; Pryor v. Foster, 130 id. 171.

The present case is one where the plaintiffs have elected to heep the land and seeh to recover for the deceit in an action of tort, and the question is, what is the measure of damages in this action? Upon this question the decisions of the courts of last resort are not in harmony. In one class of cases the measure of damages is held to be the difference between the actual value of the property at the time of the purchase, and its value if the property had been what it was represented or warranted to be; while in the other class of cases it is held to be the difference between the real value of the property retained by the plaintiff, as it was at the time of the purchase, and the value of that which he gave for it. In the former class of cases the plaintiff is allowed the benefit of his bargain, in the latter he is not. Morse v. Hutchins,102 Mass. 439, is an example of the first class of cases, while Smith v. Bolles, 132 U. S. 125, is an example of the other class.

In Morse v. Hutchins, p. 440, the court say: “ It is now well settled that, in' actions for deceit or breach of warranty,, the measure of damages is the difference between the actual value of the property at the time of the purchase, and its value if the property had been what it was represented or warranted to be. . . . This is the only rule which will give the purchaser adequate damages for not having the thing which the defendant undertook to sell him. To allow to the plaintiff . . . only the difference between the real value of the property and the price which he was induced to pay for it, would be to make any advantage lawfully secured to the innocent purchaser in the original bargain inure to the benefit of the wrongdoer; and, in proportion as the original price Avas low, would afford a protection to the party who had broken, at the expense of the party who was ready to abide by, the terms of the contract.”

In Smith v. Bolles, p. 129, on the other hand, it was said: “ The measure of damages was not the difference between the contract price and the reasonable market value, if the property had been as represented to be, even if the stock had been worth the price paid for it; nor, if the stock were worthless, could the plaintiff have recovered the value it would have had if the property had been equal to the representations. What the plaintiff might have gained is not the question, but what he had lost by being deceived into the purchase. The suit was not brought for breach of contract. The gist of the action was that the plaintiff was fraudulently induced by the defendant to purchase stock upon the faith of certain false and fraudulent representations. . . . The defendant was liable to respond in such damages as naturally and proximately resulted from the fraud. He was bound to make good the loss sustained, such as the moneys the plaintiff had paid out and interest, and any other outlay legitimately attributable to defendant’s fraudulent conduct; but this liability did not include the expected fruits of an unrealized speculation.”

Both of these cases relate to sales of personal property, but no distinction is made, in the application of these rules, between sales of personal and sales of real property; Bigelow on Fraud, 627; Sedg. on Damages (2d ed.) [559]; 3 Sutherland on Damages, §1171; and no good reason has yet been given why there should be any such distinction. Both courts, in the cases above mentioned, recognize the existence of the general rule that the defendant is only liable for such damages as are the natural and proximate result of his fraud, but they differ in applying it. In Morse v. Hutchins, the loss of the benefits of his bargain is regarded as one of the elements of plaintiff’s damage resulting naturally and proximately from the fraud, while in Smith v. Bolles such loss is not so regarded.

The general rule in regard to the measure of damages in actions of deception has been stated, and we think correctly, as follows: “ The defendant is liable, not for everything that follows upon his fraud, but for what may be presumed to have been within his contemplation at the time, as a man of average intelligence.” Bigelow on Fraud, 625. Applying the general rule as thus stated to a case like the present, we think the loss of the benefits of the bargain is one of the elements of damages which the defendant must be held to have contemplated as the natural and proximate result of his conduct, and for which he is therefore answerable. In Bigelow on Fraud, 627, the rule is stated as follows: “ It is now well settled that in actions for deceit or breach of warranty in sales, of personalty or realty, the measure of damages is the difference between the actual value of the property at the time of the purchase, and its value if the property had been what it was represented or warranted to be; ” citing numerous cases. This is the rule also as stated and favored in 3 Sutherland on Damages, pp. 589, 592. It is the rule adopted and followed in numerous cases relating to the sale of personal property, and it is the rule adopted and followed in the following cases relating to the sale of real estate: Krumm v. Beach and Vail v. Reynolds, supra, in New York; Drew v. Beall, 62 Ill. 164, 168; Nysewander v. Lowman, 124 Ind. 584; Page v. Parker, 43 N. H. 363; Shanks v. Whitney, 66 Vt. 405; Williams v. McFadden, 23 Fla. 143. Moreover it is the rule adopted and followed by this court in Murray v. Jennings, 42 Conn. 9. In that case it does not appear to have been much discussed, but its application was directly in question, was indeed the only question in the case, and it was specifically and deliberately adopted and followed. We see no good reason why it should not be considered as the settled rule in this State.

The evidence of the value of the Julius street property, then, having been offered solely for the purpose of showing the amount of the plaintiffs’ damages under the rule laid down in Smith v. Bolles, supra, was inadmissible, and the court committed no error in excluding it for that purpose.

The defendant further claims that the court erred in holding that all his representations as to the number of acres in the farm “ were not embraced in the deed itself and the descriptions contained therein.” From the objectionable way in which this matter is stated in the record, by transcript from the stenographer’s notes instead of a brief statement of the point by the court in the ordinary manner, it is a little doubtful just what the precise claim of the defendant was before the lower court upon this point. He seems to claim that as the false representations were made about a month before the deed was made, they were too remote in time to be admissible; but in his brief he says the court “ erred in refusing to hold that all the representations as to the dimensions of the property were embraced and must be found in the descriptive part of the deed itself.” He says, in effect, that the representations were made a month before the deed was given, that plaintiffs had ample opportunity during that month to find out whether they were true or-false, and that they then accepted a deed repugnant on its face to the representations ; and that these facts show that it is “ hardly credible that after all these representations the defendant executed, and the plaintiffs accepted, a deed radically different from their tenor.”

These facts were entitled to great weight as evidence bearing upon the question whether the plaintiffs relied on such representations, and whether they were made at all, and we must upon this record assume that the court gave to them all the weight to which they were entitled; but in spite of them the court found against the defendant on this point as upon a matter of fact, and we cannot review that finding here.

We understand the real claim of the defendant, upon the point now in question, to be that evidence of the oral representations was inadmissible because it tended to contradict, or vary, or add to the deed in some way; that all such representations prior to the deed were merged and embraced in it, and so could not be proved.

This claim is not tenable. The evidence was not offered to contradict, add to, or vary, the deed, but to show the fraud as alleged, which could be shown in no other way. It was offered to show the false representations which induced the plaintiffs to enter into this transaction and to accept the deed. Certain monuments were pointed out by the defendant to the plaintiffs as marking the bounds of the land as to which they were in treaty, which in fact were situated outside of it. This was done with an intent to deceive, and led her to accept the deed subsequently tendered, without having the property surveyed or making any further examination as to the number of acres embraced within the boundaries mentioned in the conveyance. Her omission to take such steps was a natural consequence of the fraudulent representations. They had precisely the effect designed by the defendant, and he was properly held responsible for the resulting damage. As was said in Russell v. Tuttle, 2 Root, 22: “ This action is not laid upon the writing, but for the fraud . . . which can be no otherwise proved than by the testimony of witnesses.” In Cabot v. Christie, 42 Vt. 121, a vendor orally and falsely represented that a farm contained one hundred and thirty acres, when it contained but one hundred and seventeen, and it was held that although a parol warranty could not be shown as against the deed, fraud in representing the quantity could be shown. In Whitney v. Allaire, 1 Coms. 305, 308, it is said: “ For more than thirty years it has been the settled doctrine of the courts of this State, that fraudulent representations in reference to the title of real estate, accompanied with damage, is a good cause of action, and that it is immaterial whether any or what covenants are contained in the deed of conveyance.”

In Carvill v. Jacks, 43 Ark. 439, a vendee induced to accept a deed by false and fraudulent representations, sued for damages for the fraud, and it was held that notwithstanding the deed and its covenants, he could prove the oral representations. A similar ruling was followed in Dano v. Sessions, 65 Vt. 79, Keefe v. Sholl, 181 Pa. St. 90, and Griswold v. Gebbie, 126 id. 353, cases where vendee, after a deed to him, sued for fraud in the sale of real estate. See also the following cases. where fraud was allowed to be shown notwithstanding the fact that the evidence in one sense tended to contradict a writing: Cummings v. Cass, 52 N. J. L. 77; Mallory v. Leach, 35 Vt. 156; Cole v. High, 173 Pa. St. 590; Feltz v. Walker, 49 Conn. 93-98; Fox v. Tabel, 66 id. 397-400. The court below did not err in admitting the evidence in question.

In his last assignment of error the defendant claims, in effect, that the court failed to adopt and apply any fixed rule as to the measure of damages, and did not assess them “ in accordance with the rules of exact justice.” The record shows that the parties upon the trial made specific conflicting claims with respect to the rule of damages, and they were entitled to have the true rule applied, and to know which of the conflicting rules was applied by the court. It was the duty of the court to adopt and apply the rule which the plaintiffs contended for, and it was also its duty to make this known to the parties in some way. The record upon this point is not as clear as it should be. It says: “ Adopting either rule, I find from the evidence as to the value of the several properties, that the result would be approximately the same.” The fact implied in this statement, that the court had heard and considered evidence as to the value of both properties, would seem to indicate the adoption of the rule which the defendant contended for, while there are other things elsewhere in the record which seem to indicate that the court adopted the other rule. The record does not show, either expressly or by clear implication, which of the conflicting rules the court adopted and applied. Perhaps the fair import of the record is, that in the process of assessing the damages the court applied both rules and, finding the results approximately the same, did not decide which of them was the true rule and exclusively applicable. It was the duty of the court to decide this question, however, and to make its decision manifest in some way to the parties, and this was not done. We think the court erred in this, but if, as is found, the application of either rule leads, in this case, to substantially the same result, it is difficult to see how the defendant has been harmed by the error, and for this” reason we do not advise a new trial on account of it.

There is no error.

In this opinion the other judges concurred, except Hamersley, J., who dissented.