191 Iowa 1268 | Iowa | 1921
Defendant answered, admitting the execution of the notes and mortgage, and pleaded counterclaim, praying that the notes and mortgage sued on be canceled, and demanding damages against the plaintiff for false representations. The matters of fraud claimed by defendant are, in substance:
(1) That the plaintiff fraudulently and falsely represented to the defendant that he personally knew the cash value of the Jasper County farm in controversy, and that it was actually worth, on November 23, 1917, $175 per acre.
(3) That said land had been subject to overflow but once in the previous six years, but that this did not prevent the producing of good crops thereon for that season.
(4) That the plaintiff had raised crops on said land of full and average yield during each of said six years.
(5) That a drainage district had legally been established which included said farm, and that such improvement would be completed within the near future.
To entitle defendant to recover, it was incumbent upon him to establish that one or more of the representations were made by plaintiff, as alleged; that such representations were false; that plaintiff knew that such representations were false when he made them, or that he made said representations, assuming and asserting that he had personal knowledge thereof; that they were made for the purpose of inducing the defendant to make the trade; that the defendant relied upon the representations, and was thereby induced to make the exchange of properties.
The court made findings of fact, finding that the plaintiff, J. W. Davis, made false representations as to the value of the Jasper County land on November 23, 1917, and as to the quality of the land, its productiveness, and the amount capable of cultivation, substantially as pleaded by defendant in his answer and counterclaim and claimed by him in his evidence; that the statements or representations were not made by the plaintiff as mere expressions of opinion, but were made as positive statements of fact, for the purpose of having them acted upon as true; that the defendant believed the false representations to be true, and relied upon them, and in such belief and reliance was induced to exchange farms with the plaintiff. The court further found that the Jasper County farm was worth $80 an acre on November 23, 1917, instead of $175 an acre, as represented by plaintiff. The court canceled the $21,500 mortgage on the Jasper County land, given by defendant to plaintiff, and found that the defendant made a case entitling him to relief in damages in the sum of $23,885, less the notes in suit, secured by mortgage in the amount of $21,500, leaving due from plaintiff $2,385, and interest thereon at 6 per cent to the date of judgment in the sum of $278, making a total of $2,663; and that, the
’ Altkougk tRe case was Reard in equity, tRe demand in tRe counterclaim is for damages. TRe defendant confirmed tRe ex-cRange of properties, and elected to recoup in damages for injury wRicR Re claims in consequence of tRe false representations wRicR Re claims were made to Rim by plaintiff, to induce Rim to make tlie exckange of properties. In sucR a case, scienter or its equivalent must be proven. Richards v. Fredrickson, 171 Iowa 669.
TRere is a wide divergence in tRe tReories of counsel as to tRe cliaracter of tRe transaction, and, tRerefore, Row tRe case sliould be considered and tRe law applied. TRere can be but little dispute as to tRe law applicable to tRe case, wRen a correct tReory of tRe case is arrived at.
We Rave carefully examined tRe record. We Rave also examined tRe transcript of tRe evidence. TRere is conflict in tRe evidence on material points, wRicR we always find in sucR cases. Plaintiff left no material eRarge of fraud or untoward fact undenied, or witRout plausible explanation. His case was bandied by his counsel with consummate skill. We are constrained to believe that the plaintiff overreached the defendant by subtle and effective fraud. Davis was a shrewd, resourceful man, a dealer and trader in lands of large experience. He Rad owned the Jasper County land for several years, and knew all about it. Walker was a farmer, with limited business experience and witRout experience in land dealing. He was totally unacquainted with the Jasper County land, and ignorant of its value and character, and Davis knew that. We think the record abundantly shows that Davis, through Nelson, and by Ris own talk with Walker, gained the confidence of Walker, so that Walker believed Ris statements to be true, concerning the land and its value, and implicitly relied upon them.
We are convinced, from the evidence and the facts and cir
Making due allowance for conflict in the testimony as to the values of the Jasper County farm and the Minnesota farm, and all other questions in dispute, it stands out in bold relief in the record that Walker received not one cent in value for his Minnesota farm of 320 acres, whatever interest he had in it; and we think it is shown by the evidence to have been worth approximately $75 per acre, in which the defendant had an interest worth, above the incumbrance, about $16,50.0. Of course, the mere fact that Walker got the worst of the deal and lost his farm would not entitle him to relief. We must determine whether the representations claimed by defendant to have been made by plaintiff were in fact made, and their legal effect, and whether there existed also the other essential elements necessary to make out actionable fraud. Counsel for plaintiff argue ably and plausibly that the transaction involved was simply an exchange of farms, wherein both parties placed upon their farms inflated values, for the purpose of trade and exchange; that neither plaintiff nor defendant attempted nor intended to put on actual values; that thei’e was no fraud committed; and that plaintiff did not make the representations attributed to him by the defendant as to the value and character of the Jasper
In Mattauch v. Walsh Bros., supra, we said:
“Counsel have discussed somewhat the question as to whether a statement of value may be regarded as an assertion of fact, or should be treated as the expression of opinion merely. This must necessarily depend on the circumstances of each case, and usually upon the intention of the party making the statement. Here, the evidence in behalf of plaintiff clearly indicated the intention of Walsh that his assertion of the value of the land should be acted upon as true, and not merely as his estimate; and if so, and it was knowingly false and induced an exchange by plaintiff to her damage, it was actionable. ’ ’
It must be borne in mind also that Davis, according to the testimony of Walker, re-enforced his statement as to the value of his land by telling Walker that he had paid $140 an acre for it, some years before. Davis denied this statement in a modified way. He admitted that he told Walker he paid $125 an acre for it. The record shows conclusively that he paid only $82 an acre for the land. We have held that false representations as to the cost of property are statements of fact entitling recovery, if relied on to one’s injury. Dorr v. Cory, 108 Iowa 725; Holmes v. Rivers, 145 Iowa 702.
The transaction in controversy seems to have been initiated by Myers, a real estate broker, of Bamsville, Minnesota, who told Walker that he knew a man in Minneapolis with a farm
Witnesses called by defendant, who were acquainted with the land many years, and owned land in the vicinity, placed the value of the land at from $40 to $50 an acre. Two real estate men, produced by Davis as witnesses, placed the value of the land at $100 an acre. The trial court found the land to be worth $80 an acre, which we think was a high value — even beyond what the evidence shows the land was worth.
We are warranted in finding’ from the record that Davis represented to Walker that a drainage district had been established which included this land. It appears from the record that no drainage district was ever established. One had been petitioned for and had been abandoned three years before this time.
“It is to be conceded that authorities substantially to this effect may be found, but it is equally true that the rule, as broadly stated by counsel, is now generally repudiated by the courts. We have repeatedly refused to recognize it in cases of this character. The more reasonable and just rule is that, as between the parties to a contract obtained by fraud and deceit, the party making a representation for the purpose of inducing another to act will not be heard to say that his false statement ought not to have been believed. ’ ’
We think appellee was not guilty of negligence that would defeat his recovery.
After a careful examination of the record, we come to the conclusion that appellant, J. W. Davis, made false representations as to the Jasper County land, substantially as claimed by appellee Walker, and that the other elements necessary to make out actionable fraud were established; that the reasonable market value of the Minnesota 320 acres was $23,360, or $73 per acre; that the mortgage given by Walker to Davis on the Jasper County 281-acre farm was $21,500; that the reasonable market value of the Jasper County farm was $22,480, or $80 per acre; that defendant Walker has made out a case entitling relief in damages in the amount of $22,380, being the difference between $44,860, which he paid Davis for the Jasper County farm by conveying his Minnesota land of the value of $23,360 and giving a mortgage on the Jasper County land for $21,500, and the value of the Jasper County farm; and that the notes-and mortgage in suit should be canceled and held for naught. Substracting the amount of the notes, $21,500, from the $22,380 damages found, reduces the damages to $880, with interest thereon to date of judgment, $100.47, making $980.47; and Davis, having paid the interest on the first mortgage on the Jasper County farm, which payment, with interest, thereon amounted to $818, was entitled to credit in that amount, leaving a balance of $162.47 due the defendant Prank Walker on his counterclaim, for which he was entitled to judgment against the plaintiff, J. W. Davis.
We think the proof found in the record furnished an unobjectionable measure of damages in the instant case. While ap-pellee had a right to submit evidence invoking the approved rule, and thereby avail himself of the full fruits of his bargain, appellant cannot complain that he did not.
Supplemental Opinion.
ARTHUR, J. — To avoid misunderstanding of our holding as to measure of damages adopted in this cause, perhaps something should be added.
It is insisted by appellant, in petition for rehearing, that, by assessing damages in the amount of the differences between the price which Walker paid Davis for the Jasper County land, as found from the evidence, and the reasonable market value thereof, we depart from and abrogate the rule heretofore announced by this court in many cases, and even in this case,— that, as said in the Stoke case:
‘ ‘ The overwhelming weight of authority in this country approves the allowance, as to the measure of damages, of the difference between the actual value of the property at the time of the purchase and its valuefif it had been what it was represented to be.”
Our holding in the instant case is not intended to and does not effect a renunciation or abandonment of the rule announced in the Stoke case and other cases holding similarly. In such eases as the instant case, as in the Stoke case, the party claiming damages flowing from fraud has properly insisted upon the rule that gives the defrauded innocent party the full benefit of his bargain. But a party guilty of fraud, as was appellant, cannot consistently complain that the damage he has inflicted has been calculated in a manner more favorable to him and less favorable to the injured party. In some jurisdictions, and notably in our Federal courts, a party who has sustained damages is confined to measure his damages by the difference between the price paid — his outlay — and the value of the property purchased ; the defrauding party is bound to make good the loss sustained, but his liability does not include the defrauded party’s expected
The original opinion must be adhered to, and the petition for rehearing is overruled.