Opinion ID: 898857
Heading Depth: 3
Heading Rank: 5

Heading: By consent of all of the other parties.”

Text: [¶25] “It is a fundamental principle of equity that parties must be restored to their pre-contractual position.” Barker , 1998 ND 223, ¶ 16, 587 N.W.2d 183. Once a district court grants formal rescission of a contract, the “[court] must restore each side to its respective pre-contractual position.” Id. Under N.D.C.C. § 32-04-23, “[o]n adjudging the rescission of a contract, the court may require the party to whom such relief is granted to make any compensation to the other which justice may require .” (Emphasis added.) However, this Court has also concluded that where a party seeking to rescind received nothing of value, the “contract sought to be rescinded [was] not one that required restoration in order to do equity.” Volk v. Volk , 121 N.W.2d 701, 706 (N.D. 1963). [¶26] “Because the remedy of rescission is not held in high esteem by the courts, the power of a court to rescind . . . should never be lightly exercised.” Heinsohn v. William Clairmont, Inc. , 364 N.W.2d 511, 513 (N.D. 1985). Rescission of a contract is not a matter of absolute right, but instead is committed to the district court’s sound discretion. Id. ; 12A C.J.S. Cancellation of Instruments §§ 10-11 (2004). A district court abuses its discretion when it acts in an arbitrary, unreasonable, or unconscionable manner. Heinsohn , at 513. The district court “acts in such a manner when its exercise of discretion is not the product of a rational mental process by which the facts of record and law relied upon are stated and are considered together for the purpose of achieving a reasoned and reasonable determination.” In re Estate of Rohrich , 496 N.W.2d 566, 573 (N.D. 1993). [¶27] The Bank argues the district court erred in granting equitable rescission of the $250,000 loan because Wiest benefitted from the loan, received consideration for the loan and had unclean hands. The Bank, however, does not deny the court’s findings that Palmer was reckless and a “rogue lender” throughout the transactions, but instead asserts any lack of collateral cannot be blamed solely on Palmer, but also on Burckhardsmeier. [¶28] In this case, the district court made extensive findings regarding Palmer’s fraud and imputing that fraud to the Bank. The court found the Bank entered into the loan agreement with full knowledge, through Palmer’s dealings, that funds were to be distributed contrary to the representations made to and authorized by Wiest. The court found Wiest was fraudulently induced into signing the note through false and misleading statements by Palmer. The court concluded the Bank could not now look to Wiest for repayment of the loan because Wiest neither received the loan proceeds nor received the promised collateral for the obligation. [¶29] Based on the record and the district court’s detailed findings, we conclude the court did not act in an arbitrary, unreasonable, or unconscionable manner in granting Wiest equitable rescission of the $250,000 loan under N.D.C.C. § 32-04-21. The court’s findings reflect that its decision was the product of a rational mental process, and we hold the district court did not abuse its discretion in granting rescission of the $250,000 loan.