Summary
concluding that "an action to rescind a contract of sale on the ground of fraud and to recover goods alleged to have been sold in reliance upon fraudulent misrepresentations is inconsistent with an action on the contract of sale."
Summary of this case from In re Integrated Health Services, Inc.Opinion
Argued February 7, 1919
Decided March 18, 1919
Isaac Adler for appellants. Glenn L. Buck for respondent.
An election of remedies takes place when a choice is exercised between remedies which proceed upon irreconcilable claims of right.
When an election is made between such claims, with full knowledge of all the facts, an action may not thereafter be maintained upon the inconsistent claim. ( Georgi v. Texas Co., 225 N.Y. 410; Mills v. Parkhurst, 126 N.Y. 89; Droege v. Ahrens Ott Mfg. Co., 163 N.Y. 466.)
An action to rescind a contract of sale on the ground of fraud and to recover goods alleged to have been sold in reliance upon fraudulent representations is inconsistent with an action on the contract of sale. ( Reed v. McConnell, 133 N.Y. 425, 435.)
After disaffirming a contract and bringing a suit in replevin for the goods sold, a party has no remedy on the contract of sale. ( Wallace v. O'Gorman, 25 N.Y.S.R. 261, and cases cited; S.C., 53 Hun, 638; affd., on opinion below, 126 N.Y. 638.)
The petition of the plaintiff in the proceeding described in the record by which it sought to reclaim certain goods delivered to the trustee in bankruptcy, expressly asserts that there were fraudulent representations made to induce the sales by the plaintiff to the defendants, and that commencing on or about the 6th of August, 1908, and continuously to the 6th of February, 1909, the plaintiff, in reliance upon such fraudulent representations, sold to the bankrupts goods and merchandise consisting of cloth including the particular pieces thereof sought to be reclaimed. It thus appears that the goods reclaimed were not purchased pursuant to an alleged separate and independent fraudulent contract relating only to the goods so sought to be reclaimed, but that such goods and merchandise were included in the sales from time to time during the time mentioned. The goods reclaimed were that part of the goods and merchandise sold during the time mentioned which remained in the hands of the bankrupts unused when the bankruptcy proceeding was commenced.
The court in connection with directing judgment for the plaintiff expressly found "that the goods which were subject to reclamation proceedings were a portion of the goods covered by the contracts of sale of which the goods mentioned in the complaint were also a part."
The plaintiff by its formal and unequivocal statement elected to rescind each and every sale made to the defendants within the time mentioned. The plaintiff succeeded in its claim that title to the goods did not pass to the defendants. It having elected to rescind the contract by which the sales were made it must abide the consequences. The rescission of the contract of sale does not prevent the plaintiff from recovering as upon an implied promise to pay the value of the goods delivered to the defendants and actually used by them. The plaintiff cannot, however, recover therefor upon the express contract of sale which it has rescinded. The rescission of the contract of sale includes a rescission of the terms of credit which were a part thereof.
In the Wallace case that we have mentioned the court refused after a replevin action had been commenced to recover possession of a portion of goods remaining unsold of purchases made from time to time in reliance upon a fraudulent representation as to the purchaser's financial responsibility, to enforce an agreement for security, a part of the original contract, even as to the value of goods which the plaintiff was unable to recover in the replevin action.
It was held that the agreement to sell and the agreement to give a mortgage to secure the purchase price of the goods sold were part of a single contract or transaction. So, in this case, the agreement to sell and the agreement to give a credit to the purchasers were part of one contract or transaction. The plaintiff cannot rescind the contract and act thereon and subsequently assert any right or advantage from the provisions of the contract as if in full force and effect.
There is no claim in the complaint that the time when the purchase price of the goods or any of them mentioned therein became due was extended by a credit given on the sales alleged therein. Assuming that the plaintiff on the proof herein could have recovered on its complaint for any sales within six years and four months prior to the commencement of the action, its rescission of the contract of sale made it necessary for it to stand upon a claim for the value of the goods had and received by the defendants from it and prevents its recovery upon the express contract which it has repudiated. As against a claim not based upon the express contract the Statute of Limitations commenced to run from each and every delivery and acceptance of merchandise.
More than six years had expired prior to the commencement of this action since each and every delivery by the plaintiff and acceptance by the defendants of merchandise. The plaintiff cannot recover, therefore, unless
1. The payment of dividends on the plaintiff's claim by the trustee in bankruptcy is in effect an acknowledgment of the debt by the defendants and a promise to pay it.
2. The institution of the bankruptcy proceeding stopped or tolled the running of the Statute of Limitations.
3. The allowance of the claim by the trustee in bankruptcy at $15,921.80 in 1910 was an adjudication binding upon the defendants as parties in the bankruptcy proceeding.
Payment by a trustee in bankruptcy, like a payment by an assignee pursuant to a general assignment, is a duty pointed out by law. Neither his duty nor power includes authority to promise that the bankrupt will pay the residue of the debt. Such a payment by an assignee under a voluntary assignment for the benefit of creditors on account of a claim against the assignor does not take the case out of the Statute of Limitations. ( Pickett v. Leonard, 34 N.Y. 175.) The same rule applies in the case of a payment by a trustee in bankruptcy.
Neither the assignee nor the trustee in bankruptcy has power to represent the bankrupts except for the purpose of the Bankruptcy Act. ( Moller v. Tuska, 87 N.Y. 166, 170.)
The Bankruptcy Act of 1898, unlike that of 1867, does not contain a provision restraining a creditor from pursuing his claim against a bankrupt debtor until the question of his discharge has been determined. The commencement of the bankruptcy proceeding does not, therefore, stop or toll the running of the Statute of Limitations.
A bankrupt is not required to examine claims presented in the bankruptcy court except when they are presented to him or unless ordered by the court or a judge thereof for cause shown, and the bankrupt shall be paid his actual expenses from the estate when examined or required to attend at any place other than the city, town or village of his residence. (Bankruptcy Law, sec. 7.) It does not appear in the record before us that the defendants or either of them ever in any way examined the claim filed by the plaintiff against the bankrupt estate of the defendants. Upon such record the allowance of the claim, although sufficient and controlling as a judgment for the purposes of the bankruptcy proceeding ( Matter of John Osborn's Sons Co., Inc., 177 Fed. Rep. 184; National Bank of Commonwealth v. Mechanics' National Bank, 94 U.S. 437), does not affect the question before us relating to the Statute of Limitations.
The judgment should be reversed and the complaint dismissed, with costs in all courts.
HISCOCK, Ch. J., HOGAN, POUND, McLAUGHLIN and ANDREWS, JJ., concur; CARDOZO, J., not voting.
Judgment reversed, etc.