Sachs v. Blewett , 206 Ind. 151 ( 1933 )

The appellee brought this action against the appellants by a complaint in two paragraphs, alleging in substance: That in June, 1928, the appellee was the owner of certain real estate in the city of Indianapolis; that she advertised said property for sale at auction; that it was announced before the sale that the successful bidder would be required to immediately make a deposit of ten per cent of the purchase price of the property as good-faith money and part payment on the property; the balance of the purchase price to be paid upon delivery of the proper conveyance and abstract of title; that when the bidding began one John Hauk made a bona fide bid of $12,100.00; that thereupon the defendants (appellants) bid $12,150.00; that Hauk then made a bona fide bid of $12,200.00, and that thereafter the defendants bid $12,225.00; that no other bids were made and that the auctioneer declared the property sold to the defendants for $12,225.00, the highest bid received; that plaintiff then demanded of the defendants a ten per cent deposit, and that defendants represented that they did not have the money with them with which to make the deposit, and that they did not have money in bank so that a check could be given; that plaintiff then informed them that a $500.00 deposit would be acceptable in lieu of a ten per cent deposit; that the defendants represented that they would pay her the $500.00 deposit at their place of business in the afternoon; that plaintiff relied upon said representations and believed them and consented to wait for the deposit money; that she went to their place several times and each time they made some excuse for not paying; that defendants finally told her they did not believe the property was worth the amount of the bid; that they would only pay $10,750.00; that defendants had attended said auction sale for the fraudulent purpose of "blocking the sale of said property," and to make fraudulent bids therefor in order to prevent the sale to any honest bidder; that all of the bids made by the defendants were fraudulently made with the intention of cheating and defrauding the plaintiff and with no intention to comply therewith, and for the purpose of preventing the sale of the property; that the plaintiff and her agent, the auctioneer, were ignorant of the fact that the bids were false and fraudulent and believed them to be in good faith; that she was at all times ready to comply with the conditions of the sale as announced by the auctioneer; that John Hauk was a qualified bidder at said sale and was ready and willing to purchase the property at his bid of $12,200.00; that except for the fraudulent bid of the defendants he would have been declared the successful bidder and the property sold to him at that figure; that afterwards Hauk refused to purchase the property at the price offered, and that plaintiff made a diligent effort to sell the property for $12,200.00, and was finally forced to hold a second auction sale approximately three weeks after the first and that at said sale the property was sold for $10,350.00. By reason of said facts she claims damages for the difference between the amount of Hauk's bid at the first auction and the price at which the property sold and the expenses of the sale, interest, and attorney's fees. The second paragraph is practically identical with the first, except that it further alleges that the defendants conspired to cheat and defraud the appellee, believing that if they were able to prevent any honest bidder from purchasing the property and have themselves declared successful bidders, they would be able to obtain the property for a sum much less than their bid because of the fact that it was necessary for the appellee to sell immediately in order to prevent foreclosure.

There was a demurrer to the complaint as a whole for want of facts, challenging its sufficiency upon the ground that "the complaint, stripped of its conclusions, does not state any facts at all. The alleged fraud and fraudulent intent is not set out. It is not shown that an agreement in writing, signed by the defendants, was entered into for the purchase of the said real estate. It is not shown that the defendants agreed, in writing, signed by them, to the terms of the said sale. It is not shown that any agreement or memorandum for the sale and purchase of the said real estate was ever signed by the defendants." The overruling of this demurrer is assigned as error.

Stripped of its conclusions and descriptive adjectives, the complaint alleges that the appellants orally agreed to purchase the real estate, and that they intended to repudiate the agreement with the object of procuring the real estate at a lower price. The promises and representations were only false in the sense that the appellants intended to and did refuse to comply with them and pay for the property as agreed.

It is provided by statute that no action shall be brought upon any contract for the sale of lands unless the contract or some memorandum or note thereof shall be in writing, signed by the party to be charged. Section 8045, Burns 1926, § 8363, Baldwin's 1934.

It is obvious that no action would be brought upon oral promises and agreements to purchase real estate that were complied with. The statute denying an action upon such 1. contracts refers to oral contracts and agreements for the sale of land which are not carried out.

Modern authorities universally agree that sales by auction are within the statute of frauds unless expressly exempted by 2. the statute. 2 R.C.L. 1135.

It is not alleged that any of the appellants' promises or agreements were in writing, and in the absence of such an allegation in the pleading it must be presumed that they 3. were oral. Horner v. McConnell (1901), 158 Ind. 280, 63 N.E. 472.

It is conceded that there is no liability under the contract because of the statute of frauds. The action is in tort and is based upon the alleged fraudulent misrepresentation of 4. appellants' intention with respect to carrying out the contract at the time it was made. In determining whether the action will lie, it is not material that the contract which the appellants intended not to comply with was unenforcible, since if the action can be maintained at all there would be liability in tort even though the contract to purchase the property were in writing and enforcible. The only difference is that in the latter event the appellee would also have an action for damages for breach of the contract.

It is not alleged that there was any relationship of trust or confidence between the parties, nor are any circumstances shown which would entitle the appellee to place more than ordinary reliance in the promises of the appellants; nor is it alleged that the appellants violated any duty that they owed the appellee except such as was predicated upon their unenforcible oral contract.

If the complaint can be upheld, it must be upon the theory that where a contract is entered into with the intention of not carrying it out, an action will lie in tort for fraud because of the intention not to carry out the contract, independent of and in addition to any action that may lie upon the contract or for its breach.

The appellee asserts that a state of mind is a fact, and that a misrepresentation as to an intention to carry out a contract is a misrepresentation of a fact upon which an action for fraud may be predicated. There appears to be much conflict of authority upon the subject. 12 R.C.L. 261.

But there is no real conflict in the authorities in this state.

A fraudulent intent alone is no actionable. There must be some fraudulent, overt act, or failure to act when duty requires it, or a breach of trust or confidence, and such must be the 5. efficient or proximate cause of injury.

"Fraud cannot be predicated upon acts which the party charged has a right by law to do, nor upon the non-performance of acts which by law he is not bound to do, whatever may be his motive, design or purpose, either in doing or not doing the acts complained of." Franklin Insurance Co. v. Humphrey et al. (1879), 65 Ind. 549.

This court has repeatedly said that actionable fraud cannot be predicated upon a promise to do a thing in the future although there may be no intention of fulfilling the promise. 6. Hayes v. Burkham (1875), 51 Ind. 130; Burt et al. v. Bowles et al. (1879), 69 Ind. 1; Bethell v. Bethell (1883),92 Ind. 318; Balue v. Taylor et al. (1893), 136 Ind. 368, 36 N.E. 269; Robinson et al v. Reinhart et al. (1893), 137 Ind. 674, 36 N.E. 519.

Two Indiana cases are cited as in conflict with this view, but they are not. Both were actions in equity to set aside a conveyance.

In Basye v. Basye (1898), 152 Ind. 172, 52 N.E. 797, a husband, relying upon his wife's representations and manifestations of love and affection, caused his real estate to be conveyed to her. She immediately left him, and it was demonstrated that she had no love or affection for him in the first instance, and that her protestations and manifestations were falsely made for the purpose of inducing the conveyance of property. A wife's love or lack of love for her husband is a present fact, demonstrable by every-day conduct, and from present love and affection a continuance thereof may ordinarily be anticipated. A husband and wife occupy a relationship necessarily involving trust and confidence. Where there is a violation of the trust and confidence, and where it is demonstrated that the fact of apparent love and affection has been misrepresented to the other trusting party to his injury, a court of equity will intervene to repair the damage.

In the case of Webster et al. v. Adams (1922),79 Ind. App. 261, 137 N.E. 883, the appellee, old, enfeebled, distressed in mind, incompetent to transact business, and relying upon relatives, who professed interest in and good will toward him, deeded them his property upon their agreement to furnish him a home and care for him during the remainder of his life. They failed in their promises and he was granted relief. There was a relationship of trust and confidence between the parties. He was old and infirm and was over-reached. Equity requires that those who deal with the helpless shall not take advantage of their greater abilities or impose upon confidence reposed, and if there is the slightest proof of fraud will intervene.

In both of these cases it is said that an averment of an intention not to fulfill a contract at the time it is made, is an averment of a present fact, but in neither case is the fact of an intention not to perform the basis of recovery. In both the injured party rightfully reposed trust and confidence in the other, and in both cases the confidence was imposed upon. In both cases the court acted specifically to restore property parted with under an executed contract. Both were of the type in which equity hastens to remedy an injustice.

This is not an action in equity to set aside a contract or to recover property fraudulently procured. It is an action at law to recover damages, and we find no authority in this state that will sustain the appellee's theory.

It was the failure of the appellants to carry out their contract to purchase the real estate which caused the damage. The damage would have resulted whether the appellants' failure 7. was due to an honest inability to comply or a mischievous preconceived design not to do so. But the law did not require the appellants to carry out their agreement, and fraud cannot be predicated upon a failure to do that which there is no legal obligation to do.

An intention not to do that which the law does not require to be done, is not illegal, and such a negative intention cannot be the basis of an action for fraud unless there is also involved the breach of some other duty. It is not alleged that the appellants owed any duty to the appellee except such as was predicated upon their unenforcible oral contract.

A person is presumed to intend what is ordinarily and reasonably implied by his agreement. If the appellants' contract to buy had been in writing, they would be responsible in 8. damages for its breach, regardless of their good or bad intention at the time it was made. But the action would arise out of the contract and not in tort. Since the contract was not in writing, the breach of it cannot be made the basis of an action, and the fact that at the time it was made they did not intend to carry it out, makes their liability for the breach no greater than if they had intended to comply with it.

Upon the appellants' bid being declared the highest, they immediately declared that they would not comply with the terms of the sale by making a deposit, and, notwithstanding this notice that they did not intend to comply with her terms, the appellee elected to negotiate concerning a sale upon other and different terms, to be complied with at a later date, rather than accept a bona fide bid for a negligibly less amount. The promises and representations made to her thereafter were merely oral agreements for the purchase of real estate, and the failure to perform merely breached a contract which was unenforcible and for the breach of which there is no liability.

Whatever the appellants' intentions might have been, it is not alleged that they did anything which tended to deceive, coerce, or persuade the appellee to reject the Hauk bid, except that they promised to put up earnest money and to buy the property at a later date. But by the statute of frauds the appellee was warned that she must not rely upon this promise; that she would do so at her peril; and that if the promise were broken no action would lie. She alleges no other promise or representation of any character.

To permit a jury to hold a contracting party liable for an imputed intention, contrary to that expressed in his contract and by which he is bound in law, and thus make him liable and accountable beyond the liability and accountability required of him by his contract, where there are no intervening duties or obligations, would so confuse the rights and liabilities of contracting parties that one could never be certain of his liability, but must anticipate the construction that a jury might put upon his conduct in determining whether his liability might be in tort as well as in contract. Such a course would obscure the elementary distinction between tortuous and contractual liability and tend to nullify the statute of frauds.

The judgment is reversed, with instructions to sustain the appellants' demurrer to the complaint.

Treanor, J., dissents.