Widmer et Ux. v. Leffelman

• Decision Date: 13 December 1949
• Citation: 212 P.2d 737,187 Or. 476
• Parties: WIDMER ET UX. <I>v.</I> LEFFELMAN
• Court: Oregon Supreme Court

187 Or. 476

212 P.2d 737

WIDMER ET UX.

v. LEFFELMAN

Supreme Court of Oregon.

Argued October 11, 1949.

Reversed December 13, 1949.

Sales — Cancellation of contract

1. In suit for cancellation of a contract for sale of a restaurant, and to recover money paid thereon by buyers, evidence was insufficient to sustain finding that seller fraudulently stated that all bills against the business had been paid and that he did not intend to pay outstanding bills, if any. O.C.L.A. § 70-414.

Sales — Nonperformance — No intention to perform — Fraud

2. Mere nonperformance of a promise made, or failure to carry out an intention expressed, in course of negotiations leading up to a sale, is neither fraud nor evidence of fraud, but there is an exception where promise is made with no intention to perform and for express purpose of perpetrating a fraud.

Sales — Evidence insufficient for misrepresentation

3. In suit for cancellation of a contract for sale of a restaurant, and to recover money paid thereon by buyers, evidence was insufficient to sustain finding that seller misrepresented that restaurant was qualified for an A rating as a restaurant.

Principal and agent — Benefits of misrepresentations — Knowledge on part of principal

4. Where seller of restaurant business received benefits of misrepresentations made to buyers by his employee, and retained such benefits after obtaining knowledge of employee's misrepresentations, seller thereby made himself a party to such misrepresentations, warranting cancellation of contract by buyers.

Sales — Fraudulent representations — Cancellation of contract

5. Evidence that seller's agent represented that there was a written lease of premises where restaurant was located, which had an unexpired term of nine months, with option of renewal for one year, when in fact the lease was merely an oral one for month to month sustained finding that there were fraudulent representations warranting cancellation of contract.

Fraud — Affirm contract and sue for damages — Disaffirm contract

6. Buyers of restaurant business, on discovery of fraudulent representations made by seller's agent in inducing the sale, had right either to affirm contract of sale and sue for damages or to disaffirm contract and be reinstated to position in which they were before contract was consummated.

Sales — Buyer's duty upon disaffirmance of contract

7. Where buyers of restaurant business elected to disaffirm contract for sale of restaurant business, on ground of misrepresentations made by seller's agent, it was incumbent on buyers to act promptly and to return or offer to return what they had received under the contract.

Cancellation of instruments — Timely disaffirmance

8. Where buyers entered into conditional sales contract for purchase of restaurant business on November 16, two or three days later buyers took possession, and on or about December 7, after discovery of misrepresentations made by seller's agent, buyers sent seller a letter offering to return restaurant business, there was timely disaffirmance by buyers entitling them to maintain an action for cancellation of the contract.

Sales — Buyer's disaffirmance — Seller's refusal — Buyer's duty with reference to care of property

9. Where buyers of restaurant business made timely disaffirmance of contract of sale after discovery of misrepresentations made by seller's agent, but seller refused buyers' offer to restore title and possession to him, buyers were only under a duty of reasonable care with reference to the physical condition of what they had received under the contract, and so long as they retained possession of the property, they were under duty of exercising the care of gratuitous bailees.

Sales — Buyer's use of property after seller's rejection of restoration

10. The use of personalty by a buyer after seller has rejected buyer's offer of restoration, will defeat attempted rescission if buyer uses the property for his personal benefit and not merely in compliance with his duty as bailee of the seller.

Sales — Buyer's timely disaffirmance — Seller's rejection of possession — Buyer's use of property for benefit of seller

11. Where buyers of restaurant business made timely disaffirmance of contract because of misrepresentations by seller's agent, but seller refused buyers' offer to return possession to seller, and buyers therefore operated the business, such operation was for benefit of seller, and buyers should account to seller for profits, less reasonable compensation to buyers for their services and expenses incurred in operating the business.

                  See: 12 C.J.S., Cancellation of Instruments, § 44
                

Appeal from Circuit Court, Multnomah County.

JAMES R. BAIN, Judge.

Francis F. Yunker, of Portland, argued the cause and filed a brief for appellant.

John F. Galey argued the cause for respondents. On the brief were Galey and Galey, of Sweet Home, and Francis E. Harrington, of Portland.

Before LUSK, Chief Justice, and BRAND, ROSSMAN, BAILEY, HAY and PAGE, Justices.

Wilfred H. Widmer and Joey June Widmer brought action against A.J. Leffelman for cancellation of a conditional sales contract for sale of restaurant business and to recover money paid thereon.

The Circuit Court of Multnomah County, James R. Bain, J., rendered a judgment for the plaintiffs and the defendant appealed.

The Supreme Court, Bailey, J., reversed the decree and remanded the cause, holding that evidence was insufficient to sustain findings that defendant had falsely represented that restaurant business was qualified for an A rating and that there were no bills or claims owed and unpaid by defendant, but that evidence did sustain finding that defendant's agent falsely represented that there was an existing lease, entitling plaintiffs to rescind.

Page, J., dissented.

BAILEY, J.

This suit was brought by Wilfred H. Widmer and Joey June Widmer, his wife, against A.J. Leffelman for cancellation of a contract for the sale of a restaurant, known as the KoZee Cafe, based on defendant's alleged fraud, and to recover the money paid thereon by plaintiffs.

The amended complaint alleges that on or about November 15, 1946, defendant agreed to sell and plaintiffs agreed to purchase the KoZee Cafe, owned by defendant, located at 5311 N.E. Sandy Boulevard in Portland, Oregon, for the sum of $8,000, payable $4,000 in cash at the time of the execution of the agreement and the balance at the rate of $100 per month, with interest at 6% per annum on the deferred payments, and that pursuant to such agreement plaintiffs paid the defendant the stipulated $4,000 and went into possession of the restaurant.

It is then alleged that defendant, for the purpose of inducing them to purchase the cafe, misrepresented to plaintiffs: (1) that defendant had an existing lease on the premises where the cafe was located "with an unexpired term of 9 months and with an option of renewal for one year in addition thereto, all at $75.00 per month"; (2) that such restaurant was qualified for and in a condition to be granted an A rating by the City of Portland; and (3) that there were no bills or claims owed and unpaid by the defendant. Plaintiffs allege that defendant knowingly made such misrepresentations with the intent that plaintiffs should rely thereon in entering into said contract and that plaintiffs did rely on each and every one of such misrepresentations and "have suffered grievous damage therefrom and thereby"; that plaintiffs "have and do elect to rescind said agreement of sale and purchase and have so notified the defendant, and have demanded of the defendant that said agreement be rescinded, and have tendered to the defendant possession of said restaurant and have offered and tendered to the defendant the net reasonable value of the use and operation of said restaurant during the time which they have occupied it, each and all of which has been and is refused by the defendant."

Plaintiffs further allege that they "renew said tender, and have filed with the clerk of the court, for such disposition as the court may direct, a bill of sale of all of their interest in said restaurant, * * *; that there is no remaining net reasonable value for the use and occupation of said restaurant after accounting for the sums which have been expended by the plaintiffs in stocking, equipping and operating the same, but nevertheless tender to the defendant such sum, if any, as the court shall determine to be the net reasonable value of such use, occupation and operation"; that because of defendant's refusal to concur in the rescission of the agreement plaintiffs are left in possession of the cafe "and are compelled to operate the same, by reason whereof additional damages will accrue to the plaintiffs during the pendency of this suit, the exact amount of which cannot be determined until the time of the determination of the rights of the parties at the trial of this case, at which time the plaintiffs will offer proof of said damages and the measure thereof."

The amended complaint sets forth a further and separate cause of suit, but, inasmuch as plaintiffs have abandoned that cause of suit, we shall ignore it.

Plaintiffs pray for a decree canceling the agreement of sale, and for judgment against defendant in favor of plaintiffs for the sum of $4,000, less "such sum, if any, as the court shall find to be the reasonable net value of the plaintiffs' use and occupation of said restaurant", and for other and further relief. The answer denies the allegations relating to the representations claimed to have been made by the defendant.

After a trial on the merits the court found that defendant made the misrepresentations charged against him in the amended complaint, that they were made for the purpose of having the plaintiffs rely thereon, and that plaintiffs did rely thereon "and have suffered damage therefrom." The court, in its decree, canceled "the written agreement of conditional sale by defendant to the plaintiffs...