Miller v. Troy Laundry Mach. Co.
| Decision Date | 15 September 1936 |
| Docket Number | Case Number: 25703 |
| Citation | 178 Okla. 313,1936 OK 513,62 P.2d 975 |
| Parties | MILLER v. TROY LAUNDRY MACHINERY CO., Inc. |
| Court | Oklahoma Supreme Court |
¶0 1. EVIDENCE - Parol Evidence to Prove Fraud Inducing Execution of Contract.
An exception to the parol evidence rule exists for the purpose of proving fraud in inducing execution of a written contract.
2. FRAUD - Rescission or Recovery of Damages as Remedy of Party Induced by Fraud to Execute Contract.
A contract may be rescinded, or damages recovered for the effect of the contract, if its execution was induced by fraud and the defrauded party has not unconditionally affirmed it.
3. EVIDENCE - Parol Evidence to Prove Fraud Inducing Execution of Written Contract Regardless of Recitals Therein.
One who is fraudulently induced to execute a written contract by the oral misrepresentation of the opposite party may show that fact in evidence in an action or defense of fraud, even though the written contract contains a recital that all agreements between the parties are contained therein and that there are no verbal agreements at variance therewith.
4. FRAUD - Misrepresentation of Quality of Property Bought Unseen.
A representation concerning the quality of property bought unseen may be the basis of fraud inducing contract of sale.
5. SAME - Fraud in Misrepresentation Made by Agent.
A transaction into which one is induced to enter by reliance upon untrue and material representations as to the subject-matter, made by an agent intrusted with its preliminary or final negotiations, is subject to rescission at the election of the person deceived.
6. FRAUD - Essentials of Fraud.
To establish fraud it must generally be shown that a material false representation was made, that the speaker knew of its falsity, or made it recklessly as a positive assertion without knowledge of its truth, that the speaker intended that the person addressed should act thereon, and that the person so addressed did act thereon to his damage.
Appeal from District Court, Tulsa County; Harry L.S. Halley, Judge.
Action by S.G. Miller against the Troy Laundry Machinery Company, Inc., for damages caused by contract induced by fraudulent representations. Plaintiff appeals from order sustaining demurrer to his evidence and entering judgment for the defendant on its cross-petition. Reversed and remanded.
Geo. W. Reed, Jr., for plaintiff in error.
Mills & Cohen, for defendant in error.
¶1 This is an appeal by the plaintiff in the trial court, from an order sustaining defendant's demurrer to plaintiff's evidence, and rendering judgment for defendant on its cross-petition.
¶2 The petition in its original form sought damages caused by an alleged breach of defendant's oral warranty as to fitness and condition of a certain laundry machine purchased by plaintiff from defendant under a conditional sales contract. The plaintiff had not yet completed payment of the purchase price. It appearing that the oral warranty or representation was at variance with the terms of the written contract of sale, and that therefore evidence thereof would be barred by the parol evidence rule, the plaintiff amended his petition so as to change his theory of recovery to that of fraudulent inducement to the signing of the contract, caused by the antecedent oral misrepresentation of the defendant's agent that the machine was in first class condition and would perform plaintiff's work satisfactorily. There is no contention by the defendant that the petition, as amended, did not set forth a cause of action in fraud; nor is there any contention that the evidence would not have supported findings of the various elements of fraud. The sustaining of the demurrer to plaintiff's evidence was based upon the assumption that the parol evidence rule prevents proof of fraud in the inducement to signing the contract when the representation causing the signing is at variance with the terms of the contract itself.
¶3 Plaintiff's evidence, and the reasonable inferences therefrom, authorize the following statement of facts. The plaintiff, owning a laundry, was approached by the agent of defendant and persuaded to buy a rebuilt laundry ironer from the defendant. The ironer was at the defendant's head-quarters in Illinois, and the plaintiff never saw it before he signed the contract. The agent represented to him that the ironer was "in first class condition"; that it "would do much more work" than the ironer then in plaintiff's possession; that the ironer would enable plaintiff to get his "work out and get it out 'satisfactorily' and in first class condition". Plaintiff, in reliance upon these representations, signed the contract in question, obligating himself to pay some $4,000 for the ironer. The contract provided in part:
¶4 He made a cash down payment, and the ironer was shipped. The defendant then sent a draft on plaintiff, along with a bill of lading, to a local bank, and plaintiff honored the draft for $500 and signed another contract substantially identical with the first contract. Later the machine arrived and was installed by defendant's representive. It proved worthless, according to plaintiff's evidence, and several months of repeated efforts to make it work, by plaintiff and defendant, proved utterly fruitless. The plaintiff refused to make further payments on the note, offered to restore the machine to defendant, and defendant refused it. The plaintiff then filed this action to cancel the notes and the contract and to recover damages caused him by the aforesaid misrepresentation. The defendant filed an answer and cross-petition, setting up the contract and the notes, and prayed judgment on the notes against plaintiff. The execution of the notes was not denied, and when the court sustained the demurrer to plaintiff's evidence it entered judgment for the defendant on the notes.
¶5 It is important to emphasize in the beginning the precise question before us. The question is not whether a written contract may be varied or contradicted by an antecedent or coexisting express oral warranty. The parol evidence rule prohibits that. This is not that kind of action. This is an action in fraud, and the question is: Where plaintiff sues to rescind or recover damages, on the theory of fraud in inducing him to sign the contract, may he prove his case by evidencing oral representations at variance with the provisions of the written agreement, which oral representations were false, and induced him to his detriment to sign the contract, which he would not have signed but for the said misrepresentations?
¶6 By the great weight of authority this question must be answered in the affirmative. It must be admitted that this exception to the parol evidence rule is not one which commends itself to good reasoning on first impression. It has its weaknesses and it is for this reason, no doubt, that considerable confusion and diversity of decisions have resulted. It does not seem right that when in an action for breach of warranty one may not show an express oral warranty at variance with the written contract, he may relabel his action as one in fraud and thus escape the parol evidence rule, thereby doing the same thing under one theory that he could not do under the other theory. Nevertheless, such is the law, and the reasons for the rule, or rather the exception, will be hereinafter set forth.
¶7 The basis of the exception is that the parol evidence rule should not be invoked as a shield for fraud, or be applied so as to work injustice. 10 R. C. L. 1056; 12 R. C. L. 429, 430. The general rule is stated in 27 C. J. 52, as follows:
"The fact that the transaction affected by fraud is evidenced by writing does not prevent the introduction of parol evidence as to the fraud, the attack of a written instrument for fraud being a well-recognized exception to the general rule. * * *"
¶8 The cases of Hooker v. Wilson, 69 Okla. 43, 169 P. 1097; American Bankers Ins. Co. v. Hopkins, 67 Okla. 150, 169 P. 489; Nickle v. Reeder, 66 Okla. 10, 166 P. 895; McLean v. Southwestern Casualty Ins. Co., 61 Okla. 79, 159 P. 660; Shuler v. Hall, 42 Okla. 325, 141 P. 280; Cooper v. Ft. Smith & W. Ry. Co., 23 Okla. 139, 99 P. 785; Colonial Jewelry Co. v. Jones, 36 Okla. 788, 127 P. 405, and Smith & Co. v. Thesmann, 20 Okla. 133, 93 P. 977, 15 Ann. Cas. 1161, support the following general statement from 22 C. J. 1215:
¶9 Our decision in Hooker v. Wilson, 69 Okla. 43. 169 P. 1097, set forth that:
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