lien for the amount of the money to be restored to him, or to have the property stand as security for it,118 or to have a resulting trust declared to the extent of the consideration furnished.117 But it does not follow that the defendant will be entitled to a restoration of the entire consideration paid, when there are charges legitimately made and properly allowed against him on the other side, as, for example, charges for the rental value of land while in his possession or for the value of the use of the subject-matter or for injuries done to it. In this event, there should be a set-off of charge against charge, and the balance only allowed as a credit to the one party or the other.118 Thus, a decree setting aside a deed made by a ward to his guardian need not make repayment of the consideration a condition precedent, when the guardian is indebted to his ward, and the amount of such consideration is credited on the indebtedness by the decree.119 So, upon setting aside a conveyance to defendant, who, in turn, conveyed to another, who took with notice of defects in defendant's title, the last grantee, being also a party to the suit, should be reimbursed for the purchase money he paid, in so far as the same may be satisfied out of money awarded to the defendant for taxes paid or other charges.120

The same rule applies where the consideration given by the defendant was not money, but a note, bond, or other evidence of debt. The decree should provide, not for its payment, but for its surrender and return to him.121 And so also where the consideration was a transfer of personal property. The plaintiff should be required to restore it or

116 Supra, § 694.

117 Kirkpatrick v. Greenland, 147 Iowa, 37, 125 N. W. 813.

118 Ashmead v. Colby, 26 Conn. 287; Tarkington v. Purvis, 128 Ind. 182, 25 N. E. 879, 9 L. R. A. 607; Nichols & Shepard Co. v. Caldwell, 26 Ky. Law Rep. 136, 80 S. W. 1099; Witham v. Walsh, 156 Mich. 582, 121 N. W. 309; Krause v. Krause, 125 Wis. 337, 104 N. W. 76.

119 McParland v. Larkin, 155 Ill. 84, 39 N. E. 609. 120 Brown v. Columbus (N. J. Ch.) 75 Atl. 917. 121 Neblett v. MacFarland, 92 U. v. Zagar, 266 Ill. 39, 107 N. E. 105; 1033, 96 S. W. 840; Coe v. Dickerson,

S. 101, 23 L. Ed. 471; Nolan May v. May, 29 Ky. Law Rep. 129 Mich. 61, 87 N. W. 1028.

account for its value.122 And if real property was transferred to the plaintiff, he may be required to execute a reconveyance of it as the price of a decree in his favor.123

§ 698. Decree on Dismissal of Bill.-In dismissing a bill in equity for the rescission of a contract or the cancellation of a written instrument, care should be taken not to incorporate in the decree any provisions which might prejudice the rights of either party in subsequent proceedings at law.12 Thus, a decree dismissing a bill in equity for the cancellation of a mortgage and of the note secured thereby, given by the plaintiff to a third person and assigned by the latter to the defendant before maturity, the plaintiff having, in ignorance of the assignment, made payments of principal and interest to the assignor, should be modified so as to be without prejudice to the plaintiff's right to redeem the land from the mortgage.125 And a decree denying a rescission and the recovery of the amount paid under the contract, but also enjoining the collection of the unpaid balance and canceling notes and a trust deed given therefor, is improper, since it attempts to make a new contract for the parties and to enforce it specifically.120

§ 699. Costs.-The successful complainant in a suit for rescission or cancellation on the ground of fraud, or for other adequate cause, will ordinarily be entitled to his costs.127 But if he has received money or other valuable consideration from the defendant, which he will be bound to restore to him upon obtaining a rescission, he must show a tender or offer to restore such consideration, made before bringing suit and kept good continuously, or else he will not be entitled to the costs.128 Conversely, if the bill is dis

122 Nichols & Shepard Co. v. Caldwell, 26 Ky. Law Rep. 136, 80 S. W. 1099; Bell v. Anderson, 74 Wis. 638, 43 N. W. 666.

123 Bell v. Campbell, 123 Mo. 1, 25 S. W. 359, 45 Am. St. Rep. 505. 124 Vannatta v. Lindley, 198 Ill. 40, 64 N. E. 735, 92 Am. St. Rep. 270.

125 Biggerstaff v. Marston, 161 Mass. 101, 36 N. E. 785.

126 Barth v. Deuel, 11 Colo. 494, 19 Pac. 471.

127 Travelers' Ins. Co. v. Redfield, 6 Colo. App. 190, 40 Pac. 195; Mountain v. Low, 107 Iowa, 403, 78 N. W. 55; McKenzie v. Donnell, 151 Mo. 431, 52 S. W. 214.

128 Dunbar v. Severance, 50 Kan. 395, 31 Pac. 1055; Ingersoll v. Cunningham, 95 App. Div. 571, 88 N. Y. Supp. 711; Harmon v. Hart

missed, or the decision is in the defendant's favor, as, by a finding that the contract or conveyance assailed is good and valid, the defendant will be entitled to his costs.129 And so also, if the defendant has offered to do substantially all that the court adjudges the plaintiff to be entitled to, and the plaintiff has refused to accept the offer, there is no error in imposing upon the plaintiff the entire costs of the suit.180 And where a party, by his own negligent or careless methods, has made necessary a suit to cancel certain of his notes left for safe-keeping with a person whose administrator claims them as evidences of debt against the maker, he should pay the costs of the proceeding, though substantially prevailing therein.121 And again, on a bill filed to set aside a mortgage as wholly void, where it was decreed that the mortgage was good as to the greater part of the amount secured by it, but void as to the residue only, it was held that the costs were properly awarded against the complainant.132

(Tenn. Ch. App.) 53 S. W. 310; Hall v. Bank of Baldwin, 143 Wis. 303, 127 N. W. 969; Fares v. Gleason, 14 Wash. 657, 45 Pac. 314. And see, supra, §§ 617, 625.

129 Gaylord v. Kelshaw, 1 Wall. 81, 17 L. Ed. 612; Burke v. Candee, 63 Barb. (N. Y.) 552; Masterson v. Finnigan, 2 R. I. 316; Boyle v. Robinson, 129 Wis. 567, 109 N. W. 623.

180 Gallagher v. Witherington, 29 Ala. 420; Mutual Nat. Bank v. Regan, 40 La. Ann. 17, 3 South. 407.

131 Andrews v. Hunt, 7 Mackey (18 D. C.) 311.

132 Rood v. Winslow, 2 Doug. (Mich.) 68.

CHAPTER XLI

OPERATION AND EFFECT OF RESCISSION

$700. In General.

701.

702.

703.

Revesting of Title.

Right to Possession and Disposal of Subject-Matter.
Recovery or Repayment of Consideration

704. Action on Rescinded Contract.

705. Rights of Action Based on Rescission. 706. Revival or Renewal of Contract.

Whethe

§700. In General. Whether the rescission of a contract is effected by mutual consent, by the demand of one party acquiesced in by the other, or by the judgment or decree of a court, its effect is to restore both parties so far as possible to their former situation, as if no such contract had been made, and to reinvest each with the title and right to whatever he has parted with under the contract.'/ Thus. a subsequent assignment of the contract by one of the parties to a third person will have no effect whatever as against the rights of the other party. So, where one is fraudulently induced to enter into a modified contract, whereby his rights are changed, and obtains a rescission of such modified contract, he may then resort to his rights under the first contract. And one fraudulently induced to purchase certain property who, instead of paying the purchase price, credited the seller with the amount thereof on a prior indebtedness, and obtains a rescission of the contract, is restored to his original right with respect to the prior indebtedness, and the credit becomes a nullity. So also, if a note is given for the price of property bought, and the contract of sale is rescinded, the consideration for the note is

1 Western Union Tel. Co. v. Kansas Pac. Ry. Co. (D. C.) 4 Fed. 284; Hayt v. Bentel (Cal. App.) 126 Pac. 370; Colson v. Smith, 9 Ind. 8; Chretien v. Richardson, 6 La. Ann. 2; Derepas v. Shallus, 15 La. 371; Smead v. Lampher, 87 Vt. 1, 86 Atl. 1005; Nye v. Taggart, 40 Vt. 295; Jones v. Grove, 76 Wash. 19, 135 Pac. 488; McClaskey v. O'Brien, 16 W. Va. 791.

2 Davis v. Willis, 57 Hun, 200, 10 N. Y. Supp. 883.

O'Shea v. Vaughn, 201 Mass. 412, 87 N. E. 616.

4 Degraw v. Elmore, 50 N. Y. 1.

taken away and it becomes unenforceable, and if a judgment has already been recovered on the note, the rescission may be pleaded in defense to an action on it.) And if a contract is entered into as auxiliary to, and dependent upon, a former contract between the same parties, and is intended to secure its performance, if the principal contract is rescinded or set aside, the other must fall with it. But a distinct and independent agreement is not thus affected, though it may have relation to the same subject-matter and be made between the same parties. The general rule, t moreover, does not exclude the making of compensation for the value or use of the subject-matter while in the possession of the party against whom rescission is obtained. Thus, the rescission of a lease for nonpayment of rent does not relieve the lessee from liability for installments of rent already past due and for which actions are pending.) In the case where a right of rescission is enforced by suit, the rescission becomes effective, not as of the time of the entry of a decree, but as of the date of an unequivocal and open declaration by the injured party that he rescinds the contract, followed, upon the refusal by the other party, by a prompt application to the court. A judgment or decree in an action for rescission has the same conclusive effect as any other. Thus, for instance, when judgment has been. given against the plaintiff in an action to rescind a purchase of personal property on account of alleged defective quality, he cannot maintain an action for a diminution of the price agreed to be paid, on account of the same defect.10

5 Volking v. Huckabay, 67 Miss. 206, 7 South. 325; Ward v. War. ren, 44 Or. 102, 74 Pac. 482; Sterman v. Thornton, 3 Ky. Law Rep. 540.

6 Callender v. Colegrove, 17 Conn. 1.

7 Simplot v. Simplot. 14 Iowa, 449. And see Babbitt v. Gibbs, 150 N. Y. 281, 44 N. E. 952; Schweinburg v. Altman, 145 App. Div. 377, 130 N. Y. Supp. 37; Jarrett v. Johnson, 11 Grat. (Va.) 327.

8 City of New York v. New York Refrigerating Construction Co., 146 N. Y. 210, 40 N. E. 771.

9 Harper v. City of Newburgh, 159 App. Div. 695, 145 N. Y. Supp. 59; Wilcox v. Lattin, 93 Cal. 588, 29 Pac. 226; Comer v. Franklin, 169 Ala. 573, 53 South. 797; Gross, Kelly & Co. v. Bibo, 19 N. M. 495, 145 Pac. 480.

10 Peterson v. Burn, 3 La. Ann. 655.