Russell Land Co. v. Mandan Chrysler-Plymouth, Inc., CHRYSLER-PLYMOUT
Decision Date | 21 November 1985 |
Docket Number | No. 10954,CHRYSLER-PLYMOUT,INC,10954 |
Citation | 377 N.W.2d 549 |
Parties | RUSSELL LAND COMPANY, a North Dakota partnership, Plaintiff and Appellee, v. MANDAN, Defendant and Appellant. Civ. |
Court | North Dakota Supreme Court |
Bair, Brown & Kautzmann, Mandan, for defendant and appellant; argued by Malcolm H. Brown.
Kelsch, Kelsch, Ruff & Austin, Mandan, for plaintiff and appellee; argued by William C. Kelsch.
Mandan Chrysler-Plymouth, Inc., ("MCPI") appeals from a judgment (1) holding that false representations of insolvency justified rescission of Russell Land Company's written release of MCPI's lease obligation for rent of a building, and (2) awarding Russell a judgment of $32,601.32 for net rent due after certain mitigations. We affirm.
Russell leased a building to MCPI, which it used for an automobile dealership. In conversations during the spring of 1981, Bruce Whittey, an officer of MCPI, told Russell that MCPI was having financial problems and was planning to close its business. On June 3, 1981, Bruce Whittey notified Russell in writing that MCPI was paying the rent through June and would surrender the leased premises on June 30, 1981. Twenty-six months of a five year lease term remained after June 30, 1981, with a monthly rent obligation of $1,475 plus utilities and taxes.
On July 31, 1981, MCPI and Russell executed a written "Release" by which Russell gave MCPI a "full and complete release with discharge ... of any and all obligation" under the lease, in consideration of MCPI's transfer to Russell of a vehicle valued at $5,000 which Russell had been leasing from MCPI.
Later, hearing rumors that MCPI had remaining assets, Russell made demand upon MCPI for information about its financial condition. Receiving none, Russell gave "Notice of Intent to Seek Rescission" of the "Release" and demanded payment of delinquent rent under the lease. This suit followed.
The trial court found:
These findings were primarily based upon the testimony of Bruce Whittey, the officer of MCPI, and Donald Russell, a partner of the Russell Land Company, who had negotiated the "Release" for their respective companies and who were the only witnesses.
Donald Russell's testimony about the representations was fairly positive:
Donald Russell testified that he relied upon Whittey's representations of insolvency in entering into the "Release."
Bruce Whittey testified that MCPI had been "experiencing some cash flow problems," was "very concerned about the economic future of Chrysler Corporation," and was "concerned about the economic future of the area of the total economy." He testified that MCPI was not insolvent when it went out of business, but that Russell never requested any written financial statements. His testimony was as follows:
On this record, MCPI argues that it had no affirmative duty to disclose information to Russell and that Russell did not meet its burden of proving fraud (Findings V and XI) by clear, satisfactory and convincing evidence.
Although compromise settlement agreements are encouraged, Muhlhauser v. Becker, 76 N.D. 402, 37 N.W.2d 352 (1948), they are voidable for fraud, like all contracts. Secs. 9-03-02, 9-03-03, 9-03-04 and 9-03-08, N.D.C.C. Fraud is a question of fact. Sec. 9-03-10,...
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