Riha v. Osterritter

MURRAY, Justice. Appellees, John Osterritter and wife, as plaintiffs below, instituted this suit in the Ninety-third district court of Hidalgo county, seeking the cancellation of vendor’s lien notes aggregating the principal sum of $10,-750. Appellees alleged that said notes had been obtained by the fraudulent conduct of appellants, George C. Riha and Dan Forbes, defendants below, and that said notes were void and of no effect. E. F. Board owned 11.36 acres of land in Hidalgo county and George S. Hollister owned 10 acres, the two tracts making 21.36 acres. Appellants were real estate men and secured a contract of purchase of these 21.36 acres of land from said Board and Hollister, agreeing to pay therefor $21,500, and did pay $500 of the purchase price, and planted, several acres of young citrus trees on the land. This contract of purchase was executed in 1030. In 1931 appellees came to the Rio Grande Valley from Chicago and ultimately decided to join appellants in the purchase of this land. Appellants were to negotiate the purchase. Appellees were defrauded in that they were led to believe that the purchase price which they and their coadven-turers were to pay for the land was $31,500. Appellees were further led to believe that there was to be a cash payment of $21,500 made when as a matter of fact only $10,000 cash was to be paid. Appellees paid $10,750 cash and signed a note jointly with appellants for $10,000 as balance of the consideration. Appellants had a secret arrangement with the sellers whereby the deed was' to falsely state the consideration to be $31,500. Afterwards, on February 26, 1931, appel-lees purchased from appellants their one-half of the land, executing in this connection their six notes in the aggregate sum of $10,750, payable to appellants. In this suit appellees seek the cancellation of these notes, and appellants ask judgment on the same. Shortly after all of these transactions ap-pellees received word that appellants had made a profit of $10,000 on this deal. Mr. Osterritter complained to appellants about this matter and appellants denied that they had.made such a large profit. This finally led to a compromise agreement whereby Riha agreed to discount notes for $2,600 and Forbes to discount his notes for the sum of $2,500. Dater this compromise agreement was repudiated by appellees and this suit instituted to cancel all notes held by Riha and Forbes. The trial was begun before a jury but later both sides having asked for an instructed verdict tlie trial court discharged the jury and rendered judgment for appellees canceling and holding as void the notes so held by Riha and Forbes. The trial court, as disclosed by his finding of facts and conclusions of law, proceeded upon the theory that this was an illegal and void transaction. We do not agree with this contention. It is clear that a fraud was perpetrated upon appellees and appel-lees could have, if they desired upon the discovery of the fraud, repudiated the entire transaction. This they did not attempt to do, but on the contrary retained possession of the land and only attempted to have the notes held by Riha and Forbes canceled. This contract was not an illegal contract but only a voidable contract. Being a voidable contract appellees could only rescind same by offering to make restitution. Appellants had paid $500 on the purchase contract. They had also planted trees upon the land. Ap-pellees did not attempt to make restitution. Even a party who has’perpetrated a fraud is [860] entitled to restitution. R. O. L. Vol. 27,. p. 653, § 414; Black on Rescission and Cancellation, § 672. There is no reason why the compromise agreement was not binding. Appellees had been informed of the fraud which had been perpetrated upon them. It is true they contend they did not have all the information in regard to the fraud. They did not know the extent of the fraud but nevertheless with knowledge of the fraud they entered into a compromise agreement and there is no reason why they could not enter into such an agreement. Having been informed of the fraud they made no attempt to repudiate the entire transaction. They have never offered restitution to appellants, hut seek to retain possesr sion of the land and cancel a part of the notes given by them as vendor’s lien notes. This they cannot do. The compromise agreement should have been enforced. The judgment of the trial court is reversed and judgment here rendered for appellants in accordance with the compromise agreement made on December 12, 1931. Reversed and rendered.