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St. John et al. v. Hendrickson.

fer to the actual investment made by each of the partners. They declare a substantive fact, distinct from the credit er ability of the firm, and they were not made to induce a person to give credit to the firm, but to induce him to become a member of it. The representations are not within the letter or the spirit of the statute, for they were not made for the purpose of giving the firm credit with the appellee. There was no error in the ruling upon the demurrer to the fourth paragraph of the answer.

It is alleged in the second paragraph of the answer, that after the appellee had been fully informed of the condition of The Lone Tree Medicine Company, and had obtained full knowledge of the amount cach of the partners had paid into the partnership, and of all the property and business of the company, the appellants offered to release him from said partnership, and to place him in the same situation that he occupied prior to investing his money in said firm; that the appellee repaid to appellants the money they returned to him at the time they offered to release him from his connection with said firm, and elected to remain a member thereof, did remain a member, and afterwards purchased the interest of two of the members of the firm, and has since assisted in conducting its business. A demurrer was sustained to this answer.

It is undoubtedly the law, that there may be a waiver of a right to recover damages for loss resulting from false and fraudulent representations by an express affirmance. It is essential to such a waiver, that the party should possess full knowledge of the fraud practiced upon him; that he should intend to confirm the contract and abandon all right to recover for the loss resulting from the fraud. Cooley thus states the rule: “The fraud may also be waived by an express affirmance of the contract. Where an affirmance is relied upon it should appear that the party having a right to complain of the fraud had freely, and with a full knowledge of his rights, in some form, clearly manifested his intention to abide by the contract, and waive any remedy he might have had for the

St. John et al. v. Hendrickson.

deception.” Cooley Torts, 505. This is the rule sanctioned and enforced by the decisions of this court. In Doherty v. Bell, 55 Ind. 205, there is an explicit recognition of this rule. It was there said by NIBLACK, J., speaking for the court: “If the appellee, with full knowledge of all the facts, as we think it fair to presume, from the allegations in the reply, it was intended to charge he had, and after the appellants became the owners of it, agreed to pay the note, provided a certain extension of time was allowed him, and in consideration thereof, such an extension was given him, we must regard him as having ratified the execution of the note, and as having waived whatever objection or defence he may have had to the manner of its execution. We do not hold that any new contract was created thereby, but that the old one was in that way recognized and ratified.” Substantially, the same doctrine was declared long before, in McQueen v. The State Bank, 2 Ind. 413.

We fully recognize and approve the rule that a party may retain what he received, stand to his bargain, and recover for the loss caused him by the fraud. We do not mean to run counter to this rule. We neither hold nor mean to hold, that affirmance by retention of the thing bargained for cuts off an action for damages. We do hold that, where a party with full knowledge of all the material facts does an act which indicates his intention to stand to the contract and waive all right of action for the fraud, he can not maintain an action for the original wrong practiced upon him. Where the affirmance of the contract is equivalent to a ratification, all right of action is gone. Bigelow Fraud, 184. It is only equivalent to a ratification when made with full knowledge of the fraud and of all material facts, and with the intention of abiding by the contract, and waiving all right to recover for the deception.

Nor are we unmindful of the settled rule that a defrauded party has an election of remedies. We heartily approve the rule that he may elect either to rescind the contract or to

VOL. 81.-23

Lovinger v. First National Bank of Madison.

stand by his bargain and sue for damages resulting from the fraud practiced upon him. Love v. Oldham, 22 Ind. 51; 2 Kent Com. 664 (10th ed). We decide nothing that conflicts with this settled rule. We do decide that where a party with full knowledge declines to repudiate a transaction known to him to be fraudulent, and fully and expressly ratifies it, he can neither rescind nor maintain an action for damages.

The second paragraph of the answer shows an express ratification, with a clear intention to abide by the contract, after full knowledge of all the facts, and is good.

Judgment reversed.

No. 8136.

LOVINGER v. FIRST NATIONAL BANK OF MADISON.

PROMISSORY NOTE.— Principal and Surety.-- Payment. Mistake.—- Forgery.

Where by a forgery of the signature of his former surety to a promissory note, the principal in a note discounted at bank deceives the bank and obtains a renewal of the loan and a surrender of the old note, and delivers it to the surety as paid and thereby induces him to believe that it has been paid, the truth coming to his knowledge only after the principal has become insolvent and absconded, the bank may recover from the surety, upon the old note, upon the ground that it was surrendered

by mistake. SAME.- Renewal of Note by Forged Note.-- Payment of Interest.--Discharge of

Surety.- A renewal of a loan by the use of a forged note, whereby the lender is deceived, interest being paid for the period in advance, is not binding upon the latter, and therefore will not discharge a surety for

the original loan. SUPREME Court.— Immaterial Evidence.- Harmless Error.-A judgment will

not be reversed for error in admitting immaterial evidence, unless it is made to appear that the appellant was in some material respect probably injured thereby. From the Jefferson Circuit Court. E. R. Wilson and E. G. Hay, for appellant. C. A. Korbly, for appellee.

Lovinger v. First National Bank of Madison.

NIBLACK, J.-Action by the First National Bank of Madison, against James D. Lovinger, on a promissory note.

The complaint was substantially as follows:

The plaintiff, a national bank, says, that on the 22d day of May, 1877, James D. Lovinger and Otto R. Halpert jointly executed to the plaintiff, for a loan of money made to said Otto R. Halpert by said bank, as makers, a promissory note, whereby said Otto R. Halpert and James D. Lovinger, as principals, promised to pay said bank $300.00 three months after said date, with interest, attorneys' fees, and other usual stipulations. That the bank discounted said note on the faith and credit of said James D. Lovinger.

That when said note fell due in August, 1877, said Halpert brought a new note, for same amount, and of like terms, made by him, and purporting to have been made by said Lovinger, and renewed said first mentioned note.

And afterward, on November 24th, 1877, when the second note fell due, Otto R. Halpert brought to the plaintiff a third note, for a like sum of money, and of like terms, signed by said Halpert, and purporting to have been signed by said Lovinger, as joint makers, payable two months after date, and renewed said second note.

That at each of said renewals said Halpert represented that said Lovinger had executed said new notes, and that he and said Lovinger desired to renew the former notes; that plaintiff relied upon said representations, and renewed the loan made in the first place; that the first and second notes were respectively surrendered to Halpert upon their renewal, who delivered the first one to the defendant Lovinger, who destroyed it, which fact was alleged as a reason for not filing a copy of said note with the complaint; that the plaintiff at the time believed said second and third notes to be valid and

genuine notes of said James D. Lovinger, and had no notice to the contrary, and relied wholly upon his solvency, credit and standing, in making said loan and discounts aforesaid, and not upon Halpert.

Lovinger v. First National Bank of Madison.

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That said second and third notes were forgeries as to said James D. Lovinger, and he wholly repudiates them. That plaintiff had no knowledge whatever that said second and third notes were forgeries as to the signature of said Lovinger, until about the 22d day of January, 1878.

That said Halpert became heavily involved and insolvent in November and December, 1877, and on the 19th of January, 1878, absconded for parts unknown, leaving no property out of which said debt could be collected.

That, as soon as the plaintiff discovered that said last mentioned notes were forgeries, the plaintiff immediately notified the said Lovinger, that plaintiff would hold him responsible for and upon said first mentioned note, and that it was due and unpaid, and offered to surrender to him said last mentioned note, which he declined to receive, and which plaintiff brings into court.

The defendant answered in five paragraphs: 1. In general denial.

2. Setting up special matters, but withdrawn before issue joined.

3. Payment in money, and by the substitution of another note.

4. That the note in suit was given for a loan of money by plaintiff to said Otto R. Halpert, and for no other purpose; that Lovinger was surety only, which was known at the time by plaintiff; that the forged notes had the genuine signatures of said Halpert thereto, and were received by plaintiff without the knowledge or consent of Lovinger, who had no notice of the same, until informed by the officers of the bank on the 22d of January, 1878.

That on the 25th day of August, 1877, when said first note matured, said Halpert brought it to Lovinger representing to him that the same was paid off, and delivered it to this defendant, Lovinger, who in good faith believed the same was fully paid, as he lawfully might.

That on said 22d day of May, 1877, when said loan was

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