Case ID: misc_24/html/0603-01.html
Source: Caselaw Access Project
Author: {"author": "Daly, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Sophie Kaufmann, Plaintiff, v. John McLaughlin, Defendant.
    (Supreme Court, New York Special Term,
    September, 1898.)
    Sales of real estate — Rescission in equity for fraud must be prompt — Legal remedy and damages.
    Where a vendee of a tenement-house, bought as alleged upon the false representation of the vendor that a silk factory was about to be built on his adjoining lot, upon which, in fact, an iron factory was subsequently constructed, seeks to rescind in equity, the action comes too late where the vendee delays it eleven months and in the meantime has continued in possession of the premises, collected and retained the rent and has paid interest upon a purchase-money mortgage which she gave on taking title. 1
    The only remedy of the vendee is. at law to recover the difference between the value of the premises, as they were, and their value had the alleged representations been true.
    Action to rescind a sale of real estate on the ground of false representations made by the vendor.
    Euring & Geiger (John A. Straley, of counsel), for plaintiff.
    Foster & Foster (Walter C. Foster, of counsel), for defendant.
   Daly, J.

The plaintiff claims that she, was induced to purchase the house and lot described in the complaint, a five-story tenement, known as No. 338 East Ninety-fourth street, in reliance upon the defendant’s statement that he was about erecting on adjoining land a silk factory which would greatly benefit the premises. The- defendant denies the making of such representations, and states that all that was said on the subject of a silk factory was after the negotiations were closed and the parties went up to look at the property, when the plaintiff asked what was going to be built on the defendant’s vacant corner, adjoining No. 338, and he. replied-: “ There was a party here about, a week ago about buying those lots. They were talking about putting a silk factory on them.” There was a third party present at the negotiations, a Mr. Kramer, who acted as a sort of adviser of the plaintiff, having undertaken to find an investment for her money, and who brought her and the defendant together to negotiate. Kramer was paid a commission oh the sale by the defendant. He was examined as a witness and he corroborates the plaintiff to the- extent of testifying, that the defendant, while the negotiations were in progress, stated to plaintiff that a silk factory was- coming in the neighborhood. It appears that the plaintiff had had some ¡knowledge of a neighborhood in which a silk factory was operated, and was favorably impressed with the advantage of owning a tenement near such an establishment, and it is likely that the prospect of having such a neighbor.would be an inducement to the purchase. It appears from the plaintiff’s testimony that she understood from the statements of defendant that his representations referred to a. proposed structure adjoining the rear of the lot she purchased. In January, 1896, soon after the -deed was delivered, excavations were begun upon lots adjoining the rear of her lot, and a factory building was erected by one Hapfel, and commenced to be used by him as an iron factory in September, 1896. The operation of this iron factory is claimed to have been injurious in no small degree to the plaintiff’s use of her tenement, although on the part of the defendant it is shown that there were several other factories in the neighborhood which might be considéred fully as 'objectionable. But if the,plaintiff be held to have made out a case of false representation inducing the purchase and sufficient 'to entitle .her to rescind the contract upon taking prompt action after the discovery of the deception, the- fact is undisputed that she suffered about a year to elapse -before manifesting any intention bo disaffirm. The law requires, as a condition of equitable relief, that the. inj ured party should disaffirm immediately upon discovery of the fraud. If, with full knowledge of it, he continues to avail himself of the benefits .of his bargain or to perform his contract, he will be deemed to have elected to affirm it. In this case 'the plaintiff continued in possession of the premises and paid interest to the defendant upon the purchase-money mortgage which she had given him upon talcing title. She took the deed and gave the mortgáge January 2, 1896. The iron factory was completed and operated in September, or, at the latest, October, 1896. According to the plaintiff’s evidence, the defendant acknowledged to her at the latter date the deception he had practiced, and yet she did not begin this action for rescission until September, 1897, and during the interval continued to pay him interest on the mortgage and to collect and use the rents of the premises. -This failure to assert her alleged right of rescission is fatal to .the equitable relief now sought, according to many authorities. In Hallahan v. Webber, 7 App. Div. 122, it is said by Van Brunt, P. J., in an opinion concurred in by all of his associates: “In the cases of Masson v. Bovet, 1 Den. 69; Cobb v. Hatfield, 46 N. Y. 533; Hammond v. Pennock, 61 id. 145; Schiffer v. Dietz, 83 id. 300; Strong v. Strong, 102 id. 69, and many ¡other cases which might be cited, it, is stated that it is a settled rule that the . right to rescind a contract for fraud must be exercised immediately upon its discovery, and that any delay in doing so will be deemed an election to affirm the contract.” In that case the plaintiff did not elect to rescind- until three months after the discovery of the' fraud, and the delay was held to be fatal, the court further saying: “ Where a party upon discovering fraud in a contract lies by and speculates as to which is the better policy to pursue •— to disaffirm or to allow the contract to stand — he cannot be permitted, after the course of events has demonstrated that disaffirmance is the better policy, to rescind; Equity -requires that he should elect promptly and not delay action and permit the other party to treat the contract as existing and act accordingly. * * * Whatever may be the true interpretation of the rule in England, as laid down in the case of Clough v. L. & N. W. R. Co., L.R., 7 Exch. 26, upon which the learned judge below relied in coming to the conclusion which he did in deciding this action, in this State reasonable promptness of action in disaffirmance of a contract is required ■upon the part of the party seeking to rescind. This rule is further illustrated in Pickslay v. Starr, 149 N. Y. 432.” See, also, Martin-Barris Co. v. Jackson, 24 App. Div. 354, decided upon the authority of the foregoing ease and of Kinney v. Kiernan, 49 N. Y. 164, and Strong v. Strong, 102 id. 69., Bpon the discovery in September or October, 1896, of the falsity of the defendant’s alleged representations, it was the plain' duty of the plaintiff to notify the defendant at once that she repudiated the contract, and to tender back a .deed of the house, and demand a cancellation of the mortgage and the return of the mopey paid; but, notwithstanding that she then, as she states, taxed him with telling her lies, and received for answer that “ it was all business,” she went on paying him interest and continued in the premise’s, thus evincing a choice to keep the property, notwithstanding the alleged fraud. This course did not deprive her of an action for such damage, as she could prove she had sustained by reason of the fraud, but it does deprive her of recourse to equity for the rescission of the contract. Her present action is. exclusively for the latter remedy, and neither her complaint nor her proofs entitle her to a judgment for damages for the fraud. This action will, therefore, have to be dismissed upon the merits, leaving her to commence, if so advised, an action for damages, thatjis to say, for the difference between the value of the premises as they were and as they would have been if the alleged representations were true. Such proof may not be easy to obtain, the value of the premises with a silk factory 'adjoining being, under ordinary circumstances, apparently'a mere matter of guesswork. . ,

Judgment for defendant, with costs.