McGinnity v. J. I. Case Threshing Machine Co.

Grace, T. This is an appeal from an order denying motion for a new trial. The plaintiff brings an action to cancel and set aside a certain contract entered into with the defendant for the purchase of a certain tractor gas-engine plowing outfit, the contract price of which was $2,525, and the freight, amounting to $150, which was accompanied-at the time of its execution by a written warranty, a copy of which is as follows: “Said machinery is purchased upon and subject to the following mutual and interdependent conditions, and none other, namely: It is warranted to be made of good material, and durable with good care, and to be capable of doing more and better work than any other machine made of equal size and proportion, working under the same condition on the same job, if properly operated by competent persons, with suitable power, and the printed rules and directions of the manufacturers intelligently followed. The conditions of the foregoing warranty are that if, after a trial of ten days by the purchaser, operated in the manner specified, said machinery shall fail to fulfil the warranty, written notice thereof shall at once be given to the J. I. Case T. M. Company, at Racine, Wisconsin, and also to the dealer from whom received, stating in what parts and wherein it fails to fulfil the warranty, and reasonable time shall be given to said cordpany to send a competent person to remedy the difficulty (unless it be of such a nature that a remedy may be suggested by letter), the purchaser rendering necessary and friendly assistance and co-operation, without compensation for labor or material furnished, and the company reserving the right to replace any defective part or parts. If, after giving the notice and opportunity to remedy the difficulty complained of, as above provided, the company fails to send a representative to remedy said difficulty (or to suggest an efficient remedy by mail), or if, upon its attempt to remedy the same, the machinery cannot be made to fill the warranty, the part that fails is to be returned immediately by the purchaser, free of charge to the place where it was received, and the company notified thereof; whereupon the company shall have the option either to furnish another machine, or part, in place of the one so returned, which shall fill the warranty, or to return the notes, or money received for the machine or part so returned, and the con — 291 — tract shall be rescinded to that extent, and no further claim made on the company.” The plaintiff, at or about the time of the completion of the first contract, paid cash for freight $150, and in addition thereto turned over to the defendant two horses and two mules of the agreed value of $525. The balance, $2,000, according to the terms of the first contract, was to be divided into four payments of $500 each, for which notes were to be given, the first of such notes being due October 1, 1914, and one of the remaining notes to be due on October 1st in each of the years 1915, 1916, and 1917, with interest thereon at 7 per cent from date until paid. To secure the notes for $2,000 plaintiff gave a chattel mortgage on all the machinery purchased from the defendant, and also a real estate mortgage upon certain real estate described in the complaint. After such first contract was entered into, the defendant desired to change the amount of the notes and reduce the time for payment from four years to three years, so that the payments would be as follows: $667 due October 1, 1914, $667 due October 1, 1915, and $666 due October 1, 1916. Such change was assented to by the plaintiff, and the notes and mortgages accordingly executed, bearing interest at 7 per cent per annum. Such notes and mortgages were executed by plaintiff to the defendant before the machinery had been tried or tested by the plaintiff. In addition to the express warranty, plaintiff relies upon an implied warranty. The machinery in question, in the latter half of October, 1913, was delivered by the defendant to L. A. McGinnity, the brother and agent of the plaintiff, at Hamlet, Williams county, North Dakota. An expert for the defendant came with the machinery for the purpose of starting it to work and trying it. The ground, however, was frozen, and no trial of the machinery was at this time had. The testimony shows that experts of the defendant came the following spring to such place and tried to make the engine and plows work, but largely failed. The plows did not seem to work and the engine would not pull all of them uphill. In addition to this it appears from the testimony that the company had sent out experts at five different times. An expert went out in the fall, another the following spring, in April, and one in the month of June, ■ one in the month of July, and one in the month of September. The same expert was on three of these trips. It appears. — 292 — from the greater weight of the testimony that the engine would not develop power and the plows would not plow straight, and neither would give any satisfaction for the work for which they were constructed. That there was serious trouble with the power of the engine is conclusively shown by the greater weight of the testimony, which shows the change of carburetors, the addition of the oiler, the fact that the engine would die down immediately when the plows were attached and put in operation, the repeated efforts of the experts to make such machinery do the work for which it was intended, their complete failure to do so, the letters and demands sent the defendant by F. J. McGinnity, the plaintiff, demanding of the defendant that such machinery do the work or that other machinery be substituted therefor which would, and notifying defendant that unless such action was taken such machinery would be returned to it. The plaintiff concedes there was to be a change in the contract so that the balance owing on such machinery would be fully paid in three yearly payments instead of four, but earnestly maintains that there was no other change asked for by the defendant. That such change in the contract was the only one spoken of. To bring about such change in the contract L. A. McGinnity, the agent of F. J. McGinnity, wrote “exhibit 2” to F. J. McGinnity, which the agent, or agents, of the defendant read, partly read, or had opportunity to read, which letter the plaintiff received and which is as follows: McGregor, North Dakota, September 22, 1913. Dear Brother:— Bee. your letter O. 3L & hope you are feeling better by this time. Was expecting you up until I got your telegram. The threshing machine pulled out last night, we threshed your wheat it made 23|* bu. they are on my place now laid up for win. the J. I. Case agent Erickson from Minot is here today & said he made a mistake on the terms of contract as he ment 4 payments instead of 4 years. Now he asked me to drop you a line & explain the change so you would understand it to change the payments from 4 years to 4 falls, or four payments, this fall one payment & 3 falls for balance. I compared contracts they are exactly the same, only change being in payments. He will send you also one & copy after you sign second. Eng. & plows are ready — 293 — at Hamlet. ans. at once & let me know what you done, every one O. K. Your Bro. L. A. McGinnity. From the testimony of L. A. McGinnity and from the letter which he wrote, and from the testimony on behalf of plaintiff relating to such subject, it would appear that it was clearly understood by the plaintiff that was to be the only change in the contract.' “Exhibit A” was the proposed new contract. It is very similar to the first contract, which is “exhibit 1,” with the exception of that part of the contract relating to the warranty of the machinery. The warranty in the proposed new contract is' radically different from the admitted warranty in the first contract. The warranty in the new contract is as follows: “It is expressly agreed that the property herein ordered is not warranted either expressly or by implication, except that the company warrants ownership thereof at the time and place of delivery.” It will be seen, therefore, that in the first contract there was a complete warranty of the machinery sold, and in the second contract there was no warranty whatever concerning the machinery other than that which related to ownership. It must be conceded that the matter of the warranty of the quality, construction, and the capability of such machinery to do the work for which it was constructed and intended to do was a very material part of the first contract, and conferred upon the purchaser of such machinery a very valuable and protective right. Such warranty was no doubt seriously considered by the purchaser at the time of the purchase of such machinery, and assured his mind that he had full protection against all defects which might exist in such machinery, or its failure to do the work for which it was constructed and intended; and it must have been relied upon by the purchaser of such machinery for his protection. The letter, “exhibit 2,” a letter from L. A. McGinnity to F. J. Mc-Ginnity, was written at a time when there was no dispute of any kind concerning such machinery, either as to the material out of which such machinery was constructed, or whether or not it would perform the — 294 — service which it was intended to perform. There was at this time no dispute between the seller and the purchaser of the machinery, the only matter which was endeavored to be changed being the time of payment. Such letter, “exhibit 2” written by L. A. McGinnity, positively states that he compared contracts, which would be the first contract containing the full and complete warranty, and the second proposed contract which he said was exactly the same, the only change being in payments. The second contract in evidence is entirely different from the first contract so far as the matter of warranty is concerned. They are wholly and entirely dissimilar. F. J. McGinnity denies the execution of the second contract which is in evidence, and even went so far as to deny his signature thereto entirely. It also appears from the evidence that the witnesses Marius Erickson and M. S. Donovan, whose names appear as witnesses on the second contract, were not present at the time said contract was executed, and were not in fact witnesses to the execution of said contract, if it were ever executed. To execute a contract legally does not merely mean that a person has signed the same, but in addition to this means that he signed such contract with full knowledge of its contents, or with an opportunity to acquire full knowledge of its contents, and that he was in no manner deceived as to the terms of the contract. A contract is only legally made where the minds of the contracting parties meet as to the terms of such contract. If “exhibit 2” is true, if L. A. McGinnity did compare the proposed second contract with the first contract and there was no difference except as to the terms of payment, then the second contract signed by F. J. McGinnity, if he did sign the same, was not the same contract which 'L. A. McGinnity examined and referred to in “exhibit 2,” the letter which he wrote to his brother. It is not for us to say at this time what were the circumstances surrounding the execution of the new contract, whether or not it was a different contract than that examined by L. A. McGinnity and referred to in his letter to his brother, or whether a different contract from that was substituted at the time of the execution of the second contract, or supposed execution thereof; but all such matters would be susceptible of proof by the testimony of competent witnesses upon a retrial of the action, upon issues fully and properly formed by additional pleadings to be made and served before a retrial of the case. The sole questions, therefore, — 295 — in this ease is the propriety of granting a new trial; and under all the circumstances of the case saying whether or not the trial court abused its discretion in refusing to grant plaintiff’s motion for a new trial. No case is ever tried unless it is tried upon its merits. Courts -exist largely for the purpose that causes of action brought therein may be tried upon their merits, and that the disputes between parties and their differences, when legally presented, may be fully examined, and the testimony thereof given by competent witnesses in court, and therefore finally determined by the court. The plaintiff in this case, after judgment in favor of the defendant, in the court below, made a motion for a new trial supported by affidavits, principal among which was the affidavit of J. A. Van Wagen. Some of the principal grounds upon which the motion for the new trial was based were accident and surprise, which ordinary prudence could not have guarded against. There are several other grounds mentioned as the basis for said motion for a new trial, but we think the ones above mentioned are all that need to be considered in disposing of this case. Section 7660, Compiled Laws of 1913, among several, other causes therein stated, any one of which is sufficient ground for a new trial, contains in subdivision 3 of said section the following language: “Accident or surprise which ordinary prudence could not have guarded against.”’ So far as the plaintiff is concerned, talcing into consideration that he signed the first contract containing the full warranty; and had full knowledge of its contents, and that the machinery was first purchased under and by virtue of such contract and warranty, and plaintiff’s repeated demands and letters to the defendant to make such machinery work, and all the other circumstances and testimony in the case which relate to the failure of the machinery to work and the bringing by plaintiff of the action upon a warranty which is the same as the one in the first contract, leads to the conclusion that plaintiff acted in good faith, and at all times believed, up to the very trial of the case, that he was protected by a warranty similar to that contained in the first contract. So far as the plaintiff then is concerned we conclude that he was entirely surprised at the time of the trial to find the defendant producing and relying upon a contract which contained absolutely no warranty other than that of ownership, which in no sense was a protection to plaintiff against any of the defects of the machinery, whether — 296 — as to construction, adaptability, power, or usefulness for the work which it was intended to do. The plaintiff, however, had an attorney in the case, one C. A. M. Spencer, who from a reading of the record we are convinced was an able and learned attorney of wide professional experience. Plaintiff’s attorney, Mr. Spencer, had correspondence with the defendant, and prior to the time of the trial procured a copy of exhibit A, which was sent to a certain bank, and which contract, exhibit A, Mr. Spencer examined. After such examination, Mr. Spencer, plaintiff’s attorney, wrote the defendant the following letter: Williston, N. D. June 2, 1915. Messrs. TJpham, Black, Bussell, & Bichardson, Milwaukee, Wis. Gentlemen:— Tour favor of May 29th relative to the contract which you sent to the bank here in the case of McGinnity vs. J. I. Case Co. duly received and noted. I have been out of town for the past few days, hence the delay in this matter. I called at the bank this morning and looked the contract over which you claim he executed instead of the one upon which I sued, and I am satisfied that McGinnity never signed any such contract as you sent to the bank, because nobody but a natural bom fool would buy an outfit of machinery such as was bought in this case, without any warranty or trial so as to see whether it would work or not, and execute his notes for $2,000 secured by real and chattel mortgages, pay $150 freight money and turn over stock to the value of $500, without any warranty that the machinery would work satisfactory; that would be worse than buying a “pig in a pokeand while I have not seen the plaintiff in this case, as he lives in Minnesota, still I take the responsibility under all the circumstances to stand upon my complaint as served, and on the contract which I set up and which he did sign, and which looks to me would be much more reasonable te assume that he executed said contract than the one sent to the bank. You, no doubt, have examined the contract sent to the bank, and it expressly provides that there is no warranty of said machinery except as to title, and I never heard a man in this country buying machinery to this amount or less under such contract. You had better make out your answer and send it here to me as soon as you get around to it, — 297 — and I will admit service, as that is customary among attorneys in this country. I may have to reply to your answer, so that the sooner you get it around the better it will be, as I presume you want to dispose of this, case as soon as possible, and I surely will show you all of the professional courtesy in this matter that is consistent with the interest of my client. This case will probably be a court case, except there may be some question of fact raised by the pleadings which will require it to be submitted to the jury, as that is often done; and as our court convenes the 28th of June, the sooner we get the issues settled the better, and I will arrange so as to get the case set for some specific-date in order that your counsel can be here and lose as little time as. is possible, although you may have a local attorney to represent you,, as I do not presume one of your firm will be here. Yours truly, . C. A. M. Spencer. It has been to some extent held in various hinds and classes of eases that the knowledge of the attorney is imputed to his client. There no doubt have arisen, and will arise, many cases to which such rule-may be very properly applied. Whether such rule is a proper one to-apply should be determined, we think, by the particular circumstances and conditions existing in each particular case; if the application of the rule to a given ease would operate to thwart a trial of the case-on its merits, the rule should have no application where the party to-the action against whose interests the rule is invoked, and his attorney, have reasonable excuse to offer or can show they have reasonable grounds for the position which they have taken, it also appearing they acted in good faith, and were surprised, and there are reasonable grounds upon which surprise may be based. It must be conceded in the case-at bar that the plaintiff relied fully upon the contract of warranty upon which he based his action. His reliance upon such warranty continued up to and including the trial, where for the first time he finds the defendant claiming he gave no warranty to such machinery. Certainly, this state of affairs must have been surprise to plaintiff. From the letter written by plaintiff’s attorney to • the defendant, it appears that his attorney took the position that plaintiff never signed — 298 — such contract, meaning the second contract, stating in such letter that “nobody but a natural born fool would buy an outfit of machinery such as was bought in this case without any warranty.” If, then, the second contract produced at the trial was actually, though possibly inadvertently, signed by the plaintiff, the plaintiff’s attorney must have been also greatly surprised. He could not have believed that any such contract as the second was signed by the plaintiff, otherwise he would have amended his pleadings so as to form new issues, which plaintiff’s substituted 'attorneys are now in effect asking the privilege to do, or, in other words, asking the privilege of a new trial, at which new trial he could try additional issues affecting the merits of the case other than those considered at the first trial. Courts favor trial on the merits; and, there appearing to be reasonable excuse for the failure of the plaintiff and his attorney in not alleging and submitting proof of the misrepresentations, if any, of defendant or its agents in and about procuring the second contract, which contained no warranty at all, and it appearing that the plaintiff was greatly surprised, and the plaintiff’s attorney fully believing that the plaintiff never executed the second contract, it was an abuse of discretion on the part of the trial court to deny plaintiff’s motion for a new trial, thus preventing a new trial upon the real merits of the case. The case under consideration is hot unlike in principle an application to open a default judgment where there is an affidavit of merits presented and answer tendered, and a sufficient showing to excuse the default. In the case of Citizens’ Nat. Bank v. Branden, 19 N. D. 489, 27 L.R.A.(N.S.) 858, 126 N. W. 102, the court in defining “surprise” used the following language: “In a case in which a party to an action employs counsel of good reputation and large experience, the neglect by such counsel of matters necessary to the ordinary procedure of the case is a ‘surprise’ to the party within the meaning of the statute entitling him to relief in such case.” Applying this definition to subdivision 3 of § 7660, Compiled Laws of 1913, which provides for new trials, we are satisfied that the plaintiff and his attorney were entirely surprised that the motion for a new trial should have been granted; that it was an abuse of discretion not to grant such motion for a new trial. The judgment of the lower court is therefore reversed and the case — 299 — remanded to it for a new trial and further proceedings in harmony with this opinion. All costs to abide the final determination of the ■case.