Ganley Bros. v. Butler Bros. Bldg. Co.

• Decision Date: 04 March 1927
• Docket Number: No. 25761.,25761.
• Citation: 170 Minn. 373,212 N.W. 602
• Parties: GANLEY BROS., Inc., v. BUTLER BROS. BLDG. CO.
• Court: Minnesota Supreme Court

212 N.W. 602

170 Minn. 373

GANLEY BROS., Inc., v. BUTLER BROS. BLDG. CO.

No. 25761.

Supreme Court of Minnesota.

March 4, 1927.

Appeal from District Court, Ramsey County; Charles Bechhoefer, Judge.

Action by Ganley Bros., Inc., against the Butler Bros. Building Company. Findings for defendant on its counterclaim. From an order denying its motion for a new trial, plaintiff appeals. Reversed.

Morphy, Bradford, Cummins, Jackson, Cummins & Lipschultz and Cowern & Jesmer, all of St. Paul, for appellant.

Doherty, Rumble, Bunn & Butler, of St. Paul, for respondent.

WILSON, C. J.

Defendant had three separate contracts for the construction of several sections of hard surface highway in St. Louis county. It sublet all the work, in one contract, to plaintiff. The complaint states three causes of action. The first alleges that the contract involved was induced by false and fraudulent representation, the details of which are therein fully stated and which contains the necessary averment of reliance and untruthfulness. The contract, which is attached to defendant's answer in support of the counterclaim therein alleged, contains this language:

"The contractor has examined the said contracts of December 7, 1922, and the specifications and plans forming a part thereof, and is familiar with the location of said work and the conditions under which the same must be performed, and knows all the requirements, and is not relying upon any statement made by the company in respect thereto. The contractor further represents that it is familiar with the kind and character of the work to be done, as called for by said plans, specifications, and contract, and that it is experienced in road building."

On the trial of the case defendant moved for judgment on the pleadings as to the first cause of action. This motion was based upon the theory that the action could not be prosecuted because of the provision of the contract, above quoted, negativing fraud. The court allowed an amendment to the complaint alleging an oral agreement of the parties limiting the operation of the language quoted and attempting to give to it a practical construction. After the amendment the motion was again made and was granted. Thereupon the plaintiff dismissed the second and third causes of action without prejudice. The issue in the counterclaim was submitted to the court. Findings were made directing judgment thereon in favor of defendant for $68,309.92. Plaintiff has appealed from an order denying its motion for a new trial. Its grievance relates solely to the disposition of the first cause of action.

Parol evidence is admissible to show that the making of the contract was procured by fraudulent representations. This does not vary the terms of the contract. It is merely to show the presence of fraud which permits an avoidance of the contract. Established fraud impeaches its validity. A contract resting on fraud, when under attack, cannot stand. The fact that the contract has been reduced to writing does not change the rule. The written agreement may express what was intended, but the wronged party so intended because of the fraud and not otherwise. The contract as written was induced by the fraud. The evidence in proof of the fraud establishes the inducing or influencing cause and in no way varies or contradicts the terms of the contract. This rule cannot be curtailed or destroyed by writing in the contract: "This contract was not procured by fraud." If so, a party could take advantage of his own fraud if he could succeed, by fraud if necessary, in getting into the instrument a clause negativing fraud. The evidence relates to an inducing cause, which is entirely distinct from the terms of the contract which are in no sense varied or modified. General El. Co. v. O'Connell, 118 Minn. 53, 136 N. W. 404; Edward Thompson Co. v. Schroeder, 131 Minn. 125, 154 N. W. 792; Hansen v. Daniel Hayes Co., 152 Minn. 222, 188 N. W. 317; Nelson v. Berkner, 139 Minn. 301, 166 N. W. 347; Roseberry v. Hart-Parr Co., 145 Minn. 142, 176 N. W. 175; Remington v. Savage, 148 Minn. 405, 182 N. W. 524; 22 C. J. 1215; Jordan v. Nelson (Iowa) 178 N. W. 544, 10 A. L. R. 1464; Rectenbaugh v. Northwestern Port Huron Co., 22 S. D. 410, 118 N. W. 697; Jones v. Brandt, 173 Wis. 539, 181 N. W. 813. Fraud is not merged in a written contract. State v. Lovan, 245 Mo. 516, 539, 151 S. W. 141. Our decisions, which are cited, have silently, but effectually, erased the holding of Peterson v. Landahl, 86 Minn. 32, 89 N. W. 1131, which can no longer be considered the law of this state. See 10 A. L. R. 1472, note. The doctrine of estoppel which sometimes becomes operative by virtue of a clause negativing fraud as in Guaranty Securities Co. v. Exchange State Bank, 148 Minn. 60, 180 N. W. 919, is not applicable.

Aside from the presence of the inconsistent clause in the contract, it is clear...