Utilities Engineering Institute v. Criddle

• Decision Date: 06 October 1943
• Docket Number: 7120
• Citation: 141 P.2d 981,65 Idaho 201
• Parties: UTILITIES ENGINEERING INSTITUTE, a corporation, Appellant v. J. W. CRIDDLE, Respondent
• Court: Idaho Supreme Court

141 P.2d 981

65 Idaho 201

UTILITIES ENGINEERING INSTITUTE, a corporation, Appellant v. J. W. CRIDDLE, Respondent

No. 7120

Supreme Court of Idaho

October 6, 1943

1. Guaranty

Salesman's false representation, made to induce father of minor student to sign contract guaranteeing payment of tuition fee for correspondence course, that salesman had arranged with designated firms for part time employment of student to enable him to pay tuition installments as they fell due constituted "fraud" inherent in the contract of guaranty so as to render it void.

2. Principal and agent

An agent having authority to sell a contract acts within the "scope of his authority" when he makes fraudulent representations as an inducement to make the sale.

3. Principal and agent

Any representations of agent, who admittedly was defendant's representative for the purpose of selling correspondence course contract, which representations were made for the purpose of selling contract and as an inducement to secure signature of minor student's father as guarantor, were made within the "scope of agent's authority" so as to bind defendant, though parties to contract agreed therein that it was entire understanding between them and that no supplementary verbal agreement should be recognized.

4. Principal and agent

Contract provision that agent cannot bind his principal by any representation or agreement will not relieve principal from responsibility for fraudulent representations as to subject matter of contract made by agent, since such representations are within the "scope of agent's actual or ostensible authority".

5. Contracts

A contract which is induced by fraud, which enters into execution of contract or is antecedent thereto, cannot stand regardless of any stipulation in contract, to the contrary and if stipulation amounts to a waiver of fraud practiced on complainant, and which induced him to enter into contract stipulation is of no effect because being against "public policy," allowing guilty party to profit by his own wrong, and denying application of principle that fraud vitiates any contract.

6. Evidence

Parol evidence was admissible to show that defendant was induced to enter into written contract of guaranty by fraudulent representations of plaintiff's agent, since "parol evidence rule" is not applicable where defense is fraud in procuring the agreement, the theory being that because of fraud there was no contract.

7. Guaranty

In action to recover on a contract of guaranty, proof of any damage or injury, however slight, sustained by guarantor by reason of fraud by which he was induced to enter into contract was sufficient.

8. Guaranty

Where minor student's father was induced to guarantee payment of tuition fee for correspondence course in electrical refrigeration by agent's false representation that he had arranged for part time employment of student after completing specified number of lessons, such fraud precluded recovery on contract of guaranty regardless of whether student completed enough lessons to be eligible for part time employment.

Appeal from the District Court of the Ninth Judicial District, for Bonneville County. Hon. C. J. Taylor, Judge.

Action on a contract of guaranty. Held for defendant. Affirmed.

H. W. Soule and A. H. Wilkie for appellant.

Where the contract stipulates, as in the instant case, "that no written alterations or verbal agreements supplementing this contract shall be recognized," or words to that effect, any statements or agreements made by the agent are not binding upon the principal. (2. C.J. 857, Pacific States Automotive Finance Corp. v. Addison, 261 P. 683, Ida; Bruner v. Kansas Moline Plow Co., 104 S.W. 816; Central Bank of Bingham v. Perkins, 251 P. 627, Ida; Bronson v. Weber, 116 S.W. 20.)

Oral agreements not be performed within one year are void. (Sec. 16-505, I.C.A.)

Promises to be performed in the future, and representations relating to things to be done in the future, cannot be made the basis for an action in fraud. (12 R.C.L. 254-5-6, secs. 21, 22; Farwell v. Colonial Trust Co., 147 F. Rep. 480; Miller v. Shurtliff, 89 N.E. 651, Ill.) Alvin Denman for respondent.

A contract of guarantee should be construed and all reasonable doubts resolved in favor of the guarantor, especially where it was drawn by the grantee. (28 C.J. 934; Peck v. Peck, (Wis.) 103 N.W. 5; Ries v. Pacific Fruit & Produce, 50 Idaho 140; Hauter v. Coeur d'Alene, 39 Idaho 621; Jones v. Bankers Trust Co., 239 F. 770.)

The law should not, and does not, permit a covenant of immunity to be drawn that will protect a person against his own fraud. Such a covenant is not enforceable because of public policy. (Note 56 A.L.R. 60; Granland v. Saraf, (Mass.) 160 N.E. 408; Note 56 A.L.R. 64; Ganley Bros. v. Butler Bros., (Minn.) 56 A.L.R. 4.)

The parol-evidence rule has nothing to do with a case where fraud in procuring the agreement is the defense. In such a case, the theory is that because of fraud there was no contract. (Arnhold v. National Aniline and Chemical Co., 20 F.2d 364; Land Finance Corp v. Sherwin Electric Co., (Vt.) 75 A.L.R. 1032; Note 56 A.L.R. 32, 34, 56.)

BUDGE, J. Holden, C.J., and Ailshie, Givens, and Dunlap, JJ., concur.

OPINION

BUDGE, J.

This is an action on a contract of guaranty. Briefly stated, the material facts are substantially as follows On July 8, 1938, Linden G. Criddle, aged 16, upon solicitation by one Cole, traveling salesman and representative of appellant, signed an application for enrollment as a student in appellant's correspondence school for a course in electrical refrigeration and air conditioning. Said application was mailed to and accepted by appellant at its place of business in Chicago, Illinois. Thereafter approximately 36 lessons on the subject of electrical refrigeration were forwarded to and received by Linden G. Criddle, who completed about 22 lessons but due to lack of finances he was unable to continue with his course. There was some correspondence between appellant and Linden G. Criddle looking to some sort of arrangement whereby the lessons were to be discontinued, which ultimately resulted in a discontinuance of the course. Linden G. Criddle paid $ 10 at the time he signed the application and thereafter paid $ 30 more on the total sum of $ 197.50, being the full amount to be paid. At the time he signed the application referred to, his father, J. W. Criddle, respondent, signed the following guaranty: "If Applicant is Under 21, A parent, Guardian Or other Responsible Adult Must Sign Below: For value received, I, the undersigned, hereby approve this application and assure payment of the tuition fee above mentioned, FULL NAME--J. W. CRIDDLE."

Appellant commenced this action in the Justice Court of Idaho Falls precinct, Bonneville County, against Linden G. Criddle, and his father, J. W. Criddle, alleged guarantor, to recover the balance due, namely $ 157.50, legal interest thereon, and for costs of suit; which resulted in judgment in favor of defendants in said action, from which judgment appellant appealed to the District Court of the Ninth Judicial District. In the District Court, respondent demurred to appellant's amended complaint upon, the ground of a misjoinder of parties defendants. The demurrer was sustained and appellant filed a second amended complaint dismissing its cause of action against Linden G. Criddle, a minor, who had repudiated the contract and, as it is alleged in appellant's second amended complaint, "cannot be held personally responsible under said contract for the reason that he is a minor." Whereupon respondent filed a second amended answer to appellant's second amended complaint. Upon the issues thus framed the cause was tried to the court and jury. Verdict was rendered for respondent and judgment duly entered thereon from which judgment this appeal is prosecuted.

Concisely stated, respondent's defense to this action is that his signature guaranteeing payment of the tuition as stipulated in the application was procured by the fraudulent representations of appellant's agent. If the signature of respondent was obtained by misrepresentations and fraud inherent in the contract, the contract is void, which, if true, make other assignments of error urged in appellant's brief unimportant.

We therefore come to the question of whether or not the evidence is sufficient to establish the fact that the signature of respondent was fraudulently obtained. It is established without contradiction that Cole, agent of appellant, represented to respondent that he had procured part-time employment for his son at Montgomery Wards and Auto Parts, business houses located in Idaho Falls, and that the son would make enough by reason of such employment to pay the installments as they became due; that respondent relied upon these representations which were false and made with the intention of fraudulently procuring the signature of respondent to the contract of guaranty. It was a false and fraudulent misrepresentation made with reference to the subject-matter of the contract, and was as to an existing fact. J. W. Criddle, respondent, was asked and made answer to the following questions:

"A. He had the boy quite enthused about it, and so he said he was coming back in--I think it that--that it was that night; and so he came back after I was home, and made me all these promises. He said that was part of his job was to come through here every six weeks--he had students all along the line here, in every town, and that was part of his job to come through here every six weeks, and give them help with anything that they needed help on. And he said he had made arrangements for part time work at several different places here after he had completed so many...