Halsey v. Minnesota-South Carolina Land & Timber Co.

• Decision Date: 16 October 1928
• Docket Number: No. 2722.,2722.
• Citation: 28 F.2d 720
• Parties: HALSEY v. MINNESOTA-SOUTH CAROLINA LAND & TIMBER CO.
• Court: U.S. Court of Appeals — Fourth Circuit

28 F.2d 720 (1928)

HALSEY v. MINNESOTA-SOUTH CAROLINA LAND & TIMBER CO.

No. 2722.

Circuit Court of Appeals, Fourth Circuit.

October 16, 1928.

H. L. Erckmann and Julian Mitchell, both of Charleston, S. C. (F. H. Horlbeck, of Charleston, S. C., on the brief), for appellant.

Legare Walker, of Summerville, S. C., for appellee.

Before PARKER and NORTHCOTT, Circuit Judges, and SOPER, District Judge.

PARKER, Circuit Judge.

This is an appeal from a judgment entered upon an order sustaining a demurrer to the complaint of plaintiff and dismissing his action. The complaint, which was filed in April, 1927, alleged that on December 31, 1923, plaintiff contracted to purchase from defendant at the price of $150,000 the timber and timber rights on certain tracts of land in Orangeburg county, South Carolina, and that pursuant to this contract a deed conveying same to plaintiff was executed on February 4, 1924. It alleged that in the course of the negotiations leading up to the sale defendant represented to plaintiff that two of the tracts of land contained over 20,000,000 feet of timber and furnished plaintiff with the field note book of an expert timber estimator who shortly before had estimated it for defendant; that this note book showed that there were some 19,215,000 feet of timber on said tract, and that defendant informed plaintiff that these figures were conservative, and that the timber would exceed them by about 20 per cent., and that the two tracts would yield approximately 24,000,000 feet. Plaintiff further alleged that he relied upon these representations, and because of them purchased the timber without having it further estimated; that upon cutting the timber he found that the two tracts contained only 12,652,194 feet; and that because of the shortage he had been damaged, not only to the extent of the pro rata payment for the amount which was short, but also for expenditures made in locating machinery on the lands and for the loss of anticipated profits.

There was no allegation that there was any warranty of quantity either in the written contract of sale or in the timber deed, nor was there allegation that the timber was sold by the foot or that a warranty as to quantity was omitted from the deed by mistake. On the contrary, the provisions of the contract set forth in the complaint show clearly that the sale was in gross. There was no allegation that the alleged false representations were false to the knowledge of defendant, or that they were made recklessly without regard to their truth, or that they related to matters peculiarly within the knowledge of defendant or its agents, or that they were made fraudulently or with intent to deceive.

The learned District Judge held that the action could not be sustained as one for breach of contract, because there was no allegation of a warranty of the quantity of the timber either in the contract or in the deed, and that it could not be sustained as an action for deceit because there was no allegation that the false representations were false to the knowledge of defendant, or that they were made recklessly as positive assertions without knowledge of their truth, or that they consisted of facts which must have been within the personal knowledge of defendant. He ruled that the plaintiff might amend by alleging scienter and try the action as one in deceit, or by alleging that the consideration was to be for a fixed price per foot, and that by mutual mistake the agreement did not set forth the true contract, and have the cause transferred to the equity side of the docket and tried as a suit for reformation. Plaintiff did not amend, however; and the question presented is whether the complaint as it stands states a cause of action. We agree with the judge below that it does not.

In the first place, the complaint cannot be sustained as a good declaration in contract, because it contains no allegation that there was a warranty as to quantity either in the contract or in the deed, but, on the contrary, shows that the sale was in gross and not on a footage basis. It is well settled that in the sale of lands or timber a warranty of quantity is not implied, but that, if the purchaser desires to protect himself with regard thereto, he must have inserted in the deed or contract a proper warranty to that end. D. T. McKeithan Lumber Co. v. Fidelity Trust Co. (C. C. A. 4th) 223 F. 773; Fidelity Trust Co. v. D. T. McKeithan Lumber Co. (D. C.) 212 F. 229; Mitchell v. Pinckney, 13 S. C. 203; Lessly v. Bowie, 27 S. C. 193, 3 S. E. 199; Erskine v. Wilson, 41 S. C. 198, 19 S. E. 489; Latimer v. Wharton, 41 S. C. 508, 19 S. E. 855, 44 Am. St. Rep. 739; People's Bank v. Bramlett, 58 S. C. 477, 36 S. E. 912, 79 Am. St. Rep. 855.

Plaintiff relies upon representations made during the negotiations as to the quantity of the timber; but it is elementary that what is said in the negotiations leading up to the sale of realty cannot form the basis of a contract action, not only because all prior negotiations are deemed to be merged in the contract or deed, but also because of the requirements of the statute of frauds. Mitchell v. Pinckney, supra; 13 C. J. 597; Seitz v. Brewers Refrigerating Co., 141 U. S. 510, 12 S. Ct. 46, 35 L. Ed. 837; Patton v. Sinclaire Lumber Co., 179 N. C. 103, 101 S. E. 613.

In Mitchell v. Pinckney, supra, the Supreme Court of South Carolina used the following language which was quoted with approval in the more recent case of Latimer v. Wharton, supra, viz.:

"The law requires that all contracts concerning the transfer of land shall be in writing. A purchaser must protect himself by covenants. It follows that, where there is no express warranty, none can be implied. Omission to warrant disproves intention to warrant, and, if that could be contradicted by implication, it would be not only creating a contract against the intention, but proving it by parol. As to land, there can be no such thing as failure of consideration growing out of a breach of contract, or, as it is sometimes expressed, the equitable condition of sale; otherwise, there would be, so far as that defense is concerned, no difference between a quitclaim and a warranty."

In the case of Lessly v. Bowie, supra, Judge McGowan, speaking for the Supreme Court of South Carolina, said:

"In a sale of lands there is certainly no implied warranty, as there may be in reference to personalty. There is no such thing as a failure of consideration arising out of a contract implied, or, as it is sometimes expressed, the equitable condition of sale. A purchaser must protect himself, if at all, by covenants in writing, out of which all his rights of defense must come, except, perhaps, in the case of fraud."

In the case of People's Bank v. Bramlett, supra, it was held that a purchaser of land at a master's sale under foreclosure was entitled to an abatement of the purchase price upon discovery before deed was executed that a portion of the lands sold had been recovered from the mortgagor under title paramount. Answering a contention that the purchaser was not entitled to relief under such circumstances, Judge Jones, later Chief Justice, stated the rule prevailing in South Carolina, which is in harmony with the rule prevailing in most other jurisdictions, as follows:

"This position may be correct after the contract has been executed and the deed of conveyance made, and the authorities cited by the attorneys for the mortgagees tend to support such contention. But there is quite a difference where the contract is executory. The general doctrine is, that one who agrees to purchase land will be allowed a reasonable opportunity to investigate the title, and if he finds that the title fails as to a portion, or there is a defect in the title, he will be allowed to rescind the trade, or an abatement from the purchase price. After the contract has been executed, however, and the deed actually made, the purchaser must look to the warranty contained in his deed, and he is entitled to only such remedy as he has under that warranty."

In D. T. McKeithan Lumber Co. v. Fidelity Trust Co., supra, this court dealt with a case where the seller of timber had furnished to the purchaser estimates as to its quantity, and where the deed recited the estimates but contained no warranty of quantity. In holding that the purchaser was not entitled to recover for the deficiency the court said:

"It is the settled law of South Carolina that in cases of sales of land there must be a specific warranty of quantity, or proof of misrepresentation amounting to fraud, to sustain the charge of failure of consideration. Mitchell v. Pinckney, 13 S. C. 203, 209; Erskine v. Wilson, 41 S. C. 198, 19 S. E. 489; Latimer v. Wharton, 41 S. C. 508, 19 S. E. 855, 44 Am. St. Rep. 739."

In the light of these authorities, it is perfectly clear that plaintiff has no right of action ex contractu for the alleged deficiency in quantity. We think it equally clear that the complaint states no cause of action ex delicto, and this because there is no averment that the representations relied on were false to the knowledge of defendant or its agents, or that they were made recklessly as positive assertions without knowledge of their truth or falsity, or that they related to matters peculiarly within the knowledge of defendant or its agents. It is true, of course, that in an action on the case for false warranty, which is an action sounding in tort, it is not necessary to allege or prove scienter. Shippen v. Bowen, 122 U. S. 575, 7 S. Ct. 1283, 30 L. Ed. 1172; Schuchardt v. Allen, 1 Wall. 359, 368, 17 L. Ed. 642. But this cannot be maintained as an action for false warranty, because, as shown above, there was no warranty. The only question which remains, therefore, is whether in an action for damages for false representation it is necessary to allege and prove scienter. In a few of the states, unquestionably, the action can be maintained without such allegation or proof. 12...