Vail v. Vail

63 S.E.2d 202 (1951)

233 N.C. 109

VAIL et al. v. VAIL et ux.

No. 675.

Supreme Court of North Carolina.

February 2, 1951.

*205 Clyde E. Gooch, Salisbury, and Roberson, Haworth & Reese, High Point, for plaintiffs-appellants.

J. J. Shields and Thomas Turner, Greensboro, for defendants-appellees.

JOHNSON, Justice.

The evidence in this case tends to show these determinative factors: (1) that the defendant, Victor B. Vail, the grantee in the deed, stood in a confidential or fiduciary relation with the grantor, Mrs. Minnie P. Vail; and (2) that she retained possession and control of the lands embraced in the deed during the remainder of her life. These crucial circumstances being made to appear, along with the rest of the evidence offered below, made out a prima facie case entitling the plaintiffs to go to the jury on both the issue of fraud and that of the statute of limitations.

The issue of fraud: Fraud has no all-embracing definition. Because of the multifarious means by which human ingenuity is able to devise means to gain advantages by false suggestions and concealment of the truth, and in order that each case may be determined on its own facts, it has been wisely stated "that fraud is better left undefined," lest as Lord Hardwicke put it, "`the craft of men should find a way of committing fraud which might escape such a rule or definition.'" Furst & Thomas v. Merritt, 190 N.C. 397 at page 404, 130 S.E. 40, 44. However, in general terms fraud may be said to embrace "all acts, omissions, and concealments involving a breach of legal or equitable duty and resulting in damage to another, or the taking of undue or unconscientious advantage of another." 37 C.J.S., Fraud, § 1, p. 204.

These essential facts must appear in order to establish actionable fraud: "(1) a false representation or concealment of a material fact; (2) reasonably calculated to deceive; (3) made with intent to deceive; (4) and which does, in fact, deceive; (5) to the hurt of the injured party." Ward v. Heath, 222 N.C. 470, 24 S.E.2d 5, 7.The material elements of fraud, a commission of which will justify the court in setting aside a contract or other transaction, are stated by Barnhill, J., in Ward v. Heath, supra, as follows: "First, there must be misrepresentation or concealment. Second, an intent to deceive or negligence in uttering falsehoods with intent to influence the acts of others. Third, the reppresentations must be calculated to deceive and must actually deceive. And, fourth, the party complaining must have actually relied upon the representations."

The nature and extent of the proofs required to establish fraud depend to a large extent on the relationship of the parties, and ordinarily, "a greater degree of proof is required to show fraud as between parties dealing at arm's length than is necessary where the fraud feasor sustains a confidential relation toward his alleged victim." 37 C.J.S., Fraud, § 114, p.432.

*206 Where a relation of trust and confidence exists between the parties, "there is a duty to disclose all material facts, and failure to do so constitutes fraud." 37 C. J.S., Fraud, § 16, p. 247.

23 Am.Jur., Fraud and Deceit, Section 14, p. 765, states the rule thus: "Where a confidential or fiduciary relationship exists, it is the duty of the person in whom the confidence is reposed to exercise the utmost good faith in the transaction and to refrain from abusing such confidence by obtaining any advantage to himself at the expense of the confiding party. Should he obtain such an advantage, he will not be permitted to retain the benefit; and the transaction will be set aside even though it could not have been impeached had no such relation existed, whether the unconscionable advantage was obtained by misrepresentations, concealment or suppression of material facts, artifice, or undue advantage."

The rule is amplified in 23 Am.Jur., Fraud and Deceit, Section 81, p. 858, as follows: "It is a well-settled principle of the law of fraud, applied particularly by courts of equitable jurisdiction, that it is the duty of a person in whom confidence is reposed by virtue of the situation of trust arising out of a confidential or fiduciary relationship to make a full disclosure of any and all material facts within his knowledge relating to a contemplated transaction with the other party to such relationship, and any concealment or failure to disclose such facts is a fraud. This principle is universally observed, although the transaction cannot be impeached if no such relationship exists."

For a comprehensive discussion of what constitutes a confidential or fiduciary relation, see Abbitt v. Gregory, 201 N.C. 577, at page 598, 160 S.E. 896. In general terms, a fiduciary relation is said to exist "Wherever confidence on one side results in superiority and influence on the other side; where a special confidence is reposed in one who in equity and good conscience is bound to act in good faith and with due regard to the interests of the one reposing the confidence." 37 C.J.S., Fraud, § 2, p. 213. Suffice it to say, without more, that as between principal and agent, the relation applies with all of its rigor in all of its implications. McNeill v. McNeill, 223 N.C. 178, 25 S.E.2d 615; 37 C.J.S., Fraud, § 16, pp. 248 and 249; Am.Jur., Fraud and Deceit, Section 14, p. 763 et seq.

The defendants, contending that the evidence was insufficient to take the case to the jury on the issue of fraud, urge that there is no evidence showing that Victor B. Vail said or did anything at the time the deed was signed to prevent his mother from reading it, and that in the absence of some proof that she did not read the deed, or was prevented from reading it, she being literate, is presumed to have read it. On this premise, defendants contend that the evidence does not justify the inference that Minnie P. Vail was deceived by anything her son Victor said or did. Defendants say the case is governed by the rule which ordinarily precludes a literate person who signs an instrument from asserting, in the absence of fraud, that he did not read the instrument and was ignorant of its purport. The defendants rely on the decisions in Ward v. Heath, supra; Colt Co. v. Kimball, 190 N.C. 169, 129 S.E. 406, and cases therein cited.

The defendants' position is untenable and the authorities relied on are distinguishable. In the cases cited, the parties were dealing at arm's length, and in neither of the cases was the complaining party lulled into security by fraud or artifice of the other party and thereby prevented from reading the instrument. In the instant case the parties stood in a confidential relation, and the evidence tends to show elements of positive fraud and deception, reasonably calculated to dull the mother's call to vigilance and justify her in not discovering the contents of the deed: It appears in evidence that Mrs. Vail was a widow about seventy-two years of age when she made the deed; that she lived alone; that "Victor was accustomed to looking after his mother, running a great many errands and performing many personal services for her"; that he helped collect her rents. It is also in evidence that two days after his mother's funeral Victor confessed to some of the plaintiffs that: "* * * I gave the wrong description and had the deed made out to the old homeplace *207 instead of the little place that mother told me I could have on Vail Alley. I came by this property wrong. * * * I got it wrong. I will deed it back to the estate just any time you all say so."

The evidence here, standing as it does undenied and unexplained, is sufficient to support these findings and inferences: that Mrs. Vail, reposing confidence in her son, Victor, directed him, as her agent, to have the small Vail Alley lot run off and deed thereto prepared so she might convey it to him as a gift; that he, in breach of his trust, surreptitiously substituted the description of the larger, more valuable Vail homeplace on South Main Street; that by fraudulently suppressing the true state of facts while silently pretending that the deed contained the Vail Alley property, he thereby procured from his mother lands not intended by her to be conveyed, and that she, under the circumstances of the confidential relation with her son, was lulled into security by his fraud and signed the deed without discovering, in the exercise of due diligence, the true state of facts. In short, we conclude that the evidence, measured by the applicable rules of law, is sufficient to sustain, though not necessary to impel, a finding of all the essential elements of fraud. That makes it a prima facie case for the jury.

The issue of the statute of limitations: The defendants having set up the three-year statute of limitations, G.S. § 1-52, subsection 9, in bar of plaintiffs' right to recover, the burden of proof devolved upon the plaintiffs to show that their cause of action was not barred, i.e., the burden was upon the plaintiffs to show that their cause of action did not accrue until sometime within the period of three years next before the commencement of the action. Taylor v. Edmunds, 176 N.C. 325, 97 S.E. 42; Sanderlin v. Cross, 172 N.C. 234, 90 S.E. 213; Hooker v. Worthington, 134 N.C. 283, 46 S.E. 726; 54 C.J.S., Limitations of Actions, § 388, p. 527.

Under the statute pleaded here, a cause of action, like this one, to set aside an instrument for fraud, accrues, and limitations begin running, when the aggrieved party discovers the facts constituting the fraud, or when, in the exercise of reasonable diligence, such facts should have been discovered. Blankenship v. English, 222 N.C. 91, 21 S.E.2d 891, 892; Wimberly v. Washington Furniture Stores, 216 N.C. 732, 6 S.E.2d 512, and cases therein cited. See also 34 Am.Jur., Limitation of Actions, Section 165, p. 132.

And it is the accepted rule that "Knowledge by the defrauded person of facts which in the exercise of proper diligence would enable him to learn of the fraud ordinarily is equivalent to discovery of the fraud." 54 C.J.S., Limitations of Actions, § 189, p. 188. The rule is concisely stated by Stacy, C.J., in Blankenship v. English, supra: "A party having notice must exercise ordinary care to ascertain the facts, and if he fails to investigate when put upon inquiry, he is chargeable with all the knowledge he would have acquired, had he made the necessary effort to learn the truth of the matters affecting his interests." In this respect the law regards the means of knowledge as knowledge itself. Hargett v. Lee, 206 N.C. 536, 174 S.E. 489; Pasquotank County v. American Surety Co., 201 N.C. 325, 160 S.E. 176; 54 C.J.S., Limitations of Actions, § 189, p. 190. However, it is generally held that "The failure of the defrauded person to use diligence in discovering the fraud may be excused where there exists a relation of trust and confidence between the parties." 54 C.J.S., Limitations of Actions, § 194, p. 198. This is so for the reason that a confidential or fiduciary relation imposes upon the one who is trusted the duty to exercise the utmost of good faith and to disclose all material facts affecting the relation. Also, a confidential relation by its very nature presupposes that the confiding party, in deference to the confidence and trust reposed in the other party, may in a measure relax his faculties of vigilance and act upon the assumption, until notice to the contrary, that the person in whom confidence is reposed will disclose, in the honest performance of his duty, all of the *208 essential facts connected with the relation and take no unfair advantage. Accordingly, it is generally held that when it appears that by reason of the confidence reposed the confiding party is actually deterred from sooner suspecting or discovering the fraud, he "is under no duty to make inquiry until something occurs to excite his suspicions." 54 C.J.S., Limitations of Actions, § 194, p.199.

In Small v. Dorsett, 223 N.C. 754, bot. p. 761, 28 S.E.2d 514, quoting from 34 Am. Jur., Limitation of Actions, Section 168, p. 135, the applicable rule is stated as follows: "Where a confidential relationship exists between the parties, failure to discover the facts constituting fraud may be excused. In such a case, so long as the relationship continues unrepudiated, there is nothing to put the injured party on inquiry, and he cannot be said to have failed to use due diligence in detecting the fraud * * * Similarly, an agent, sued for fraud, cannot set up that the principal should have suspected him."

Our decisions hold that the mere registration of a deed, containing an accurate description of the locus in quo and indicating on the face of the record facts disclosing the alleged fraud, will not, standing alone, be imputed for constructive notice of the facts constituting the alleged fraud, so as to set in motion the statute of limitations. In addition to the record, there must be facts and circumstances sufficient to put the defrauded person on inquiry which, if pursued, would lead to the discovery of the facts constituting the fraud. Tuttle v. Tuttle, 146 N.C. 484, 59 S.E. 1008; Modlin v. Roanoke Railroad & Nav. Co., 145 N.C. 218, 58 S.E. 1075; Stubbs v. Motz, 113 N.C. 458, 18 S.E. 387. All the more is this so where the parties stand in the confidential relation of principal and agent, wherein the duty of the principal to investigate becomes subordinate to that of the agent to disclose the true state of facts.

It appears in evidence that Minnie P. Vail lived only three years, seven months, and eight days after the deed was executed. The action was instituted by the plaintiffs seven months and five days after her death. The deed shows on its face that the "use, control and ownership" of the property was reserved for Mrs. Vail during the rest of her life. This reservation, nothing else appearing, supports the inference that she retained possession of the property until her death. And such evidence of possession becomes a relevant circumstance bearing heavily on the issue of the statute of limitations. It, when considered in connection with the confidential relation of the parties, is sufficient on this record to sustain the inference and conclusion that after the deed was made by Mrs. Vail nothing occurred during the rest of her life to excite her suspicion or put her on such inquiry as should have led, in the exercise of due diligence, to a discovery of the fraud, and that therefore the plaintiffs' action is not barred by the statute of limitations.

The defendants contend that the nonsuit below should be affirmed on authority of the decisions in Massengill v. Oliver, 221 N.C. 132, 19 S.E.2d 253; Blankenship v. English, 222 N.C. 91, 21 S.E.2d 891; and Sanderlin v. Cross, 172 N.C. 234, 90 S.E. 213. These cases are distinguishable. No confidential relation appears to have existed in either of them. In Sanderlin v. Cross, supra, and in Massengill v. Oliver, supra, the grantors did not, as in the instant case, retain possession of the locus in quo. In the Sanderlin case the grantees immediately went into and remained in the open, notorious possession of the lands for more than 13 years before the death of the grantor. It also appears that the timber was cut and removed from a large portion of the land seven ar eight years before the suit was instituted. The Massengill case involved farm lands. There, the grantee went immediately into and remained in open, undisputed possession for more than nine years before the suit was commenced. In the Blankenship case, the plaintiff acquired title to real property, *209 subject to a contract of record permitting the timber to be cut within three years, thinking the time for cutting was eighteen months. At the trial he admitted he was told a week after the purchase that the time was three years. After being so put on notice, he failed to examine the public records or bring suit for wrongful cutting within three years. Therefore, having slept on his rights for more than three years after notice, clearly his action was barred by limitations.

The defendants stress the evidence tending to show that one of the plaintiffs, W. C. Vail knew his brother Victor had a deed for the homeplace before his mother's death. However, it is not made to appear when W. C. Vail received notice, nor does it appear that he ever passed on to his mother his information about the deed Be that as it may, the wrong here complained of was solely against Minnie P. Vail. She alone had the right to maintain an action for redress in her lifetime; as long as she lived, limitations could run only against her. No right of action accrued to the plaintiffs until her death, and therefore until then limitations did not run against them. Holt v. Holt, 232 N.C. 497, 61 S.E.2d 448. See also 9 Am.Jur., Cancellation of Instruments, Section 45, p. 389. What is here said, of course, is not at variance with the rule that when the statute of limitations has started running against the ancestor, but at his death the action is not barred, the statute continues to run against the heir or devisee. Frederick v. Williams, 103 N.C. 189, 9 S.E. 298.

With the case going back for a new trial, we refrain from further comment or discussion, since the defendants' evidence, as indicated in aspects of the cross examinations, may develop a different state of facts surrounding the execution of the deed and subsequent events from what now appears on the prima facie level.

The judgment of the court below is

Reversed.