Wolf Co. v. Smith Mercantile Co.

Connor, J. Defendant alleges that the contract by which plaintiff sold to it the corn-meal mill, for the purchase price of which the note sued on was given, was procured by fraudulent representations, as set out in the answer. It seeks to recover of plaintiff damages which it alleges it has sustained in consequence of such representations, and sets up such damages as a counterclaim to the note. Defendant relies upon the law as stated by Justice Hoke in May v. Loomis, 140 N. C., 352: “Where a sale has been effected by an actionable fraud, the purchaser has an election of remedies. He may ordinarily, at least at the outset, rescind the trade, in which case he can recover the purchase price or any portion of it he may have paid, or avail himself of the facts as a defense in bar of recovery of the purchase price, or any part of it, which remains unpaid, or he may hold the other party to the contract and sue him to recover the damages he has sustained in consequence of the fraud.” 13 C. J., 395. *325 Plaintiff assigns as error, committed in tbe trial of tbis action, tbe admission by bis Honor, oyer its objections and subject to its exceptions, of tbe testimony of witnesses offered by defendant as to statements made to tbe president of defendant company, prior to tbe execution of tbe contract, by tbe salesman of plaintiff company, contending tbat same were incompetent and inadmissible, for tbat tbey tended to contradict, add to, and alter tbe written contract between tbe parties. Defendant neither alleged nor offered to prove a warranty. It alleged fraudulent representations, made by plaintiff to procure tbe execution of tbe contract. Tbe testimony offered was competent and admissible to establish tbe truth of these allegations, and tbe assignments of error are not sustained. Machine Co. v. Feezer, 152 N. C., 516; Unitype Co. v. Ashcraft, 155 N. C., 64; Machine Co. v. Bullock, 161 N. C., 3. “Where tbe execution of tbe contract is produced by fraud, a party is not bound by any clause precluding him from setting up false and fraudulent representations within a proper and reasonable time.” 13 C. J., 394. The learned counsel for plaintiff, in bis brief filed in tbis Court, states tbat be is advertent to authoritative decisions of tbis Court bolding tbat oral testimony of conversations contemporaneous with the execution of a contract in writing are admissible as evidence, where there are allegations of fraud in the procurement of the execution of the contract. He insists, however, tbat testimony of conversations bad between the parties or their representatives offered as evidence of fraudulent representations a “considerable time” before the execution of the written contract are not admissible. In tbis case the negotiations resulting in the sale of the machinery were begun in the summer of 1920; the machinery was shipped by plaintiff to defendant in October, 1920; the written contract was executed 12 November, 1920; the mill was installed during December, 1920, and operations begun 1 January, 1921. Defendant’s evidence was to the effect tbat the fraudulent representations were made when the negotiations were begun. The admissibility of the testimony is not dependent upon the time when the oral representations were made, with respect to the date of the signing of the written contract. The conduct of the parties, their words.and deeds throughout the entire treaty may be shown to the jury upon the issue of fraud. Knight v. Houghtalling, 85 N. C., 17. Plaintiff also assigns as error tbe admission of evidence, over its objections and subject to its exceptions, tending to show damages resulting from tbe fraudulent representations alleged, and tbe amount of such damages. Tbe testimony tbat if tbe mill bad bad a daily capacity of 200 bushels, as represented, defendant would have made a profit of from $200 to $250 per month, whereas, with a daily capacity of only 90 bushels, it could not operate tbe mill without loss, was competent to *326 sustain the allegation that defendant had been damaged. The testimony that defendant spent over $1,700 in the necessary equipment and installation of the mill was competent as tending to show the amount of damages sustained, there being evidence that such expenditures were not only necessary, but were in the contemplation of the parties at the time the sale was made. The contract price of the machinery sold to defendant by plaintiff was $3,239.28; the amount spent by defendant for freight, lumber, belts, and labor in equipping and installing the mill was $1,774.63, making the total cost of the mill to defendant $5,013.91. Without these additional expenditures, the machinery sold to defendant by plaintiff would have been worthless to defendant. There was evidence that the mill, when completed, fully equipped and properly installed, was worth only about one-half what a mill with the capacity to produce 200 bushels of meal per day would have been worth. Upon the third issue the court instructed the jury as follows: “Ordinarily, in an action of this sort, where this kind of defense is set up and it is insisted that defendant has been injured by the fraudulent conduct of plaintiff, the measure of damages is the difference between what the machinery was actually worth and what it would háve been worth if it had been as represented, with such additional damages as would be reasonably foreseen by .the parties at the time the contract was entered into, and which naturally grew out of the failure of the representations to be true. The purpose of the law is to give the defendant, if entitled to damages at all, such damages as will compensate him for the actual loss sustained, which could have been reasonably foreseen by the parties at the time the representations were made.” There was no exception to this instruction. It is a correct statement of the law applicable to facts which the jury could find from the evidence. There was no error in the admission of the testimony as evidence, and the assignment of error is not sustained. There was no error in the admission of the letters from defendant to plaintiff, and from plaintiff to defendant in reply. They were competent as evidence upon the second issue, as tending to show not only that representations were made as to the capacity of the mill, but also that plaintiff knew that the representations were false. In its letter dated 8 November, 1921, defendant wrote to plaintiff as follows: “¥e cannot pay these notes. As heretofore advised, this mill was bought under guaranty to grind from 12 to 15 bushels per hour of whole corn, and with cracker attachment the output was guaranteed to be increased not less than 25 per cent. This should have yielded a daily output on 10 hours run of approximately 200 bushels. We were never able to get the mill to turn out over half this amount.” In reply, plaintiff, in its letter dated 10 November, 1921, says: “We note what you say with *327 reference to tbe capacity of tbe mill, and in reply would state tbat we bave thousands of such mills in operation, and they are giving entire satisfaction and doing just exactly what they are represented to do. All tbat tbe machinery required is proper handling, and it will do just exactly as represented.” Plaintiff by its appeal presents to this Court for review only assignments of error made upon exceptions taken during tbe trial to matters of law or legal inference. There was competent evidence tending to sustain tbe allegations in tbe answer. Tbe charge of tbe learned and careful judge who presided at tbe trial was without error. Tbe judgment is affirmed. There is No error.