Goggans v. Winkley ( 1970 )

MR. JUSTICE HASWELL

delivered the Opinion of the Court.

Action for damages by purchasers of land against sellers and real estate agent based on alleged false representations of the latter inducing purchasers to buy. The district court of Lincoln county directed a verdict for defendants and entered judgment of dismissal. From the district court’s denial of purchasers’ motion for new trial, purchasers appeal.

Plaintiffs herein are Tom and Phoebe Goggans who purchased from defendants, Clarence H. and Dorothy I. Winkley, a two acre tract of land with frontage on the Libby-Jennings highway in Lincoln County, Montana. The purchase was made about March 1, 1967, through the other defendant, M. M. Mansfield, a real estate agent in Libby who handled the sale for the Winkleys. Plaintiff-purchasers made an earnest money payment and signed a written purchase offer on a form prepared by the real estate agent which contained the following provisions:

“All representations made by Broker or its agents to Buyer concerning said real or personal property are believed by it and them to be true and correct and are made in good faith but neither Broker nor any of its salesmen or agents represents or warrants any thereof to be true. Buyer has personally inspected said premises and personal property and is personally familiar with the location, size, and condition thereof and is relying solely upon Buyer’s own information about and investigation of the same and also as to any financing of this sale contemplated by Buyer.”

The sale was completed by a written contract for deed signed by plaintiff-purchasers and defendant-sellers which contained the following provision:

“It is agreed and understood between the parties hereto that the expense of surveying the premises herein described shall be borne by second parties.”

Plaintiff-purchasers entered into possession and made certain improvements on the property, generally consisting of a gas station, store, and trailer park. Thereafter plaintiff-purchasers were informed by agents of the Montana highway department that their property encroached upon the highway right-of-way approximately 40 feet. This action followed.

According to plaintiff-purchasers, the real estate agent made false representations which induced them to enter into the contract for deed under which they purchased the property. These generally consisted of statements to the effect that certain stakes on the property marked its boundaries, that such survey was accurate and the stakes marked the true boundaries, and that any additional survey by the purchasers would be a waste of time and money. According to plaintiff-purchasers, they relied on these statements, obtained a drawing of the property from the real estate agent with dimensions of the property marked thereon, went to the property and measured the distances between the stakes which checked with the dimensions on the drawing, and accordingly did not have a survey made.

Plaintiff Tom Goggans testified at length concerning the representations made to him by the real estate agent. His wife did likewise. During the course of plaintiffs’ case-in-ehief the contract for deed signed by the purchasers and sellers was introduced in evidence whereupon defendants moved that:

“* * * all evidence concerning oral representations made by [the real estate agent] be stricken from the record and that, no further evidence be admitted in the course of this trial concerning any such misrepresentations; the written agreement, comprising the entire agreement between the parties”.

No ruling was immediately made on this motion by the court although argument was heard thereon outside the presence of the jury. In chambers plaintiffs then submitted the following-offer of proof:

“MR. DOUGLAS: Comes now the plaintiffs and submit the following- offer of proof:

‘ ‘ That by the sworn testimony of Phoebe Goggans and by the sworn testimony of Tom Goggans, they will testify that when they contacted the defendant, Mr. Mansfield, they considered him a representative broker and that he had full knowledge of the general business of real estate and more particularly specific knowledge as to the property that they were-interested in purchasing; that on several occasions prior to the execution of the contract dated March 1st, Mr. Mansfield advised them that he knew all the facts concerning this property; that the property had been surveyed by a competent surveyor, that the boundaries were properly staked and that said stakes represented the true boundaries of the property; that any additional survey would have- to be at their own expense but that it was a waste of time ; that in reliance upon such statements the defendants signed the contract dated March 1st and. on the reliance of the representations by Mr. Mansfield considered the provision as to expenses of survey applied only to additional surveys; that by virtue of the representations and the reliance thereon, the plaintiffs were damaged in the following amounts: Work, labor and material in the development of the property for a store, trailer park and service station in the amount of $11,550.35; In addition thereto, the plaintiff, Tom Goggans, would tstify that he expended his own work and labor for a period of a year with more than 40 hours per week for each week in the development of the trailer park, the construction of the store building and other work directly related thereto; that the present value of the property by virtue of the encroachment on State Highway land is nil; that the defendant Phoebe Goggans, devoted at least 10 hours a week for a period of a year on the development of the trailer park and store; that a reasonable value of the services of Phoebe Goggans was the sum of $1,200:.00; that a reasonable value for the labor of Tom Goggans was $7,500.00; that in addition thereto, the plaintiffs purchased a 1962 Detroiter Mobile Home, Serial No. F.B. 54-2F-10S of a reasonable value of $5,000.00; that the trailer was made a permanent part of the store building ; that by the testimony of the said Tom Goggans, the boundaries as established by the stakes was incorrect; that in support thereof the plaintiffs would have called Yern Borden, an Engineer with the Montana State Highway Department, who, by reason of his employment, experience and training, is familiar with surveying and all matters relating thereto, and that the Montana Highway right-of-way encroaches upon this property and did encroach upon same as staked by persons unknown 42 feet across the front of said property; that by the testimony of Bud Steele, a duly qualified, experienced appraiser of property both commercial and agricultural; that the present value of said property as a trailer park and store is nil. At the outset and at all times thereafter for the purchase of this property the Goggans were interested in purchasing the property and the development thereof for a trailer park and store and gas station; that they advised Mr. Mansfield of their plans for the development of said property and that he was well aware of same at all times; that had the plaintiffs known of the true boundaries of said property they would not have been interested in purchasing the property at any price and that the purchase of said property was made solely upon the reliance of the fraudulent statements of Mr. Mansfield as more particularly stated in this offer of proof.”

Defendants objected to such offer of proof and the court denied the offer in the following language:

“THE COURT: The Court denies plaintiffs’ offer of proof for the following reasons:

“That the allaged misrepresentations made by Mr. Mansfield as a broker did not constitute fraud in view of the provisions of the contract dated March 1st and more particularly the provision on page 2 of Defendants’ Exhibit B which reads as- follows: ‘It is agreed and understood between tlie parties hereto that the expense of surveying the premises herein described shall be borne by second parties’, and for the further reason that such testimony is not of such a nature as to be an exception to the Parole (sic) Evidence Rule relative to written contracts. The Court makes this ruling based upon the files, pleadings and exhibits submitted as well as the offer of proof denied.”

Plaintiffs then made a second offer of proof that the same representations were also made between the time of the written offer to purchase and execntion of the contract for deed. The court denied this offer of proof on the same basis that the previous offer was denied.

Thereupon the trial reconvened in the courtroom in the presence of the jury. Plaintiffs rested their case-in-chief. Defendants moved for a directed verdict in their favor which the court granted, thereafter entering judgment of dismissal of plaintiffs’ action.

’ Subsequently plaintiffs moved for a new trial which the district court denied. This appeal followed. We note that the notice of appeal herein indicates that the appeal is from the order denying the motion for new trial. However, all parties in their briefs and oral argument have treated this as an appeal from the final judgment and we shall so treat it.

The basic underlying issue upon this appeal is whether the district court properly directed a verdict for defendants. If it did, plaintiffs’ motion for new trial was properly denied; otherwise it should have been granted.

■ Initially we note that without the evidence encompassed in plaintiffs’ offer of proof, there is a failure of proof of some of the material elements of plaintiffs’ claim and a directed verdict for defendants is proper. Thus our inquiry here is reduced to a determination of whether plaintiffs’ offer of proof was properly denied.

The district court denied plaintiffs’ offer of proof on two grounds: (1) the alleged misrepresentations did not constitute fraud because the contract required the purchasers to bear the expense of surveying the premises, and (2) the alleged oral misrepresentations are barred by the parol evidence rule.

“Whether or not there has been fraud in any given case is generally a question of fact. It is often said to be pecularily a question for the jury, in cases in which a jury trial may be had, and that it should be submitted to them if there is substantial evidence to support a finding of its existence. ’ ’ Russell v. Russell, 153 Mont. 461, 452 P.2d 77. Citing Healy v. Ginoff, 69 Mont. 116, 220 P. 539 (1923); Riley v. Byrne, 145 Mont. 138, 399 P.2d 980 (1965).

In the instant case we are dealing with an action of fraud or no fraud at all. By statute, actual fraud

“® * * consists in any of the following acts, committed by a party to the contract, or with his connivance with intent to deceive another party thereto, or to induce him to enter into the contract:

* sfc * -X: # -7f # j£« a&

‘ ‘ 2. The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true * Section 13-308, R.C.M.1947.

Where, as here, plaintiff must make out a prima facie case of actual fraud, the material elements thereof have heretofore been held by this Court to consist of the following: (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker’s knowledge of its falsity, or ignorance of its truth; (5) his intent that it should be acted upon by the person and in the manner reasonably contemplated; (6) the hearer’s ignorance of its falsity; (7) his reliance upon its truth; (8) his right to rely thereon; (9) and his consequent and proximate injury. Helena Adjustment Co. v. Claflin, 75 Mont. 317, 243 P. 1063; Young v. Handrow, 151 Mont. 310, 315, 443 P.2d 9.

In the instant ease the district court held, in effect, that plaintiffs had no right to rely on any representations of the real estate agent because the contract for deed, signed by purchasers and sellers, provided

“It is agreed and understood between the parties hereto that the expense of surveying the premises herein described shall be borne by [purchasers]. ’ ’

Purchasers’ argue, and their offer of proof includes, that by reason of the representations of the real estate agent that he knew all the facts concerning the property, that it had been surveyed by a competent surveyor, that the boundaries were properly staked and said stakes represented the true boundaries of the property, and that any additional survey would have to be made at their own expense but that it was a waste of time; they considered the provision as to expenses of survey to apply only to additional surveys. Purchasers contend they were thus induced not to survey. Purchasers interpret the survey provision in the contract to mean that if any future survey is to be made, it shall be made at purchasers’ expense without placing any duty upon purchasers to make any survey in the first instance.

Sellers, on the other hand, contend that the purchasers knew they were buying 'unsurveyed property, that Mrs. Goggans testified they were buying the property “as is”, and therefore the survey provision in the contract was known and understood by the purchasers to mean that they must survey the property at their own expense to ascertain the true boundaries thereof.

We hold that, in any event, the survey provision in the contract does not bar inquiry into the question of whether purchasers got what they bargained for. If certain representations were made to purchasers by the sellers’ agent relative to a previous survey, the marking of the boundaries thereof with stakes, and the measurements of the perimeter of the property and that these representations were properly relied upon thereby inducing purchasers to buy without a survey, all as comprehended in purchasers’ offer of proof, and it later turns out that the representations are incorrect and the property is in fact in a different location and encroaches on the state’s right-of-way, then the purchasers are not.foreclosed from attempting to prove these facts by the contract provision in question. The district court was in error at this point.

The second ground assigned by the district court for denying purchasers’, offer of proof is that the proffered oral testimony is barred by the parol evidence rule. This rule is set out in statntory form in Montana as section 93-401-13, R.C.M.1947, and basically provides that as between the parties to a written contract, no evidence of the terms of the contract other than the contents of the written contract itself are admissible in evidence. This general statutory principle is subject to numerous exceptions, the one with which we are concerned in the instant case being set forth in the statute itself:

* * But this section does not exclude other evidence of the circumstances under which the agreement was made * * # or establish * * * fraud * *

Here purchasers have alleged and offered to prove fraud in the form of false representations which induced them to enter into the contract in the first place. Fraud in the inducement has always been held to be provable by parol, notwithstanding the parol evidence rule. Advanee-Rumely Thresher Co., Inc., v. Wenholz, 80 Mont. 82, 258 P. 1085; Sathre v. Rolfe, 31 Mont. 85, 77 P. 431.

Sellers argue that testimony of the alleged oral representations of the real estate agent are inadmissible because they varied the terms of the written contract. They argue that here the subject of the alleged false representation was an integral part of the written contract and fully covered by the writing, citing in support: Biering v. Ringling, 78 Mont. 145, 252 P. 872; Armington v. Stelle, 27 Mont. 13, 69 P. 115; Kelly v. Ellis, 39 Mont. 597, 104 P. 873. Suffice it to say that although these cases stand for the proposition cited, they are inapplicable in the instant case. Here, the alleged false representations related to the boundaries of the property as staked on the ground which allegedly induced purchasers to enter into the written contract of purchase. The writing in this contract did not require purchasers to make a survey to ascertain the boundaries as a matter of law, as we have heretofore held.

Nothing herein contained is to be taken as any expression by this Court of the ultimate merits of this controversy, our decision herein being limited to the district court’s directing a verdict.

The judgment of the district court is vacated and the cause remanded to it for a new trial.

MR. CHIEF JUSTICE JAMES T. HARRISON, and MR. JUSTICES JOHN C. HARRISON and JOHN W. BONNER, concur.