Frowen v. Blank

• Decision Date: 04 February 1981
• Citation: 493 Pa. 137,425 A.2d 412
• Parties: Harry W. FROWEN, Executor of the Estate of Blanche Frowen, Deceased, Appellant, v. J. Marshall BLANK.
• Court: Pennsylvania Supreme Court

Page 412

425 A.2d 412

493 Pa. 137

Harry W. FROWEN, Executor of the Estate of Blanche Frowen Deceased, Appellant, v. J. Marshall BLANK.

Supreme Court of Pennsylvania.

Argued Sept. 25, 1980.

Decided Feb. 4, 1981.

[493 Pa. 140] Robert J. Milie, Greensburg, for appellant.

Christ J. Walthour, Jr., and S. Wayne Whitehead, Greensburg, for appellee.

Before O'BRIEN, C. J., and ROBERTS, NIX, LARSEN, FLAHERTY, KAUFFMAN, JJ.

OPINION OF THE COURT

NIX, Justice.

This appeal is in response to a dismissal of an action in equity seeking the rescission of an agreement for the sale of real estate. The basis of the action was an alleged fraud in seeking the execution of the agreement. The Chancellor was affirmed by the court en banc in finding that fraud had not been established nor had there been a showing that a confidential relationship existed between the parties to the agreement.

On May 22, 1968, Blanche Frowen executed an agreement to sell to J. Marshall Blank, appellee, her farm containing approximately seventy (70) acres in Unity Township, Westmoreland County, for the sum of $15,000.00, of which $500.00 was paid prior to the execution of the agreement and the remaining balance of $14,500.00 no later than one year following the death of Ms. Frowen. Interest computed at the rate of five percent per annum was to be paid quarterly on the unpaid balance. The instant action was initiated by a complaint in equity filed November 29, 1973 by Blanche Frowen as plaintiff. This action resulted in a decree by the Chancellor which was affirmed by the Court en banc, with one judge dissenting, ¹ dismissing the complaint, holding that Ms. Frowen had failed to establish her burden of proof regarding the allegations of fraud. On appeal to the Superior Court the case was remanded. Frowen v. Blank, 242 Pa.Super. 276, 363 A.2d 1267 (1976) (Frowen I). In Frowen I, Ms. Frowen argued "that if she did not prove fraud, she did prove a breach of confidential relationship." Id. at 277, 363 A.2d at 1268. The Superior Court was inclined to agree that there had been a breach of a confidential relationship but declined to so rule and elected to remand because of the inadequacy of the lower court's findings as to the existence of a confidential relationship. Thus in Frowen I the lower court was expressly directed on remand to resolve the evidentiary disparities necessary to decide whether a prima facie case on the issue of confidential relationship had been established.

Upon remand the Chancellor, after setting forth findings of fact and conclusions of law in which he determined that no confidential relationship had been established, reaffirmed his earlier decree. The exceptions were dismissed this time by a unanimous court en banc. On appeal the Superior Court affirmed with one judge dissenting. Frowen v. Blank, 266 Pa.Super. 145, 403 A.2d 585 (1979). (Frowen II ). ² This Court granted review to determine whether the record did establish prima facie the allegation of fraud or in the alternative whether it established a confidential relationship between decedent and appellee.

We begin our analysis remembering that the findings of the Chancellor will not be reversed unless it appears that he has clearly abused his discretion or committed an error of law. Yuhas v. Schmidt, 434 Pa. 447, 258 A.2d 616 (1969). Where credibility of witnesses is important to the determination, the Chancellor's findings are entitled to particular weight because of his opportunity to observe their demeanor. Brentwater Homes, Inc. v. Weibley, 471 Pa. 17, 369 A.2d 1172 (1977). Where a reading of the record reasonably can be said to reflect the conclusions reached by the Chancellor, a reviewing court may not substitute its judgment for that of the Chancellor. Payne v. Kassab, 468 Pa. 226, 361 A.2d 263 (1976). A reviewing court, however, is not bound by findings which are without support in the record or have merely been derived from other facts. In re McKinley's Estate, 461 Pa. 731, 337 A.2d 851 (1970).

After a consideration of the Chancellor's findings and a review of the record we are satisfied that appellant did not prove fraud. The basic theory to establish the fraud allegation is that the decedent was deceived into believing that the agreement entered into on May 22, 1968 conveyed a leasehold interest to appellee and was not an outright sale. To support this view, appellant points to the age of decedent at the time of execution (eighty-six years of age); her infirmities at the time (impaired hearing); her limited formal training (two years of elementary training); and the agreement itself. It is argued that the payment of interest on a quarterly basis, that the total consideration was $15,000 for a property worth approximately $35,000 at the time of the purported sale, that only $500 of the "purchase price" was required to be paid within her lifetime would comport to a lease agreement and not the sale of a fee interest. However, the sine qua non of actionable fraud is the showing of a deception. Kriner v. Dinger, 297 Pa. 576, 147 A. 830 (1929); Cox v. Highley, 100 Pa. 249 (1882); Huber v. Wilson, 23 Pa. 178 (1854); Shane v. Hoffmann, 227 Pa.Super. 176, 324 A.2d 532 (1974). A fraud consists in anything calculated to deceive, whether by single act or combination, or by suppression of truth, or a suggestion of what is false, whether it be by direct falsehood or by innuendo, by speech or silence, word of mouth, or look or gesture. In re McClellan's Estate, 365 Pa. 401, 407, 75 A.2d 595, 598 (1950); In re Reichert's Estate, 356 Pa. 269, 274, 51 A.2d 615, 617 (1947).

Here appellee presented evidence, which the Chancellor found to be creditable, that at the time the agreement was executed it was fully explained to the decedent, by two separate lawyers, and that she was aware that it was a sale of her property and not a lease. See Findings of Fact No. 11. ³ This finding negates the possibility of any deception based upon the nature and the terms of the document executed on May 22, 1968.

Nonetheless, appellant stresses what he terms as the patent unfairness of the agreement and argues that fraud should be presumed from that fact coupled with the age and condition of decedent at the time of the execution of the agreement. We recognize that allegations of fraud may be supported, in proper circumstances, by presumption. Goldstein Co. v. Greenberg, Inc., 352 Pa. 259, 42 A.2d 551 (1945). However such is not the case unless the facts clearly proven warrant a presumption of the existence of the alleged fraud. Goldstein v. Greenberg, supra. A deception as to the nature of the agreement may not be presumed from its asserted unfairness to the complaining party where the Chancellor has found, based upon credible and competent evidence, that that party had been fully explained and understood the nature of the agreement at the time of its execution. We, therefore, affirm the Superior Court's acceptance of the Chancellor's conclusion that appellant failed to prove fraud in this record.

As previously noted, appellant argues in the alternative that the record establishes the existence of a confidential relationship between decedent and appellee. If a confidential relationship has been established on this record, our earlier finding that appellant had failed to affirmatively show fraud would not preclude appellant from some relief. Rescinding a contract because of fraud calls into play one set of criteria; rescission based on the breach of a confidential relationship is another proposition.

When the relationship between the parties to an agreement is one of trust and confidence, the normal arm's length bargaining is not assumed, and overreaching by the dominant party for his benefit permits the aggrieved party to rescind the transaction. Ruggieri v. West Forum Corp., 444 Pa. 175, 282 A.2d 304 (1971); Young v. Kaye, 443 Pa. 335, 279 A.2d 759 (1971); McCown v. Fraser, 327 Pa. 561, 192 A. 674 (1937); Null's Estate, 302 Pa. 64, 153 A. 137 (1930). This is so because the presence of a confidential relationship negates the assumption that each party is acting in his own best interest. Young v. Kaye, supra; McClatchy's Estate, 433 Pa. 232, 249 A.2d 325 (1969); Null's Estate, supra. Once a confidential relationship is shown to have existed, it then becomes the obligation of the party attempting to enforce the terms of the agreement to establish that there has not been a breach of that trust. Scott Estate, 455 Pa. 429, 316 A.2d 883 (1974); Ruggieri v. West Forum Corp., supra; McClatchy's Estate, supra; Kees v. Green, 365 Pa. 368, 75 A.2d 602 (1950); Brooks v. Conston, 356 Pa. 69, 51 A.2d 684 (1947).

We agree with Judge Spaeth in his dissent in Frowen II that if such a relationship did exist between the decedent and the appellee, finding that the decedent understood the terms of the agreement does not necessarily preclude a finding that the relationship had been breached. Frowen v. Blank, supra, 266 Pa.Super. at 153-155, 403 A.2d at 589-90. Where a confidential relationship exists, the law presumes the transaction voidable, unless the party seeking to sustain the validity of the transaction affirmatively demonstrates that it was fair under all of the circumstances and beyond the reach of suspicion. See Leedom v. Palmer, 274 Pa. 22, 117 A. 410 (1922); Ruggieri v. West Forum Corp., 444 Pa. 175, 282 A.2d 304 (1971); Young v. Kaye, 443 Pa. 335, 279 A.2d 759 (1971); Appeal of Darlington, 147 Pa. 624, 23 A. 1046 (1892); Stepp v. Frampton, 179 Pa. 284, 36 A. 177 (1897). The crux of the controversy presently before us is whether the record here establishes the existence of a confidential relationship. The majority of the Superior Court agreed with the Chancellor's conclusion that no such relationship had been established. Our review of this record forces the contrary conclusion.

The general test for determining the existence of such a relationship is whether it is clear that the parties did...