Miller v. Protrka

• Decision Date: 21 December 1951
• Citation: 238 P.2d 753,193 Or. 585
• Parties: MILLER et ux. v. PROTRKA et ux.
• Court: Oregon Supreme Court

Page 753

238 P.2d 753

193 Or. 585

MILLER et ux. v. PROTRKA et ux.

Supreme Court of Oregon.

Dec. 21, 1951.

Bert McCoy, Jr., and Cecil Stickney, of Eugene, argued the cause and filed briefs for appellants.

Windsor Calkins, of Eugene, argued the cause for respondent. On the brief were Calkins & Calkins, of Eugene.

Before BRAND, C. J., and HAY, ROSSMAN, WARNER and LATOURETTE, JJ.

WARNER, Justice.

This suit was brought by the plaintiffs, Joe Miller and Edith Miller, his wife, to foreclose a contract for the sale of a motel. The defendants, George Protrka and Anna Protrka, his wife, filed a cross-complaint seeking a rescission of the contract. They alleged fraudulent representations. From a decree of foreclosure in favor of the plaintiffs, the defendants appeal.

The Millers as the sellers and the Protrkas as the buyers entered into an agreement on the 5th day of August, 1949, for the sale and purchase of what is known as Seal's Motel in Eugene, Oregon, and certain chattels used in connection with its operation for an agreed price of $125,000. The Protrkas made an initial payment of $25,000 and agreed to pay the balance by monthly payments of not less than $1,400, together with interest.

The Millers acquired the motel in December, 1947, and operated it continuously thereafter until they sold it to the Protrkas, who entered into possession on August 6, 1949. It is described as having 31 living units, one of which was reserved by the owners as quarters for themselves and occasionally one as quarters for the help. The remaining units were held for rental to the transient public.

Mr. Miller, prior to coming to Eugene, was engaged in the transportation business in Montana. Because of poor health he gave little attention to the operation of the motel and spent much of his time in Montana or Wyoming where the Millers owned other property. Mrs. Miller, a former schoolteacher, remained in Eugene where she gave her entire time and attention to the management of the motel property. It was she who was in charge of the records and various business matters incident to its operation.

On May 25, 1949, Mr. Miller, enroute to Montana, stopped in Portland long enough to list the motel for sale with G. E. Carlson, a real estate broker of that city. He then signed a commission contract and at the same time supplied Mr. Carlson with certain information concerning the motel and its operative history; but because of Mr. Miller's want of accurate information in this respect, Mr. Carlson later made personal contact with Mrs. Miller in Eugene. From her he secured more accurate data predicated upon the book records which she had at hand. On June 11, 1949, this resulted in a new listing signed by both Mr. and Mrs. Miller which supplanted the earlier listing of May 25 signed by Mr. Miller alone.

Mr. Carlson advertised the motel for sale from July 6 to 8, 1949, inclusive, in the Oregonian, a daily newspaper published in Portland, Oregon. This advertisement carried the following statements upon which the defendants rely: '* * * Newly furnished and decorated last Feb. Did over $40,000.00 last 12 mo. * * * Hardly ever a vacancy * * *.'

This advertisement came to the attention of the Protrkas for the first time on the date of its last publication and enlisted their interest in the property. They called and made an appointment with Mr. Carlson, who came to their home in Portland the same day. The Protrkas were then living in an apartment house which they owned and operated.

At that time Mr. Carlson handed them and they thereafter retained a typewritten memorandum entitled 'Estimated Income--Seal's Motel--Eugene, Oregon (30 Rentals).' This statement, compiled by him with considerable detail from some data supplied by the plaintiffs, computed the rental return on 29 units at a reduced 'winter rate' for five months and at an enhanced 'summer rate' for seven months, with a total annual gross income of $56,700. This statement of 'Estimated Income' was followed by an itemization of seven major expense items computed on an annual basis in the total amount of $13,486. According to Mr. Carlson's computation and as shown by his prepared memorandum, the annual net return from Seal's Motel was '$42,214.00.' (Predicated upon the figures employed by Mr. Carlson, the estimated net return should read $43,214.) The defendants rely heavily upon this memorandum to support their claim of fraud. We shall hereinafter refer to it as the 'Carlson statement.'

After the discussion between Carlson and the defendants at their Portland home on July 8, it was arranged that they would personally inspect the property in Eugene on July 12. Carlson drove them to Eugene and participated in the conversations which they then had on the occasion of their first meeting with the Millers. Their inspection of the premises resulted in the Protrkas making an earnest payment while then in Eugene. The next step of consequence and, as far as shown by the record, the second meeting had between the buyers and the sellers was in the offices of Commonwealth, Inc., in Portland where the deal was finally closed and the instant contract executed. The Protrkas took possession of the property the next day. They have been continuously in possession ever since.

On December 16, 1949, under the impression they had been cheated in their bargain by false and fraudulent representations made by the Millers and their agent Carlson in their behalf, the Protrkas addressed a letter to the Millers through their attorney indicating an intention to rescind the contract and demanding restitution of the monies which they had paid thereunder. This was followed by the Millers filing the complaint in this suit praying for a strict foreclosure of the instant contract. As the basis therefor the Millers alleged that the Protrkas had breached the contract by their failure to pay real and personal taxes due and payable in 1949 aggregating $1,261.80 and by reason of their failure to pay the monthly instalment of $1,400 due and payable under the contract as of January 5, 1950. By their answer and cross-complaint, the defendants Protrka sought to have the contract rescinded on the ground of false and fraudulent representations alleged to have been made to them by the Millers, which may be summarized as follows: That plaintiffs had wrongfully and falsely represented (1) that Seal's Motel had been making a profit in excess of $40,000 annually and that the gross receipts were $155 per day; (2) that the minimum rental for any unit was the sum of $4 per night; (3) that there was 'hardly ever a vacancy' when, as defendants allege, there were many vacancies; and (4) that the motel was one approved and recommended by the Oregon State Motor Association so as to entitle it to use and advertise with an AAA sign, thereby indicating to the public that the said motel met certain specifications and standards as to equipment, respectability and cleanliness and as a device to assist in obtaining a high-class patronage.

As hereinbefore noted, the defendants Protrka seek a rescission of the contract of August 5, 1949. A suit for rescission is a disaffirmance or repudiation of the contract and not an affirmation of it as would be true in an action for deceit. Rescission is often granted where an action for deceit could not be maintained. The right of rescission does not, as the right to recover damages in a common-law action for deceit, depend upon fraud for, if the transaction were the result of a false representation of a material fact, it could not stand against the injured party's right to rescind, however honestly made. Weiss v. Gumbert, Or., 227 P.2d 812, 819; Sharkey v. Burlingame Co., 131 Or. 185, 197, 282 P. 546.

A person alleging fraud has the burden of proving the same by a preponderance of the evidence. Blair v. McCool, 136 Or. 139, 146, 295 P. 950, 298 P. 244. The law never presumes fraud. It is never assumed on doubtful evidence. To the contrary, it must be established by proof clear, satisfactory and convincing. Belanger v. Howard, 166 Or. 408, 414, 112 P.2d 1022; Metropolitan Casualty Ins. Co. v. N. B. Lesher, Inc., 152 Or. 161, 167, 52 P.2d 1133; Castleman v. Stryker, 107 Or. 48, 60, 213 P. 436.

When the relation of vendor and vendee exists, the doctrine of caveat emptor applies unless there is some subsisting fiduciary relationship between the parties. Howard v. Merrick, 145 Or. 573, 579, 27 P.2d 891. No such fiduciary tie is present here, nor is any claimed. The foregoing rule, therefore, becomes one of importance in guiding us to our final determination in this matter.

The charge of fraud relating to the absence of a license to use an AAA sign is so palpably without merit that it is unnecessary to discuss it, and we will proceed to a consideration of the other three items which, it will be observed, are more or less related in character in that they all bear on the motel's earning capacity.

The Protrkas rest their case primarily upon what they claim are the misrepresentations as to income reflected by the Carlson statement, the Oregonian advertisement and Carlson's assurances that the figures therein employed by him were from the Millers' books. They insist that they bought the motel upon the reliance that it was 'taking in $56,000 a year' and $155 per day. This last amount, it will be observed, is the annual gross return of $56,700 found in the Carlson statement reduced to a per diem basis. It, therefore, follows that an expected return of $56,000 and a per diem return of $155, as claimed by the Protrkas, are substantially one and the same. It is the defendants' contention that the recital in the advertisement to the effect that the motel 'did over $40,000.00 last 12 mo.' referred to net income and not gross income. Mrs. Protrka said she asked Mrs. Miller if she could see the books on the occasion of her visit to the motel on July 12 but was met with the response that 'there was no use of seeing the...