This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
If the defrauded party has conveyed title to land by reason of fraud as to a collateral matter, he can not in most jurisdictions recover such land by an action at law, such as ejectment.1 His remedy, and his only remedy, is a suit in equity to cancel such conveyance.2 If the plaintiff in an ejectment action claims under a deed which was procured by fraud in the inducement, the defendant can not attack such deed for such fraud unless by statute and a reconveyance is not necessary, the grantor may have cancellation in equity if there is, in such jurisdiction, a court of full equity powers, having statutory authority to act.11
8 Rockwell v. Capital Traction Co., 25 D. C. App. 98.
9 Pacific Mut. Life Ins. Co. v. Webb, 157 Fed. 155.
10 Vandervelden v. Chicago & Northwestern Ry., 61 Fed. 54; Pacific Mut. Life Ins. Co. v. Webb, 157 Fed. 155; Maine Northwestern Development Co. v. Northern Commercial Co., 213 Fed. 103 (obiter).
1 Rogers v. Colt, 21 N. J. L. 704; Jackson v. Hills, 8 Cow. (N. Y.) 290; Gant v. Hunsucker, 34 N. Car. 254, 55 Am. Dec. 408.
2 United States. Blackburn v. Wooding, 56 Fed. 545, 6 C. C. A. 6.
Alabama. Gewin v. Shields, 167 Ala. 593, 52 So. 887.
Illinois. Pittenger v. Pittenger, 208 111. 582, 70 N. E. 699; Hursen v. Hursen, 212 111. 377, 103 Am. St. Rep. 230, 72 N. E. 391; Fischer v. Fischer. 245 111. 426, 92 N. E. 283; Little v. Dyer, 35 111. App. 85.
Indiana. Westphal v. Heckman, 185 Ind. 88, 113 N. E. 299.
Massachusetts. Lefevre v. Chamberlain, 228 Mass. 294, 117 N. E. 327.
Michigan. Grogg v. Maynard, 164 Mich. 535, 129 N. W. 723; Cochran Timber Co. v. Fisher, 190 Mich. 478, 157 N. W. 282.
Mississippi. Horn v. Beatty, 85 Miss. 504, 37 So. 833.
New York. Adams v. Gillig, 199 N. Y. 314, 32 L. R. A. (N.S.) 127, 92 N. E. 670.
Oklahoma. Rumbaugh v. Rumbaugh, 39 Okla. 445, 135 Ac. 937.
Oregon. Hall v. Catherine Creek equitable defenses may be made in an action at law.3 A conveyance of land may be rescinded on the application of the grantee because of fraudulent representations as to the title made by the grantor.4 An exchange of realty may be rescinded for fraud as to the area of one of the tracts.5 A conveyance of realty to the grantor's wife may be rescinded for her fraud in accepting such conveyance when she did not intend to live with the grantor after she had induced him to convey such realty.6 Rescission will be given on the application of the creditor for fraud in representing that the loan would be used to discharge a prior lien;7 or for fraud in obtaining a release of a prior mortgage and the substitution of a later mortgage by representing that there were no subsequent incumbrances.
In some jurisdictions, however, there were no courts of equity powers, or the equity powers of the courts of chancery were very limited, and equity did not have power to set aside a conveyance of realty for fraud in the inducement. Under such circumstances the common-law courts assume the power to set conveyances of land aside for fraud in the inducement rather than to hold that such conveyances were valid and that there was no remedy of any sort for such fraud.8 As a result, when courts of equity were created in such jurisdictions, or when full equity power was conferred upon them, they found that the courts of law were giving relief in such cases, and accordingly the courts of equity sometimes held that they could not give relief, since there was a full, adequate and complete remedy at law.9 Subsequent legislation, however, hasr in some cases, restored this jurisdiction of equity.10 Even in a jurisdiction in which a deed obtained by fraud is absolutely void,.
Develop. Co., 78 Or. 585, L. R. A 1916C, 996, 153 Ac. 97.
Washington. Chilberg v. Aiken, 77 Wash. 249 [sub nomine, Chilberg v. Boyd, 137 Ac. 487].
West Virginia. French v. McMillion, 79 W. Va. 639, L.R. A. 1917D,228,91 S. E. 538; see also Matteson v. Wagoner, 147 Cal. 739, 82 Ac. 436; Bormann v. Hatfield, 96 Wash. 270, 164 Ac. 921 [sub nomine, Bormann v. Vyverberg, L. R. A. 1917E, 1052].
3 Wells v. Caywood, 3 Colo. 487; Union Brewing Co. v. Meier; 163 111. 424, 45 N. E. 264; Taylor v. King, 20 Va. (6 Munf.) 358, 8 Am. Dec. 746.
4 Kathan v. Comstock, 140 Wis. 427, 28 L. R. A. (N.S.) 201, 122 N. W. 1044.
5 Lefevre v. Chamberlain, 228 Mass.. 294, 117 N. E. 327.
6 Hursen v. Hursen, 212 111. 377, 103 Am. St. Rep. 230, 72 N. E. 391.
7 Matteson v. Wagoner, 147 Cal. 739, 82 Ac. 436.
8 Pratt v. Pond, 87 Mass. (5 All.) 50; Bassett v. Brown, 100 Mass. 355.
9 Pratt v. Pond, 87 Mass. (5 All.) 59; Bassett v. Brown, 100 Mass. 355.
10 Billings v. Mann, 156 Mass. 203, 30 N. E. 1136.
The right of a grantor to have rescission for fraud by which he is induced to execute a deed, is superior to the lien of judgment creditors whose judgments were rendered prior to such conveyance.12 A deed which cancels a conveyance for fraud cancels the fraudulent contract of sale under which the deed was delivered.13 One who has been induced to purchase land by fraudulent representations, and who rescinds such contract because of such fraud, is not entitled to a lien on such land for the amount which he has paid in advance under such fraudulent contract.14 If rescission of a conveyance of realty is granted on the application of the grantee who has been in possession of such realty, such grantee can not recover interest upon the purchase money which he has paid in.15