Court Opinion

ID: 8260186
Source: CourtListenerOpinion
Date Created: 2022-10-16 15:53:04.879132+00
Date Added: 2024-06-11T16:43:09.173123
License: Public Domain

*116SEPARATE OPINION,. ON MOTION EOR REHEARING.
Biggs, J.
A re-examination of this case, on the motion for rehearing, has led me to the conclusion that the judgment of the circuit court ought to be reversed. The effect of our opinion is to hold that a contract may be rescinded in an action at law. This, I do not think can be done. Where the execution of a contract is admitted, a court of law can only recognize and enforce its legal effect. If one of the contracting parties wishes, by judicial action, to be released from it, he must apply to a court of equity. Wheré, however, a contract has been obtained by fraud, it is permissible for the defrauded party, on his own motion, without the aid of any court, to rescind it, if he acts promptly after the discovery of the fraud. But, in order to make the rescission complete, he must return, or offer to return, whatever of value he may'have received on account of such contract. There is an exception to this general rule where an unquestioned claim has been compromised by the payment of a smaller sum. But this case does not come within the exception, because the original liability was a matter of controversy. In the present action it is admitted,or at least the jury so found, that the plaintiff received under the contract about $10 in money and medical attendance furnished by the defendant of the value of $50. Until these amounts were returned, or offered to be returned, to the defendant, the plaintiff’s contract of compromise stood as a legal bar to the prosecution of his original cause of action. If the money had been returned, then the plaintiff could have proceeded with his action, upon the theory that the contract had been rescinded, and his plea of fraud in the rexdy could then have been supplemented and supported by his act of avoidance or rescission, which in my oxffnion was absolutely necessary to make the plea good. Courts of law may try such an issue on the theory that *117the right of rescission has been exercised by the plaintiff, and, if it is developed on the trial that such right was available, the rights of the parties would then be determined as if the contract had never existed. In this way a court of law may make effective previous acts of rescission, but in doing so it cannot be said that the court annulled or canceled the contract.
What has been said is supported by the supreme court of New York (Gould v. Bank, 86 N. Y 75 ; Cobb v. Hatfield, 46 N. Y. 533); the supreme court of Georgia (East Tenn., etc., Ry. Co. v. Hayes, 10 S. E. Rep. 350); the supreme court of Massachusetts (Thayer v. Turner, 8 Metc. 550; Kimball v. Cunningham, 4 Mass. 502); the supreme court of Illinois (Doane v. Lockwood, 115 Ill. 490; Moriarty v. Stofferan, 89 Ill. 528); the supreme court of New Hampshire (Pierce v. Wood, 3 Foster, 519); and Bigelow on Fraud, sections 74, 75.
The case of East Tenn., etc., Ry. Co. v. Hayes, supra, was exactly like the case at bar. There had been a compromise settlement, and the railroad company had paid Hayes $100. The company interposed the compromise agreement in bar of the action, and Hayes replied that it was obtained by fraud. The sole question in the case was, whether Hayes could recover on his original cause of action, unless it appeared that he had returned, or offered to return, the money .before the commencement of the suit. The court, in a well-considered opinion, held that a return of the money before the commencement of his action was a condition precedent to the right to maintain it. It was said : “While fraud may vitiate or avoid all contracts, the contract is nevertheless not void, but, voidable only, at the instance of the person defrauded. He who perpetrates the fraud cannot avoid the same, or vitiate it, on account of his own conduct. It may be a good contract until it is avoided by the action or at the instance of him who is defrauded. * * * Something must be *118done by the party defrauded before the contract can cease to bind. When that something has been done, and the engagement has been terminated, the contract is said to have been rescinded, and the process by which this result is effected is called rescission. A contract may be rescinded, out of court, at the instance of the party defrauded, where an agreement has been made, and something of value has been received by the defrauded party, whether vendor or purchaser it matters not. This must, before suit, be tendered back to the wrong-doer in the name of rescission, with demand of return of what the wrong-doer has received. The object of the tender is to effect a restoration, of the status quo, and in this class of cases it is a condition precedent to rescission.”
The case of Gould v. Bank, supra, is also a similar case to the one under consideration. In that case the supreme court of New York collected and commented on all the reported cases, and, in a very exhaustive and satisfactory opinion, came to the conclusion that, where there had been a compromise of a cause of action and anything of value had been paid on account of it, a suit could not be based on the matters thus settled, unless the contract had been previously rescinded by the judgment of a court, or by the plaintiff returning or offering to return whatever of value he' received under the contract. The court said: “The compromise agreement, unless annulled, is an absolute bar to the action. It is a general rule laid down in the text-books and reported cases, that a party who seeks to rescind a contract into which he has been induced to enter by fraud must restore to the other party whatever he has obtained by virtue of the contract. Cobb v. Hatfield, 46 N. Y. 533. Tie cannot retain anything he received under the contract and yet proceed in disaffirmance thereof. * * * But the claim of the plaintiff is that because it was finally determined by the court that the sum paid the plaintiff and much more was due him from the bank, *119the fact that he did not return the money furnished no defense to the action. It is believed, that this claim, under the circumstances of this case, has no sound basis of principle or authority to rest on.” Further on in the opinion the court said : “ The difference between an action to rescind a contract and one brought, not to rescind it, but based upon the theory that it has already been rescinded, is as broad as a gulf. They depend upon different principles and require different judgments.”
It would serve no good purpose to quote further from the authorities cited. An examination of them will show that, where a matter in dispute has been compromised, and an action is based on the original relations between the parties, the plaintiff must show that, previous to the commencement of the action, he rescinded the contract of settlement by placing his adversary in statu quo, that is by paying back to him the consideration of the contract. The contrary to this seems to me to be illogical, unless a contract obtained by fraud is void ab initio. If this rule be adopted, then neither party would be bound, which is contrary to the great weight of authority. Such a contract is absolutely binding on the party practicing the fraud, and it is only voidable at the instance of the party defrauded. It cannot be said that a contract is absolutely binding on one party, and absolutely void as to the other.
I find nothing in the decisions of our own court which are opposed to the views herein expressed. In the case of Vautrain v. Railroad, 78 Mo. 44, the plaintiff denied that he received any money or anything else of value in settlement of his action.
In Blair v. Railroad, 89 Mo. 383, there was an equitable count which was first tried by the court, and in this trial the compromise agreement was set aside, and the plaintiff ordered to deposit in court the amount received by her under the compromise. When an action for rescission is brought in a court of equity, it *120is only necessary for tbe plaintiff in his petition to offer to return or restore to the defendant what he has received. Allerton v. Allerton, 50 N. Y. 670.
In Mateer v. Railroad, 16 S. W. Rep. 839, the plaintiff, as in the Vautrain case, denied that he had received anything by way of compensation for the injuries received. I, therefore, conclude that the circuit court committed error in refusing the defendant's seventeenth instruction.
On other branches of the case I agree with my associates, but it seemed to me that our reasoning was so much opposed to that of the supreme court in some of the cases cited that the case ought to be certified. In fact I think that our decision on the quantum of evidence necessary to sustain the issue of fraud, or other ground of rescission, is opposed to the decision of the supreme court in the Yautrain case.