Court Opinion

ID: 5201778
Source: CourtListenerOpinion
Date Created: 2022-01-06 15:53:49.328468+00
Date Added: 2024-06-11T08:27:12.765472
License: Public Domain

Ingraham, J. (concurring):
I concur with Mr. Justice Clarke that, for the reasons stated, no cause of action is alleged against the defendant Doelger, but I do hot concur in his conclusion that a causé of action is stated'as against the defendants Jones and Moran. I can find mo "allegation that the transfer of the business by Belford to Jones and Moran was made to hinder, delay or defraud creditors, or that Jones and Moran purchased the property with that intent. The substance of the allégation is that Jones and Moran purchased the property of Belford for $1,950, and that that property, including the good will of the business, was worth $3,000.
It appeared that Belford was indebted to the defendant Doelger for a, considerable amount, alleged in the complaint to be $1,191; that Doelger owned the building and fixtures, which he rented to Belford from May 1, 1905, to May 1, 1906, at an annual rental of $3,000, and Belford assumed a mortgage, of $10,000 held by Doel*654gev upon the premises; that on October U, 1905, Doelger notified the defendant Belford that he must sell out and vacate forthwith and refused to accept a purchaser of Belford’s business and good will who made an-offer of $3,500. Doelger was under no obligation to Belford’s creditors to allow him to continue in possession of property for which, as appears from the complaint, he had not paid the rent due therefor, and had not paid Doelger for the supplies furnished to enable him to continue his business. It is quite evident that the purchaser of- this. business, including the good will, could not successfully conduct the business' or continue in possession of the property without the consent of Doelger and he was not required to give such consent to any person or' persons suggested by the lessee. He accepted Jonós and Moran as purchasers. They were, therefore, entitled to purchase the property at what they considered a fair price, and that they made an advantageous purchase is no reason, in the absence of fraud, why they should-be deprived of it.
. This complaint, however, is sought to be sustained upon the allegation that after Doelger had notified Belford that he must sell out and vacate forthwith, and on October 18, 1905, a stranger called upon Belford and gave him several drinks of whisky; that thereafter Belford became totally unfit to discuss or. consider any business proposition and was unable to understand his acts or the' effect thereof; that thereupon the stranger offered him $50 cash if he would sell his place, equipment, business and good will for $lj950, and. obtained from Belford his signature to a contract embodying such terms, paying said Belford $50 ; that thereupon said stranger notified Belford that he was acting as agent in- the matter for Jones and' Moran. and that the transaction would be closed at the office of the defendant Doelger, where Belford-Would receive' $1,900 and sign a bill of sale. The complaint then'alleges that continuously after the signing of such contract Belford steadily .drank alcoholic beverages and at no' time between the signing of the contract and October twenty-first was lie able to comprehend the nature of his acts or the effect’ thereof, which fact is apparent and well known to every person with whom he came in contact; that on October 20, 1905, Belford called at the office of Doelger, - where - the bill of sale was signed. Doelger paid 'him the amount *655due him from Belford, and the balance of the money was paid to Belford, who disposed of it by spending part- of it and applying the balance to the payment of debts; that on October twentieth the representative of Jones and Moran took possession of the premises and Belford vacated the same.
Belford, so far as appears, never sought to disaffirm this transaction, but the plaintiffs, as his creditors, commenced this action in February, 1906, claiming to disaffirm this transfer upon the ground that the same was fraudulent and void as against the plaintiffs as creditors of Belford, or in the alternative to recover judgment against the defendants for the amount of Belford’s indebtedness to plaintiffs.
It seems to be conceded that the plaintiff would be required, to repay to Jones and Moran the amount that they paid to Belford before the transfer could be set aside. There is no allegation that Jones and Moran received any money of property out of the transaction, but simply that they obtained an assignment' of this business, which included the good will, lease and fixtures, for a sum of money which was less than its real value. There is nothing to justify a personal judgment against any of the defendants for any surp of money, but it is claimed that the plaintiffs were entitled to have the sale set aside and a receiver appointed to take possession of the assigned property for the benefit of- Belford’s creditors. Belford makes no complaint, but his creditors seek to enforce a right that he had to set-aside the transfer upon the ground that he was intoxicated and did not know what he was about. I do not see how it can be said that Jones and Moran were responsible for his intoxication, and the case must stand or fall upon whether these allegations are sufficient to show that Belford was incompetent by reason of temporary insanity caused by the excessive use of alcohol to make a valid transfer of his business-
Clearly, before such a transfer could be set aside, the plaintiffs would be compelled to repay the amount that Jones and Moran actually paid, and to sustain such an action, as I understand the rule, it is necessary to allege either a tender of the amount or a willingness to repay as, a condition of the equitable relief asked for. It is held in the prevailing opinion,, however, that a complaint is not demurrable because it fails to make an offer to return the con*656sideration received by the assignee. The case of Hay v. Hay (13 Hun, 315) is cited as an authority for that proposition. The complaint in that case alleged' that while one James Hay, for whom the plaintiff was the committee, was insane and under the"duress and restraint of the defendant, the latter extorted from him an agreement in writing, and on the same day, with fraudulent intent and unlawful coercion, induced him to execute a will, wherein defendant was named sole legatee and executor. Subsequently Hay was found a lunatic and defendant was appointed his" committee ; that the defendant, subsequently, by false representations induced the plaintiff to enter into an agreement with him, by which plaintiff waived all objections to the probate of the will, which was admitted to probate, and ■ defendant qualified as executor and continued to act as such. Subsequently the defendant obtained by fraud a general release from the plaintiff, and the complaint demanded that these four instruments be adjudged to be void. There was here no allegation, so far as appears, that the plaintiff had ever received anything from the defendant or that there was anything that the plaintiff should be compelled to restore in order to entitle him to maintain the action. Ho authorities are cited in the opinion upon the necessity of an offer to restore money that has been actually received by a lunatic or incompetent person for the transfer of property, and from the "report the question does not seem to have been presented.
The case of Kley v. Healy (149 N. Y. 346) is also cited as sustaining this contention, but I think it is an authority for the defendants. That was an action to set aside certain instruments executed by the defendant on the ground that they had been obtained by fraud. Judgment was entered at Special Term in favor of the plaintiff, which judgment was reversed by the General Term of the Court of Common Pleas (9 Misc. Rep. 93), and from the order of reversal the plaintiff appealed to the Court of Appeals. The reversal of that judgment was there sustained upon the ground that" “ the plaintiff has not offered to restore the defendant to the position which he occupied at the time when the agreement for settlement was made between them, and the court in its decree has not provided for ,such restoration as a condition of awarding the relief demanded.” The reason given is in the conjunctive and not in the disjunctive, and it *657would appear to follow from what was said that an allegation in the complaint of an offer to restore was necessary to sustain any cause of action. There was a dissent in that case, but the rule stated in the prevailing opinion seems to have been conceded, the only dissent being upon the principle that the point should have been made upon the trial and not left to be first considered on appeal. That case was before the Court of Appeals upon a former appeal (Kley v. Healy, 127 N. Y. 555), where the complaint was dismissed upon the opening. That judgment was reversed upon the principle that “ oné who attempts to rescind a transaction on the ground, of fraud is not required to restore that which in any event he would be entitled to retain, either by virtue of the contract sought to be- set aside or of the original liability. * * * While the sum retained should be taken into account in the award of relief, an offer to restore it is not a condition precedent to the bringing of an action to set aside the fraudulent release. * * * If her action failed, she was entitled to the sum received by virtue of the transaction itself. If she succeeded, the sum was less than she was concededly entitled to by the original judgment. In any event, therefore, she had only that which, without dispute, belonged to her, and a restoration, or the offer thereof, was unnecessary prior to the commencement of the action, for such conditions as might be essential to the protection of the defendant could be inserted in the judgment ultimately rendered.”
In Gould v. Cayuga County Nat. Bank (86 N. Y. 75) the condi tions under which a party may sue in case of transfer.or agreement obtained by fraud is stated as follows : “ One situated like the plaintiff can rescind by tendering or restoring what he has received, and then commence his action. He may keep what he has received and sue to recover damages for the fraud ; or he may commence an action in equity to rescind and for equitablé relief, offering in his complaint to restore in case he is not entitled to retain what he has received.”
From these cases the rule in relation to these actions is settled. When a plaintiff sues at law he is bound to tender the amount that he has received before maintaining the action based upon a rescission of the conveyance thus obtainéd; or he may, sue generally to recover damages for the fraud. He may also apply to a court of *658equity to rescind. In eqniiy where it appears that if he obtained-the relief for which he asked'he would not be entitled- to retain what he received, he must, in his complaint, offer to restore the amount received as a condition of equitable relief.
In this case I think it clear that if Belford had commenced this action, to rescind and repossess himself of the property assigned to Jones and Moran, he would have been compelled to repay to Jones and Moran the money that had been paid to him and which had been applied by him to the payment of his debts, or applied by him for his own purposes. It certainly would be inequitable for Belford or his creditors to obtain possession of the property for which Jones and Moran had paid $1,950 and not repay to them the amount that they had paid and which had been applied by. Belford to his own use. - Plaintiffs, as his creditors, can certainly stand in no better position than he stood, and' can obtain a rescission only upon the terms upon which he could insist upon such rescission. An allegation that plaintiff offered to restore is material, for' although the plaintiffs claim that this property, including the good will of the business, was worth $3,000, it is ' alleged that Jones and Moran actually paid $1,950 for it. It does not appear that Doelger was bound to recognize any assigned of Jones and Moran as a tenant or allow them to continue in possession of the leased property. However much .the plaintiffs might desire to recover the amount of Belford’s indebtedness to them, there is nothing to show that they would be willing under these conditions to repay to Jones and Moran the amount' that they had actually paid for the business. At any rate, Jones and Moran were entitled to receive that amount before tl^e. sale could be rescinded, and these plaintiffs could not maintain an .action for the rescission of the sale without tendering either the amount that Jones and Moran had paid for -the business, or offering in the complaint to make restitution.
For these reasons I think the demurrer should have been sustained. ' '
As -to defendant Doelger, judgment' reversed, with costs, and demurrer sustained, with costs,- with leave to respondents to amend on payment of such costs. As to defendants. Jones and Moran, judgment affirmed, with costs. Settle order on notice. '