Stanton v. Zercher

• Decision Date: 25 April 1918
• Docket Number: 14260.
• Citation: 101 Wash. 383,172 P. 559
• Parties: STANTON v. ZERCHER et al.
• Court: Washington Supreme Court

172 P. 559

101 Wash. 383

STANTON v. ZERCHER et al.

No. 14260.

Supreme Court of Washington

April 25, 1918

Department 2. Appeal from Superior Court, Benton County; Ralph Kauffman Judge.

Action by Richard Stanton against R. H. Zercher and F. E. Zercher wherein defendants filed a counterclaim. Judgment for defendants, and plaintiff appeals. Affirmed.

Moulton & Jeffrey, of Kennewick, for appellant.

Hal H Cole, of Toppenish, for respondents.

HOLCOMB J.

This controversy arose over the purchase by the respondents from the appellant, on or about August 18, 1914, of a certain insurance and loan business in Kennewick Wash., for a consideration of $4,830, on which was paid the sum of $2,000 cash at the time of the transaction, and notes aggregating $2,830 were given for the remainder. Certain payments were thereafter made and credit given therefor, as a result of which the trial court instructed the jury that the amount of recovery upon the notes in principal totaled the sum of $2,843.63, with interest thereon 12 per cent. per annum from June 7, 1916, the date of the commencement of the action, to the date of the submission to the jury, in case appellant recovered against respondents. The interest as above specified would have aggregated $161.12, making the total recovery, in case appellant had recovered anything, $3,004.75, principal and interest.

As an affirmative defense, and by way of counterclaim to appellant's complaint, respondents alleged certain false and fraudulent representations made by appellant in negotiations leading up to the sale, as follows: That the business of appellant was an old, established business; that there were no others in the field, and no chance for them to come in; that the business had increased largely in volume during the year next prior to the transaction; that the values at which the various properties upon the books of appellant were insured were the correct insurable values; that his reputation as an insurance man, as well as the reputation of 'Stanton's Insurance Office,' in Kennewick and vicinity, was good, and that, in case the business was continued under the name of 'Stanton's Insurance Office,' people would continue to do business with the office on account of the standing and reputation of Stanton, appellant advising respondents to continue the business under the name of 'Stanton's Insurance Office'; that in connection with the insurance business he had been and then was agent for the Pacific Building & Loan Company, which agency and business he would turn over to the respondents, and that he had been deriving from the insurance and loan business a total monthly net commission income of $400 or $500; that the good will of the business was valuable, and that the appellant's standing and reputation, as well as the standing and reputation of the office, was good; that the insurance business, including the furniture and fixtures of the office and the good will of the business, together with the agency of the Pacific Building & Loan Association, was reasonably worth the sum of $4,830. It is claimed that all the foregoing representations were false, and that appellant knew them to be false when made.

In addition to the foregoing, respondents claim that, after taking over the business, they discovered that the business had not been on the increase for the preceding year; that the reputation of the appellant was bad; that the business had not been earning the income of $400 or $500 per month, and that it had not been earning any income in excess of $250 per month; that the books and records which had been exhibited to him by the appellant were padded and falsified, and that the true condition and status of the business had been concealed from the respondents; that the properties covered by insurance were insured beyond their actual valuation and in violation of the law; that the good will of the business was of little or no value; that the appellant had been paying and allowing commissions and rebates to various persons and corporations in order to secure business; that the agency of the Pacific Building & Loan Association had been discontinued; and that the insurance business was not worth to exceed the sum of $1,830. Respondents further alleged that they relied upon the representations made to them concerning the business, believed the same to be true, would not have purchased the business had they known the same to be false, and that they were accordingly damaged in the sum of $5,000.

All of the alleged fraudulent representations were denied by appellant in his reply. The issues were submitted to the jury, and at the close of the trial the court instructed the jury that appellant was entitled to recover on his notes, with interest at 12 per cent. per annum from June 7, 1916, as heretofore stated, and that, if the jury found the respondents were entitled to recover more than this amount, their verdict should be for respondents to the extent of such excess; that if they found that respondents' damage exactly equaled the amount due appellant their verdict should be for respondents, and if they found that the amount of respondents' damage, if any, was than appellant was entitled to recover, their verdict should be for appellant for the difference. The jury returned a verdict for the respondents; in other words, finding that the damage to respondents was exactly equal to the amount which appellant would otherwise be entitled to recover. Judgment thereon for costs was entered by the clerk against appellant. In due time appellant filed his motion for judgment notwithstanding the verdict and for a new trial in the alternative, which motions were denied by the court, and a formal judgment, dismissing appellant's action and allowing respondents their costs and disbursements, was entered.

Twenty-eight errors are claimed by appellant, divided into nine groups. Under the allegations of respondents' affirmative answer, that the representations made by appellant, if false, constituted actionable fraud and deceit, and that respondents had the right to rely upon them, is well settled by the decisions of this court. Gilluly v. Hosford, 45 Wash. 594, 88 P. 1027; Blum v. Smith, 66 Wash. 192, 119 P. 183; Gillette v. Anderson, 85 Wash. 81, 147 P. 634; Christensen v. Koch, 85 Wash. 472, 148 P. 585; Duffy v. Blake, 80 Wash. 643, 141 P. 1149; Sowles v. Fleetwood, 97 Wash. 166, 165 P. 1056. Appellant's claims of error are so numerous, involved, and intricate that they cannot be separately discussed fully within the proper limits of this opinion.

One of the principal claims of error is that the question of the good will of the business should not have been submitted to the jury. The court, as appellant says correctly, instructed the jury that the measure of respondents' damage, if any, was the difference between the value of the business which they actually got and the value it would have had, had it been as represented, to wit, its purchase price, in this case, $4,330; the sum of $500, which was given for office furniture and fixtures, not being in controversy. To determine this difference, it was, of course, necessary for the jury to determine the value of the business as it was when respondents received it, and for the purpose of guiding the jury along this line the court gave, among others, instructions numbered 8 and 17. In instruction No. 8 they were told:

'Your first inquiry naturally will be: 'What was the thing which the plaintiff sold, outside of the tangible personal property, consisting of the furniture and fixtures?' To my mind, it was nothing more or less than the good will of the concern. * * * I charge you that this is the law of this case. A learned English judge has said that by the term 'good will' is meant 'every advantage that has been acquired by the old concern by carrying on its business; everything connected with or carrying with it the benefit of the business.' Tested by this definition, what did the defendants buy? In my opinion, they bought the reputation which the Stanton Agency had built up in the community, its right to represent and solicit business for the companies which it had on its bills, its ability to earn commissions on renewals of insurance, its ability to earn commissions on new business to be acquired, and the probability that, by reason of its standing and reputation in the community, new business would come to the concern.'

In No. 17 the jury were told:

'To sum up: If you believe from the evidence here that the plaintiff made any or all of these representations, that such representations or any of them are false, were known by him at the time to be false, or were not known by him at the time to be true, or that he suppressed the truth concerning any of these matters, of which it was his duty to speak, that the defendants relied upon the truth of these representations, either active or passive, and could not by reasonable diligence have ascertained their falsity, that as a result thereof they bought the business, and that they paid therefor a sum in excess of the value of the good will of the business as I have defined it, then they have been damaged by the making of these representations, and it will be your duty to ascertain and fix the sum of such damages.'

Appellant complains that, because both appellant and respondents testified that the consideration for the sale was arrived at by ascertaining the amount which one renewal of the business then on the books would produce in the form of commissions which was found to be $4,330, all of the...