that where the subject of the sale has been sent to the buyer by carrier or where the sale is of property in transit if the buyer has paid the freight the seller must refund the amount so paid.' The seller is not required, as a condition precedent to his right to rescind, to return worthless securities or property rights received from the buyer.8 Where the buyer surreptitiously gains possession without paying the purchase price in full, as required by the terms of the contract, the seller may regain possession of the property by replevin without paying or tendering what the buyer may have paid, as such an action does not go to the rescission of the contract, but is merely in enforcement of the seller's right to possession until the price is paid or he has waived such right. A third person, taking with notice of the fraud, cannot, it seems, raise the objection that the consideration received by the seller from the fraudulent buyer was not returned,10 and where the fraudulent buyer paid part of the price in cash it has been held that where the action is against a third person, who received. the goods from the fraudulent buyer with notice of the fraud, he cannot set up such nontender as a defense.11 As regards the necessity for a return by the seller, a distinction is made between the cases where the seller is pursuing his legal remedies and where he sues in equity, and it is held that, though an offer to return is necessary in the former case, still in equity it is sufficient that in his bill of complaint he offers a restoration.12 608. Notes Given by Buyer.-It is the general rule that if the buyer has given his negotiable note for the price or has accepted a negotiable draft therefor, the seller must return it, because if he is permitted to recover without such return, the buyer may be rendered liable to a bona fide purchaser of such paper, 18 and the fact that the buyer is insolvent has been held not to affect this rule.14 Where, however, the buyer has given his non-negotiable note, it has been held that there is no necessity for its return as a condition to the right to rescind; in such a case rescinding the sale rescinds or terminates the contract of the buyer to pay and the giving of a note not negotiable 7. See Wilcox v. San Jose FruitPacking Co., 113 Ala. 519, 21 So. 376, 59 A. S. R. 135 (quære). 8. Note: 21 L.R.A. 207. 9. Jennings v. Gage, 13 Ill. 610, 56 Am. Dec. 476. Notes: 21 L.R.A. 208; 1 L.R.A. (N.S). 475. 10. Manning v. Albee, 14 Allen (Mass.) 7, 92 Am. Dec. 736. Note: 21 L.R.A. 208. 11. Benesch v. Waggner, 12 Colo. 534, 21 Pac. 706, 13 A. S. R. 254. 12. Smith v. Ryan, 191 N. Y. 452, 84 N. E. 402, 123 A. S. R. 609, 14 Ann. Cas. 505, 19 L.R.A. (N.S.) 461. 13. Wilcox v. San Jose Fruit-Packing Co., 113 Ala. 519, 21 So. 376, 59 A. S. R. 135; Thompson v. Peck, 115 Ind. 512, 18 N. E. 16, 1 L.R.A. 201; Skinner v. Michigan Hoop Co., 119 Mich. 467, 78 N. W. 547, 75 A. S. R. 413. Note: 2 L.R.A. 155. 14. Wilcox v. San Jose Fruit-Packing Co., 113 Ala. 519, 21 So. 376, 59 A. S. R. 135. is nothing more than an express promise to pay and is avoided with the sale.15 It has been held that though the buyer has given his negotiable note, yet if the note has not been negotiated, the return is not a condition precedent to the commencement of an action founded on the seller's rescission, provided the note is produced at the trial to be surrendered,16 and if the buyer's negotiable paper is overdue and has been protested, and is still in the hands of the seller, it has been held that there is no necessity for its return.17 If the note given by the buyer is that of a third person ordinarily its return or tender is a condition precedent to the seller's right to rescind, whether the note was negotiable or not,18 but if the note is worthless, as in case of a forged note, no offer to return is necessary. 19 Ordinarily it would seem that if the seller has transferred the note of the buyer and has not regained it, he would be in no position to rescind the sale; but it has been held that where the seller was induced to take the buyer's note by the fraudulent misrepresentations of the buyer as to the value of securities given with the note, which turn out to be worthless, and the buyer has absconded, the fact that the seller transferred the buyer's note and had not regained it would not prevent his rescinding the sale and recovering possession of the goods from a third person who received them from the buyer with notice of the fraud.20 609. View Applying Equitable Principles.-There are a few courts which have been inclined to treat the question as to the duty of the seller to return the consideration received by him in an equitable manner and as far as possible administer relief similar to that which would be awarded in a suit in equity for rescission.1 And it has been expressly held that the return of money received on a contract of sale induced by fraud is not a condition precedent to the commencement of a suit in replevin for the property, but the court can require the plaintiff to repay as a condition of relief any excess of money received over the damage to his property and the value of any that is not recovered. It has also been held that replevin for goods 15. Thurston V. Blanchard, 22 Pick. (Mass.) 18, 33 Am. Dec. 700; Nichols v. Michael, 23 N. Y. 264, 80 Am. Dec. 259. Notes: 80 Am. Dec. 268; 21 L.R.A. 206. 16. Thurston V. Blanchard, 22 Pick. (Mass.) 18, 33 Am. Dec. 700; Nichols v. Michael, 23 N. Y. 264, 80 Am. Dec. 259. 17. Skinner v. Michigan Hoop Co., 119 Mich. 467, 78 N. W. 547, 75 A. S. R. 413. Note: 21 L.R.A. 207. 18. Note: 21 L.R.A. 207. 19. Note: 21 L.R.A. 207. 20. Manning v. Albee, 14 Allen (Mass.) 7, 92 Am. Dec. 736. 1. John V. Farwell Co. v. Hilton, 84 Fed. 293, 39 L.R.A. 579; Phenix Iron Works Co. v. McEvony, 47 Neb. 228, 66 N. W. 290, 53 A. S. R. 527; Sisson v. Hill, 18 R. I. 212, 26 Atl. 196, 21 L.R.A. 206. Notes: 21 L.R.A. 209; 1 L.R.A. (N.S.) 475. 2. Sisson v. Hill, 18 R. I. 212, 26 Atl. 196, 21 L.R.A. 206 (explaining an earlier case). But see Thompson v. Peck, 115 Ind. 512, 18 N. E. 16, 1 fraudulently purchased may be maintained without tendering back a partial payment of the consideration, if the buyer has realized from sales more than the amount which he has paid. So it has been held that in cases where the seller sued in trover that when the fraudulent buyer has given his note, or even the note or other obligation of a third person, as the consideration, in whole or in part, for the goods obtained, it is not necessary for the seller to return, or offer to return, such note or obligation before suit, but that it is enough if he brings it into court to be impounded at the trial for the benefit or protection of the buyer. It has been held that if the buyer of goods purchases them with intent to defraud the seller, and then, with the same intent, enters into a compromise agreement with the latter, by which he agrees to return part of the goods and pay for the remainder at a future day, the seller may, upon discovery of the fraud in the compromise before such day, immediately rescind the agreement, and, by replevin, retake the goods remaining in the hands of the buyer, without tendering or redelivering to him the goods received under the compromise, although, by its terms, the seller has waived the right to replevin the goods on the ground of fraud in their purchase.5 610. Waiver of Seller's Right to Rescind Generally.-A sale induced by the fraud of the buyer is voidable merely at the option of the seller, and to entitle him to rescind and avoid the sale he must do it within a reasonable time after coming to the knowledge of the fraud." The seller, however, cannot be deemed guilty of acquiescence or delay until he has acquired knowledge of the fraud and his right of rescission may be maintained at any distance of time after the sale, where the fraud has been concealed, provided third persons may not have acquired an interest in the goods." The defrauded seller has several remedies to which he may resort, one class based on the affirmance of the sale, the other class based on its rescission; and under the general doctrine of the election of remedies,8 his resort to one class of remedies may preclude his subsequent resort to another inconsistent remedy," L.R.A. 201. This is very similar to the rule existing in some jurisdictions under which the buyer is permitted to retain the property as security for what he has paid. See infra, par. 647. Metc. (Mass.) 68, 39 Am. Dec. 711; Arnold v. Hagerman, 45 N. J. Eq. 186, 17 Atl. 93, 14 A. S. R. 712; Barnard v. Campbell, 58 N. Y. 73, 17 Am. Rep. 208; Mackinley v. McGregor, 3 Whart. (Pa.) 369, 31 Am. Dec. 3. John V. Farwell Co. v. Hilton, 522. 84 Fed. 293, 39 L.R.A. 579. 7. Mackinley v. McGregor, 3 Whart. 4. Sisson v. Hill, 18 R. I. 212, 26 (Pa.) 369, 31 Am. Dec. 522. Atl. 196, 21 L.R.A. 206. 5. Munzer v. Stern, 105 Mich. 523, 63 N. W. 513, 55 A. S. R. 468, 29 L.R.A. 859. 8. See ELECTION OF REMEDIES, vol. 9, p. 958. 9. See supra, par. 606, as to the effect of rescission by seller for fraud on rights based on the continuance of 6. Seeley v. Seeley Howe-Le Van Co., 130 Ia. 626, 105 N. W. 380, 114 the contract. A. S. R. 452; Hoffman v. Noble, 6 and ordinarily the resort by the seller with knowledge of the fraud to a remedy founded in theory on an affirmance of the sale will constitute a waiver of his right to rescind and subsequently resort to a rem edy founded on a rescission of the sale.10 The endeavor of the defrauded seller to obtain security does not preclude him from rescinding the sale if, at the time of such endeavor, he was not aware of the facts entitling him to rescind,11 and it has been held that the mere fact that he requests payment from the buyer before bringing an action based on a rescission of the sale does not constitute a waiver of his right to rescind. A creditor may well request his debtor to pay for goods purchased, and, if payment be refused, may seek rescission, if the conditions justify it.12 The election of the seller to treat the sale as valid is binding on him although no injury would result to the buyer if the election were set aside.13 611. Action for Price as Waiver.-The institution of an action by the seller for the purchase price with knowledge of the fraud on the part of the buyer is generally considered an election to affirm the contract and precludes the seller from thereafter suing to recover the property sold founded on the rescission of the sale,14 and it is immaterial that the action for the price is discontinued or dismissed before an action based on the rescission is commenced.15 So if the defrauded seller in case of a sale to a corporation for which a receiver is afterwards appointed attempts to collect the purchase price from the receiver, after knowledge that the sale was procured by fraud, he cannot rescind the sale and recover the goods on a failure to make the collection.16 On the other hand, where the sale was for cash, and the fraud consisted in the buyer's giving his check, which on due presentation was dishonored, it has been held that the mere fact that the seller improvidently sued out an attachment against the buyer, which was immediately dismissed without any benefit accruing to the seller or injury to the buyer, did not constitute such an election as to preclude the seller from reclaiming the property from the buyer or third person's N. W. 1059, 59 A. S. R. 434; Lloyd Notes: 27 Am. Dec. 90; 5 L.R.A. 15. Conrow v. Little, 115 N. Y. 387, 22 N. E. 346, 5 L.R.A. 693. 16. Seeley v. Seeley Howe-Le Van Co., 130 Ia. 626, 105 N. W. 380, 114 A. S. R. 452. taking with notice of the fraud.17 It has also been held that where the defrauded seller instead of seeking to recover the goods proceeds in attachment to recover the price and levies his attachment on the goods, one who took a chattel mortgage from the fraudulent buyer with notice of the fraud and as security for an antecedent debt could not hold the goods as against the attachment.18 An action for the price without knowledge of the fraud will not preclude a subsequent rescission of the sale on discovery of the fraud.19 It has been held that a suit against the buyer to recover the value of a part of the goods which remain in his possession does not affirm the purchase of the whole goods, nor preclude the seller from recovering the remainder, in an action of replevin theretofore instituted against a mala fide purchaser from the fraudulent buyer.20 612. Recovery of Judgment for Price. The fact that the seller has recovered judgment for the price without knowledge of the fraud does not itself preclude him from rescinding the sale. The act of obtaining judgment stands on the same footing as any other act recognizing the existence of the contract of sale, and must be governed by the same rules. The fact that the original claim against the buyer for the price of the goods is extinguished by the judgment is not material. The case is not different in that regard from what it would have been if the seller had taken from the buyer his own note, or the note of a third party, in payment of the original claim. But where the seller has recovered judgment for the price, he cannot maintain a bill in equity with a double aspect, the one as a judgment creditor to set aside a transfer by the buyer as in fraud of creditors and the other to set aside the sale for fraud practiced by the buyer. 613. Replevin by Seller.-The seller, in case the sale is induced by the fraud of the buyer, has the choice of several remedies at law. He may, and this is the course he usually pursues, maintain an action of replevin or detinue to regain possession, and as against the buyer 17. Johnson-Brinkman Commission Co. v. Central Bank, 116 Mo. 558, 22 S. W. 813, 38 A. S. R. 615; JohnsonBrinkman Commission Co. v. Missouri Pac. R. Co., 126 Mo. 344, 28 S. W. 870, 47 A. S. R. 675, 26 L.R.A. 840. 18. Browning v. De Ford, 178 U. S. 196, 20 S. Ct. 876, 44 U. S. (L. ed.) 1033. 19. Note: 15 L.R.A. 89. 20. Sleeper v. Davis, 64 N. 6 Atl. 201, 10 A. S. R. 377. H. 59, 1. Kraus v. Thompson, 30 Minn. 64, 14 N. W. 266, 44 Am. Rep. 182. Note: 10 A. S. R. 380. 2. Lloyd v. Brewster, 4 Paige Ch. (N. Y.) 537, 27 Am. Dec. 88. See EQUITY, vol. 10, p. 423 et seq. 3. Benesch v. Waggner, 12 Colo. 534, 21 Pac. 706, 13 A. S. R. 254; Louisville Dry Goods Co. v. Lanman, 135 Ky. 163, 121 S. W. 1042, 135 A. S. R. 451, 28 L.R.A. (N.S.) 363; Farley v. Lincoln, 51 N. H. 577, 12 Am. Rep. 182; Sleeper v. Davis, 64 N. H. 59, 6 Atl. 201, 10 A. S. R. 377; Masson v. Bovet, 1 Denio (N. Y.) 69, 43 Am. Dec. 651; Cary v. Hotailing, 1 Hill (N. Y.) 311, 37 Am. Dec. 323; Root v. French, 13 Wend. (N. Y.) 570, 2 Am. Dec. 482; Nichols v. Michael, 23 N. Y. 264, 80 Am. Dec. |