Opinion
Rehearing Denied Aug. 28, 1973.
Page 474
Allen P. Mitchem, Denver, for plaintiffs-appellees.
Madden & Strate, P.C., William J. Madden, George J. Francis, Denver, for defendants-appellants.
PIERCE, Judge.
In February of 1967, plaintiffs Carl and Juanita Smith entered into an agreement with defendant Jerry Kalavity to form a corporation. By the terms of the agreement, plaintiffs were to deed a tract of land which they had owned for approximately fourteen years, to the defendant corporation when it was formed. The land to be conveyed, approximately eighty-two acres, had been annexed to the City of Thornton in 1965 and zoned for use as commercial property or for mobile homes. Under the terms of the agreement, defendant was to pay off all outstanding obligations secured by the land, and stock in the corporation was to be issued to plaintiffs. It is undisputed that both parties performed to this extent.
Plaintiffs brought this action seeking, among other things, rescission of both the agreement to form the corporation and the deed. The basis of the claim for rescission, as stated in the original complaint, was that defendant had made certain representations to plaintiffs, knowing them to be false, to induce them into the agreement to form the corporation. Generally, plaintiffs contended that defendant represented that he would immediately commence development of the land into a mobile home park. More specifically, plaintiffs allege that defendant represented to them, prior to the execution of the agreement, that he had access to the necessary financing to develop the land, and that such development was his sole purpose in entering into the agreement. It is undisputed that a mobile home park has not been developed on the land, and the record reflects no significant steps toward such an objective.
Trial was to the court. In its findings of fact and conclusions of law, the court found two bases for ordering rescission of the agreement and the deed. It first concluded that the written agreement to form the corporation was not intended to be a final embodiment of the full agreement of the parties. The court determined that the parties had, in fact, agreed that Kalavity was to immediately develop a mobile home park and that his failure to do so was a failure of consideration, entitling plaintiffs to rescission and cancellation of the deed. Alternatively, the court found that Kalavity had knowingly made false representations with regard to his present ability to consummate any development of the land, which representations were relied upon by plaintiffs to their detriment. The court determined that this was fraud in the inducement of the contract and therefore was grounds for rescission of the deed.
Because either basis of the court's findings would be adequate to entitle plaintiffs to rescission, and because we feel that the court properly concluded that there was a fraud, we feel constrained to review only the propriety of that portion of the court's ruling.
I.
Appellants raise three points relevant to a determination of whether the trial court could properly conclude that there had been a fraud. They first contend that the alleged misrepresentations were not of the type adequate to be the basis of a claim in cozenage. They then contend that parol evidence was improperly allowed to establish the alleged misrepresentation. Finally, they contend that evidence of events subsequent to the execution of the agreement to form the corporation was improperly relied upon by the court in determining that a fraud had occurred.
The basis of the appellants' first contention is that the representations attributed to defendant Kalavity concerning his ability to arrange the financing of the project and his current desire to carry through with it, were opinions concerning future events and thus were not actionable fraud. Farris v. Strong, 24 Colo. 107, 48 P. 963. However, the trial court specifically found that Kalavity misrepresented both his then existing financial condition and his then existing intention to develop the property. Thus, Kalavity's representations with regard to both his state of mind and his financial ability were not predictions, but were statements of current intent and current ability, clearly contrary to the facts at that time and thus could constitute fraud. Teare v. Sussman, 120 Colo. 488, 210 P.2d 446; See also, W. Prosser, Torts s 109 (4th ed.). The trial court's finding on this matter is supported by the evidence and thus will not be disturbed on appeal.
We find appellants' contention that the trial court improperly allowed parol evidence to establish the fraud, also to be without merit. Appellants contend that parol evidence, attributing to defendant Kalavity a specific intent to develop a mobile home park, was contrary to the express statements contained in both the written agreement to form the corporation and the articles of incorporation. In both these documents, the corporation's purposes were defined as real estate development and sale. Defendant argues that since neither document specifically limited the purpose of the corporation to development of a mobile home park, any parol testimony to establish this more limited purpose was clearly inadmissible. However, it has long been the rule in Colorado that the oral prior and contemporaneous declarations of the parties to a written instrument are admissible to show that its execution was procured by fraud. Johnson v. Cummings, 12 Colo.App. 17, 55 P. 269. Here, the record supports the conclusion reached by the trial court that certain oral representations made to plaintiffs induced them into an agreement that they might not have otherwise made. As such, this evidence was properly admitted to show the inducement into the agreement and hence, the fraud.
Finally, we find no merit in appellants' contention that the trial court improperly relied upon evidence of acts subsequent to the execution of the disputed agreement to establish fraud in the inducement. We do note that the trial court specifically mentioned subsequent acts by Kalavity in its findings of fact and conclusions of law. However, we conclude that there was adequate evidence of misrepresentation prior to and contemporaneously with, the execution of the agreement to establish a case of fraud against defendant Kalavity. This being the case, in a trial to the court, the admission of evidence as to subsequent acts was, at worst, harmless error. Heaton v. Nelson, 69 Colo. 320, 194 P. 614.
II.
Citing Gladden v. Guyer, 162 Colo. 451, 426 P.2d 953, appellants next contend that plaintiffs lost any right to rescission of the deed and the agreement by delaying an unreasonable length of time after they discovered the alleged fraud before asserting their rights. However, the court specifically found that plaintiffs did not have sufficient knowledge of the falsity of the representations made by Kalavity to put them on inquiry as to their veracity, until some four months prior to the filing of their complaint. The question of what constitutes a reasonable time to rescind is for the court to decide in light of all the facts. Lathrop v. Maddux, 58 Colo. 258, 144 P. 870. Under the facts of this case, we cannot say that plaintiffs waited an unreasonable length of time. Therefore, we affirm the determination of the trial court that there was not an unreasonable delay.
III.
Appellants next contend that the court erred in several particulars in admitting certain evidence. Only one of the several alleged errors merits individual discussion. Specifically, prior to trial of this matter, the defendants began taking plaintiff Carl Smith's deposition. The deposition was recessed before counsel for defendant had completed his questioning. Unfortunately, Smith died before the taking of the deposition could be reconvened and completed. Because it is incomplete and because it was never signed by the deponent, defendants cite C.R.C.P. 30 and argue that it was inadmissible for any purpose. However, the deposition was signed and certified by the officer before whom it was taken after the deponent's death. We conclude the C.R.C.P. 30 was substantially complied with. Courts have generally held under such circumstances that the deposition is admissible, and the fact that it is incomplete or not signed goes to its probative value and not its admissibility. ReTrac Corp. v. J. W. Speaker Corp., 212 F.Supp. 164, See also, 4A J. Moore Federal Practice 32.05(2d ed.). We conclude that this is the proper rule under such circumstances, and therefore, find no error.
With regard to appellants' other allegations of error as to rulings on the admissibility of evidence, we note that this matter was tried to the court, and we therefore presume that the trial court properly disregarded all immaterial, incompetent or hearsay evidence in reaching its conclusion. Bill Dreiling Motor Co. v. Travelers Indemnity Co., 29 Colo.App. 163, 482 P.2d 999. Consequently, we will not address each of the alleged errors. We have, however, reviewed each of the court's disputed rulings and find no basis for reversal.
IV.
Finally, appellants contend that the remedy applied by the court is inequitable in that it fails to restore the parties to their status prior to the agreement. Specifically, the trial court's order required, upon rescission of the deed, that plaintiffs must return to the defendants the money expended to clear the encumbrances from plaintiffs' title, plus all property taxes paid on the land. Appellants now contend that in addition to this sum, plaintiffs should be required to pay the interest defendant Kalavity has incurred on the loans procured to raise the money. Such an award is not required. See, Parish v. Casner (Mo.), 282 S.W. 392. We adopt the rule that where plaintiff is successful in an action for rescission, he need not pay any interest on sum to be paid back to the defendant.
Judgment affirmed.
ENOCH and SMITH, JJ., concur.