Clerin v. Eccles

BURNETT, J. There are very many assignments of error, but substantially they are grounded upon the proposition urged by the defendants that the plaintiff is seeking to recover upon a contract which he has not performed on his part; further, that because the defendants pledged to the plaintiff as collateral for the security of the note, the stock they bought, they had received nothing from him, in consequence of which the' consideration of the note wholly failed, giving rise to the corollary that it was not necessary for the defendants to give notice of the rescission of the contract. 1, 2. It is true as a principle of law that a party seeking to recover upon a contract must show in his complaint either that he has performed all of the — 351 — conditions on Ms part to be performed or that performance thereof has been waived by the defendant. The stipulations in the contract were joint and several as between the parties on either side; that is to say, Clerin promised jointly and severally with his co-contractors that he would transfer to the defendants all of the 500 shares of stock of the corporation. Consequently, he must show in his complaint either that he caused all of this to be done or that its full performance was waived by the defendants. The agreements of the parties of the first part and of the parties of the second part about the giving of the notes and the transfer of the stock to the defendants were mutual and concurrent covenants. In other words, the defendants were not bound to issue any note to any of the other contracting parties until all of the 500 shares of stock were tendered to the former. The allegation in the complaint to the effect that the plaintiff transferred and the defendants accepted his stock, that the latter gave and plaintiff accepted their note sued upon, that plaintiff’s associates were ready, able and willing to transfer their stock, and that the- defendants refused to take over the same, is a sufficient statement from which the conclusion may be drawn that the defendants, at least as to the plaintiff, waived strict performance of the contract on his part as a condition precedent to his maintenance of this action on their note. The defendants chose to deal with the plaintiff separately and put him in a position where he could sue alone. If all of the stock had been delivered to the defendants and they had given to each of the former stockholders their ■ note in compliance with the contract, no one would claim that all holders of defendants’ notes must join in a single action on all — 352 — of the notes. Under such circumstances each holder would be entitled to bring action on his own note, in his own name, without joining his former fellow stockholders. Pro tanto, this is the situation in which the defendants have placed the plaintiff; so that, taken altogether, the complaint states facts sufficient to constitute a cause of action, as in a case where the plaintiff has pleaded part performance of the contract on his part and waiver by the defendants of strict performance of the remaining covenants. This is sufficient to put the defendants upon their defense. 3. Granting that the plaintiff’s co-contractors were remiss in their duty, if the defendants would escape liability upon their contract or upon their note which is part of that contract, they had then the choice of two remedies. Providing they acted promptly on discovery of the breach of the covenant, whether by plaintiff, who is jointly and severally bound thereon, or by his co-contractors, the defendants could rescind the contract, but in doing so they wopld have to give notice thereof to the plaintiff and return all of the property they had received as part performance of the agreement on the part of the plaintiff. On the other hand, in the absence of a rescission as thus pointed out, the defendants could retain all they had received, and when sued for the purchase price could counterclaim against the note in damages they had suffered on account of the plaintiff’s breach of the contract. 4, 5. The general rule is that it is of no effect to renounce the contract without giving notice thereof to the opposite party. The defendants, seek to avoid the application of this principle by citations to the effect that where they have received nothing by — 353 — virtue of the contract notice of rescission is not necessary; further, that where a consideration for a note has wholly failed, it will he a complete defense to the note as between the original parties thereto; and, still further, that a partial failure of consideration may he urged as a defense against the note pro tanto. As showing that they received nothing under the contract, the defendants point out in argument that although the stock held by the plaintiff was transferred to them, yet they immediately pledged it to him as collateral in support of their note, and hence they urge the conclusion that they received nothing from the plaintiff by virtue of the contract. The argument is fallacious, however, for it has been held many times that a mere pledge of stock does not deprive the pledgor of his property therein: State ex rel. v. Smith, 15 Or. 98 (14 Pac. 814, 15 Pac. 137, 386); 19 Am. & Eng. Corp. Cas. 496; Irving Park Assn. v. Watson, 41 Or. 95 (67 Pac. 945); 16 Am. & Eng. Corp. Cas. (N. S.) 320; Cohen v. Big Stone Gap Iron Co., 111 Va. 468 (69 S. E. 359, Ann. Cas. 1912A, 203, and note). The conclusion is plain, therefore, that the defendants did receive something as part performance of the contract and that there has not been a total failure of consideration for the note so as to dispense with notice of rescission of the contract of which the note may be conceded to he a part as between the immediate parties thereto. On the hypothesis, also, that the restoration of the property as upon rescission is well pleaded, proof thereof is not found in the fact that the purchased stock was pledged to the seller as collateral, for, as we have seen, the pledgor still has property in the pledge. This being true, the defend — 354 — ants have yet some property which they have not returned so as to accomplish rescission or to establish entire failure of consideration, obviating the necessity of giving notice of their renunciation of the contract. As to notice of rescission, the principle is thus stated: “If a party means to rescind a contract because of the failure of the other party to perform it, he should give a clear notice of his intention to do so, unless the contract itself dispenses with such notice, or unless notice becomes unnecessary by reason of the conduct of the parties”: 13 C. J. 619; Hennessy v. Bacon, 137 U. S. 78 (34 L. Ed. 605, 11 Sup. Ct. Rep. 17); St. Regis Paper Co. v. Santa Clara Lumber Co., 186 N. Y. 89 (78 N. E. 701). The answer is utterly silent about notice, or any excuse dispensing with it, within the meaning of the rule thus laid down. The answer is defective as a plea of rescission. The defendants do not pretend to count upon damages as a counterclaim against the note. Failing in pleading rescission, if they would recover damages, they must allege the breaches of thé contract by the plaintiff upon which they rely. The effort of the answer is to show that the plaintiff and his associates accepted the renunciation of the contract by Eccles and took possession of the property. This was denied by the plaintiff, and the jury by its verdict has found that his position is correct. 6. In brief, the plaintiff has substantially pleaded a case showing that he has partly performed his contract and that further performance, on his part at least, was waived by the defendants in contracting with him individually. The defendants have not shown by their answer that they took, advantage of their right to rescind the contract, in that they fail — 355 — to aver notice thereof. They have not assigned in their answer any breach of the contract by the plaintiff not included in their waiver, as a legal conclusion to be drawn from the allegations of the complaint. Neither have they counterclaimed against the note in damages. Having placed the plaintiff in a position to sue them as an individual without reference to the shortcomings of his co-contractors, the most they could have done was to counterclaim against him for damages. They have not done this. The provision of the contract that either party should have the right to reassume possession on failure of the other party to perform is evidently collateral to the principal undertaking, which on the part of the defendants, as the pleadings disclose, is to pay a certain sum of money absolutely and at all events. Recaption of the property was a permissible but not an exclusive remedy for the plaintiff. The judgment was right, and must be affirmed. Affirmed.