6 S.D. 511 | S.D. | 1895
The complaint in this action is quite lengthy, but, for the purpose of a discussion of all the questions raised and argued on this demurrer, the following condensed statement will probably sufficiently present the facts stated in the complaint: Defendant Stick was a stockholder in, and the president and active manager of, £he National Bank of Dakota, a duly organized national bank at Huron. In August, 1889, he sold to plaintiff, Taylor, 90 shares of the capital stock of said bank, under and upon the strength of certain false and fraudulent representations to Taylor as to the condition of the bank, its business and its assets. That, in payment therefor, Taylor
The obligation of a party to a negotiable instrument may be extinguished 1 ‘in like manner with that of parties to contracts in general.” Comp. Laws, Sec. 4515. A party to a contract may rescind the same ‘ ‘if the consent of the party rescinding * * * was obtained * * * through fraud, * * * exercised by or with the connivance of the party as to whom he rescinds.” Id. Sec. 3589. In this case Taylor seeks to enforce a rescission of his contract of purchase of the stock, and to recover from the appellant bank both his own and his wife’s notes, given in part payment for such stock.
Appellants’s first proposition in support of the claim that the complaint does not state a cause of action is a double one, and is thus stated in his brief: ‘‘The notes never had any legal existence, and could not have been the subject of an action, until they had been discounted to thiá defendant. The passing of the notes to Stick, a person not named or intended as payee, was not a good delivery, and gave no vitality to the notes.” If we apprehend appellant’s thought, it is that, the notes being made payable to the bank, a delivery to Stick did not vitalize them, and that, never having become operative notes for want of delivery, they have never become the subjects of discount, and consequently the bank never has discounted them. This conclusion is neither tenable nor available to appellant. By the terms of the purchase, Stick was entitled to these notes from Taylor. At Stick’s instance and request, they were made payable to the bank, instead of himself. They wei’e so made,
In the cases cited by appellant in support of the proposition under consideration, the notes were made for the purpose of discount at a designated bank, but upon presentation to said bank it refused to take them, — in this respect precisely the reverse of the fact in this case. In the cited case of Prescott v. Brinsley, 6 Cush. 233, the court held that, as to the sureties, the purpose of making the note was never accomplished, and that the subsequent unauthorized use of the note by the principal was not binding upon the sureties. The note was by its terms payable to the bank at which it was to have been discounted. Upon the refusal of the bank to take it, the principal maker, without the knowledge or consent of its sureties, made other use of it. The court held that the sureties were not bound. The facts in the other cited cases of President, etc., of Mechanics’ Bank v. Ross, 1 Blackf. 316, and First Nat. Bank v. Strang, 72 Ill. 559, were substantially the same, except that the parties who were held not to be bound were not sureties, but principal makers, whose notes, after refusal by the bank to which they were made payable, and at which they were to be discounted, were, without their consent, sold to other parties. It will thus be seen that the very fact upon which the foregoing cases turned, to wit, the non acceptance by the banks named as payees, and the consequent defeat of the very conditions upon
Appellant further says: ‘ ‘In this transaction Stick’s knowledge of the fraud which he had perpetrated upon plaintiff is not charged to the bank, and hence the bank did not take thé note with notice.” But this is directly in the face of the allegation of the complaint “that said bank took said notes * * * with full notice and knowledge of all the false and fraudulent statements and representations so made to plaintiff by said defendant Stick * * * and with full notice and knowledge that said notes were obtained from the plaintiff by said defendant Stick, through said false and fradulent statements and representations aforesaid, and in no other way. ” We cannot assume, as appellant argues, that the bank’s only notice or knowledge was that of its president, Stick. The allegation is general that the bank had “full notice and kdowledge,’’ and, for the purposes of this demurrer, this must be treated as ad • mitted. If, upon the trial, it turns out that it had no other notice or knowledge than such as should be imputed todt from t he knowledge of Stick, it will then have to be determined
The complaint alleges that these notes were obtained from Taylor through the fraudulent statements of Stick, and that, at his request they were made payable to the bank of which he was the president, and that the bank, with full knowledge of such fraud and that the notes were so obtained, took the same. Such facts, if proved and unexplained, would place the bank in pari delicto with Stick. If, upon the facts stated in the complaint, Taylor could make the same defense against these notes in the hands of the bank as in the hands of Stick, we are unable to see why his right to rescind was and is not the same against both. ‘‘The rights of a party who has been defrauded in making a contract are, on the discovery of the fraud within 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.” Herrin v. Libbey, 36 Me. 357. See also note to Tarkington v. Purvis (Ind. Sup.) 25 N. E. 879, and cases there cited. Upon the facts stated in the complaint, Taylor would have been entitled to rescind as against Stick if the notes had been taken to and held by him. He would have the same right as against the bank, unless it took the notes as an innocent holder for value. Bank v. Taylor (S. D.) 58 N. W. 297, and cases cited. Having, as alleged in the complaint, taken the notes with full knowledge of Stick’s fraud, it cannot be treated as an innocent party, whose rights would stand' in the way of rescission. Whether plaintiff, Taylor, asserted his right and election to rescind within a reasonable time after the discovery of the alleged fraud, may be a question to be litigated in the trial; but the express allegations of the com-pl aint that he gave notice of his intention and election to rescind ‘‘as soon as he learned the true condition of the bank!’ would, if proved, show a full discharge of his duty as to time.