Shepherd v. Kendrick

• Decision Date: 12 May 1938
• Docket Number: 6 Div. 240.
• Citation: 236 Ala. 289,181 So. 782
• Parties: SHEPHERD v. KENDRICK ET AL.
• Court: Alabama Supreme Court

181 So. 782

236 Ala. 289

SHEPHERD v. KENDRICK ET AL.

6 Div. 240.

Supreme Court of Alabama

May 12, 1938

Rehearing Denied June 16, 1938.

Appeal from Circuit Court, Jefferson County; Gardner Goodwyn, Judge.

Bill by H. H. Shepherd against W. J. Kendrick, Jr., and James D Webb, as executors of the will, and as trustees of the estate of Julian Kendrick, deceased, and others, for accounting and to enjoin foreclosure of a mortgage. From a decree sustaining a demurrer to the bill, complainant appeals.

Reversed and remanded.

McEniry & McEniry, of Bessemer, for appellant.

Bradley Baldwin, All & White and W. A. Rose, all of Birmingham, for appellees.

GARDNER Justice.

The bill discloses that complainant purchased from Julian Kendrick, now deceased, certain lands therein described, for the purpose of operating a dairy. Deed was duly executed upon the payment of $3,000 cash, and the execution of notes and a mortgage on the land to secure the remainder of the purchase price of $21,000. The executors of the Kendrick estate threatened a foreclosure of the mortgage, which composes the larger part of the estate which is alleged to be insufficient to repay complainant for the injury and damage he has sustained.

Complainant avers that the water supply on the land is insufficient for dairy purposes, and it was necessary to erect wells to supplement the natural streams, and that before he discovered this fact he had expended in improvements a large sum of more than $21,000 in improvements upon the land. He charges fraudulent misrepresentations as to the water supply upon which he acted to his injury, and seeks a reduction of the mortgage indebtedness to the amount of damages suffered by the vendor's fraud. An accounting is sought, and offer to do equity and to pay, within the time allowed by the court whatever sum may be found due upon such accounting. The bill also prays for injunctive relief against the foreclosure of the mortgages.

The bill is not one for rescission of a sale contract for fraud as in Perry v. Boyd, 126 Ala. 162, 28 So. 711, 85 Am.St. Rep. 17; Mortgage Bond Co. v. Carter, 230 Ala. 387, 161 So. 448; Harris v. Nichols, 223 Ala. 58, 134 So. 798; Bullard Shoals Mining Co. v. Spencer, 208 Ala. 663, 95 So. 1; Merritt v. Ehrman, 116 Ala. 278, 22 So. 514; Catanzano v. Hydinger, 228 Ala. 547, 154 So. 588; Catanzano v. Hydinger, 233 Ala. 116, 170 So. 214. Nor is it a bill merely seeking to invoke the well-recognized principle that a court of equity will prevent perversion of the power of sale in a mortgage from its legitimate purpose to that of oppression of the debtor and to purposes foreign to that for which it was intended (Ballenger v. Price, 219 Ala. 412, 415, 122 So. 628), though the restraint of foreclosure proceedings may here be incidentally involved.

The equity of the bill, however, may well rest upon the right of the mortgagor to exercise his equity of redemption ( Adams v. Whitehead, 234 Ala. 389, 175 So. 356; Cox v. Davis-Wilson-Gaillard Commission Co., 206 Ala. 167, 89 So. 437; O'Rear v. Kimbro, 227 Ala. 22, 148 So. 435), and for the abatement of the purchase price because of damages suffered by fraudulent representations of the vendor, somewhat akin to the bill considered in Neal v. Williams, 168 Ala. 310, 53 So. 94, where the vendee sought specific performance and an abatement of the purchase price on account of the vendor's fraud.

The case of Wendell v. Ozark Orchard Co., Mo.App., 200 S.W. 747, cited in 51 A.L.R. p. 82, was a bill by the mortgagor, as here, and is more directly in point, and in this respect states principles which are in harmony with our own.

But it is insisted the bill discloses no actionable fraud, no statement of an existing fact, but an expression of an opinion, and relating to the future, and which gives no right to action, citing, among other authorities, 26 Corpus Juris 1065; 66 Corpus Juris 572; Palmetto Bank & Trust Co. v. Grimsley, 134 S.C. 493, 133 S.E. 437, 51 A.L.R. 46; Patton v. Tidwell, 17 Ala.App. 663, 87 So. 624; Munroe v. Pritchett, 16 Ala. 785, 50 Am.Dec. 203; Bomar v. Rosser, 131 Ala. 215, 31 So. 430; Bradfield v. Elyton Land Co., 93 Ala. 527, 8 So. 383; Joseph v. Decatur Land, Imp. & Furnace Co., 102 Ala. 346, 14 So. 739.

But we think the argument overlooks some very material averments of the bill. It is shown that at the time of inspection of the land there were several streams of water thereon of sufficient volume for a dairy business of one hundred and fifty cows. The vendor and his agent were informed complainant was purchasing for an extension of his dairy business, and it was this supply of water, that is, the supply which he had then observed on the land, that both the vendor and his agent assured him was a permanent supply, and that "said streams were never dry * * * and that he had owned said lands for several years." Complainant did not know the land nor whether the water supply was permanent, but relied upon the assurance thus given him. Large expenditures were made before the dry season, and after being completed the summer months of 1928 came on and the water supply was greatly diminished, "one or two streams of large volume of water completely dried up," and the lands were left without sufficient water supply for a dairy of one hundred and twenty cows, and it was necessary to bore wells. But this is not all, for in paragraph 6 of the bill the vendor's intent to deceive is averred in the following language: "That the representations made by said Julian Kendrick that said water supply was permanent on said lands, were false; that said Julian Kendrick knew that said representations were false at the time he made them, and that he fraudulently made said representations at said time with the intent to induce the complainant to purchase said lands."

The Michigan court in Kefuss v. Whitley, 220 Mich. 67, 189 N.W. 76, quotes approvingly the statement of Lord Bowen in Smith v. Land & House Property Corporation, L.R., 28 Ch.Div. 15, as follows (page 81): "It is material to observe that it is often fallaciously assumed that a statement of opinion cannot involve the statement of a fact. * * * If the facts are not equally known to both sides, then a statement of opinion by the one who knows the facts best involves very often a statement of a material fact, for he impliedly states that he knows facts which justify his opinion."

And the author of the notes found in 51 A.L.R. p. 63, makes the following observation: "If one makes a statement regarding an event to take place in the future, obviously the statement should ordinarily be regarded merely as an expression of opinion, and the courts will frequently stop at this point and hold that such a statement cannot serve as a basis on which to predicate fraud. But if there are circumstances tending to show an actual fraudulent intent at the time the promise or representation regarding a future event is made, then the situation is entirely changed. According to the weight of authority, if the person making the promise of statement as to a future event is guilty of an actual...