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Supreme Court of Canada

Real property—Agreement to purchase motel on basis of exchange of equities in parties’ respective properties—Misrepresentations by vendor—Action against vendor’s estate—Measure of damages.

Evidence—Corroboration—Alleged misrepresentations by vendor—Action against vendor’s estate—Corroboration of plaintiffs evidence—The Alberta Evidence Act, R.S.A. 1955, c. 102, s. 13.

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The plaintiff claimed she was defrauded in a real estate transaction by the misrepresentations of R. She had been persuaded by R to buy a motel, in which R had a two‑third interest and L a one-third interest, on the basis of exchanging her equity in an apartment for the vendors’ equity in the motel. The motel was subject to a mortgage of $36,000. After taking possession, the plaintiff learned that the income of the motel was greatly below the figure represented by R. She was unable to make the payments called for under the mortgage and as a result of foreclosure proceedings she lost the motel and all she had put into it.

R died after action was brought and after discovery but before trial. The trial judge, who gave judgment in favour of the plaintiff against the executors of R’s estate, found that there had been misrepresentations on the part of R as to his purported role of agent only, as to the owner of the motel and as to income and that these misrepresentations induced the plaintiff to enter the contract. On appeal, the Appellate Division varied the trial judgment by reducing the amount thereof from $21,224.48 to $12,000. The executors then appealed to this Court and the plaintiff cross-appealed to restore the amount awarded by the trial judge.

Held (Laskin J. dissenting in part as to amount of damages): The appeal should be dismissed and the cross-appeal allowed.

Per Martland, Judson, Hall and Spence JJ.: There was ample corroboration of the plaintiff’s evidence within the meaning of s. 13 of The Alberta Evidence Act, R.S.A. 1955, c. 102, and the plaintiff was entitled to succeed on the findings made by the trial judge.

The Appellate Division reduced the award to $12,000 on the basis that, whereas the motel had been sold to the plaintiff at a price of approximately $48,000, its actual value was only $36,000, this being the amount of the mortgage which was foreclosed without any order for sale being granted. The difference between these figures was held to be the amount of the damage sustained by the plaintiff. However, this was not a sale of property represented to be worth $48,000 but only worth $36,000. It was an exchange of equities—equity for equity. Plaintiff’s equity was worth $21,224.48. The equity of R and L in the motel property was valueless. Plain-

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tiff’s loss was, therefore, the value of her equity in the apartment which was fixed by the trial judge at $21,224.48.

Per Laskin J., dissenting in part: The transaction between the parties resulted in the plaintiff conveying to R and his co-owner an equitable interest valued under the contract at $16,408.86 (after adjustments). In return she received an equitable interest valued under the contract at $16,456.29 (after adjustments). In fact, this interest proved valueless and the plaintiff was deceived into accepting it for the contractual price put upon it. Her loss was, accordingly, $16,408.86. Hepting et al. v. Schaaf et al., [1964] S.C.R. 100, referred to.

APPEAL and CROSS-APPEAL from a judgment of the Supreme Court of Alberta, Appellate Division, varying a judgment of Dechene J. Appeal dismissed and cross-appeal allowed, Laskin J. dissenting in part as to amount of damages.

R.M. McLennan, for the defendants, appellants.

F. Hochachka, for the plaintiff, respondent.

The judgment of Martland, Judson, Hall and Spence JJ. was delivered by

HALL J.—This appeal arises out of a real estate transaction in which the respondent, Helen Goyan, claims she was defrauded by the misrepresentations of one Mike Ruptash. Ruptash died after action was brought and after discovery but before the trial. The appellants are the executors of the Mike Ruptash estate.

The evidence discloses that Ruptash who had previously tried to interest respondent in the purchase of an hotel approached her during the summer of 1960 to purchase a motel in White Rock, British Columbia. Ruptash actually had a two-third interest in this motel but concealed that fact from respondent and represented himself to her as agent of the owner. He arranged for respondent to see the motel and told her that

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the owner was an Englishman who would meet her at the train in White Rock and that this man could not speak Ukrainian. The respondent was Ukrainian with a limited knowledge of the English language. She went to White Rock and was met by a man there who was George Ruptash, Mike’s son, whose maternal language was Ukrainian, but conversed wholly in English with the respondent.

Respondent did not agree to buy the motel at this time. Mike Ruptash continued to persuade her to do so and finally she agreed to deal on the basis of exchanging her equity in an Edmonton property for the vendors’ equity in the White Rock motel. The motel was subject to a mortgage of $36,000. She alleges that she was induced to enter into the transaction by Ruptash’s representation that the motel had an average monthly income over the year of $1,000.

The offer to purchase made between the parties was signed by William C. Lumsden only as vendor. Ruptash signed as witness. The formal documents executed later in the office of Mr. G.P. Peterson, a barrister and solicitor practising in Edmonton, showed Ruptash and Lumsden as vendors. Respondent testified that she was unaware of this at the time. In any event, she completed documents which transferred her equity in the Edmonton property to Ruptash and Lumsden and gave them possession. She went to White Rock where she soon learned that the income from the motel was greatly below $1,000 a month and she was totally unable to make the payments called for under the mortgage which she had assumed and the mortgagee took action to foreclose the mortgage with the result that respondent lost the motel and all she had put into it.

Regarding the misrepresentations, the learned trial judge found as follows:

I do find, however, that there were misrepresentations by the deceased Mike Ruptash. These misrepresentations were material and, accepting as I do the evidence of the plaintiff on these points, they induced her to enter into a contract. They consist of the misrepresentation as to the owner of the motel which Mike Ruptash was selling to the plaintiff. He had a two-thirds interest in that motel and purported to act as a real estate agent. He told Mrs. Goyan

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that the owner of the motel was an Englishman, whose wife was leaving him, who was sick and had a little boy. He told her that the man who would meet her at the train was the owner. Those representations were not true. As I have already indicated, he told her that he was acting merely as a real estate agent when in fact he was the owner.

The important misrepresentation and the one which had the greatest effect in inducing this unfortunate woman to enter into this transaction was the representation that the motel had an average monthly income over the year of $1,000. That was not true. Exhibit 16 clearly indicates that the income of the motel was far less than that. It also indicates that there was a period when there was highway work going on in the area, during which a large number of rooms were leased, which artificially increased the income; but even at that, the average monthly rate for that period, the period covered by Exhibit 16, is not $1,000 a month. In fact, the motel was a losing proposition and the income from it after the plaintiff took over was not sufficient to pay their current expenses, let alone reduce the mortgage.

But for the death of Mike Ruptash prior to trial, respondent was entitled to succeed on the findings made by the learned trial judge. However, s. 13 of The Alberta Evidence Act, R.S.A. 1955, c. 102, which provides that:

13. In an action by or against the heirs, next of kin, executors, administrators or assigns of a deceased person, an opposed or interested party shall not obtain a verdict, judgment or decision on his own evidence in respect of any matter occurring before the death of the deceased person, unless the evidence is corroborated by other material evidence.

had to be overcome by respondent.

The learned trial judge said with respect to corroboration:

My examination of the documents which establish the values, the documents which governed the various transactions, both with respect to the apartment building and with respect to the motel itself, the statement of income which I have referred to and which was filed as Exhibit 16, in my view are sufficient corroboration.

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In addition to the evidence which Dechene J. held to constitute corroboration within said s. 13, there was also testimony of a meeting which took place early in 1961 in the office of Mr. Alexander Dubensky, an Edmonton solicitor, after respondent returned to Edmonton. This meeting came about due to the fact that respondent was alleging that she had been defrauded by the misrepresentations made by Mike Ruptash. Present at the meeting were: Mr. Peterson, the solicitor who had prepared the formal documents effecting the exchange of equities; Mr. Lumsden and Mr. Mike Ruptash, the vendors; the respondent and her solicitor, Mr. Dubensky. The respondent was asserting that the income had been misrepresented. It is significant that Mr. Lumsden, who testified regarding this meeting, was saying that the income had been stated to be $800 a month and an effort was made by him to show her that in July and August 1961 the income was $780 and $825 respectively to which respondent insisted that Ruptash had “fooled” her. There was no evidence that Ruptash at this meeting denied respondent’s allegations that he had misrepresented the yearly income to her. There was merely an attempt to show that the income for July and August was in the $800 range which did not, of course, meet respondent’s claim that the income was represented to her to be $1,000 a month throughout the year.

The Appellate Division concurred in the finding of fraudulent representation and also found corroboration within the meaning of s. 13 but on different grounds. I prefer the approach and finding of the learned trial judge on this issue and with the additional evidence as to the meeting in Mr. Dubensky’s office just referred to I am of opinion that there was ample corroboration within the meaning of the relevant section.

The respondent is, accordingly, entitled to damages. The learned trial judge awarded her $21,224.48, being the value of her equity in the Edmonton property which she transferred to Ruptash and Lumsden. The Appellate Division reduced the award to $12,000 on the basis that, whereas the motel had been sold to the respondent at a price of approximately $48,000, its actual

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value was only $36,000, this being the amount of the mortgage which was foreclosed without any order for sale being granted. The difference between these figures was held to be the amount of the damage sustained by the respondent.

The respondent has cross-appealed to restore the amount awarded by Dechene J. I am of opinion that respondent is entitled to succeed in her cross-appeal. This was not a sale of property represented to be worth $48,000 but only worth $36,000. It was an exchange of equities—equity for equity. Respondent’s equity was worth $21,224.48. The equity of Ruptash and Lumsden in the motel property was valueless. Respondent’s loss was, therefore, the value of her equity in the Edmonton property which was fixed by Dechene J. at $21,224.48.

The appeal should accordingly be dismissed with costs and the cross-appeal allowed restoring the amount awarded by the learned trial judge with costs. The respondent is also entitled to her costs in the Appellate Division.

LASKIN J. (dissenting in part)—I agree with Mr. Justice Hall that the appeal should be dismissed and the cross-appeal as to damages allowed. However, I would determine the quantum of damages differently from the measure proposed by him.

Counsel for the parties agreed before the Alberta Appellate Division, and reaffirmed their agreement in argument before this Court, that the plaintiff’s recovery (if she succeeded on the merits of her action for deceit) should be based on the difference between the price she paid and the actual value of the property she received. The Alberta Appellate Division did not follow this prescription, which is a recognized one in this type of action: see Fleming on Torts, 3rd ed., 1965, p. 611. Nor, in my opinion, did the trial judge, whose judgment would be restored by the recovery proposed by Mr. Justice Hall.

The transaction between the parties resulted in the plaintiff conveying to the deceased Ruptash and his co-owner an equitable interest valued under the contract at $16,408.86 (after adjust-

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ments). In return she received an equitable interest valued under the contract at $16,456.29 (after adjustments). In fact, this interest proved valueless and the plaintiff was deceived into accepting it for the contractual price put upon it. Her loss was, accordingly, $16,408.86.

The trial judge fixed the loss at $21,224.48 on the basis of evidence that the property which the plaintiff conveyed was worth $35,000, subject to the mortgage thereon of $13,775.52. In so doing he ignored the transaction price of $30,000, subject to the mortgage, which was given to the property. The deceit of which the plaintiff successfully complained in her action affected the value of what she received, not the value of what she gave. In suing for damages for deceit arising out of the contract of exchange of properties, she does not disaffirm the contract but rather seeks her out-of-pocket loss to the extent to which the promisors failed to give the value bargained for. Even if this Court were to apply the “loss of bargain” formula of damages (more apt in breach of warranty cases), which is the predominant American rule, the plaintiff’s loss would be the equity value of the property acquired from her vendors, which was stated to be $16,456.29 (after adjustments), this being the difference between the value if the fraudulent representations had been true and the actual value, which was nil. No greater value was established in the evidence on the basis of the representations being true.

In Hepting et al. v. Schaaf et al.[1], there was also an exchange of properties, albeit not a full one in that the defrauded plaintiffs had transferred their house to the defendants in part payment only of the purchase price. The assessment of damages was viewed in this Court in terms of the reduced value of the property purchased by the plaintiffs, resulting from a fraudulent misrepresentation of the defendants. In proceeding to determine this value, the Court took as a starting point the value fixed by the purchase

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price as being its worth according to the representation made by the vendors, there being no evidence to the contrary. The defendants were unable to establish a higher value for the property they sold, and hence the plaintiff’s damages were fixed in the amount by which the value of what they received fell below what they had been promised for the price they had paid.

Consistently with the foregoing decision, the damages in the present case must be the amount by which the value of the property sold fell below the price paid under the contractual arrangements. Not only were the defendants unable to show a higher value than the price but on the property sold to the plaintiffs, but, in fact, it had no value. The damages were, accordingly, $16,408.86.

The measure of damages that the trial judge applied was not one based on a claim in tort or for breach of warranty, but rather one that could only be reached on the theory of “waiver of tort, suit in assumpsit” The plaintiff’s recovery would be calculated according to the unjust enrichment of the defendants at her expense. On this formula, she could properly bring evidence of the actual rather than contractual value of the property given as the price for what she received from the defendants. I need not consider whether this is indeed a case where the plaintiff would have been entitled to elect as between suing in damages for deceit or for the value of the benefit received by the defendants. The parties made their position plain before the Alberta Appellate Division and before this Court in agreeing on the principle that should govern the amount of recovery. There is no occasion, therefore, for this Court to consider the plaintiff’s right to an amendment of pleadings or to permit an election as to the basis on which she should have judgment: see United Australia Ltd. v. Barclay’s Bank Ltd.[2]

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Appeal dismissed with costs and cross-appeal allowed with costs, LASKIN J. dissenting in part as to amount of damages.

Solicitors for the defendants, appellants: Ross, McLennan, Ross, Geddes & Ranson, Edmonton.

Solicitors for the plaintiff, respondent: Grotski & Hochachka, Edmonton.

 



[1] [1964] S.C.R. 100.

[2] [1941] A.C.1.

 

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