Court Opinion

ID: 8011417
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:58:37.765875+00
Date Added: 2024-06-11T16:35:47.267952
License: Public Domain

Macfarlane, J. (concurring).
— I agree to the conclusion reached by the court that the judgment should be affirmed, but desire briefly to give my reasons therefor.
The questions insisted upon in this court by defendant are: First, that an action could be not *376maintained for damages until the release had been canceled by a decree in equity; and, .second, that the release could not be attacked for fraud, either in law or equity, until plaintiff had restored to defendant whatever of considerations he had received thereunder.
An examination of this abstract of record fails to show that any objection was, at any time, by pleading or otherwise, made to the failure of plaintiff to return, or tender to defendant, the consideration paid under' the release. On the other hand, the record does show that the defendant insisted upon the validity of the release throughout the trial, and gave it prominence as a defense. It'may, therefore, be reasonably inferred that a tender would have been refused, and was waived. In addition, it affirmatively appears upon the record, that the amount paid out by defendant on account of the release was restored to it by a reduction of the judgment which was obtained by defendant. Manifestly, defendant was not prejudiced by a failure to make the tender.
We have often said that this court will o'nly consider questions to which exceptions have been saved in the circuit court, or which affirmatively appear upon the record proper. We must, therefore, decline to consider the second proposition.
This leaves simply the question whether the reply properly put in issue the validity of the release; or, in other words, whether a release of the character of this one can be avoided, in an action at law, on the ground of fraud charged in the reply to the answer of defendant setting it up in bar of plaintiff’s action. Defendant insists that it is a complete bar, until canceled by the decree of a court of equity.
It is undoubtedly true that fraud was one of the original heads of equity jurisdiction. “But,” says Blackstone, “every kind of fraud is equally cognizable *377* * * in a court of law; and some frauds are cognizable only there, as fraud in obtaining a devise of lands.” 3 Black. Com. 431. “Courts of equity and courts of law have a concurrent jurisdiction to suppress and relieve against fraud.” Lord Mansfield in Bright v. Eynon, 1 Burr. *396. This principle has received recognition and approval by this court-from the decision of Montgomery v. Tipton, 1 Mo. 446, to that of Clough v. Holden, 115 Mo. 336.
This doctrine is not disputed when the fraud is pleaded by way of answer to a cause of action stated in the petition, but, it is insisted, and argued with much learning and ability, that a different rule applies in case the charge of fraud is made to a release when pleaded as a bar to the action. In such case it is argued that the release must be canceled by the decree of a court of equity before the original action can be prosecuted. The principal ground of objection urged to the right to raise the question of fraud by reply is, that such a course of proceeding permits questions of fraud to be tried by a jury, instead of a chancellor, and the rescission of a release to be obtained upon evidence which would have been insufficient in a court of equity.
But this objection can be urged with equal plausibility, to pleading fraud by answer, which, it is conceded, may be done. When we keep in view the fact that courts of law have jurisdiction to relieve against fraud, it would seem to follow logically that its jurisdiction may be exercised to relieve against a fraudulent contract pleaded as a defense, as well as against a fraudulent contract which is made the subject-matter of the suit. It would seem wholly unnecessary, and oppressive to drive a plaintiff to another jurisdiction for relief against a defense, of which he may have had no information until the answer was made, when the forum, *378having all the parties before it, has ■ concurrent jurisdiction of the same subject-matter. This is particularly true in jurisdictions wherein legal and equitable rights are administered by one court and in one proceeding, as in this state.
Chitty says: “To a plea of release, he (plaintiff) may reply non est factum, or that it was obtained by duress or fraud.” 1 Chitty on Pleadings [16 Am. Ed.] 608. It is contended by counsel that Mr. Chitty had reference alone to a release obtained pending the suit. It is true, the references made are to cases in which pleas puis darrein continuance were interposed, but the author’s general accuracy in the statement of his proposition forbids my acceptance of any qualification to the broad and general declarations. Bliss, in his work on Code Pleading, lays down the same rule, section 201.
The rule given by Mr. Chitty has been generally, if not uniformly followed by the courts of this country. “The pleading of a release first occurs generally in the answer or plea of the defendant, unless in actions brought to set aside a release. And the controverting of the release is usually made under the plaintiff’s reply.” 20 Am. and Eng. Encyclopedia of Law, 766.
The following cases will be found to follow the rule given by Chitty, supra, as applied to a release of claims for damages on account of personal injuries caused by negligence. Railroad v. Lewis, 109 Ill. 120; Bussian v. Railroad, 56 Wis. 325; Railroad v. Brazzil, 78 Texas, 314; Sobieski v. Railroad, 41 Minn. 169; O’Brien v. Railroad, 57 N. W. Rep. (Iowa), 425; Mullen v. Railroad, 127 Mass. 87; Addystone, etc., Co., v. Copple, 22 S. W. Rep (Ky.) 323; Dixon v. Railroad, 100 N. Y. 170; Bean v. Railroad, 107 N. C. 731; O’Neil v. Railroad, 63 Mich. 690; Railroad v. Hayes, 83 Ga. 558; Railroad v. Higgins, 44 Ark. 296.
The pleading necessary to assert and attack such *379release has not been directly considered or decided by this court. In Vautrain v. Railroad (8 Mo. App. 538) a release was pleaded in bar and the reply charged that it was obtained by fraud. No question of the propriety of thus attacking the release was raised or considered but the sufficiency of the pleading to put in issue the validity of the release was, inferentially, at least, conceded. This decision was approved by this court without comment. 78 Mo. 44.
In the ease of Blair v. Railroad, 89 Mo. 383, the petition contained two counts, one in equity to set aside the release and the other for the damages received. This method of proceeding was approved by this court. There can be no doubt that a plaintiff can elect to have the release set aside by suit in equity before proceeding at law on the original cause of action. The Blair case, then, only settled the question that the two actions may be joined in separate counts in the same petition.
This court has recognized the right of a plaintiff to plead fraud in reply to a transaction set up by answer as a bar in the original cause of action. Wright v. McPike, 70 Mo. 177; Williams v. Railroad, 112 Mo. 463; Jarrett v. Morton, 44 Mo. 277.
Our conclusion is that the validity of the release was properly put in issue by the reply.
Black, C. J., and Be ace, J., concur in this opinion.
Burgess, J.
— Finding myself unable to agree to some of the propositions asserted in the majority opinion of the court, I feel justified in giving my reasons and those of my associates, who agree with me, why I do not do so. ■
Mr. Ohitty, in his work onpleadings, says that “to a plea of release, he (the plaintiff) may reply non est factum, or that it was obtained by * *' * fraud.” 1 Chitty on Pleadings [16 Am. Ed.], p. 608. He also *380gives the form of reply of fraud, where the defendant has pleaded a release. 2 Chitty, 455. But from the general way in which the author thus states the law it is impossible to tell what kind of release he has reference to, whether all kinds or mere receipts or acquittances. If the latter, there is no question as to the correctness of the rule as a receipt may be contradicted at any time by verbal testimony.
In the case of Wild v. Williams, 6 Mees. & W. 490, the court refused to strike out a plea puis darrein continuance setting up a release, on affidavit showing release was obtained by fraud, holding that the plaintiff could contest the plea on that ground under a replication setting up the fraud. It is scarcely necessary to say that in that case, as the release had not been executed at the time of the commencment of this suit, that it could not then have been set aside, because not in existence.
In the case of Webb v. Steele, 13 N. H. 230, and Hoitt v. Holcomb, 23 N. H. 535, the" rule as laid down by Mr. Chitty is adhered to. So it is also in the case of Bussian v. Railroad, 56 Wis. 325, and in Dixon v. Railroad, 100 N. Y. 170. In the case of O'Donnell v. Clinton, 145 Mass. 461, the plaintiff returned or offered to return the money received by him on the settlement before instituting his suit. So did the plaintiff in the case of Peterson v. Railroad, 38 Minn. 510.
The case of Lusted v. Railroad, 71 Wis. 391, was a case in which the plaintiff sustained personal injury, and whose stock was injured at the same time in a collision, and he was induced by fraud and fraudulent representation to settle and compromise the case for $50 when he executed a receipt in full of all damages to stock and for personal injuries, and it was held that it was unnecessary for him to offer to refund the money received by him before bringing his suit for the injuries *381sustained to his person because no such thing was embraced in the settlement. .The same rule was announced in the case of Ryan v. Gross, 12 Atl. Rep. 115. In the case of Railroad v. Lewis, 109 Ill. 120, the same rule is announced.
It was also held in that case that as the contract of settlement was obtained by fraud it was absolutely void and need not be rescinded in order to remove it out of the way to the assertion of a right. And, further, that, under such circumstances, the party might bring his action without first paying or tendering back the money that he had received on the settlement. The case of Mullen v. Railroad, 127 Mass. 86, is cited as an authority supporting the rule announced in that case. The facts in the case last cited were that the signature of the plaintiff was obtained to a paper purporting to be a settlement and discharge of the cause of action by fraudulent representations that it was merely a receipt for a gratuity, and the court in speaking with reference thereto says: “It is well established that, if a party enters into a contract and in consideration of so doing receives money or merchandise, and afterwards seeks to avoid the effect of such contract as having been fraudulently obtained, he' must first give back to the other party the consideration received. Coolidge v. Brigham, 1 Metc. 547; Eastabrook v. Swett, 116 Mass. 303. And if, after accepting a certain sum in settlement of an unliquidated claim for damages under a contract, one seeks to pursue his remedy for the damages on the ground that the settlement was procured by fraud, or is not binding upon him, he must first repay the amount received; Brown v. Hartford Ins. Co., 117 Mass. 479. “The principle on which these decisions rest is just; but it applies to those cases only where that which was received, and which must be returned, was the consideration of the contract or settlement *382which the receiver intended to make, and understood that he was making, and which he seeks to avoid by reason of fraudulent practices of the other party which led him to agree to its terms. It does not apply to cases where a party holds out that he gives the consideration for one thing, and by fraud obtains an agreement that it was given for another thing.”
In the ease at bar the plaintiff knew what the settlement and release embraced, but avers that it was obtained from him by fraud and fraudulent misrepresentations, and in this respect comes clearly within the rule announced in the case of Mullen v. Railroad, supra, which requires that the parties to the settlement be placed in statu quo, before the claimant can recover.
In the case of Vautrain v. Railroad (8 Mo. App. 538; s. c., 78 Mo. 44) the defense was that the settlement and receipts were obtained by fraud, and, although plaintiff had received $200 which was expressed in the receipt to be in full satisfaction of his demand against the road company, the court held that, as it was not shown that it was paid under an agreement of settlement of the damages that he was not bound to return it, clearly intimating that if it was so received, as a condition precedent to his recovery he must return it, though the opinion is not very distinct on the point. These authorities are all predicated on the theory announced in the case of Railroad v. Lewis, supra, that, when a settlement and release are obtained by fraud it is absolutely void as to all the parties thereto, and the party suing is not bound to refund the money received by him under such circumstances before bringing his suit or that the party from whom he received the money was indebted to him in a still larger sum, and that for that reason he had the right to retain the money thus received. The first proposition does not seem to be sustained by either reason or authority, *383as contracts of settlement, although, fraudulently obtained, are not absolutely void, but only voidable. Railroad v. Hayes, 83 Ga. 558; Ins. Co. v. Howard, 111 Ind. 544; Gould v. Bank, 86 N. Y. 75.
As to the second proposition, the rule can have no application in this case where all liability is denied. The court of appeals (46 Mo. App. 79), in its approval of the case of Railroad v. Lewis, supra, and cases which announce a similar doctrine, makes no distinction between cases where a liability is admitted and where all liability is denied, although such distinction really exists. Dissenting opinion of Biggs, Judge, in this case, in the court of appeals; Railroad v. Hayes, supra; Gould v. Bank, supra; Alexander v. Grand Avenue Railway Co., 54 Mo. App. 66.
Some of the authorities which announce a contrary rule, with respect to the failure of plaintiff to return to defendant company whatever he had received of value from it, by way of compromise, and for the release of his right of action, and to rescind the contract, will now be adverted to.
The case of Gould v. Bank, supra, was an action brought to recover damages for the alleged breach of an agreement made by the defendants to return to the plaintiffs therein certain United States bonds loaned by him to the bank. The defense was a return of the bonds and a compromise agreement, whereby the bank agreed to pay plaintiff, in satisfaction of his claim against it a certain ' sum of money which plaintiff accepted. To this answer plaintiff made reply that he was induced to enter into the compromise agreement by fraud of defendants. No offer to return the money was made. Earl, J., in delivering the opinion of the court, said:
“The compromise agreement,runless annulled, is an absolute bar to this action. It is a general rple laid *384down 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). He can not retain anything he received under the contract and yet proceed in disaffirmance thereof.”
It was further held in that case that, as it was an action at law upon the original claim, plaintiff must show that he rescinded the fraudulent compromise prior to the commencement of the action, and that, as no rescission was shown, a final determination by the court that plaintiff was entitled to more than the sum paid was no answer to the objection. It was also held that the rule is different where the compromise was of an undisputed claim. And that the offer to rescind might be made for the first time in the complant. That is a leading and one of the best considered cases anywhere reported.
“It is idle to say that the distinction between legal and equitable actions has been wiped out by the modern practice. It is true that all actions must be commenced in the same way; that in every form of action the facts constituting the cause of action or defense must be truly stated; that fictions in pleadings have been abolished, and that both kinds of actions are triable in the same courts. But the distinction between legal and equitable actions is as fundamental as that between actions ex contractu and ex delicto, and no legislative fiat can wipe it out. (Reubens v. Joel, 13 N. Y. 488; Goulet v. Asseler, 22 N. Y. 225.) At any rate, 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.” Gould v. Bank, supra.
*385The rule is laid down in Evans v. Gale (17 N. H. 573), as follows: “If one has been induced to make a contract to pay money or to deliver anything, by such means that he is entitled to rescind the transaction, he must, in order to do so, first restore to the other party whatever may have been received in exchange for the money or other thing he seeks to recover back, and to which he would become entitled as his own property immediately upon the rescission of the act, whose proper effect would have been to vest it in the other party.” The reason of the rule, as stated by Chief Justice Shaw in Thayer v. Turner (8 Metc. 550), is that, “the plaintiff, so far as it is in his power, shall put the defendant in statu quo, by restoring and revesting his former property in him, without putting him to an action to recover it, before he can exercise his own right to take back the property sold, or bring an action for it.” Kimball v. Cunningham, 4 Mass. 502. In the case of Doane v. Lockwood, 115 Ill. 490, it was held that when the vendor had received any valuable consideration or note of the purchaser upon a sale of goods, he can not rescind the contract for fraud without first returning or offering to return the consideration, received, whatever it may be.
So when a party is induced to sell property, upon, false and fraudulent representations as to amount of property and to take a note to secure the payment of the purchase price, he may rescind the contract by offering to return the note but he can not maintain replevin for the property sold until he does so. Moriarty v. Stofferan, 89 Ill. 528. If anything has been paid by the purchaser, although he obtained the property through fraud, before the vendor can recover it, he must restore whatever value he received to the- purchaser.
*386The parties should be-put in statu quo as far as possible. Stevens v. Hyde, 32 Barb. 171; McMichael v. Kilmer, 76 N. Y. 36; Graham v. Meyer, 99 N. Y. 611; Baird v. The Mayor, etc., 96 N. Y. 567; Tisdale v. Buckmore, 33 Me. 461; Camplin v. Burton, 2 J. J. Marsh. 216; Gifford v. Carvill, 29 Cal. 589; Estis v. Reynolds, 75 Mo. 563; Bisbee v. Ham, 47 Me. 543; 1 Bigelow on the Law of Fraud, pp. 73, 74.
When one has received anything of value on a ■settlement of ■ a right of action and executed a release thereof, it- follows inevitably that the contract of settlement, not being void, it constitutes an insuperable barrier against a recovery so long as it is not rescinded ■or avoided by an offer to return the consideration paid for it. It was in principle so held in Insurance Co. v. Howard, 111 Ind. 544. It was there decided that it -did not “alter the case that the compromise may have been brought about by the fraud and misrepresentation of the defendant. Or that in the end it was found that a sum largely in excess of the amount paid to settle the disputed liability was due the plaintiff.” See, also, Brown v. Ins. Co., 117 Mass. 479.
In Lee v. Railroad, L. R. 6 Ch. App., 527, the plaintiff was injured by a railway accident, and sent in a claim for £691. The defendant paid him £400, and took a receipt acknowledging that sum to be in full discharge of his claim. He afterward sued the company to recover further compensation, and it pleaded that the plaintiff had accepted the £400 in full satisfaction and discharge of the right of action. Plaintiff then filed his bill to restrain the company from relying on the plea, and, while he was defeated upon another ground, Lord Justice James expressed the opinion that he could get no relief in that court, on the gound of mistake in giving the discharge, “except on the terms of giving back the £400, and being put in exactly *387the same position he was in when the transaction was accepted.”
In the case of Railroad v. Hayes, 83 Ga. 558, the plaintiff was injured by a railway accident. The defendant pleaded a settlement of the claim, and the payment of $100 to plaintiff in satisfaction thereof. Issue was taken on this plea, and it was held by the -court that plaintiff could not successfully reply by showing that the agreement of release was obtained by defendant’s fraud, without also showing that, before commencing his suit, he had tendered to the defendant the sum received with demand of return of what defendant had received from him, thus rescinding the settlement. 1 Bigelow on Fraud, 7374; 2 Beach on Modern, Equity Jurisprudence, sec. 552; dissenting opinion of Biggs, J., St. Louis court of appeals, in this case; Alexander v. Railroad, 54 Mo. App. 70.
The same rule has been announced by the St. Louis court of appeals in the case of Cahn v. Reid, 18 Mo. App. 115, and by this court in the cases of Jarrett v. Morton, 44 Mo. 275; Hart v. Handlin, 43 Mo. 171, and in Estes v. Reynolds, 75 Mo. 563.
The rule is, in actions of trover or replevin to recover property parted with, and all actions based solely upon the original relations between the parties, the plaintiff must show that he rescinded the fraudulent contract before the commencement of the action, by returning, or offering to return, to the party from whom it was received, whatever of value was received for the release; in other words, that he had a cause of action when he commenced his action. Gould v. Bank, 86 N. Y. 75, and authorities cited. It is also held that, in case where a vendor upon a sale induced by fraud has taken the vendee’s note, he may repudiate the •contract and bring'his suit to recover the property sold without first surrendering the note. Thurston v. *388Blanchard, 22 Pick. 18; Nichols v. Michael, 23 N. Y. 264. The reason is, as between the parties the note is not property, but a mere promise to pay, which' is-avoided by the rescission of the contract. It is of no value to the vendee, and needs to be surrendered to him at the trial, merely because it might otherwise housed to his detriment. Gould v. Bank, supra.
It will thus be seen that the authorities are almost unanimous in holding that where money or any other-valuable thing is paid on a settlement to obtain a. release of any right of action, before the person to-whom it is paid and who has the right of action can recover on it, he must return, or offer to return, whatever-he has received, if of any value, and this he must do, although the settlement or release was obtained by-fraud. And it is also manifest from the decided weight of authority, that the offer to return whatever of value has been received as a consideration for the settlement or release, must be made before or at the-time the suit is brought, and the contract or agreement, in so far as it lies in the power of the party desiring to do so, rescinded.
The question has never been directly passed upon by-the appellate courts of this state in a case where theaetion was for personal injuries, except in two cases,, the case at bar, in which the St. Louis court of' appeals, by a majority opinion, held that, as the plaintiff had been induced by fraud or undue influence, to release his right of action, he might sue upon such-right of action without first obtaining the annulment of the release by suit in equity; and as such release was pleaded as a defense to the action, he might in his-reply set up the fraud or undue influence in avoidance-of it. Biggs, J., dissented from this decision.
In the case of Alexander v. Railroad, the ruling-was directly to the contrary and in that ease it was. *389held, that where fraud is alleged to have been practiced upon a party in the compromise settlement of a claim for damages at which a money consideration passed, a return or offer to return the latter is a prerequisite to the right to annul the contract settlement, and to sue upon the original cause. While it is true that in the case of Mateer v. Railroad, 105 Mo. 351, the answer pleaded a settlement of plaintiff’s right of action, and ■ the payment of a moneyed consideration for the' release, the question now under consideration, was not passed upon or adverted to, so that case can not be considered as an authority on this-question.
In this state the question as to whether the plaintiff, before suing, or at the time thereof, under the ■circumstances disclosed by the evidence, must have placed the defendant in statu quo by returning, or offering to return, to it everything of value received by him in consideration for the release, is an open one, the nearest approach to an adjudication upon that question by this court being the case of Blair v. Railroad, 89 Mo. 383, wherein it was held that the plaintiff, who, as she alleged in her petition, had by fraud been induced to compromise a right of action she had against the defendant therein for damages, might include in the same petition, two counts, one to set aside the .settlement for fraud, offering to return the money received by her on the settlement, and the other an action on the •case for damages.
That this is the proper practice seems clear. A proceeding to set aside a settlement or release obtained by fraud should be by a proceeding in equity and should be tried by the court. Moreover in a case like this the evidence should be clear and satisfactory, “such ■as will preponderate over presumption or evidence on the other side.” It must be clearly and distinctly proved. 1 Biglow on the Law of Frauds, p. 123. By *390proceeding in this way the burden of proof rests on the plaintiff to establish the fraud, while in an action at law when fraud is set up as a defense in obtaining the release the case is triable before a jury and a preponderance of evidence is only required in order to set aside the settlement. Not only this, but when the proceeding is in the first place to set aside the settlement and release an opportunity is offered for a fair trial of the questions relating to the bona fides of the settlement and release, disconnected from the hearing of any facts relating to the main facts at issue in the case. This is but fair and equitable.
The plaintiff should have embraced in his petition, in connection with the count for damages, a separate count to set aside the settlement and release, and with an offer to refund to defendant everything of value received from it in consideration of such settlement and release, as was done in the case of Blair v. Railroad, supra.
The question of tender was argued both orally and. in elaborate briefs, both in division and in banc, and no suggestion was made that the question was not properly for decision and it was only discovered since the first submission that it was not saved in the circuit court. For this reason we considered it in division two, and as this opinion expresses our views, we will not rewrite the opinion filed in division two, but.we hold that the release can only be set aside in a court of equity' and therefore dissent from the view taken by a majority of the court on that question.
G-antt, P. J., and Sherwood, J., concur in this opinion.