
    Common Pleas Court of Montgomery County.
    Martin, Gdn., v. Willis et al.
    Decided March 27, 1928.
    
      Martin & Martin, for plaintiff.
    
      Compton & Compton, for defendants.
   Snediker, J.

This case has proceeded to the place where there is on file a second amended petition to which the defendants,. James L. Willis and Ella B. Willis, and the defendant, the American Loan & Savings Association, demur.

The points insisted upon by these defendants are that the petition does not show an offer to account for the rents and profits of the property transferred by the Willis’s to the plaintiff’s ward, nor is there an allegation controverting the fact that the American Loan & Savings Association has not in good faith taken the mortgage on the property transferred by the plaintiff’s ward to the Willis’s, and that there is no allegation in the petition that the American Loan & Savings Association had notice of the alleged incompetency of the plaintiff’s ward at the time of executing the mortgage to it by the Willis’s. The prayer of the petition before us, among other things, is, “that the defendants James L. Willis and his wife Ella B. Willis be required to deliver up the deed to said Riverdale street property to this court, that this court cancel the same, or order a reconveyance of said premises to the plaintiff as guardian of the estate of the said Emma A. Ninds” * * * “that the deeds purporting to convey said Ruth avenue and Folkerth street properties to Emma A. Ninds be cancelled of record and rendered null and void and of no efféct” * * * “that the defendants James L. Willis and Ella B. Willis be required to áccóunt to this court for all sums of money which they received on said mortgage loan from said the American Loan & ■ Savings Association on said Riverdale street property' over and above $1,900, up to the amount found due on' said mortgage including interest, insurance and taxes.”

It will be observed from the allegations of the petition which set forth the cause of action that there is a charge of false representations made to one of extreme age and' incompetent mentally to contract, by which representation she was induced, or led to or did convey her property of & value of about $6,000 for properties of the defendants' Willis which were, after deducting the mortgage encum-' brances thereon, of no value; in other words had. no equity, which was or would be available to the plaintiff’s ward in' the event it became necessary to realize thereon.

Because of these misrepresentations and because of the' conveyances, this suit is brought in equity and the court is asked to rescind the contracts entered into between the parties and to require an accounting as to rents and profits and as to encumbrances subsequently placed upon the property. There is not here a condition in which the plaintiff for his ward does rescind or has rescinded the. contract, but he prays this court that the contract may. be cancelled and rescinded. This makes a case in which-the rule, which is insisted upon by counsel filing the de-' murrers — that one who seeks to rescind a contract must offer to return or must return the consideration therefor, —does not apply.

In 3 Wisconsin Reports at page 208 in the case of Ludington, v. Patton et al., the Supreme Court held:

“In respect to an action in equity for the rescission of a contract on the ground of fraud, previous restoration or offer to restore what was received thereon is not a condition precedent to the right to commence the same, as in ease of an action at law. In equity it is only necessary-to show by the complaint a willingness to do equity, and a failure in that regard does not go to the cause of action unless taken advantage of by a special demurrer. A demurrer ore tmus is not sufficient.”

There is in this petition plainly an expression of readiness and willingness to do equity, or to have the court do equity, if our decree is to the effect that the transfer made by the plaintiff’s ward to the Willis’s be cancelled.

There is another case well reasoned, which more fully discusses and explains the rule to which we have referred as having been determined in the Wisconsin case. In Haydon et al. v. St. Louis & San Francisco Railroad Company, 117 Mo. App., the same question was raised and carefully gone into. After referring to a number of cases, both in Missouri and in other states, in which the rule was laid down that “where one is induced to enter into a contract by reason of false and fraudulent representations he can rescind the same only by placing the other party in statu quo,” Judge MacFarlane then says:

“These were all actions at law, and there is a broad distinction between a bill in equity brought to rescind a contract and an action at law based upon the theory that it has already been rescinded.”

He then refers to the case of Gould v. Cayuga County National Bank, 86 N. Y., 75, where the court says:

“If this had been an action in equity to rescind the contract, the court could have done equity between the parties and so moulded its judgment as to accomplish that result. It could, if needful, have brought into the litigation matters pertaining to the trust created by Starin for plaintiff’s benefit, and to that end could have ordered that Starin and the trustee be made parties. This action was brought as an action at law, no mention being made in the complaint of the compromise agreement or of the $25,000 paid to the plaintiff. A purely legal defense was set up; it was tried as an action at law, and no motion was made to convert it into an equity action * *
“The difference between an action to rescind a contract and one brought, not to rescind it, but based upon the theory that it has already been rescinded,' is as broad as a gulf.”

Quoting from the decision of Chief Justice Cooper in Brown v. Norman, 56 Miss., 369, the court reads:

“But in equity the complainant does not necessarily rescind and sue; he may sue for rescission. He is required to restore the consideration, not however as a condition of acquiring the right to sue but because of the equitable maxim that he who seeks equity must do equity.”

And also from Story under the head of Cancellation of Instruments:

“Courts of equity act upon an enlarged and comprehensive policy; and therefore in granting the relief they will impose such terms and qualifications as shall meet the just equities of the opposing party.”

And from Barker v. Wallace, 8 Beav., 92, which was a suit to cancel a life insurance policy on the ground that it had been obtained by false and fraudulent representations:

“Premiums had been paid on the polimy by the assured. The plaintiffs did not make a tender of the premiums before bringing the suit. On this ground a demurrer to the bill was filed. The prayer of the bill was that the policy might be delivered up to be cancelled, or that the plaintiffs might otherwise be relieved, in such manner as the court might think fit. This was held sufficient and the demurrer was overruled. Substantially the same ruling was made by Lord Selborne, L. C., in Jervis v. Berridge, 8 Chan. App. Cases, 351.”

So with this pleading before us, accompanied with the prayer which we find embodied in the petition, we cannot say that this plaintiff fails to state a cause of action because of the absence of an allegation of willingness to return or because he fails to state that he has offered to return the consideration for the conveyance which he seeks to have this court cancel and rescind. There is much force also in the point made by counsel for plaintiff that the allegations of the petition are to the effect that the property conveyed to plaintiff’s ward is absolutely of no value, making it unnecessary that there should be a restoration or an offer to restore to the Willis’s such valueless property.

As to the building association, the allegations of the petition are to the effect that it now claims some interest in the Riverdale street property and that a mortgage was given by the Willis’s after their acquisition of that property to it.

Considering the averments of this pleading and the relief which may be afforded (if the contentions of the plaintiff are true), and the requirements which may be made of the defendants, the Willis’s, and of the plaintiff, our opinion is that the demurrer of the American Loan & Savings Association ought to be overruled. It will not do for a court to say that if a man acquires property fraudulently, and thereupon gives • a mortgage to a bona fide mortgagee, that our hands are tied and that the plaintiff may not have any equitable relief from the fraud which was imposed upon him. There were conditions in the case referred to by counsel for the American Loan & Savings Association not present here as shown by the allegations of the petition in this case. At any rate, unless the facts were all before the court in evidence we would hesitate to make an application of that rule of equity which might relegate this plaintiff to an action at law because of the interposition of this mortgagee.

The demurrers are overruled.  