Opinion
April 6, 1962 —
May 1, 1962.
APPEAL from an order of the circuit court for Dane county: NORRIS E. MALONEY, Circuit Judge. Affirmed.
For the appellants there was a brief and oral argument by Frederick F. Hillyer of Madison.
For the respondents there was a brief by Oldenburg, Manzer Engel of Madison, and oral argument by H. Maxwell Manzer.
An action for damages based upon fraudulent misrepresentations brought by the purchasers of a farm, Walter and Betty Harweger, against Myron and Mae Wilcox, the sellers and previous owners of a farm.
The complaint alleges two causes of action: The first being based upon fraudulent misrepresentations and the second an equitable action for rescission based on mutual mistake as to the total number of acres in the farm. The second cause of action was dismissed by the trial court on the grounds of failure of proof.
The issues in the damage action based on fraud were submitted to the jury in a special verdict. On June 7, 1961, the jury found: (1) That defendants or their agents for the purpose of inducing plaintiffs to buy the farm, represented that the farm contained 80 acres of tillable upland soil and about 35 acres of tillable bottomland, adequately drained; (2) that such representation was false; (3) that plaintiffs believed such representations to be true and relied thereon in making purchase of the farm; and in answer to the damage question found that had the farm been as represented, it would have had a fair market value of $36,000; and that the farm had an actual fair market value of $26,000.
The court held that the evidence sustained the jury's findings to all of the questions except the damage question; that the verdict was not perverse, but that the damages were excessive. The court further found that $6,000 was the reasonable amount of plaintiffs' damages and ordered that plaintiffs should have the option to enter judgment for that amount plus costs, or defendants to have a new trial on the issue of damages only.
On July 7, 1961, without prior notice to either party, the court, on its own motion, vacated its prior order, enlarged the time within which to hear and determine motions after verdict an additional fifty days, set the matter for oral argument on August 21, 1961, and directed the exchange of briefs. Thereafter, and on July 21, 1961, at the request of the court, plaintiffs' counsel wrote the judge a letter agreeing to the extension of time for motions after verdict.
The matter was reargued September 15th, and the court on the same day made its decision on the motions after verdict wherein it found that the evidence sustained the jury's findings to all of the questions except the damage question. As to damages, the court found that the $10,000 damages found by the jury were excessive, that because plaintiffs' expert witness did not give his opinion as to the value of the farm if it was as represented, plaintiffs had failed to establish such value and that plaintiffs were not entitled to the "out-of-pocket" rule of damages; that it was prejudicial error on the part of the trial court to sustain the objection to the question put to plaintiffs' expert witness on cross-examination as to his opinion of the "represented" value of the farm, on the grounds that such an opinion had not been covered on direct examination; that the case should be settled for $7,250, and that defendants should have the option within twenty days to waive the prejudicial error and consent to judgment for that sum plus costs, or in lieu thereof, defendants to have a new trial on the issue of damages only. An order was entered October 17, 1961, more than twenty days having elapsed since the granting of such option. From that order the plaintiffs appeal.
Defendants-respondents were the owners of a farm located in Dane county. About February 16, 1959, they listed the farm for sale with H. E. Gilbert, a real-estate broker, and signed a listing contract with Mr. Gilbert, which contract described the farm as:
"Acres tillable — 80 up 35 marsh, . . . Acres timber 3 Oak Grove, balance of acreage — marsh and pasture."
Mr. Gilbert prepared a brochure, advertising the farm and a part of the brochure stated:
"The farm itself consists of 138 acres. There is 80 acres of good upland soil — brown silt, technically called Miami; there is about 35 acres of good bottomland that has been adequately drained; there is a 3-acre oak grove, and the rest of it is in lowland and pasture."
A copy of the brochure was mailed to plaintiffs who lived in Central Illinois. During the month of February, 1959, plaintiffs visited the farm twice accompanied by Mr. Arthur Smith, one of Mr. Gilbert's salesmen. Due to the depth of snow on the ground they were unable to walk around the farm. Plaintiffs relied on the representations made as to the number of tillable acres in the farm and in March, 1959, purchased it for $36,000.
After moving on the farm, plaintiffs ascertained that there were only about 62 acres of tillable upland and from seven to 15 acres of tillable bottomland; and that the entire area of the farm inclosed within what plaintiffs assumed to be the boundary fences was only 116 acres.
Plaintiffs commenced an action setting forth two causes of action: (1) An action for damages based on fraudulent misrepresentation; and (2) an equitable action for rescission based on mutual mistake as to the total number of acres in the farm.
During the trial both parties offered expert testimony as to the actual value of the farm. On behalf of the plaintiffs, Mr. Robert Smith testified in substance as follows: That he had been in the appraising business for about twenty-eight years. In the years 1958 and 1959, he was employed by the town of Pleasant Springs to make reassessment appraisal of all of the real estate in the township; and pursuant to such employment he examined and made an appraisal of the Harweger-Wilcox farm.
On May 21 and 22, 1961, he made another appraisal of the Harweger farm. He walked over a good portion of the farm, he examined the farm carefully, the buildings and soil, and referred to comparable sales in the area. He calculated a total of 62 acres of work land. The combined value of the land and buildings founded off to $19,000, which in his opinion was the fair market value of the farm in 1959.
On cross-examination this witness was asked his opinion of the value of the farm if it had been as represented. Objection was made on the grounds that that matter had not been covered on direct examination and the objection was sustained on that ground.
Mr. Arthur Smith testified for the defendants in substance as follows: (He was the salesman for Mr. Gilbert who conducted the negotiations for the sale of the farm.) That he had been on the Harweger farm four or five times, twice when the deal was made and a couple of times after that. He made a detailed inspection of the buildings, but did not measure them, that is the only farm in the town of Pleasant Springs that he had sold and he was not aware of any comparable sales in the town of Pleasant Springs.
As far as he knew, the farm had 80 acres of good upland soil and 35 acres of good bottomland, and in 1959, was worth $36,000. The farm as represented was worth $36,000, and if it had only the number of acres of plowland, as testified to by Mr. Robert Smith, it would have been worth approximately that.
In his opinion the fact that the farm was located near Madison had a great deal to do with its value. He also considered Mr. Wilcox's testimony as to a gross income of $12,000 for 1959 a substantial factor. He calculated that the cost of operation is equal to about one half the gross income or $6,000 which would mean a return of approximately 11 percent on the investment. He testified that the national average for the year previous to the trial was three and one-half percent on farmland.
It is relevant that Mr. Wilcox also testified that his gross profits for 1958 were only some $7,400 and that on his income-tax returns for the years 1957 and 1958, he claimed net losses of $1,169.58 and $2,760.43, respectively.
The relevant issues on this appeal are: (1) Whether the trial court could extend time to decide motions after verdict on its own motion; (2) whether the trial court's refusal to allow cross-examination of the expert witness as to the value of the farm as represented was error; and (3) damages.
Extension of Time on Trial Court's Own Motion.
Respondents rely on the case of Beck v. Wallmow (1938), 226 Wis. 652, 277 N.W. 705, to sustain their position that sec. 270.49(1), Stats., grants the trial court discretion to enter an order extending the time for cause on its own motion.
It is appellants' position that the holding of the Beck Case was overruled by Boyle v. Larzelere (1944), 245 Wis. 152, 13 N.W.2d 528, which case stands for the proposition according to the appellants, that the matter of enlarging time came under the provisions of sec. 269.45, a statute of general application, except as limited as to time for making the order under sec. 270.49.
The Boyle Case however does not overrule Beck v. Wallmow, supra. Boyle holds that the court cannot extend the time after the period (within sixty days after rendition of verdict) has run since sec. 270.49, Stats., controls over sec. 269.45 in this respect. 33 W.S.A., p. 121, sec. 270.49.
In the instant case the court granted an extension of time on its own motion within sixty days after rendition of verdict when the court learned that the defendants' brief, though filed with the court, had not been served upon plaintiffs. This court in Kamuchey v. Trzesniewski (1959), 8 Wis.2d 94, 98 N.W.2d 403, said trial courts should as a matter of practice require that any briefs submitted to the court be served upon opposing counsel. Beck v. Wallmow, supra, states (p. 657):
"The statute [sec. 270.49(1)] is clear and unambiguous. The trial judge may, on his own motion for cause, enter an order extending the time in which to decide the motion. In the administration of justice many situations will arise which properly may be considered causes for extending the time for hearing and deciding motions after verdict. It is clearly within the power of a trial judge to act in such situations."
The requirements of sec. 269.45, Stats., do not apply to granting an extension of time under sec. 270.49(1). The power conferred by sec. 269.45 is highly discretionary with regard to granting an extension of time, and the court's action in granting an extension of time under sec. 270.49 (1) is also highly discretionary. Such determination by the trial court will not be disturbed except in cases where it clearly appears that it has been abused. See Syver v. Hahn (1958), 4 Wis.2d 468, 90 N.W.2d 632; Miller v. Belanger (1957), 275 Wis. 187, 81 N.W.2d 545; and Banking Comm. v. Flanagan (1940), 233 Wis. 405, 289 N.W. 647. We determine that the record fails to disclose an abuse of discretion.
Cross-examination.
The value of the farm as represented was relevant evidence. The purpose of the expert testimony was to determine what the value of the farm actually was. The trial court was correct in ruling that it had committed prejudicial error when it refused to allow cross-examination of plaintiffs' expert as to that subject.
Birdsey v. Butterfield (1874), 34 Wis, 52, 62, Contra.
In 2 Jones, Evidence (5th ed.), p. 831, sec. 437, the author states:
"CROSS-EXAMINATION OF EXPERT WITNESSES. — . . . Great latitude is ordinarily the rule in the cross-examination of such witnesses. The party cross-examining an expert witness is not confined to the theory on which the adversary has conducted his examination; he may go into details, and may put the case before the expert in all its phases.
"The witness may be requested to answer hypothetical questions which present the facts claimed to constitute the case or the defense of the party examining him; and the hypothetical questions may, subject to the reasonable discretion of the court, assume any facts that are relevant to the case and of which there is evidence."
Damages.
The evidence relating to damages in the instant case consisted of testimony by the expert on behalf of the defendants that the actual value and the value of the farm as represented were each $36,000. The expert called by the plaintiffs testified only as to the actual value of the farm, which he said was $19,000.
Under the benefit-of-bargain rule the evidence was not sufficient to support a verdict where the plaintiffs' expert witness was not permitted on cross-examination to testify as to what the value of the farm was as represented. The trial court correctly stated that Wisconsin is committed to the benefit-of-bargain rule However, in fraud cases evidence relating to out-of-pocket damages should be admitted as relevant.
Neas v. Siemens (1960), 10 Wis.2d 47, 102 N.W.2d 259, holds that the price paid by the purchaser is relevant evidence on the issue of the value of the property if it had been as represented.
Kakelly v. Martin (1874), 34 Wis. 525; Kobiter v. Albrecht (1892), 82 Wis. 58, 51 N.W. 1124; Warner v. Benjamin (1895), 89 Wis. 290, 62 N.W. 179; Potter v. Necedah Lumber Co. (1899), 105 Wis. 25, 80 N.W. 88, 81 N.W. 118; Ohrmundt v. Spiegelhoff (1921), 175 Wis. 214, 184 N.W. 692; Luedke v. Pauly Motor Truck Co. (1924), 182 Wis. 346, 195 N.W. 853; Mueller v. Michels (1924), 184 Wis. 324, 197 N.W. 201, 199 N.W. 380; Kimball v. Antigo Bldg. Supply Co. (1952), 261 Wis. 619, 53 N.W.2d 701; Anderson v. Tri-State Home Improvement Co. (1955), 268 Wis. 455, 67 N.W.2d 853, 68 N.W.2d 705; Neas v. Siemens (1960), 10 Wis.2d 47, 102 N.W.2d 259.
The evidence in the instant action would have been sufficient to sustain the verdict as to damages had the defendants been permitted to cross-examine the plaintiffs' expert witness as to the value of the farm if it had been as represented. The findings and order of the trial court for a new trial limited to the issue on damages are affirmed.
By the Court. — Order affirmed.
The defrauded plaintiff should have the option of recovering either under the "benefit-of-bargain" rule or the "out-of-pocket" rule. In fraud cases, the purpose is to wholly indemnify the injured party. In most of the cases, if not all, recovery under the "benefit-of-bargain" rule exceeds what would be recovered under the "out-of-pocket" rule. However, in this case it is quite apparent the "benefit-of-bargain" rule is no bargain, and the plaintiff will recover less than the difference between the actual value and the amount he paid for the farm. The result, therefore, is to allow the defendant to keep a benefit from his own wrong, i.e., the difference between the value of the farm as represented and the higher sale price. This is inequitable and unjust.
The two rules have been exhaustively analyzed in Selman v. Shirley (1939), 161 Or. 582, 85 P.2d 384, 91 P.2d 312, 124 A.L.R. 1, Anno. p. 37 et seq., in which the court came to the conclusion that neither of the rules should be applied inflexibly. Prosser, Law of Torts (2d ed.), pp. 568, 570, sec. 91, states this decision has given more-careful consideration to the problem than any other and is beginning to be followed in other jurisdictions. In the case at bar, to limit recovery by applying the "benefit-of-bargain" rule in favor of the defrauding party rather than in favor of the defrauded party for whose benefit the rule exists, allows the retention of a bargain by the defrauding party.
I am authorized to state that Mr. Justice FAIRCHILD concurs in this dissent.