Opinion ID: 2212444
Heading Depth: 1
Heading Rank: 5

Heading: whether the trial court erred in denying vermilyeas the remedy of rescission of their twenty-year lease with bdl?

Text: The Vermilyeas do not challenge the sufficiency of the evidence to support the trial court's findings of fact. They allege that the facts found by the court when applied to the rules of law concerning judicial rescission do not support the court's conclusions of law and judgment denying them the remedy of judicial rescission. The equitable relief of rescission, being extraordinary, should never be granted, except where the evidence is clear and convincing. Windedahl v. Harris, 37 S.D. 7, 156 N.W. 489 (1916). An appellate court in an equity case is required to read all the evidence produced, and give consideration to all facts and circumstances in evidence, as shown by the record. 5 C.J.S. Appeal and Error § 1462 (1958). We review the trial court's conclusions and judgment based upon the evidence of the case, and upon the facts as found by the trial court, and the rules of law concerning judicial rescission. The Vermilyeas never wanted a twenty-year lease and this was communicated to BDL in the early stages of negotiation over the lease. The Vermilyeas' Cost Cutter license was for fifteen years, and they wanted a lease with a five-year term and a five-year option that was the same as their Rapid City salon leases, and which would not exceed the license term. They were, however, willing to sign a twenty-year lease if that was what was required by BDL. Vermilyeas were laboring under the mistaken belief that this was required by BDL, and believed that their only choice was signing a twenty-year lease or foregoing the opportunity to open their shop in the Mall. Three separate statutes of this state are applicable to the facts of this case. SDCL 53-11-2, in pertinent part, provides that a party to a contract may rescind the same... [i]f [the] consent of the party rescinding... was given by mistake or obtained through ... fraud ... exercised by or with the connivance of the party as to whom he rescinds .... SDCL 53-4-2 provides that [c]onsent is deemed to have been obtained through ... fraud ... or mistake, only when it would not have been given except for one or [both] of them. SDCL 53-4-9 provides that a mistake of fact is a ... [b]elief in the present existence of a thing material to the contract which does not exist.... The import of these statutes was explained in Dolan v. Hudson, 83 S.D. 144, 153-154, 156 N.W.2d 78, 83 (1968), where this court stated that In Beatty v. Depue, 78 S.D. 395, 103 N.W.2d 187, this court recognized that a unilateral mistake of a material fact is ground for rescinding a contract under our statutes where consent to the contract is mistakenly given. However, the court further said the mistake had to be so fundamental in character that because of it the minds of the parties did not meet. The following test of materiality was quoted with approval from Grymes v. Sanders, 93 U.S. 55, 23 L.Ed. 798 [1876]: `A mistake as to a matter of fact, to warrant relief in equity, must be material, and the fact must be such that it animated and controlled the conduct of the party. It must go to the essence of the object in view, and not be merely incidental. The court must be satisfied, that but for the mistake the [complaining party] would not have assumed the obligation from which he seeks to be relieved.' The evidence in this case clearly and convincingly establishes that the Vermilyeas would not have consented to the twenty-year lease, but for their mistake. The Vermilyeas were laboring under a belief in the present existence of a thing material to the contract which did not exist. They were mistaken as to the requirement of a twenty-year-lease commitment. Certainly, a twenty-year-lease as opposed to a five-year-lease is material, and not merely incidental. The materiality of the mistaken fact, the twenty-year-lease term requirement, is evidenced by the Vermilyeas' repeated objections to it. This mistake controlled their conduct. The evidence and the trial court's findings clearly support this. The trial court found that had the Vermilyeas refused a twenty-year-lease it is quite possible that they would have either negotiated a shorter term lease or would have lost the lease space to another tenant. No other small tenants, such as the Vermilyeas, signed a twenty-year-lease, and the Vermilyeas have clearly stated and shown that they would not have done so but for their mistake. This conclusion is further evidenced by the fact that the Vermilyeas had five-year leases on their two established Cost Cutters salons located in Rapid City where they resided, and by the fact that the Mall contained other unleased spaces at the time negotiations to lease were taking place, and that negotiations for lease terms of less than twenty years were taking place at this time with prospective tenants other than the Vermilyeas. None of these tenants, in Vermilyeas' class size, signed twenty-year leases. The remaining elements that the Vermilyeas had the burden of clearly and convincingly proving were that they attempted with reasonable diligence to promptly rescind upon discovering facts entitling them to rescind, SDCL 53-11-3 and SDCL 53-11-4, and that they have offered to restore or have restored to BDL everything of value which they received from BDL under the contract, SDCL 53-11-5. The trial court specifically found that Vermilyeas acted diligently upon discovering facts entitling them to rescind. BDL refused the Vermilyeas' demands for modification or rescission of the lease and forced them to seek judicial rescission. The Vermilyeas have offered to substantially restore BDL to the status quo by giving back the leased premises in the event that the lease is rescinded by this court. It is impossible to place BDL in the exact status quo by turning back the time clock to restore the leased space to BDL on the date the lease documents were executed and the law does not require this. A substantial restoration is all that is required. 12A C.J.S. Cancellation of Instruments § 54 (1980). In the event that the Vermilyeas have paid all monies due under the lease to the date of this decision and comply with remaining lease terms not made impossible or unnecessary by rescission, the return of the leased premises to BDL will accomplish substantial restoration. The record and the facts found by the trial court support its conclusion that but for the Vermilyeas' mistake, they would not have consented to a twenty-year-lease term. The trial court did not reach the right result, however, when it denied Vermilyeas the remedy of rescission based on their mistake, and it erred in so doing. For this reason, we must reverse the trial court's decision and grant Vermilyeas the remedy of rescission of the twenty-year-lease. The judgment of the trial court is reversed. MILLER, C.J., and MORGAN, HENDERSON and SABERS, JJ., concur. ROBERT K. MILLER, Circuit Judge, for WUEST, J., disqualified.