Drake v. Nunn

• Decision Date: 19 April 1923
• Docket Number: 8 Div. 413.
• Citation: 210 Ala. 136,97 So. 211
• Parties: DRAKE v. NUNN ET AL.
• Court: Alabama Supreme Court

97 So. 211

210 Ala. 136

DRAKE v. NUNN ET AL.

8 Div. 413.

Supreme Court of Alabama

April 19, 1923

Rehearing Denied June 30, 1923.

Appeal from Circuit Court, Madison County; Robert C. Brickell Judge.

Action by F. M. Drake against J. E. Nunn and Dan Osborn. From a judgment for defendants, plaintiff appeals. Reversed and remanded.

The primary facts upon which the plaintiff, Drake, grounds his right of action are as follows:

The defendant Nunn owned 160 acres of farm land which he sold to the defendant Osborn in the summer of 1919, for $16,000. Osborn paid $2,000 in cash, and Nunn made a deed to him which was placed in escrow with the Huntsville Bank & Trust Company, to be delivered to Osborn upon the latter's payment to the bank of the balance of $14,000 on or before January 5, 1920.

Thereafter in September, 1919, on the suggestion of either Nunn or Osborn, Drake agreed with them to purchase the land; his undertaking being to pay Osborn $2,500 for his contract with Nunn, of which $2,000 was to reimburse Osborn for cash purchase money paid to Nunn, and $500 was for profit to Osborn.

On his part, Nunn gave to Drake an instrument in writing acknowledging receipt of $2,000 from Drake as part payment on the land sold to him, as shown by the deed contemporaneously deposited with the bank-which deed was to be delivered by the bank to Drake provided, on or before January 5, 1920, Drake paid over to the bank $14,000 in cash, or else at his opinion, paid over $5,000 in cash, and executed and delivered to the bank his note and mortgage for $9,000, payable in one year, at 8 per cent. covering the land purchased. A further stipulation was that if Drake should fail to take up the escrow deed as stipulated, on or before January 5, 1920, he would forfeit to Nunn the cash payment of $2,000 as liquidated damages.

Theretofore, in 1917, Nunn had executed a mortgage, including this and other lands, to the Chickamauga Trust Company, securing a debt of $34,000, $30,000 of which remained unpaid; and in 1918 he had executed a second mortgage on this and other lands to I. Schiffman & Co., securing a debt of $56,500. Both of these mortgages had been duly recorded, and stood thus on the record of mortgages.

Drake had no knowledge nor notice of the existence of either mortgage, and the evidence does not indicate that Osborn knew of this existence. The defendant Nunn did not disclose the fact of their existence to Drake during their negotiations, nor at nor prior to the time of making the contract of sale with Drake when he paid the $2,500 to Osborn; but Nunn made no representations on the subject, and did nothing to actively deceive or mislead Drake in respect thereto.

Drake testified that he first learned of the existence of the Chickamauga Trust Company's mortgage in a conversation with Nunn about December 1, 1919, and that Nunn then told him he would have to get it released before he could let him (Drake) have the place. Drake then examined the records and saw the record of the mortgage. This mortgage, as the record shows, was transferred by the mortgagee to State Life Insurance Company of Indiana, in October, 1917. Drake did not learn of the existence of the Schiffman mortgage until January 7, 1920.

Drake testified further:

"A few days *** before the 5th of January I talked with Nunn and told him I would be here on the 5th, and he told me that he would also be here, and that he was ready to take the matter up and give the deed. He did not say anything about the release that day, but had told me before that day that he would have it here (in Huntsville)."

Plaintiff stated his case in twelve counts, the first four of which were the common counts.

Counts 5, 6, and 12, to which demurrer was sustained, charge deceit and fraudulent concealment.

Count 7 declares for deceit in the sale of lands, "which the defendants represented to plaintiff as being free of incumbrance and said defendants knew at the time of said sale to plaintiff that said land had been mortgaged to others to secure the sum of $87,500, which defendants knew was not paid," etc.

Count 8 claims damages for that defendants sold to plaintiff the lands in question for the sum of $16,500 "and defendants fraudulently represented to plaintiff that said lands were free of incumbrance and deceived plaintiff by concealing from him the fact that at the time there were two mortgages" thereon which "defendants knew at the time were not paid or satisfied"; that Nunn executed a deed to plaintiff, covenanting that he had a good right to sell the lands in question free of incumbrance "which defendants knew at the time was untrue"; the plaintiff was induced to pay to Osborn the sum of $2,500; that the deed was placed in escrow with the bank, to be delivered when plaintiff performed the conditions agreed on or before January 5, 1920; that thereafter plaintiff learned of the existence of the mortgages, which defendants promised to have released on January 5, 1920, but that defendants failed to secure such release, etc.

Counts 9, 10, and 11, to which demurrer was sustained, declare upon a breach of the covenant of warranty contained in the deed executed by Nunn to plaintiff.

Defendants plead non debitat, the general issue, and special pleas 3 to 9, inclusive. The third plea avers that after the transaction between Nunn and Osborn, the latter sold to Drake under the circumstances shown; that the two came to Nunn with a request for the substitution of Drake for Osborn; that Nunn "for the accommodation of the said Drake and Osborn agreed to this," and executed a deed conveying the lands to Drake together with an agreement by which Drake was to pay the balance of $14,000 on or before January 5, 1920, or $5,000 cash on that date, the remainder secured by mortgage, one year from date. The plea sets up as matter of avoidance that Drake failed either to pay the entire amount due or to pay $5,000 and deliver a mortgage for the balance. The other pleas set up in defense that Drake did not pay or offer to make payment to the bank on or before the date stated; that Nunn was ready, able, and willing to perform, and Drake did not make tender as agreed; that it was agreed Nunn should discharge the lien of the mortgage after Drake had performed; and that he had been ready, able, and willing to so discharge, etc.

J. H. Ballentine, of Huntsville, for appellant.

R. E. Smith and White & Watts, all of Huntsville, for appellees.

SOMERVILLE J.

It is clear that there is no foundation in the evidence for any recovery, under any count of the complaint, against the defendant Osborn. He merely sold to plaintiff his contract for the purchase of the land from the defendant Nunn, and he was guilty of no deceit, either actively or passively, with respect to the incumbrances complained of; nor was he guilty of any breach of warranty or of contractual obligation. So far as he was concerned, the rule of caveat emptor must be applied to plaintiff.

The evidence shows without dispute that the deed made by Nunn to plaintiff, and placed as an escrow with the Huntsville Bank, to be delivered upon plaintiff's compliance with the conditions of the contract of sale, was never delivered and never became operative as an executed conveyance, and therefore no action could lie for the breach of any of its covenants.

Plaintiff's right of action against Nunn, if any, must be grounded on one of two propositions: (1) Deceit in not disclosing the existence of the outstanding incumbrances; or (2) breach of the executory contract of sale in not removing the incumbrances, or in not being able, ready, and willing to do so whenever plaintiff, being himself able, ready, and willing, offered performance on his part, on or before January 5, 1920.

It is the settled law of this state that the vendor of personal property owes to the vendee the duty of disclosing to him any fact, unknown and not apparent to him, which would impair the vendor's title; and the failure to make such disclosure is an actionable deceit. Corry v. Sylvia Y Cia, 192 Ala. 550, 68 So. 891, Ann. Cas. 1917E, 1052. The same principle is here invoked as to a sale of land, where there were outstanding incumbrances, apparent upon the mortgage records, which were accessible to the vendee's inspection had he chosen to wait and examine them.

It is perhaps impossible to deduce from our decisions on this subject a rule which is entirely harmonious with all that has been written. See Younge v. Harris' Adm'r, 2 Ala. 108; Steele v. Kinkle, 3 Ala. 352; Cullum v. Branch Bank, 4 Ala. 21, 37 Am. Dec. 725; Van Arsdale v. Howard, 5 Ala. 596; Morgan v. Patrick, 7 Ala. 185; Bryant's Ex'r v. Boothe, 30 Ala. 311, 315, 68 Am. Dec. 117; Jordan v. Pickett,

78 Ala. 331, 338; Meeks v. Garner, 93 Ala. 20, 8 So. 378, 11 L. R. A. 196; Hawkins v. Merritt, 109 Ala. 261; 19 So. 589; Rarden v. Badham, 142 Ala. 500, 38 So. 1029; Corry v. Sylvia Y Cia, 192 Ala. 550, 68 So. 891, Ann. Cas. 1917E, 1052; Consumers' C. & F. Co. v. Yarbrough, 194 Ala. 482, 69 So. 897.

But on principle, and in substantial harmony with our best-considered cases, we are constrained to hold that, where the contract for the sale of land is executory on both sides-the purchaser having parted with nothing of value-the agreement to convey at a future time is consistent with an intention to procure a release of outstanding incumbrances or to cure existing defects of title, and the existence of such incumbrances or defects, though not disclosed to the purchaser, is not a fraud upon him and will not support an action for deceit, nor justify a rescission of the contract. In such a case the vendor may honestly intend to remove the incumbrances or cure the defects in due season to convey a good title to the purchaser when...