Whitney v. Allaire

By the Court, Jewett, J. When this case was before the court on the former occasion, it was held that a present interest in the term passed to the defendant from the plaintiff for one year; that the defendant having taken the lease of the wharf upon the faith of the fraudulent misrepresentations of the plaintiff, had an election either to repudiate the contract or to take the benefit of it; and that though he chose the latter course he might, when sued for the rent, claim a deduction by way of recoupment for the damages which he had sustained in consequence of the fraud; and that although the defendant, having taken possession of the wharf after he discovered the fraud, was thereby precluded from afterwards rescinding the contract, still it did not affect his right of action for the fraud committed. The court considered the defendant’s right of action complete on the day of making the contract, whether it should be held that the contract created an inter esse termini or was merely [557] executory; and in either case they thought there could be no waiver of the claim to damages. Upon the last trial the charge was in conformity to the principles thus laid down. On a review of the question I am entirely satisfied that the doctrine stated and illustrated by the learned judge who delivered the judgment of this court at that time is sound, and is sustained as well upon principle as authority, and that it is not, as the plaintiff’s counsel supposed, in conflict with the case to which he has referred. It was conceded on the argument that the principles of law applicable to a contract for the sale and purchase of personal chattels were equally applicable, so far as this question is concerned, to the contract under consideration. It cannot be doubted, but that a vendee of a personal chattel has a remedy against the vendor for fraud, which the latter has practiced upon him. The actions in which this remedy is sought by the vendee are, either when he is sued for the price of the article, or where he sues the vendor for its defects, or to recover back the price, where he has paid. If the action is by the vendor for the price, the defects may be shown in reduction of the plaintiff’s damages when they are less than the price unpaid, or in bar when they are equal to or exceed such price. By proving the fraud and damage, the vendee may reduce the demand, where his injury is less than the price unpaid; and where it is equal or greater, he may defeat the action altogether. This is authorized by law to prevent circuity of action. (King v. Boston, 7 East, 481, note; Cormack v. Gillis, id. 480.) Again; when the vendee is sued for the price, he may show the fraud and prove that he has rescinded the contract by returning or offering to return the whole of the property purchased at the earliest practicable moment after the discovery of the fraud; and then he will not be liable for the price agreed to be paid. A return of the property to the vendor, or an offer to return, is in no case necessary, except to enable the vendee to withhold or recover back the price. Where there is an actual disaffirmance of the contract, the title of the property is revested in the vendor. In all cases of fraud, the vendee, who alone has the [558] right of disaffirmance, may remain silent, and bring his action to recover damages for the fraud, or may rely on it by way of defence to the action of the vendor, although there has been a full acceptance by him, with knowledge of the defects in the property. An affirmance of the contract by the vendee, with such knowledge, merely extinguishes his right to rescind the sale. His other remedies remain unimpaired. The vendor can never complain that the vendee has not rescinded. (Kellogg v. Denslow, 14 Conn. R. 411; Boorman v. Johnston, 12 Wend. 566; Waring v. Mason, 18 id. 426; Hoggins v. Bucraft, 1 Dana's Ken. R. 30; 2 Kent's Com. 5th ed. 480, note B. and the cases there referred to; Long on Sales, by Rand, 213, 219, 240.) If the defence arose out of the contract itself or depended upon a rescission of it, it would clearly be without foundation, as there is no pretence of any thing being due to the defendant by the terms of the contract, or that he has at any time rescinded it or attempted to do so. On the contrary, he received the benefit of it. The defence is based upon the alleged tortious act imputed to the plaintiff, in inducing the defendant to. enter into the contract by which he sustained damage. This is set up by way of recoupment or in reduction of damagés. Fraud and damage have ever been regarded as a solid foundation for an action. (Pasley v. Freeman, 3 Term. R. 51.) A. party defrauded in a contract has his choice of remedies. He may stand to the bargain, even after he has discovered the fraud, and recover damages on account of it, or he may rescind the contract and recover back what he paid or sold. (2 Kent's Com. 5th ed. 480, note a; Weston v. Downes, Douglass, 23; Towers v. Barrett, 1 Term. R. 133; Payne v. Whale, 7 East, 274; Long on Sales, 214 to 216.) So in the case of a warranty. The party to whom it has been made may - sue and recover for the breach without returning the property But if he bring an action to recover back the price, he will fail although there is a breach of the warranty, unless a rescission of the contract is shewn. There is no principle or authority, showing that where a person has been defrauded by another in [559] making an executory contract, a subsequent performance of it, on his part, even with knowledge of the fraud acquired subsequent to the making and previous to the performance, bars him of any remedy for his damages for the fraud. The party defrauded, by performing his part of the contract with a knowledge of the fraud, is deemed to have ratified it, and is precluded thereby from subsequently disaffirming it. That is the extent of the rule. His right of action for the fraud remains unaffected by such performance. But having gone on aftc discovering the fraud, he cannot afterwards disaffirm the bargain, or sue for the consideration. The rule for ascertaining the damages of the defendant to be recouped, was more favorable to the plaintiff than that on which he had a right to insist. The true principle was laid down by this court in determining the former writ of error, but the plaintiff has not been prejudiced by the instruction which was given. The judgment must be affirmed. Judgment affirmed.