Rankin v. Bigger

• Decision Date: 23 April 1935
• Docket Number: 29233.
• Citation: 260 N.W. 202,128 Neb. 800
• Parties: RANKIN v. BIGGER.
• Court: Nebraska Supreme Court

260 N.W. 202

128 Neb. 800

RANKIN v. BIGGER.

No. 29233.

Supreme Court of Nebraska.

April 23, 1935

Syllabus by the Court.

One who has been induced by fraud to enter into a contract may affirm the contract and maintain an action to recover the damages he has sustained or may set up such damages by way of defense or counterclaim. Where he has thus affirmed and set up the fraud in an action upon an obligation arising out of the contract the burden is upon him to establish the amount of his damages, and an instruction so advising the jury is not erroneous.

Appeal from District Court, Lancaster County; Chappell, Judge.

Action by Lois C. Rankin against Edward C. Bigger, wherein defendant filed counterclaim. Judgment for plaintiff, and defendant appeals.

Affirmed.

William Niklaus and J. E. Mockett, both of Lincoln, for appellant.

Beghtol, Foe & Rankin, of Lincoln, for appellee.

Heard before GOSS, C. J., ROSE, DAY, PAINE, and CARTER, JJ., and LOVEL S. HASTINGS and LIGHTNER, District Judges .

LIGHTNER, District Judge.

Suit on a promissory note. Defense fraud. Finding for plaintiff, and defendant appeals.

The $500 note in suit is part of the consideration given in December, 1930, for a one-third interest in a patent right on a wrench. The agreed consideration for such interest was $5,000, part of which was paid in cash and the balance represented by notes, some of which have since been paid. Plaintiff is not an innocent holder and any defenses defendant may have are still available to him.

The defense pleaded is fraud in the sale of the patent right, in that the seller as an inducement to cause defendant to purchase falsely represented to him that a patent broker had offered the sum of $20,000 for the right to make, use and vend such patented wrench. He alleges he purchased by reason of such false representation, and that the one-third interest was not worth $5,000 and not worth in excess of $500 and that he has been damaged in the amount of $5,000.

The error complained of as grounds for reversal is that the court in instruction No. 7 placed the burden upon the defendant of proving the amount of his damages on account of the fraud. The defendant insists that proof of fraud and that damages resulted therefrom is a complete defense to the note regardless of the amount of the damages. The gist of his theory is contained in an instruction which he tendered, which after stating the essential elements necessary to constitute fraud concluded in the following language: " That, in reliance upon said representation, the said Edward C. Bigger executed the original promissory notes to his damage; then your verdict shall be for the defendant." The law does not sustain defendant's contentions. A person who has been defrauded has an election of remedies. In 27 C. J. 18, it is said: " One who has been injured by fraud may elect to accept the situation created by the fraud and seek to recover his damages or he may elect to repudiate the transaction and seek to be placed in statu quo. For example * * * one who by fraud has been induced to enter into a contract may affirm the contract and maintain an action to recover the damages which he has sustained, or may set up such damages by way of defense or recoupment or counterclaim, or he may rescind the contract and avail himself of the remedies based upon a rescission, or he may sue in equity in a proper case to cancel or rescind the contract, or to secure a reformation of the instrument. This right or election applies, for example, to one who has by fraud been induced to enter into a contract for the purchase or sale of real or personal property."

In this case there was no rescission. The contract was affirmed and the defendant set up his damages as a defense. It was therefore necessary for him to establish the amount of his damages. In such cases the measure of damages is generally the difference in value between the article or thing purchased if it had been as represented and its actual value. It was held in Reed v. Occidental Bldg. & Loan Ass'n, 122 Neb. 817, 241 N.W. 769:" To state a cause of action for fraud or conspiracy to defraud, it is necessary for the pleader to allege not only the conspiracy and the doing of the fraudulent acts, but also facts showing that damage resulted therefrom."

In the body of the opinion is a discussion which refers to several other Nebraska cases. We quote from 122 Neb. page 822, 241 N.W. 769, 771, as follows: " ‘ There is no doubt of the right of a plaintiff to maintain an action against two or more parties for conspiring to do, and actually doing some unlawful act to his damage; but the court, so far as we are aware, are unanimous in holding that confederation and conspiracy are not actionable unless something in pursuance of the common plan is actually done, and the thing done results in injury to the plaintiff, and the facts constituting this injury, and the damage resulting therefrom, must be alleged.' Commercial Union Assurance Co. v....