Clapp, Goldmann and Ewart. The opinion of the court was delivered by Clapp, S.j.a.d.
This is an appeal by Milton M. and Adrian M. Unger, counsellors, seeking to sustain an assignment made to them in their own right.
In Driscoll v. Burlington-Bristol Bridge Co. , 8 N.J. 433 (1952), appellants represented 12 defendants there designated as the selling syndicate. The syndicate and Fitzgerald & Co. Inc. (over which the court has not acquired jurisdiction) sold their stock in the Burlington-Bristol Bridge Company to the Burlington County Bridge Commission at a gross profit of $3,050,347. At the time of the sale they deposited $119,900 with the Chemical Bank & Trust Company as "escrow agent" to pay certain taxes and other claims which -- except for taxes of perhaps $13,321.10 -- never eventuated. The residue of the deposit was to go to themselves. $100,000 of this $119,900 was held to be a part of the profits of the sale (8 N.J. , at p. 466). The remaining $19,900 we speak of later.
Some months after the remand of the case by the Supreme Court, certain members of this syndicate assigned to appellants their interest in the $119,900, namely, 54 1/4% or $65,045.75, in return for services and disbursements of appellants. The order appealed from held, in effect, that the assignment was nugatory.
The first question here is whether as a result of the fraud infecting the transaction, as related in the opinion cited, the syndicate at the time of the assignment held their interest in the $100,000 upon a constructive trust for the Bridge Commission. If so, the assignment to the appellants did not cut off the Bridge Commission's rights for the appellants, as the syndicate's attorneys throughout the litigation, are to be charged with notice of those rights.
The Supreme Court's opinion (8 N.J. , at p. 501), and the judgment on the remand of the case, both made this direction:
"To the extent that the members of the selling syndicate * * * have an interest therein, the entire transaction in all its ramifications is rescinded and they shall repay to the bridge commission the sum of $3,050,347."
the gross profit mentioned. Earlier in the opinion (8 N.J. , at p. 500), the Supreme Court had said:
"The members of the selling syndicate must make restitution of that which they have received, for otherwise they will be unjustly enriched by their fraud at the expense of the public."
Although the Supreme Court did not direct a rescission of the whole transaction, it did so, most emphatically, as to the syndicate's interest therein, and hence as to the profits of $3,050,347 (including the $100,000) paid by the Commission to the syndicate on the sale. A rescission of a transaction is the undoing of it; it returns the parties (with exceptions not now relevant) to the very ground upon which they originally stood. N.Y. Life Insurance Co. v. Weiss , 133 N.J. Eq. 375, 379 (E. & A. 1943); Green v. Stone , 54 N.J. Eq. 387, 396 (E. & A. 1896). So on the rescission or disaffirmance of a simple sale or exchange of chattels because of fraud, the title to each chattel is restored to its former owner. 5 Williston on Contracts (Rev. Ed.), Sec. 1370; cf. Williamson v. N.J. Southern R.R. Co. , 29 N.J. Eq. 311, 319 (E. & A. 1878). However, we deal here with another matter. The syndicate took $100,000 out of the purchase price and included it in the escrow deposit. Our
concern therefore is not with the price (or a chattel given in lieu of it), but with the proceeds ...