Lo Frese v. Hayes

• Decision Date: 08 February 1957
• Docket Number: No. 16031.,16031.
• Citation: 240 F.2d 277
• Parties: Mary M. LO FRESE, Appellant, v. Harry HAYES and Charlotte Hayes, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

240 F.2d 277 (1957)

Mary M. LO FRESE, Appellant, v. Harry HAYES and Charlotte Hayes, Appellees.

No. 16031.

United States Court of Appeals Fifth Circuit.

January 9, 1957.

Rehearing Denied February 8, 1957.

Cody Fowler and Margaret Deaton, Tampa, Fla., Fowler, White, Gillen, Yancey & Humkey, Tampa, Fla., of counsel, for appellant.

Edward I. Cutler, Tampa, Fla., for appellees.

Before RIVES, TUTTLE and JONES, Circuit Judges.

JONES, Circuit Judge.

In 1939 Pasco County, Florida, acquired by condemnation an easement for a right of way for a highway, later to be known as State Highway 45 and as U. S. Highway 41. The easement acquired was over lands in Pasco County and included a strip of land through the Northwest Quarter of the Southwest Quarter of Section 1, Township 24 South, Range 18 East. This tract, subject to the highway easement, was acquired in 1946 by the appellees, Harry Hayes and Charlotte Hayes, husband and wife. They sold off several portions of the original tract. On the unsold area of about ten acres lying west of the highway, which there ran in a Northerly-Southerly direction, the appellees constructed a service station, a restaurant and a motel. These were operated by the appellees under the name of Hayes Motel and Truck Stop, catering to the truckers. The appellees, desiring to sell the property, listed it with a real estate agent who placed an advertisement in a Tampa, Florida, newspaper.

In April, 1952, the appellant, Mary M. Lo Frese, a widow, went from New York to Florida with some money but no business experience, looking for an investment. She saw the newspaper advertisement offering the Motel property for sale and contacted the real estate agency. She was taken to the property, looked it over and examined the books and records. Hayes showed the appellant the North, West and South boundaries of the tract. The East boundary along the highway was never pointed out to the appellant. Hayes told the appellant the neon sign was on the right of way; she saying he so told her after she signed a purchase agreement, again saying that she knew it when she bought the property, and finally saying she was not sure. Hayes admitted he knew that the right of way was 200 feet wide, extending 125 feet West and 75 feet East of a center line.

A price of $40,000 was agreed upon and a contract of sale was executed on April 19, 1952. The appellant procured counsel to represent her in the transaction. Her attorneys gave an opinion on the title as it was shown by abstracts. The opinion described the property under search as being "All of NW-º of SW-º, Section 1, Township 24 South, Range 18 East, lying West of U. S. Highway #41, less" two parcels described by metes and bounds. The title opinion contained the usual proviso that it was subject, among other things, "to any matters which might be disclosed by an accurate survey of the property". The opinion called attention to the acquisition by Pasco County of the right of way and stated that "It would require a survey of the property to determine how this would affect the property under examination". The appellant testified that "right after I talked about taking over the place and I signed the contract I asked him Hayes about, `I think I should have the place surveyed,'" and she quoted Hayes as replying "That won't be necessary; it will save you some money". In response to a question as to whether she relied upon Hayes' statement she first said "no" and then said "yes". The appellant said the real estate agent was present when she discussed the survey with Hayes but he could remember no such conversation. The appellant later testified that after she received the title opinion Hayes told her she didn't need a survey. This was nearly a month after the agreement was executed. She was unable to remember her testimony as to the statement being made on the earlier date. Hayes said he made no such statement. No survey was procured.

On May 20, 1952, the transaction was closed; the appellees delivered their deed conveying to the appellant the property by the same description as that in the title opinion. The appellant gave back a mortgage securing $25,000 of the purchase price. About 18 months later the appellant conveyed the property to her brother and she returned to her former home in New York. The brother made the payments of installments on the mortgage. More than two years after the conveyance by the appellees to the appellant it was discovered that the filling station, a part of the restaurant, and a part of one of the motel buildings had been erected on the highway right of way. The maximum encroachment did not, apparently, exceed twenty-five feet. After an unsuccessful effort to procure a deed from the State of Florida, the appellant's brother re-conveyed to her. The suit from whence arises this appeal was then filed. The appellant, as plaintiff, sought to rescind and cancel the contract of sale and the conveyance and for restitution of the moneys that had been paid. Her complaint was in two counts, by the first of which she charged that the appellees represented to the appellant that the improvements were within the boundaries of the property conveyed, and that such representations were false and fraudulent and known by the appellees to be so, that the representations were made for the purpose of inducing the appellant to enter into the agreement, that appellant, not knowing the truth with regard to the representations, was deceived thereby and was induced to enter into the agreement. The second count was based upon an alleged mutual mistake as to the location of the buildings with respect to the boundaries. The appellees denied making any representations, asserted that the appellant failed to exercise due diligence in not procuring a survey as her counsel recommended, contended that the appellant, by delaying action for about six months after she had knowledge of the encroachment, had elected not to rescind; and finally, set up a defense that the appellant could not restore the status quo.

The Court denied the appellant's motion for summary judgment, reserved ruling on the appellees' counter-motion for summary judgment, and the cause went to trial before the Court without a jury. When the appellant had completed the presentation of her evidence, the Court, upon appellees' motion under Rule 41(b) Fed.R.Civ.Proc., dismissed the complaint, and entered judgment for the appellees on the ground that the appellant had shown no right to relief. Among the Court's findings is the following:

"Plaintiff did not show by any proof that the defendants knew of this encroachment at the time of the transaction between them, or that defendants committed any act of fraud. On the contrary, plaintiff had full opportunity of inspection and was informed by her attorneys, before consummating the transaction, of the advisability of having a survey made to determine how the State\'s right of way affected the property. In a stipulation of counsel dated October 5, 1955, and filed October 6, 1955, the parties agreed that there should be made available to the Court, without the requirement of formal filing which was waived, the depositions of the parties and certain exhibits identified therewith, including a copy of the opinion of title rendered by plaintiff\'s counsel in May of 1952, advising her that a survey would be necessary. Pursuant to this stipulation, the opinion of title was submitted to and considered by the Court, along with the plaintiff\'s admission on cross-examination that she had not seen fit to follow her attorneys\' advice. Had a survey been obtained prior to consummation of the transaction, plaintiff would then have discovered the encroachment of which she is now complaining."

The Court made these conclusions of law:

"The Court has jurisdiction over the parties and the subject matter. Because of plaintiff\'s failure to exercise due diligence for her own protection in the transaction, she is precluded from relief in a Court of equity under the circumstances. After a transaction is executed by delivery of a deed and a purchase money mortgage and possession is taken thereunder, a purchaser who has not been evicted cannot, in the absence of fraud actuating the transaction, obtain the aid of a Court of equity to rescind the transaction or have the purchase money restored due to encroachment or overlaps, resulting from a mistake as to a border line."

The complaint set forth a claim founded upon fraud. Early in Florida jurisprudence it was held that "A false representation of a material fact, made with knowledge of its falsity, to a person ignorant thereof, with intention that it shall be acted upon, followed by reliance upon and by action thereon amounting to substantial change of position, is a fraud of which the law will take cognizance." Wheeler v. Baars, 33 Fla. 696, 15 So. 584. See Watson v. Jones, 41 Fla. 241, 25 So. 678; Allen v. United Zinc Co., 64 Fla. 171, 60 So. 182; Huffstetler v. Our Home Life Ins. Co., 67 Fla. 324, 65 So. 1; Fosgate v. Nocatee Fruit Co., D.C.S.D.Fla.1924, 3 F.2d 606; Ramey v. Koons, 5 Cir., 1956, 230 F.2d 802. Obviously the appellant has not established a case meeting this test of fraud. Before us the appellant urges two propositions, first, that it was not necessary to prove that a misrepresentation was intentionally made; and second, that it was not necessary that the plaintiff exercise due diligence to discover whether the representations were...