Case Name: CALLIHAN v. TALKOWSKI
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1963-12-02
Citations: 372 Mich. 1
Docket Number: Calendar No. 41, Docket No. 49,429
Parties: CALLIHAN v. TALKOWSKI.
Judges: Black, Souris, Smith, and O’Hara, JJ., concurred with Kavanagh, J.
Reporter: Michigan Reports
Volume: 372
Pages: 1–14

Head Matter:
CALLIHAN v. TALKOWSKI.
1. Praud — Inducement—Misrepresentation of Gross Sales of Tavern Business.
Trial eourt committed error in holding that a previous representation of past gross sales figure in tavern business could not be considered as an element of inducement, whore parties had entered into a written contract which omitted mention thereof and at the discussion and signing of which no mention of such gross sales figure was made, the proper test being whether or not the advertised figure exerted a material influence upon the minds of the plaintiff purchasers and was I of several motives which produced the resulting sale for which the purchasers sought damages by reason of alleged misrepresentation.
2. Costs — New Trial.
Costs of trial and appeal are directed to abide final result of new trial, where action for fraud is reversed for retrial.
Carr, C. J., and Dethmers and Kelly, JO-., dissenting.
References for Points in Headnotes
24 Am Jur, Praud and Deceit § 204.
5 Am Our 2d, Appeal and Error § 1012.
Appeal from Mackinac; Fenlon (Edward H.), J.
Submitted May 7, 1963.
(Calendar No. 41, Docket No. 49,429.)
Decided December 2, 1963.
Case by Gerald D. Callihan and Helen L. Callihan against John W. -Talkowski for damages sustained by reason of fraud and misrepresentation in sale of resort restaurant and bar. Judgment for defendant. Plaintiffs appeal.
Reversed and remanded for new trial.
Herbert, Wood <& Hood (George G. Wood, of counsel), for plaintiffs.
Brown & Brown (James J. Brown, of counsel), for defendant.

Opinion:
Kavanagh, J.
Plaintiffs appeal from a judgment of no cause for action entered by the circuit court for the county of Mackinac in a law action for fraud. Plaintiffs in their declaration for damages alleged fraud predicated on defendant's misrepresentation of gross sales of a bar and food business known as Cut River Inn. They further alleged they had read 2 advertisements in the Detroit News offering the place for sale, the first of which read in material part as follows: "Gross sales $29,000 in 8 months." The second advertisement read in material part as follows : "Gross sales $29,000 for 8 months."
Plaintiffs contend they relied on these representations and in pursuance thereof purchased the business for the price of $29,300 plus that portion of the merchandise inventory in excess of $800. They discovered, after a period of operation, that their gross income from the business was going to be substantially below the $29,000 gross sales for 8 months. They sought in their declaration $20,000 damages for the fraudulent misrepresentations.
Defendant answered denying the allegations and alleging that the plaintiffs were informed the Cut River Inn was for sale and visited the premises before the newspaper advertisements appeared and', therefore, could not have relied upon the advertisements. He further alleged that the $29,000 gross was discussed prior to the plaintiffs' acceptance of defendant's proposal of sale and it was clearly ex plained and pointed out to plaintiffs that defendant had not had a full season's business experience; that the $29,000 gross was the figure told to defendant to be the previous owner's (Fisher's) gross sales for the year 1954; that plaintiffs understood defendant did not have personal knowledge of the gross for any 1 year's operation. The answer further alleged that it was explained to plaintiffs that the combined gross sales of the Fishers and Talkowskis were not equal to $29,000 during 1955 because business had been down that year due to the steel strike.
As an affirmative defense, the defendant alleged in his answer that he had been defrauded by the misrepresentation of the value of plaintiffs' equity in a certain land contract, which equity had been transferred to defendant by plaintiffs as a $7,100 credit on the purchase price of the Cut River Inn.
In reply, plaintiffs denied that defendant at any time, in any manner, qualified, deviated or detracted from the representation to them that the business had $29,000 gross sales for the 8-month operating season. They denied any fraud with reference to the equity in their land contract. Both parties admit the falsity of the. representation as to the $29,000 gross sales.
The case was tried below on behalf of defendant on the theory of Krause v. Cook, 144 Mich 365:
"If a person receives information from others, and believes it, and repeats it, explaining that he has no personal knowledge, he is not guilty of fraud." (Syllabus 3.)
The matter is argued here on the same theory and reliance is had upon the same case. Krause v. Cook is not applicable to the facts in the instant case. Even if we found defendant Talkowski actually told plaintiffs the gross sales figure of $29,000 was not his figure but that of the previous owner, if it was in fact false, lie would not be absolved from liability unless there was an absence of reliance.
In Aldrich v. Scribner, 154 Mich 23, 27 (18 LRANS 379), Justice Carpenter, writing for a majority of the Court, distinguished the holdings in Holcomb v. Noble, 69 Mich 396, and Busch v. Wilcox, 82 Mich 315, from Krause v. Cook, supra, stating:
"In the Holcomb and Busch Cases the defendant himself obtained what plaintiff lost by means of the false representations. In the Krause Case the defendant was an agent, who at most received only 10% of the damages caused by the false representations. This difference, in my judgment, places the Krause Case outside the rule of the Holcomb and Busch Cases. That rule is peculiarly a Michigan rule."
Justice Carpenter then went on to say (p 28):
"In Michigan we have held (see cases cited in the opinion of Justice Morse in the Holcomb Case, supra) that, in order to constitute a fraud, it is not necessary that the person making the statement should either know that it is untrue or be recklessly and consciously ignorant whether it be true or not. It is sufficient if it be false in fact. It must be said, however, that in the cases in which this principle has been applied, the defendant obtained what the false representations caused the plaintiff to lose. Applied in such cases, the principle is a just and salutary one."
The rule of the Holcomb Case has been recently followed by Justice Black in Kroninger v. Anast, 367 Mich 478, and by Justice Souris in Irwin v. Carlton, 369 Mich 92, 95.
The trial court supported its finding of no reliance by plaintiffs on the newspaper advertisements as follows:
"The facts show conclusively that the carefully prepared written agreements included the full understanding of the parties with definite knowledge that they were purchasing at fixed prices certain enumerated types of personal property which were involved in this sale. The consideration very fully explained in the agreements, was based upon a fixed price for 3 definite groups of personal property. No actionable fraud could arise out of such a complete, fully explained transaction embodied in a written instrument. No confidential relationship or other influence existed on the record. The parties were strangers and dealt at arms length with the common attorney who pointed out in the agreement exactly what was offered and what was purchased.
"The discussion in Mr. McNamara's office which resulted in the execution of the preliminary agreements, show that the statement in the advertisements did not enter into the transaction as a motivating cause and inducement of this sale. The reason for this statement above is that the agreements themselves show that a definite price was fixed as the consideration by the parties, and that Mr. McNamara, representing both parties in drafting the agreement, after full discussion with them, divided the consideration into 3 separate parts. This language in the agreement is quoted as follows:
" 'The consideration paid on this agreement is as follows: For personal property other than stock and merchandise $18,500; for license, interest in lease, trade and bar fixtures and good will $10,000; for stock and inventory $800, this to include food, condiments, souvenirs and perishable supplies.' "
The trial court's reasoning seems to be that where no mention is made of false representation at discussion and signing of purchase agreement, and where purchase agreement divides, purchase. price into 3 separate items (per liquor control commission requirements), the previous representation of the past gross sales figure is not material to the pur •ckaseAñd'cbuld-'not,'therefore, have been, one of the elements óf inducement. :-
The f actually decisive issue the trial court should have decided was whether the defendant's advertised misrepresentation exerted a material influence upon the minds of plaintiffs, although it might be only 1 of .several motives, acting together, which produced the result. Smith on Fraud, p 83; Massey v. Luce, 158 Mich 128, 135. A negative answer cannot be inferred solely- from the fact the parties entered into, a written contract which contained no mention 'of the- gross sales representation.
The trial court- did not test the factual situation in the light- of this rule of law.
Under the authority of Schneider v. Pomerville, 348 Mich 49, the cause is remanded with direction 'that the trial court test the factual situation in light ,of the rule of the Massey Case.
On remand, either side may' present additional -testimony, on any of the questions in the case. If the determination, to :be made by written opinion making detailed findings of fact and specific findings of law, be in defendant's favor, a new judgment of no cause of action shall be entered; if in plaintiffs' favor, a new judgment shall enter for such damages in amount- as may be found on retrial.
Remanded accordingly. Costs of this Court and of the trial court shall abide and be taxed according to the final result.
Black, Souris, Smith, and O'Hara, JJ., concurred with Kavanagh, J.