Johnson v. Owens, 285

• Decision Date: 24 February 1965
• Docket Number: No. 285,285
• Citation: 140 S.E.2d 311,263 N.C. 754
• Court: North Carolina Supreme Court
• Parties: Beatrice E. JOHNSON v. Dorothy J. OWENS.

Page 311

140 S.E.2d 311

263 N.C. 754

Beatrice E. JOHNSON v. Dorothy J. OWENS.

No. 285.

Supreme Court of North Carolina.

Feb. 24, 1965.

Dockery, Ruff, Perry, Bond & Cobb, Charlotte, for plaintiff.

Bradley, Gedhardt, DeLaney & Millette, Charlotte, for defendant.

SHARP, Justice.

The oft-stated essential elements of fraud, or deceit, are: "the representation, its falsity, scienter, deception, and injury. The representation must be definite and specific; it must be materially false; it must be made with knowledge of its falsity or in culpable ignorance of its truth; it must be made with fraudulent intent; it must be reasonably relied on by the other party; and he must be deceived and caused to suffer loss.' * * * The principle applies to contracts and sales of both real and personal property. * * *' Berwer v. Union Central Life Insurance Co., 214 N.C. 554, 557, 200 S.E. 1, 3; accord, Keith v. Wilder, 241 N.C. 672, 86 S.E.2d 444; Cofield v. Griffin, 238 N.C. 377, 78 S.E.2d 131, 40 A.L.R.2d 966; Harding v. Southern Loan & Insurance Co., 218 N.C. 129, 10 S.E.2d 599.

When we attribute to plaintiff's evidence the verity required by defendant's motion for nonsuit, it plainly is sufficient to establish that defendant made the positive and specific representation that the heating system was in excellent condition and adequate to heat the house. It is sufficient to establish, purchase the house. Plaintiff's evidence and that defendant knew it to be so. Patently, the representation affected the value of the property, and defendant specifically intended that it should induce plaintiff to purchase the house. Plaintiff evidence raises the inference that she was actually deceived by the misrepresentation and that she relied upon it to her damage. The only real question in the case is whether, under all the circumstances, plaintiff 'reasonably relied' upon the representation.

Defendant argues that, even if her statements about the furnace were false, plaintiff had ample opportunity to inspect the house on two occasions in defendant's absence and to test the furnace herself, as well as to have it inspected by an expert; that, had she moved the furniture, she would have discovered the soot damage from the furnace; and that she should have been put on her guard by the chill in the house in February each time she entered it. In other words, defendant contends that plaintiff's own evidence affirmatively discloses that plaintiff acted unreasonably in relying upon her representations.

'The right to rely on representations is inseparably connected with the correlative problem of the duty of a representee to use diligence in respect of representations made to him. The policy of the courts is, on the one hand, to suppress fraud and, on the other, not to encourage negligence and inattention to one's own interest,' Calloway v. Wyatt, 246 N.C. 129, 134, 97 S.E.2d 881, 886 (a case in which the complaint was fatally defective). 'The question is whether it is better to encourage negligence in the foolish or fraud in the deceitful.' Annot., Fraud predicated upon vendor's misrepresentation of physical condition of real property, 174 A.L.R. 1010, 1025. In White Sewing Machine Co. v. Bullock, 161 N.C. 1, 9, 76 S.E. 634, 637; and Cofield v. Griffin, supra, 238 N.C. at 381, 78 S.E.2d at 134 (both cases in which the court rejected such contentions by the defendant), it is said: "We are not inclined to encourage falsehood and dishonesty by protecting one who is guilty of such fraud on the ground that his victim had faith in his word, and for that reason did not pursue inquires which would have disclosed the falsehood." See Annot., Opportunity of buyer of personal property to ascertain facts as affecting claim of fraud on part of seller in misrepresenting property, 61 A.L.R. 492, 505-506 (doctrine of reasonable reliance in early North Carolina cases).

In Cowart v. Honeycutt, 257 N.C. 136, 142, 125 S.E.2d 382, 387, a case in which the plaintiff contended that she was prevented from reading a release by the fraud of the defendant, Parker, J., speaking for this Court, said:

'Defendant in his brief admits that there was evidence of a false representation of a material fact which was relied upon by plaintiff, but contends plaintiff as a matter of law was not justified in relying upon such representation, and her reliance was not reasonable. Such a contention is without merit. Our reply to such contention is this: 'In Gray v. Jenkins, 151 N.C. 80, 65 S.E. 644, 645, this Court said: 'The law does not require a prudent man to deal with everyone as a rascal, and demand covenants to guard against the falsehood of every representation which may be made as to facts which constitute material inducements to a contract. There must be...