Int'l Harvester Co. of Am. v. Thomas

• Decision Date: 08 September 1919
• Citation: 43 N.D. 199,176 N.W. 523
• Parties: INTERNATIONAL HARVESTER CO. OF AMERICA v. THOMAS et al.
• Court: North Dakota Supreme Court

43 N.D. 199

176 N.W. 523

INTERNATIONAL HARVESTER CO. OF AMERICA

v.THOMAS et al.

Supreme Court of North Dakota.

June 30, 1919.

Rehearing Denied Sept. 8, 1919.

Syllabus by the Court.

The plaintiff sold to defendants, the Thomases, a certain gas engine, accompanied by a written warranty and took the defendants' notes and mortgages for the same before the delivery of the engine. Defendants made certain payments thereon, and were to much expense in buying repairs for the engine. According to the preponderance and weight of the testimony, the engine was wholly worthless. Held that the notes were without consideration, or if there were any consideration it had failed; that the mortgages, both chattel and real, securing the notes, were of no force nor effect, and were or had become wholly invalid and unenforceable; that the defendants are not liable on the notes nor mortgages; that the defendants are entitled to recover any payments made and the amount expended by them for repairs thereon.

Where a renewal note is given instead of another which represented part of the indebtedness of a certain transaction, whatever defenses might have been available as against original note is equally available as against the renewal note, so long as the transaction remains one between the original parties.

Where one had given a renewal note for another note which represented part of the purchase price of certain machinery and in addition to the ordinary terms of a promissory note there was inserted in the renewal note a waiver of the maker's remedies, if any, against the payee, and said note is signed without the defendants expressing any intention to waive their right to such remedies, or without their attention being particularly called to the waiver in the note, even though they could read and write, it is held that such waiver in such circumstances is of no force nor effect, and is wholly invalid and constitutes constructive fraud, it being a contract in itself separate and distinct from the promissory note, and there being no testimony showing that defendants intended to sign anything except a promissory note.

Plaintiff by its experts procured other waivers of defendants' remedies against the plaintiff upon various pretexts, such as procuring defendants to sign a waiver while representing it simply to be a paper to show delivery of the engine, etc. Held, that waivers procured in this manner were procured by misrepresentation and constituted constructive fraud; that by reason thereof they were of no force, effect, nor validity; that the signing of the same by the defendants in the circumstances in which they were signed in no manner defeats their rights or remedies against the plaintiff.

Appeal from District Court, Hettinger County; W. C. Crawford, Judge.

Action by the International Harvester Company of America against Peter W. Thomas, Erma Z. Thomas, and another, with counterclaim by Peter W. Thomas and Erma Z. Thomas. Judgment for plaintiff, and defendants appeal. Reversed and remanded.

Christianson, C. J., and Birdzell, J., dissenting.

Jacobsen & Murray, of Mott, for appellants.

Miller, Zuger & Tillotson, of Bismarck, for respondent.

GRACE, J.

This is an action brought to recover upon two certain promissory notes, one for $1,100 and one for $1,175, each bearing interest at the rate of 8 per cent. and to foreclose certain chattel and real estate mortgages given to secure such notes. The notes and mortgages are signed by the Thomases. The defendant, Ruby H. Tallmadge, has no interest in this case on appeal. The complaint is in the usual form. The separate answer of the Thomases admits the execution of the notes and mortgages, and that plaintiff is the owner and holder of them. The defendants further pleaded that the notes and mortgages were wholly without consideration, or that if there ever was any consideration the same has wholly failed. The defendants pleaded a breach of warranty. They aver that the engine delivered to the defendant by the plaintiff was not the engine bargained for. They pleaded a counterclaim for the sum of $3,500, based upon the loss of crop for four different years.

The material facts, so far as ascertained from this record, which is in an exceedingly poor condition on account of the loss of the exhibit in the case which became lost before the case reached this court, are substantially as follows:

The Thomases purchased from plaintiff certain machinery, consisting of tractor engine and certain attachments thereto. Exhibit D appears to be an order for such machinery. A copy of the same is as follows:

“Order for Gas and Gasoline Engine.

To International Harvester Company, Town, Bismarck, N. D.:

The undersigned of R. R. No. N. W. 1/4 Sec. 22-133-97, P. O. county of Hettinger, state of N. D., hereby orders, subject to your approval and to all conditions of agreement and warranty printed on back of this order and made a part hereof, to be shipped on or about the (at once) to Tallmadge & Myers at New England engine one 30-60 H. P. international gas or gasoline engine, regular size of pulley, complete, including necessary fixtures, at price of three thousand two hundred seventy-five dollars, to be paid in cash in three years and balance of purchase price to be paid in 7 horses. Attachments. One each of the following, at the following prices: One P. & O. engine gang plow, with both bottoms. One 15-bbl. A. & T. tank. One set 12? extensions. One 1 H. P. starter engine. One steering device. In consideration whereof the undersigned will receive same on arrival, will pay freight and charges thereon from Chicago, Ill., and upon delivery or tender thereof will pay to your order, and execute approved notes payable to your order as follows: $1,000 due Nov. 1, 1913; $1,100 due Nov. 1, 1914; $1,175, due Nov. 1, 1915. Said notes to draw interest at the rate of eight per cent. per annum from date until maturity, and 10 per cent. per annum from maturity until paid. It is expressly agreed that this order shall not be countermanded, and that the title to said property shall remain vested in you and your assigns, until the entire purchase price has been paid in money. It is expressly agreed that the property herein ordered shall be and remain personal property in whatsoever manner it may be annexed to realty. The undersigned hereby acknowledge having received a true copy of this order, agreement and warranty as indorsed on the back thereof.

Security: W. 1/2 of N. W. 1/4 and S. E. 1/4 of N. W. 1/4 and S. W. 1/4 of N. E. 1/4 of Sec. 22, Twp. 133, R. 97, Hettinger county; and N. E. 1/4 of Sec. 21, Twp. 133, R. 97, Hettinger county.

Order dated the 26th day of April, 1913. Taken by W. E. Behrens. Signatures: Peter W. Thomas and Erma Z. Thomas.”

The back of agreement is as follows:

“ Warranty and Agreement.-International Harvester Company of America (Incorporated) warrants the within described engine to do good work, to be well made, of good materials, and durable if used with proper care. If upon one day's trial, with proper care, the engine fails to work well, the purchaser shall immediately give written notice to International Harvester Company of America, at Chicago, Ill., and to the dealer from whom it was received, stating wherein the engine fails, shall allow a reasonable time for a competent man to be sent to put it in good order, and render necessary and friendly assistance to operate it. If the engine cannot then be made to work well, the purchaser shall immediately return it to the said dealer, and the price paid shall be refunded which shall constitute a settlement in full of the transaction. Use of the engine after three days, or failure to give written notice to said company and said dealer, or failure to return the engine as above specified, shall operate as an acceptance of it and a fulfillment of this warranty. No agent has power to change the contract of warranty in any respect. This express warranty excludes all implied warranties, and said company and said dealer shall in no event be liable for breach of warranty in an amount exceeding the purchase price of the engine. If within ninety days time any part proves defective, a new part will be furnished on receipt of part showing defect.”

The engine was received by the Thomases for which they gave their three notes, two of which are above described and another of $1,000 was paid in November, 1913. Thomas gave a renewal note of the $1,100 note which was due in November, 1914. This note became lost. Upon said note is the following:

“This is renewal and extension of time of payment of my note number 72 the year 1913 given (with one other note) in full payment of the purchase price of engine-eight bottoms, plow, oil tank machine and in consideration of such renewal and extension I hereby expressly waive all claims arising out of the purchase of said property and all defenses statutory or otherwise to the payment hereof. The indorsers, sureties, and guarantors severally waived presentment for payment, protest, and notice of nonpayment and diligence.”

It is claimed by the defendants that at the time they made the renewal note that the plaintiff agreed to make good its warranty, and that such renewal note and mortgages to secure the same were made only upon these conditions. The notes in question were executed and delivered to the plaintiff prior to the delivery of the engine in question. The engine was delivered to the defendants. It was brought out by Mr. Vedders, who was acting for the company. He operated it about half a day, had more or less trouble with it. He plowed about three or four hours the first day. Within two days after that the plaintiff called for an expert through Tallmadge & Meyers of New England, then agents of the plaintiff. The next morning Mr. Bankston, an expert of the company, went out and worked on the engine. The defendants claim there is no consideration for the note by reason of breach of the warranty hereinbefore set forth....