Holly Hill Lumber Co. v. McCoy

• Decision Date: 21 December 1942
• Docket Number: 15480.
• Parties: HOLLY HILL LUMBER CO., Inc., v. McCOY.
• Court: South Carolina Supreme Court

23 S.E.2d 372

201 S.C. 427

HOLLY HILL LUMBER CO., Inc., v. McCOY.

No. 15480.

Supreme Court of South Carolina

December 21, 1942

[Copyrighted Material Omitted]

L D. Jennings and M. W. Seabrook, both of Sumter, for appellant.

T B. Bryant, Jr., of Orangeburg, for respondent.

FISHBURNE Justice.

This is a suit for specific performance of an executory contract--an option--to convey land, in which there was a decree for the plaintiff. Defendant appeals.

On July 15, 1941, the defendant, Addison E. McCoy, executed and delivered to the plaintiff, a corporation, an option based upon a valuable consideration, wherein he agreed to sell to the plaintiff a tract of land containing 560 acres, more or less, situated on Four Hole Swamp in Orangeburg County, for the purchase price of $10,000. The option was to be exercised on or before September 15, 1941. The plaintiff elected to purchase the land, and notified the defendant in person on August 29, 1941, of its readiness to comply, but the defendant informed the plaintiff that he would not perform the contract, and stated that he would not accept the purchase money. Thereafter, on September 2, 1941, this suit was brought.

The defendant admits the execution and delivery of the contract, but defends upon the ground that the option was obtained through the fraud and misrepresentation of the plaintiff, and that the purchase price is so grossly inadequate as to render the contract unconscionable. The cause was referred under a general order of reference to the Honorable John S. Bowman, Judge of the Orangeburg County Court, as special referee, who, after holding several references, filed a full report and recommended that specific performance be ordered. Upon exceptions being taken to the Circuit Court, a decree was issued on July 6, 1942, in which the referee's report was confirmed in all respects, and the defendant was ordered and directed to specifically perform the contract in accordance with its terms.

The gist of the defense is that there is a large and valuable lime deposit on the tract of land in question which lies from six to fifteen feet beneath the surface; that the defendant was ignorant of this fact when the option was given; that the plaintiff was fully apprised of the existence of the lime bed, which greatly enhanced the value of the property, and not only concealed this knowledge from the defendant, but made false representations thereabout which in effect lulled him to sleep.

For an understanding of the questions involved a statement and discussion of the facts becomes necessary.

The defendant had owned the tract of land for many years, having inherited it from his father, and it was used by him for agricultural purposes. Sometime in the year 1936, he sold all of the timber situated thereon to the plaintiff. The tract originally contained 610 acres, but in 1937, the defendant sold and conveyed to the plaintiff 50 acres thereof for the sum of $1,000. This 50 acre tract was incorporated by the plaintiff as a part of its mill site, upon which a large lumber mill was operated. It appears that in addition to the mill site, the plaintiff owned a large body of land-- over 10,000 acres--adjoining and almost surrounding the 560 acre tract which is the subject of this action.

In view of the contentions made by the defendant, it is interesting to note who took the initiative with reference to the sale of the property. In 1937 or 1938, the defendant commenced the operation of a laundry business in the City of Orangeburg, and feeling the need of more capital, he went to the home of Mr. L. E. Miller, president of the plaintiff at Holly Hill, and endeavored to sell him the 560 acres in question for the sum of $3,500 but in his testimony he said that he would then have accepted therefor $2,500 in cash. The offer of sale was not acted upon at that time by the plaintiff because of its lack of financial ability. However, the matter was not dropped, and later on, and through the years, the parties resumed and continued negotiations for the sale and purchase of the premises. On several occasions the defendant was interviewed by the plaintiff's attorney, and at other times by Mr. Miller, with reference to the sale. About eighteen months prior to the execution of the option, negotiations became active. The defendant was offered $5,000 for the property, then, some months later, $7,500. The defendant finally fixed the purchase price at $10,000, and this agreement was embodied in the option contract executed on July 15, 1941.

Mr. Miller in his testimony, while admitting that the possibility of a lime deposit on the land was one of the factors which influenced the plaintiff in making the purchase, gave as the controlling reasons for acquiring the property: First, it was adjacent to the mill site and mill property of the plaintiff; second, the desire for elbow room; third, the connecting up of very large adjacent properties which practically surrounded this tract; fourth, the prevention of encroachment upon their real estate holdings; fifth, the obtaining of pasture lands for a cattle and hog farm so as to have a supply of fresh meats for the company store; and, sixth, unimpeded rights-of-way across the 560 acre tract of land for business operations.

The special referee found that the possibility of a lime deposit was a factor considered by the plaintiff. But he held that the reasons stated above were the actual and controlling considerations which moved the plaintiff in wishing to purchase the defendant's property.

Mr. McCoy contends that the plaintiff had full knowledge of the presence of the lime deposit on the land and of its great value, and not only fraudulently concealed this fact from him, but made certain false representations concerning it, which induced him to enter into the contract. From a careful consideration of the evidence, we agree with the referee and the Circuit Court that the plaintiff's conduct is not open to this charge.

After the execution of the option, the plaintiff, openly and without secrecy, had holes bored on the property for the purpose of definitely ascertaining the existence and depth of the lime deposit. The testimony shows that while the information may not have been widespread, yet quite a number of people in the Holly Hill section, where the land is located, knew that a substratum of lime was present in that area. In fact, the Atlantic Lime Corporation was mining and manufacturing lime at its plant located within a half mile of defendant's property, and had been so engaged for nearly two years before the defendant executed the option contract. The defendant, however, although this manufacturing plant was in sight of his property, and although he visited his farm once a week, disclaimed knowledge of the fact that lime was actually being mined there. And this knowledge is denied although Mr. Cope, the managing supervisor of the lime plant, a witness for the defendant, testified that he had given wide publicity and advertisement to the operation of his manufacturing plant.

Several months before the execution of the option contract, Mr. Sam McCoy, a brother of the defendant and a prominent business man at Holly Hill, told him of the existence and operation of this lime plant near his property. But the defendant says that he received the impression that it was a fertilizer plant, and that the lime used in connection therewith was not dug from the ground. It appears from his testimony that his interest was finally awakened to the presence and value of the lime deposit on his place when he observed flakes of lime on the edges of the holes bored by the plaintiff. He then made inquiries and reached the conclusion that his land was worth far more than he had agreed to sell it for. When the holes were bored, according to Mr. Miller's testimony, the plaintiff had no certain knowledge of the presence of the lime deposit, and had never thereafter submitted samples of the soil for a laboratory test.

The general doctrine with respect to concealment or non-disclosure as a form of actual fraud may be stated as follows: If either party to a transaction conceals some fact which is material, which is within his own knowledge, and which it is his duty to disclose, he is guilty of actual fraud.

Professor Pomeroy (Pom.Eq.Jur., Vol. 2, Sec. 901) says: "It is certain that every concealment or failure to disclose material facts known to one party is not fraud in equity or at law, whatever quality it may have before the tribunal of the individual conscience. It has never been contended, in our system of jurisprudence, that a vendor in a contract of sale is bound to disclose all facts which, if known by the buyer, would prevent or tend to prevent him from making the purchase. Much less has it ever been maintained that the buyer is bound to discover all facts known to himself which would enhance the value of the article sold or affect the conduct of the vendor."

Non-disclosure becomes fraudulent only when it is the duty of the party having knowledge of the facts to uncover them to the other.

And this brings up the question, when does such duty rest upon either party to any transaction? The duty to disclose may be reduced to three distinct classes: First, where it arises from a pre-existing definite fiduciary relation between the parties; second, where one party expressly reposes a trust and confidence in the other with reference to the particular transaction in question, or else from the circumstances of the case, the nature of their dealings, or their position towards each other, such a trust and confidence in the particular case is necessarily implied. The third class includes those instances where the very contract or transaction itself, in its essential nature,...