Walker, Evans Cogswell v. Ayer

May 12, 1908. The opinion of the Court was delivered by On 23d September, 1903, Walker, Evans Cogswell Company made a written contract with Hartwell M. Ayer to lease to him two Empire typesetting machines, with the provision that the machines should become the property of Ayer upon performance of his promise to pay for them the sum of eight hundred dollars. Two hundred dollars of the purchase money was paid in cash and the remainder was to be paid in quarterly installments of seventy-five dollars, with interest at eight per cent. per annum. On 31st January, 1905, this action was brought for three hundred and seventy-five dollars and interest alleged to be due on the credit portion of the purchase money. The answer thus states the defense relied on: "That at said time the defendant was running and operating a newspaper and printing office in the city of Florence, and the said delivery and contract was entered into by the said parties with reference to said business, and the said property was delivered and the said contract entered into by the said parties to secure the use of said property in setting and distributing type and facilitating and promoting the business of the said office.

"That at all of said time the plaintiff represented that the said property was machinery, and paraphernalia appertaining thereto, in good and sound condition and suitable for the purpose of setting and distributing type and facilitating the same and the work and labor of the said office, and the defendant was induced to receive the said property and sign said contract upon the same.

"The defendant was induced to receive the said property and sign the said contract not only on the aforesaid representations, but upon the special representations made to him by the said plaintiff to the effect: (1) That said machines would set clear proofs with little practice by the operators. (2) That there was no trouble in correcting the galleys. (3) That any person of ordinary intelligence could operate the same. (4) That each machine would do the work of five printers, working by hand. (5) That the distributors were simple and an ordinary boy could attend to them. (6) That they had been in successful operation for years. (7) That they would not break type. (8) That they would pay for themselves in a short time. (9) That they were particularly suitable and adapted to a small newspaper and printing office like that of defendant, and the defendant, confiding in the truth of said representations, was induced to receive said property and enter into said contract.

"The defendant alleges that all of said representations, both general and special, were and are wholly false and so known to the plaintiff at the time, and the same were made to mislead and overreach the defendant, and the said property was and is wholly unsuited for the purpose for which it was delivered to the defendant and wholly worthless.

"That the defendant, relying on the said representations and wholly induced by the same, paid to the plaintiff the first payment of two hundred dollars ($200) mentioned in the said agreement, and attempted to use said property in his office for the said purposes, and the defendant, in good faith attempted to use said property and make the same come up to the said representations made by the plaintiff and perform the work it was represented to do from said date until about the first day of May, 1904, to defendant's great loss and expense, when defendant abandoned his effort in that regard and tendered the property to the plaintiff, and refused to make any further payments thereon, but the plaintiff refused to receive the same.

"That the said property has not since been used, or attempted to be used, by the defendant, but the same was and is subject to the demand of the plaintiff."

The defendant further set up a counterclaim on the same statements as are made in the answer, with the additional allegation: "That the defendant was induced by plaintiff's said false and fraudulent misrepresentations not only to pay to the plaintiff said two hundred dollars, the first payment thereon, but was induced thereby to pay to plaintiff fifty dollars on account of alleged charges for packing said property and to further expend the sum of thirty-five dollars freight charges on said property from the city of Charleston, from which point the said property was shipped by the plaintiff to the defendant, and to further expend the sum of one hundred dollars for work, labor and material in putting up and putting together the said machines, the same having been by the plaintiff separated into parts to facilitate shipment of the same. That during the said period, when the defendant was making, in good faith, efforts to use and operate said machinery in setting type and performing the work in his office, for which it was sold and falsely represented to do and perform, defendant was put to the further necessary expense of hiring and paying extra hands and help, over and above the cost of performing the same work by hand to the amount of nine hundred and sixty dollars; all of which said sums were induced and caused to be paid by the defendant by the said false and fraudulent representations and acts of the plaintiff, to the damage of the defendant thirteen hundred and forty-five dollars."

The plaintiff replied to the counterclaim denying its material allegations The plaintiff also demurred to all the defenses except the general denial, "on the ground that they fail to state facts sufficient to constitute a defense, in that the alleged false and fraudulent representations, if true as alleged, amounted to nothing more that mere matters of opinion and commendatory expressions as to value, prospects and the like, and fraud cannot be predicated thereupon."

The first exception assigns error in the order of the Circuit Court in overruling the demurrer. Some of the representations alleged in the answer, taken separately, may well be regarded as the mere puffing of his property by a seller, which the purchaser is not justified in relying on; still, after allowing for all this, there remains the allegation that the plaintiff represented as distinct facts that the machines would not break the type, that they were suitable and valuable for setting up type, that the defendant relied on these representations and was induced by them to enter into the contract, and that these representations were false and fraudulent and the machinery turned out to be wholly worthless. There is no allegation of an express general warranty of the machines, but only of the particular representations above set forth.

The rule in this State is, that the seller, without any express warranty or representation of value, is held to warrant the article sold to be of value for the purpose to which it is ordinarily applied. The allegation here being that there was a complete failure of consideration of the contract by reason of the machines being absolutely worthless, the defendant, under the rule stated, on proof of his allegation, would be entitled to rescission of the contract. Martin v.Ry. Co., 70 S.C. 8. This would be so even in the absence of allegations of express representations of quality and value. The case is, of course, stronger in view of the above mentioned allegation of such representations. The demurrer was, therefore, properly overruled.

The plaintiff next contends the Circuit Judge should have granted his motion to direct a verdict on the ground "that the defendant had totally failed to establish the allegations in reference to false representations." The record certainly shows the defendant introduced evidence of the representations alleged in the answer, his own reliance on them, breaking of the type and worthlessness of the machinery. The plaintiff, however, vigorously presses the point that the evidence showed the defendant had opportunity to examine the machines, that he did examine them while at work in plaintiff's publishing house, and that plaintiff did not give any express warranty. All this would not justify the direction of a verdict for the plaintiff, however, unless the parties dealt with equal means of information. In Bryce v. Parker, 11 S.C. 337, 340, the Court says: "It is argued, however, that there was no warranty, nothing but a mere representation, and, therefore, the defendant's counterclaim could not be said to be a cause of action arising on a contract. In 1 Pars. on Cont., 580, it is said, `any distinct assertion or affirmation of quality made by the owner during a negotiation for the sale of a chattel, which it may be supposed was intended to cause the sale, and was operative in causing it, will be regarded either as implying or constituting a warranty.'"

Though in this State the rule is more favorable to the seller of real estate than to the seller of personal property, there being no implied warranty of title or quality in the sale of land, yet even in such sales it is said in Rupart v.Dunn, 1 Rich., 101, 105: "When the buyer, without adequate means for forming his own judgment, relies upon the representations of the seller, then these representations must be fair and full." And in Ruberg v. Brown, 50 S.C. 397,401, 27 S.E., 873, which was also an action to set aside the sale of land, the Court says: "Hence, to entitle one to relief for false representation, the misrepresentation must relate to some material fact, past or existing, concerning the subject of the contract, within the range of knowledge, as distinguished from matters of mere belief or opinion, uncertain or conjectural, upon which reliance has been placed with resulting damage, when the complaining party did not deal upon equal terms and with equal means of information. False expressions of opinion by one possessing special knowledge concerning the subject of the contract, which the other party, ignorant on the subject and with unequal means of information, relies on to his injury, may be actionable for fraud. If a party's situation, with reference to property contracted for, is such that he cannot fairly and reasonably exercise his own judgment in reference thereto, he is not a dealer on equal terms, and has a right to rely on representations of value, by the seller, made to induce the purchase."

Can it be said the evidence shows beyond dispute the parties dealt on equal terms? The machines had been in use in the plaintiff's publishing office for several years, and plaintiff's managers had full knowledge of its condition and effectiveness. The defendant testified he had observed in several places the working of typesetting machines, but had no experience in their use, either personally or in his business, that such machines are complicated, and that in purchasing this one he did not trust his own knowledge or his examination, but relied on the representations of the plaintiff's manager. Mr. Cogswell, the managing agent of the plaintiff, himself testified it required an operator of considerable experience to manage the machine. It seems clear from this evidence that the Court could not adjudge as a legal conclusion that the defendant was on such equal terms with the plaintiff, and had such opportunity to examine the machine as to take the case out of the general rule and relieve the plaintiff from all obligations, if the machine turned out to be worthless.

If the representations which the defendant alleged and testified to, as made, were untrue and were relied on by the defendant; and if the defects would not have become obvious to him by the reasonable use of his opportunity for examination and the machine turned out to be worthless, then the defendant was entitled to rescind the contract. The fact that untrue representations, if made by Mr. Cogswell, were made in good faith in reliance on the statements of employees of the plaintiff, could not affect the right of the defendant to rescind, for as to him the effect on his right to rescind would be the same as if they had been made with the intention to deceive. It is true, the machines were known by the defendant to be second-hand, and he had notice from this fact not to expect of them the highest efficiency. But the plaintiff alleged and offered evidence tending to prove the machines would break the type in operation, and that they could be used only at such loss as to render them practically worthless. Notice that the machines were second-hand did not put the defendant on notice not to rely on the representations of the seller that the machines would not break type, and would be of value in the work for which they were to be used. The principle is thus stated inWood v. Ashe, 3 Strob., 64, 71: "The general rule is that a warranty is not implied against defects which are obvious, or of which the purchaser is notified. But if, by fraud, misrepresentation or deceit, the purchaser is misled respecting the character, extent or probable consequences of the defect or disease, of which he has no notice, a warranty is implied."

From these considerations it seems clear, under the law of this State, there was such evidence offered in support of the defense and counterclaim set up by the defendant as to make it proper to submit the case to the jury, and to warrant refusal of a new trial. The testimony of Mr. Cogswell, the manager of plaintiff corporation, was at variance with that of defendant, being to the effect that the machines were of value and gave satisfactory results in the plaintiff's printing house, and that he made no representations beyond giving an opinion as to the merit of the machines, and expressly refused to make any guaranty whatever.

By exceptions to the charge the plaintiff submits the Circuit Judge erred in refusing to charge these requests: "There is no fraud or deceit in a contract between parties capable of contracting, where no fiduciary relation exists, where no facts are concealed."

"To entitle the purchaser to rescission of the contract on the ground of misrepresentation, it must appear that the misrepresentation was so made as that the party may be supposed to have acted on the faith of it, in concluding the contract, without examining or judging for himself."

"Where a party undertakes to make investigations of his own, and the vendor does nothing to prevent his investigation from being as full as he chooses to make it, the purchaser can not afterwards allege that the vendor made misrepresentations."

"Representations, for instance, amounting merely to commendatory expressions, or exaggerated statements as to value, or prospects or the like, as where the seller puffs up the value and quality of his goods, or a man, to induce another to contract with him, holds out flattering prospects of gain, are not regarded as fraudulent."

The record shows the Circuit Judge did charge all these propositions. In giving them to the jury he modified them, however, in accordance with what we have tried to show is the settled law of this State as to the warranty implied in the sale of personal property, and as to the effect of representation as to quality and value. Authority will be found in other jurisdictions to support the plaintiff's requests without modification. But such decisions rest on the application to sales of personal property of the rule caveat emptor, which has long been repudiated in this State.

None of the exceptions raise any question as to the measure of damages in a case of rescission such as this, nor as to whether any part of the damages set up in the counterclaims was remote, nor as to whether the verdict was excessive; and we express no opinion on these points.

The judgment of this Court is, that the judgment of the Circuit Court be affirmed.