Howell v. Waters

• Decision Date: 19 August 1986
• Docket Number: No. 862SC66,862SC66
• Citation: 347 S.E.2d 65,82 N.C.App. 481
• Parties: Vernon F. HOWELL v. Donald Ray WATERS.
• Court: North Carolina Court of Appeals

Page 65

347 S.E.2d 65

82 N.C.App. 481

Vernon F. HOWELL v. Donald Ray WATERS.

No. 862SC66.

Court of Appeals of North Carolina.

Aug. 19, 1986.

Pritchett, Cooke & Burch by Stephen R. Burch and W.W. Pritchett, Windsor, for plaintiff-appellant.

Wilkinson & Vosburgh by John A. Wilkinson, Washington, for defendant-appellee.

WHICHARD, Judge.

Plaintiff contends the court erred by granting defendant's motion for a directed verdict "in view of plaintiff's evidence that Defendant's agent misrepresented the boundary lines of the tract of land which plaintiff purchased." In ruling on a motion for a directed verdict the court must view the evidence in the light most favorable to the nonmoving party. Husketh v. Convenient Systems, 295 N.C. 459, 461, 245 S.E.2d 507, 508-09 (1978). The motion should be granted only if the evidence is insufficient, as a matter of law, to support a verdict for the nonmoving party. Id.

The evidence, viewed in the light most favorable to plaintiff, can be summarized as follows:

On 4 January 1979 plaintiff purchased a tract of land from defendant. Plaintiff negotiated the terms of the purchase with Herbert Hoell, defendant's agent.

In September 1978 Hoell and plaintiff viewed the property. Hoell described the boundaries of the property to plaintiff as follows: the southern boundary of the property is canal No. 10; the eastern boundary is the Broadcreek Outfall canal; the northern boundary is canal no. 9; and the western boundary abuts Mr. Myers' property. Plaintiff assumed that Hoell's description of the boundaries was complete and accurate and relied on his description in having the timber appraised prior to purchasing the property.

While portions of the southern, eastern and northern boundaries of the property conveyed are canal no. 10, the Broadcreek Outfall canal, and canal no. 9, respectively, a portion of the southern boundary lies north of canal no. 10, a portion of the eastern boundary lies west of the Broadcreek Outfall canal, and a portion of the northern boundary lies south of canal no. 9. The boundaries of the property conveyed deviate from Hoell's incomplete representation of the boundaries so as to exclude at least 125 acres. The contract pursuant to which the property was conveyed described the property as follows: "that plot, piece or parcel of land ... in the county of Beaufort State of N.C. being known as and more particularly described as ... 484 AC. in Pantego twnsp. owned by [defendant]."

Hoell testified for plaintiff and admitted that he had represented to plaintiff "in a very general manner" that the southern boundary of the property was canal no. 10, the eastern boundary was the Broadcreek Outfall canal and the northern boundary was canal no. 9. Prior to making these representations, Hoell had been given a freehand sketch of the property by defendant. The sketch correctly depicted the boundaries of the property conveyed. Hoell testified that he "did not tell [plaintiff] that [he] knew where all of the boundaries of the tract were, and [he] did not know where they were."

Plaintiff has denominated his claim as one based on "mutual mistake." However, the evidence would support an action for rescission of the contract based on fraud. The essential elements of fraud are as follows:

"(1) That defendant made a representation relating to some material past or existing fact; (2) that the representation was false; (3) that when he made it, defendant knew that the representation was false, or made it recklessly, without any knowledge of its truth and as a positive assertion; (4) that defendant made the representation with intention that it should be acted upon by plaintiff; (5) that plaintiff reasonably relied upon the representation and acted upon it; and (6) that plaintiff thereby suffered injury." [Emphasis supplied.]

Lamm v. Crumpler, 240 N.C. 35, 44, 81 S.E.2d 138, 145 (1954), quoting Cofield v. Griffin, 238 N.C. 377, 379, 78 S.E.2d 131, 133 (1953); see also Hinson v. Hinson, 80 N.C.App. 561, ---, 343 S.E.2d 266, 274 (1986). Hoell's representation regarding the boundaries of the property related to a material existing fact, and while portions of the boundaries were as Hoell represented, a jury could find that his incomplete description amounted to a false representation. Prior to showing the property to plaintiff, Hoell had been given a sketch which accurately depicted the boundary lines. Hoell testified regarding his knowledge of the boundaries at that time: "I did not tell [plaintiff] that I knew where all the boundaries of the tract were, and I did not know where they were. I would have furnished more detailed information if [plaintiff] had asked for it." Based on the foregoing a jury could find that Hoell's description of the boundaries was made recklessly, without regard to the truth or falsity of the representation. Further, given the relative positions of plaintiff and Hoell--a potential purchaser viewing the property and an agent of the owner giving a tour of the property--a jury could find that Hoell's description of the boundaries was made as a positive assertion with the intent that it should be acted upon by plaintiff, and that plaintiff reasonably relied upon the representation. As Hoell's principal, defendant is liable for Hoell's representations to the same extent as if he had made them himself. MacKay v. McIntosh, 270 N.C. 69, 72-73, 153 S.E.2d 800, 803 (1967).

Plaintiff, however, did not plead fraud. In his answer defendant stated: "In the instant action, [plaintiff] abandons the theory of a misrepresentation and bases his claim upon the allegation of Mutual Mistake...." The record does not reveal an attempt by plaintiff to assert fraud as a ground for rescission of the contract subsequent to the pleading stage, and although the majority of the cases cited in plaintiff's brief are fraud cases, plaintiff's attorney expressly stated in oral argument that plaintiff was not attempting to assert a claim based on fraud.

"In passing upon a trial judge's ruling as to a directed verdict, we cannot review the case as the parties might have tried it; rather, we must review the case as tried below, as reflected in the record on appeal." Tallent v. Blake, 57 N.C.App. 249, 252, 291 S.E.2d 336, 339 (1982). We are mindful that N.C.Gen.Stat. 1A-1, Rule 15(b) provides: "When issues not raised by the pleadings are tried by the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings." The evidence which supports a claim for fraud was also relevant to the issue of mutual mistake raised in plaintiff's complaint and, as such, its admission does not constitute "implied consent" to try the issue of fraud. Gilbert v. Thomas, 64 N.C.App. 582, 585, 307 S.E.2d 853, 855-56 (1983) ("When, however, the evidence used to support the new issue would also be relevant to support the issue raised by the pleadings, the defendant has not been put on notice of plaintiff's new or alternate theory. Therefore, defendant's failure to object does not constitute 'implied consent.' "); see also Munchak Corp. v. Caldwell, 37 N.C.App. 240, 246 S.E.2d 13 (1978). Accordingly, if plaintiff is to prevail on his contention that the court erred in granting defendant's motion for a directed verdict, he must do so on the pleaded ground of mutual mistake.

Under certain circumstances a contract for the sale of real estate may be rescinded on the basis of mutual mistake of fact. See, e.g., MacKay v. McIntosh, 270 N.C. 69, 153 S.E.2d 800 (1967). In MacKay the Court rescinded an executory real estate contract when the parties, at the time of execution, shared the mistaken belief that "the subject property was within the boundaries of an area zoned for business." MacKay, 270 N.C. at 73-74, 153 S.E.2d at 804. The Court reasoned:

"The formation of a binding contract may be affected by a mistake. Thus, a contract may be avoided on the ground of mutual mistake of fact where the mistake is common to both parties and by reason of it each has done what neither intended. Furthermore, a defense may be asserted when there is a mutual mistake of the parties as to the subject matter, the price, or the terms, going to show the want of a consensus ad idem. Generally speaking, however, in order to affect the binding force of a contract, the mistake must be of an existing or past fact which is material; it must be as to a fact which enters into and forms the basis of the contract, or in other words it must be of the essence of the agreement, the sine qua non, or, as is sometimes said, the efficient cause of the agreement, and must be such that it animates and controls the conduct of the parties." 17 Am.Jur.2d, Contracts Sec. 143.

In our opinion, and we so hold, whether the subject property was within the boundaries of an area zoned for business is a factual matter; and, under the evidence, the mutual mistake as to this fact related to the essence of the agreement.

Id. at 73-74, 153 S.E.2d at 804.

In Financial Services v. Capitol Funds, 288 N.C. 122, 217 S.E.2d 551 (1975), the Court qualified the requirement that a mistake be mutual as follows:

In order for the remedy of rescission to be operable because of mistake of fact, there must be mutual mistake of fact. A unilateral mistake, unaccompanied by fraud, imposition, undue influence, or like oppressive circumstances, is not sufficient to avoid a contract or conveyance. Tarlton v. Keith, 250 N.C. 298, 108 S.E.2d 621; Cheek v. R.R., 214 N.C. 152, 198 S.E. 626. The following pertinent statement aptly summarizes the requirement of mutuality:

... It is said that ordinarily a mistake, in order to furnish ground for equitable relief, must be mutual; and as a general rule relief will be denied where the party against whom it is sought was ignorant that the other party was acting under a mistake and the former's conduct in no way contributed thereto, and a fortiori this is true where the mistake is due...