Darlington v. J. L. Gates Land Co., 142 Wis. 198

142 Wis. 198 | Wis. | 1910

B'abwes, J.

The appellant contends that the complaint fails to state a cause of action for damages for deceit based on •the fraudulent oral representations alleged. It further contends that no cause of action is stated for damages for breach of the covenant of warranty contained in the deed. In support of the position taken, it is argued that the complaint shows that the timber deeds were not recorded; that the ven-dees in such deeds were not in possession of the lands when the defendant’s deed to plaintiffs was delivered; that the timber had not been cut and removed from the lands on such date; that it should be presumed that plaintiffs pursued the usual and customary business methods and promptly recorded their deed; and that by virtue of the recording act (sec. 2241, Stats. 1898) the timber deeds became and were wholly void as to the plaintiffs, and they received by their conveyance everything that the defendant agreed to sell and in fact did sell to them.

The complaint alleges positively that the vendees in the timber deeds were not in possession of the lands in December, 1904, when the plaintiffs examined them, and states on information and belief that they were not in possession on January 15, 1905, when the land contract was in fact executed. It is silent as to whether they went into possession or cut any timber between January 15th and the date when the warranty deed was delivered, being the 25th of the same month, except as it alleges that during the months of January, February, and March, 1905, such vendees entered into possession of the lands and cut and removed the timber. The complaint also avers that the timber deeds were not recorded on January 15, 1905, but is silent as to whether or not such deeds were recorded at any time thereafter. It contains no averment that either the deed or the land contract was ever recorded.

It is obvious that there was a breach of the covenant of warranty when the deed was delivered. By that covenant the defendant represented that it had good title to timber which it did not own. Its warranty was not that the plaintiffs would get good title if they promptly recorded their deed, or if they had recorded their land contract, so as to cut off prior outstanding equities in favor of third parties who had purchased a part of the property but had failed to either go into, possession or record their conveyances.

If the grantees in the timber deeds either entered into possession of the lands or recorded their conveyances (assuming that they were entitled to record) prior to' the time the deed or land contract to plaintiffs was recorded, such grantees got good title, as against the plaintiffs, to the timber which they purchased. In order to hold that no cause of action exists-in favor of the plaintiffs, we must assume either (1) that the land contract was recorded on January 15th; or (2) that the grantees in the timber deeds did not go into possession of the lands or record their deeds prior to the date on which the deed or land contract to plaintiffs was recorded; or (3) that such grantees did not take possession of the lands or record their conveyances until the plaintiffs might have recorded their deed, and that they cannot recover if they lost any rights by failing to record -their conveyances promptly. As to the defendant, the plaintiffs were not obliged to record their deed or land contract at all. They had a perfect right to rely on the covenants of warranty contained in their deed, and were not charged with the duty of assuming that such covenants were untrue in fact. What was said by the Connecticut court in reference to a claim that an action for deceit would not lie for a fraudulent representation as to title because the vendee might have protected himself by examining the registry records is equally applicable to the situation presented in this case. The court used this language:

“It is an extraordinary defense for a man, when sued for making a false and fraudulent representation, respecting the title of another, by which the purchaser became deceived and defrauded, to say to him you cannot recover because by searching the records you might have discovered the falsity of my representations; in other words, because you believed what I stated to be true, and acted accordingly without further evidence.” Watson v. Atwood, 25 Conn. 313, 320.

In order to hold the complaint bad, this court cannot indulge in the presumption that plaintiffs recorded their deed or land contract at any particular time. If these instruments were recorded in time to render the timber deeds void, such fact is defensive matter. Unless we indulge in the presumption that such documents were recorded at some particular time, manifestly the complaint states facts sufficient to constitute a cause of action.

The complaint should also be sustained on another ground. If, by a liberal interpretation of its averments, a good cause of action can be gleaned therefrom, the demurrer should be overruled. Roe v. Lincoln Co. 56 Wis. 66, 70, 13 N. W. 887. Reading the complaint in the light of this rule, it can reasonably be construed as alleging, in a vague and indefinite manner, that the timber on the lands in dispute was being cut and removed at the time the deed was delivered to the plaintiffs. The statement is in effect that the timber was cut and removed during that month, but not prior to the 15th. It is true the entry might not have been made until after the 25th, but this uncertainty of averment should be remedied by a motion to make the complaint more definite and certain, and does not render the complaint demurrable. Roe v. Lincoln Co., supra.

It is evident from a reading of the complaint that the pleader attempted to state a cause of action for damages for ■deceit arising out of fraudulent representations as to title, knowingly made, and which induced the plaintiffs to purchase the lands and part with the consideration paid therefor. That the plaintiffs should not be confined to their remedy to sue for damages for a breach of the covenant of warranty contained in their deed is not free from doubt. The averments of the complaint are sufficient to state a cause of action for breach of covenant, so that in any event the demurrer should be overruled. Still the question of determining whether- a cause of action for deceit will lie is not entirely an academic one, as the rule of damages may be different in the two classes of actions. In the absence of actual fraud, the plaintiffs, in suing on a breach of covenant, would only be entitled to such a fractional part of the whole consideration paid as the value of the timber at the time of the purchase bore to the whole purchase price, with interest thereon. Docter v. Hellberg, 65 Wis. 415, 424, 27 N. W. 176, and cases cited. .Whether this rule does not also extend to actions brought on covenants where actual fraud has been perpetrated need not be decided, in view of the conclusion reached as to the character of the •cause of action stated.

The federal supreme court has held that representations made in good faith as to title become merged in a deed subsequently given containing a covenant of warranty, and that the action must be brought on the covenant. Andrus v. St. Louis S. & R. Co. 130 U. S. 643, 9 Sup. Ct. 645. This case is followed in Farrar v. Churchill, 135 U. S. 609, 10 Sup. Ct. 771, and in Wright v. Phipps, 90 Fed. 556, which is affirmed' without discussion by the court of appeals of the Second circuit (98 Fed. 1007, 38 C. C. A. 702).

The precise question here involved was before the court in Ward v. Wiman, 17 Wend. 193. A fraudulent representation as to title was made by the vendor and relied on by the vendee. The lands were conveyed by deed of warranty, and an action for deceit, based on the fraudulent representation,, was instituted. The defense was interposed that suit could only be maintained on the covenant, because the oral representation became merged in the covenant in the deed. The-court held that the fraud was “not merged nor extinguished by the covenant, but affords an additional and more complete remedy to the party.” Other New York cases to the same effect are Wardell v. Fosdick, 13 Johns. 325, and Krumm v. Beach, 96 N. Y. 398, 406. Other cases which follow the New York rule are Watson v. Atwood, 25 Conn. 313; Eames v. Morgan, 37 Ill. 260; Claggett v. Crall, 12 Kan. 393, 397. The cases are numerous which hold that an action may be maintained on fraudulent representations orally made as to title where a conveyance has thereafter been executed and delivered, although the question of merger is discussed in but a few of them. They are collated in note 35, 11 Cyc. 1068. The rule deduced from the decisions so cited is stated in the following language:

“If the representations are known to be false when made,, and have produced damage to the opposite party, the subsequent consummation of the agreement will not shield the grantor, whether there are covenants in the deed or not.”

It would seem to be sound in principle to hold that the doctrine of merger should not apply in a.case involving actual fraud. It is here alleged that the agent of the. defendant not only represented that he had good title to the lands, but he specifically stated that the timber thereon would become the property of the plaintiffs if they purchased, and that defendant owned it and had a good right to sell it. It is further alleged that such agent knew the representations to be false and fraudulent when he made them. Actual fraud is therefore shown by the complaint and admitted by the demurrer. A tort was committed, assuming the averments made to be true. The rule of damages, as well as .the remedy for the enforcement of the right, may be different in a tort action from one on contract. Huganir v. Cotter, 102 Wis. 323, 78 N. W. 423. We think it is a salutary rule to hold that where, as here, actual fraud is alleged, the fraudulent oral representation as to title is not merged in the covenant of warranty contained in the deed subsequently given. We do not understand that the federal decisions cited lay down any different rule. The doctrine of those cases seems to be confined to representations made in good faith, and does not extend to representations known to be fraudulent when made.

We therefore hold that the complaint states a cause of action for damages for deceit arising out of the fraudulent representations alleged and which induced the plaintiffs to make the purchase. We do not determine how or to what extent the plaintiffs’ rights are affected by sec. 2241, Stats. (1898), if the evidence should show that the deed or land contract to plaintiffs was recorded before the vendees in the timber deed went into possession or recorded their deeds. Such a situation may not arise. We have not been favored with any argument or citation of authority upon the point by respondents’ counsel, and with very little by counsel for the appellant. It being unnecessary to decide the question, the court feels that it should not be passed upon until it is more fully argued.

By the Court. — Order affirmed.