Opinion
BOBBITT, Justice (concurring).
The parol evidence rule does not apply when it is alleged and shown that the execution of a written instrument was procured by fraud. Stansbury, North Carolina Evidence, Second Edition, § 257. Here, defendant, on the ground of fraud, seeks to rescind the contract in its entirety.
Defendant, in its further answer and defense, alleges the reasonable market value of plaintiffs' property with its use restricted to 'residential' purposes is only $12,500.00 instead of the contract price of $24,500.00; that plaintiffs' agent represented to defendant that plaintiffs' property 'had no restrictions that would prohibit its use for business purposes except zoning restrictions of the City of Charlotte, North Carolina, which restricted its use to office and institutional use,' when in fact the use of plaintiffs' property is restricted to 'residential' purposes only; that said false representations were made with knowledge of their falsity or recklessly without knowledge of their truth and as a positive assertion; that they were made with the intention that they would be relied upon by defendant; that they were in fact relied upon and acted upon by defendant in the execution of the contract; and that defendant has been damaged on account thereof.
Unquestionably, the elements of fraud are sufficiently alleged. The narrow question for decision is whether the fact that the written contract contains the words, 'it is understood that the property will be conveyed subject to such conditions, reservations and restrictions as appear in instruments constituting the chain of title,' is sufficient to establish as a matter of law that defendant could not reasonably rely on said false representations. In my view, whether defendant could and did reasonably rely on said false representations should not be determined until defendant has had opportunity to bring forward its evidence. Hence, I concur.
HIGGINS, Justice (dissenting).
The parties entered into a written contract that plaintiffs would sell and the defendant would purchase a house and lots No. 12 and 13, in block 4, Shenandoah Park, Charlotte, for $24,500.00. The contract provided: 'It is understood that the property will be conveyed subject to such conditions, reservations, and restrictions as appear in instruments constituting the chain of title * * *.'
Upon the defendant's refusal to fulfill the contract, the plaintiffs brought suit for specific performance. The defendant, by answer, admitted the execution of the contract but by way of further defense alleged:
'3. Plaintiffs, through their exclusive sales agent * * * represented * * * that plaintiffs' property 'had no restrictions that would prohibit its use for business purposes except zoning restrictions of the City of Charlotte, North Carolina, which restricted its use to office and institutional use,' when in fact by deed recorded in Book 1185, page 248 of the Mecklenburg Registry and by restrictive covenants recorded in Book 1198, page 495 of the Mecklenburg Registry, the use of plaintiffs' property is restricted to 'residential' purposes only.'
The defendant alleged the representations were false and fraudulent, were intended to and did deceive the defendant to its damage. The record does not indicate the parties contracted otherwise than on equal terms. Regardless of what either's real estate broker said, or thought, or remembers about restrictions (and lawyers often disagree about their meaning) the parties solemnly contracted in writing that the conveyance would be made subject to such conditions, reservations, and restrictions as appear in the chain of title. By this vital provision the parties agreed and determined by reference to the public records (which neither could change) exactly what conditions, reservations, and restrictions were embraced within their contract. The writing binds the parties to look to the public records and nowhere else for those conditions.
This decision, to which I cannot agree, strikes one of the fundamentals from contract law. It says that a written instrument may be contradicted by parol. If the further defense, which Judge Patton struck from the answer, is restored, the door is opened to defendant to show by parol evidence conditions, reservations, and restrictions other than those which are disclosed by the chain of title. The jury, according to which party's witnesses swear harder or louder, may make for the parties a contract different from that which they made for themselves.
Heretofore it seems to have been the law that when a contract has been reduced to writing and signed by the parties, their prior negotiations become merged in the written instrument. That written agreement may not be varied, added to, taken from, or contradicted by parol evidence. 'As against the recollection of the parties, whose memories may fail them, the wirtten word abides.' Jefferson Standard Life Insurance Co. v. Morehead, 209 N.C. 174, 183 S.E. 606.
The plaintiffs' contentions are that the contract speaks the truth. The defendant contends to the contrary. If its contention is correct, the written word neither abides very long nor with much force.
In order to prevent fraud, the law requires certain contracts--or some memorandum thereof--to be in writing and signed by the party to be charged. Contracts to sell land fall in this category. The purpose of reducing a contract to writing is to avoid any controversy over its terms. Bank of Varina v. Slaughter, 250 N.C. 355, 108 S.E.2d 594. 'It is a well settled rule [of law] that when parties have reduced their agreement to writing parol evidence is not admissible to contradict it for the reason that the written memorial is the best evidence of what the parties have agreed to.' McLawhon v. Briley, 234 N.C. 394, 67 S.E.2d 285. I vote to affirm.
RODMAN, Justice (dissenting).
I concur in the dissenting opinion of Higgins, J. I do not understand there is disagreement in the Court as to what must be established to rescind a contract on the ground of fraud. Our disagreement in this case relates to the application of the law to the facts as alleged and admitted by the demurrer.
The legal principle here controlling was aptly stated by Barnhill, J. in Harding v. Southern Loans&sInsurance Co., 218 N.C. 129, 10 S.E.2d 599. He said: 'Representations concerning the value of real property or its condition and the adaptation to particular uses will not support an action in deceit unless the purchaser has been fraudulently induced to forbear inquiries which he would otherwise have made, and if fraud of this latter description is relied on as an additional ground of action, it must be specifically set forth in the declaration. Parker v. Moulton, 114 Mass. 99, 19 Am.Rep. 315. 'It is generally held that one has no right to rely on representations as to the condition, quality or character of property, or its adaptability to certain uses, where the parties stand on an equal footing and have equal means of knowing the truth. The contrary is true however where the parties have not equal knowledge and he to whom the representation is made has no opportunity to examine the property or by fraud is prevented from making an examination.' 12 R.C.L. 384. When the parties deal at arm's length and the purchaser has full opportunity to make inquiry but neglects to do so and the seller resorted to no artifice which was reasonably calculated to induce the purchaser to forego investigation, action in deceit will not lie.'
Parker J. reduced the rule to two terse sentences. He said: 'The right to rely on representations is inseparably connected with the corrlative problem of the duty of a representee to use diligence in respect of representations made to him. The policy of the courts is, on the one hand, to suppress fraud and, on the other, not to encourage negligence and inattention to one's own interest.' Calloway v. Wyatt, 246 N.C. 129, 97 S.E.2d 881.
Here defendant alleges plaintiff's agent represented that the property was not subject to restrictions prohibiting its use for business purposes. He impliedly asserts that he contracted to purchase with the intent to use for business purposes. When the contract was executed, defendant knew he was obligating himself to take the property subject to whatever restrictions appeared in plaintiff's record title. The objectionable restriction appears in plaintiff's record title. Defendant could have ascertained what restrictions appeared in plaintiff's title as easily as the purchaser in Calloway v. Wyatt, supra, could have ascertained about the inadequate water supply. In one case the truth could have been ascertained by turning on a water spigot, in the other, by looking at the recorded deeds constituting plaintiff's chain of title.
How simple it would have been to have required a statement in the contract that none of the restrictions would prohibit the use of the property for business purposes. Defendant's allegation that he reasonably relied on the statement of plaintiff's agent is not admitted by the demurrer, because it is, in my opinion, not a statement of fact, but on the admitted facts is an erroneous legal conclusion.