This is an appeal from a decree dismissing a bill brought by Adolph Scheftel, the appellant, to rescind a contract of purchase of 320 acres of land from the appellee, Leopold Hays, and to recover the purchase money, $27,200. The purchase was made A.pril 19, 1887. The land purchased was 320 acres eight miles southeast of the city of Wichita, in the state of Kansas. The appellant was a leather dealer in New York city, and was accustomed to dealing in stocks and bonds of corporations and other property. The appellee was a dealer in leather at Wichita, and a customer of the appellant. In the autumn of 1886 the appellant had purchased 40 acres of land a few miles distant from the city of Wichita, for $200 an acre;, at the suggestion of the appellee, under an agreement with him that he should have 45 per cent, of the profit,, and should bear 45 per cent, of the loss, resulting from the purchase and resale of the tract. This tract had been sold again for $400 au acre before the purchase of this 320 acres was made. In the years 1886 and 1887 there was an ei:a. of wild speculation in lots and lands in and around Wichita, and their price was not measured by their intrinsic value, but by the height of the speculative fever that possessed the purchasers.
The glaring fraud perpetrated on the appellant gave him the right the moment he discovered it t,o rescind this purchase. There was, however, no obligation upon him to exercise that right. He had the option to reconvey the land, and recover his purchase money, or to retain the property and affirm the contract. Justly and wisely the law gives him his choice, but at the same time it imposes on him the duty of making his election speedily. It not only imposes this duty, but it compels its performance. If he elects to rescind, it demands that he shall return the property he has obtained, and give notice of his election promptly upon the discovery of the fraud, to the end that the parties may be placed in statu quo. Nor can he avoid an election by delay or inaction, for silence and acquiescence are fatal to the right to rescind. They are an election to ratify the contract.
There are no cases in -which the effect of the application of this principle is more salutary than in those involving speculative investments. A. court of equity rescinds a fraudulent contract, on the ground that it can worlc no injustice to place both parties in the situation in which they were before the contract was made. Where the value of property is largely speculative and subject to rapid changes, this can only he perfectly done soon after the sale is perfected. If the fraud is discovered while the value of the property remains substantially as it was when the sale was ma.de, a, rescission of the contract then is just and equitable. But if the purchaser waits for years after he discovers the fraud, and until the property has greatly depreciated in value, and then first seeks x*escission, he asks the court to burden his vendor with an unnecessary loss caused by his own inaction. Thus, in the case before us, hi May, 1887, when the appellant discovered t he fraud of which he complains, the land in dispute might undoubtedly have been readily sold for $50, perhaps for $75 an acre. If he had then given notice of his election to reconvey the land, and sought a return of his money, the appellee might have sold the land, and have repaid the purchase money without serious loss. But in 1890, after three years of depreciation, the land could not have been sold for more than 50 per cent, of its market value in 1887, and a rescission then made must entail upon the appellee a loss of thousands of dollars that is the direct result of the appellant’s delay.
Xor is the reason for this delay difficult to divine. Under date of June 6, 1887, the appellant notified Mr. Hays that, if the report that he had bought the property for $50 instead of $75 an acre was correct, he would certainly claim the difference, $25 an acre, from him. Evidently he did not them intend to rescind this contract, hut to affirm it, and trust to the law for his damages, because he undoubtedly then thought that the rapidly advancing prices of real estate would soon make the land more valuable than the money he had paid for it. If his anticipations had been real
There is another fatal objection to the maintenance of this bill. This is a suit of which the court below has concurrent jurisdiction with the courts of the state of Kansas. In such a case the national courts, sitting in equity, will not be moved to set aside a fraudu-, lent transaction where the complainant has remained quiescent' after the discovery of the fraud for a period longer than that fixed by the statute of limitations of the state. Rugan v. Sabin, 3 C. C. A. 578, 53 Fed. Rep. 420; Wagner v. Baird, 7 How. 234, 237; Godden v. Kimmell, 99 U. S. 201, 210; Burke v. Smith, 16 Wall. 390, 401; Kirby v. Railroad Co., 120 U. S. 130, 139, 7 Sup. Ct. Rep. 430; Boone
The statutes of Kansas provide that no civil action for relief on the ground of fraud (other than for the recovery oí real property) shall be brought unless it is commenced within two years after the discovery of the fraud. Gen. St. Kan. 1889, par. 4095. The fraud in this case was discovered in 1887. Ko action was commenced until “November 13, 1890. The suit was barred in the courts of Kansas by this statute of limitations, and the court below properly refused to permit it to be maintained there.
It has not escaped our notice that counsel for appellant seek to avoid the effect of the rules to which we have adverted on the ground that no time runs against the victim, of a fraud while its perpetrator fraudulently and successfully conceals the facts that would disclose it, and that the letter of Hays repeating his false representations, and inclosing the false certificate of his vendor, together with the false statement he caused the agent, Solomon, to make in his letter to the appellant, did prevent the latter from discovering the facts until 1890. This ground, however, is untenable for at least three reasons:
First. ^Notice of facts and circumstances which would put a man of ordinary prudence and intelligence on Inquiry is, in the eye of the law, equivalent to knowledge of all the facts a reasonably diligent inquiry would disclose. The appellant admits that as early as June, 1887, he was informed that the appellee had paid but $50 an acre for this land; that he was a scamp, a scoundrel, and a cheat; and that he then caused several parties to appraise the land, all of whom agreed that it was hardly worth $50 an acre. This was ample notice to put an ordinarily prudent man on inquiry, and if the inquiry had then been prosecuted with the diligence exercised in 1890, after the property had depreciated in value, it would undoubtedly have disclosed the same facts now proved. Eugan v. Sabin, 3 C. C. A. 578, 53 Fed. Rep. 419, and cases cited.
Second. The victim of a fraud, who has received notice enough to excite his attention and put him on his guard, cannot evade the duty of speedy and diligent inquiry by merely calling on the chief perpetrator, whose interest it is to conceal the facts, to reiterate or prove his false statements. He can no more escape a ratification of the contract, and the bar of the statute of limitations by obtaining a repetition of the misrepresentation and fraudulent proofs in support of it from him who made it, and then refusing to verify them from independent and proper sources of information, than he can by relying on the truth of the first misrepresentation, and refusing to make any inquiry after notice of facts and circumstances indicating a fraud. A diligent inquiry is an honest inquiry, — one reasonably calculated to discover, not to conceal, the facts,' — and an inquiry of the perpetrator of the fraud alone is one plainly calculated to conceal them. Eugan v. Sabin, supra, 421; Singer v. Jacobs, 11 Fed. Rep. 559, 563; Wood v. Carpenter, 101 U. S. 135, 139, 143.
The decree below is affirmed, with costs.