May v. . Loomis

Hoke, J., after stating the facts: Accepting the testimony favoring defendants’ claim as true, and we are required so to accept it where a nonsuit is directed against the party who offers it, the facts disclose a clear case of deliberate fraud in which there appears every element of an actionable wrong — false representations as to material facts knowingly and wilfully made as an inducement to the contract, and by which the same was effected, reasonably relied upon by the other party and causing pecuniary damage. It is well established that the principle applies to contracts and sales of both real and personal property. The authorities are decisive and are against the ruling of the judge below as to the defendant’s counterclaim. Walsh v. Hall, 66 N. C., 233; Houghtalling v. Knight, 85 N. C., 17. Lunn v. Shermer, 93 N. C., 165; Ramsey v. Wallace, 100 N. C., 75; Brotherton v. Reynolds, 164 Pa. St., 134. It is urged that the buyers in this case were negligent and on that account their claim for relief is barred; but not so. The parties were not at arm’s length in reference to these representations and did not have equal opportunities of informing themselves. The only one of the defendants who had any experience in such matters essayed to make an examination of the property, but broke down from weakness incident to bis disease, and told the plaintiffs be would have to rely on their statements. Further, there was evidence tending to show artifice used to induce the buyers to forbear making *357 inquiry about the matter. In 14 Am. & Eng. Enc. (2 Ed.), 123, we find it stated: “Iu uo case can a person escape responsibility for representations on the ground that the other party was negligent in relying on them, if, in addition to making the representations, he resorted to artifice which was reasonably calculated to induce the other party to forego making inquiry.” Our decisions are to like effect. Walsh v. Hall, supra; Hill v. Brower, 76 N. C., 124; Blacknall v. Row land; 108 N. C., 554; s. c., 116 N. C., 389. Again, it is contended that these representations were not as to facts, but were mere matters of opinion, and we are cited to a number of authorities as supporting the plaintiff’s position — Fagan v. Newson, 12 N. C., 20; Saunders v. Hatterman, 24 N. C., 32; Lytle v. Bird, 48 N. C., 222; Credle v. Swindell, 63 N. C., 305; Etheridge v. Vernoy, 70 N. C., 724, and some others. As stated in Cash Register Co. v. Townsend, 137 N. C., 652: “Expressions of commendation or opinion or extravagant statements as to value or prospects, or the like, are not regarded as fraudulent in law;” but these representations in the case before us were not of that character; they were not mere matters of opinion, but purported to be statements of fact and were so intended and accepted by the parties. Knowing that the only one of the defendants whose experience qualified him to make an examination of the property with 'any intelligence, was physically unable to do so, the plaintiffs assured the defendants that they had caused the timber on the land to be carefully estimated, and such estimate showed that there were 3,000,000 feet of hardwood timber'on the tract; whereas, in fact and truth, the knowledge furnished to the plaintiffs by those estimates showed only 1,000,000 feet on the same. Even where there is doubt on the question, the matter must be referred to the jury to determine whether representations, though expressed in the form of opinion, were given and reasonably relied on *358 as- material facts inducing the trade. And the 'authorities cited do not support the plaintiffs on the facts of the case before us. In Fagan's case, supra, the complaining party bad refused bis deed because the boundaries did not include two acres of meadow land which had been pointed out to him as being part of the land bargained for. Recovery was denied, the principal opinion being based on the fact that these two acres were at the time in adverse possession of third persons, and this was sufficient to put the purchaser on inquiry; and one judge concurring, rested bis opinion on the ground that the complaining party having refused the deed, no title passed, and an action for deceit would not lie simply for the loss of a good bargain. In Saunders' case, supra, the court denied relief because the representations were simply matters of opinion as to value, both parties having equal opportunities to ascertain the truth by the exercise of reasonable care. In Vernoy's case, supra, there was no claim or evidence tending to show actual fraud, and this opinion intimates that, in case of actual fraud, the doctrine of caveat emptor does not apply as was said by the same judge writing the opinion in Hill v. Brower, supra. The only cases which give support to the plaintiffs’ position are those of Lytle v. Bird and Credle v. Swindell, supra, in both of which it was expressly held that an action for deceit would lie in no case, on the sale of land for fraudulent representation as to the quantity sold or what particular land was included in the deed; and this on the ground that the parties should inform themselves by a survey. These two cases are contrary to the trend of modern decisions; were expressly disapproved as to the point for which they are now cited, in the case of Walsh v. Hall, supra, and have since been ignored as authority. Where a sale has been effected by an actionable fraud, the *359 purchaser has an election of remedies. He may ordinarily, at least at the outset, rescind the trade, in which case he can recover the purchase price or any portion of it he may have paid, or avail himself of the facts as a defense in bar of recovery of the purchase price or any part of it which remains unpaid, or he may hold the other party to the contract and sue him to recover the damages he has sustained in consequence of the fraud. In order to 'rescind, however, the party injured must act promptly and within a reasonable time after the discovery of the fraud, or after he should have discovered it by due diligence ; and he is not allowed to rescind in part and affirm in part; he must do one or the other. And, as a general rule, a party is not allowed to rescind where he is not in a position to put the other in -statu quo by restoring the consideration passed. Furthermore, if, after discovering the fraud, the injured party voluntarily does some act in recognition of the contract, his power to rescind is then at an end. These principles will be found in accord with the authorities. Bishop on Contracts, secs. 679, 688; Beach on Contracts, sec. 812; Page on Contracts, secs. 137, 139; Clark on Contracts, pp. 236, 237; Trust Co. v. Auten, 68 Ark., 299; Parker v. Marquis, 64 Mo., 38. Applying these principles to the facts before us, the defendants could not now rescind the trade and plead the fraud in bar of recovery on the notes. They have made payments in recognition of the contract; they have manufactured and sold the timber, and are not in a position to restore the consideration. They contracted to manufacture and sell the timber on the land, according to the evidence, not long after the trade, and their explanation seems satisfactory. They had put out large sums of money on the enterprise; and the witness Loomis states that he complained of the fraud before the note was due, but went on and cut the timber as the best and only thing to do to save themselves. *360 The fact, however, that they are not now in a position to rescind the trade and plead the fraud in bar of recovery on the notes, does not prevent them from setting up the fraud by way of counterclaim and recovering for the damages suffered. This may be done, though the defendants have made payments in recognition of the contract, and may have continued to manufacture and sell the lumber after knowledge of the fraud. Trust Co. v. Auten and Parker v. Marquis, supra. The damages usually being the difference between the value of the property sold as it was and as it would have been if it had come up to the representations. The sale having been ratified, the plaintiff can maintain an action on the notes, subject to any counterclaim the defendants may have against the plaintiff, to be determined under the law as here declared and on the facts as they may be established. There is error. The judgment will be set aside and a new trial awarded. New Trial.