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MCLEAN v. CLAPP.

decided: November 2, 1891.

MCLEAN
v.
CLAPP.



APPEAL FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF ILLINOIS.

Author: Brewer

[ 141 U.S. Page 430]

 MR. JUSTICE BREWER delivered the opinion of the court.

In December, 1855, Edwin W. McLean, owning a store and stock of goods in Amboy, Illinois, sold the same to Ruggles W. Clapp, in payment for which he received four notes, amounting in the aggregate to five thousand nine hundred and eighteen and sixty-six one-hundredths dollars, drawing ten per cent interest, and secured by mortgage on four hundred and eighty acres of land. The first of these notes, for five hundred dollars, due in twenty-five days, was paid; the others were not. The last of the notes became due in May, 1857. Soon thereafter suit was commenced in the state court on them, and to foreclose the mortgage. In this suit the defence of usury was pleaded. A settlement was made with Clapp, in pursuance of which the three unpaid notes were surrendered; and in lieu thereof there was taken a draft for one thousand dollars, drawn on his brother, Alfred Clapp, of New York City; and eleven notes, five for two hundred dollars each, dated June 10, 1857, made by William Jones to Ruggles W. Clapp, three made by Cyrus Craig, November 29, 1856, to Ruggles W. Clapp, two for one thousand dollars each and one for fourteen hundred dollars; and three made by Curtis Cannon, August 1, 1857, to Ruggles W. Clapp, for four hundred and thirty-three and thirty-three one-hundredths dollars each. These notes were all endorsed "without recourse," and were nominally, at least, secured by conveyances of real estate. Also, to secure the draft, on which only $250 was ever paid, a conveyance was made of a lot and building in the

[ 141 U.S. Page 431]

     town of Amboy. There was no formal release of the mortgage; but the suit to foreclose was dismissed. This settlement was consummated some time in the latter part of 1857, or the fore part of 1858; and was consummated on the part of McLean by W. E. Ives, his attorney at Amboy, McLean himself having moved after the sale of the store to Great Barrington, Massachusetts, though it is claimed by the defendants that the terms of the settlement were agreed upon between McLean and Clapp in the summer of 1857, when McLean was on a visit to Amboy. In the summer of 1861 McLean, dissatisfied with the conduct of Ives as his attorney, discharged him and placed his business in the hands of one M. L. Arnold. While Arnold testified that in the same summer he notified Clapp that McLean repudiated the settlement, nothing was in fact done looking toward a repudiation until May, 1872, when this suit was commenced in the Circuit Court of the United States, by McLean, to set aside the settlement, and foreclose the mortgage, as though it still remained security for the original notes. Answers were filed, and some preliminary steps taken in the case during one year, and up to May, 1873. From that time no order was made or proceedings had in the case until July, 1882, when it was dismissed for want of prosecution. In the November following the order of dismissal was set aside and the case reinstated, and leave given to file a bill of revivor in the name of the widow and heirs of McLean, who had died in 1875. The case thereafter proceeded regularly till May, 1887, when, upon final hearing, the bill was dismissed.

The contentions of defendants are substantially -- first, that McLean himself arranged the terms of the settlement of 1857; that he did this understandingly and without any fraud or misrepresentations on the part of Clapp, and hence cannot now repudiate it; secondly, that if he did not himself arrange such terms, be was in 1861 fully informed of the character and value of the paper and securities received by his agent in the settlement, and that with such full information he thereafter acquiesced in and ratified it; and, thirdly, that his laches and delay in asserting his rights forbid any recovery against

[ 141 U.S. Page 432]

     the present holders of the property conveyed by the original mortgage.

We notice only the second of these contentions. If the settlement by which the original notes were surrendered was made under such circumstances that McLean had a right to repudiate it, it was his duty to do so as soon as advised of all the circumstances justifying such repudiation; and he also must have repudiated it in toto. The settlement was a new contract between him and Clapp, and the law is clear that he cannot take the benefits of that contract and repudiate its burdens. The rule is thus stated by this court in the case of Grymes v. Sanders, 93 U.S. 55, 62: "Where a party desires to rescind upon the ground of mistake or fraud, he must, upon the discovery of the facts, at once announce his purpose and adhere to it. If he be silent, and continue to treat the property as his own, he will be held to have waived the objection, and will be conclusively bound by the contract, as if the mistake or fraud had not occurred. He is not permitted to play fast and loose. Delay and vacillation are fatal to the right which had before subsisted. These remarks are peculiarly applicable to speculative property like that here in question, which is liable to large and constant fluctuations in value. Thomas v. Bartow, 48 N.Y. 200; Flint v. Wood, 9 Hare, 622; Jennings v. Broughton, 5 DeG. M. & G. 139; Lloyd v. Brewster, 4 Paige, 537; Saratoga & S.R.R. Co. v. Rowe, 24 Wend. 74; Minturn v. Main, 3 Seld. 220; 7 Rob. Prac. c. 25, sect. 2, p. 432; Campbell v. Fleming, 1 Ad. & El. 41; Sugd. Vend. (14th ed.) 335; Diman v. Providence W. & B.R.R. Co., 5 R.I. 130."

If McLean did not himself arrange the terms of this settlement, if he was not at the time it was made fully informed of the character and value of the securities taken in exchange, he did become so fully informed in 1861, when he visited Amboy, and, discharging Ives, transferred his affairs to the control of Arnold. This appears distinctly from his own testimony. Now, if he desired to rescind his contract, his duty was at once to return what he had received, and repudiate wholly and forever the transaction. So far from doing this,

[ 141 U.S. Page 433]

     he did exactly the contrary; he retained all the notes and securities received under the settlement, and has never yet returned one of them. He took and held possession of all the real estate. As late as March 12, 1868, he conveyed a part of it to Cephas Clapp for eight hundred and fifty dollars. In November, 1867, he deeded to his agent Arnold another tract for one hundred and fifty dollars. It is true that Arnold testifies that he was to have this land to help him pay the expense of prosecuting this suit if unsuccessful, and that he was to hold it so as to tender it back to the defendants if successful. The letters, however, which accompanied this transaction indicate that it was an absolute sale, with no such conditions; and it appears, also, that a note of one hundred and fifty dollars was sent by Arnold to McLean in payment for the land. Further, he collected rent for the building in Amboy, which was conveyed to him as security for the draft, until it burned down in 1865. He also paid taxes on other tracts of land conveyed in this settlement, and collected rents therefrom -- some rent being collected by Mr. Arnold for the benefit of the present complainants, as late as 1881 and 1882 -- after McLean's death and the commencement of this suit. So even if we credit the testimony of his agent, that in 1861 he notified Clapp of an intent to rescind, (and Mr. Arnold's integrity as a witness is strongly impeached by many witnesses,) still the conduct of McLean in reference to the property for a series of years, long after 1861, is at variance with the idea of rescission, and was plainly a ratification of that settlement; and brings the case clearly within the rule laid down by this court, in the case just cited. He acted as owner, and assumed all the rights and burdens of ownership. He became owner only through that settlement. His conduct, after full knowledge, ratified and affirmed the settlement, and by it the original notes were paid, and the lien of the mortgage in fact discharged.

Were this all that appeared in the case, there would be nothing rising to the dignity of a question. But it is said, and this is the strong point made by the complainants in this respect, that in ...


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