POWER & IRRIGATION CO. OF CLEAR LAKE v. BANK OF WOODLAND et al., 226 F. 698

ROSS, Circuit Judge (after stating the facts as above).

Section 24 of the Judicial Code of the United States, provides, among other things, as follows: “No district court shall have cognizance of any suit (except upon foreign bills of exchange) to recover upon any promissory note or other dioso in action in favor of any assignee, or of any subsequent holder if such instrument be payable to bearer and be not made by any corporation, unless such suit might have been prosecuted in such court to recover upon said note or other chose in action if no assignment had been made.” In Bushnell v. Kennedy, 76 U. S. (9 Wall.) 390, 19 L.

Ed. 736, the Supreme Court expressly declared that under the comprehensive designation “chose in action” are included “all debts and all claims for damages for breach of contract, or for torts connected with contract.” lr is not contended that if this action is based upon a chose in action the court below had jurisdiction.

But it is earnestly insisted on the part of llie plaintiff in error that the action is founded upon an obligation imposed by law, the argument being that the complaint shows upon its face that the contract therein set out was rescinded by the defendants in error, to which rescission the plaintiff in error consented and thereby became entitled under the law to recover the moneys that, had been paid by his assignor under the contract. Sections 1689 and 1691 qf the Civil Code of California provide as follows 5 “See. 1689. A party to a contract may rescind the same in the following •cases only: “1.

If the consent of the party rescinding, or of any party jointly contracting with him, was given by mistake, or obtained through duress, menace, fraud, or undue influence, exercised by or with the connivance of the party -as to whom he rescinds, or of any other party to the contract jointly interested with such party; “2. If, through the fault of the party as to whom he rescinds, the consideration for his obligation fails, in whole or in part; “8. If such consideration becomes entirely void from any cause; “4. If such consideration, before it is rendered to him, fails in a material respect, from any cause; or, “5.

By consent of all the other parties.” “Sec. 1691. Bescission, when not effected by consent, can be accomplished •only by<tke use, on the part of the party rescinding, of reasonable diligence to comply with the following rules: “1. He must rescind promptly, upon discovering the facts which entitled him to rescind, if he is free from duress, menace, undue influence, or disability, and is aware of his right to rescind; and, “2.

He must restore to the other party everything of value which he has ■received from him under the contract; or must offer to restore the same, upon •condition that such party shall do likewise, unless the latter is unable or positively refuses to do so.” And

section 1688 of the same Code declares that “a contract is extinguished by its rescission.” We are unable to sustain the contention of the appellant that the complaint shows upon its face that the contract therein set out was rescinded. Of course, it might have been rescinded by the consent of the respective parties to it, and upon such rescission it would have been extinguished; but so far from the complaint showing any such ■consent and consequent extinguishment, it shows only an attempted rescission on the part of the defendants, without showing the grounds therefor.

By the express provision of the state statute referred to, rescission, when not effected by consent, can be accomplished only by the use on the part of the party rescinding of reasonable diligence to comply with certain prescribed conditions, one of which is the restoration to the other party of everything of value which he has received from him under the contract. The compláint not only fails to show a rescission of the contract by the consent of the parties thereto, but fails to show compliance by the defendants with that among other conditions prescribed by the state statute.

It alleges, after setting out certain payments by the plaintiff’s assignor: “That while the said contract was in full force and effect, the defendants, by an instrument in writing executed and delivered to Vandercook, extended the time within which he was to make payments of all sums of principal and interest provided for in the contract, then remaining due and unpaid, together with interest due or to become due thereon, until and including March 24, 1912. * * * That thereafter and while the said agreement of January 19, 1907, was in full force and effect, the defendants rescinded the same, and notified Vandercook in writing of such rescission and cancellation, and that his rights and privileges thereunder had terminated and that they would no longer be bound thereby.” It may be that such attempted rescission by the defendants was because of some default or defaults of the plaintiff’s assignor.

There is nothing to the contrary in the complaint. If so, and the defendants were without fault, it would hardly be claimed that the plaintiff would be entitled to recover what was paid by its assignor. Joyce v. Shafer, 97 Cal. 335, 337, 32 Pac. 320. We agree with the court below that the real basis of the action as staled in the complaint is the contract therein set out, and that the proper determination of the controversy between the parties depends upon the actions of the parlies thereunder and their respective defaults, if any such occurred. The judgment is affirmed.