Federal Surety Company, a Corp. v. Midwest Construction Company, a Corp.

• Decision Date: 24 December 1929
• Citation: Federal Surety Company, a Corp. v. Midwest Construction Company, a Corp., 228 N.W. 432, 58 N.D. 937 (N.D. 1929)
• Court: North Dakota Supreme Court

228 N.W. 432

58 N.D. 937

FEDERAL SURETY COMPANY, a Corporation, Appellant, v. MIDWEST CONSTRUCTION COMPANY, a Corporation and Herbert F. Schumacher. HERBERT F. SCHUMACHER, Respondent

Supreme Court of North Dakota

December 24, 1929

Appeal from the District Court of Cass County, Cole, J.

Affirmed.

Pierce Tenneson, Cupler & Stambaugh, for appellant.

"Proof of fraud must be clear and convincing . . . fraud must be proved by facts which are inconsistent with an honest purpose." Reitsch v. McClintock, 35 N.D. 555 160 N.W. 694.

"In order to abrogate the effect of a written instrument, the showing of fraud by him who desires to be released must be established by evidence sufficient to satisfy the judgment and conscience of the jury thereof." Rokusek v National Union F. Ins. Co. 50 N.D. 123, 195 N.W. 300; Guild v. More, 32 N.D. 432, 155 N.W. 44; Laskin v. Lee, 50 N.D. 437, 196 N.W. 505.

"If, from the entire evidence on the subject, good faith, or an honest mistake even, may be as rationally and reasonably inferred as fraud, then the law leans to the side of innocence." Steinbach v. Bauclair, 38 N.D. 223, 164 N.W. 672.

"A contract will not be set aside because one of the parties failed to read a portion of the contents before he signed it, when he had ample opportunity to read it and to know the contents, and no misrepresentation to the termis was made to him." Melzner v. Toman, 57 N.D. 639, 223 N.W. 691; Watkins Co. v. Keeney, 52 N.D. 280, 201 N.W. 833; Little v. Little, 2 N.D. 175, 49 N.W. 736; Rokusek v. National Union F. Ins. Co. 50 N.D. 123, 195 N.W. 300; Minneapolis Threshing Mach. Co. v. Hocking, 54 N.D. 559, 209 N.W. 996; Northern Trust Co. v. Havelock Equity Exch. 51 N.D. 346, 199 N.W. 763.

Actual fraud is always a question of fact. Comp. Laws 1913, § 5851.

The falsity of a representation and the intent to deceive are always questions of fact unless indisputably established by the facts. 27 C.J. 75.

"'Inducement' ordinarily relates to the consideration, and is explanatory of the operation of the terms of the contract upon the subject-matter in the minds of the parties." State Bank v. Burke, 53 N.D. 777, 208 N.W. 115.

Lemke & Weaver, for respondent.

"As a general rule fraud in the execution or issue of a bond renders it invalid." 9 C.J. 22.

The neglect of a party to a party induced by the fraud of the other cannot be taken advantage of by the latter. 13 C.J. § 250.

"An indemnitor who is induced to enter into the contract of indemnity by fraudulent representations or concealment on the part of the indemnitee as to some material fact is not bound by the contract." 31 C.J. 421.

"One induced by false representations of another to sign a contract can defend it, though negligent in signing it." Finkelstein v. Hanslin, 188 N.W. 737.

Burke, Ch. J. Birdzell, Nuessle, Burr, and Christianson, JJ., concur.

OPINION

BURKE

This is an action to recover on a general contract of indemnity. There was a judgment against the Midwest Construction Company by default, Herbert Schumacher appearing in defense of his answer.

After the taking of the testimony, and both parties having rested, the plaintiff moved for a directed verdict which was denied, and the jury having returned a verdict for the defendant, Herbert Schumacher, the plaintiff thereafter moved to vacate and set aside the judgment, and for judgment for the plaintiff, notwithstanding the verdict, or in the alternative for a new trial, which motion was denied, and the plaintiff duly appeals from the judgment entered in said action and from the order denying the motion for judgment notwithstanding the verdict, or for a new trial.

It was stipulated in effect, that on the third day of March, 1926, the defendant, the Midwest Construction Company, was awarded a contract by Clay county, Minnesota, for the construction of a section of road in said county; and that on the third day of March, 1926, the defendant, the Midwest Construction Company, applied to the plaintiff for a bond as required by laws of Minnesota, and that on the third day of March, 1926, the plaintiff, as surety executed such bond with the defendant, the Midwest Construction Company, as principal. That the Midwest Construction Company entered upon the performance of the work of constructing said highway, employing labor, purchasing tools, machinery, material, and that on about the sixth of July, 1926, the defendant, the Midwest Construction Company, abandoned said work; that the Midwest Construction Company became indebted for the labor, tools, machinery, materials, insurance premiums, equipment and supplies in the sum of $ 4,546.24, which sum was paid by the plaintiff for the Midwest Construction Company, as a liability on said bond. The plaintiff further expended the sum of $ 2,500 in purchasing material, supplies and labor, in completing the building of said road, and the further sum of $ 819.21 in other necessary expenses, receiving from the said county of Clay on the completion of said work the sum of $ 4,010.13. The plaintiff claims that it is entitled to recover on a general indemnity bond executed on the sixth day of May, 1923.

The general contract of indemnity was signed by the defendant, Herbert Schumacher, on the sixth day of May, 1923. At that time, the defendant testified, that he was working for the Midwest Construction Company as foreman, in building a road near Dale, Minnesota; that his father, Charles Schumacher, and one Mr. Fevig, an agent of plaintiff, drove out to the place where he was working on the road. His father introduced Mr. Fevig, and witness said: "We didn't have much conversation I was busy, and he just pulled out this paper (meaning the general contract of indemnity) and he said sign it. It relates to some work up in North Dakota, and I signed it, and went on to my work. I did not read it." Ques. "Why did you not read it?" Objected to, as calling for a conclusion of the witness. Objection, overruled. Ans. "I was busy and I believed Mr. Fevig, what he said was truth. At that time the Midwest Construction Company had two jobs in North Dakota, one in Barnes county, and one in Ransom county. They were the only jobs that the Midwest Construction Company had at that time, and the one in Dale, Minnesota, upon which I was working. It was after dinner in the afternoon sometime, that Mr. Fevig and my father came out. About one year later I quit working for the Midwest Construction Company. The crew of about twenty-five men was busy working when they came out, and I was in charge of it. He just pulled out this here paper, and told me to sign it, it was for some North Dakota job, and I signed it." This testimony was all objected to, by the plaintiff, on the ground that it was an attempt to change and vary the written terms of the contract by parole testimony. It was not an attempt to change the terms of a written contract, but it was offered for the purpose of showing fraud and deceit in the securing of the defendant's signature by making it appear to the defendant that it related to some work in North Dakota. It is the theory of the defense, that the defendant's father came with the representative of the indemnity company to where Herbert Schumacher was supervising, as foreman, the work of some twenty-five men who were working in the building of a road, that they came there during working hours, and the defendant Herbert Schumacher was told to sign the bond which related to some road construction in North Dakota, and which the Midwest Construction Company had a contract for at that time; that relying upon the statement that it related to the work in North Dakota, he signed what turned out to be a general bond of indemnity.

"Of course if the other party induces the signer to sign the paper without reading it, and to rely on his statement as to the contents, this may give the signer a right, if the statement was fraudulent, to avoid the contract as against him on the ground of fraud."

13 C.J. 371; 6 R.C.L. 624, §§ 43, 44; Standard Mfg. Co. v. Slot, 121 Wis. 14, 105 Am. St. Rep. 1016, 98 N.W. 923; Keller v. Ruppold, 115 Wis. 636, 95 Am. St. Rep. 974, 92 N.W. 364; Willard v. Nelson, 35 Neb. 651, 37 Am. St. Rep. 455, 53 N.W. 572; Wilcox v. American Teleph. & Teleg. Co. 176 N.Y. 115, 98 Am. St. Rep. 650, 68 N.E. 153; Crim v. Crim, 162 Mo. 544, 85 Am. St. Rep. 521, 54 L.R.A. 502, 63 S.W. 489; Black v. Wabash, St. L. & P.R. Co. 111 Ill. 351, 53 Am. Rep. 628; Finkelstein v. Henslin, 152 Minn. 386, 188 N.W. 737.

There was no error in the admission of the testimony. Appellant contends that it was error to permit witness to answer the question, viz.: "Now then, why didn't you read it?" (Meaning the contract of general indemnity) over the objection that it was calling for a conclusion. The answer being, "I was busy, and I believed Mr. Fevig what he said was the truth." It is well settled, that in actions where fraud or warranty is pleaded as a defense, that the defendant is entitled to testify that he believed and relied on the statements made.

Jones on Evidence, vol. 2, page 1337, § 714, states the rule as follows:

" Where fraud or deceit are alleged, or recovery is sought for breach of warranty, the party seeking recovery may testify directly that he relied upon representations of the promisor and that but for such representations he would not have entered into the contract."

" Barron G. Collier v. Bailey, 31 Ga.App. 197, 120 S.E. 427; Breshears v. Callender, 23 Idaho 348, 131 P. 15; Chester v. American Trust & Sav. Bank, -- Ind.App --, 141 N.E. 10; Van Spanje v. Hostettler, 68 Ind.App. 518, 119 N.E. 725; McCord v. Mitchell, 182 Iowa 196, 165 N.W. 453; Aurand v. Perry Town Lot & Improv. Co. 178 Iowa 262, 159 N.W. 779; Zenor v. Smith, 150 Iowa 424, 130 N.W. 382; ...