Stroup v. Conant
520 P.2d 337 (1974)
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Rule of Law:
A lease may be rescinded for fraudulent misrepresentation when a party induces the agreement through misleading half-truths or concealment of material facts, and the injured party is not required to prove pecuniary damages to obtain this equitable remedy.
Facts:
- Plaintiff's son advertised commercial premises for lease in a newspaper.
- In response, defendant called and, when asked about his intended business, stated he would operate a 'variety type operation' selling items like 'watches, wallets, chains, trinkets and a few books and novelties.'
- Relying on this description, plaintiff's attorney drafted a lease specifying the use as 'for the sale of gifts, novelties, etc.,' which both plaintiff and defendant signed.
- Shortly after taking possession, defendant opened the 'Birds & Bees Adult Book Store,' which exclusively sold pornographic magazines and books and displayed large signs in the windows.
- Other tenants in the building, who operated a gun shop, a meat market, and a paint store, complained to the plaintiff that the adult bookstore was harming their businesses.
- A neighborhood resident circulated a petition in protest of the store, gathering 300 signatures in the predominantly residential area.
Procedural Posture:
- Plaintiff sent a letter to defendant demanding he vacate the premises but did not initially tender a return of the rent paid.
- Plaintiff filed a complaint in a trial court seeking to rescind the lease and offering to restore the status quo.
- Defendant filed a general denial.
- Following a trial, the trial court issued a decree rescinding the lease in favor of the plaintiff.
- Defendant, as the appellant, appealed the trial court's decree to this court, with the plaintiff as the appellee.
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Issue:
Does a tenant's misrepresentation by half-truth and concealment regarding the intended use of a property constitute sufficient grounds for a landlord to rescind the lease, even without proof of pecuniary damage?
Opinions:
Majority - Tongue, J.
Yes. A tenant's misrepresentation by half-truth and concealment about the intended use of a property provides sufficient grounds for a landlord to rescind the lease without proving pecuniary damage. The court found there was ample evidence that the defendant engaged in misrepresentation through 'half-truths and concealment of special knowledge' by describing his business as a variety store while intending to open an adult bookstore. Citing precedent, the court held that when one undertakes to answer an inquiry, they have a duty to tell the whole truth. Furthermore, the court affirmed that proof of pecuniary damage is not a requirement for the equitable remedy of rescission; the harm to the plaintiff in the form of humiliation, embarrassment, and the potential loss of other tenants was sufficient.
Analysis:
This decision reinforces the principle that rescission is an equitable remedy available for fraudulent inducement, even when the misrepresentation involves concealment or half-truths rather than an affirmative falsehood. It clarifies that in Oregon, a suit for rescission, as distinguished from an action for damages, does not require the plaintiff to prove a specific financial loss. The ruling protects property owners from being bound to contracts where the other party has been fundamentally dishonest about their intentions, particularly when the true use of the property is controversial and could harm the owner's reputation and other business relationships.
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