Clark v. Wells

• Decision Date: 20 November 1914
• Docket Number: 18,823 - (78)
• Citation: 149 N.W. 547,127 Minn. 353
• Parties: CHARLES H. CLARK v. W. A. WELLS and Another
• Court: Minnesota Supreme Court

149 N.W. 547

127 Minn. 353

CHARLES H. CLARK v. W. A. WELLS and Another

Nos. 18,823 - (78)

Supreme Court of Minnesota

November 20, 1914

Action in the district court for Ramsey county against W. A. Wells and H. W. Mennig to recover $25,000. The facts are stated in the opinion. The case was tried before Brill, J., who made findings and ordered judgment in favor of defendants. From an order denying his motion for a new trial, plaintiff appealed. Reversed and new trial granted.

SYLLABUS

Rescission of contract -- fraud -- return of property.

1. The party who rescinds a contract on the ground of fraud must, as a general rule, place the other party in statu quo by returning what he received; but "the party guilty of the fraud is not entitled to anything more than substantial justice, and a fair opportunity to receive what he parted with." If, through the fault of the wrongdoer, the party defrauded is unable to return all the property received, in the condition in which he received it, it is sufficient, if he restore the property so far as he is able, and secure to the wrongdoer the equivalent of what cannot be returned.

Rescission of contract -- return of going business.

2. If the wrongdoer refuses to receive the property when tendered back, the defrauded party may properly do what is necessary to conserve its value, and does not thereby waive his rescission. Where he receives a going business, he may without waiving his rescission, continue it as a going business during the pendency of the suit to recover what he parted with, if he remain ready, at all times, to turn over to the wrongdoer both the business, in substantially the condition in which he received it, and the profits derived therefrom.

Christofferson & Burnquist, George T. Olsen and Durment, Moore & Oppenheimer, for appellant.

John F Fitzpatrick, for respondents.

OPINION

TAYLOR, C.

This is an action to recover back the purchase price paid by plaintiff for the business and property of the Prussian Remedy Co. The complaint, among other things, contains allegations to the effect that plaintiff purchased such business from defendants for the sum of $25,000 paid to them in money and property; that he was induced to make such purchase by fraudulent misrepresentations made by them; that, upon learning of the fraud, he rescinded the purchase, notified defendants thereof, and tendered the business and property back to them in substantially the same condition as when taken over by him; and that defendants refused to return the consideration received therefor. The answer, among other things, denied and put in issue all charges of fraud.

Plaintiff took over the business on July 3, 1912. The action was commenced on September 6, 1912, and was tried on December 2, 1913. Defendants alleged, by supplemental answers, that plaintiff had operated and carried on the business continuously, and for his own profit, after the commencement of the action. At the beginning of the trial, the parties entered admissions upon the record to the following effect:

That plaintiff gave notice of rescission in proper time and brought his action in proper time; that he carried on the business in the usual and customary manner from the time he took it over, on July 3, 1912, until the time of the trial; that, in manufacturing and preparing the remedies for sale, he used the materials and stock on hand, and replaced the same with new stock and materials; that, out of the proceeds of the business, he paid the operating expenses, including a salary to himself, but appropriated no part of the profits other than such salary; that the profits not reinvested in the business were placed in the bank; that, in conducting the business, he had given his notes in the sum of $7,000 and had sold goods upon credit, in the usual course of business, for which accounts receivable were outstanding in the sum of $16,210; and that the business had been conducted in a building leased to him by defendants, at a rental of $150 per month, and for which he had neither paid, nor been asked to pay, any rent.

The misrepresentations charged were set forth in detail in the complaint. After the above admissions had been made, plaintiff sought to prove such misrepresentations, but the testimony offered for that purpose was excluded. Thereupon plaintiff made an offer to prove all the allegations of the complaint. To this offer defendants interposed the following objection:

"The defendants admit that due notice of the rescission of the contract set up in the complaint and answer was given by the plaintiff to the defendants and that the rescission was made within a due and reasonable time after the transaction, but object to any proof of any other allegation in the complaint upon the ground that the plaintiff retained the business of the Prussian Remedy Co. and carried it on as his own from the time of the commencement of this action up to the time of trial, as appears by the facts stipulated in the record in this action."

This objection was sustained. Thereupon plaintiff further offered to prove:

"That the plaintiff offered to rescind said contract and that at all times since the commencement of this action has been ready, willing and able to deliver to the defendants substantially the property received by the plaintiff from the defendants, and that many times since the commencement of this action has offered so to do, and that all such offers have been refused by the defendants, and that plaintiff is now ready, willing and able to return to the defendants said business and all thereof substantially as received by the plaintiff from the defendants, and to account to the defendants for any and all profits and other transactions had in connection with the operation of said business."

In reply to an inquiry by the court, plaintiff stated that this offer should be taken as qualified by the admissions previously made, and the proof was excluded as irrelevant and immaterial in view of such admissions. Both parties then rested without offering any further evidence. The court held that plaintiff "has disabled himself from restoring to the defendants the original property and business so purchased by him. * * * Has waived and abandoned his former rescission, and is not entitled to any relief," and directed judgment for defendants. Plaintiff made a motion for a new trial and appealed from an order denying the motion.

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