Godfrey v. E.P. Burton Lumber Co.

• Decision Date: 22 September 1910
• Citation: 70 S.E. 396,88 S.C. 132
• Parties: GODFREY et al. v. E. P. BURTON LUMBER CO. [D1]
• Court: South Carolina Supreme Court

70 S.E. 396

88 S.C. 132

GODFREY et al. v. E. P. BURTON LUMBER CO. ^[D1]

Supreme Court of South Carolina

September 22, 1910

Appeal from Common Pleas Circuit Court of Colleton County; Chas. G Dantzler, Judge.

Action by William Godfrey and others against the E. P. Burton Lumber Company. From a judgment dismissing the complaint, plaintiffs appeal. Affirmed.

The facts are thus succinctly stated in the argument of the appellants' attorneys:

"This was an action commenced by the plaintiffs against the defendant (October, 1908) for the rescission of a contract sought to be rescinded, consisting in a sale of a body of timbered lands to the plaintiffs by the defendant such lands being located in Colleton county. The complaint contains substantially these allegations: That the plaintiffs, being engaged in the lumber and timber business and the defendant, being the owner in fee of certain timbered lands, which it desired to sell, a description of which is set forth in the complaint, entered into negotiations for the sale of the same to the plaintiffs. That the agent of the defendant, acting within the scope of his employment, in showing the plaintiffs over said lands, pointed out to the plaintiffs as a part of the lands so owned by the defendant a large body of land, containing about 750 acres very heavily timbered, and represented to the plaintiffs that the purchasers from the defendant would acquire the same. That the plaintiffs were strangers in the community, living at a distant point, and being ignorant of the true boundaries, and having no means of ascertaining the same, and believing such representation by the agent of the defendant to be true, and, relying upon the good faith thereof purchased of the defendant the lands mentioned and described, paying the defendant $56,000 therefor, and took the defendant's conveyance thereof. That at a subsequent period the plaintiffs caused the said lands to be surveyed, and thereupon ascertained that the body of land, containing about 750 acres, being very heavily timbered and which constituted the chief inducement in making the purchase, was not owned by the defendant, and that the plaintiffs had acquired no title thereto. That immediately after ascertaining this fact the plaintiffs brought the matter to the attention of the defendant, and demanded of the defendant a rescission of the contract, but the defendant refused to rescind in whole or in part. The defendant, in its answer, denied that there was any misrepresentation, alleged that there was outstanding an unsatisfied mortgage on the property, and stood upon its legal rights under the contract. There are various other allegations and matters in the pleadings which we do not deem it necessary to recount here. The case was referred to the master, with instructions to take testimony and report the same, together with his findings of fact and conclusions of law. The master took the testimony, and, after argument thereon, made his report, finding that all of the allegations of the complaint were substantially true and correct; but he refused to rescind the contract, holding 'that justice will be done if the defendant be required to repay the plaintiffs out of the purchase money received by it the reasonable value of the two parcels lying within the red and yellow lines, with interest from the date of the purchase, these parcels having been pointed out by the agents of the defendant as being owned by the defendant, and the plaintiffs having purchased and paid out their money, relying upon the truth of such representation.' He found that the reasonable value in the aggregate of the two parcels so pointed out by the defendant as being owned by it, which it did not own, amounted to $16,305.30, and that the plaintiffs were entitled to judgment against the defendant for this amount, together with interest from the date of the purchase to the date of the report, amounting in the aggregate to $18,588.04. To this report both the plaintiffs and the defendant excepted."

On hearing the exceptions to the master's report, his honor, the circuit judge, rendered a decree, which he thus concluded after stating the testimony as to the negotiations before the purchase: "Neither the plaintiffs nor their surveyor, Clark, testify as to what occurred during this visit to the property, except that James P. Maynard testified that Clark had 'made the survey,' evidently referring to that occasion, and denied that he, James P. Maynard, at any time said 'that the best thing to do would be to buy what the Burtons owned, and go ahead and cut the whole thing.' Subsequently the purchase of the property was completed by the payment of $46,000 and the delivery of a note for $10,000 for the balance of the purchase money, and a deed of conveyance to the property, executed by the defendant to the plaintiffs. Afterwards, and before the maturity of the note, plaintiffs contended that a portion of the property conveyed did not belong to the defendant, and proposed an abatement in the price. This proposition was refused; and thereafter, in November, 1907, the note for $10,000 was paid. This suit for the rescission of the contract was commenced in October, 1908. Two of the most important questions involved are: Did the defendant misrepresent its holdings to plaintiffs, and, if so, did the plaintiffs' reliance upon the defendant's representations induce them to purchase the property? During the hearing of the case on circuit, I was inclined to answer these questions affirmatively; but upon a review of the testimony, which is voluminous, and a careful consideration of it, I cannot conclude that the purchase of the property was made by the plaintiffs on account of their reliance upon defendant's representations. 'All

the cases agree that the proof of such misrepresentations, whether they are fraudulent or unintentional, must "be full, clear, and explicit," that they are calculated to influence the party in concluding the contract, and that he acted upon them without examining for himself and exercising his own judgment.' Mitchell v. Pinckney, 13 S.C. 211. During the last visit to the property by James P. Maynard, one of the plaintiffs, with Clark, a surveyor of the plaintiffs, and F. G. Morehead and H. M. Tuten, James P. Maynard remained upon the property with Clark, the surveyor, for three or four days, and this fact is very strong evidence that plaintiffs were investigating and examining for themselves, and exercising their 'own judgment' accordingly. When all of the testimony is considered, I cannot conclude that the evidence preponderates in favor of the plaintiffs' contention. Means v. Brickell, 2 Hill, Law, 666. After the sale of the property to plaintiffs, and after the alleged discovery of misrepresentation, they exercised acts of ownership over it, and endeavored to sell it as their own at an advanced price. The testimony shows that the plaintiffs were undertaking to dispose of the property up to January, 1909, after the commencement of this action. This is a suit in equity for the rescission of a contract, not an action at law for damages; and the law, in relation to the duty of a party claiming rescission, is well stated in the case of Shappirio v. Goldberg, 192 U.S. 242, 24 S.Ct. 259, 48 L.Ed. 419: 'It is well settled by repeated decisions of this court that, where a party desires to rescind upon the ground of misrepresentation or fraud, he must upon the discovery of the fraud announce his purpose and adhere to it.' If he continues to treat the property as his own, the right of rescission is gone, and the party will be held bound by the contract. Grymes v. Sanders, 93 U.S. 55, 23 L.Ed. 798; McLean v. Clapp, 141 U.S. 429, 12 S.Ct. 29, 35 L.Ed. 804. In other words, when a party discovers that he has been deceived in a transaction of this character, he may resort to an action at law to recover damages, or he may have the transaction set aside in which he has been wronged, by the rescission of the contract. If he chooses the latter remedy, he must act promptly, 'announce his purpose, and adhere to it,' and not by acts of ownership continue to assert right and title over the property, as though it belonged to him. *** 2 Pomeroy, Eq. Jurisprudence, par. 897; Rupart v. Dunn, 1 Rich. Law, 106. Wherefore, it is ordered and adjudged that the exceptions to the master's report so far as consistent with this decree, be sustained; and, so far as inconsistent herewith, be overruled. It is further ordered, adjudged, and decreed that the complaint herein be dismissed with costs."

From this decree the plaintiffs appealed upon numerous exceptions.

Howell & Gruber, for appellants. Nathans & Sinkler, for respondent.

GARY A. J.

It will not be necessary to consider the exceptions in detail, as the questions presented by them are dependent upon a few well-settled principles of law and equity.

When negotiations for the sale of land culminate in an executed contract by delivery of the deed, and payment of the purchase money in full, and the purchaser thereafter discovers that there is an outstanding paramount title to a part of the land, he may elect to pursue one of the following remedies against his vendor: (1) He may bring an action for rescission of the contract; or (2) he may sue to recover damages for fraud (Welborn v. Dixon, 70 S.C. 108, 49 S.E. 232), or he may sue upon the covenants of warranty in his deed.

The first question that will be considered is whether there was error on the part of the circuit judge in ruling that the plaintiffs were not entitled to a rescission of the contract. "While a purchaser of land remains in quiet possession thereof, he cannot sustain a bill for rescission or abatement of price on the ground of an outstanding title, unless on the score of fraud."...