Summary
In Fay Egan Co. v. Cohn Bros., 158 Miss. 733, 130 So. 290, the court held that where goods are purchased on material representations made by the seller, and not upon the purchaser's own judgment, and the representations are false, this is fraud, and seller must make his statements good, regardless of whether the seller had an actual fraudulent intent or not. Putting it differently, if the seller makes material representations of fact, without knowing whether they are true or false, this is fraud in law and the seller must make his statement good.
Summary of this case from Lizana v. Motor Sales Co.Opinion
No. 28811.
October 20, 1930.
1. CONTRACTS.
Fraud vitiates everything it enters into.
2. SALES.
Where sales contract was procured by fraud, every provision of contract evidencing transaction was avoided, including 30-day trial and acceptance provision.
3. SALES.
Where seller makes material representations of fact without knowing whether they are true or false, this is "fraud" in law, and seller must make his statement good.
4. SALES. Sellers, making representations and inducements to induce buyer to keep machine, after 30- day trial and acceptance period, waived provisions regarding retention of property after 30 days as acceptance.
The contract provided that retention of property after thirty days should constitute trial and acceptance, be conclusive admission of truth of all representations made by consignor and a fulfillment of all its contracts of warranty, express or implied.
5. SALES.
Where sellers notified buyers they would not accept machine back, buyers were not required to return machine, as provided in contract, upon rejecting machine.
APPEAL from chancery court of Lincoln county. HON. V.J. STRICKER, Chancellor.
Brady, Dean Hobbs, of Brookhaven, for appellant.
Appellees, Louis Cohen Bros. are estopped by their contract to deny the truth of the facts, terms and conditions agreed upon and settled by virtue of making the contract.
An experienced business man, who discusses a transaction for several hours with an agent, and then deliberately sits down and signs the contract and notes, ought not to be heard to say that he did not understand so plain a transaction.
Brenard Mfg. Co. v. Sumrall, 139 Miss. 507, 104 So. 160.
In vain will contracts be written and governed by their terms as expressed in writing, if defendants, who are able to do so, fail to read them over and are allowed to set up verbal understandings at variance with the written terms of the contracts.
Jourdan v. Albritton, 146 Miss. 651, 111 So. 591; Tropical Paint and Oil Co. v. Mangum and Hatcher, 155 Miss. 876, 125 So. 248; Colt Co. v. Odum, 136 Miss. 651, 101 So. 853.
In connection with the provision of the contract relative to the effect of retaining the machine for thirty days after its arrival at destination, we find that a warranty may be conditioned that it shall be deemed fulfilled after a trial for a certain limited time.
35 Cyc. 413.
It has been settled that it is right and proper to agree on what shall constitute an acceptance.
Potter v. Less, 94 Mich. 140; Farrington v. Smith, 77 Mich. 550; Childs v. O'Connell, 84 Mich. 533; Lee v. Bangs, 43 Minn. 23; Rosenfield v. Swensor, 45 Minn. 190; Turner v. Machine Company, 97 Mich., 166; Gentelli v. Strarace, 133 N.Y. 140; Stevenson v. Hertzler, 109 Ala. 423; Moline Co. v. Pearce, 52 Neb. 577; J.I. Case Threshing Machine Co. v. McCoy et al., 111 Miss. 715, 72 So. 138; McPherson v. Gullett Gin Co. et al., 134 Miss. 771, 100 So. 16; Folkes v. Pratt, 86 Miss. 254, 38 So. 224; J.A. Fay Egan Co. v. T.J. Dudley Sons, 129 Ga. 314, 58 S.E. 826; W.C. Meredith v. J.A. Fay Egan Co. (Ga.), 137 S.E. 409.
The written contract is in full force and effect because Louis Cohn Bros. are estopped to deny it on account of their conduct and acts done under and in performance of the contract.
6 R.C.L. 932, par. 316; 13 C.J. 616, par. 671. May, Sanders, McLaurin Byrd, of Jackson, for appellant.
The appellees are estopped at this late day to claim a breach of the warranty. They are estopped by the contract which they deliberately made, and by their conduct.
This is not a case of latent defect discovered after the expiration of the time limit. The inefficiency of the machine, if any, was immediately discoverable, and according to the appellee's superintendent was discovered and reported to the appellee, and the purchaser was under duty to reject the machine and return it to the seller, f.o.b. Cincinnati, Ohio, within thirty days. Failing in this he was bound by his contract.
P.Z. R.L. Jones, of Brookhaven, for appellees.
The whole contract is void. Fraud vitiates everything into which it enters.
Wren v. Hoffman, 41 Miss. 620; Davis v. Heard, 44 Miss. 51; Ins. Co. v. Antram, 86 Miss. 224; Howie v. Pratt, 83 Miss. 15; Keanum v. R.R. Co., 151 Miss. 784; McRaney v. R.R. Co., 128 Miss. 248; Folkes v. Pratt, 86 Miss. 254; Henry v. Rawleigh, 152 Miss. 320; Alexander v. Meek, 132 Miss. 311.
Whether the party misrepresenting a material fact knew it to be false, or made the representation without knowing it was true or false, is wholly immaterial. And even if the party innocently misrepresents a material fact, by mistake, it is equally conclusive, for it operates as a surprise and imposition on the other party.
Alexander v. Meek, 132 Miss. 311.
False and fraudulent representations made by one party to a contract, by which the other is induced to enter into the contract, render it voidable at the election of the defrauded party; and a stipulation in such a contract to the effect that the false and fraudulent representations by which the one party induced the other to enter into it shall not affect its validity is, itself, of no validity.
13 C.J. 420, sec. 350; Bridger v. Goldsmith, 143 N.Y. 424, 38 N.E. 458; 13 C.J. 394-5; 27 C.J. 18; Braxton v. Liddon (Fla.), 38 So. 717; Brenard v. Pearson, 106 So. 171; J.A. Fay Egan Co. v. Lafayette Lumber Co., 119 So. 781; Nash Miss. Valley Motor Co. v. Childress (Miss.), 125 So. 708.
The rule of law that parol testimony cannot be heard to vary written agreements has never been carried so far as to defeat the right to prove a failure of consideration. In such cases it has no application.
Buckels v. Cunningham, 6 S. M. 358; Meyer v. Casey, 57 Miss. 615; Dulaney v. Jones, 100 Miss. 835; Coke v. Blackbourne, 57 Miss. 691; Uniform Negotiable Instrument Law, sec. 2782, Hemingway's Code 1927; Love v. Dakin, 147 Miss. 835; Hattiesburg Chero-Cola Bottling Co. v. NuGrape Bottling Works, 150 Miss. 762; Baum v. Lynn, 72 Miss. 932; 8 C.J. 744, secs. 1017-1019; 22 C.J. secs. 1555-1569.
R.H. J.H. Thompson, of Jackson, for appellee.
There is no inconsistency between praying for rescission of a written contract because executed under a state of facts rendering it non-enforcible for fraud, imposition and overreaching and asking its reformation, making the written evidence the true actual agreements of the parties.
In this case if the contract as written is non-enforcible and the court below was warranted in rescinding it the appellant, complainant, was properly denied relief. If, however, the facts showed that the defendants were entitled to a reformation of the contract, making it evidence the true agreements of the parties, then the machine contracted for was never shipped by the complainant to the defendants, and the bill of complaint was properly dismissed.
Appellants filed their bill against appellees in the chancery court of Lincoln county, seeking foreclosure of a purchase-money lien against a planer, matcher, and molder purchased by appellees from appellants, and a personal judgment over if the machine failed to sell for a sufficient amount to pay the balance of the purchase money. Appellees answered the bill, and made their answer a cross-bill, charging that the contract and notes which were the basis of the suit were procured by appellants through false and fraudulent representations, and asked for a judgment for the amount of the installments already paid on the machine by appellees, together with damages, and the cancellation of the notes and contract sued on. There was a trial on original bill, answer, and cross-bill of appellees, appellants' answer to the cross-bill and proofs, resulting in a final decree canceling the notes and contract, and requiring appellants to pay to appellees the amount paid by the latter on the machine, together with interest; but denied special damages. From that decree appellants prosecute this appeal.
In its decree the court found as a fact that the contract and notes evidencing the purchase of the planer by appellees were procured by false and fraudulent representations of appellants. Appellees made a cash payment on the purchase price of the planer, and, as provided in the contract, gave their notes for the balance in three equal installments, due in three, six, and nine months. Two of the notes were paid; the last one due remained unpaid.
The contract evidencing the transaction provided, among other things, that, in case of rejection, "the undersigned (Louis Cohn Brothers) would promptly deliver the planer to the consignor, f.o.b. Cincinnati; that a retention of the property bought after thirty days from arrival at destination, shall constitute a trial and acceptance, be a conclusive admission of the truth of all representations made by or for the consignor, and a fulfillment of all its contracts of warranty, express or implied; and that this contract shall not be modified or added to by any agreement not expressly stated herein."
Appellants contend, in the first place, that no fraud is shown; and, in the second place, that, if fraud was shown, appellees were estopped from setting it up by the thirty-day trial and acceptance provision in the contract above set out, appellees having retained the machine after the thirty-day period.
We think there was sufficient evidence to sustain the chancellor's finding that the purchase-money contract and notes were procured by the false and fraudulent representations of appellants. The chancellor found substantially the following facts: Appellees wanted a planer to operate in connection with their portable sawmill, but knew nothing about such machines. Appellants were engaged in selling such machines, and represented to appellees that they knew and had what they needed. Appellees were acting in good faith throughout, and upon the "continued representations of appellants that if properly handled the planer would do the work for which appellees wanted it." Appellants induced appellees to change operators of the planer from time to time and otherwise experiment with it. Upon appellees' advice finally an operator of planers of forty years' experience tried out the machine, and advised appellees that it was too frail and light to render the service for which it was sold, and which appellants represented that it would perform. This expert made a personal examination and test of the machine for several days. He and others testified that it would not do the work for which it was sold. The representative of appellants went out to the mill, and examined the planer, and afterwards admitted that it was not suitable for use in connection with a portable sawmill. After appellees purchased the machine, appellants on receiving numerous complaints from time to time that it would not do the work, continued to represent to them that it would do the work, and insisted that the trouble must be with the operator. Appellees changed operators, and tried in other respects to carry out the suggestions and instructions of appellants. These representations and inducements by appellants were carried on long after the thirty-day trial and acceptance period had expired. The court expressly found in its decree that appellees acted in perfect good faith, while appellants induced the appellees to purchase the machine through false and fraudulent representations in reference to its performance, and that the machine "was utterly worthless and useless for the purpose for which it was sold."
Fraud vitiates everything it enters into. The contract and notes which were the basis of this suit, having been procured by fraud, are void in all of their provisions — the fraud permeated the whole transaction. Every provision of the contract evidencing the transaction was avoided by the fraud, and this, of course, included the thirty-day trial and acceptance provision of the contract. Wren v. Hoffman, 41 Miss. 616; Davis v. Heard, 44 Miss. 50; Insurance Co. v. Antram, 86 Miss. 224, 38 So. 626; Folkes v. Pratt, 86 Miss. 254, 38 So. 224; Henry v. Rawleigh Co., 152 Miss. 320, 120 So. 188.
Where goods are purchased on material representations of the seller, and not upon the purchaser's own judgment, and the representations are false, and induced the purchaser to make the bargain, the contract cannot stand, regardless of whether the seller had an actual fraudulent intent or not. Putting it differently, if the seller makes material representations of fact without knowing whether they are true or false, this is fraud in law, and the seller must make his statement good. Hall v. Thompson, 1 Smedes M. 443; Oswald v. McGehee, 28 Miss. 340; Rimer v. Dugan, 39 Miss. 483, 77 Am. Dec. 687; Lindsey v. Lindsey, 34 Miss. 432; Alexander v. Meek, 132 Miss. 298, 96 So. 101.
The thirty-day trial and acceptance provision in the contract go down with the balance of the contract; appellants' fraud was as fatal to that as to the other provisions of the contract. Where the execution of a contract is procured by fraud, the party is not bound by a clause therein precluding him from setting up fraud within a reasonable time. 13 C.J. 394, 395. And, furthermore, appellants by their course of conduct waived this provision in the contract.
After following out appellants' suggestions from time to time as to how the machine could be made to do the work for which it was intended, appellees were finally convinced that the machine was utterly unfit and incapacitated for the purposes for which it was purchased, and thereupon wrote appellants, rescinding the contract, and stating that they held the machine subject to appellants' order. The contract provided that, if appellees rejected the machine, they would promptly deliver it to appellants f.o.b. Cincinnati, Ohio. Appellees did not so deliver the machine because they were notified by appellants that the latter would not agree to a rescission of the contract, and declined to accept the machine back. Appellees, therefore, were not required to do the vain and useless thing of shipping the machine back to Cincinnati to appellants, when the latter had notified appellees that they would not accept it.
Affirmed.