Downer v. Smith

Bennett, J. This action is.defended upon the ground that the note was obtained by the frau'd 'of the plaintiff, lié being at the time the note Was givep, the real owner thereof This note, with 'others, seems to have been given by this defend» ant and one Cyrus Safford for some mortgage interests, which the plaintiff held on lands in Braintree, Granville, and Roxbury J being a large amount of hiortgages, and other things, not neces-. sary now to specify particularly. It is not controverted on this trial, but that the plaintiff was guilty of false representations in respect to the title of the lands conveyed to the' defendant, and that he at the time knew them to be false, and that the defendant at the time of the trade supposed the representations to be true, and relied upon them. The important question in this case is, whether there has been such a repudiation or rescinding of the contract on the part of the defendant, as to enable him successfully to defend against this action. It is a common principle, that when one has a right to rescind a contract, and exercises that right, he must restore the other party to- the same condition that he would have been in if no contract had-been made ; but a defrauded party does not lose his right to rescind because the contract has been in part executed, and the parties cannot be fully restored to their former position, [8] but he must rescind as soon as the circumstances will permit; and he cannot go on with the contract after the fraud has been discovered, so as to prejudice the fraudulent party by the rescisión being delayed. In other words, if a party rescinds, he must do it with all reasonable dispatch, upon discovering the fraud. How then are the facts in this case as applied to these principles ? We do not think the release by the plaintiff of his attachment against Tarbell can prejudice the defendant’s right to rescind. This release was a part of the contract, and it was a voluntary act on the part of the plaintiff, he at the time having full knowledge of his own fraud. The attachment created but an inchoate right, and by its release nothing passed to the present defendant which he can restore ; and I apprehend the same may be said as to the release by the plaintiff of a portion of the Bliss farm mortgage. If there was nothing further in this case, we should find no difficulty in opening the case. But we have already said, that if a party rescinds on the ground of fraud, he must do it at once on discovering the fraud ; but he is not bound to rescind; and if he still continues to act under the contract, it will be regarded as an election of his right, and a waiver of the right to rescind. In Silway v. Fogg, 5 M. & S. 83, there was a contract to remove certain rubbish for a specified sum, and it was found -by the person who took the job upon commencing the work, that he had been deceived by false representations as to the quantity of the rubbish ; but still he' weut on and removed it and then sought by reason of the fraud to recovet more than the contract price; but it was held, that by his simply going on, he had waived all right to rescind and could only recover the price agreed to be paid. See also Saratoga R. R. Co. v. Row, 24 Wend. 74. It is to be taken that the defendant was made aware of the fraud very soon after the contract was closed; but he did not then repudiate the contract and restore the property which he had gained by the contract, but held and used it as under his contract. The defendant was made aware of the prior mortgages on the property in two or three days after the trade, and this fact constituted the representation fraudulent; and yet the defendant went on and put it out of his power to restore to Downer what was still within his contract. He discharged mortgages, and [9] created a new mortgage to the State Treasurer of thirteen hundred dollars, and took a certificate of deposit for that amount, and took possession of the personal property, and subsequently disposed of it, and he also assigned away for his own benefit the fifteen hundred dollar mortgage; and the first two thousand dollar note given under this contract, which matured at the end of eight months, was taken up. We think, without going further into the facts, the testimony was ample to show an affirmance of the contract by the defendant after the discovery of the fraud; and it is well settled, that if after the discovery of the fraud, the party elects to go on under the contract, that is an affirmance of it, and concludes him from subsequently rescinding it. We see no good and sufficient reason why this case must not be governed by those rules which are ordinarily applicable to the rescisión of contracts. If no part of the notes had been paid to. Downer, the defence, if good for one note, would have been good for all. It is altogether impracticable to settle the rights of the parties in this case, as the 'facts now stand, in actions upon the notes by any known principles of the law. Judgment affirmed.