Eaton v. Sontag

• Decision Date: 01 June 1978
• Parties: Randell C. EATON et al. v. Frederick SONTAG et al.
• Court: Maine Supreme Court

Page 33

387 A.2d 33

Randell C. EATON et al. v. Frederick SONTAG et al.

Supreme Judicial Court of Maine.

June 1, 1978.

Alan C. Pease (orally), Wiscasset, for plaintiffs.

Perkins & Perkins by James Blenn Perkins, Jr. (orally), Boothbay Harbor, for defendants.

Before DUFRESNE, C. J., and WEATHERBEE, POMEROY, WERNICK and ARCHIBALD, JJ.

DUFRESNE, Active Retired Justice. ¹

Randell C. Eaton and Evelyn M. Eaton, the plaintiffs, and Frederick Sontag and Marie Sontag, the defendants, prior to April 18, 1973, had met on social occasions during the period of some fifteen years. During the summer season of 1972 the Eatons operated a campground on Knickerbocker Road, in Boothbay, Maine, which they were in the process of developing. Since Mr. Eaton was working in Connecticut and had three more years to go before he could retire from his municipal employment and it became obvious it would be difficult to secure somebody to carry on the management of the camping business for the upcoming season, the Eatons had decided to dispose of their holdings. They listed the property with area realtors. When the Sontags visited them in Connecticut around the Christmas holidays, the Eatons' campground in Boothbay became a recurrent subject of conversation as the Eatons viewed the Sontags as possible purchasers. Though the Sontags displayed no desire to buy the property at that time, the Eatons pursued their initial overtures in the new year by sending the Sontags plans of the campground project together with complete investment costs to date. They followed this with their own visit with the Sontags in Florida during the first week in March. The sale was consummated on April 18, 1973, when the Sontags accepted a warranty deed of the property for the price of eighty thousand ($80,000.00) dollars, paying twenty-six thousand ($26,000.00) dollars cash and giving their note secured by mortgage for the balance of fifty-four thousand ($54,000.00) dollars payable in three (3) years with interest at the rate of six percent (6%) per annum.

The Sontags took possession of their new acquisition that very day, which was the first time they were viewing the campsite on location. Their maiden summer operation was a complete disappointment as they grossed slightly over four hundred ($400.00) dollars. On September 20, 1973 Mr. Sontag dispatched a letter to Mr. Eaton in which he complained generally that the plaintiffs had overcharged the defendants by more than twenty-five thousand ($25,000.00) dollars and that they had misrepresented their gross revenues for the five (5) weeks of operation in 1972 when they claimed they had taken in fifteen hundred ($1500.00) dollars. The letter suggested the Eatons should repurchase the property or make an adjustment respecting the balance of the Sontag obligation. By reply letter, Mr. Eaton denied the overcharge claim and any wrongdoing in their dealings with the Sontags. He refused to renegotiate the terms of the existing note and mortgage. The Sontags continued their payments on the note for the months of October and November, but ceased to make further payments on their obligation thereafter.

This precipitated the plaintiffs' complaint for damages dated April 22, 1974 based on five monthly overdue instalments on the note in the aggregate amount of $1620.00, plus interest and costs. By way of counterclaim, the Sontags sought rescission of the sale, cancellation of the note and mortgage, and refund to them of the moneys paid to the Eatons at the closing, on the ground they had been induced to enter into the purchase of the campsite by the fraud of the Eatons.

The parties stipulated that the amount due on the note was $1296.00, and the case was tried before a Lincoln County jury on the counterclaim. The jury returned a unanimous verdict for the plaintiffs in the amount stipulated and judgments were entered in favor of the plaintiffs and against the defendants on the complaint and counterclaim. The defendants have appealed. We deny their appeal.

The charge of fraud which the defendants set out to prove against the plaintiffs as alleged in the counterclaim was that the Eatons misrepresented to them that the campsite was a gold mine; they had taken in fifteen hundred ($1500.00) dollars in five weeks of their first season of operation; there was city water on the premises; the Sontags could live on the premises year-round; also they failed to disclose that the expenditures incurred in the development of the campground did not reflect the true value of the property.

This Court stated in Getchell v. Kirkby, 113 Me. 91, 92 A. 1007 (1915), that

"(a) contract obtained through false and fraudulent representations may be rescinded or affirmed at the election of the party defrauded, and this principle applies to contracts under seal, as well as to other classes of contracts. Deeds (including mortgage deeds) procured by covin or fraud as between the parties, are as dead as forged deeds."

Again, in Getchell v. Kirkby, supra, at page 95, 92 A. 1007, at 1008, this Court quoted with approval the rule applied in Union Railroad Company v. Dull, 124 U.S. 173, 183, 8 S.Ct. 433, 437, 31 L.Ed. 417 (1888):

" 'Cancelling an executed contract is an exertion of the most extraordinary power of a court of equity. The power ought not to be exercised except in a clear case, and never for an alleged fraud, unless the fraud be made clearly to appear; never for alleged false representations, unless their falsity is certainly proved, and unless the complainant has been deceived and injured by them.' "

In Horner v. Flynn, Me., 334 A.2d 194 (1975), we stated at page 200:

"We think it is the considered policy of the law that a litigant who asserts fraud will be held to fail to meet his burden of proof by a preponderance of the evidence unless he produces evidence having strong capability to induce belief."

Again, expressing the standard of proof in affirmative terms we added in Horner that, because of the nature of the issue of fraud in any civil litigation, "evidence will constitute preponderance only if it is clear evidence, convincing evidence and unequivocal evidence." Id. at page 200.

The jury exonerated the plaintiffs from any fraud which induced the defendants to purchase the plaintiffs' campground. From this record, we cannot say that the jury was wrong as a matter of law. The jury could rationally conclude that there was not that qualitative evidence of clear and convincing proof of fraud.

We are aware that we said in Getchell v. Kirkby, supra, "rescission does not follow unless the vendee does abandon possession to the vendor." Here, the issue of fraud to support rescission was tried on the theory that the plaintiffs had refused to accept the defendants' offer to reconvey the premises. Without expressing any opinion on the sufficiency of compliance with the reference rule in this case, we will discuss the several points of error raised in this appeal.

The defendants argue on appeal that the past association of the parties as social friends for the period of fifteen years raised their relationship in connection with any business transaction between them to one of a confidential nature, and, under such circumstances, the rule of caveat emptor did not apply, but rather, there existed a duty on the part of the plaintiff vendors to disclose to the defendant vendees the plaintiffs' financial embarrassment by reason of the campground development instead of representing the operation as a gold-mine opportunity. We disagree.

We agreed in Ruebsamen v. Maddocks, Me., 340 A.2d 31 (1975) that the "fiduciary or confidential relation" concept when used in connection with improper influence affecting the validity of some transaction was one of broad application and that it embraced not only technical fiduciary relations such as may exist between parent and child, guardian and ward, attorney and client, etc., but may also encompass relationships wherein confidence is actually reposed in another by reason of their social ties, citing Eldridge v. May, 129 Me. 112, 150 A. 378 (1930).

In Eldridge, we recognized that

"(f)raud in equity includes all willful or intentional acts, omissions, and concealments which involve a breach of either legal or equitable duty, a trust or confidence, and are injurious to another, or by which an undue or unconscientious advantage is taken over another."

But, in Ruebsamen, we said that "(t)he salient elements of a confidential relation are the actual placing of trust and confidence in fact by one party in another and a great disparity of position and influence between the parties to the relation." (Emphasis supplied) Id. at page 35.

"(M)ere kinship itself (mere friendship itself) does not establish a confidential relation; often relatives are hostile to each other or deal at arm's length and act independently and so are held not to have been a confidential relation." (Again, emphasis supplied) Id. at page 35.

"(E)ven where specific facts tend to show intimate dealings, as between family members or friends, the existence of a confidential relationship remains a question of fact and need not be imposed by law. If the parties to a transaction are of mature years and in full possession of their faculties, their continuing lifelong relation as sisters-in-law and friends will not give rise to a confidential relation as a matter of law unless there is evidence of superior intellect or will on the part of the one or the other, or of trust reposed or confidence abused." Id. at page 35.

See also, Chandler v. Dubey, Me., 325 A.2d 6 (1974); Atlantic Acoustical & Insulation Co. v. Moreira, Me., 348 A.2d 263 (1975).

The authorities do agree that friendship between the parties to a transaction in itself is not sufficient to show a confidential relation. Carpenter & Carpenter v. Kingham, 56 Wyo. 314, 109 P.2d 463, 475 (1941); Cox v. Schnerr, 172 Cal. 371, 378, 156 P. 509, 512 (1916).

The expression "confidential relation"...