152 Mich. 177 | Mich. | 1908
Defendant Keturah C. Werkheiser is the wife of her co-defendant, William H. Werkheiser, and the mother of the other two defendants, Frank F. Werkheiser and George Werkheiser. In the year 1905 the defendants William EL, Frank F., and George Werkheiser, constituting a partnership under the name of W. EL Werkheiser & Sons, owned and published the Flint Daily News and the Genesee Democrat. November 16, 1905, they sold the same to complainants for the agreed consideration of $13,500. All the consideration except $4,261 was paid in cash. For that amount complainants gave their promissory notes secured by a mortgage on the plant. The mortgage authorized the mortgagee to take possession of the mortgaged property if any part of the same should be sold, assigned, or disposed of. Subsequently, this
Complainants have not disaffirmed the contract, and, therefore, they cannot seek relief upon the ground of rescission. They have affirmed the contract. They contend they were damaged by the fraud of defendants; that the amount of those damages exceed the amount represented by the mortgage in question; that defendant Keturah is not a bona fide holder of that mortgage, and that they have a right to a decree in equity canceling the same. The testimony that the firm of W. H. Werkheiser & Sons misrepresented the circulation is clear and convincing. It is insisted, however, that complainants placed no reliance upon this misrepresentation, but did rely upon an examination of the books which contained a correct statement of the circulation. It is true that complainants did under
' It is urged that the testimony affords no basis for measuring complainants’ damages. We think otherwise. Defendant Frank F. Werkheiser testified that the cash receipts for the year preceding the sale affords a proper measure of the worth of a newspaper, and that this rule was stated to complainants before they purchased. We know from other testimony how much greater the annual earnings of the plant would have been had the circulation been as represented. In that case (that is, if the circulation had been as represented) the annual earnings the year before the sale would have exceeded the actual earnings by an amount greater than the mortgage indebtedness. This excess of earnings under the rule testified to by Frank F. Werkheiser indicates the difference in value
Defendants present an ingenious argument in support of their proposition that complainants were not damaged by the fraudulent representations. That argument briefly stated is this. It was represented to complainants by defendants that the gross income of 'the plant for the year preceding the sale was $18,800; that it is established by the testimony that it did earn that year $18,800; that this being so, the false statement relating to the circulation was utterly immaterial and affords no ground for claiming that complainants were damnified. We are forced to reject this argument because in our judgment it is not established by the testimony that the income of the property the year before complainants purchased was $18,800. It is true that some of defendants’ witnesses testified that the income was as represented, but this was not corroborated by a production of the books covering this entire period — and we believe them to have been missing through no fault of complainants — and for that and other reasons we discredit the testimony. We are therefore compelled to reject the argument of defendants under consideration and to say that the testimony does satisfactorily prove that complainants’ damages resulting from the fraud of defendants exceeded the indebtedness secured by the mortgage.
This disposition of the facts brings us to the important legal question in this case, viz., Can complainants resort to a court of equity for relief ? There is no doubt that complainants might recover the damages caused by this fraud by bringing suit in a court of law against the defendants constituting the firm of W. H. Werkheiser & Sons. Nor is there any doubt that if complainants were sued in a court of law for the balance unpaid on the contract they might recoup the damages caused by said fraud. And this would be true whether that suit were brought in the name of the original parties to the fraud or in the
In Carroll v. Rice, Walk. Ch. (Mich.) p. 374, suit was brought in equity to procure the cancellation of certain securities given by complainant for the purchase of property on the ground that said purchase was induced by fraud. It was held that complainant’s delay disentitled him to relief upon the ground of rescission, but that he had a right to have his damages for the fraud determined and when determined “indorsed as so much paid on his bond for the purchase money.”
“ The plaintiff’s complaint alleged that by defendant’s fraudulent representations he was induced to purchase a farm of the defendant for the sum- of $18,000; that the farm was in fact worth not over $12,000; that if the defendant’s representations had been true, the farm would have been worth $20,000; that the plaintiff paid in cash $5,000, assumed a mortgage of $2,000, and gave a bond and mortgage for $11,000, payable in $1,000 annual installments, one of which he has since paid.”
He prayed that the bond and mortgage might be canceled, and for damages. The lower court dismissed this complaint on the ground that no damages had yet been sustained and that the facts alleged would defeat a recovery on the bond. This judgment was reversed, the court saying:
“Without discussing the correctness of the decision of the learned justice on the mere question of damages, it seems to us that he overlooked the fact that a part of the relief demanded * * * was the equitable relief of the surrender and cancellation of the bond.”
See, also, Parks v. Burbank, 58 Iowa, 707; and Badgett v. Frick & Co., 28 S. C. 176.
Defendants’ counsel cite many authorities which hold that a defrauded party in order to rescind a contract must act with diligence and that he must restore to the party who defrauded him what he received. The propositions declared by these authorities are elementary principles of law. But they have no application to this case. Complainants are not seeking to rescind their contract. They have affirmed their contract and they recognize its binding force. They obtain relief in this case not upon the ground of rescission, but upon the ground that they are entitled to have their damages — damages computed upon the assumption that the contract is affirmed — resulting from defendants’ fraud applied in payment of the •mortgage in suit.
It follows from this reasoning that the decree entered