Herman v. Gray

• Decision Date: 24 February 1891
• Parties: HERMAN v. GRAY.
• Court: Wisconsin Supreme Court

79 Wis. 182

48 N.W. 113

HERMAN

v.GRAY.

Supreme Court of Wisconsin.

Feb. 24, 1891.

Appeal from circuit court, Kenosha county; JOHN W. WINSLOW, Judge.

This action is upon a promissory note made by defendant to plaintiff, or order, for $1,364, with interest, dated July 11, 1887, and due three months after date. The complaint is in the usual form of complaints in such actions. The amended and supplemental answer of defendant admits the making of the note, but denies any indebtedness thereon to plaintiff. It alleges that the note was given in renewal of another note, dated July 8, 1886, given in part payment for a half interest in certain personal property sold by plaintiff to defendant, together with a one-half interest in a certain patent-right and improvements thereon covering a machine known as the “Gaylord-Martin Patent Brick-Machine,” designed and intended for mixing clay and making bricks; and that the machines, constructed in accordance with the specifications in the patent, are wholly impracticable, unfit for use, and worthless. The answer then proceeds to allege, at considerable length, that the defendant was induced to make such purchase by means of numerous false and fraudulent representations, therein stated, made by plaintiff to him respecting the value of the patent, and the qualities and value of machines constructed under it, upon the truth of which representations the defendant relied in making the purchase; also that the price agreed upon therefor was $4,500, of which sum defendant then paid plaintiff in cash $1,136, and gave his two promissory notes for the balance of the $4,500, one of them being the note in renewal of which the note in suit was given; and that on July 8, 1887, he paid the plaintiff $617 on the other note. The answer further alleges that, at the time of such sale, the plaintiff agreed to sell to the defendant, in connection with such interest in the patent, a one-half interest in several machines already built, but that such machines were and are worthless. Such amended and supplemental answer was filed by leave of court on condition that defensive matter only should be pleaded therein, and it was treated on the trial as a defense only to the action, and not as containing a counter-claim. It contained, however, a demand for judgment against plaintiff for the sums paid him by defendant on account of such purchase. The jury found a special verdict, consisting of answers to 16 questions of fact submitted to them by the court, nearly all of which relate to the false and fraudulent representations made by plaintiff to defendant, and to the question whether the plaintiff recovered for his use and benefit any of the proceeds arising from the sale of three of the machines included in such purchase. Such questions were all answered in favor of the defendant; that is to say, the jury found that the alleged fraudulent representations were made by plaintiff as charged in the answer; that they were false to the knowledge of the plaintiff; that the defendant believed them to be true, and relied upon them in making the purchase; and that he received none of the proceeds of three machines, included in the purchase, which were afterwards sold. They also found that machines constructed under the patent were not useful or valuable, and that the defendant received no valuable consideration for the note in suit. Successive motions by plaintiff for judgment on the special verdict, and for a new trial, were overruled, and judgment for defendant was ordered, and entered, dismissing the complaint, with costs. The plaintiff appeals from the judgment.Frank N. Hoyt, for appellant.

To rescind a contract, a party must first restore or offer to restore, without unnecessary delay, whatever he has acquired by it. Simmons v. Putnam, 11 Wis. 193;Williams v. Ketchum, 21 Wis. 432. Where the defense is a total failure of consideration, any value shown to have been received under the contract defeats the plea. Johnson v. Titus, 2 Hill, 606. Where partial failure of the consideration is alleged, the extent of the failure must be alleged and proved. Bisbee v. Torinus, 26 Minn. 165, 2 N. W. Rep. 168. The sale of machines manufactured under the rights acquired by the contract estops the party to allege that the contract is void. Webster-Glover Lumber, etc., Co. v. St. Croix Co., 71 Wis. 317, 36 N. W. Rep. 864;Cogswell v. Colley, 22 Wis. 399. The election to abide by or rescind the contract must be made as soon as the fraud is discovered. Acquiescence in the sale is an election, and will not be affected by the discovery of a new incident in the fraud. Grannis v. Hooker, 31 Wis. 474;Abbott v. Johnson, 47 Wis. 239, 2 N. W. Rep. 332;Keller v. Oberreich, 67 Wis. 282, 30 N. W. Rep. 524;Locke v. Williamson, 40 Wis. 377;Thompson v. Libby, (Wis.) 29 N. W. Rep. 150;St. John v. Hendrickson, 81 Ind. 350;Troup v. Appleman, 52 Md. 456.

Williams, Friend & Bright, for respondent.

LYON, J., ( after stating the facts as above.)

Before and at the time defendant purchased the property in question, the plaintiff and one Gurney were owners of two letters patent, one of which was issued in 1883 on an invention by one Martin of a machine for making bricks, and the other was issued in 1885 to Martin for improvements of such machines, which improvements consisted mainly in adding crushers thereto. Plaintiff and Gurney were engaged as partners in the manufacture and sale of the machines. The title to the patents was in Gurney. The sale of the property in question by plaintiff to defendant is evidenced by an agreement in writing, signed by the parties, in and by which plaintiff sold and conveyed to defendant, for the consideration of $4,500, his one-half interest in all brick machines which Gurney and the plaintiff then had, and the materials which go in connection therewith, and in the patents covering such machines; plaintiff to procure the proper assignments thereof from Gurney to defendant. In execution of the agreement, Gurney assigned to defendant a one-half interest in both patents, and defendant paid plaintiff $1,136 in cash, or its equivalent, and gave plaintiff his two promissory notes for the balance of the $4,500,--one for $2,000, and the other for $1,364,--and executed to plaintiff a chattel mortgage on such patents to secure the payment of the notes. The note in suit was given in renewal of the latter note. Defendant has since paid $617 on the $2,000 note. Immediately after such purchase, Gurney and defendant formed a copartnership, under the firm name of Gurney & Co., for the purpose of continuing the business theretofore carried on by Gurney and the plaintiff. It seems that the business of Gurney & Co. was confined to disposing of some of the machines on hand at the time of the purchase.

The amended and supplemental answer, which raised the issues on which the case was tried and determined, contains numerous averments which are proper subjects of a counter-claim for damages caused by the alleged false and fraudulent representations of plaintiff; but such averments are not sufficiently pleaded as a recoupment of damages or counter-claim, in that they do not specify the amount of damages caused thereby, nor demand judgment therefor. The demand in such answer for judgment against plaintiff for the sums paid by defendant on account of his purchase of the property is entirely unsupported by any of the averments in the pleading. To entitle him to such relief, the defendant must aver facts showing a rescission of the contract of purchase, or which entitle him to have such rescission adjudged, and there must be a demand of judgment therefor. Until the contract is rescinded in some manner defendant cannot maintain an action to recover such...