Elgin v. Snyder

Mr. Justice Bean delivered the opinion of the court. From the evidence it appears that the Salem Box & Lumber Company was an infant industry. Its parents, the incorporators, seemed to have had faith in its future development. Its success depended in a great measure upon faith and credit. The capital was limited, and instead of growing to huge proportions the industry pined away and died. 1. This contract, in controversy for the exchange of stock for land, was made about October 19, 1907. Plaintiff entered into active management of the business, assisted in increasing the debts of the company, and, as he states, found out in a short time that the concern did not amount to anything, and had no money to pay its bills with. For that reason, after about a month, he was unwilling to serve as manager. Notwithstanding this fact, he retained his stock, treated it as his own, speculated on the chance of the business improving, and the stock increasing in value, and did not offer to rescind the contract, or return the stock to defendant Snyder, until the complaint was filed in this suit, March 6, 1909; the tender of the stock being long after that date. It is a well-settled principle of law, and so held in this State,that one who desires to rescind a contract must act promptly upon the discovery of the accident, fraud, or mistake which affords grounds for the relief sought, and place the other party in statu quo, returning or offering to return that which has been received. Vaughn v. Smith, 34 Or. 54 (55 Pac. 99); Sievers v. Brown, 36 Or. 218 (56 Pac. 170); Clarno v. Grayson, 30 Or. 111 (46 Pac. 426). 2. It was held by this court, in Scott v. Walton, 32 Or. 460 (52 Pac. 180), that a party induced by fraud to make [303] a contract has, upon the discovery of the fraud, an election of remedies, either to affirm the contract and sue for damages, or disaffirm it and be reinstated in the position in which he was before it was consummated. The adoption of one of these remedies, which are wholly inconsistent, is the exclusion of the other. If he desires to rescind, he must act promptly, and return or offer to return what he has. received under the contract. He cannot retain the fruits of the contract, awaiting further developments, to determine whether it will be more profitable for him to affirm or disaffirm it. Any delay on his part, especially in remaining in possession of the property received by him under the contract, and dealing with it as his own, will be evidence of his intention to abide by the contract. 3. The conduct of the plaintiff in this case, in regard to this contract, does not measure up to the standard of the rule laid down in either of the above cases for one who desires to rescind a contract on the ground of fraud. It was plaintiff’s duty, when he became dissatisfied, found that the concern did not amount to anything, and would serve no longer as manager, if he desired to rescind the contract, to do so then, inform defendant S. H. Snyder, and return or offer to return the certificates of stock which he had received. He had no right to retain the same and await future developments, in order to ascertain whether, under favorable conditions, the venture of the company would be a success, or, under adverse circumstances, a failure. It was no excuse for plaintiff’s failure to return the stock that it afterwards became valueless. Crossen v. Murphy, 31 Or. 119 (49 Pac. 858). Neither does the allegation in the complaint that he did not discover the evidence of the transaction for a long time thereafter, constitute an excuse for his delay of about two years. During this time, he retained the consideration he had received, which was an evidence of his intention to [304] abide by the contract, and he is not entitled to maintain a suit in equity to rescind such contract. Scott v. Walton, 32 Or. 460 (52 Pac. 180). As to the original transaction, it would seem from the evidence, which we have set out quite fully, that, while the figures placed upon the property of the company, represented in part by the certificates of stock transferred to plaintiff, were high, plaintiff was, to say the least, negligent in making .no examination of the property, especially the real estate, and no investigation in regard to the value of the stock. 4. It is recognized by law to be characteristic of human nature for the owner to set a high value on his property, for the purpose of enhancing it in his purchaser’s estimation. Hence, when the parties are dealing on an equal footing, it does not help the purchaser, who relies upon the vendor’s statement as to value, when no warranty is intended, and when the language used does not affirm some specific fact, but is a mere expression of opinion. Scott v. Walton, 32 Or. 460 (52 Pac. 180), Pomeroy’s Equity Jurisprudence, § 878. The trial court found for defendant in regard to the validity of the contract, and, under all the evidence and circumstances of the case, we think the decree of the circuit court was right and should be affirmed, and it is so ordered. Affirmed.