Upper San Joaquin Irrigating Canal Co. v. Roach

Hayne, C. — Action upon a promissory note; judgment for plaintiff; defendant appeals.

The material facts are as follows: The plaintiff, being in need of money to complete its canal, sent its president to New York to sell some of its stock. He sold some stock to the defendant’s intestate, and took the note sued on in payment. It is claimed that at the time of the sale the president represented to the vendee that the canal could be completed for fifty thousand dollars, when, as a matter of fact, more than three hundred thousand dollars was required to complete it. The evidence shows that some sort of representation was made to the vendee. The president (whose testimony is relied on by the defendant to make out his case) so states. But he says in one place: "I expressed to him that in my opinion it would not cost over fifty thousand dollars. I did not bind myself that it would not, and it was with that, the understanding that it would not cost fifty thousand dollars, that he went into the. enterprise.” In [554]another place he says: “We said it would cost probably less than fifty thousand dollars.” The representation was made in perfect good faith. Everybody supposed at that time that the canal could be completed for the sum mentioned. The increased cost resulted from unforeseen difficulties arising from the nature of the soil. The position is, that there was a misrepresentation as to a material matter.

But if it be assumed in favor of the defendant, for the purposes of this opinion only, that there was such a misrepresentation as entitled the vendee to some relief, such relief could consist only in damages for the misrepresentation, or in the rescission of the contract. No question as to such damages arises in the case, because no counterclaim was set up. We do not intend by this to say that the relief could be had by way of counterclaim. It is sufficient for present purposes that nothing of the kind was attempted. And the vendee did not elect to rescind. Tie kept the stock after being informed of the true state of the case. And after it was sold for assessments, his administrator brought an action to recover its value from the company, which action was pending at the time of the trial herein. It is perfectly clear that a misrepresentation does not enable the vendee to keep the thing sold and avoid paying what he agreed to pay for it. If he wishes to avoid paying, he must rescind the contract and return the property (if it have any value) within a reasonable time after becoming aware of the truth. (Gifford v. Carvill, 29 Cal. 589; Fitz v. Bynum, 55 Cal. 459.)