Bishop v. EA Strout Realty Agency

• Decision Date: 29 May 1950
• Docket Number: No. 6066.,6066.
• Citation: 182 F.2d 503
• Parties: BISHOP et al. v. E. A. STROUT REALTY AGENCY, Inc.
• Court: U.S. Court of Appeals — Fourth Circuit

182 F.2d 503 (1950)

BISHOP et al. v. E. A. STROUT REALTY AGENCY, Inc.

No. 6066.

United States Court of Appeals Fourth Circuit.

Argued April 19, 1950.

Decided May 29, 1950.

Sol C. Berenholtz, Baltimore, Md. (Solomon Kaplan, Baltimore, Md., on brief), for appellants.

John W. T. Webb and William W. Travers, Salisbury, Md. (Webb, Bounds, Travers & Adkins, Salisbury, Md., on brief), for appellee.

Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.

PARKER, Chief Judge.

This is an appeal by plaintiffs from a judgment for defendant on a directed verdict in an action to recover damages for deceit. Plaintiffs are husband and wife who purchased a tract of land with water frontage for the purpose of using it as an angler's camp. The defendant is the real estate agency that is alleged to have sold the property acting through its local representative or "associate", one Oscar C. Davis, who was not joined in the action. The complaint alleges that plaintiffs were induced to purchase the land through the false and fraudulent representations of Davis as to the depth of the adjacent water and that they suffered damage as a result. The case was heard before a jury and the trial judge directed verdict for defendant on the ground that the falsity of the representations could have been discovered by plaintiffs by an examination of the property purchased. Defendant contends that the direction of the verdict should be sustained on the ground given by the trial judge and also on the additional grounds that no fraudulent intent was shown, that there was no proof of damage and that it was not shown that Davis was acting for defendant in the sale of the property.

As the case must be tried again it is not desirable to discuss the evidence in detail. It is sufficient to say that when taken in the light most favorable to plaintiffs, as it must be on motion for directed verdict, it was amply sufficient to take the case to the jury. There was evidence tending to show that the property was listed with defendant for sale, that Davis handled business for defendant in the locality where the land was situate and that defendant afterwards recognized the sale as having been made through its agency. There was evidence that plaintiffs notified Davis of the purpose for which they desired the property and of the necessity of having deep water adjacent to it so that boats could be brought in, and that they were assured by him that this property would suit them to a "T" and that the water adjacent was not less than six feet deep at low tide and nine feet or more deep at high tide. They testified that they were shown the property at high tide and relied upon these statements of Davis without making soundings because they trusted him and had no reason to believe that he was not telling the truth. Plaintiffs paid $3,000 down, giving a $4,000 mortgage for the remainder of the purchase price, and entered into possession and made certain expenditures for improvements. Shortly thereafter they discovered that the water adjacent to the property was very shallow. Because of this, it was not at all suited for the purpose for which it had been purchased and plaintiffs had to abandon it. When they attempted to see Davis, they were unable to get him to meet with them to discuss the matter. The mortgage given by plaintiffs was foreclosed and the property was bought in at the foreclosure sale for the amount of the mortgage debt. The evidence thus presents all the elements necessary to a recovery on the ground of actionable fraud, which are set forth by the Court of Appeals of Maryland in Gittings v. Von Dorn, 136 Md. 10, 15, 109 A. 553, 554, as follows:

"To entitle the plaintiff to recover it must be shown: 1. That the representation made is false; 2. that its falsity was either known to the speaker, or the misrepresentation was made with such a reckless indifference to truth as to be equivalent to actual knowledge; 3. that it was made for the purpose of defrauding the person claiming to be injured thereby; 4. that such person not only relied upon the misrepresentation, but had a right to rely upon it in the full belief of its truth, and that he would not have done the thing from which the injury resulted had not such misrepresentation been made; and 5. that he actually suffered damage directly resulting from such fraudulent misrepresentation. McAleer v. Horsey, 35 Md. 439; Buschman v. Codd, 52 Md. 202; Robertson v. Parks, 76 Md. 118, 24 A. 411; Cahill v. Applegarth, 98 Md. 493, 56 A. 794; Boulden v. Stilwell, 100 Md. 543 551 60 A. 609, 1 L.R.A.,N.S., 258."

We do not think that plaintiffs are precluded of recovery because they accepted and relied upon the representations of Davis as to the depth of the water without making soundings or taking other steps to ascertain their truth or falsity. The depth of the water was not a matter that was apparent to ordinary observation; Davis professed to know whereof he was speaking; and there was nothing to put plaintiffs on notice that he was not speaking the truth. There is nothing in law or in reason which requires one to deal as though dealing with a liar or a scoundrel, or that denies the protection of the law to the trustful who have been victimized by fraud. The principle underlying the caveat emptor rule was more highly regarded in former times than it is today; but it was never any credit to the law to allow one who had defrauded another to defend on the ground that his own word should not have been believed. The modern and more sensible rule is that applied by the Court of Appeals of Maryland in Standard Motor Co. v. Peltzer, 147 Md. 509, 510, 128 A. 451, where it was held not to be negligence or folly for a buyer to rely on what had been told him. This is in accord with the modern trend in all jurisdictions which is summed up in A.L.I. Restatement of Torts, sec. 540...