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POCATELLO SECURITY TRUST COMPANY, Respt.,

V.
WALTER W. HENRY, Appt.

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(35 Idaho, 321, 206 Pac. 175.) Rescission — of contract to purchase lot — representations as to improve

ments. 1. Representations by one engaged in opening a tract of land for settlement, to induce the purchase of a lot therein, that upon receipt of a specified portion of the purchase money for the tract, street pavements, sidewalks, sewers, water mains, trees, and lights would be installed on the tract, will, if false, justify rescission of the contract for fraud if accompanied by false representations that many of the proposed improvements are actually under way, and that prominent people are engaged in erecting expensive dwellings on the tract.

[See note on this question beginning on page 343.] Trial — directing verdict — effect. perform, and without which the

2. An instruction which directs a promise would not have been acceptrerdict has the same effect as an or- ed or acted upon, such statement is der sustaining a motion for nonsuit, a representation, and if falsely made in that it admits the truth of the ad- is ground for avoiding a contract, versary's evidence and every infer- though the thing promised to be done ence of fact that may be legitimately lies in the future. drawn therefrom.

[See 12 R. C. L. 257.] (See 26 R. C. L. 1068.] Fraud — failure to perform promise.

- predicated on nonperformance of 3. While a failure to perform a

promise.

4. Fraud may be predicated upon promise cannot amount to fraud, if such promise is accompanied by a

the nonperformance of a promise in

certain cases, where the promise is statement of existing fact which shows the ability of the promisor to

the device to accomplish the fraud.

[See 12 R. C. L. 254 et seq.; 2 R. Headnotes 2-4 by LEE, J.

C. L. Supp. 1409; 12 R. C. L. 237.]

APPEAL by defendant from a judgment of the District Court for Bannock County (Terrell, J.) to review a judgment in favor of plaintiff in an action brought to recover the amount alleged to be due on two promissory notes. Reversed.

The facts are stated in the opinion of the court. Messrs. Paul S. Haddock and E. D. which are offered as inducements for Reynolds for appellant.

him to enter upon certain conduct. Messrs. Budge & Merrill, for re- 2 Pom. Eq. Jur. $ 892. spondent:

False representations as a basis of A party is not justified in relying action, whether for damage or for upon representations made to him rescission of a contract, are such

27 A.L.R.-22.

only as in some manner actually mis- would be given as appellant might lead the party to his damage.

desire; (2) that respondent had reMarriner v. Dennison, 78 Cal. 202, ceived in cash one half of the total 20 Pac. 386; Richardson v. Lowe, 79 C. C. A, 317, 149 Fed. 625; Jakway v.

purchase price of said addition, and Proudfit, 76 Neb. 62, 106 N. W. 1039,

would forthwith pave, curb, and gut109 N. W. 388, 14 Ann. Cas. 258;

ter the streets in said addition, lay American Bldg. & L. Asso. v. Bear,

concrete sidewalks and adequate 48 Neb. 455, 67 N. W. 500; Lorenzen sewer system and water mains, plant v. Kansas City Invest. Co. 44 Neb. 99, elm trees, and install cluster street 62 N. W. 231.

lights, during the season of 1918, Fraud without damage furnishes as provided in said agreement; (3) no ground for action, nor is fraud

that it had contracted to sell all the without damage a defense.

lands in the east half of said addiWoodson v. Winchester, 16 Cal. App. 472, 117 Pac. 565; Holton v.

tion; (4) that Clyde Bacon had purNoble, 83 Cal. 7, 23 Pac. 58.

chased a number of lots in said adA motion for nonsuit comes too

dition, and had contracted to build late after the case has been submit- during said season, and was then ted to the jury, or after the court has engaged in building, a house to cost given peremptory instructions and $25,000; (5) that Peter Bethune and discharged the jury, or after judg- other purchasers of lots in said adment.

dition had building contracts for 38 Cyc. 1552; Drummond v. Louisville & N. R. Co. 109 Fed. 531; Balti

constructing dwelling houses during , more & O. S. W. R. Co. v. Trennepohl

, leges that all of these representa

said season of 1918. Appellant al44 Ind. App. 105, 87 N. E. 1059. Since fraud must relate to facts

tions were false and fraudulent, and then existing or which have previ- were made in bad faith, for the purously existed, the general rule is that pose of defrauding him, and that at fraud cannot be predicated upon the time of making the same restatements promissory in their na- spondent had no intention of keepture, and relating to future action. 12 R. C. L. 21; Knowlton v. Keenan,

ing any of said promises, but that 146 Mass. 86, 4 Am. St. Rep. 282,

appellant had relied upon the same, 15 N. E. 127; Bigelow v. Barnes, 121

and had been induced to execute and Minn. 148, 45 L.R.A.(N.S.) 203, 140

deliver said notes by reason of such N. W. 1032.

promises, and had been greatly inLee, J., delivered the opinion of

jured thereby; and that, upon disthe court:

covering the falsity of these repreThis action was commenced by re

sentations, he had tendered a return spondent, Pocatello Security Trust

of the possession of said lots and de

manded a rescission of the contract Company, to recover against appellant, Walter W. Henry, upon two

of purchase. promissory notes.

Upon issues thus joined, a trial The complaint contains a count

was had to the court with a jury, upon each note in the usual form.

and at the close of the evidence reThe answer admits their execution · spondent moved the court for a diand nonpayment, and as an affirma

rected verdict on the grounds : (a) tive defense alleges that they were

That the affirmative allegations of given in payment for three lots in

the answer had not been sustained; Blue Lakes addition west to Twin

(b) that it was not shown that any Falls town site, purchased in ac

of the statements claimed to have cordance with an agreement exe

been made were material; (c) that cuted May 15, 1918, and that re

it was not shown that any of said

a spondent, in order to induce appel- statements were made with a knowllant to enter into said agreement. edge of their falsity, or with intent made certain false and fraudulent to deceive, or that they did deceive, representations: (1) That if ap- that appellant acted upon such pellant was unable to pay said notes representations in executing said at maturity, such extensions of time notes; (d) or that appellant had sus

(35 Idaho, 321, 206 Pac. 175.)) tained any damage by reason there- represented to him that the condiof; (e) that the evidence was in- tion in the agreement, which prosufficient to constitute a defense. vided that upon the pavement of one

Appellant moved for a nonsuit on half of the selling price of the entire the ground that respondent had not addition in cash it would install tendered a deed to the lands agreed these improvements, had been comto be purchased, which motion was plied with, and that the sewers, denied as having been made too late. curbs, gutters, cluster lights, and The jury was then directed to return trees were already in, and that rea verdict for respondent for the full spondent was then engaged in putamount of the notes, together with ting in paving, and that all of these interest and attorneys' fees. From improvements had to be completed the judgment entered upon this ver- before the 1st of November of that dict, this appeal is taken.

year, and that Bethune and Bacon, It is not necessary to consider all sheep men from Jerome; were then of the assignments of error.

constructing buildings in said addiAn instruction which directs a tion; Bacon's house to cost $25,000.

verdict has the same The allegations in the answer with Trial-directing verdict- effect as an order reference to the false and fraudulent effect.

sustaining a motion representations, with the exception for nonsuit, in that it admits the of that part relating to the houses truth of the adversary's evidence, then being constructed upon said and every inference of fact that may premises, relate to promises of imbe legitimately drawn therefrom. provements that were to be installed In effect, it instructs the jury that in the future, and appellant's testithere is no evidence to support the mony that respondent's agent repreclaim of the party against whom sented to him that certain of these such verdict is directed. Keane v. improvements had already been conPittsburg Lead Min. Co. 17 Idaho, structed might have been objected to 179, 105 Pac. 60; Marshall v. Gilster, as not being within the allegations 34 Idaho, 420, 201 Pac. 711.

of the answer. But respondent's The agreement for the purchase counsel, upon cross-examination, of these lots for which these notes brought out the fact that respondwere given provides, among other ent's agent had represented to appelthings, that respondent, upon re- lant that the cluster lights were in, ceiving cash payment for one half of that there were 150 men then workthe purchase price of said addition, ing on the pavement, that all the lots would pave with bitulithic pavement on the east side had been sold and the streets fronting on said lots for just a few left on the west forty, that a width of 30 feet, would curb and Clyde Bacon was then erecting a gutter said streets, would lay a 5- building to cost $25,000, Peter foot concrete sidewalk thereon, Bethune was also building a house, would lay adequate sewers and wa- and a great number of other people ter mains, would set out elm trees 24 were also constructing buildings, feet apart along said streets front- and that the biggest part of the paving on said lots, and have the same ing was in on the east side, and they tended by a competent nurseryman were working right along putting for a period of two years, and would in all of the pavement. install cluster street lights, with The sale agreement does not fix a standards set not more than 300 feet definite time when these improveapart, upon the streets improved. ments were to be completed, but apOther conditions are contained in

pellant testifies that respondent's this agreement which it is not neces- agent told him that they were to be sary to notice.

made during the season of 1918, and Appellant testified that when he that they had not been made at the made this agreement with the com- time of the trial of this cause, the pany's agent, Nerlon, such agent latter part of 1920. It appears from an affidavit in the record that the tions were false. Under this state company is now insolvent and in the of facts, we do not think that it can hands of a receiver.

be said as a matter of law that all of A number of these representa- these representations were of such tions were made to other witnesses, character as to fall within the rule particularly with regard to improve- of being merely matters of opinion, ments to be made or that had been or promises of future performance, made in the way of paving, curbing, and they could not, therefore, afford and guttering, laying sewers and any ground for a rescission of this water mains, and putting out shade agreement or defense against the trees. Upon objection being inter- payment of these notes sued on, posed, this line of testimony was ex- which were given for the purchase cluded as incompetent and imma price of these lots. terial, on the ground that it related It is frequently said that a promto promises of improvements which issory statement cannot be the basis were to be made in the future. Re- of an action for deceit; and a prespondent contends that, because diction of future things is at best these representations related to im- an opinion. It is undoubtedly true provements that were to be installed that a failure to perform a promise in the future, such promises fall cannot amount to fraud. In many within the rule of expressions of jurisdictions, without consideration opinion, and were not statements of of the question whether a promise fact upon which appellant had a was made with an intention not to right to rely; that they were not perform it, it is held that the making statements of fact, and could readily of the promise cannot be an actionhave been investigated as to their able fraud. It has been pointed out, truthfulness. The court below ap- however, that, when a promise is pears to have adopted this view, and made with intention not to perform instructed a verdict for respondent it, the promisor is guilty of misrepaccordingly.

resentation. 3 Williston, Contr. § As already observed, in- 1496. structed verdict admits the truth of A statement which by itself might appellant's evidence, and all infer- be a mere expression of opinion may ences that a jury would have been be so connected with a statement of justified in drawing from it had the a material fact as to amount to case been submitted to the jury. It fraud. A statement of value inresults, therefore, that upon this rec- volving and coupled with a stateord appellant was induced to pur- ment of a material fact is fraud. If chase these lots upon the representa- a material fact is misrepresented, tion that the entire addition was the addition of a promise to such then being paved, that sewers and misrepresentation does not prevent water mains had been or would be it from being fraud, if the other elelaid, cement sidewalks put in, cluster ments of fraud exist. Where the lights installed, and ornamental promise is made without any intent trees put out, and that well-known, on the promisor's part to keep it, responsible citizens were then en- but to induce action on the part of gaged in constructing residences, the promisee, it is held to be fraud. one to cost $25,000. These repre- Page, Contr. $$ 293–298. “Fraud sentations were the inducement that may be predicated on the nonpercaused appellant to sign this con- formance of a prom- Frau tract of purchase and execute these ise in certain cases

-predicated

on nonperformnotes in payment for this property, where the promise ance of promises. without which he would not have en- is the device to accomplish the tered into the agreement. He states fraud.” 12 R. C. L. p. 257, § 23; all of this positively, and is cor- Adams v. Schiffer, 11 Colo. 15, 7 roborated in part by other witnesses, Am. St. Rep. 202, 17 Pac. 21; Sweet and all testify that the representa- v. Kimball, 166 Mass. 332, 55 Am.

an

($5 Idaho, 321, 206 Pac. 175.) St. Rep. 406, 44 N. E. 243; Cerny Cooper v. Ft. Smith & W. R. Co. 23 v. Paxton & G. Co. 10 L.R.A.(N.S.) Okla. 139, 99 Pac. 785. 640 and note (78 Neb. 134, 110 N. “A fraudulent promise which inW. 882); Metcalf v. Hart, 3 Wyo. duces a person to act in such a way

a 513, 31 Am. St. Rep. 122, 27 Pac. as to affect his legal right, or to al900, 31 Pac. 407.

ter his position to his injury or risk, False representations as to future is actionable." Cockrill v. Hall, 65 events will constitute fraud, where Cal. 326, 4 Pac. 33; Langley v. Rodthese events depend upon the acts of riguez, 122 Cal. 580, 68 Am. St. Rep. the party making the representa- 70, 55 Pac. 406; Brison v. Brison, tions, and form the inducement 75 Cal. 525, 7 Am. St. Rep. 189, 17 whereby the other party is led into Pac. 689. the transaction. Henderson v. San

A representation within the Antonio & M. G. R. Co. 17 Tex. 560, meaning of the law of fraud is any67 Am. Dec. 675.

thing short of a warranty, which "If the promise is accompanied proceeds from the action or conduct with statements of existing facts

of the party charged, and which is which show the ability of the prom

sufficient to create upon the mind a isor to perform his promise, and

distinct impression of fact conducive without which the promise would

to action.” St. Louis & S. F. R. Co. not be accepted or acted upon, such

v. Reed, 37 Okla. 350, 132 Pac. 355. statements are denominated repre

“Where the party alleges and sentations, and if falsely made are

proves that he was induced by magrounds of avoiding the contract, terial, false, and fraudulent repre

sentations to enter into a contract though the thing promised to be done lies wholly in the future."

which he would not have entered inRuss Lumber & Mill Co. v. Mus

to but for such false and fraudulent cupiabe Land & Water Co. 120 Cal.

a contract

representations, 521, 65 Am. St. Rep. 186, 52 Pac.

obtained thereby is voidable.” Mc995.

Lean v. Southwestern Casualty Ins.

Co. 61 Okla. 79, 159 Pac. 660. False representations by a vendor

“Any statement of an existing of land of his intention to make im

fact material to the person to whom provements which will benefit the it is made, which is false and known property sold are ground for re

by the person making it to be false, scinding the contract. Roberts v.

and which is made to induce the exJames, Ann. Cas. 1914B, 859, and

ecution of a contract, and which does note (83 N. J. L. 492, 85 Atl. 244). induce the contract, is a fraud,

One who is induced to buy lots in which will sustain an action to avoid a proposed town by the representa- the contract." Adams v. Gillig, 199 tions of the proprietor that a dock N. Y. 314, 92 N. E. 670, 32 L.R.A. will be constructed near the prem- (N.S.) 127, and note, 20 Ann. Cas. ises, and that a town will be laid out 910 and note, citing the following and built up, and the streets opened authorities which sustain the foreand improved, will be relieved in going: Old Colony Trust Co. v. equity from the performance of the Dubuque Light & Traction Co. (C. contract, where the proprietor aban- C.) 89 Fed. 794; Williams v. Kerr, dons the intention of making the 152 Pa. 560, 25 Atl. 618; Chicago, promised improvements and the T. & M. C. R. Co. v. Titterington, town never comes into existence, 84 Tex. 218, 31 Am. St. Rep. 39, 19 though it is not alleged that there S. W. 472. See also Rogers v. Sal

an intention not to perform mon, supra. when the sale was made. Rogers Appellant's contention that one of v. Salmon, 8 Paige, 559, 35 Am. the inducements for signing these Dec. 725; Roberts v. James, supra; notes was a promise that he was to Wilson v. Carpenter, 91 Va. 183, 50 be given such additional time to pay Am. St. Rep. 824, 21 S. E. 243; the same as he might desire is with

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