King et al. v. Hopkins et al.

"Where a person, by means of false representations of facts materially affecting the identity and value of certain real estate, induces another to enter into a contract for the purchase thereof, upon the faith of such representations, and upon which he was justified in relying, the purchaser may, in an action brought by the vendor for the purchase price recoup the damages which he has sustained by reason of such false representations, although the vendor believed them to be true when he made them, and had good reason for so believing.

And in the opinion by Judge Upson speaking for the court, it is said:

"It may be considered as well settled in this state, by the cases above cited, that an action for damages, caused by misrepresentation, cannot be maintained without proof of actual fraud, or such gross negligence as amounts to fraud. When, however, a person claims the benefit of a contract into which he has induced another to enter by means of misrepresentations, however honestly made, the same principles cannot be applied. It is, then, only necessary to prove that the representation was material and substantial, affecting the identity, value or character of the subject-matter of the contract; that it was false; that the other party had a right to rely upon it, and that he was so induced by it to make the contract, in order to entitle him to relief, either by the rescission of the contract, or by recoupment in a suit brought to enforce it."

In the case at bar it would seem that as the defendant, the assignee for the benefit of creditors, and who stood in the shoes of Hopkins, was by way of defense, asserting a contract of sale between the plaintiffs and his assignor, by which, as he claimed, the goods became the property of Hopkins, there is ground to believe that in this case the plaintiffs were at liberty to show that such contract was invalid, and should not, in effect, be enforced, by proving that false representations had been made to them to induce them to enter into this contract on which they were authorized to rely, and did rely, and which induced them to make the contract, and that these representations were untrue, even if the purchaser believed them to be true, and had reasonable ground for his belief. Unless there is some technical rule to the contrary, it would appear that the doctrine and reasoning of the court in the case of Mulvey v. King, supra, would apply to this kind of a case as well as to the one before that court. It is clear, from the cases decided by our own supreme court, that a court of equity would not enforce such a contract in an actior for specific performance, and in an action at law to recover on such a contract, wculd allow the defendant to recoup his damages suffered by reason of such a contract, though the representations were innocently made, as by mistake. And it is difficult for me to see, why, under our liberal practice, the same result should not be arrived at by allowing the person to whom such representations were made, to rescind the contract and replevy the goods, where nothing had been paid on them, and no notes therefor had been given, as was the fact in this case. And in my judgment such seems to be the weight of the recent authorities.

Bigelow on Fraud, page 77, makes this statement of law in relation to this subject:

"Judicial rescission may be of two kinds: one a substitute for 'rescission in pais' where the latter would be equally effectual as rescission; the other where it is necessary to retort to the courts, not for the purpose of recovering the property merely, but to obtain rescission itself. The former case occurs where the defrauded party in a sale or the like

Hamilton Circuit Court.

has received nothing of value from the wrong-doer, and instead of making demand out of court for his property, by way of rescission, proceeds at once to sue for it, as by trover or replevin, which he may do."

And he cites quite a number of cases in support of the proposition. And again on page 411, a part where he is discussing the rights of the parties under the head of "Innocent Misrepresentation," the same view is taken, and he quotes the decision in the case of Stevens v. Austin, 1 Met., 557, to the effect of rescission of a sale of personalty for misrepresentation by the purchaser, revests the title in the vendor ipso facto. And the vendor, if he has nothing to return, may thereupon sue in replevin or trover without a prior demand." See, also, the discussion of the question in Anson on Contracts, and Wald's Pollock on Contracts.

While the law on this point is not clear, I incline to the opinion that on the state of facts suggested, viz.: an innocent but really untrue representation by the purchaser, such rescission may be made in an action of this kind and the goods be properly reclaimed. Judge Swing doubts whether under the law as it stands, this can be done, but in the view we take of the case, this division of opinion on a rather abstract question, is not important here, for the reason hereinafter stated.

The question under discussion was raised, or attempted to be raised, in this way: The plaintiffs asked the court to give to the jury special charge No. 1, as follows:

"If you find that at the time Hopkins purchased these goods from the plaintiffs, he represented to the plaintiffs that his stock in trade was worth $18,000.00, and that his outstandings equalled his liabilities, and the plaintiffs relied upon this statement, and if you find that this statement was substantially untrue, then the plaintiffs were entitled to rescind the contract and recover the goods irrespective of the question whether Hopkins believed the statement to be true or not, and irrespective of whether he had reason to believe it to be true or not. The only question is whether it was substantially true in fact."

We incline to the opinion that this charge so requested did not fairly raise the question which has been discussed. It does not take into the account the question whether the plaintiffs parted with their goods, and were induced to do so on account of these representations— only that they relied upon them. Something more than this was necessary. They might have relied upon them, and yet have been induced to sell the goods, or part with the possession of them for other and different considerations. And it is perhaps objectionable on the ground that it practically tells the jury that if they find such representation to be substantially untrue, that plaintiffs, as a matter of law, were entitled to rescind the contract and recover the goods. This might depend upon the question whether the plaintiffs had been prompt in their action on the discovery of the fraud, and if any restoration was necessary, whether it had been made, which were questions of fact to be found by the jury under appropriate instructions from the court, as to which the charge requested is silent.

But whatever may be the law on this particular point, we are of the opinion that substantial justice has not been done in this case, and that on the evidence introduced, the verdict should have been in favor of the plaintiffs below. We think it quite apparent, from the testimony of Hopkins himself, that at the time of making these representations he did not have a stock of goods worth $18,000.00, and that he had not always, nor at that time, accounts on his books more than sufficient to meet his

King et al. v. Hopkins et al.

outstanding indebtedness. And furthermore, that he could not have believed that these statements were true, in view of all the circumstances of the case; or to say the least of it, they were made recklessly and without any information on the subject "calculated to induce such belief;" and as they were untrue, they are fraudulent. According to his own statement, just previous to September 1, he had a stock of goods of the value of something near $10,000.00 and after the large purchases made by him after that time including those purchased from plaintiffs and others shortly before the assignment to Mr. Stahlberg, it probably did not amount to more than $14,000 or $15,000, for it was only appraised, including the fixtures, at $7,540.00, or at 50 cents on the dollar, and many of these goods were of old styles and of little value. But if it be conceded that his representation as to his stock of goods being worth $18,000 was well founded, it seems clear from his own statements and the undisputed statements of other witnesses, that at the time of those representations, or for some time before, he did not have on his books accounts more than sufficient to meet his liabilities. As has been stated, during the summer before, these accounts at no time amounted to $10,000. His indebtedness during that summer on the judgment notes held by two persons alone, was between $11,000 and $12,000 and he was largely indebted to others as we gather from his rather unsatisfactory testimony. His whole indebtedness at his assignment, November 16, 1892, was $26,000-$13,000 to others than those holding the judgment notes. And although he did considerable business after he purchased new goods from the plaintiff and others, in September and October, and up to the assignment in the middle of November, selling in his usual way, on the installment plan, his book accounts at his assignment in November, as we understand, at their face value only amounted to $3.182.50, and which we think were practically worthless, for at the time of the trial on April —, 1894, nearly two years after the assignment, nothing whatever had been collected thereon. Indeed, Hopkins himself testifies that he could not tell how much of his accounts were good, bad or indifferent. That it depends a great deal upon circumstances as to whose accounts in installment houses are good, bad or indifferent. He said that he thought that if he had remained in business, a large proportion of them could have been collected (how large a proportion he did not say), but that he did not suppose that any installment house in Cincinnati would have given ten cents on the dollar for them in case of an assignment; that they are generally poor people who thus buy, and that they take advantages. It appears from the evidence of the appraisers that on many of these accounts nothing had been paid for years, but that all of them entered into the appraisement made. We are satisfied that they were substantially worthless.

If those statements and conclusions are correct, the case is brought clearly within the doctrine of the cases referred to, and the representations were false and fraudulent as to these accounts, and the plaintiffs had the right to rescind the contract by taking the goods, as they did.

We see no other error in the proceedings, and on this ground the judgment will be reversed, and the cause remanded for a new trial. W. C. Herron, for Plaintiff in Frror.

Wilby &Wald, for Defendant in Error.

Wood Circuit Court.

OIL AND GAS LEASE.

[Wood Circuit Court, October Term, 1896.]

Haynes, Scribner and King, JJ.

JAMES G. TAYLOR V. THE Peerless RefiNING CO.

WHEN A WELL WILL NOT BE CONSIDERED AS A "GAS WELL."

There are two classes of property provided for in an oil and gas lease. One is an oil well, and the other is a gas well, both of which cannot usually exist at the same time and be paying property. And, as the general provision of such lease is that if the lessee gets a gas well he is to pay a certain rental, and if he gets an oil well he is to pay so much royalty for each well; therefore where the lessee under such lease did sink a number of wells and in each case found a little gas which was used for running the boilers on the premises, such well in the general sense would not be considered as a "gas well" upon which the lessee would be liable for the payment of any stipulated rentals.

HAYNES (orally.)

This was an action brought upon what is known as an oil and gas lease to recover certain stipulated rentals. The lease was very much of the same character as the lease referred to in the case of The Ohio Oil Company v. McCrory, ante, decided by Judge King, and I shall not go over the ground again. There is perhaps a little difference in the phraseology of this lease in that it uses the word "utilizing," but I don't' think there is any great difference in the legal force of the two papers. The truth is, and the whole case lies in a nut shell,-that there are two classes of property provided for in these leases. One is an oil well, and the other is a gas well, and it is pretty difficult for both of them to exist at the same time and be paying property. That is to say: If oil is found, the gas is practically gone from the well as far as burning in houses is concerned, though it may be used around the boilers for pumping the wells. In these two classes of property, the general provision of the lease is that if a lessee gets one class he is to pay a certain rental usually so much for each gas well, and if he gets the other, so much royalty for each well. In each of these cases the parties had wells sunk on the premises and are receiving the royalty right along. In each case they found a little gas, and in this case they used the gas for running the boilers on the premises, but to say in either case that the well was a "gas well" in the general sense, would be a misnomer.

When the testimony closed, the court instructed the jury to return a verdict in favor of the defendant, and in doing that we think the court did just what it ought to have done, and the judgment will be affirmed. James & Beverstock, Attorneys for Plaintiff.

Ross & Kinder, Attorneys for Defendant.

Gladwell v. Holcomb and Hume.

LANDLORD AND TENANT.-NOTICE.

[Lucas Circuit Court, June 25, 1897.]

King, Haynes and Parker, JJ.

*THOMAS J. Gladwell V. ELIZABETH HOLCOMB AND ELIZABETH HUME.

1. TERMINATION OF A TENANCY FROM Year to YEAR.

Where a tenant enters into possession of certain premises under a written lease for the term of one year, and after its expiration he holds over from year to year without any other lease having been made: Held, that such tenancy may be terminated by the landlord by serving the tenant with a notice four months before the expiration of the year during which he was then holding the premises. The common law rule requiring a notice of six months, is inapplicable to the termination of a lease like this.

2. CHARGING THE JURY AS TO WHAT INCLUDES A REASONABLE NOTICE TO QUIT. Under a tenancy from year to year, the serving of a notice upon the tenant four months before the expiration of the year he was then serving, includes a reasonable notice to quit the premises, and it is not error for the court to charge the jury to that effect.

KING, J.

This proceeding is to reverse tne judgment of the court of common pleas affirming a judgment of a justice of the peace. The action was begun before a justice of the peace by the defendants in error here upon a complaint of forcible entry and detention against the plaintiff in error here. A trial was had, which resulted in a verdict of the jury and a judgment for the plaintiffs in that action, which judgment was affirmed by the court of common pleas.

Several objections are taken to this judgment, and reasons alleged why the judgments of the court of common pleas and of the justice of the peace ought to be reversed. We do not find any of these allegations of error of sufficient importance to discuss except one. The principal point which I desire to notice is the complaint which is made here, and which was urged in the court of common pleas—that the judgment and verdict are wrong because of the charge of the court to the jury and because of the refusal of the court to give a request.

Mr. Gladwell entered into possession of the premises which he was in the occupation of at the time of this trial under a written lease made to him of a certain store-room on Monroe street, in the city of Toledo, for the term beginning on the first day of January, 1889 and running to the first day of January, 1890, for an annual rental of $360 per annum, payable monthly, in advance, on the first day of each month. Mr. Gladwell entered into possession of these premises and occupied them during the contination of this lease; and at its expiration and afterwards, he held over and continued his occupation of the same premises, without any other lease having been made or executed between the parties and continued his occupation up to the time of the trial and paid the rent-as far as appears here- in accordance with the terms of the lease under which he entered into possession.

On the 31st of August, 1896, the plaintiffs below notified Mr. Gladwell or served upon him the following notice:

This decisions to submitting question as to reasonable notice to the jury, is approved and followed by the same court in Ashley v. Walker, 8 Circ. Dec, 369.