Brown v. Techdata Corp., Inc.

• Decision Date: 05 April 1977
• Docket Number: No. 31990,31990
• Citation: 234 S.E.2d 787,238 Ga. 622
• Parties: David L. BROWN et al. v. TECHDATA CORPORATION, INC., et al.
• Court: Georgia Supreme Court

Page 787

234 S.E.2d 787

238 Ga. 622

David L. BROWN et al. v. TECHDATA CORPORATION, INC., et al.

No. 31990.

Supreme Court of Georgia.

April 5, 1977.

Rehearing Denied April 21, 1977.

Hayes & Hayes, Mose S. Hayes, Jr., Atlanta, for appellants.

Sutherland, Asbill & Brennan, John A. Chandler, Strother & Weiner, Beryl H. Weiner, Nall, Miller & Cadenhead, Gerald A. Friedlander, Atlanta, for appellees.

PER CURIAM.

This is a case of fraud and deceit in which the purchaser of the assets of a printing business sued the seller and others for equitable rescission of the sales contract on the ground that the purchaser had been fraudulently induced to enter the contract.

The purchaser is Richard A. Crawford, plaintiff and appellee. The seller is David L. Brown, defendant and appellant, who was president and major stockholder of the printing business which was incorporated in 1970 as Horizon Ventures, Inc., f/k/a Techdata Corp. (referred to as Techdata I), also a defendant and appellant. The other plaintiff and appellee is also Techdata Corp. (referred to as Techdata II) and was incorporated by Brown in 1974 as the successor corporation to Techdata I.

Other party defendants at trial who are not parties to this appeal are Chapman & Company, the business broker that referred Crawford to Techdata; George J. Morley, Techdata I's principal salesman; and, Rhodes, Inc., Techdata's principal customer. In addition to serving as Techdata's principal salesman, Morley was also one of the vice presidents of Rhodes.

The appellees, Richard A. Crawford and Techdata Corp. II filed the present action in May, 1974, in DeKalb Superior Court, charging David L. Brown, George J. Morley, Rhodes, Inc., Horizon Ventures, Inc., f/k/a Techdata Corp. I and Chapman & Company with various acts, omissions to act, representations, and nondisclosures amounting to fraud and sought a rescission of the purchase and sale agreement, actual and punitive damages, and the expenses of litigation, including attorney fees.

In purchasing the assets of Techdata I, Crawford had executed two promissory notes in favor of Brown, one for $50,000 which Crawford had already paid and one for $63,482.42 which had not been paid. Crawford had also paid Chapman & Company $11,500 in commissions for arranging the sale. Crawford sought.$61,500 in damages (restitution), and $100,000 in punitive damages and expenses of litigation, including attorney fees.

By consent of the parties, the trial court ordered that a prior suit filed by Brown against Techdata II in the DeKalb state court be stayed. The relief sought by Brown in the state court suit for damages on account of the breach of an employment contract entered into between himself and Techdata II was asserted by way of counterclaim in the superior court suit. Brown also counterclaimed for payment of the $63,482.42 promissory note executed by the purchaser.

The defendant, Chapman & Company, filed a motion for summary judgment and it was granted. The case was submitted to a jury but defendant Rhodes' motion for a directed verdict was granted by the trial judge. The jury returned a verdict in favor of the plaintiff and appellee Crawford against the defendants Brown, Morley and Techdata I. Brown and Techdata appeal and urge eight enumerations of error as reasons for reversing the judgment of the trial court.

The first enumeration of error contends that the trial court erred in overruling appellant Brown's motion to allow him to occupy the procedural status of a plaintiff since he was the initial moving party in the litigation by previously suing Techdata II in DeKalb state court. We do not think that the trial court erred in overruling this motion.

By consent of the parties the superior court stayed proceedings in the state court to avoid a multiplicity of suits. Both court proceedings involved the same parties but the state court lacked the power to grant the affirmative equitable relief sought by the appellees. The action taken by the superior court in enjoining the suit in state court was not error nor is it enumerated as error in this appeal. See Robertson v. Barber, 229 Ga. 553, 193 S.E.2d 9 (1972); Carswell v. Scott, 225 Ga. 798, 171 S.E.2d 499 (1969); Code Ann. § 55-103 (Ga.L.1878-9, p. 139). See also Zachry v. Industrial Loan & Investment Co., 182 Ga. 738, 186 S.E. 832 (1936). Jurisdiction over appellant Brown as a defendant in the superior court was properly obtained and appellant filed a counterclaim in the superior court embracing his complaint in the state court. In our opinion, the superior court properly placed the burden upon the appellees in that court and appellant did not object to it. Thus, the trial court did not err in refusing to give appellant Brown the procedural status of a plaintiff in this litigation.

Enumeration of error No. 2 contends that the trial court erred in failing to grant appellants' motions for a directed verdict and judgment notwithstanding the verdict on the ground that the evidence submitted by plaintiff Crawford was insufficient as a matter of law to support an action for fraud and deceit. Certain portions of the documentary evidence submitted by Crawford to the jury, which he argues were very important to the jury's finding of fraud, were omitted from the appeal record by appellants. Although the full transcript of the testimony introduced at trial was filed in this appeal, under these circumstances we will presume that the evidence submitted at trial was sufficient to support the trial court's findings. See, e. g., Satterfield v. Satterfield, 236 Ga. 155, 156, 223 S.E.2d 136 (1976); Nicholson v. Nicholson, 231 Ga. 760, 204 S.E.2d 292 (1974). Code Ann. § 6-805 (Ga.L.1965, pp. 18, 24).

The essential elements in an action for fraud and deceit have been variously stated in the reported decisions. See, e. g., Daugert v. Holland Furnace Co., 107 Ga.App. 566, 130 S.E.2d 763 (1963); Doanes v. Nalley Chevrolet, Inc., 105 Ga.App. 846, 847, 125 S.E.2d 717 (1962); Vaughan v. Oxenborg, 105 Ga.App. 295, 298, 124 S.E.2d 436 (1962); Anderson v. Macy & Co., 101 Ga.App. 894, 896, 115 S.E.2d 430 (1960), and, Brown v. Ragsdale Motor Co., 65 Ga.App. 727, 730, 16 S.E.2d 176 (1941). Stated as succinctly as possible, the plaintiff must show that the defendant made a false, material representation of an existing fact with knowledge that it was false or with reckless disregard as to whether it was true and that it was with the intent that it be acted upon by the plaintiff; and, further, that the plaintiff acted upon the misrepresentation in reasonable reliance of its truth in a manner reasonably foreseeable by the defendant and to the plaintiff's proximate injury.

The appellants argue that any alleged misrepresentations made to the buyer did not involve presently existing facts, were not as a matter of law material, and that as a matter of law the buyer was not reasonable in acting upon the representations of the seller or diligent in attempting to ascertain the truth. Questions of fraud, the truth and materiality of representations made by a defendant, and whether the plaintiff could have protected himself by the exercise of proper diligence are, except in plain and indisputable cases, questions for the jury. See, e. g., Braselton Bros. Inc. v. Better Maid Dairy Products, Inc., 222 Ga. 472, 150 S.E.2d 620 (1966); Travel Wholesale, Inc. v. Herren, 132 Ga.App. 560(2), 208 S.E.2d 571 (1974); Central Chevrolet, Inc. v. Campbell, 129 Ga.App. 30, 198 S.E.2d 362 (1973); Smith v. Holman, 117 Ga.App. 248, 249, 160 S.E.2d 533 (1968); Neville v. Buckeye Cellulose Corp., 118 Ga.App. 439, 164 S.E.2d 257 (1968); Anderson v. R. H. Macy & Co., Inc., 101 Ga.App. 894(1), 115 S.E.2d 430 (1960); Stovall v. Rumble, 71 Ga.App. 30(1), 29 S.E.2d 804 (1944). The evidence introduced by the buyer at trial made out a jury question on each element of fraud and by its verdict the jury resolves each of those questions in favor of the buyer. Consequently, this case cannot be resolved favorably to the seller as a matter of law.

Appellants' third enumeration of error that the trial court erred in failing to grant their motion for a new trial is not supported by argument or citation of authority and will not be reviewed.

In enumeration of error No. 4, appellant makes a two-pronged argument. First, it is argued that the buyer has not made an unconditional and continuing tender of the subject matter of the sales contract which appellants argue is a condition precedent to an aggrieved buyer bringing an action to rescind the contract and suing in tort for fraud and deceit. Using this premise, appellants then argue that the buyer is relegated to an action at law to affirm the contract and sue for damages. So, appellants argue that when the proper legal effect is given to a merger clause in the sales contract, providing that, "no representations, promises or inducements not included herein shall be binding upon any party hereto," the buyer's case collapses.

"A contract may be rescinded at the instance of the party defrauded; but, in order to rescind he must promptly, upon discovery of the fraud, restore or offer to restore to the other whatever he has received by virtue of the contract if it be of any value." Code Ann. § 20-906 ((East Tennessee V. & G. Ry. Co. v. Hayes ) 83 Ga. (558) 560, 10 S.E. 350). See Dimmick v. Pullen, 224 Ga. 452, 162 S.E.2d 427 (1968); Wheeler v. Pioneer Investments, Inc., 217 Ga. 367, 122 S.E.2d 518 (1961). The common law requirement contained in this Code section serves two distinct, although complementary, purposes. It finds application in two distinct types of cases, one commonly referred to as a rescission "at law" and the other called a rescission "in equity." See Dobbs, Remedies, §§ 4.8, 9.4 (1973).

In the rescission "at law" the tender itself effectuates the rescission. "(I)f the sale has been induced by fraudulent representations on the part of the seller as to existing conditions, a contract...