Schwalbach v. Jones

• Decision Date: 02 February 1925
• Docket Number: Civil 2215
• Citation: 27 Ariz. 260,232 P. 558
• Parties: ALEXANDER M. SCHWALBACH, Appellant, v. CHARLES C. JONES, Appellee
• Court: Arizona Supreme Court

232 P. 558

27 Ariz. 260

ALEXANDER M. SCHWALBACH, Appellant, v. CHARLES C. JONES, Appellee

Civil No. 2215

Supreme Court of Arizona

February 2, 1925

APPEAL from a judgment of the Superior Court of the County of Maricopa. M. T. Phelps, Judge. Affirmed.

Messrs Cox & Moore, for Appellant.

Mr Harold Baxter, for Appellee.

OPINION

McALISTER, C. J.

This is a suit to collect fifteen promissory notes aggregating $1,750 out of a series of twenty-one notes totaling $2,500 and to foreclose a chattel mortgage securing them. The plaintiff, Charles C. Jones, payee of the notes, prevailed and the maker, Alexander M. Schwalbach, defendant, appeals from the judgment.

Appellee and Paul Schwalbach, brother of appellant, were the owners of the S. & J. Battery Company at Phoenix, Arizona, and the Central Auto Electric Shop at Blythe, California. Appellant purchased from the former his one-half interest in these two concerns for $2,500, and satisfied the latter as to his in a way that gave him the right to mortgage the entire property. The notes were in payment of appellee's interest and the chattel mortgage secured their payment. A contract between appellee and Paul Schwalbach as the first parties and appellant as the second party containing the terms of the sale was executed at the same time as the notes and mortgage.

The answer admits the execution of the notes and mortgage but denies any indebtedness thereon, alleging that they were procured by fraud, in that appellee, for the purpose of inducing appellant to enter into the said contract and execute and deliver the notes and mortgage, falsely and fraudulently represented to him that the money invested in the business amounted to $4,800, and that he, the plaintiff, had put up and invested $2,500 of this sum, which made him, at the time the deal was entered into, the owner of a 25/48 interest in said business; that said representations were false and untrue in this: The total amount invested in said business up to that date was $3,400, of which sum appellee had put up and advanced only $500, and he was, therefore, owner of a 5/34 interest in said business, instead of a 25/48 interest as represented by him. It further appears from the answer that appellant, relying on the representations of appellee, executed and delivered the contract and notes; that the true value of appellee's interest in said business at that time was the sum of $705.88; and that said notes and mortgage over and above this sum were without consideration and void. The same facts were set up in a cross-complaint, though the latter contained the further allegation that appellant had paid on said notes $792, including interest, and that he was damaged in the sum of $86.12, the difference between the value of appellee's interest in the business and the amount paid him by appellant.

In both his reply and answer to the cross-complaint appellee denied specifically all allegations of false and fraudulent representations regarding the total amount invested in the property as well as the amount put up and advanced by him. The case was submitted on interrogatories. The jury answered these in favor of appellee; and judgment for him followed.

The only errors assigned are based upon two instructions of the court regarding the degree of proof required to sustain the allegations of fraud. The first one reads as follows:

"You are instructed that fraud is odious in contemplation of law and not to be presumed. It must be established by clear and satisfactory evidence, and the burden of proof is on the defendant to overcome the legal presumption that there is no fraud. The defendant must establish the claim of fraud which he asserts by preponderance of the evidence."

The second is in these words:

"In order to sustain a defense or support a cross-complaint of this kind, it is necessary for the defendant to satisfy the jury by a preponderance of the evidence, first, that the defendant made a substantial, material representation respecting the transaction; second, that it was false, or made in wanton disregard of its truth or falsity; third, that when he made it he knew it was false; fourth, that he made it with the intention of inducing the defendant to act upon it; fifth, that the defendant was misled thereby, and in reliance thereon did act upon it and thereby suffered damage."

The particular language objected to is that fraud "must be established by clear and satisfactory evidence," and that "it is necessary for the defendant to satisfy the jury by a preponderance of the evidence" as to the existence of the necessary elements of fraud. The argument of appellant is that in using the words "clear," "satisfactory," and "satisfy" to define the degree of proof necessary to establish the alleged fraudulent representations of appellee, the court required more than proof by a mere preponderance of the evidence. This contention rests upon the proposition that the party having the burden of proof in a civil action is required to sustain that burden by a preponderance of the evidence only, and that any instruction which imposes a heavier burden upon him is erroneous. There is no question but that such is the general rule in civil causes, and in some jurisdictions it applies to an allegation of fraud the same as to any other averment. Brady v. Cole, 164 Ill. 116, 45 N.E. 438; Ruby & Co. v. Jamison, 143 Ky. 486, 136 S.W. 909; McNaughton v. Smith, 136 Mich. 368, 99 N.W. 382.

The weight of authority, however, is that when fraud is relied on, either in the complaint or the answer, it must be established by "clear and satis- factory evidence." Lepley v. Anderson, 142 Wis. 668, 33 L.R.A. (N.S.) 836, 125 N.W. 433; Castleman v. Stryker, 107 Or. 48, 213 P. 436; Russell v. Brooks, 92 Ark. 509, 122 S.W. 649; Hampton v. Webster, 56 Neb. 628, 77 N.W. 50; Nelson v. Steen, 192 Pa. 581, 44 A. 247; New York Life Ins. Co. v. Davis, 96 Va. 737, 44 L.R.A. 305, 32 S.E. 475; Brennan v. Growdon, 106 Or. 377, 212 P. 189; Everett v. Standard Acc. Ins. Co., 45 Cal.App. 332, 187 P. 996; Everist v. Drake, 26 Colo.App. 273, 143 P. 811.

A note to Lepley v....