Ely v. Mumford

By the Court, Ingraham, J. There are two classes of cases in which the right to recover depends on proof of fraud in making the contract; one in which the plaintiff seeks to rescind the contract and recover back money paid or goods delivered in performance of it, and the other where the plaintiff merely seeks to recover damages for a fraud practiced on him. In the first case the plaintiff, in order to recover back the money paid, or the goods delivered, must place the parties in the same condition they were in before the contract was made, by restoring or offering to restore any thing received by him on account of it. (Baker v. Robbins, 2 Denio, 136. 3 E. D. Smith, 199. 14 Barb. 594. 10 N. Y. Rep. 294.) In the other case the plaintiff may recover for the deceit or fraud, and still leave the contract in force where his claim is only for damages for the deceit, and he does not ask to receive back property delivered under the contract, or when from the nature of the contract, and part performance under it, the parties can not be restored to their original condition. Such is the rule in equity, as to contracts for land. (Bradley v. Bosley, 1 Barb. Ch. 125.) And so in actions at law, (Culver v. Avery, 7 Wend. 380,) and where property has [633] been sold under fraudulent representations. (Nickley v. Thomas, 22 Barb. 652.) In such cases the plaintiff can recover for the deceit, without restoring the property. The actual value of the property would be allowed in estimating the damages. (Allaire v. Whitney, 1 Comst. 305.) In an action merely to recover damages for the deceit, it is not necessary to rescind the contract. If it has been performed, in whole or in part, the recovery would not be for the property obtained in pursuance of it, but for the loss which the party injured has sustained by the deceit, after allowing the^ actual value of what he has received. Besides this, in an action for deceit, where the ground of recovery is the fraud, if the plaintiff swears to a good cause of action, he is entitled to an order for arrest; and the merits of such cause of action can not be tried on affidavits, on a motion to vacate the order of arrest. The grounds on which the order of arrest was vacated, in this case, were mere matters of defense in the action, and were not such as should be sufficient to vacate the order of arrest. In Van Epps v. Harrison, (5 Hill, 63,) Bronson J. says: “ In contracts of sale which have been fully executed on the part of the vendor by delivery or conveyance of the thing sold, no fraud on his part in making the contract can operate as a bar to an action for the price, unless the vendee has returned the property, on the discovery of the fraud. When sued for the price, the vendee may, in general, recoup damages ; but while he retains the property, he can not treat the contract as wholly void, and refuse to pay any thing. By retaining the property, he affirms the validity of the contract, and can be entitled to nothing more than the damages which he has sustained by reason of the fraud.” In Sweetman v. Prine, (26 N. Y. Rep. 224,) Marvin, J. says: “ This rule (that the purchaser may rescind and reclaim the goods on restoring what he had received) applies equally to vendees who have been induced to purchase by fraud. If they desire to. be entirely relieved from the con [634] tract, they must rescind it, and restore or offer to restore the property purchased. • If they retain the property, they may, when sued for the price of it, recoup the damages arising from the fraud, or they may have an action for the damages.” Whether this action is merely for the deceit, or is brought to set aside the contract, and recover back the money loaned under it, the plaintiff was entitled to the order of arrest, and the defendant, can only he relieved by establishing his defense upon a trial. [New York General Term, November 5, 1866. Order reversed. Geo. G. Barnard, Clerke and Ingraham, Justices.]