Graham v. Ellmore

This is an action for damages for fraud in a real estate transaction wherein the plaintiffs exchanged certain land in Oregon for an interest in certain land in Orange County owned by the defendant Ellmore. The defendant August Mennes was a real estate salesman in the employ of the defendant L. L. Mennes, who was a real estate broker. The defendant Indemnity Company had furnished a bond for the broker and salesman, under the provisions of the California Real Estate Act. The two last-named defendants had no connection with the matter out of which this case arose, other than this relationship to the salesman. It is alleged in the complaint that both the defendant Ellmore and the defendant August Mennes represented to the plaintiffs that the Orange County land was encumbered only by a deed of trust for $2,500 when in fact it was covered also by another deed of trust for about $6,000, and that this representation was then known by each of said defendants to be false, fraudulent and untrue. The plaintiffs, having recovered judgment against the defendant Ell-more only, have appealed, on the judgment-roll alone, from that portion of the judgment which was in favor of the other defendants.

It is appellants’ contention that in view of the findings made judgment must be entered against all of the defendants. The court found that Ellmore and August Mennes each represented that the property was subject only to a deed of trust for $2,500 when in fact it was subject also to another for $6,000; that Ellmore knew at the time that the property was subject to the additional encumbrance; that August Mennes did not know this fact; that when he made the representation August Mennes believed it to be true; and: that the representation made by August Mennes was the same representation which had been made to him by Ell-more. The court further found that L. L. Mennes had

Incidentally, the appellants argue that they are entitled to judgment against the real estate agents in the sum of $4,000, being the amount of the judgment entered against the owner. While this matter is not important here, under the view we take of the ease, it may be observed in passing that such an amount would give the appellants more than twice what they would have received had the representations made been true and, in so far as these respondents are concerned at least, we see no reason why the judgment, if entered against them at all, should not be based upon the usual and established measure of damages (Hines v. Brode, 168 Cal. 507 [ 143 Pac. 729 ]).

The main point urged is that judgment must be entered also against a real estate salesman when both he and the owner have made a false representation, even though the salesman believed the statement made to have been true and even though the same representation had been made to him by the owner. The appellants rely upon Stirnus v. Adams, 50 Cal. App. 730 [ 195 Pac. 955 ], Spaulding v. O’Connor, 87 Cal. App. 82 [ 261 Pac. 766 ], and Muller v. Palmer, 144 Cal. 305 [ 77 Pac. 954 , 957], These cases are not decisive of the question before us. In Stirnus v. Adams, supra, an action for money had and received, it would seem that the agent alone made the misrepresentations and that each of the defendants had received part of the money paid. In any event the agent knowingly participated in the fraud. In Spaulding v. O’Connor, supra, the agents were acting for an undisclosed principal. In Muller v. Palmer, supra, the defendants misrepresented their own title, it being held that such a matter was one within their own knowledge. The appellants particularly rely upon certain language quoted in the last-named case to the effect that it is a false representation if a party asserts that as true which he does

“Actual fraud is committed where one, with intent to induce another to enter into a contract, makes a positive assertion in a manner not warranted by the information of such person of that which is not true even though he believes it to be true.”

This statement is based upon sections 1709 and 1710 of the Civil Code, which sections, in so far as they apply here, impose a liability for “the assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true”. In Andrew v. Bankers & Shippers Co., 101 Cal. App. 566 [ 281 Pac. 1091 , 1095], the court said: “When a cause arises out, of an alleged false representation, the plaintiff, in order to prevail, must ordinarily show that the representation was as to a material fact, that such fact was false and known to be false by the party making it, or else recklessly made, or without reasonable grounds for believing its truth; ...”

In Maxson v. Llewelyn, 122 Cal. 195 [ 54 Pac. 732 ], it is said: “Where a man makes a representation in the reasonable belief that it is true, fraud will not be imputed to him if it afterward be shown to be untrue, but there must be reasonable grounds for his belief. (2 Pomeroy’s Equity Jurisprudence, sec. 880; Kerr on Frauds, 57.)”

While in the instant case the court found that the statement made by the salesman was untrue, it was also found that he believed it to be true, that he did not know of the existence of the other encumbrance and that he had been told by the owner that only one encumbrance existed. From all its findings the court drew the conclusion that the respondents were not liable. There is an implied finding that the salesman had reasonable grounds for believing the statement made to be true. Whether such statement was warranted by his information and whether he had reason

The judgment is affirmed.

Marks, J., and Jennings, J., concurred.