262 F. 292 | 9th Cir. | 1920
Action at law by Dyer to recover money paid to the International Banking Corporation, because of an alleged mistake. There was a verdict and judgment in favor of the Banking Corporation. The facts appear to lie these:
On April 1, 1914, Dyer, plaintiff in error, and one Green, who died in September, 1914, made a contract whereby the Green-Dyer Company, a corporation, was to be formed to engage in the billboard business. Green agreed to subscribe and pay for all capital stock of $10,-000: Dyer to buy from Green half of this stock for $30,000, payable as follows: $10,000 upon the execution of the agreement, $10,000 on July 1, 1914, and $10,000 on October 1, 1914. The contract contained the following clause:
“No payment shall be made by said Djer, other than said $.10,000, until the said plants shall have been duly and legally transferred to the Green-Dyer Company, as hereinbefore required, and until said plants shall have been completed as provided in paragraph IX hereof.”
“That should the said Green fail or refuse to complete said plants by June 1, 1914, or within 60 days, as provided in the last proviso, the said Green shall at the election of said Dyer return forthwith to said Dyer all moneys received by him under this contract together with interest thereon at 8 per cent, per annum from April 1, 1914, until paid.”
Paragraph VI of the contract provided that if Dyer, before April 1, 1915, should become dissatisfied with the purchase arranged for, and should desire a return of all moneys paid by him under the contract, he should notify Green to that effect, and Green promised to pay Dyer all moneys paid under the contract, payments in return to be as follows: $10,000 on April 1, 1915, $10,000 on or before July 1, 1915,- and final payment of $10,000 on or before October 1, 1915; the deferred payments of $10,000 each to be evidenced by notes, and the whole of the $30,000 to bear interest at the rate of 8 per cent, from April 1, 1915.
Green transferred the $10,000 note (dated April 1, 1914) to the International Banking Corporation, defendant in error, a few days after execution) the corporation then having knowledge that the plaintiff, Dyer, was not required to pay the money represented by the note un-le'ss the plants should be completed to 10,000 linear feet. On July 1, 1914, Dyer paid the note held by the corporation, although at the time of the payment the work of completing the plants to 10,000 linear feet had not- been done; Dyer, however, believing that it had been done, and the payment being made while he was under that belief. Thereafter Dyer learned that the necessary work had not been performed, and brought this action to recover the amount he had paid on the note.
It was in 'evidence that Green negotiated the note for value prior to maturity; that after it was discovered that Green had not performed his contract, as agreed, Dyer first made demand for the payment of the money; that Green was then dead, and his estate was insolvent, although Green may not have been insolvent when he discounted Dyer’s note at the bank. Dyer never rescinded the contract, and never tendered the note back to the bank, or offered to restore the stock he had received under the contract, and as late as March, 1915, demanded of Green’s estate all of the moneys paid by Dyer under the contract of April 1, 1914, including the $10,000 involved in this'suit. It is also in evidence that, after the nonpayment of such money on October 15, 1915, Dyer sold out all of the stock of Green in the company for $10,000 in collection of his demand. This right to sell was claimed by him under the fourth paragraph of the contract, which provided that the entire capital stock of the Green-Dyer Company should be deposited in escrow, and that Dyer should notify Green, before April 1, 1915, whether he elected to continue or withdraw from the company, and that in the event of election to continue the stock should be delivered by the escrow holder to the parties, 50 shares to each, and
The principal errors assigned arise upon the instructions to the jury. Among other things, the court charged that Dyer could not recover unless he rescinded the contract, and that when he discovered that the work had not been done it was his duty to offer to rescind the contract. The court also charged that the banking corporation was in as good a position as Green, and that, if the money had been paid to Green, Dyer could not recover from Green on the ground of mistake without rescinding the contract.
The argument in behalf of Dyer is that, as the Green-Dyer contract and the note in question were made at the same time, in the same transaction, and between the same parties, the contract and note were in effect one instrument as to all persons having knowledge that they were concurrent and dependent; that the banking corporation, having notice of the provisions of the contract, received the assignment of the note as a nonnegotiable instrument, subject to all conditions and defenses that would have attached to it, had it remained in the hands of the original payee; and that, as the work required by the contract to mature the note was not done, the banking corporation had no enforceable claim against Dyer at the time the note was paid.
On the other hand, it is the contention of the banking corporation that Dyer in no event can recover the money he paid under the contract unless he first rescinded the contract. It is said that Dyer could have rescinded when he discovered breach by Green, or could have affirmed, electing to hold Green under the terms of the contract, but, not having elected to rescind, his right to sue Green in general as-sumpsit is gone.
The case is simplified by avoiding confusion of the rights of Dyer as against Green with the rights of Dyer as against the banking corporation. As between Dyer and Green, the contract measures their respective rights; whereas, any right that Dyer has against the bank rests not upon a purely contractual relationship, but upon the principle that, where one has paid money to another under a mistake which, in equity and good conscience, should not have been paid, he may have redress by an action in the nature of assumpsit. United States v. Barlow, 132 U. S. 271, 10 Sup. Ct. 77, 33 L. Ed. 346; Steamship Co. v. Joliffe, 69 U. S. (2 Wall.) 450, 17 L. Ed. 805; Page on Contracts, § 789. This principle is in no way inconsistent with the rule, relied upon by plaintiff, that the several notes and contract should be considered together. Civ. Code Cal. § 1642; Goodwin v. Nickerson, 51 Cal. 166.
We are in accord with the opinion expressed in Spotton v. Dyer, 184 Pac. 23, where the main questions now presented were decided. In the case just cited the District Court of Appeal of the First District of California had before it the very contract now here involved. There Spotton, for the bank, sued Dyer upon the note payable October 1, 1914. Dyer set up the contract with Green, and pleaded that
“To hold that Dyer was compelled to abandon his contractual rights as a prerequisite to his enforcement of them would be absurd.”
The Supreme Court of the state denied the motion of the bank for a hearing, and the judgment has become final.
The error of the District Court was in assuming that, because there was a breach of the Green-Dyer contract by Green, rescission was essential before Dyer could maintain action against the bank. The relevancy of the contract referred to was to show that by virtue of its terms, all of which were known to the bank, Dyer was not obliged to make payment unless certain work specified in the contract was per-forméd before June 1, 1914; but the bank had no contractual relationship with Dyer which required Dyer to rescind, nor would the liability of the bank be affected by a rescission by Dyer.
The judgment is reversed, and the cause is remanded, with directions to grant a new trial.