Potter v. Taggart

Taylor, J.

It will be seen by the complaint that the appellant seeks to rescind a contract of purchase, and recover back from the respondent the purchase money of the note and mortgage, basing his rescission upon the ground of the alleged fraudulent representations and concealment on the part of the respondent of the fact that twenty-two acres of the land described in the mortgage had been released by the respondent before the sale thereof to the appellant.

The learned counsel for the respondent insists ■ — first, that the complaint does not show that the appellant was injured by the alleged fraudulent representations and concealment of the respondent, and so fails to state any reason for a rescission of the contract; and second, that it fails to show that he returned or offered to return the note and mortgage to the respondent before the action was commenced, and in that respect fails to show him in a position to demand his puichase money back.

We are inclined to hold that after answer, upon an objection taken for the first time to its sufficiency, the complaint is sufficient in both respects. In the case of Hazleton v. Union Bank, 32 Wis., 34 -43, Justice Lyon, in delivering the opinion, says: “The rule is well settled that a greater latitude of presumption may be indulged in to sustain a complaint where the objection that it does not state a cause of action is taken for the first time at the trial, and after an issne of fact has been taken upon it by answer, than where the same objection is taken by demurrer.” The same rule was stated in Teetshorn v. Hull, 30 Wis., 162 -167; Hamlin v. Haight, 32 Wis., 238 -242; Luth *399 eran Evangelical Church v. Gristgau, 31 Wis., 328 ; Johnson v. Ashland Lumber Co., 45 Wis., 119 ; Johannes v. Youngs, id., 448; Wittmann v. Watry, id., 493. Under the rule established by the cases cited, we think the complaint sufficiently alleges that the respondent was guilty of making either a fraudulent representation or a fraudulent concealment of the fact that a part of the property described in the mortgage had been released before the date of the sale, and that such fraud was injurious to the appellant.

The allegations of the complaint show, as a matter of fact, that the mortgage was of less value as a security after the release of the twenty-two acres than it was before such release. It alleges that the twenty-two acres were in fact sold for $125; and it is a fair inference that the mortgage as a security was at least worth as much less as the value of the land sold and released. But in addition to this, there is a positive allegation in the complaint that, by reason of the release of the twenty-two acres, “ the mortgage became thereby and was of much less value, and that said note became and was of less value, than they would .have been had not said release been executed, and that said note and-'mortgage thereby became of little value to the plaintiff, and thereby the plaintiff has lost all the benefit and advantage which he might and would have derived from the purchase of said note and mortgage.”

If it be necessary, in order to entitle a party who has been induced to make a purchase of a note and mortgage or any other property by the false and fraudulent representations of his vendor, to show that he has been damaged in' fact by such false representations, in order to entitle him to rescind the contract and recover back the purchase money, it would seem that the allegations above quoted from the complaint clearly show such damage. Certainly, if his note and mortgage were still well secured, notwithstanding the release, then the plaintiff could not have truthfully made the statement “ that he had lost all the benefit and advantage which he might and would *400 have derived from tbe purchase of said note and mortgage.” The only legitimate benefit and advantage he could dei’iye from the purchase of the note and mortgage would be to receive upon the same the amount secured thereby, with interest; and if, by reason of the release, he was unable to secure the payment of that amount, then he was damaged by such release. Upon this point, though the allegations are quite general, yet, under the rule above quoted, they are quite sufficient to show that the appellant has sustained damage by reason of the release of the twenty-two acres before his purchase, and that by reason of such release he would be unable to collect the amount due upon the same. • :

Upon the second point -we think the allegations of the complaint are sufficient. The rule as to the rescission of contracts, stated by Leake in his Digest of the Law of Contracts, is as follows: “ The fact that the contract was induced by fraud gives the party defrauded the right, on discovering the fraud, to elect whether he will continue to treat the contract as binding, or avoid it; but the contract continues valid until he has determined his election by avoiding it.” “ He must determine his election to rescind by express words to that effect, or by some unequivocal act, under circumstances which render such words or act binding.” The complaint in this action states that, as soon as the appellant ascertained that he had been defrauded in the purchase of the note and mortgage, he immediately went to the respondent “for the purpose of demanding of him a return of the $403.91 so paid by the appellant to the respondent, and to return to him the said note and mortgage; but the respondent then and there refused to do anything in regard to the matter, and then and there refused, and still does refuse, to return to plaintiff said sum or any part thereof.” It is true, this allegation does not state in express words that the appellant offered to return the note and mortgage to the respondent, but we think it is fairly to be inferred from the language used that he did make such *401 offer. He says be went to the respondent for the purpose of mating such offer and to demand his money back, and; that the respondent refused to do anything in regard to the matter, and “then and there refused, and still does refuse,.to return the money or any part thereof.” The refusal of the respondent to 'do anything about the lhatter, and to return the money or any part thereof, clearly implies that he was requested by the appellant to do something' about it and to return the money.

In order to rescind a contract by a purchaser, when a ground • for rescission exists, it is not necessary to make any formal tender of the property held by the purchaser; it is sufficient to offer to make return of the same (see Van Trott v. Wiese, 36 Wis., 439 -448; Mann v. Stowell, 3 Pin., 220 ); and if the vendor refuses to receive the property back and return the purchase money, or do anything except to keep what he has, no formal tender of the property is necessary. The right of the vendor to have the property formally tendered is waived by his refusal to accept it in advance.

In Wright v. Young, 6 Wis., 127 , this court say: “In this case the appellant has from the outset resisted the performance of the contract, and insisted that it was not binding on him. Any tender to him, while occupying this ground of defense,' would have been au idle ceremony.” So, in the case at bar, the respondent insists that the appellant has no right to rescind the contract, and refuses to return the purchase money, or any part thereof. By taking that position he relieves the appellant from making any formal tender of the note and mortgage. The appellant has done all that is necessary to maintain his action when he shows that he has offered to return what he had received upon the contract, and that the respondent has refused to receive it and return the purchase money. The following cases hold the same rule: Racine Co. Bank v. Keep, 13 Wis., 209 -214; Corbitt v. Stonemetz, 15 Wis., 170 -172; *402 McWilliams v. Brookens, 39 Wis., 334 ; Cunningham v. Brown, 44 Wis., 72 .

If the vendor in such case is ready to rescind on his part, then it becomes necessary for the purchaser to tender and return to the vendor all he has received under the contract. When the vendor refuses to do anything in the matter, and the vendee brings his action to recover the purchase price, he must prove on the trial that he is in a condition to restore to the vendor-what he received upon the contract, and should make restoration upon the trial. If the purchaser of a horse seeks to rescind the contract for the fraud of the vendor,, he must, before suit brought, notify the vendor that he electd to rescind the contract, and offer to return the horse; but if the vendor refuses to do anything about the matter, he must keep the horse for the vendor, and subject to his order, and must, upon the trial, show that the horse is subject to the order of the vendor. The complaint would have been more formal if it had stated that the appellant was then ready and willing to return the note and mortgage to the'respondent; but we do not think this statement so essential as to make the complaint .the subject of a demurrer ore tenus on the trial.

The plaintiff’s right to bring an action to recover back the purchase money which has |)een wrongfully obtained from him •on a sale of property which has been delivered to him, is perfect when he has, upon the discovery of the fraud, promptly notified the vendor that he elects to rescind the contract and offers to return the property purchased; and possibly, when the yendor does not in terms refuse to recognize his right to have the contract rescinded, he must make a formal tender of the property received by him; and when the vendor refuses absolutely to refund the purchase money, or absolutely refuses to recognize the vendee’s right to rescind, no formal tender is necessary, and notice of his determination to rescind the contract on account of the fraud, and an offer to return the prop *403 erty purchased, are sufficient to enable him to maintain his action. All the rights of the vendor in such case can be preserved upon the trial by requiring the plaintiff to show that he is able and willing to return the property purchased, and he may be required before judgment to place the property where the defendant can obtain possession of the same. See Clough v. London & N. W. Railway, L. R., 7 Exch., 26; Nellis v. Bradley, 1 Sandf., 560 ; Coghill v. Boring, 15 Cal., 213 .

Under the decisions of this court the plaintiff might have brought an action in form for money had and received by the defendant for the plaintiff’s use, without setting out any of the facts upon which his right of action depended; but upon the trial he would be compelled to show the fraud of the defendant in the sale of the note and mortgage, and his offer to return the note and mortgage before action brought, in order to entitle him to judgment. See Mann v. Stowell, 3 Pin., 220 ; Simmons v. Putnam, 11 Wis., 193 ; Grannis v. Hooker, 29 Wis., 65 . We think if the appellant proves the allégations of his complaint, when construed liberally in accordance with the rule above stated, he would be entitled to recover the purchase money paid for the note and mortgage, for the reason that it was obtained by fraud, which was injurious to the appellant, and that the rights of the respondent can be preserved by requiring the appellant to bring the note and mortgage into court on the trial and execute an assignment thereof to the respondent.

By the Cowrt. — The judgment of the circuit court is reversed, and the cause remanded for a new trial.