Binkholder v. Carpenter

• Decision Date: 31 August 1967
• Docket Number: No. 52568,52568
• Citation: 260 Iowa 1297,152 N.W.2d 593
• Parties: Forrest R. BINKHOLDER and Mary Ann Binkholder, Appellees, v. Yale T. CARPENTER and Glenna P. Carpenter, Appellants.
• Court: Iowa Supreme Court

Page 593

152 N.W.2d 593

260 Iowa 1297

Forrest R. BINKHOLDER and Mary Ann Binkholder, Appellees, v. Yale T. CARPENTER and Glenna P. Carpenter, Appellants.

No. 52568.

Supreme Court of Iowa.

Aug. 31, 1967.

Max R. Werling, Tipton, for appellants.

Casterline & Hamiel, Tipton, for appellees.

STUART, Justice.

This is an action in equity by the purchasers of a farm to rescind the real estate contract for mutual mistake and to recover their downpayment. There is substantial agreement on the facts. Defendants and their real estate agent believed and represented to plaintiffs that the 720 acre farm contained 450 acres of crop land and had a crop base for participation in ASC programs of 416 acres making possible a $10,000 payment under the 1964 government program. Plaintiffs verified these figures at the local ASC office. They will hereinafter be referred to as purchasers and defendants as vendors.

The contract was executed December 28, 1963 and purchasers paid $10,000 down. On or about February 25, 1964, a former tenant informed purchasers that the farm did not contain 450 acres of crop land. A remeasurement at the ASC office disclosed there were, in fact, only 362 acres of crop land which reduced the corn base from 416 acres to 345 acres. Maximum government payments on the new base were $8800 rather than $10,000. Parties agree the figures are accurate and it is not disputed that the non crop land is worth $75 to $150 less per acre than crop land.

Although the contract set out in the printed record does not show it, parties agree purchasers were to make a payment of $5000 on March 1, 1964. This was not paid.

On March 5, 1964 purchasers' attorneys sent the following letter to vendors by restricted certified mail:

'Mr. & Mrs. Forrest Binkholder of Gerald, Missouri, have requested us to write to you to inform you that they have elected to rescind the real estate contract entered into by you and the Binkholders on 12--28--63. This is the contract covering the farm near Wheatland, Iowa. The reason for their election to rescind the contract is the material misrepresentation in the number of acres of crop land on the farm made by you and your real estate agent. Reliable information obtained by Binkholder last week from the DeWitt, Iowa A.S.C. and soil conservation offices is that there are 362 acres of crop land on the farm. This is 88 acres less than the 450 acres of crop land which was represented to the Binkholders.

'We assume that under these circumstances you will be willing to refund to Binkholders the $10,000 downpayment. We would appreciate it if you would advise us when to expect return of the $10,000. The Binkholders have not taken possession of the farm. However, anything which the Binkholders may have acquired as a result of this contract will be returned to you.

'If we do not hear from you by March 17, 1964, we will assume that you refuse to return the downpayment and it will be necessary for us to take legal steps to obtain it.'

On March 10, vendors caused a Notice of Fortfeiture of Real Estate Contract authorized by Chapter 656, Code of Iowa to be served on purchasers alleging default in failure to make the payment due March 1, 1964. On April 7th purchasers filed this petition in equity. On April 13, the notice of forfeiture with a proper return of service was filed in the office of the county recorder. On April 22 notice of this action in equity was published and a notice of the suit was mailed to vendors.

The trial court held the forfeited contract remained in existence for such legal action as sought here, rescinded the contract for mutual mistake and entered judgment for plaintiff for $10,000 and costs.

I. The first three divisions of vendors' argument are grounded on the proposition that the forfeiture proceedings, which have not been challenged by purchasers, extinguished the contract and left nothing for the court to rescind and terminated any right purchasers may have had to a return of their downpayment.

Although it has not been argued by appellees, we believe vendors are confronted with a basic issue we cannot ignore and which requires an affirmance of the lower court. '(W)e are committed to the rule that we must affirm the trial court if any sufficient basis appears in the record therefore, even though the ruling was placed upon a different ground', Stover v. Central Broadcasting Co., 247 Iowa 1325, 1330--1331, 78 N.W.2d 1, and even though plaintiffs do not seek to uphold it on the ground suggested. Stake v. Cole, 257 Iowa 594, 133 N.W.2d 714, 718--719. See also: Hot Spot Detector v. Rolfes Electronics Corp., 251 Iowa 674, 653, 102 N.W.2d 354; Wilkinson v. County Board of Education, 251 Iowa 876, 880, 102 N.W.2d 924; McCoy v. Martin, 257 Iowa 146, 131 N.W.2d 783, 784. Can vendors in a real estate contract, by complying with the statutory forfeiture provisions, bar purchasers from recovering their downpayment when purchasers had, by their own affirmative act, previously rescinded the contract? We think not.

'Rescission', as used in connection with the cancellation or termination of contracts, has two connotations. A contract may be rescinded by the acts of one of the parties and does not require court action except such action at law as may be necessary to restore the status quo. 17A C.J.S. Contracts, §§ 434, 438. Rescission may also be effected by a suit in equity seeking to have the court declare a rescission and restore the status quo. The methods are analogous, but not the same. Both are governed by equitable principles. 17A C.J.S. Contracts § 413, p. 504; 13 Am.Jur.2d 496, Cancellation of Instruments, § 1.

'The fact that the same word 'rescission', is used to designate both the equitable remedy of cancellation and the termination of a contract by the act of a party to it has been productive of no little confusion. Unfortunately in some of the cases for rescission in equity language is used from which it might be inferred that precisely the same principles govern in suits in equity that are applied to determine the right of the party to sue at law. The remedy of rescission in equity must not, however, be confused with the rescission of a contract by a party thereto, as they are essentially different; in the latter case by his rescission or repudiation of a contract a party merely gives notice to the other party that he does not propose to be bound by the contract; whereas in the former case a court of equity grants rescission or cancellation, its decree wipes out the instrument, and renders it as though it does not exist. Moreover, while a court of equity entertains a suit for the express purpose of procuring a contract of conveyance to be cancelled and renders a decree conferring in terms that exact relief, a court of law entertains an action for the recovery of possession of chattels, or, under some circumstances, for the recovery of land, or for the recovery of damages, and although nothing is said concerning it either in the pleadings or in the judgment, a contract or conveyance, as the case may be, is virtually rescinded; the recovery is based on the facts of such rescission and could not have been granted unless the rescision had taken place.' 12 C.J.S. Cancellation of Instruments § 5, p. 945.

We recognized these two uses of rescission in Butler Mfg. Co. v. Elliott & Cox, 211 Iowa 1068, 1071--1072, 233 N.W. 669, which is quoted with approval in United States Hoffman Machinery Corp. v. Carlson, 253 Iowa 304, 309, 111 N.W.2d 271. In Butler Mfg. Co., supra, we said:

'Rescission is the unmaking of the contract. Rescission may be accomplished by acts In pais, as well as through resort to the court of equity; but, in order to accomplish rescission In pais for breach of warranty (as well as for other causes), there must be, within reasonable time after knowledge of the existence of the cause * * *, an election to rescind. Within reasonable time, too, knowledge of, from unmistakable act or notice manifesting (it), such election must be conveyed to the seller * * * and the buyer must restore or offer to restore, the status quo. Until restoration or offer to make restoration is made, there is ordinarily, at law no rescission. (Citing authorities)

'When the buyer rescinds, he renounces the contract and his ownership of the property obtained thereunder and invests the seller with the ownership as if the contract had not been made. Continued exercise by the buyer of ownership or dominion of the property after notice of rescission and offer to return necessarily asserts ownership in the buyer, denies the ownership of the seller, and waives or withdraws the notice. (Citing authorities).'

Application of these statements to the particular facts before us discloses that purchasers combined the two methods of rescission. The letter of March 5 to vendors from purchasers' attorneys met the requirements of a 'rescission in pais'. However, instead of bringing a law action to recover their downpayment, they brought their action in equity seeking a rescission and general equitable relief as well as the recovery of the downpayment.

Ordinarily, equity does not take jurisdiction to declare a rescission when purchaser has an adequate and complete remedy at law by the recovery of the payments made. 12 C.J.S. Cancellation of Instruments § 9, p. 948. However, equity did take jurisdiction and the matter was tried there without objection. We do not believe this fact would change the relationship between the forfeiture proceedings and the pre-existing rescission.

If a contract were properly rescinded by an act of one of the parties, there would be no contract to forfeit. The side obligations which resulted from the termination of the contract would remain for legal determination if necessary to restore the status quo. 17A C.J.S. Contracts § 440.

We therefore hold the rescission preceded the forfeiture and the forfeiture did not bar purchasers from bringing an action to recover the...