Wolfe v. Severns

This action arose out of the pretended sale of certain oil-well equipment, consisting of a derrick, tanks, tools, etc. James, Price and Richards owned certain oil leases and oil-well equipment at Huntington Beach, Orange County, California. They were in financial difficulties and made an assignment of their interest in said leases and said equipment to a certain creditors’ committee consisting of Spraul, Fairchild and Gale. Said creditors’ committee had certain negotiations with Clarence R. Bailey, Pearl R. Bailey, his wife, W. J. White, and Mamie B. White, his wife, looking to the sale of said property. In said negotiations it was agreed to sell said property to Bailey and White for an agreed consideration, payable at specified times; that they were to place all necessary papers in escrow and the delivery thereof was to be made according to the escrow instructions. The deal was never completed because of the failure of Bailey and White to carry out the terms of their agreement. Bailey and White were never in possession of the property, although they did a little work thereon by special arrangement with Spraul, one of the creditors’ committee. The appellant, as judgment creditor of Bailey and White, caused an execution to be levied on certain of the personal property in said lease, said personal property being the same property that is the subject of the controversy here. At the sheriff’s sale on said execution the said Spraul announced publicly that the creditors’ committee claimed the property being offered for sale under said execution. The appellant and his attorney and others were present. Appellant’s attorney heard the claim made by Spraul, but appellant does not remember hearing any such claim. Appellant’s attorney advised him that all he would get as a result of said sale was the right, title and interest of the judgment debtors. The appellant was the purchaser of said property at said execution sale.

Appellant requested one Doekins to inform him if he found anyone desiring to purchase oil-well equipment, stating that he had two complete outfits, derricks and all, from the crown block down, referring to the property that he

While they were inspecting the property before going to the office of appellant’s attorney, certain representations were made, appellant representing to respondent that he was the owner of said property and there was no claim against the same that he knew of except city taxes, which, in his opinion, would not exceed $50. They went to the office of appellant’s attorney and said attorney prepared an instrument and handed the same to the respondent, who objected to the description of the property therein and then said attorney suggested that he make an assignment of the sheriff’s certificate of sale, which theretofore had- been handed to the respondent for perusal, or a bill of sale on the back of the sheriff’s certificate of sale. An assignment of said certificate was placed on the back thereof, executed and delivered to the respondent herein. Whereupon the respondent asked if it was good, and being informed that it was, delivered a check for $1,000, the purchase price of said property, to the appellant. They immediately went to the sheriff’s office and inquired if appellant had a right to sell the certificate of sale and were informed by a deputy sheriff that the appellant had such right. Respondent then ordered his employees to dismantle the derrick preparatory to moving the same, but shortly after they began to do so they were notified by some other parties that they were the owners of said property, which fact said employees reported to the respondent. Respondent then made further inquiry of the sheriff’s office and learned for the first time that the only interest that he received in the property was the interest of the judgment debtors, which, if any, was questionable. Whereupon respondent immediately returned the certificate of sale, together with the assignment thereon, which had been delivered to him, and demanded the return of his check. The check was delivered to the appellant herein on the twelfth day of February, 1929, and the

Respondent asks affirmance of the judgment for failure of the appellant to set up sufficient evidence to comply with the rules of this court. While the testimony set out by the appellant is rather meager, yet we are of the opinion that it is sufficient to require a denial of the motion for affirmance. The motion is, therefore, denied.

It is admitted by the appellant that if there is any substantial evidence to support the findings of the trial court the findings cannot be disturbed on appeal. However, appellant insists that the evidence is insufficient to support the findings. The theory upon which appellant’s contention is based is that appellant acquainted respondent with the source of his title by showing him the sheriff’s certificate of sale, and insists that in so doing respondent was placed within that class of persons whose duty it is to investigate before purchasing, and having failed to do so, he is precluded from the defense of fraud, and that he got all he bargained for; hence no failure of consideration.

Appellant cites Brimmer v. Salisbury, 167 Cal. 522 [ 140 Pac. 30 ], That ease is one where the court is passing upon the obligation of one who has entered into an executory contract of sale, and the court says at page 527: “ ‘ The conveyance by the vendor was not a breach of the contract. One may sell land which he does not own, and yet be able, when the time of performance arrives, to furnish a good title. In the meantime the purchaser would not be at liberty to disaffirm the contract on the ground that then the vendor was unable to make a good title. It would be incumbent upon him to offer to perform, or to show that at the time of performance the vendor could not furnish the title.’ Here it is immediately to be noted that a vendor under an executory contract of sale who has title may part with it under two essentially different conditions. He may part with it to a third person, who if he be not charged with knowledge of the previous executory contract, takes it freed from the obligations of that contract. Such would be the case were the executory contract of sale unrecorded.

Appellant cites certain other cases to the same effect. It will readily be seen that these cases are not in point where there is no executory contract in connection with the sale.

There is a conflict in the evidence on the question of the representations made as to title and the claims of others thereto. This court, therefore, must accept as true that testimony which tends to support the findings, together with all reasonable inferences therefrom.

It is never presumed that a party has committed a fraud, and where fraud is alleged for the purpose of depriving him of a right it must be clearly made out. (McCarthy v. White, 21 Cal. 495 [ 82 Am. Dec. 754 ]; Ryder v. Bamberger, 172 Cal. 791 [ 158 Pac. 753 ] ; Wendling etc. Co. v. Glenwood etc. Co., 153 Cal. 411 [ 95 Pac. 1029 ] ; Casey v. Leggett, 125 Cal. 664 [ 58 Pac. 264 ]; Abrams v. Daugherty, 60 Cal. App. 297 [ 212 Pac. 942 ] ; Everett v. Standard Acc. Ins. Co., 45 Cal. App. 332 [ 187 Pac. 996 ].) To establish fraud the evidence must be clear, satisfactory and convincing. (McCarthy v. White, supra; 12 R. C. L. 183.) Such has been the rule in this state from an early date and such the rule continues to be.

Respondent testified in part as follows: “He (Doekins) told Mr. Wolfe (appellant) that he brought me down, that I was in the market for a rig, and Mr. Wolfe said he had two for sale and we got in the ear and came down to look at them. Mr. Mabry: Q. Where were they located? Witness: A. At the corner of Sixteenth and Olive streets, Huntington Beach. Q. When you got there, did you'

Appellant testified: “Did you ever tell Mr. Severns you were the owner of the property? ... I only told him I had a sheriff’s bill of sale. Mr. Mabry: Q. You never told him you were the owner of the property? ... He didn’t answer the question yet. The Court: Answer the question. Read the question, Miss Reporter. . . . The Court: Answer the question. Did you tell him that or not ? Do you understand the question? Witness: A. Yes. The Court: Will you answer it then? Witness: A. I don’t believe I did, only

In the case at bar the defendant went to the place where the property was located and after examining that which he desired to buy he made two direct and pertinent inquiries and two only. First, “What do I get if I buy this property?” Second, “Is there anything against it?” As to the first inquiry he was told “I own it. You get it all from the crown block down, including the pipe in the ground.” As to the second he was told, “There is no claim against it that I know of except the city taxes.” The defendant was satisfied with what he saw and agreed to purchase a derrick, tanks, tools, etc., after having been told by appellant that he owned said property, that he got it all, that there was nothing against it except the city taxes, which, in the opinion of appellant, would not exceed $50.

Blake v. Arp. 180 Cal. 144 [ 179 Pac. 683 , 684], is a case where fraud was alleged and. found. The basis for such allegation and finding was that defendant therein was the owner of a lot and sold the same to plaintiff, stating to plaintiff that he owned the title to said lot. At the time of the purchase a Us pendens was on record in the case, which resulted in a judgment against himself and his vendee (plaintiff in said cause). The court said: “The jury was justified in finding him guilty of fraud under the circumstances even though he believed the truth of his assertion (Civ. Code, sec. 1572, subd. 2) and they were so instructed by the court. Appellant urges the fact that the evidence was insufficient to show any fraud on his part for the reason, as he claims, that plaintiff knew as much about the title as he did, and that therefore his statement was a mere expression of opinion, and cites in relation thereto the following cases: Choate v. Hyde, 129 Cal. 580 [ 62 Pac. 118 ]; Rheingans v. Smith, 161 Cal. 362 [Ann. Cas. 1913B, 1140, 119 Pac. 494 ]. . . . Moreover, the evidence of plaintiff was that she was constantly lulled into inaction by the repeated assertion of defendant that he had the title, notwithstanding the allegations of the plaintiff in said suit.” Crandall v. Parks, 152 Cal. 772 [ 93 Pac. 1018 ], is a case wherein the plaintiff was the owner of certain real and personal property and the defendant in order to induce plaintiff to make an exchange for his property in Oregon and

. . . That plaintiff never made or commenced an investigation for himself as to the value of the Oregon land or the ownership of the personal property, that he believed and relied solely on the statements and representations of defendant in relation thereto and that he was induced to make the exchange solely by reason thereof, is all fully established by the findings, which are conclusive upon this appeal. We know of no reason why defendant should be allowed to maintain that plaintiff was not entitled to rely without investigation on his part, upon a representation as to the value of the land so remotely situated, which he had never seen and could not personally examine, a representation ‘to the truth of which the party has deliberately pledged his faith’. (See Dow v. Swain, 125 Cal. 681 , 684 [ 58 Pac. 272 , 274].)

In Oppenheimer v. Clunie, 142 Cal. 313 [ 75 Pac. 899 , 901], the court says in quoting Mr. Justice Temple in Colton v. Stanford, 82 Cal. 398 [ 16 Am. St. Rep. 137 , 23 Pac. 16 ] :

“The power to cancel a contract is a most extraordinary power. It is one which should be exercised with great caution,—nay, I may say, with great reluctance,—unless in a clear case. A too free use of this power would render all business uncertain, and, as has been said, make the length of the chancellor’s foot the measure of individual rights. The greatest liberty of making contracts is essential to the interests of the country. In general the parties must look out for themselves.

“It is stated in Southern Development Co. v. Silva, 125 U. S. 250 [ 31 L. Ed. 678 , 8 Sup. Ct. Rep. 881 ], that in order to justify a court of equity in setting aside a contract on the ground- of fraudulent representations the complainant must show by clear' and decisive proof:

“ ‘First—That the defendant has made a representation in regard to a material fact.

“ ‘-Secondly—That such representation is false.

“ ‘Thirdly—That such representation was not actually believed by the defendant, on reasonable grounds, to be true.

“ ‘Fourthly—That it was made with intent that it should be acted on.

“ ‘Fifthly—That it was acted on by complainant to his damage; and ■

“ ‘ Sixthly—That in so acting on it, the complainant was ignorant of its falsity, and reasonably believed it to be true. ’

“This court said in Colton v. Stanford, 82 Cal. 399 [ 16 Am. St. Rep. 137 , 23 Pac. 28 ]: ‘A misrepresentation as the basis of rescission must be material; but it can be material only when it is of such character that if it had not been made the contract would not have been entered into. The misrepresentation, it is true, need not be the sole cause of the contract, but it must be of such nature, weight and force that the court can say “without it the contract would not have been made.” ’

“ . . . The rule is thus stated by Pomeroy in his work on Equity Jurisprudence (sec. 893): ‘If after a representa

tion of fact, however positive, the party to whom it was made institutes an inquiry for himself, has recourse to the proper means of obtaining information, and actually learns the real facts, he cannot claim to have relied upon the misrepresentation and to have been misled by it. Such claim would simply be untrue. The same result must plainly follow when, after the representation, the party receiving it has given to him a sufficient opportunity of examining into the real facts, when his attention is directed to the sources of information, and he commences, or purports or professes to commence, an investigation. The plainest motives of expediency and of justice require that he should be charged with all the -knowledge which he might have obtained had he pursued the inquiry to the end with diligence and completeness. He cannot claim that he did not learn the truth, and that he was misled. ’ And again the same author says (sec. 894): ‘If in a contract of sale or leasing, representations are made by the vendor concerning some incidents, qualities, or attributes of the subject-matter which are open and visible, so that the falsity of the statement is patent to an ordinary observer, and it is made to appear that the purchaser at, or shortly before, the concluding of the contract, had seen the thing itself which constitutes the subject-matter, then a knowledge of the facts is chargeable upon such party; he is assumed to have made the agreement knowingly, and cannot allege that he was misled by the false representations. ’ ”

In the case at bar said representations were material and respondent relied on them and delivered his check to appellant in payment for said property. Certainly such representations were false. Appellant knew them to be false, because he was informed by his attorney that the only interest he had in said property was the interest of the judgment debtors. Second, the record is silent as to any other or further knowledge of appellant concerning his ownership of said property. The record does not show any knowledge on the appellant’s part to justify his claim of ownership. Such information did not justify a representation of ownership of any title at all. (Civ. Code, sec. 1572; Blake v. Arp, supra.) Plaintiff told defendant that he knew of no claims against the property except city taxes, which would not be more than $50 in his opinion.

Further, taking the representation that there were no claims against the property excepting city taxes in a sum less than $50, in the opinion of the appellant, appellant joined the creditors’ committee, Spraul, Fairchild and Gale, as parties defendant with Bailey, White, etc., in the action out of which the judgment and execution sale and sheriff’s certificate arose and upon the creditors’ committee’s representation in open court of the contract between the creditors’ committee and Bailey and White et ah, appellant dismissed the cause of action as to the creditors’ committee and continued to prosecute said cause as to Bailey and White to judgment, caused execution to issue in said cause and upon the execution sale, before buying said property, was present when one of the creditors’ committee, Spraul, announced to all present that they claimed such property. Plaintiff does not remember the statement so made, or if one was made. However, his attorney heard such a statement. His attorney, a number of times, advised appellant that all he got by the said purchase was the interest of the judgment debtors and that was all he had a right to sell. Further, plaintiff must have known that the defendant was making these inquiries as to title and claim of others, to know what he was buying, and that he was relying upon him, appellant, for his

Pair dealing, common honesty and good conscience required the appellant to make a full disclosure as to the title and other claims known by him to be against the property, rather than to continue to lull this confiding defendant into a continuance of his belief in the representations of the plaintiff. Appellant having failed to do so, was guilty of fraud in procuring the $1,000, and the whole contract was void ab initio. There was therefore no consideration for the check for $1,000. Other objections urged are devoid of merit. The findings are abundantly supported by the evidence 'and the judgment is not against the law.

Judgment affirmed.

Marks, Acting P. J., and Barnard, J., concurred.