Court Opinion

ID: 9559538
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:30:57.745644+00
Date Added: 2024-06-11T09:10:13.390292
License: Public Domain

Stafford, J.
(dissenting) — The majority has based its opinion upon three types of contact between plaintiff and defendants which are said to result in actionable misrepresentation. My review of the record reveals no basis for that conclusion.
The first type of contact is an assumed actionable misrepresentation by the alleged agent of defendant. The majority opinion is based primarily upon the assumed existence of an "agency" between the real estate broker, Estvold, and the. defendants Hopke. In making that assumption the majority has overlooked the fundamental premise that "agency" is not itself a fact. Rather, it is a legal concept dependent upon the existence of specific required factual elements. Moss v. Vadman, 77 Wn.2d 396, 402-03, 463 P.2d 159 (1969) citing Restatement (Second) of Agency § 1(1) (1958). As Moss points out, there must be
the manifestation of consent by one person that another shall act on his behalf and subject to his control, with a correlative manifestation of consent by the other party to act on his behalf and subject to his control.
See also Busk v. Hoard, 65 Wn.2d 126, 129, 396 P.2d 171 (1964). Absent the required facts of consent and control, "agency does not exist in law." Matsumura v. Eilert, 74 Wn.2d 362, 368, 444 P.2d 806 (1968); Busk v. Hoard, supra at 129; Restatement (Second) of Agency § 1(1), comments a and b at 8 (1958); 2A C.J.S. Agency § 5 (1972).
It is of interest that the trial court, in what is incorrectly denominated a "finding of fact," makes one and only one reference to broker Estvold as defendants' "agent." Other than that singular use of the word, the trial court set forth nothing to support what should correctly have been designated a "conclusion of law." We are not bound by the trial *460court's incorrect designation of the legal relationship as a finding of fact. Findings of fact which are actually conclusions of law will be dealt with as conclusions of law. Neil F. Lampson Equip. Rental & Sales, Inc. v. West Pasco Water Sys., Inc., 68 Wn.2d 172, 174, 412 P.2d 106 (1966); Kane v. Klos, 50 Wn.2d 778, 799, 314 P.2d 672 (1957); see also State v. Reader's Digest Ass'n, 81 Wn.2d 259, 266-67, 501 P.2d 290 (1972); Fain v. Nelson, 57 Wn.2d 217, 219, 356 P.2d 302 (1960). Thus, although the trial court made a singular so-called factual finding of "agency," the pertinent inquiry remains whether the legal relationship of "agency" (i.e., a conclusion of law) is supported by findings of fact and they in turn are supported by the evidence. A careful analysis of the record reveals that this conclusion of law is supported by no finding of fact whatsoever. Consequently, it cannot stand. Freeman v. Stemm Bros., 44 Wn.2d 189, 193, 265 P.2d 1055 (1954); 2 L. Orland, Wash. Prac. § 308, at 344 (3d ed. 1972).
This shortcoming was recognized by the Court of Appeals. After hearing the appeal on its merits that court, in an order of remand, required the trial court to make specific findings of fact on
whether Mr. Estvold was Hopkes' agent and the per acre representations made by Estvold bound the Hopkes.
(Italics mine.)
The order of remand was entirely proper. Old Windmill Ranch v. Smotherman, 69 Wn.2d 383, 390-91, 418 P.2d 720 (1966); Peterson v. Neal, 48 Wn.2d 192, 292 P.2d 358 (1956); Gnash v. Saari, 44 Wn.2d 312, 267 P.2d 674 (1954). In Bowman v. Webster, 42 Wn.2d 129, 134-35, 253 P.2d 934 (1953), we said:
It is necessary . . . for the trial court to make the ultimate findings of fact concerning all of the material issues. . . .
The remedy most frequently applied has been to reverse and remand with instructions to the judge ... to *461make and enter the necessary findings of fact and conclusions of law, to be followed by the entry of judgment from which either party may appeal.
Subsequently the trial court prepared "Supplemental Findings of Fact." But, the findings clarified nothing. Once again the sole reference to the subject of "agency" was a similar legal conclusion:
Norris M. Estvold was the agent of defendants Hopke in the sale of the real estate . . .
Thus, as with the original findings of fact, the pertinent inquiry still remained whether the legal conclusion of "agency" was supported by findings of fact and they in turn by the evidence. As indicated earlier, consent and control are the essential elements of "agency." If no factual pattern exists which gives rise to the legal relationship of "agency," none exists. Moss v. Vadman, supra; Busk v. Hoard, supra; Restatement (Second) of Agency § 1 (1958).
Unfortunately, the Court of Appeals did not again remand the cause with another order requiring the necessary findings of fact. Rather it proceeded, in the absence of findings of fact required to support the legal conclusion of agency, to set forth its own facts in support of the legal relationship. The majority herein has fallen into the same trap. Rather than remand the cause for proper findings of fact, it has gleaned from the Statement of Facts a few "facts" which presumably would support such a legal relationship. But a review of that Statement of Facts makes it clear it would be equally possible to recite other facts which would affirmatively establish a lack of agency. There is even evidence which indicates that broker Estvold might have been an agent of plaintiff Myers. In the absence of findings of fact the majority should not have relied upon a recitation of its own preferred facts in support of its position. As we said in Stringfellow v. Stringfellow, 56 Wn.2d 957, 959, 350 P.2d 1003, 353 P.2d 671 (1960):
Factual disputes are to be resolved by the trial court. The Washington constitution, by Art. IV, § 6, vests that power exclusively in the trial court. The power of this *462court is appellate only, which does not include a retrial here but is limited to ascertaining whether the findings are supported by substantial evidence or not.
See also Oil Heat Inst. v. Mukilteo, 81 Wn.2d 7, 9, 498 P.2d 864 (1972).
At the very least, the majority should have reversed the judgment and remanded the case to the trial court for the purpose of making findings of fact material to the determination of "agency." On the other hand, if the majority felt further remand would not be productive, the trial court and Court of Appeals should have been reversed outright. Plaintiff, Alexander Myers and Company, Inc., had the burden of establishing the existence of an agency. Moss v. Vadman, supra; Walker v. Pacific Mobile Homes, Inc., 68 Wn.2d 347, 413 P.2d 3 (1966). When the findings of fact are silent upon a material point, the facts are deemed to have been found against the party having the burden of proof. Ingle v. Ingle, 183 Wash. 234, 246, 48 P.2d 576 (1935); Geneva Water Corp. v. Bellingham, 12 Wn. App. 856, 866, 532 P.2d 1156 (1975); Baillargeon v. Press, 11 Wn. App. 59, 521 P.2d 746 (1974). Thus, plaintiff must bear the brunt of the trial court's failure to make the necessary findings of material fact.
Next the majority contends express authorization from defendants Hopke was not required to enable Estvold to make binding representations as to the size of the tract. An agent, it is said, has the power to act within the scope of his authority. I agree with this abstract legal principle. However, there are no findings of fact to support the legal conclusion of agency and therefore the principle does not apply to this case. The majority's position is not well taken.
The second ground of actionable misrepresentation is based upon an asserted direct contact between plaintiff's agent, Mr. Barker, and Mr. Hopke. Mr. Hopke is alleged to have told Mr. Barker the property contained 70 acres. The statement of facts does disclose the following comment by Mr. Barker concerning how he learned there were 70 acres: from "Norrie [Mr. Estvold], and in conversation with Mr. *463Hopke." That is the sole reference in the case to a direct contact between Mr. Barker and defendants.
However, the trial court made no finding of fact concerning such a direct contact. Rather, it relied solely on the theory of agency. This so-called "fact" appears for the first time in the majority opinion unsupported by any finding of fact made by the trial court. We are limited to ascertaining whether a finding of fact is supported by substantial evidence. Stringfellow v. Stringfellow, supra; Oil Heat Inst. v. Mukilteo, supra. Since there is no finding of fact touching the subject of direct contact the majority should not have assumed such a fact in reaching its conclusion. Rather it should have remanded the cause to the trial court for determination of that factual issue as we did in Old Windmill Ranch v. Smotherman, supra; Peterson v. Neal, supra; Gnash v. Saari, supra; and Bowman v. Webster, supra.
The third and last contact relied upon by the majority is an assumed actionable misrepresentation stemming from statements contained in the earnest money agreements.
The first earnest money agreement dated February 14, 1969, was prepared by Mr. Barker, plaintiff's agent. It contained a legal description followed by the expression "Total parcel to contain 70 acres more or less." The price was set at $154,000, without mention of a per acre cost, and closed with the sentence: "Purchase price to be adjusted at the rate of $2,200.00 per acre in event survey reveals more or less than 70 acres." The agreement was signed by Richard Myers, Vice-President and later President and General Manager of plaintiff company. However, defendants rejected it because it provided for insufficient interest.
Subsequently, defendants were presented with a second earnest money agreement dated March 3, 1969. Basically it was identical to the first except for the provision of a higher rate of interest. Before signing it, Mr. Hopke used a red pencil to strike out the sentence which read: "Purchase price to be adjusted at the rate of $2,200.00 per acre in event survey reveals more or less than 70 acres." Thereafter *464the Hopkes initialed the deletion and signed the agreement. Concerning the deletion, Mr. Barker, plaintiff's agent, said:
He [Mr. Hopke] was unwilling to guarantee an adjustment on the acreage because he indicated he wanted a fixed price on the property . . .
Richard Myers, plaintiff's principal officer in the negotiations, saw the deletion and signed the agreement with the price adjustment clause deleted. The sentence "Total parcel to contain 70 acres more or less" remained in the earnest money agreement.
On April 22, 1969, the defendants and plaintiff executed a formal real estate contract. It is significant that the contract contained only the legal description and price. No reference was made to the tract containing "70 acres more or less." In fact, there was no reference whatsoever to acreage.
Plaintiff paid $38,000 down followed by five installments from November 6, 1969, to November 8, 1971. Thereafter, a survey revealed the tract contained only 50.99 acres and plaintiff commenced this action.
The majority acknowledges that defendants' alleged representation of 70 acres more or less was made in ignorance of the truth. But, they say, even in the absence of an intent to deceive, this is sufficient to uphold a finding of misrepresentation. I agree. But, I disagree with the further conclusion that assumes the misrepresentation amounted to actionable fraud.
Fraud has nine essential elements. Beckendorf v. Beckendorf, 76 Wn.2d 457, 457 P.2d 603 (1969); Puget Sound Nat'l Bank v. McMahon, 53 Wn.2d 51, 330 P.2d 559 (1958). One of the essential elements is plaintiff's right to rely on defendants' representation. Thus, more is required than mere reliance upon an alleged misrepresentation. Plaintiff had the burden of establishing, as a part of its case, that it had a right to rely upon defendants' representation. Fleischman v. Hockett, 49 Wn.2d 328, 301 P.2d 166 (1956); Rummer v. Throop, 38 Wn.2d 624, 231 P.2d 313 (1951). Further, the right to rely must be established by *465clear, cogent and convincing evidence. Beckendorf v. Beckendorf, supra; Puget Sound Nat'l Bank v. McMahon, supra.
The term clear, cogent and convincing evidence denotes a quantum or degree of proof greater than a mere preponderance of the evidence. Holmes v. Raffo, 60 Wn.2d 421, 374 P.2d 536 (1962); Lewis Pac. Dairymen's Ass'n v. Turner, 50 Wn.2d 762, 314 P.2d 625 (1957); Cheesman v. Sathre, 45 Wn.2d 193, 273 P.2d 500 (1954). It is the equivalent of saying that the ultimate fact in issue must be shown by evidence that is highly probable. In re Sego, 82 Wn.2d 736, 513 P.2d 831 (1973); Richards v. Pacific Nat'l Bank, 10 Wn. App. 542, 519 P.2d 272 (1974).
We are committed to the rule that a trial court's findings of fact will not be disturbed on appeal if they are supported "by substantial evidence." Sylvester v. Imhoff, 81 Wn.2d 637, 503 P.2d 734 (1972). But, evidence that may be sufficiently "substantial" to support an ultimate fact based upon a "preponderance of the evidence" may not be sufficient to support an ultimate fact in . issue, proof of which must be established by "clear, cogent, and convincing evidence." In re Sego, supra; In re Estate of Reilly, 78 Wn.2d 623, 640, 479 P.2d 1, 48 A.L.R.3d 902 (1970). Thus, the question to be resolved at this juncture is not merely whether there is substantial evidence to support the trial court's ultimate determination of the factual issue, but whether there is substantial evidence to support such findings in light of the "highly probable" test, i.e., whether there exists the necessary quantum of proof.
In this light the majority's determination of plaintiff's right to rely is based primarily on the fact that the boundaries of the acreage were not reasonably ascertainable without a survey. But, in considering whether plaintiff had a right to rely upon defendants' representation, other undisputed factors must be considered, for example: Mr. Richard Myers and his father (plaintiff's vice-president and president), their agents and two of their real estate investors walked the property prior to drafting the original earnest *466money agreement. Mr. Richard Myers, plaintiff's principal officer, testified that at the time of the transaction he did not know "whether there was 51 or 91 or 70 [acres] . . .'' Since the property lines were not easily ascertainable, plaintiff contemplated a survey at some time in the future. Defendants specifically deleted, with bold red lines, all reference to a per acre adjustment in the event a survey disclosed either more or less than 70 acres. All of this was known to Mr. Richard Myers, who signed the earnest money agreement for plaintiff. Further, Mr. Barker, plaintiff's own agent said of the deletion:
He [Mr. Hopke] was unwilling to guarantee any adjustment on the acreage because he indicated he wanted a fixed figure on the property . . .
Finally, Mr. Richard Myers, acting for plaintiff, knowingly and voluntarily signed the final contract which contained no reference to "70 acres more or less" and again omitted any reference to a per acre adjustment in the event of a shortage or overage.
Under these circumstances, how can it be said that plaintiff, a firm of knowledgeable real estate speculators, had a right to rely upon alleged earlier representations made by Mr. Hopke? Where is the clear, cogent and convincing evidence of a right to rely? Under the circumstances before us there is no such right. The law requires one to take some reasonable steps to ascertain the facts for himself. In short, one cannot close his eyes to facts that surround him and proceed blindly proclaiming "I have a right to rely." As we said in Rummer v. Throop, supra at 633:
The inquiry as to vendee's right to rely involves the question of his diligence in ascertaining the facts for himself. It also involves his exercise of care and judgment in acting upon representations which run counter to knowledge within this possession or reach.
See also Rackham v. Koch, 125 Wash. 451, 216 P. 835 (1923). Furthef, we observed in Fleischman v. Hockett, supra at 338:
*467Our conclusion is that where, as in this case, the purchaser is experienced and he has made an investigation of the premises, undeterred by the seller, and has seen all that there is to be seen, he is not entitled to rely upon the misrepresentations of the seller as to the acreage where a subsequent survey reveals that the acreage is only slightly more than one third of the amount represented by the seller. (In this case, 64.1 acres compared to 158 acres.) This discrepancy is certainly so glaring and palpable as to put an experienced farmer on notice.
In other words, in an arm's length transaction, the allegedly defrauded party at least must exercise ordinary care for the protection of his own interests. He is charged with knowledge of all facts which would have been discovered by a reasonably prudent person under the same or similar circumstances. The failure to exercise reasonable diligence is not excused by mere confidence in the honesty and integrity of the other party to the transaction. Courseview, Inc. v. Phillips Petroleum Co., 158 Tex. 397, 407, 312 S.W.2d 197 (1957). In the same regard also see 12 S. Williston, Contracts § 1501, at 408 (3d ed. 1970).
After considering the record in the foregoing light, I can only conclude that plaintiff's right to rely upon defendants' representation was not established by clear, cogent and convincing evidence.
The judgment of the trial court should be reversed and the cause dismissed.
Wright, C.J., and Brachtenbach, J., concur with Stafford, J.