Holland Furnace Co. v. Korth

• Decision Date: 05 November 1953
• Docket Number: No. 32526,32526
• Citation: 262 P.2d 772,43 Wn.2d 618
• Court: Washington Supreme Court
• Parties: , 41 A.L.R.2d 1166 HOLLAND FURNACE CO. v. KORTH.

Page 618

43 Wn.2d 618

262 P.2d 772, 41 A.L.R.2d 1166

HOLLAND FURNACE CO. v. KORTH.

No. 32526.

Supreme Court of Washington, Department 2.

Nov. 5, 1953.

Wayne A. Wyman, Seattle, for appellant.

Wright & Wright, Seattle, for respondent.

HAMLEY, Justice.

Holland Furnace Company brought this action against Una J. Korth to recover the unpaid contract price for converting defendant's heating plant from gas to oil. The trial court sustained an affirmative defense based on rescission for fraud, and dismissed the action. Plaintiff appeals.

The essential facts, as found by the trial court, may be summarized as follows: Miss Korth was obtaining unsatisfactory service from an old cast iron coal and wood furnace which had been converted for the use of gas, with gravity circulation of warm air. On November 12, 1951, she contracted plaintiff company regarding her heating problem, and its salesman, L. W. Wing, promptly appeared at her home.

After examining the furnace, inspecting the house, and being advised that respondent desired to rent three upstairs bedrooms, Wing recommended an oil conversion installation comprising a Holland PM-2 burner to be installed in the existing furnace box, a 7-barrel oil tank, a No. 2528 blower with new cold air connections, and a change in the size of four warm air pipes. Within an hour and a half after reaching the house, Wing had respondent's signature on a contract calling for such an installation at a purchase price of $1,413.14.

In inducing respondent to enter into this contract, Wing represented that this conversion installation was the best possible installation she could get for the money; that it was adequate in design to heat the entire house comfortably and evenly in the coldest Seattle weather; and that the installation would do so. Wing further represented that his proposed conversion would result in a furnace better than the new, modern furnaces; and that it was designed to and would cut respondent's fuel bills in half.

In his negotiations with respondent, Wing represented himself to be an expert in the design and sale of furnace installations, and that he had the knowledge, experience and ability to properly design respondent's furnace. All such representations were made with the intent that respondent would rely thereon, and with the knowledge that respondent was inexperienced in such matters. Respondent did rely implicitly upon these representations in entering into the contract.

The conversion was installed within the next two days, but proved inadequate to heat the entire house to a comfortable, even temperature in cool Seattle weather. In cold weather it was impossible to heat some rooms. The conversion was not the best possible installation respondent could have obtained for the money, and was not better than a new, modern furnace. At no time since installation has the efficiency of the converted plant been such as to cut the fuel cost in half, as compared to the previous cost of gas heat, nor has there been any reasonably close approach to such reduced cost figure.

For a period of nearly two months, appellant's employees made repeated attempts to improve the system by making adjustments and installing new pipes. On or about January 15, 1952, any further effort in this direction was abandoned. Respondent has made no payment on the contract price other than initial down payment of $148.36.

On February 16, 1952, respondent, through her attorney, wrote a letter to appellant, notifying it that the installation was not acceptable, and directing appellant to remove its property from the premises. Appellant's complaint instituting the present action was verified on April 10, 1952, and filed on October 21, 1952. Respondent's answer reasserting rescission was served on June 9, 1952, and filed on October 27, 1952. The company has not removed its property, nor has it returned any of the parts of the old furnace removed in making the conversion. Respondent continued to use the furnace to provide heat for her home from the time of its installation until the time of the trial.

Appellant questions a number of these findings of fact. In our opinion, however, each such finding is supported by clear, cogent and convincing evidence.

Appellant also argues that these findings of fact do not support the conclusion of law that the conduct of appellant, through its agent L. W. Wing, constituted in law fraud upon respondent in the inception of the contract. Calling attention to the nine essential elements which must be present to constitute actionable fraud, as set out in Webster v. L. Romano Engineering Corp., 178 Wash. 118, 34 P.2d 428, it is contended that the facts found fail to establish the existence of at least three of these elements.

The first such element, as set out in the Webster case, is that there must have been a representation of an existing fact. Appellant takes the position that Wing's representations to the effect that the proposed installation would heat economically, adequately and evenly, relate neither to a past transaction nor to an existing fact, but are expressions of opinion as to future events.

Where it is not shown that the buyer relied upon the salesman's asserted special and peculiar knowledge of the article or of the conditions under which it was to be used, a statement that such article will satisfactorily meet the buyer's requirements will be regarded as an expression of opinion about something to take place in the future. Webster v. L. Romano Engineering Corp., supra. Actionable fraud cannot be predicated upon such a statement.

But where the salesman does assert such special and peculiar knowledge, and the buyer relies thereon, a statement that the article is appropriate for, and will satisfactorily meet, the buyer's requirements will be regarded as a representation of fact. Holcomb & Hoke Mfg. Co. v. Auto Interurban Co., 140 Wash. 581, 250 P. 34, 51 A.L.R. 39; Weller v. Advance-Rumely Thresher Co., 160 Wash. 510, 295 P. 482. See, also, 51 A.L.R. 46, 81, annotation.

Under the findings of fact summarized above, this case is governed by the rule announced in the Holcomb and Weller cases. The requirement that the representation be of an existing fact has therefore been met.

Another essential element necessary to establish actionable fraud is that the speaker must have 'knowledge of its falsity or ignorance of its truth'. (Italics ours.) Webster v. L. Romano Engineering Corp., supra [178 Wash. 118, 34 P.2d 430]. Appellant contends that this element is here lacking, and points to these observations made by the trial court 'I don't attribute to him [Wing] any moral dishonesty in the statements he made * * *.'

'Now no one has testified that these representations were known to be false at the time and made knowingly or fraudulently.'

The italicized portion of the above-quoted language from the Webster opinion is but another way of stating the rule that if a person represents as true material facts susceptible of knowledge, to one who relies and acts thereon to his injury, he cannot defeat recovery by showing that he did not know his representations were false, or that he believed them to be true. Jacquot v. Farmers Straw Gas Producer Co., 140 Wash. 482, 249 P. 984. For recent applications of this rule, see Darnell v. Noel, 34 Wash.2d 428, 208 P.2d 1194; Gronlund v. Andersson, 38 Wash.2d 60, 227 P.2d 741.

The findings of fact recite that, in the case of each representation concerning the capacity of the installation, Wing either knew the representation to be false, 'or made it recklessly and carelessly without knowing for certain whether it was true or false.' Under this finding, it is therefore apparent that the fraud element now under discussion was present in this case.

One of the other elements necessary to establish actionable fraud is that the fact which is represented have 'materiality.' Webster v. L. Romano Engineering Corp., supra. Appellant argues that the element of materiality was missing here because one of respondent's witnesses testified that if a larger fan had been installed, at an additional cost of seventy-five dollars, 'it would have made all the difference in the world. It would have been a good installation then so far as heating the house goes. * * *'

We need not decide whether or not a misrepresentation which costs the purchaser an additional $75 over and above the contract price of $1,413.14 is material. The representations which were relied upon in this respect were that the installation would give warm and even heat at a reduced cost of one half. Whether or not the 'good installation' this particular witness had in mind would accomplish all of these represented results is pure speculation.

In any event, the diagnosis of this witness was not made until the day before he testified, which was long after the rescission. When notice of rescission was given, the situation was that appellant had made numerous adjustments of the installation and had finally abandoned any further efforts to correct the difficulty. The purchaser then had the right to assume that if the correction could have been made at nominal expense, appellant would have made or suggested it. The materiality of the representations was established as of that date by the fact that heat was then inadequate, uneven and relatively expensive, without prospect of improvement except by making a further substantial outlay of money.

Appellant next contends that parol evidence, admitted without objection because material to the issue of fraud, was thereafter...