Ellenburg v. Edward K. Love Realty Co.

• Decision Date: 20 April 1933
• Docket Number: 30319
• Parties: Hattie Ellenburg v. Edward K. Love Realty Company, a Corporation, Appellant
• Court: Missouri Supreme Court

59 S.W.2d 625

332 Mo. 766

Hattie Ellenburg v. Edward K. Love Realty Company, a Corporation, Appellant

No. 30319

Supreme Court of Missouri

April 20, 1933

Appeal from Circuit Court of City of St. Louis; Hon. Frank Landwehr, Judge.

Affirmed.

Gustave A. Stamm and Maurice L. Stewart for appellant.

(1) It is fundamental that plaintiff must recover, if at all, on her right of action as it existed at the institution of the suit. Tobin v. McCann, 17 Mo.App. 483. (2) Plaintiff having elected to pursue the equitable remedy for rescission of the contract of purchase, and having pleaded false representations by the defendant as the only ground of equitable jurisdiction, the evidence must show: (a) That the defendant has made a representation in regard to a material fact. (b) That such representation is false. (c) That such representation was not actually believed by the defendant on reasonable grounds to be true. (d) That it was made with intent that it should be acted upon. (e) That it was acted on by the plaintiff to her damage. (f) That in so acting on it the plaintiff was ignorant of its falsity and reasonably believed it to be true. (g) That the representation must have been the inducement for the contract. These are the necessary elements which must be shown by clear and convincing evidence in order to entitle plaintiff to maintain her action. Morgan County Coal Co. v. Halderman, 254 Mo. 641 163 S.W. 828; Southern Development Co. v. Silva, 125 U.S. 247, 31 L.Ed. 678; Levermore v. Middlesborough Town Lands Co., 106 Ky. 163, 50 S.W. 13; Towels v. Campbell, 204 Ky. 591, 264 S.W. 1107, 50 A. L. R. 175. (3) In an action for rescission based upon false representations, the evidence must show that the false representations were of a positive nature and were the inducement which influenced the plaintiff to enter into the contract now sought to be rescinded. McCaw v. O'Malley, 298 Mo. 413; Bryan v. Hitchcock, 43 Mo. 531; Anderson v. McPike, 86 Mo. 300; Younger v. Hoge, 211 Mo. 444, 111 S.W. 23; Birch Tree State Bank v. Dowler, 167 Mo.App. 373, 151 S.W. 786. (4) Where the evidence shows, as in this case, that the plaintiff, through her own agents, made a seperate investigation and nothing was done to prevent that investigation from being as full as the plaintiff chose, and no effort was made to hinder such investigation and the means of knowledge were open and at hand to both parties, the reliance upon the alleged misrepresentations of the defendant is not shown, and the plaintiff is accordingly not entitled to recover on account of defendant's alleged misrepresentations. Brown v. South Joplin Lead Co., 194 Mo. 706; Morgan County Coal Co. v. Halderman, 254 Mo. 645; Shappirio v. Goldberg, 192 U.S. 241, 48 L.Ed. 419; Farrar v. Churchill, 135 U.S. 609, 34 L.Ed. 250; Hagee v. Grossman, 31 Ind. 223; Eppley v. Kennedy, 131 A.D. 1, 115 N.Y.S. 360; Palmer v. Shields, 71 Wash. 463, 128 P. 1051; McCarter v. Zeller, 35 Cal.App. 593, 170 P. 636. (5) The application to this case of the rule that the cancellation of an executed contract is an exertion of the most extraordinary power of a court of equity, which ought not to be exercised except in a clear case and upon strong and convincing evidence requires a finding for defendant. Linneman v. Henry, 316 Mo. 683, 291 S.W. 109; Nichols v. Wimer, 230 S.W. 345; Cohron v. Polk, 158 S.W. 609; Jackson v. Wood, 88 Mo. 78; Bryan v. Hitchcock, 43 Mo. 531; Bragg v. Kirksville Packing Co., 226 S.W. 1013. (6) Hattie Ellenburg, having remained at all times an undisclosed principal, must take the contract for the purchase of the deed of trust by her agent J. M. Levi, as she finds it, subject to all the equities and defenses against the agent as if the agent were the sole principal; and since Levi, her agent, could not have maintained rescission based on false representations, plaintiff's action must fail. Story on Agency, sec. 420; Henderson v. Botts, 56 Mo.App. 143; Foreign Trade Banking Corp. v. Gerseta Corp., 237 N.Y. 265, 142 N.E. 607, 31 A. L. R. 935. (7) The misrepresentations alleged to have been made by the unidentified woman in defendant's office to Mrs. Leo Ellenburg, without inquiry by Mrs. Leo Ellenburg as to her position or authority, are not such representations as would justify a person of ordinary prudence, conversant with business usages and the nature of the particular business and acting in good faith, in reasonably relying thereon. 1 Mechem on Agency, sec. 736. (8) Representations which constitute mere expressions of opinion furnish no basis for an action to rescind a contract. Cornwall v. McFarland Real Estate Co., 150 Mo. 383; Brown v. South Joplin Lead Co., 194 Mo. 704. (9) Misrepresentations as to matters of law do not constitute fraud since the law is presumed to be equally within the knowledge of all parties. Upton v. Tribilcock, 91 U.S. 45, 23 L.Ed. 205; 12 R. C. L. 295, 296; Torbitt v. Hayes, 196 S.W. 789. (10) Fraud cannot be imputed by law to one who makes representations as to the title to real estate in honest reliance upon a certificate of title. Elwell v. Russell, 71 Conn. 462, 42 A. 862. (11) Relief in equity must be bottomed upon some fundamental ground of equity jurisdiction. Haydon v. Railroad, 222 Mo. 140. (12) Where the petition shows upon its face that adequate relief at law was available to the plaintiff, the petition lacks the essential jurisdictional facts essential to relief in equity; and this jurisdictional defect may be raised by the adversary, or the court of its own motion, at any stage of the proceedings. Benton County v. Morgan, 163 Mo. 661, 64 S.W. 123; Griffin v. Robinson, 204 S.W. 28; Haydon v. Railway Co., 222 Mo. 126, 121 S.W. 19; Torbit v. Warner, 217 S.W. 42; Albers v. Moffitt, 187 S.W. 903; Powell v. City of Louisville, 141 F. 962; Stacey v. Robinson, 184 Mo.App. 64. (13) Where the plaintiff, as in this case, purchases an investment security, such as a deed of trust, which is of a character well known in the market, and the contract of sale was made between parties who knew, or should be presumed to have known, the custom of the trade in relation thereto, it was error on the part of the trial court to exclude evidence of the existing trade custom. People's Natl. Bank v. Central Trust Co., 179 Mo. 666. (14) In order to recover in this case, plaintiff will be restricted to the grounds for relief set forth in her first amended petition, to-wit, false representations; and failure to establish the alleged false representations requires a reversal of the decision below, and a finding for defendants, no other or different basis for relief being now available to the plaintiff. Thiemann v. Heinze, 120 Mo. 630, 25 S.W. 534; Torbitt v. Hayes, 196 S.W. 791.

Taylor, Mayer & Shifrin, Jones, Hocker, Sullivan & Gladney, Lon O. Hocker and Ralph T. Finley for respondent.

(1) It is universally held that a court of equity will decree a rescission of a contract where the same is entered into under a mistake of fact on the part of one party and misrepresentations by the other party contributing to such mistake, and in such case it is no defense that such misrepresentations were innocently made. 21 C. J. 87-88; 39 Cyc. 1260, 1261; 12 R. C. L. 343, sec. 98; Lynch v. Land & Lumber Co., 135 Mo.App. 672; Cook v. Smith, 184 Mo.App. 566; Buckman v. Bankers Mortgage Co., 263 S.W. 1051; Hickey v. Drake, 47 Mo. 371. (2) In such cases it is immaterial whether the misrepresentations were made with a fraudulent intent, because if they were innocently made the plaintiff would be entitled to recover, and if they were fraudulently made the plaintiff would likewise be entitled to recover. Griffith v. Townley, 69 Mo. 13; Goodin Mercantile Co. v. Organ, 186 S.W. 590; Smith v. Means, 155 S.W. 457; Devero v. Sparks, 176 S.W. 1057; Peters v. Lohman, 171 Mo.App. 482; Norton v. Bohart, 105 Mo. 632; 13 C. J. 381. A wealth of authorities will be found in other jurisdictions supporting the foregoing principle. Case Notes, 49 L. R. A. (N. S.) 1222; 50 L. R. A. (N. S.) 1091; 67 Am. Dec. 675. The decision of Judge Faris in Morgan County Coal Co. v. Halderman, 254 Mo. 596, does not support appellant's contention that false representations must have been fraudulently made in an action for equitable rescission, because in that case Judge Faris specifically held that it is not necessary to show actual knowledge of the falsity of such representations in order to justify a rescission, and his decision was expressly based on other grounds. Morgan County Coal Co. v. Halderman, 254 Mo. 641. (3) The plaintiff intended to purchase a first deed of trust. The evidence shows either an express or implied warranty that it was a first deed of trust. In such case that the deed of trust should be a first deed of trust being the principal element and condition of the contract, the plaintiff was entitled to a rescission. 13 C. J. 381; Smithers v. Bircher, 2 Mo.App. 509; Smith v. Means, 155 S.W. 457. (4) The remedy of rescission on the ground of mistake induced by false representations, mutual mistake or breach of warranty, express or implied, being a remedy cognizable alone in equity, the remedy is concurrent with that at law, and in such case the defense of adequate remedy at law is not available. 1 Pomeroy's Equity Jurisprudence, pp. 168-169, sec. 138, p. 171, sec. 139; Lime & Cement Co. v. Citizens Bank, 158 Mo. 280; Hanson v. Neal, 215 Mo. 283; Pratt v. Clark, 57 Mo. 189; Clinkenbeard v. Weatherman, 157 Mo. 112; Ryan v. Miller, 236 Mo. 508; Hart v. Daggett, 6 S.W.2d 147. (5) The releases of the two prior deeds of trust by Bell and Grant were fraudulent and void. Crecelius v. Home Heights Co., 217 S.W. 508; Cooper v. Newell, 263 Mo. 200.

Frank P. J. All concur, except Hays, J., not voting, because not a member of the court at the time cause...