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decided: October 15, 1894.



Author: Shiras

[ 155 U.S. Page 38]

 MR. JUSTICE SHIRAS, after stating the case, delivered the opinion of the court.

As the proceedings in the Gugenheim case were regular upon their face, and extrinsic evidence was required to show their invalidity, we think a court of equity was the proper tribunal to afford effectual relief. Slater v. Maxwell, 6 Wall. 268; Cocks v. Izard, 7 Wall. 559; Oelrichs v. Spain, 15 Wall. 211, 228; Freeman on Judgments, ยงยง 499 and 500.

Nor do we think that the contention, that for the Circuit Court of the United States to grant such relief would be to interfere with the jurisdiction of the state court, is well founded. Pennoyer v. Neff, 95 U.S. 714; Johnson v. Waters, 111 U.S. 640; Arrowsmith v. Gleason, 129 U.S. 86.

[ 155 U.S. Page 39]

     Whether the presumption, in favor of innocent third parties, that Kebler had authority to enter an appearance for Robb and Strong, trustees, and to receive the proceeds of the sale, was sufficiently overcome by the evidence in this case, we need not consider, because we agree with the conclusion of the court below that the acts of Kebler, whether done with or without authority, were subsequently adopted and ratified by the complainants.

That the course of Robb and Strong, in voluntarily appearing in the case of Coppock v. Kebler, and filing an answer and cross-petition therein, whereby they sought to appropriate to themselves the benefit of the mortgage given by Kebler, in June, 1887, to F.G. Roelker, would have been an adoption and ratification of the acts of Kebler done in their behalf, and would have estopped them, as against innocent third parties whose proceedings were or may have been influenced by such course, is clear, upon reason and authority, if Robb and Strong were acting in their own behalf. This course was deliberately chosen, after the lapse of several months from the death of Kebler, and with a full knowledge of all the facts. It does not appear that they acted under any mistake, nor that, when they afterwards dismissed their cross-petition and resorted to the present suit, they had acquired any additional information. The subsequent withdrawal of their answer and cross-petition did not avail to put the parties in statu quo. Such withdrawal could not restore to the purchasers at the Gugenheim sale their lost opportunity to pursue Kebler's estate. Nor is it necessary that it should be made to appear, by evidence, that benefit would certainly have accrued to Vos and Stix from an attempt, if seasonably made, to secure indemnity from Kebler's estate. The right to seek such indemnity was a valuable one, and it is enough that it appears that Robb and Strong, by acquiescing in Kebler's acts and resorting to legal proceedings against his administrator and partner, prevented Vos and Stix from promptly and perhaps successfully pursuing their remedies against the criminal's estate.

Similar reasoning was applied by this court in the case of Leather Manufacturers' Bank v. Morgan, 117 U.S. 96, 114.

[ 155 U.S. Page 40]

     It was there held that a depositor, whose checks had been fraudulently raised by his clerk, lost his remedy against the bank by his delay and negligence in making known the facts to the bank and thus giving it an opportunity to seek restitution from the wrongdoer, and the following language was used:

"Still further, if the depositor was guilty of negligence in not discovering and giving notice of the fraud of his clerk, then the bank was thereby prejudiced, because it was prevented from taking steps, by the arrest of the criminal, or by an attachment of his property, or other form of proceeding to compel restitution. It is not necessary that it should be made to appear, by evidence, that benefit would certainly have accrued to the bank from an attempt to secure payment from the criminal. Whether the depositor is to be held as having ratified what his clerk did, or to have adopted the checks paid by the bank and charged to him, cannot be made, in this action, to depend on a calculation whether the criminal had at the time the forgeries were committed, or subsequently, property sufficient to meet the demands of the bank. An inquiry as to the damages in money actually sustained by the bank by reason of the neglect of the depositor to give notice of the forgeries might be proper if this were an action by it to recover damages for a violation of his duty. But it is a suit by the depositor, to falsify a stated account, to the injury of the bank, whose defence is that the depositor has, by his conduct, ratified or adopted the payment of the altered checks, and thereby induced it to forbear taking steps for its protection against the person committing the forgeries. As the right to seek and compel restoration and payment from the person committing the forgeries was, in itself, a valuable one, it is sufficient if it appears that the bank, by reason of the negligence of the depositor, was prevented from promptly, and, it may be, effectively, exercising it."

We do not deem it necessary to review the numerous cases, involving questions of election of remedy and ratification, cited on behalf of the respective parties, but shall content ourselves with referring to two or three which satisfactorily illustrate the principles upon which we proceed.

[ 155 U.S. Page 41]

     Thompson v. Howard, 31 Michigan, 309, 312, was a case where a father who had brought an action of assumpsit for a minor son's wages, and, after the jury disagreed, had discontinued the suit, and brought an action for the unlawful enticing away and harboring the son. The Supreme Court said:

"A man may not take contradictory positions; and where he has a right to choose one of two modes of redress, and the two are so inconsistent that the assertion of one involves the negation or repudiation of the other, his deliberate and settled choice of one, with knowledge, or the means of knowledge of such facts as would authorize a resort to each, will preclude him thereafter from going back and electing again. . . . [The plaintiff's] proceeding necessarily implied that the defendant had the young man's services during the time with plaintiff's assent, and this was absolutely repugnant to the foundation of this suit, which is, that the young man was drawn away and into defendant's service against the plaintiff's assent."

In Conrow v. Little, 115 N.Y. 387, 393, 394, the court said:

"The contract between Branscom and the plaintiffs was, upon the discovery of Branscom's fraud, voidable at their election. As to him, the plaintiffs could affirm or rescind it. They could not do both, and there must be a time when their election should be considered final. We think that time was when they commenced an action for the sum due under the contract, and in the course of its prosecution applied for and obtained an attachment against the property of Branscom as their debtor. They then knew of the fraud practised by him, and disclosed that knowledge in the affidavit on which the attachment was granted, and became entitled to that remedy because it was made to appear that a cause of action existed in their favor by reason of 'a breach of contract to pay for goods and money loaned obtained by fraud.' The attachment was levied and the action pending when the present action, which repudiates the contract and has no support except on the theory of its disaffirmance, was commenced. The two remedies are inconsistent. By one, the whole estate of the debtor is pursued in a summary manner, and payment

[ 155 U.S. Page 42]

     of a debt sought to be enforced by execution; by the other, specific articles are demanded as the property of the plaintiff. One is to recover damages in respect of the breach of the contract, the other can be maintained only by showing that there was no contract. After choosing between these modes of proceeding, the plaintiffs no longer had an option. By bringing the first action, after knowledge of the fraud practised by Branscom, the plaintiffs waived the right to disaffirm the contract, and the defendants may justly hold them to their election. The principle applied in Foundry Company v. Hersee, 103 N.Y. 26, and Hays v. Midas, 104 N.Y. 602, require this construction, for the present contains the element lacking in those cases, viz., knowledge of the fraud practised by the vendee; and by reason of it the plaintiffs were put to their election.

"It is not at all material to the question that the plaintiffs discontinued the first suit before bringing the present to trial, for it is the fact that the plaintiffs elected this remedy, and acted affirmatively upon that election, that determines the present issue. Taking any steps to enforce the contract was a conclusive election not to rescind it on account of any thing known at the time. After that the option no longer existed, and is of no consequence whether or not the plaintiffs made their choice effective."

In Butler v. Hildreth, 5 Met. (Mass.) 49, it was held that "an assignee of an insolvent debtor," under the insolvent law of 1838, "may affirm a sale of goods made by such debtor for the purpose of delaying or defrauding his creditors, and receive the price of the goods from the vendee. And if such assignee, knowing all the facts of the case, brings an action against the vendee, on a note given by him for the price of the goods, and secures the demand by an attachment of his property, he thereby so far affirms the sale, and waives his right to disaffirm it, that he cannot, by discontinuing such action, and demanding the goods, entitle himself to maintain an action of trover against the vendee, on his refusal to return them."

At page 51 the court said: "It would, we think, be going too far to say that merely demand of the price would be deemed a waiver of his right to avoid the sale and claim the

[ 155 U.S. Page 43]

     goods; because, in many cases, if the price could be obtained, it would be equally beneficial to the creditors, and he would have no farther occasion to pursue the harsher remedy of impeaching the sale. But we think that, if the assignee commences an action against the purchaser for the price, and causes his property to be attached to secure it, this is a significant act, an unequivocal assertion that he does not impeach the sale, but by necessary implication affirms it.It is an act, too, deeply affecting the rights of the purchaser, whilst it is an assertion of his own; and if done with a knowledge of all the facts which ought to influence him in his election, it is conclusive."

In Connihan v. Thompson, 111 Mass. 270, 272, the court said: "The defence of waiver by election arises where the remedies are inconsistent; as where one action is founded on an affirmance and the other upon the disaffirmance of a voidable contract or sale of property. In such cases, any decisive act of affirmance or disaffirmance, if done with knowledge of the facts, determines the legal rights of the parties, once for all. The institution of a suit is such a decisive act; and if its maintenance necessarily involves an election, to affirm or disaffirm a voidable contract or sale, or to rescind one, it is generally held to be a conclusive waiver of inconsistent rights, and thus to defeat any action subsequently brought thereon."

The rule established by these cases is that any decisive act by a party, with knowledge of his rights and of the facts, determines his election in the case of inconsistent remedies, and that one of the most unequivocal methods of showing ratification of an agent's act is the bringing of an action based upon such an act.

We cannot accept the contention that Robb and Strong never had any legal standing in the Coppock case, and that the filing of their answer and cross-petition was merely a fortuitous circumstance, which did no injury to Vos and Stix. It is true that when the answer and cross-petition were, by leave of court, withdrawn, the record did not, of itself, disclose any good reason for making them parties, and their

[ 155 U.S. Page 44]

     demurrer was properly sustained. But if they had stood upon their case, as set up in their answer and cross-petition, it would seem that they would have been entitled to relief.

These views justify the decree of the court below, unless the fact that Robb and Strong were trustees calls for a different conclusion.

It is claimed that the interest held by Robb and Strong, in the lands embraced in the deed and lease between them and Loth, was in the nature of an estate in realty, and that, as trustees, they could not themselves, nor by authority given to Kebler, have consented to the sale of such lands in the Gugenheim case. If the nature of their tenure was indeed such that it could not be affected by the sale in the Gugenheim case without their consent, and if, as trustees, they were disabled from consenting, it would seem to follow that the sale in that case was inefficacious, and that the remedy at law would be the sufficient and only one.

But our examination of the deed and lease, read in the light of the testimony of the parties, satisfies us that, as between Robb and Strong and Loth, the transaction was that of a loan of money secured by the covenants of the lease.

Moritz Loth testified, in the present case, that he regarded the transaction as a loan; and Robb and Strong, in the petition filed by them against Vos and Stix, alleged that "the said transactions between them and the said Moritz Loth were in truth and in fact a loan by them to the said Moritz Loth of the sum of $10,000, in consideration whereof the said Moritz Loth conveyed to them the premises hereinbefore described, and they executed to the said Loth the lease hereinbefore described containing the privilege of purchase for the said sum of $10,000," and they accordingly prayed that "their claim shall be declared to be a first and best lien on the premises, and that unless the defendants should pay them the said $10,000, with interest, the said land might be sold for the satisfaction of their claim."

It also appears that, in the Gugenheim case, the petition averred that Robb and Strong, trustees, held the land only as security.

[ 155 U.S. Page 45]

     Accordingly it would seem plain that the rights of Robb and Strong, trustees, were correctly asserted by Kebler in the answer and cross-petition filed by him in the Gugenheim case, and that, assuming that he was authorized to appear, the decree in that case, directing the lands to be sold, and awarding to Robb and Strong, trustees, the said sum of $10,000 and interest out of the proceeds, was fully warranted. It follows that, by the payment into court of the amount of the principal and interest of the money found to be due to Robb and Strong, trustees, and by the conveyance to them by the master of the lands in question, in pursuance of the decree, the purchasers became vested with a fee simple title to said lands.

The decree of the court below is accordingly


MR. JUSTICE JACKSON and MR. JUSTICE WHITE, not having heard the argument, took no part in the decision.

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