Zager v. Setzer

Citation88 S.E.2d 94,242 N.C. 493
Decision Date30 June 1955
Docket NumberNo. 678,678
CourtUnited States State Supreme Court of North Carolina
PartiesMax ZAGER v. John W. SETZER.

Thomas Turner, Greensboro, and Proctor & Dameron, Marion, for defendant, appellant.

Moseley & Edwards and Armistead W. Sapp, Greensboro, for plaintiff, appellee.

JOHNSON, Justice.

Our study of the record leaves the impression that the evidence relied on by the defendant was sufficient to carry the case to the jury on the issues of rescission and damages raised by the further defense and counterclaim.

The evidence discloses that the theatre was operated by C. C. Freeman previous to its acquisition by the defendant. Freeman purchased the equipment on the installment-payment plan from the plaintiff about 15 October, 1951, and continued operations until sometime the following spring or summer, when he gave it up and left town. A foreclosure ensued, under which the plaintiff reacquired title to the equipment. Following this, it was sold to the defendant. As a part of the negotiations leading up to the defendant's purchase of the equipment and the signing of the conditional sale contract, the plaintiff represented to him that the previous operator of the theatre had a weekly gross income therefrom of between $600 and $700. The defendant closed the deal after determining that the costs of operating the theatre would be approximately $560 a week. The building and equipment were completely renovated, after which the defendant operated the theatre for a period of several months under the management of a competent, experienced operator. However, the weekly gross income never approximated $600 or $700, as represented by the plaintiff. On the contrary, it ranged from a high of $487 to a low of $222, with the average being $320. Also, it was disclosed by the testimony of former operator Freeman that his highest weekly gross income was $443, with the average being only $343, and that he closed the theatre 'because it was very unprofitable.'

The foregoing line of evidence, when considered with other testimony of an amplifying and corroborative nature, was sufficient to show prima facie the existence of all the elements of actionable fraud. Ward v. Heath, 222 N.C. 470, 24 S.E.2d 5; Vail v. Vail, 233 N.C. 109, 63 S.E.2d 202.

True, the record discloses no evidence tending to show the plaintiff knew the amount of the former operator's gross income. And in this sense the evidence fails to disclose affirmatively that the plaintiff had knowledge of the alleged falsity of his representation to the effect that the former operator grossed from $600 to $700 a week. However, the evidence is sufficient to support the inference that the plaintiff's representation as to the gross weekly income of the former operator was recklessly made, or positively averred when he was consciously ignorant whether it was true or false, and was intended by him and accepted by the defendant and reasonably relied on as a statement of fact by which the defendant was deceived and caused to suffer loss. The evidence tending to show this state of mind is an adequate substitute for proof of scienter. Roberson v. Williams, 240 N.C. 696, 83 S.E.2d 811; Gray v. Edmonds, 232 N.C. 681, 62 S.E.2d 77; Palomino Mills, Inc., v. Davidson Mills Corp., 230 N.C. 286, 293, 52 S.E.2d 915, 921; Whitehurst v. Life Insurance Co., 149 N.C. 273, 62 S.E. 1067; 23 Am.Jur., Fraud and Deceit, Sec. 68, 1954 Supplement. See also comprehensive annotation entitled 'False representations as to income, profits, or productivity of property as fraud,' 27 A.L.R.2d 14, pp. 60 and 61; Roberson v. Swain, 235 N.C. 50, 69 S.E.2d 15.

We have not overlooked the variance between the defendant's allegations and proofs. In his further defense and counterclaim the defendant expressly alleges the scienter, i. e., that the plaintiff knew of the falsity of his representation as to the weekly gross...

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7 cases
  • Early v. Eley
    • United States
    • North Carolina Supreme Court
    • March 28, 1956
    ...Loan & Ins. Co., supra; Cash Register Co. v. Townsend, supra. This case is easily distinguishable from the case of Zager v. Setzer, 242 N.C. 493, 88 S.E.2d 94. In the Setzer case the plaintiff, as a part of the negotiations, represented to the defendant that the previous operator of the the......
  • Wachovia Bank & Trust Co. v. Smith, 793SC145
    • United States
    • North Carolina Court of Appeals
    • February 5, 1980
    ...made with reckless indifference as to their truthfulness and with an intent that the other party should rely upon them, Zager v. Setzer, 242 N.C. 493, 88 S.E.2d 94 (1955), such is not the case here. Moreover, there was no evidence tending to show that any representations were made in order ......
  • Cantrell v. Woodhill Enterprises, Inc., 201
    • United States
    • North Carolina Supreme Court
    • April 17, 1968
    ...allegation and their proof. G.S. § 1--169. Variance occurs when the proof does not conform to the case pleaded. See Zager v. Setzer, 242 N.C. 493, 88 S.E.2d 94; Davis v. Rhodes, 231 N.C. 71, 56 S.E.2d 43. See also Note, 41 N.C.L.Rev. 647 (1963). The court therefore could not dismiss the act......
  • Haith v. Roper
    • United States
    • North Carolina Supreme Court
    • June 30, 1955
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