Mueller v. Michels

• Decision Date: 23 June 1924
• Citation: 184 Wis. 324,199 N.W. 380
• Parties: MUELLER ET UX. v. MICHELS ET AL.
• Court: Wisconsin Supreme Court

184 Wis. 324

199 N.W. 380

MUELLER ET UX.

v.MICHELS ET AL.

Supreme Court of Wisconsin.

June 23, 1924.

On rehearing. Reversed and remanded with directions.

For former opinion, see 197 N. W. 201.

DOERFLER, J.

Upon a motion for rehearing by plaintiffs' counsel, it is urged that the court erred in holding that it could not award damages for the reason that in bringing this action for rescission in equity the plaintiffs had elected their remedy, and that, having so elected, with full knowledge of all the facts, they must stand upon rescission; that, the plaintiffs being in no position at the time of the commencement of the action to restore the status quo, and it being necessary in a rescission for a party asserting this remedy to act with reasonable promptness after discovering the fraud, rescission could not be decreed; and that therefore plaintiffs are remediless.

To support the holding of this court we cited Luetzke v. Roberts, 130 Wis. 97, 109 N. W. 949;Cole v. Getzinger, 96 Wis. 559, 71 N. W. 75; Pomeroy, Eq. Jurisprudence, § 1410, and a number of other decisions in this and other courts. In Cole v. Getzinger, supra, it is said:

“It appears to be well settled that where a court of equity obtains jurisdiction for the purpose of granting some distinctively equitable relief such as the specific performance of a contract or the rescission or cancellation of some instrument, and it appears from facts disclosed at the hearing, but not known to the plaintiff when he brought his suit, that the special relief prayed for has become impracticable, and the plaintiff is entitled to the only alternative relief possible, of damages, the court may, and generally will, instead of compelling the plaintiff to incur the double expense and trouble of an action at law, retain the cause, decide all the issues involved, and decree the payment of mere compensatory damages (1 Pomeroy, Eq. Jur. § 237); especially since, by the Code, the distinction between courts of law and courts of equity has been abolished. Hall v. Delaplaine, 5 Wis. 206, 213;Tenney v. State Bank, 20 Wis. 161, 163, 164;Hopkins v. Gilman, 22 Wis. 476, 480;Combs v. Scott, 76 Wis. 672;Van Rensselaer v. Van Rensselaer, 113 N. Y. 208.”

That the foregoing doctrine has ample support by the decisions of this court will appear from a reading of the cases cited and referred to.

The latest decision adhering to such doctrine is Luetzke v. Roberts, supra, but since such decision the rule applicable has been liberalized and broadened to such an extent as to practically overrule the former holdings. In McLennan et al. v. Church, 163 Wis. 411, 158 N. W. 73, Justice Marshall writing the decision, it is said:

“It is not the law, as seems to have been thought, * * * that in all cases where specific performance is sought and is not obtainable because of facts known to the plaintiff when he commenced his action therefor, that the court cannot or should not grant other relief by way of compensation, even though it be such as would be a proper subject of an action at law for damages. There are decisions along that line, as Combs v. Scott, 76 Wis. 662, 45 N. W. 532, * * * but they do not indicate the limitation of the rule on the subject. It may be broadly stated thus: In case of an action having been commenced in good faith to obtain equitable relief, and it subsequently appearing that such relief cannot, or ought not to be, granted, but the facts disclosed by the evidence show that plaintiff has suffered a remediable wrong in the transaction forming the groundwork of the action, entitling him to be compensated by money damages, the court may, and where justice clearly requires it under the circumstances, should retain the cause and afford such relief, and make the same efficient by provisions for a recovery as in an ordinary legal action or as are appropriate to a judgment for equitable relief, as may be best suited to the circumstances of the particular case. [Citing cases.] * * * Under our judicial system, there are no distinctions between actions at law and suits in equity. We have only the civil action of the Code as an instrumentality to redress or prevent wrongs, triable with or without a jury according to whether the nature of the relief demanded is legal or equitable. There is but one court and one form of action; therefore, up to the point where the constitutional right of trial by jury would be unduly prejudiced by going further, there is no want of power to grant legal relief in an action commenced to secure equitable relief only, and the practice to grant such relief, in the interest of a speedy and economical settlement of controversy has been so progressive that it can no longer be properly said that where the facts of a case warrant only legal relief and were known to the plaintiff when he commenced his action for equitable relief, the court will not, should not, or cannot grant the former. Though a person may know the facts entitling him only to legal relief when he commences his action for equitable relief, he may be excusably mistaken and invoke that judicial remedy without any design, or there being reasonable ground to suspect a design, to thereby invade his adversary's right of trial by jury, and the ends of justice can best be obtained by finally terminating the litigation in the pending action. In such a case there is no want of jurisdiction to retain the cause for that purpose.”

See, also, Gates v. Paul, 117 Wis. 170, 94 N. W. 55;Knauf & Tesch Co. v. Elkhart Lake S. & G. Co., 153 Wis. 306, 141 N. W. 701, 48 L. R. A. (N. S.) 744.

[1] Undoubtedly the plaintiffs originally had the right to pursue one of several remedies: First, they had the right to restore the original situation, rescind the contract, and recover back the consideration parted with; second, they could offer to restore, and, by keeping such offer good, could sue in equity for a rescission of the contract and for a recovery of the consideration with which they parted; or, third, they could have sued the defendants at law for the damages resulting from the fraud. Denis v. NuWay P. C., 170 Wis. 333, 175 N. W. 95;Heckendorn v. Romadka, 138 Wis. 416, 120 N. W. 257.

[2][3][4] We must bear in mind prominently the distinction between legal rescission and equitable rescission. In order to recover the consideration which a person parted with, on the ground of fraud, it is necessary as a condition precedent that the defrauded person must first either return that which he received or offer a return thereof, and, if the fraud be duly established, the money or property with which the defrauded party has parted may be recovered. In other words, the fraud will avoid and annul the contract, and, there being therefore no consideration for the transaction, a recovery of the money or property parted with will be adjudged. In a legal rescission the defrauded party rescinds, and he does so by either restoring or by offering to restore the consideration received by him, and it follows as a matter of course, if the fraud be established, that he may recover the consideration paid, whether it be money or property. On the other hand, the party himself does not rescind in a suit for equitable rescission. In such a case the appeal to the court is an application for the court to rescind, and the rescission does not take place until it is adjudged by the court. An action for rescission is addressed to the sound discretion of the court, and like all such matters, when passed upon by the trial court, will not be disturbed excepting for abuse of discretion. Weinhagen v. Hays, 174 Wis. 233, 178 N. W. 780, 183 N. W. 162, 187 N. W. 756. If it is a matter of discretion with the court to decree rescission or to refuse it, then it cannot be said that a party by commencing the action...