Kundel v. Portz

• Court: Michigan Supreme Court
• Writing for the Court: STARR
• Citation: Kundel v. Portz, 301 Mich. 195, 3 N.W.2d 61 (Mich. 1942)
• Decision Date: 17 March 1942
• Docket Number: No. 67.,67.
• Parties: KUNDEL et ux. v. PORTZ et al.

301 Mich. 195

3 N.W.2d 61

KUNDEL et ux.

v.PORTZ et al.

No. 67.

Supreme Court of Michigan.

March 17, 1942.

Action by Thomas Kundel and Mary Kundel, his wife, against Edward Portz, A. J. Primm, and Lauergne Hill to rescind contract for sale of fixtures and stock of grocery store and meat market, on ground of fraud and misrepresentation, or to recover amount paid under the contract, on ground that there had been a mutual rescission. From a judgment of no cause of action in favor of defendants, plaintiffs appeal.

Judgment reversed without a new trial, and case remanded for entry of judgment for plaintiff in accordance with opinion.

Appeal from Circuit Court, Wayne County, in Chancery; Adolph F. Marschner, Judge.

Before the Entire Bench, except WIEST, J.

Isaac M. Smullin, of Detroit, for appellants.

Casper C. Cutler and Louis A. Gottlieb, both of Detroit, for appellees.

STARR, Justice.

Plaintiffs appeal from judgment of no cause of action, entered January 6, 1941.

On March 4, 1938, plaintiffs purchased from defendant Hill, stepdaughter of defendant Portz, the grocery store and meat market, including merchandise, fixtures, and lease, located at 7719 Harper avenue, Detroit, at a price of $2,500. Plaintiffs paid $1,000 in cash and executed promissory notes for the balance, which was to be paid in monthly installments of $75. Plaintiffs took possession and began operating the store.

On June 18, 1938, plaintiffs filed bill of complaint charging defendants with fraud and misrepresentations in connection with the sale. On July 5, 1938, plaintiffs' attorney wrote defendant Portz the following letter, which Portz admits receiving:

‘In re: Thomas Kundel and Mary Kundel, his wife, v. Edward Portz, A. J. Primm, and Lauergne Hill

‘Dear Sir:

‘On June 18, 1938, suit was instituted against you for the rescission of a certain agreement made between you and Mr. Kundel concerning the purchase of a meat market store located at 7719 Harper avenue, Detroit, Michigan. There is an order to show cause now pending in this case, and your attorney asked for an adjournment which was granted to him.

‘Mr. Kundel has in the meantime, been compelled to move from the premises by your landlord, and you are, therefore, notified that the fixtures and the merchandise sold by you to Mr. Kundel, are now in the premises at 7719 Harper avenue, of which you can take immediate possession.

‘Mr. Kundel is surrendering to you, the possession of the fixtures and stock purchased from you because he feels he has been defrauded by you in many respects, and particularly for the reason that he purchased the store upon your assurance that he will remain in the premises under a lease, and since he has been compelled to move from the premises, he has no use for the merchandise or fixtures purchased from you.

‘For are, therefore, requested to pay back to Mr. Kundel, all the moneys received by you from him and to reimburse him for the damages suffered as a result of this transaction.

‘Sincerely yours,

‘Isaac M. Smullin

‘Attorney for Mr. Kundel

‘ims/r

‘copy to Louis Gottlieb, Attorney.’

A few days later plaintiffs, at the request of defendant Portz, delivered the store keys to Portz's agent. Portz took immediate possession of the store, merchandise, and fixtures and later, without notifying plaintiffs, sold the fixtures for $2,000.

On July 11, 1938, defendants filed answer generally denying plaintiffs' charges. At the pre-trial hearing the case was transferred to the law side of the court. On November 4, 1939, plaintiffs filed declaration, the first count charging fraud and misrepresentations and claiming judgment against defendant Portz; the second court charging fraud and misrepresentation and claiming judgment against defendants Portz and Hill; the third count, being the common counts and claiming judgment against all three defendants.

In their bill of complaint plaintiffs alleged that ‘they are foreigners by birth and are almost illiterate in the English language and without business experience,’ that defendant Portz asked them to sign a certain instrument which they ‘believed to be a bill of sale, but which instrument was in effect only an agreement to sell,’ and that ‘they signed those instruments without being able to read the same * * * relying upon the assurance of defendants that the instruments contained all the terms and the conditions agreed upon.’

In their declaration plaintiffs alleged that they negotiated with defendant Portz for the purchase of the store and were assured that Portz was the owner; that after taking possession of the store they discovered that the agreement of sale and purchase was signed by defendant Hill, stepdaughter of defendant Potz; that defendants Portz and Hill conspired together to deceive and defraud plaintiffs; that at the time of the sale in March, 1938, defendant Portz falsely represented that the lease of the premises would not expire for nine months, and that he had an arrangement with the lessor to remain in the premises after its expiration; and that in reliance upon such representations plaintiffs purchased the merchandise and fixtures. Plaintiffs further alleged that they later discovered that Portz did not have such lease, but was renting the store on a month-to-month basis; that on June 10, 1938, the owner of the store building served plaintiffs with notice terminating their tenancy and requiring them to vacate; that after receiving such notice they tendered the merchandise and fixtures back to defendant Portz and requested repayment of all moneys they had paid Portz; that Portz accepted such tender, took possession of the store, and instructed plaintiffs to turn the keys over to his (Portz's) agent; that during the time they were in possession of the store plaintiffs had increased the value of the stock of merchandise and the fixtures in the amount of $1,000. Plaintiffs made no charge in their declaration against defendant Primm, but in their bill of complaint they charged him, as the agent of Portz, with fraud and misrepresentation in connection with the sale. Defendants filed answer denying all allegations as to fraud and misrepresentations, and the matter came on for hearing before the court without jury.

At the conclusion of the trial the lower court held that plaintiffs had failed to establish the alleged fraud and misrepresentation and on December 31, 1939, entered judgment of no cause of action.

On January 8, 1940, plaintiffs filed motion to set aside such judgment and for entry of judgment in their favor for the amount they had paid on the purchase price of the store. Such motion was based upon the claim that the tender of the merchandise and fixtures back to defendants and the acceptance thereof constituted a mutual rescission of the agreement of sale and purchase, and that plaintiffs were entitled, under the common counts of their declaration, to recover the amount paid on the purchase price. The trial court's opinion, filed March 18, 1940, stated, in part:

‘At the hearing the plaintiff claimed that there was actual fraud and misrepresentation upon the part of the defendants, and claim damages sustained as a result, and, likewise, claim that defendants having accepted back the tender to them of the merchandise and fixtures consented to a rescission and are bound as a matter of law to a return of the monies paid by them and received by the defendants.

‘At the conclusion of the hearing the court found that plaintiffs had failed to establish the fraud and misrepresentation as alleged and directed entry of a judgment of ‘No cause of Action’ in favor of the defendants.

‘The matter is now before the court on plaintiffs' motion to set aside judgment of ‘No Cause of Action’ and for judgment in favor of the plaintiffs based upon the second count in the declaration, insisting that the plaintiffs are entitled to recover for the money paid to the defendants for merchandise and fixtures which was tendered back to the defendant and accepted by him. * * *

‘As stated, in this motion it is plaintiffs' claim that accepting the court's findings and abandoning their claim for such recovery, the plaintiffs are, nevertheless, entitled to judgment on the common counts for money received and paid to the defendants for the merchandise and fixtures which were tendered back to them and which were accepted. * * *

‘In the case at bar there is no dispute that the defendant accepted the plaintiffs tender of the merchandise and fixtures purchased in accordance with the terms of the letter explaining the purpose of the tender back, and, under the circumstances, are responsible to the plaintiffs for the purchase price received.’

On the same date judgment was entered, providing, in part, as follows:

‘It is ordered and adjudged by the court now here that said judgment of no cause of action in favor of the defendants (entered December 21, 1939) be and it hereby is set aside.

‘It is further ordered and adjudged that the plaintiffs do recover against the defendants their damages hereby assessed in the sum of $1,329.38 together with their costs and charges by them about their suit in this behalf expended, to be taxed, and that plaintiffs have execution therefor.

‘It is further ordered that all the promissory notes given as part of the purchase price in this matter be cancelled and delivered to the plaintiffs. * * *

‘When a contract of sale has been mutually rescinded or abandoned the parties are entitled to be placed in status quo; that is, where the return of the property is effected with the vendor's consent, he is responsible to the vendee for the amount received on the purchase price.

‘By accepting the property involved in the sale the defendants ended all contractual rights between the parties.

‘The plaintiffs having paid to the defendants the sum of $1,329.38 are entitled to a judgment in that sum. * * *

‘Plaintiffs are likewise entitled to a cancellation and the return of all the promissory notes given as a part of the...