Flack v. Wahl

ALLEN, J. This is an action at law for the recovery of damages for fraud alleged to have been perpetrated upon plaintiffs in a real estate transaction involving the exchange of properties. This action was originally instituted against defendant Wahl and one Duncan, the latter a real estate agent; but during the progress of the trial the case was dismissed as to Duncan. The .trial, before the court and a jury, resulted in — 20 — a verdict and judgment for plaintiffs, and defendant Wahl appealed. Prior to July 2, 1908, plaintiffs owned a farm, referred to as their homestead, near Godfrey, Madison County, Illinois, consisting of approximately forty acres, upon which was located an eight-room residence and other improvements. The property was free and clear of incumbrance, and, it seems, reasonably worth $6000. Defendant Wahl (to whom we shall refer as “defendant’’) owned three cottages on Kraft street, in the city of St. Louis, and had placed the same in the hands of a firm of real estate agents, Dougherty & Bush, in the city of St. Louis, for sale. Duncan was in the employ of Dougherty & Bush, or connected with them, as a salesman. It is said that he,' acting for Dougherty &. Bush, had previously sold a farm near that of plaintiffs’ belonging to one Gillinwater, a brother-in-law of plaintiff Charles D. Flack, and that plaintiffs, having thus become acquainted with him, and being desirous of selling their farm, or obtaining income property therefor, placed it in the hands of Dougherty & Bush, who thus became the agents of both plaintiffs and defendant, though it appears that plaintiffs were not aware that these agents represented defendant. Through such agents plaintiffs’ farm was brought to the attention of Wahl, who inspected it, and while upon the premises .proposed to plaintiffs to exchange his three said cottages therefor. Both of the plaintiffs testified that defendant represented to them that two of these cottages were then renting for $25 per month each, and one for $20 per month, a total of $70 per month; that the three, with the lots npon which they were situated, were covered by first.mortgages thereon amounting in all to only $3050; and that the lots and cottages were valued at and worth in the market $9000', or $5950 over and above the encumbrances thereon. Shortly thereafter plaintiff Charles D. Flack came to the city of St. Louis to inspect the cottages. According to his testimony he was taken out to the cottages by Duncan but did not enter any of them. He says that Duncan told him that — 21 — the tenants were people who worked at night and slept during’ the day, and could not then be disturbed. Plaintiffs both testified that they relied implicitly upon the representations made by defendant and Duncan, and made no investigations other than that above mentioned. It appears that plaintiffs were inexperienced and ignorant respecting city property, while defendant, it seems, was an experienced dealer in real estate generally. On July 2, 1908, plaintiffs and defendant entered into a written contract for the exchange of plaintiffs’ farm for defendant’s cottages. In making the trade the farm was valued at $6000; the “equity” in the cottages was put. in at $5000; and defendant was to pay to plaintiffs $1000 in cash. The trade was consummated on this basis; but in paying plaintiffs the cash difference in supposed values defendant deducted $200 or more as commissions for Duncan, or Dougherty & Bush. The written conduct, prepared by Duncan or by some other person connected with Dougherty & Bush, after describing defendant’s three houses, referred to them as being “subject to first deeds of trust of $1500 and $1500.” Thereafter, on or about July 29, 1908, the deeds were exchanged, and defendant paid plaintiffs the money above mentioned. The deed which plaintiffs received to the cottages was executed by a brother-in-law of defendant, who had held the legal title to the property for defendant. It recited that one cottage was subject to a first deed of trust for $1500, and that each of the other two was subject to a deed of trust for $1550, a total encumbrance of $4600. Such were in fact the first mortgage liens against the property received by plaintiffs. There were also second mortgages, but these were agreed to be released and were released. In closing the transaction plaintiff Charles D. Flack called in one Tietjens, a real estate dealer, to see that the papers were in proper form. Tietjens did not examine the cottages, or have' anything to do with the transaction other than as above mentioned. — 22 — The evidence adduced by plaintiff goes to show that the cottages were not renting for $20 and $25 per month, as defendant is said to have represented, but that one was renting for $12 per month, while the other two were váeant, and that the property was found to be worth nothing over and above the mortgages. It appears that shortly after the exchange of properties was consummated plaintiffs went to relatives in Ohio; that Mrs. Flack was sick, and they did not return to St. Louis until June, 1909. In the meantime the cottages, after some considerable delay, it is said, in getting them out of the hands of Dougherty & Bush, were placed by plaintiffs in the hands of another real estate firm for rent. Such rents as were collected, it seems, went to meet im terest and expenses;' and plaintiffs received no income therefrom. Plaintiffs held the property until on or about May 24, 1910. The notes secured by deeds of trust had become due, and the holder thereof was pressing for payment and about to foreclose; and plaintiff, having been advised that their equity was worthless, conveyed the property by quit-claim deed, to the holder of the deeds of trust. It is unnecessary to rehearse the details of defendant’s evidence. Duncan testified that when he took plaintiff Charles D. Flack to examine the cottages, Flack went through one of them. And_ he denied that he said or did anything to .prevent Flack from making an investigation. Defendant could not recall having made any statements to plaintiffs as to the market value or rents of the cottages. When asked whether he had made any representations as to the rents, he repeatedly replied: “Not that I remember of.” The jury returned a verdict in plaintiffs’ favor for $4000. The trial court, in passing upon defendant’s motion for a new trial, required plaintiffs to remit $1500 of this verdict, upon the ground that the evidence did not warrant a recovery by plaintiffs for alleged false representations as to the amount of the encumbrance on the cottages received by plaintiffs from defendant. Plaintiffs filed- such remittitur, and judgment was en — 23 — tered for $2500. From this judgment the appeal before us is prosecuted. Such further reference to the proceedings below will be made as may appear necessary to a disposition of the questions raised on appeal. I. It is earnestly insisted by learned counsel for appellant that the evidence adduced by plaintiffs failed to make a prima-facie case for the jury and that the trial court erred in overruling appellant’s demurrer to the evidence. But we regard it as altogether clear that there is no merit in this contention. The main argument advanced in this connection is that plaintiffs had full opportunity to investigate, for themselves, and that plaintiff Charles D. Flack did investigate as far as he chose; and that plaintiffs cannot now be heard' to complain that they were deceived. But this argument avails nothing, under the circumstances of the case. We may omit reference to the alleged representations of defendant other than as to rents. The evidence as to the latter, alone, suffices to make the case one for the jury. [See Thaler v. Niedemeyer, 185 Mo. App. 257, 170 S. W. 378, and cases cited.] Defendant knew what the cottages were renting for, and plaintiffs did not. Plaintiffs, who were ignorant and inexperienced in matters of the sort, did not have equal means for obtaining this information; and plaintiffs’ evidence makes it appear that Duncan, acting within the scope of his authority as defendant’s agent, prevented a further investigation by falsely representing that the tenants slept during the day and could not be disturbed. Furthermore, plaintiffs had the undoubted right to rely upon defendant’s unequivocal statements, if made, as to the matter of facts, of this character; and if such statements were false it does not lie in defendant’s mouth to say that plaintiffs should not have been so negligent or foolish as to believe and rely upon them. [See Judd v. Walker, 215 Mo. 312, 114 S. W. 979; Stonementz v. Head, 248 Mo. 243, 153 S. W. 108.] Other questions raised in connection with — 24 — this assignment of error need not be here discussed. We think that the demurrer was well ruled. II. There is here no question as to the admissibility of evidence tending to prove that defendant made certain representations as to value. This evidence came in without objection; but the cause was not submitted to the jury upon the theory that defendant could be held liable for such representations, and we -need not therefore consider the question whether any liability could thereby be cast upon defendant under the circumstances of the ease. [See Stonemetz v. Head, supra.] III. The cause was submitted to the jury on ten instructions. Four of these were given at paintiffs’ request, three at the request of the defendant, and three by the court of its own motion. Ten instructions offered by the defendant were refused. Plaintiffs’ first instruction, the main instruction for plaintiffs covering their case, required the jury to find that defendant made false representations both as to rents and as to encumbrances on the property. And it told the jury that if they found the facts therein required to be found then to return a verdict for plaintiffs, and to assess plaintiffs’ damages “at the difference between the reasonable market value of the equity, if any, in said cottages at the time of said trade, and the reasonable market value of what the equity in said cottages would have been, if any, if they had been as represented,” not exceeding the amount sued for. In this connection it may be well to say that this instruction, being thus in the conjunctive (requiring the jury to find false representations both as to rents and encumbrances, in order to find for plaintiff), if the issue as to false representations concerning encumbrances should not have been submitted, nevertheless if this was cured by the remittitur, the instruction cannot be said to have been fatally erroneous in submitting such issue, for in this view it merely required the jury to find more than was necessary in order to find for plaintiffs. In — 25 — deed it is not suggested that the instruction is erroneous on this account. It is argued, however, that the court erred in permitting plaintiffs, over defendant’s objections, to testify that they did not read the deed which they received conveying to them the title to defendant’s cottages. If this was error we are of the opinion that a proper remittitur would cure it. The evidence indisputably showed, and it was conceded by both parties throughout, that the real encumbrances upon defendant’s cottages amounted to $4600. Plaintiffs claimed that defendant had falsely represented that the encumbrances amounted only to $3050. Under the evidence and the instruction, in no event could the jury have allowed plaintiffs more than $1550 on account of false representations as to the encumbrances. The trial court, in passing-upon the motion for a new trial, concluded that in view of the fact that plaintiffs accepted a deed which correctly set forth the amount of the encumbrances, which was scrutinized by Tietjens for them, so much of the verdict as could have been predicated upon false representations as to encumbrances should he remitted. Such remittitur, had it been of the proper amount, we think would have cured the error, if any, in admitting the testimony complained of. We believe that the trial court undertook to pursue the proper course, under the circumstances of the case. But the difference between the actual encumbrances and 'the encumbrances as said to have been represented by defendant was $1550 and not $1500. We consequently hold that in order to sustain the judgment before us on appeal we must, in any event, require the plaintiffs to remit the further sum of $50. IV. It is argued that plaintiffs’ first instruction mentioned above, is fatally defective, in that it purports to cover the entire case while it leaves out “the element of defendant’s honest belief in the truth of the things he is charged to have represented to plaintiffs.” As to this, it is sufficient to say that the defendant did not testify that he made the representations charged in the — 26 — honest belief that they were true, but testified merely that lie did not remember making any statements touching the matters alleged to have been misrepresented. Another complaint as to this instruction is that it does not in terms require the jury, in assessing plaintiffs’ damages, to make their findings from the evidence in the case. But it is quite clear that there is no merit in this suggestion. The instruction repeatedly requires the jury to find matters therein stated i 1 from the evidence; ’ ’ and the jury could not well have done otherwise in assessing the damages. Certain criticism is made as to the wording of plaintiffs’ other instructions. But it is quite apparent, that they are free from reversible error. Y. Complaint is made of the refusal of defendant’s instruction No. 1, which is quite lengthy and need not' be here set out. Its refusal was not error for the reason that all matters sought to be covered thereby were fully and properly covered by other instructions given, with the exception of that contained in the last paragraph thereof. That paragraph sought to have the jury told that' if they had a reasonable doubt as to whether defendant or his agent did or did not make false representations to plaintiffs, then the jury should resolve such doubt “in favor of honest and fair dealings on the part of said défendant Wahl and return a verdict for him in regard thereto.” It is argued that where the evidence adduced is as consistent with honesty and fair dealing as it is with a fraudulent design the law will presume that the transaction is bona fide and not fraudulent. [See State ex rel. v. Shelton, 249 Mo. 660, 156 S. W. 955.] But this rule does, not justify the portion of this refused instruction under consideration. The law cast upon plaintiffs the burden of proving their case by the preponderance of the evidence, but did not require them to prove it beyond a reasonable doubt. It is argued that the court erred in refusing defendant’s instruction No. 8. This instruction proceeded upon the theory that defendant’s evidence went to show that any representations made by him were based on — 27 — statements made to Mm by tbe person from whom he purchased the cottages, and that he believed such statements to be true. We find no support for this theory in the testimony adduced, and for this reason, if none other, the instruction was properly refused. VI. Defendant complains greatly of the rulings of the triál court in admitting testimony of the witness Grillinwater respecting the mental capacity of plaintiff Charles D. Flack, and in refusing defendant a continuance on the ground of surprise because of the admission of this testimony. This witness was asked by plaintiffs’ counsel whether he knew anything concerning Flack’s ‘1 capacity, or competency as a man of business.” He replied that he did. Defendant’s counsel objected on the ground that Flack had “appeared and testified intelligently” and shown that he was “not a person entitled to a guardian and wholly capable of taking care of his affairs.” This objection was overruled. Thereupon plaintiffs’ counsel (referring to Flack’s mental capacity) asked the witness: “What is it?” The witness replied: “He is thoroughly incompetent.” Defendant’s counsel again objected “on the ground stated in the objection to the former question,” which objection was overruled. TÍie witness was then asked to explain what he meant by saying that Flack was incompetent. Defendant’s objection to tMs on the ground that the witness had “not shown himself qualified” was overruled; and in response to an inquiry by the court, the witness stated that he had resided in the same house with Flack for many years. Being again asked to explain, the witness said: “The various foolish transactions he has made in business, and various other acts in his life that showed thorough and entire incompetence of intelligent action.” Defendant’s counsel moved to strike this out as being “wholly incompetent and Mghly prejudicial to the defendants.” This motion was overruled. The court’ then proceeded to question the witness as to the period of time during which the latter observed Flack; where — 28 — upon defendant’s counsel further objected to all of this' testimony on the ground that the petition contained no allegation as to the lack of mental capacity on the part of Flack. After argument of counsel, this was overruled. Defendant also filed an affidavit of surprise and prayed for a continuance, but this prayer was denied. On cross-examination of this witness, he was asked by defendant’s counsel: “You have never had Mr. Flack examined for insanity, have you?” To which he replied: “Most certainly not.” "We have deemed it advisable to thus set out, as briefly as possible, what occurred below. The only question before us in this connection is whether testimony of this character is admissible at all, in the absence of an allegation in the petition to the effect that plaintiff Charles D. Flack was weak-minded or mentally incapable of protecting himself in a business transaction. If the testimony of this witness is objectionable as being conclusions rather than statements of fact, that question is not here. It is insistently urged that the trial court erred in overruling defendant’s objections based upon the ground that no issue of this character was made by the pleadings, and in refusing defendant a continuance upon the ground of surprise. From the record before us it appears^ that the trial court ruled as it did upon the theory that this testimony was admissible under the allegation of the petition that plaintiffs relied upon the alleged false representations of defendant, believing them to be true, and were thereby induced to enter into "the contract in question and consummate the same. A consideration of this assignment of error has led us to the conclusion that this view is sound. It was, of course, unnecessary for plaintiffs to plead anything respecting the mental capacity of plaintiff Charles D. Flack as an essential element of their action for fraud. The petition alleges all of the substantive facts constituting the cause of action sued upon. Among these is the necessary averment that plaintiffs relied upon the representations alleged to have been made to them. It was essential that plain — 29 — tiffs sustain this averment by proof; and it would seem that it was proper to receive for this purpose any evidence having any probative force and effect- — and not otherwise inadmissible — which tended to support such averments. An allegation that Flack was weak-minded would seem to have no proper place in this petition. The Code requires a plain and concise statement of the facts constituting the cause of action (Sec. 1794, Rev. Stat. 1909); and .provides that only the substantive facts necessary to constitute the cause of action shall be stated (See. 1813, Rev. Stat. 1909); and provides further that a party shall not be required to. state evidence in his pleading or to disclose therein the means by which he intends to prove his case. (Sec. 1818, Rev. Stat. 1909). Here, the substantive facts to be alleged are, that defendant made certain specified false representations of material facta in connection with an exchange of properties; that defendant knew such representations to be false, or made them of his own knowledge when he had no knowledge as to their truth or falsity; that they were made with the intent and purpose that they be acted upon by plaintiffs, and that plaintiffs did rely and act thereupon to their damage. All of these substantive facts were properly alleged. It would have been unnecessary and improper to plead the evidence by which plaintiffs expected to prove such substantive facts. The fact that Charles D. Flack was weak-minded,' if true, was not one of the substantive facts constituting the cause of action, and hence was not alleged. Were the action one to rescind the contract on the ground that Flack was mentally incapable of contracting, the question would be quite a different one. But in the instant case it seems quite clear that the question is not whether plaintiffs should have pleaded this matter, but whether evidence of this character is admissible at all in an action of this precise character. It was not admissible for any purpose except to prove that the representations were relied upon. In such cases reliance is a question of fact, to be established not alone by a party’s own assertion but to be gathered from probative facts and — 30 — circumstances which cast light upon the matter. And if the party alleging fraud be ignorant, inexperienced or of weak intellect, and hence guileless and readily susceptible to the artful designs of a fraud-feaser, and easily imposed upon, proof thereof ought to be held admissible in support of the allegations of reliance. Particularly is this true here, we think, since defendant strongly contended and sought to make it appear that plaintiffs had full opportunity to investigate, and did* investigate, and are not in a position to assert that they relied and acted upon the representations alleged. In a leading encyclopedic compendium of our- law the rule concerning this matter is thus stated: “Evidence is admissible of any facts tending to show reasons for reliance upon defendant’s representation — -as that the discovery of the true condition of things was difficult, that the relations of the parties were of á confidential nature, that plaintiff was ignorant of the matters to which the representations related, while defendant was familiar with them, or that plaintiff was of weak intellect and easily imposed uponA [See 20 Cyc, 117.] (Italics ours.) In Bloomer v. Gray, 10 Ind. 326, cited in support of the italicized portion of the text above quoted, the action was one for fraud and deceit. A witness was permitted to state that the plaintiff was weak-minded at the time of the transaction in question. As to the propriety of admitting this testimony, the appellate court said: “We fully concur in the statement of counsel for the appellant, that the gravamen of the action is not to recover on account of the weak-mindedness of the appellee, but we cannot for that reason say that this evidence was not competent; on the contrary, we think it was proper for the purpose of showing his susceptibility to the representations of the decedent. The representations made, if false, would have created a liability against the decedent, whether the appellee was weak-minded or not, and to show that he was weak-minded did not increase the liability or entitle him to a recovery — 31 — which otherwise he did not have. The fraud consisted in misleading the appellee and then taking advantage of him after he had been thus deceived. Any fact which tends to throw light on the manner in which the artifice was perpetrated is proper. True, the wrong done was no greater on account of appellee’s weak mental condition, yet he was probably more susceptible to the wiles and cunning of the artful than if his mental faculties were strong and unimpaired. The jury were to determine the question of fraud from all the facts and circumstances, hence were entitled to know not only what the representations were which the decedent made, but what the probable effect of the same was upon the mind of the appellee, and what influence, if any, they had upon his making the trade.” It is true that in that case the petition alleged that certain false representations were made to plaintiff “who was weak-minded.” But these words, thus thrown into a petition charging actual fraud, did not, in our opinion affect the question of the admissibility of the testimony mentioned. And it appears from the quotation above that the court so considered the matter, and placed its ruling upon the ground that the testimony was admissible under the allegation of reliance. In Cummings v. Thompson, 18 Minn. 246, a similar question was considered. The action was upon a promissory note and the defense was one of fraud in obtaining the note, without consideration, perpetrated by the payee through a false reading thereof to defendant. It was not alleged that the defendant was unable to read. A portion of the opinion is as follows: “We are also of opinion that under the allegation that the defendant relied upon and believed the false reading and misrepresentations of the contract by Ensign, and was misled thereby, it was competent for the defendant to prove the facts offered to be proved relating to his inability to read. The averment that the defendant relied on, and believed the reading of the contract, and the representations of its contents by Ensign, is an allegation of fact, and essential to constitute a — 32 — fraud. . . . And it would seem to be apparent, that the evidence offered of the inability of the defendant to read, in connection with the facts that he executed the contract without reading it, or further inquiry, would tend directly to show that in thus executing the instrument he did in fact rely upon and was misled by Ensign’s reading and misrepresentations of it. The defendant’s inability to read is, therefore, merely a specific fact which goes to support the general allegations in the pleadings, and need not be specially stated.” These authorities we regard as here in point and strongly persuasive in support of respondents’ position. We are referred to no ease in this State directly in point. A multitude of our cases might be cited in support of the general principles which we have attempted to state and apply above, but it is unnecessary to encumber the opinion with such citations. Flack had not been adjudged insane nor “examined for insanity.” The testimony of his brotherrin-law, Grillinwater, though couched in strong terms, when considered with all of the other evidence in the ease, must be taken to indicate merely a weakness of intellect on the part of Flack rendering him an easy victim in the hands of a shrewd and designing trader. Flack acted for himself and his wife in making such investigation as was made, and his lack of intelligence or acuteness, and his consequent gullibility, was a factor of no little importance under the circumstances of the case. It was, however, a specific probative fact tending to establish the ultimate fact alleged, viz., that he relied upon the representations made. [In this connection, see, also, Jacobson v. Whiteley, 38 Wis. l. c. 437.] Appellant places much reliance upon the opinion of this court in Hill-Dodge Banking Co. v. Loomis, 140 Mo. App. 62, 119 S. W. 967. But that ease did not deal with the question here presented. The question decided was that, under a general denial, or a plea of non est factumit could not be shown in defense to an action on a promissory note that at the date of the execution thereof the mind of the maker was so weakened by — 33 — disease that he was'unable to transact business or comprehend the nature of a business transaction. The principles and reasoning upon which that opinion is based afford no support, we think, to appellant’s position that it was here necessary to plead mental infirmity on the part of Flack in order to render admissible the testimony complained of. In Feeney v. Howard, 79 Cal. 525, the necessity of pleading the existence of a fiduciary relation, under the circumstances of the case, was involved. The suit was one to declare a trust, based upon the breach of a parol agreement to reconvey land. No actual fraud was alleged or proved. It was sought, however, to make out a case of constructive fraud by proof of the existence of a fiduciary relation between the parties. But the existence of such relation had not been alleged. The court, in part, said: “It is true that it was held in Brison v. Brison, 75 Calif. 525, that if by means of a parol promise to re-convey a party obtains a deed without consideration from one to whom he stands in a fiduciary relation, the violation of the promise is constructive fraud, although at the time of the promise there was no intention not to perform. . . . But it is essential to the operation of this principle that there be a fiduciary relation. It is one of the facts constituting the fraud. The facts constituting fraud must be averred in cases of constructive as well as of actual fraud. [Golson v. Dunlap, 73 Cal. 164.] And in this case no fiduciary relation is averred.” Where no actual fraud is charged, and the case must proceed, if at all, upon the theory of constructive fraud arising by virtue of the existence of a fiduciary relation, the existence of such relation then becomes a constituent element of plaintiffs’ case — one of the substantive facts which he must plead. On the other hand, where actual fraud is alleged, it is held that confidential relations existing between the parties may be shown, i hough not specifically pleaded, in support of the allegation that the plaintiff relied upon the representations — 34 — charged to have been made. [See Glaspie v. Keator, 56 Fed. 203; 20 Cyc. 117.] And in like manner if plaintiffs were here seeking to rescind or avoid the contract on the ground that Flack was mentally incompetent to contract, it would be essential to allege this fact which would then become a constituent element of the cause of action. But since the action is for actual fraud alleged, mental infirmity need not be pleaded; though evidence thereof was, we think, admissible upon the ground and for the purpose above mentioned. Appellant insists that the court committed reversible error in overruling the application for a continuance on the ground of surprise. But from the views expressed above it necessarily follows that the defendant could not properly claim surprise on the ground of the admission of testimony of this character. Because of the nature of the action, defendant, we think, was bound to know that the susceptibility of plaintiff Charles D. Flack to representations of the character in question was a matter drawn in issue by the pleadings as they stood. We cannot well hold that the trial court should have found that defendant was actually misled to his prejudice. [Sec. 1846, Rev. Stat. 1909.] In this connection we may incidentally state that the court, in entering the order passing upon the motion for a new trial, among other things, recites that the appearance •and conduct of Flack on the stand indicated that he was weak-minded. But irrespective of this — and without giving any weight thereto — we are of the opinion that no reversible error was committed in denying the continuance. In our opinion the position which defendant took below and has taken here regarding the admission of testimony of the character in question, under the pleadings as they stood, is not tenable. Defendant, however, would have been entitled to an instruction, had one been offered, instructing the jury to the effect that this testimony could be considered only for the purpose of de — 35 — termining the issue as to whether plaintiffs relied upon the representations, if made. Other questions touched upon in the briefs are not controlling and need not be discussed. The judgment appears to be for the right party, and we perceive no prejudicial error in the record other than that relating to the amount of the remittitur ordered. If plaintiffs, therefore, will, within ten days, remit the further sum of $50, the judgment will be affirmed; otherwise it will be reversed and the cause remanded. It is so ordered. Becker, J., concurs; Reynolds, P. J., dissents in a separate opinion filed.