Bridgmon v. Walker

• Decision Date: 23 September 1959
• Citation: 344 P.2d 233,218 Or. 130
• Parties: Betty R. BRIDGMON and Samuel A. McAllister, Trustee in Bankruptey of Raymond D. Bridgmon, Respondents, v. J. J. WALKER and John P. Celoria, Appellants.
• Court: Oregon Supreme Court

Page 233

344 P.2d 233

218 Or. 130

Betty R. BRIDGMON and Samuel A. McAllister, Trustee in

Bankruptey of Raymond D. Bridgmon, Respondents, v. J. J. WALKER and John P. Celoria, Appellants.

Supreme Court of Oregon, Department 1.

Argued Dec. 3, 1958.

Decided Sept. 23, 1959.

Dale Jacobs, Oregon City, argued the cause for appellants. With him on the brief were S. J. Graham and Bertrand J. Close, Portland.

Seymour L. Coblens, Portland, argued the cause for respondents. On the brief were Reinhardt & Coblens.

Before PERRY ^*, C. J., and ROSSMAN, McALLISTER ^**, and O'CONNELL, JJ.

PERRY, Justice.

Raymond D. Bridgmon and Betty R. Bridgmon, husband and wife, as plaintiffs, brought this suit in the Circuit Court for Multnomah County against George B. Ruschka, J. J. Walker and John P. Celoria, as defendants. The body of their complaint alleges:

'V

'That the making and execution of the aforesaid written agreements and the performance thereof by the plaintiffs according to the said terms as above set forth were procured by the fraud and deceit of the defendants exercised by them and each of them upon the plaintiffs for that purpose through the wilfully false and fraudulent representations and statements made to the plaintiffs by the defendants as follows:

'1. That the house was made of all new materials.

'2. That the house had a cement foundation and was properly supported.

'3. That the land upon which the property stood was properly drained; that the water supply was pure, wholesome, and adequate; and that the sewage was properly disposed of.

'4. That the building in all respects conformed to the state building and sanitation codes.

'5. That the building in all respects conformed with the Federal Housing Administration requirements and standards.'

They sought $6,000 as compensatory and $6,000 as punitive damages. The jury returned a verdict for compensatory damages in the amount of $4,500. From the judgment entered the defendants appealed.

The facts disclose that plaintiffs Raymond D. Bridgmon and Betty R. Bridgmon entered into a contract to purchase real property owned by defendant George B. Ruschka. The defendants John P. Celoria and J. J. Walker are real estate agents, and as agents of Ruschka effected the sale of this property to Bridgmons. The total consideration for the purchase of the Ruschka property was $8,450. The plaintiffs transferred to Ruschka their $1,150 equity in a house they were purchasing as a down payment and agreed to make monthly payments upon the balance due. In October, 1951, the plaintiffs Bridgmon moved into the property where they resided for several years before moving from the property. Mr. Bridgmon stated their reason for moving from the property as follows:

'Q. Why did you move out? A. Why, the cost of the repairing of the foundation and stuff--it was more than I could afford so I let it go.'

While this statement of plaintiff's indicates a complete abandonment of the contract, we will consider the matter as a statement of attempted rescission.

After the plaintiffs Bridgmon had given up possession of the property, Ruschka resold the property, but there is no evidence that this action was taken in furtherance of a mutual rescission.

After the appeal had been filed, the defendant Ruschka and the plaintiffs Bridgmon entered into an agreement whereby for the sum of $900, which was to apply against the judgment, Ruschka was released from all liability and the rights of the plaintiffs in the judgment as against the defendants Walker and Celoria were retained. On a motion of the plaintiffs this court dismissed the appeal as to George B. Ruschka. Also, a motion was granted in this court substituting for Raymond D. Bridgmon as plaintiff Samuel A. McAllister, trustee in bankruptcy of Raymond D. Bridgmon.

The defendants Walker and Celoria contend the trial court erred in failing to sustain their motion for an involuntary nonsuit, a directed verdict, and in instructing the jury that the measure of damages was the difference between the amount the plaintiffs agreed to pay for the property and the reasonable market value of the property at the time of sale.

Assuming, as the jury must have, that the defendants by fraud induced the plaintiffs into entering into the contract, it is well established in this jurisdiction that a vendee who has been deceived into entering into a contract of purchase may upon discovery of the fraud either affirm or rescind the contract. These rights are not concurrent, but are inconsistent. Amort v. Tupper, 204 Or. 279, 282 P.2d 660; Taylor v. Grant, 204 Or. 10, 279 P.2d 479, 1037, 281 P.2d 704; Widmer v. Leffelman, 187 Or. 476, 212 P.2d 737, 196 Or. 401, 249 P.2d 476; Baker v. Casey, 166 Or. 433, 112 P.2d 1031; Belanger v. Howard, 166 Or. 408, 112 P.2d 1022; Crouch v. Butler, 119 Or. 344, 248 P. 849; Fairbanks v. Johnson, 117 Or. 362, 243 P. 1114; T. B. Potter Realty Co. v. Breitling, 79 Or. 293, 155 P. 179; Scott v. Walton, 32 Or. 460, 52 P. 180.

If defrauded party elects to affirm the contract, he may sue for the benefits to which he is entitled thereunder or for damages for the deceit. Selman v. Shirley, 161 Or. 582, 85 P.2d 384, 91 P.2d 312, 124 A.L.R. 1, 16; Burgdorfer v. Thielemann, 153 Or. 354, 55 P.2d 1122, 104 A.L.R. 1407; McFarland v. Carlsbad Hot Springs Sanatorium Co., 68 Or. 530, 137 P. 209.

If, on the other hand, the defrauded party elects to disaffirm the contract, his remedy lies in restoration to his former position. Such defrauded party need not in all circumstances find relief only in a court of equity, but he may seek this restoration as damages in an action at law. Nisson v. Tillman, 213 Or. 133, 323 P.2d 329; Kruse v. Bush, 85 Or. 394, 167 P. 308.

Therefore, it is the fraud in the securing of the contract that gives plaintiffs any right of recovery, for '* * * In the absence of fraud or some other ground for rescission, the vendee cannot escape the obligations he has assumed in the contract of purchase, nor can he recover back the purchase money which he has paid.' Kruse v. Bush, supra, 85 Or. 394, 397, 167 P. 308, 309.

The election of a vendee to rescind the contract is, therefore, a waiver of his right to sue a vendor for damages based on the fraud arising out of the contract.

Since the evidence conclusively discloses that the plaintiffs elected not to affirm the contract, the plaintiffs are not entitled to the benefits they would have received thereunder nor are they entitled to damages for deceit. They are only entitled to such sum as will restore them to their condition as it existed before the contract was entered into.

The pleadings in this case will not support an action for rescission, and the trial court erred in failing to grant the defendants' motion for a non-suit and directed verdict.

The cause is reversed with directions to enter judgment for defendants.

McALLISTER, Chief Justice (specially concurring).

I concur in the result as to the appealing defendants, J. J. Walker and John P. Celoria.

O'CONNELL, Justice (dissenting).

This is an action brought against J. J. Walker, John P. Celoria and George B. Ruschka to recover damages resulting from alleged fraudulent representations made by the defendants in connection with the sale of a house to the plaintiff, Betty R. Bridgmon, and Raymond D. Bridgmon. From a verdict and judgment for the plaintiffs, the defendants Walker and Celoria appeal. In consideration of the payment of $900 by the defendant Ruschka, the plaintiffs covenanted not to proceed further against him and he is, therefore, not a party on this appeal. Although Raymond D. Bridgmon's interest in this proceeding is represented by the plaintiff trustee in bankruptcy, I shall for convenience refer to him as one of the plaintiffs.

The sale was negotiated by the defendant, John P. Celoria, who was employed as a salesman by the defendant J. J. Walker, a real estate broker. The purchase price was $8,450. As a part of the down payment the plaintiffs assigned their equity ($1,150) in another house which they were then purchasing. The earnest money agreement was executed on October 8, 1951 and the final land sale contract was executed on October 18, 1951.

The property consisted of a house and two acres of land which was a part of a subdivision being developed by George B. Ruschka. The house was built on a clay tile foundation faced with concrete. Water was supplied from a well located on the property. Sewage was disposed of by way of a septic tank.

The plaintiffs' complaint charged the defendants with five separate fraudulent representations. Two of these were withdrawn from the jury and do not present questions on appeal. The remaining specifications of deceit are that the defendants falsely represented (1) that the house had a cement foundation and was properly supported; (2) that the land was properly drained, that the water supply was pure, wholesome and adequate and that the sewage was properly disposed of; and (3) that the buildings in all respects conformed with the Federal Housing Administration requirements and standards.

The complaint alleges that these alleged misrepresentations were made by the three defendants. The record discloses however, that the defendant Walker made no representations personally and, therefore, his liability, if any, must be based upon the representations of his agent Celoria.

The first error assigned is the trial court's failure to grant the defendants' motion for a nonsuit and for a directed verdict. There was sufficient evidence to require the submission of the case to the jury. I shall consider only the evidence relating to one of the specifications of fraud.

Raymond Bridgmon testified that 'we talked about the foundation and he [Celoria] said it was a good concrete foundation.' This representation, considered in the setting in which it was made, can be regarded as constituting a representation that the house was properly supported. Celoria denied that he made any...