Shook v. Scott

353 P.2d 431, 56 Wash. 2d 351, 1960 Wash. LEXIS 358

• Court: Washington Supreme Court
• Decided: June 23, 1960
• Docket: 34888
• Status: Published

Opinions

Rosellini, J.

— In this action for rescission of a contract for the purchase of certain land, the plaintiff alleged that he was induced to enter the contract by the representations of the defendant H. P. Scott (hereafter referred to as Scott) that a well supplying water for the property was capable of producing seven hundred fifty gallons per minute and that one tenth of such production, or seventy-five gallons per minute, would be available to the plaintiff for use on the property covered by the contract and that, in any event, water in such quantities as to render the same suitable for the growing of crops would be available to the plaintiff.

A jury acting in an advisory capacity returned a verdict for the plaintiff. The court adopted the jury’s recommendation, entered findings that the representations concerning the availability of water were false, and rendered judgment for the plaintiff. Error is assigned to these findings and to the conclusion that the representations were fraudulent.

The court made no finding regarding the capacity of the well. There was no evidence on this question other than the testimony of the plaintiff and of Scott. The latter testified that he had no personal knowledge of the well’s capacity, but had heard that a test had been run which showed that it would produce about seven hundred fifty gallons per minute. The plaintiff testified that there was evidence in another action (the nature of which will be explained later in this opinion) that the capacity of the well was seven hundred fifty gallons or more per minute. Since the evidence showed other factors which accounted for the unsatisfactory water supply, the mere fact that the plaintiff was receiving less than seventy-five gallons per minute would not sustain an inference that the capacity was less than was represented by Scott.

The judgment, therefore, must rest upon the finding that Scott represented to the plaintiff that seventy-five gallons per minute, or a water supply adequate to irrigate the property, would be available to the plaintiff, and that this representation was untrue.

It was the testimony of the plaintiff that Scott did make this representation, when the plaintiff inquired about the water supply, and the court was entitled to believe it. The land in question was a portion of a tract which was developed by Scott’s predecessor in title, one Berto. Water for the tract was furnished from a single well owned by Berto.

Under a contract with Berto, Scott was given an undivided one-tenth interest in the well, and the right to install and operate a pump and pipe line to his property, consistent with the rights of the owners of the other interests in the well. The contract further provided that Berto, himself, would install electric power, a pump, and two-inch pipe to the boundary of the Scott tract.

The plaintiff succeeded to these rights when he entered into the contract of purchase. This contract contained the following provisions:

“Sellers agree that as long as this contract is in force, purchasers shall have full enjoyment and use of the easements granted to Sellers by the contract with Fred G. Berto and Vinta L. Berto, as recorded in office of Benton County Auditor, and upon payment of purchase price, will transfer and assign their interest thereto to purchasers. ...

“The property has been carefully inspected by the purchaser, and no agreements or representations pertaining thereto, or to this transaction, have been made, save such as are stated herein.”

The plaintiff planned to use the land for the growing of alfalfa. Scott had owned the property some two years when he sold it to the plaintiff, and had grown some “fair crops” of alfalfa on it. The plaintiff installed a sprinkler system for irrigation purposes, and, during the first year of his ownership, succeeded in growing three crops of alfalfa. In the meantime, one Gray, the successor of Berto, was beginning to interfere with the water supply. Exactly what was done in the beginning is not clear from the record, but eventually Gray and a Mr. Christian “destroyed the cut-off and riser” to this property, according to the plaintiff’s testimony, and made it impossible for him to raise crops.

When the plaintiff first received notice that his use of the water might be curtailed, he complained to Scott, who made some unsuccessful attempts to get the problem satisfactorily adjusted and eventually brought suit against Gray, a suit in which the other owners, including the plaintiff, joined.

A decree was entered in that action ordering the defendant to make all necessary changes to meet the requirements of a water system adequate to furnish domestic and household water at sufficient pressure, and irrigation water in the amount of one tenth of the total output of the well “but not under pressure to operate a sprinkler system.”

Thereafter, the plaintiff, being dissatisfied with the manner in which Gray was complying with this decree, moved the court for an order adjudging him in contempt. Upon a hearing, this motion was denied, and the court determined that the plaintiff was being furnished water “exactly as he contracted for such water.” No appeal was taken from the judgment nor from the order. It was in this action, according to the plaintiff’s testimony in the present action, that the man who dug the well stated that it had a capacity of seven hundred fifty gallons or more per minute.

The plaintiff was not satisfied with the results of the action brought by Scott and the other owners against Gray. After its termination, he continued to complain to Scott; and when nothing more was done to increase his water-supply, he brought this action for rescission.

As we have said, the court was entitled to believe the testimony of the plaintiff that Scott, in answer to a specific inquiry, had told him there would be adequate water for irrigation purposes and that if he did not receive an adequate supply, he, Scott, would refund his money. The court was also entitled to believe the plaintiff’s further testimony that the supply was inadequate for his purposes. The question remains whether a statement of this kind can constitute a fraudulent representation.

Fraud, as this court has often reiterated, must be proved by evidence that is clear, cogent and convincing. The necessary elements are stated in Webster v. L. Romano Engineering Corp., 178 Wash. 118, 34 P. (2d) 428. The first essential is that the statement be a representation of an existing fact. The rationale of this requirement appears in Nyquist v. Foster, 44 Wn. (2d) 465, 268 P. (2d) 442, wherein the court said:

“It is helpful to consider the reasons supporting the usual rule that fraud can be predicated only upon representations of existing fact. Among the several reasons stated by authorities are the following: (a) A statement as to future performance is a ‘mere estimate’ of something to take place in the future; Tacoma v. Tacoma Light & Water Co., 16 Wash. 288, 47 Pac. 738; (b) ‘. . . a representation that something will be done in the future, or a promise to do it, from its nature cannot be true or false at the time when it is made;’ 23 Am. Jur. 799, 801, § 38; See, also, Rankin v. Burnham, 150 Wash. 615, 274 Pac. 98; and (c) ‘ . . . were the rule otherwise, any breach of contract would amount to fraud; and that to permit a rescission for fraud by one who has no ground for complaint except an unfulfilled promise — a broken contract — would obscure elementary distinctions between remedies, and tend to nullify the Statute of Frauds.’ 51 A. L. R. 46, 61, Annotation.”

The proper test to apply, in determining whether a representation pertains to an existing fact or is a mere expression of opinion or a promise, was set forth in that case in these words:

“ . . . Where the fulfillment or satisfaction of the thing represented depends upon a promised performance of a future act, or upon the occurrence of a future event, or upon particular future use, or future requirements of the representee, then the representation is not of an existing fact. ...”

In Holland Furnace Co. v. Korth, 43 Wn. (2d) 618, 262 P. (2d) 772, 41 A. L. R. (2d) 1166, we said that a statement that an article will meet the buyer’s requirements will be regarded as an expression of opinion about something to take place in the future. See, also, Lincoln v. Keene, 51 Wn. (2d) 171, 316 P. (2d) 899.

On the other hand, a statement is one of existing fact if a quality is asserted which inheres in the article or thing about which the representation is made so that, at the time the representation is made, the quality may be said to exist independently of future acts or performance of the one making the representation, independently of other particular occurrences in the future, and independently of particular future uses or future requirements of the buyer. In Nyquist v. Foster, supra, we held that a statement by a dealer to a prospective buyer of an automobile trailer that its sidewalls would not warp, related to a then existing condition which inhered in the material at the time the statement was made, and it was therefore a representation of existing fact upon which fraud might be predicated.

Applying the tests set forth in that opinion, did the assertion that adequate water (or seventy-five gallons per minute) would be available to the plaintiff pertain to an existing fact, or was it a statement of opinion, or a prediction, or a promise? This statement, according to the evidence, was inspired by Scott’s understanding of the capacity of the well, which so far as the evidence discloses, was correct. But whether the water would be made available to the plaintiff depended on the terms of the contract with Berto (predecessor of Gray) and its future performance. Both parties knew the terms of the contract. Whether in its performance adequate water for the irrigation purposes of the plaintiff would be furnished, depended on the future acts of the promisor and the future requirements of the plaintiff. At best, the statement of Scott can only be construed as a warranty or guaranty that the contract would be performed, and that in its performance, seventy-five gallons per minute, an amount adequate for the plaintiff’s needs, would be made available to him. As such, it was not a representation on which an action for fraud could be grounded.

Since there was no direct evidence that the capacity of the well was less than was represented by Scott, and this capacity was not disputed by the plaintiff, it can be inferred from the evidence he presented that the well was not utilized to its full capacity, or that under the Berto contract, Gray was not required to furnish water at a pressure sufficient to successfully operate the plaintiff’s sprinkler system and did not do so. If either of these factors was the cause of the failure of the water supply, the plaintiff’s loss was not occasioned by his reliance on a misrepresentation of fact on the part of Scott, but by his reliance on the latter’s unfulfilled prediction or statement of opinion. Consequently, there is lacking the clear, cogent, and convincing proof of a false statement concerning an existing fact, which is necessary to sustain an action founded on fraud.

The evidence was that Scott did not actually know the capacity of the well, but relied upon hearsay. He testified that there had been plenty of water when he farmed the land, and there was no evidence to the contrary. Scott’s actions after the plaintiff complained to him of the water shortage, were consistent with a belief on his part, held in good faith, that the plaintiff was entitled to and should receive an adequate water supply.

In Vinneau v. Goede, 50 Wn. (2d) 39, 309 P. (2d) 376, the seller represented that a well located on the land was an adequate water supply for all purposes, when in fact the water was not fit for human consumption and was inadequate for any purpose. In Gronlund v. Andersson, 38 Wn. (2d) 60, 227 P. (2d) 741, the court granted rescission where sellers of land represented, through their agent, that there was a sufficient water supply on the land, when in fact the well did not afford sufficient water. There was evidence that this condition existed prior to the sale of the land. In both of these cases, the sellers misrepresented then existing facts pertaining to the well in question; whereas here, the seller’s only representation as to the condition of the well (that it had a capacity of seven hundred fifty gallons per minute) was not shown to be false. The plaintiff here complains, not because the well could not produce the amount of water which the defendant said it could, but because his promise to return the respondent’s money if the water was not made available to him was unfulfilled. There was no evidence that the defendant misrepresented the terms of the contract under which the water was to be delivered, and in fact, as we have said, those terms were contained in a written contract which was assigned to the plaintiff and of which he had actual notice.

Courts in other jurisdictions which have considered representations similar to those involved in this action, have refused to hold such statements fraudulent. In Wolleson v. Coburn, 63 Cal. App. 315, 218 Pac. 479, a representation that “in the winter months when there is rain there will be plenty of water for the stock” was held to be merely an unfulfilled prediction or an erroneous conjecture as to a future event and not actionable. The court of civil appeals of Texas held, in Lott Town & Improvement Co. v. Harper, (Tex. Civ. App.) 204 S. W. 452 (affirmed 228 S. W. 188), that an oral guaranty by the seller of land that the land would be irrigated adequately by a canal company which would give the purchaser its contract to furnish water, would not support a defense of fraud in a suit by the holder of notes given for the price of the land. If the guaranty was construed as a promise on the part of the seller to furnish irrigation water, the court said, it could not be the basis of an action of fraud unless there was proof that it was made with no intention of keeping it. (There is in this case no contention that the fraud of the defendant was in making a promise which he had no intention of keeping.) The averments of the cross-complaint were to the contrary, for in it were alleged in detail the efforts and steps taken by the seller to secure an adequate supply of water to the land.

The case is much in point, for not only was the fulfillment of the seller’s prediction or promise dependent on the actions of a third party, as in this case, but the seller actively assisted the buyer in attempting to secure an adequate supply of water from the party obliged to furnish it, just as Scott did in this action.

Also, in Mid-Continent Life Ins. Co. v. Pendleton, (Tex. Civ. App.) 202 S. W. 769, a representation made by a seller of land that water would be on the land in sixty days was held nonactionable in the absence of an allegation and proof that the “promise” was made with the fraudulent intent of not keeping it. And, in Morrison v. Koch, 32 Wis. 254, it was held that a vendor’s assurance that a dam would always in the future continue to furnish the full amount of power conveyed, could not be regarded as a fraudulent representation, though it proved to be erroneous, it being on its face a mere assertion of his opinion, and the purchaser having the same opportunity as the seller to form a judgment on the subject.

On the other hand, in Shepherd v. Kendrick, 236 Ala. 289, 181 So. 782, the court held actionable a representation by a vendor that the streams on the land conveyed were never dry and the water supply was permanent. There was proof in that action that the streams did in fact dry up during the dry season, and this was known to the seller. Justifiably, an actual fraudulent intent was found. In that case there was clearly a misrepresentation of an existing fact, the past condition of the streams during the dry season.

The principles applied in those cases are in accord with those laid down by this court. Their application to the evidence in this case compels us to conclude that the plaintiff failed to sustain the burden of proving that his purchase of the land was induced by fraud, as that term has been defined by this court. The prayer for rescission, therefore, should have been denied.

The judgment is reversed.

Weaver, C. J., Mallery, Hill, and Donworth, JJ., concur.