In Tarault v. Seip, 158 N.C. 363, 74 S.E. 3, 6, Mr. Justice Brown thus states the rule as it is applied by the courts of North Carolina: "An essential element of actionable fraud is the scienter or knowledge of the wrong on the part of the vendor.Summary of this case from C.W. Denning Co. v. Suncrest Lumber Co.
(Filed 13 March, 1912.)
1. Deeds and Conveyances — Covenants — Intention — Interpretation.
Covenants in a deed are construed most strongly against the grantor, and any language evidencing such an intention is sufficient.
2. Deeds and Conveyances — Fraud and Deceit — False Representations — Evidence.
In order to recover damages for fraud in the procurement of a sale of lands, there must be false representations as an inducement of purchase, and shown to have been the reason for making the contract, and relied on.
Actions for fraud and deceit rest in the intention with which the representation is made, and not upon the representations alone.
4. Same — Scienter — Burden of Proof.
When damages are sought in an action by the vendee of lands for fraud and deceit in the procurement of the purchase, claiming that certain lands were represented as being included in the description in the deed, when in point of fact they were not, the burden of proof is on the vendee relying upon the fraud to prove the scienter of the vendor; and the principle holding the vendor liable for his statement, when the representation is a part of the warranty, whether it be true or not, has no application.
5. Same — Nonsuit.
In the contemplation of purchase of a large tract of lands the vendee sent its agents for the purpose of examination, who were informed by the agent of the vendor that he had not been over the lands and was unacquainted with its boundaries. The vendor's agent was sick and only showed certain lands in cultivation, and sent another person with the vendee's agents to show them the boundaries, who, at a certain place, said, "This ditch marks the line," whereas the ditch only marked a part of the boundary and excluded the lands in controversy, which belonged to an adjoining owner. The vendee's agents were given full opportunity to examine the lands, and could have ascertained that the lands in controversy were not included in the boundaries subsequently given in the deed: Held, no evidence in an action for damages for fraud and deceit, and a motion for nonsuit should be granted.
ALLEN, J., dissenting.
APPEAL from Cline, J., at September Term, 1911, of CURRITUCK. (364)
Pruden Pruden and S. Brown Shepherd for plaintiff.
J. C. B. Ehringhaus and E. F. Aydlett for defendants.
The plaintiff sued to recover on a note for $10,000, given for the purchase money of certain lands. The defendant pleaded counterclaims which are embodied in these issues:
1. Did the plaintiff covenant to warrant and defend the title to the lands described in the answer? Answer: Yes.
2. Were the defendants ousted from the lands, or any part thereof, as alleged in answer? Answer: Yes: 17-80 of the Cox lands.
3. What damage is defendant entitled to recover for 17-80 of Cox land, named by M. B. Mott and others, for value of land and attorney's fees and cost of witnesses? Answer: $2,055.35 and interest form 1 January, 1908.
4. What damage are defendants entitled to recover because of the time of their employers in defending the Mott suit? Answer: $150.
5. What damages are defendants entitled to recover for the 3-80 of the Major John Cox lands? Answer: $900.
6. Did plaintiff represent to defendants that the line of his lands ran to the ditch which is the southern boundary of the A. M. Willey land? Answer: Yes.
7. Were those representations false and fraudulent? Answer: Yes.
8. Were those representations relied upon by defendant, and were they calculated and did they deceive the defendant Seip? Answer: Yes.
9. What damages are defendants entitled to recover of plaintiff by reason of said representations? Answer: $10,000, with interest from 23 August, 1902, at 6 per cent.
10. What amount is due the plaintiff on the note of $10,000? Answer: $10,250, with interest at 6 per cent from 26 July, 1906, on $10,000.
His Honor allowed the counterclaims embodied in the third (365) issue, $2,055.35, with interest from 1 January, 1908, and in the ninth issue, $10,000, with interest from 23 August, 1902, both aggregating $17,925.56, and rendered judgment, after satisfying and discharging the purchase money note, against the plaintiff for $4,508.89. For some reason not set out, his Honor set aside the fourth and fifth issues and declined to allow the amounts as a counterclaim to the defendants.
From the judgment rendered the plaintiff appealed.
There are only two matters presented for our consideration upon this appeal and they relate to the counterclaims passed upon in the third issue and in the sixth, seventh, eighth, and ninth issues.
1. It is contended that the clause in the deed from plaintiff to Seip is not sufficient to create a covenant of warranty of title to the lands described in the deed, and that therefore defendants cannot recover on the third issue. The language of warranty is as follows:
"And we, Joseph Tarault and Richard E. Norton, the said grantors, do, for ourselves and our heirs, executors, and administrators, covenant with the said grantee, his heirs and assigns, that at and until the ensealing of these presents we were well seized of the above described premises as a good and indefeasible estate in fee simple, and have good right to bargain and sell the same in manner and form as above written; that the same are free and clear of all encumbrances whatsoever, except taxes thereon, and that we will warrant and defend said premises, with the appurtenances thereunto belonging, to the said grantee, his heirs and assigns forever, against all lawful claims and demands whatsoever, except taxes."
The learned counsel for plaintiff evidently place but little reliance upon this contention, for they cite us no authority and give no reason in support of it. They content themselves with simply calling our attention to it in their brief. We presume that the theory upon which the exception was taken is, the words "title to" being (366) omitted from the warranty clauses renders it insufficient as a covenant of warranty of title. The position is untenable. Covenants are construed most strongly against the grantor, and any language evidencing such an intention is sufficient. 11 Cyc., 1076 and 1077; 14 Century Digest, "Covenants," sec. 1.
2. The defendants further contend that they were induced to purchase the land by the willful and false representations of the plaintiff in respect to the boundary, whereby the plaintiff was cheated out of about 1,000 acres of land. This counterclaim is embodied in the sixth, seventh, eighth, and ninth issues. The evidence taken in its most favorable light for defendants tends to prove these facts.
H. C. Hosier, of Ohio, a stockholder of the defendant Carolina Land and Lumber Company, which company the defendant John Seip organized to take over the land purchased by him of the plaintiff Tarault, together with A. B. Lukens and E. S. Skilder of Norfolk, and O. D. Jackson, the real estate broker negotiating the sale, went to look over the land before the purchase. The plaintiff Tarault was at home sick, suffering from asthma, and showed the parties only the cultivated land, but was unable to show them the boundaries of all the land. He also stated to the purchasers that he did not know the boundaries of the land and had never been around it, which testimony is uncontradicted. He got a colored man to go with the party to show the lines. When they came to a ditch 6 feet wide Jackson and the colored man both said, "We are now on the Tarault property," and that "this ditch marks the line." The party remained in the vicinity for several days, investigating the land, and later Mr. Seip came from Ohio and closed the transaction. The lands sold to Seip covered some 9,192 acres in all and the purchase price was $70,000. Four or five years afterwards it was found that this ditch did not mark the boundary of the property, and that there was between the ditch and the true Tarault line something like 1,000 acres, which belonged to one Willey, and was later recovered by Willey in a suit. In surveying this boundary it was found that the ditch was right at the boundary in one place, and it was further (367) established that the line between Willey and Tarault was well defined and marked, Willey having cut it out every few years. This testimony is corroborated by A. B. Lukens and O. D. Jackson. Jackson was not sure whether he and the colored man stated the line was at the ditch or near it, but said that they all took it for granted that the ditch was the line. It is further in evidence that this Willey land was well timbered. Upon this testimony of defendants the plaintiff moved for a nonsuit on the defendants' counterclaim as to fraud, which motion was refused. The plaintiff then introduced one Sears, who testified that he was present when Tarault told Jackson, Hosier, and Lukens that he had been only half a mile in the swamp and did not know where the lines were. Deposition of Tarault was introduced, further stating that he had told the defendants that he had not been over the property and did not know where the lines were, and did not know anybody who did, and that he told them to take their time and look at the lines and the records and if they did not want it, it was all right; he had just as lieve keep it. Witness Lukens was recalled and stated that he did not remember Tarault's saying that he did not know where the lines were. Upon the close of the testimony the plaintiff renewed his motion as to nonsuit, which motion was refused. The plaintiff then asked the court to charge that upon all the evidence they should answer the sixth, seventh, and eighth issues "No" and the ninth issue "Nothing."
It is admitted that the boundaries of the deed do not cover the Willey land, and therefore the defendants cannot recover upon the warranty as to that. The cause of action the defendants seek to establish is based upon the allegation that the plaintiff represented to defendants that the Willey land was included in his own boundaries, that such representation was knowingly false and was made by plaintiff with the false and fraudulent purpose of inducing defendants to purchase, and that they made the purchase in consequence of such representations, relying upon them.
Accepting the doctrine that the principle that false representations as to material facts knowingly and willfully made as an inducement to a contract applies to contracts and sales of land as well as personalty, (368) we are unable to find in the record any evidence of those necessary elements which are essential to constitute actionable fraud.
In order to constitute such, there must be false representations as to material facts, knowingly and willfully made as an inducement to the contract. Such representations must be shown to have been the reason for making the contract and that they were reasonably relied upon by the other party. May v. Loomis, 140 N.C. 352. In this often cited case Mr. Justice Hoke lays down these principles and quotes abundant authority sustaining them. Applying them in this case, we find no evidence at all sufficient to sustain the allegations of the answer or the findings of the jury.
The plaintiff told the purchasers that he did not know the boundaries. He told them that Sam Jones, the negro, was familiar with the lines. There is not a scintilla of evidence that this statement was made to deceive. All the evidence shows that plaintiff was sick, and in sending the negro with the purchasers he acted in good faith. The ditch did constitute a part of the boundary at one point and there is no evidence that the negro Jones acted with any fraudulent purpose when he said, "This ditch marks the line." That he made a mistake is not sufficient. Erroneous statements made by the vendor in the sale of land as to the location of a boundary are not sufficient, standing alone, to impeach the transaction for fraud. We think that Gatlin v. Harrell, 108 N.C. 487, lays down the proper rule for cases of this kind. The facts in that case are practically the same as those in the case at bar. There the vendor pointed out the corners and lines on several occasions, and it turned out that these boundaries were not the correct one, and the opinion, after referring to the fact that the court below had granted nonsuit on the facts, said:
"We think the suggestion of the court was well founded. The whole of the evidence, accepted as true, did not in any reasonable view of it prove the alleged fraud and deceit. The proof was that the defendants pointed out to the plaintiff certain corners and line trees of the tract so sold, and that these, or some of them, were not the true ones; but there is nothing to prove that the defendant knew that they (369) were not the true ones, nor that they fraudulently intended to mislead, deceive, and get advantage of the feme plaintiff. The proof, further, was that the defendants said the tract had been surveyed and contained 115 acres. There was nothing to prove that it had not been surveyed, or that it did not contain that quantity. The mere fact that the defendants pointed out corners and lines not the true ones could not of itself prove fraud and deceit, especially in the total absence of proof that the tract conveyed did not contain the quantity of land specified in the deed as containing 115 acres, more or less. Indeed, there was no proof, so far as it appears, as to the quantity of land the defendants contracted to sell to the feme plaintiff, or what quantity they conveyed, otherwise than as shown by the deed put in evidence.
"There was no proof to sustain the material allegations of the complaint. In the absence of such proof, it is obvious the plaintiffs could not recover, and the court hence properly intimated that they could not. There must be probata as well as allegata."
In our case there was nothing said or done to willfully mislead the purchasers, nor was artifice used to prevent a full inquiry. The purchasers remained at the property several days and satisfied themselves. They were told by the vendor that he did not know the boundaries, and all the vendor did was to give them what means he had at hand to aid them. He sent a colored man to show the boundaries, and, as far as it appears, thought the colored man knew the boundaries. It turns out that the ditch was actually at the true boundary in one place, and it was not a great mistake for the colored man to have assumed that this large ditch, starting at the boundary and running a long distance, was the real boundary. Being swamp land, with the necessity for boats to cruise in it, there was much less opportunity for any one to be familiar with the true lines. Again, the evidence discloses that the lines were well marked and cut, and a little investigation on the part of the purchasers would have acquainted them with the true boundaries. If purchasers make mistakes and suffer loss by reason of such a state of facts as is disclosed here, it must be attributed to their own lack of (370) proper and diligent inquiry, and they should not be heard to say, years afterwards, that they were fraudulently induced to make the purchase. Moreover, the evidence here does not show sufficiently that the defendants purchased this large tract of land, relying upon the testimony of the agent Jackson and the negro, in regard to this particular boundary.
An essential element of actionable fraud is the scienter or knowledge of the wrong on the part of the vendor. Where the representation is made as a part of the warranty, the vendor is held liable for his statement, whether he knew it to be true or not, but where the action is for fraud the burden is upon the party setting it up to prove the scienter. This distinction is well made by Chief Justice Pearson in Etheridge v. Palin, 73 N.C. 216, and is well supported by numerous authorities in this and other States. This Court said in Tilghman v. West, 43 N.C. 183: "Nor can fraud exist where the intent to deceive does not exist, for it is emphatically the action of the mind that gives it existence." And in Hamrick v. Hogg, 12 N.C. 350, Judge Henderson says: "It is not sufficient that the representation be false in point of fact; the defendant must be guilty of a moral falsehood. The party making a representation must know or believe it to be false, or, what is the same thing, have no reason to believe it to be untrue." The action for fraud and deceit rests in the intention with which the representation is made, and not upon the representations alone.
This doctrine is generally held by all courts in this country and in England. Berry v. Peak, L. R., 14 App. Cs., 337; Byard v. Holmes, 34 N.J.L. 296; 2 Kent Com., 484; Shrakelt v. Bickford, 74 N. H., 57. Shell v. Roseman, 155 N.C. 90, is a case in point in which the evidence of intentional deceit is clear and full, as pointed out by Mr. Justice Allen in the opinion of the Court.
The judgment of the Superior Court is reversed upon the sixth, seventh, eighth, and ninth issues and the motion of plaintiff to nonsuit defendants upon that counterclaim is allowed. Let judgment be entered in the Superior Court for plaintiff in accordance with this opinion, to wit, for $10,250, with 6 per cent interest from 26 July, 1906, on $10,000, subject to a credit of $2,055.35 bearing 6 per cent interest from 1 January, 1908. (371)