Opinion ID: 1354462
Heading Depth: 2
Heading Rank: 1

Heading: Remedy of Recission

Text: The Webbs claim error in the court's refusal to find that the Ledbetters' misstatements regarding the condition of the machines were material, entitling the Webbs to rescind the contract. Misrepresentation of a material fact, even if innocently made, will entitle the party who has justifiably relied thereon to rescind the contract. Prudential Insurance Company of America v. Anaya, 78 N.M. 101, 428 P.2d 640 (1967). Ordinarily the question of materiality is one of fact. Modisette v. Foundation Reserve Insurance Co., 77 N.M. 661, 427 P.2d 21 (1967). It is unnecessary to decide whether the evidence below supports the court's denial of the requested findings. Rescission is an equitable remedy which seeks to restore the status quo ante. See Prudential Insurance, 78 N.M. at 106, 428 P.2d at 645; Ham v. Hart, 58 N.M. 550, 273 P.2d 748 (1954), overruled on other grounds, Hockett v. Winks, 82 N.M. 597, 485 P.2d 353 (1971). The defrauded party must return or offer to return that which has been received under the contract as a condition precedent to maintaining a suit for rescission. Prudential Insurance, 78 N.M. at 106, 428 P.2d at 645. Although substantial rather than strict compliance will satisfy the rule, the record in this case is devoid of evidence of any effort at compliance by the Webbs. See Robison v. Katz, 94 N.M. 314, 610 P.2d 201 (Ct.App.), cert. denied, 94 N.M. 675, 615 P.2d 992 (1980); Gottwald v. Weeks, 41 N.M. 18, 63 P.2d 537 (1936). The uncontroverted testimony is that: (1) the Webbs closed the business without prior notice to the Ledbetters; (2) the Ledbetters learned of the Webbs' intention to quit the business only when they accidentally discovered the Webbs in the process of removing equipment from the premises; (3) the Webbs defaulted on the business lease which had been assigned to them; (4) because of the Webbs' abandonment, the landlord subsequently padlocked the premises, forcing plaintiffs to litigate their right to enter and repossess the equipment in which they held a security interest; and (5) the equipment of the business was subsequently repossessed and sold pursuant to the security agreement and in a commercially reasonable manner. Defendants' acts made it impossible to restore the status quo ante. The above facts, together with the trial court's unchallenged finding that the Webbs converted the Ledbetters' video vending machine, deprive the Webbs of the clean hands necessary to seek the equitable remedy of recission. Cf. Ortiz v. Lane, 92 N.M. 513, 590 P.2d 1168 (Ct.App. 1979); Wyrsch v. Milke, 92 N.M. 217, 585 P.2d 1098 (Ct.App. 1978).