Malas v. Lounsbury

• Decision Date: 21 June 1927
• Citation: 193 Wis. 531,214 N.W. 332
• Parties: MALAS v. LOUNSBURY ET AL.
• Court: Wisconsin Supreme Court

193 Wis. 531

214 N.W. 332

MALAS

v.LOUNSBURY ET AL.

Supreme Court of Wisconsin.

June 20, 1927.

Dissenting Opinion, June 21, 1927.

Appeal from Circuit Court, Dane County; August C. Hoppmann, Judge.

Action by Nick Malas against F. L. Lounsbury and the Southern Wisconsin Acceptance Company, wherein the defendant acceptance company brought a cross-complaint. Judgment for plaintiff against defendant Lounsbury, and for defendant acceptance company against plaintiff, and plaintiff appeals. Reversed and remanded, with directions.--[By Editorial Staff.]

The plaintiff commenced this action for the cancellation of a conditional sales contract, which he executed to the defendant F. L. Lounsbury. Upon its face the contract was for the remainder of the purchase price of a refrigerating plant which was to have been installed by the defendant Lounsbury in plaintiff's meat market in Madison by April 25, 1925. The plant had not been installed by July 9, 1925, and on that day the defendant Lounsbury procured the signature of the plaintiff to the conditional sales contract upon false representations that all of the parts of the plant were then at the depot in Madison ready for immediate installation. Defendant Lounsbury sold the contract to the defendant acceptance company and never performed. The defendant company answered and by way of cross-complaint asked for judgment in its favor against the plaintiff upon the conditional sales contract. The case was tried before the court without a jury. The court found as facts the making of the contract between Lounsbury and plaintiff on March 25, 1925; that the price to be paid by the plaintiff was $964, $100 of which was to be paid on the date of the contract and the balance was to be paid at the rate of $72 per month; that the defendant Lounsbury falsely represented to the plaintiff on July 9, 1925, the day on which the contract was executed, that the refrigerating machine was then at the depot in Madison; that he desired to borrow $50 from the Bank of Wisconsin on the conditional sales contract in order that he might be able to pay the freight so as to get possession of the machine; that a few days after the signing of the contract the defendant Lounsbury sold it to the defendant company for $800; that the defendant company purchased the contract in the regular course of business and was an innocent purchaser; that there was due the defendant company the sum of $991.44 as principal, interest and attorneys' fees under said contract. The court also found that the defendant Lounsbury took some steps in the installation of said machine but entirely failed to complete such installation; that plaintiff extended, in aid of installing said machine, $162.10, and that, if said machine had been installed as provided for in said contract, plaintiff would have saved the sum of $1 per day in the cooling of his place of business; that plaintiff removed the parts of the machine which had been installed at an expense of $38.10; that on the 1st day of December, 1925, plaintiff notified both defendants that he rescinded said contracts and tendered back all of the parts of the machinery placed on the premises by the defendant Lounsbury. The court concluded that the plaintiff was entitled to judgment against Lounsbury for $672.20, with costs and disbursements; that the complaint be dismissed as to the defendant acceptance company with costs; that the defendant acceptance company recover from the defendant the sum of $991.41, with interest and costs.

From the judgment entered accordingly, the plaintiff appeals.

Owen, J., dissenting.

Curkeet & Lewis, of Madison, for appellant.

Sanborn, Blake & Aberg, of Madison (Ernest H. Pett, of Madison, of counsel), for respondents.

ROSENBERRY, J.

The principal contention of the plaintiff is that, the conditional sales contract having been procured by false and fraudulent representations, it is voidable both as to the defendant Lounsbury and his assignee, the defendant company.

The contention of the defendant company is that the plaintiff, having knowingly and intentionally signed the contract which contained a recital to the following effect:

“This agreement, witnesseth: That Modern Equipment & Engineering Company (Lounsbury) hereinafter called the seller and Nick Malas hereinafter called the buyer, has bought one model 2 1/2-ton Arctic refrigerating machine, serial number ______, as per proposal attached hereinafter referred to as the goods, delivery and acceptance of which is hereby acknowledged by the buyer, for which the buyer, agrees to pay the seller,” etc.

--the plaintiff is now estopped to deny the truth of the recital as against an innocent purchaser who has relied upon it.

In support of its contention, the defendant company cites Guaranty Securities Co. v. Equitable Trust Co., 136 Md. 417, 110 A. 860;Guaranty Securities Co. v. Exchange State Bank of Minneapolis, 148 Minn. 60, 180 N. W. 919;Bristol-Goodson Electric Light & Power Co. et al. v. Bristol Gas, E. L. & P. Co., 99 Tenn. 371, 42 S. W. 19; and other cases.

We do not find it necessary in our disposition of the case to discuss or decide the very interesting question raised by the contention made by the defendant company. Bearing upon the question, however, attention is called to the following cases: American Nat. Bank v. Sommerville, 191 Cal. 364, 216 P. 376;Whiting v. Squeglia, 70 Cal. App. 108, 232 P. 986;Pacific Acceptance Corp. v. Whalen (Idaho) 248 P. 444.

It clearly appears that the signature of the plaintiff to the conditional sales contract was procured by the false and fraudulent representations made by the defendant Lounsbury; that, as between the plaintiff and the defendant Lounsbury, the contract was voidable because its execution was induced by fraud there can be no reasonable question.

[1] We are then confronted with the question, Does the assignee, the defendant company, stand in any better position than its assignor, the defendant Lounsbury, so far as the right of the plaintiff to avoid the contract is concerned? An express agreement made in a contract that it shall be incontestable for fraud is void as against public policy. Reagan v. Union Mutual Life Ins. Co., 189 Mass. 555, 76 N. E. 217, 2 L. R. A. (N. S.) 821, 109 Am. St. Rep. 659, 4 Ann. Cas. 362; Pearson v. Dublin, A. C. 351; Industrial, etc., Trust v. Tod, 180 N. Y. 215, 73 N. E. 7.

[2] Since Wheelton v. Hardisty, 8 E. & Bl. 232, in which Lord Campbell held that provision in a contract that it should be indefensible was “subject to an implied exception of personal fraud which shall vitiate every contract,” it has been the rule that all contracts procured by fraud were voidable with the single exception of negotiable instruments.

[3] Fraud in the inducement of a contract may be set up by the obligor as a defense when sued upon it. Harriman Nat. Bank v. Seldomridge, 249 U. S. 1, 39 S. Ct. 244, 63 L. Ed. 443; 1 Page on Contracts, p. 343, par. 547, and cases cited; Hamley v. Till, 162 Wis. 533, 156 N. W. 968.

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