Holder v. Smith

• Decision Date: 18 April 1952
• Docket Number: No. 18199,18199
• Parties: HOLDER v. SMITH et al.
• Court: Indiana Appellate Court

Page 177

105 N.E.2d 177

122 Ind.App. 371

HOLDER v. SMITH et al.

No. 18199.

Appellate Court of Indiana, in Banc.

April 18, 1952.

Frank R. Ryan, Danville, Lucille Martin, Indianapolis, Parr, Parr & Parr, Lebanon, for appellants.

Davidson, Raber & Gibbs, Danville, Scifres & Hollingsworth, Lebanon, for appellees.

BOWEN, Chief Judge.

This is an appeal from a judgment in an action instituted by the appellants to recover on promissory notes, executed by the appellees. Appellants' complaint was in two paragraphs in which they seek to recover upon a breach of contract and notes given thereunder. The appellees filed an answer in two paragraphs consisting of a denial and an affirmative answer alleging actionable fraud in the procurement of the contract and notes. The appellees, defendants below, also filed a counterclaim seeking affirmative relief and asking a return of the monies paid predicating their action upon fraud.

Issues were joined upon the foregoing pleadings, and there was a trial by the court without the intervention of a jury, and the court entered a finding and judgment that the notes described in the appellants' complaint were executed without consideration and were procured from the appellants by fraud and false representation as alleged in appellees' answer. The court found that the defendants were entitled to have the contract rescinded and the notes sued upon cancelled and set aside. The court made a further finding for the appellants and against the appellees on the appellees' cross complaint. The court adjudged that the notes sued upon were void, and that the same be cancelled and held to be of no force and effect.

Appellants filed a motion for a new trial alleging that the decision of the court was not sustained by sufficient evidence and was contrary to law with other specifications which were waived by appellants in their briefs.

Further assignments of error in the motion for a new trial were waived by the appellants by reason of the failure to present the same.

Appellants' main contention in this appeal is that the appellees have failed to prove fraud, and that they have failed failed to prove all of the essential elements of fraud, that would entitle them to a rescission of the contract. Appellants also claim that the appellees have not proved grounds for a rescission of the contract, and that there was not a proper offer of the return of consideration on the part of the appellees. Appellants further contend that assuming fraud did exist, and in effect a rescission was properly made, the appellees ratified the contract subsequent to such rescission; that by reason of the fact that the appellees have failed to prove fraud the court's judgment for the appellees is not sustained by sufficient evidence and is contrary to law.

From the record, it appears that on the 1st day of June, 1949, the appellants sold to the appellees on a conditional sales contract a certain restaurant and filling station business, not including the real estate on which the same was located, which restaurant and filling station was located at the intersection of Highways Nos. 36 and 43 in Putnam County, Indiana. Under the terms of the contract, the appellees were to give the appellants their several promissory notes. The conditional sales contract describes the articles of personal property purchased by the appellees and included a list of equipment and property contained within the restaurant and filling station. The appellants on the reverse side of the conditional sales contract executed an affidavit as follows: 'M. C. Holder and Green G. Pierce being first duly sworn according to the law says that he purchased the property described in the within conditional sales contract from Sanford Gay and Maple M. Gay; that there are no liens or incumbrances of any kind or nature against said property except the interest of the as stated on reverse said conditional vendor and affiant of said property. Affiant says that he makes this affidavit for the purpose of inducing Kathryn Smith and Roscoe O. Smith to purchase the same.'

While the foregoing affidavit contains grammatical errors, typographical errors, and omissions, in the testimony the reference contained in such affidavit as to the persons on the reverse side was explained as being an amount due and owing to Mr. and Mrs. Gay of $3,571.57.

The appellees were in the possession of the property and made the initial payment of $500 and three subsequent payments totaling $1,000. The conditional sales contract was executed in June. About August 17th of the same year, the appellees learned that one Lafe McGaughey was claiming some of the property they believed they had purchased. They later talked with McGaughey who was the owner of the real estate on which this restaurant and filling station was located. He told them that a large portion of the merchandise in the store was his, and could not be sold by anyone. The appellees thereafter failed to make any further payments on the contract. The appellee, Roscoe Smith, testified that the next time Mr. Holder and Mr. Pierce were out after he received information that McGaughey was claiming an interest in the articles in the restaurant that he tried to repudiate the contract and give the articles back to them. In response to the question, 'Did you say anything to Mr. Holder and Mr. Pierce about taking back the material and giving you your money?' the appellee, Roscoe Smith, testified as follows: 'I tried to give the restaurant back to Mr. Holder and Mr. Pierce before September 1st and they didn't accept it back.' Later McGaughey brought suit for possession of the premises and the appellees were dispossessed.

The appellees testified that they were not delinquent in the rent, but that by reason of the fact they had no lease they could not put up any defense. At the time they were dispossessed they took some of the property covered by the conditional sales contract to their residence in Danville, Indiana. After the appellees got these items of personal property not claimed by McGaughey into their residence in Hendricks County, a replevin suit was brought against them by a Mr. Newby, and a judgment by default was obtained by Newby by which Newby was awarded all of the property remaining except the water heater, workbench, and two step ladders. The appellee, Roscoe Smith, also testified that he made an attempt to repudiate the contract on August 27th and did not promise to pay the notes off at any time after that.

However, on cross-examination, he admitted that thereafter he wrote a letter to Mr. Backer, the attorney for the appellants, to the effect that he was trying to raise the payments, but had not had good luck, and that business was bad, and that he would call him the next day.

Another letter was introduced into evidence to Mr. Backer in which he said that if business did not improve he would try to borrow the money for the appellants. Another letter was introduced into evidence dated November 7th addressed to Mr. Backer which referred to bad luck and a fire in the restaurant and concludes with these words. 'I think if we can get past this month with the strikers settled we are okay. What we want to know is how we stand in operations. We are taking a beating out there for the last 50 days--please advise as soon as possible. We want either to ease our minds or get out.'

The date of the removal of the property from Putnam County to Hendricks County was about the middle of December. The possession suit was filed the day before Thanksgiving.

Appellee Smith...