Court Opinion

ID: 7824882
Source: CourtListenerOpinion
Date Created: 2022-09-07 18:04:30.904006+00
Date Added: 2024-06-11T16:30:49.935755
License: Public Domain

Robert S. Lindsey, Special Justice. I concur in the denial of specific performance (E-89-1592). It is only in denying rescission that I would reverse and remand (E-89-1524). The Chancellor was of the opinion that Fisher had not met the burden of proof so as to entitle him to restitution, and concluded that the circumstances had been so altered by part execution that the parties could not even be closely restored to status quo so that it was impossible to grant rescission. As a general rule, restoration of the status quo is a prerequisite to rescission. Absolute and literal restoration is not required, but only such restoration as is reasonably possible in accordance with equitable principles. Stanford v. Smith, 163 Ark. 583, 260 S.W. 435 (1924). The Chancellor noted that both parties asked for rescission. Two other filings pinpoint an agreement to rescind. In a motion filed January 9, 1990, Hill included: 3.3 Plaintiff has requested rescission. . . . 4. Plaintiff and defendants concur that rescission is an appropriate remedy. It is therefore appropriate for the court to enter its order granting rescission at the request of both parties. In a response filed January 11, 1990, Fisher included: Respondents concur that the court should order rescission of the contract relating to the sale of the Mercedes-Benz - dealership in Fayetteville, Arkansas, . . . A Restatement comment makes a distinction between an “agreement of rescission” and the exercising of a right of rescission. Restatement (Second) of Contracts § 283 (1981). Arkansas cases recognize this distinction. In Arkansas, by mutual consent, the parties to a contract may rescind it in whole or in part. In Elkins v. Aliceville, 170 Ark. 195, 279 S.W. 379 (1926), we said: It is well settled that the parties to a contract may at any time rescind it in whole or in part by mutual consent,. . . Id. at 200. In Afflick v. Lambert, 187 Ark. 416, 60 S.W.2d 176 (1933), we said: It is therefore a well settled rule of this Court that any parties who can make a contract can rescind or modify it by mutual consent. . . . Id. at 418. It is urged that these cases only encompass situations where the parties mutually agreed to rescind before any performance, and that the principle is not applicable here. This court, however, quoting the rescission language from both Elkins and Afflick, said that a contract was terminated in midterm by mutual consent in Haering Oil Co. v. Beasley, 221 Ark. 607, 254 S.W.2d 951 (1953). Haering was a bulk sales agent for petroleum products and furnished equipment such as hydraulic lifts, tanks, pumps and air compressors. Beasley owned a filling station and contracted with Haering to sell his petroleum products for one year from September 1,1947, to August 31,1948, and thereafter from year to year, subject to termination at the end of any year upon 30 days notice. In February 1949, Beasley notified Haering that he was going to purchase his petroleum products from Lion Oil Company and asked Haering to invoice the equipment which was at Beasley’s to Lion Oil Company. Haering contended that Beasley could not terminate the contract until August 31 of any year and sought damages for breach of contract. The court said that the contract was terminated by mutual consent when Haering, in accordance with Beasley’s request, sold the equipment to Lion Oil Company and stopped selling petroleum products to Beasley. Cases that apply the principle that restitution must be substantially in toto recognize a “mutual consent” exception. In Herrick v. Robinson, 267 Ark. 576, 595 S.W.2d 637 (1980), a seller of assets sued the buyer for the balance due. The buyer’s counterclaim included an allegation that the contract had been rescinded. The court denied rescission on the ground that the attempt to rescind was not timely. It was also argued that the buyer had never made an offer of restoration. We said: A contract cannot be rescinded, except by mutual consent, where the circumstances have been so altered by part execution, that the parties cannot be put in statu quo. Id., 267 Ark. at 588 (emphasis supplied). In Bellows v. Cheek, 20 Ark. 424 (1859), we said: A contract cannot be rescinded without mutual consent, when circumstances have been so altered, by part execution, that the parties cannot be put in statu quo; for if it is to be rescinded at all, it must be rescinded in toto. (Emphasis supplied) Similar language from this court is in Desha’s Exrs. v. Robinson, Admr., 17 Ark. 228, 238 (1856). While Stanford v. Smith recognized that generally rescission called for restoration of the status quo, it also pointed out that if full restoration were not possible, the court could proceed with partial restoration and adjust the equities.1 A one-half interest in a mercantile business in Dumas was a problem. Stanford owned a house and the one-half interest. Smith owned forty acres of land in Texas. A trade was made but when Stanford arrived in Texas, he found the Texas property not as represented. This court held that rescission was in order even though it could not reestablish the mercantile partnership. The mercantile business was operated as a partnership, and that partnership was, of course, dissolved by the sale of Stanford’s interest therein. We cannot re-establish this partnership, but we can charge Smith with the value of the property which he received, after giving him credit for the debts against it which he assumed. The one-half interest in the mercantile partnership could not be and was not restored but, nevertheless, the Court ordered rescission and adjusted the equities. Equity will not decline to grant aid “merely because circumstances intervening since the occurrence of the transaction complained of may render it difficult to restore the parties exactly to their original situations,” citing 4 R.C.L. p. 511. I similarly view the Mercedes-Benz franchise. Although there may be a technical differentiation of a rescission by “mutual consent” before performance, there are forceful reasons for giving effect to separate and joint requests from the parties for equitable rescission. This is particularly so when the parties seem to agree as to what will be adequate compliance with the status quo restoration requirement. Each appears to be suggesting, in general, that Fisher would get return of physical assets still in existence; Hill would be given credit for the $1,270,902.44 paid by him through the escrow accounts; and Fisher would offset the fair rental value of the assets in the enterprise during the period of Hill’s operation. Fisher’s counsel urged that the parties could be placed in status quo “by the Court’s giving appellee Hill credit for ‘monies paid’ and giving appellant Fisher an offset for the ‘fair rental value.’ ” Hill’s testimony was abstracted in this manner: If this contract were to be rescinded and both parties restored to their position before execution on February 28, 1986, that would be fine with me. I would get my million dollars back and pay the Fishers for the fair market value and rent for their property for 3 '/i years, or whatever the time is that I had the property. Obviously, the Mercedes-Benz franchise is out of the picture, whether there is or is not rescission. One annotator has written: The object of the rule [restoration of status quo] is theoretically to place the parties in statu quo; but the rule is equitable, not technical, and does not require more than that such restoration be made as is reasonably possible and such as the merits of the case demand. 17A Am. Jur. 2d Contracts § 592 (1991). Again: In the event restoration of the status quo is impossible, restoration may be granted if the court can balance the equities and fashion an appropriate remedy that would do equity to both parties and afford complete relief. 17A Am. Jur. 2d Contracts § 597 (1991). If this is a matter of rescission by “mutual consent,” then it was within the rights of the contracting parties. If there were only requests by both parties for rescission, then under the equitable principles and guidelines established by the courts, restoration of the status quo was not so impossible as to preclude giving effect to what was agreed. Accordingly, I would reverse and remand E-89-1524 for further proceedings consistent with this opinion.   This case also stands for the general rule that if there cannot be restoration, a party “is remitted to action for damages.” Here, damages were sought but there is no reference to nor discussion of the damage claim in light of the denial of the rescission claim.