Witte v. Hobolth

• Court: Michigan Supreme Court
• Writing for the Court: CLARK
• Citation: Witte v. Hobolth, 224 Mich. 286, 195 N.W. 82 (Mich. 1923)
• Decision Date: 01 October 1923
• Docket Number: No. 68.,68.
• Parties: WITTE v. HOBOLTH.

224 Mich. 286

195 N.W. 82

WITTE

v.HOBOLTH.

No. 68.

Supreme Court of Michigan.

Oct. 1, 1923.

Appeal from Circuit Court, Lapeer County, in Chancery; Wm. B. Williams, Judge.

Suit by Otto Witte against Harry Hobolth. Decree for plaintiff, and defendant appeals. Affirmed.

Argued before WIEST, C. J., and FELLOWS, McDONALD, CLARK, BIRD, SHARPE, MOORE, and STEERE, JJ.

Wiest, C. J., and Fellows and Moore, JJ., dissenting in part.Elmer Shumar, of Imlay City, for appellant.

B. F. Reed and G. W. Des Jardins, both of Lapeer, for appellee.

CLARK, J.

Defendant conducted a combined hotel and restaurant in Imlay City. He owned part of the personal property. He held the real estate and part of the personal property under a lease from J. C. Shaw and Lydia Shaw. Intending to sell, he employed a broker in Detroit who advertised the business for sale. Plaintiff, in Detroit, a brewer by trade, saw the advertisement. He, his wife, and an employee of the broker went to Imlay City, met defendant, and saw the property. Plaintiff claims to have stated that he was without experience in that business. He says that representations were made to him by defendant by which he was induced to purchase, which he did the following day for $5,500-$2,600 in cash, and the remainder by a series of notes secured by a chattel mortgage on the property purchased. Defendant gave plaintiff a bill of sale of many articles, including chairs, tables, stoves, utensils, cutlery, soda fountain, cash register, etc., and ‘all linen, sheets, pillows, bed spreads, bedding, towels,’ etc., and ‘all stock on hand, consisting of cigars, tobacco, confectionery, groceries, vegetables, drinks, etc., together with all fixtures, good will, and assignment of lease of Wayfarer's Inn, Imlay City, Michigan.’ Defendant also leased to plaintiff the real estate for a term beginning in June, 1921, and ending September 1, 1925, the lease also reciting:

‘It is understood that the furniture and fixtures now in said building and owned by J. C. Shaw and Lydia T. Shaw shall be included in this lease.’

The monthly rental was $50. Soon after plaintiff took possession he complained to defendant that he had been defrauded. It is said that defendant put him off with suggestion and advice that the business be resold. Some time before the sale to plaintiff defendant made some arrangement to sell to one Layle, who was put in possession; but this proved a failure, and defendant took back the property and another sale was decided upon, in the proceeds of which it appears Layle was to have an interest. It appears that in addition to the $2,600 which plaintiff paid down he had about $500. This, with $100 he borrowed, has gone into the business. Finally, 84 days after purchasing, plaintiff filed this bill praying that defendant be restrained from selling or assigning the notes and mortgage and from foreclosing the mortgage, and that:

‘Defendant be decreed to restore to plaintiff the $2,600 purchase money paid to him by plaintiff, and until said sum is paid by defendant that plaintiff have a lien on the personal property for that amount.’

There is a prayer for general relief, and, though not in apt words, rescission is prayed, together with cancellation of the writings and obligations. The testimony of plaintiff and his witnesses tends to show that the value of the lease and the condition of the building were misrepresented; that the heating plant and the plumbing were bad; that the income and volume of the business were grossly misrepresented; that the quantity of personal property in the place belonging to defendant, as distinguished from that belonging to the Shaws, was also misrepresented, as well as the value of the property sold. Plaintiff also had testimony of statements and admissions by defendant to the effect that in the sale plaintiff had been unfairly dealt with. The evidence in behalf of defendant is in conflict, in the main, with the evidence in plaintiff's behalf. The trial judge found for plaintiff and decreed rescission and the cancellation of the notes, the mortgage and the lease, an injunction against the transfer of the notes and mortgage and against the foreclosure of the mortgage, the payment by defendant to plaintiff of the sum of $2,600 and interest, with costs, and that plaintiff have a lien on all the said personal property in question to secure the payment of the amount. Defendant has appealed.

1. It is insisted that rescission and cancellation, the contract being executed, ought not to be decreed unless the fraud be made clearly to appear and unless the falsity of the claimed representations be certainly proved (citing Oliver v. Baldwin, 201 Mich. 336, 167 N. W. 910), and that plaintiff has not met such burden. A more detailed statement of the particulars of the property and of the business and of the claimed fraud and misrepresentation in regard thereto will profit no one. A careful reading of the record satisfies us that the plaintiff has met such burden, and that the trial judge was right in his finding.

2. It is urged that plaintiff should have acted more promptly in seeking rescission and cancellation. He says he learned of the fraud in about three weeks after the purchase. His bill was filed about two months later. But in the meantime there had been attempted, at defendant's suggestion, a resale of the property, plaintiff being willing to accept considerable loss if the matter could be so adjusted. But such sale was not made. It does not appear that defendant was injured by the lapse of such time. The effect of his suggestion of resale was delay. We think plaintiff acted with reasonable promptness. We said in Barron v. Myers, 146 Mich. 510, 109 N. W. 862: ‘The law of laches should be used as a shield and not a sword.’ See John Schweyer & Co. v. Mellon, 196 Mich. 590, 162 N. W. 1006.

3. It is said that plaintiff neither restored nor offered to restore to defendant the property received before seeking rescission. Neither was necessary. A bill in equity praying rescission proceeds on the theory that there has been no rescission, not on the theory that rescission has already been accomplished. Were plaintiff to sue at law for the money he paid defendant, he should before suit, restore, or tender restoration of, the property he received, that by his own act he thus may have legal right and title to the money. See 9 C. J. 1215; Jandorf v. Patterson, 90 Mich. 40, 51 N. W. 352.

4. The decree for rescission and cancellation gives plaintiff a lien on the said personal property to secure payment of the amount found to be due. Counsel for defendant says that this is contrary to the holding in Mulheron v. Henry S. Koppin Co., 221 Mich. 187, 190 N. W. 674, where we held, quoting from syllabus:

‘Where a contract for the purpose of a cottage was rescinded by the vendees and canceled by a court of equity on the ground of vendor's fraud, the court was not authorized to award the vendees a lien on the premises for the payments made, since their right to a lien must be based on the contract, and when that was rescinded the parties were remitted to their original rights.’

In so holding, we followed Von Hoene v. Barber, 215 Mich. 538, 184 N. W. 526, where, without discussing the question, we followed the majority opinion in Davis v. William Rosenzweig Realty Co., 192 N. Y. 128, 84 N. E. 943,20 L. R. A. (N. S.) 175, 127 Am. St. Rep. 890. Justice Fellows in writing the Mulheron Case distinctly points out that the Davis Case has been severely criticized, and shows that it is against the great weight of authority, but we were constrained to follow precedent of the Von Hoene Case. In this we were wrong. Such holding in both the Von Hoene and Mulheron Cases should be overruled. That such holding is bad in principle and against the overwhelming weight of authority appears by the following. In 39 Cyc. 2031, 2032, it is said in the text:

‘If the contract fails, or is avoided, because of the inability or refusal of the vendor to make a marketable title, or title free from incumbrances, or because of fraud or misrepresentation in the contract, or for any other reason which is chargeable to the vendor and which is not due to default on the...