Schulte v. Westborough, Inc.

• Decision Date: 03 May 1947
• Docket Number: 36858.,36857
• Citation: 163 Kan. 111,180 P.2d 278
• Parties: SCHULTE et al. v. WESTBOROUGH, Inc., et al. DENNON et al. v. SAME.
• Court: Kansas Supreme Court

180 P.2d 278

163 Kan. 111

SCHULTE et al. v. WESTBOROUGH, Inc., et al.

DENNON et al. v. SAME.

Nos. 36857, 36858.

Supreme Court of Kansas

May 3, 1947

Rehearing Denied June 14, 1947.

Appeal from District Court, Sedgwick County, Division No. 2; Robert L. Nesmith, Judge.

Consolidated actions by V. F. Schulte and Osa Schulte, and by Floyd Dennon and Opal Dennon, against Westborough, Inc., and others to recover damages on ground that plaintiffs were defrauded in the purchase of dwelling houses. From orders overruling demurrers to plaintiffs' amended petition, defendants appeal, and plaintiffs move to dismiss the appeals.

Motion denied and orders reversed.

Syllabus by the Court.

1. An action for relief on the ground of fraud must be commenced within two years from the time the cause of action accrues but such cause of action is not deemed to have accrued until the discovery of the fraud. G.S.1935, 60-306 (Third).

2. In order to state a cause of action on the ground of fraud which will toll the running of the two year statute of limitations it is necessary that the petition clearly disclose the fraud was not, and in the exercise of reasonable diligence could not have been, discovered earlier than within the two year period preceding the commencment of the action.

3. Where on a demurrer to plaintiffs' amended petition the trial court refuses to consider certain new allegations in such petition on the ground they were made more than two years after the cause of action accrued and were therefore too late and plaintiffs fail to cross-appeal from such adverse ruling, pursuant to G.S.1945 Supp. 60-3314 they cannot be heard to complain of the adverse ruling on an appeal by defendants from an order overruling their demurrers to plaintiffs' amended petition.

John F Eberhardt, of Wichita (Robert C. Foulston, George Siefkin George B. Powers, Samuel E. Bartlett, Andrew F. Schoeppel, Carl T. Smith, Stuart R. Carter, Dale C. Kidwell, John J. Darrah, and Robert B. Morton, all of Wichita, on the brief), for appellants.

Richard B. Clausing, of Wichita (Payne H. Ratner, Donald C. Allen, Frederick A. Mann, and Louise Mattox, all of Wichita, on the brief), for appellees.

WEDELL Justice.

These were two actions to recover damages on the theory plaintiffs were defrauded in the purchase of a dwelling house. The legal issue in the cases is identical. They were consolidated in the district court for the purpose of presenting demurrers to the respective petitions and are consolidated on appeal. The ruling on the demurrers in case No. 36,857, Schulte v. Westborough, Inc., et al., will control the ruling in case No. 36,858, Dennon v. Westborough, Inc., et al. The defendants Westborough, Inc., and the Rock Island Lumber Company appeal from orders overruling their demurrers to plaintiffs' amended petition.

Appellees seek to have the appeals dismissed on technical grounds. We have concluded the request should be denied but shall briefly treat the point later.

The action was brought by appellees, purchasers of real estate, against a party named in the contract of purchase as the owner, a number of other appellants alleged to have been engaged in a joint enterprise with the owner, and with each other, in developing, building and selling the property and against a party claimed to have sold the property as the agent of all appellants. Only the alleged false and fraudulent representations pertaining to the basement floor of the dwelling are involved. They were:

'That in truth and in fact said representations were false in the following respects: That whereas the Federal Housing Administration specifications for the building of the basement floor in said dwelling house required a basement floor of four inches in thickness of concrete over the entire basement, the actual tickness of the basement floor of concrete of said dwelling house was as thin as from two and one-eighth (2 1/8) inches to two and one-fourth (2 1/4) inches and was defective thereby and by reason thereof * * * the surface waters caused by the heavy rains of about April 24, 1944, did break and crack the basement floor of said dwelling house and admitted flood waters which have damaged said plaintiffs. * * *.'

The fraudulent representations were alleged to have been made at the time the property was purchased, February 9, 1942. The action was not filed until April 9, 1946. It will be observed the damage to the floor was alleged to have occurred April 24, 1944. Summons was served on all defendants by April 10, 1946, which was less than two years after the date of the damage. The answer day designated in the summons was May 9, 1946, which was more than two years after the date of the damage. The demurrers to the original petition were filed in time but more than two years after the date of the damage. Appellants filed a general demurrer and also demurred for the reason the petition disclosed on its face the cause of action was barred by the statute of limitations. On September 11, 1946, more than two years after the damage, appellees filed an amended petition alleging for the first time that '* * * the said false and fraudulent representations were not discovered by plaintiffs until on or about the 24th day of April, 1944.' Appellants lodged the same demurrers to the amended petition previously leveled against the original petition. The trial court ruled the new allegation in the amended petition was too late and would not be considered. From that adverse ruling against appellees they have not appealed although they might have done so under the provisions of our cross-appeal statute. G.S.1945 Supp. 60-3314; Walker v. S. H. Kress & Co., 147 Kan. 48, 75 P.2d 820; Rusch v. Phillips Petroleum Co., et al., 180 P.2d 270.

The trial court interpreted the amended petition, without the amendment, as disclosing the fraud was discovered April 24, 1944, and overruled the demurrers. From that ruling the appeal is taken.

An action for relief on the ground of fraud must be commenced within two years from the time the cause of action accrues but such cause of action is not deemed to have accrued until the discovery of the fraud. G.S.1935, 60-306 (Third). Appellees cite cases in which it has been said that if the original petition, although informally and defectively, states facts which aided by reasonable inference constitute a cause of action, an amendment only amplifying or making more specific the allegations in the petition will relate back to the beginning of the action. Fox v. Turner, 85 Kan. 146, 116 P. 233; Ballard v. Kansas City M. & O. R. Co., 95 Kan. 343, 148 P. 764; Kerr v. Carson, 133 Kan. 289, 299 P. 929, and other similar cases. Assuming, without deciding, the amendment in the instant case had only that effect and should have been allowed, the fact remains the trial court refused to consider the amendment on the ground it was too late. Since appellees have not cross-appealed from that adverse ruling, the only order here for review is the order overruling appellants' demurrers to the amended petition, absent the amendment.

The original petition, as previously stated, was not filed until four years after the fraudulent representations were alleged to have been made. In order to toll the statute of limitations it was, therefore, necessary to allege facts which clearly disclosed the fraud was first discovered at a time which was less than two years before the commencement of the action. That fact could not be left open to conjecture.

Young v. Whittenhall, 15 Kan. 579; Doyle v. Doyle, 33 Kan. 721, 7 P. 615; Myers v. Center, 47 Kan. 324, 27 P. 978; McCalla v. Daugherty, 4 Kan.App. 410, 46 P. 30; Orozem v. McNeill, 103 Kan. 694, 176 P. 106; Manka v. Martin Metal Mfg. Co., 153 Kan. 811, 817, 113 P.2d 1041, 136 A.L.R. 653. Unless the petition clearly disclosed that fact no cause of action was stated. It was equivalent to no petition. Cunningham v. Patterson, 89 Kan. 684, 685, 132 P. 198, 48 L.R.A.,N.S., 506; Kerr v. Carson, 133 Kan. 289, 290, 299 P. 929; Bortko v. Polish National Alliance, 154 Kan. 533, 119 P.2d 536; Waddell v. Woods, 160 Kan. 481, 163 P.2d 348.

Beginning with the early case of Young v. Whittenhall, supra, we adopted and have followed the view of the Supreme Court of California, that the discovery portion of our fraud statute is in the nature of an exception to the general rule in fraud cases and that in order to obtain relief under the exception it is necessary for a pleader to clearly being himself within the exception. We shall not burden the opinion with numerous quotations from the cases previously cited and from others which might be added. For example, however, in Orozem v. McNeill, supra, it was said:

'An argument is made to the effect that the petition should be interpreted as showing that the plaintiff did not at once learn of the falseness of the representations made to her. If she claimed that she did not learn the real facts until within two years before the commencement of the action, she could have set the matter at rest by so alleging. The case cited in the original opinion (Young v. Whittenhall, 15 Kan. 579) is decisive of the proposition that such an allegation is necessary.' (103 Kan. 694 page 697, 176 P. 107.) (Present italics.)

The instant petition failed to so allege. We are...