Carter v. Hoblit, S-1801

• Decision Date: 13 May 1988
• Docket Number: No. S-1801,S-1801
• Citation: 755 P.2d 1084
• Parties: James E. CARTER, Sr. and Eleanor B. Smalley, widow and successor in interest to Edward B. Smalley, deceased, Appellants, v. D.P. HOBLIT, Appellee.
• Court: Alaska Supreme Court

Page 1084

755 P.2d 1084

James E. CARTER, Sr. and Eleanor B. Smalley, widow and successor in interest to Edward B. Smalley deceased, Appellants, v. D.P. HOBLIT, Appellee.

No. S-1801.

Supreme Court of Alaska.

May 13, 1988.

Rehearing Denied June 28, 1988.

Albert Maffei, Anchorage, for appellants.

G. Kent Edwards, Hartig, Rhodes, Norman, Mahoney & Edwards, Anchorage, for appellee.

Before RABINOWITZ, C.J., and BURKE, MATTHEWS, COMPTON and MOORE, JJ.

OPINION

MATTHEWS, Justice.

The trial court granted summary judgment in favor of D.P. Hoblit. We conclude that there are genuine issues of material fact and reverse.

FACTS ¹

James E. Carter, Sr., Edward B. Smalley, and D.P. Hoblit agreed in 1948 to purchase land owned by D.D. and Myrtle Clover. The purchase price was $750 which Hoblit agreed to pay with the understanding that he would be promptly reimbursed by Carter and Smalley. Title was to be taken in the names of the three purchasers. Hoblit bought the property from the Clovers on March 23, 1948, but took the deed in his name alone. Carter and Smalley each paid Hoblit $250 as their share of the purchase price in a timely fashion. They did not know that the deed was solely in Hoblit's name. The deed was not recorded until June 21, 1973.

Hoblit, Carter, and Smalley were friends and intended to subdivide the property into three lots on which each would build a home. To this end the parties started to survey the property but the survey was aborted when they were doing clearing work and Hoblit cut his leg with an ax, requiring emergency medical treatment. This seemed to mark the end of their joint development plan and apparently nothing has been done with the property to this date.

Since 1948, Hoblit has paid all taxes and assessments against the property. From time to time, Smalley or Carter offered reimbursement, but Hoblit would state that there was no problem since the taxes were quite low--until 1959 the taxes were only $5 per year. Edward Smalley died on May 23, 1966 and appellant Eleanor Smalley succeeded to his interest in the property. In the early 1970's Hoblit sought Carter's advice concerning the Greater Anchorage Area Borough's efforts to obtain a sewer right-of-way on the property. It was suggested that the three owners share the expenses of dealing with the Borough equally but Hoblit declined, saying it was no financial hardship to him and that the expenses could be evened out when the property was sold.

In May of 1977, Hoblit invited Carter and Eleanor Smalley to his house. There Hoblit explained that he wanted to purchase the property from them for a daughter who was getting married. He offered to buy each share for $10,000. Carter and Smalley had the property appraised and discovered that it was worth between $96,500 and $104,000. They declined the offer.

Carter first learned that the title was only in Hoblit's name in February, 1981 when, during the process of a divorce, a title search was conducted. Eleanor Smalley was advised of this soon thereafter.

PROCEEDINGS

After negotiations between the parties failed to settle their differences, this action was filed on December 15, 1983. The complaint alleges that Carter, Eleanor Smalley, and Hoblit are tenants in common, or, alternatively, partners, and requests a decree requiring Hoblit to convey an undivided one-third interest to each plaintiff and for related relief.

Hoblit moved for summary judgment on four grounds: the statute of limitations, laches, the statute of frauds, and on the merits. The motion was granted without specifying reasons. We therefore assume that each ground presented was found to be valid. Carter, who has taken an assignment from Eleanor Smalley, appeals.

I. STATUTE OF LIMITATIONS

Alaska Statute 09.10.230 ² provides that an action for the determination of a claim to real property must be commenced within ten years. This suit was not brought until some thirty-five years after Hoblit breached the alleged agreement and assumed sole title to the property in question. In the absence of circumstances that would toll the ten year limitations period, this action would be barred.

Carter contends that the period of limitations should be tolled until February of 1981, when Carter discovered the deed recorded in Hoblit's name. He argues that Hoblit concealed his sole ownership through a "thirty-five year course of misrepresentation, false statements, and fraudulent acts."

Alaska Statute 09.10.230 expressly provides that in an action for fraud the running of the time within which an action may be commenced starts from the discovery of the fraud. Fraud can be established by silence or non-disclosure when a fiduciary relationship exists between the parties. W. Keeton, D. Dobbs, R. Keeton & D. Owen, Prosser and Keeton on the Law of Torts § 106, at 738 (5th ed. 1984). A fiduciary relationship will arise where one voluntarily acts as the agent of another, as where one offers to purchase real estate for another. Ray v. Winter, 67 Ill.2d 296, 10 Ill.Dec. 225, 367 N.E.2d 678, 682 (Ill.1977); Restatement (Second) of Agency §§ 1, 13 (1958). The fiduciary has a duty to fully disclose information which might affect the other person's rights and influence his action. E.g., Wilkinson v. Smith, 31 Wash.App. 1, 639 P.2d 768, 771 (1982).

Carter has produced evidence which demonstrates a factual question as to the existence of a fiduciary relationship, and the duties that it entailed. As a fiduciary for Carter and Smalley, Hoblit was obliged to disclose all facts which might affect their interests. One such fact would be the placing of title in Hoblit's name alone. The failure to disclose this information could be viewed as a fraud.

Fraud can also be committed in the absence of a fiduciary duty where the defendant's statements are half truths, or true remarks which omit material information. The Restatement (Second) of Torts § 529 (1977) provides that a literally true statement may be fraudulent if it omits additional qualifying information likely to affect the listener's conduct. "A representation stating the truth so far as it goes but which the maker knows or believes to be materially misleading because of his failure to state additional or qualifying matter is a fraudulent representation." Id.; see also Prosser on Torts § 106, at 738 ("[I]f the defendant does speak, he must disclose enough to prevent his words from being misleading....")

According to the appellants, Carter and Smalley, believing that they held an ownership interest in the property, inquired as to their obligation for property taxes. On occasion in the 50's, 60's, and 70's Hoblit allegedly told them that they need not contribute because he would pay them and the matter would be taken care of later. Hoblit's responses, if the facts are as averred, are deceptive because they imply that Carter and Smalley own the property. The same may be said for Hoblit's refusal to allow Carter and Smalley to pay for the expenses of negotiating with the Borough concerning the sewer right of way.

Further evidence of fraudulent concealment is found in the 1977 discussion which Hoblit had with Carter and Eleanor Smalley where Hoblit is said to have offered to purchase their shares of the property. Again, such an offer would imply an ownership interest, thus concealing from the offerees the fact that title to the property was not in their names.

Having concluded that there is enough evidence of fraud to raise an issue for trial, a legal question must be resolved. The question is whether there is a requirement that a fraud victim act reasonably in order to be entitled to the benefit of the statutory discovery rule of AS 09.10.230. ³ In actions for fraud not involving real property, and thus not involving the statutory discovery rule, we have held that the statute of limitations is tolled only so long as reliance remains reasonable. Sharrow v. Archer, 658 P.2d 1331, 1334 (Alaska 1983).

Section 230, however, speaks of discovery of the fraud as a fact rather than as to when the fraud might have been discovered had the victim acted reasonably. We have suggested in the context of a real estate fraud case on the merits that lack of due care by the victim is not a defense. Cousineau v. Walker, 613 P.2d 608, 614 (Alaska 1980):

The growing trend and tendency of the courts will continue to move toward the doctrine that negligence in trusting in a misrepresentation will not excuse positive willful fraud or deprive the defrauded person of his remedy.

Id. (quoting W. Jaeger, Williston on Contracts § 1515B, at 487 (3d ed. 1970)). Among the reasons for this trend is a perception that fraud victims are often credulous or trusting to an unreasonable extent, and that a due care defense tends to reward the defrauder. ⁴ These reasons apply with equal force to the statutory discovery rule for fraud. Because of them we decline to read a requirement that a fraud victim have acted reasonably into section 230. ⁵

II. LACHES

In Kodiak Elec. Ass'n, Inc. v. DeLaval Turbine, Inc., 694 P.2d 150, 157 (Alaska 1984), reh'g denied, 696 P.2d 665 (Alaska 1985), we held that the appellant's claim for property damage was not barred by the statute of limitations and that the defense of laches was inapplicable to it because "laches is inapplicable to an action at law.... When a party is seeking to enforce a legal right, as opposed to invoking the discretionary equitable relief of the courts, the applicable statute of limitations should serve as the sole line of demarcation for the assertion of the right."

Carter's complaint requests only equitable relief, though the transaction described would support a claim for damages. Therefore, laches is an available defense under the rule of Kodiak Electric. ⁶

We have held that to successfully assert the defense of laches, the defendant must show (1) that the delay by the plaintiff was unreasonable and inexcusable, and (2) that undue prejudice to the defendant resulted from the...