Court Opinion

ID: 9844109
Source: CourtListenerOpinion
Date Created: 2023-09-24 02:57:47.660202+00
Date Added: 2024-06-11T09:15:27.981241
License: Public Domain

McQUADE, Justice.
This action was brought by the appellants to set aside a written contract for the sale of realty, and a counterclaim was interposed by respondents asking foreclosure of a contract for sale of realty. This latter claim may be more aptly referred to as one for specific performance.
Respondents were the owners of a motel known as the Rancho Thunderbird, situated in the Village of Ketchum, Blaine County, Idaho. The real property had improvements located thereon consisting generally of cafe, bar, lounge, motel, and living quarters. The property will be referred to generally as the Thunderbird Motel. The Village of Ketchum is adjacent to the world-famous Sun Valley ski resort. The record suggests that motel patronage in wintertime for that area is to a large extent dependent upon skiers, and furthermore that the greatest volume of occupancy is during the skiing season.
About December seventh, 1958, appellants visited the motel properties. On this and subsequent occasions appellant Earl E. Walker inspected the premises, looked at the bookkeeping records of respondents, observed another motel nearby, noted the advancing construction of a new motel, talked with a former owner of the Thunderbird, and visited with other persons who appellant Earl Walker anticipated would *488shed light upon the earning potential of the Thunderbird Motel properties.
After their negotiations, the parties entered into a written contract whereby Walkers agreed to purchase the motel for $48,350. Walkers paid $2,500 cash and transferred a farm having an agreed value of $23,500. Remainder of the purchase price, to wit, $22,350, was to be discharged by $200 monthly payments. Interest at six per cent was to be credited first, and the remainder applied to the unpaid balance. Appellants went into possession December 26, 1958. Payments totaling $964 were made on the property. Respondents paid insurance, $252.94, and taxes, $629.77.
Appellants seek cancellation of the contract of sale on the principal ground that fraud had been perpetrated by representation that the motel property had produced a gross income from $9,000 to $12,000 per year. The trial court found no fraud and that respondents were entitled to specific performance as a matter of law because appellants were in default under the contract. Judgment was entered accordingly.
Walker inspected the premises on his first visit, and talked with the Nunnenkamps about the motel business in general. At that time Walker contends Nunnenkamp stated the gross income of the motel was never less than $9,000 annually, and that operating expenses were in the approximate sum of $3,800 per year.
Because of the “Quonset construction” Walker queried the Nunnenkamps as to how the Thunderbird competed with the other motels for trade. At that time Mrs. Nunnenkamp advised Walker
“ * * * ‘It fills right up with them; when there is any business in town, it gets its share/ ”
The Nunnenkamps deny the asserted representation as to income, and counter by the fact that Walker had inspected the books relating to the motel’s income and expenses. Walker admits his inspection of the books, but complains that a different set of books was shown to him, other than those produced by the Nunnenkamps on the trial.
Respondents offered a different version of the transaction. They testified books which were shown to Walker were the only records of which they were possessed. They also made a showing that January and February of 1959 constituted the poorest skiing season which had been experienced in that area. This is asserted to have had an adverse effect upon the income of the Thunderbird Motel, which grossed $4,264.35 between January 1, 1959, and September 15, 1959. They also assert that Walker was skeptical about the “Quonset construction” appearance as it related to production of business, and in that regard he made certain plans for alteration of the buildings. Another factor to which Nunnenkamps *489point relative to lower income of the motel is inexperience of Walker’s son, who was placed in control of the property’s management. He was without prior experience in motel management, and spent considerable time away from the property in an attempt to produce additional business.
Appellants contend that a reservation list was not as represented by respondents. The reservation list was of people who had made advance arrangements to stay at the motel while skiing at nearby facilities. Respondents explain that persons on the list failed to fulfill their reservation requests because there was a lack of snow during the skiing season.
Appellants urge cancellation of the agreeents misrepresented that the Thunderbird ment for an additional reason that respond-Motel secured its fair share of business available in the area. Walker contended that such representation was untrue because people would drive up to the motel and continue on their way after observing the premises. This would be true even though many of the other motels were filled to capacity. Walker testified that the “Quonset construction” appearance of the improvements reacted adversely to the potential motel trade.
Appellants urged the trial court to set aside and cancel the contract because of these alleged fraudulent misrepresentations. After hearing the evidence, and in view of all the evidence introduced, the trial court concluded that no fraud had been perpetrated upon appellants by respondents, and entered judgment for foreclosure of the contract.
Appellants assign as error the many findings of facts and conclusions of law of the trial court. They also assign as error that the trial court’s judgment constituted a forfeiture of all sums paid, although the amount paid 'was beyond all reasonable relation to any damages sustained by the respondents.
To establish the allegation of fraud, a party must prove by a preponderance of the evidence all of the elements which are inherently contained in such allegation.
“ * * * Comprehensively stated, the elements of actionable fraud consist of: (1) A representation. (2) Its falsity. (3) Its materiality. (4) The speaker’s knowledge of its falsity or ignorance of its truth. (5) His intent that it should be acted on by the person and in the manner reasonably contemplated. (6) The hearer’s ignorance of its falsity. (7) His reliance on its truth. (8) His right to rely thereon. (9) And his consequent and proximate injury. * * * ” 37 C.J.S. Fraud § 3, pp. 215-216.
See also 23 Am.Jur., Fraud and Deceit, sec. 20, p. 773.
*490The elements of fraud set forth in the above C.J.S. quotation were substantially approved and followed by this Court in Weitzel v. Jukich, 73 Idaho 301, 251 P.2d 542, wherein this Court said:
“Elements of fraud generally consist of a representation or statement of a past or existing fact which is material, which is untrue; the speaker’s knowledge of its falsity or ignorance of its truth; his intention that it should be acted on by the person to whom it is made; ignorance of its falsity on the part of the person to whom it is made and reliance on the representation; his right to rely upon it; his damage occasioned thereby. * * * ”
A party alleging fraud has the burden of proof. All elements of such allegation must be established by clear and convincing evidence. Barron v. Koenig, 80 Idaho 28, 324 P.2d 388; Scogings v. Love, 79 Idaho 179, 312 P.2d 570; Cooper v. Wesco Builders, 76 Idaho 278, 281 P.2d 669.
Appellant Walker inspected the property himself, talked with a former owner, discussed the motel potential with another motel operator in the Ketchum area, made a cursory examination of the books, and indicated through his proposed future plans that some changes were necessary to improve the business potential.
Lack of snow in January and February resulted in very little business for any of' the motels in that area. Another important factor in the successful operation of the business is the operator himself. In this ■instance, the operator was inexperienced in this type of business, and although he may have made a determined effort, nevertheless there were competent witnesses who testified that in their opinion the operation carried on was not conducive to a successful business.
Appellants rely largely upon their allegation that the respondents misrepresented past income of the motel. Respondents testified the representations were made in accordance with the books introduced on the trial. There was also independent evidence of the parties in this regard. The trial court concluded that respondents did not make such misrepresentations.
An analysis of the evidence leads to the conclusion that appellants had made a comparatively thorough evaluation of the property and its potential before entering into the contract. It appears that appellants were relying upon their own investigation of the property regarding its worth. This also was the finding of the trial court, which we sustain.
Where a party relies upon his own investigation or judgment as to the value of property, he is not entitled to relief upon *491the ground of false representations, Nelson v. Hoff, 70 Idaho 354, 218 P.2d 345; Smith v. Johnson, 47 Idaho 468, 276 P. 320; Breshears v. Callender, 23 Idaho 348, 131 P. 15; Petersen v. Holland, 79 Idaho 63, 310 P.2d 810.
It does not appear that appellants were induced to forebear inquiry, but were furnished all of the information which was requested. See Brown v. Bledsoe, 1 Idaho 746.
Appellants also assign error on the part of the trial court in that a forfeiture as provided in the judgment of the amounts already paid is an unconscionable penalty. Our rule pertaining to contract provisions for liquidated damages requires that they be in a reasonable relation to the actual damages. If the forfeiture fixed by the contract is arbitrary and bears no reasonable relation to the anticipated damages, and is exorbitant and unconscionable, it is regarded as a penalty, which results in the contractual provision’s being void and un-. enforceable. Graves v. Cupic, 75 Idaho 451, 272 P.2d 1020.
Appellants are asking for an equitable determination of the relation between moneys paid in and damages actually suffered by the respondents. As announced in Howard v. Bar Bell Land & Cattle Co., 81 Idaho 189, 340 P.2d 103, equity will intercede to grant relief in such cases.
In Graves v. Cupic, 75 Idaho 451, 272 P.2d 1020, this Court recognized the established policy of law against the allowance of punitive damages for breach of contract in the absence of fraud, malice, oppression, or other sufficient reason; but it recognized that parties to a contract may agree upon liquidated damages in anticipation of a breach in any case where the circumstances are such that accurate determination of the damages would be difficult or impossible, provided that the liquidated damages fixed by the contract bear a reasonable relation to actual damages, but that if the forfeiture or damages fixed by the contract are arbitrary and bear no reasonable relation to the anticipated damages, and are exorbitant and unconscionable, they are regarded as a “penalty” and the contractual provision therefor is void and unenforceable.
There has been no determination made by the trial court as to rental value of the premises for the period of time appellants held the premises under the contract. Because of the short duration of time which appellants held the property, and in the absence of proof to the contrary, no consideration is given to loss of market value of the premises. On the contrary, there is some evidence on the record of the fact there has been an accretion in the property’s value.
The trial court will review the evidence, and may take additional evidence to deter*492mine rental value of the premises for the purpose of making a determination if appellants are entitled to any of the moneys paid under the contract. If the amount paid in is thus disproportionate to the damages sustained by respondents occasioned by appellants’ breach of contract, that portion in excess thereof must be returned to appellants by respondents.
Judgment reversed and the cause remanded to the trial court for further proceedings consonant with this opinion.
Costs to appellants.
TAYLOR and KNUDSON, JJ., concur.
SMITH, C. J., and NORRIS, District Judge, dissent.