Opinion ID: 4521723
Heading Depth: 2
Heading Rank: 1

Heading: the equitable rescission claim

Text: Equitable rescission is a “remedy which calls for the highest and most drastic exercise of the power of a court of chancery—to annul and set at naught the solemn contracts of parties.” Schmidt v. Household Fin. Corp., II, 276 Va. 108, 115 (2008) (quoting Bonsal v. Camp, 111 Va. 595, 599 (1911)). “If rescission is granted, the contract is terminated for all purposes, and the parties are restored to the status quo ante.” Id. (quoting McLeskey v. Ocean Park Inv’rs, Ltd., 242 Va. 51, 54 (1991)). Like any claim, a claim seeking the equitable rescission of a contract must be adequately pled in a valid pleading. See generally Parker, 296 Va. at 333 (“Pleadings are as essential as proof, the one being unavailing without the other.” (quoting Ted Lansing Supply Co. v. Royal Aluminum & Constr. Corp., 221 Va. 1139, 1141 (1981))). 4 [O]ne of the first principles with respect to the rescission of a contract is that . . . there must be first a sufficient averment of facts showing the plaintiff [is] entitled in equity to the relief which he seeks, and satisfactory proof of these facts, to justify the interposition of the court; and in addition to all this the court must be able substantially to restore the parties to the position which they occupied before they entered into the contract. Schmidt, 276 Va. at 115 (emphasis added) (quoting Bonsal, 111 Va. at 599). Generally, a court will not rescind a completed foreclosure sale. See Ramos v. Wells Fargo Bank, NA, 289 Va. 321, 324 (2015); Squire, 287 Va. at 519. Nevertheless, there are several “potential exceptions” to the inapplicability of rescission as a remedy in this context. Ramos, 289 Va. at 324 n.. A foreclosure sale may be set aside in cases “involving fraud, collusion with the purchaser, and a foreclosure sale price of such gross inadequacy that it shocks the conscience of the court.” Parrish v. Federal Nat’l Mortg. Ass’n, 292 Va. 44, 52 (2016) (quoting Ramos, 289 Va. at 324 n.). This Court has also recognized that a material breach of a deed of trust could, in certain circumstances, constitute sufficient grounds to warrant the remedy of rescission. See, e.g., id. at 52-53; Everette v. Woodward, 162 Va. 419, 424-27 (1934); Smith v. Woodward, 122 Va. 356, 374 (1918); Wasserman v. Metzger, 105 Va. 744, 752-53 (1906). This Court, however, has never held that equitable rescission is available in cases where a plaintiff fails to plead that he or she incurred any damages or suffered any harm caused by an alleged breach of a deed of trust. Rescission based upon a breach of contract is not a cause of action in itself, but rather a remedy. See, e.g., Ramos, 289 Va. at 324 n.; Squire, 287 Va. at 519; Schmidt, 276 Va. at 115 (all describing equitable rescission as a “remedy”). “Remedies . . . do not exist in the abstract; rather, they flow from and are the consequence of some wrong.” Devine v. Buki, 289 Va. 184, 187 (2015) (quoting Bacon v. City of Richmond, 475 F.3d 633, 638 (4th Cir. 2007)). 5 The cause of action underlying this rescission claim is a breach of contract action. “The elements of a breach of contract action are (1) a legally enforceable obligation of a defendant to a plaintiff; (2) the defendant’s violation or breach of that obligation; and (3) injury or damage to the plaintiff caused by the breach of obligation.” Ramos, 289 Va. at 323 (quoting Filak v. George, 267 Va. 612, 619 (2004)). Thus, the present claim requesting the remedy of equitable rescission presupposes a breach of contract that has caused the plaintiff some form of harm. Furthermore, the remedy of equitable rescission in this context is only available when the underlying breach of contract is “substantial” or “material.” See Bolling v. King Coal Theatres, Inc., 185 Va. 991, 996 (1947) (“Ordinarily, rescission will not be granted for breach of a contract which is not of such substantial character as to defeat the object of the parties in making the contract, or where the remedy at law is plain, adequate and complete.”); 26 Samuel Williston & Richard A. Lord, A Treatise on the Law of Contracts § 68:2, at 40-44 (4th ed. 2019) (“Rescission and restitution will lie provided the breach is substantial or material.”). The terms “substantial” and “material” imply that the breach of contract underlying a rescission claim has caused some type of injury or harm to the non-breaching party. Despite the previous demurrer that expressly addressed the issue of damages, YoungAllen’s amended complaint failed to allege facts establishing that the breach of the deed of trust caused her any harm. Young-Allen’s amended complaint alleged that Bank of America “failed to send required notices to her, as required by the Deed of Trust—specifically, the requirement that it send her a notice of the right to cure, state the amount that must be paid and where it must be sent, and the date by which that figure is good to reinstate/cure.” The complaint, however, did not allege that Young-Allen had the ability to cure her default. Without such an allegation, the complaint did not establish that the alleged breach caused any harm. If Young-Allen could 6 not have cured her default, Bank of America’s failure to send the notices at issue regarding the right to cure did not cause Young-Allen to sustain an injury or incur any damages. Young-Allen’s amended complaint failed to allege that she could have cured her default and prevented the foreclosure sale if she received the notices at issue. 1 Thus, Young-Allen failed to plead facts to establish that Bank of America’s failure to send the required notices caused her any harm. Accordingly, Young-Allen’s complaint failed to plead facts to support the drastic remedy of equitable rescission and the circuit court did not err by sustaining the demurrer to that claim.