271 F. 561 | 8th Cir. | 1921
The receiver of the Mercantile National Bank of Pueblo, Colo., hereafter called the Pueblo Bank, recovered a judgment against the First National Bank of Kansas City, hereafter
The questions that have been discussed by counsel cover a wide range, but the facts that are deemed essential are in narrow compass. The defendant requested and was refused a finding that the evidence was insufficient to make a case for the ’ plaintiff, and the determination of the propriety of that refusal is the only question that requires consideration. The defendant asserts that the refusal of this request was error, because under the pleadings and the evidence the defendant had proven that the credit of November 23, 1914, had been obtained by the fraud of the Pueblo Bank, and the defendant was therefore justified in repudiating the entry of credit then given. The asserted fraud is that the Pueblo. Bank, when it sold the note to the defendant, fraudulently concealed the fact that the L,ive Stock Exchange National Bank of Chicago held a prior and superior chattel mortgage given by Monahan & Co. on the same cattle; that it fraudulently concealed the fact that the number of cattle owned by Monahan & Co. was much less than the number stated in the chattel mortgage held by defendant; that it fraudulently concealed the fact that before the defendant discounted the note practically all of the cattle had been shipped to Texas, and that a new chattel mortgage had then been given upon them in that state by a purported owner of them. It was shown that the Pueblo Bank was closed and placed in the hands of the Comptroller of the Currency on March 29, 1915, and the defendant was then informed, by one of its officers who was at Pueblo, of several suspicious facts affecting other of its loans, and that over 200 of the cattle of Monahan & Co. had died before the execution of the defendant’s mortgage, and that the remainder had been sold. The defendant on that day made a debit entry charging the account of the Pueblo Bank with the amount of the Monahan & Co. note of November 20.
Assuming without deciding, that the facts show such a fraud by the Pueblo Bank as would authorize the defendant to repudiate the item
“Wo take pleasure in complying with your instructions, and herewith inclose the note properly indorsed. I desire to state this note, signed by A. J. Monahan & Co., $1!),723.18, will be due about April 20, 1913, and this letter will be your authority to charge the account of the Mercantile National Bank with the same on that dale.”
The plaintiff contends that the defendant did not repudiate the purchase oí the note and collateral security and its acceptance of the guaranty of the Pueblo Bank, and did not proceed as upon a rescission for the alleged fraud; but that the defendant then and ever since has affirmed the contract of purchase and the offer to allow the note to be charged against the deposit, and has asserted its cancellation of credit relying upon its ownership of the note and mortgage and the authority of the letter of the Pueblo Bank.
“Where a parly desires to rescind upon the ground of mistake or fraud, he must, upon the discovery of the facts, at once announce his purpose, and adhere to it. If he be silent, and continue to treat the property as his own, he will be held to have waived the objection, and will be conclusively bound by the contract, as if the mistake or fraud had not occurred. He Is not permitted to play fast and loose. Delay and vacillation are fatal to the right which had before subsisted. These remarks are peculiarly applicable to speculative property like that here in question, which is liable to large and constant fluctuations in value.” Shappirio v. Goldberg, 192 U. S. 232, 212, 24 Sup. Ct. 259, 48 L. Ed. 419; Burk v. Johnson, 146 Fed. 209, 218, 76 C. C. A. 507; Richardson v. Lowe, 149 Fed. 625, 628, 631, 79 C. C. A. 317; Ripley v. Jackson Zinc & Lead Co., 221 Fed. 209, 211, 136 C. C. A. 619.
Stuart v. Hayden, 72 Fed. 402, 411, 18 C. C. A. 618, 626:
“One who is induced to make a sale or trade by the deceit of his vendee has a choice of two remedies upon his discovery of the fraud: He may affirm the contract, and sue for Ids damages; or he may rescind it, and sue for the property he has sold. The former remedy counts upon and affirms the validity of the transaction; the latter repudiates the transaction, and counts upon its invalidity. The two remedies are utterly inconsistent, and the choice of one rejects the other, because a sale cannot be valid and void at the same time.”
Mudsill Min. Co. v. Watrous, 61 Fed. 163, 186, 9 C. C. A. 415, 437;
“When a purchaser acquires knowledge that he has been defrauded, he hag an election of legal remedies. lie may keep the property and sue for damages, or repudiate the contract and demand rescission. These remedies are not concurrent, but inconsistent, and the adoption of one of necessity excludes the other. The rule is well settled in equity that after knowledge of the fraud*564 the party must, within reasonable time, make an election as to whether he will affirm the 'trade, notwithstanding the fraud, or offer to restore the property and demand the return of his purchase money. If, after the knowledge of the facts which entitle him to rescind, he deal with the property as owner, it is evidence of acquiescence and an affirmance of the contract. The authorities to this point are numerous, and the principle well settled.”
See A. Klipstein & Co. v. Grant, 141 Fed. 72, 72 C. C. A. 511; Roseboom v. Corbitt, 196 Fed. 627, 634, 116 C. C. A. 301; Miller v. Continental Shipbuilding Corporation (C. C. A.) 265 Fed. 158, 161; Issenhuth v. Kirkpatrick, 258 Fed. 293, 295, 169 C. C. A. 309; 2 Pom. Eq. Jur. § 897.
. The election maybe manifested by any conduct or declarations showing the course the party intends to pursue. One method by which a party may declare his election to affirm is by bringing suit, or by defending a suit brought against him on the theory of affirmance. Robb v. Vos, 155 U. S. 13,43, 15 Sup. Ct. 4, 39 L. Ed. 52; Black on Rescission, •§§ 590, 625.
learned of the shipping of the cattle to Texas and of the giving of a
By its answer in this case the defendant asserted that those acts were frauds chargeable to the Pueblo Bank, but it also alleged that it debited the item in dispute because it had discounted the note on the express
The briefs of counsel likewise justify the attempted application of the deposit upon the propositions that the credit was procured by fraud and was the application of the deposit expressly agreed to by the Pueblo Bank. These positions are clearly inconsistent, because the defendant could not repudiate the contract of sale and offer of a charge against the Pueblo Bank deposit without surrendering all rights under them. Its claim of credit for the amount of the face of the note, instead of for the credit given the Pueblo Bank, its assertion to the receiver of the grounds for its action, and its pleading and contention that it was authorized by the express authority of the Pueblo Bank to charge its account with the amount of the note, manifest its election to enforce the note and security notwithstanding its offers to return the papers and its claim of fraud inducing their acceptance of them. The offer to return the papers is equivocal, as it might express the thought that the defendant was placing the Pueblo Bank in statu quo, or the thought that the defendant had received payment according to the letter authorizing the application of deposit, and therefore was no longer entitled to the collateral note and mortgage. It did not elect to rescind, and to adhere to it without vacillation, nor did it act consistently with a purpose to pursue that course, and must be held to have waived the right to disaffirm the contract of discount.
The judgment will be affirmed.