It must be conceded that a fraud was committed by the plaintiff upon the defendant, by representations made as to the health of the assured at the time when the back premiums were paid and accepted; and the policy which had been forfeited, by reason of a failure to pay the premiums as they became due, was sought to be restored to its former condition. A single question, therefore, arises upon this appeal, and that is, whether the judge erred in holding that the defendant was bound, upon the discovery of the fraud, to return the premiums and to disaffirm the new contract, *Page 199 and never having done so, it did not offer any defence to the plaintiff's claim; and in directing a verdict for the plaintiff.
There is no doubt of the correctness of the general rule that where a party seeks to disaffirm a contract upon the ground of fraud he is bound to act promptly upon the discovery of the fraud, and to return, or offer to return, all that he has received under the contract. Rescission on the ground of fraud, failure of consideration, and kindred reasons, is a right in equity; and hence, where the return of the money or property can be made, and equity is thereby done, no good reason exists why the rule stated is not fully complied with. In other words, a man shall not keep what he has obtained under a fraudulent contract, and then claim that it shall be rescinded without any return. The rule referred to is, most generally, applied in actions to recover property, or for a wrong, as to recover the price of goods sold and delivered, or for money paid fraudulently when the plaintiff seeks redress, and hence, ordinarily, has no just and equitable claim until he has restored, or offered to restore, the property or money which he has received. Such actions generally relate to contracts of sales between vendor and vendee, as those already referred to, and not to actions of the character of the one at bar.
Without considering whether the rule referred to precludes a party from setting up the fraud as a defence when money received has not been returned, or an offer made to that effect, and conceding the correctness of the rule as applicable to this case, we are of the opinion that the rule was substantially complied with by the offer made to allow the plaintiff to take judgment for the amount of the premiums paid and entered thereon. The defendant was not bound to make the offer before the claim was presented, and had sixty days from that time to pay the amount. The action was brought soon afterwards, and if the offer had been accepted, would have restored all the parties to their former condition, and done equity between them. The time within which, after the death *Page 200 of Mrs. Harris, the offer was made was reasonable and sufficiently prompt, and this was all which could be required. InAllerton v. Allerton (50 N.Y., 670) this court held that the rule that he who seeks to rescind an agreement upon the ground of fraud must place the other party in as good a condition as that in which he was when the agreement was made, is satisfied if the judgment asked for will accomplish that result, and in such case no offer to return that which was received is necessary. It is true, in the case cited, the plaintiff had brought the action claiming that there was fraud, and that the contract was void; but the principle is equally applicable where the defendant asserts that the contract was fraudulent and void.
After stating the rule, that the party seeking to rescind must place the other party in as good a situation as that in which he was when the agreement was made, in the opinion, it is said, by FOLGER, J., "the law looks to the result, and not the means." It was also remarked that the reason of the rule is, that the party shall not retain the thing which is the subject of the contract, and, on his action, recover the price paid for it, or retain the price paid and, on his action, recover the thing; and that this reason is satisfied when the claim made and the judgment sought by the plaintiff will leave with the defendant all that he parted with, and thus put him in as good plight as at the time of the agreement. The same result would have followed here by a judgment in favor of the plaintiff for the premiums paid. It is no answer to say that the offer not having been accepted within the ten days, it was deemed to be withdrawn, for it was the fault of the plaintiff that he did not accept it, and thus obtain restoration of the money which he had paid.
Under the circumstances of this case, as justice has been done, and the result has been attained which the law contemplates, the order of the General Term should be affirmed, and judgment absolute ordered for the defendant, with costs.
All concur; CHURCH, Ch. J., ANDREWS and EARL, JJ., concur in result.
Order affirmed and judgment accordingly. *Page 201