Hallen v. Martin

McCOY, J. Ini December, 1909, the plaintiff, pursuant to an agreement in writing theretofolre made, conveyed -to' defendant, subject to incumbrances, 360 acres of New Mexico land, and a lot in thie oi:ty of Brookings, S. D., and gave defendant a -bill of sale of a blacksmith shop on said lot. As¡ a consideration therefor plaintiff received- a deed -of 640 acres -Of New Mexico land, -and gave to defendant a mortgage of $2,880 thereon. Plaintiff took up hi.s residence upon his liewfy 'acquired- l'andl in January, 1910, and 'in Jume, 191-1,’ disposed of thie sarnie-. In 1912 he brought thi-s action for $10,100 damages for fraud and' deceit in defendsantis representations -as to the kind, quality, v-al-ue, and fitness ficlr .agriculture -of 'the' land -traded for, whereby' he -w-as induced to enter into the agreement for exchange. Trial' was — 346 — (hlad to th-e jury, which- rendered a verdict-for plaintiff in the s-u'm of $3,680, •with interest. Brom the jud^^ment and an arder denying a new trial defendant appeals. Motion) to' diiislmliis-s appeal -has been made based on the ground that since tíre appeal was' perfected the appellant has taken a plasMon (inconsistent with his right to) further maintain- this appeal’; but a majority olf the membersi of this court are of tire view that s-uicih motion is without merit, and the sarnie is therefore denied. There was. much 'conflict in tíre evidence upon the issues of fact, 'as we view the evidence, the same was sufficient to sustain tihle verdict. [1] A vital question urged1 by appellant is that tire trial •court, by instructions, submitted toi the jury an erroneous measure of damages. The tidal court instructed the jury that the measure of plaintiff’s damages was the difference between what the property be traded for was; worth and what it would have been worth if it had been as represented. Appellant contends that tíre measure of plaintiff’s damages was the difference in value between what plaintiff got and wlfait' he parted with. This is a tort action, sounding in damages, for fraud and deceit. Plaintiff alleged, .and the jury so. found, that defendant fraudulently deceived plaintiff as to the quality of the New Mexico, land:. Plaintiff didi not seek a rescission of due contract of sale, but, electing. toi stand on tíre contract, brought this action for fraud and deceit. The only question here involved is, what is tire proper rule or measure of damages applicable to a case of this character? There 'is what .is -termed a “majority” andl a “minority” rule. 153 Iowa, 274, 133 N. W. 709, 38 L. R. A. (N. S.) 465, Ann. Cas. 1913E, 274. Under the minority rule in such cases, ¡the measure of damage is the difference between the actual value of tire property sold at the time of sale and- the price paid therefor by plaintiff. The “minority” seem is to be the -rule adhered to by s-ome of the federal courts and a very few of the state courts. The “minority” rule is well stated! in Smith v. Bolles, 132 U. S, 125, 10 Sup. Ct. 39, 33 L. Ed. 279. By reason of the overwhelming weight of judicial decision of the state courts, -th-e views of -the best text book writers, and the provisions of our Code, we are inclined ito the view) (that the “majority” rnl-e is the — 347 — sounder and the'one established in this state by our Civil Code. Under the “majority”' -rule, the measure of damages, in tort actions for fraud and deceit, is the difference between the actual value óf the property as it was at 'the time of -sale and what it would have been worth if the representation® bad been true. In Stoke v. Converse, 153 Iowa, 274, 133 N. W. 709, 38 L. R. A. (N. S.) 465, Ann. Cas. 1913E, 270, a very recent case, .the Supreme -Court of Iowa said: “The overwhelming weight of authority in this' country approves'the allowance, as the measure of-damages, of the difference between the actual value of the property at the time of the purchase andi its value if it -had been what it was represented to be.” 'The opinion in this Iowa case by Mr. Justice Ladd is well ■considered!, review® the authorities thoroughly, and should be carefully read anld considered in passing upon this .rule. In Gunderson v. Mining Co., 22 N. D. 329, 133 N. W. 554, the Supreme 'Count of North Dakota, with a Civil Ooidle .precisely the same as exists lin this state, said: “This ¡is an action for deceit, not for 'rescission. There is a vast difference between the actions, and ¡the difference must conistamtly be kept in mind. * *• * The plaintiff * * * demands that the representations of the sellers be made good in damages. * * * His damages would be the difference between -what his stock would have been worth at the time of the sale if as represented and what At was ¡actually worth at that time. Or, stated a little differently, hie can compel the sellers -to make good their- representation's by paying ¡damages fiotr those things they have misrepresented. We must go- back to the day the stock wlas sold, and determine how much more plaintiff’is ¡stock wlould have been worth had the statements made to him been true.” In Fargo Coke Co. v. Fargo Elec. Light Co., 4 N. D. 219, 59 N. W. 1066, 37 L. R. A. 593, a prior decision, the Supreme Court of Niaritb Dakota also ¡said: “It is obvious .that ¡these two¡ mies cannot ;be reconciled. One gives to the party deceived thle full' benefit otf his bargain. • Tire other does not. We are -clear that the best reason is with the doctrine that, where one is deceived and defrauded, he can recover as damages the difference between thie value of what he would have obtained had the statement 'been- true and the value — 348 — of what he actually .received. This represents his actual lo’ss by ■reason off the fraud of the seller, on the theory that he does not rescind' the 'contract. Of course, if hie sees fit to rescind' for fraud, he can. only recover back what he has paid. But if he desires to stand by tine agreement, as he has a perfect right to d'oi, he can logically say to tire wtfongdber: 'If jtou had told me the truth, the property would have 'been worth bo much. It 6s not worth so much, because it is not as you represented it. I demand that you make good1 the difference in money/ ” Tire logic and reasoning of this Ntorth Dakota decision by Mr. Justice Corliss seems to ns to he unanswerable. In Spreckles v. Gorrill, 152 Cal. 383, 92 Pac. 1011, the Supreme Court of California, under a Civil Code also precisely the same as sections 2293 and 2312 of the Civil Code of this state, speaking of this rule, said: .“’One who buys property is: lawfully entitled to' all the benefit of 'the purchase — that is, to> thie full v'alue of the property he buys — regardless of the price he paid. And it is a fundamental principle of the law of fraud that where one has, by false and fraudulent representations as to the quality of property, led another to believe it to - he possessed of valuable qualities, and thereby wrongfully induced the other to buy the property, presumably in order to' obtain the benefit of property possessing those qualities, the seller will not be allowed1 to show as a defense to an action for such fraud that the property in its actual condition' was wiolrth the price paid or more. The real question in all suich cases is whether or mot the property, if it had been as represented, would have been of substantially greater value than its actual' Value in its real condition. • The price actually paid is immaterial as an element in the cause of action, ■ though it may he admissible evidence on the question of value.' * * * For example, in Murray v. Jennings, 42 Conn. 9, 19 Am. Rep. 527. the plaintiff exchanged a pair of oxen for a horse, upon the representation of the defendant that tire horse was sound'. The horse proved unsound, and the plaintiff sued for damages for the deceit. Thie horse, in its unsound state, was worth $125. If it had been sound it 'would have been worth $225. The -oxen were worth oinly $100. Plaintiff recovered $100 as the differemce between the value of the unsound horse and its value if it 'had been. — 349 — sound'. This iwias said to be correct, and ¡the value of the oxen held Elmimaberial, the count saying: ‘Tine law gives, her [plaintiff] the benefit of the 'contract, and plaices1 heir with respect to it, and1 to all her rights under it, in the same position as if no fraud had! been practiced upon he'r, and as if the hlolrse was as sound 'and valuable as she had a right, from the defendant’s representations1 to her, to believe it was.’ ” In Drew v. Beall, 62 Ill. 164, the Supreme Court of Illinois, in a case involving an exchange of lands, said!: “The defendant had received the consideration agreed to be paid .by the plaintiff, and the latter, was entitled to have such a •tract of land as this was represented: to be, and if he has not gelt it ¡his damages, by reason of not getting it, and the proper measure of dkmages, we think, is the difference between the actual value of the land and the value of such a piece of land as this was represented to be by the defendant. “Such is the measure of damages' in an action for breach of a warranty on a sale of personal property. * * * And it is the same in 'an action for a deceit in a sale. * * * And the same rule seems to obtain upon the sale lof real estate where the action is for deceit in relation to its quality or condition.” In Antle v. Sexton, 137 Ill. 410, 27 N. E. 691, affirming 32 Ill. App. 437, the Supreme Court of Illinois also* said: “The theory of the action is that for the fraudulent and deceitful representation of the defendant, inducing plaintiff to make a contract which he would not have made other wfee, and by which he has been damaged, he should have his remedy, and: this regardless of any remedy the law might afford upon the con.traiclt itself. * * * We also agree with the views expressed in the appellate court: 'opinion in respect to ith'e measure of damages. * * * The rule adopted was the difference in value between tine saiw timber obtained and what wtouM have been obtained if there had been eighty aares of it; that is, calculate a shortage of fifty acres' at the price per aore which it -was shown to be worth. * * * In Field, Dam. § 706, the rule is stated thus: ‘In cases, of fraudulent representations of the quality of property .sold, the general rule of damages is- tihle difference between the value of the property as it is and whiat it would.be if the representations had teen tru'e.’ To the sarnie effect see 2 Sedg. Dam. 559, where, — 350 — after a similar statement of the rule with regard to personal property, the author add®: ‘The same rule, I apprehend, holds upon the sale of real estate where the 'action is 'far deceit.’ ” In the case of Whitney v. Allaire, 1 N. Y. 305, in consider-mg this rule, thé New York Court of’ Appeals said: “The last question relates, to the damages. The rule given to the jury was as favorable as the plaintiff had a right to require. T-lxe measure of damages' (in> an a'ctoon upon a warranty, and for fraud in the sale of personal property, aire the same. In either case they are .dfetermiined by the difference in vtalue between the article sold and what it should be according toi the warranty or representation. * * * The same rule obtains, I apprehend, upon the sale of real estate, where the action is for deceit.” In the state of New York the Gaunt of Appeals has at all times applied this rule in. deceit actions. Benedict v. Trust Co., 91 App. Div. 103, 86 N. Y. Supp. 370; Krumm v. Beach, 96 N. Y. 398; Hubbell v. Meigs 50 N. Y. 480; Vail v. Reynolds, 118 N. Y. 297, 23 N. E. 301. In Morse v. Hutchins, 102 Mass. 439, the Supreme Court of Massachusetts, in a tort action far deceit, said: “It fe nlclw 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 tine purchase and its vialúe if the property had been what it was represented, or warra-nted ta be. * * * This is the .only rule which will- give the purchaser adequate damages’ for mat having the tiling which the defendant undertook to sell him. To allow to the plaintiff (as the learned' Counsel far the defendant argued in this case) only the difference between the real value of tine property and the price which he was induced to ipay for it would be to make any advantage lawfully secured ta the innocent purchaser in the original bargain inure to the benefit of the .w-roagdloer, and', in pro*portioo as the original price wla® low, would afford ito' .a protection to .the party wha bad broken, at the expense of .the party who was ready to aibildle by the terms of the 'contract.” The clear philosophy of tiilis' Massachusetts case is that to apply the minority rule is toi place a premium on fraud, and deceit, because oftentimes the defendant, under the minority rule, woluldl get out much easier by virtue of his fraud and deceit — 351 — than if he had only been guilty of a .breach of contractual warranty. The clear ■ import .of ithe foregoing cited decisions is that the rule or measure of damages, in -.toirt actions for deceit is precisely the same as' in actions ex contractu for breach of warranty. Logical demonstration and .proper interpretation, and -construction of the provisions of the Civil -Code of this- state clearly and unerringly indicate that the measure of dlamages for breach of warranty of 'contract is identical with the measure of damages in tort aictfonis based on fraud and .deceit. Section 2293 of the Oivlil Ood'e pHoivides that the measure of 'damage for breach of contract “is ithe amount which will' comp ensate the party aggrieved for the detriment * * * caused thereby.” Section 2305 provides that the detriment .caused by ithe breach of a warranty of the quality of personal property -is the excess, if any, of .the value which the property would have had, at the time to whiioh the warranty referred, if. it had been complied with, over its actual value at that time. Thes'e twoi sections of our Civil Code aire merely 'declaratory -of the common-law rule as to' the measure of damages, for breach of warranty, to the effect that the purchaser, in ease of breach of warranty, tíouldi recover as. damages the difference between the actual Value of the property and wihat the property would have been worth had it been as warranted. Section 23x2 provides that in tort actions the measure of 'damage “is the amount whioh will compensate for all the detriment sproximately caused thereby.” Precisely .the s'ame rule or measure olf damage provided for by section 2293 for breach of oontraot. Both these sections 2293 and 2312 are declaratory of the common law. Fairbanks v. Williams, 58 Cal. 241. And both sections establish the same measure of damages. Crow v. Canal Co., 130 Cal. 309, 62 Pac. 562, 1058. Section 2329, Civil Code, provides that, notwithstanding the provisions of this chapter, no person can recover a greater amount of damages for the breach of an obligation than he could have gained by the full performance thereof on- both sides-. These sections of our statute should all be construed together, 'and so as to give force and effect to each and a© thereof. The clear import of 'section 2329 is that a person- may recover in damages for the breach of an obligation all that he could have gained 'by a full performance thereof — 352 — on both sliicfes. This is a general section, •applicable alike to damages arising from breach' of contract 'as ‘well -as those arising from the breach of am obligation not arising from, a contract. Where there has been a 'breach of am obligation' not arising from a con* tract, s'ulcih as a tort based1 on fraud and deceit, under the minority rule it would be impossible for the plaintiff to recover the amount he would' have gained' by full performance on the part of the defendant, because, if the property had been as represented by defendant, the plaintiff would' have received the value of the property as it .wias represented to be. We are therefore of the view 'that this section 2329 comprehends and establishes the majority rule in tort actions; that is, that tire respondent is entitled to recover the difference between, the actual value of the property and wlhiat it wlould have been worth if it had 'been asi represented by appellant. [2, 3] These sections of our Civil Code being- declaratory of the common law, what was the common law, prior to the existence, of lotur Civil 'Code must be considered in construing these sections. The 'decision's, heretofore cited from states not hlavhig a Civil Code like ours clearly indicate what was the commion-law rute in relation to, this subject. In Drew v. Beall, Antle v. Sexton, Whitney v. Allaire, Krumm v. Beach, and Morse v. Hutchins, supra, it is held that the measure of damages for breach of Warranty under a contract, and for fraud and deceit in a tort action, are 'the same. In some’ jurisd'icti’O'ns it was held that in tort actions the minority rule was the measure of damages,. With these two aommon-law ■rules in view — 'the majority and minority — it is clear that the legislative mind of this state, by the enactment of sections 2286, 2293, 2312, and 2329 of our Civil Code, intended! to, adopt a compensatory damage rule, being the majority rule, as indicated by tiie ' foregoing cited) decis'Üotas' from Ne>w York; Illinois, Massachusetts, and Connecticut, and other decisions' of like import of other jurisdictions. Sections 3300 and 3333 of the Civil Code of California, in tlreir language establishing'' the rule f'or measure of damages, are precisely the same as sections 2293 and, 2312 of our Civil Code! .The Civil Code of California also, contains a section precisely the'samé as'section 3305 of ou;r Civil Code, and the Civil Code cif California a’oo contains 'a section precisely the 'same as — 353 — section 2329 of our Civil Code, and it must foe presumed that the Supreme Gourit of California in rendering the decision in Spreckles v. Gonrill, supra, had these is'ections of their Civil Code in mind. The Civil Code of North Dakota also contains identically itihe sarnie provisions, and we cainUot presume that the Supreme Colurt of North- Dakoita in- rendering the decisions in Fargo Coke Co. v. Elec. light Co. and Gunderson v. Mining Co., supra, didi not have in mind1 these sections of their statute law. We are also of the view that the Supreme Court of this state in the case of McCabe v. Desnoyers, 20 S. D. 581, 108 N. W. 341, being a case wherein the -trial -court -instructed the jury in a deceit action that the plaintiff was -entitled to -damages for 'the value of a horse such as was represented by defendant and what the horse in fact .proved to be, had in view the provisions, of our statute, when, it held that such instruatioo stated the law correctly as applicable to sai-d -case. Cooley on Torts (3d Ed.) 932, supports thle majority rule, and states that th-e seller" is bound to malee its false representations goad in- damlages. Sutherland -on Damages -al-sO' approves -the majority rule. Sutheirlandi on Damages (3d Ed.) §§ 1171, 1172. [4] Damages under the majority rule are not “speculative” within thie meaning of speculative damages. Speculative damages are “prospective” in their nature, s-uch .as the value of crops expected to be grown- in -the future upon lands whi-ch were- the subject of sale, or the future earnlogsi, rents, and profits of personal -property .which was the subject of is'ale. But damages or detriment .sustained fo-y reason oif .the loss of the bargain, already 'consummated-, are n-ot wi-thin itihe rule of speculative damages,• and never have been so considered. The plaintiff was entitled to- the benefit -of his bargain. Drew v. Beall and Murray v. Jennings supra. Dlamages for loss of the benefits of a bargain are compensatory in their nature- .’and" the -direct and proximate oon-seqjuence of thie fraud. In these- cases th-e plaintiff recovers for the direct results of the fraud and deceit. This is the logic of the majority rule, as disclosed by the 'decisions sustaining that rule. There i's one other proposition that should not he lost sight of in -'connection wlith toe application of the majority rule in connection with .the element of .that '-rule that the price paid by pl-ainiff is immaterial, as Illustraated- by such" cases as Murray v. Jen — 354 — nings. There is a class of cases where ¡there bad been an exchange ¡oif .properties, and! where the defendant by counterclaim charged tine plaintiff with fraud and ¡deceit in connection with the property received hy defendant. In such cases, which is not this ¡case, that which represented the price palid by plaintiff ¡would then be material and the subject of ¡consideration., as there would then be a croiss^application of the majority ¡rule. But in all those oases, • such .as this, where río fault ¡or fraud1 is charged against tine plaintiff by the ¡pleadings, the plaintiff is entitled to the full benefit of bis bargain, regardless of -what consideration he paid; he reoovers what he lost by reason of defendant’s fraud and deceit, whlicfa would be the .difference between the value of What be actually received and whiat its value would have ¡been, if it had been as ¡represented by defendant. As stated hy Ooicley, under such1 circumstances the .defendant would then be placed in the some position as if the contract bad ¡been fully performed on both sides, ¡being the rule 'established by section 2329 of our Civil Code. [5] It -must 'also he observed that the rule of damages in 'relation to tire sale or trade of personal property Is applicable to the ¡sale or trade of real property. Drew v. Beall, Antle v. Sexton, Whitney v. Allaie, supra; 2 Sedg. Dam. 559. It must he kept in ¡mind that ithis is not a case for the rescission or repudiation of'a contract on the ground of fraud, but is a case ¡where the ¡respondent plaintiff relies on the contract, and is seeking to recover damages which are the proximate result of defendant’s false tad fraudulent representations of tine quality of the thing sold1; where the .defendant must make good In money damages that ¡which] plaintiff has last by reason of such fraud and deceit; that is ¡the only ataouint ¡which' ¡would compensate plaintiff for the detriment caused by ¡such fraud ¡and deceit; that is the rule established by our Civil 'Goldie; that is. the web and wtoof of the substance of the majority rule. Hence we are of the view, tad therefore bold, that the learned trial- court committed no error by giving the instruction complained of. Other assignments ¡of error have been am'die, all of which have 'been considered. Biniding"'mo error in' thte record, the judgment and order appealed from are affirmed.