Caples v. Morgan

• Decision Date: 21 November 1916
• Parties: CAPLES v. MORGAN.
• Court: Oregon Supreme Court

160 P. 1154

81 Or. 692

CAPLES v. MORGAN.

Supreme Court of Oregon

November 21, 1916

Department 2.

Appeal from Circuit Court, Multnomah County; C. U. Gantenbein Judge.

Action by Jane Caples against W. L. Morgan. From judgment for defendant, plaintiff appeals. Reversed and remanded.

This is an action to recover sundry monthly installments of rent alleged to be due upon a five-year lease of real property in Portland, the execution of which and possession thereunder being admitted. That anything is due is denied. Answering affirmatively, the defendant alleged, in substance, that he was the principal stockholder in a firm of architects engaged in the business of building apartment houses and family dwellings; that oral negotiations were entered into between the defendant and the agent of plaintiff for the erection upon the real property of the latter of an apartment house containing 71 rooms, to be leased to the defendant for the term of five years at the rate of $8 per room per month; that before the negotiations were completed and the lease finally executed the plaintiff's agent falsely represented to the defendant that a third party had offered to take a lease for that term at the rate of $10 per room per month, in which event, if accepted, the defendant firm would not be allowed to construct the building; that this representation was made for the purpose of inducing the defendant to agree to the larger rental; that, relying upon the statement mentioned and believing it to be true, the defendant agreed to the lease in question at the larger rental, and as he says "will be obliged for the remainder of the term of said lease to pay the sum of $2 per room per month more than he had agreed with said agent to pay for the same, or than said plaintiff was offered for same, or could have then or now receive from any other person therefor, or than same was then or is now worth, and defendant was, has been, and is damaged by reason thereof and thereby in the sum of $8,520." A demurrer to the further and separate answer on the ground that it did not state facts sufficient to constitute a cause of defense to the complaint or counterclaim against the plaintiff, and that the defendant's cause of action set forth as a counterclaim did not accrue within two years prior to the commencement of this action nor within two years prior to the filing of the counterclaim, was overruled. Every allegation in the new matter of the answer was denied by the reply, except as expressly admitted therein. It admits that the agent was authorized to negotiate for and find a tenant for an apartment house to be erected on the property, and to negotiate for proposals to construct the same, but that he was not authorized to enter into such a lease, nor to conclude the contract for the construction of the building that the defendant proposed to the agent to take a lease on the building to be erected for five years on the basis of $8 per room per month, but that the proposal was never accepted. It also admits that the agent represented that the third party had made an offer for a lease running for the same term at $10 per room per month, and avows that the plaintiff is informed and believes, and therefore alleges, that the offer had, in fact, been made; and, lastly, affirmatively avers the defense of the statute of limitations, for that it appears that the alleged fraud was perpetrated April 11, 1910, whereas the answer was not filed until more than two years after that date. A general demurrer to the new matter in the reply was sustained, apparently on the ground that the questions involved had been settled by the ruling on the demurrer to the allegations of the answer. During the progress of the trial, over the objection of the plaintiff, the defendant was allowed to amend his answer so as to call it set-off and recoupment instead of counterclaim, and by changing the prayer to the effect that the plaintiff take nothing and defendant be dismissed with his costs and disbursements. The jury found a special verdict to the effect that the statement of the agent that the third party had offered $10 per month was false, that defendant in taking the lease relied upon that offer, and that but for the offer he would have secured it at a rental of $575 per month for the whole building; and as a general verdict the jury found for the defendant. From the judgment rendered on this verdict, the plaintiff appeals.

M. L. Pipes and J. W. Reynolds, both of Portland (Flegel, Reynolds & Flegel, of Portland, on the brief), for appellant. T. G. Greene and E. B. Seabrook, both of Portland (Bauer & Greene, A. H. McCurtain, and Malarkey, Seabrook & Dibble, all of Portland, on the brief), for respondent.

BURNETT, J. (after stating the facts as above).

Complaint is made about permitting the amendment of the answer. It is not shown, however, that the plaintiff was taken by surprise or that her rights were prejudiced thereby. She could not have experienced any injury on that account; for, whereas the original answer demanded a judgment for the excess of the damages alleged over what should be found due to the plaintiff by the terms of the lease, the change allowed her to escape any judgment for this possible overplus. Neither can the statute of limitations be urged against a mere defense of the kind here involved. Our statute stating the time within which actions may be brought refers to instances where the party claiming to have been defrauded institutes proceedings on his own behalf for the recovery of damages. It does not contemplate mere resistance of a claim founded upon a contract into which the defendant has been inveigled by the fraudulent conduct of the other contracting party. The rule is thus stated by Mr. Justice Henshaw in Hart v Church, 126 Cal. 471, 58 P. 910, 77 Am. St. Rep. 195:

"It is also true that, where a party seeks relief upon the ground of fraud or mistake, the action must be commenced within three years after the discovery of the facts constituting the fraud or mistake; but a different case is presented where the party who has procured the fraudulent contract, or who seeks to take advantage of it, asks to have it declared valid or to enforce its executory terms, and is thus himself asking affirmative relief. The three-year statute of limitations does not bar the defendant in such a case from objecting to the validity or to the enforcement of the contract upon the ground of fraud. It is not incumbent upon one who has thus been defrauded to go into court and ask relief, but he may abide his time, and, when enforcement is sought against him, excuse himself from performance by proof of the fraud."

To like effect are the cases of Evans v. Duke, 140 Cal. 22, 73 P. 732; State v. Tanner, 45 Wash. 348, 88 P. 321; Advance Co. v. Doak, 36 Okl. 532, 129 P. 736. The injured party is not bound to presume that his adversary will at all events endeavor to enforce the contract which is corrupted with his own fraud, at least beyond what would be justly his due. A wronged individual may safely rest on a mere defense grounded upon the deceit of the other party so long as the contract itself is liable to be enforced. The taint is inherent in the agreement, and as a defense will last as long as the convention it affects.

The most difficult question to be determined is whether or not the false representation that the third party had offered $10 per month is material and vitiates the contract or is a basis of damage pro tanto. That the representation was false is established by the special verdict of the jury beyond our power to investigate. So far as the precise question thus presented is concerned it is new in this state. There are many authorities which sustain the position of plaintiff. The argument is stated in Williams v. McFadden, 23 Fla. 143, 1 So. 618, 11 Am. St. Rep. 345, as follows:

"To entitle a party to maintain an action for deceit by means of false representations, he must, among other things, show that the defendant made false and fraudulent assertions in regard to some facts or facts material to the transaction in which he was defrauded, by means of which he was induced to enter into it. The misrepresentation must relate to alleged facts, or to the condition of things as then existent. It is not every misrepresentation relating to the subject-matter of the contract which will render it void or enable the aggrieved party to maintain an action for deceit. It must be as to matters of fact, substantially affecting his interests, not as to matters of opinion, judgment, probability, or expectation"--citing 3 Suth. Dam. 484, and Long v. Woodman, 58 Me. 49.

The reasoning seems to be that the representation does not affect or pretend to affect the intrinsic qualities of the property under consideration; that the statement of the offer of the third party is but another way of saying that he has an opinion that the value is so much; that opinions are not material, and may be set down as "trader's talk." A fair statement of the rule relied upon by the plaintiff is found in Beare v. Wright, 14 N.D. 26, 103 N.W. 632, 69 L. R. A. 409, 8 Ann. Cas. 1057:

"It is apparent that the representation as to what others paid for the stock did not affect its value. It has not been found that there were any fiduciary relations existing between the parties, or that there were any other facts or circumstances giving rise to an implied agreement that the price paid by the vendor or others should be the price to the plaintiff. It is not found or admitted that there was any express contract to that effect. In the absence of special circumstances of that nature, a mere false statement as to the price paid by the vendor or others is not actionable deceit"--citing many authorities.

Again in Cole...