Achenbach v. Mears , 272 Mich. 74 ( 1935 )

This appeal presents a controlling issue of fact. After seeing and hearing the witnesses for the respective parties the circuit judge found defendants guilty of actionable fraud. He denied relief to plaintiffs by way of rescission, and in lieu thereof, decreed that defendants should respond in damages to plaintiffs, the amount awarded to be deducted from a chattel mortgage which defendants took from plaintiffs in consummating the fraudulent transaction. The findings of the circuit judge, covering 10 pages of the printed record, contain a careful and detailed recapitulation of the testimony. I am of the opinion that the decree entered in the circuit court is sustained by the proofs in the case.

The relief was granted solely on the ground that defendants fraudulently misrepresented to plaintiffs the size or amount of the stock of general merchandise which defendants, as a part of this transaction, traded to plaintiffs for their equity in a farm. Plaintiffs allege this stock was represented by defendants to inventory at approximately $4,600. Defendants admit it was represented to be of an inventory value of approximately $4,000. The circuit judge found this value did not exceed $2,000. This finding is supported by an inventory made about six months after plaintiffs took possession of the stock. This inventory was obtained by adding to the stock then on hand the amount of merchandise sold by plaintiffs in the meantime and by deducting from this total the amount of the merchandise bought by plaintiffs and placed in stock during the same period. Fairly accurate records were presented of both the purchases and sales. In addition there was credible testimony that at or about the time suit was started this stock was larger than when plaintiffs took possession, and an inventory taken at this later date disclosed a value of approximately $2,300. The record is convincing that defendants misrepresented the size and value of this stock of general merchandise.

There was delay on the part of plaintiffs in bringing suit for rescission, accounting, etc. We quote a part of the record bearing upon the circumstances surrounding such delay and also upon plaintiffs' reliance upon defendants' alleged misrepresentation. Plaintiff John A. Achenbach testified:

"I did have a discussion or talk with Mr. Mears about the inventory which he had taken. He told me that they had just completed their inventory due to this cotton tax, and that it amounted to $4,600. He told me that I should say perhaps a week before the agreement. I asked to see the inventory. He first told me it was over to the house and Mr. Mears and I went over to the house, and when we got over there, he said he couldn't find it; it must be back to the store, and wasn't anything more said that night about it. The inventory was mentioned two or three different times. I never saw the inventory. We did discuss a little bit about the inventory, but Mr. Mears dissuaded me in having one taken. * * *

"Q. Did you place your sole reliance upon the representations that Mr. Mears made to you as to the value of the merchandise?

"A. Yes. * * *

"Q. You have testified that Mr. Mears represented to you that the inventory which he had just completed amounted to $4,600?

"A. That is right.

"Q. In entering into this agreement did you rely upon that statement of Mr. Mears' that the inventory amounted to $4,600?

"A. I did. * * *

(Cross-examination:) I never had any experience in a mercantile business, nor had my wife. * * * I didn't have any idea exactly how much the stock was worth, except what Mr. Mears told me.

"Q. Didn't make any effort to learn, did you?

"A. The reason that we —

"Q. (Interrupting:) Answer the question; didn't make any effort to learn?

"A. No, sir. I had no inventory taken."

On cross-examination plaintiff further testified:

"Q. So far as you are concerned, you went there and looked the stock over, he had been up and seen your farm, and you decided to trade?

"A. Yes, sir.

"Q. You relied on your own judgment, you and your wife?

"A. Yes, sir."

But on redirect examination he testified as follows:

"Q. You have testified, Mr. Achenbach, that up to the time the deal was made you relied on your own judgment in making the deal?

"A. That is right. * * *

"Q. What did you rely on in forming your judgment, in making your judgment?

"A. Well, mostly, of course, on what Mr. Mears had told me * * * partially on my own, and it was Mr. and Mrs. Mears told Mrs. Achenbach and myself a great many things in regard to the store and more or less influenced us that way. * * *

"Q. What did you rely on in determining that it was a fair trade?

"A. Well, on Mr. Mears' inventory and his figures."

Further, as bearing upon the question of delay in taking an action in consequence of the alleged fraud, the same witness testified (cross-examination):

"Q. Two weeks after you took possession (November 2, 1933) you discovered you had been defrauded, didn't you?

"A. Yes, to a certain extent.

"Q. Why didn't you take an inventory?

"A. Well, it is like I said this morning: In the first place, if Mr. Mears had gone ahead and settled up his back accounts, I wouldn't have said anything about it, but since he didn't — (witness interrupted) * * * I don't know as I ever complained to him about the inventory being smaller than what we thought. It was perhaps, oh, six weeks or two months before we had really decided that there wasn't as much merchandise as what there was supposed to have been. * * *

(Direct examination:)

"It took me six weeks or two months because we were totally unfamiliar with the grocery business or dry goods and it was after the salesmen began calling and we began getting acquainted with them that we started asking questions. * * *

(Cross-examination:)

"Q. So the reason you didn't discover that this inventory wasn't as large as it should have been When you bought it, because you were unfamiliar with the business, isn't that so?

"A. That is right.

"Q. And you didn't discover that until when? * * *

"A. Probably six weeks or two months before we were certain that it wasn't, or quite certain.

"Q. Two months. Two months at the most you knew the inventory wasn't what it should have been?

"A. Yes, sir, we figured it wasn't."

In disposing of this case it should be borne in mind that it now presents only the question of awarding damages if plaintiffs have established the alleged fraud. Appellants have not questioned, nor could they question, jurisdiction of the equity court to dispose of the whole matter, because they filed a cross-bill in which equitable relief was also sought by them but not granted in the circuit court.

In the opinion filed the circuit judge said:

"Our first impression upon this record might easily be that plaintiffs acquiesced in the situation with full knowledge of it and that they waived fraud, if any, that had been perpetrated upon them, but, upon mature consideration and deliberation, I think we cannot rightfully conclude that plaintiffs at any time, with full knowledge and understanding of the situation, acquiesced in such, if any, wrong as had been perpetrated nor that they knowingly and understandingly waived such, if any, fraud as had been perpetrated. It seems very clear to me that defendants definitely and intentionally overreached the plaintiffs in respect to the — at least in respect to the inventory and the value of the stock just prior to the exchange. I am satisfied that the defendants materially misrepresented the value of the merchandise, the inventory of the merchandise, to plaintiffs who were, because of an entire lack of experience in such affairs, wholly at a loss to cope with the statements and representations made by the defendants."

One who makes a fraudulent misrepresentation as to a matter exclusively within his knowledge, as did the defendants in the instant case relative to inventory value of the stock, cannot seize upon the theory of caveat emptor as a means of defense.Johnson v. Campbell, 199 Mich. 186; John Schweyer Co. v.Mellon, 196 Mich. 590.

"In a suit to rescind a contract on the ground of fraud and deceit, it is no defense that plaintiff was unduly gullible."Bailey v. Perkins (syllabus), 224 Mich. 27.

See, also, O'Neill v. Kunkle, 244 Mich. 653.

"This court has frequently held that it does not lie with the perpetrator of a fraud to say that his victim was too credulous, and reposed too much confidence in those with whom he dealt and who assumed to have superior knowledge of the subject upon which they spoke." Matteson v. Weaver, 229 Mich. 495; citing cases.

Even in a case wherein rescission, instead of damages, was decreed we have stated the rule as to delay barring recovery as follows:

"This court has many times held that one seeking relief for fraud must act promptly after its discovery. Draft v.Hesselsweet, 194 Mich. 604; Bowen v. Stocklin, 215 Mich. 341. The mere lapse of time, however, is not sufficient to constitute laches. Backus v. Backus, 207 Mich. 690; Walker v.Schultz, 175 Mich. 280; Humiston, Keeling Co. v. Yore,181 Mich. 629. The delay in moving may always be explained, and, if satisfactorily accounted for, relief will be granted, notwithstanding the lapse of time. Mulheron v. Henry S. KoppinCo., 221 Mich. 187." Bayley v. Friedberg, 226 Mich. 125, 128.

"While we hear chancery cases de novo and are not controlled by the finding of fact of the trial judge, we should not overlook the fact that he had an advantage we do not possess, that of seeing, hearing the witnesses in open court. While not controlling, his opinion as to their credibility is always helpful." Steele v. Shaffer, 241 Mich. 632.

Under this record, I am of the opinion that the decree entered in the circuit court should be affirmed, with costs to appellees.

BUTZEL and BUSHNELL, JJ., concurred with NORTH, J. NELSON SHARPE, J., did not sit.