Earl v. Saks & Co. - 36 Cal. 2d 602, 226 P.2d 340 (1951)

Rule:

A gift can be rescinded if it was induced by fraud or material misrepresentation, whether of the donee or a third person, or by mistake as to a basic fact.

Facts:

On April 4, 1947, A. K. Barbee and Mrs. Earl went to the fur salon of Saks. A representative of Saks showed them a mink coat and told them its price was $ 5,000. Barbee told Saks that he would like to buy the coat for Mrs. Earl but that he would pay no more than $ 4,000 for it. Saks rejected repeated offers of Barbee to purchase the coat for $ 4,000. Unknown to Barbee, Mrs. Earl then asked Saks to pretend to sell the coat to him for $ 4,000, and stated that she would pay the difference between $ 4,000 and the price of the coat. Saks agreed to this. It told Barbee that it would sell the coat to him for $ 3,981.25, made out a sales slip for that amount, and Barbee signed it in the belief that that was the full price of the coat. Saks then delivered the coat to Barbee; he in turn delivered it to Mrs. Earl and said that he gave it to her. Mrs. Earl, wearing the coat, left the store with Barbee. The next day, April 5, Mrs. Earl returned the coat to Saks to be monogrammed and paid Saks the balance of its price, $ 916.30. Later the same day Barbee told Saks that he had revoked the gift to Mrs. Earl, that he was the owner of the coat (which he thought he had purchased for $ 3,981.25), that he would pay the agreed price ($ 3,981.25) only if Saks would deliver the coat to him, and that it was not to deliver the coat to Mrs. Earl. Thereafter Mrs. Earl demanded that Saks deliver the coat to her; Saks refused and attempted to return her $ 916.30; but she refused to accept the money; Saks retained (and still retains) possession of the coat. Mrs. Earl then sued Saks, alleging conversion of the coat. Saks filed an interpleader action. The trial court held that Mrs. Earl was entitled to the coat, and Barbee sought review.

Issue:

Was Barbee’s rescission of the gift proper?

Answer:

Yes.

Conclusion:

The court found that Saks’ and Mrs. Earl’s actions regarding the sale were fraudulent. A gift can be rescinded if it was induced by fraud or material misrepresentation, whether of the donee or a third person, or by mistake as to a basic fact. In this case, Barbee was entitled to rescind the gift of the coat, and that he did properly rescind the gift.