Overby v. Beach , 220 La. 78 ( 1951 )

HAMITER, Justice.

Mrs. Eunice Overby Beary, wife of Allan R. Beary, Jr., and a resident of Orleans Parish, instituted this rescission action to obtain the annulment of several instruments by and through which she acquired by purchase certain real property in the City of New Orleans bearing Municipal Nos. 4810-12-14-16 Pitt Street and consisting of five separate apartments under the same roof.

To plaintiff’s petition the defendants, Mr. and Mrs. Albert J. Babin and the French Market Homestead Association, tendered exceptions of no right and no cause of action. The district court sustained the exceptions and dismissed the suit of plaintiff. She is appealing.

According to the allegations contained in the petition of plaintiff, on which the exceptions are determinable, she became interested in acquiring for investment purposes the above property which had been listed for sale with a certain New Orleans real estate agency by the owners, Mr. and Mrs. Babin. In the written contract of listing, dated July 7, 1948, the Babins had designated the legally collectible rental which they were receiving for each of the five apartments. While negotiating for the purchase of the property plaintiff required the Babins “to warrant to her in writing what the legally collectible rents for each of the said five apartments in the property on Pitt Street were”, and they gave to her the “written warranty”.

On August 3, 1948, plaintiff further alleges, she executed with the Babins a written agreement to purchase the property for the total price of $23,400 upon the following terms: Paying to the Babins $5400 in cash, and giving them a second mortgage note of $6000; and delivering to the French Market Homestead Association a vendor’s lien and first mortgage note of $12,000, it having agreed to lend that sum for payment to the Babins.

On September 8, 1948, in consummating the purchase agreement, authentic acts were passed before the same notary whereby the Babins conveyed to the Homestead Association, it reconveyed to plaintiff (retaining the vendor’s lien and special mortgage), and the latter granted to the Babins the second mortgage.

On January 31, 1949, plaintiff was informed that the rental charged for one of the apartments was in excess of the maximum permitted by the Office of Price Administration. Thereupon she consulted the New Orleans branch of that Federal agency and “discovered that the registered O. P. A. ceiling rentals for each and every one of the five apartments contained within the property at issue in .these proceedings were at variance with thé sums which had been represented to the petitioner by the defendants in these proceedings as being legally collectible under their warranty in writing.” The variance as to all of the five apartments totaled $98 per month, $277 being the O. P. A. ceiling and $375 being the “warranted legally collectible” rental.

Other pertinent allegations contained in plaintiff’s petition are the following:

“Petitioner alleges that the principal cause of her entering into the agreement to purchase the property and later actually purchase the said property, and the principal motive which she had in making the investment was the result of the warranty in writing by the defendants in these proceedings, the Babins, that the rents shown in said warranty and shown in the listing agreement heretofore described and referred to were legally collectible and would remain legally collectible by the purchaser, the plaintiff in these proceedings, from and after the act of sale by the parties, plaintiff and defendants, was passed.

* ■ * * * * *

“ * * * Petitioner alleges that had she had the least cause to believe or know that the rentals represented to her as being collectible were not legally collectible, she would never have entered into the contract of purchase or effectuated the same.

“Petitioner now alleges in the alternative that there occurred either error of fact as a result of the said written warranty of the defendants by which there was no meeting of the minds and no consent between the parties, the seller and purchaser, to-wit: your petitioner and the Babins, or that the Babins deliberately misrepresented the legally collectible rentals to the petitioner with the intent and purpose to defraud the petitioner by obtaining her consent to pay the asked purchase price, and that they deliberately misrepresented the legally collectible rents for that reason and for that purpose.

“Petitioner alleges that, under the circumstances, she is entitled to a rescission of the whole agreement as having been induced by either error of fact, or in the alternative, by fraud practiced upon the petitioner by the defendants, and that there was no meeting of the minds and no contract between the parties. Petitioner alleges that she is entitled to have this Honorable 'Court rescind the agreement to purchase and the agreement of sale, and that she is entitled to be restored to the position she occupied prior to her signature of the agreement to purchase and her signature to the act of sale and various acts of mortgages.”

Annexed to and made a part of plaintiff’s petition are certified copies of the several documents alleged on and mentioned above.

At the outset, in considering defendants’ exceptions of no cause of action directed to the petition, and which were sustained by the district court, it is to be noted that plaintiff’s demand is predicated entirely on alleged misrepresentations of the Babins, as to legally collectible rentals, contained in the written real estate listing and also in the document termed by plaintiff “the warranty in writing.” The Homestead Association is not charged at all with misrepresenting the revenue; nor is there any provision respecting such rentals in the executed contract to purchase or in the notarial acts of conveyance, reconveyance and mortgage. It becomes necessary, therefore, to examine the two documents relied on by plaintiff for the success of her action, certified copies of which are annexed to the petition and control the allegations thereof.

The written real estate listing consists of a small card, on one side of which, above the signature of the' Babins, are stipulations (both printed and typewritten) with reference to the employment of the realtor, for a period of three months, to sell the property at a specified price. The reverse side of the card originally blank, contains typewritten information concerning the five apartments, including the monthly revenue produced- by each. This information was evidently typed thereon by the realtor after obtaining it from the Babins; however, the signatures of the latter do not appear along with it.

The other document, or the alleged “warranty in writing,” is typewritten (with a few interlined corrections made with peri and ink) on two pages, one of which bears the signatures of the Babins and plaintiff’s husband. It is titled “Furniture inventory of- 4810-12-14 — 16 Pitt Street.” Then follows a listing of each apartment by its address, along with a monthly monetary figure set opposite, such as: “4810 Lower Front Apt. $100. mo.”; and under the listings are detailed descriptions of the furniture contained in the respective apartments. The document contains no other information or language. It does not recite, and certainly it is not as plaintiff alleges, a warranty of legally collectible rentals. In fact, there is nothing to indicate exactly what was intended by the stipulated monthly amount set opposite each listed apartment. It might well have meant the monthly revenue then being received by the Babins without regard to whether'it was legally permissible or not.

Viewed in a light most favorable to plaintiff, the two documents, with respect to rentals, constitute only false assertions by the Babins relative to an element of the value of that whjfh was the object of the purchase and sale transaction. The property, consisting exclusively of apartments, is and has been maintained for purposes of investment; and its value is determined largely by the rentals or revenues that it produces. The question then is: Do these false assertions amount in law to such fraud as will form the basis of an action of rescission? Under .the facts and circumstances of this case we think not.

Found in Article 1847 of the Revised .Civil Code, under that section treating of the nullity resulting from fraud of conventional obligations, are certain rules relative to fraud as applied to contracts. Included in the article are the following provisions:

“Fraud, as applied to contracts, is the cause of an error bearing on a material part of the contract, created or continued by artifice, with design to obtain some unjust advantages to the one party, or to cause an inconvenience or loss to the other. From which definition are drawn the following rules:

“1. Error is an .essential part of the definition; an article [artifice] that can not deceive can have no effect in influencing the consent, and can not injure the validity of the contract..

“2. The error must be on a material part of the contract, that is to say, such part as may reasonably be presumed to have influenced the party in making it; but it needs not be the principal cause of the contract, as it must be in the case of simple error without artifice.

“3. A false assertion as to the value of that which is the object of the contract, is not such an artifice as will invalidate the agreement, provided the object is of such a nature and is in such a situation that he, who is induced to contract by means of the assertion, might with ordinary attention have detected the falsehood; 'he shall then be supposed to have been influenced more by his own judgment than the assertion of the other.

“4. But a false assertion of the value or cost, or quality of the object, will constitute such artifice, if the object be one that requires particular skill or habit, or any difficult or inconvenient operation to discover the truth or falsity of the assertion. * * *»

No difficult or inconvenient operation was required of this plaintiff to discover the truth or falsity of the assertions charged to the Babins respecting the revenue production of. the apartments. Rentals of residential property today are matters of Federal regulation and control, and those permitted to he collected can easily be determined by any interested person through a request to the proper authority. In the City of New Orleans, where the apartments are located and where plaintiff resides, is and has been for years a branch of the Office of Price Administration from which plaintiff could have obtained on mere inquiry official information as to the legally permissible rentals. She, in other words, might with ordinary attention have detected the falsehood. Not having sought the official information she is supposed to have been influenced more by her own judgment than by the assertions of the Babins.

Regarding the failure of plaintiff to make the mentioned inquiry, her counsel, in his brief, states: “ * * * There was the possibility that had Mrs. Beary so applied to the O. P. A. she would have been given erroneous information. If she had depended entirely upon O. P. A. information sought for by her and given to her by it, and had not been given the plain and specific representation and warranty of the collectible rents by her vendors, she could not then have filed this suit and asked for a rescission of this sale because it would have 'been stated, then, by the Babins, that Mrs. Beary had not asked them to represent or warrant what the collectible rents were. Mrs. Beary, under the circumstances, would have probably been without a cause of action.”

It cannot be assumed that the Federal authority would have given' plaintiff erroneous information; rather the contrary would seem likely. But had she inquired and had been misinformed, it could then be said that she proceeded with ordinary attention and took all possible precautions; and a proposition of law different from the one now under consideration would be presented.

There are numerous decisions supporting the above expressed view that the false assertions of the Babins, under the circumstances of this case, did not constitute such fraud as will justify a rescission of the sale.

In Rocchi v. Schwabacher & Hirsch, 33 La.Ann. 1364, the court quoted with approval language of the United States Supreme Court found in Slaughter’s Administrator v. Gerson, 13 Wall. 379, 20 L.Ed. 627, as follows: “The misrepresentation which will vitiate a contract of sale, and prevent a court of .equity from aiding its enforcement, must not only relate to a material matter constituting an inducement to the contract, but it must relate to' a matter respecting which the complaining party did not possess at hand the means of knowledge; and it must be a misrepresentation upon which he relied, and by which he was actually misled to his injury. * * Where the means of knowledge are at hand and equally available to both parties, and the subject of purchase is alike open to their inspection, if the purchaser does not avail himself of these means and opportunities, he will not be heard to say that he has been deceived by the vendor’s misrepresentations. * * * ”

In Forsman et al. v. Mace et al., 111 La. 28, 35 So. 372, 373, the plaintiffs sought to have set aside their purchase of a logging contract and of a logging outfit, they alleging (among other things) that their consent “to the contract was induced.by the fraud of the defendants, who grossly exaggerated the quantity of the timber to be hauled, and represented the haul to be much shorter and the outfit to be in much better condition than was true”. As to these charges the court observed and held:

“After reading and carefully weighing the evidence pro’ and con the other grounds of nullity, we are not satisfied that the fraud complained of has been made out. Two of the plaintiffs were experienced timbermen. They were taken to the logging camp, and afforded the fullest kind of opportunity to examine and be informed as to the condition of the oxen, and as to the location and quantity of the timber. By so simple a thing as looking at the map of the parish they could have known of the distance. They went over the land to look at the timber, and if they did not go over all of it they have but themselves to blame. We think the case is fully covered by paragraph 3 of article 1847, Civ.Code, reading as follows: * * *

“It may be that defendants did not, though they say they did, inform plaintiffs that the timber had been estimated by an expert, and the quantity fixed at 6,000,000 feet; and it may be they did, though they say they did not, tell plaintiffs that in their opinion the timber would cut 18,000,000 feet; but the field was as wide open to plaintiffs as to defendants to make estimates on the timber. It is not pretended that this estimate of 18,000,000 feet was given as the result of an examination made by experts.

“If the oxen are as bad off as plaintiffs and some of their witnesses depict them, plaintiffs have but themselves to blame for buying them. They were given a full opportunity to inspect them.

“The preponderance of the evidence is that in speaking of the haul the defendants had reference to the average haul, not to the furthest haul. A glance at the map (and plaintiffs do not deny that they were advised by the defendants to get one, and they had ten days in which to do so) would have shown at once what the furthest haul was.

“That the plaintiffs made a most disadvantageous contract there can be no doubt. But they appeal in vain to the courts. The courts can only enforce the contract as made. The contract is the law of the case, and, though it happens to be a hard law, it must be enforced nevertheless.”

Misrepresentations as to the nature, location and value of land were made the basis of an action for rescission of the sale in Pike v. Kentwood Bank, 146 La. 704, 83 So. 904, 905. Therein the court held: “As to the alleged fraud on the part of the bank and its agents in reference to the value and worth of the land, and the uses to which it had been and might be put, these are not such misrepresentations as to cause the contract of sale to be set aside. All of these matters could have been verified by an inspection of the land, which was accessible to the plaintiff at all times.”

Citing with approval the Pike and Forsman cases, supra, the court made substantially the same observation in Davitt v. Long-Bell Farm Land Corporation et al., 162 La. 59, 110 So. 88.

And to a similar effect is the holding in Davis v. Lacaze, 181 La. 75, 158 So. 626.

In a supplemental brief, filed after this opinion was prepared, plaintiff’s counsel relies on and discusses American Guaranty Company v. Sunset Realty & Planting Company, Inc., et al., 208 La. 772, 23 So.2d 409, in which the two quitclaim deeds were set aside on the ground of concealment of material facts regarding the value of the land involved. The decision is clearly inapplicable for the reason that it was found there (quite unlike the situation here) that the plaintiff could not, without great difficulty and expense, make an investigation to determine the value of the land which was located some two thousand miles from plaintiff’s domicile.

Since the plaintiff herein failed to obtain the readily available official information regarding the apartments’ legally permissible rentals, she cannot now be relieved of the consequences of that inattenion. And it follows that defendants’ .exceptions of no cause of action were correctly sustained.

Other contentions were made by defendants under those exceptions and also under the exceptions of no right of action. But it is unnecessary to consider them in view of our above announced conclusion.

For the reasons assigned the judgment appealed from is affirmed.

FOURNET, C. J., dissents and assigns written reasons. PONDER, J., dissents. HAWTHORNE, J., concurs in the decree. McCALEB, J., dissents with written reasons.