Fox v. Southern Appliances, Inc., 279

• Decision Date: 28 April 1965
• Docket Number: No. 279,279
• Citation: 264 N.C. 267,141 S.E.2d 522
• Parties: J. G. FOX and wife, Ella C. Fox v. SOUTHERN APPLIANCES, INC., and C. D. Mitchell.
• Court: North Carolina Supreme Court

Page 522

141 S.E.2d 522

264 N.C. 267

J. G. FOX and wife, Ella C. Fox v. SOUTHERN APPLIANCES, INC., and C. D. Mitchell.

No. 279.

Supreme Court of North Carolina.

April 28, 1965.

Ray Rankin, Charlotte, for plaintiffs.

Ervin, Horack, Snepp & McCartha, Charlotte, for defendants.

MOORE, Justice.

No verbal agreement between parties to a written contract, made before or at the time of the execution of such contract, is admissible to very its terms or to contradict its provisions. Jefferson Standard Life Insurance Co. v. Morehead, 209 N.C. 174, 183 S.E. 606. It will be presumed that the writing merged therein all prior and contemporaneous negotiations. Neal v. Marrone, 239 N.C. 73, 79 S.E.2d 239. But parol evidence is admissible to show that a written contract was procured by fraud, for the allegations of fraud challenge the validity of the contract itself, not the accuracy of its terms--the instrument itself, on the issue of fraud, is the subject of dispute. Anderson Cotton Mills v. Royal Manufacturing Co., 218 N.C. 560, 11 S.E.2d 550; Hardware Co. v. Kinion, 191 N.C. 218, 131 S.E. 579; Miller v. Howell, 184 N.C. 119, 113 S.E. 621; White Sewing Machine Co. v. Bulluck, 161 N.C. 1, 76 S.E. 634; Unitype Co. v. Ashcraft Bros., 155 N.C. 63, 71 S.E. 61. Fraud alleged as a defense to the enforcement of a written contract is not an attempt to vary or contradict the terms of the contract, for if the fraud be proven it nullifies the contract. White v. Fisheries Products Co., 185 N.C. 68, 116 S.E. 169; J. I. Case Threshing Machine Co. v. McKay, 161 N.C. 584, 77 S.E. 848; Tyson v. Jones, 150 N.C. 181, 63 S.E. 734. 'It is elementary that where a contract or transaction was induced by false representations, the representations and the contract are distinct and separable--that is, the representations are usually not regarded as merged in the contract * * *.' 23 Am.Jur., Fraud and Deceit, s. 23, p. 775-6.

But plaintiffs stand on the proposition that 'where the written instrument itself precludes the representation relied upon, an action on such alleged representations cannot be maintained.' 2 Strong: N.C. Index, Fraud, s. 10, p. 384; Wilkins v. Commercial Finance Co., 237 N.C. 396, 75 S.E.2d 118. They contend that the precise subject matter of the parol representation is dealt with in the written contract. The contract provides 'that the property will be conveyed subject to such * * * restrictions as appear in instruments constituting the chain of title.' Defendant alleges that it was represented that the property 'had no restrictions that would prohibit its use for business purposes except zoning restrictions of the City * * * which restricted its use to office and institutional use.' We do not agree that the contract deals with the precise matter involved in the representation. Both relate to restrictions, but the representation expressly relates to the extent of business restriction, while the contract merely refers defendant to the source to which he may have resort for information as to what restrictions there are. 'Referring a representee to the sources of the speaker's information does not necessarily relieve the representor from liability for false statements, since the representee's right to rely on such statements without an investigation of the sources of information mentioned is not necessarily destroyed by such reference. Whether the representee should have consulted the sources referred to depends on circumstances and is often held to be a question for the jury.' 23 Am.Jur., Fraud and Deceit, s. 158, p. 965. 'It is generally held that fraud may be predicated on false representations or concealments, although the truth could have been ascertained by an examination of public records. As otherwise expressed, the general rule is that the mere fact that public records, if examined would show the representee that representations of fact are false does not preclude his establishing fraud, because he is under no duty to make such examination. This principle is especially applicable where a representation is knowingly false and is made for the express purpose of deceiving and defrauding another who relies on it, where there is a duty of disclosure of information, where the party to whom the representations are made has no opportunity to examine the records, or where such investigation would not reveal the truth. In some of the older cases the scope of the rule has been limited, making its application depend on prudence. It has been held that to excuse an examination of the records, when accessible, the representation must be such as to induce the party to whom it is made to refrain from making such examination, and that the fact that such an examination would have disclosed the facts, although it does not necessarily destroy the right of reliance, is nevertheless entitled to its weight in determining whether the representations are such as would impose on a person of ordinary prudence.' ibid, s. 163, pp. 972-974. The law with respect to misrepresentations of matters of public record is discussed in an exhaustive annotation in 33 ALR 853-1161, entitled 'Fraud--Matters of Public Record,' in which cases from the various jurisdictions of the United States and England are listed and annotated.

A purchaser of property seeking redress on account of loss sustained by reliance upon a false represenmtation of a material fact made by the seller may not be heard to complain if the parties were on equal terms and he had knowledge of the facts or means of information readily available and failed to make use of his knowledge or information, unless prevented by the seller. But the rule is also well established that one to whom a definite representation has been made is entitled to rely on such representation if the representation is of a character to induce action by a person of ordinary prudence, and is reasonably relied upon. The right to rely on representations is inseparably connected with the correlative problem of a duty of a representee to use diligence in respect of representations made to him. The policy of the courts is, on the one hand, to suppress fraud and, on the other, not to encourage negligence and inattention to one's own interest. Colloway v. Wyatt, 246 N.C. 129, 97 S.E.2d 881; Keith v. Wilder, 241 N.C. 672, 86 S.E.2d 444; Pridgen v. Long, 177 N.C. 189, 98 S.E. 451. For a case involving misrepresentations as to matters of record in the sale of land, see Whitaker v. Wood, 258 N.C. 524, 128 S.E.2d 753, in which it was held that the question whether plaintiffs might reasonably rely on seller's representations was for the jury.

The legal...