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30

Cancellation of Instruments 4 Cal. Jur.

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800 V. DEFENSES. 30. Laches. In respect to the question of laches, there is a distinction between an action to cancel an instrument and an action to recover possession of the property itself or to quiet title to it. The degree of promptness required in the former is the same as in the case of rescission of contracts.15 It is a fundamental rule in courts of equity that a party desiring to rescind must do so promptly upon discovering the existence of ground for rescission.16 Upon obtaining knowledge of the facts

15. Berkley v. Hibernia Sav. etc. Pac. 851 (four and one-half Soc., 21 Cal. App. 456, 132 Pac. months); Hammond v. Wallace. S3 467. Cal. 522, 20 Am. St. Rep. 239, 24 16. Woodard v. Glenwood L-um- Pac. 837 (eighteen months); Bailey her Co., 171 Cal. 513, 153 Pac. 9dl; v. Fox, 78 Cal. 389, 20 Pac. 868 Phelps v. Grady, 168 Cal. 73, 141 (four months); Burkle v. Levy, 70 Pac. 92; Garstang v. Skinner, 165 Cal. 250, 11 Pac. 643 (fifteen Cal. 721, 134 Pac. 329; Del Campo months); Bancroft v. Woodward, v. Camarillo, 154 Cal. 647, 98 Pac. 59 Cal. Dec. 617, 190 Pac. 445 1049; Oppenheimer v. Clunie, 142 (two and one-half years); DominCal. 313, 75 Pac. 899; Ruhl v. guez v. Dominguez, 7 Cal. 424 Mott, 120 Cal. 668, 53 Pac. 304; (nineteen years); Fulmele v. Los Toby v. Oregon Pacific R. R. Co., Angeles Investment Co., 34 Cal. 98 Cal. 490, 33 Pac. 550; Pratt v. App. Dec. 533, 196 Pac. 923 (sixFiske, 17 Cal. 380; Hazzard v. teen months); Ramsdcl] v. RayJohnson,- 30 Cal. App. Dec. 889, 187 mond, 29 Cal. App. Dec. 251, 183 Pac. 121; United Motor San Fran- Pac. 569 (three and one-half oisco Co. v. Callander, 30 Cal. App. years); Taylor v. Hammcl, 39 Cal. 41, 157 Pac. 561. See, also, Civ. App. 205, 178 Pac. 547 (twelve Code, $1691, subd. 1 (requiring months); Tisdale v. Bryant, 38 promptness in case of voluntary Cal. App. 750, 177 Pac. 510 (four rescission). In the following cases years); Maginess v. Western Sethe periods indicated were held to curities Corp.,' 38 Cal. App. 56, 175 constitute laches: Bancroft v. Pac. 277 (six months); Greene v. Woodward, 59 Cal. Dec. 617, 190 Locke-Paddon Co., 36 Cal. App. Pac. 445 (two and one-half years); 372, 172 Pac. 168 (two years); Brown v. Domestic Utilities Mfg. Barklev v. Hibernia Sav. etc. Soc., Co., 172 Cal. 733, 159 Pac. 163 21 Cal. App. 456, 132 Pac. 467 { twelve months); Evans v. Duke, (three years). In the following

340 Cal. 22, 73 Pac. 732 (four cases the periods indicated were years); Wills v. Porter, 132 Cal. held not to constitute laches: Suhr 516, 64 Pac. 896 (two years); v. Lauterbach, 164 Cal. 591, 130 Gamble v. Tripp, 99 Cal. 223, 33 Pac. 2 (one year and nine and one-

801 entitling him to rescind, plaintiff should commence the proceedings for relief as soon as reasonably possible. Acquiescence consisting of unnecessary delay after such knowledge will defeat equitable relief.17 As has often been said, there is no artificial rule as to the lapse of time or circumstances which will justify the application of the doctrine. Each case as it arises must necessarily be determined by its own circumstances. In order to bar a remedy because of laches, there must appear, in addition to mere lapse of time, some circumstances from which the defendant or some other person may be prejudiced, or there must be such lapse of time that it may be reasonably supposed that such prejudice will occur if the remedy is allowed.18 Laches may be predicated on the lapse of a shorter space of time than the period of the statute of limitations, where injury to the other party results from the delay.19 But delay in bringing suit after notice of rescission is no defense if no damage has resulted therefrom.80 The question of laches is to be decided in the first instance by the trial court, and if its conclusion thereon can reasonably be held to
i half months) ; Martin v. Lawrence, 17. Evans v. Ehike, 140 Cal. 22, 156 Cal. 191, 103 Pac. 913 (three 73 Pac. 732. months) ; Davis v. Butler, 154 CaL 18. Suhr v. Lauterbach, 164 Cal. 623, 98 Pac. 1047 (two months); 591, 130 Pac. 2; Hannah v. SteinMatteson v. Wagoner, 147 Cal. man, 159 Cal. 142, 112 Pac. 1094; 739, 82 Pac. 436 (five months); Cahill v. Superior Court, 145 Cal. Ex-Mission Land & W. Co. v. 42> 78 Pac- 467J Hart v. Church, Flash, 97 Cal. 610, 32 Pac. 600 126 Cal- 471 77 Am- st- KeP- 195. ( five months); Marston v. Simp- 58 Pac- 910' Dea9V v- Taylor- 39 son, 54 Cal. 189 (six months) ; Cal' AP?' 235' 178 Pac" 5385 Unit^ Bechtold v. Coney, 29 Cal. App. ,M*or San Francisco Co. v. CalDec. 487, 183 Pac. 841 (two *"*> Cf A" "' 561; Richards v. Farmers etc. months); Menefce v. Oxnam, 29 Ba ? c&] 94 pac CM. App. Dec. 153, 183 Pac. 379 393 See> ag t(> ,achcg genoral,V; ( seven weeks) ; Deasy v. Taylor, EQUITY. 39 Cal. App. 235, 178 Pac. 538 (one 19. Suhr

v_ Lauterbach, 164 Cal. year); Richards v. Farmers' etc. 59 1( 130 pac. 2. Bank, 7 Cal. App. 387, 94 Pac. 20. Menefee v. Oxnam, 29 Cal. 393 (one year). See EQUITY. App. Dec. 153, 183 Pac. 379. IV Cl. Jur. 51 gQJ

802 find sufficient support in the evidence, an appellate court should not interfere therewith.1 31. Estoppel. A person cannot wait until time shall demonstrate whether the contract sought to be canceled turns out to be good or bad,2 or until he has enjoyed the use of the property as long as there seems to be a good chance of profit from it.3 If, after discovering the untruth of the representations, he conducts himself in reference to the transaction as though it were still subsisting and binding, he thereby waives all benefit of and relief from the misrepresentations. And where plaintiff with knowledge of the existence of ground for cancellation has permitted the other party to expend money upon the property sought to be recovered;4 or if by reason of plaintiff's delay conditions have so changed that cancellation will cause the defendant5 or third parties6 to sustain material loss that they would not otherwise have suffered, this relief will not be granted. Obviously, this is true to an even greater degree where the plaintiff has himself impaired the value of the property.7 32. Ratification. Acts evincive of an intent, with knowledge of the invalidity, to abide by the contract constitute an affirmance thereof and a waiver of the right

1. Suhr v. Lauterbaeh, 164 Cal. 3. Kornblum v. Arthurs, 154 Cal. 591, 130 Pac. 2; Davis v. Butler, 246, 97 Pac. 420; Oppenheimer v. 154 Cal. 623, 98 Pac. 1047; Larkin Clunie, 142 Cal. 313, 75 Pac. 899; v. Mullen, 128 Cal. 449, 60 Pac. Evans v. Duke, 140 Cal. 22, 73 1091. Pac. 732. 2. Lion v. McClory, 106 Cal. 623, 4. Beardsley v. Clem, 137 Cal. 40 Pac. 12; Hammond v. Wallace, 328, 70 Pac. 175. 85 Cal. 522, 20 Am. St. Rep. 239, 5. Garstang v. Skinner, 165 Cal. 24 Pac. 837; Colton v. Stanford, 721, 134 Pac. 329; Ramsdell v. 82 Cal. 351, 16 Am. St. Rep. 137, Raymond, 29 Oal. App. Dec. 251, 23 Pac. 16; Hazzard v. Johnson, 183 Pac. 569. 30 Cal. App. Dec. 889, 187 Pac. 6. Meyers v. Merillion, 118 Cal. 121; Maginess v. Western Securi- 352, 50 Pac. 662; Fish v. Benson, ties Corp., 38 Cal. App. 56, 175 71 Cal. 428, 12 Pac. 454.

Pac. 277. As to estoppel as a de- 7. Wilson v. Beazlcy, 32 CaL fense generally, see ESTOPPEL. App. Dec. 743.

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of rescission,8 as, for instance, where a party, after discovering the facts which give him the right to rescind, proceeds to deal with the property involved as if the contract or transaction were still in effect.9 A confirmation of a fraudulent transaction is so inconsistent with justice, so unnatural, so liable to be connected with fraud, that it ought to be watched with the utmost strictness and to stand only upon the clearest evidence as an act done with all the deliberation that ought to attend a transaction the effect of which is to ratify that which in justice ought never to have taken place.10 Therefore, efforts to settle a controversy that has arisen, out of the instrument do not constitute an affirmance;11 but the . making of a new contract in place of the old one, with knowledge of the fraud involved in the old contract, amounts to a waiver, unless it is accomplished by undue influence, fraud or mistake.18 The removal of certain parts from an automobile which is the subject matter of the instrument, in order to bring them into court for exhibition, does not constitute a waiver where the property is not injured or its redelivery prevented thereby;13 nor does such use of the property as is involved in returning it to the defendant;14 nor the collection of a certificate of deposit and the deposit of the money as

8. Matteson v. Wagoner, 147 v. Locke-Paddon Co., 36 Cal. App. Cal. 739, 82 Pac. 436; Montgomery 372, 172 Pac. 168. v. McLaury, 143 Cal. 83, 76 Pac. 10_ Grecn v Duvergey, 146 Cal. 964 (holding, however, rule not 379j go pac 234. applicable where acts were prior ,.,..',. 11. Freeman v. Kieffer, 101 Cal. to discovery of invalidity); Biilil v. Mott, 120 Cal. 668, 53 Pac. 304; """' Delano v. Jacoby, 96 Cal. 275, 31 12' Brt>wn v- Domestic Utilities Am. St. Rep. 201, 31 Pac. 290; Mfg- C" 172 Ca]- *33, 159 Pac. Fulmele v. Los Angeles Investment Co., 34 Cal. App. Dee. 533, 13- United Motor San Francisco 196 Pac. 923; Millar v. Bell, 32 Co. v. Callander, 30 Cal. App. 41, Cal. App. Dec. 894, 192 Pac. 172. J57 Pac. 561.

9. Bancroft v. Woodward, 59 14. Knight v. Bentel, 39 Cal. Cal. Dec. 617, 190 Pac. 445; Greene App. 502, 179 Pac. 406.

804 security for a loan of less than half its value;15 nor the payment of assessments on stock purchased under the contract sought to be canceled.16 A waiver or ratification made with knowledge of only a part of the invalidating circumstances does not preclude a party from later bringing suit for cancellation on the basis of other circumstances.1 So, likewise, when there is a breach of a continuing covenant, the waiver of one breach does not preclude an action for cancellation on the basis of a subsequent breach.2 33. Excuses for Delay. Where there is a total failure of consideration3 or the instrument is void as against public policy,4 laches is no defense. And, as a general rule the plaintiff's ignorance of his rights negatives any laches on his part; but this rule is subject to the principle that notice of facts and circumstances which would put a man of ordinary prudence and intelligence on inquiry is, in the eye of the law, equivalent to knowledge of all the facts a reasonably diligent inquiry would disclose.5 Furthermore, knowledge of facts creating a right to cancellation is equivalent to knowledge of the right itself.6 Where, however, the failure of the plaintiff to discover and press his rights is due to the concealment and

15. Green v. Duvergey, 146 Cal. 329; Del Campo v. Camarillo, 15-1 379, 80 Pac. 234. Cal. 647, 98 Pac. 1049; Lady Wash16. Munson v. Fishburn, 59 Cal. ington Consol. Co. v. Wood, 113 Dec. 680, 190 Pac. 808. G&1- 482> 45 Pac- 809- See gen1. Willev v. Clements, 146 Cal. erally> as to Busing la<*cs, 91 79 Pac 850 EQUITY. Greene v. Locke- PatMon " ' .,. , T , Co., 36 Cal. App. 372, 172 Pac. 2. Woodard v. Glenwood Lumber Co., 171 Cal. 513, 153 Pac. 951. ' 6. Bancroft v. Woodward, 59 3. Bichter v. Union Land etc. Ca] ^ 61? j lflfl pa(, 4 Ruhl Co., 129 Cal. 367, 62 Pac. 39. y Mott> m Ca, ^ 53 pa<. 3Q4 4. Colby v. Title Ins. & Trust See> however, Munson v. Fishburu, Co., 160 Cal. 632, Ann. Cas. 1913A, 59 Cal. Dec. 680j ]90 Pac 808; 515, 35 L. B. A. (N. S.) 813, 117 an(j Hannah v. Steinman, 159 Cal.

Pac. 913. 142, 112 Pac. 1094, where plaintiff 5. Bancroft v. Woodward, 59 Cal. was held excused because he did Dec. 617, 190 Pac. 445; Garstang not know his rights until he conv. Skinner, 165 Cal. 721, 134 Pac. suited a lawyer.

805 deception practiced by the defendant,7 or to the fact that the plaintiff is subject to duress, menace, undue influence or disability,8 he will not be prejudiced thereby. So, too, where the defrauding party is one to whom the other had the right to give his confidence, circumstances sufficient to put him on inquiry must be more suspicious than if they had been strangers.9 A delay which is the result of indulgence extended by the plaintiff to the defendant is no defense.10 For instance, when it has been granted at the instance of the defendant in order to enable him to perform an agreement which he was unable to perform at the time stipulated, the obligation to rescind will not be revived until a reasonable opportunity has been afforded for compliance with such promise, unless it is by its terms to be performed within a certain time.11 The prompt bringing of a prior action on the same ground in the same court,12 or in a different court by mistake,13 sufficiently negatives a charge of laches. And it is held that the delay of a deceased grantor does not bring the rule into operation against his heir.
14 7. Evans v. Duke, 6 Cal. Unrep. 513, 153 Pae. 951; Owen v. 973, 69 Pae. 688; Mabry v. Ban- Pomona Land & Water Co., 131 dolph, 7 Cal. App. 421, 94 Pae. Cal. 530, 63 Pae. 850, 64 Pae. 253; 403. Bay v. American Photo Player Co., 8. Brown v. Domestic Utilities 31 Cal. App. Dec. 586, 189 Pae. Mfg. Co., 172 Cal. 733, 159 Pae. 130; Grotheer v. Panama-Pacific 163; Fulmele v. Los Angeles In- Land Co., 41 Cal. App. 19, 181 vestment Co., 34 Cal. App. Dee. Pae. 667. 533, 196 Pae. 923; Stockton v. 12. Hart wig v. Clark, 138 Cal. Hind, 34 Cal. App. Dec. 343, 196 668, 72 Pae. 149. Pae. 122. See, also, Civ. Code, 13. California Farm etc. Co. v. 1691, Bubd. 1 (excusing delay in Schiappa-Pietra, 151 Cal. 732, 91 voluntary rescission where one of Pae. 593. these conditions exists). 14. Donnelly v. Bees, 141 Cal. 9. Marston v. Simpson, 54 Cal. 56, 74 Pae. 433. But see Code 189. Civ. Proc., 353, declaring the con10. Menefee v. Oxnam, 29 Cal. trary as to legal actions. As to App. Dc. 153, 183 Pae. 379. statutes of limitation or laches as

11. Cooper v. Huntington, 178 bar to suit by heirs or next of kin Cal. 160, 172 Pae. 591; Woodard to set aside conveyance or transfer v. Glenwood Lumber Co., 17f Cal. by ancestor, see 2 A. L. B. 447.

806 34. Statute of Limitations. For instances of fraud or mistake the legislature has fixed a period of three years within which the action must be brought, and in those particular cases this would seem to be the general measure to determine whether the injured party is properly chargeable with laches,15 at least where there is no consideration for the instrument sought to be canceled, and third parties cannot be prejudiced by the delay of the party seeking to rescind. In other words, before the stricter rule of laches intervenes, some person must be shown to have been injured by the plaintiff's delay.16 This period of limitation applies even where the title to real estate is involved,17 unless the plaintiff seeks in the action for cancellation to recover possession or establish title otherwise than by nullifying the instrument procured by fraud or mistake, in which case the limitation of five years for the recovery of real property applies. 18 The period of the statute does not begin to run in cases based on fraud or mistake until the discovery of such fraud or mistake,19 and may be terminated as to a person not a party to the action by notice of the filing of the complaint.80 Whore the fraud is set up as a defense and affirmative relief is sought merely as auxiliary to such defense, the lapse of the statutory period is not a bar.1 Where the maker of a note agreed orally to

15. Code Civ. Proc., 338, subd. bell v. Genshlea, 180 Cal. 213, 180 4; Hart v. Church, 126 Cal. 471, Pac. 336; Page v. Garver, 146 Cal. 77 Am. St. Eep. 195, 58 Pac. 910; 577, 80 Pac. 860; Murphy v. Barkley v. Hibernia Sav. etc. Soc., Crowley, 140 Cal. 141, 73 Pac. 820, 21 Cal. App. 456, 132 Pac. 467; overruling 8. C., 7 Cal. Unrep. 49, Richards v. Farmers' etc. Bank, 70 Pac. 1024; City of Oakland v. 7 Cal. App. 387, 94 Pac. 393. Carpentier, 13 Cal. 540. 16. Deasy v. Taylor, 39 Cal. App. 19. Code Civ. Proc., 338, subd. 235, 178 Pac. 538. 4; Duff v. Duff, 71 Cal. 513, 12 17. Castro v. Geil, 110 Cal. 292, Pac. 570; Moore v. Moore, 56 Cal. 52 Am. St. Rep. 84, 42 Pac. 804; 89. See FRAUD AND DECEIT. Duff v. Duff, 71 Cal. 513, 12 Pac. 20. Matteson v. Wagoner, 147 570; Moore v. Moore, 56 Cal. 89; Cal. 739, 82 Pac. 436. People v. Blankcnship, 52 Cal. 619. 1. Cox v. Schnerr, 172 Cal. 371, 18. Code Civ. Proc., 318; Camp- 156 Pac. 509; Hart v. Church, 126

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furnish goods and services in payment thereof and actually performed his agreement, any right that he may have had to cancellation of the note was held to be barred at the expiration of the period during which he could bring an action to recover for the goods and services.3 35. Pari Delicto and Other Defenses. A court of equity will not interfere to set aside an executed contract if it is immoral or opposed to law or public policy, if the parties are in pari delicto.3 Therefore, a grantor of property who has received and retained the consideration for his conveyance cannot recover the property conveyed upon the sole ground that the consideration was unlawful in part.4 But this rule applies only in case the illegal transaction is entered into voluntarily and the turpitude of the parties is mutual. Where the rule has been applied, it will be found that both parties entered into the illegal contract or transaction voluntarily and were equally culpable. If, on the other hand, the party seeking the relief is not a free moral agent and his consent to the illegal transaction was obtained through duress, menace or undue influence, he is not regarded as in pari delicto with the person obtaining his consent by the employment of such means, and will not be precluded from invoking affirmative relief in equity to set aside the instrument so executed.5 Wrong in such case rests chiefly, is not solely, on the superior, by whom it will be presumed it was contrived, and the inferior will be regarded as a mere instrument for accomplishing an

Cal. 471, 77 Am. St. Rep. 195, 58 mel, 39 Cal. App. 205, 178 Pac. Pac. 910; Evans v. Duke, 6 Cal. 547. Unrep. 973, 69 Pae. 688. 4. Ripperdan v. Weldy, 149 Cal. 2. Gates v. Lane, 49 Cal. 266. 667' S7 Pac- 276 (construing Civ. Code, 1608). 3. Colby v. Title Ins. etc. Co., 5. Colby v. Title Ins. & Trust 160 Cal. 632, Ann. Cas. 1913A, 515, Co., 160 Cal. 632, Ann. Gas. 1913A 35 L. E. A. (N. S.) 813, 117 Pac. 515| 35 L. B. A. (N- S) g^ m 913; Ripperdan v. Weldy, 149 Cal. pac. 913. g^ aB to illegal COQ. 667, 87 Pac. 276; Taylor v. Ham- tracts, CONTRACTS.

808 end not his own, which is in effect to put the rule on the ground that in such cases the consent of the party imposed on is not free.6 The same is true when the execution of the instrument was obtained by fraud.7 A stipulation that errors of description shall not avoid

a contract, or shall be the subject of compensation, or both, does not take away the right of rescission for fraud or mistake where such mistake is in a matter essential to the inducement of the contract and is not capable of exact and entire compensation.8 Inability of the defendant to restore property received by him under the instrument is no defense, because an award of damages will be considered an equivalent relief.9

6. Donnelly v. Rees, 141 Cal. 56, 740, 127 Pac. 49. See supra, 74 Pac. 433. 16, 17. 7. Gatje v. Armstrong, 145 Cal. 8. Civ. Code, 1690. 370, 78 Pac. 872; Donnelly v. Rees, United MotQr gan Francj8eo 141 Cal. 56, 74 Pac. 433. Or by Co v Callander, 30 Cal. App. 41, the abuse of a confidential relation- jgy pac ggj ship. Fieg v. Gjurich, 163 Cal.

(T. M.)

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