Title: Federici Et Ux v. Lehman

State: oregon

Issuer: Oregon Supreme Court

Document:

Reversed January 31, 1962.
*71 Stuart W. Hill, Portland, argued the cause for appellants. On the briefs were Gilley, Busey, Hill & Nash, Portland.
J. Robert Jordan, Portland, argued the cause for respondents. With him on brief was John F. Reynolds, Portland.
Before McALLISTER, Chief Justice, and WARNER, PERRY, SLOAN and BRAND, Justices.
REVERSED.
PERRY, J.
The plaintiffs brought this action alleging that they had rescinded a contract entered into between themselves and the defendant John Bates for the purchase of real estate situated in the city of Portland and seek to recover back money advanced in the purchase of the property.
*72 The complaint alleges, as grounds for their right to rescind, fraud committed by defendants and mutual rescission by the parties. Defendants deny both contentions of the plaintiffs.
The jury returned a verdict for the plaintiffs and the defendants appeal.
The complaint alleges that the plaintiffs entered into a written contract with the defendants "whereby defendants agreed to sell and plaintiffs agreed to buy" certain described real estate for a definite sum of money; that plaintiffs paid $5,106.90 thereon; that their purpose in purchasing said property was to construct a medical clinic thereon; that defendants made false representations upon which the plaintiffs relied;
There is no evidence that would support plaintiffs' contention of mutual rescission. The defendants' answers deny the allegations of plaintiffs' complaint. While plaintiffs state "there is nothing further for plaintiffs to do to rescind the said contract", this is merely a conclusion of the pleader and not a recital of fact.
1. It is well established that one induced to enter into a contract by fraud may upon discovery of the fraud elect his remedy. He may either rescind the contract *73 and be returned to his former position or he may affirm the contract and sue for the damages suffered by reason of the fraud. Kruse v. Bush, 85 Or 394, 167 P 308; Nisson v. Tillman et ux, 213 Or 133, 323 P2d 329; Bridgmon v. Welker, 218 Or 130, 344 P2d 233.
2. If a defrauded party elects to rescind he may bring an action at law if full relief may there be granted or he may bring a suit in equity.
3. It is an elementary principle that if the recovery is sought at law, one who seeks to recover that which he has paid under the executory contract must tender back what he has received under the contract or show some legal excuse for his failure. Restatement of the Law, Contracts, § 480.
4, 5. In an equitable action for rescission, an offer in the complaint is sufficient for equity has the power to render full and appropriate relief to all parties regardless of the specific prayers. Katz v. Obenchain, 48 Or 352, 85 P 617; Ruth v. Hickman, 214 Or 490, 330 P2d 722.
This is not true in an action at law and therefore one who claims a right to rescind must place the party in status quo or attempt to do so before bringing his action at law. T.B. Potter Realty Co. v. Breitling, 79 Or 293, 155 P 179.
6. This rule of law of prior restoration or tender applies to contracts governing the sale of real property as well as contracts governing other transactions. T.B. Potter Realty Co. v. Breitling, supra; Roberts v. James, 83 NJL 492, 85 A 244; Lackovic v. Campbell, 225 Mich 1, 195 NW 798; Barker v. Fordville Land Co., 264 Mich 95, 249 NW 491; Walcrath Realty Co. v. Van Dyke, 263 Mich 316, 248 NW 634; Todd v. Bettingen, 109 Minn 493, 124 NW 443. This rule of prior restoration applies to contracts rescinded by mutual agreement as well as contracts rescinded by one party as a matter of right. Mascall v. Erikson, 131 Or 509, 283 P 2.
There is some divergency of opinion among courts as to the necessity of a prior conveyance and tender by a vendee back to a vendor before commencement of *75 an action of rescission where the contract of sale is in installments and the deed and possession are to be delivered upon full payment of the purchase price. See cases cited supra. And we note this statement, which is dictum, in Kruse v. Bush, 85 Or 394, 167 P 308 (supra) which deals with a vendee's right to rescind for fraud a land purchase contract:
In Kruse v. Bush, supra, as in Roberts v. James, supra, there was a contract of purchase of real property under which the vendee was to receive a deed and possession only upon completion of the purchase price. Before completing payment of the purchase price and receiving the deed or possession, the plaintiff, as vendee, brought his action to rescind. Under these circumstances the court seemed to be of the opinion that a complete renunciation of the equitable title in the vendee in his complaint was sufficient to re-invest the vendor with the fee simple title, so that no further action on the part of the vendor to establish his record title would be necessary.
The matter now before us is different. The contract provides: "Possession of said premises is to be delivered to the purchaser on or before date of closing 1959."
7. At the time the contract was entered into there was a building upon the premises occupied under written lease by Guy and Mary Chimenti. The building was used by the lessees as a restaurant and on June 17, 1959, an agreement was entered into between the plaintiffs and the Chimentis for a cancellation of the lease *76 and the removal of the lessee's property on or before July 10, 1959.
The agreement also provides:
It therefore appears from the record that the plaintiffs went into possession and authorized the destruction of the building. There is also some evidence in the record that the Chimentis damaged and removed some portions of the real property.
In 5 Corbin on Contracts, § 1114, we read:
But whether an offer by the plaintiffs to place the defendants in status quo is a condition precedent to the commencement of an action for rescission need not be here determined, for it is certain that somewhere in the proceedings there must be some affirmative action on the part of the plaintiffs to place the defendants in status quo, and there is none.
*77 At the conclusion of the evidence the defendants each moved for a directed verdict upon the ground that there was no evidence of an offer to place the defendants in status quo. The motion should have been granted.
The defendants also moved for a directed verdict on the grounds that there was a failure to prove fraud. This motion was also denied and is assigned as error.
The allegation of fraud relied upon by the plaintiffs to justify their right to rescind the contract consisted of a statement that "defendants had secured and would furnish to plaintiffs eight tenants to occupy the said structure" and that they, the defendants, "would remove from the property at their own expense the tenant of defendant in possession of said property."
8. It is well established that false representations to constitute fraud that will relieve a party to a contract must be such representations as would deceive a person of ordinary intelligence. Wheelwright v. Vanderbilt, 69 Or 326, 138 P 857; Holmberg v. Prudential S. & L. Ass'n, 130 Or 1, 278 P 943; Union Central Life Ins. Co. v. Kerron, 128 Or 70, 264 P 453.
This simply means that the false representations are such that under the attendant circumstances plaintiff, a person of ordinary intelligence, has a right to rely upon them. Andrews v. United Finance Co., 204 Or 429, 283 P2d 652.
In substance, the facts testified to by the plaintiff Paul A. Federici, a real estate dealer and builder, are that defendants interested him in the purchase of the property upon which he proposed to build a building with office space for doctors and dentists; that at the time the negotiations commenced the defendants had already procured plans for the structure to be built. *78 These plans were not acceptable to him and he so advised the defendants. He entered into the written agreement and subsequent to its execution he had preliminary drawings made of the proposed building.
In reference to the representations respecting the tenants in the building to be constructed which he states induced his entry into the contract and his election to rescind, he testified as follows:
*81 With reference to his purpose in procuring the preliminary drawings of the new building he testified:
It is to be noted that the allegation in the complaint that defendants represented that they had eight tenants to occupy said structure when it should be completed is quite different from plaintiffs' testimony to the effect that the representation was that they would have no difficulty in obtaining eight tenants.
Plaintiffs' own testimony discloses that at the time the representation was made they would not accept the plans obtained by the defendants for the building to be constructed, but intended to substitute their own *83 plans at a later date; that under these circumstances no one would enter into a five-year lease of space in the building and they knew this, as shown by their testimony that they procured preliminary drawings for the purpose of showing them to prospective tenants who would not enter into a lease until they could see what they were "getting into."
9. It is clear to us that reasonable minds could reach only one conclusion, and that is, the statement made was solely one of opinion as to what could be accomplished in the future. This, of course, is not actionable fraud. Restatement, Contracts, ch 15, § 474, p 902.
As to plaintiffs' contention that they were misled into entering into the contract by the statement of defendants that they would bear the expense of removing the tenant, we merely note that subsequent to the execution of the agreement plaintiffs paid defendants $500 of the cost of removing the tenants with the understanding that this was to be deducted from the total purchase price and this was agreed to by the defendants.
We have in this opinion treated the named persons, Donald M. Lehman, and Larry Brickley as parties defendant since the court and parties treated them as such.
We have searched the record and are unable to find any evidence that either held any title to the real estate which is the subject of this action and could therefore under any theory be proper parties to this action.
For the above reasons the cause is reversed with instructions to enter judgment for the defendants.