Nelson Realty Co. v. Darling Shop of Birmingham, Inc.

• Decision Date: 24 October 1957
• Docket Number: 6 Div. 84
• Citation: 267 Ala. 301,101 So.2d 78
• Court: Alabama Supreme Court
• Parties: NELSON REALTY CO., Inc., et al. v. DARLING SHOP OF BIRMINGHAM, Inc.

Page 78

101 So.2d 78

267 Ala. 301

NELSON REALTY CO., Inc., et al. v. DARLING SHOP OF BIRMINGHAM, Inc.

6 Div. 84.

Supreme Court of Alabama.

Oct. 24, 1957.

Rehearing Denied March 6, 1958.

Earl McBee and John S. Tucker, Jr., Birmingham, for appellants.

Cabaniss & Johnston, K. E. Cooper and Meade Whitaker, Birmingham, for appellees.

SIMPSON, Justice.

This is an appeal by Nelson Realty Co. from a decree of the lower court sustaining a demurrer to the substitute cross-bill of Nelson, the appellant.

The original bill was filed by Darling Shop of Birmingham, the appellee, seeking a declaratory judgment to clarify a lease existing between Darling and Nelson. Nelson, in turn, initially filed an answer and cross-bill which sought to defeat a renewal of the lease and to require Darling to vacate the premises. There were several amendments to the original pleadings and two previous appeals. For a better understanding of the case, see 255 Ala. 586, 52 So.2d 211 and 262 Ala. 495, 79 So.2d 793.

A substitute answer and cross-bill was filed on November 21, 1955, after the first appeal, and amended August 29, 1956, after the second appeal and the consent of Prudential Insurance Company (mortgagee of the property), who had been assigned the rents therefrom, had been obtained.

It is the contention of the appellant on this appeal that the lower court was in error in sustaining the demurrer to the cross-bill as amended for the following reasons: that there is a sufficient allegation which would warrant an accounting between the parties; that a sufficient ground for the rescission of the lease is stated viz.: fraud in the procurement of the lease contract; and that in the event that a rescission of the contract is not warranted, then he is entitled to a specific performance of those promises fraudulently made by Darling for the remodeling and merchandizing of the building. We limit discussion to these propositions.

The following facts are apparent from the pleadings: Nelson interposed the original cross-bill grounded on the claim that Darling had not met the necessary conditions to effectuate a renewal of the existing lease between the parties. This ground was held insufficient by the lower court and by this court on the first appeal. 255 Ala. 586, 52 So.2d 211. After amending the cross-bill (by the substitute cross-bill), it was again brought up on appeal and this court then held that it would be necessary for Nelson to obtain the consent of Prudential, to whom the proceeds of the lease had been assigned, before the cross-bill could be maintained. 262 Ala. 495, 79 So.2d 793. After the case was remanded, Nelson obtained such consent from Prudential, amended his substitute cross-bill showing such consent, and now contends that he has the right to challenge the validity of the lease on the ground of fraud in its procurement.

The salient facts of the alleged fraud are: Nelson avers that while he was negotiating with Darling for the leasing of the property, as a material inducement for the giving of the lease by Nelson, Darling promised and agreed that they would remodel the building as soon as war shortages of building materials were relieved so as to increase the sales and therefore, increase the productivity of the premises. It is further alleged by Nelson that when the formal lease was executed, because of the shortages of materials, instead of binding Darling to this unconditional promise to remodel, the lease contained a provision that 'the tenant may at any time make any and all repairs, alterations or improvements upon said premises as it may deem necessary * * *'. Nelson avers that at the time the promise to remodel when materials could be available was made, although he (Nelson) relied on such promise and executed the lease, Darling had no intention of keeping it and that the fraud so committed in making such a promise to induce him to execute the lease entitles him to a recission thereof.

The trial court, in sustaining the demurrer, made no reference to any specific grounds on which the ruling was rested. Therefore, only those grounds going to the sufficiency of the bill as a whole will be considered. Rowe v. Rowe, 256 Ala. 491, 55 So.2d 749; Shaddix v. Wilson, 261 Ala. 191, 73 So.2d 751; Penton v. Brown-Crummer Inv. Co., 222 Ala. 155, 131 So. 14; Rikard v. O'Reilly, 232 Ala. 667, 169 So. 320.

Since a demurrer to a bill as a whole should be overruled if any one of the bill's aspects presents a case for equitable relief (8 Ala.Dig., Equity, k232, p. 529) and a bill is not defective even though it ask for alternative relief (Stamey v. Fortner, 230 Ala. 204, 160 So. 116) the sole consideration on this appeal is to determine if the substituted cross-bill of Nelson presents a case for equitable relief in any aspect.

No question of the consent of Prudential enters into the determination of this appeal. Prudential has given its consent to the maintenance of the suit so that obstruction to the claim of Nelson mentioned on the last appeal (262 Ala. 495, 79 So.2d 793) has been removed.

We are mindful of the oft stated rule that for an allegation of fraud to be sufficient, it must aver facts disclosing in what the fraud consists, so as to advise respondent what he is called upon to defend against. Williams v. Williams, 238 Ala. 637, 193 So. 167; Doswell v. Hughen, Ala., 94 So.2d 377. General averments of fraud which are in effect conclusions of the pleader, will not suffice as against proper demurrer. Williams v. Williams, supra.

The principle of law here controlling and firmly settled in this jurisdiction is that a promise made with the intention in the mind of the promisor not to perform, may be a misrepresentation of a subsisting fact, and if material and relied upon as an inducement to the contract, is a fraud entitling the promisee to a rescission or cancellation. Williams v. Williams, supra.

While a failure to fulfill a mere promise alone will not give rise to actionable fraud, yet if with an intent to deceive, a promise is made with no intention of fulfillment at the time such promise was made and relied upon, and injury to the defrauded party results therefrom, fraud may be predicated thereon. Cross v. Maxwell, 263 Ala. 509, 83 So.2d 211 and authorities cited therein; Doswell v. Hughen, supra.

It is the contention of the appellee that such an antecedent verbal promise intentionally omitted from the written contract entered into between the parties is not subject to enforcement either directly or indirectly. In support of this contention, the appellee cites several cases, i.e., Betts v. Gunn, 31 Ala. 219; Folmar v. Lehman-Durr Co., 147 Ala. 472, 41 So. 750; Goulding Fertilizer Co. v. Blanchard, 178 Ala. 298, 59 So. 485; Ballentine v. Bradley, 236 Ala. 326, 182 So. 399; Harper v. Kansas City Life Ins. Co., 240 Ala. 472, 199 So. 699; Bankhead v. Jackson, 257 Ala. 131, 57 So.2d 609; and Holmes v. Riley, 240 Ala. 96, 196 So. 888. However, the court in the consideration of the above cases was not concerned with fraud which entered into the inducement of the contract.

Nor does a written contract estop the parties from showing fraud in the inducement if seasonable action is taken. Stanard Tilton Milling Co. v. Mixon, 243 Ala. 309, 9 So.2d 911; Alabama Machinery & Supply Co. v. Caffey, 213 Ala. 260(3), 104 So. 509; J. A. Fay & Egan Co. v. Independent Lumber Co., 178 Ala. 166, 59 So. 470. 'The law does not countenance a contract against the consequences of fraud.' Alabama Machinery & Supply Co. v. Caffey, supra, 213 Ala. 262, 104 So. 511. If the promises made were tainted with fraud, and there was a fraudulent intent in obtaining the lease, without intention of performance and pursuant to it, the promises were not fulfilled, the statute of frauds becomes immaterial. Doswell v. Hughen, supra. The action in such cases is based upon the fraud in the procurement of the contract, and not upon the contract itself. Pierce v. Wilson, 34 Ala. 596.

Estoppel is argued on the part of the appellee in bar of the claim of the appellant in that allegedly appellant did not act seasonably after discovery. However, to take advantage of estoppel, it must be availed of by special plea (Jones & Co. v. Peebles, 130 Ala. 269, 30 So. 564; Cloverland Apartments, Inc., v. Ansley, 265 Ala. 380, 91 So.2d 470) alleging facts upon which the estoppel is predicated. Jones & Co. v. Peebles, supra; Gulf Red Cedar Co. v. Crenshaw, 169 Ala. 606, 53 So. 812. An exception to this rule is where facts necessary or sufficient to establish the estoppel affirmatively appear from the face of the bill, in which case it may be taken advantage of by demurrers. J. M. Card Lumber Co. v. Ozement, 187 Ala. 237, 65 So. 792. Here, however, according to our interpretation, we do not think sufficient facts are apparent from the face of the cross-bill to show that this defense is available to defeat Nelson's claim.

The rule is that upon the discovery of the fraud, the party must act with promptness. An express affirmance of the contract by word or act after the discovery of the fraud defeats the right of rescission. Stafford v. Colonial Mortgage & Bond Co., 221 Ala. 636, 130 So. 383; Kyser v. Southern Building & Loan Ass'n, 224 Ala. 673, 141 So. 648. What is seasonable action depends upon the facts in each particular case. Stafford v. Colonial Mortgage & Bond Co., supra. There can be no estoppel without knowledge or means of knowledge of all material facts. American National Bank & Trust Co. v. Powell, 235 Ala. 236, 178 So. 21. The common sense of the rule is that a person cannot be estopped from asserting a fact of which he was ignorant, and which, when he became acquainted with the situation, commenced his remedial action with promptness. We interpret the cross-bill as governed by this last stated principle.

The appellee contends that from the acts of accepting the rent and paying off one and part of another mortgage the appellant is estopped from seeking a...