Simmons v. Evans

• Decision Date: 29 November 1947
• Citation: 206 S.W.2d 295,185 Tenn. 282
• Parties: SIMMONS et ux. v. EVANS et ux.
• Court: Tennessee Supreme Court

206 S.W.2d 295

185 Tenn. 282

SIMMONS et ux. v. EVANS et ux.

Supreme Court of Tennessee.

November 29, 1947

Appeal from Chancery Court, Knox County; A. E. Mitchell, Chancellor.

Suit in equity by L. E. Simmons and wife against Woodrow Evans and wife to rescind a sale of a residence to complainants by defendants and recover the purchase price paid. From a decree sustaining a demurrer to the bill of complaint, complainants appeal.

Reversed and remanded.

Judd Acuff, of Knoxville, for appellants.

Jenkins & Jenkins, of Knoxville, for appellees.

TOMLINSON Justice.

This is an appeal from the action of the Chancellor in sustaining a demurrer to the bill of complaint filed by appellants, L. E. Simmons and wife, hereinafter called complainants. The purpose of the bill was to have rescinded on the ground of fraud a sale of a residence to complainants by appellees hereinafter called defendants, and a recovery of the purchase price of $6,000. Appropriate preliminary injunctions to protect alleged rights were granted. The bill was filed promptly upon the discovery of the alleged fraud and therein the complainants offered to put the defendants in statu quo by reconveying the property.

According to the allegations of the bill as amended, complainants entered into negotiations with defendants for the purchase of a residence in Powell Station, Tennessee. During the course of negotiations, defendants told complainants 'that they would have all the water they wanted' or 'could use all the water they wanted at the flat rate of $2.00 per month.' Water was furnished the public in that community by a utility known as Powell's Station Water Company. Thereafter, the parties reached an agreement, and the purchase price paid. When complainants took possession they learned that each night the water was cut off at 7 o'clock and was not on again until 7 the next morning. They promptly took the matter up with the defendants, and in the course of discussion, defendants were asked why they didn't tell complainants the facts about the water condition, and one of them replied 'we did not tell you because we knew that you would not buy the property if we told you about the water being off half the time.' 'We did not tell anybody.' The bill alleges that the water conditions reduced the value of the property at least one-third and that these complainants would not have bought it had they been informed of that situation. Fraud by concealment of a material fact and by material misrepresentation is alleged. They unsuccessfully demanded a return of the purchase price offering to reconvey the property. They repeat that offer in their bill, which prays for a rescission or in the alternative for damages, if rescission cannot be had.

The Chancellor dismissed the bill as a result of sustaining those grounds of the demurrer which averred that the bill (1) fails to state that the defendants made any fraudulent or false representations with respect to the water supply or with respect to a material matter, and (2) affirmatively discloses that defendants did not make such representations but remained 'silent on said subject' and (3) that complainants inspected the property, knew the source of the water supply, and could have made specific inquiry of these defendants or ascertained from other sources the true situation and, therefore, are estopped. No ruling was had upon the 6th ground of the demurrer, averring that the bill sought to procure a judgment for unliquidated damages.

Since the demurrer avers that the bill shows on its face that the defendants remained silent on the subject, it is well to at once take note of the general rule that 'one may be guilty of fraud by his silence, as where it is expressly incumbent upon him to speak concerning material matters that are entirely within his own knowledge.' However, as observed in 23 American Jurisprudence, page 856, 'the difficulty is not so much in stating the general principles of law, which are pretty well understood, as in applying the law to particular groups of facts.'

The first question is whether under the group of facts in this case it was incumbent upon the defendants to speak. This Court held as early as 1813 'it to be a sound principle of equity that each party to a contract is bound to disclose to the other all he may know respecting the subject matter materially affecting a correct view of it unless common observation would have furnished the information.' Perkins v. McGavock, 3 Tenn. 415 417. We construe the expression 'common observation,' as used in the above quotation, to include the exercise of ordinary diligence.

Defendants knew at the time they were negotiating for the sale of this property to complainants that water was never supplied to this residence from 7 P.M. to 7 A.M. This was a fact of controlling importance in determining the desirability and value of that residence. Defendants realized such controlling importance of this fact, as evidenced by their statement that they did not inform complainants thereof 'because we knew that you would not buy the property if we told you.' Implicit also in this statement is an admission by the defendants that they knew complainants to be unaware of this very material fact. They were, therefore, duty bound to disclose this fact unless common observation or such inquiry...