{ "id": 8617269, "name": "MAX ZAGER v. JOHN W. SETZER", "name_abbreviation": "Zager v. Setzer", "decision_date": "1955-06-30", "docket_number": "", "first_page": "493", "last_page": "496", "citations": [ { "type": "official", "cite": "242 N.C. 493" } ], "court": { "name_abbreviation": "N.C.", "id": 9292, "name": "Supreme Court of North Carolina" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "45 S.E. 2d 35", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 0 }, { "cite": "228 N.C. 159", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8624785 ], "opinion_index": 0, "case_paths": [ "/nc/228/0159-01" ] }, { "cite": "93 N.C. 292", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 11273406 ], "opinion_index": 0, "case_paths": [ "/nc/93/0292-01" ] }, { "cite": "59 S.E. 2d 844", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 0 }, { "cite": "232 N.C. 281", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8599035 ], 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"S.W.2d", "opinion_index": 0 }, { "cite": "83 S.E. 392", "category": "reporters:state_regional", "reporter": "S.E.", "opinion_index": 0 }, { "cite": "168 N.C. 330", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8659463 ], "opinion_index": 0, "case_paths": [ "/nc/168/0330-01" ] }, { "cite": "40 S.E. 2d 470", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 0 }, { "cite": "227 N.C. 50", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8620881 ], "opinion_index": 0, "case_paths": [ "/nc/227/0050-01" ] }, { "cite": "69 S.E. 2d 15", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 0 }, { "cite": "235 N.C. 50", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8620879 ], "opinion_index": 0, "case_paths": [ "/nc/235/0050-01" ] }, { "cite": "27 A.L.R. 2d 14", "category": "reporters:specialty", "reporter": "A.L.R. 2d", "opinion_index": 0 }, { "cite": "62 S.E. 1067", "category": 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"reporters:state", "reporter": "N.C.", "case_ids": [ 8609692 ], "opinion_index": 0, "case_paths": [ "/nc/240/0696-01" ] }, { "cite": "63 S.E. 2d 202", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 0 }, { "cite": "233 N.C. 109", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8599905 ], "opinion_index": 0, "case_paths": [ "/nc/233/0109-01" ] }, { "cite": "24 S.E. 2d 5", "category": "reporters:state_regional", "reporter": "S.E.2d", "opinion_index": 0 }, { "cite": "222 N.C. 470", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8630989 ], "opinion_index": 0, "case_paths": [ "/nc/222/0470-01" ] } ], "analysis": { "cardinality": 516, "char_count": 8882, "ocr_confidence": 0.576, "pagerank": { "raw": 2.6160705818339644e-07, "percentile": 0.8208766225366807 }, "sha256": "fb3146b2481a670e3b70e0c64e7773fb4a345f922b95c378d83f7e47e355e8eb", "simhash": "1:4a03c7a65e7a24ac", "word_count": 1461 }, "last_updated": "2023-07-14T17:51:17.837681+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "MAX ZAGER v. JOHN W. SETZER." ], "opinions": [ { "text": "JohnsoN, J.\nOur study of the record leaves the impression that the evidence relied on by the defendant was sufficient to carry the case to the jury on the issues of rescission and damages raised by the further defense and counterclaim.\nThe evidence discloses that the theatre was operated by C. C. Freeman previous to its acquisition by the defendant. Freeman purchased the equipment on the installnient-payment plan from the plaintiff about 15 October, 1951, and continued operations until sometime the following spring or summer, when he gave it up and left town. A foreclosure ensued, under which the plaintiff reacquired title to the equipment. Following this, it was sold to the defendant. As a part of the negotiations leading up to the defendant\u2019s purchase of the equipment and the signing of the conditional sale contract, the plaintiff represented to him that the previous operator of the theatre had a weekly gross income therefrom of between $600 and $700. The defendant closed the deal after determining that the costs of operating the theatre would be approximately $560 a week. The building and equipment were completely renovated, after which the defendant operated the theatre for a period of several months under the management of a competent, experienced operator. However, the weekly gross income never approximated $600 or $700, as represented by the plaintiff. On the contrary, it ranged from a high of $487 to a low of $222, with the average being $320. Also, it was disclosed by the testimony of former operator Freeman that his highest weekly gross income was $443, with the average being only $343, and that he closed the theatre \u201cbecause it was very unprofitable.\u201d\nThe foregoing line of evidence, when considered with other testimony of an amplifying and corroborative nature, was sufficient to show prima facie the existence of all the elements of actionable fraud. Ward v. Heath, 222 N.C. 470, 24 S.E. 2d 5; Vail v. Vail, 233 N.C. 109, 63 S.E. 2d 202.\nTrue, the record discloses no evidence tending to show the plaintiff knew the amount of the former operator\u2019s gross income. And in this sense the evidence fails to disclose affirmatively that the plaintiff had knowledge of the alleged falsity of his representation to the effect that the former operator grossed from $600 to $700 a week. However, the evidence is sufficient to support the inference that the plaintiff\u2019s representation as to the gross weekly income of the former operator was recklessly made, or positively averred when he was consciously ignorant whether it was true or false, and was intended by him and accepted by the defendant and reasonably relied on as a statement of fact by which the defendant was deceived and caused to suffer loss. The evidence tending to show this state of mind is an adequate substitute for proof of scienter. Roberson v. Williams, 240 N.C. 696, 83 S.E. 2d 811; Gray v. Edmonds, 232 N.C. 681, 62 S.E. 2d 77; Mills v. Mills, 230 N.C. 286, 293, 52 S.E. 2d 915, 921; Whitehurst v. Insurance Co., 149 N.C. 273, 62 S.E. 1067; 23 Am. Jur., Fraud and Deceit, Sec. 68, 1954 Supplement. See also comprehensive annotation entitled \u201cFalse representations as to income, profits, or productivity of property as fraud,\u201d 27 A.L.R. 2d 14, pp. 60 and 61; Roberson v. Swain, 235 N.C. 50, 69 S.E. 2d 15.\nWe have not overlooked the variance between the defendant\u2019s allegations and proofs. In his further defense and counterclaim the defendant expressly alleges the scienter, i.e., that the plaintiff knew of the falsity of his representation as to the weekly gross income of the former operator of the theatre. Whereas the evidence discloses at most prima facie proof only of the legal substitute therefor \u2014 the constructive scienter, i.e., that the representation was recklessly made or averred under circumstances showing conscious ignorance whether it was true or false. The question thus posed is whether this variance is of sufficient materiality to justify nonsuit under application of the rule explained and applied in Suggs v. Braxton, 227 N.C. 50, 40 S.E. 2d 470.\nOn this record it does not appear that the plaintiff was misled to his prejudice by the variance between the defendant\u2019s pleading and proof. Hence, under application of G.S. 1-168 the variance will be treated as immaterial and insufficient to support the judgment of nonsuit entered below.\nOur attention has not been directed to any previous decision of this Court involving the precise question of variance here presented and our research discloses none. The case of Pritchard v. Dailey, 168 N.C. 330, 83 S.E. 392, cited by the plaintiff, is factually distinguishable.\nHowever, the conclusion here reached finds support in these decisions from other jurisdictions: Luikart v. Miller (Mo.), 48 S.W. 2d 867; Turk v. Botsford, 70 Or. 198, 139 P. 925. See also Watson v. Jones, 41 Fla. 241, 25 So. 678; Packard v. Pratt, 115 Mass. 405; Cook v. Gill, 83 Md. 177, 34 A. 248. And these decisions of this Court support the principle here applied: Dennis v. Albemarle, ante, 263; Spivey v. Newman, 232 N.C. 281, 59 S.E. 2d 844; Mode v. Penland, 93 N.C. 292.\nThe ruling of the court below in dismissing by compulsory nonsuit the defendant's pleas for rescission and damages must be held for error. The verdict and judgment will be set aside to the end that the defendant may have a new trial, and it is so ordered. See Randle v. Grady, 228 N.C. 159, top p. 165, 45 S.E. 2d 35, top p. 40.\nSince the other questions presented by this appeal may not recur on retrial, we refrain from discussing them.\nNew trial.", "type": "majority", "author": "JohnsoN, J." } ], "attorneys": [ "Thomas Turner and Proctor & Dameron for defendant appellant.", "Moseley and Edwards and Armistead W. Sapp for plaintiff appellee." ], "corrections": "", "head_matter": "MAX ZAGER v. JOHN W. SETZER.\n(Filed 30 June, 1955.)\n1. Fraud \u00a7 12: Cancellation and Rescission of Instruments \u00a7 12 \u2014 Evidence held sufficient to overrule nonsuit on issue of fraud.\nEvidence tending to show that plaintiff, the owner of personal property comprising a motion picture theatre, represented that the previous operator of the theatre had a weekly gross income therefrom in a certain sum, that defendant purchased the property after determining that his operating-costs would be in a smaller amount, that defendant, after renovating the theatre, realized a gross income in a much smaller sum, and that the former operator\u2019s gross weekly income was only about half that represented by plaintiff, is held, when considered with other testimony of an amplifying and corroborative nature, sufficient to show prima facie the existence of all the elements of actionable fraud, and nonsuit on defendant\u2019s counterclaim for rescission and damages was erroneously entered.\n2. Fraud \u00a7 4\u2014\nThe fact that the evidence discloses that plaintiff had no knowledge of the falsity of his representation is not fatal when the evidence further discloses that the representation was material and was intended by plaintiff to be accepted and relied on by defendant, and that the representation was recklessly made, or positively averred when plaintiff was consciously ignorant whether it was true or false.\n3. Trial \u00a7 23f: Fraud \u00a7 12: Cancellation and Rescission of Instruments \u00a7 12\u2014\nOn defendant\u2019s counterclaim for rescission and damages, the fact that defendant alleges scienter of plaintiff, whereas the evidence discloses at most prima facie proof only of constructive scienter in that the representation was recklessly made in conscious ignorance of its truth or falsity, does not justify nonsuit for variance, since upon the record it does not appear that plaintiff was misled to his prejudice. G.S. 1-168.\n4. Fraud \u00a7 9: Cancellation and Rescission of Instruments \u00a7 9: Election of Remedies \u00a7 2\u2014\nWhen justified by the facts, a party may maintain an action for rescission of an instrument and also for damages resulting from the fraud which induced its execution.\nAppeal by defendant from Flail, Special Judge, at 13 September, 1954, Civil Term of Guilpoed (Greensboro Division).\nCivil action to recover balance alleged to be due on a conditional sale contract executed by the defendant in purchasing from the plaintiff personal property comprising a motion picture theatre.\nThe defendant by answer admits the execution of the conditional sale contract, but by further defense and counterclaim seeks rescission and damages on allegations of fraudulent representations made by the plaintiff whereby the defendant was induced to execute the contract. These affirmative pleas of the defendant were dismissed at the close of the evidence on plaintiff\u2019s motion for judgment as of nonsuit. Thereupon the court submitted to the jury the single issue of debt which arose in the plaintiff\u2019s action against the defendant. The jury, in response to a peremptory instruction, answered the issue in favor of the plaintiff.\nFrom judgment entered on the verdict, the defendant appeals, assigning errors.\nThomas Turner and Proctor & Dameron for defendant appellant.\nMoseley and Edwards and Armistead W. Sapp for plaintiff appellee." }, "file_name": "0493-01", "first_page_order": 535, "last_page_order": 538 }