Opinion ID: 1098766
Heading Depth: 1
Heading Rank: 6

Heading: rescission or cancellation of deed containing the restrictive covenant

Text: We restate the second, third, and fourth certified questions as follows: If the subject covenant is void as an unreasonable restraint on alienation under Florida law, is the deed subject to rescission for mistake or cancellation for inadequate consideration where the covenant is stated in the deed to be part of the consideration for the deed, when the grantee has been in possession under the deed for more than fifteen years, paid all taxes on the subject property, and constructed substantial improvements including a home thereon? We answer this question in the negative and find that the deed is not subject to rescission or cancellation, but the grantor's successors are entitled to equitable relief under the circumstances of this case. The subject property conveyed to the grantee consisted of approximately 306 acres upon which the grantee's father constructed a house, improved the pasture, and constructed fences. From the stipulated facts, no more than ten dollars in cash was paid for the property. What must be answered is whether the void restraint results in such a mistake or inadequate consideration that equity requires rescission, cancellation, or other equitable relief. The heirs of the grantor claim that if the covenant is void, rescission is the proper remedy because the option constituted the whole of the consideration. They cite the Restatement of Property, section 394, comment F (1948 Supp.), which provides: Effect of invalidity of option to repurchase. An option to repurchase the whole or any part of the interest conveyed is necessarily only one ingredient in the entire transaction between the parties. If this ingredient is so essential a part of the entire agreement that the parties would not have made the agreement, if they had known of the option's invalidity, then the failure of the option is a sufficient basis for appropriate proceedings to rescind the entire transaction and to restore each of the parties to the situation in which he was before the transaction was made. [Emphasis supplied.] The grantors also assert that to declare the covenant void, but deny rescission or cancellation of the deed, is to make the conveyance by the original grantor a total gift of the subject property. This they argue was clearly not the intent of either party to the transaction. The grantee's heirs contend that relief by way of rescission would be improper because it would have the same effect as enforcement of the invalid covenant. They assert that the restatement position recommending rescission was adopted solely on the authority of Pure Oil Co. v. Baars, 224 N.C. 612, 31 S.E.2d 854 (1944), the circumstances of which are distinguishable from the instant case. It is contended that the position of the Supreme Court of Connecticut in Neustadt v. Pearce, 145 Conn. 403, 143 A.2d 437 (1958), is applicable under the instant facts. Neustadt concerned a repurchase clause which recited that the option to repurchase was part of the consideration of the sale. The court held the repurchase clause to be void, but found that this did not require cancellation of the deed. The grantees further cite our decision in Brinkley v. Arnold, 98 Fla. 166, 123 So. 569 (1929), as authority for the proposition that failure of part of the consideration does not establish a sufficient basis for rescinding or canceling the deed. In Brinkley the grantor conveyed certain Florida land in return for a sum of money and eighty acres of land in Arkansas. The grantor sought cancellation of the deed to the Florida land, alleging that the grantee had not possessed title to the Arkansas tract. It was held that cancellation was not equitably required because the grantor made an inadequate inquiry concerning the status of the Arkansas land, and, under the circumstances, such a partial failure of consideration did not require cancellation. Our conclusion is not wholly in accordance with either party's contention or the trial court's holding. The covenant in this instance is clearly an unreasonable restraint which inhibits the free alienation of this property. Both the grantor and the grantee believed, however, that the covenant was valid at the time of the conveyance. The grantee accepted the property with the understanding that the covenant was part of the consideration and subsequently, at the time the improvements were made on the property, had the grantors subordinate their right to the necessary mortgages. Further, it is unrefuted that the covenant was the primary part of the consideration for the conveyance of this property. The stipulated facts clearly reflect that the original grantor desired to give the land to the grantee as a homestead for as long as the grantee and his heirs wanted to keep or use the property, but the grantor did not want the grantee to sell the property. We disagree with the conclusions reached by the United States District Court that the unreasonable restraint contained in the repurchase covenant was a unilateral mistake of law by the grantor. From the stipulated facts it is our conclusion that this was a mutual, not a unilateral, mistake. If the action to eliminate the void restraint results in a rescission or cancellation, we agree such a judgment would have the same effect as enforcing the repurchase option; the commencement of the suit to remove the restraint would actually accelerate the effect of the repurchase option. This certainly was not the grantees' desired purpose in the action. Such a result could have a chilling effect on future grantees seeking to remove unreasonable restraints upon the use of their land. On the other hand, voiding the restraint and denying rescission or any other equitable relief to the grantor's successors effectively frustrates the clear intent of the original grantor and destroys what he considered the primary consideration for this land. It is obvious from the stipulated facts that this transaction would not have occurred but for the void restraint. In our view, the circumstances of this cause make it impossible to return the parties to this transaction to status quo. Although under the circumstances we find equity does not require rescission or cancellation, we do believe that the grantor's successors are entitled to equitable relief. When the equity powers of the court have been brought into an action, its active jurisdiction will be continued until full justice has been done between the parties. City of Miami v. Keton, 115 So.2d 547 (Fla. 1959); Schupler v. Eastern Mortg. Co., 160 Fla. 72, 33 So.2d 586 (Fla. 1948); see H. Kooman, Florida Chancery Pleading and Practice § 7 (1939). The appropriate relief should be left to the trial court, which should be allowed to consider evidence and take testimony concerning the actual consideration paid by the grantees for the subject property. Relief to be considered could include an equitable or vendor's lien on the property for its market value at the time of the original conveyance, increased by present dollar inflation, but not property appreciation, payable at the time of any future conveyance. It appears that unless grantor's successors receive the present-day dollar value of the market value of the property at the time of the original conveyance, they will not, in actuality, be receiving the full equitable relief to which they are entitled. We deem it inappropriate upon a certified question to direct specific relief under the circumstances of this record and suggest remanding this cause to the trial court for the purpose of receiving such additional testimony and evidence as may be necessary to provide suitable equitable relief. In summary, the first question is answered by our finding that the repurchase option is an unreasonable restraint; the remaining questions are answered by our finding that no rescission or cancellation is required but other equitable relief is appropriate. It is so ordered. ENGLAND, C.J., and ADKINS, SUNDBERG, ALDERMAN and McDONALD, JJ., concur. BOYD, J., concurs in part and dissents in part with an opinion.