Raymond v. Edelbrock

Engerud, J. Defendants executed and delivered to plaintiff, who does business under the name “La Crosse Credit Association,” the following contract: “Wahpeton, N. D., 8-15, 1902. I agree to send to the La Crosse Credit Association, within twenty days from the above date, correct post office addresses of and amount due from at least thirty debtors who owe me accounts and notes, not outlawed, amounting in the aggregate to one hundred and fifty dollars. The first money received on said notes and accounts up to thirty-six dollars I agree to send to said association within five days after their receipt. If I comply with this agreement, I am not to pay any money to said association except from money collected. Should I fail to comply with this agreement I promise to pay to said association said sum of thirty-six dollars, as liquidated damages, within ten days after default. Two two-cent stamps to accompany each claim. All claims sent for collection to be listed on blanks furnished by said association and to give the name of debtor, correct post office address, date of last payment or purchase and occupation of debtor if said occupation is known to me. In consideration of this agreement the LaCrosse Credit Association agrees to handle this subscriber’s business for a period of four years, to send this subscriber, upon request, blanks on which to send claims for collection1, to give each claim diligent attention, and to furnish a special report, when requested, in accordance with the provisions made in the special report book which will be mailed to the subscriber upon request. The La Crosse Credit Association agree that if they do not fulfill their part of this agreement they will, upon default, pay this subscriber the sum of thirty-six dollars. No agent of the La Crosse Credit Association has authority to change the terms of this agreement. Receipt of a copy of the *234 above agreement is hereby acknowledged [Signed] La Crosse Credit Ass’n, per Harry Taggart. Edelbrock & Massoth.” The defendants failed to comply with the contract in this that they sent to the plaintiff within twenty days after the execution'of the contract the names of only five debtors who owed defendants the aggregate sum of $150, instead of the names of thirty debtors. For this breach of said contract the plaintiff brought this action to recover $36 stipulated damages for the breach thereof. The defendants denied liability on the ground that their signatures to the contract had been procured by fraud. There was a trial by jury and a verdict for defendants. A statement of the case was duly settled, upon which plaintiff applied for judgment notwithstanding the verdict, or for a new trial. Both motions were denied and the plaintiff appeals from the judgment. Appellant contends that the plea of fraud is conclusively disproved, and that a verdict should have been directed in his favor, and hence that he is entitled to a judgment notwithstanding the verdict; but, even if he is not entitled to such judgment, there should be a new trial by reason of the insufficiency of the evidence to justify the verdict and numerous alleged errors of law. It is urged by the appellant that the allegations of the answer are insufficient to show that the contract was void, because it does not allege that the same was rescinded upon the discovery of the alleged fraud. The point is well taken. The obligation imposed by the contract upon the plaintiff was wholly executory. The defendants had received nothing under the contract and consequently had nothing to restore to the plaintiff as a condition precedent to exercising their option to treat the whole transaction as a nullity. The views of the writer on this subject are not in accord with those of my associates and are in conflict with those expressed by the majority of the court in Sonnesyn v. Akin, 14 N. D. 248, 104 N. W. 1026. I fully agree with the views expressed by Judge Fisk in his dissenting opinion in. that case. Rescission of a contract is the act of canceling it by restoring the conditions existing immedately before it was made. Rescission is effected by each party returning to the other what has been received pursuant to the contract or its equivalent. It is manifest that if nothing has been received through the voidable' contract by the party seeking to avoid it there is nothing for him to do as a condition precedent to' exercising 'his election to treat it as a nullity except *235 to assert the invalidity of the transaction whenever the guilty party seeks to assert some right under it. The defrauded party has the option to treat the transaction as void or valid and this right continues so long as the party having the election does not do anything which amounts to a ratification. The defrauded party is not required to give notice of disaffirmance, provided he does not after knowledge of the fraud, retain the fruits of the fraudulent transaction, or tacitly or by affirmative action lead the other party to change his position by reason of apparent ratification. These propositions are so plainly elementary that citation of authorities is unnecessary. • We call attention, however, to the following: Bigelow on Fraud (Ed. 1888) p. 77 et seq.; Thurston v. Blanchard, 22 Pick. (Mass.) 18, 33 Am. Dec. 700; Starch Co. v. Lendrum (Iowa) 10 N. W. 900, 42 Am. Rep. 53. It is next claimed that the answer, although alleging fraud in procuring the contract sued on, does not show any damage, present or prospective, resulting from the fraud. It is not necessary to avoid a contract for fraud that any damage has been or may be suffered by the defrauded party. As was said in Beare v. Wright (lately decided by this court) 103 N. W. 634, a contract induced by fraud “is voidable, xiot because of any supposed pecuniary damage done to the defrauded party, but because the consent of the latter was not free. Rev. Codes 1899, sectioxrs 3836 3841-3844. Fraud, actual or constructive, renders a contract voidable for the same reason that mistake, undue influence, duress, etc., have the same effect.” We think the answer was sufficient The allegations of the answer are not, however, sustained by the proof. The only evidence in behalf of the defendants as to the alleged fraud is that of one of the defendants. In response to several very leading questions he was induced to make answers which, standing alone, give some apparent support to the allegations of fraud. When the answers to these leading questions, however, are read in connection with his testimony on cross-examination it clearly and conclusively appears that he carelessly signed the contract without reading it himself or having it read to him, and that no miss-statements of its contents were made to him. It further appears by his own admission that after he had learned the exact terms of the contract he ratified it by partial perforxnance. The verdict for defendant being based solely on the defense of fraud is without support in the evidence. A *236 verdict should have been directed for plaintiff, but for nominal damages only. It will be observed that the plaintiff is seeking to recover damages for only a partial breach of the contract. The defendants sent to plaintiff within the time prescribed the required amount of claims for collection, but failed to send the specified number. By the terms of the contract the defendants promised to pay $36 “as liquidated damages” if they failed “to comply with this agreement.” If this language is to be construed to mean that the stipulated sum was to be the measure of damages for a breach of any of the stated conditions, then the pretended liquidation of damages was a mere agreement for a penalty; and the entire stipulation would be void for familiar reasons. Where a contract stipulates for the performance of several acts and fixes the same amount of damages for the nonperformance of any single minor condition' as is fixed for a total breach, regardless of the relative detriment apt to result from such partial breach as compared to the loss for a total breach, the very terms of the contract itself demonstrate that compensation for actual detriment was not the thought of the parties. If the agreement is not for compensaion it is necessarily one for a penalty. Such a stipulation is therefore void. Lyman v. Babcock, 40 Wis. 503; Lampman v. Cochran, 16 N. Y. 275; Sedgwick on Damages (8th Ed.) section 406; Sutherland on Damages (3d Ed.) section 295. It follows that if the stipulation in question is to be upheld it must be construed to be applicable only to a total breach. Sedgwick on Damages (8th Ed.) section 415. The stipulation fixing the amount of damages in case of a total breach having no application to the partial breach shown in this case, it was incumbent upon the plaintiff to prove the extent of his loss if he would recover more than a nominal amount. This he failed to do. The only attempt to do so was in the examination of plaintiff whose testimony was taken by deposition. He was asked this question: “What damages have you sustained b}r reason of the failure of the defendants to keep and perform their contract?” The question was objected to on the trial on the ground that it called for the conclusion of the witness, and incompetent testimony, and there was no proper foundation laid. The objection was properly sustained. The question did not call for a statement of facts upon which an estimate of damages could be based. The opinion of *237 the witness as to what his damages should be was clearly incompetent. Objections to testimony by deposition may be made at the trial for incompetency. Rev. Codes 1899, section 5687. Although the plaintiff failed to prove actual damage he was nevertheless entitled to recover nominal damages for the defendant’s breach of contract. Revised Codes, section 5016. The court should have given an instruction to that effect as requested by the plaintiff. This case was commenced in justice court, and hence the recovery of only nominal damages would entitle the plaintiff to recover full costs. The action also involves the validity of the contract in question. The effect of this verdict and judgment is to nullify the contract itself and forever bar the plaintiff from asserting any right under it, as well as to absolve the defendant from all obligations under it. As we have seen, the evidence did not warrant such a ,verdict and judgment. If the judgment were to be affirmed the plaintiff would be wrongfully deprived of a substantial right. Under such circumstances the verdict must be set aside even though the plaintiff was entitled to only nominal damages. 1 Sutherland on Damages, 11, 13, 815; 8 Am. & Eng. Enc. Law (2d Ed.) 560. We decline to entertain respondents’ motion to dismiss the appeal, because the motion comes too late. The regularity of the appeal was not questioned until after a rehearing had been ordered. The ground upon which the dismissal is urged, if tenable, is an irregularity not of a jurisdictional nature. The judgment is reversed, and a new trial ordered.