Snow v. Alley

• Citation: 11 N.E. 764,144 Mass. 546
• Parties: SNOW v. ALLEY.
• Decision Date: 21 May 1887
• Court: United States State Supreme Judicial Court of Massachusetts

144 Mass. 546

11 N.E. 764

SNOW v. ALLEY.

Supreme Judicial Court of Massachusetts, Barnstable.

May 21, 1887

COUNSEL

R.G. Ingersoll, J.M. Morton, and H.M. Knowlton, for defendant.

We submit, first, that there is no evidence of fraud to sustain the verdict. Fraud is to be proved, and not presumed. See the rule stated in Schultz v. Hoagland, 85 N.Y. 467; Baird v. Mayor, 96 N.Y. 593. Upon the facts, all the familiar badges of fraud are wanting. There were no misrepresentations nor lies. There were no confessions by the plaintiff of wrong-doing. If these facts, all taken together have any tendency to prove fraud, then any man can go the jury with such a charge, whenever a promise has been made its performance postponed, and the fact of it finally denied by the maker. Attwood v. Small, 6 Clark & F. 252; Baird v. Mayor, 96 N.Y. 593.

Even if there is some evidence of fraud, the plaintiff is not entitled, upon the facts, to maintain this action. Trover, in a case like the present, proceeds upon the right of the defrauded party to rescind. By rescinding, he becomes entitled to the possession of the property which he has been induced to part with by means of the fraud. But, whether the fraud be more or less, in order to rescind, the parties must be restored to the position in which they were before the contract was made, so far as any change has been caused by anything done pursuant to the contract. The party rescinding cannot retain any of the property, advantages, or benefits which he has received through the contract, and at the same time rescind it. The restitution must be entire, and, if the situation of the parties has been so far changed in good faith that restitution cannot be made, then relief must be sought in some other form of action. The rescission must take place before the action is brought. All this is true, whether the action be trover, replevin, ejectment, or any other form which involves the rescission of a contract. Kerr, Fraud & M 327, note; Benj. Sales, § 888, note a; Kimball v Cunningham, 4 Mass. 502; Miner v. Bradley, 22 Pick. 457; Thayer v. Turner, 8 Metc. 550; Morse v. Brackett, 98 Mass. 205; Bassett v. Brown, 105 Mass. 551; Coolidge v. Brigham, 1 Metc. 547; Estabrook v. Swett, 116 Mass. 303; Brown v. Hartford Ins. Co., 117 Mass. 479; Cook v. Gilman, 34 N.H. 556; Gould v. Cayuga Co. Nat. Bank, 86 N.Y. 75; Cobb v. Hatfield, 46 N.Y. 533; Pearsoll v. Chapin, 44 Pa.St. 9; Poor v. Woodburn, 25 Vt. 234; McCrillis v. Carlton, 37 Vt. 139; Worley v. Moore, 97 Ind. 15; Smith v. Brittenham, 109 Ill. 540; Herman v. Haffenegger, 54 Cal. 161; Potter v. Taggart, 54 Wis. 395, 11 N.W. 678; Campbell v. Fleming, 1 Adol. & E. 40; Hunt v. Silk, 5 East, 449; Clarke v. Dickson, El.Bl. & El. 148; Clough v. London & N.W.R. Co., L.R. 7 Exch. 37; Cargill v. Bower, 10 Ch.Div. 517, 518; Western Bank of Scotland v. Addie, L.R. 1 Scotch App. 145; Sheffield Nickel, etc., Co. v. Unwin, 2 Q.B.Div. 214; Bisbee v. Ham, 47 Me. 543.

"Restitutio in integrum can take place only when the party making it is able to put those against whom it is asked in the same situation as that in which they stood when the contract was entered into." Western Bank v. Addie, supra; Metropolitan E.R. Co. v. Manhattan E.R. Co., 11 Daly, 438. A contract cannot be rescinded unless in toto; no part of the benefit can be retained, and the parties to the contract must be placed in statu quo. Worley v. Moore, supra. The general rule is subject to certain exceptions. (1) If the defrauding party has given his note, it is sufficient for the other party to offer its return at the trial. (2) If the consideration received by the defrauding party is worthless, and of no value to the other party, it need not be returned. (3) If the property has passed from the possession of the defrauding party to that of a bona fide holder, the party defrauded cannot claim a return; but, if the property has passed into the possession of a party cognizant of the fraud, it may be reclaimed, even though the defrauding party may have given value therefor to the defrauded party, which has not been restored to him.

All the cases cited by the plaintiff to the court at nisi prius fall within one or more of the foregoing exceptions, and all of them affirm the general doctrine as claimed by the defendant. See Clough v. London & N.W.R. Co., L.R. 7 Exch. 26; Manning v. Albee, 14 Allen, 7; Stevens v. Austin, 1 Metc. 557; Mullen v. Old Colony R. Co., 127 Mass. 86; Bartlett v. Drake, 100 Mass. 174; Adams v. O'Connor, Id. 515; Neblett v. Macfarland, 92 U.S. 101; Garner v. Mangam, 93 N.Y. 642; Metropolitan E.R. Co. v. Manhattan E.R. Co., 11 Daly, 373.

The plaintiff is not without a remedy, even if this action cannot be maintained. He can recover in an action for damages for deceit, if the facts are as he claims. And it is apparent, from the charge of the learned chief justice who tried the case below, that he followed the law applicable to actions of deceit, rather than that belonging to actions of trover based upon a rescission. See Safford v. Grout, 120 Mass. 20. In the two cases the rules of law are entirely different, as well as the rules of damages. In an action for deceit, the plaintiff would only recover the damages caused by the defendant's failure to loan the $20,000, and buy the 32 bonds; while, in an action of trover, the rule of damages would be the value of the 150 bonds at the time of conversion. The error committed in applying the principles of the action for deceit was a very serious one, so far as it affected the defendant. It makes no difference that Roberts and others paid back to the defendant the money which he loaned to the company. This is a matter inter alios, and the plaintiff cannot take advantage of it in this action. See Stevens v. Austin, supra.

No authority, we believe, can be cited, that, upon consideration, will be found to conflict with these views. The rule laid down in 2 Pars.Cont. 780, is thus commented on by HALLETT, J., in American Wine Co. v. Brasher, 4 McCrary, 247: "The authorities cited do not bear him out. I have examined them. In my judgment, none of them support this conclusion. That is not an extraordinary thing with this author; but it seems some courts have accepted the propositions as stated." A statement which may, perhaps, be fairly construed to mean the same as the one from Parsons, may be found in Wharton's Law of Contracts, § 285. But neither of the authorities referred to sustains it; which are Chandler v. Simmons, 97 Mass. 508; Bartlett v. Drake, 100 Mass. 174; Smith v. Smith, 30 Vt. 139. Even in a court of equity, would the plaintiff obtain any relief? At the very least, would it not say to him: "You have been silent when you should have spoken, and you cannot now be heard to speak. You cannot speculate on the chance of the defendant keeping his agreement, and on the probability that if he does not, the postal company will be a success; and, when you find that he has not kept his agreement, complain to this court and ask for relief. It is due to you that his position has been irrevocably changed."

The defendant further submits that another important defense upon which he had a right to have the judgment of the jury was wholly ignored in the instructions they received, to-wit, the question of whether the plaintiff, by his acts and conduct, waived the fraud practised upon him, if there had ever been any? There can be no question that this is a very vital inquiry in all cases where it is sought to set aside an oral or a written contract on the ground of fraud. Whenever a contract is made between the parties, it is binding upon them, except in case of fraud practised by one of them. When such fraud exists, it does not avoid the contract ab initio, for the defrauded party may deem it more for his interest to proceed to enforce his contract, notwithstanding the fraud, or at least to go on with the contract, and bring his suit for damages for the fraud. The election is his. But it is one which he must promptly make; and, having once elected in any positive manner, he is bound thereby, and, if he affirms the contract, he cannot afterwards avoid it. To allow the plaintiff to go on and get all the benefits of the contract, and then annul it, and recover back his consideration, would be monstrous. Clough v. London & N.W.R. Co., L.R. 7 Exch. 29-36; Attwood v. Small, 6 Clark & F. 252-505; Metropolitan E.R.R. v. Manhattan E.R.R., 11 Daly, 373-447.

It is well settled that the election must be made within a reasonable time after the plaintiff acquires knowledge of the alleged fraud, or some fact comes to his knowledge tending to raise a reasonable suspicion of fraud. Whitcomb v. Denio, 52 Vt. 382; Hunt v. Hardwick, 68 Ga. 100; Leaming v. Wise, 73 Pa.St. 173; Grymes v. Sanders, 93 U.S. 55; Jennings v. Broughton, 5 De Gex, M. & G. 126. Whether the rescission has taken place within a reasonable time is, when the facts are disputed, a question of fact for the jury. Whitcomb v. Denio, supra.

The essence of the action of trover is that the defendant has acquired and holds possession of the goods sued for wrongfully as against the plaintiff. The case at bar cannot be maintained, except upon proof that the defendant acquired such wrongful actual possession of the bonds themselves as against the plaintiff. If the defendant in good faith received possession of the bonds from a third party, then the plaintiff cannot recover. We assume it to be undisputed law that, if a party receives property upon a fraudulent contract, and, before the contract is avoided, transfers the property to an innocent third person, and afterwards receives the same property from the third person as collateral, the last receiving is not a conversion as to the original owner because he is liable to...