Turner Agency v. Pemberton

• Decision Date: 03 November 1923
• Citation: 38 Idaho 235,221 P. 133
• Parties: THE TURNER AGENCY, a Copartnership Composed of H. R. TURNER, R. S. TURNER and C. H. GUNTER, Doing Business Under the Firm Name and Style of Said TURNER AGENCY, at Pocatello, Bannock County, Idaho, Appellants, v. W. L. PEMBERTON, Respondent
• Court: Idaho Supreme Court

221 P. 133

38 Idaho 235

THE TURNER AGENCY, a Copartnership Composed of H. R. TURNER, R. S. TURNER and C. H. GUNTER, Doing Business Under the Firm Name and Style of Said TURNER AGENCY, at Pocatello, Bannock County, Idaho, Appellants, v. W. L. PEMBERTON, Respondent

Supreme Court of Idaho

November 3, 1923

SALE OF BUSINESS-RECOVERY OF BALANCE OF PURCHASE PRICE-MISREPRESENTATION-COUNTERCLAIM-REPRESENTATION AS TO BOOKS OF ACCOUNT-KNOWLEDGE OF FALSITY-FACTS PECULIARLY WITHIN KNOWLEDGE OF VENDOR.

1. A claim for damages arising out of misrepresentation by the vendor may be set up by the vendee as a counterclaim in an action for the balance of the purchase price.

2. Upon the sale of an insurance business, a representation by the vendor that the books of account correctly show the amounts owing to insurance companies, and the bills receivable, is actionable, if untrue, and relied on by the vendee, even though it is not shown that it was made wilfully and with knowledge of its falsity.

APPEAL from the District Court of the Fifth Judicial District, for Bannock County. Hon. O. R. Baum, Judge.

Action for cancelation of promissory note and damages. Cross-complaint on note. Judgment for defendant on cross-complaint. Reversed.

Reversed and remanded. Costs to appellant.

Peterson & Coffin and H. R. Turner, for Appellant.

The phrase in subd. 6, sec. 6888, C. S., to the effect that a decision is "against law" applies particularly to a case where the trial court has failed to find upon all of the material issues. (Brown v. Macey, 13 Idaho 451, 90 P. 339.)

Budge &amp Merrill, for Respondent.

A purchaser of personal property cannot avoid payment of a note given as part of the purchase price on the ground of fraud and deceit without rescinding the contract and tendering back the property purchased. (Caldwell v. Ruddy, 2 Idaho 1, 1 P. 339; Cowen v. Harrington, 5 Idaho 329, 48 P 1059; Kemmerer v. Pollard, 15 Idaho 34, 96 P. 204; Daniels v. Englehart, 18 Idaho 548, 111 P. 3, 39 L R. A., N. S., 938; Harshbarger v. Eby, 28 Idaho 753, Ann. Cas. 1917C, 753, 156 P. 619; Moyer v. Hyde, 35 Idaho 161, 204 P. 1068.)

A failure of the court to find upon an immaterial issue, or upon an issue which would not change the result of the lawsuit if a finding were made, is not cause for a reversal. (In re Adams Estate, 128 Cal. 380, 57 P. 569, 60 P. 965; Southern P. R. R. Co. v. Dufour, 95 Cal. 615, 30 P. 783, 19 L. R. A. 92; Darling Milling Co. v. Chapman, 131 Mich. 684, 92 N.W. 352; Louvall v. Gridley, 70 Cal. 507, 11 P. 777; Tage v. Alberts, 2 Idaho 249, 13 P. 19; Kent v. Richardson, 8 Idaho 750, 71 P. 117; Wood v. Broderson, 12 Idaho 190, 85 P. 490; State v. Baird, 13 Idaho 126, 89 P. 298; Later v. Haywood, 14 Idaho 45, 93 P. 374.)

MCCARTHY, J. Dunn, William A. Lee and Wm. E. Lee, JJ., concur. Edgington, District Judge, dissents.

OPINION

MCCARTHY, J.

This is an action by appellants to procure the cancelation of a promissory note and for damages. The complaint alleges that appellants agreed to buy and respondent to sell an incorporated insurance business, which respondent conducted, and of which he owned practically all the stock; that the balances owing to and owed by said corporation, as shown on its books, were used as a basis in arriving at the purchase price; that respondent wilfully, fraudulently, knowingly and wrongfully represented to appellants that said books of account correctly showed said balances; that said books of account did not correctly show said balances; but on the contrary $ 876.39, owing to the insurance companies for which the corporation was acting as agent, was not shown on the books, and $ 276.09 in bills receivable which the books showed to be owing had been collected; that appellants believed and relied upon these representations of respondent; that appellants executed and delivered to respondent in part payment of the purchase price a promissory note for $ 1,000; that respondent is insolvent. This note appellants sought to have canceled but they also asked for damages. By way of answer respondent denied all the material allegations of the complaint and also filed a cross-complaint seeking to recover on the note in question. By way of answer to the cross-complaint, and also as a counterclaim, appellants set up the same matters contained in their complaint. So far as the question of misrepresentation is concerned the only finding of the court is that respondent did not make the representations set forth in the complaint wilfully, fraudulently, knowingly or wrongfully or with intent to cheat or deceive appellants. Judgment was for appellants on the cross-complaint for the full amount of the note and interest and attorney fee. The appeal is from an order denying a motion for a new trial.

The only assignment of error is that the decision is against law in that the court failed to find on all the material issues, the specific point being that the court failed to find whether respondent made the representations charged in regard to the books of account and whether such representations were untrue. If the point be well taken it is ground for reversal, and it can be raised under the assignment that the decision is against law.

"Failure to find on all the material issues upon which evidence was introduced is error for which a new trial will be granted.

"Where a judgment is entered upon findings which do not determine all the material issues raised by the pleadings with respect to which evidence was introduced, the decision is against law and a new trial may be granted on that account." (Brown v. Macey, 13 Idaho 451, 90 P. 339.)

Respondent's first contention is that appellants were not entitled to any relief, because they neither alleged in their complaint nor proved that they have tendered back the stock of the corporation and control of the business, which passed to them upon the sale. In support of this contention they rely upon Cowen v. Harrington, 5 Idaho 329, 48 P. 1059. In that case the facts were that defendant bought a placer claim of plaintiff, paying him $ 1,500 in cash, and giving two promissory notes for the balance. He subsequently discovered that certain representations made by plaintiff were false. In an action upon the promissory notes defendant set up the fraud as a defense. The supreme court held that the lower court correctly struck the answer, because it did not allege that defendant had offered to rescind the contract and restore the property to the plaintiff. The court says:

"When one has been defrauded in making a contract, he must rescind the same and offer to restore the party to his original rights within a reasonable time after the discovery of the fraud, or he may affirm the contract and claim damages for the injury, neither of which did the defendant do."

This is a sound rule, but it was misapplied to the facts of that case. The defendant was not seeking to rescind the contract. He had paid a substantial amount and did not seek to recover it. He sought to defend the action for the balance on the ground that he had been...