Adams v. . Gillig , 199 N.Y. 314 ( 1910 )

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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] Any contract induced by fraud as to a matter material to the party defrauded is voidable. There are many rules as to what constitutes an inducement by fraud, and also affecting the general statement that any contract will be set aside for fraud, that have been established as necessary to protect the rights of all the parties to a contract, which need not be stated in this discussion, except so far as they affect the particular transaction under consideration.

It may be assumed that promises of future action that are a part of the contract between the parties, to be binding upon them, must be stated in the contract. An oral restrictive covenant, or any oral promise to do or refrain from doing something affecting the property about which a written contract is made and executed between the parties, will not be enforced, not because the parties should not fulfill their promises and their legal and moral obligations, but because the covenants and agreements being promissory and contractual in their nature and a part of, or collateral to a principal contract, the entire agreement between the parties must be deemed to have been merged in the writing. The value of a writing would be very seriously impaired if the rule mentioned in regard to including the entire agreement in such writing is not enforced.

A strict enforcement of such rule tends to greater security and safety in business transactions and leaves less opportunity for dishonesty and false swearing, induced, perhaps, by a change of purpose or a failure to obtain the result that was anticipated when the transaction was originally consummated and reduced to writing. Such rule makes it necessary for the parties to a written contract to include everything therein pertaining to the subject-matter of the principal contract, and if by mistake or otherwise an oral agreement, a part of the transaction, is omitted from the writing, it can only be made effective and enforceable by a reformation of the writing, so that the same shall include therein the entire agreement between the parties. The rule is quite universal that statements promissory in their nature and relating to future actions must be enforced if at all by an action upon the contract. It is unnecessary to decide or discuss the question whether under some possible circumstances the courts will not in equity lay hold of false statements that are contractual in their nature to prevent the consummation of a fraud.

It is not claimed on this appeal that the defendant made promises which became a part of the contract, or that the deed could be reformed by including therein restrictive covenants. The rule in regard to including the entire agreement between the parties in the writing does not take away or detract from the general rule by which a contract can always be set aside for fraud affecting the transaction as to a material fact that is not promissory in its nature. Any statement of an existing fact material to the person to whom it is made that is false and known by the person making it to be false and which is made to induce the execution of a contract, and which does induce the contract, constitutes a fraud that will sustain an action to avoid the contract if the person making it is injured thereby.

We have in this case findings by the trial court sustained by the record, which show that the defendant purposely, intentionally and falsely stated to the plaintiff that he desired to purchase a portion of her vacant lot for the purpose of building a dwelling or dwellings thereon. He must have known that if he thereby induced her to convey to him such portion of the lot and his intention to build a garage thereon was carried out it would injure her to an extent in excess of the full consideration to be paid by him to her for such lot.

The plaintiff relied upon the defendant's honesty and good faith in the purchase, and was apparently willing to take her chances of a subsequent change in his intention, or of his selling the lot to another whose intentions and purposes might be entirely different.

The simple question in this case is, therefore, whether the alleged intention of the defendant to build a dwelling or dwellings upon the lot which he sought to purchase is such a statement of an existing material fact as authorizes the court to cancel the deed because of the fraud.

The distinction between a collateral agreement as a part of a contract to do or not to do a particular thing, and a statement and representation of a material existing fact made to induce the contract may be further profitably considered.

A promise as such to be enforceable must be based upon a consideration, and it must be put in such form as to be available under the rules relating to contracts and the admission of evidence relating thereto. It may include a present intention, but as it also relates to the future it can only be enforced as a promise under the general rules relating to contracts.

A mere statement of intention is a different thing. It is not the basis of an action on contract. It may in good faith be changed without affecting the obligations of the parties. A statement of intention does not relate to a fact that has a corporal and physical existence, but to a material and existing fact nevertheless not amounting to a promise but which as in the case under discussion affects and determines important transactions. The question here under discussion is not affected by the rules relating to the admission of testimony. As it was not promissory and contractual in its nature there is nothing in the rules of evidence to prevent oral proof of the representations made by the defendant to the plaintiff. In an action brought expressly upon a fraud, oral evidence of facts to show the fraud is admissible. (Pomeroy's Equity Jurisprudence, sec. 889.)

This case stands exactly as it would have stood if the plaintiff and defendant before the execution and delivery of the deed had entered into a writing by which the defendant had stated therein his intention as found by the court on the trial and the plaintiff had stated her acceptance of his offer based upon her belief and faith in his statement of intention, and it further appeared that the statement was so made by the defendant for the purpose of inducing the plaintiff to sell to him the lot, and that such statement was so made by him falsely, fraudulently and purposely for the purpose of bringing about such sale.

Intent is of vital importance in very many transactions. In the criminal courts it is necessary in many cases for jurors to determine as a question of fact the intent of the person charged with the crime. Frequently the life or liberty of the prisoner at the bar depends upon the determination of such question of fact. In civil actions relating to wrongs, the intent of the party charged with the wrong is frequently of controlling effect upon the conclusion to be reached in the action. The intent of a person is sometimes difficult to prove, but it is nevertheless a fact and a material and existing fact that must be ascertained in many cases, and when ascertained determines the rights of the parties to controversies. The intent of Gillig was a material existing fact in this case, and the plaintiff's reliance upon such fact induced her to enter into a contract that she would not otherwise have entered into. The effect of such false statement by the defendant of his intention cannot be cast aside as immaterial simply because it was possible for him in good faith to have changed his mind or to have sold the property to another who might have a different purpose relating thereto. As the defendant's intention was subject to change in good faith at any time it was of uncertain value. It was, however, of some value. It was of sufficient value so that the plaintiff was willing to stand upon it and make the conveyance in reliance upon it.

The use of property in a particular manner changes from time to time and restrictive covenants of great value at one time may become a source of serious embarrassment at a later date. The fact that restrictive covenants cannot ordinarily be drawn to bend to changed conditions has made many purchasers disinclined to accept conveyances with such covenants. A restrictive covenant in a deed may be of sufficient importance to justify a refusal by a contractee to accept a conveyance subject to such conditions. A person in selling property may be quite willing to execute and deliver a deed thereof without putting restrictive covenants therein and in reliance upon the good faith of express, unqualified assurances of the present intention of the prospective purchaser. In such case the intention is material and the statement of such intention is the statement of an existing fact.

Unless the court affirms this judgment, it must acknowledge that although a defendant deliberately and intentionally, by false statements, obtained from a plaintiff his property to his great damage it is wholly incapable of righting the wrong, notwithstanding the fact that by so doing it does in no way interfere with the rules that have grown up after years of experience to protect written contracts from collateral promises and conditions not inserted in the contract.

We are of the opinion that the false statements made by the defendant of his intention should, under the circumstances of this case, be deemed to be a statement of a material, existing fact of which the court will lay hold for the purpose of defeating the wrong that would otherwise be consummated thereby.

We have not overlooked the many authorities called to our attention by the appellant. In Wilson v. Deen (74 N.Y. 531);Kley v. Healy (127 N.Y. 555, 561); Gray v. Palmer (2 Rob. 500; affd., 41 N.Y. 620); Lexow v. Julian (21 Hun, 577; affd., 86 N.Y. 638); Gallager v. Brunel (6 Cow. 346); Gage v. Lewis (68 Ill. 604); Haenni v. Bleisch (146 Ill. 262), and many other cases in this and other states the court had under consideration representations that were promissory and contractual in their nature, and which, if enforced at all, could only be enforced under the rules relating to contracts.

We are unable to find authorities where the exact question considered herein has been directly discussed by the court, but the principle herein annunciated finds support in Hennequin v.Naylor (24 N.Y. 139); Old Colony Trust Co. v. Dubuque Light Traction Co. (89 Fed. Rep. 794); Edgington v. Fitzmaurice (L.R. [29 Ch. Div.] 479); Williams v. Kerr (152 Pa. St. 560);Lewis v. Gollner (129 N.Y. 227); Butler v. Watkins (13 Wall. 456), and other cases.

Equity will interfere to grant relief where necessary to prevent the consummation of a fraud. (Freeman v. Freeman,43 N.Y. 34.)

It is said that this decision will open the door to other litigation. If that is the effect of it, then, so far as the decision asserts power in the court to prevent dishonesty, false dealing and bad faith in business transactions, it should be welcomed.

It is not the intention of the court to extend the effect of this decision by implication, or to a case other than one where the facts are clearly found against the defendant.

The courts will be vigilant to prevent the rescission for fraud of a contract deliberately made unless the fraud is admitted or proven by most satisfactory evidence. (6 Cyc. 336.)

We do not concede the accuracy of the statement made before us on behalf of the defendant to the effect that false statements similar to the one made by the defendant to induce the execution of the deed by the plaintiff are common in business transactions, but if true, and controversies arise over the retention of the fruits of such frauds, and the fraudulent inducement is conceded or proven beyond reasonable controversy, the transactions will not have the approval and sanction of the courts.

The judgment should be affirmed, with costs.

CULLEN, Ch. J., GRAY, VANN, WERNER, WILLARD BARTLETT and HISCOCK, JJ., concur.

Judgment affirmed.