Linderman Mach. Co. v. Hillenbrand Co., 10053.

Decision Date18 June 1920
Docket NumberNo. 10053.,10053.
PartiesLINDERMAN MACH. CO. v. HILLENBRAND CO.
CourtIndiana Appellate Court

OPINION TEXT STARTS HERE

Appeal from Circuit Court, Ripley County; Robert A. Creigmile, Judge.

Action by the Hillenbrand Company against the Linderman Machine Company. Judgment for plaintiff, and defendant appeals. Affirmed.

Superseding former opinion in 125 N. E. 81.

F. M. Thompson, of Versailles, Cross, Foote & Sessions, of Muskegon, Mich., and George H. Batchelor, of Indianapolis, for appellant.

Korbly & McNutt, of Indianapolis, for appellee.

McMAHAN, C. J.

The appellant sold appellee a machine known as a “jointer and matcher.” The appellee having failed to pay for said machine, appellant in July, 1914, filed its complaint in the District Court of the United States for the District of Indiana to recover the purchase price. Appellee appeared to said action and filed its answer; the first paragraph being a general denial. The second paragraph alleged fraud on the part of appellant in inducing appellee to purchase the machine. The third paragraph alleged a conditional purchase of the machine; its installation and operation by appellant for two weeks in an effort to demonstrate that it would successfully do the work for which it was intended; that the machine failed to do said work successfully; that appellee refused to accept the machine and notified appellant to remove the same from appellee's factory; that appellee had faithfully fulfilled every obligation on its part as required by the contract of purchase. Upon the trial a judgment was rendered in favor of appellee that appellant take nothing.

After the rendition of this judgment in the United States District Court, appellee instituted this action against appellant to recover damages for fraud and deceit. It is alleged in the complaint herein that appellant by fraud induced appellee to sign an order for the purchase of said machine to be delivered to appellee on trial and subject to its approval, and that said machine was to be installed by appellant in appellee's factory at Batesville, Ind., and that by reason of the fraud of appellant appellee had been put to great expense in installing said machine, in paying freight on it, in removing it from its factory where installed, and in loss of material and time in attempting to operate it. A demurrer for want of facts having been overruled, appellant filed an answer in three paragraphs; the first being a general denial. The second paragraph alleges that appellant had brought its action against appellee in the United States District Court for the District of Indiana to recover the purchase price of said machine, that said cause was put at issue, a trial had upon its merits, and judgment rendered in said cause in favor of appellee, and that the cause of action stated in appellee's complaint herein could have been filed by way of cross-complaint in said action, but was not.

The third paragraph is similar to the second; the main difference being that the pleadings in the United States District Court and the judgment are set out in full. Appellee's demurrer for want of facts to the second and third paragraphs of answer herein was sustained. The court found the facts specially and stated its conclusions of law thereon in favor of appellee. The judgment followed the conclusions of law. Appellant filed its motion for a new trial; the specifications not waived being that the decision of the court is (1) not sustained by sufficient evidence, and (2) is contrary to law.

[1][2] Appellant's main contentions are: (1) That an action for damages for fraud in inducing appellee to enter into the contract for the purchase of the machine will not lie because such sale was made upon trial subject to rejection by appellee after trial, and that appellee's only remedy is rejection; (2) that appellee, having filed an answer in the federal court wherein it set up the alleged fraud as a defense, and having failed in that action to ask affirmative relief by way of cross-complaint, is now barred from prosecuting the present action. We cannot agree with appellant in either of these contentions. Nor can we agree with the statement of appellant that appellee's action for damages is predicated on an affirmance of the contract, and that the institution of the action for damages is in itself an affirmance of the sale. This is an action for damages occasioned by the fraud of appellant, and not an action for a breach of a warranty. In Case Threshing Machine Co. v. Badger, 56 Ind. App. 399, 105 N. E. 576,Nave v. Powell, 52 Ind. App. 496, 96 N. E. 395, and Burk v. Keystone Mfg. Co., 19 Ind. App. 556, 48 N. E. 382, cited by appellant, the purchaser in each case was claiming damages on account of a breach of warranty. The court in each of these cases, as it did in Church v. Baumgardner, 46 Ind. App. 570, 92 N. E. 7, recognized the right of a defrauded purchaser to rescind and sue for damages on account of the fraud. If a buyer rescinds the sale, this will ordinarily preclude any subsequent claim for general damages for the fraud, as the claim for such damages is founded on the continued existence of the sale which has been put at an end by the rescission. But, where the buyer has suffered special damages as distinguished from general damages, he may, according to the better view, after rescission, recover such special damages. 24 R. C. L. 353; note 31 L. R. A. (N. S.) 911; 14 Am. & Eng. Ency. L. (2d Ed.) 179; Hedden v. Griffin, 136 Mass. 229, 49 Am. Rep. 25;Mack v. Latta, 178 N. Y. 525, 71 N. E. 97, 67 L. R. A. 126;Smith v. Bolles, 132 U. S. 125, 10 Sup. Ct. 39, 33 L. Ed. 279;McRae v. Lonsby, 130 Fed. 17, 64 C. C. A. 385;Faris v. Lewis, 2 B. Mon. (Ky.) 375;Warren v. Cole, 15 Mich. 265;Atlantic, etc., R. Co. v. Hodnett, 29 Ga. 461.

In Hackney Mfg. Co. v. Celum (Tex. Civ. App.) 189 S. W. 988, appellee purchased a tractor and plow from appellant with the understanding that he was to have the privilege of testing the machinery for the purpose of seeing the work which it would do before accepting it. Promissory notes were executed in part payment, and on appellee's failure to pay suit was instituted. Appellee filed a cross-complaint in which he charged that the contract was obtained through fraud, and that in testing the machinery he had incurred expenses of $244 for labor, gasoline, and lubricating oil in testing the machinery, which consisted of a tractor, engine, and plow. The court in discussing the right of a purchaser upon his rescission of a contract for fraud said:

“The rule is well settled that upon rescission of a contract for fraud inducing its execution the purchaser is entitled to recover back the purchase price, if already paid, with such special damages, if any, as could have been reasonably contemplated as a result of the fraud. And when the purchaser has incurred necessary expenses, which are the direct and proximate consequence of the fraud, such expenses should certainly be taken into consideration as a proper element of special damages.”

It was held in Farris v. Ware, 60 Me. 482, that the buyer of personal property who had rescinded the contract for fraud could recover expenses for repairs.

In an action for fraud, the damages to be recovered must always be the natural and proximate consequence of the act complained of. Hartford Life Ins. Co. v. Hope, 40 Ind. App. 354-365, 81 N. E. 595, 1088.

The theory of the courts in granting relief to a purchaser in an action by him for fraud is that the loss sustained by him and which is the natural result of the fraud should be made good, and that he should be placed, as near as practicable, in as good condition as he was prior to the perpetration of the fraud.

In Accumulator Co. v. Dubuque St. R. Co., 64 Fed. 70, 12 C. C. A. 37, where a seller warranted a system of storage batteries which he knew would necessitate an expenditure by the buyer, for the construction of a...

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