Erskine v. Chevrolet Motors Co.

Walkee, J.,

аfter stating the case: the plaintiffs and defendants, as plaintiffs allege, or, at least, plaintiffs and defendant Obevrolet Motor Company of Atlanta executed certain paper-writings called contracts, wbicb were so skillfully prepared by defendants, as contended by plaintiffs, as to inveigle plaintiffs into the belief tbat plaintiffs would be afforded protection thereby, and that they would be warranted in incurring the great expense necessary in advertising defendants’ output and in establishing agencies for defendants in the designated territory. the efforts of a competitor to take the Asheville agency from plaintiffs caused them to examine the alleged contracts, and plaintiffs then became aware tbat the paper-writings did not constitute contracts, if defendants’ contentions proved correct, and, therefore, tbat they were entirely at the mercy of the defendants. Huffman v. Page Motor Co., 262 Fed., 117; Adler v. Dodge Bros., 237 Fed., 860; Battle v. Smith, 113 S. E. (Ga.), 235, 239. When the plaintiffs realized tbat their agencies might be taken from them by defendants, at will, they offered to surrender the contracts without incurring further expense, but the general agent of defendants refused to accept the contracts, and assured the plaintiffs tbat the contracts would not be canceled, and agreed tbat the automobiles covered by the shipping orders for the months of January to July, 1920, inclusive, would be delivered as therein ordered. It was solely on the faith of- this subsequent agreement tbat plaintiffs went ahead and gave their time and expended large sums of money in establishing the agencies, wbicb were expected to be mutually profitable to plaintiffs and defendants. So confident were plaintiffs in the success of their undertaking tbat they bound themselves to take 67 automobiles in addition to those covered by the original shipping orders.

If tbe original contracts (Exhibits “A” and “B”) were not binding, and tbe oral agreement of 18 December, 1919, was tbe first and only contract, or if Exhibits “A” and “B” did constitute obligations which were modified and madе certain by tbe subsequent oral agreement of 18 December, 1919, is not material. The defendants are bound by the subsequent oral agreement of their general sales agent, whereby defendants modified the original contracts (Exhibits “A” and “B”) and bound themselves to deliver the particular automobiles specified in the shipping orders, and at. the time therein stated. Lane v. Engineering Co., 183 N. C., 307.

The plaintiffs refused to continue as agents of defendants, and to give the time and money required for the establishment of the agencies, unless the defendants would bind themselves to deliver the particular cars ordered for the months of January to July, inclusive. The consideration moving to the plaintiffs was the profits they would receive on those particular cars, and the considerations moving to defendants were the receipt by them of prices fixed for the cars, and the advertisement of their automobiles so that the demand for their output would be greater. Mfg. Co. v. McPhail, 181 N. C., 205. The contract was not unilateral, a mere nudum pactum, but valid and binding, reciprocal duties and obligations bеing. assumed by each side. The defendants obligated themselves to sell and the plaintiffs obligated themselves not only to buy at the prices fixed by defendants, but also to continue as agents of defendants for the sale of Chevrolet automobiles and trucks, and to rent a garage, employ mechanics and salesmen, advertise defendants’ product, and to do what was necessary for the mutual advantage of the contracting parties. Approximately $8,000 was expended by plaintiffs in establishing the agencies on the faith of the oral contract. This money was paid out by direction of defendants and for the benefit of defendants, and the only consideration therefor was the agreement of the defendants to deliver the automobiles .and trucks that had been ordered. Now the defendants repudiate their contract, refuse to deliver the automobiles and trucks, and insist that plaintiffs are without remedy, and that defendants can take the benefit of plaintiffs’ time аnd money without giving anything in return. This position is one of the first impression, and is not supported by law. Holt v. Wellons, 163 N. C., 124. Plaintiffs contend that even if the oral agreement in controversy had been unilateral, the defendants would be bound, as they received the benefits of the consideration for which they bargained, viz.: the plaintiffs continuing as agents, and using their time and money in advertising and establishing the agencies. Richardson v. Hardwick, 106 U. S., 252; 27 Law Ed., 145; Storm v. United States, 94 U. S., 76; 24 Law Ed., 42. “If mutuality, in a broad sense, were held to be an essential element in every valid contract, in the sense that both сontracting parties could sue on it, there could be no such thing as a valid unilateral or option contract, or a contract to enforce a reward, offer, or a guaranty, or in many other instances occurring in ordinary business affairs. As a unilateral contract is not founded on mutual promises, the doctrine of mutuality of obligation is inapplicable to such a contract. If the promisor has received a consideration, his promise is binding, and may be termed an obligation; but as there is no promise on the part оf the promisee, there can be no mutual obligations. Accordingly, where one makes a promise, conditioned upon the doing of an act by another, and the latter does that act, the contract is not void for want of mutuality, and the promisor is liable though the promisee did not at the time of the promise engage to do the act; for upon the performance of the condition by the promisee, the contract becomes clothed with a valid considerаtion, which relates back and renders the promise obligatory. An option, supported ‍‌​​​‌​‌​‌‌‌‌‌​‌​‌​‌‌‌‌​‌‌‌​​‌​​‌​​‌​​​‌‌​​‌‌​​‌​‍by a consideration, furnishes another illustration of a contract, which is valid notwithstanding the lack of mutuality. It is no objection to the validity of the contract that the holder of the option is under no obligation to exercise it. Similarly the privilege of purchasing given a lessee, in case the lessor makes a sale of the premises, is not invalid on the ground that it is wanting in mutuality, since this privilege is part of thе consideration for accepting the lease.” 6 Ruling Case Law, p. 687, see. 94. The measure of damages is the difference between the contract prices at which the automobiles were to be delivered to plaintiffs at Asheville and Hendersonville and the market value of the automobiles at those places during the period fixed by the contract for their delivery (Jeanette Bros. Co. v. Hovey, 113 S. E., 665, 666), or to state it differently, and with the same result, the difference between the purchase prices as fixed by defendants and the sales prices as fixed by defendants. Hardware Co. v. Buggy Co., 167 N. C., 423; Steel Co. v. Copeland, 159 N. C., 556.

The court below held that the original contracts are void and not enforceable as contracts, and that the oral contract is not binding because it is based on those paper-writings, which are of no effect, and dismissed the action.

Plaintiffs rely upon the reported cases, which show, as they contend, that retail automobile dealers have been repeatedly victimized in relying on “written contracts” (Exhibits “A” аnd “B”) when in fact they were without protection, and in the instant case where defendants did bind themselves by a valid and enforceable oral contract and received the benefit of the time, labor, and money expended on the faith thereof; they should be required to answer in damages for losses sustained by plaintiffs on account of its wrongful breach by defendants.

It must be clearly understood that, in these various contentions of the plaintiffs, they are not relying solely upon the original written contract, which contained the reserved powers of cancellation. It is not necessary for us even to pause in tbis discussion for tbe purpose of considering the validity of defendants’ contention that they are not, and neither of them is, liable for any breach of those contracts, for if there is such liability arising out of the subsequent oral agreement with Mr. Herold, as general agent of the companies, it is quite sufficient to dispose of the case adversely to the dеfendants’ contention, for we are now dealing with a nonsuit; and the evidence must be taken in the most favorable view for the plaintiffs; and, furthermore, they are entitled to have us adopt, and act upon, any reasonable inference to be drawn from the evidence treated in that favorable light for them. No one shall be enriched by making another poor. If defendants received a benefit by reason of the services rendered by the plaintiffs, under a contract between them which defendants afterwards repudiated, or refused for any reason to perform, the plaintiffs may not recover on the special contract, because of its express terms, but the defendants cannot retain any benefit they have received and at the same time deny liability and refuse to pay anything, for this would be rank injustice, as said by the Court in Manhattan Life Ins. Co. v. Buck, 93 U. S., 24. This Court said, in Gorman v. Bellamy, 82 N. C., 496: “The inclination of the courts is to relax the stringent rules of the common law which allow no recovery upon a speсial unperformed contract itself, nor for the value of the work done, because the special excludes an implied contract to pay. In such case, if the party has derived any benefit from the labor done, it would be unjust to allow him to retain that without paying anything. ‘The law, therefore, implies a promise,’ say the Court, ‘to pay such remuneration as the benefit conferred is really worth,’ ” citing Dumott v. Jones, 23 How. (U. S.), 220; Monroe v. Phelps, 8 Ellis & Black, 739. The same principle has since been frequently approved аnd applied in other cases by this Court.

Commenting on the Manhattan case, supra, Mr. Keener, in his excellent treatise on Quasi-Contracts (Ed. of 1893), p. 247, says: “Now it is submitted that no distinction can be drawn between Cutter v. Powell, 6 T. R., 320, and Manhattan Life Ins. Co. v. Buck, 93 U. S., 24. In each case there was an express condition to the effect that in the event in question the plaintiff should have no claim upon the defendant; in each case it is conceded that the plaintiff had no rights against the ‍‌​​​‌​‌​‌‌‌‌‌​‌​‌​‌‌‌‌​‌‌‌​​‌​​‌​​‌​​​‌‌​​‌‌​​‌​‍defendant on the contract itself. But by the terms of the contract, which provided that the plaintiff should hаve no rights on the contract in the event which has happened, it was distinctly stated in the case of Manhattan Life Ins. Co. v. Buck, supra, that the plaintiff was to have no rights of any kind against the defendant. If, then, the case of the Manhattan Life Ins. Co. v. Buck, supra, is to be supported, it must be put upon the ground that the court will relieve against a forfeiture, and will therefore disregard a clause of the kind found in the policy. But if the court will disregard such a clause in favor of a plaintiff wbo bad paid money, tbe same court should certainly disregard the clausе in favor of a plaintiff who has rendered services, since in the one case as much as in the other the defendant has received from the plaintiff that for which he has not given the plaintiff an equivalent.”

But it is not necessary that we adopt either of these views in the present instance, as the oral contract with Herold, the general agent or manager, so modifies the written contracts by eliminating the provisions as to cancellation, and in other respects, and his representations, promissory or otherwise, were of such a persuasive and tempting character, as to create a cause of action in favor of the plaintiffs, of quite a different kind from that which arose, if at all, upon the special written contract. To say the least of.it, the language, conduct, and manner of Herold was calculated to impress the plaintiffs to believe that they could safely go ahead with their projected scheme as agents оr distributors of defendants’ cars and other vehicles, with the • assured, and even warranted, expectation that the defendants would comply with their orders promptly and assist them in every way to success in their venture, which was to inure more to their benefit than to that of the plaintiffs. Stronger or more effective inducement could not have been held out to the latter, or have encouraged them in the belief, and even conviction, that they could safely make the anticipatеd expenditures in installing and equipping their plant at Asheville and Hendersonville upon the assurance of the defendants that they would get their money back thus laid out, and realize a substantial profit from the enterprise. If we should hold that plaintiffs have no legal right to be reimbursed for their outlay, under such circumstances, and to recover their reasonable and certain profit thus promised to them, would be to disregard all well settled principles of the law in like cases.

If one makеs a promise to another which at the time of making it he does not intend to perform, and induces the latter thereby to part with value, or to act to his own prejudice, he will be liable for the consequent damages to him who is thus misled by the false promise. It has been held by us that in cases of fraud, where the person committing it has been thereby enriched to the damage or detriment of the other, an innocent party, indebitatus assumpsit will lie upon the ground that the law implies a promise to restore what has been gained by the transaction. Armfield Co. v. Saleeby, 178 N. C., 298; 6 S. E. Digest, 866. Another well established species of fraud by a vendee is purchasing with a positive intention not to pay for the goods. If such intention were known to the vendor he certainly would not sell. Its suppression, therefore, is a legal fraud. Benjamin on Sales (I ed.), p. 410; Des Farges v. Pugh, 93 N. C., 31; Wallace v. Cohen, 111 N. C., 103; Donaldson v. Farwell, 93 U. S., 631; Stewart v. Emerson, 52 N. H., 303. The case of Rudisill v. Whitener, 146 N. C., 403, approved tbe principle as stated. In Bigelow on Fraud it is said tbat, according to tbe current of authority, a debt is created by fraud where one intending at tbe outset not to pay for property induces tbe owner to sell it to bim on credit by falsely representing or causing tbe owner to believe tbat be intends to pay for it, or by concealing tbe intent not to pay. A false and fraudulent representation or promise we understand to be one made witb tbe intention in tbe mind of tbe promissor not to perform tbe promise. This is tbe misrepresentation of a subsisting fact, false witbin tbe knowledge of tbe party making it, and calculated to deceive. Speaking of an аctionable fraud, Lord Bowen, in Edington v. Fitzminnia, 29 L. R. Chan. Div., 459, says: “There must be a misrepresentation of a subsisting fact; but tbe state of a man’s mind is as much a fact as tbe state of bis digestion. It is true tbat it is difficult to prove wbat ‍‌​​​‌​‌​‌‌‌‌‌​‌​‌​‌‌‌‌​‌‌‌​​‌​​‌​​‌​​​‌‌​​‌‌​​‌​‍tbe state of a man’s mind at a particular time is, but if it can be ascertained, it is as much a fact as anything else. A misstatement as to tbe state of a man’s mind is therefore a misstatement of a fact.” Hill v. Gettys, 135 N. C., 373, 375. Justice Ashe said in Des Forges v. Pugh, supra: “It matters not by wbat means tbe deception is practiced — whether by signs, by words, by silence, or by acts — provided tbat it actually produced a false and injurious impression of such a nature tbat it may reasonably be supposed tbat, but for such deception, tbe vendor might never have entered into tbe contract.” A promise is usually without tbe domain of tbe law unless it creates a contract, but if made, when there is no intention of performance, and for tbe purpose of inducing action by another, it is fraudulent, and may be made tbe ground of relief. Hill v. Gettys, 135 N. C., 375; Braddy v. Elliott, 146 N. C., 582. In tbe Hill case, supra, tbe Court ordered tbe cancellation of a mortgage because of a fraudulent promise, and in tbe opinion quotes witb approval tbe following excerpts from text-books and decisions: “Tbe general rule in regard to promises is tbat they are without tbe domain of tbe law unless they create a contract, breach of which gives to tbe injured party simply a right of action for damages, and not a right to treat tbe other party as guilty of a fraud. But tbat proceeds upon tbe ground tbat to fail to perform a promisе is no indication tbat there was fraud in tbe transaction. There may, however, have been fraud in it, and this fraud may have consisted in making a promise witb intent not to perform it. To profess an intent to do or not to do, when tbe party intends tbe contrary, is as clear a case of misrepresentation and of fraud as could be made.” Herndon v. R. R., 161 N. C., 650-656; Williams v. Hedgepeth, 184 N. C., 114; Trust Co. v. Yelverton, ante, 314. A promise is a solemn affirmation of the intention as to a present fact. 1 Bigelow on Fraud, 484 (the author is discussing, of course, civil remedies). “When a promise is made with no intention of performing it, and for the very purpose of accomplishing a fraud, it is a most apt and effectual means to that end, and the victim has a remedy by action or defense.” Goodwin v. Horne, 60 N. H., 485. “the intent is always a question for the jury, and to determine whether the intent was fraudulent the jury have necessarily to look to the circumstances connected with the transaction or those immediately preceding or following it.” Des Farges v. Pugh, supra. This important question was fully considered in Massey v. Alston, 173 N. C., 215, and the principal authorities examined and cited by the Court. Mr. Bispham in bis work on Equity (9 ed.), 211, deals with the subject from the standpoint of equity, and says regarding it: “the representation must not be an expression of intention merely. A man has no right to rely upon what another says be intends to do unless, indeed, the expression of intention assumes such a shape that it amounts to a contract, when, of course, the party will be bound by bis engagement and for the breach of which the other side has, ordinarily, an adequate remedy at law. But if a promise is made with no intent to рerform it, and merely with a fraudulent design to induce action under an erroneous belief, or if a representation amounts to a statement of fact, although dependent upon future action, in either case there is ground for equitable relief.” Referring to that passage, it is said in Massey v. Alston, supra, that “Mr. Bispham is fully sustained in this view by the authorities he cites. As we are told by moralists and jurists, words are to be taken by courts of justice in the sense which it was intended they should be, and which those using them wished and believed that they would be understood by him to whom they are addressed, and the latter has the right to accept and act upon them as having such a meaning. The intention that he should thus understand them, and govern himself accordingly in his business intercourse with another who used them, is what gives a right to relief if it turns out that they are false, and if they induce the other party to act to his prejudice, relying upon the truth of what is said, in accordance with a fair and reasonable interpretation of the words. “If defendant said (as in Massey v. Alston, supra), that he would pay at once, or immediately, if the deed was delivered to him, and he had no intention of keeping his promise, and no ability to do so, as appeared in that case, and he made the false statement, dishonestly and for the the purpose of getting possession of the deed, and thereby overreaching the plaintiff, knowing that plaintiff was trusting in his promise and its strict fulfillment, and gave up the deed because he did so confide in the defendant’s integrity and in the belief that he would do exactly what he had promised, we cannot see why this is not such a false representation as would entitle tbe plaintiff to relief. And tbe great weight of authority is to this effect.”

Let us now apply these principles to the case in hand. If the defendants, acting through their general agent, having authority to bind the principals, represented what they would do, not intending at the time to do and perform what was promised, and thereby induced plaintiffs, relying on his statement, so to act as to bring loss upоn themselves, ‍‌​​​‌​‌​‌‌‌‌‌​‌​‌​‌‌‌‌​‌‌‌​​‌​​‌​​‌​​​‌‌​​‌‌​​‌​‍if the promises and representations as to what would be done were falsely made, and were not carried out, and not intended to be executed, and plaintiffs were thereby made to suffer loss, the wrong was an actionable one, and they may recover for the loss or injury resulting therefrom. Both law and equity will afford relief in proper cases.

Of if the defendants, by themselves or their duly authorized agent, made promises or representations, upon which the plaintiffs hаd the right to rely, and they were misled thereby to their prejudice, they may recover the resulting loss.

The defendants further contend- that there is no mutuality, as between the parties to the contract, which they say means no consideration to support it as an enforceable agreement. But there is such consideration, it being the benefit and advantage defendants were to receive from the wide advertisement and sale of their cars, and from other advantages, which they were so keenly anxious to reap, as their agent intimated, and furthermore, as a part of the consideration, they were to have the services, efforts, and expenditures of the plaintiffs in that behalf. "What more would they want or could they require? Besides all this, there was mutuality and consideration sufficient to uphold the contract, as defendants were not only to lay out large sums of money in preparation for the fulfillment of their agency to sell the defendant’s cars, but were to pay the scheduled prices, or in default of that, the reasonable prices of the defendants for the same. It must be kept in mind that plaintiffs are not relying altogether upon the written contracts, as amended subsequently, but upon the oral representations and promises of the defendants, by which they were deceived and thereby lost. Plaintiffs were to pay the list prices, subject to changes of the same according to the rise or fall of prices in the market, but still they werе to pay. The cars were to be shipped “according to schedule attached,” and Herold said, with impressive words and manner, “We will take special pains in seeing that what you order is shipped promptly, and the company agrees, through me, to do everything, in its power, that will make this agency a big success, and we will cooperate with you in every way to that end.” These were not only impressive words, but calculated to inspire the plaintiffs with confidence in their truth, and sinсerity, and to induce a free expenditure of tbeir money and effort in producing tbe desired and promised result.

Where no time is fixed, if it is not fixed here, for the performance, duration, and completion of the contract, the law implies that a reasonable time will be allowed. Winders v. Hill, 141 N. C., 694; Michael v. Foil, 100 N. C., 178; Bunch v. Lumber Co., 134 N. C., 116; Waddell v. Reddick, 24 N. C., 424.

The orders for cars were given by plaintiffs in reliance upon the representations and promises of Herold, the defendants’ general agent, and not necessarily upon the written contracts, unmodified by the oral agreement, or even as modified "by it, as there are considerations, independent of the written agreements, upon which the oral agreement may well rest.

The agreement is not affected by the statute of frauds, the two cases relied on by defendants for the suggestion as to the statute, viz., W. City Fire Ins. Co. v. Lichtenstein, 181 App. Div. (N. Y.), 681, 685; Pearlberg v. Levischn, 112 Misc. (N. Y.), 95, were both decided in New York, the statute of that State and ours being essentially different as to contracts not to be performed within a year, and in other respects.

The position that the contracts were executed in the name of the plaintiffs as individuals seems to be untenable, if not trivial, the intention manifestly being that the plaintiffs should act individually until their incorporation. This objection is more technical and formal than substantial. It does not prejudice the defendants materially that the incorporation of plaintiffs has been delayed. It may be that the incorporation might take place now, and the corporations made pаrties, as successors to the individual plaintiffs. We do not see how the merits of the transaction will be materially affected either way. The Code provides, Pell’s Revisal, sec. 415: “No action shall abate by the death, marriage, or other disability of a party, or by the transfer of any interest therein, if the cause of action survive or continue, but the Court, on motion at any time within one year thereafter, or afterwards on a supplemental complaint, may allow the action to be continued by or against his representative or successor in interest.” It is plainly evident that this contention must have been an afterthought of the defendants, and not the substantial reason for the failure to comply with their contracts.

We have thus carefully considered all reasonable grounds of objection set up by the defendants, and find none of them to be tenable. The ‍‌​​​‌​‌​‌‌‌‌‌​‌​‌​‌‌‌‌​‌‌‌​​‌​​‌​​‌​​​‌‌​​‌‌​​‌​‍rulings of the Court are consequently reversed, and the nonsuit is set aside. This necessitates the calling of a jury to try the case.

New trial.

Adams, J.

This opinion was written by Me. Justice Walkek in accordance with the decision of the Court, and was filed after his death.

Case Details

Case Name: Erskine v. Chevrolet Motors Co.

Court Name: Supreme Court of North Carolina

Date Published: May 26, 1923

Citation: 117 S.E. 706

Court Abbreviation: N.C.