Price v. Stout

O’Brien, J.: The single question upon this appeal is whether the complaint is defective in not averring that the plaintiff offered to restore what he had received at the time he signed the receipts upon the ■accounting between the parties. The appellant relies upon the well-settled rule which, in the Encyclopaedia of Pleading and Practice (Vol. 18, p. 829), is thus stated: “In suits for the rescission and cancellation of contracts the court applies the familiar maxim ■of equity of almost universal application that he who seeks equity must do equity. The plaintiff will not be permitted to repudiate his contract and still retain the benefits which he has derived from it; and his desire and willingness to restore what he has received must appear in the bill or complaint, otherwise he will have no ■standing in a court of equity.” (See, also, Duff v. Hutchinson, 57 Hun, 152.) Therein it was held (head note): “An instrument of general release cannot be restricted in its operation to those frauds which were actually in the mind of the party giving it when it was given, in a case in which such party subsequently finds that he was ignorant of the existence of certain other frauds which it was not intended by him that the instrument should cover and that he ought to have been more careful in giving it;” and it was further held that in an action to procure a rescission of the contract it was necessary to offer in the complaint to restore what had been obtained upon the settlement and "as the consideration for the giving of the release. [338] So, here, if' the "complaint had shown that there was a dispute as to the amount due and an adjustment and a settlement between the parties and .that the plaintiff had executed the receipt in consideration of obtaining 459 shares of stock in full settlement, then the rule invoked would apply. It will be noticed, however, that the allegations present no such cause of action, but show that there was an accounting between the parties, and as the result of such an accounting the plaintiff received the shares of stock at a fixed value of fifty dollars per share. The transaction is no other or different than if instead of stock he had received an amount, of money equivalent to the value of the shares at the price fixed. It does not appear that there was any dispute as to the amount due the plaintiff, and, therefore, what the defendant was obligated to pay was ascertained and determined between them without any compromise or settlement. In other words, the complaint alleges that the defendant received from the plaintiff a certain sum of money for disbursement in a certain venture, and that thereafter he furnished the plaintiff with an account which was accepted as true, and for the balance due the plaintiff, the defendant, instead of money, gave the stock at the agreed price of fifty dollars a share. It is then alleged that On such, accounting the defendant falsely and fraudulently represented that he had paid out the'sum of $42,749.10 for taxes on the St. James building and was entitled to a credit on account of such payment;, that it was because the plaintiff relied upon the truth of this statement and representation that he accepted the account as true and correct and executed the receipts, and that the plaintiff, finding that such taxes were paid not by the defendant but by another, brings this action to prevent the defendant from getting the benefit of a, credit which was secured by his false and fraudulent representation. The distinction between an agreement of .settlement where, as the-result of a compromise of conflicting claims, some property or thing of value has been parted with (in which case if the action is brought to set aside the settlement it is necessary to restore or offer what has-thus been received), and á transaction .as herein outlined, where, ...as-the result of an accounting, the parties have agreed upon the amount, to Which they are respectively entitled, and it thereafter appears, that one of the parties thereto by false and fraudulent representa [339] tions has secured an unwarranted credit for himself, is obvious, and the reason which in the former instance requires a restoration or an offer to restore what was received is in the latter instance entirely wanting. We think that the cases cited and relied upon by the learned judge at Special Term as showing that the complaint was sufficient are directly in point, and particularly Ballard v. Beveridge (171 N. Y. 194). Therein it was sought to maintain an action for conversion of stock fraudulently retained by an agent, and it appeared that the defendant had furnished a statement upon which a compromise was made and the plaintiff relied upon the correctness of the statement as to the use of the stock. When, however, he obtained knowledge of the falsity of the statement as to the disposition of this particular stock, he brought the action for a conversion, and it was insisted that his remedy was to rescind the settlement and tender back what he had received, but it was held that “ a rescission of such settlement and a return of the property delivered by the agent to his principal in pursuance thereof is not necessary as a condition to the maintenance of such action, since a mistake as to one item in an account may, upon discovery after the settlement of the account, be corrected and the rights of the parties be adjusted in respect thereto without opening up the entire account.” It is attempted to distinguish that. case as an authority upon the ground that it was an action at law, whereas this is a suit in equity. In an action at law, however, the requirement is much stricter, for when a restitution is necessary it must be tendered before suit brought, whereas in equity all that is required is that in the complaint there should be an allegation of a tender or a willingness to return what was received upon the trial. The reason upon which the rule is based is the same in an action at law as in a suit in equity. Where upon the facts restitution is necessary, it must be made in both forms of action, the only difference being, as pointed out, that at law the complaint must allege a tender back before action brought, while in equity an allegation of a willingness to restore upon the trial is sufficient. Although Ballard v. Beveridge (supra) was an action at law, what was therein said is in principle applicable, that “ Where an agent already compensated for his services, has surrendered to his principal only a portion of the property in his hands, [340] it would be strange if lie could resist a claim for the remainder retained by means of a false account, unless the plaintiff should redeliver to him property not his own but belonging to the plaintiff, and upon which no lien in favor of the defendant existed.” The inferences from tlie complaint here are that there was after crediting the defendant with the payment of the taxes upon the St. James building, á certain amount due the plaintiff, and the delivery to him of the 549 shares at the agreed value, of fifty dollars a share left, still unpaid him the sum .of $17,000 which, as shown by. the second receipt, was disposed of by the defendants delivering the 300 additional shares of stock at the. agreed value of fifty dollars per share. • It is clear that whatever may be the result of this action, the plaintiff is entitled to retain what, he has received ; and, in addition, he should, upon proof of the allegations of his complaint, receive an amount equivalent to what should originally have been •paid him had' the defendant not falsely represented that he had expended the sum named in payment of taxes on the. St. James -building. We think, therefore, that, as it was - neither necessary to restore nor to make an offer to restore before action, nor to so allege in the ■complaint, the complaint is not defective on this ground, and the Special Term was. right in overruling the demurrer.. The interlocutory judgment , should accordingly be affirmed, with costs, with leave to. defendant to withdraw demurrer and to answer upon pay■ment of costs in this court and in the court below. Patterson, McLaughlin, Hatch and Laughlin, JJ., concurred. Judgment affirmed, with costs, with leave to defendant to withdraw demurrer and answer on payment of costs in this court and in .the court below.