Laminack v. Black ( 1928 )

It is the admitted rule that one induced by fraud to make a contract of purchase, although it be an executed and not an executory one, may, upon discovery of the fraud, either affirm the contract and sue for damages, or he may repudiate the contract, tender back what he has received under it, and recover what he has parted with as the consideration. 13 C.J. p. 611; 2 Black on Rescission, § 563; 2 Pomeroy on Eq. Jur. § 872. If the party elects to rescind or revoke the contract and to seek for a remedy, then it is incumbent upon him that he assert his remedial right with diligence and without delay upon becoming aware or obtaining knowledge of the fraud. It is the well-settled rule that one possessing the right to rescind on the ground of fraud, and desiring to exercise such right, must not be guilty of unreasonable or unnecessary delay in the assertion of his purpose and in taking steps to make it effective. 2 Black on Rescission, §§ 536, 538; 2 Pomeroy on Eq. Jur. § 917; Dalton Adding Mach. Sale Co. v. Wicks (Tex.Civ.App.) 283 S.W. 642; Colt Co. v. Head (Tex.Com.App.) 292 S.W. 198. Further, quoting from Hunt v. Kellum, 59 Tex. 535:

"He must restore what he had received, and replace all parties in their original situation. Moreover, he must do this within a reasonable time, and whilst the situation of the parties remained so far unchanged that they could be restored to their first position."

Promptness of return or tender of the property as an equitable act is important and requisite in practical consequence, because delay may operate as a means of injury or damage to the party required to take back the property in loss during the interim of an advantageous use or resale of the property. 3 Elliott on Contracts, § 2434; 2 Pomeroy on Eq. Jur. § 897; Roberts v. James, 83 N.J. Law, 492, 85 A. 244, Ann.Cas. 1914D, 859. Promptness of proceedings is requisite because delay in proceedings for relief has the effect of the imputation of acquiescence, which is a bar to any equitable remedy. 2 Pomeroy on Eq. Jur. § 917; 3 Elliott on Contracts, § 2431. Acquiescence consisting of unnecessary delay after knowledge of the fraud operates to defeat the right itself of equitable relief. 2 Pomeroy on Eq. Jur. § 817. The delay, even without positive acts of ratification, amounts to a waiver of the right to rescind. 3 Elliott on Contracts, § 2433. Therefore, in view of the special findings of the jury, and in the light of the evidence of appellee, the simple question in the appeal is that of whether or not the appellee had the right and acted with the reasonable promptness required to entitle him to the remedy of rescission. The jury made the special findings that appellee was defrauded in the sale, and that he did not demand a rescission, claiming that he had been defrauded in the trade, until about two months after the day of sale, and did not make return of the mule until more than four months after sale. The appellee kept the mule "in his possession" all that period of time. And the suit for relief was not filed until August 16, 1925, more than six months after the sale. Appellee admitted as a fact in the trial that he found out the same day of purchase, February 7, 1925, that the mule was not entirely of the disposition and fitness for use that appellant represented him to be. And, as further appears, "within a few days" afterwards appellee's son and son-in-law made repeated additional trials and extra efforts to induce the mule to work. Through these affirmative means and ample efforts to test out the mule it was made sufficiently evident, and afforded the appellee knowledge enough, that the mule was not as represented to be, "perfectly gentle to handle and well broke to work." If these were the facts appellee's testimony goes to show, then he was armed with knowledge of the fraud, with the right to rescind if seasonably and promptly demanded. He had fair indication of the falsity of the representation on the afternoon of the delivery of the mule, and he necessarily had full and sufficient knowledge thereof from the diligent efforts during the first two weeks thereafter. That was a reasonable time in which to make the test. By that time he could have fairly investigated and ascertained, and did so, that the representation made was untrue and that he had been deceived in the trade. No more efforts than so made could have been required of him to test out the mule without being subjected to the imputation of ratification of the trade by positive acts of ratification in continued use of the mule after knowledge of the fraud and while he was free from its influence. He could not reasonably claim that he was in ignorance of the fraud through the efforts made to test out the mule shortly after the day of purchase. These facts so appearing, then the effect of the special findings of the jury that the demand for rescission was made on April 6, is that the appellee did not act with the reasonable promptness required in order to avoid the imputation of acquiescence, defeating his right to the equitable relief of rescission. Knowing reasonably and sufficiently within the first two weeks' trials after delivery of the rule that fraud was practiced upon him, the appellee delayed in offering to revoke the trade for some six weeks, and delayed in actually tendering back the mule for some four months, and delayed in instituting suit until some six months after day of sale. There is no pretense or claim in the evidence of any adequate cause for delay of so long a time in demanding a rescission and invoking return of the mule after obtaining knowledge of the fraud. The parties lived only about seven miles apart, and the evidence indicates that the seller was not absent, but at home all the time. There is no pretense that appellant induced the delay. The appellee was not under disability preventing him from acting promptly in demanding rescission. In view of the circumstances, the location of the parties with respect to each other, the subject-matter of the trade, the opportunity to demand rescission, and the time of acquiring knowledge by appellee of the fraud, the delay in making demand for rescission was unreasonable. As analogous: Collins v. Tigner, 5 Pennewill (Del.) 345,60 A. 978 (delay of three weeks); Rosenfield v. Swenson, 45 Minn. 190,47 N.W. 718 (delay of six weeks); Kleeb v. Lumber Co., 27 Wash. 648,68 P. 202 (delay of sixty days). If, as appears, the appellee kept the mule and used it, after knowing of the fraud, to see if he had a good bargain, then such act may be regarded as a waiver of the fraud by positive acts of acquiescence. But as that issue was not involved in the verdict of the jury, that phase of the case may not be here determined. In view of the evidence and the special findings of the jury mentioned, the judgment should have been the reverse of that awarded by the court. The appellant's request for judgment on the verdict in his favor should have been granted.

The jury made findings against the appellant's claim for cost of feeding the mule, as sought in the cross-action. In view of this finding and in keeping with such verdict, it was not error to deny the appellant recovery for the alleged cost of feeding the mule. The appellee, as a consequence, would be entitled to retake immediate possession of the mule, free of any such claim for cost of feed.

The present case is not comparable to the case of Hubbs v. Marshall (Tex.Civ.App.) 175 S.W. 716. The judgment in that case was held supportable on the ground that the suit was, in substantial form, a suit for damages. The present suit, according to the phraseology of the plaintiff's pleading, is distinctly a suit for rescission claiming the refund of the whole purchase price, and it cannot be construed to be an action in the alternative for damages. The parties have treated the suit as one distinctly for rescission only.

The judgment is reversed and judgment is here rendered for appellant, with costs of appeal and of the trial courts. Appellant is denied recovery on cross-action for alleged cost of feeding the mule.