T. B. Potter Realty Co. v. Breitling

Opinion by Mr. Chiee Justice Moore. There was received in evidence at the trial in support of the first cause of action set forth in the com — 300 — plaint a contract entered into June 17, 1909, between the Potter-Cbapin Realty Company, a corporation, and Emma Whitney for the sale of lot 10 in block 89 of Bayocean Park for $750. She on December 30, 1910, for the expressed consideration of $1 assigned all her right, title and interest in the contract to the defendant. The second cause was manifested by a contract signed August 5,1909, by the company last named and M. D. Jameson, for the sale of lot 19 in block 80 for $750. He on February 23, 1911, assigned in the same manner all his interest in the agreement to the defendant. The third cause was upheld by a contract concluded February 9, 1910, between the Potter-Chapin Realty Company and Harry M. Howard for the sale of lot 20 in block 70 for $700. He, on December 29, 1910, assigned in like manner all his interest in the agreement to the defendant. The fourth cause was evidenced by a contract consummated August 5, 1909, between the plaintiff and the defendant herein for the sale of lot 18 in block 80 for $750. Each of these contracts contains clauses which read: “The party of the first part agrees to have water-pipes laid either in front, or rear, or through each lot sold in Bayocean Park (said water-pipe to belong to the party of the first part); to grade and pave all streets in Bayocean Park, and to lay paved sidewalks on each side of same; to lay out and improve grounds to contain not less than six acres, and to erect on said grounds a first-class hotel and such other attractions as may be deemed most suitable and desirable by it; to install at least three docks, or boat landings, on the bay side of Bayocean Park, and to operate a ferryboat between Bay City, or some other suitable railroad station, on the eastern side of Tillamook Bay and Bay-ocean Park. “Said first party hereby agrees to work continuously on said improvements, and to expend not less than one hundred thousand dollars ($100,000) each year from — 301 — January 1, 1909, until same is fully completed. All improvements herein named to he made without expense to party of second part. * * The said second party, in consideration of the premises, hereby agrees that * * he * # will make punctual payments of the above sums as each of the same shall become due respectively, and that in respect to each of such payments time is of the essence of this contract. It is further agreed that in case the said party of the second part shall fail to make any such payments promptly at the time provided in this contract for such payment, or shall fail in the performance of any other agreement herein contained by him to be performed, or violate any other of the agreements herein contained, then and in any such case all payments which shall have been made by the party of the second part hereunder shall be absolutely and forever forfeited to the said party of the first part, and this contract shall be null and void as to both parties hereto without notice, and the said party of the first part shall have the right, without notice, thirty days after the failure of the party of the second part to comply with the stipulations of this contract, or any one of them, to enter upon the land aforesaid and take immediate possession thereof, together with the improvements and appurtenances thereto belonging. And the said party of the second part covenants and agrees that * * he * * will surrender unto said party of the first part the said land and appurtenances without delay or hindrance. ’ ’ 1. In construing these provisions, contained in a like agreement, it was held in T. B. Potter Realty Co. v. Derby, 75 Or. 563 (147 Pac. 548), that the writing, hav-_ ing stipulated that in case of default in the payment of any of the installments as they matured, all sums of money paid under the terms of the contract should be lost to the purchaser and “this contract shall be null and void as to both parties,” prescribed an exclusive remedy for the purchaser’s failure, neglect or refusal to keep his engagement, and prevented the vendor from — 302 — recovering unpaid installments of the purchase price. The conclusion reached in that case, though the decision was rendered after this cause was tried in the lower court, necessarily determines that the plaintiff herein is not entitled to recover any part of the unpaid installments of the purchase price. The question, therefore, to be considered is whether or not the case made by the defendant conclusively shows that by reason of the alleged fraudulent representations of the plaintiff he is entitled to recover the sums of money paid on account of his purchase of the several lots in Bayocean Park. It is argued by plaintiff’s counsel that the several answers, by way of counterclaims, do not state facts sufficient to constitute defenses, in that they contain neither an averment that' the defendant had rescinded or sought to annul the contract, nor an allegation that he had sustained any damages by reason of the asserted false representations. An Objection to that effect was interposed to questions propounded to the defendant who, as a witness in his own behalf, was interrogated in respect to the alleged false representations, but, the objection having been overruled, an exception was allowed. . Based on the same grounds, the plaintiff’s counsel, .when both parties had introduced their evidence and rested, moved for a directed verdict in favor of their client, but the motion having been denied an exception was saved. Thereupon the defendant’s counsel stated to the court that the 'written agreements had been received in evidence, and if a verdict were returned for the defendant he would, before the judgment was entered, make'proper assignments of the contracts to the plaintiff, thereby complying with the tenders alleged in the answer. — 303 — The evidence discloses that a very narrow strip of land, forming a peninsula, containing about 600 acres, situate between the Pacific Ocean and Tillamook Bay and extending southerly from that inlet of the sea, was purchased by the plaintiff, which caused the premises to be surveyed and platted as a summer resort and called Bayocean Park. The surface of this tract is quite uneven and, though composed chiefly of sand dunes, the soil contains sufficient alluvion to grow successfully trees, brush and shrubs. By a system of extensive advertising in newspapers, and by a profuse distribution of books and pamphlets, setting forth the assumed marvelous attractions and superior advantages of Bayocean Park, and by the employment of a printed map on which the streets were indicated as open for travel, and many lots were represented as containing buildings, as the resort would appear when completed as contemplated, many parcels of the land were sold at what now appears to have been exorbitant prices, only a very small part of which was paid down, the remainder. of the consideration being payable in monthly installments, varying from $6 to $10 according to the purchase price. Prom the sums of money thus obtainéd, the plaintiff caused to be erected a hotel, a dancing-hall, and other improvements, to be graded and paved several streets, and to be partially buried in the sand a single line of small iron pipe conducting fresh water to the grounds. If the persons who agreed to purchase lots had been able, ready and willing to keep their engagements by promptly paying the monthly installments as they severally matured, the plaintiff might possibly have carried out the magnificent scheme of improvement and adornment of which its agents were the authors and promoters. When sums of money for the sale of real property were freely — 304 — flowing in constant streams to the plaintiff’s coffers, the prices of lots in Bayocean Park, which at all times were only speculative, fluctuated as hope was inspired by the circulation of new rumors of speedy improvement, or disappointment was induced by failure to realize the expected advantages, thereby either stimulating further investments or retarding payments of monthly installments. Financial depression on the Pacific Coast, as elsewhere in the United States, punctured the bubble of speculation, which obtained in respect to lots in Bayocean Park, resulting in disaster to the plaintiff and misfortune to the purchasers. 2. These varying and imaginary selling prices of lots in such platted land demanded of a purchaser thereof, who undertook to rescind a sale of any part of the real property by reason of alleged false representations, speedy action in order immediately to place the vendor in statu quo, by returning or offering to give back everything of value that had been received. “Where a party,” says Mr. Justice Swayne in Grymes v. Sanders, 93 U. S. 55, 62 (23 L. Ed. 798), “desires to rescind upon the ground of mistake or fraud, he must, upon the discovery of the facts, at once announce his purpose, and adhere to it. If he be silent, and continue to treat the property as his own, he will be held to have waived the objection, and will be conclusively bound by the contract, as if the mistake or fraud had not occurred. He is not permitted to play fast and loose. Delay and vacillation are fatal to the right which had before subsisted. These remarks are peculiarly applicable to speculative property like that here in question, which is liable to large and constant fluctuations in value. ’ ’ 3. A party to a contract who has been induced to enter into it by the deceitful practice or willful device resorted to by another with intent to injure him may, upon the discovery of the fraud, treat the agreement as — 305 — subsisting and maintain an action to recover the damages which he has sustained. He may, however, if he act promptly upon such ascertainment, restore or offer to return, whatever he has received under the contract, and sue for the consideration which he has given or paid. He cannot retain the advantages of the agreement in order to determine whether or not a disaffirmance is the more profitable course to pursue. Rescission demands prompt action on the part of the defrauded party, and any unreasonable delay in asserting a disaffirmance of the contract will be considered as an election to treat it as continuing, and his right of action will be limited to a recovery of the damages which he has suffered: Knott v. Stephens, 5 Or. 235; Wells v. Neff, 14 Or. 66 (12 Pac. 84, 88); Frink v. Thomas, 20 Or. 265 (25 Pac. 717, 12 L. R. A. 239); Clarno v. Grayson, 30 Or. 111 (46 Pac. 426); Crossen v. Murphy, 31 Or. 114 (49 Pac. 858); Scott v. Walton, 32 Or. 460 (52 Pac. 180); Vaughn v. Smith, 34 Or. 54 (55 Pac. 99); Sievers v. Brown, 36 Or. 218 (56 Pac. 170); Dundee Mortgage Co. v. Goodman, 36 Or. 453 (60 Pac. 3); State v. Blize, 37 Or. 404 (61 Pac. 735); Waymire v. Shipley, 52 Or. 464 (97 Pac. 807); Elgin v. Snyder, 60 Or. 297 (118 Pac. 280); Van de Wiele v. Garbade, 60 Or. 585 (120 Pac. 752); Hewitt v. Andrews, 69 Or. 581 (140 Pac. 437); Seeck v. Jakel, 71 Or. 35 (141 Pac. 211, L. R. A. 1915A, 679); Whitney v. Bissell, 75 Or. 28 (146 Pac. 141, L. R. A. 1915D, 257); Spence v. Dull, 75 Or. 267 (146 Pac. 95). 4. The defendant had never been in possession of any of the lots which he agreed to purchase, so that the value thereof is unimportant. What he received was the written agreement. These contracts when returned were not canceled by the plaintiff and another — 306 — agreement executed, but the original writing was assigned by a purchaser to another vendee, who had evidently been secured by the plaintiff. The last payment on one of the causes of action was made December 5,1912, while the last payment on the other causes was made July 8, 1912. It will be remembered this action was commenced December 2,1913. It will thus be seen that a period of 11 months and 27 days had elapsed in one cause, and 1 year, 4 months and 24 days in the others before the plaintiff undertook to recover the matured installments. The defendant testified, as averred in the answer, that, having heard rumors to the effect that the alleged statements so made by the plaintiff were false, he ceased making further payments on the contracts, but that he did not visit and inspect the lots until inore than six months thereafter when he found that such representations were untrue. The defendant resided at Portland, Oregon, and in a day he could have made the journey from that city to Bayocean Park. He is chargeable with laches in not sooner ascertaining and properly asserting his rights, and in consequence of such neglect he is not, by reason of an attempted rescission, entitled to recover any part of the sums of money which he paid on account of the contract. 5. That the affirmative defenses interposed to the several causes of action were predicated on the ground of rescission is evidenced by the alleged offer of the defendant to return the written agreements, after he had inspected the lots, if such proposal can be considered a. tender, and by his assignments of the contracts, which were evidently made after the verdict in his favor was returned. These assignments were acknowledged September 12, 1914, or 3 days after the trial of the cause was commenced. — 307 — 6. The defendant, referring to the lots which he agreed to purchase testified they were worth nothing to him. Based on this sworn statement, his counsel maintain that the sum of $1,440, which was paid on the contracts by the client, is the measure of the recovery to which he was entitled as damages caused by the fraudulent representations. What property may be worth to a particular individual affords no evidence of its value, which is determined from the sum to be realized from a voluntary sale thereof. The defendant’s testimony was incompetent, and as no other evidence on this subject was offered, it must be assumed the lots had some value, so that the judgment rendered is not the true measure of recovery, even if the defenses interposed be construed as seeking a recoupment of damages. The latter theory presupposes a full performance of the terms of the contract by the vendor, and if such hypothesis were carried into effect, the defendant would be entitled to conveyances of the lots, which he had agreed to purchase, without paying any consideration therefor. It will thus be seen that the affirmative defenses are nothing more than attempts to rescind without tendering the contracts or offering to place the plaintiff m statu quo, which proffer is essential in a law action. Without adverting to the allegations of new matter in the answer, which it is maintained by .plaintiff’s counsel are insufficient to constitute defenses to the action, it is concluded that an error was committed in not dismissing the action as to both parties. From these considerations it follows that the judgment is reversed and the action dismissed as indicated. Reversed and Dismissed. Mr.. Justice Bean, Mr. Justice Burnett and Mr. Justice Harris concur.