Roberts v. James

• Decision Date: 18 November 1912
• Parties: ROBERTS v. JAMES.
• Court: New Jersey Supreme Court

85 A. 244

83 N.J.L. 492

ROBERTS

v. JAMES.

Court of Errors and Appeals of New Jersey.

Nov. 18, 1912.

(Syllabus by the Court.)

Error to Circuit Court, Gloucester County.

Action by William T. B. Roberts against Benjamin F. James. Judgment for plaintiff, and defendant brings error. Reversed, and venire de novo awarded.

Action by vendor against purchaser to recover purchase price of lots. The written agreement of sale requires the payment of the purchase price in monthly installments, and provides that, upon default in payment, the vendor may treat the whole purchase money remaining unpaid as immediately due and payable. The deed is to be delivered upon payment of the whole purchase money, and the purchaser, it is provided, shall have no right of possession until the deed is delivered. No installment of purchase money has been paid. The defendant (the purchaser) has never had possession. He defended upon the ground that the contract was induced by fraudulent representations of the plaintiff's agent, Sands, by whom alone the contract on the part of the plaintiff was made. The lots were in a great field, and there was evidence that Sands represented that there was going to be a hotel near by at a spot pointed out by him, and that there was to be a railway station, cement walks, a park with swings; that Roberts was back of the enterprise; that he was going to build 100 houses; that 25 were then contracted for; that, when there were 50, they would get a railway station. The houses had not been built. There seems to be no railway station. The hotel was partly built, but sold by the sheriff, torn down, and the lumber sold at auction. There was no proof of rescission of the contract by the defendant, other than the fact that he defended this suit on the ground of fraud. A verdict was directed in favor of the plaintiff for the balance due upon the ground as stated by the trial judge that there was no proof to go to the jury of a legal rescission, and that the alleged representations were mere promises.

John Boyd Avis and David O. Watkins, both of Woodbury, for plaintiff in error.

Joseph J. Summerill, of Woodbury, for defendant in error.

SWAYZE, J. (after stating the facts as above). It is settled that, where a party seeks to be relieved from a contract upon the ground that it was induced by fraud, he must, except so far as he has some legal excuse for failure, restore his adversary to the position he was in at the time of the contract, and that there can be no rescission as long as he retains anything received under the contract, which he might have returned, and the withholding of which might be injurious to the other party. This statement of the rule is taken from the opinion of the Supreme Court in Byard v. Holmes, 33 N. J. Law, 119, 127. It has been approved by this court. Crosby v. Wells, 73 N. J. Law, 790, 801, 67 Atl. 295. The reason upon which it rests is the injustice of permitting a man to retain a benefit under a contract which he on his part repudiates. By its terms the rule requires only the return of what has been received. It is applicable only to a contract that has been partly executed, and not to a contract that still remains wholly executory on the part of the alleged fraud doer. In such a case the party who undertakes to rescind has received no advantage, he has nothing to return, and all he can do is to deny his obligation under the contract if he does so in a reasonable time, he has rescinded the contract. Even where he has in fact received something under the contract, he is not always bound to return it. The rule, "like other rules of justice, must be so applied in the practical administration of justice as shall best subserve, in each particular case, the undoing of wrong, and the vindication of the right." Pidcock v. Swift, 51 N. J. Eq. 405, 408, 27 Atl. 470; Guild, Ex'r, v. Parker, Receiver, 43 N. J. Law, 430; Doughten v. Camden Building & Loan Ass'n, 41 N. J. Eq. 556, 7 Atl. 479.

It is also settled that one who desires to rescind a contract must act within a reasonable time. Dennis v. Jones, 44 N. J. Eq. 513, 14 Atl. 913, 6 Am. St. Rep. 899; Clampitt v. Doyle, 73 N. J. Eq. 678, 70 Atl. 129. What is a reasonable time necessarily depends on the circumstances of each particular case. It is settled in the English courts that, unless the situation of the other party has changed to his detriment, the contract continues until the party defrauded elects to avoid it, and he may keep the question open as long as he does nothing to affirm the contract. Clough v. London & Northwestern Railway (1871) L. R. 7 Ex. 26, 41 L. J. Exch. 17; Morrison v. Universal Marine Ins. Co. (1873) L. R. 8 Ex. 205, 42 L. J. Exch. 115; United Shoe Machinery Co. of Canada v. Brunet (1909) A. C. 330. He may even wait until action is brought against him (Clough v. London & Northwestern Railway, ubi supra), and a plea setting up the fraud amounts to a rescission of the contract (Lawton v. Elmore, 27 L. J. Ex. 141; Dawes v. Harness, L. R. 10 C. P. 166, 44 L. J. C. P. 194; Aaron's Reefs v. Twiss [1896] A. C. 273, 65 L. J. P. C. 54). The case last cited was an action by a company against a shareholder for calls upon his stock. In such cases the right of creditors and other stockholders to have the stock paid for requires a prompt disaffirmance of the subscription to stock; but, inasmuch as in the case before the court the rights of creditors and other stockholders were not involved, it was held enough to set up the fraud by way of defense when action was brought. Lord Watson put the case very neatly. He said: "The respondent is not seeking to rescind the contract. He is merely resisting its enforcement by the party guilty of the fraud." We have approved the same principle in a case where the vendor of chattels sought to rescind and reclaim his property because of the fraud of the vendee. Williamson v. N. J. Southern R. Co., 29 N. J. Eq. 311, 319. We there said: "The vendor may rescind the contract of sale and reclaim the property until, with a knowledge of the fraud, he elects to ratify and confirm the sale, or third persons, acting on the apparent ownership of the property by the fraudulent vendee, acquire rights therein bona fide and for a valuable consideration. Delay in exercising the power of rescission is evidence of an election to treat the sale as valid, of more or less weight, according to the circumstances of the case, but of itself does not operate as an estoppel, unless in the meantime superior rights of third persons have intervened." In a case like...