Bostic v. Amoco Oil Co.

• Decision Date: 18 March 1977
• Docket Number: Nos. 76-1265,76-1266,s. 76-1265
• Citation: 553 F.2d 329
• Parties: Joseph M. BOSTIC, Appellee, v. AMOCO OIL COMPANY, Appellee, v. Roy D. BOWIE and Lois P. Bowie, Appellees, and Sun Oil Company of Pennsylvania, a corporation, Appellant. Joseph M. BOSTIC, Appellant, v. AMOCO OIL COMPANY, Appellee, v. Roy D. BOWIE et al., Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 329

553 F.2d 329

Joseph M. BOSTIC, Appellee, v. AMOCO OIL COMPANY, Appellee, v. Roy D. BOWIE and Lois P. Bowie, Appellees, and Sun Oil Company of Pennsylvania, a corporation, Appellant.

Joseph M. BOSTIC, Appellant, v. AMOCO OIL COMPANY, Appellee, v. Roy D. BOWIE et al., Defendants.

Nos. 76-1265, 76-1266.

United States Court of Appeals, Fourth Circuit.

Argued Nov. 10, 1976.

Decided March 18, 1977.

Amos A. Bolen, Lewisburg, W. Va., for Joseph M. Bostic.

Edward W. Eardley, Charleston, W. Va. (Steptoe & Johnson, Charleston, W. Va., on brief), for Sun Oil Co.

W. H. File, Jr., Beckley, W. Va., (File, Payne, Scherer & Brown, Beckley, W. Va., on brief), for Amoco Oil Co.

Louis George, Huntington, W. Va., for Roy D. and Lois Bowie.

Before BRYAN and FIELD, Senior Circuit Judges, and WINTER, Circuit Judge.

ALBERT V. BRYAN, Senior Circuit Judge:

This is an action by Joseph M. Bostic to recover damages of the American Oil Company for alleged constructive fraud in not conveying to him a lot of land in Greenbrier County, West Virginia according to the agreement of sale between them but, instead deeding to him a lot adjoining the lot upon which Bostic had built as contemplated in his purchase. With a jury waived, the District Court held the conveyance to Bostic to be the result of mutual mistake and not ascribable to the fraud of Amoco. It authorized rescission of the sale, but denied him damages. Bostic appeals (No. 76-1266).

In a third-party complaint Amoco named as defendants Roy D. and Lois P. Bowie (the Bowies), owners of the intended lot, and their lessee, Sun Oil Company. It charged them with actionable conduct in failing to warn Bostic of his mistake in building upon the wrong land and charged, further, that they were obligated either to buy the building at its fair market value or to sell the lot to Bostic at its unimproved fair market value. Bostic filed a similar complaint against the Bowies and Sun. In responsive pleadings, the third-party defendants denied any liability to Amoco and Bostic; they also counterclaimed for trespass by Bostic, and Sun cross-claimed to suspend its liability to the Bowies for rent. The Court held groundless these fraud claims as well as the trespass counterclaim, with the right in Bostic to remove the improvements, and ordered Sun to continue the lease payments. Sun appeals (No. 76-1265).

Despite its repetition, a close narration of the evidence is essential here. In February 1973 appellant Bostic took over a Texaco station on U.S. Route 60, three or four miles west of White Sulphur Springs, West Virginia. Operation of the filling station with incidental mechanical work looked more promising when United Parcel Service (UPS) indicated a desire to have Bostic maintain its 10-truck fleet in that area. As his existing facilities were limited, in the summer of 1973 Bostic became interested in acquiring the vacant lot adjacent to and immediately east of "next to" his Texaco station for construction of a garage with repair shop and a UPS depot. A "For Sale" sign had been posted on this lot for many months.

Encouraged by the availability of a Small Business Administration loan from a local bank, Bostic telephoned one Pharoah in Baltimore, Maryland about the lot, as directed by the "For Sale" notice. Replying, Pharoah advised Bostic that he represented Amoco and offered to send him a topographic map of the property. In a few days, the map (the plat) arrived with a letter which described the property as ". . . the land next to the Texaco station . . .." While the loan was in process, Bostic obtained a valuation of the property from a local appraiser, Andrew McLaughlin, and thereafter inquired of Pharoah whether Amoco would accept the appraisal figure of $22,500. Pursuant to Pharoah's instructions, Bostic, who on the bank's initiation had obtained the services of attorney Ralph Keightley, asked the lawyer to prepare a 90-day option agreement to buy from Amoco at this price.

The agreement was subsequently forwarded to Pharoah with a $500 down payment together with McLaughlin's report, the latter reciting that it covered ". . . the lot joining Texaco Station on Rt. 60 . . . ." Executed in due course by an Amoco official, this agreement described the subject property as ". . . containing 0.50 acres, more or less, adjoining the property owned on the west by Texas Oil Company . . . ." The option was exercised by Bostic and the transaction was concluded in February 1974 with money from the bank loan. Thereafter Bostic went forward with erection of the proposed improvements on the lot next to the Texaco station.

In August 1974, when all improvements had been completed, or obligated for, it was discovered through statements of Sun representatives that, in fact, Amoco had conveyed to Bostic a lot immediately east of the intended lot, the latter, as heretofore explained, being next to the Texaco station. A sketch of the lots in suit, with their relative positions, follows:

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

Bostic thus was faced with the problem of having built on a lot, owned by Roy D. Bowie and his wife, and by them leased to the Sun Oil Company, and located between the Texaco station and the deeded lot. Thereupon disbursements of the bank loan were stopped, leaving Bostic with outstanding building debts in excess of $28,000, plus the obligation of the loan, as well as a debt of $17,000 for acquisition of miscellaneous business equipment. Bostic since has lost the arrangement with UPS because he could not provide it a lease. The cost of moving the Bostic buildings from the Bowie or intended lot rendered this alternative impracticable, just as was the possibility of Bostic's purchase of the Bowies' lot they were asking $70,000 to $80,000 for it, more than three times the Amoco-Bostic price.

I.

In our judgment the decision of the District Court is erroneous in rejecting Bostic's action for damages and declaring his only remedy was rescission for a mutual mistake of fact. This was not, as Amoco asserts, a finding of fact reversible only if "clearly erroneous"; rather it was an incorrect conclusion of law upon uncontroverted facts. For this reason the judgment must be vacated.

To us the injury to Bostic was the direct and proximate consequence of fraud in the vendor's misrepresenting the situs of the land as agreed upon. While the evidence disclosed no deliberate deceit, Bostic plainly proved a fraud in actuality.

The law of fraud in West Virginia is set out in Horton v. Tyree, 104 W.Va. 238, 139 S.E. 737 (1927):

"(O)ne to whom a representation has been made as an inducement to enter into a contract has the right to rely upon it as true quoad the maker and need make no further inquiry. If he does so rely upon it, and it turns out to be untrue, and he is injured thereby, the party making the representation is liable for the damages, which may be recovered in an action of deceit. . . . Whether the defendant made the statement imputed to him, knowing it to be materially untrue, and for the fraudulent purpose of deceiving the plaintiff as charged in the declaration, we need not inquire, for it is not, in order to maintain this action, indispensable that the defendant be shown to have known the statement was false. For it is elementary doctrine that a false representation may be made scienter, so as to afford a right of action in damages, in contemplation of law, in any of the following ways: (1) With actual knowledge of its falsity; (2) without knowledge either of its truth or falsity; or (3) under circumstances in which the person making it ought to have known if he did not know of its falsity. . . ." (Citations omitted) (Accent added.)

See Purcell v. Robertson, 122 W.Va. 287, 8 S.E.2d 881 (1940).

In circumstances such as those of the instant case, where the impetus for the misrepresentation is a mistake of fact by the party making the representation, the resulting tort is labeled "constructive" fraud. See Purcell v. Robertson, supra; Atkinson v. Jones, 110 W.Va. 463, 158 S.E. 650 (1931).

That Bostic intended to buy, and Amoco agreed to sell to him, only the lot immediately to the east of and "next" to his Texaco station is repeatedly and emphatically manifested in the negotiations for and consummation of the sale. At the risk of repetition, the steps thereof and the developments in each must be set out chronologically.

1. Bostic testified that in 1973 there was a "For Sale" sign on the intended lot bearing the name, the Maryland address, and the telephone number of one H. A. Pharoah. By coincidence, Bostic had observed a man place the sign on the lot during the summer of 1972, before he began operation of the Texaco station. Bostic's place of business, the Texaco station, adjoined the intended lot and he saw the sign daily.

His testimony was corroborated by Charles Collison, an employee of the station, who also witnessed the man place the sign on the lot in the summer of 1972 "about 10 feet east of the Texaco lot and then it was several feet off the paved highway", U.S. Route 60. Collison stated that he knew where the Texaco station line was located.

Bostic's testimony was also corroborated by McLaughlin, who had appraised the intended lot for Bostic early in 1973 after Bostic's initial contacts with Pharoah. While Pharoah's deposition, introduced at trial, indicated that he believed that in September 1972 the sign had been placed by him by staking it in a pile of dirt on the conveyed lot, he had not previously, nor since, seen the lot until he came to West Virginia in 1975 to be deposed.

2. In any event, as mentioned, during the summer of 1973 Bostic called Pharoah at the telephone number on the sign and they discussed a purchase of the lot. As a result, an undated letter was written to Bostic by Pharoah saying:

"Confirming our telephone conversation of this date, regarding the land next to the Texaco station at the intersection of I-64...