Court Opinion

ID: 8200010
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:23:45.165106+00
Date Added: 2024-06-11T16:40:53.612203
License: Public Domain

Mr. Justice Wickhem,
in his concurring opinion, said (p. 195) :
“It may also fairly be stated that no cause of action is alleged for rescission, not because this relief is not demanded in the prayer, but because there is no- allegation of facts showing a disaffirmance. In so far as fraud is relied upon as a basis for relief, it must be considered that the complaint proceeds upon an affirmance of 'the contract, and that the action was intended to be one at law for deceit. . . .
“In so far as a plaintiff seeks to predicate fraud upon an intention never to keep a contemporaneous oral promise, which formed a part of the negotiations between the parties, and which is inconsistent with the stipulations of the writing as ultimately integrated, it may well be that the parol-evi-dence rule operates to eliminate proof of this fraud on the ground that the promisee ought not to be permitted to rely upon an oral promise inconsistent with the written agreement, and that, however valid the doctrine that fraud may always be shown consistently with the parol-evidence rule, permission in such a situation to- prove this type of fraud opens the door to a destruction of the parol-evidence rule. See note 56 A. L. R. 46. Certainly this contention would seem to have much force where the action for fraud is based upon an affirmance of the contract. It is certainly more arguable, if the contract has been disaffirmed or if there is a defense based upon the assumed invalidity of the contract because of fraud, that the parol-evidence rule has no application, since the effect of the evidence is to- destroy the contract from its beginning and not to contradict or modify any of its individual terms.”
Since the first and second amended complaints (both of which wer'e considered by this court), attempted to state causes of action for frauj and deceit, and since the present fourth complaint attempts to- state a cause of action based on a disaffirmance of the contract and for a rescission thereof, we are confronted with a situation which we may not ignore and which compels us to say that the plaintiff, having elected in two of his complaints to affirm the contract and to sue for such damage as he had sustained as a result of the asserted *368fraud and deceit, he may not now allege a cause of action based upon a disaffirmance of the contract and ask for rescission. Under the well-established law a party may not affirm a contract and later on disaffirm it and ask for rescission. An action for damages for fraud and deceit is universally held to involve an affirmance of the contract. In such an action the plaintiff affirms, the contract and sues to recover the amount of damages he has sustained as a result of the fraud practiced upon him. In an action where the plaintiff has disaffirmed or rescinded a contract there is, of course, no affirmance of it. In the Restatement, Contracts, it is said:
“§ 484. Loss of power of avoidance by affirming transaction. The power of avoidance for fraud or misrepresentation is lost if the injured party after acquiring knowledge of the fraud or misrepresentation manifests to the other party to the transaction an intention to affirm it, or exercises dominion over things restoration of which is a condition of his power of avoidance, except as stated in § 482.”
Note 6 to that section is as follows :
“6. A fraudulently induces B to enter into a contract. On discovery of the fraud B brings an action of tort for deceit against A. Subsequently B discontinues the action Rnd informs A of an intent to avoid the transaction. Even if the notification would have been seasonable and effective had the action of deceit not been brought, the bringing of the action is a manifestation of intent to affirm the transaction and precludes avoidance thereafter. If B had brought an action on the contract, this also would preclude avoidance. B is here exercising an election between inconsistent substantive rights and not merely between inconsistent procedural remedies.”
The rule stated in the Restatement is in accord with the law of this state. In Smeesters v. Schroeder, 123 Wis. 116, 101 N. W. 363, it was held that in fraud cases a person has a right to elect either to stand upon the contract which the defendant has induced and recover the damages resulting, or rescind the contract, and upon returning what he has received, recover back that with which he has parted; and that *369such alternative remedies are wholly inconsistent. It was there said (pp. 118, 119) :
“Either there is a contract, for breach of which plaintiff is entitled to recover damages, or the contract is set aside and goes out of existence, whereby he becomes entitled to a return of that with which he parted on the faith of the contract. The existence of one situation negatives the other.
“It has often been held that, whatever other facts may be decisive, the actual commencement of a suit predicated on either theory is plenary and complete proof of the exercise of plaintiff’s election.”
In Bischoff v. Hustisford State Bank, 195 Wis. 312, 320, 218 N. W. 353, the court, approving of the rule in Smeesters v. Schroeder, supra, said :
“The rule that under the statute inconsistent causes of action may be properly joined cannot operate so as to impair the rule that a party cannot pursue inconsistent remedies. In this case if there was fraud in the inducement the plaintiff had the right to elect whether he would disaffirm the contract and recover the consideration or affirm the contract and sue for damages on account of the fraud. He could not do both. ... A suit in the first instance upon the contract for damages for breach would no doubt be an affirmance of it, which would preclude an action for rescission, but the reverse is not true.”
That case, however, seems to be authority for the rule that the bringing of an action for rescission of a contract in the first instance does not thereafter, in case the plaintiff is denied relief, preclude him from bringing an action based on the contract. That is good law. Obviously when rescission of the contract is denied the contract still remains. In the Bischoff Case this court was dealing with an asserted mis-joinder of inconsistent causes of action. In 1 Page, Contracts, § 339, after reciting the remedies which are available to a defrauded party, it is said (p. 539) :
“The election of one of these remedies is a waiver of the others. Thus where the fraud is committed by the adversary *370party to the contract, the injured party may elect between his right to avoid the contract, and his right to affirm it and to sue in tort in the action of deceit, and the election of either remedy, as suing for the purchase price after discovery, or suing on the contract after discovery of the fraud, or bringing an action to recover damages sustained by reason of such fraud, or encouraging the receiver of the fraudulent purchaser of the goods to sell them, or treating the contract as rescinded, bars the other.”
See also 5 Williston, Contracts (Rev. ed.), § 1528, where it is said:
“The doctrine of election of remedies is not peculiar to actions based upon fraud, but it is, perhaps, most frequently applied or discussed in connection therewith. The defrauded party had the alternative but inconsistent rights and remedies of affirmance of the transaction and recovery of damages for the deceit, or of disaffirmance and restitution where restitution is available. As pointed out in the Restatement of Contracts, ‘a choice between remedies for an injury must be distinguished from a choice between substantive rights and privileges.’ However, the choice of substantive rights necessarily produces a corresponding limitation in the field of possible remedies. Cases of contracts voidable for fraud raise both the problems of election between substantive rights and between inconsistent remedies. The traditional view has been that the choice between substantive legal relations — between contract or no contract — is made by mere manifestation of election, whether that be simply by the injured party’s conduct in other ways, or by his bringing suit for rescission or action for damages for deceit.”
It appears from our prior decisions in this same action that in the first and second amended complaints the plaintiff unquestionably attempted to state a cause of action for fraud and deceit, thereby clearly affirming the contract. Now the plaintiff, after having failed to state a cause -of action for fraud and deceit, has abandoned that kind of action and attempts tO' state a cause of action based on a contract asserted to be void for fraud which he has rescinded and which he asks the court to rescind in equity by finding that under all of the circumstances he is entitled to equitable rescission. Such *371procedure not only involved an election of inconsistent remedies but also an election of substantive rights. Under the circumstances we think it clear that the plaintiff is precluded from bringing the present action which is either one based upon legal rescission or one in equity praying for rescission by the court. We therefore deem it unnecessary to decide whether the fourth amended-complaint states a cause of action for either legal or equitable rescission.
Since, however, it appears that the same allegations which this court held in Beers v. Atlas Assurance Co. 215 Wis. 165, 253 N. W. 584, stated a cause of action for breach of contract, are contained in the present complaint, it must be held now as was held there, and for the same reasons, that the present complaint states a cause of action for breach of contract.
By the Court. — Order affirmed, and cause remanded for further proceedings according to law. Costs in this court to be taxed against the plaintiff.