Nelson v. Hatch

HATCH, J.

The learned referee in making disposition of this case seems to have proceeded upon the ground that the action was one for a rescission of the contract, and that the same could not be maintained, as the plaintiff had not restored or offered to restore the benefits which he took under his contract with the defendants, and upon the faith of which he advanced the money. It must be conceded that, if the action was to rescind the contract, it was incumbent upon the plaintiff, in the absence of fraud, as a condition precedent to its maintenance, to have made restoration of benefits received, or an offer to restore the benefits. In order for the plaintiff to avail himself of an offer to restore, he must have pleaded his ability and willingness to restore, and made such offer good by compliance with it upon the trial, otherwise it would be unavailing. Gould v. Bank, 99 N. Y. 333, 2 N. E. 16. Such an action is in its nature an equitable action, and the demand is properly made for equitable relief. Here no such offer was pleaded, and there was in fact no restoration .of benefits, so that, if it be material to the cause of action, the plaintiff must fail. If, however, the plaintiff took nothing of benefit under his contract, then the rule which requires a restoration of benefits would have no application, as there would be nothing which could operate to the disadvantage of the defendants or change their status by such failure. The reason for the rule rests upon the fact that where a rescission is sought the parties are entitled to be placed in the same position, so far as they have parted with value, as they were in when the contract was made. The only exception to this rule is where fraud has been practiced, and the action is based thereon. Cox v. Stokes, 156 N. Y. 492, 51 N. E. 316; Kley v. Healy, 127 N. Y. 555, 28 N. E. 593; Martin v. Bank, 160 N. Y. 190, 54 N. E. 717. It will be a task of some difficulty to find where the plaintiff took any benefit, or the defendant parted with value, under this contract. The interest which was assigned to the plaintiff by the terms of his contract with the defendants was dependent upon the fulfillment of the contract between the defendants and Mrs. Daniels. It is established that the defendants never performed the contract, and never became entitled to any money or property thereunder. There was no privity of contract between the plaintiff and Mrs. Daniels, so that he never acquired any right as against her; and she expressly repudiated her contract with the defendants, and refused to be bound by it. In what the benefits consisted which the plaintiff received and could restore is most hazy. A reassignment of the interest which the plaintiff took under his contract would carry nothing with it, if there was no interest which it could operate upon; and, if nothing could pass by it, then it would be an idle ceremony to execute it.

Aside from this question, and assuming for present purposes that there was something to restore, we are of opinion that the learned referee misconceived the character of the action. Instead of being an equitable action to rescind the contract and recover the sums of money paid thereunder, it seems to be an action at law to recover damages for a breach of the contract. The averments of the complaint, we think, make this plain. It first sets out that a contract was made between the defendants and Mrs. Daniels, giving in substance its terms, and then avers that for the purpose of carrying out such contract the contract was made which is the subject of this action, and further avers its terms and the advancement of money thereunder. It then avers that the defendants abandoned their contract with Mrs. Daniels, and refused to perform the same, and that the contract has been annulled; that by reason of such abandonment the plaintiff has been deprived of all interest therein by virtue of his contract, on account of which he has been damaged in the" sum of $7,000, for which sum, with interest, he demands judgment. There is nothing in these averments which shows that the plaintiff seeks to rescind or annul his contract. On the contrary, he avers facts that make it appear that the defendants have made it impossible for them to perform their contract with him, and that by reason* of such fact he has been damaged. This constitutes the action one for a breach of a contract, and for its maintenance the plaintiff was not called upon to restore or offer to restore anything^ So far as the present record is concerned, it is quite clear that the' evidence would justify a finding that there was a breach of the contract upon the part of the defendants, occasioned by the fact of their abandonment of the contract with Mrs. Daniels, by the performance of which alone could the plaintiff hope to take any benefit under his contract. Such fact would furnish ground for finding a breach of the conditions of the plaintiff’s contract. By the course adopted by the learned referee, the plaintiff has been deprived of a consideration of this question, and of the evidence bearing thereon. We are not presently concerned with the question as to whether the abandonment of the contract with Mrs. Daniels was in furtherance of a scheme on the part of Mr. Warren and others to deprive Mr. Hatch of the benefits to be derived therefrom or not. If such be the fact, it would not excuse either for a failure to fulfill the contract which they made with the plaintiff. For redress of this matter, if there exists ground therefor, Mr. Hatch must be remitted to his remedies against the parties who have worked the wrong. It furnishes no defense to this action, unless the plaintiff be a party thereto, but of such fact there does not appear to be any claim.

For these reasons, we think the judgment should be reversed, and a new trial granted before another referee, with costs and disbursements to the appellant to abide the event. All concur.