Ernst Iron Works, Inc. v. Duralith Corp.

• Citation: 270 N.Y. 165,200 N.E. 683
• Parties: ERNST IRON WORKS, Inc., v. DURALITH CORPORATION et al.
• Decision Date: 03 March 1936
• Court: New York Court of Appeals

270 N.Y. 165

200 N.E. 683

ERNST IRON WORKS, Inc.,

v.DURALITH CORPORATION et al.

Court of Appeals of New York.

March 3, 1936.

Action by the Ernst Iron Works, Inc., against the Duralith Corporation and another. From a judgment of the Appellate Division of the Supreme Court, Fourth Department (243 App.Div. 852, 278 N.Y.S. 1014), which affirmed a judgment of the Trial Term in favor of the plaintiff, the named defendant appeals, by permission.

Judgment of Appellate Division and that of Trial Term reversed, and complaint dismissed.

Appeal from Supreme Court, Appellate Division, Fourth department.

Jesse Freidin, Charles L. Apfel, and Leonard L. Berliner, all of New York City, for appellant.

Irving I. Beckler, of Buffalo, for respondent.

FINCH, Judge.

The defendant is engaged in the manufacture and sale of a wall texture called ‘Duralith.’ Since 1933 it has been manufacturing and selling in addition a coloring material called ‘Duratint.’ On May [270 N.Y. 168]5, 1933, the plaintiff, a corporation having its place of business in Buffalo, N. Y., signed a printed contract for the purchase of 20 tons of Duralith, and at the same time signed an order for Duratint. The contract was submitted to the officers of the defendant corporation and accepted by them. The products ordered were delivered to the plaintiff and payment was made for them. Shortly afterwards, in July of 1933, this action was instituted to rescind the contract on the ground that the plaintiff had been induced to enter into it by fraudulent representations of a sales agent of the defendant.

The contract signed by the plaintiff is a uniform contract used by the defendant. It contains the following clauses:

‘The company makes no representation regarding previous sales in distributor's territory.’

‘No representation or warranty of any kind shall be binding upon either the Duralith Corporation or the dealer unless it has been incorporated in this agreement.’

Despite these provisions of the contract, the plaintiff maintains that the defendant's sales agent, Liberman, told the officers of the plaintiff before they entered into the contract ‘that ‘Duralith’ with colors had not been sold or distributed in the City of Buffalo or County of Erie previously thereto and that if plaintiff entered into said contract that plaintiff would then become the sole distributor for said product in the City of Buffalo and County of Erie in the State of New York and would be the first and only distributor to sell and distribute said product in the said territory. * * *' The evidence offered at the trial shows that the defendant had made two or three small sales of Duralith in the city of Buffalo prior to entering into the contract with the plaintiff. There is no evidence that a distributor for the Buffalo area had previously been appointed by the defendant. The jury returned a verdict in favor of the plaintiff, and the judgment entered thereon has been affirmed.

The defendant maintains that the admission in evidence of testimony of statements made by the sales agent, Liberman, violated the parol evidence rule, since these statements conflict with the provisions of the contract contained in the above-quoted clauses. The plaintiff, however, points to the cases which hold that a person cannot exempt himself from liability for fraud by inserting in his contract a blanket or merger clause. Bridger v. Goldsmith, 143 N.Y. 424, 38 N.E. 458;Jackson v. State, 210 App.Div. 115, 205 N.Y.S. 658; S. Pearson & Son v. Lord Mayor, etc., of Dublin [1907] A.C. 351. See 5 Wigmore on Evidence (2d Ed.) § 2439. No one can dispute the validity and the justice of the rulings in the cited cases. A rogue cannot protect himself from liability for his fraud by inserting a printed clause in his contract. This principle disposes of the blanket clause providing that no representation shall be binding unless incorporated in the agreement. Whether or not parol evidence of statements made by an agent may be introduced in an action for fraud against a corporation where such statements are at variance with specific provisions in a printed contract which was read by the plaintiff is a closer question (see 56 A.L.R. 13, at page 51 et seq.); but it is one which it is unnecessary to consider now since the case at bar may be disposed of on other grounds.

Assuming that parol evidence of the statements of the agent is admissible and that the testimony of plaintiff's witnesses is true, is the plaintiff entitled to judgment against the defendant? This action is one in rescission for fraud. Fraud is an essential element, and must be proven by the plaintiff. Obviously, if the statements made by the agent to the plaintiff were true, there was no fraud. The plaintiff alleged and offered testimony to show that the sales agent stated that Duralith with colors, that is, Duratint, had not been previously sold in Buffalo, and that the plaintiff would become the first and only distributor of that product in the territory. To show the falsity of this statement, it offered proof of one or two small sales of Duralith which were made about six months prior to its own purchase. But there is no claim that it was ever told that Duralith, as contrasted with Duralith with colors, had never been sold in Buffalo. In fact, it admitted that it was informed of one sale of Duralith in Buffalo made several years before its purchase. It may be, however, that Duralith and Duralith with colors so closely resemble each other that a...