Tracy v. Morell
2011 Ind. App. LEXIS 893
| Ind. Ct. App. | 2011Background
- In 2002, Morell sold Tracy a used tractor for $12,500, with Tracy signing a no-interest promissory note for $12,000; he paid $8,500 total and stopped in June 2003.
- Detective Dixon found Tracy's tractor identification number altered; Morell later pled guilty to four counts of receiving stolen property; investigation suggested the tractor could be stolen.
- Tracy filed a fraud complaint on December 11, 2003, alleging Morell knowingly misrepresented ownership and that the tractor was seized as stolen property.
- Morell counterclaimed for $4,000, alleging Tracy defaulted on the promissory note; trial court conducted a bench trial on June 21, 2010.
- The trial court dismissed Tracy's complaint with prejudice for failure to prove fraud and found Tracy owed $4,000 on the note.
- On appeal, the Indiana Court of Appeals held the dismissal was error, analyzed fraud elements, and ultimately found mutual mistake and public policy issues voiding the contract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether trial court erred in sua sponte dismissal of fraud claim | Tracy's complaint stated a claim with evidence supporting fraud. | Morell's defenses and weak credibility prevented proof of fraud. | Dismissal improper; record supports fraud claim and proper relief on remand. |
| Whether Tracy proved fraud by Morell | Circumstantial evidence shows Morell knowingly misrepresented ownership or possession. | Evidence failed to prove Morell acted with requisite culpability. | Evidence supports inference of misrepresentation; fraud proven by preponderance of evidence. |
| Whether mutual mistake voids the contract for sale of the tractor | Mutual mistake about the tractor's identity renders the contract voidable. | No mutual mistake; contract stands. | Mutual mistake exists; contract rescission proper. |
| Whether dealing in altered property voids the contract on public policy grounds | Courts should enforce rescission to return parties to status quo ante. | Public policy not violated if parties intended sale. | Contract void on public policy; rescission allowed. |
| Effect of rescission on the promissory note and monetary remedy | Tracy entitled to recover payments plus interest after rescission. | Note enforceable unless rescission granted. | Promissory note null and void; Tracy recovers $8,500 plus prejudgment interest; remand for judgment. |
Key Cases Cited
- Wilkin v. 1st Source Bank, 548 N.E.2d 170 (Ind. Ct. App. 1990) (mutual assent and contract formation principles; standard for rescission)
- Carrell v. Ellingwood, 423 N.E.2d 630 (Ind. Ct. App. 1981) (circumstantial evidence admissible to prove fraud)
- Sam and Mac, Inc. v. Treat, 783 N.E.2d 760 (Ind. Ct. App. 2003) (burden of proof in civil fraud cases; preponderance of the evidence)
- Poppe v. Jabaay, 804 N.E.2d 789 (Ind. Ct. App. 2004) (mutual mistake and rescission guidance)
- Scheiber v. Dolby Laboratories, Inc., 293 F.3d 1014 (7th Cir. 2002) (equitable restoration on rescission considerations)
- Franklin v. White, 493 N.E.2d 161 (Ind. 1986) (rescission proper after mutual mistake of fact)