Doughten v. Camden Building & Loan Ass'n

[561] The opinion of the court was delivered by Scudder, J. It is claimed that under these facts the association was authorized to rescind the resolution to substitute the bond and mortgage of $2,600 for the two prior mortgages, and the stock and loan on thirteen shares for the previous loan on twenty-five shares. But, granting that the complainant had the right to rescind on the non-performance of the full terms of the contract by the defendants, they failed to legally exercise that right before there was a substantial compliance on the part of the defendants by payment of the municipal taxes; and the bills to foreclose were not filed until after these taxes had been paid. The consideration was good, and completed before the agreement was annulled. One party to a contract which imposes reciprocal obligations upon both parties may have a right to rescind it by reason of the failure of performance of conditions by the other party, but he must, if he wish to rescind for such cause, return to the other party what he has received, so as to put him in the same position he was before. It is a well-settled principle of law and equity that a party cannot rescind a contract by his own will, and at the same time keep possession of the consideration, in whole or in part, which he has received under it. So far as it is practicable, he must put the other party in statu quo before he can exercise his right of rescission. The rule is that there shall be “ prompt repudiation and restoration as far as possible.” Byard v. Holmes, 4 Vr. 119; Gay v. Alter, 102 U. S. 79; Hunt v. Silk, 5 East 449; Clough v. London & N. W. Ry. Co., L. R. (7 Ex.) 26, 37; Bwlch-y-Plwm Mining Co. v. Baynes, L. R. (2 Ex.) 324; Pollock’s Principles of Contracts 509; 2 Parsons Cont. *679. In this case the twenty-five shares of the prior loans were transferred to the association in part performance of the agreement; the mortgage for $2,600 was executed and recorded. The assignment of shares was delivered to the treasurer of the [562] association, and the bond and mortgage were left in the possession of their solicitor. It is no answer to say that there was not a formal acceptance of them by the association. It is enough that the defendant William S. Doughten, or his representatives, by legal transfers, put them in the possession and control of the company’s agents in part performance of the contract, and in such form that he could not be restored to his former position without the action of the association. He could not cancel the mortgage for $2,600, and satisfy the record; nor could he re-assign the twenty-five shares to himself. It might in equity be allowed that the complainants should, on failure to conclude the arrangement by the delay and neglect of the defendants, transfer the credits of the payments on account of the thirteen shares in the last loan series to the former loans, on which there were large arrearages, and the defendants could have no just cause of complaint, but it is not necessary to decide this, for the complainants have done nothing to restore the defendants to their former position, but have shown a purpose to manage the matter for their own advantage, and to regard the transaction as altogether void. They have taken the shares of the old loans, and credited them to the defendants at their withdrawal value, not at their actual value, which is a well-known difference in the business of all loan associations; they have changed the special appropriations of- payments or the thirteen shares of the last series to the dues and the indebtedness on the old loans; they have left the assignments of those shares-in the hands of their treasurer; and the bond and mortgage for $2,600, to them duly executed, and recorded by the act of their solicitor for their greater security, is in his hands; and they have left the defendants to get these papers, and right themselves as they may be able. This is not rescission, with proper regard to the equitable rights of the defendants, but a repudiation of the partly executed contract without any attempt at restoration. This they cannot do, and the decrees should be reversed, and the bills dismissed, with costs. Decree waanimously reversed.