*1 DECEMBER, Machinery Company Reaves Ben Dallas Farm 1957. No. A-6316. Decided November Rehearing overruled December 233.) Series *2 Knape, Dallas, petitioner. Wilbur T. holding Appeals prior in to the erred fully plain
purchase machinery of the defendant had informed plaintiff knew of the tiff capabilities of his business and that nature loader, while defendant did not. tractor Henry 533; Phillips, v. 151 Ladd v. S.W. Whit ledge, refused; Roberson, error Maddox v. 29
Cantey, Hanger,
Johnson, ScarboroughA Gooch, Carlisle
<fe
Reichelt,
Ed
Worth,
respondent.
Cravens and
all of
Fort
sustaining
opinion
In
Appeals
of the Court of Civil
cited
Thompson
Sawyers,
873;
v.
Free Sew-
ing
Atkins,
history;
Machine Co.
no
writ
Kirby
Thurmond,
Mr. Justice Calvert granted thirty points Writ error in this case on two of petitioner’s of error application. points contained The two pose question admissible, of whether evidence is “merger” contract, the face of a clause in a written to establish the contract was induced fraud. hold it We is. Petitioner, partnership, a plaintiff, sought recovery as from respondent, defendant, as of the balance on a due written con- purchase tract of of an Oliver OC-3 crawler and an tractor By way Oliver-Ware 3W-I respondent loader. of cross-action sought a rescission recovery of the contract and a of the value of a equipment Ford tractor and petitioner he had delivered to part as price of the of the Oliver tractor and loader. In a non-jury judgment denying trial petitioner entered recovery awarding respondent sought. the relief Find- ings of fact support conclusions of judgment law judge. filed the trial was affirmed Appeals. Court of Civil 2d 180. completed printed A ORDER OLIVER “CUSTOMER’S FOR
EQUIPMENT” form constitutes the written between parties. following provision: It contains the read have “I agree part the matter on the back hereof and to it as a of this signature. printed my order as if it were above I also acknow- ledge receipt copy of а of this order understood to be relating the entire contract warranty to the sale and equipment excepting any notes, above described as condi- mortgages tional sales contracts or chattels entered into specified.” above theOn reverse side of the order and under a heading following “WARRANTY AND AGREEMENT” is the applicable language: goods “Seller warrants that new OLIVER *3 good herein agrees described are well material, made and of and replace, to place business, period F.O.B. sellers of goods for a of six months delivery after Buyer by Seller, of such to such parts upon inspectiоn found workmanship to be defective in or * ** material. warranty This is made lieu of all other war- ranties, express implied, warranty or and is no made or author- * * ized to be made other than herein set forth. respondent upon pleading, proof rests findings respondent was induced to enter into the con- by representations tract false capabilities to work of the loader, Oliver tractor knowingly by petitioner’s made one of partners respondent, to relied, on which he and but for which would he not have entered objected into the contract. Petitioner to the support evidence respondent’s offered to plea of fraud ground on the vary that asserting it would the terms of the writ- ten contract. In representations that evidence of oral capabilities of the work of the tractor and loader was inadmis- petitioner holdings sible Co., relies on the Co. v. Harrison App., 254; Wright
Texas Com.
Couch,
App.,
history;
Civ.
no writ
Distributors Inv. Co.
Patton,
Super-Cold
130 Texas
South
Elkins,
west
v.Co.
140 Texas
ing resulting decisions and indicates confusion which can hardly be explained away resolved or with nice distinctions. Some of the decisiоns should be noticed.
There dealing good are earlier subject, cases with the but a Thomp
starting purposes this discussion is Edward point for in that Sawyers, 873. Suit son Co. v. unpaid on the installments on a written contract case was By defendant price of law cross-action books. ground sought that he had on the been rescission and plain promise of the enter into the contract induced to promise supplements, which to furnish future tiff’s fraudulently kept. intention that it should made with no be representations or provision contained a that no guaranties not ex the salesman had been made being Appeals, di pressed contract. admissibility vided, question to this certified court answering promises. In of evidence with to the oral reference 874) question said : court “Contracts, though writing, in- reduced are avoided to when promises, kept, duced material intended to never be vary contract, one is his written but because allowed because binding real assent is essential to a contract.
ij: “One who entitled to avoid an entire written contract longer by any it lacked his because assent can no be bound stipulations, including relating its those guaranties which induced its execution.” *4 holding Sawyers case, taking
In the face of the in the and no it, Appeals held, noticе of A Section of of in the Commission Threshing Manes, J. I. Case Mach. 254 that Co. S.W. a purchaser not, anof could on the automobile basis of fraudulent representations perform antecedent oral of an as the to capabilities (see App., ance thereof Texas Civ.
758), obligations and rescind avoid the of a written contract merger limiting which contained a a clause and clause the au agent. holding thority particular of the The seems rest to finding plaintiff the fact that there was “no that was induced sign by (254 931) to the contract fraud or .1 deceit.” S.W. holding in the Manes case was then made the founda- holding, by court, Avery tion of the the same in Co. v. Harrison Co., App., by petitioner, 267 relied on here Com. S.W. turn, approval by quoted which in this with court as de- Patton, cisive in Distributors Inv. Co. v.
1Emphasis ours. holding cases, by may the 2d It said that these aided 47. be S.W. Wright Couch, Appeals in of of the Eastland Court Civil least, firmly 207, seemed, for a at to establish in time S.W. execution jurisprudence our a fraud the distinction between contract, of a and inducement a dis- contract fraud the of subsequently by opinion the of this court in tinction reinforced Super-Cold Elkins, 140 Texas Southwest Co. v. recognized always that distinction has not or 97. But been
enforced, by court, even shall see. wе Avery Co., supra, plaintiff’s
In Co. v. Harrison suit was for damages growing out the of a and some tractor plows. machinery The contract for the sale of the contained merger by Appeals recovery clause. The affirmed a Civil plaintiff ground plaintiff pleaded on the that had and proved by that he had been to enter into the contract by agents fraudulent capabili- made of the work machinery. ties Co., v. Harrison Co. Appeals’ judgments Commission recommendation that the trial Appeals court and the Court of be reversed by
that adopted be rendered for the defendant was opinion this court. its In Appeals the Commission of took notice Sawyers (267 257) case but that said if the suit before it could be ground treated as one “for plaintiffs that by were induced fraud enter into the contract pleadings were insufficient to sustain such action. In the opinion, however, course of the the court announced the rule allegations proof absence of by reason fraud, accident or mistake the written contract contained some- thing agreed by not parties, or reason thereof omitted promise, representation some warranty, or or that reason of artifice, representation, some fraudulent parties or conduct the sign contract, signed induced to Avhen it was parties prevented knowing did not know or were from what contained, conclusively presumed it would be that the written agreement parties contained whole representations, evidence of statements or not dis- warranties closed 256). the contract would be admissible. showing rule precludes announced of fraud in the induce- distinguished ment of a contract as from in the execu- fraud *5 Avery tion thereof. The rule thus announced v. Harrison Co. Co. became the rule of Inv. v. Pat- decision Distributors Co. ton, supra.
The Patton case involved a a сross-action to rescind written wagon contract of a and a fraudu- tractor of because capabilities agent regarding the work representations of an lent parts. written its and the of some of of the tractor newness “secondhand,” is.” It “as sold the tractor contract described merger judgment rescission a A trial court contained clause. by findings induced jury the contract was was entered on by representation. judgment affirmed the fraudulent citing Thompson opinion Appeals Co. in an Civil Law, Contracts, Ruling Sawyers, an A.L.R. v. Elliott Case Appeals annotation and decisions Texas Courts of Civil any is” or proрosition that contract induced fraud —“as otherwise, though containing merger void- clause —is even purpose of estab- is for the able and evidence admissible lishing vitiating 2d the contract. 83 the fraud and This court reversed the of the Court 786-787. Manes, Threshing and, Appeals authority v. of J. I. Case Co. Couch, Wright supra, Avery Co., supra, Harrison Co. v. only supra, fraud held that a written contract was voidable execution, (110 saying 48) in its 2d : representations negatived by specifically “These were and, writing, by denominating if them fraud the written con- aside, may higher tract be set then a written contract is of no dignity forbidding varying than an oral one. The rule by parol prior written if contract would become dead letter agreements govern permitted parties rather oral agreements subject than written on the same matter. subseauent Attaching representations does not label fraud to the oral change their character.” quoted Wright approval
The court also with from v. Couch 49) as follows : representations,
“False regarding pres- whether matters of past existence, whether, (in ent or or promises) the nature of existence, future do constitute actionable fraud if the they it is specifically provides claimed contrary to the of such and no claim made express agreement.” the contract does not the true opinion Thompson Sawyers took no notice of v.Co. other authorities cited and relied on the Court of Civil Appeals. case,
The rule of Patton as drawn from Wright Couch, again approved by Harrison Co. Super-Cold Elkins, court in Southwest Co. v. expression which will be found the latest of this *6 inducing representations in and which fraudulent
court in alleged plea a of total of as a for failure basis contract refrigerating given money *7 special issue in- of a denied the submission defendant was de- executed time the release was quiring at the whether de- and conditions. plaintiff its terms knеw of livered principal right the issue was to the submission fendant’s question Appeals. The court said Commission before the case affect the result of could not to issue if an answer error, and continued: it would not be refusal to submit jury finding is opinion as the so far are of the “We any this concerned, absolutely issue of case immaterial to it is the release and conditions of plaintiff knew the terms whether agent claim same time he delivered to question at the that, induced the execu- defendant, if fraud reason for the thereof, state delivery under the settled law tion and for fraud.” subject set aside to be was voidable release 964). (12 2d only rejected by implication the idea thus
The court au it and as would avoid fraud in the execution of the release holding- Sawyers It no notice thority case. took its cited the for not satisfied But the court was v. Harrison Co. Co. expressly in the rejected it reject implication; to the idea following language: that, the release since the contention of the defendants
“It is promise above-quoted provisions of em- itself contains the [no * * * plaintiff can set ployment has made” been before etc.] by oral evi- or contradict the terms thereof aside the release fraud, proof that fraud commit- dence of must show [was] agent by release, preparation that the claim ted in the or prevented plaintiff ascertain- act had from fraudulent some ing said release. cannot the true terms and conditions of We contention, release is the reason that if the assent to this every inception, each and in its then voidable on account of fraud (sic) and without portion is unenforceable and clause thereto (12 964). binding plaintiff. effect on the follows, many authorities, and the above from “It therefore may others, though plantiff read over have that even signed at the time hе release, may its known contents have the defendant com- and delivered same to the claim panis, law, fact, not, release a such could constitute such contract, binding plaintiff procured by on the if it fraud. * * 966). *.” antedating decisions,
There
number of other Texas
case,
the Patton
which held that
evidence was admissible
merger
prove
containing
that a written contract
clause
disclaiming
agents
responsibility
a clause
Gypsum
Shields,
fraud. See United States
Co. v.
724, 726,
App.,
Texas Civ.
affirmed
agent;
Texas
(Representations by
The rule of the Adams, Texas substantially fact in v. similar situations Willis Vest, Billington 855, dismissed, v. App., 2d writ 138 Civ. S.W. Rogers 705, history, and App., Texas 268 S.W. 2d no writ Civ. 429, Co., App., 2d no writ S.W. v. J. I. Case Texas Civ. 272 hand, subsequent history. of Civil the other there are On case, Appeals’ decisions, in in this which addition to the decision v. applied case. the rule of Patton See Strickler have 989, Co., App., 2d International 141 Harvester Texas Civ. S.W. dismissed, judgment; v. writ Lone Olds Cadillac Co. correct Star refused, Vinson, Aрp., writ want Texas 2d Civ. S.W. vigorous merit, dissent based which there was a cases, Avery Co., Wright, and which Patton and Elkins majority sought ground case harmonize with the Patton party the con complaining not to read was induced tract; Willis, App., Super-Cold Co., Texas Civ. Southwest refused, N.R.E., 2d in which the contract writ Chowning, read; Super-Cold Texas not App., Southwest Co. refused, N.R.E., Civ. 2d in which writ was said that if the contract fraud absence was induced Ammons, immaterial; of fraud in its execution was Coleman v. history, App., Texas Civ. no writ which Wright vigorous Co., there was also a dissent based on cases; Roy McIntire, and Patton B. Klossner F. App., pending, Civ. writ of error recognized prior court the conflict in and chose decisions Sawyers Presley follow the rather than decisions the Pat ton decision. conflicting authority may two lines of not be distin
guished ground sought, the that different remedies that are is, damages that some are suits for for and others are actions rescission, for it is well by settled that one who fraud may to enter into a has his choice remedies. “He bargain stand to the fraud, and recover he the may contract, thing rescind bought, the and return the re and paid.” ceive Blythe back what Speake, 429, he (421), 437, (428) ; Transportation Co., Russell Industrial Texas 113 may A.L.R. 1. Neither the Co. and Patton distinguished cases on the оne hand be from the Thompson Presley ground and cases on the other on the that the former involved contracts of and the latter con tracts liability. of release of Aside from the fact that the nature of the contracts affords no sound law, basis for a distinction in it will be Thompson noted that in the Presley cases, and involv ing liability, releases strongly courts relied on the Saw- purchase, and yers a contract of case which involved Rapid authority turn, principal Sawyers opinion,' cited as in- Smith, a case Ry. 553, 86 Transit volving liability. a release of
Considering herein and state of our decisions reviewed noted, a situation identical we find ourselves confronted with Supreme Massachusetts that faced with Judicial Court Southgate, case Mass. 2d 551. That in Bates v. 31 N.E. Prior question in the instant case. involved the same involved decisions of were in the same state the Massachusetts courts decisions, same of conflict and confusion as are our and reason. The Massachusetts courts chose to resolve the conflict by adopting containing rule a written contract a mer- ger clause can be avoided for fraud in its antecedent or fraud inducement and that evidence rule does not stand in way proof opinion, of such frаud. The court’s written Qua, predicates Justice public the decision policy, on sound 558) follows : N.E. principle weigh “As a matter necessary it is the ad- vantages certainty against in contractual relations the harm injustice that result from fraud. In obedience to the de- larger public policy mands of a long ago the law abandoned the position that a regardless contract must be held sacred parties fraud of one of the in procuring it. No one advocates a conceptions. return to outworn public The same policy that general promise sanctions the avoidance aof obtained deceit attempts strikes down all policy circumvent by means of contractual devices. In the realm of fact it is entirely possible party agree for a knowingly to that no have him, been made to while at believing the same relying time upon representations which in fact have been made and in fact are false but for which he would not agreement. have made the deny possibility ignore To is to frequent instances in everyday experience parties accept, where often without critical examination, upon agreements and act containing somewhere within their four cornеrs exculpatory clauses in one form or another, they so, but where nevertheless, do upon reliance honesty supposed friends, plausible disarming salesmen, statements of To refuse relief customary or the course of business. opening
would result in the door to a multitude thwarting of frauds general and in policy of the law.” *10 We make the same choice made the court, Massachusetts doing and in bring so we the subject law on the in this state weight authority, great the 32 C.J.S. 942- harmony with
into 946, 778-781, Evidence, 979a; Fraud and De Am. Jur. Sec. 1041-1068; 137-156; 26; A.L.R. ceit, 75 A.L.R. Sec. 1361-1362; of the Restatement of the Law with the rule A.L.R. 1079; 573, p. 2, Contracts, and with views of Vol. sec. 3, Contracts, 580, p. on sec. eminent Corbin Vol. textwriters. * * * may assent, (“But inducement fraud in the 257-260 existence, preventing its without make the voidable agreed showing writing on and complete that was not as without integration In such the offered testi- of its terms. rase mony that have [*] [*] merely [*] legal operation proves the existence of their own, one that collateral prevents factors legal operation having from the full it written contract contradicting varying is would have had. This or otherwise although agreement, vary the written terms of fy does or nulli- it legal ; Sales, Ed., effect.”) part their Williston on Revised 631b, p. (“It provision is a sec. common Vol. written reprеsentations promises, no other contracts or induce- writing. than pro- ments were made are contained Such effectual to visions are exclude warranties not included in the writing misrepresentations, unless based on fraudulent but it is provisions proof now well settled such cannot bar of fraudu- remedy them.”) ; lent tracts, or Williston on Con- Ed., 811A, pp (“And
Revised Vol. sec. 2281-2285 like rule, merger evidence clause is ineffectual ex- prior contemporaneous clude or repres- evidence extraneous principal entations of either the or an to establish fraud by way rescission, of defense or in an action for since even if innocent, principal is himself he cannot be allowed to re- * * * agent. tain a benefit obtained fraud of his There distinguish are which between decisions fraud in the induce- execution, holding ment of the contract and fraud in the merger precludes proof of clause the former kind. This distinc- ; Wigmore supported.”) Evidence, tion is not to be Second Ed., pp (“Fraud always Vol. sec. 325-326 is a matter representations; and how is it represen- of false that extrinsic ignored as warranties to be tations are but fraud to be explanation seems to admitted? The be that the vital additional party’s mind, is the state in fraud element neither document, intended to be embodied in the can be nor is written considering not forbid hence rule does it and that wherever claim.”) ; element of the Elliott Contracts, is the vital Vol. go through (“if making one form sec. 70 misrepresentation of some fraud or made contract because agent, his relative to a material element of party other *11 he would the truth agreement, if he had known such that the by him. There assent, may avoided given the contract be his have 2, fraud.”) ; Vol. it when is no real assent can be Evidence, Ray, Second 1650; Texas Law of and McCormick sec. * * expres- only oral (“* the Ed., 2, when sec. 1644 Vol. сontract, warranties, is, parts as the that relied on as sions are assumed, Evi- obligations intentionally the Parol being as misrepresentations they as applies. are relied on If dence Rule fraud, Parol theory recovery then the or defense is and the propo- clearly application. the latter without On Evidnce Rule is wavering apparent in Texas cases there has some sition been warranties, writing a disclaimer of the contained where authority ‘merger seems to the sounder clause.’ Yet even here avoiding agreements purpose for the admit extrinsic “fraud.”) ;2 Black on Recission and instrument for Cancella- cases, interesting tion, 408. For comments on Texas Vol. sec. 361, 366, T.L.R. and 31 T.L.R. 906. see 21 T.L.R. sought remedy In the instant case the is rescission. In an suggests in 27 T.L.R. the author that an inno- article principal required respond cent should not to in for be the fraud of his thority when the limits the au- written wronged agent, in of the and that such situations the party relegated his action or a should be for rescission suit damages against agent. suggested adopted rule was Super-Cold Willis, applied in and Southwest Co. v. Civ. refused, N.R.E., App., 219 writ in rescission recovery damages against a prin- was allowed but an innocent cipal question That is not was disallowed. before and we do us not decide it. findings fully support- trial court filed detailed of fact right
ing respondent’s Many petitioner’s points of rescission. holdings Appeals attack of error findings support have the evidence. of fact We have reviewed pertinent and conclude that there the probative evidence is evidence of findings. supporting Accordingly,
force these , points error are overruled. purchase price of the Oliver tractor and loader petitioner agreed
$4,134.50. By of the contract the terms to ac cept thereof the sum of in satisfaction cash $2050.00 and a Wagner loader a tractor with “trade-in” of Ford an F. & F. arrangements Respondent Rotocycle made advance Cutter. with 2Emphasis authors. payment cash sum cover loan of a sufficient bank mortgage gave security the bank for the loan machinery, mortgage with machinery on the and a new old understanding machinery delivered new when mortgage mortgage thereon filled serial number the contract of machinery released. the old would be When petitioner his respondent delivered to
purchase was executed *12 mortgagee Immediately $2050.00, bank. drawn on check for by respondent delivery machinery discovery after of the represented, рerform payment on the check that would not as machinery respondent stopped stored and de- and the was was machinery. demand a return of the trade-in The was manded machinery by petitioner sold the trade-in and took refused who machinery possession sequestra- under Oliver a writ respondent prayed In his for recission of the tion. cross-action recovery cancellation of the check and for contract and representing the reasonable cash market value of the $2094.00 trade-in machinery. Judgment according respon- was awarded to prayer. dent’s by
Petitioner seems to сontend that the execution of the mortgage respondent chattel ratified the contract and disabled rescinding mortgage himself from The contract. chattel was respondent executed before machinery discovered that the would perform represented regarded not and cannot be as a ratifi- cation of the contract. Neither does the execution of mort- gage prevent a Payment rescission of the contract. on the check stopped money was and the advanced the bank was not used. The evidence does not indicate the continued existencе mortgage debt which the was being intended to secure. There mortgage extinguished. no debt lien of the was Perkins v. Sterne, 561, 563; (548), 563, ; 23 Texas (550) 916, 29 Texas Jur. Mortgages, sec. 94. A somewhat similar contention was sum- marily disposed the San Antonio Appeals Court of Civil Carle, in Packard-Dallas 735, 738. complains
Petitioner recovery by respondent of the objection sum of One $2094.00. recovery to the respon is that prove dent failed to necessary damages measure of as set out Morriss-Buick Pondrom, 98, 899, to-wit: the difference between the value of what he parted with and what he received under the contract. The Pon drom case involved an affirmance of a procured damages. fraud and a suit for measure of there application out has no set ato suit for rescission. money the market value recovery in this was case awarded awarded machinery petitioner It was had sold. trade-in machinery. evi- There was in lieu return of the trade-in of a finding fair market supporting the trial court’s dence error to machinery $2100.00, and it not value of the return recovery respondent in lieu of award of $2094.00 Cancellation, machinery. on Recission and of the trade-in Black 1570; p. 695, p. sec. Can- Vol. sec. C.J.S. Instruments, 79d(l), p. cellation of sec. 1093. Appeals of the Court of Civil is affirmed.
Opinion delivered November concurring.
Mr. Justice Smith agree prepared many I am analysis with opinion. agree cases majority However, referred in the I with the result reached this case for the reason that the record *13 shows transaction, including that the entire the statements made (owner) Myers Mr. Kincaid (agent), and Mr. was one of continuing fraud my opinion findings and in trial court are sufficient to show pro- fraud in the inducement or curement as aswell fraud in the execution of the contract. Under case, the record in this going I see no reason for into the record of the cases such as the dijerent Patton case which invоlved facts pleadings. and different It proper affirm the of
Appeals.
Opinion delivered November 1957.
Rehearing overruled December 1957. Company Texas Prudential Insurance v. Oral Vera Dillard No. A-6211. Decided November 1957. Rehearing overruled December 242.) S.W. 2d Series notes for a of consideration device. analyzed (other of here than the El- the series cases With held, case) it, court in Texas & kins before nevertheless Ry. Presley, 2d that P. Co. v. plaintiff’s fraudulent juries as to the extent of the in- promises employment, permanent of of fraudulent agents, all liability made to induce release of for damages, rendered the release and could be estаblished voidable by parol holding evidence. The in was made the face of recitals upon plaintiff in the written instrument judgment that the relied his own nature, injuries as to the extent duration of his promise agreement employment and that no or other mentioned in the release had been made. The defendant con- tended that inasmuch as the release contained the re- above only by citals it could be proof avoided in its fraud execu- tion, contention, but the court said: “We cannot assent to this for the reason that if the release is on voidable account of fraud inception, in every portiоn its then each and and clause thereto (sic) is binding unenforceable and plain- without on effect tiff.” 152 holding Presley doubly significant case is because procedural background. its orig opinion reflects on inal submission the relying Eastland Appeals, Court of Civil on the Patton case and the therein, other cases cited reversed the trial judgment court’s plaintiff judg for the and rendered defendant, ment rehearing, relying but on motion for Ry. Texas & N. O. Thompson, Co. v. App., 12 Texas Com. Thompson 963 and Sawyers, supra, v.Co. and cases therein cited, opinion withdrew its first and entered judgment affirming judgment. opinion trial court’s rehearing adoptеd qualification by without this court. By our Presley obviously decision quite case this court strong reverted Sawyers to the rule of the case and it found support in the Appeals’ opinion Commission of in Texas & N. Ry. Thompson, O. 12 S.W. 2d which intervened be tween the plaintiff and Patton In that cases. case the sought to set aside written release and to recover personal injuries. right predi His to set aside the release cated by way promise on fraud in its inducement of an employment principal. that no The release recited jury found made. The employment had been promise necessary elements promise and also found was made making was no contention There in the thereof. of fraud signature. obtaining plaintiff’s fraud there was involved