Court Opinion

ID: 5586906
Source: CourtListenerOpinion
Date Created: 2022-01-11 01:56:13.030286+00
Date Added: 2024-06-11T08:36:17.298540
License: Public Domain

ON MOTION EOR REHEARING.
Hines, J.
In one ground of the motion for rehearing it is insisted that we overlooked section 4305 of the Civil Code, which requires that a party seeking rescission must promptly, upon discovery of the fraud, restore or offer to restore to the other whatever he has received by virtue of the contract, if it be of any value. This question was not expressly raised by demurrer to the petition, nor was it raised or discussed in the brief of counsel for the defendant. But, conceding that this point should be considered under the general ground of demurrer that the petition set forth no cause of action, we do not think that this principle was applicable in this case. The general rule is that one who seeks the rescission of a contract on the ground of fraud must restore or offer to restore the consideration received thereunder, as a condition precedent to bringing the action. Williams v. Fouché, 157 Ga. 227 (121 S. E. 217); *410Williams v. Fouché, 160 Ga. 801 (129 S. E. 49); Civil Code, § 4305. But to this general rule there are exceptions, based upon equitable reasons. Coffee v. Newsom, 2 Ga. 442 (3); Timmerman v. Stanley, 123 Ga. 850 (51 S. E. 760, 1 L. R. A. (N. S.) 379); While v. Sikes, 129 Ga. 508 (59 S. E. 228, 121 Am. St. R. 228); Collier v. Collier, 137 Ga. 658, 667 (74 S. E. 275, Ann. Cas. 1913A, 1110); Wynne v. Fisher, 156 Ga. 656 (119 S. E. 605); Williams v. Fouché, supra; Flelcher v. Fletcher, 158 Ga. 899 (124 S. E. 722); Southern Railway Co. v. Williams, 160 Ga. 541 (5) (128 S. E. 681). In this case the defendant did not have legal title to the land for a part of the purchase-money of which the notes sued upon were given, but held the same under an executory contract of purchase. The plaintiff paid to the vendor in said executory contract of sale the balance due him by the defendant on the purchase-money of this land; and the defendant procured his vendor to make a deed directly to the plaintiff, and took from the plaintiff notes for the balance of the purchase-money due by the plaintiff to him, secured by a mortgage on this land. In these circumstances the plaintiff would be entitled to a lien on the land for the amount of the purchase-money paid by him to the vendor of the defendant under such contract of sale, and should not be required to convey or offer to convey to the defendant in this case said land until said amount had been paid back to him. In these circumstances a court of equity can adjust by the final decree in the case the rights and equities of the respective parties, and, in case of rescission, should require the parties to give effect to the respective rights and equities of each other. By the final decree in the case the plaintiff, if he succeeds in rescinding the contract between him and the defendant, can be required to convey to the defendant this land. Under the facts of this case we do not think that the plaintiff should have conveyed or offered to convey to the defendant this land until he had been reimbursed for the amount of money paid by him to the vendor of the defendant.
It is insisted that we overlooked the basic fact in this case that the agent was not only the agent of the plaintiff who seeks to repudiate the contract, but was also the agent of the party who does not seek such repudiation. A casual reading of the opinion in this case will show that this contention is not well founded. The decision may be wrong in that it may announce an incorrect prin*411ciple of law; but it can not be contended that we overlooked this fact in reaching the conclusion announced. But if we did not overlook this fact but reached a wrong conclusion and announced an incorrect principle of law, we should retract and correct the erroneous conclusion reached by us. With the view of determining whether we erred in our opinion, we have again carefully considered the question involved. It is insisted by counsel for the defendant that we quoted Mechem on Agency, as authority for the conclusion reached by us; and that we overlooked the following principle announced by this author: “But the most difficult question is this: —If my agent enters your employment without your knowledge and without any negligence on your part, may I repudiate? To permit me to do so, it is obvious, is to permit me to take advantage, against a perfectly innocent partj, of the misconduct of my own agent. The rule is often stated broadly enough to cover this case also, though it is not so easy to see upon what grounds it is based. The practical foundation of the rule in this case, if it applies, must doubtless be found by approaching the matter from the standpoint of the other party, namely, in the conviction that not even an innocent third party, who is also the principal of the same agent, may be allowed voluntarily to retain benefits or advantages which came to him only through the act of his agent and as the result of that same agent’s perfidy to his other principal.” 2 Mechem on Agency (2d ed.) 1716, § 2139. In the first place it will be noted that Mechem does not undertake to state that, in the circumstances stated, innocent principals can not repudiate the contract. The author then states the practical foundation of the rule, if it exists, and states that it “must doubtless be found by approaching the matter from the standpoint of the other party, namely, in the conviction that not even an innocent third party, who is also the principal, of the same agent, may be allowed voluntarily to retain benefits or advantages which came to him only through the act of his agent and as the result of that same agent’s perfidy to his other principal.” In the opinion in this case we held that either of the innocent principals could repudiate the contract, and rested our decision upon the foundation suggested by Mechem in the above quotation from his work on agency. The reason for the rule which we announce is, that a principal can not retain benefits and advantages secured by him through the act of his agent, and as the result of that same *412agent's perfidy to his other principal. The fraud of the dual agent is the fraud of his principal; and such principal can not retain the fruits of such fraud. It follows that the principle announced in section 4537 of the Civil Code, that, when one of two innocent persons must suffer by the act of a third person, he who put it in the power of the third person to inflict the injury must bear the loss, is not applicable in this case, for the reason that the principals are not innocent parties, but are each chargeable with the fraud perpetrated by the common agent.
For the reasons stated above, the motion for rehearing is denied.