J. I. Case Threshing Machine Co. v. Copren Bros.

The action was by plaintiff to recover an alleged balance due upon three certain promissory notes, executed by defendants to plaintiff as part payment of the purchase price of a certain thirty horse-power traction engine sold by plaintiff to defendants, and to have foreclosed a certain chattel mortgage on said engine given to secure the payment of said promissory notes. Prom a judgment in favor of plaintiff, defendants prosecute this appeal.

This ease has been before us twice before. The first appeal was from a judgment in favor of plaintiff, which judgment, on November 25, 1916, was reversed. (J. I. Case Threshing Mach. Co. v. Copren Bros., 32 Cal. App. 194 , [ 162 Pac. 647 ].) In the opinion therein will be found a full statement of the facts of the ease. The second appeal was from an order changing the place of trial from Sierra County to Plumas County, and we reversed

The original complaint in the action was filed September 11, 1914, and the prayer of said complaint was for judgment in the sum of $900.99, the amount of the principal and interest due on said notes on June 22, 1914. The nature of the action, 'as originally brought, and the contents of the original complaint, may be given here as they are briefly stated in the opinion on the former appeal of this case ( 32 Cal. App. 194 , [ 162 Pac. 647 ]), as follows:

“Action to recover a judgment for money claimed to be due and unpaid upon three certain promissory notes. The complaint alleged that the notes were executed on July 5, 1912; that they were secured by a mortgage of even date on certain personal property; that the mortgage provided in the event of default in the payment of the notes the plaintiff could take possession of the mortgaged property and sell the same with or without' notice, and after deducting the expense of the sale apply the balance on the notes secured by the mortgage-; that the balance remaining unpaid on said notes after crediting the proceeds of such sale should at once become due and payable; that, acting under the terms and provisions of the mortgage, the defendant, upon default in the payment of the notes, and on June 22, 1914, took possession of and .sold the mortgaged property for five hundred dollars, and, after deducting twenty dollars expenses, credited $480 on the notes; that there had been paid on one note before that time $74.45, which, with the credit of $480, left a balance of principal due of $684.30, and judgment was asked for this amount and interest as provided in the notes. The court, at the conclusion of the taking of the testimony, instructed the jury to find a verdict for the plaintiff for the amount sued for, and it did so. This appeal is from the judgment following such verdict. The defendants filed a general and special demurrer to the complaint, which was overruled.”

On a rehearing of the case, this court said, among other things: “But plaintiff having elected to enforce its rights by public sale and having brought its action upon the assumption that there was such a sale, there was an entire failure of proof. So, also, was there an entire failure of proof that any sale was made,”

[1] The amended complaint changed the nature of the action from that of one at law for the recovery of the balance due on the promissory notes given by defendants to plaintiff to that of a suit in equity to foreclose the mortgage given by defendants to plaintiff on the engine sold to the former by the latter to secure the payment of the notes in suit.

The amended complaint is in three counts, in two of which it is alleged" that no payment has been made upon the notes and that the principal of each of said notes and the interest are now due. In the other count credit is given on the note for the sum of $74.45.

The grounds of the opposition by the defendants to the order permitting the plaintiff to file the amended complaint which are principally urged here as those upon which insistence for a reversal of the judgment is predicated are: 1. That the amended complaint sets up entirely different and distinct causes of action from those set up in the original complaint, and that said causes of action are barred under the terms of section 337 of the Code of Civil Procedure ; 2. That the plaintiff, by the mortgage in question, was expressly given two different, distinct, and inconsistent remedies, by either of which it was at liberty to enforce payment of the promissory notes in suit, that it was, therefore, put to its election as to which of said remedies it would adopt, and that having, in the first instance, elected to adopt and pursue one of the remedies, it waived the right to employ the other remedy for the enforcement of its demands, to wit, by foreclosure of the mortgage, and is, therefore, now estopped from invoking that remedy.

2. We do not think this is a case where the doctrine of election between remedies applies. The cases where that principle has been successfully invoked are generally where a party, having two different and distinct remedies available to him for the enforcement of a single right or obligation, has adopted one of the remedies and through it has pressed his action to final judgment, and, finding that he has failed to adopt the course or the remedy which would have rendered the execution of his judgment the more effectual, attempts to invoke the other remedy. Where, for illustration, the holder or owner of a promissory note, which is secured by a mortgage, elects to proceed at law and so sues upon the note, without relying upon the security of his mortgage, and has obtained judgment which has become final, it has been held that, in such case, the plaintiff waives his security and cannot go into a court of equity and secure relief by way of a foreclosure. This proposition is an essential corollary of one of the underlying or fundamental concepts of the reformed procedure, to wit, the prevention of a multiplicity of suits. (Ould v. Stoddard, 54 Cal. 613 .)

The ease of Parke & Lacy Co. v. White R. L. Co., 101 Cal. 37 , [ 35 Pac. 442 ] (cited by appellants here), was just such a case as the one first above hypothetically stated. It

This case, it is very clear, does not come within the above case.

The case of San Bernardino Invest. Co. v. Merrill, 108 Cal. 490 , [ 41 Pac. 487 ], also cited by the appellants here upon the doctrine of election, aside from a few general observations as to the nature of that doctrine and the oc

We conclude that the court below made no mistake in allowing the plaintiff to amend its complaint (Crittenden v. St. Hill, 34 Cal. App. 107 , [ 166 Pac. 1016 ]), nor do we think it is shown that there was an abuse of judicial discretion in doing so. To the contrary, under the peculiar circumstances of the situation, the allowance of the amendment was eminently proper as in the interest of justice. (Alden v. Mayfield, 33 Cal. App. 684 , 693, 694, [ 166 Pac. 377 ].)

[3] 3. It is next contended that the corporate capacity of the plaintiff was not properly shown. It is a well-settled rule that “a mortgagor of property who has dealt with the mortgagee as a corporation, and received from it the consideration of the mortgage note, is estopped from denying its corporate capacity in an action by the corporation to foreclose the mortgage.” (Syllabus in Bank of Shasta v. Boyd, 99 Cal. 604 , [ 34 Pac. 337 ].) The following cases and authorities also declare the rule to be as thus stated: Grangers’ etc. Assn. v. Clark, 67 Cal. 634 , [ 8 Pac. 445 ]; Oregonian Ry. etc. Co. v. Oregon Ry. etc. Co., 10 Sawy. 464 , 22 Fed. 245 ; Cowell v. Springs Co., 100 U. S. 61 , [ 25 L. Ed. 547 , see, also, Rose’s U. .S. Notes]; Close v. Greenwood Cemetery, 107 U. S. 466 , [ 27 L. Ed. 408 , 2 Sup. Ct. Rep. 267 ] ; Bigelow on Estoppel, pp. 527-529; Morawetz on Private Corporations, sec. 750; Spelling on Corporations, sec. 44; Raphael Weill & Co. v. Crittenden, 139 Cal. 488 , [ 73 Pac. 238 ]; Fresno Canal & Irr. Co. v. Warren, 72 Cal. 379 , [ 14 Pac. 37 ]; Camp v. Land, 122 Cal. 167 , [ 54 Pac. 839 ],

That the defendants dealt with the plaintiff as a corporation is indubitably shown by the fact that the notes and the mortgage which they executed in favor of plaintiff and upon which this action is founded and the affidavit attached to the mortgage were signed and presumably read by them.

[4] 4. The court made no error in denying the application of the defendants for a trial by jury. A proceeding or action instituted for the purpose of foreclosing a mortgage, either on real or personal property, involves an equitable remedy, and it is about as elementary a proposition as is to be found in the whole body of the law that juries are allowable in the equity courts, if at all, only

[5] 5. It is next contended that the court erred in not permitting the defendants to prove an alleged oral warranty made by the plaintiff’s agent before the execution of thé written order or contract of sale as to the capacity or horse-power of the tractor and also by not allowing testimony in support of the charge (introduced for the first time in this case through the amended answer) that the plaintiff’s agent fraudulently and with intent to deceive and defraud the defendants made false representations to the defendants as to the character, quality, and capacity of the engine and its ability to perform certain specified service, and by which representations the latter, so it is alleged, were solely influenced and induced to enter into the contract of sale.

The defendants, on the close of plaintiff’s case, proceeded to introduce testimony in support of the averments of their answer as to the alleged oral warranty and the alleged fraudulent representations by which they were induced to enter into the contract of sale, whereupon counsel for plaintiff objected to any testimony addressed to those matters of defense, but suggested that the court overrule the objections, which were based upon the usual general and also certain special grounds, and so allow the testimony to go in, subject to the objections made against it and to a motion by plaintiff to strike it out after it was all before the court. With this understanding, testimony in support of the special defenses referred to was admitted, but was later

But there are several ready answers to the contention that the action of the court iii striking from the record the testimony mentioned was erroneous.

This court held, in its opinion on the former appeal of this case ( 32 Cal. App. 194 , 200, [ 162 Pac. 647 , 650]), that the contract in question contained no warranty that the engine was of thirty horse-power, or would, in its operation, develop that power; that the only warranty written in the order blank for the engine was that it would be made of good material, “and durable with care, and be capable of doing more and better work than any other machine made of equal size and proportions, working under the same conditions on the same job, if properly operated by competent persons, with competent steam or horse-power, and the printed rules and directions of the manufacturer, intelligently followed.” Acting Justice Ellison, who wrote the opinion in that case, further said therein: “It [the order for the machinery] would seem to have been carefully drawn for the purpose of expressly excluding all other'* warranties. It contains no warranty as to the horse-power of the engine. The pleading [answer of defendants] did not allege any rescission or offer to rescind the contract, and we conclude the court did not err in excluding evidence as to the horse-power the engine would develop.”

The decision in that case upon the question whether the order contained a warranty that the engine was of a certain capacity or horse-power embodies the law of the case as to that question and is controlling on this appeal, notwithstanding that the plaintiff was permitted to amend its complaint and so set up some additional facts. (Weller v. Brown, 25 Cal. App. 216 , [ 143 Pac. 251 ]; Heidt v. Minor, 113 Cal. 385 , [ 45 Pac. 700 ]; Wallace v. Sisson, 114 Cal. 42 , [ 45 Pac. 1000 ]; People v. Hamilton, 103 Cal. 488 , [ 37 Pac. 627 ] ; Allen v. Bryant, 155 Cal. 256 , [ 100 Pac. 704 ].) It follows that the effect of the testimony stricken out by the court would have been, if it had been allowed to

In. Peterson v. Chaix, 5 Cal. App. 525 , 537, [ 90 Pac. 948 ], this court, through Presiding Justice Chipman, stated the rule, in applying it in that case, as follows: “The written contract merged all previous negotiations, and is presumed,

The rule is with singular clearness stated in the last-named case (Yuba Mfg. Co. v. Stone) by Justice Burnett. The following pertinent excerpts may with advantage be incorporated herein: “It is not disputed by appellant that an additional warranty cannot be shown to that contained in the written contract, but it is contended that the offer constituted an effort to prove fraud which operated' as an inducement to the execution of said agreement, and which, if shown, would avoid the whole contract and relieve the appellant from the apparent liability on said promissory notes. . . . An ‘express warranty’ means simply an undertaking or covenant that the thing which is the subject of the contract is or is not of a certain quality or capacity. It is difficult, therefore, to resist the conclusion that appellant sought to add to the warranty contained in said written instrument. Of course, the significance of the said parol assurance was not changed by reason of the fact that it is claimed to have been fraudulently given. Whether the promise was made with or without a deceitful intent, its importance to appellant arose from the consideration that it related to the character of the tractor, which was to be furnished. Its quality as a warranty would not be changed or affected in the least by alleging that the representation was fraudulently made.”

Again, it is said in that case, referring to the rule that prior representations and negotiations are to be considered as having been merged in the "written agreement and cannot

The opinion in question then concludes with these observations, which have pertinent and cogent application to the case before us: “Manifestly, the court, as far as possible, should protect an innocent party against the fraud of one seeking to take an unconscionable advantage; but in this class of cases, when the parties have deliberately reduced their contract to writing and have undertaken to set forth the character of the contrivance which is sold, and there is no mistake or fraud connected with the execution of said instrument, it is reasonable and in accordance with the law to hold that the contract shall not be avoided by reason of some false representation as to the quality of the machine, idhich representation the vendee has seen fit to completely ignore in the written instrument. It is true, of course, that a defrauded party cannot by the simple ‘device of a written instrument’ be deprived of the right to prove the fraud, but it is equally true that he cannot be permitted to nullify the rule in relation to written instruments by the specious claim that he was deceived by certain oral representations. ’ ’

Nothing can be added to what is said in the case last above considered with regard both to the question as to the alleged oral warranty of the engine and the claim and allegations of fraudulent representations by the agent of plaintiff to the defendants to induce them (and which they alleged did induce them) to enter into the contract of sale

[6] But we may further suggest that, according to the facts of this case and the authorities, the defendants waived the alleged fraud and misrepresentation as to the capacity and power of the engine which they charge were made by the agent of plaintiff who negotiated the sale and which they allege and attempted to prove influenced and induced them to enter into the contract, and are estopped from raising the question of fraud in this case.

The evidence which was presented by the defendants, but which was stricken from the record, shows that they received the engine on the fifth day of July, 1912, and immediately put the engine to use; that they then discovered that it not only failed to develop the thirty horse-power which they allege that the .plaintiff warranted its capacity to be, but failed to work at all—at least, satisfactorily. Notwithstanding their knowledge of these facts, they retained the engine, and it is not made to appear that they made any complaint of the failure of the engine to measure up, as to power, to the representations which they claim were falsely made by the plaintiff as to the capacity or power of the tractor until the seventeenth day of November, 1912—a period of over four months after they had received the engine and attempted to work it—when they addressed to the plaintiff a letter in which they said: “As we have had a very poor year with our contracts, we will not be able to pay note due on November 1, 1912. We would like to arrange if possible to have all' payments extended one year, as that will give us a chance to get some kind of work for the tractor, as it was a total failure on our wood contract and by trying to haul with it, we only got out about % of our contract this season.” The letter then proceeded to say that the engine would not do the work as guaranteed, etc., but this is not material to the present consideration.

It is very clear from the foregoing statement of the situation that the defendants waived any fraud which they claim might have characterized the transaction before it culminated in the execution of the written contract, or, perhaps, more properly speaking, waived the right to raise the question of fraud.

“A defrauded party,” says the supreme court, in Ruhl v. Mott, 120 Cal. 668 , 677, [ 53 Pac. 304 ], “has but one election to rescind, and he must exercise that election with reasonable promptness after discovering the fraud. (Dennis v. Jones, 44 N. J. Eq. 513 , [ 6 Am. St. Rep. 899 , 14 Atl. 913 ].) Delay in rescission is'evidence of a waiver of the fraud, and of an election to treat the contract as valid. Any acts evincive of an intent to abide by the contract are evidence of an affirmance of the contract, and of a waiver of a right of rescission. (Delano v. Jacoby, 96 Cal. 275 , [ 37 Am. St. Rep. 201 , 31 Pac. 290 ]; Marten v. Burns Wine Co., 99 Cal. 355 , [ 33 Pac. 1107 ] ; Bailey v. Fox, 78 Cal. 389 , [ 20 Pac. 868 ]; Bach v. Tuch, 126 N. Y. 53 , [ 26 N. E. 1019 ]; Crooks v. Nippatt, 44 Minn. 239 , [ 46 N. W. 349 ]; Pearsoll v. Chapin, 44 Pa. St. 9 .)”

The above is only declaratory of the rule of our code (Civ. Code, sec. 1691). applied, however, to a situation such

It is wholly unnecessary to multiply cases illustrating the application of the principle under discussion. In our own state reports may be found many such cases other than those cited above.

We can perceive no possible ground upon which the appellants may expect to prevail in this ease under its circumstances as they are shown here and as they were shown by the record in the case on the former appeal. If they became parties to a bad bargain, it is, of course, to be greatly deprecated that they were not fortunate enough to relieve themselves from the ill consequences thereof. But when a person is lured or otherwise led into a business engagement or a contract, which is, as to him, unconscionable or inequitable (and we are not to be understood as intimating that upon the record we are justified in saying that this is of that class), he must, before he can justly expect equity to extend to him her 'protecting hand, exercise a proper degree of vigilance and act promptly after he has discovered that an unconseientious advantage has been taken of him in the transaction, to the end that not only may the wrong which has thus been'inflicted upon him be redressed, but that the rights of the other party to the agreement, if rights he has, may be preserved, or he be restored as near to statu quo as the circumstances of the situation will permit and in equity justify. The defendants here, as we have shown, not only slept upon their rights, but by their conduct gave the plaintiff the right to believe that the bargain was satisfactory to them. They knew what their contract was and had ample opportunity to subject to a practical test the machinery they had purchased,

The judgment appealed from is affirmed.

Ellison, P. J., pro tern., and Burnett, J., concurred.

A petition to have the cause heard in the supreme court, after judgment in the district- court of appeal, was denied by the supreme court on February 16, 1920.

All the Justices concurred.