In Molnar v. Beriswell (1930), 122 Ohio St. 348, 171 N.E. 593, the Ohio Supreme Court found the difference between the value of an apartment building as it was represented to be (wholly rented) and its actual value at the time of the purchase (partially rented) was an appropriate measure of damages in an action involving a sale induced by a vendor's fraudulent representation.Summary of this case from Northpointe Properties v. Charter One Bank
Decided May 7, 1930.
Fraud — Measure of damages for fraudulent representation by vendor of realty — Difference between actual and represented value — Evidence of value of apartment wholly and only partially occupied, competent.
1. The measure of damages resulting from a sale induced by a vendor's fraudulent representation is the difference between the actual value of the property at the time of the purchase and its value had it been as represented.
2. Where the alleged representation was that all suites of an apartment house were occupied by tenants at a stated rental, when in fact a portion thereof was unrented and unoccupied, the measure of damages is as above stated, and evidence of the value of the premises wholly rented and occupied as represented, and the value thereof so partially rented and occupied, was competent to go to the jury.
ERROR to the Court of Appeals of Cuyahoga county.
This action is one to recover damages alleged to have been sustained by the plaintiff, Theresa Molnar, by reason of claimed false representations made by George M. Beriswell and Ida M. Beriswell in the exchange of real estate.
Upon the trial of the case evidence was adduced sustaining the claim that false representations were made respecting the eight-suite apartment involved in the transaction, in that the four rear suites were represented as renting at $50 per month, when, with the exception of one, they were in fact renting at $45 per month, and, further, in that all the front suites were represented as occupied and renting for $55 per month, when, in fact, two of the front suites were then vacant.
Upon the trial of the issues to a jury a verdict was returned in favor of the plaintiff, upon which judgment was rendered. Upon proceeding in error the judgment was reversed "for error in refusing to submit written interrogatory to the jury, for error in adopting the wrong rule of damages, and because the judgment is contrary to the weight of the evidence." Thereafter a motion for an order certifying the case to this court was overruled. Upon retrial of the case a verdict was again returned for the plaintiff, upon which judgment was rendered. That judgment was reversed by the Court of Appeals "for error in the admission of testimony as to the measure of damages and for the further reason that the verdict is excessive." Upon motion the record was ordered certified to this court for review.
The evidence adduced upon the last trial, tending to show the damage sustained by the plaintiff, is in substance stated in the following testimony of two real estate brokers:
(Mr. Feigenbaum) "Q. I will ask you now, Mr. Feigenbaum, assuming that the apartment you went out to see, 15121 Clifton Boulevard, to which I have called your attention, was rented out, the front suites at $55 per month and the rear suites at $50 per month, during the month of December and particularly on the 7th of December, 1926, and taking into consideration the fact that one of the front suites was occupied by the owner, or his agent, what, in your opinion, would that apartment fairly and reasonably be worth on the market at that time? Also giving consideration to the fact that the tenancies in that block were from month to month. In other words, that the occupants of that building had no leases other than arrangements of residing in that apartment from month to month and paying rent from month to month? A. $40,000.
"Q. What, in your opinion, would that apartment have been fairly and reasonably worth on the market in the month of December, 1926, and particularly the 7th of December, 1926, assuming that one of the front suites was rented at $55 per month, one suite occupied by the agent of the owner, two suites unoccupied, and the rear suites, at least two of them, renting at $45 per month and the other two at $50 per month. What, in your opinion would that apartment have been worth in the market in December, 1926, and also assuming that none of the tenants have leases for any length of time, but were tenants only from month to month? A. $30,000."
(Mr. Kochan) "Q. Now, assuming that this apartment house to which I have called your attention, located at 15121 Clifton Boulevard, was rented, the front suites at $55 per month and the rear suites at $50 per month, in December, 1926, and particularly on the 7th of December, 1926, and that one front suite was occupied by the owner or his agent, and that the tenancies in that building were of no particular duration but were in fact from month to month. What in your opinion was that apartment fairly worth in the market at that time? A. $38,000.
"Q. Now, I will ask you, Mr. Kochan, what, in your opinion, was that apartment worth assuming that one of the front suites was rented at $55 per month, a like suite occupied by the agent of the owner and two front suites unoccupied, and the rear suites, at least two of them, renting at $45 per month, and the other two at $50. What, in your opinion would that apartment have been fairly and reasonably worth on the market December, 1926, and particularly December 7th, 1926, and also assuming that the tenancies were from month to month? A. I would say it would be about $30,000."
Mr. Lionel C. Rosenbaum and Mr. J.W. McCarron, for plaintiff in error.
Mr. W.J. Patterson and Mr. J.M. Patton, for defendants in error.
The "error in the admission of testimony as to the measure of damages" set forth in the journal entry of the Court of Appeals as one of the grounds upon which it based its reversal of the judgment of the trial court is predicated upon its conclusion, as disclosed by the opinion, that the trial court adopted and applied an erroneous rule as to the measure of damage, and that is the primary question presented to this court. Upon finding that the verdict was excessive the Court of Appeals would have been authorized to reverse the judgment of the trial court upon that ground alone, but for the fact that it had reversed a previous judgment in the same case upon the weight of the evidence. If accompanied by a finding that the excessive verdict was induced by passion and prejudice, it had full authority to reverse, although a former judgment in the same case had previously been reversed upon the ground that the verdict was against the weight of the evidence. Waldron v. N.Y. Central Ry. Co., 106 Ohio St. 371, 140 N.E. 161. Although the opinion of the Court of Appeals indicated the view that passion and prejudice had induced the excessive verdict, such finding was not made by the court in its journal entry.
We cannot agree that there was any error in the rule adopted and applied by the trial court respecting the measure of damages. We deem that settled by uniform decision of the courts of last resort. Thompson on Real Property, Section 4310, and 4 Sutherland on Damages (4th Ed.), Section 1171, are in substantial accord in stating that the measure of damages, where a sale is procured by a vendor's fraudulent representation, "is the difference between the actual value of the property at the time of the purchase and its value if the property had been what it was represented to be." Numerous cases are cited supporting this proposition.
As stated by our own court, the measure of damage in such cases is the difference between the actual value of the property at the time of purchase and sale and its value at that time, had the property been as it was represented to be. Linerode v. Rasmussen, 63 Ohio St. 545, 59 N.E. 220. The same rule has been applied in cases such as this, where misrepresentation is made respecting the occupancy of apartments in an apartment house, or the amount of rentals being paid by the tenants thereof. Page v. Johnston, Jr., 205 Mass. 274, 91 N.E. 214, 215; Bunck v. McAulay, 84 Wn. 473, 147 P. 33; Ettlinger v. Weil, 184 N.Y. 179, 77 N.E. 31.
In the case of Page v. Johnston, supra, the claimed misrepresentation was that all the apartments in a three-family apartment house were rented at a monthly rental stated, when, in fact, only one of the apartments was rented. The court there held that the measure of damage was the excess of the value of the property as represented over its value as it actually was. In the course of the opinion it was stated: "A house filled with tenants may be an entirely different thing in value from a house only one-third filled, and that may be so even if the tenants are simply tenants at will. A purchaser may be willing to take his chances as to whether tenants in a house already filled may leave, and not be willing to do so as to getting tenants for the unoccupied parts of a house only partly filled." In that case evidence was introduced showing the trouble experienced in getting tenants for the unfilled apartments of the house. The reviewing court held that although the true rule applicable is the difference between the property as represented and as it in fact then was, yet that "it may well be that the evidence as to the difficulty in procuring tenants and the loss incurred by a failure to procure them was the best standard under the circumstances of this case by which to measure that difference."
Evidence of the character above indicated would have been competent, and presumably would have been permitted, had it been tendered, but the evidence in question was likewise competent to go to the jury to aid it in ascertaining the actual loss sustained by the plaintiff by reason of the claimed misrepresentation. The party guilty of fraud is to be charged with such damages as have naturally and proximately resulted therefrom.
Although the damages awarded may appear large, this court does not weigh the evidence. Finding there was no error in the admission of the evidence, or in the submission of the questions of fact to the jury, the judgment of the Court of Appeals, reversing the judgment of the court of common pleas, is reversed.
MARSHALL, C.J., KINKADE, ROBINSON, DAY and ALLEN, JJ., concur.
JONES, J., dissents from the judgment.