Gladden v. Guyer

Decision Date01 May 1967
Docket NumberNo. 22345,22345
Citation426 P.2d 953,162 Colo. 451
PartiesJohn P. GLADDEN and Rena L. Gladden, Plaintiffs in Error, v. Louis V. GUYER, Irma C. Guyer, Wayne E. Booker, Frances G. Booker, Edwin W. Hayes, and Garnet L. Hayes, Defendants in Error.
CourtColorado Supreme Court

Foard, Foutch & Hunt, Rector & Kane, Colorado Springs, for plaintiffs in error.

Murray, Baker & Wendelken, Leon H. Snyder, Gerald W. Bennett, Colorado Springs, for defendants in error.

DAY, Justice.

We will refer to the plaintiffs in error as the Gladdens or as plaintiffs, as they appeared in the trial court. The defendants in error will be referred to as the defendants or as the sellers.

The Gladdens bought a dairy farm in El Paso County from the sellers for a purchase price of $350,000. The transaction was consummated on June 15, 1964, and the Gladdens took possession of the lands, improvements and dairy herd on July 1, 1964. As a result of bovine tests conducted immediately after the Gladdens took possession of the dairy herd, it was ascertained that a number of the cows were infected with brucellosis and tuberculosis. This information became known to the Gladdens on July 9, 1964--nine days after they had taken possession of the herd.

The Gladdens did not institute suit against the sellers until March, 1965. At that time, although they alleged four causes of action, their complaint has only two claims. Under 'Causes of Action' numbered 1, 2 and 4, one remedy--rescission--is sought; and under 'Cause of Action' number 3, damages are prayed for.

Prior to trial the Gladdens, by order of the court, were required to elect which remedy they intended to pursue at the trial, i.e., rescission or damages. They filed a written election asking the court for rescission. The sellers, in a counterclaim, prayed the court to order specific performance of the contract of purchase, and it was on these issues that trial was had.

At the close of all the evidence the court entered its findings of fact which are hereby summarized as follows:

1. The defendants had full knowledge of the existence of the diseased animals prior to the negotiations and during the period of negotiation and that the defendants displayed a State Department of Agriculture certificate certifying that the herd was free of brucellosis and the plaintiffs had seen said certificate during the negotiations.

2. That the existence of brucellosis was a material fact to the entire transaction, and the discovery of the disease was not available through ordinary inspection, and in the absence of disclosure of the disease the plaintiffs had the right to rely upon the herd being free of the disease.

3. The herd had not been tested for tuberculosis since February 5, 1962 until July 6, 1964, and the defendants did not know of the existence of tuberculosis and did not conceal that fact from the plaintiffs.

4. That the plaintiffs by remaining in possession of the animals after the discovery of the disease and by their exercise of full control and dominion over all the property ratified the contract. The acts of the plaintiffs in refusing to sell the property at a modest profit and thereafter negotiating for a loan with which to purchase additional cattle, all done with the knowledge that the defendants had concealed the disease evidenced an intention to affirm the contract.

The court then concluded that the sellers were under a duty to disclose their knowledge of brucellosis infected cows in the herd, and that their failure to do so constituted fraud. The court also held that as to those cows which were found to react to the test for tuberculosis, the existence of the disease was not known to the sellers and hence no fraud or deceit was involved. The court then concluded that the Gladdens, with knowledge of the concealment, engaged in a course of conduct which evinced an intention to affirm the contract and that the remedy of rescission was therefore lost to them. The court entered a judgment in favor of the sellers and further entered a decree requiring specific performance of the contract by the Gladdens.

The points relied upon on this writ of error for reversal of the judgment are:

I. The court properly found that the defendants defrauded the plaintiffs, but there was a gross insufficiency of evidence for the court to find that the plaintiffs, at any time, intended to affirm the contract. The evidence adduced at trial regarding ratification and affirmation was insufficient as a matter of law.

II. The court committed error in law when it found that although the defendants did not comply with the requirements of 8--5--40, C.R.S.1963, as to the testing of the herd prior to sale and as to the submission of an official brucellosis certificate, their failure to do so did not render void the contract of sale entered into by the parties.

III. The court committed error in law when it required the plaintiffs to elect between their causes of action prior to trial.

I.

On this assignment, the most that can be said for the Gladdens' contention is that there was a dispute as to the time when they became aware of the fact that the sellers had knowingly misrepresented the condition of the herd and had knowingly concealed the presence of brucellosis in the herd. The Gladdens contend that the critical date was November, 1964, and that a letter of rescission was sent to the sellers in December--after legal counsel had been consulted. There is other evidence that the fact of misrepresentation, sufficient to require immediate and unequivocal action to rescind, was known as early as July 9, 1964. That there is support for the court's finding of the latter date rather than the November date as the time when the Gladdens were aware of the misrepresentation, we quote from the testimony of plaintiff John Gladden:

'Q. And you didn't feel that things had been misrepresented to you then after you got the results of these tests?

'A. I knew they had been.

'Q. Oh, you knew immediately, then, After the results of these July 6th tests that things had been misrepresented to you?

'A. That is correct.

'Q. But you felt you were reasonably protected under the terms of the agreement?

'A. I had my name on $183,000 note, plus all of my stuff mortgaged on it, plus my name on that contract.

'Q. But you made no complaint about this misrepresentation until when?

'A. I complained to Mr. Booker every time I seen him.

'Q. All right, I understood you to say that you felt that you were reasonably well protected under the contract until such time as they didn't keep their agreement the latter part of October?

'A. I thought I had the law on my side, yes.

'Q. Well, what I was trying to get at, when did you start complaining about these misrepresentations?

'A. The day the test was run, or the day The test was read I started complaining.

'Q. And who did you complain to?

'A. To Mr. Booker.

'Q. And what did you say to him?

'A. I let him know that I wasn't satisfied, and I told him He had misrepresented the herd to me.

'Q. But you kept right on in possession of the property, operating the dairy for some months after that?

'A. I felt I had to.' (Emphasis added.)

In Richardson v. Lowe, 10 Cir., 149 F. 625, the court stated:

'* * * The duty of rescinding arises immediately upon acquiring knowledge of the substantial and material facts constituting the fraud. It is not requisite that the defrauded party shall be acquainted with all the evidence constituting the fraud before the duty to act by way of rescission arises. Campbell v. Fleming, 1 A. & E. 40; Fry on Specific Performance of Contracts (2nd Ed.) §§ 703, 704; Bach v. Tuch, 126 N.Y. 53, 26 N.E. 1019; Taylor v. Short, 107 Mo. 384, 17 S.W. 970. When he has evidence sufficient to reasonably actuate him to rescind the contract and on which he has once acted, no subsequent discovery of cumulative evidence can operate to execute waiver of the fraud if one has in the meantime occurred, or to revise a once lost right of rescission. The election to waive the fraud once deliberately made is irrevocable. Vacillation or speculation cannot be tolerated. See cases supra.' (Emphasis added.)

Subsequent to the discovery of brucellosis in the herd, and prior to any action which could be characterized as a repudiation of the sale, the Gladdens engaged in a course of action which the court found precluded the remedy of rescission. The following are transactions which the court had before it:

Consummation of a $183,000 loan; the obtaining of two ninety day extensions thereon, and further extensions thereon to run to January 15, 1966; payment on the loan in excess of $65,000; the entering into an agreement on August 12, 1964 whereby the sellers agreed to give to the Gladdens calves and farm machinery to replace cattle culled from the herd after being found to be infected...

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