Reynolds v. Davis , 303 Mo. 418 ( 1924 )

Action for damages for fraud and deceit in the sale to plaintiffs of an undivided two-thirds interest in certain land and a mining lease in Newton County, Missouri. From a judgment for plaintiffs in the sum of $16,000 the defendant has appealed.

The suit was instituted in Newton County, and was tried in Dade County upon a change of venue. The land involved comprised 160 acres. It is referred to as the Bert (Burt) West farm. The amended petition, upon which the case was tried, contained numerous charges of fraudulent representations.

Appellant makes no contention that the petition did not state a cause of action, or that plaintiffs failed to make a case for the jury, and we will not set out such petition or undertake to recite in detail the facts which the evidence of the plaintiffs and defendant tended to establish, except as such facts may be further developed in disposing of the numerous assignments of error. Such assignments are that the trial court erred in refusing to strike out certain parts of the petition, in admitting improper evidence offered by plaintiffs and refusing to strike out improper testimony upon motion of defendant, in excluding proper evidence offered by defendant, in giving improper instructions at plaintiffs' request and in refusing proper instructions requested by defendant.

I. Defendant filed eight separate motions to strike out portions of the amended petition, each beingMotion to directed to certain designated allegations in theStrike Out. petition. The trial court sustained motions four, six and seven, and overruled the remainder. Having saved his exceptions, defendant complains of this action.

After the court overruled motions one, two, three, five and eight, defendant answered, admitting the sale of the land and the execution and delivery of the mining lease, as charged in the petition, and denied generally all the other allegations of the petition. Such action precludes us from considering whether the court erred in failing to strike out such portions of the petition. Even if such allegations should have been stricken out, sufficient allegations of fraudulent representations remained in said petition to constitute a good cause of action. In such case the rule is that the error in overruling the motion to strike out is waived by answering over. [Fuggle v. Hobbs, 42 Mo. 537; Walser v. Wear, 141 Mo. 443; Dakan v. Mercantile Co., 197 Mo. 238; Lewis v. Barnes, 220 S.W. (Mo.) 487; Sittig v. Kersting, 284 Mo. 143.]

Appellant seeks to avoid the force of this rule because, as he contends, the matters sought to be stricken out stated no cause of action and a general demurrer would lie, and cites cases which hold that, where the petition fails to state a cause of action, such petition may be attacked for the first time after verdict or even upon appeal. Such cases have no application where the petition states a good cause of action without the averments sought to be stricken out. The assignments of error in the court's rulings on motions to strike out are therefore overruled.

II. Appellant complains of the action of the trial court in permitting plaintiffs to offer evidence tending to prove allegations in the petition whichPuffing defendant sought unsuccessfully to haveRepresentations. stricken out by the motion above referred to. This because such allegations were of representations which were mere matters of opinion, or mere boosting or puffing, and not such false representations as would support an action for fraud and deceit. Assuming, without so deciding, that defendant is correct in his characterization of such alleged false representations as not being actionable, yet such statements and representations were part of the conversations leading up to the closing of the transaction in issue and the plaintiffs were entitled to show such statements of defendant and of his agent Bower, in connection with other representations which in themselves did constitute actionable false representations.

The general rule is laid down in 27 Corpus Juris, page 50, as follows:

"Where a question of fraud is involved, great latitude is ordinarily permitted in the introduction of evidence, although such latitude does not extend to the permission of the introduction of evidence wholly foreign to the issues or irrelevant to the transaction involved. Subject to this qualification it is proper to admit any evidence which is competent by other rules of law, either direct or circumstantial, which in the opinion of the court has a legitimate tendency to prove or disprove the allegations in issue, the matter resting largely in the discretion of the trial court. The whole transaction involving the alleged fraud may be given in evidence. Every relevant circumstance in the condition and relation of the parties, and subject-matter, and every act and declaration of the party charged with fraud, is competent evidence, if in the opinion of the court it bears such a relation to the transaction under investigation as to persuade the jury that the allegation of fraud is or is not well founded."

It is said in the same excellent work (27 C.J. pp. 39, 40) that: "While evidence of other false statements than those charged in the declaration is not of course admissible if such other representations are relied upon as a part of the cause of action, it may frequently be admissible because relevant to the issue of fraud. Representations differing from but tending to prove the representations set out, or to show that the representations set out may have influenced plaintiff, are admissible. Evidence of other representations contemporaneous with those set out in the declaration may be admissible to show the meaning, or the falsity, of those alleged, or to showscienter; or they may be admissible as evidentiary details of the main misrepresentation charged."

The general rule as above announced has been recognized in adjudicated cases in Missouri. [Smalley v. Hale, 37 Mo. 102; Wagner v. Bender, 187 S.W. 1128, and cases cited therein.]

When the trial judge came to instruct the jury he was careful to submit the case to them only on the issue of the falsity of representations that the land had produced sixty dollars' worth of wheat per acre in 1917, and that a face of lead and zinc ore twenty or thirty feet high had been opened up in a shaft on said land, and that eight or ten feet of such ore was almost solid ore, which would run thirty per cent ore, and that drill holes had been sunk adjacent to such shaft which showed rich bodies of ore. At the request of defendant the trial court also instructed the jury that these were the allegations of fraud upon which plaintiffs sought to recover and that, unless they found and believed "from the greater weight and credibility of the evidence that defendant made one or both of said statements," they should find for defendant. These two instructions were tantamount to withdrawing from the consideration of the jury, as actionable fraudulent representations, all other statements and representations of defendant which were mere matters of opinion or predictions or puffing. If the defendant desired more specific instructions withdrawing from the consideration of the jury any particular statement or statements, he should have requested such instructions.

III. It is next contended that the trial court erred in permitting plaintiffs to introduce testimony showing what the value of the said farm would have been, if it had beenDamages. as represented, because, as it is said, the petition does not state any facts authorizing the introduction of such testimony. For the same reason, similar complaint is made of Instruction Two.

In a case of this sort and under proper pleading, a defrauded plaintiff may be awarded such damages as will enable him to receive not only the difference between the actual market value of the property and the price which he paid therefor, but something over and above such damages, if any, represented by the difference between the price actually paid by him for such property and what its value would have been if it had been as represented. Such damages enable a defrauded party to obtain "the benefit of his bargain." Recovery of such damages is authorized in Missouri, as is clearly shown by the following cases, which we find in respondent's brief: Kendrick v. Ryus, 225 Mo. l.c. 165; Morrow v. Franklin, 233 S.W. l.c. 232; Ryan v. Miller, 236 Mo. l.c. 508; Addis v. Swofford, 180 S.W. l.c. 555; Bank v. Byers,139 Mo. 627; Boyce v. Gingrich, 154 Mo. App. l.c. 204; Boyd v. Wahl, 175 Mo. App. 181.

Appellant does not contend that damages, as for the benefit of the bargain made, cannot be recovered, but insists that such damages are special and must be pleaded to authorizePleading a recovery thereof, and further contends thatand Proof. respondent was not entitled to recover such special damages in this case because they were not pleaded.

The sufficiency of the petition to support such recovery is therefore the real question to be considered under this assignment. If it is sufficient, both proof and instructions touching damages covering the benefit of the bargain were proper. If such petition is not sufficient to support such recovery, both the admission of such testimony and the giving of Instruction Two were error. Instruction two is as follows:

"If the jury find the issues for the plaintiffs, they will assess their damages at such sum, if any, as represents the difference between the actual value of the interest in the Bert West farm, purchased by plaintiffs, and what such interest would have been worth if it had been as represented by defendant (if you find it was represented by him) not to exceed the sum of twenty-five thousand dollars."

Respondents insist that their petition is sufficient to indicate that they sought to recover as damages the difference between the real and the represented value of the land. It may be they are correct in this. We will not consider it from that angle, as we prefer to dispose of the assignment upon broader grounds.

In none of the Missouri fraud cases cited in the briefs does there appear to have been any discussion of the question of pleading with reference to the recovery of damages for the benefit of the bargain. It is the general rule that such damages may be recovered. In 27 Corpus Juris, at page 92, it is said:

"The measure of the damages sustained by the purchaser where a purchase has been induced by fraud, is, according to the weight of authority, the difference between the real value of the property purchased and the value which it would have had had the representations been true."

As appears from the cases previously cited, the Missouri rule is in line with the weight of authority. It needs no citation of authorities to demonstrate that, if the measure of damages is the difference between the real and the represented value, the difference between the price paid and the value as represented constitutes merely a part of the usual and ordinary damages and does not constitute special or unusual damages and is recoverable as general damages, within the limit of damages claimed in the petition, without being specially pleaded, just as the difference between the real value of the property purchased and the price paid therefor is included in such general damages. Expressed differently, the measure of damages, where property has been purchased under actionable fraudulent representations, is the difference between the real value and the value as represented, and this is made up of two elements, the difference between the real value and the price paid, plus the difference, if any, between the price paid and the value as represented. The two parts constitute the whole and conversely the whole is greater than and necessarily includes its parts.

Broadly sketched, the petition charged the making by defendant and his agent Bower of certain representations for the purpose of inducing plaintiffs to purchase the land in question and that plaintiffs relied thereon and, by reason of said representations, they paid two-thirds of the purchase price of $41,000 therefor; that said representations were false, etc., and prayed for damages in the sum of $25,000. Proof of what the value of said land would have been, if it had been as represented, was offered by plaintiffs and admitted by the trial court. We think the pleading and proof were sufficient to authorize the giving of Instruction Two and the recovery as damages of the difference between the real and the represented value of the land.

IV. Further complaint is made of Instruction Two, above set out, on the ground that it authorized the jury, in determining what the value of the land would have been if it had been as represented, to take into consideration "allRepresentations of the statements and representations claimedto be Considered. to have been made by Davis and did not confine the jury to the statements and representations claimed to have been made by defendant as to the value of wheat produced during the year 1917 and as to the ore body through which the shaft passed and the per cent of recovery thereof, and the showing of the drill holes near the shaft."

The trial court submitted the case only on the representations mentioned, and, at the request of defendant, gave an instruction telling the jury upon what representations the case was submitted. Defendant asked no instruction withdrawing other statements and representations from the consideration of the jury. This attack upon Instruction Two in this court is without merit.

Instruction two is further criticized because it did not limit the jury to any particular time in fixing the value to be placed upon said land. The testimony as to such value was all directed to the time the land was purchased and we do notValue at think the jury could have been misled by theParticular instruction. Defendant asked no instruction on theTime. point, except as the time was fixed in defendant's refused Instruction A, which is discussed hereafter. While it is undoubtedly true that the value must be that of the sale date, we do not think this omission, on the record before us, constitutes reversible error.

V. Error is assigned to the giving of Instruction Three. It reads as follows:

"The court instructs the jury that if you find and believe from the evidence that prior to the time of the sale from defendant to plaintiffs the plaintiffs had been interested and associated with the said C.M. Bower in business transactions, and that they reposed trust and confidence in him, and if youPersonal further find that the defendant, knowing this,Investigation: employed the said C.M. Bower to assist him inConcealment. making the said sale, and that the defendant and the said Bower in furtherance of said attempt concealed from the plaintiffs the fact that the said Bower was being paid a commission for making said deal, and falsely represented to the plaintiffs and led them to believe that the said C.M. Bower was purchasing an undivided one-third interest in said real estate, covered in said purchase; and if you further find that by reason of said deception practiced by the defendant and the said Bower, they were led to believe and did believe that the said Bower was purchasing an interest in said real estate on equal terms with them; and if you further find that the plaintiffs were, by reason of said deception and fraud, induced to enter into the contract and purchase said real estate, then the court instructs you that defendant cannot rely upon the fact that plaintiffs did not make further investigation as to the truthfulness of the representations made to them, if any, by the said C.M. Bower and by the defendant."

The first point made against the instruction is that "it does not require the jury to find from the evidence that plaintiffs, by reason of the fact that they and Bower had been associated in business transactions and that they reposed trust and confidence in Bower by reason thereof, believed and relied upon the fact that Bower was purchasing an interest in said real estate on equal terms with them. If the business transactions theretofore had between plaintiffs and Bower did not cause them to rely upon the truth of the statements made by Bower, then the rule ofcaveat emptor applies."

The evidence shows that Bower and respondent Lusk had previously been associated together in a common enterprise, of which Bower was at that time the manager. The criticism of the instruction that it failed to require the jury to find that plaintiffs reposed confidence in Bower because of such previous business relations is purely technical and without substance. The natural inference from a finding that such previous business relations existed and that plaintiffs reposed confidence in Bower is that such confidence grew out of such previous business relations.

Again, appellant contends there is no evidence of such business relations between Bower and either Lusk or Reynolds as would authorize them to rely upon his statements. We think there is substantial evidence of business relations between Bower and Lusk of a confidential nature, because Bower was shown to have been managing some common enterprise. We do not understand appellant to contend that such business relations must have existed between Bower and all the purchasers.

The instruction is further criticized on the ground that it assumes defendant knew Bower and the plaintiffs had previously been associated in business. We do not think the instruction is justly subject to such criticism. It required a finding of previous business relations and then proceeded "and if you further find that the defendant, knowing this, employed the said C.M. Bower," etc. It required not only a finding of the employment, but also knowledge of such prior business relationship.

The evidence shows that Bower told defendant he had some "friends" he thought he could interest in the purchase of the land. Defendant admitted that he secretly gave Bower a rebate or commission of about $3000, which was not given to the plaintiffs. There is also evidence tending to show that the checks given by Bower for his one-third interest were not cashed by the appellant. We think there is substantial evidence in the record tending to prove that defendant knew plaintiffs relied upon Bower because of prior business relations and that defendant took full advantage of plaintiffs' confidence in Bower. There is evidence of statements made by Bower regarding the land which had a tendency to lessen their vigilance in dealing with defendant. The assignment of error in respect to the giving of Instruction Three is overruled.

VI. Defendant complains of the refusal of his requested Instruction A, which was as follows:

"The court instructs the jury that if you find for the plaintiffs under the instructions given in this case, then you will assess their damages at the difference between what plaintiffs paid defendant Davis for the landsMeasure of purchased by them from him and the reasonable, fairDamages. market value of said lands at the time of the purchase thereof by plaintiffs from defendant Davis."

What we have above said concerning the sufficiency of the petition to authorize a recovery represented by the difference between the real value of the land and its value if it had been as represented shows that this instruction improperly limited plaintiffs' recovery and that its refusal was proper.

VII. Defendant complains of the refusal of Instruction C, which was as follows: "The court instructs the jury that the plaintiff cannot recover upon the ground that C.M. Bower wasCommission. paid a commission." The petition did not seek, nor did any of the instructions given for plaintiffs authorize, a recovery on the ground that Bower was paid a commission. We are unable to understand on what theory Instruction C was offered by defendant. The evidence that Bower was paid a commission or given a rebate and that his checks were not cashed was clearly competent, but such facts were not pleaded, nor relied upon as a basis for recovery. Such evidence was merely corroborative proof of the existence of the basic facts in the case.

VIII. Error is assigned because the trial court refused defendant's Instruction D, which was as follows:

"The court instructs the jury that if you find and believe from the evidence that the plaintiffs, by the exercise of ordinary care, could have investigated andPersonal Investigation. ascertained the kind and character of the Bert West land for farming purposes and what it produced the preceding (year) here, then you will find the issues in favor of the defendant upon the allegation of misrepresentation as to the agricultural value and agricultural productiveness of said land."

This instruction ignored the evidence of the previous business relation of plaintiffs and Bower and the effect of such business relations upon the extent of the investigation plaintiffs were required to make because of such relationship. The instruction was therefore properly refused.

IX. Complaint is made of the admission of testimony in respect to defendant's reasons for wishing to sell; that Bower said twenty-acre mining leases could be sold for $2500 each; that the royalty would pay forReasons for the land in a short time. It is said defendant'sSelling. reasons for selling were immaterial, and that the testimony as to such statements and representations did not constitute actionable fraudulent representations. Even if all this be true, all such statements were part of the transaction which plaintiffs were entitled to show. The trial court did not authorize the jury to find for plaintiffs upon such statements. Complaint is also made because the trial court refused to strike out said testimony. If the testimony was admissible in the first instance, and we think it was, the trial court properly refused to strike it out.

X. Error is assigned in the refusal of the trial court to permit defendant to show knowledge on the part of plaintiff Reynolds that Bower was paid a commission. It appearsKnowledge that the first payment had been made at the time suchof Fraud. knowledge is said to have been acquired by Reynolds. Plaintiffs could then have refused to go on with the contract and could have sued for the money then paid or they could go on with their contract and sue for damages if the property was not as represented. [Ryan v. Miller, supra, l.c. 509.] They chose the latter course and it is no defense to such action that plaintiffs, after partially performing their contract, obtained knowledge of such fact and afterward performed the contract on their part.

XI. The final contention is that error was committed by the trial court in permitting plaintiffs to show by the deposition of witness Caruthers that the reputation of defendant for honesty and fair dealing was bad. This testimony was offered in rebuttal and for the purpose of impeaching defendant as a witness. This was proper. Defendant cites Black v. Epstein, 221 Mo. l.c. 304, 305; Bank v. Richmond, 235 Mo. l.c. 542 and Gourley v. Callahan, 190 Mo. App. l.c. 670. The cases are not in point.

In Black v. Epstein, appellant sought to show the good reputation of defendant for honesty and fair dealing when it had not been attacked. In Bank v. Richmond, the testimony of a witness was offered to support one whose reputation had not been attacked. In Gourley v. Callahan, it was held that where defendant was asked about attempting to violate a young woman other than the plaintiff, evidence of his good character was admissible.

In this case defendant took the stand and was subject to impeachment like any other witness. Evidence that his reputation for honesty and fair dealing was bad had a direct bearing upon the credit the jury should give to his testimony as a witness. The evidence was properly admitted. [Pioneer Stock Powder Co. v. Goodman, 201 S.W. (Mo. App.) 576 and cases cited; Williamson v. McElvain, 199 S.W. (Mo. App.) 567.]

XII. It is our conclusion that the case was well tried and that the record before us is free from reversible error. The judgment is affirmed. Walker, J., concurs; White, J., concurs in result and in all except Paragraph I.