Sheppard v. Blitz

• Decision Date: 14 November 1945
• Citation: 163 P.2d 519,177 Or. 501
• Parties: SHEPPARD <I>v.</I> BLITZ
• Court: Oregon Supreme Court

177 Or. 501

163 P.2d 519

SHEPPARDv.

BLITZ

Supreme Court of Oregon.

Argued October 16, 1945.

Affirmed November 14, 1945.

Rehearing denied December 12, 1945.

Election of remedies

1. A party who has been induced to enter into contract by fraud has upon its discovery election of remedies and may affirm the contract and sue for damages, or disaffirm it and be reinstated in position in which he was before it was consummated, and adoption of one remedy excludes the other.

Election of remedies

2. A person who avoids a transaction is not entitled thereafter to affirm the transaction unless avoidance was induced by fraud, material misrepresentation, or duress of transferee.

Appeal and error

3. Where decree in suit to rescind subscription for purchase and exchange of stock decided that defendant had made misrepresentations with which he was charged, when Supreme Court reversed decree on sole ground that there was a defect of parties defendant, all other matters involved in litigation were left undetermined.

Election of remedies

4. Where only matter finally adjudicated in suit to rescind subscription for purchase of stock was that relief could not be granted without other parties being joined as defendants, there was no irrevocable election of remedies, so as to preclude plaintiff from thereafter maintaining action for recovery of damages for fraud in subscription contract.

Abatement and revival

5. In action for damages for fraudulent representations in contract for purchase of stock, there was no fatal defect of parties defendant because no substitute for defendant as trustee was joined as defendant in the action after defendant's death, since if more than one person was involved in perpetration of fraud, plaintiff could sue wrongdoers jointly or severally.

Appeal and error

6. The Supreme Court's review is limited to record made in trial court, and if appellant desires that testimony taken in former trial should be considered by Supreme Court, appellant should have such testimony properly identified in bill of exceptions.

Appeal and error

7. Where none of testimony taken on trial was properly before Supreme Court, Supreme Court would assume that there was

sufficient evidence to support jury's verdict, and that there was no material misstatement of the evidence in argument to jury.

                  See 18 Am. Jur. 160
                  28 C.J.S., Election of Remedies, § 22
                

IN BANC.

Appeal from Circuit Court, Multnomah County.

FRANKLIN C. HOWELL, Judge.

Suit by Chester A. Sheppard against Enid R. Blitz, executrix of the estate of A.I. Blitz, deceased, to recover damages for decedent's fraud in connection with a contract for purchase of stock in a corporation. From a judgment for plaintiff, defendant appeals.

AFFIRMED. REHEARING DENIED.

Arthur A. Goldsmith, or Portland, for appellant.

Wendell K. Phillips, of Portland (Sheppard & Phillips, of Portland, on the brief), for respondent.

BAILEY, J.

In February, 1938, Chester A. Sheppard instituted a suit in the circuit court for Multnomah county against A.I. Blitz, individually, and A.I. Blitz, trustee, for a decree rescinding and canceling a contract entered into between him and A.I. Blitz, individually and as trustee; canceling an agreement signed by him for the purchase of stock in a corporation to be thereafter organized, and for other relief. The amended complaint, on which the cause was tried, alleged that the plaintiff had been induced by the false and fraudulent representations of A.I. Blitz to enter into the contracts which he sought to have canceled.

Before the suit came on for trial, and on the 20th day of March, 1940, A.I. Blitz died, and thereafter his widow, Enid R. Blitz, executrix of his estate, was substituted for him individually as party defendant. No substitution was made for A.I. Blitz, trustee.

At the conclusion of the trial of the case, the circuit court entered a decree in accordance with the prayer of the amended complaint, and from that decree defendant Enid R. Blitz, executrix of the estate of A.I. Blitz, deceased, appealed. This court reversed the decree, on the ground that there was a defect of parties defendant, and remanded the cause for further proceedings not inconsistent with its opinion. Sheppard v. Blitz, 168 Or. 691, 126 P. (2d) 509.

After the entry of the mandate of this court, Sheppard, with the permission of the circuit court, filed a second amended complaint in which he sought to affirm the contracts, which he had previously attempted to have canceled, and to recover from Enid R. Blitz, executrix of the estate of A.I. Blitz, deceased, damages resulting to him from certain alleged false and fraudulent representations of A.I. Blitz, by which he was induced to enter into those contracts. Thereafter, with the permission of the court, plaintiff filed his third amended complaint, wherein the identical alleged false and fraudulent representations of Blitz, on which Sheppard relied in the suit for cancellation of the contracts, are set forth as the basis for his recovery of damages.

In defendant's answer to the third amended complaint she denied that her decedent had made the false and fraudulent representations charged against him, and in an affirmative defense she set forth the facts relating to the institution of the suit by plaintiff in the circuit court for the cancellation of the contracts hereinbefore referred to, the trial of the suit and the entry of a decree therein canceling and rescinding those contracts, and the reversal of the decree therein by the supreme court. It is then alleged that, by reason of those facts, plaintiff had elected "as his remedy a rescission and disaffirmance of the transactions set forth in plaintiff's third amended complaint and is barred from proceeding in an action at law for damages arising therefrom, and based upon an affirmance thereof, said remedy being wholly inconsistent with the remedy previously elected by plaintiff."

The jury, which heard the evidence, returned a verdict for $7500 in favor of the plaintiff. From the judgment entered thereon, defendant has appealed.

Defendant asserts that the institution of the suit by plaintiff for the rescission of the contracts hereinbefore referred to, with full knowledge of the facts, barred him from thereafter bringing an action for damages. In support of this contention she relies on the following cases: Scott v. Walton, 32 Or. 460, 52 P. 180; Robinson v. Cable, 109 Or. 579, 217 P. 624; Rehfield v. Winters, 62 Or. 299, 125 P. 289; Yokota v. Lindsay, 116 Or. 641, 242 P. 613; Milton v. Hare, 130 Or. 590, 280 P. 511; United States v. Oregon Lumber Company, 260 U.S. 290, 67 L.Ed. 261, 43 S.Ct. 100. She also cites, in addition to those cases, 28 C.J.S., § 6, p. 1070.

1. Scott v. Walton, supra, was a suit for the cancellation of a deed on the ground of fraud. Relief was denied the plaintiff because of his delay in bringing suit after discovery of the fraud. Mr. Justice Robert S. BEAN, in rendering the decision of the court, laid down the following well-recognized rule of law:

"A party who has been induced to enter into a contract by fraud, has, upon its discovery, an election of remedies. He may either affirm the contract, and sue for damages, or disaffirm it, and be reinstated in the position in which he was before it was consummated. These remedies, however, are not concurrent, but wholly inconsistent. The adoption of one is the exclusion of the other."

The foregoing excerpt has been quoted many times with approval by this court and has been applied in numerous instances in suits for rescission. The opinion continues:

"If he desires to rescind, he must act promptly, and return or offer to return what he has received under the contract. He cannot retain the fruits of the contract awaiting future developments to determine whether it will be more profitable for him to affirm or disaffirm it. Any delay on his part, and especially his remaining in possession of the property received by him under the contract, and dealing with it as his own, will be evidence of his intention to abide by the contract."

What the court was referring to in the last above-quoted excerpt was not a choice of remedies but, in reality, a choice of substantive rights. Schenck v. State Line Telephone Company, 238 N.Y. 308, 144 N.E. 592, 35 A.L.R. 1149.

In Robinson v. Cable, supra, the court held that the decree in a former suit was a final adjudication of all the matters at issue in that suit, "and as the present suit presents no issue not determined in the former suit, the matters alleged in the complaint are merged in the former decree." In the course of the opinion, the court, after referring to the rule announced in Scott v. Walton, supra, proceeded as follows: "By her former suit she elected to disaffirm the contract and recover back the money she had expended. She now seeks to affirm the contract and sue for damages. The commencement of the former suit, carried, as it was, to a successful termination, was an irrevocable election of remedies upon her part, and precludes her from maintaining her present suit." (Emphasis supplied).

Rehfield v. Winters, supra, was an action at law for damages based on the false representations of the defendant. It appears that prior to the institution of this action the plaintiff had instituted a suit for the rescission of the contract of sale of the property involved in the action at law, and that during the trial of the equity suit the defendant contended that such remedy was not available to plaintiff. In this contention he was upheld by the trial court, and thereupon plaintiff took a nonsuit. This court observed that since the defendant had obtained such ruling, he "cannot now well claim that it was erroneous", and held that the institution of that suit did not bar him from bringing an action at law for damages.

In Yokota v. Lindsay, supra, plaintiff, instituted a suit to foreclose a mortgage. The court, after referring to the rule announced...