Marion v. Grand Coulee Dam Hotel

• Decision Date: 02 February 1950
• Docket Number: 30998.
• Citation: 35 Wn.2d 589,214 P.2d 204
• Parties: MARION v. GRAND COULEE DAM HOTEL et al.
• Court: Washington Supreme Court

214 P.2d 204

35 Wn.2d 589

MARION v. GRAND COULEE DAM HOTEL et al.

No. 30998.

Supreme Court of Washington

February 2, 1950

Department 1

Action by E. E. Marion against the Grand Coulee Dam Hotel, a corporation, and another for alleged misrepresentations of defendants in inducing plaintiff to establish a dental office in Grand Coulee and to lease office space from the defendant corporation.

A demurrer to plaintiff's amended complaint was sustained in the Superior Court for Grant County, Robert T. Hunter, J and from a judgment of dismissal plaintiff appealed.

The Supreme Court, Donworth, J., held that no cause of action for fraud was stated.

Judgment affirmed.

Hamblen Gilbert & Brooke, Spokane, for appellant.

Moe &amp Huse, Ephrata, for respondents.

DONWORTH, Justice.

This is an action to recover damages because of alleged misrepresentations of the defendants in inducing the plaintiff to establish a dental office in Grand Coulee Washington, and to lease office space from defendant corporation. A demurrer to plaintiff's amended complaint was sustained and plaintiff having elected to stand upon that pleading, the trial court entered judgment of dismissal of the action from which plaintiff appealed.

The allegations of the complaint are in substance as follows: Respondent Grand Coulee Dam Hotel Co. is a Washington corporation and respondent Fred M. Weil is the president thereof. Appellant is a licensed dentist in the state of Washington and, except for the period at Grand Coulee, was engaged in the practice of dentistry in the city of Spokane.

About the first day of February, 1947, respondent Weil represented to appellant that there were 18,000 people residing within an area of Five miles of Grand Coulee and that there was an excellent opining for a dentist there. About the twentieth day of the same month respondent Weil further represented to appellant that the only dentist practicing in the area referred to had been killed in an automobile accident.

These representations were false and in truth and in fact there were not in excess of 7,500 people within a radius of five miles of Grand Coulee and there were two other dentists engaged in the practice of dentistry within said area. Respondent Weil knew the representations to be false and that they were made for the purpose of inducing appellant to leave office space from the respondent corporation. Appellant did not know of the falsity of these representations and, relying on the truth thereof entered into a one-year lease with the respondent corporation dated March 4, 1947, covering certain space in its hotel building. By the terms of this lease appellant agreed to pay a monthly rental of $216.67 and had the privilege of renewing the lease for an additional four years. Upon execution of the lease, appellant paid to the respondent two months rent. In further reliance upon these representations appellant about March 4, 1947, purchased dental equipment at a cost of three thousand dollars and resigned his employment as a dentist in Spokane for which he was receiving $7500 annually. Had it not been for such representations and the appellant's reliance thereon, appellant would not have resigned his position in Spokane and entered into the lease and opened up a dental office at Grand Coulee.

Prior to 1947 the appellant had lived and practiced dentistry in Spokane for a period of six years and was not familiar with Grand Coulee and knew no person in Grand Coulee other than respondent Weil. Although it was extremely difficult for appellant to leave his employment in Spokane, he visited Grand Coulee between February 1, 1947, and March 4, 1947, which is a distance of some one hundred miles from Spokane, for the purpose of investigating the desirability of establishing a dental office there and he did not learn of any facts which would indicate that the representations made by respondent Weil were false.

When the falsity of the representations was discovered by appellant about April 20, 1947, he informed respondent Weil and refused to pay further rental under the terms of the lease.

If the representations had been true, appellant would have made a net profit of $15,000 a year during the five-year life of the lease, whereas the office was operated by appellant for the months of April, May, June and July, 1947, at a loss of $2000. The dental equipment which was purchased by him for $3000 is worth now only $500. Appellant prayed for judgment against the respondents in the sum of $37,500.

In considering the effect of a pleading to which a demurrer has been interposed, it is the approved rule that its allegations must be liberally construed in favor of the pleader. The demurrer admits the truth of the facts well pleaded, including every legitimate inference deduced therefrom, but does not admit the truth of the inference of facts alleged, unless those facts are sufficient to justify the inference. McGillivary v. Montgomery Ward & Co., 19 Wash.2d 582, 143 P.2d 550.

The single question for our decision is whether the complaint states a cause of action for fraud.

In Webster v. L. Romano Engineering Corp., 178 Wash. 118, 34 P.2d 428, 430, we set out the essential elements of fraud in the following language: '* * * But what is fraud? This court has been reluctant to circumscribe it by definition. Knutsen v. Alitak Fish Co., , 28 P.2d 334; American Savings Bank & Trust Co. v. Bremerton Gas Co., 99 Wash. 18, 168 P. 775. We have, however, along with all other courts, recognized certain essential elements that enter into its composition. These are: (1) A representation of an existing fact; (2) its materiality; (3) its falsity; (4) the speaker's knowledge of its falsity or ignorance of its truth (5) his intent that it should be acted on by the person to whom it is made; (6) ignorance of its falsity on the part of the person to whom it is made; (7) the latter's reliance on the truth of the representation; (8) his right to rely upon it; (9) his consequent damage.'

Appellant contends that the facts set out in the complaint show clearly that all of the elements listed above are present. Respondents maintain that the complaint is defective in two particulars: (1) that there is no showing that appellant had the right to rely upon the truth of their representations, or (2) that there is not showing that their representations were material. Respondent further contends that the complaint states no cause of action for damages as the damages alleged are entirely speculative, uncertain and remote, and are completely devoid of any basis upon which damages could be assessed or recovered.

In Forsyth v. Davis, 152 Wash. 595, 278 P. 676, 677, we made these observations: 'That testimony must be 'clear, cogent and convincing,' in order to support a judgment as for fraudulent misrepresentations, is well settled. It is also true that, as was stated by this court in Wilson v. Mills, 91 Wash. 71, 157 P. 467, a case based upon alleged fraudulent misrepresentations, that 'every case of this character must rest upon its own facts, subject to certain general principles.' This being true, it is seldom that opinions in cases previously decided are of more than general assistance in determining whether or not the facts in a particular case do or do not support a judgment for damages based upon alleged fraudulent misrepresentations.'

Both appellant and respondents have cited a number of our decisions as supporting their respective views as to whether, under the facts alleged in the complaint, there was justifiable reliance by appellant upon respondents' alleged representations. We have examined these decisions and will first refer to those relied upon by appellant.

In the following cases, cited in appellant's brief, this court held the purchaser had a right to rely on the representations of the seller because the means of knowledge were not as open to the purchaser as to the seller:

Gilluly v. Hosford, 45 Wash. 594, 88 P. 1027 (representations as to dividends yielded by stock in a laundry company); Wooddy v. Benton Water Co., 54 Wash. 124, 102 P. 1054, 132 Am.St.Rep. 1102 (representations relating to amount of acreage and susceptibility to irrigation); Crawford v. Armacost, 85 Wash. 622, 149 P. 31 (representations as to amount of assessments on city lots); Eyers v. Burbank Co., 97 Wash. 220, 166 P. 656 (representation that land was seeded to alfalfa and producing certain tonnage); Warwick v. Corbett, 106 Wash. 554, 180 P. 928 (representations as to earning capacity of a feed mill); Jones v. Elliott, 111 Wash. 138, 189 P. 1007 (representations as to value of mortgaged land and financial responsibility of maker of notes secured thereby); Connell v. McGill, 124 Wash. 350, 214 P. 1 (representation that certain lots faced on a public street); Bickford v. Uthe, 134 Wash. 636, 236 P. 276 (representations regarding character of orchard and soil composition); Shrader v. Slocum, 163 Wash. 178, 300 P. 524 (representations as to quality and productiveness of agricultural land); Miller v. Frederick, 171 Wash. 452, 18 P.2d 40 (representations as to net profits of a hotel business); Jones v. McQuesten, 172 Wash. 480, 20 P.2d 838 (representation as to carrying strength of building); Gray v. Wikstrom Motors, Inc., 14 Wash.2d 448, 128 P.2d 490 (representation as to retail price of an automobile).

In several of the above cited cases the purchaser made at least a partial investigation as to the truth of the representations and was held not to have waived his right to rely on the seller's statements. For example, in Jones v Elliott, supra, we stated that it could not be held under the facts of that case that the purchaser should have mistrusted the truth of the seller's statements. The pertinent language of the...