Swanson v. Domning

• Citation: 86 N.W.2d 716,251 Minn. 110
• Decision Date: 29 November 1957
• Docket Number: No. 37159,37159
• Parties: Joanne E. SWANSON, Appellant, v. Leonard DOMNING and Ruth Domning, and Odean C. Lee and Mary Doe Lee, a.k.a. H. R. Hoem, d.b.a. Home Finders, a.k.a. Home Finders Rental Registry, Respondents.
• Court: Supreme Court of Minnesota (US)

Page 716

86 N.W.2d 716

251 Minn. 110

Joanne E. SWANSON, Appellant, v. Leonard DOMNING and Ruth Domning, and Odean C. Lee and Mary Doe Lee, a.k.a. H. R. Hoem, d.b.a. Home Finders a.k.a. Home Finders Rental Registry Respondents.

No. 37159.

Supreme Court of Minnesota.

Nov. 29, 1957.

Syllabus by the Court

1. In an action based on fraudulent representations, a person is liable if he makes a false representation of a past or existing material fact susceptible of knowledge, knowing it to be false, or as of his own knowledge, without knowing whether it is true or false, with intention to induce the person to whom it is made to act in reliance upon it, or under such circumstances that such person is justified in acting in reliance upon it, and such person is thereby deceived and induced to act in reliance upon it, to his pecuniary damage.

2. An unqualified affirmation amounts to an affirmation of one's own knowledge.

3. It is immaterial whether a statement made as of one's own knowledge is made innocently or knowingly. An intent to deceive is not necessary. Nor is it necessary to prove that defendants knew that the representations were false.

4. Fraudulent intent may be proved by showing that the party knew his statements were false; or that, having no knowledge of their truth or falsity, he did not believe them to be true; or that, having no knowledge of their truth or falsity, he yet represented them to be true of his own knowledge.

5. Where, after learning of the fraud, a principal retains the benefits of a transaction consummated for him by an agent as the result of fraudulent representations, he takes the benefits subject to the taints under which they were obtained.

6. Where a client voluntarily testifies to statements alleged to have been made to an attorney, or statements made by an attorney to client, he waives the attorney-client privilege as to the things testified to by the client and cannot prevent the adverse party from calling the attorney to rebut or complete the conversation on that matter.

7. Waiver or estoppel are affirmative defenses which must be pleaded. Where such defenses are neither pleaded nor submitted to the jury, they cannot be raised for the first time in this court.

8. Statements alleged to have been made in sale of real estate examined and Held sufficient to sustain action if believed by the jury.

Harry H. Peterson, Minneapolis, for appellant.

Faricy, Moore & Costello and Norman Biorn, Terence P. Brennan, St. Paul, for respondents.

KNUTSON, Justice.

This is an appeal from an order of the trial court denying plaintiff's motion for a new trial.

Defendant H. R. Hoem, whose full name is Hannah R. Hoem, operates a real estate business under the trade name of Home Finders or Home Finders Rental Registry. Defendant Odean C. Lee is the son of Hannah R. Hoem and is employed by her in her real estate business.

Defendants Leonard Domning and Ruth Domning were the owners of a ten-acre tract of land in rural Ramsey County, in this state, which they had listed with Home Finders for sale.

Plaintiff owned an apartment house in north Minneapolis. Through an advertisement in a newspaper, she contacted Home Finders Rental Registry by telephone in the early part of October 1954 for the purpose of seeking its assistance in procuring a tenant for one of her apartments. As a result of this telephone conversation, Lee called on plaintiff for the purpose of discussing the matter with her. The apartment later was rented by plaintiff without the assistance of Lee, but the two became quite well acquainted as the result of this contact. Shortly after the first call, plaintiff, through the suggestions of Lee, became interested in purchasing the Domning property. Lee took her out to the property, and she looked it over. A dwelling house was located on the ten acres of land, and plaintiff went all through the house and over the land, but she claims that she did not get into the room which was supposed to be the bathroom; she admits that in other respects she did inspect the property. Originally the Domnings were asking $14,500 for the property. After some negotiations, plaintiff offered them, through Lee, $11,000. Later she added $300, which they demanded for installing a new septic tank.

Plaintiff claims that she was induced to purchase the property as the result of fraudulent misrepresentations of Lee. It is her claim that he told her that the property was worth twice what she bought it for; that with a comparatively small amount of fixing the house and two acres could be sold for $17,000 and that he had a buyer who would pay that amount for it; that he was a painter and decorator by trade and had a crew of men ready to go to work on the house immediately so that it could be sold in the very near future and she would get her money back out of it with a substantial profit; that the land could be subdivided so that six to nine lots could be obtained from each acre of land and sold for $1,000 each; and that the house was equipped with water and a toilet. Plaintiff claims that she relied upon these representations, all of which were false. Plaintiff had some experience in buying real property, having purchased other property prior to the one here involved, but she claims that she relied upon Lee's superior knowledge concerning the matters which he represented to her.

The jury could find from the evidence that the entire property was worth considerably less than plaintiff paid for it and that the cost of subdividing and platting the property would more than offset any amount plaintiff received for it above the amount she paid. It is admitted that there was no toilet in the house at the time plaintiff purchased it, but defendants claim that plaintiff was aware of that fact when she inspected the house.

On November 2, 1954, plaintiff signed an earnest money contract and gave Lee a cashier's check for $3,000 as a downpayment. Lee and plaintiff then went to the Domning home to complete the purchase. Plaintiff remained in the automobile while Lee went into the Domning home. The Domnings accepted the offer and signed the contract, whereupon the $3,000 check was turned over to them, and they still retain that amount. Plaintiff claims that when she signed the contract it was in blank aside from the printed portions thereof. Lee claims that it was complete in all details. Plaintiff claims that, subsequent to the signing of this instrument, she went to an attorney, Glenn G. Nybeck, to have the title examined and that he then advised her not to sign the contract for deed which had been prepared because the transaction was 'a shady deal.' She claims that during the latter part of November she discovered that the representations of Lee were false, and she thereafter commenced this action to recover the $3,000 which had been delivered by Lee to the Domnings. The jury returned a verdict in favor of all defendants, and this appeal followed.

The questions presented for our determination are: (1) Whether the court erred in instructing the jury as to the essential elements of a right to recover in an action based upon a fraudulent representation; (2) whether the fraudulent representations of Lee are imputable to defendants Leonard and Ruth Domning when they retained the payment obtained as the result of such representations; (3) whether the court erred in permitting defendants to call attorney Nybeck to rebut the statements plaintiff testified he had made; (4) whether the court erred in admitting evidence showing a close personal relationship between Lee and plaintiff; and (5) whether the court erred in permitting evidence showing that plaintiff had changed attorneys after discovery of the fraud.

1. The rule we follow in this state in establishing a fraudulent representation is stated in 8 Dunnell, Dig. (3 ed.) § 3818, as follows:

'A person is liable for fraud if he makes a false representation of a past or existing material fact susceptible of knowledge, knowing it to be false, or as of his own knowledge without knowing whether it is true or false, with intention to induce the person to whom it is made to act in reliance upon it, or under such circumstances that such person is justified in acting in reliance upon it, and such person is thereby deceived and induced to act in reliance upon it, to his pecuniary damage.' ¹

2. An unqualified affirmation amounts to an affirmation of one's own knowledge. ²

3. It is immaterial whether a statement made as of one's own knowledge is made innocently or knowingly. An intent to deceive no longer is necessary. ³ Nor is it necessary to prove that defendants knew the representations were false. ⁴

4. Fraudulent intent may be proved by showing that the party knew his statements to be false; or that, having no knowledge to their truth or falsity, he did not believe them to be true; or that, having no knowledge of their truth of falsity, he yet represented them to be true of his own knowledge. ⁵

The instruction given to the jury by the trial court on this issue was:

'To recover against the agent, the plaintiff must prove by an overweight of the evidence, * * * each one of the following five essentials:

'(2) That Lee knew such representation to be false, or made it without belief in its truth, or recklessly, careless whether it be true or false.'

Defendants claim that the last sentence of this instruction embodies the rule of law that, even though innocently made, a representation is actionable if it is false in fact. We do not think so. It is not necessary that the statement be recklessly or carelessly made. It makes no difference how it is made if it is made as an affirmation of which defendant has knowledge and it is in fact untrue. The right of recovery in a case of this kind is based on the fact that such statement, being untrue in fact, relied upon by the other party in entering into the transaction, has resulted in the loss to him which he should not be required...