Court Opinion

ID: 7820403
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:52:23.747738+00
Date Added: 2024-06-11T16:30:43.503731
License: Public Domain

Concurrence upon denial of rehearing delivered September 25, 1978 Conley Byrd, Justice, concurring. I agree that the decision of the trial court should be affirmed but because I do not agree with the method used to affirm the trial court, I am taking the time to set forth the reasons why the trial court should be affirmed on the merits. The record shows that the parties entered into a 10 year lease on September 1, 1974 for a going restaurant. The lease contains 30 separate numbered provisions. The provisions upon which appellant relied to rescind the contract for breach of a covenant are as follows: “7. TITLE CERTIFICATES. A. Lessor agrees that she will furnish to the Lessee a certificate of title or a certificate of title insurance certified to by a bonded abstractor or a certified title insurance company showing that she has clear title to the real estate and appurtenances herein leased free and clear of all encumbrances and has a good right to lease said real estate and appurtenances and hereby warrants quiet and peaceful possession during the period of this lease and any extension thereof, by the Lessee upon the performance of the provisions of this lease which are to be performed by the Lessee. 13. OPTION TO PURCHASE. Not in lieu of but in addition and supplemental to the rights set forth in Paragraph 12, the Lessee shall have, and is herewith given, the following right and option to purchase all of Lessor’s right, title and interest in and to the leased premises: Lessee may purchase the demised premises at the end of the primary term of this lease for a purchase price of One Hundred Forty Thousand Dollars (1140,000.00) payable in cash on delivery of deed. The option herein granted may be exercised by Lessee by delivery of sixty (60) days prior written notice to the Lessor of the exercise of the option, and the deposit of ten. percent (10%) earnest money to bind the sale. 14. COVENANT OF TITLE. Lessor covenants and warrants that it has good title to the property herein leased and that it has good right to lease the premises and will warrant and defend the title thereto, and will indemnify Lessee against any enforcible lien, encumbrance or defect in the title of the property herein leased. Within thirty (30) days after notice of Lessee’s exercise of an option to purchase and depositing the earnest money, Lessor shall furnish Lessee with title insurance policy, in Standard form, guaranteeing fee simple title in Grantee. All enforcible liens, encumbrances, restrictions and other defects in title shall be cleared by Lessor promptly on notice from Lessee, except that Grantee agrees to accept title subject to subdivision and deed restrictions and reservations of record, if any, as of this date. 15. DAMAGE OR DESTRUCTION TO RESTAURANT UNIT.A. In the event between the date of this agreement and the date Lessee takes possession of said property, any portion of the restaurant is damaged or destroyed by fire or any other casualty and is not restored on or before said date Lessee receives possession, the Lessee may elect to: 1. Terminate this agreement, in which event all rights and obligations of the parties hereto shall cease and the Lessor shall return to the Lessee the $2,000.00 down payment made by the Lessee at the date of closing, or 2. Extend the time of taking possession of said property until the same has been rebuilt and is in the same condition as at the time this agreement was executed providing such reconstruction can be. completed within a period of ninety (90) days. If said property cannot be restored and reconstructed within a ninety (90) day period, then this lease is automatically ceased and terminated. 29. As a part of the consideration of entering into the above and foregoing lease, the Lessor and Lessee are simultaneously entering into an agreement for the purchase of the restaurant equipment now owned by the Lessor and used in connection with the dining table restaurant located at 832 West Walnut Street in Rogers, Arkansas. The parties have agreed that at the time the original $2,000.00 down payment referred to in paragraph 3, a. of the agreement is paid, it will pay to the Lessor the sum of $35,000.00 and receive a warranty bill of sale to said equipment. This agreement also provides for the operation of said restaurant by the. Lessor for a period of thirty (30) days, together with a sixty (60) day remodeling and start up period for the Lessee. If Lessor refuses to comply with the terms of this lease or if the property covered by this lease is damaged or destroyed to such an extent that it is not suitable for use as a restaurant so that the basic ten (10) year lease does not come into actual operation, the Lessor shall not only refund the $2,000.00 down payment above referred to, but will also refund to the Lessee the $35,000.00 paid by the Lessee to the Lessor for said equipment. The refunding of the purchase money for the equipment shall be covered by the provisions of paragraph 15 of this lease.” Appellant in contending that the existence of the $68,-000.00 first mortgage on the premises in favor of American Foundation Life Ins. Co., constituted a breach of the lease warranting a rescission readily admits that he learned of the mortgage in late September or early October of 1974 from his own insurance agent. The record demonstrates that notwithstanding the existence of this knowledge, appellant took possession of the premises and made substantial repairs to the premises. It was not until March 24, 1975 that appellant removed all of the new equipment purchased by him and demanded a rescission. During the meantime appellant had disposed of approximately 90% of the equipment it had purchased from appellee for $35,000.00. It is also admitted that appellant made the improvements to the property without obtaining the title certificates provided for in item #7, supra. There was also evidence that the restaurant had not prospered during the time of appellant’s operation. Based upon the evidence presented the trial court ruled that appellant had waived his right of rescission by not taking steps to rescind the lease within a reasonable time. In view of the fact that, by the time of trial, both parties wanted out of the lease, the trial court awarded appellant a judgment for improvements made in the amount of $9,885.80 on the basis that the appellee would otherwise receive an unconscionable windfall. Appellant appeals contending that it was entitled to a rescission as a matter of law under the terms of the contract and that the trial court should have awarded it additional damages in the amount of $35,000 paid for the equipment, the $2,000 down payment on the lease and $6,592.82 for losses between the purchase price and the salvage price of certain equipment it had bought. For the reasons hereinafter stated, I agree with the trial court. In the first place, appellant was unable to show that it had sustained any damages as a result of the existence of the mortgage — i.e. it speculated that it might not be able to rebuild the premises in the event of a fire loss. The facts would lead one to believe that knowing all of the facts appellant elected to operate the business until it had the opportunity to determine its profitability. Such conduct on the part of a litigant amounts to a waiver of the litigant’s rights to insist upon its right to a rescission. See 17 Am. Jur. 2d Contracts § 489, where it is pointed out that the right to rescind a contract may be lost where there is a ratification or waiver. As pointed out in United States v. Haynes School Dist. No. 8, 102 F. Supp. 843 (E.D. Ark. 1951) the right to rescission and restitution is an extreme one and does not arise from every breach. The general rule is that rescission will not be permitted for a slight or casual breach of the contract, but only for such breaches as are so substantial and fundamental as to defeat the object of the parties in making the agreement. While there is a dispute in the testimony as to whether appellant made a full tender of the $35,000 equipment it purchased from appellee, the preponderance thereof lies in favor of appellee that no such tender was made. Consequently, appellant failed to show that it was entitled to the equitable remedy of rescission. See Rhodes v. Survant, 209 Ark. 742, 192 S.W. 2d 880 (1946), where it was stated: “It is an elementary principle of law that if one would rescind his contract, he must return or offer to return the consideration which induces its execution. Numerous authorities are cited in the note to § 451 of the chapter on Contracts, 12 Am. Jur., p. 1031, to the effect that the very idea of rescinding the contract implies that what has been parted with shall be restored on both sides, and that releasing one party from his part of the agreement and excusing him from making the other party whole is not agreeable to reason or justice, and that the general rule is therefore that if a party wishes to rescind an agreement he must place the other party in status quo.” For the reasons herein stated, I would affirm the trial court’s judgment. Harris, C.J., joins in this concurrence.