Court Opinion

ID: 8851561
Source: CourtListenerOpinion
Date Created: 2022-11-26 17:15:03.04529+00
Date Added: 2024-06-11T17:05:30.943501
License: Public Domain

TAFT, Circuit Judge,
after stating the case, delivered the opinion of the court.
We may concede, without deciding, that the fact that the court ■below had talcen possession of all the assets and property of the Cardiff Company by a receiver, and was in the course of administering its estate under a general creditors’ bill, gave the court ancillary jurisdiction to hear and determine a controversy like that sought to be raised by this bill, without regard to citizenship of the parties; for, admitting the jurisdiction, it is manifest that, on general principles of equity, the court was right in dismissing the bill. The complainants had no standing at all to seek the relief they prayed, except on the theory that they were creditors of the company. They could not be creditors until the contract for the purchase of lots from the company, by the terms of which they were debtors and not creditors, was rescinded. Therefore, if their bill fails to state a good case for rescission, they must go out of court. They base their right to rescind on the falsity of representations made in March, 1890, and inducing their purchase in April following. They did not file their bill to rescind for three years and a half thereafter. The lots which they bought were of uncertain value, changeable from month to month, and dependent on the success of a *705manifestly speculative enterprise. It was their duty, as soon as they learned that fraud had been practiced on them, at once to give notice of rescission and sede relief in the courts. There is not a line in the bill giving any reason for their delay in taking these steps. They waited, indeed, until after the court below, in another action, had taken possession of the assets under another creditors’ bill, and had sold the property of the company under its decree, before asserting their right to rescind and to he considered creditors. The bill shows the collapse of the company by the appointment of a receiver and the abandonment of its enterprise, at least two years before the filing of the bill in this case. Certainly, if there had been any fraud in the sale of lots in April, 1890, the complainants were put on inquiry as to its existence. The proceedings in the other creditors’ bill and the appointment of the receiver so affected the enterprise in which the complainants had embarked that they could not have been ignorant of them. Foster v. Railroad Co., 146 U. S. 88, 13 Sup. Ct. 28. Under such circumstances, a delay of three years and a half, before attempting to rescind, cuts off the right to do so, even if it existed originally. “A delay which, might have been of no consequence in an ordinary case may he amply sufficient to bar relief when the property is of a speculative character, or: is subject to contingencies, or where the rights and liabilities of others have been in the meantime varied. If the property is of «a. speculative or precarious nature, it is the duty of a man complaining of fraud to put forward his complaint at the earliest possible time. He cannot be allowed to remain passive, prepared to affirm the transaction if the concern should prosper, or to repudiate it if that should prove to he to his advantage.” Hayward v. Bank, 93 U. S. 611-618; Oil Co. v. Marbury, 91 U. S. 587; Grymes v. Sanders, 93 U. S. 55; Johnston v. Mining Co., 148 U. S. 360, 13 Sup. Ct. 585; Mining Co. v. Watrons, 9 C. C. A. 415, 437, 61 Fed. 163. If any cause of action exist in favor of the complainants against the directors of the company for fraud, this must he asserted by action at law. For these reasons we are of opinion that, on the facie of the bill, complainants were not entitled to rescission because of unexcused delay, and therefore that the bill was rightly dismissed on demurrer. The decree of the circuit court is affirmed.