Facts
- Rudolph and Carice Hirsch owned a residence and an adjoining one-acre lot in Newtown Township, Delaware County, Pennsylvania.
- The Hirsches agreed in writing to sell the lot to Mr. Silberstein for $10,000.
- The agreement provided that it “shall not be assigned or transferred by the Buyer without the written consent of the Seller.”
- Before contracting with the Hirsches, the Silbersteins executed a declaration of trust with the Crosses, agreeing to convey the lot to the Crosses after acquisition.
- At settlement, the Hirsches deeded the lot to the Silbersteins; on the same day, the Silbersteins deeded the lot to the Crosses.
- The Hirsches claimed they investigated Silberstein and believed he would be their neighbor; they did not know the Crosses’ identity during negotiations.
- The Hirsches sued in equity to rescind or cancel both deeds, alleging violation of the non-assignment clause and fraud based on nondisclosure of the Crosses as the real purchasers.
Issues
- Whether a buyer violates a contract clause prohibiting assignment or transfer of a real-estate sales agreement by taking title and then conveying the property to a third party pursuant to a preexisting declaration of trust.
- Whether an agent’s failure to disclose an undisclosed principal, coupled with the seller’s belief that the agent is the true purchaser, constitutes actionable fraud warranting rescission absent a duty to disclose and cognizable damages.
Decision
- The Supreme Court of Pennsylvania affirmed the decree dismissing the sellers’ equity complaint.
- The Court held the agreement of sale was not assigned or transferred; the buyer’s later deed to the third party was a separate transaction and did not breach the non-assignment clause.
- The Court held there was no actionable fraud because the buyer-agent had no duty, on these facts, to disclose the principal’s identity, and the sellers showed no legally cognizable damages after receiving the full contract price.
Legal Principles
- A contractual prohibition on assigning or transferring a sales agreement bars assignment of the contract itself, not a subsequent conveyance of the property after the buyer takes title, absent additional restricting language.
- An agent contracting in the agent’s own name for an undisclosed principal generally has no duty to disclose the principal’s identity; nondisclosure alone does not establish fraud.
- Rescission for fraud requires more than subjective dissatisfaction with the counterparty’s identity; the claimant must show a duty to disclose and legally cognizable injury, not merely receipt of the agreed consideration with buyer identity later revealed.
Conclusion
The court refused to rescind two deeds where the buyer did not assign the sales contract but instead conveyed the land after closing, and where nondisclosure of an undisclosed principal did not amount to fraud in the absence of a duty to disclose and proof of compensable harm.