Rauh v. Waterman

• Decision Date: 25 February 1902
• Citation: 29 Ind.App. 344,63 N.E. 42
• Parties: RAUH et al. v. WATERMAN et al.
• Court: Indiana Appellate Court

29 Ind.App. 344

63 N.E. 42

RAUH et al.

v.WATERMAN et al.

Appellate Court of Indiana.

Feb. 25, 1902.

On rehearing. Former opinion sustained, and judgment below affirmed.

For former opinion, see 61 N. E. 743.

ROBY, J.

Appellants' counsel argue in their brief upon the petition for a rehearing that the finding of the trial court to the effect that the sale to Schwabacher was induced by fraud is without support in the evidence. The facts are not disputed. If they are such as to admit of the inference of fraud, the finding must stand. The argument is based upon the statement that the facts show a settlement of an existing controversy, and a sale of the goods thereafter, uninfluenced by fraud. If the premise is granted, the conclusion is irresistible. Appellees' agent sold five barrels of whisky to Schwabacher, to be paid for upon delivery. Schwabacher had no title to the goods, and no right to the possession thereof without paying the price. Curme, Dunn & Co. v. Rauh, 100 Ind. 247-255. Upon learning that the whisky was at the depot at Indianapolis, to which place it was to be shipped, Schwabacher wrote appellees a letter as follows:

“Indianapolis, Ind., March 15, 1893. Messrs. Jos. S. Finch & Co., Pittsburg, Pa.- Gentlemen: I am in receipt of invoice & B. L. 5 bbls. G. W. Rye. Spg. ' 90. The goods was bought on 4 mos. time, & you mark bill cash. I will not receive the goods, and they will remain at the depot, subject to your order, until I can hear from you. Sorry there should be a misunderstanding on first order. Very truly yours, etc., Jos. Schwabacher.

“I inclose memorandum made with your agent: ‘Memorandum Copy. 5 Bbls. '90 Finch Rye, Feby., $1.90, 4 mos., with labels for 25 cases free, & 50c. per case (25) allowance for making boxes and labels.”’

It is specially found that the statements that said whisky was bought on four months' time, and that such memorandum had been made with the agent, were false, and were made by Schwabacher with the fraudulent intent and purpose of deceiving Finch & Co., and inducing them to permit him to take the whisky from the depot without the immediate payment of its price. Immediately upon receipt of his letter, Finch & Co. answered that Lyons, their salesman, had reported the sale of the five barrels as cash, but, as there had been a misunderstanding, to settle it they were willing to make the terms four months, and directing Schwabacher to go ahead and receive the goods. Schwabacher, upon the receipt of such letter in due course of mail, got the whisky from the railroad company, and later mortgaged it to secure the payment of a pre-existing debt. The appellants do not, therefore, occupy the position of bona fide purchasers. Boling v. Howell, 93 Ind. 331;Hewitt v. Powers, 84 Ind. 295. Appellees were at the time ignorant of the fact as to the terms of credit, except as the same was stated to them by the agent when the sale was made, and assented to the delivery of the goods on four months' time in order to compromise, as they believed,a genuine misunderstanding. Fraud vitiates contracts. It is frequently, in case of sales, based upon the concealed insolvency of the purchaser, and his intention not to pay. It does not follow, however, that such facts alone justify rescission and the recovery of goods. The remedy may be had whenever the contract is induced by fraud, without regard to what particular form it may assume, or what devices may have been followed in working it out. The representation as to the time of payment was a material one. The copy of an alleged memorandum made with appellees' agent went to the substance. The appellees were led to believe that a misunderstanding existed, when in fact there was none, but, instead, a scheme to get the whisky without paying the money for it. It is true that a misstatement of facts equally within the knowledge of the parties does not constitute actionable fraud. It is also true, as a general proposition, that notice to an agent is notice to his principal. Neither of these propositions is applicable to the facts of this case. Appellees were merchants at Pittsburg, Pa. Schwabacher was a wholesale dealer at Indianapolis. Lyons was a traveling salesman in the employment of appellees, and on February 4, 1893, made the sale to Schwabacher of the whisky before referred to, and immediately forwarded the order to his firm, who shipped the goods, and sent the consignee a bill of lading marked “Cash.” On the evening of the same day that the sale was made, Lyons left Indianapolis on a trip through the western portion of the United States, going to San Francisco, Cal., and, in going and returning, stopped at various cities and towns for the purpose of selling goods, and returned to Pittsburg about the 1st of April. A necessary element in the deception of appellees was found in the absence of their agent. Under such circumstances, the further proposition that one guilty of fraud cannot complain because his statements were credited becomes applicable. Schwabacher represented by the copy of the alleged memorandum that the agent had agreed to four months' time. Of this representation the agent had no knowledge. The evidence thus presented to appellees appeared to conclusively show that the report made to them by their salesman was erroneous. The letter was adroitly worded, and well calculated not only to deceive appellees as to the main fact, but to prevent them from investigating, as they could have done without delay had the salesman returned to Pittsburg. Under such circumstances, they had a perfect right to take Schwabacher at his word. The question as to how far and when one party may rely upon the assertion of the other has been much considered in a variety of cases. The logical and just test is found in the standard of a reasonable man's action under the same conditions, modified, of course, by particular facts rendering the defrauded person unable to use such degree of care for his own protection. The decisions can be harmonized by the application of this rule. The varying facts upon which they rest make a general rule necessary to their correct understanding. A reasonable man might well rely upon such statements made under such circumstances as those established herein. Many authorities are cited to the effect that where, with full knowledge, the settlement of an existing controversy is made, which involves and depends upon the assertion of a false claim by one party, and in which such claim is reiterated, the settlement is final. The proposition and the authorities do not apply to a case in which the settlement is obtained by means of the concealment of the fraud, and by inducing the belief in the existence of a wholly different state of facts. A settlement made with full knowledge, and a settlement induced as this one was, are two different things. No question of fraud was involved in the settlement made, but the settlement of an alleged misunderstanding was one step in working out the fraud itself.

The petition for the rehearing is overruled.

COMSTOCK, C. J., and BLACK, HENLEY, and ROBINSON, JJ., concur.

WILEY, J.

Upon the original hearing I concurred with my associates in the second division in the opinion affirming the judgment. On the petition for rehearing, I have had occasion to more carefully re-examine the questions presented by the record, and have reached the conclusion that the judgment should be reversed. This has necessitated a consideration of the case by the full bench, and as my associates are of the opinion that the conclusion originally reached is correct, and hence that the petition for a rehearing should be overruled, I will take this occasion to express my reasons why the judgment below should be reversed.

Appellee has not filed any brief in support of the judgment. This itself, under the recent holding of the supreme court, is sufficient reason for a reversal. Neu v. Town of Bourbon, 62 N. E. 7;Berkshire v. Caley, 60 N. E. 696. But in my judgment the facts disclosed by the record do not support the judgment in favor of appellee. It is clear that appellee's defense rested upon the sole ground that by the letter of Schwabacher it was claimed that the sale of the whisky to him by Finch & Co. was upon a credit of four months, when in fact the sale was for cash. From this it is evident that the whole controversy had reference to the terms of the contract of sale, and not to outside facts furnishing the inducement to the contract. The point in controversy between Finch & Co. and Schwabacher was as to the terms of the sale. The former represented through their agent who sold the whisky that the sale was for cash, while the latter claimed it was on a credit of four months. Schwabacher was fortified by a memorandum, made at the time of the sale, showing that it was on a credit of four months, but this memorandum was not signed by either party. The contract of sale, therefore, was within the statute of frauds, and not binding; for it was for goods of the value of more than $50, and not in writing. Section 6635, Burns' Rev. St. 1901. Schwabacher had a right to repudiate the contract, and refuse to accept or receive the goods, and, if he had, he would have been freed from liability. The pivotal questions in the case, it seems to me, arise upon the correspondence between the parties after the whisky had been shipped to Schwabacher, and he had received a bill showing that the sale was for cash. He at once informed the sellers that the sale was to be on a credit of four months, that he would not receive the goods on the terms indicated by them, and that the goods were subject to their order. In response to this communication, Finch & Co. wrote Schwabacher, informing him that their agent had reported the sale for cash, but for the purpose of settling the misunderstanding they were willing to make the terms four months, and requested him to receive the goods, which he did. So we are confronted with the plain propos...