Sibley v. Southland Life Ins. Co.

11 S.W.2d 250

• Court: Court of Appeals of Texas
• Decided: November 15, 1928
• Docket: No. 2187
• Status: Published

Opinion

WALTHALL, J.

Appellee Southland Life Insurance Company, a corporation, brought this suit against appellants, Kean Lumber Company, a corporation, and S. W. Sibley, alleging that Sibley employed one J. O. Ellis, a joint broker, and in that capacity and in the matters here involved was acting for all parties to this controversy, to negotiate a trade •of 22 houses and lots in San Jacinto Lawn, an addition to the city of Dallas, Tex., in exchange for sundry properties which had been acquired by Southland Life Insurance Company through foreclosures. Title to the San Jacinto Lawn property was vested in Kean Lumber Company, in which Sibley was the principal stockholder. The Kean Lumber ■Company property was incumbered for $96,-800, by vendor’s notes and mortgages, upon some of which Sibley was primarily liable as maker, and in the transaction Southland Life Insurance Company was to take said property subject to said incumbrances, but not to exceed that sum, except for ad valorem taxes for 1926. It was represented by Sibley that each of the San Jacinto Lawn lots was improved with a brick veneer dwelling, with outhouses, and promised that all such improvements as had not then been completed would be completed at or after the time of closing the transaction. Such representations and promises were communicated by Ellis to the proper officers of Southland Life Insurance Company, and were relied upon by them as a ¡material, inducing cause for closing the trade.

Pursuant to such representations and promises Sibley and the Kean Lumber Company caused the 22 houses to be pointed out to Southland Life Insurance Company’s representative, a written contract was made between Southland Life Insurance Company and •Kean Lumber Company setting out the terms of the deal, and deeds were duly passed consummating the trade.

It is alleged that some of the houses were never completed by the Kean Lumber Company and Sibley, and that Southland Life Insurance Company, at an expense 'of $2,680.93, itemizing same, caused them to be completed after the defendants had failed to do so. It is further alleged that among the properties pointed out to Southland Life Insurance Company was lot 6, block E, San Jacinto Lawn; that lot was improved. It is alleged that it was represented to Southland Life Insurance Company that said improved lot was lot 7, block E, San Jacinto Lawn. Southland Life Insurance Company, relying on such representation, acquired title to said lot 7, believing that it was improved. It subsequently learned that lot 7, to which it had thus acquired title, was a vacant lot, and was not the improved property pointed out to it before the transaction was closed. The difference' in the market value between lot 6 and lot 7 was alleged to be $3,100.

It was further alleged that the promises made by Sibley regarding the completion of the houses were false and fraudulent, and were made for the purpose of inducing South-land Life Insurance Company to make the trade. Appellee set out the several items of expenditures incurred and paid to complete the properties and prayed for judgment against Kean Lumber Company, jointly and severally, for the amount of its damages as alleged.

We have found no answer of the Kean Lumber Company in the record. Sibley’s original answer contained pleas of general exception and genéral denial. Sibley’s amended answer pleaded general exception, special exceptions, general denial, and special denials. On motion Sibley’s amended answer was stricken, for the reason that same was not filed three days before announcing ready for trial, to which Sibley excepted. At the conclusion of the evidence the jury returned a verdict, on special issues submitted', substantially as follows, which issues more definitely reflect the issues tendered in the pleading than the foregoing brief statement:

(T) Sibley represented to Ellis that the property located in San Jacinto Lawn, which was to be traded to Southland Life Insurance Company, consisted of 22 houses and lots.

(2) Such representation was communicated to Southland Life Insurance Company.

(3) Southland Life Insurance Company relied upon such representation as a material, inducing cause for entering into the contract.

(4) Such representation was false.

(5) Southland Life Insurance Company would not have entered into the contract and made the trade it did with Kean Lumber Company, except for such representations.

(6) The reasonable market value of the net equity (that is, the full value, less the incum-brance of $4,400) of lot 6, block E, San Jacinto Lawn (the improved property), on February 17, 1926, was-$3,100.

(7) The reasonable market value of lot 7, block E, San Jacinto Lawn (the vacant lot), on February 17, 1927, was $1,250.

(8) Sibley promised Ellis that the houses in San Jacinto Lawn, to be conveyed to Southland Life Insurance Company in the transaction, would be fully completed.

(9) At the time Sibley made such promise to Ellis, he did not intend to comply with such promise.

(10) Such promise was communicated to Southland Life Insurance Company".

(11) Such promise was relied upon by South-land Life Insurance Company as a material, inducing cause for entering into the contract.

(12) Kean Lumber Company made representations to Southland Life Insurance Company as to whether lot 7, block E, had a house on it.

(13) Southland Life Insurance Company relied on and acted on representations in. buying said lot.

(14) Southland Rife Insurance Company, in closing the trade, did not make their own inspection of said properties and rely on their own inspector’s report.

(15) (To be answered conditionally.)

(16) Kean Lumber Company did not complete the houses in San Jacinto Lawn involved in this suit at its own expense.

(17) (To be answered conditionally.)

(18) Southland Life Insurance Company necessarily expended $1,866.06 to complete said houses.

(19) Prior to the conveyance to it of said properties, Southland Life Insurance Company did not make an investigation whether a house was located on lot 7, block E, of San Jacinto Lawn addition.

(20) A proper investigation would not have disclosed that no house was situated on said lot 7.

(21) Sibley directed Ellis not to make any representations as coming from him.

On the verdict as returned,, judgment was entered for appellee against Sibley and Kean Lumber Company, jointly and severally, for $3,155.78. Sibley alone prosecutes this appeal. -

Opinion.

Appellant’s propositions are extremely lengthy. He discusses the first six propositions together. The contention made is to the effect that in neither appellant’s pleading nor proof offered is alleged or shown the values of the properties appellee gave in exchange or the values of the properties received in .exchange, in the transaction between appellee and appellant and Kean Lumber Company; that .appellee’s measure of damage, if any it has, “is the difference between what the party defrauded gave for the land which he obtained and what he received in exchange”; and that, as neither the pleading nor proof show such values or difference in .values, no basis for damage is shown, and the petition was subject to appellant’s general demurrer, ánd the evidence, not showing the relative values of the properties, furnishes no basis for judgment for appellee.

In 1919, the Texas Legislature enacted what is now, and was in operation at the time of the 'transactions involved here, article 4004. That article reads:

“Actionable Fraud. Actionable fraud in this State with regard to transactions in real estate or in stock in corporations or joint stock companies shall consist of either a false representation of a past or existing material fact, or false promise to do some act in the future which is made as a material inducement to another party to enter into a contract and but for which promise said party would not have entered into said contract. Whenever a promise thus made has not been complied with by the party making it within a reasonable time, it shall be presumed that it was falsely and fraudulently made, and the burden shall be on the party making it to show that it was made in good faith but was prevented from complying therewith by the act of God, the public enemy or by some equitable reason. All persons guilty of. such fraud shall be liable to the person defrauded for all actual damages suffered, the rule of damages being the difference between the value of the property as represented or as it would have been worth had the promise been fulfilled, and the actual value of the property in the condition it is delivered at the time of the contract. All persons making the false representations or promises and all persons deriving the benefit of said fraud, shall be jointly and severally liable in actual damages.”

The portion of the above article referred to and discussed by Judge Bishop, for the Commission of Appeals, section A, in Clem v. Evans, 291 S. W. 871, 51 A. L. R. 1135, is not involved in this ease; nor the latter part of the article, applying to exemplary damages.

In the trial of the case at bar the court sub-initted the facts for actual damages only, and, in submitting the facts to be found, applied the rule for the measure of damages as in the above article of the statute; that is, the difference between the value of the property, as represented and as it would have been worth, had the promises been fulfilled, and the value of the property in the condition it is delivered, and not the common-law rule as it had obtained before the above statute was enacted. The question, then, is whether since the enactment of article 4004, the measure of damage in the exchange of real property, induced by fraud, is the difference between the value of the property as represented, or as it would have been worth had the promise been fulfilled, and the actual value of the property in the condition it is delivered at the time of the contract.

Iri this case, as we view it, Sibley was not sued on his promises as contractual obligations. Such promises, were shown only as elements of actionable fraud which induced the contract, and the action was one for fraud and deceit, and not an action ex contractu. A false representation of an existing fact, where damage resulted therefrom, has always been ground for actionable fraud. Before the enactment of article 4004, in the ease of future promises, the law waá that a promise knowingly, falsely, and fraudulently made, without the intent to fulfill it, when acted upon to his damage by the promisee, constituted actionable fraud. Russell v. Industrial Transportation Co., 113 Tex. 441, 251 S. W. 1034, 258 S. W. 462, 51 A. L. R. 1. The fact was sufficiently pleaded, found by the jury, and the finding supported by evidence, that the difference in the market value between lot 6 and lot 7 was $3,100, and that the cost necessarily incurred to finish the houses was $1,-866.06; judgment was rendered for that total, less certain admitted credits.

The case of George v. Hesse, 100 Tex. 44, 93 S. W. 107, 8 L. R. A. (N. S.) 804, 123 Am. St. Rep. 772, 15 Ann. Cas. 456, is referred to by appellant. It states the common-law rule as to the measure of damages on exchange of real property, Induced by false representations, and where the suit was to recover damages for tbe fraudulent representation by wbicb tbe plaintiff bas been induced to enter into tbe contract to bis loss, tbe rule for tbe measure of his damages stated to be “tbe difference between the value of that-wbicb be bas parted with and tbe value of that wbicb be bas received under tbe agreement.’’’- That case was decided several years' prior to tbe enactment of article 4004.

Tbe suit here we construe to be one for deceit, resulting in damages, and not for breach of contract. Tbe elements of facts pleaded, and proved, as to tbe damages sustained, bring tbe case, we think, under tbe rule for tbe measure of damages stated in article 4004 of our statute. There is in the facts of this’ case, as found, a false representation of an existing material fact in pointing out lot 6 with a bouse thereon, and representing it as lot 7, with no house thereon; there is also here, as found, a false promise to do some act in tbe future, made as a material inducement to enter into tbe contract for tbe exchange of properties, and but for wbicb promise tbe contract would not have been entered into.

In Prideaux v. Roark, 291 S. W. 868, Judge Bishop of tbe Commission of Appeals, section A, defines a false representation of a past or existing fact, as applied to article 4004, to be a representation which is untrue, though tbe party making it did not know it was untrue at tbe time of making it. We have here, as found, a false promise to the effect that the bouses would be fully completed when tbe bouses were not fully completed, and that tbe party so promising did not, at tbe time of making tbe promise, intend to comply therewith. In tbe same case Judge Bishop defines a false promise, as applied to árticle 4004, to do some act in tbe future in a prqmise wbicb tbe promisor did not intend to perform at tbe time it was made. We see no reason why this case does not come squarely under article 4004, and have applied tbe measure of damages therein provided.

In enacting tbe article defining what shall constitute actionable fraud and prescribing a rule for damages, tbe Legislature said, in section 4 of tbe act (Acts 1919, c. 43), that tbe fact that there is now in this state no comprehensive law protecting citizens from being defrauded by false representations and promises, evidently intending by tbe act to change tbe common-law rule as to tbe measure of damages, as stated in George v. Hesse to tbe statutory rule as in the act, when tbe facts as stated in tbe act are made to appear. This case clearly involves a “transaction in real estate,” an exchange of real estate for real estate, regardless of their respective values.. Tbe suit is not one for specific performance of a contract, nor for damages on breach of contract, but is one for deceit, and strictly under tbe provisions of tbe act of 1919.

There are some cases referred to and discussed by appellant and appellee wbicb seem to follow tbe common-law rule for tbe measure of damages in real estate and stock transactions stated in George v. Hesse, as that rule was applied prior to tbe act of 1919, and referred thereto by appellant as authority for so bolding; but, without undertaking to analyze or differentiate these cases in their facts from tbe case at bar, we bold that tbe trial court was not in error in applying tbe meas'ure of damage stated in article 4004 of our statute.

Tbe evidence is too extensive, some 268 pages of tbe record and maps, to reproduce it here in reply to appellant’s propositions, severally, that it does not support the jury’s findings. We have carefully reviewed tbe evidence, and are of tbe opinion that’it is sufficient to call for tbe submission of each of tbe several issues submitted, and to ‘sustain tbe findings made, and we overrule each of such propositions.

Tbe contract involved here, executed by tbe Kean Lumber Company, contained tbe following ;

“This contract embodies within its terms tbe complete agreement between the parties hereto, and there are no verbal understandings or agreements not incorporated herein.”

Tbe trial court permitted parol evidence on tbe several issues of fraudulent representations and promises made prior to tbe contract, and appellant submits that tbe admission of such evidence violates the rule against admitting parol evidence to alter, vary, add to, or contradict tbe terms of a written contract. Tbe contention is not sustained by tbe authorities. Tbe rule is clearly stated in 22 C. J. 1215, where it is said that parol evidence is always admissible to show, for tbe purpose of invalidating a written instrument, that its execution was procured by fraud, or that, by reason of fraud, it does not express tbe true intentions of tbe parties, and that tbe rule is not rendered inapplicable by tbe fact that tbe writing contains a recital similar to that above.. Allegations of fraudulent representations and promises were sufficiently pleaded to admit tbe evidence.

Appellant’s fourth proposition relates to what be calls his alternative promise, asserting in substance that, if be made any promise relative to completing tbe unfinished bouses, such promise was an alternative promise that Kean Lumber Company would complete them or would make satisfactory guaranty by posting a certified check for $5,000, and that by doing so ké, Sibley, was relieved from any further liability on bis promise. We think ■that ■ probably under tbe authorities cited, such would be tbe rule if appellee’s suit was on Sibley’s promise as a contractual obligation. But sucbj is not appellee’s cause of action as we view it. But, as hereinbefore said, tbe suit is for deceit, a statutory action for damages, under article 4004, growing out of a contract as pleaded, by reason of tlie fraudulent representations and promises inducing tbe contract.

Appellant’s propositions bave not been severally discussed, but all have been considered and are overruled.

Finding no reversible error, the case is affirmed.