Miller v. Continental Shipbuilding Corp.

265 F. 158, 1920 U.S. App. LEXIS 1387
CourtCourt of Appeals for the Second Circuit
DecidedMarch 12, 1920
DocketNo. 82
StatusPublished
Cited by10 cases

This text of 265 F. 158 (Miller v. Continental Shipbuilding Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Miller v. Continental Shipbuilding Corp., 265 F. 158, 1920 U.S. App. LEXIS 1387 (2d Cir. 1920).

Opinion

ROGERS, Circuit Judge

(after stating the .facts as above). This action was brought for money had and received, upon a contract rescinded by plaintiff because of alleged false representations. The contract, which plaintiff entered into in his own name, was in fact made on behalf of his principal in Morocco; but that fact was not disclosed at the time the contract was signed, and is not material in the decision of the case. The contract called for the construction of “one 1,500-ton D. W. wooden steamer,” according to plans and specifications annexed to the contract, and was to be especially adapted for carrying coal on ocean voyages. As originally drafted, the contract [160]*160•did not specify when the vessel was to be completed. A clause, however, was subsequently added which provided that the vessel was to be completed “in June, 1918, subject to delays caused by the government or by strikes or by subcontractors.”

The plaintiff alleged in his complaint that defendant falsely and fraudulently represented to him that it had a shipyard fully equipped and located at Tudlow, N. Y., on the Hudson river, equipped for the 'immediate construction of a vessel of the type described in the contract, and that it could and would construct and deliver to plaintiff such vessel within the time agreed upon; that it represented that it was working on United States government orders for the building of vessels, and that unless plaintiff at once signed the cpntract defendant would be unable to construct a vessel for him. It was alleged that these representations were false, and known to be false by defendant at the time they were made, and that they were made with intent to deceive the plaintiff as to their truth, hoping thereby to induce him to enter into the contract, which otherwise he would not have been persuaded to sign. It was alleged, also, that the plaintiff, relying on these representations, entered into the contract, and paid to defendant under the contract, and by reason of false statements that the vessel was being constructed by defendant at its yard, defendant knowing at the time that the statements were untrue, various sums of money, ambunting, as heretofore stated, to $49,002.02. The plaintiff, upon discovering that the representations were untrue, duly demanded before the commencement of the action the return of the sum aforesaid, and that defendant refused to comply with the demand. The answer denied that any fraudulent representations had been made, and demanded judgment dismissing the complaint and for the costs of the action.

[1] This raised an issue of fact, which the court submitted to the jury, instructing them that, if they found that the statements alleged were made, and were false, and known to defendant to be false, their verdict was to be for the plaintiff, unless they found that the plaintiff, after ascertaining their falsity, nevertheless continued to act as.though they had not been iñade; but that, if they found5 that the plaintiff continued so to act after ascertaining the truth, he could not thereafter come into court and complain that he made the contract,. induced thereto by reason of defendant’s false representations. On this phase of tile subject he charged in part as follows:

‘You can readily appreciate that it would be grossly unfair, even if a party had induced another to enter into a contract by means of false statements^after the party had been so induced to enter the contract, had learned that the statements were false, it would be grossly unfair to permit the party tints learning the reaj truth to proceed with the contract to such a point as he deemed advisable,* and then to allow him to rescind, although the other party might have become involved in very heavy obligations as a result of being permitted to carry out the contract without complaint on the part of the party who had been deceived. The law on the subject is admirably expressed by a well-known text-oook writer, who says: ‘If a person, after acquiring knowledge of circumstances which would justify him in rescinding a contract to which he'is a party, makes any declaration or does any act which distinctly recognizes the contract as still subsisting, and as binding upon him, he will be held to have waived his right to rescind.’ ”

[161]*161If the plaintiff, with full knowledge of the falsity of the statements which he says were made to him prior to t(ie signing of the contract, after he discovered the facts continued to act as though no such statements had been made, and as though he expected and required defendant to live up to the terms of the contract, then certainly he cannot come into court to complain that he entered into the contract because of the fraud which his own conduct has waived. When he discovered the truth, he had a right either to rescind or to continue to perform the contract and maintain an action for damages. But he was bound to act promptly, and his election, once made, was final and conclusive. He is not permitted to play fast and loose. If he remains silent, he waives his right to rescind. Delay and vacillation are fatal. Grymes v. Sanders, 93 U. S. 55, 62, 23 L. Ed. 798. When a party desires to rescind on the ground of fraud, he must, on discovery of the facts, at once announce his intention and adhere to it. Bispham’s Equity (8th Ed.) § 259. This was not done in this case.

[2] The plaintiff testified that defendant’s vice president had informed him, prior to the signing of the contract, that it had a complete shipbuilding plant, fully equipped, and that it was building ships. This testimony was contradicted; and there is testimony showing that at the time the contract was signed the plaintiff had no shipyard, no buildings, and no machinery, and that plaintiff knew these facts on January 18th. There is testimony that about the middle of February the president of the defendant company exhibited to plaintiff three or four photographs indicating the buildings which were then under construction, and the progress that was being made, and that this was in response to plaintiff’s question, “Well, how are you making out with your buildings?” After looking at the pictures, the testimony is that plaintiff said “he was very much pleased at the progress we had made up to that date.” On February 25, 1918, he visited the plant, and spent about two hours there, and was shown the exact condition of things. No shipbuilding was going on. There was no machinery on the premises, except a hoisting engine, which had not been set up, but was in the yard, a circular saw, and a couple of other machines in crates. The plaintiff again expressed his satisfaction at the progress that had been made in the erection of the building then in process of construction, and which was up and complete at that time, and ready to receive the roof. There was no other building on the premises, save a shanty and a shed. On March 10th plaintiff again visited the shipyard with the president of the defendant, and was there for an hour and a half, and the trip was undertaken that the plaintiff might see the work of putting in the foundation for the keel blocks. On March 18th plaintiff sent up to the yards his own employe, who spent two weeks there, and reported from time to time the progress being made. The plaintiff was there again the last week in March, and again on April 4th.

.On April 10, 1918, plaintiff gave notice, “in pursuance of paragraph sixth of the contract,” that, “a disagreement having arisen,” [162]

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Bluebook (online)
265 F. 158, 1920 U.S. App. LEXIS 1387, Counsel Stack Legal Research, https://law.counselstack.com/opinion/miller-v-continental-shipbuilding-corp-ca2-1920.