Opinion
March 4, 1953 —
March 31, 1953.
APPEAL from a judgment of the circuit court for Wood county: HERBERT A. BUNDE, Circuit Judge. Modified and, as modified, affirmed.
For the appellants there were briefs by Brazeau Brazeau of Wisconsin Rapids, and oral argument by Richard S. Brazeau.
For the respondent there was a brief by Reiland Schmidt of Wisconsin Rapids, and oral argument by Donald E. Reiland and Leon S. Schmidt.
Action for damages alleged to have been caused by the fraudulent statements of defendant Leslie Reddick which induced plaintiff to enter into a contract with defendant Alfred M. Reddick, doing business as Arco Distributing Company, whereby plaintiff bought from Arco certain merchandise for resale. The jury found for plaintiff in a special verdict and allowed his damages at $1,446. Thereafter, the trial court reduced the damages to $820 and entered judgment on the verdict as so amended. Defendants have appealed from the whole judgment and plaintiff has moved to review the court's reduction of the amount allowed by the jury.
The following accepted statement of facts is from appellants' brief:
"The plaintiff is a resident of the state of Ohio, and is a farmer by occupation. At the time in question, the defendant, Alfred M. Reddick, was the sole proprietor of the Arco Distributing Company, which is located in the city of Wisconsin Rapids, Wisconsin, where Mr. Reddick made his home. Said company was engaged, between the years of 1946 and 1950, in the distribution of boats, air conditioners, oil burners, and other commodities. During this same time, the defendant, Leslie Reddick, a brother of Alfred Reddick, was engaged as a salesman for this company and resided in the village of Wauwatosa, Milwaukee county, Wisconsin. In the early winter of 1950 the Arco Distributing Company advertised in the Wooster Daily Record in Wayne county, Ohio, for a salesman to cover the area surrounding Wooster, Ohio, such salesman to be employed in the jobbing and selling of the products of the Arco Distributing Company. In response to this advertisement, the plaintiff wrote to Alfred M. Reddick applying for the job and stating that he was a man of experience in dealing with the public. Thereafter, on the 16th day of February, 1950, the defendant, C. Leslie Reddick, as a salesman and employee of the Arco Distributing Company, went to Lodi, Ohio, and called upon the plaintiff. On this day the plaintiff purchased from the defendant, C. Leslie Reddick, 20 portable air conditioners at a cost of $700, and 20 `Sure Heat Oil Burners' at a cost of $1,180, and signed a contract which contained the conditions of the purchase and sale agreement, which contract was dated the 16th day of February, 1950. On or about February 22, 1950, the stoves and air conditioners were delivered to the plaintiff, at his farm in Lodi, Ohio, by the Steffke Freight Company, a trucking concern. In the presence of plaintiff, Mr. Brenneman, and his housekeeper, Mrs. Ault, the stoves and air conditioners were unloaded and placed in his barn for storage. Shortly thereafter the plaintiff wrote to defendant, Mr. Alfred M. Reddick, informing him that I several of the plastic tubes on the stoves were broken, to which Mr. Reddick responded by informing him that he could go to a garage and get some copper tubing instead of the plastic and send the bill to him. Plaintiff never took advantage of such offer to make good any defects.
"At no time did Mr. Brenneman, the plaintiff, offer to tender the stoves and air conditioners back to the defendants, nor did he at any time notify the defendants that the stoves and air conditioners were damaged other than the plastic tubing missing and at no time did he inform defendants that he was looking to them for damages until the commencement of his action in October of 1951, some twenty-one months after the stoves were delivered to him. Except for the two units which are exhibits in this case, all stoves and air conditioning units were on plaintiff's farm in Lodi at the commencement of this action.
"In his complaint, the plaintiff alleged that C. Leslie Reddick had made certain oral misrepresentations to him on February 16, 1950, prior to his entering into the written agreement, namely, that if the plaintiff would purchase the 20 air-conditioning units and the 20 oil burners, that a representative of the company would contact the plaintiff within three or four days and would remain with the plaintiff for a period of thirty days for the purpose of instructing him how to sell the units. Also, the plaintiff alleged that the defendant, C. Leslie Reddick, had further told the plaintiff that his profit for the sale of these 40 units would be between $700 and $800 and that sales literature would be furnished with the stoves and air conditioners when the same were delivered to the plaintiff, and that after the 40 units had been sold that the plaintiff would be taken into the firm as a salesman at a salary of $75 per week plus commissions.
"The plaintiff further alleges that the defendant C. Leslie Reddick had informed him that the units were new and in perfect condition and that all of such representations were false in fact and were known to be false by the defendant C. Leslie Reddick at the time they were made and that these representations were relied upon by the defendant, and by them was thereby induced to purchase the units in question.
"The plaintiff further testified that the units when they arrived were in an unsalable condition; that they were not accompanied by explanatory sales literature, and were not followed by a company representative, and that as a result thereof plaintiff suffered loss of profit in the amount of $350, loss of $1,880 paid to the defendants for the purchase of the units, and for the loss of $2,000 which was the average profit made by the plaintiff at his farming occupation, which farming operations were curtailed in order that the plaintiff would be ready to serve the defendants, and that the total damage to this plaintiff was $4,230. The answer of the defendants denies that the defendant Leslie Reddick made any false or fraudulent representations to the plaintiff, and further sets forth other matters in answer to the complaint, and he denies such representation.
"The complaint does not ask for rescission of the contract of sale because of the alleged fraudulent representations of C. Leslie Reddick. It merely asks for damages."
By special verdict the jury found that in negotiating the contract defendant Leslie Reddick informed plaintiff that:
A. A company representative would come to give sales instruction; that this was false; that the speaker knew it was false; that this induced plaintiff to make the contract to buy; that the statement was intended to induce him;
B. That sales literature would be furnished; that this was false; that the speaker did not know this was false; that the statement induced plaintiff to make the contract; that the statement was intended to induce him;
C. That the units were new and in condition to be sold; that this was false; that the speaker did not know this was false; that the statement induced plaintiff to make the contract; that the speaker intended it to induce him.
The jury also found that defendants did not perform the conditions of the contract.
On the question of damages the question submitted by the court was answered by the jury as follows:
"Question 7. What, if anything, was the difference in the market value of the stoves and air-conditioning units as represented by the defendant, Leslie Reddick, and the market value thereof as shipped to plaintiff?
"Answer: $1,446."
Other material facts will be stated in the opinion.
Appellants insist that this action is one to recover damages for breaches of warranty that the merchandise covered by the contract should be of merchantable quality, and they contend that respondent's action will not lie because respondent did not notify appellants within a reasonable time after receipt of the goods that he elected to rescind the contract, as provided by sec. 121.69 (3), Stats., or that he intended to look to the appellants for damages, as provided by sec. 121.49, and interpreted by Marsh Wood Products Co. v. Babcock Wilcox Co. (1932), 207 Wis. 209, 225, 240 N.W. 392. We agree that no such notice was given by respondent and that he cannot maintain an action for breach of warranty but that does not dispose of the issue of fraud. Appellants submit that much testimony was admitted appropriate to an action for breach of warranty and would have us believe that the issue of fraud had been abandoned. We cannot find this to be the case. The complaint charged fraud and questions concerning fraud were asked the jury and answered, and there was ample evidence to sustain such answers except the one that the units were not in merchantable condition when the contract was executed. The action cannot be disposed of as one for breach of warranty but must be considered as one founded upon defendants' fraud.
Appellants do not question the jury's findings that respondent was induced to enter into the contract by the fraud and deceit of appellants and we see no reason to question them either. Appellants' attack on the verdict is directed to the issue of damages and the finding that the units were not in merchantable condition. They contend that there is no evidence to support such finding or the damages found by the jury or the reduced amount allowed by the trial court in motions after verdict.
Both Wisconsin and Ohio have adopted the Uniform Sales Act. We regard this sale as one of unspecified goods in which title passed to the buyer when the goods were appropriated to the contract. Sec. 121.19 (4) (a), Stats. At the very latest this occurred when the heaters and air conditioners were delivered by appellants to the trucking firm for transportation to respondent. Appellant Alfred M. Reddick and his employee, who helped prepare and deliver the merchandise for shipment, testified that at that time they inspected and tested each article and delivered it to the trucker in perfect condition. Respondent had no evidence to the contrary and could only say that the heaters arrived in a damaged condition. He admitted that they might have been damaged in transit. From date of delivery to the time of trial they remained in respondent's barn which certainly could not enhance their appearance. One damaged heater and a damaged air conditioner with like history were put in evidence. The air conditioners were shipped in closed cartons and respondent testified he had opened only a few cartons and in some the air conditioners were undamaged while in others damage existed.
Proof is clearly lacking to support the findings of the jury in section C of the verdict that the representation was false that the units were new and in condition to be sold. The arrival of damaged goods coupled with an admission that they could have been broken in transit is not proof that they were damaged when delivered to the carrier and that fact was denied by two witnesses without any contradiction. We conclude that this finding and the associated damages, as found either by the jury or by the court, are based on speculation and must be set aside. This conclusion also makes it unnecessary to consider respondent's motion to review the court's reduction of damages as having been made after the term and more than sixty days after verdict, and without offering respondent a choice between accepting the reduced sum or having a new trial. If the court's award cannot stand neither can we reinstate the jury's, for lack of evidence to support it.
But we may not dismiss the action, as appellants wish us to do, for we believe that the interests of justice require consideration of a measure of damages which was not submitted to the jury but which is demanded by the evidence produced at the trial. Furthermore, the nature of the evidence is not such as to require a jury to pass upon it in a new trial. The measure of damages adopted by the trial court is that approved by Meske v. Wenzel (1945), 247 Wis. 598, 20 N.W.2d 654, and is suited to an action in which the goods themselves were misrepresented but it is inappropriate when the evidence does not support a finding of such misrepresentation, which we have already said is the case here. But the buyer is not without redress if by fraudulent statements not going to the quality or quantity of the goods he is persuaded to contract for merchandise at an excessive price. A part of the inducement for respondent's payment was appellants' fraudulent representation that a sales instructor would teach him sales techniques for these articles and that sales literature would be furnished him. In spite of such fraud respondent has retained the goods and he is liable for their true value, but if that differs from what he was induced by fraud to pay he is entitled to the difference. Restatement, 3 Torts, pp. 59, 108, secs. 525, 549, states the rule thus:
"Sec. 525. Liability for Fraudulent Misrepresentations. One who fraudulently makes a misrepresentation of fact, opinion, intention, or law for the purpose of inducing another to act or refrain from action in reliance thereon in a business transaction is liable to the other for the harm caused to him by his justifiable reliance upon the misrepresentation."
"Sec. 549. Measure of Damages. The measure of damages which the recipient of a fraudulent misrepresentation is entitled to recover from its maker as damages under the rule stated in sec. 525 is the pecuniary loss which results from the falsity of the matter misrepresented, including
"(a) the difference between the value of the thing bought, sold., or exchanged and its purchase price or the value of the thing exchanged for it,
We may disregard the air conditioners. The proof was that some were defective, and some were not, of the small number which respondent examined, and even as to those found to be defective the proof of difference between actual value and purchase price is lacking. But as to heaters, we know that on February 16, 1950, respondent paid $1,180 for 20 of them. This works out to $59 each. Alfred Reddick testified on the trial, in January, 1952, that the heater in evidence was then worth $99.50 at retail. That is what Leslie Reddick in person had informed respondent was the retail value when the contract was signed in 1950, so by defendants' own testimony the value, whatever it might be, was not changed in the interim. But in this interim in his local newspaper Reddick advertised the same heaters at retail, for $29.50 each. We have then an established actual retail value of $29.50 per unit for which by fraudulent misrepresentations respondent was induced to pay $59, and that in bulk quantities. The difference per unit is $29.50 and for the 20 units is $590. Under the rule quoted from Restatement, which applies to a transaction such as this, respondent should recover this difference from appellants.
No loss of profits or other damage claimed by respondent was supported by proof nor was a question on it submitted.
Over vigorous objection by appellants, respondent was allowed to testify that when Leslie Reddick came to see him Reddick drove up in a Cadillac automobile. Appellants submit that their objection should have been sustained and the admission of the evidence was prejudicial error and requires a new trial. Respondent submits that the testimony was so clearly immaterial that it must have been disregarded by the jury. We agree that its irrelevancy is clear; so clear that respondent's insistence on getting it into evidence could only have been for an intended prejudicial effect. While it hardly lies in respondent's mouth now to argue that his attempt was unsuccessful, our study of the whole record convinces us that the prejudicial effort was in vain. Consequently, the application for a new trial for that cause must be denied. By the Court. — Judgment modified by reducing respondent's damages to $590, with interest, and as so modified, affirmed. No costs will be allowed on the appeal. Appellants to pay the fees of the clerk.