Hafner v. Ritzinger, 37726

• Decision Date: 10 July 1959
• Docket Number: No. 37726,37726
• Citation: 97 N.W.2d 839,256 Minn. 196
• Parties: Paul R. HAFNER and Sarah G. Hafner, copartners, Appellants, v. John B. RITZINGER and Charlotte K. Ritzinger, Respondents.
• Court: Minnesota Supreme Court

Page 839

97 N.W.2d 839

256 Minn. 196

Paul R. HAFNER and Sarah G. Hafner, copartners, Appellants, v. John B. RITZINGER and Charlotte K. Ritzinger, Respondents.

No. 37726.

Supreme Court of Minnesota.

July 10, 1959.

Syllabus by the Court.

1. The parol evidence rule is inapplicable to exclude evidence of fraudulent oral representations by one party which induce another to enter into a written contract.

2. The rule we follow in establishing a right to recover for fraudulent representations in the sale of property is that a person is liable for fraud if he makes a false representation of a past or existing material fact susceptible of knowledge, knowing it to be false, or as of his own knowledge without knowing whether it is true or false, with intention to induce the person to whom it is made to act in reliance upon it, or under such circumstances that such person is justified in acting in reliance upon it, and such person is thereby deceived and induced to act in reliance upon it, to his pecuniary damage.

3. The essential elements of an action based on fraudulent representations may be established by a fair preponderance of the evidence.

4. A person who has been engaged in appraising real estate over a number of years was sufficiently qualified to give an opinion as to value even though he had not actually bought and sold such property.

5. The alleged misconduct of defendants' attorney was not of such a serious nature that it was an abuse of discretion on the part of the trial court to deny a new trial.

Lewis L. Anderson, St. Paul, for appellants.

John E. Daubney, Bouthilet, Daubney & Swenson, St. Paul, for respondents.

KNUTSON, Justice.

This case arises out of the sale of a house by plaintiffs to defendants. Plaintiffs, Paul R. Hafner and Sarah G. Hafner, are husband and wife. Paul R. Hafner has been engaged in the business of building and selling houses for about 25 years. Mrs. Hafner took no part in the sales transaction involved here except to sign certain papers, and she did not testify. References hereinafter to plaintiff will refer to Paul R. Hafner and not his wife.

In the month of December 1955, defendants, who are husband and wife, purchased a home from plaintiff located at 910 Edgewater Avenue West in the village of Shoreview, Ramsey County, for the sum of $29500. Sometime after purchasing this home, defendants had plaintiff do some additional work on a porch. When defendants failed to pay for this additional work, plaintiff sued to recover the sum of $423.10. Defendants admitted liability for that amount and counterclaimed for $2,500 damages as a result of fraudulent representations made by plaintiff in the sale of the house. The case went to trial on the counterclaim, and the jury returned a verdict of $1,750 for defendants. This appeal is from an order of the municipal court denying plaintiff's motion in the alternative for judgment notwithstanding the verdict or for a new trial.

Viewing the evidence most favorable to the verdict, as we must do, the jury could find that in the early summer of 1955 defendants had made several visits to homes in the process of construction by plaintiff. They were interested in purchasing a new home, but the homes then under construction were smaller than they wanted so they decided to wait until one more suitable to their needs was constructed. On a Sunday in December 1955, defendant John B. Ritzinger first called at the house which was later purchased to inspect it. Plaintiff was then present in the house. In the afternoon of the same day, Mrs. Ritzinger called to inspect the house. Plaintiff had built some 18 houses in the immediate neighborhood of the one purchased by defendants prior to the time of this sale. Defendants were familiar with the fact that plaintiff had built several houses in that neighborhood. After inspecting the house, John B. Ritzinger asked plaintiff whether he 'had any water condition in the area and also what situation might exist in the basement of that house.' Plaintiff replied that 'he couldn't guarantee any basement, but he had built all the homes in that immediate area and he had yet to build a house with a wet basement.' The same answer was given to a similar question when Mrs. Ritzinger was there to inspect the house in the afternoon. While these answers are denied by plaintiff, the jury could accept defendants' version of the conversations which took place.

There is no dispute that commencing on Easter Sunday in 1956 substantial quantities of water entered the basement at the junction of the cement block foundation with the basement floor. Defendants have alleviated part of the trouble by installing drain tile at the outside of the foundation walls at considerable expense.

There is evidence from which the jury could find that at least two other houses built by plaintiff in the immediate neighborhood of that purchased by defendants had similar water trouble and that plaintiff may have had knowledge thereof at the time defendants inquired of him concerning water conditions in the basement.

Defendants have four children ranging in age from 5 to 14 years. They had intended to use the basement as a recreation room. Both defendants testified that they would not have purchased the house at all if they had known that they would have trouble with water in the basement.

The questions presented on this appeal are: (1) Whether the trial court erred in receiving evidence as to the alleged representations made by plaintiff prior to the execution of the contract for deed, it being the contention of plaintiff that such evidence varies the terms of a written contract; (2) whether the elements of actionable fraud were shown to be present, assuming that the statements testified to by defendants actually were made; (3) whether the witness Bettendorf was qualified to testify as an expert on the value of the house with or without the water condition which existed; (4) whether the quantum of proof as outlined in the court's instructions was correct; and (5) whether there was such misconduct of defendants' counsel as to justify a new trial.

1. Apparently it is plaintiff's contention that, even if the statements regarding water conditions in the basement were made as claimed by defendants, the defendants thereafter signed an earnest money contract and later a contract for deed in which no reference is made to such representations; hence, that it follows that evidence of such oral representations are inadmissible under the rule that oral evidence may not be admitted to vary the terms of a written contract. It is obvious that plaintiff's position is based on a misconception of the application of the rule. Evidence of fraudulent representations is not admitted to vary the terms of a contract but to establish that, because of such fraudulent representations, the purchaser did not get what he bargained for. In Rosenquist v. Baker, 227 Minn. 217, 222, 35 N.W.2d 346, 349, we said:

'It is well settled that the parol evidence rule is not applicable to exclude evidence of fraudulent oral representations by which one party induces another to enter a written contract, provided the representations were such that the other party might reasonably rely upon them.' ¹

If plaintiff's contentions were tenable, a purchaser could seldom, if ever, recover damages for a fraudulent representation in the sale of real estate.

2. The rules respecting the right to recover for a fraudulent representation in the sale of property are adequately stated in 8 Dunnell, Dig. (3 ed.) § 3818, and have been stated in a number of recent decisions of this court. ² As found in § 3818--

'A person is liable for fraud if he makes a false representation of a past or existing material fact susceptible of knowledge, knowing it to be false, or as of his own knowledge without knowing whether it is true or false, with intention to induce the person to whom it is made to act in reliance upon it, or under such circumstances that such person is justified in acting in reliance upon it, and such...