29 Cal. 589 | Cal. | 1866
This is an action upon two promissory notes given for a part of the purchase money for shares of stock in a mining company. The defense is, that the defendant was induced to purchase by the false and fraudulent representation of the plaintiff as to the value of the mines owned by the company issuing the stock. There is no averment in the answer, and no proof or finding of the Court, that defendant notified the plaintiff of his intention to rescind the contract on the ground of the fraud, or that he offered to return the stock. On the contrary, it appears that this defect was made one of the grounds for a new trial, and the Court required the defendant to deposit the stock with the Clerk for the benefit of the plaintiff as a condition of denying the motion.
We do not think the matters which the defendant sought to prove, as they are presented by the record, were mere matters of opinion or information, as to which the defendant had no right to rely upon the statements of the plaintiff. (Smith v. Richards, 13 Peters, 26 ; Bennett v. Judson, 21 N. Y. 239.)
Fraudulent sale of mining stoclc, and rescission of contract.
Appellant insists that, although the matters alleged and claimed to have been proved, might, if true, have justified the defendant in rescinding the contract and returning the stock, yet, until such rescinding and return, they constituted no defense to an action on the note; and such is the general rule upon the subject. In Herrin v. Libbey, 36 Maine, 357, the rule is expressed in the following language, viz : “ The rights of a party who has been defrauded in making a contract are, on the discovery of the fraud, ivithin a reasonable time, to rescind the contract and restore the parties to their former condition, or to affirm the contract and claim compensation or damages for the injury he has sustained by reason of the fraud.” In Burton v. Stewart, 3 Wend. 239, the Court say: “ Had they intended to treat the contract as void, on the ground of fraud, it was their duty, when they discovered that
Return of property after trial is not in time to obtain rescission of contract.
If it was necessary to rescind the contract and return the property in this case, a surrender of the stock to be delivered to the plaintiff made after verdict and judgment, upon requirement of the Court as a condition of denying a new trial, was not in time. The cases cited by respondent on this point are of a different class and not applicable, or, strictly speaking, are not within the rule. They are cases where a party, upon fraudulent representation as to his pecuniary condition, has induced other parties to sell him goods on credit, giving his own note therefor. The vendor in such cases, upon discovering the fraud, may bring trover or replevin without first surrendering the note. But he must be prepared to surrender it on the trial. Of course, in that class of cases no loss can result to the defendant from retaining his own note till the trial. But where the vendee gives the note of a third party upon a fraudulent representation as to the responsibility of the maker, the vendor must return the note to the vendee before suing, for the delay may result in injury to the vendee. This distinction is stated and authorities referred to in the note before cited. (3 Greenl. 33, note.)
To apply these principles to the present case. There is no averment in the answer, and no evidence, that defendant rescinded the contract and returned, or made a tender of the stock, and no averment that it was of no value, unless the averment that it was “ of little or no value ” can be so construed. If it was not absolutely without value to either party—if it had a little value—there was a consideration which, being actually retained, did not afterward fail, and it was necessary to rescind the contract and return the consideration within a reasonable time after the discovery of the fraud. We are inclined to think the allegation cannot be regarded as an averment that there was no value. It must be
It is true that the Court, upon the evidence, (which, however, was admitted under objection that it was inadmissible under the pleadings,) found that the mine of the company “ was of no value whatever,” but there is no finding as to whether the “ shares of mining stocle in the Amargoza Minitig Company,” which formed the consideration of the note, were valueless or otherwise. The value of the mine referred to may have been the main inducement to purchase, and the defendant may have been entitled to rescind the contract in consequence of fraudulent representations in regard to its value, yet it by no means follows that the stock of the company owning the mine was utterly valueless because that particular mine was so. And the burden of alleging and showing that the stock was valueless rested on the defendant. The company may, for aught that appears to the contrary, have had other property, or a paid up capital sufficient to have still made the stock of some value. As there was no averment that the stock had no value, there was strictly no issue tendered on that point, and although there is no exception for want of a finding, the Court cannot be presumed to have found on such issue. The cause appears to us to have been somewhat loosely tried on both sides, and not with a clear view of the distinction made by the authorities before cited between those cases that require a rescission of the contract and return of the articles purchased, and those which do not. But on the motion for a new trial the necessity of rescinding the contract and returning the stock was distinctly urged, and the Court was evidently strongly impressed with the soundness of this view. The learned Judge, in deciding the motion, observes: “ The plaintiff, with considerable force, says that the defendant should not avoid payment of the notes and retain the stock. Although the stock is valueless to the defendant, and never had any value, yet the plaintiff has a right to the pos
Judgment and order denying a new trial reversed, and a new trial granted, with leave to the parties to amend their pleadings as they may be advised.