Keylon v. Inch

• Decision Date: 14 August 1934
• Docket Number: 25036.
• Parties: KEYLON et ux. v. INCH et al.
• Court: Washington Supreme Court

35 P.2d 73

178 Wash. 522

KEYLON et ux. v. INCH et al.

No. 25036.

Supreme Court of Washington

August 14, 1934

Department 2.

Appeal from Superior Court, King County; Robert S. Macfarlane Judge.

Action by Luther C. Keylon and wife against Samuel Inch and another. From an order dismissing the action with prejudice as to respondent Inch, plaintiffs appeal.

Affirmed.

Shumate & Clarke, of Seattle, for appellants.

Green &amp Burnett and McMicken, Ramsey, Rupp & Schweppe, all of Seattle, for respondents.

HOLCOMB, Justice.

In this action for damages, based on fraud and deceit, the lower court, upon the conclusion of the testimony on behalf of appellants, sustained a challenge interposed by respondent Inch to the sufficiency of the evidence, on the ground that appellants had waived their action for damages, could not recover, and the jury was thereupon discharged. The lower court accordingly entered an order dismissing the action with prejudice, as to respondent Inch. From that action on the part of the lower court, this appeal was taken.

Upon the challenge to the sufficiency of the evidence introduced by appellants, the trial judge assumed as true all evidence and all reasonable inferences and deductions therefrom offered on behalf of appellants. We must so consider the evidence on this appeal.

The facts may be briefly summarized as follows: Respondent Inch prior to 1925, owned property in Seattle known as the Gotham Garage. In 1925 he sold it to Bliss, a defendant in this action, in return for a cash consideration and a mortgage for $28,000, secured by the garage property. From 1925 to 1930, Bliss owned and rented the garage property. In 1930, due to poor business conditions, Bliss was in default on the mortgage to the amount of $4,000. He therefore became anxious to sell the property. He listed it with various persons, including the real estate firm of John Davis & Co., with whom respondent was associated as a broker. Appellants, who had resided in Yakima for some years, where they had been engaged in buying, selling, and trading real estate, early in the spring of 1930 went to Seattle to look for some real estate which they could purchase, either for cash or by a trade of some of their Yakima property. On inquiry at a real estate office, known as the 'Realty Mart,' a broker spoke of the Gotham Garage property. He informed them, among other things, that there was a lease on the property paying $425 per month. At that time they personally examined this property with the idea of purchasing. On a later visit to Seattle they again visited the office of the Realty Mart to discuss this property. The broker who had previously shown it to them, however, had left that office. They then went to the Gotham Garage itself and asked the tenant, one Hart, at what real estate firm the property was listed for sale, and were dirested to John Davis & Co.'s office. It is undisputed that appellants examined the property and secured information as to the rental thereof Before they approached respondent Inch at the office of John Davis & Co. At their request, Inch discussed with appellants the terms for a sale of the garage property. According to their testimony he stated, in response to their questions, that the lease on the property paid $425 per month; that Hart, the tenant, was paying that rent and that he understood that he would continue to pay that rent on a further lease for a period of ten years. Having already visited the property, and knowing the tenant Hart and the monthly rental, when they approached Inch in his office the information he gave them was that which Bliss had given at the office at the time he listed the property for sale. Bliss also confirmed the statement that when he listed the property with John Davis & Co. he stated that there was a lease for $425 per month, but did not reveal the further fact that the tenant was not paying that rent. There was no evidence that Inch had any connection whatever with the management or renting of the garage property. Thereafter, appellants went again to the garage property, examined it, and questioned Hart as to the rent he was paying, the ability of the property to pay the rent, and his willingness to continue his tenancy. Hart, testifying as a witness for appellants, said that under instructions from Bliss he told them he was paying $425 per month; that the garage was paying that sum, and that he was willing under certain circumstances to lease it for a period at that rent. There was no evidence, nor could any possible inference arise from any testimony, that Inch had any part in any conspiracy between Bliss and Hart to defraud appellants.

After their conversation with Hart and their examination of the property, on June 23, 1930, appellants purchased the garage from Bliss, giving him an apple orchard of uncertain value in the Yakima valley, and $4,500 cash for his equity. In addition, they assumed the obligation of Bliss to Inch by giving a new note and mortgage for $32,000 to Inch in lieu of the Bliss mortgage for $28,000 plus $4,000 for defaults which had accrued.

It is undisputed that appellants, immediately after their purchase, took over the management and collection of rents on the property. They knew, therefore, at the time of the first payment of rental to them by Hart that the property was not returning $425 per month, as provided in the lease. Appellant the husband testified that within three months after the purchase he met Bliss who then informed him that at the time of the purchase, he, Bliss, was not receiving and had never received the full rent of $425 per month. In October, 1930, Hart transferred his lease to one Avery, at which time appellants received payment in full at the rate of $425 per month from the 1st of July until the time of that transfer. The new lease with Avery was at a lower rental than that provided in the former lease to Hart.

In spite of the fact that appellants knew by October, 1930, that Hart and Bliss had misrepresented the actual rental and Hart's desire to take a 10-year lease, they, nevertheless, continued to collect the rents and manage the property until July, 1931. At that time, intending to go to California, they turned the collection of rents over to respondent Inch, stating that due to their absence he could manage the property to better advantage than they could. During all of 1931 and until they returned to Seattle in August, 1932, appellants conducted a correspondence with respondent Inch relating to the management of the garage. In none of their letters, in spite of the knowledge as to the condition of the rents and leases on the property, did they make any claim to Inch that he had misled them by any misrepresentation.

After July, 1931, appellants made no attempt to keep the mortgage to respondent in good standing. Respondent Inch applied all the rents collected by him on the existing defaults. By August, 1932, interest on the mortgage was a year in default, a year's taxes were owing on the property, and several local improvement assessments were unpaid. At that time respondent found it necessary to secure the consent of appellants to the transfer of the tenancy in order to secure any rental whatever. Receiving no reply to his request for consent to such a transfer, in August, 1932, he wrote that he would be forced to take some action on the mortgage unless they interested themselves in the condition of the property.

In September, 1932, on their return from California, after trading off an apartment house they had acquired there, appellants interviewed Inch and expressed a desire to deed the property back to him in consideration of the cancellation and discharge of the note and mortgage. They desired to avoid a deficiency judgment and to get the mortgage canceled. Inch refused to cancel the note and mortgage unless the delinquent taxes and local assessments were paid. Finally, on September 27, 1932, he did cancel and return the note and mortgage to appellants in consideration of a quitclaim deed to the property from appellants, an assignment of the rents, and a note signed by both appellants for approximately $1,100, covering only delinquent taxes and assessments. At the same time there was also executed an assignment of a chattel mortgage upon the equipment in the premises which had run to appellants. This assignment was made to respondent Inch.

Three days after that transaction, on September 30, 1932, the original complaint in this action was verified by appellants. Bliss was made a party to the action, but made no defense, thereby consenting to a default judgment against him in the sum of $40,500 being entered. He did not appeal from that judgment, and testified as a witness for appellants.

Appellants correctly state the rule that persons suffering damages because of wrongs perpetrated on them by others, in transactions of this kind, have an election upon discovering the fraud to rescind with reasonable diligence or affirm the contract and sue for damages for the deceit. This last was the remedy they had elected to pursue. Pronger v. Old National Bank, 20 Wash. 618, 56 P. 391; McDaniel v. Crabtree, 143 Wash. 168, 254 P. 1091.

Appellants incorrectly assert that they were not bound by knowledge of the fraud perpetrated upon them until after they had located and talked with Hart, who had...