Massey-ferguson, Inc., Appellant, v. Bent Equipment Company, Appellee, 283 F.2d 12 (5th Cir. 1960)

Before us is an appeal from summary judgment entered in favor of appellee Bent Equipment Company, plaintiff below, awarding damages in the sum of $72,399.67 against appellant Massey-Ferguson, Inc., defendant in the court below. The crucial questions arise from an order entered by the court below striking certain defenses included in the answer of Massey-Ferguson.

The complaint as amended claims substantially the amount recovered based upon the alleged breach of a written contract between appellant and appellee covering purchase by appellant of the assets and business, including accounts and notes receivable, of appellee. Bent had, directly and through several subsidiary corporations, conducted the business of franchised distributor of appellant's manufactured products in Florida and a part of Georgia for a period of several years prior to execution of the purchase-sale contract of September 13, 1957.

In this contract appellant agreed to purchase the "customer notes and accounts receivable on Bent's books at the aforesaid date of termination [October 15, 1957] of said franchises for the book value thereof less the related reserve for doubtful accounts on Bent's books at that date."¹  Following the quoted words is the paragraph of the contract around which most of the argument of the parties is centered:

"9. Bent shall execute all assignments or other documents necessary to convey to M-H-F (appellant) full rights to said notes or accounts receivable, including the right to bring suit for collection thereof, and Bent warrants that the notes and accounts receivable represent true and valid claims against the debtors."

The pleadings disclosed without conflict that appellant paid appellee for all accounts in obedience to the terms of the contract quoted above, except twenty accounts the aggregate of which formed the basis of this action. Appellant declined to pay those accounts, justifying its refusal, in its argument before us, upon two grounds:

1. That the warranty above quoted constituted a warranty to the appellant that the notes and accounts were just debts due appellee, that they were collectible, or, at least, that appellee had no knowledge that they were not collectible; that appellant, with appellee's knowledge, relied upon said warranty, and that appellee breached this warranty in tendering said twenty notes and accounts to appellant.

2. That a confidential and fiduciary relationship existed between appellant and appellee, and that appellant had a right to rely, and did rely, upon representations made to it during the negotiations preceding the contract; that appellee falsely, fraudulently and knowingly represented to appellant that said notes and accounts were collectible, and that it had no knowledge that they were otherwise, when appellee knew that the same were not then, and had not for sometime been, collectible; that appellant relied upon said representations with appellee's knowledge, and that appellee's course of action constituted a fraud, which absolved appellant from any liability for payment of said disputed notes and accounts.

The court below granted a motion filed²  by appellee to strike all of the allegations contained in appellant's answer setting forth said defenses, as well as its counterclaim and other pleadings asserting the same facts and claims.

We think the court correctly granted the motion to strike that portion of the answer included under contention 1 supra. The action was upon a writing and the warranty which the parties chose to insert in it is in language which is clear, definite, explicit and unambiguous, and there is no lack of harmony between the warranty and any other provisions of the contract. Under such circumstances it is the court's duty to determine the intent of the parties from the language they put into their writing without resort to the aids sometimes permitted, such as parol evidence of prior negotiations between the parties, to assist it in arriving at the intention of the parties. This is clearly established by decisions of this Court,³  by the general law⁴  and by the decisions of the Florida courts.⁵ 

We think the court erred, however, in striking the defense based upon fraud, as set forth in appellant's ground of argument number 2 supra. It is always proper that the court, in construing a writing, put itself, as nearly as possible, in the position of the contracting parties in determining the meaning of the words they used.⁶  So placing ourselves, we think it is clear that the allegations of appellant's answer setting up fraud make a prima facie case which should be heard by the court and submitted to and determined by the fact-finder if appellant is able to produce evidence of the quantity and quality required to establish charges of fraud.⁷ 

We are not unmindful that, under Rule 9(b) F.R.Civ.P., averments of fraud must be stated with particularity. We think the averments of appellant's pleadings relating to fraud conform to this requirement. We do not hold that the mere relationship between appellant and appellee under which appellee had been distributor for many years of appellant's products, standing alone, creates a fiduciary relationship. In fact, it is manifest from this whole record that these parties were dealing at arm's length, appellant being the one desiring to sever the relationship and insisting thereon; and that it wrote the contracts involved. But the relationship of Van Etten Bent, as the prime actor in appellee's dealings, coupled with the projection of the relationship for five years after the execution of the contract, are entitled to consideration in determining whether or not such a relation of trust actually existed.

Fraud is a matter of such indefinite character that, ordinarily, a charge of it should not be stricken from a pleading unless it is clear that, under no circumstances, could proof, conforming to the strict requirements provided in fraud charges, be introduced under the pleadings, which would probably convince the trier of the facts that fraud had in fact been perpetrated.

What we said in White v. Union Producing Co., 1944, 140 F.2d 176, 178, is persuasive here: "Fraud vitiates everything it touches. It is difficult to define; there is no absolute rule as to what facts constituted fraud; and the law does not provide one `lest knavish ingenuity may avoid it.'" Much the same idea was expressed in our decision of Abbott v. United States, 1956, 239 F.2d 310, 314, where, quoting from one of our earlier cases and citing several others from various courts, we said: "* * * the law does not define fraud; it needs no definition; it is as old as falsehood and as versable as human ingenuity."

Whether fraud has been committed ordinarily requires the determination of questions of fact by the jury, if the case is one tried by jury, or by the court if the case is tried without a jury. 24 Am.Jur., Fraud and Deceit, § 291, p. 137; 37 C.J.S. Fraud § 123, p. 448; and § 124, p. 451.⁸  We do not, therefore, think that the court should have stricken from the pleadings the allegations of fraud, but should have heard the evidence; and if it should satisfy the standard required to establish a case of fraud, the trier of the facts should have been permitted to pass upon the evidence.

The court did not give any reason for granting a summary judgment, but such an action followed much as a matter of course after the defenses interposed by appellant had been stricken. Appellee filed in support of the motion the affidavit of Van Etten Bent, its president, which established the remaining allegations of the complaint, most of which had been admitted in the answer.⁹  The final judgment from which the appeal is taken was rendered, of course, upon the basis of the court's prior wrongful action in eliminating entirely the defense of fraud; and, because of this error, it cannot stand. The judgment is, therefore, reversed and the cause is remanded for further proceedings consistent with this opinion.

Reversed and remanded.