Court Opinion

ID: 6697287
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:56:52.684312+00
Date Added: 2024-06-11T16:01:17.572924
License: Public Domain

CoNNOR, J.
This is an action begun and tried in the Superior Court of Buncombe County for the rescission of certain contracts made and entered into by and between the plaintiff, and the defendant, W. I. Phillips Company, a corporation, during the summer of 1925; for the cancellation and surrender of certain notes executed by the plaintiff, *572and for the recovery of sums of money paid by tbe plaintiff to said defendant, pursuant to said contracts. The relief sought by the plaintiff of the defendants other than the said W. I. Phillips Company is predicated altogether upon his right to have said contracts rescinded by judgment and decree in this action. If plaintiff is not entitled to this relief as against the defendant, W. I. Phillips Company, it is clear that he has no cause of action against the other defendants upon which he is entitled to the relief sought against them in this action. The first question, therefore, to be decided on this appeal is whether upon the allegations of the complaint, and upon the evidence offered at the trial, plaintiff is entitled to the equitable remedy of rescission.
The jurisdiction of a Court of Equity, or of a court exercising the powers of a Court of Equity, such as the Superior Court of this State, to direct and enforce the rescission of contracts, and the surrender and cancellation of written instruments for due cause, and to grant such other relief as the party may be entitled to, is settled beyond question. 9 C. J., 1159. The grounds on which equity interferes for rescission are distinctly marked, and every case proper for this branch of its jurisdiction is reducible to a particular head. They are principally fraud, mistake, turpitude of consideration, and circumstances entitling to relief on the principle of quia timet j and generally they do not include inadequacy of price, improvidence, surprise, or mere hardship. Promises, honestly made, which the promisor cannot fulfill, do not furnish sufficient grounds for vacating a contract based thereon; but mutual mistake, or false representations as to material facts which constitute an inducement to the contract and upon which the party had a right to rely, will give equity jurisdiction. 4 R. C. L., 487.
As a general rule, fraud as a ground for the rescission of contracts, cannot be predicated upon promissory representations, because a promise to perform an act in the future is not in the legal sense a representation. Fraud, however, may be predicated upon the nonperformance of a promise, when it is shown that the promise was merely a device to accomplish the fraud. A promise not honestly made, because the promisor at the time had no intent to perform it, where the promisee rightfully relied upon the promise, and was induced thereby to enter into the contract, is not only a false, but also a fraudulent representation, for which the promisee, upon its nonperformance, is ordinarily entitled to a rescission of the contract. These principles have been recognized and applied by this Court in Shoffner v. Thompson, 197 N. C., 667, 150 S. E., 195; McNair v. Finance Company, 191 N. C., 710, 135 S. E., 90; Bank v. Yelverton, 185 N. C., 314, 117 S. E., 299; Pritchard v. Dailey, 168 N. C., 330, 84 S. E., 392; Hill v. Gettys, 135 N. C., 373, 47 S. E., 449, and in many other cases cited in the opinions in these cases.
*573Where there was evidence showing that promissory representations were made by the defendant as inducements to plaintiff to enter into the contract, and that plaintiff rightfully relied upon such representations, as alleged in his complaint, and that the promises were not performed by the defendant, after the contract was entered into by and between the parties, it has been held by this Court that the fraudulent intent, at the time the promises were made, not to perform them, could be inferred by the jury from the fact of nonperformance. Clark v. Laurel Park Estates, 196 N. C., 624, 146 S. E., 584. Authorities are cited in the opinion by Glpifrkscm, J., in support of the decision in that case. Quoting from Braddy v. Elliott, 146 N. C., 578, 60 S. E., 507, it is said that the subsequent acts and conduct of a party to a contract may be submitted to the jury as some evidence of his original intent 'and purpose, when they tend to indicate it. Where, however, as in the instant case, all the evidence as to the subsequent acts and conduct of the promisor, shows that after the contracts sought to be rescinded on the ground of fraudulent representations, were entered into, there was a substantial and continued effort on the part of the promisor, involving the expenditure of a large sum of money, to perform the promises, this principle does not apply, for the reason that the evidence does not show or tend to show a fraudulent intent, at the time the promises were made, not to perform them. If, as the evidence in this case tends to show, the improvements which the W. I. Phillips Company promised and represented to the plaintiff would be made in Royal Pines, were not completed, or were defective, as alleged in the complaint, the plaintiff is entitled to recover damages for breach of contract; he is not entitled, however, to the equitable remedy of rescission on the ground of fraud, for the reason that there was no evidence which shows that at the time the contracts were entered into, the W. I. Phillips Company did not intend to perform the promissory representations alleged in the complaint. Indeed, all the evidence tends to show that these representations were honestly made, as an inducement not only to plaintiff to purchase lots, but also to others to do likewise. For nearly a year after plaintiff purchased lots in Royal Pines, the W. I. Phillips Company kept a force of 50 to 100 men at work, making the improvements as represented. Since the execution of the trust agreement, which was approved by the property owners committee, the trustee has expended over $240,000, collected on the notes of the lot owners, and advanced by the defendant, L. B. Jackson, on improvements in Royal Pines. With respect to the representation made contemporaneously with the execution of the deeds, that W. I. Phillips Company then had in bank a sufficient sum of money to pay the costs of the improvements as promised to the plaintiff and other purchasers of lots, it is sufficient to say that there was no evidence tending *574to show that tbis representation was false in fact. Tbe evidence shows that said company did expend large sums of money in making improvements in Royal Pines in accordance with its representations and promises.
Conceding, however, that there was evidence tending to show that plaintiff was induced to enter into contracts with the defendant, W. I. Phillips Company, for the purchase of lots in Royal Pines by false and fraudulent representations as alleged in the complaint, we are of opinion that all the evidence showed that plaintiff by his conduct has waived, both as to said company and as to the other defendants, his right to a rescission of said contracts. His equity, if any, was barred by his acceptance of benefits accruing to him from said contracts, and by his delay in demanding the equitable remedy of rescission. Plaintiff entered into possession of the lots conveyed to him by the W. I. Phillips Company during the summer of 1925, and remained in such possession, occupying as a home for himself and family, a house on one of the lots, until 1 September, 1927. If the promissory representations with respect to improvements in Royal Pines were fraudulent, as alleged by plaintiff, for that they were not honestly made by the W. I. Phillips Company, plaintiff could have discovered the fraud, at least, prior to 1 September, 1926, when as a member of the property owners committee he elected to retain said lots and rely upon the provisions of the trust agreement, for the completion of said improvements in accordance with the schedule prepared by the engineers and attached to the trust agreement.
In Van Gilder v. Bullen, 159 N. C., 291, 74 S. E., 1059, it is said: “It is also well established that the right to rescind must be exercised promptly, and if there is unreasonable delay, the right is lost, and the party defrauded is generally relegated to his action for damages. Alexander v. Utley, 42 N. C., 242; Knight v. Houghtalling, 85 N. C., 17.” In that case it was held that the party who alleged that he had been induced to enter into the contract by fraudulent representations made by the other party, had no right of rescission, as there had been a delay of about two years after the discovery of the alleged fraud, before the action in which he prayed for rescission was commenced. During this time the said party had retained the deed procured by the contract, and did no act indicating a purpose to rescind. The decision in that case is determinative, we think, of the instant case. The plaintiff in this case has lost his right of rescission, if any he ever had, and is relegated to an action for damages resulting from the breach of contract by the W. I. Phillips Company.
We have not discussed or decided the«questions presented by this appeal with respect to the admission of evidence at the trial, nor have we considered plaintiff’s motion that the appeal of the defendant, *575Wachovia Bank and Trust Company, be dismissed for tbe reasons assigned. In the view which we take of this case, these questions, although discussed in the briefs and in the oral argument, have become immaterial. There was error in the refusal of defendant’s motion, at the close of all the evidence, that the action be dismissed, as of nonsuit. Upon all the evidence plaintiff has failed to show that he is entitled to the equitable remedy of rescission. Indeed, it would be unjust and inequitable for the plaintiff to be relieved of his obligation by reason of the execution of his notes, payable to W. I. Phillips Company, and to recover the money paid on the purchase price of the lots conveyed to him. It would seem that the other property owners who relied upon the execution of the trust agreement in which provision was made for the improvements in Royal Pines, in which they as well as the plaintiff are interested, have rights of which they would be unjustly deprived if plaintiff should be granted the relief for which he prays by this action. It may be that these property owners, as well as plaintiff, are entitled to recover damages of the W. I. Phillips Company and L. B. Jackson, for a breach of contract, with respect to the improvements in Royal Pines.
In accordance with this opinion, the judgment must be
Reversed.