Dubinsky Realty Co. v. Lortz

• Decision Date: 13 July 1942
• Docket Number: No. 12171.,12171.
• Parties: DUBINSKY REALTY CO. et al. v. LORTZ et al.
• Court: U.S. Court of Appeals — Eighth Circuit

129 F.2d 669 (1942)

DUBINSKY REALTY CO. et al. v. LORTZ et al.

No. 12171.

Circuit Court of Appeals, Eighth Circuit.

July 13, 1942.

Robert Burnett and B. L. Liberman, both of St. Louis, Mo. (Henry H. Stern and Dubinsky & Duggan, all of St. Louis, Mo., on the brief), for appellants.

Arnim Beste and J. E. Patton, both of St. Louis, Mo., for appellees.

Before SANBORN and WOODROUGH, Circuit Judges and TRIMBLE, District Judge.

WOODROUGH, Circuit Judge.

This is an appeal by Dubinsky Realty Company and Saul A. Dubinsky from a verdict and judgment rendered against them in an action brought by George Lortz and Lena Lortz, husband and wife.

The suit was brought on August 18, 1937, and the case was tried upon the first amended petition of the plaintiffs and the general denial contained in the answer thereto.

Plaintiffs are farmers living in St. Clair County, Illinois, and defendants are realtors in St. Louis, Missouri. Plaintiffs pleaded that defendants induced them to buy "for investment purposes" the apartment house property in St. Louis County containing ten apartments known as 744-46 Westgate Avenue on September 24, 1932, "for $36,000 by paying $14,000 of said purchase consideration in securities, accepted at $10,000, and $4,000 in cash, balance of the consideration having been represented by deeds of trust in the amount of $22,000 to which said conveyance was made subject." It was alleged that the plaintiffs were induced to buy the property by false and fraudulent representations wilfully made by defendants which were believed and relied upon by plaintiffs and that approximately a year after plaintiffs had acquired the property defendants notified plaintiffs that the property was "running into the red" and defendants then induced plaintiffs to exchange their interest in the Westgate property on December 1, 1934, for an undivided one-fourth interest in another apartment property in the City of St. Louis, known as the Palmer Apartments. That such exchange was also induced by false and fraudulent representations wilfully made by defendants which were believed and relied upon by plaintiffs. That the Palmer Apartment property was subject to the lien of a deed of trust for $107,800 and "there was no equity therein and there is none now." There was no allegation as to what the value of the Westgate property was at the time of plaintiffs' purchase. The amended petition concluded:

"Plaintiffs state they have received no return on their cash investment of $14,000.00 which they were fraudulently and maliciously induced to make in said real properties herein described since January 31, 1934, and have been damaged in the sum of $14,000.00, together with the loss of interest at 6% per annum thereon from January 31, 1934, to date.

"Wherefore, plaintiffs pray judgment against said defendants, and each of them, in the said sum of $14,000.00, and interest from January 31, 1934, to cover actual damages suffered, and because of the reckless and malicious character of said acts, as aforesaid, on the part of the said defendants, plaintiffs pray punitive damages in such sum as will deter others from like or similar acts, said sum not to exceed $20,000.00 or a total judgment of $34,000.00, and interest, and for their costs."

Voluminous testimony was adduced at the trial and at the conclusion defendants moved for directed verdict and also made timely requests for instructions to the jury. The rulings were adverse to them, and the case having been submitted to the jury, a verdict was returned in favor of the plaintiffs in the amount of $18,143.83, which included $11,000 actual damages, $4,643.83 interest and $2,500 punitive damages. The judgment was rendered on the verdict. On this appeal the defendants complain of the instructions given and refused, and of errors assigned in respect to the admission and exclusion of evidence.

Opinion.

Although the first amended petition of the plaintiffs on which their case against the defendants was submitted is somewhat involved, it clearly discloses that it was the plaintiffs' intention to state an action against the defendants for the recovery from them of the sum of $14,000 which the defendants had by means of false representations in connected transactions induced the plaintiffs to invest in the Westgate and Palmer apartment properties, together with interest and punitive damages. The proof adduced by the plaintiffs also established that they did acquire the Westgate property subject to encumbrances of $22,000 and that they did on defendants' inducement exchange their interest in that property for the Palmer apartment property which was subject to an encumbrance of $107,800. Their allegations were that there was no equity in the Palmer apartment property over the incumbrance so that the plaintiffs "have received no return on their cash investment of $14,000.00 which they were fraudulently and maliciously induced to make in said real properties." Defendants' general denial of the allegations tendered the issue whether plaintiffs had lost their investment by reason of the alleged worthlessness of the interest in the Palmer apartments.

But when the court formulated its charge to the jury it did not adhere to the issues tendered by the pleadings. Although it correctly advised the jury that plaintiffs were claiming that they had suffered the damages sought to be recovered by reason of defendants' alleged false representations inducing the plaintiffs to purchase the Westgate property and then to exchange that property for the Palmer property, one property being in the County of St. Louis and the other being in the City of St. Louis, it gave instructions to the jury only in relation to the Westgate property purchase and the charge was entirely silent and contained nothing concerning the exchange of the property for the Palmer property. There was no reference in the instructions to the value of the Palmer property or of the interest which plaintiffs acquired and still retain in it. The jury was instructed¹ that if they found and believed that the defendants had induced the plaintiffs to buy the apartment property in St. Louis County known as Westgate, by means of false representations, knowingly or recklessly made by defendants and believed and relied on by plaintiffs that said property was worth $36,000 and that the rental income was sufficient to pay the operating expenses and to pay off the lien of a deed of trust standing against the property in the sum of $22,000 at the rate of $3,000 each year on the principal, then their verdict should be in favor of the plaintiffs. The instruction was further, that if the finding was in favor of plaintiffs the damages should be assessed at the difference between what would have been the value of the Westgate property if the facts were as represented, and its actual value at the time plaintiffs purchased the property.

It appears to be the law of Missouri that one who has been induced to purchase property by the seller's false representations may keep the property and maintain an action against the seller for the difference between what would have been the value of the property if the facts were as represented and its actual value at the time of purchase,² and the court's instructions submitted this case to the jury as though the pleadings had presented that kind of an action involving plaintiffs' purchase of Westgate and nothing else.

The allegations and prayer of plaintiffs' first amended petition do not permit the interpretation that such was the nature of the plaintiffs' cause of action. It is unequivocally alleged in the pleading that the plaintiffs had received the title to the Palmer property through the exchange of their Westgate property and they attributed the loss of their investment to the alleged worthlessness of the title to the Palmer property, and they therefore pray judgment in the alleged amount of their investment. Their amended petition was filed in the Federal District Court nearly six months before decision in Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, and it is plain that the plaintiffs did not intend to and did not plead in their amended petition the cause of action which the court's instructions submitted to the jury. It is elemental that a party who has sued upon one cause of action may not recover upon another and different one, and the instructions which confined the jury's consideration to the plaintiffs' Westgate purchase and eliminated consideration of the cause of action for the loss of their investment which the plaintiffs had pleaded was erroneous.

It may be that if the plaintiffs had been so advised they could have brought a distinct and single action for loss of the benefit of their bargain in respect to their purchase of the Westgate property under Missouri law. Although such an action could not have been maintained in this Circuit at the time plaintiffs filed their first amended petition (Roosevelt v. Missouri St. Life Ins. Co., 8 Cir., 78 F.2d 752, loc. cit. 762), we assume that it could be since Erie R. Co. v. Tompkins, supra. But even if the plaintiffs' amended petition in this case were construed to state such an action, which it does not, our study of the record has convinced that the verdict and judgment here could not be sustained.

In such an action the measure of recovery is the difference between what would have been the value of Westgate if the facts were as represented and its actual value at the time plaintiffs purchased the property, and it was incumbent on the plaintiffs to establish such actual value at the time of purchase. The defendants called several realtor witnesses who qualified as experts on the value of Westgate and they gave it as their opinion that the true value was about $36,000, or substantially the amount plaintiffs charge defendants represented it to be worth. The plaintiffs did not call any witnesses qualified to give an opinion on the...