Court Opinion

ID: 8038318
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:23:32.643255+00
Date Added: 2024-06-11T16:36:57.750703
License: Public Domain

Messmore, J.,
dissenting.
I respectfully dissent from that part of the opinion with reference to tender. This is an action at law to rescind a contract for the purchase of stock. The general rule is stated in Building & Loan Ass’n of Dakota v. Cameron, 48 Neb. 124, 66 N. W. 1109, as follows: “It has been often held, and may be regarded as elementary law, that one who seeks to rescind a contract on the ground of fraud must offer to return the property or consideration received therefor by him, provided it be of any value, within a reasonable time.” Citing Clark v. Tennant, 5 Neb. 549; Brown v. Waters, 7 Neb. 424; Babcock v. Purcupile, 36 Neb. 417, 54 N. W. 675. This rule has not been departed from by this court.
The petition in the instant case (and it is important) alleged, in substance, the purchase of 120 shares of stock on May 5, 1937, the fraud and discovery thereof, and an offer to return the stock certificate and one dividend of $6. The prayer was for judgment in the amount of $1,200, with interest at 6 per cent, from May 7, 1937. Plaintiff retained $226 dividends, received under the certificate, which he did not in his petition offer to tender back to the defendant. Upon the trial, and on November 17, 1941, plaintiff renewed his offer made January 6, 1940, which was an offer to return the stock certificate and one 6-dollar dividend, and, in addition, for the first time offered to return all dividends received and interest thereon, then amounting to $272. The latter tender was objected to as not being within a reasonable time; that the plaintiff for two years affirmed that part of the contract beneficial to him, thus having' the use and benefit of the dividends during that time. The facts developed that plaintiff’s demand upon the company was for the return of $1,200, plus interest from May 7, 1937, to January 6, 1940, or $192, making a total of $1,392. The petition and prayer of the petition verify this statement. The proper tender was to offer the return of the certificate of stock, dividends received thereon, plus interest received under the contract; then demand the $1,200, evidencing* the certificate of stock, with interest at 6 per cent, to the date *105of tender, as prayed in the petition. At the date of tender plaintiff’s dividends exceeded by $34 the 6 per cent, interest on the $1,200. In other words, there was never at any time a tender that would place the parties in statu qiio, or in the same position they were in before the contract was made, the plaintiff at all times having received more from the defendant than he ever offered to return.
In the case of Alfree Mfg. Co. v. Grape, 59 Neb. 777, 82 N. W. 11, this court held:
“A pleading for rescission of a contract for a breach in its conditions must allege the ground upon which a right to rescind is based — an offer to rescind without unnecessary delay by a tender of the property received, with a request for a return of the consideration. The offer to return the property must be continuous, and kept good by a proper averment to that effect.
“A contract cannot be rescinded in part and a part remain executed. If rescinded at all, it must be in toto, and the parties thereto placed in statu quo so far as the circumstances will permit.”
Suffice it to say that plaintiff’s petition did not make the proper tender as by law required. The tender must be a condition precedent to a law action to rescind a contract for the purchase of stock. The foregoing rule has been the law in this state and has been announced by the Massachusetts court, which has been cited and approved by the decisions of this court. The case of Loomis v. Pease, 234 Mass. 101, 125 N. E. 177, was based on rescission of a contract for purchase of stock. Plaintiff offered to return the stock before filing suit but did not offer to return the dividends received. The court said (p. 107) :
“To recover under this count (rescission) the plaintiff must have disaffirmed the contract and restored to the defendant the benefits derived therefrom. He must have done everything within his power to return to the defendant the property received and restore him to the same condition as before the contract was made.”
In the case of Rasmussen v. Hungerford Potato Growers *106Ass’n, 111 Neb. 58, 195 N. W. 469, this court said: “Immediately upon learning the facts he (plaintiff) should announce to his adversary that he does not intend to be bound by the terms of the agreement made, and tender back what he has received under it. To maintain rescission at law, he must do this at or prior to the time of the commencement of h'is action. Due allegation of his acts of rescission should be made in the petition. Alfree Mfg. Co. v. Grape, 59 Neb. 777; Pollock v. Smith, 49 Neb. 864; First Nat. Bank v. McKinney, 47 Neb. 149; American Bldg. & Loan Ass’n v. Rainbolt, 48 Neb. 434; Baker v. Thomas, 102 Neb. 401; First Nat. Bank v. Yocum, 11 Neb. 328; Symns & Co. v. Benner, 31 Neb. 593.”
The rule of practice is too well established to be gainsaid in cases where objection is made as in the case at bar. It is a most salutary rule, having its basis in truth and natural justice. The Rasmussen case was cited with approval by Circuit Judge Kenyon in Albert Lea Foundry Co. v. Iowa Savings Bank, 21 Fed. (2d) 515. The foregoing rule has been the rule in this state, adopted by this court, throughout its history since the case of Clark v. Tennant, 5 Neb. 549, down to the case of Aron v. Mid-Continent Co., 141 Neb. 806, 4 N. W. (2d) 884.
The majority opinion eliminates consideration of the pleadings which is equivalent to saying: Regardless, the facts in this case come within the exception to the rule; then announces the exception as follows: “Where the party rescinding would be entitled to retain the money or property received, either by virtue of an original liability if the contract be rescinded, or under the contract itself if rescission be refused, no tender or offer of restoration is required. If, then, the thing to be restored consists of money, the amount of which can be credited in partial cancelation of the injured party’s claim, a failure to restore will not preclude a suit to recover the consideration paid.”
Aside from the text and citation, Restatement, Contracts, the opinion cites Symns & Co. v. Benner, 31 Neb. 593, 48 N. W. 472. The facts in that case were: “Symns sold *107goods to Benner on the representation that Benner was entirely free from debt; that the goods in his store were paid for, and he was in the habit of discounting his bills and would pay the same within 10 days, whereupon goods to the amount of $500 were sold to him by Symns. In 10 days from the date of purchase Benner paid $100, and soon afterwards executed a mortgage for a large amount to his brother and surrendered possession thereunder of his goods.. Attachments were thereupon levied upon the goods, whereupon Symns brought an action in replevin to recover the goods previously sold by him, and on the trial paid into court the amount of money paid by Benner under the purchase, less the amount of goods sold by Benner. It was held that, as there was uncertainty as to the amount of goods sold by Benner, and as the offer to pay the $100 residue was made on the trial, and as soon as the amount was ascertained, it was within a reasonable time. The above decision naturally falls within the exception and is based upon the proposition that the person guilty of the fraud has put it out of the power of the party defrauded to make such return; that is, a return in toto. In the case at bar this situation did not arise. The party guilty of fraud has not put it out of the power of this plaintiff to make a return in toto, and no exception is made because it constitutes a return of money.
The case of Phenix Iron Works Co. v. McEvony, 47 Neb. 228, 66 N. W. 290, is cited: The court held, with reference to the tender: “When a vendor seeks to rescind a sale for fraud he must return or offer to return any portion of the purchase money which he may have received; but he need not do so when the property has been damaged by the fraudulent vendee to an amount equal to the purchase money so received.” The above case likewise meets the exception and is not analogous to the case at bar.
Collins v. Hughes & Riddle, 134 Neb. 380, 278 N. W. 888, is cited. This was a damage action for personal Injuries received by the plaintiff by virtue of an automobile accident, based on negligence of the defendant. A release had *108been procured by defendant for $15 in complete settlement. The case proceeded to trial on the negligence of the defendant. A verdict for $15,000 was returned for the plaintiff; a remittitur of $10,000 was required, and the case was remanded for the reason that the verdict was excessive and constituted prejudicial error. The release was set aside, and the exception to the rule, as heretofore announced, was stated.
The instant case is one to rescind the purchase of a certificate of stock, wherein the purchase was induced by fraud, and does not admit of the exception, and never has until the decision in the instant case. There are no other Nebraska cases cited in the majority opinion to sustain the exception, and it is respectfully submitted that the foregoing cases are not authority for the application of the exception to the facts in the instant case. The mere statement of the exception refutes itself for the reason that the dividends the plaintiff received were under, and by right created by, the contract. To effectuate a rescission of this contract is to destroy it and all rights' created under it, including the right to retain the dividends received. When counsel argues that the contract is rescinded, plaintiff has no remaining right, in any event, under the contract and especially any right to keep the benefits except by affirmance of the contract. The phrase, that “one need not offer to return that which he would be entitled to keep in any event,” has its origin in a different branch of the law,— compromise and settlement, accord and satisfaction, or where the property sold has been damaged or placed beyond the power of the defrauded party to make a tender in toto. The effect of rescission is to extinguish the contract so effectively that, in contemplation of law, it never had had any existence. It puts an end to the contract for all purposes. Primarily, it is a rescission of an agreement to purchase stock, to put the parties 'in the same position they were prior to making the contract. 12 Am. Jur. 1038, sec. 455. To permit the rescinding party to retain one species of property received under the contract, and not all the *109property of value, does not create an exception, but is to ignore and destroy a well-established rule of law.
The plaintiff in the instant case does not come within any of the legitimate exceptions to the rule. The property retained by him had value; its retúrn was entirely possible. With the question of fraud, as presented in the instant case, I have no quarrel. It is my purpose to sustain a salutary rule of law and not to promiscuously create an exception to it and, in fact, adopt the exception as a rule of law, to govern this court in future cases involving a law action to rescind a contract for the purchase of stock. While this rule might do violence in some cases, it has been 'proved to be a definite, clear and salutary rule in a majority of cases involving a law action of this kind.