WILLSON v. MUNICIPAL BOND CO. et al.*
Appeal from the judgment on verdict for plaintiff.
Plaintiff-respondent Willson owned a piece of improved real property in Beverly Hills, subject to trust deeds, with a new exchange value as fixed by himself of $85,000. About June, 1930, Willson discussed with one Irwin, a real estate man, his desire to dispose of his property. Later Irwin told Willson that he had contacted a downtown broker (M. D. Fox hereinafter referred to) who had said he could secure some improvement bonds for the equity. About July 1, 1930, Willson first met Fox. The meeting was in the escrow department of the Bank of America, at the suggestion of Irwin, and there were also present the escrow clerk, Irwin, and a friend of Willson's named Hauschield. At that time Fox stated he had examined Willson's property and would give him $85,000 worth of San Diego county improvement bonds for it. Willson stated he would have to be assured as to the value of the bonds and that he would have to make a loan on them. Fox said he could get the loan and that the bonds were worth 100 cents on the dollar. Later in the conversation Fox said he could secure a loan of $27,500 on the bonds. Escrow instructions were drafted and signed by Willson and Fox as the escrowing parties, in accordance with their previous discussions.
On the occasion of the first meeting Willson agreed that the commission on the deal could be divided between Irwin and Fox. The latter secured a loan on the security of the bonds, the note being signed by an employee in his office and in effect was guaranteed by Municipal Bond Company. This was the first time the name of this company appeared in the transaction, so far as Willson was concerned. It appears, however, that the bonds were really the property of the Municipal Bond Company, which turned them over to Fox for the purpose of closing the deal, and this company and not Fox was the real party in interest in the deal with Willson. Before the escrow was closed, Willson had requested his close friend, Hauschield, to look at the San Diego property covered by the bonds; and, after doing so, Hauschield reported to Willson that the location and description of the real property was as Fox had given it and congratulated Willson on the fine deal he had made. Several witnesses testified that the bonds had no market value. One of the witnesses as to the value of the bonds was not permitted by the court to answer whether they had any actual value as distinguished from market value, and the court excluded proffered evidence of appellants of the actual value of the bonds. On the theory that he had been induced to make the exchange of properties by a false representation, the plaintiff recovered at the hands of the jury a verdict of $59,360.92, the difference between the value of what he parted with and what he received, including the proceeds of the $27,500 loan.
Respondent's right to a recovery depends primarily upon the existence of a false representation which he accepted as true, which induced him to consummate the deal and without which he would not have made the exchange. The first question for decision therefore is: Was the statement of Fox that the bonds were worth 100 cents on the dollar such that, if false but relied upon as true by respondent, it can be made the basis of the recovery of damages herein, or was the statement of Fox merely the expression of his opinion or belief and hence insufficient to support an action for fraud and deceit?
It must be noted that Fox did not state the market value of the bonds, nor that there was a market for them; nor did he state that the bonds could then and there be turned into their face value in cash. The nature of the bonds, the time and manner of their payment, and the source of the funds for the payment thereof was patent upon the face of the bonds, and the law relating to public improvement bonds (The Acquisition and Improvement Act, also known as the Mattoon Act [St. 1925, p. 849, as amended]), under which they were issued and by which they were controlled. The lands covered by the bonds and their location were correctly described by Fox to Willson. Hauschield, Willson's friend, who looked at the property, agreed with Fox's description and expressed himself as believing Willson was making a good deal. The nature of the bonds was such that, to a degree at least, the full payment of their obligation depended upon future happenings. Respondent could as readily have ascertained the value of the bonds, so far as it was then ascertainable, as Fox; both knew the nature of the lands in San Diego subject to taxation to pay the bonds; both must have known that the payment of the bonds depended upon future prosperity and would be affected to a degree at least by a depression. The statement of Fox amounted to no more than the expression of an opinion or belief that the obligation of the bonds would be paid in full, and that the bonds were amply secured. Such statements will not furnish the basis of an action for damages in the event that the obligation turns out to be of a value less than that expressed in the opinion. See People v. Gibbs, 98 Cal. 661, 33 P. 630; Lion v. McClory, 106 Cal. 623, 40 P. 12; Gleason v. McPherson, 175 Cal. 594, 597, 166 P. 332; Herrill v. Rugg, 114 Cal. App. 492, 300 P. 140; Pease v. Thornburg, 118 Cal. App. 53, 4 P.(2d) 618.
We are not unmindful of the cases in which it has been held that under some circumstances a false statement as to the value of property ceases to be mere opinion and becomes a false representation upon which an action for fraud and deceit or for rescission may be predicated. These cases are, however, distinguished in that the misrepresentations were made as ones of fact, with intent to deceive, where the information in the possession of the representor was such as to render his statement as to value one which he knew to be false, where the value of the property did not depend upon what the future might bring and where the circumstances evidenced the desire to take an undue advantage and the representor had knowledge not available to the person to whom the representations were made. See discussion in Dunshee v. Boadway, 119 Cal. App. 678, 683 et seq., 7 P.(2d) 325.
There being as a matter of law no fraudulent representation, such as is necessary to sustain an action for fraud and deceit, there is no occasion to discuss the other points raised on this appeal.
The judgment is reversed.
FRICKE, Justice pro tem.
We concur: STEPHENS, P. J.; CRAIL, J.