Collins v. Berman , 209 Ala. 67 ( 1923 )

Appellees filed this bill to rescind an agreement between the parties and to recover a pecuniary judgment against appellant for a sum of money deposited by appellees with appellant to be forfeited in the event appellees failed to perform the agreement. The substance of the bill is that the parties entered into an agreement for the sale by defendant to complainants, at cost less an agreed discount, of a stock of merchandise and the movable fixtures and appliances used in the business conducted by defendant, the purchase price to be paid as soon as the total amount thereof could be determined by an inventory to be taken by complainants; that "as an evidence of good faith the buyers agree to and hereby deposit with the seller certified check for $1,000, which said deposit is also by way of guaranty that they will take said stock of merchandise on or by December 15th, 1921;" that by the contract it was further provided "that, if the buyers shall fail or refuse to consummate this agreement on or by said December 15th, 1921, the obligations hereunder on the part of the seller shall cease * * * and the bank shall be authorized to pay to him the said $1,000, so hereby agreed to be deposited, and the seller may take or retain the same as agreed liquidated damages for the failure of the said buyers to perform their said contract on or by said date, time being of the essence of this agreement, if consummated the above $1,000 is to be part of the purchase price"; that in order to induce complainants to enter into said contract defendant made false and fraudulent representations as to the quality of the stock, the quantity of certain goods forming a part thereof, and the cash price, upon all which complainants relied; that, on account of the fraud averred, complainants canceled the trade, but defendant keeps the money. The prayer, briefly stated, is that the contract be canceled, and that the sum of money in the hands of defendant be treated as the fruit of an inequitable and unconscionable forfeiture, and that defendant be decreed to pay the same to complainants. Complainants offer to do equity if need be.

For mere "trader's talk," mere general commendations of property sought to be sold, and representations as to value and cost, the vendor is not held answerable. Tillis v. Smith Sons Lumber Co., 188 Ala. 122, 65 So. 1015. But the averment of the bill is that the representations complained of were falsely and fraudulently made, and induced complainants to enter into the contract. On demurrer these averments must be accepted as true, and, if so, they show a cause of action in complainants. Perry v. Johnston, 59 Ala. 648; Harton v. Belcher, 195 Ala. 186,70 So. 141.

On the facts averred in the bill complainants' remedy is by action at law. Both parties have proceeded on the theory that the agreement no longer subsists as a valid executory contract; it is not necessary that it be canceled as a false muniment of title, no title to land being involved (Merritt v. Ehrman,116 Ala. 278, 22 So. 514); the title is now where it would be after a formal decree of rescission; all that complainants need ask is that they be awarded a judgment for the money alleged to have been wrongfully appropriated by defendant; the record of such a suit will be a complete answer to any future action by appellant on the contract. Russell v. Little, 28 Ala. 160. Fraud alone is not a ground of equitable jurisdiction, as this court has frequently decided. Smith's Ex'r v. Cockrell, 66 Ala. 64; Hunt v. Jones, 203 Ala. 541, 84 So. 718, where a number of our decisions are cited.

The briefs deal with the question of penalties and forfeitures and the considerations on which courts of equity grant relief in such cases, but we think that discussion is unnecessary in this case. Complainants, without reference to such considerations, are entitled to have their money back because, as they aver in effect, it was obtained from them by means of a contract which was fatally infected with fraud. If they prove this averment, on which their bill in its present frame appears to depend, they are entitled to recover the entire sum, and, for aught appearing, a judgment at law will be adequate to afford them complete justice. Or, if the bill may be construed as conceding, in the alternative, that, even if there was no fraud, and complainants were at fault in failing or refusing to execute the contract, still the contention is the deposit with defendant of the check for $1,000 was a mere security, and not by way of liquidated damages in the event complainants failed or refused to carry out their contract; that defendant has not suffered damage commensurate with that sum, and equity should afford relief. But, even in that case, the law court is as competent to determine the proper construction of the contract in this particular as is the court of equity, as competent to ascertain the amount of damage caused by the detention of complainants' money, and to render judgment therefor. Cases in which the law courts have exercised this jurisdiction are noted in Walshe v. Smith Lumber Co., 178 Ala. 472, 59 So. 455. No other cause for the intervention of equity being shown, complainants must be relegated to their remedy by judgment at law. 1 Pom. Eq. Jur. (4th Ed.) § 434. Defendant's demurrer should have been sustained.

Reversed and remanded.

ANDERSON, C. J., and GARDNER and MILLER, JJ., concur.