Court Opinion

ID: 6965100
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:52:27.287956+00
Date Added: 2024-06-11T16:08:34.841876
License: Public Domain

Mr. Justice Bailey delivered the opinion of the Court. The complainant, by his bill, is seeking to rescind and procure the cancellation of a certain transaction or agreement, by which, in consideration of the sum of $40,000 to him paid by the defendant, he assigned and transferred, and, in substance, surrendered to the defendant, a certain contract between him and the defendant, by the terms of which the complainant, in consideration of certain services to be by him performed, was to have transferred to a trustee, for his use, a certain proportion of the shares of the capital stock of the Chicago and South Side Rapid Transit Railroad Company, and a certain proportion of the bonds to be issued by said company. The substance of the case made by the bill is, that the defendant, by himself and his agents, made to the complainant certain false and fraudulent representations in relation to the value of the complainant’s rights under said contract, and that the complainant, relying upon said representations and believing them to be true, was induced to and did surrender said contract to the defendant for the sum of $40,000, that being but a small part of the real valúe of the shares of stock and bonds to which, by the terms of said contract, he had become entitled. It is not pretended that the complainant has ever returned or offered to return to the defendant the $40,000 received by him as the consideration for the surrender of, said contract. He does not even offer by his bill, except in a qualified way, to make such return. In his original bill nothing was said on that subject, and that bill having been held insufficient on demurrer, he filed an amendment thereto, in which there is no attempt to show a return or tender of said consideration, but merely an excuse for not having made such return or tender. Said excuse is, in substance, that he has spent a considerable portion of said money, and being a man of limited means, he can not procure or control that sum of money, so as to make a tender; that if he succeeds in his suit, there will be found due him in cash, stocks and bonds, an amount largely in excess of said sum; that his return of said consideration and the delivery to him by the defendant of the cash, stocks and bonds due under said contract, should be simultaneous acts, and that the complainant should not be required to pay back said consideration until the entry of the final decree, and he offers to return it by deducting it from the amount of cash, stocks and bonds which shall, on the final hearing, be found due him from the defendant. A contract into which a party has been induced to enter by the fraud of the other party is not void, but is only voidable at the election of the defrauded party. Until he has elected to rescind, and has performed such acts on his part as are necessary to work a rescission, the contract remains in full force, and he is entitled to no remedy which is not based upon the theory of its continued validity. ' It is a general rule, to which there are but few exceptions, that the restoration of the party against whom the relief is sought, or the offer to restore him to the position which he occupied before the transaction complained of took place, is a condition precedent to the right to rescind. The right can be exercised only upon the terms of returning the consideration received, or perhaps, under certain circumstances, of returning its value. 1 Bigelow on Frauds, (ed. 1888,) 420. As said in Neblett v. Macfarland, 92 U. S. 101: “In cases of this character, the general principle is, that he who seeks equity must do equity; that the party against whom relief is sought shall be remitted to the position he occupied before the transaction complained of. The court proceeds on the principle that, as the transaction ought never to have taken place, the parties are to be placed as far as possible in the situation in which they would have stood if there had never been any such transaction.” The rule requiring a party seeking to rescind a contract for fraud to place or offer to place the other party in statu quo, as a condition precedent to his right to. rescind, has been so frequently affirmed in this State as to require no extended discussion or illustration.- Thus, in Strong v. Lord, 107 Ill. 25, it is said: “There can be no dispute as to the general rule, that the party who would rescind a contract on the ground of fraud, must restore the other party to the condition in which he stood before the contract was made.” So, in Doane v. Lockwood, 115 Ill. 490, it was said: “Undoubtedly, the law is, where a party has received any valuable consideration upon the sale of property, he can not rescind the contract for fraud, without first returning, or offering to return to the purchaser the consideration received, whatever it may be. The title of the fraudulent purchaser is subject to be divested, at the election of the seller, within a reasonable time after the fraud is discovered. When the sale is thus rescinded for fraud, it is as though no sale of the property had been made, and in that event the original taking will be regarded as a tortious taking without the consent of the vendor, and the title at once becomes reinvested in him, as though it had never been divested. Until the contract is rescinded, it is obvious that both the title and the right of possession remain in the fraudulent purchaser.” In Buchenau v. Horney, 12 Ill. 336, which was a suit by a seller for the consideration of the property sold, the defense being that the sale had been rescinded by the purchaser for fraud, it was said: “A party can not rescind a contract of sale, and at the same time retain the consideration he has received. He can not affirm the contract as to part, and avoid the residue, but must rescind in toto. He must put the other party in as good a condition as he was before the sale, by a return of the property purchased. There may be an exception where the subject matter of the sale is entirely worthless. But if it is any benefit to the seller, the purchaser must restore it before he can put an end to the contract.” To similar effect see Jennings v. Gage, 13 Ill. 610; Bowen v. Schuler, 41 id. 192; Ryan v. Brant, 42 id. 78; Wolf v. Dietzsch, 75 id. 205; Lovingston v. Short, 77 id. 588; Kellogg v. Turpie, 93 id. 265 ; Smith v. Brittenham, 109 id. 540; Same v. Same, 98 id. 188; Preston v. Spaulding, 120 id. 208 ; Farwell v. Hanchett, id. 573. The complainant then having failed to show that, prior to the filing of his bill, he elected to rescind the transaction or agreement complained of, or took any of those steps which are legally necessary to effectuate a rescission, it must be held that, so far as is shown by the bill, said transaction remains in full force, and that the complainant is entitled to no relief based upon the theory of its rescission. The facts alleged in the amendment to the bill are clearly insufficient to bring the case within any of the recognized exceptions to the rule that, in order to a rescission, the consideration received must be returned or tendered. The fact that, before ascertaining the alleged fraud, he had expended a large part of said consideration, is no excuse for not tendering to the defendant the amount of said consideration. As said by Mr Bigelow in his Treatise on the Law of Frauds: “ The rule requiring tender is not dispensed with by evidence that the injured party disposed, in whole or in part, of what he had received, before having become aware of the misrepresentation. He will then be left to an action for damages, or to a right to have the contract price reduced, if the price remains unpaid.” 1 Bigelow on Frauds, 425. The same rule, in substance, is held in McCrillis v. Carlton, 37 Vt. 139. Upon analogous principles, it must be held that, the inability of the defrauded party, by reason of his financial situation or want of means, to raise the amount of the consideration received for the purpose of making a tender, after having once spent it, does not exempt him from the operation of the rule requiring such tender, in order to a rescission. It is sought, however, "by the amendment to the bill, to bring the case within an exception to the general rule, recognized by some of the authorities, viz, that where the judgment or decree itself will accomplish the result of placing the other party in statu quo, a tender need not be made before suit brought, but that the rescission may be made by the pleadings. Without pausing to consider the soundness of the alleged exception or its precise scope, it is clear that the case stated in the bill does not come within it. The case is not shown to be one where the defendant can be placed in statu quo by the decree. The consideration to be returned is $40,000 in cash. The equity to which the complainant, by his bill, claims to be entitled, is, to be reinstated in his rights under the original contract between him and the defendant, and to have said contract enforced in his favor. If restored to his rights under said contract, he will be entitled to have certain stocks and bonds of the Chicago and South Side Rapid Transit Railroad Company placed in the hands of a designated trustee for his use. The relief sought does not necessarily involve any money decree in his favor out of which the consideration received by him could be deducted and thus satisfied. He alleges that a sufficient amount of the stocks and bonds of said railroad compahy to satisfy the terms of said contract still remains in the defendant’s hands or under his control, and under that allegation, all the decree he could be entitled to in any event would be, that the defendant surrender to said trustee said stocks and bonds. He could claim no money decree. It is true, he prays for an accounting, and if it should turn out that the defendant has not sufficient stocks and bonds to comply with said contract, that the defendant be decreed to pay over the deficiency in money, but there is nothing showing or tending to show, with any degree of certainty, that the litigation will or can result in a money decree, and certainly not in a decree for as large a sum as the consideration received. Under these circumstances, the only way in which the defendant could be placed in statu quo by the decree would be, a by requiring him to account in money for the stocks and bonds to which the complainant is entitled under said contract. That clearly could not be done, at least, if the defendant saw fit to obey the decree requiring the surrender of said stocks and bonds. He would be under no obligation to retain them as the equivalent of the $40,000 paid by him as the consideration for the surrender of said contract, nor could the court compel him so to do. Other questions are raised by counsel in their arguments, but as what we have said necessarily disposes of the case, those questions need not be considered. The judgment of the Appellate Court affirming the decree of the Superior Court will be affirmed. Judgment affirmed.