Christy v. Heil, 50910

• Decision Date: 17 September 1963
• Docket Number: No. 50910,50910
• Citation: 255 Iowa 602,123 N.W.2d 408
• Parties: Harry R. CHRISTY and Jessie J. Christy, Appellees, v. Dale L. HEIL and Patricia B. Heil, Appellants.
• Court: Iowa Supreme Court

Page 408

123 N.W.2d 408

255 Iowa 602

Harry R. CHRISTY and Jessie J. Christy, Appellees, v. Dale L. HEIL and Patricia B. Heil, Appellants.

No. 50910.

Supreme Court of Iowa.

Sept. 17, 1963.

W. Howard Smith, Cedar Rapids, for appellants.

Warren C. Ackley, Cedar Rapids, for appellees.

STUART, Justice.

Purchasers of real estate brought this action at law for damages which they allege were sustained by reason of the false representations of the vendors concerning the water supply on the property which was the subject of the contract between the parties. The jury returned a verdict in favor of purchasers in the amount of $2,825. Vendors filed a motion for judgment notwithstanding the verdict and a motion for new trial which were overruled by a judge other than the trial judge, who had died before the motions were submitted. Subsequently vendors filed a petition to vacate judgment and for new trial which resulted in a judgment against them for costs. Vendors have appealed both cases which are now consolidated.

The defendant vendors purchased the property in question in 1954 and lived there until August 13, 1960. On May 23, 1960 vendors signed an offer and acceptance on another property and executed the purchase contract August 10, 1960. On August 2, 1960 vendors installed a filter in the water system. They replaced the filter cartridge one time after they had moved out.

Purchasers first saw the property in late August when it was empty. A key was obtained and they were allowed to inspect the premises freely. They admit they were on the premises five to eight times prior to signing the contract.

On September 10 vendors and purchasers were both on the premises. At that time 'Christy (purchaser) told Heil (vendor) that he had a large family, and would like to know the condition of the well, and he said the water was good and clean, we would not have any trouble with the pump, and there was plenty of water, the well is a good well and the water is clean'. This conversation is supported in substance by Mr. Kenny the real estate agent who was also present. On cross-examination Mr. Christy testified that before he moved in 'he did not use the water out there on those occasions when he was out there, but he could not remember, it is possible that he might have'.

The contract of purchase was executed November 4, 1960. While the purchasers were moving into the house on November 5, a water faucet was turned on and only a small stream came out. About this time Mr. Heil drove up and Mr. Christy told him about the water. Heil then, for the first time, told him about the filter and showed him where it was, how to take it apart and clean it and suggested that they get a new filter cartridge.

There is evidence that when the Christys moved in, the water was not good clean water and was not fit for human consumption. Vendors claim they used the water up until the time they moved out and the only thing wrong with it was that it would get cloudy. They admitted having algae difficulty in the past.

The trial court in this case instructed the jury the plaintiffs must establish by clear, satisfactory and convincing evidence that the defendants or either of them knowingly made false representations concerning the condition of the well with intent to deceive plaintiffs and that they as ordinary reasonable prudent persons had a right to rely upon such representations and did so rely. In addition the court instructed upon plaintiffs' duty to investigate as follows:

'You are instructed that the plaintiffs had a duty to investigate the facts pertaining to the land which they were about to purchase, and that if they had the means of investigating and did not investigate, or if the circumstances attending the transaction were such as to put them on inquiry and they did not make any inquiry, they can not recover against these defendants even though the representations made by the defendants were false and known by the defendants to be false and made with the intention to injure the plaintiffs, unless you further find that the plaintiffs were induced to refrain from investigation by acts and statements of the defendants.'

No exceptions were taken to these instructions and they are now the law of the case. They express the law as set forth in the numerous cases involving false representations which grew out of the land doom of the early 1920's. The trend of recent cases is toward the doctrine that a vendor cannot shield himself from liability by asking the law to condemn the credulity of the purchaser. 55 Am.Jur. 539, Vendor & Purchaser, § 67. We are not called upon to review our prior opinions in the light of the present trend in this case and shall not do so.

I. Vendors assign 18 errors which are argued in six divisions. The first six alleged errors are argued under the proposition that a purchaser of realty who examines the premises prior to the purchase thereof, is precluded from recovery upon the grounds that he either did not rely, or had no right to rely upon the alleged false representations.

This is not a correct statement of the law. The mere fact an investigation has been made, does not preclude the purchasers from recovering for damages sustained as a result of vendors' false representations. The facts and circumstances vary in each case. Whether the purchaser should be precluded from recovery because of his investigation or opportunity to investigate is ordinarily for the trier of fact. Bean v. Bickley, 187 Iowa 689, 701, 174 N.W. 675; Eckstein v. Storck, 199 Iowa 1375, 1379, 203 N.W. 796; Hughes v. Greider, 194 Iowa 726, 729, 190 N.W. 420. The evidence, which will be discussed under subsequent divisions, created a jury question in the instant case.

II. In the first division appellant also argues one cannot, after discovery of the falsity of representation, enter into a contract and at the same time demand damages for fraud. This is a correct statement of the law but does not apply to the facts in the instant case as the contract had been signed, down payment made and possession assumed prior to the discovery that the well was no good. The contract was executory only to the extent of the remaining monthly payments and delivery of the deed and abstract.

The majority rule as analyzed in 13 A.L.R.2d 807, 815, is that a party defrauded in the making of a contract who discovers the fraud after having partly performed may continue with performance and also have his action in damages. The Iowa rule seems to be that one cannot recover damages if when one discovers the fraud he is still wholly at liberty to save himself. The theory is that any injury sustained thereafter is self-inflicted. We say in Bean v. Bickley, 187 Iowa 689, 711, 174 N.W. 675, 684:

'The true interpretation of the rule is that if the contract remains executory in whole or part when the fraud is discovered, and no injury will be suffered by rescinding instead of affirming, then any injury caused by proceeding is self-inflicted. There is not and there should not be a general rule, even in an executory contract, that mere discovery and proceeding bars all rights to redress. That must depend on the situation of the wronged party. He should not be compelled to refrain from affirming and proceeding further if rescinding will lose him a profit he would have enjoyed had he been fairly dealt with--much less if rescinding will cause him actual injury. It will be found, upon careful examination, that the cases which, on surface reading, declare that acts of affirmance waive damages are invariably cases (and some of them note the fact) wherein the defrauded party could save himself from further loss by rescinding, and would suffer no injury therefrom.'

In that case payments were still due on notes secured by a mortgage. In the instant case payments are still due under the contract. Purchasers should not be compelled to rescind and lose the advantage of a favorable transaction because false representations were discovered before payment was made in full. The Iowa rule differs little from the general rule in its effect.

III. Appellants urge the statements alleged to have been made were matters of opinion which should not have been relied upon under the circumstances. The alleged statements are that the water was good and clean, there would not be any trouble with the pump, there was plenty of water, and that the well was good. Ordinarily the question of whether the representations made are opinion or fact is for the jury to determine and depends upon the facts and circumstances in each case. Hetland v. Bilstad, 140 Iowa 411, 419, 118 N.W. 422; Owens v. Norwood-White Coal Co., 188 Iowa 1092, 1116, 174 N.W. 851; Boysen v. Petersen, 203 Iowa 1073, 211 N.W. 894; Hall v. Crow, 240 Iowa 81, 34 N.W.2d 195; Lamasters v. Springer, 251 Iowa 69, 99 N.W.2d 300. In this case it was for the jury to determine whether the statements that 'it was a good well' and 'the water is good' were opinion or fact. The jury could have concluded the defendants were in a position to know the actual condition of the well and intentionally misrepresented the facts. On the other hand the jury could have believed the defendants used the well all the time they lived on the premises and had the honest opinion that the well was good. However plaintiffs claim defendants went further and stated that the water was clean. Defendants admit the water was not clean but deny making such statements. Mr. Heil testified: 'I did not tell him that the water was clean, because we had had algae in the water, and I was not one to be loose with the truth'. The question to be determined by the jury was whether the statement was actually made not whether it was opinion rather than fact.

IV. Under the same division, defendants urge that they were entitled to an instruction on 'puffing' or 'dealers talk', as this was a matter of opinion and not a statement of fact. No requested instruction was filed but the...