Williams v. Collins

• Jurisdiction: Oregon
• Parties: Merlin R. WILLIAMS, Respondent, Cross-Appellant, v. Richard COLLINS and Joella, husband and wife, and Vern L. Spiker, dba Spiker Realty, Appellants, Cross-Respondents. ; CA 12177.
• Citation: 42 Or.App. 481,600 P.2d 1235
• Docket Number: No. 77-5160,77-5160
• Court: Oregon Court of Appeals
• Decision Date: 01 October 1979

Page 1235

600 P.2d 1235

42 Or.App. 481

Merlin R. WILLIAMS, Respondent, Cross-Appellant, v. Richard COLLINS and Joella, husband and wife, and Vern L Spiker, dba Spiker Realty, Appellants, Cross-Respondents.

No. 77-5160; CA 12177.

Court of Appeals of Oregon.

Argued and Submitted July 20, 1979.

Decided Oct. 1, 1979.

Gerald R. Pullen, Portland, argued the cause and submitted the brief for appellants, cross-respondents.

Michael W. Doyle, Eugene, argued the cause for respondent, cross-appellant. With him on the brief were Bick & Monte, P. C., and Donald A. Bick, Eugene.

Before SCHWAB, C. J., and LEE, GILLETTE and CAMPBELL, JJ.

CAMPBELL, Judge.

This is a suit by the plaintiff purchaser to rescind a contract of sale and a promissory note. The contract of sale provided that the defendants Collins agreed to sell and the plaintiff agreed to purchase the Ada Resort on Siltcoos Lake near Florence, Oregon. The promissory note was given by the plaintiff to the defendant Vern L. Spiker dba Spiker Realty of Ventura, California, in payment of the real estate commission on the sale. ¹

The trial court granted rescission of the contract of sale and the promissory note. We affirm the rescission. The trial court gave the plaintiff a judgment against defendant Spiker for the sum of $200, representing the payment on the promissory note. We affirm that judgment. The trial court also awarded the plaintiff a judgment against the defendants Collins for the sum of $20,000, representing the plaintiff's down payment in the amount of $30,000 less reasonable rental in the amount of $10,000. On the plaintiff's cross appeal we modify that judgment and increase it to $23,600.

In November 1976, the defendants Collins, husband and wife, listed the Ada Resort on Siltcoos Lake for sale with the defendant Vern L. Spiker. Spiker had previously spent a week at the resort as a customer of the Collinses and for that reason had some first hand knowledge of the property listed. The Ada Resort included lake frontage, a cabin, a store building, four houseboats, five smaller fishing boats, a dock, and a camping area.

Plaintiff Williams had worked for Sears, Roebuck & Co. in the Los Angeles area for 19 years in the service and repair department. He retired from that company in November 1976 with total assets of between $30,000 and $40,000. Early in January 1977, the plaintiff drove north to seek his fortune. In Ventura, plaintiff contacted defendant Spiker. Spiker showed plaintiff the listing agreement on the Ada Resort. At this time the defendants Collins were visiting relatives in Bakersfield. A week or two later a meeting was arranged between the plaintiff and all the defendants at the Spiker real estate office. The listing agreement was again shown to and discussed with plaintiff.

An earnest money receipt for the sale and purchase of the Ada Resort was executed by plaintiff and the defendants Collins on February 1, 1977. The sale was subject to the buyer's on-site approval of the property. Plaintiff travelled to Oregon, where he met the defendants Collins and inspected the resort on the 12th, 13th and 14th of February.

On February 28, 1977, while in Spiker's office, plaintiff signed a contract to purchase the Ada Resort. The contract was prepared by defendant Spiker's attorney. The contract provided for a purchase price of $275,000 with a down payment of $30,000 cash. The unpaid balance was to draw interest at the rate of 81/2% Per annum and was to be paid in accelerating monthly installments starting with the sum of $1,500 including interest. ²

On March 16, 1977, plaintiff and his adult son arrived at the Ada Resort. They spent the next several weeks making various repairs and improvements to the property. The resort was opened to the public for business on June 1, 1977.

By July 1977, plaintiff had become disenchanted with his purchase of the Ada Resort. On that date his attorneys sent to the defendants Collins a notice of rescission with a demand for the return of plaintiff's down payment in the amount of $30,000. Plaintiff delivered possession of the resort to the defendants Collins at noon on July 31, 1977. Defendants Collins then took over operation of the resort. Thereafter, plaintiff filed this suit for rescission.

After a six day trial, the court found that the parties had rescinded the contract for the sale of the resort on Siltcoos Lake by their conduct. ³

Defendants raise four assignments of error: (1) defendants demur for the first time in this court to the plaintiff's cause of suit for rescission on the ground that it does not state facts sufficient to constitute a cause of suit, there being no allegation of fraud; (2) the trial court erred in decreeing the rescission of the contract of sale when it contained exculpatory language and plaintiff did not plead or prove fraud; (3) the court erred in deciding the case on a legal theory not pleaded; and (4) there was no substantial evidence of misrepresentations, mutual or unilateral mistake, and plaintiff did not act promptly after the discovery of any alleged misrepresentation or mistake.

We do not reach defendants' third assignment of error, that the trial court was wrong in deciding the case on a legal theory not pleaded, because on de novo review we decide the case on theory actually pleaded.

The defendants' first two assignments of error turn on whether or not plaintiff pleaded and proved fraud.

"Comprehensively stated, the elements of actionable fraud consist of: (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) his intent that it should be acted on by the person and in the manner reasonably contemplated; (6) the hearer's ignorance of its falsity; (7) his reliance on its truth; (8) his right to rely thereon; (9) and his consequent and proximate injury." Conzelmann v. N.W.P. & D. Prod. Co., 190 Or. 332, 350, 225 P.2d 757 (1950).

See also Rice v. McAlister, 268 Or. 125, 128, 519 P.2d 1263 (1974).

Plaintiff's complaint for rescission contains a count based on innocent misrepresentation and a count based on mutual mistake. However, the count for mutual mistake contains the following allegation: "Defendants, if not themselves mistaken, Concealed the fact that such facts existed." (Emphasis supplied.) Concealment when there is a duty to speak is fraudulent. Heise et ux. v. Pilot Rock Lbr. Co., 222 Or. 78, 352 P.2d 1072 (1960).

When plaintiff's complaint is matched against the elements of actionable fraud in Conzelmann v. N.W.P. & D. Prod. Co., supra, and Rice v. McAlister, supra, we find:

"Before Plaintiff agreed to purchase the resort, * * * (1) The Defendants represented to Plaintiff that the resort was a fully operational resort with An annual profit of $30,000 * * *.

(6) (7) "That In reliance on the foregoing representations and believing them to be true Plaintiff executed a contract * * * (3) (5) The representations * * * were given by Defendants As a material inducement to Plaintiff To purchase the resort property and Plaintiff would not have purchased said resort except for said representations.

(2) "The foregoing representations were not true at the time they were made (9) in that said resort did not have a $30,000 annual profit, * * *.

(4) "Defendants, if not themselves mistaken, Concealed the fact that such facts existed." (Emphasis added.)

Plaintiff has specifically alleged all the elements of actionable fraud, except "(8) his right to rely thereon." Conzelmann v. N.W.P. & D. Prod. Co., supra.

No motions or demurrers were filed against the plaintiff's complaint in the trial court. A complaint is liberally construed when a demurrer is filed for the first time on appeal. Sherrod v. Holzshuh, 274 Or. 327, 546 P.2d 470 (1976); Keegan et al. v. Lenzie, 171 Or. 194, 135 P.2d 717 (1943).

In Briscoe v. Pittman, 268 Or. 604, 609-10, 522 P.2d 886 (1974), the court stated:

"The defendants also contend that the complaint and the findings of fact are deficient because they do not allege the plaintiff's ignorance of the falsity of the statement concerning the amount of the acreage and the plaintiff's right to rely thereon, all as required by Musgrave and Conzelmann. The two above-cited cases list nine requirements to sustain fraud, but they unduly fractionalize the essential elements. As an illustration, it is unnecessary to allege or find the hearer's ignorance of the falsity of a statement if it is alleged and found that the hearer relied upon it, because ignorance of the falsity of the statement Is necessary to reliance. Also, while an allegation or finding of reliance is an allegation or finding of fact, whether or not a person Has a right to rely is a conclusion which the law draws from facts and is not an allegation or finding of fact."

We interpret the above language to mean that plaintiff is not required to specifically plead his right to rely. All he need plead is actual reliance.

We are of the opinion that plaintiff's complaint states a cause of suit for rescission based on fraud and therefore the defendants' demurrer set out in their first assignment of error is overruled.

Under our de novo review, we consider whether or not plaintiff has proved fraud which would entitle him to rescind.

Plaintiff's complaint and proof centers on the following portion of defendants' listing agreement of the resort with the defendant Spiker:

"May-June-July-Aug-Sept Income $6,000 mo., boats and rental, expense $500 mo., lic & taxes $1,000, price $275,000, 29% Down, 3 years same owner."

This listing agreement was shown to plaintiff by the defendant Spiker at their first meeting. A week or two later it was again shown to plaintiff by all the defendants. At both meetings the contents of the listing agreement and the annual profit of the Ada Resort were discussed. Plaintiff testified that at the second meeting all the defendants agreed and represented that the resort had an annual profit...