Advance-Rumely Thresher Co. v. Terpening

• Decision Date: 17 November 1920
• Docket Number: 4217.
• Citation: 193 P. 752,58 Mont. 507
• Parties: ADVANCE-RUMELY THRESHER CO. v. TERPENING ET AL.
• Court: Montana Supreme Court

193 P. 752

58 Mont. 507

ADVANCE-RUMELY THRESHER CO. v. TERPENING ET AL.

No. 4217.

Supreme Court of Montana

November 17, 1920

Appeal from District Court, Musselshell County; Charles L. Crum Judge.

Action by the Advance-Rumely Thresher Company against A. W Terpening and others. From a judgment for defendants and an order denying its motion for a new trial, the plaintiff appeals. Reversed and remanded.

M. J Lamb, of Billings, for appellant.

MATTHEWS J.

The complaint herein consists of two causes of action. The first alleges the execution and delivery, for a valuable consideration, by A. W. Terpening and Gertie M. Terpening, his wife, of certain promissory notes aggregating the sum of $1,963.50, dated October 2, 1912; that the payment of said notes and interest was secured by the execution and delivery of a chattel mortgage on a certain traction engine with attachments, a gang plow, breaker bottoms, and stubble bottoms, and all attachments and tools used therewith, and as additional security the execution and delivery of a mortgage on certain real estate. The second cause of action alleges the execution and delivery by the same makers, of certain promissory notes bearing date August 23, 1913, for a valuable consideration and aggregating $1,032, which notes were secured by a chattel mortgage on the tractor engine above mentioned and on a separator, wagon, and other machinery and attachments, and also by a second mortgage on the real estate described in the first cause of action.

The answer admits all of the allegations of the complaint and admits that plaintiff would be entitled to the relief sought, were it not for the facts alleged in nine separate special defenses and counterclaims therein set out. These allege the purchase of the machinery mortgaged from plaintiff's assignor by defendant A. W. Terpening, alleged to have been induced by knowingly false and fraudulent representations; total failure of consideration by reason thereof; breach of the warranties contained in the contracts of sale; the expenditure of $600 in an attempt to make the traction engine work; the payment of $1,200 on the purchase price notes described in the first cause of action, and $195 on those described in the second cause of action, and that the machinery purchased was wholly worthless. As a further separate defense defendants allege that the plaintiff took from their possession the separator and its attachments, and converted the same to its own use, and thereby abandoned its second cause of action. The answer closes with a prayer that plaintiff take nothing, and that defendants be awarded a decree of cancellation of the notes and mortgages, and judgment for the sum of $1,200.

Replying, the plaintiff admits the purchase of the property alleged in the answer, and denies all other allegations of the special defenses and counterclaims; sets up the signed order and agreement of purchase and contract of sale, showing the warranties therein contained and the manner in which the purchaser shall proceed to give notice of a failure of any part of the machinery to fill the warranty, and that failure to so proceed shall constitute a waiver of the warranty and a full release of the company. The reply then alleges that defendants never gave notice of any defect or failure to fill the warranty as provided in the contract and order, or at all.

On the day of the trial the defendants were permitted to make numerous amendments to their answer, among which we find the following:

"The defendants allege that upon the breach of the warranty above set forth, they notified the * * * company thereof, and thereupon its agents and employees at various times attempted to remedy said defects, but were unable to do so; that they thereupon abandoned all attempts to make the engine comply with the warranties, and repossessed themselves of said engine and separator, with all attachments, and rescinded the contract of sale; that the defendants complied with all the provisions of said warranty as to which it was their duty to do anything, and the failure, if any, on their part in this behalf was by reason of the facts above set forth, and the acts of the * * * company above alleged, waived by said company."

The action seems to have been tried throughout by both the court and counsel, on the theory that it was an action at law, and resulted in a verdict for $1 in favor of the defendants on which judgment was entered for $1 and costs. The plaintiff has appealed from the judgment and an order denying its motion for a new trial.

On the trial the plaintiff introduced the notes and mortgages and evidence of the devolution of title thereto from the Rumley Products Company to itself, and rested.

1. At the opening of the defense, counsel for plaintiff moved the court to compel the defendants to elect on which of their several defenses they would rely, which motion was denied, the court stating that the ruling was "with the understanding that there isn't any question of rescission in the case." The court thereupon announced:

"The position of the defendants is two defenses. One is that there was no consideration at all, that the machinery was worthless; and the other is that there was a breach of warranty, and that they were entitled to recover the amount of money expended in trying to get the thing to work." While it is difficult to ascertain just what position the defendants take in their nine separate defenses, it seems clear that they rely, first, on a rescission of, or the right to rescind, the contract and have the money which they had paid on the contract returned to them, by reason of the alleged failure of consideration; and, second, on their right to recover damages for a breach of warranty, and this is indicated even in the statement of the court in narrowing the issues, as above quoted. This being conceded, the court should have granted the motion and compelled the defendants to elect on which of the two defenses they would rely.

Although it is permissible, under our procedure, to set forth inconsistent defenses, they must not be so inconsistent as to be incompatible. Johnson v. Butte Copper Co., 41 Mont. 158, 108 P. 1057, 48 L. R. A. (N. S.) 938; Day v. Kelly, 50 Mont. 306, 146 P. 930; Chenoweth v. Great Northern Ry. Co., 50 Mont. 481, 148 P. 330. The buyer may affirm the contract and sue for damages for the breach of warranty, or he may rescind the contract and sue for a recovery of the money paid; but he cannot insist that the contract has been rescinded and yet recover on the contract. 30 Am. & Eng. Enc. of Law (2d Ed.) 199; Abraham Bros. v. Browder, 114 Ala. 287, 21 So. 818; Osborne & Co. v. Poindexter (Tex. Civ. App.) 34 S.W. 299; Houser & Haines Co. v. McKay, 53 Wash. 337, 101 P. 894, 27 L. R. A. (N. S.) 925; Doornbos v. Thomas, 50 Mont. 370, 147 P. 277.

As was said by this court in the Doornbos Case:

"When the plaintiff, after a fair trial of the drill, discovered the defects in it, he had these options: (1) To rescind the contract if the facts justified it and recover the purchase price; * * * (2) to retain the drill and bring his action for damages for a breach of the warranty; or perhaps (3) to bring his action for the fraud practiced upon him. * * * If the purchaser elects to exercise the first option, he is bound by his election, and cannot thereafter sue for a breach of the warranty. The measure of damages is the purchase price [[citing cases]. The rule as stated in these cases prevails in most jurisdictions, even though title has passed to the purchaser, and the contract does not specifically stipulate for a rescission. In this jurisdiction the right of the purchaser to rescind does not exist if title has passed to him, unless the warranty was intended to operate as a condition. Rev. Codes, § 5121. Subject to this limitation, the rule as stated above must be correct, for the reason that by exercising his option to rescind the purchaser has elected to extinguish the contract (Rev. Codes, § 5062), and by doing so has dissolved entirely his relation with the seller created by it, thus incidentally adjusting also all the rights growing out of it. In Abraham Bros. v. Browder, supra, the rule is stated thus: 'There must be a subsisting contract to support an action for a breach of warranty. If the facts justify it, a buyer may rescind a contract and sue for the purchase money paid; or he may sue and recover damages for a fraud practiced upon him; or he may affirm the contract and maintain an action for breach of warranty. He cannot insist that a contract has been rescinded, and yet recover on the contract.' "

However, as defendants continued in possession and operated the machinery throughout the fall of 1912 and the seasons of 1913 and 1914, and in fact up to the time of the commencement of this action when the property was taken into the custody of the sheriff, there can be no question of a rescission of the contract, and they must defeat the plaintiff's case, if at all, on the theory of a breach of warranty.

2. Plaintiff's fourth, fifth, sixth, and seventh assignments of error are directed to the insufficiency of the evidence to warrant the verdict, and will be considered together.

As to the notes and mortgages set forth in the second cause of action, aggregating the principal sum of $1,032...