Essenburg v. Russell

• Decision Date: 04 September 1956
• Docket Number: No. 78,78
• Citation: 78 N.W.2d 136,346 Mich. 319
• Parties: Andrew ESSENBURG, Jr., and Jeannine Essenburg, Plaintiffs and Appellees, v. Otto RUSSELL and Beatrice Russell, Defendants and Appellants.
• Court: Michigan Supreme Court

Page 136

78 N.W.2d 136

346 Mich. 319

Andrew ESSENBURG, Jr., and Jeannine Essenburg, Plaintiffs and Appellees, v. Otto RUSSELL and Beatrice Russell, Defendants and Appellants.

No. 78.

Supreme Court of Michigan.

Sept. 4, 1956.

John W. Bellamy, Petoskey, for defendants and appellants.

John S. Clark, Petoskey, for plaintiffs and appellees.

Before the Entire Bench.

CARR, Justice.

This is an action for damages based on a claim of misrepresentation in the sale of a grocery store and business in the City of Charlevoix. Prior to November 29, 1952, defendants were operating said store as proprietors under a contract of purchase from a third party. Following some negotiations between plaintiffs and defendants the former agreed to pay the sum of $25,000 for the property, including the merchandise on hand and the good will. The agreement was reduced to writing and signed by the parties. It is the claim of the plaintiffs that defendants stated during the negotiations that the cost price of the stock of goods and merchandise in the store was approximately $4,000. The contract referred thereto in specific terms, stating that 'the said stock of goods and merchandise being of the value of approximately $4,000.00 cost price * * *.'

Plaintiffs went into possession of the store on the 1st of December following the execution of the agreement. It is their claim that they concluded after an examination of the stock that the cost price was less than had been represented to them by defendants. Accordingly they, with the assistance of other parties who were experienced in the grocery business, made an inventory which, as they claimed on the trial of the case, disclosed that the cost price of the stock of goods at the time of purchase was not approximately $4,000 but was in fact about one-half that sum. Plaintiffs complained to defendants immediately following the taking of the inventory, but no adjustment of the matter was made. Subsequently, under date of December 15, 1952, defendants by letter offered to rescind the transaction. Such offer was not accepted by plaintiffs, it being their claim, as found by the trial court, that they had altered their position by selling their home in Flint, removing to Charlevoix, and taking over the operation of the store.

Plaintiffs started the present case on December 24, 1952. The declaration filed alleged the claimed misrepresentation as to the cost price of the merchandise in the store and the statement in the contract above mentioned. It further set forth that as of November 29, 1952, the date of the contract, said cost price was the sum of $1,948.70. Defendants by their answer denied that they had misrepresented the cost price of the stock of goods, alleging in substance that the attorney who prepared the contract requested information as to the value of merchandise on hand and that defendants then insisted that they did not know the approximate cost price of the stock. The figure of $4,000 was inserted in the contract, apparently with the acquiescence and approval of the defendants. The answer further set forth defendants' offer to rescind the transaction, take back the store, and return to plaintiffs the sum of $10,000 which had been paid on the contract.

Based on the testimony offered and received at the trial the circuit judge, hearing the matter without a jury, determined that plaintiffs had established the making of the representation as claimed and that the actual cost price of merchandise on hand at the time of the transaction was substantially as claimed by them. Judgment was accordingly entered in their favor in the sum of $1,816.41. In determining said amount the trial court gave defendants credit for the claimed value of certain empty bottles on the premises, for meat on hand, and for certain other minor items omitted by plaintiffs from their inventory. Defendants have appealed.

At the outset of the trial in circuit court counsel for defendants moved to dismiss the case on the pleadings filed. It was claimed in support of said motion that the declaration failed to state a cause of action for damages on the ground of fraud and deceit. Reference was also made to the offer of rescission, it apparently being the theory of defendants that such action tended to negative any intention on their part to deceive plaintiffs. Decision on the motion was reserved. It is apparent from the opinion of the trial judge that he came to the conclusion that defendants' claims as to the pleadings were without merit.

It clearly appears from the record that the case was tried in circuit court on the theory of misrepresentation rather than of intentional fraud and deceit. In Holcomb v. Noble, 69 Mich. 396, 37 N.W. 497, it was held that:

'The doctrine is settled in this State that if there was in fact a misrepresentation, though made innocently, and its deceptive influence was effective, the consequences to the plaintiff being as serious as though it had proceeded from a vicious purpose, he would have a right of action for the damages caused thereby either at law or in equity. Converse v. Blumrich, 14 Mich. 109; Steinbach v. Hill, 25 Mich. 78; Beebe v. Knapp, 28 Mich. 53; Webster v. Bailey, 31 Mich. 36; Starkweather v. Benjamin, 32 Mich. 305; Baughman v. Gould, 45 Mich. 483 .' (Syllabus 3.)

In Busch v. Wilcox, 82 Mich. 315, 336, 46 N.W. 940, an instruction to the jury by the trial court, based on the holding in the Holcomb case, was approved. In Rosenberg v. Cyrowski, 227 Mich. 508, 551, 198 N.W. 905, the rule as announced in the earlier decisions was recognized in the following language:

'When action is brought to recover for false and fraudulent representations made by one party to another in a transaction between them, any representations which are false in fact and actually deceive the other and are relied on by him to his damage are actionable, irrespective of whether the person making them knew them to be false or acted in good faith in making them, when the loss of the party deceived inured to the benefit of the other. Holcomb v. Noble, 69 Mich. 396, 37 N.W. 497; Busch v. Wilcox, 83 Mich. 315, 46 N.W. 940; Aldrich v. Scribner, 154 Mich. 23, 117 N.W. 581, 18 L.R.A.,N.S., 379; Hubbard v. Oliver, 173...