rule of law upon this point is this: So long as the defrauded person has made no election, he retains the right to determine it either way, provided that, in the interval while he is deliberating, an innocent third party has not acquired an interest in the property, or that in consequence of his delay the position of the wrong-doer himself has not been substantially affected.1 But the mere fact that a party to fraud has before the rescission issued a writ and commenced an action pertaining to the subject-matter of the fraud is not such a change of position as will preclude the defrauded party from exercising his election to rescind. Nor is a declaration of intention to rescind necessary prior to the answer to such action. Nor will the mere bringing of suit upon the contract prevent a later rescission of it, though presumptively such a suit will be an election to affirm it.3 Indeed it has been held that judgment for the price of goods in favor of a defrauded vendor will not prevent him from rescinding the contract thereafter if he was ignorant of the fraud when he obtained his judgment. Clearly the plaintiff may stop his suit upon the contract and rescind if he only then discovered the fraud; in this the authorities are agreed.

The right to rescind is to be determined by the state of

1 Clough v. London Ry. Co., L. R. 7 this did not mean that no statement Ex. 26 (Ex. Ch.). on the record, however explicit, could amount to an election.

2 Clough v. London Ry. Co., supra, modifying Newnham v. Stevenson, 10 C. B. 713, 723, where it had been said: "The commencement of an action in trover, which may be abandoned at any time, and which assumes that the goods came into the possession of the defendant lawfully, cannot without more be taken to be an election on the part of the assignees to avoid the transfer.' See Stevenson v. Newnham, 13 C. B. 285; Billiter v. Young, 6 E. & B. 1, 33; Bulkley v. Morgan, 46 Conn. 393; Butler. Hildreth, 5 Met. 49. It was said in Clough v. London Ry. Co. that

8 Whitwell v. Vincent, 4 Pick. 449; Bulkley v. Morgan, 46 Conn. 393; Equitable Foundry Co. v. Hersee, 103 N. Y. 25; Clough v. London Ry. Co., supra; Newnham v. Stevenson, 10 C. B. 713. But see Butler v. Hildreth, 5 Met. 49; Acer v. Hotchkiss, 97 N. Y. 395, and Equitable Foundry Co. v. Hersee, supra, in regard to knowledge.

4 Kranse v. Thompson, 30 Minn. 64, citing Pratt v. Philbrook, 41 Maine, 132; Clough v. London Ry. Co., supra; Lloyd v. Brewster, 4 Paige, 537.

things at the time the contract was entered into, and will not be affected by the turn of subsequent events, except in so far as such events may tend to show that there was no ground for a rescission. Thus where a party files a bill to rescind a contract for an exchange of lands, on the ground of a fraudulent concealment by the other party of the existence of judgment liens upon his land, the discharge of such liens after the filing of the bill will not affect the plaintiff's rights.1

The rescission as a matter of caution should be made promptly upon the discovery of the fraud; 2 not however, as it should seem, upon the discovery of suspicion of the fraud, or upon being put upon notice, but in such cases from the time when by reasonable diligence the fraud would have been discovered. But delay will only be evidence of waiver,3 and it is perhaps sufficient to say that rescission, if made at all, should be made within reasonable time after discovery of the fraud.4

$9. FRAUD ON POWERS.

A fraud upon a power,' which need be no more than a constructive fraud,5 may be committed either on the donor of the power or on the objects of it, or upon both. It is committed on the former when a power to create a burden on the estate in settlement is used for a purpose not intended; it is

1 Thomas v. Coultas, 76 Ill. 493; Merritt v. Robinson, 35 Ark. 483.

2 Sharpley v. Louth Ry. Co., 2 Ch. D. 663, C. A.; Baird v. New York, 96 N. Y. 567; Gonld v. Cayuga Bank, 86 N. Y. 75; Thomas v. Barton, 48 N. Y. 193; Upton v. Trebilcock, 91 U. S. 45; Bayard v. Holmes, 4 Vroom, 119; Estes v. Reynolds, 75 Mo. 563.

8 Schiffer v. Dietz, 83 N. Y. 300; Bulkley v. Morgan, 46 Conn. 393; Williamson v. New Jersey R. Co., 29 N. J. Eq. 311; Marston v. Simpson, 54 Cal. 189; Davis v. Stuard, 99 Penn.

St. 295; Parmlee v. Adolph, 28 Ohio St. 10; Wicks v. Smith, 21 Kans. 412.

4 Neblett v. Macfarland, 92 U. S. 101; Collins v. Townsend, 58 Cal. 608; Marston v. Simpson, 54 Cal. 189; Merrett v. Robinson, 35 Ark. 483; Bulkley v. Morgan, 46 Conn. 393; Masson v. Bovet, 1 Denio, 69; Wilson v. Fisher, 5 Houst. 395; Hunt v. Blanton, 89 Ind. 38; Key v. Jennings, 66 Mo. 356; Brown v. Mutual Ins. Co., 32 N. J. Eq. 809; Nealon v. Henry, 131 Mass. 153; Bassett v. Brown, 105 Mass. 551.

Ante, p. 12.

committed on the latter when a power to control the devolution of the estate is used to give a benefit to some one not an object of it. But of course when all the objects on whom alone such fraud can be committed concur in or confirm the transaction, and no imposition or undue influence is used in the matter, the fraud is waived.2

As an illustration of fraud upon the donor the case may be given of the donee of the power appointing the fund to one of the subjects named in the power, upon an understanding that the appointee will lend the fund to the donee; such appointment is bad, though the fund was to be loaned on good security. In such a case the party entitled in default of appointment obtains the fund.*

As an illustration of fraud upon the objects of the power the case may be stated of an appointment made with the object of giving an advantage to the appointor, directly or indirectly; in this case he is a trustee of the power, and subject to the obligations of a trustee. Still if the object of the appointment be to secure a benefit for all the objects of the power, the appointment is good, though the appointor may to some extent participate in such benefit. Thus, in the case cited, it was urged that certain appointments (made by a tenant for life acting under a power given by a marriage settlement), the object of which was to effect building leases, were for the benefit of the appointor, and therefore, not being authorized by the settlement, were invalid. But the Master of the Rolls considered that this principle should give way, where, as in this case, the benefits of the appointment extended to parties in interest. The building leases had indeed benefited the tenant for life; but they had also bene

1 Rowley v. Rowley, Kay, 258; Skelton v. Flanagan, L. R. 1 Irish Eq. 362, 369.

2 Skelton v. Flanagan, supra.

3 Arnold v. Hardwick, 7 Sim. 343.

4 Ib.

5 Palmer v. Locke, 15 Ch. D. 294, C. A., Cotton, L. J.; Roach v. Trood, 3 Ch. D. 429, C. A.

6 In re Huish's Charity, L. R. 10 Eq. 5; Roach v. Trood, 3 Ch. D. 429, C. A.; Beere v. Hoffmister, 23 Beav. 101.

fited the other interested parties in the improved value of the property, which they would lose if the appointment were declared void. To hold otherwise would be to strain a rule intended to benefit the objects of the power to a rigid exactness, which would inflict manifest injury upon them.1

It is not necessary however that an appointment under a power should be directed (contrary to the intent of the power) to the benefit of the appointor, in order to make it invalid as a fraud upon the objects of the power. Where the donee exercises a power of appointment in favor of one of several objects of the power with a view to the benefit of a stranger, the appointment is in ordinary cases, but not necessarily,2 considered fraudulent;3 and this too though the appointee be ignorant of the fraud, and though the motive of the donee be not morally wrong. In the case cited a married woman having a power to appoint a fund (of which she was to receive the income during her life) among her children, appointed the whole fund at her death to her eldest daughter. The object of this was that the daughter should, out of the fund, benefit her father. The daughter was not informed of her mother's intention until after the mother's death; but the appointment was held invalid.5

1 See McQueen v. Farquhar, 11 Ves. 467; Cockcroft v. Sutcliffe, 25 L. J. Ch. 313; Topham v. Portland, 1 De G., J. & S. 517; s. c. 11 H. L. Cas. 32, L. R. 5 Ch. 40; Vane v. Dungannon, 2 Schoales & L. 118; Warde v. Dixon, 28 L. J. Ch. 315; Cooper v. Cooper, L. R. 8 Eq. 312; s. c. L. R. 5 Ch. 203; In re Marsden's Trust, 4 Drew. 594.

been cited,' said the court, 'there has been a direct bargain between the donee of the power and the person in whose favor it is exercised, under which the donee of the power was himself to derive a benefit; and certainly there has been nothing of that kind in this case. In my opinion however it is not necessary that the appointee should be privy to the transaction, because the design to

2 See Roach v. Trood, 3 Ch. D. 429, defeat the purpose for which the power

Baggallay, L. J.

In re Kirwan, 25 Ch. D. 373. In re Marsden's Trust, 4 Drew. 594. This shows that the fraud is constructive.

6 In some of the cases which have

was created will stand just the same, whether the appointee was aware of it or not; and the case of Wellesley v. Morrington, 2 Kay & J. 143, shows that it is not necessary, in order to bring the case within the scope of the jurisdiction

On the other hand it is laid down by Lord Justice Fry1 that the mere conferring of a benefit upon a person not an object of the power will not avoid an exercise of such power, if made with approval of the real objects, or even if made with approval of the person who would take under an exercise in favor of the object of the power, as where an appointment was made to a married daughter, and she and her husband resettled it, giving benefits not only to their children but to a stranger to the family, or where the appointment was made upon the usual terms of a marriage settlement upon the marriage of an infant daughter.3

In the case first cited trustees of a power of appointment had acted in good faith, the only objection raised to their action being that they had imposed the requirement of resettling a portion of the property, by the appointees thereof, as a condition of the exercise of the power, thus conferring by possibility benefits upon persons who were not objects of the power. It was declared on authority of a decision rendered by Lord Hardwicke,5 and of a very recent case, that the existence of an antecedent contract between the donee of the power and the appointee of a resettlement conferring benefits upon a stranger would not alone render the appointment invalid. But it was declared that if such contract was the 'causa sine qua non' of the appointment, the case would be dif

in which this court acts, that the appointee should be aware of the intentions of the appointment, or of its being actually made. Neither is it necessary that the object should be the personal benefit of the donee of the power. If the design of the donee in exercising the power is to confer a benefit, not upon himself actually, but upon some other person not being an object of the power, that motive just as much interferes with and defeats the purpose for which the trust was created, as if it had been for

the personal benefit of the donee him

self.' See Roach v. Trood, 3 Ch. D. 429, Baggallay, L. J.

1 In re Turner, 28 Ch. D. 205, C. A., from whose language the present and the next paragraph are in substance taken.

2 Wright v. Goff, 22 Beav. 207.

8 Fitzroy v. Richmond, 27 Beav. 190. 4 In re Turner, supra.

5 Langston v. Blackmore, Amb. 288. 6 Roach v. Trood, 3 Ch. D. 429. Cooper v. Cooper, L. R. 8 Eq. 322, was also referred to.