Stephenson v. Allison

• Decision Date: 30 May 1899
• Citation: 26 So. 290,123 Ala. 439
• Parties: STEPHENSON v. ALLISON ET AL.
• Court: Alabama Supreme Court

26 So. 290

123 Ala. 439

STEPHENSON v. ALLISON ET AL.

Supreme Court of Alabama

May 30, 1899

Appeal from chancery court, Morgan county; William H. Simpson Chancellor.

Bill by R. L. Stephenson against J. F. Allison and another to cancel a mortgage. Cross bill by defendants to foreclose. Decree for defendants, and plaintiff appealed. Affirmed.

The bill in this case was filed by the appellant against the appellees. The purpose of the bill and the facts of the case necessary to an understanding of the decision on the present appeal are sufficiently stated in the opinion. On the final submission of the cause upon the pleadings and proof, the chancellor rendered a decree denying the relief prayed for and ordering the bill dismissed; and it was further decreed that the relief prayed for in the cross bill filed by Allison and Harris be granted, and that the mortgage executed by the original complainant to the cross complainants be foreclosed for the amount of the mortgage debt and 10 per cent solicitor's fees,-the mortgage stiplating for such fee. This decree, ordering the sale of the lands contained in the mortgage, gave the description of said lands as the same were described in said mortgage, and it was referred to the register to make said sale and report thereon. The register reported the sale of the said lands described in the mortgage, but did not designate the number of acres, and there were some irregularities in the description as contained in the report of the register. This report of the register was confirmed. The complainant appeals, and assigns as error the decree of the chancellor denying the relief prayed for in the original bill, and granting the relief prayed for by the cross complainants, and the decree confirming the report of the register.

Sharpe J., dissenting.

E. W. Godbey, for appellant.

O. Kyle, for appellees.

TYSON J.

The bill in this cause was filed by the appellant on October 22, 1895, seeking a rescission and cancellation of a certain mortgage executed by him to the respondent Allison on the 27th day of September, 1894, to secure the payment of three promissory notes, of $333.33 1/3 each, due, respectively, January 27, 1895, May 27, 1895, and September 27, 1895, upon the ground of fraud. It was alleged in the bill that this mortgage was executed by the complainant to secure an indebtedness contracted with the respondent Allison for the sale of a right to sell a patented churn in the state of Arkansas, and that Allison represented he had a patent upon this churn, the same being a new and novel invention, when in truth he had no patent, and, if he had, the same was neither useful nor novel, and therefore void, and consequently there was no consideration for the notes and mortgage. The bill further charges that Allison represented to the complainant that he had a patent upon a certain sample churn, which he exhibited to the complainant, when, in fact, if he had a patent at all, it was upon a different churn than the one exhibited, and that he represented to the complainant that the patented churn was useful and salable, that he had made sales of the patent right to make and vend the churn in large areas of territory in Alabama, Tennessee, and Texas, when, in fact, said representations as to salableness and of the sales of the patented right in those territories were wholly false. There was an amendment to the bill, in which it was averred that, before the commencement of the suit, the complainant demanded of Allison a rescission of the sale and transfer of the patent right to him for the state of Arkansas, and a release of the mortgage, which Allison had refused, and had offered to transfer and return to him all rights which the complainant had acquired under the deed to him from Allison to sell the churn in the state of Arkansas. It was also averred, in another amendment to the bill, that "complainant submits himself to the jurisdiction of the court, and offers to restore or return anything which the court may consider him bound to do. *** After complainant's return from Arkansas he sent one E. E. Gunn to defendant Allison to get him to agree to a cancellation or a rescission of the trade, but said Allison refused to do so, and then said Gunn saw said defendant Harris, who likewise refused to agree to a rescission, even for a bonus of $500, though complainant was under no obligation to rescind. Not before complainant's return from Arkansas did he know that Allison had not a patent on the particular device exhibited to him." Allison answered the bill, in which he specifically denied making any false statements whatever, and asserted that he had letters patent from the United States government authorizing him to make and vend the churn throughout the said United States of America under the act of congress regulating patents; and he set up, as a further defense, that, if there was any fraud, the complainant had ratified and affirmed the contract of sale, by making sales of the patent right to persons in the state of Arkansas to make and vend the churn in several counties in that state. Harris, the other respondent to the bill, who was the owner of two of the notes secured by a transfer from Allison, filed his answer, showing his acquisition of these notes. Both the answers of Allison and Harris were made cross bills, and prayed a foreclosure of the mortgage. The answer of complainant to these cross bills contains, in addition to the averments of fraud alleged in his bill and amended bill, the defense that the letters patent issued to Allison were invalid, for the reason that the invention or device he sold to complainant was not patentable.

So far as the complainant's right to maintain the bill and the decree denying him relief are concerned, there are two propositions, supported by the undisputed evidence conclusive of the correctness of the decision of the chancellor. The first proposition upon which the correctness of the decree may be based is the failure of the complainant to prove any demand of Allison to rescind the contract of sale at any time, or the refusal of Harris to agree to a rescission for a bonus of $500, and the knowledge on the part of the complainant "that Allison had not a patent on the particular device exhibited to him" until his return from Arkansas. On the contrary, the evidence affirmatively establishes that no demand was made upon Allison, and no refusal by Harris, as alleged. Furthermore, complainant, by his own testimony, establishes that he had seen the letters patent before making the purchase, and, after making the trade, he asked Allison for them, who informed him that he would have to send to Washington and get a copy. "I wrote to Troup at Washington, and he sent them to me. I saw the letters patent about the time I made the trade, or shortly afterwards." The second proposition, which is conclusive against his right to maintain the bill to rescind for fraud, is also supported by his testimony, in which he shows that, after he became aware that Allison induced him to enter into the contract of purchase by fraudulent representations, as he alleges, he sold in the state of Arkansas a number of patent rights, receiving notes, money, and land in payment therefor. Quoting his own testimony on this point, in answer to the question, "State whether or not you had received information of the falsity of the various representations made by Allison to you prior to disposing of this territory in Arkansas," he said: "Yes, sir; I did. I knew it before I went to Arkansas. Of course, I was into it, and had to do the best I could. After I commenced working I found that it was no good." Continuing, he said: "I learned that [referring to certain statements, which he alleges Allison made, that were false about the sale of the churns around Danville] before we left here. I also learned, after I had purchased and before we left here, that he had not sold Tennessee and Texas; but I had made the agreement, and I thought I would make the money out of it if I could. After getting into it, I tried three times, and could do nothing with it." No proposition is better settled than, "if the party defrauded would disaffirm the contract, he must do so at the earliest practical moment after discovery of the cheat. That is the time to make his election, and it must be done promptly and unreservedly. He must not hesitate; nor can he be allowed to deal with the subject-matter of the contract and afterwards rescind. The election is with him. He may affirm or disaffirm the contract, but he cannot do both; and if he concludes to abide by it, as upon the whole advantageous, he shall not afterwards be permitted to question its validity. The party who would disaffirm a fraudulent contract must return whatever he has received from it. This is on a plain and just principle. He cannot hold on to such part of the contract as may be desirable on his part, and avoid the residue, but must rescind in toto, if at all." Masson v. Bovet, 43 Am. Dec. 651, and note (s. c. 1 Denio, 69); Dill...