Opinion ID: 692067
Heading Depth: 1
Heading Rank: 2

Heading: rescission issue: the district court's grant of limited

Text: NEW TRIAL AND JNOV 22 After the first trial in this case, the jury returned a verdict in favor of the Fund, including a finding that HAL and the Guarantors breached a substantial provision of the Modification Agreement such that the Fund could rescind the Modification. 5 Post-trial, HAL and the Guarantors filed a motion for JNOV on the Fund's claim for rescission of the Modification Agreement. 23 In its motion for JNOV, HAL and the Guarantors argued that the district court had issued an erroneous instruction regarding the rescission claim. 6 HAL and the Guarantors argued that Florida law holds that cancellation or rescission will not be granted for a breach of contract absent some other equitable ground for rescission. In making this argument, HAL and the Guarantors relied heavily on International Realty Associates v. McAdoo, 99 So. 117 (Fla.1924), and Richard Bertram & Co. v. Barrett, 155 So.2d 409, 411 (Fla. 1st Dist.Ct.App.1963). Because the Fund relied only on a substantial breach of the contract as its basis for claiming rescission, HAL and the Guarantors argued that the jury instruction regarding rescission was erroneous and that it was entitled to judgment based on the International Realty standard. 24 The district court agreed with HAL and the Guarantors, first finding that its charge to the jury regarding rescission was in error. The district court quoted Richard Bertram, which stated The rule is well settled in this country that cancellation or rescission will not be granted for breach of contract, in the absence of fraud, mistake, undue influence, multiplicity of suits, cloud on title, trust, or some other independent ground for equitable interference. 155 So.2d at 411-12. The district court went on to find that the Fund had presented no evidence in the case demonstrating the existence of an independent ground justifying rescission, and that HAL and the Guarantors had not abandoned or repudiated the Modification Agreement. Thus, the district court granted a JNOV in favor of HAL and the Guarantors on the rescission claim. 25 Although International Realty and Richard Bertram do state that as a general rule rescission will not be granted solely on grounds of breach, the Florida law recognizes an exception to this general rule for the breach of a dependent covenant in a contract. Steakhouse, Inc. v. Barnett, 65 So.2d 736 (Fla.1953). The Steakhouse court stated, As a general rule, rescission is granted for fraud as to existing fact, but not for failure to perform a covenant or promise to do an act in the future, unless the covenant breached is a dependent one. Id. at 737. The Steakhouse court went on to say: 26 A covenant is dependent where it goes to the whole consideration of the contract; where it is such an essential part of the bargain that the failure of it must be considered as destroying the entire contract; or where it is such an indispensable part of what both parties intended that the contract would not have been made with the covenant omitted.... A breach of such a covenant amounts to a breach of the entire contract; it gives to the injured party the right to sue at law for damages, or courts of equity may grant rescission in such instances if the remedy at law will not be full and adequate. 27 Id. at 738 (citations omitted). See also, Gittlin Cos. v. David & Dash, Inc., 390 So.2d 86 (Fla. 3d Dist.Ct.App.1980); Hustad v. Edwin K. Williams & Co.--East, 321 So.2d 601, 603 (Fla. 4th Dist.Ct.App.1975) (The breach of a dependent covenant gives the injured party the right to rescind the contract, or to treat it as broken and recover damages for a total breach.), cert. denied, 333 So.2d 41 (Fla.1976); Street v. Sugerman, 307 So.2d 883, 884 (Fla. 3d Dist.Ct.App.1974), cert. denied, 315 So.2d 196 (Fla.1975). 28 Thus, it is clear that Florida law recognizes that rescission may be granted where a party breaches a term which is an essential part of the bargain between the contracting parties such that its breach destroys the entire contract. The instruction to the jury was practically a verbatim statement of Florida law as set out in Steakhouse and its progeny. Therefore, we find that the jury instruction was not erroneous, and that Florida law does recognize rescission for a substantial breach of the contract that essentially destroys the contract. Accordingly, we hold that the district court erred in its conclusion that the jury instruction is deficient. Moreover, there is no indication that the jury was confused by the issues at trial exclusive of the rescission instruction. In light of our holding that the instruction was not erroneous, we reverse the district court's grant of a new trial. 29 The district court also granted JNOV in favor of the plaintiffs, holding as a matter of law that there was no rescission. 7 The standard of review for JNOV requires an independent determination of whether the facts and inferences point so overwhelmingly in favor of the movant, here HAL and the Guarantors, that reasonable people could not arrive at a contrary verdict. We find in this case that there was substantial evidence supporting the jury's findings that HAL and the Guarantors breached the heart of the Modification. The Fund adduced evidence that HAL was required to make interest payments for a minimum of two-years before it could tender the deed to the Oaks to the Pension Fund in satisfaction of its duties and obligations under the Modification. HAL and the Guarantors tendered the property to the Fund after only making five months of interest payments. Additionally, the Fund adduced evidence that neither HAL nor the Guarantors paid the $600,000 of new cash into the Oaks required under the Modification. Finally, the Fund presented evidence to show that plaintiffs further breached the Modification by abandoning management responsibilities for the Oaks without having been relieved of those duties in accordance with the Modification. The jury obviously credited the Fund's evidence that HAL and the Guarantors had abandoned their obligations under the Modification. We conclude that a reasonable jury could find that plaintiffs breached the Modification, and that this breach went to the heart of the contract. 30 The district court also stated, as a reason for granting the JNOV, that it would be impossible to restore the parties to their original position. Equity will not usually order rescission unless the condition of the parties may be restored as it existed prior to the execution of the contract. See Steakhouse v. Barnett, 65 So.2d at 738. However, all that would be required to return the parties to the status quo was the return of any money spent under the Modification before the breach. See Janeczek v. Embry, 330 So.2d 837, 838 (Fla. 3d Dist.Ct.App.1976) (Generally a court of equity will enter a monetary judgment when necessary to afford complete relief.). 31 Therefore, we reverse the judgment granting JNOV in favor of the plaintiffs on the rescission issue. Moreover, in light of our reversal of the district court's grant of a new trial, we order that the district court reinstate the jury's verdict in the first trial, including the jury's verdict in favor of the Fund on rescission. Thus, we reinstate the jury's verdict in favor of the Fund and against HAL and HDI in the amount of $11.3 million, and in favor of the Fund and against Head and Wochna in the amount of $2.12 million. We also instruct the trial court to return the parties to status quo by ordering the Pension Fund to return to the plaintiffs any money spent under the Modification. 8