proper case, bring an action for the deceit; or, 3. He may rescind the sale and recover his goods or their value. The last of these, which is the most common and usually the most efficacious, is the only one which requires consideration in this place. The form of action is ordinarily replevin for the goods procured with the fraudulent intent on the part of the buyers not to pay for the goods." Reager v. Kendall (1897), Ky. App., 39 S. W. R. 257. On July 7th K. purchased lumber of R. K. was insolvent at the time and knew it, but R. did not find it out until July 13th, when the present action was brought to rescind the sale and reclaim the lumber. The lumber was delivered on July 9th and 10th, and on the 11th a large part of it was found at the house of K.'s wife and was being used in the construction of a building on her lot. On July 12th K. made a voluntary assignment for the benefit of creditors. The court held that in the purchase of this lumber he [K.] acted fraudulently, and with the intention to deprive plaintiff of his property, saying: "We think that the appellant in this case had a right to a rescission of the contract, and for a restitution of the lumber sold and found in the possession of the vendee or his assignee, and for a personal judgment for the value of the goods which had been disposed of." Aultman v. Carr (1897), 16 Tex. Civ. App. 430, 42 S. W. R. 614. On March 15, 1895, M. was insolvent, yet he informed the Louisiana agency of Dun & Co. that his assets were about $27,000, and his liabilities about $11,000, and Dun's rated him accordingly. On September 18th he ordered of A., through their traveling salesman, a carload of buggies. A., upon receipt of the order, exam ined M.'s rating in Dun's and Bradstreet's, and finding M. rated in both at between ten and twenty thousand, with excellent credit, accepted the order and proceeded to ship the buggies, which reached M. on the morning of October 12th. About October 1st M.'s creditors began to press him, and on October 9th or 10th he had a deed of trust made out in blank. On the evening of October 12th, after unloading the buggies and putting them in his storehouse, M. executed and delivered the deed of trust, including in the conveyance the buggies just received, and made his uncle, C., the trustee. C. took without knowledge of the representation to Dun & Co., but without paying any consideration. On October 16th, upon learning of this assignment, A. elected to rescind the contract of sale, and demanded of C. the return of the goods, and, upon being refused, commenced these proceedings in sequestration. The court held that "the sale of the goods could not have been completed until their delivery to the carrier. At that time Morris was not only insolvent, but his creditors were pressing him, and he knew it. At the time the goods were received . . . he had for several days had the deed of trust prepared, leaving a blank for the name of the trustee, and on the very day of their arrival the name of the trustee was inserted and the deed delivered. At the time the claimed purchase of the goods was completed themselves or trover for their value, though the seller may repossess himself of the goods by his own act, it has been held, if he can do so without unnecessary violence or a breach of the peace. § 908. Election of remedy - Reasonable time. A sale induced by the fraudulent practices of the buyer is not absolutely void, but voidable merely, and therefore presents to the seller the alternative of affirmance or disaffirmance. And he must do one thing or the other; and he cannot, in respect of the same goods, do both. He has, however, neither occasion nor reason for election until the fraud is discovered by him, and what he does before that time, therefore, cannot be deemed the purchaser could not have reasonably expected to pay for them." Judgment was therefore given in favor of A. against M. and C. and the sureties for the full value of the goods, they having been disposed of. Whitaker v. Brown (1899), - Tex. Civ. App. —, 49 S. W. R. 1104. W. had been in the habit of buying lumber of B. in carload lots, paying cash for it. About October 1, 1897, he ordered the carload in question, and it was shipped on October 4th, at his request, to H. At that time, within the space of fifteen days, W. continued sending in orders until eight or ten carloads of lumber were ordered from B., nothing being said about paying cash or buying on credit. On October 18th W. made a deed of trust for the benefit of certain other creditors, conveying $9,575 worth of claims, including the claim against H. for the lumber in question. A few days before this, W. wrote B. asking if they would accept his sixty-day paper for the lumber. They replied in the affirmative, but did not hear from him again. Said the court: "The conduct of Whitaker on this occasion, and the circumstances, indicate in a reasonable manner that he intended to get from plaintiffs [appellees] the goods without paying for them, and this being a substantial fraud [is] sufficient in law to annul the sale." Hodgeden v. Hubbard (1846), 18 Vt. 504, 46 Am. Dec. 167, criticised in Dustin v. Cowdry, 23 Vt. 646. 2 Clough v. London & N. W. Ry. Co., L. R. 7 Ex. 26; Brown v. Pierce, 97 Mass. 46, 93 Am. Dec. 57; Cochran v. Stewart, 21 Minn. 435; Old Dominion St. Co. v. Burckhardt, 31 Gratt. (Va.) 664; Barnard v. Campbell, 58 N. Y. 73, 17 Am. R. 208; Union Stockyards Co. v. Mallory, 157 Ill. 554, 41 N. E. R. 888, 43 id. 979, 48 Am. St. R. 341. 3 Lloyd v. Brewster, 4 Paige (N. Y.), 537, 27 Am. Dec. 88; Bank of Beloit v. Beale, 34 N. Y. 473; Bulkley v. Morgan, 46 Conn. 393; Dibblee v. Sheldon, 10 Blatch. 178; First Nat. Bank v. Tootle, 44 Neb. 59, 80 N. W. R. 264; Kearney Milling & Elevator Co. v. Union Pacific Ry. Co. (1896), 97 Iowa, 719, 66 N. W. R. 1059, 59 Am. St. R. 434. to be an election. After the discovery of the fraud he must not take inconsistent positions, and if he desires to exercise his election and rescind the sale he must do so before innocent third parties have acquired rights in the property, or the condition of the vendee has been altered in reliance upon his inaction, and, at all events, within a reasonable time." 1 Thus, in Clough v. London & N. W. Ry. Co., L. R. 7 Ex. 26, the sellers did not discover the fraud until during the trial of an action which was brought against them, owing to their repossessing themselves of the goods in pursuance of the contract. They were then permitted to file a plea to 'that effect, and the jury found that the fraud was proved. See also, that the election must be with knowledge of the fraud, Equitable Foundry Co. v. Hersee, 103 N. Y. 25; Pence v. Langdon, 99 U. S. 578 (where it is said: "Acquiescence and waiver are always questions of fact. There can be neither without knowledge. The terms import this foundation for such action. One cannot waive or acquiesce in a wrong while ignorant that it has been committed. Current suspicion and rumor are not enough. There must be knowledge of facts which will enable the party to take effectual action. Nothing short of this will do"); Kraus v. Thompson, 30 Minn. 64, 44 Am. R. 182 (where it is held that the right of the seller to rescind for the buyer's fraud is not defeated by his having obtained judgment for the price in ignorance of the fraud, the court saying: "The invariable rule is that this right to rescind may be exercised upon discovery of the fraud, and that no acts in recognition of the existence of the contract of sale, done before such discovery, will amount to an affirmance or ratification, so as to preclude the vendor from rescinding when the grounds for rescission are discovered," citing Pratt v. Philbrook, 41 Me. 132, and the Clough case, supra); Woonsocket Rubber Co. v. Loewenberg, 17 Wash. 29, 48 Pac. R. 785, 61 Am. St. R. 902. 2 In Barnard v. Campbell (1874), 58 N. Y. 73, 17 Am. R. 208, it is said: "The contract of sale was defeasible at the election of the plaintiffs, the vendors, if the election was seasonably made, and the goods reclaimed in proper time, after the discovery of the fraud. The plaintiffs could lose the right by delay as against the wrong-doer, if, in consequence of such delay, his position should be changed, and they would have lost it absolutely if, during the interval between the delivery of the goods . . . and the disaffirmance of the sale by the plaintiffs, the goods had been sold to an innocent third party for a valuable consideration." In Clough v. London & N. W. Ry. Co., L. R. 7 Ex. 26, it was held that the defrauded seller had the right to exercise his election at any time after knowledge of the fraud, until he has affirmed the sale by express words or unequivocal acts; that he may keep the question open as long as he does nothing to affirm the contract; and that so long as he has made no election he retains the right to avoid it, subject to this: that if, while he is deliberating, an innocent third party has acquired an interest § 909. Evidence of election. The election here is between contract (i. e., the contract of sale) or no contract, and whatever the seller may voluntarily do, after notice of the fraud, tending to recognize the existence of the contract, must be deemed to be evidence of an election to abide by it, and may therefore defeat a subsequent rescission. Bringing an action for the price,' accepting part payment thereof,2 tak Reasonable time runs from the discovery of the fraud, and not from the time that seller has the necessary evidence to prove it. Phoenix Milling Co. v. Anderson, 78 Ill. App. 253. in the property, or if, in consequence rily a question of fact for the jury, to of his delay, the position even of the be determined in view of all the cirwrong-doer is affected, he will lose cumstances. Smith v. First Nat. his right to rescind. See also John- Bank, 45 Neb. 444, 63 N. W. R. 796. son v. McLane, 7 Blackf. (Ind.) 501, 43 Am. Dec. 102; Bulkley v. Morgan, 46 Conn. 393; Emerson v. McNamara, 41 Me. 565; Hopkins v. Appleby, 1 Stark. 477; Stewart v. Dougherty, 3 Dana (Ky.), 479; Pollock v. Smith, 49 Neb. 864, 69 N. W. R. 312; Byrd v. Rautman, 85 Md. 414, 36 Atl. R. 1099. "When fully advised," say the court in Pence v. Langdon, 99 U. S. 578,"he must decide and act with reasonable dispatch. He cannot rest until the rights of third persons are involved and the situation of the wrong-doer is materially changed. Under such circumstances he loses the right to rescind, and must seek compensation in damages. But the wrong-doer cannot make extreme vigilance and promptitude conditions of rescission. It does not lie in his mouth to complain of delay unaccompanied by acts of ownership, and by which he has not been affected. The election to rescind or not to rescind, once made, is final and conclusive." Whether the vendor has acted within a reasonable time is ordina 2 See Boyd v. Shiffer, 156 Pa. St. 100, 27 Atl. R. 60; Overton v. Brown, 63 Mo. App. 49. See also Dennis v. Jones, 44 N. J. Eq. 513, 14 Atl. R. 913, 6 Am. 1 Conrow v. Little, 115 N. Y. 387, 22 N. E. R. 346, 5 L. R. A. 693; Equitable Foundry Co. v. Hersee, 103 N. Y. 25, 9 N. E. R. 487; Hays v. Midas, 104 N. Y. 602, 11 N. E. R. 141; Fowler v. Bowery Sav. Bank, 113 N. Y. 450, 21 N. E. R. 172, 10 Am. St. R. 479, and note, 4 L. R. A. 145, and note; O'Bryan v. Glenn, 91 Tenn. 106, 17 S. W. R. 1030, 30 Am. St. R. 862; Bank of Beloit v. Beale, 34 N. Y. 473; Carter v. Smith, 23 Wis. 497; Dibblee v. Sheldon, 10 Blatch. 178; Bulkley v. Morgan, 46 Conn. 393; Butler v. Hildreth, 5 Metc. (Mass.) 49; Connihan v. Thompson, 111 Mass. 270; Beurmann v. Van Buren, 44 Mich. 496, 7 N. W. R. 67; Bank of Little Rock v. Frank, 63 Ark. 16, 37 S. W. R. 400; Mapes v. Burns, 72 Mo. App. 411. Pursuing remedies equivalent to an action, such as prosecuting the claim in bankruptcy or against the St. R. 899; Knuckolls v. Lea, 10 Humph. (Tenn.) 577, as to the effect of part payments. ing security for it,' or accepting any other benefit under and in pursuance of the contract of sale, are common acts showing an affirmance of it. So, on the other hand, if he elects to rescind and does so, he cannot, if he fails to recover his goods, in whole or in part, subsequently bring an action for the price, or any other action based upon the theory of an existing con estate of a deceased purchaser, may have the same effect. See Farwell v. Myers, 59 Mich. 179, more fully given in later note to this section. "The claim of plaintiff to rescind is wholly inconsistent with his proof in bankruptcy of a promissory note taken for the price of the goods. Ormsby v. Dearborn, 116 Mass. 386;" Seavey v. Potter, 121 Mass. 297. But a seller of goods who, upon discovering that the sale was induced by fraud, and thereupon replevying part of the goods, subsequently proves a claim for the balance as for goods sold and delivered against the purchaser's estate in insolvency, without objection on the part of the assignee or of any creditor, is not thereby precluded from maintaining his action of replevin. Raphael v. Reinstein (1891), 154 Mass. 178, distinguishing the two cases last cited supra. Demand of payment or security.In Boyd v. Shiffer (1883), 156 Pa. St. 100, 27 Atl. R. 60, there was evidence that, immediately before giving notice of rescission, the seller's agent, who acted in the matter, demanded payment or security; and this was claimed to be such an affirmance as would preclude a subsequent rescission, but this claim was denied. The court said: "Assuming this to be the correct view of the rather contradictory testimony as to what took place, it was not such an affirmance or ratification of the contract as would bar the plaintiffs of their right to rescind; plaintiffs could ac cept payment or security for their goods if the fraudulent debtor chose to make the one or give the other; the fraud on them consisted in the representation, at the time of the purchase. that he was amply able to pay; the demand and refusal only demonstrated the absolute falsity of his previous representation; he gave them nothing in response to the demand, and they got nothing by it. If any note or property had passed, or there had been an assignment of any book accounts as payment or security, this would have been such an affirmance of the contract as would have been wholly inconsistent with the right of rescission, and plaintiffs' case would fail: but there was nothing of this kind,-only a demand for payment or security, a refusal, followed immediately by reclamation of the goods.” A demand for security, made by the seller's agent in ignorance of the fraud, does not prevent rescission. Woonsocket Rubber Co. v. Loewenberg, 17 Wash. 29, 48 Pac. R. 785, 61 Am. St. R. 902. 1 Joslin v. Cowee, 52 N. Y. 90. But unsuccessful efforts to get a compromise or security do not prevent rescission unless the party does some act which evinces a clear intention to waive the right. Cortland Mfg. Co. v. Platt, 83 Mich. 419, 47 N. W. R. 330. See Boyd v. Shiffer, in previous note. |
