January 9, 1939.
In buyer's action for fraud, evidence authorized finding that automobile was sold under false representation as to mileage and that such representations was the material factor which induced the trade.
A misrepresentation that speedometer, showing 5,341 miles, correctly represented mileage was sufficient to avoid contract for sale of automobile, which had been actually operated 14,380 miles.
A buyer who has been deceived by material false representations in procurement of contract rendering it void may elect to rescind and to be restored to position he occupied at time of sale, but he must act promptly and return to seller that which buyer obtained as part of sale, and thereupon seller must restore to buyer anything of value which seller obtained from buyer as consideration.
A buyer who has been deceived by material false representations in procurement of contract may retain property and recover from seller difference between actual value of property in condition it was when delivered to buyer and the price paid by him to seller.
$200 to buyer for fraud in sale of automobile, for which buyer agreed to pay $711.77 and gave his automobile, valued at $200, $36 cash, and note for balance, was not excessive where testimony for buyer was that actual value of automobile did not exceed $350, and automobile was repossessed from buyer by finance company holding note and assignment of conditional sales contract, leaving buyer liable on note.
APPEAL from the circuit court of Jones county; HON.W.J. PACK, Judge.
Welch Cooper, of Laurel, for appellant.
It was understood by Sumrall that he was buying a car that had been used. The trouble is that he now says that he thought the car had been driven only about five thousand miles when in fact it had been driven fifteen thousand miles. That in short is the contention of the appellee and was his contention in the court below. Appellant contends that no matter what was said between the parties, that the result was that there was a solemn contract entered into between the parties and all representations made by the agent of the appellant were superseded by the written contract. Our court has many times so held.
J.I. Case Threshing Machine Co. v. McCoy, 72 So. 138, 111 Miss. 715; McInnis v. Manning, 95 So. 250. 131 Miss. 119; Dowling v. Smyley, 116 So. 294, 150 Miss. 272; State Highway Dept. v. Duckworth, 178 So. 148; Belleville Supply Co. v. Dacey, 141 Miss. 569, 106 So. 818; Gerard Motor Co. v. McEachern, 150 Miss. 437, 116 So. 818; Pritchard v. Hall, 167 So. 629; J.B. Colt Co. v. Harris, 171 So. 695; Industrial Finance Corp. v. Wheat, 142 Miss. 536, 107 So. 382.
The clearest discussion that we have found on the right to rescind a contract and what must be done by a defrauded party who elects to rescind, is found in Vol. 6 R.C.L. under the subject of "Contracts," Section 316.
For the purpose of this discussion, we are treating the matter as if there had been a perfect offer on the part of the appellee to rescind the contract. The record does not reveal this, but assuming that there was an offer to rescind and a tender of the automobile by the appellee (and the record certainly does not show this tender of the automobile by appellee), nevertheless, the appellee did not leave the automobile at the place of business of the appellant but continued to use it and treated it as his own. The rule is that where a purchaser after rescinding the contract of sale, held the goods in his possession, treated the property as his own, after the fraud is discovered, he has forfeited his proffered rescission. In other words, the situation is analogous to one who makes a tender of money. The tender must be kept alive. In this case the tender was not kept alive.
Comer v. Franklin, 53 So. 797; Everett v. Pickens, 83 So. 33; Tarkington v. Purvis, 9 L.R.A. 607; Jagers v. Griffin, 43 Miss. 134; Shade v. Diamond L. Service Station, 114 So. 260, 148 Miss. 157; Alig v. Lackey, 75 So. 139, 114 Miss. 392; Pritchard v. Hall, 167 So. 629, 175 Miss. 588; J.B. Colt Co. v. Harris, 171 So. 695, 177 Miss. 536.
A waiver of, or estoppel to exercise, the right of the buyer to rescind arises where, after discovering the fraud or defect, he retains the property without objection, or retains and uses or sells it, treats or deals with it as his own or exercises any acts of ownership over it.
55 C.J., sec. 254.
F.B. Collins, of Laurel, for appellee.
It is just as elementary and just as much "Horn Book" law that fraud vitiates everything into which it enters, even solemn written contracts, as the rule referred to by appellant's counsel.
Gross v. McKee, 53 Miss. 536.
One who obtains a written contract by means of false and fraudulent representations cannot shut out evidence as to such representations on the ground that it explains or contradicts the written instrument.
12 R.C.L. 397, sec. 145; Nash Miss. Valley Motor Co. v. Childress, 125 So. 709; Lizana v. Edward Motor Sales Co., 141 So. 295; Gross v. McKee, 53 Miss. 536; Hirschburg Optical Co. v. Jackson, 63 Miss. 21; Henry v. W.T. Rawleigh Co., 152 Miss. 320, 120 So. 188.
Counsel argues that it was error to admit the evidence of Stringer, the former owner of the car, to the effect that he had run the car 15,000 miles while he owned it, and that it was in bad condition at the time he turned it back to the appellant. But in this counsel is in error because this goes to show the falsity of the representations made to appellee by Gartrell, appellant, president and general manager, at the time of the sale.
Nash Miss. Valley Motor Co. v. Childress, 125 So. 709.
An offer to rescind the contract is not necessary in order to entitle the purchaser to maintain an action for damages for the fraud. It is necessary where he seeks to recover back the consideration paid; then he must offer to return what he has received, and rescind the contract.
Myers v. Estelle, 47 Miss. 4.
Whenever fraud is perpetrated by one party to the injury of another, the offender is liable, and the most solemn transactions may be set aside and rendered inoperative. Accordingly, the defrauded party may elect to rescind and be restored to his former position. On the other hand, he may elect to affirm the transaction and sue either for the benefits to which he is entitled thereunder or for damages for the deceit.
12 R.C.L., page 406, sec. 153 and page 413, sec. 158.
Sumrall, the appellee, brought an action against Laurel Auto Supply Company in the County Court of Jones County for damages for fraud and deceit. On the trial of the case the jury returned a verdict for $200. The case was appealed to the Circuit Court and affirmed, and appeal is prosecuted here.
The fraud alleged and proven almost conclusively was that the appellant sold a car, which had been used as a demonstrator, to Sumrall and accepted in payment therefor a used car owned by Sumrall as a payment of $200, and $36 cash. He executed an installment agreement, the substantial elements of which have been many times before this Court, and also his promissory note for the balance to be paid in monthly installments. The note was a negotiable instrument. It was transferred to a finance corporation, a third party, without recourse by the appellant. Likewise, the conditional sales contract of Sumrall was assigned to the finance company.
The fraud proven was that while the car was sold as a used car, it was likewise sold as a demonstrator car, and, at the time of the making of the contract between Sumrall and the automobile company, the speedometer on the car showed that it had been operated a mileage of 5,341 miles. Gartrell, the general manager of the automobile company, told Sumrall, in the presence of witnesses, that the speedometer correctly represented the mileage. It was shown without contradiction that when the automobile company had repossessed the demonstrator car from the person to whom it was first sold, the speedometer then showed that the car had been operated 14,380 miles. There was other evidence that the car was in bad order within three days after the consummation of this trade. The jury could not have found otherwise on the facts in this case but that the car was sold under this false representation, and that this representation was the material factor which induced the trade. There were other misrepresentations, but the one as to the mileage was sufficient to render void the contract regardless of the other matters. See Nash Mississippi Valley Motor Co. v. Childress, 156 Miss. 157, 125 So. 708, and Lizana v. Edward Motor Sales Co., 163 Miss. 266, 141 So. 295, and the authorities therein cited.
A purchaser of property who has been deceived by material false representations in the procurement of the contract, which renders it void, may elect to rescind and to be restored to the position he occupied at the time of the sale. He must, however, act promptly and return to the seller that which he, the buyer, obtained as a part of the sale, and thereupon the vendor is under obligation, and it is his duty, to restore to the buyer anything of value which the seller has obtained from him as a consideration therefor. Or he may retain the property and recover from the seller the difference between the actual value of the property in the condition as it was when delivered to him, and the price paid by him to the seller therefor.
The evidence introduced on behalf of appellee was to the effect that as soon as he discovered the misrepresentation within about three days he offered to return the automobile he had received to the seller and demanded the restoration of his old car and the cash he had paid. The seller declined to do this. Thereafter the appellee retained the car and used it as if his own for several months until it was taken from him by a third party on a writ of replevin instituted by the finance company, the owner of the conditional sales contract.
We will assume, for the purpose of this decision, but not so deciding, that the retention of the car by the appellee waived his right to a rescission.
The testimony is on behalf of appellee that the actual value of the automobile at the time of the sale did not exceed $350. Omitting the carrying charges, the price he agreed to pay for the car was $711.77, of which he paid his car, valued at $200, and $36 cash, and executed a note for the balance, plus carrying charges. Had he paid the full contract price in cash at the time of the void sale, there could be no debate as to the measure of damages to be applied in this case, which under appellee's evidence would be the difference between $711.77 and $350, which would be far in excess of the $200 which the jury allowed the appellee.
The note was immediately sold by the appellant to an automobile finance company, and without recourse, and was negotiable. The amount paid to the appellant by the finance company for the note is not shown, but for the purpose of this discussion it may be assumed that appellant collected from the finance company the face of the note, less the carrying charges. It is material to emphasize here that the note went into the hands of a third party without notice so far as this record discloses so that the appellee has no defense against the note in the hands of a third party. The appellee was not shown to have been insolvent. We therefore must assume that the appellee can be coerced into the payment of the note, or whatever may be due on it. It is not shown in this record what the finance company received for Sumrall's car, which it had repossessed, but if the amount of the value as shown by appellee's evidence should be taken as the proper credit, still there would be much more due than the $200 allowed by the jury.
The appellant's testimony, however, was that the car was worth, at the time of the trial, about $700. The jury saw the car. If the jury had adopted the appellant's evidence as to the value of the car then it would be clear that with the car repossessed from him credited on his note, at what appellee says was its value, his note to the finance company would be fully discharged.
However, this record only shows that the note is still an outstanding liability of the appellee, and that it is in the hands of a third party, and there is nothing in this record to show that he cannot be compelled to pay whatever the finance company may establish as being the balance due on the note, if anything. The note appears to be in the hands of a third party as a holder for value without notice, which so far as this record discloses leaves the appellee without a defense thereto. So that we conclude the case, which stands before us, as if the appellee had paid the full contract price, less the carrying charges.
It would seem from this statement of facts that the jury ought to have returned a verdict for $236, the value of the car traded in by appellee, and the cash paid by him, as a minimum. Yet the jury saw the car and heard the evidence as to its remaining in the possession of the appellee for several months, which may account for the jury's verdict.
This statement of the case leads us to the conclusion that there is no reversible error in the record.