Russo v. Williams

• Decision Date: 17 June 1955
• Docket Number: No. 33665,33665
• Citation: 160 Neb. 564,71 N.W.2d 131
• Parties: Thomas RUSSO and Elizabeth Russo, husband and wife, Appellants, v. Fred E. WILLIAMS and Cora B. Worth, Executors of the Estate of George E. Williams, deceased, et al., Appellees.
• Court: Nebraska Supreme Court

Page 131

71 N.W.2d 131

160 Neb. 564

Thomas RUSSO and Elizabeth Russo, husband and wife, Appellants, v. Fred E. WILLIAMS and Cora B. Worth, Executors of the Estate of George E. Williams, deceased, et al., Appellees.

No. 33665.

Supreme Court of Nebraska.

June 17, 1955.

Syllabus by the Court.

1. A party who has been induced to enter into a contract by fraud has, upon its discovery, an election of remedies. He may either affirm the contract and sue for damages or rescind it and be reinstated to the position he was in before it was consummated.

2. To maintain an action for rescission because of false representations the party seeking such relief must allege and prove what representations were made; that they were false and so known to be by the party charged with making them or else were made without knowledge as a positive statement of known fact; that the party seeking relief believed the representations to be true; and that he relied and acted upon them and was injured thereby.

3. Fraud is never presumed, but must be established by the party alleging it by clear and satisfactory evidence.

4. In an action in which relief is sought on account of fraud, the burden of alleging and proving the existence of all the elements thereof is upon the party seeking such relief.

5. If a party, without knowing whether his statements are true or not, makes an assertion as to any material matter upon which the other party has relied, the party defrauded will, in a proper case, be entitled to relief.

6. A purchaser of real estate has a right to believe and rely upon representations made to him by his vendor as to the character, quality, and location of the property, when the facts concerning which the representations are made are unknown to the vendee.

7. To maintain an action for fraudulent representations it is not only necessary to establish the telling of the untruth, knowing it to be such or that it was told without knowledge of the facts, but also to prove that the plaintiff had a right to rely upon it, did so rely, altered his condition because thereof, and suffered damages thereby.

8. A person is justified in relying upon a representation made to him where the representation is a positive statement of fact and where an investigation would be required to discover the truth.

9. The mere fact that one makes an independent investigation or examination, or consults with others, does not necessarily show that he relies on his own judgment or on the information so gained, rather than on the representations of the other party, nor does it give rise to a presumption of law to that effect. If, under the circumstances, he is unable to learn the truth from such examination or investigation or, without fault on his part, does not learn it and in fact relies on the representations, he is entitled to relief, all other ingredients of liability being present.

10. Whether the right of one party to a contract to rescind the same arises on account of fraud inducing the contract or an account of a breach by the other party of a dependent covenant, such right is barred by failure of the one party, for an unreasonable time after knowledge of the facts giving rise to such right, to declare a rescission and disclaim the benefits of the contract.

11. The question whether laches exists in a particular case depends upon its own peculiar circumstances and is addressed to the sound discretion of the court, the question of the unreasonableness of the delay depending largely upon the nature of the property in the particular case.

12. As a general rule, if one party has been induced to make a contract by reason of any material misrepresentation on the part of the other party or his agent, specific performance will be denied, whether the misrepresentation was willful and intended, or made innocently, or with an honest belief in its truth.

13. The specific performance of a contract by a court of equity is not generally demandable or awarded as a matter of absolute legal right but is directed to and governed by the sound legal discretion of the court, dependent upon the facts and circumstances of each particular case. It will not be granted where enforcement would be unjust.

14. The remedies of rescission and damages are inconsistent; the former proceeding upon disaffirmance and the latter upon affirmance of the contract.

15. If the contract is actually rescinded it thereby becomes nonexistent.

16. However, an election of remedies is not made if, in fact, the remedy sought does not exist.

Dryden & Jensen, Kearney, Paine & Paine, Grand Island, for appellants.

Ward W. Minor, Kearney, Fitzgerald, Hamer, Brown & Leahy, Omaha, Blackledge & Sidner, Kearney, for appellees.

Heard before SIMMONS, C. J., and CARTER, MESSMORE, YEAGER, CHAPPELL, WENKE, and BOSLAUGH, JJ.

WENKE, Justice.

Thomas Russo and Elizabeth Russo, husband and wife, brought this action in the district court for Buffalo County against Fred E. Williams and Cora B. Worth, executors of the estate of George E. Williams, deceased. The purpose of the action is to rescind a contract entered into by the plaintiffs with these defendants for the purchase of a motel property located in Kearney, Nebraska. The basis for the action is the claim that Fred E. Williams, one of the executors, made false and fraudulent representations about the property in order to induce plaintiffs to buy it and that plaintiffs, relying thereon, were induced to do so. The trial court found against the plaintiffs and dismissed their action but granted defendants specific performance of the contract on the basis of the escrow agreement entered into pursuant thereto, as prayed for in their cross-petition. Plaintiffs filed a motion for new trial and have perfected this appeal from the overruling thereof.

The Fort Kearney National Bank of Kearney, Nebraska, was also made a defendant. It is the escrow agent of the parties for the purpose of carrying out the provisions of the agreement, which provisions are more specifically set out later in this opinion. The bank has no interest in the controversy except to carry out the orders of the court entered herein. This it has agreed to do as is evidenced by its answer.

In regard to the matter complained of appellants alleged: '* * * the executor of the estate of Geroge (George) E. Williams, Fred E. Williams, made certain false and fradulent (fraudulent) representations to these plaintiffs for the purpose of inducing them to purchase said real estate, as hereinafter described and amongst other things, represented to these plaintiffs with reference to said premises, as follows: (1) That said premises were free of termites and were in good condition. (2) That the plumbing in said premises was in good serviceable and working condition. (3) That the furnace in the main office building was in good serviceable and workable condition. (4) That the entire premises were in good serviceable and working condition, and that said property was a good income property. (5) That the sewer and septic tank on said premises were in good working and serviceable condition.'

They then alleged further: '* * * that said premises were not in fact in good condition; that they were infested with termites; that the sewer was not in good condition nor the septic tank therein; that the plumbing was in bad condition and corroded; that the furnace and stoker in the main office building was not in workable condition whatsoever; that in fact, said buildings and all of said premises were in bad condition, and operation of said cabin camp would necessitate the expenditure of large sums of money to place it back into condition to operate again.'

This action, being equitable in character, is triable here de novo in conformity with section 25-1925, R.R.S.1943, which requires this court to: '* * * reach an independent conclusion as to what finding or findings are required under the pleadings and all the evidence, without reference to the conclusion reached in the district court or the fact that there may be some evidence in support thereof.' See, also, O'Brien v. Fricke, 148 Neb. 369, 27 N.W.2d 403; Rettinger v. Pierpont, 145 Neb. 161, 15 N.W.2d 393; Krelle v. Bowen, 128 Neb. 418, 259 N.W. 48.

That rule is, however, subject: '* * * to the condition that 'when the evidence on material questions of fact is in irreconcilable conflict, this court will, in determining the weight of the evidence, consider the fact that the trial court observed the witnesses and their manner of testifying, and must have accepted one version of the facts rather than the opposite.'' Rettinger v. Pierpont, supra [145 Neb. 161, 15 N.W.2d 398]. See, also, O'Brien v. Fricke, supra; Krelle v. Bowen, supra; Chitwood Packing Co. v. Warner, 138 Neb. 800, 295 N.W. 882.

This latter has particular significance here for a careful consideration of the testimony of the appellants leaves one in doubt as to just how much credence can be given to parts thereof.

George Edward Williams, also referred to as George E. Williams, died on November 13, 1951, the owner of the Midway Auto Court, the property herein involved. It consists of about 3 acres of land located in the eastern part of Kearney, Nebraska, on which are located the following buildings: One combination residence and office building which is two stories high and has a basement, 20 one-room units referred to as cabins, and a two-story building used for storage purposes. We shall hereinafter refer to the combination residence and office building as the residence-office building. In addition to the above improvements used for motel purposes it also has space available and rented for the use of trailers. The address of the motel is 1620 East Twenty-fifth Street, Kearney, Nebraska.

George Edward Williams, whom we shall herein refer to as the deceased, purchased this motel property in the early part of 1946. Since 1928 he had been a rancher, living on his ranch located some 40 miles...