Sauter v. St. Michael's College

• Decision Date: 15 August 1962
• Docket Number: No. 6609,6609
• Parties: J. H. SAUTER, Plaintiff-Appellee, v. ST. MICHAEL'S COLLEGE, a Corporation, Defendant-Appellant.
• Court: New Mexico Supreme Court

Page 134

374 P.2d 134

70 N.M. 380

J. H. SAUTER, Plaintiff-Appellee, v. ST. MICHAEL'S COLLEGE, a Corporation, Defendant-Appellant.

No. 6609.

Supreme Court of New Mexico.

Aug. 15, 1962.

Kellahin & Fox, Santa Fe, for appellant.

Bigbee & Stephenson, Charles D. Olmsted, Santa Fe, for appellee.

GARNETT R. BURKS, District Judge.

The parties will be referred to herein as they were designated in the district court.

Plaintiff filed his action in the District Court of San Juan County for the recovery of damages sustained by him by virtue of alleged fraudulent representations made by the defendant corporation in connection with the sale by plaintiff of his business to one William F. Colwes. In his complaint plaintiff prayed for actual damages in the amount of Twenty One Thousand, Five Hundred Dollars ($21,500.00), and for punitive damages in the amount of Twenty Five Thousand Dollars ($25,000.00). The case was tried by a jury and a verdict was returned in plaintiff's favor in the amount of Nineteen Thousand Dollars ($19,000.00) for actual damages sustained by plaintiff. Judgment for the plaintiff was entered for said amount and defendant has appealed therefrom to this court.

Plaintiff was engaged in the automobile sales business in Santa Fe, New Mexico, and conducted such business on premises leased by him from the defendant under four lease agreements, each of which was for a separate parcel of land. Three of the leases were dated November 22, 1950, and the fourth was dated February 1, 1953. Each of the leases was for a period of years ending in 1965, each contained a provision that the plaintiff lessee should make certain specified improvements upon the particular parcel of land within a fixed time, and each also contained a provision that the lessee should not underlet the premises therein described or assign such lease without first obtaining the written assent of the defendant lessor. The plaintiff did not in all respects make the improvements provided to be made by him within the time specified in the leases, but the time for making such improvements had been indefinitely extended by agreement of the parties due to the outbreak of the Korean War. The plaintiff was not, however, relieved from his obligation to ultimately make such improvement.

By written agreement dated May 26, 1953, plaintiff agreed to sell and Colwes agreed to buy plaintiff's said business. This agreement provided, among other things, that plaintiff would obtain and furnish Colwes with the defendant's written consent to the assignment of said leases to him, Colwes, and that Colwes would assume and perform all of the plaintiff's covenants contained in the leases for the payment of rentals and the construction of improvements.

Plaintiff asserted that before he executed the agreement of May 26, 1953, with Colwes, he contacted the defendant and defendant represented to him that it would approve the assignment of the leases to Colwes in the event plaintiff sold such business to Colwes, if Colwes would agree to perform the building covenants contained in the leases. Plaintiff did sell his business to Colwes and within several months following the execution of the agreement of May 26, 1953, transferred all of the assets and properties of the business to him. Defendant refused to assent to the assignment of the leases to Colwes after such sale and transfer. By letter dated September 21, 1953, which was subsequent to the sale and transfer of the business, defendant's attorney advised plaintiff's attorney to the effect that defendant would approve such assignment if plaintiff would pay defendant the sum of Fourteen Thousand, Four Hundred Fifty Dollars ($14,450.00) and would also assign his interest in a contract he had for the purchase of real estate known as the 'Lopez Property.' This contract referred to in the letter was a contract between one Christine Cunningham, Executrix of the Last Will and Testament of James C. Lopez, deceased, and the plaintiff for the sale and purchase of land in the City of Santa Fe, New Mexico. At the time such letter was written the plaintiff, as the purchaser, had paid the sum of One Thousand Dollars of the total purchase price of Eight Thousand Dollars. Plaintiff paid defendant the said sum of Fourteen Thousand, Four Hundred Fifty Dollars ($14,450.00) and also assigned his interest in said contract to the defendant.

The first point defendant raises in its appeal is that the conditional nature of the alleged fraudulent representations made by it will not support the verdict or the judgment.

The defendant is a corporation and no issue is raised as to the agency or authority of any of the persons who represented or purported to represent it in the transactions involved in this suit. The plaintiff testified that one Brother Francis, principal of St. Michael's High School, was the person with whom he always did business on behalf of the defendant; that before the agreement of May 26, 1953, was executed he went to the defendant's office, but was unable to see Brother Francis, but that he did talk to Brother Andrew, another of the defendant's agents; that he advised Brother Andrew of his intention of selling his business to Colwes and asked him 'to check Mr. Colwes to see if they would accept the business rental.' Plaintiff further testified that on May 24, 1953, he returned to defendant's office and talked to Brother Francis. A portion of the plaintiff's testimony with reference to this conversation is as follows:

'Q Did you have a conversation with Brother Francis?

'A Yes.

'Q Would you tell us, to the best of your recollection, what that was?

'A Well, I told him I wanted to sell my business and I wanted to transfer my leases, assignment, to Mr. Colwes.

'Q And what did Brother Francis say, if anything?

'A He said it would be all right so long as Colowes fulfilled--performed my covenants.

'Q Now, did he attached may qualifications to that statement?

'A No.

'Q Do you remember anything else that was discussed there at that time?

'A No, I do not.

'Q Did he finally state whether or not they would or would not approve the assignments?

'A He said they would approve it.

'Q With the provisions you memtioned?

'A Yes.

'Q That Mr. Colwes would agree to----

'A Perform their building covenants.

'Q Was there anything about your not having completed the building or the covenants?

'A No.'

The testimony concerning the time of this conversation, the subject of it, and even whether it took place, is conflicting. In its statement of facts in its brief in chief the defendant says: 'It was denied by Brother Francis that this conversation that place, or if it did he, Brother Francis, did not remember it.' This appears to be a correct summary of Brother Francis' testimony on this point. The evidence is also conflicting as to whether in this conversation Brother Francis told the plaintiff that the assignments of the leases would be approved if Colwes performed the building covenants or if they would be approved if Colwes would agree to perform such covenants.

This is an action founded in fraud. The essential elements required to sustain an action for fraud, are that a representation was made as a statement of fact which was untrue and known to be untrue by the party making it, or else recklessly made; that it was made with intent to deceive and for the purpose of inducing the other party to act upon it; and that the other party did in fact rely on it and was induced thereby to act to his injury or damage. Pacific Royalty Co. v. Williams (C.C.A. 10, 1955) 227 F.2d 49; Equitable Life Ins. Co. of Iowa v. Halsey, Stuart and Co. (C.C.A. 7) 112 F.2d 302; Davis v. Wilson, 10 Cir., 276 F. 672; Standard Ins. Agency, Inc. v. Northeast Rapid Transit Co., 40 Ariz. 408, 12 P.2d 777. There must be a concurrence of all of these essential elements and without this there can be no actionable fraud. None of these elements can be presumed, but each must be shown by clear and convincing evidence. Berrendo Irrigated Farms Co. v. Jacobs, 23 N.M. 290, 168 P. 483; Frear v. Roberts, 51 N.M. 137, 179 P.2d 998; Equitable Life Ins. Co. of Iowa v. Halsey, Stuart and Co., supra; Standard Ins. Agency, Inc. v. Northeast Rapid Transit Co., supra; See, also, Kaye, v. Cooper Grocery Co., 63 N.M. 36, 312 P.2d 798.

The court instructed the jury that the burden was on the plaintiff to prove, by clear and convincing evidence, the material allegations of the complaint which are denied by the defendant. The court also specifically instructed the jury that in order for it to return a verdict in plaintiff's favor it must find from the evidence the various essential elements of fraud as hereinabove set forth, and that otherwise the verdict should be for the defendant. In Anderson v. Reed, 20 N.M. 202, 148 P. 502, L.R.A.1916B, 862, the court noted that the findings of the lower court were predicated upon facts and circumstances proven in the case, and quoted from Smith on the Law of Fraud, Sec. 266:

'Fraud, therefore, is properly made out by marshaling the circumstances surrounding the transaction and deducing therefrom the fraudulent purpose where it manifestly appears, as by presenting the more positive and direct testimony of actual purpose to deceive; and, indeed, circumstantial proof in most cases can alone bring the fraud to light, for fraud is peculiarly a wrong of secrecy and circumvention, and is to be traced, not in the open proclamation of the wrongdoer's purpose, but by the indications of covered tracks and studious concealments.'

In Telman v. Galles, 41 N.M. 56, 63 P.2d 1049, this court said:

'The intent with which an act is done is known only to the person who does it and can only be proved by circumstances unless he admits it himself.'

The record discloses that the sale of plaintiff's business to Colwes was of sufficient magnitude to invoke a certain degree of care on the part of a reasonably prudent man under the circumstances; that each of the four leases...