Genet v. President of the Delaware & Hudson Canal Co.

Majority

p. 328

Augusta G. Genet, Respondent, v. The President, Managers and Company of the Delaware and Hudson Canal Company, Appellant.

(No. 5.)

Headnote

Inconsistent remedies — the right to rescind a contract waived by receiving royalties thereunder—a judgment of rescission only confirms the act of rescission by the party recovering it.

A party to a contract, authorizing the other party thereto, upon the payment of . certain royalties, to mine for coal upon the land, of the former, who claims a . right to terminate the contract on the ground of an alleged violation of its conditions by the other party thereto, waives such right to terminate the contract by bringing an action to recover damages for such breach of contract and by receiving the royalties provided for by the contract subsequently accruing thereunder, although, in the receipts therefor, it is stated that the money was received without waiver or prejudice.

It is no answer by the party seeking to rescind the contract that she was entitled ■ to receive the benefits of the contract until it could "be ascertained whether she would he able to establish her right to rescind or not, because the court could not permit her to rescind unless the right to rescind existed on her part.

A party seeking to rescind a contract must determine whether or not she has a right to.reseind, and, after having exercised that right as far as she is able to do so, she may come into court to have such action on her part established by the judgment of the court, hut the judgment relates hack to the rescission and has its foundation therein.

Appeal by the defendant, The President, Managers and -Company of the Delaware and Hudson Canal Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 29th day of'

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December, 1897, upon the decision of the court rendered after a trial at the New York Special Term.

The action was brought in February, 1893. The complaint set forth a contract of March 28, 1864, made between the plaintiff and her husband and the defendant, under which the defendant was authorized to mine for coal upon certain lands of the plaintiff in the State of Pennsylvania, and after alleging certain acts of the defendant thereunder further alleged:

“ That said property is about double in length to the width thereof. That said shaft and breaker are located at one end thereof. That the said fourteen foot vein, about the middle of said property, was of the thickness of twenty feet, and required extra care and support in the mining thereof; yet the defendants, well knowing the same, carelessly and negligently. omitted to mine the same with proper care or to support the same sufficiently, so that on or about the thirteenth of September, 1886, the same ' caved in ’ and brought down with it the above lying and unmined Diamond vein to the extent of about nine acres, in consequence whereof, also, no more of plaintiff’s said coal can be mined from said veins through said breaker and shaft, and the .same has become useless therefor, and the defendants have since then, as aforesaid, and now are using the same without right solely for other purposes and advantages of their own, as aforesaid.

“ And plaintiff further shows that, in mining said coal on plaintiff’s land, the defendants made a large number of openings from said veins into adjoining lands belonging to them, through which water also runs down upon plaintiff’s said coal and land and drowns the •same.

“ That in consequence of the said exhausting of said land of the coal within the meaning thereof, and the ending of said contract by the terms thereof, the plaintiff did, on the seventh day of February, 1893, cause to be served upon the said president of said company a notice and demand, signed by herself and her said husband, parties to said contract, requiring said defendants to cease and desist from mining coal from their property called the ‘ Farm ’ that lies across said river from said Marvin Shaft situated upon the property described in said agreeihent, and forbidding them to pile or place coal or culm "

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from said farm, or from any other lands, on the surface of said land, or from working any machinery thereon for said purposes ; and a reasonable time having elapsed since they ceased to mine coal from said land which, was the subject of said agreement requiring them also forthwith to remove therefrom the breaker and other machinery,, buildings, stables and improvements or other things erected or placed or maintained thereon by them since said 25th day of March, 1864, as required to do by the terms of said agreement; also to fill up and stop all gangways, water ways, openings, railroad tracks and other things, erected, constructed or maintained thereon since the making of said agreement to connect the workings thereon with their said other workings, etc., adjoining, but they have wholly failed and omitted to do so, and still continue to mine their said coal through the same and to put culm, slate and bone on said lands as aforesaid.”

• The plaintiff demanded judgment:

“First. That said contract has become executed and ended, and that the defendants have no further rights thereunder,” etc.

“ Second. That they, their agents, officers, etc., may be perpetually enjoined from claiming any further interest in said property under said agreement, and from denying plaintiff’s right thereto free from said agreement,” etc.

“ Third. That they may be required and adjudged to account with plaintiff and to pay her the damage she has sustained,” etc.

“ Fourth. That they, their agents and- servants, may be enjoined and restrained from claiming or exercising-or alleging any right, title or interest or claim thereto, and from denying or in any way interfering with plaintiff’s right and title to said premises, the same as if • said agreement had never been made, or that they may be adjudged to release the same to-her.”

Frank F. Smith, for the appellant.

George O. Genet, for the respondent.

An appeal from a judgment enteren in, favor of the defendant was before this court in March, 1896, and it will not be necessary to. rehearse again the facts which appeared in the opinion rendered ■

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upon that appeal. ( 2 App. Div. 491 .) Upon that appeal this court held that the court below might have been justified in finding that the contract had not been executed because of the exhaustion of the coal upon the land of the plaintiff, and that for that reason the defendant had no further rights thereunder; but that in view of the evidence which was offered the plaintiff might be entitled to-relief by reason of the unskillful manner in which the defendant had conducted its mining operations under the agreement, and as this branch of the case did not seem to have been considered, a new trial was ordered, in order that it might be properly and completely presented. Prior to such new trial the defendant obtained leave to amend its answer by setting up that the plaintiff, with full knowledge of the facts in regard to the cave-in which was alleged to be the culmination of the unskillful working of the mine by the defendant, had brought actions against the defendant to enforce the contract and had accepted large sums of money as royalties under the contract, and had thereby waived the right to terminate the contract, even if such right might otherwise have existed.

The evidence showed that it was in September, 1886, that this cave-in occurred, and that in March, 1888, the plaintiff brought an action against the defendant to recover a large amount of damages sustained by reason of such cave-in; and that in February, 1891,. the plaintiff brought an action upon the contract now sought to be terminated for an accounting in respect to the coal mined by it under the agreement; and that in February, 1896, the plaintiff brought a further action against the defendant for an accounting of the coal mined under the contract since the date of the action commenced in February, 1891, which last two actions are now pending and on trial before a referee.

It further appeared that ever since the said September, 1886, and down to April, 1891, the plaintiff has been regularly paid and has received the minimum rental and royalties provided for by the contract under consideration.

In view of these facts, it is claimed upon the part of the appellant that the ¡ffaintiff has waived the right to terminate the contract,, if such right ever existed. It is a familiar principle of law that, where circumstances occur which authorize a party .to rescind a contract, he must elect whether he will rescind or whether he will pursue

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his remedies under the contract, and that he cannot do both. Oases illustrative of this principle are those where property has been obtained by reason of fraudulent representations. The party may elect to sue upon the ground of fraud, or upon the implied contract to pay the value of the property obtained (Terry v. Munger, 121 N. Y. 161 ), and the pursuit of either of these remedies is an election which prevents resort to the other. A similar rule prevails in those cases where a party has the right to rescind a contract because of fraud. He may, after knowledge of the fraud, rescind and recover back that with which he has parted, or he may continue to perform on his part and, unless he has waived the fraud, maintain, an action for the damages sustained. If he rescinds, he must do so immediately on discovering the fraud, and. if he continues to perform under the contract, he will be considered to have elected to affirm-it. (Pryor v. Foster, 130 N. Y. 171 .)

Applying the principle here enunciated to the facts in the case at bar, it is difficult to see 'why the plaintiff, by receiving -the rents and royalties under the contract and by bringing an action for damages because of the breach of the implied obligations of the contract, has not elected to stand by the contract and not to terminate it.

It is true that, in the receipts for the royalties and minimum rents given by the plaintiff for this series of years, the money is said to be received without waiver or prejudice. Without waiver of whát ■or without prejudice to what, is not stated; and there is no .evidence tending to show that the defendant, upon the payment of the money, agreed that it might be received without the ordinary incidents attending receipt.

It is nowhere intimated or suggested that the defendant was aware, at the time of the receipt of these rents and royalties (except as to.the last few payments), that the plaintiff made any claim that she was entitled to any relief, except for damages because of the misuse of her property, and a judgment of the court in this.action -declaring the lease to have ended according to its terms. There is certainly no evidence of any waiver upon the part of the defendant of such rights as- it may have acquired by reason of the action of the plaintiff after she had obtained knowledge of the wrongs which she now alleges she has suffered. It is a familiar principle that a landlord cannot maintain ejectment against a tenant for breach of

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covenant and at the same time receive the rent reserved in the lease, the receipt of the rent with knowledge of the breach being a waiver of such breach. (Smith Landl. & Ten. *109, and cases there cited.)

It is further laid down in the case of Conrow v. Little ( 115 N. Y. 387 ) that where a party tabes legal steps to enforce a contract it is a conclusive election not to rescinden account of anything then known to him. Other cases might be cited to the same effect, but the principle is well established that a party cannot claim under a contract and claim to rescind at the same time. The remedies are inconsistent; and, if he has the right to rescind, he must make his election to rescind; and if he so does, his remedies under the contract cease. If, upon the contrary, he seeks to enforce his rights under the contract, it is an affirmance of the contract and a waiver of the right to rescind'.

■ It has been suggested that this is an action upon the part of the plaintiff • asking the judgment of the court that she be permitted to rescind, and that, as she could not know what the judgment of the court was .going to be upon that question, she was entitled to receive the benefits of the contract until it might be ascertained whether she had been able to establish her right to rescind or not, because the court could not permit her to rescind unless the right to rescind upon her part existed. It is clear that the plaintiff is not a ward of the court; she has to act for herself, and she is to determine for herself whether or not she has a right to rescind: and, after she has exercised that right as far as she is able to do it, she may undoubtedly come into court to have that action established by the judgment of the court;' but the judgment relates back to the rescission and has its foundation thereon. Although a party may have lost his right to rescind or may be unable to rescind because of inability to comply with the rules of law respecting rescission, yet it by no means follows that all remedy is lost. He still has his action for damages resulting from the wrongful act of the other contracting party. (Gould v. Cayuga Co. National Bank, 99 N. Y. 333 .) But such an action in no way affects the binding force or validity of the contract in question. It is a remedy afforded by the law to compensate a party for wrongs which have been committed against him in respect to the contract or its subject-matter. It is undoubtedly true that if the defendant had not at least tendered these rents and royalties, its

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rights under the contract would have been forfeited. But it is not true that if the plaintiff had not accepted the rents and royalties tendered, after she claimed the right to rescind because of the wrongful act of .the defendant, the validity of the contract would have been thereby "affected. The defendant was bound to tender, but the plaintiff was not bound to accept, if by so doing she lost her right, which was-more valuable than the immediate receipt of the rent or'royalty.

It would seem, therefore, that, by enforcing her rights under the contract, the plaintiff had waived the right to claim a termination of the contract by reason of the alleged wrongful acts of the defendant.

In view of the conclusion at which we have arrived upon this point, it seems to be unnecessary to discuss the question presented by the respondent, that this agreement was a mere revocable license, because' it appears that, even if it was revocable, its existence has been recognized and insisted upon by the plaintiff, and consequently no effectual revocation has ever been made.

The judgment should be reversed and a new trial ordered, with costs to the-appellant to abide the event.

Barrett, Rumsey, Patterson and O’Brien, JJ., concurred.

Judgment reversed, new trial ordered, costs to appellant to abide event.

Cases cited

Terry v. Munger 121 N. Y. 161 N.Y. 1890-04-15 p. 332
Pryor v. Foster 130 N. Y. 171 N.Y. 1891-12-01 p. 332
Conrow v. Little 115 N. Y. 387 N.Y. 1889-10-08 p. 333
Gould v. Cayuga County National Bank 99 N. Y. 333 N.Y. 1885-06-09 p. 333