Kunde v. O'Brian, 41290.

• Citation: 214 Iowa 921,243 N.W. 594
• Decision Date: 24 June 1932
• Docket Number: No. 41290.,41290.
• Parties: KUNDE ET AL. v. O'BRIAN ET AL.
• Court: Iowa Supreme Court

214 Iowa 921

243 N.W. 594

KUNDE ET AL.

v.O'BRIAN ET AL.

No. 41290.

Supreme Court of Iowa.

June 24, 1932.

Appeal from District Court, Wapello County; R. W. Smith, Judge.

This was a proceeding by the plaintiffs to obtain a rescission of a real estate contract entered into with the defendant Alice O'Brian. The rescission was granted, and the parties placed in statu quo. Plaintiffs appeal from that judgment and decree.

Modified and affirmed.

Lloyd L. Duke, of Ottumwa, for appellants.

Smith & Work, of Ottumwa, for appellees.

KINDIG, J.

On April 25, 1923, Frank Kunde and Anna L. Kunde, the plaintiffs-appellants, purchased from Alice O'Brian, the defendant-appellee, a house and lot in Ottumwa. The house was modern and contained eight rooms. This purchase was under a written contract naming a consideration of $4,800. Of that sum appellants paid appellee $1,000 in cash, and the remaining portion of the consideration was to be paid at the rate of $50 per month. Those monthly payments were regularly made by appellants to appellee until April 1, 1926. No payment has been made on the purchase price by the appellants since that time, although they remained in possession of the house until October 4, 1930.

Appellants refused to make further payments on the purchase price after April 1, 1926, because it is alleged they learned that a driveway on the premises did not wholly belong to the property, but an adjacent owner had an easement to use the same. It is claimed by the appellants that, when they purchased the property, the appellee assured them that the driveway belonged thereto unincumbered. Consequently appellants refused to make further payments on the purchase price, and, on October 8, 1927, commenced the present proceeding for a rescission of the contract. Thereafter the case was tried, and on October 1, 1930, the district court entered a judgment and decree finding that the appellants had properly rescinded the contract, confirming such rescission, and placing the parties in statu quo. Then, on October 4, thereafter, the district court entered a supplemental decree giving appellee immediate possession of the premises under the rescinded contract.

There is no objection on appellants' part to that portion of the judgment and decree confirming the rescission of the contract, nor do they complain of the supplemental decree which gave appellee possession of the property. Their complaint is confined to that portion of the judgment and decree entered October 1, 1930, which attempts to establish the status quo between the parties.

While it appears that there is more than one defendant in this case, yet, so far as material here, the appellee Alice O'Brian is the only person interested as defendant. She therefore hereafter will be referred to as the appellee.

That portion of the judgment and decree which attempts to place appellants and appellee in statu quo, so far as material, is as follows:

First. Appellants were given the $1,000 cash payment made at the inception of the contract, and all the monthly payments made at the rate of $50 per month thereafter, aggregating $1,750, together with certain interest payments amounting to $480. Then appellants were allowed interest on those sums from the time each item was paid until the rescission. In addition to the foregoing, the district court allowed the appellants taxes paid on the premises as follows: March 24, 1924, $71.20; September 16, 1924, $71.21; March 18, 1925, $89.93; September 17, 1925, $70.97; March 16, 1926, $89.57. Furthermore, the district court allowed the appellants interest on the taxes thus paid at the rate of 6 per cent. per annum from the date of each payment until the rescission. Apparently the appellants have no complaint about the allowance of those items, nor the interest figured thereon.

Second. The appellee received, through the decree, rental on the premises, for the time it was occupied by appellants, at the rate of $50 per month, together with interest on each monthly rental from the time the same should have been paid in advance. When this rental is deducted from the amounts allowed the appellants, as above explained, the balance remaining is $220.38. This is the amount the appellants actually received in cash from the appellee under the judgment and decree.

So far as material here, three objections are made by appellants to the judgment and decree of the district court. These objections are: First, that no rentals at all should have been allowed appellee under the circumstances; second, in any event, the rentals thus allowed should not have been on the basis of $50 per month; and, third, the district court should have allowed appellants a sum for certain improvements which they placed on the house. The so-called improvement items were rejected by the district court.

I. Did the district court properly allow appellee rent for the property during the time the same was occupied by appellants? This is the first question.

At the inception, it is to be recognized that appellants are asking that the district court confirm their rescission of the real estate contract. While such application for the confirmed rescission is based upon the alleged fraud of appellee in misrepresenting the title to the driveway, yet the fraud, if any, was material only for the purpose of justifying the district court in granting the relief. A rescission is such whether based upon fraud or some other cause. If appellants desired damages as distinguished from a rescission of the contract for the loss of their bargain, they should have asked that relief at law. Nevertheless, appellants selected their remedy in equity, and asked for a rescission of the contract. “Rescission is the unmaking of the contract.” Butler Manufacturing Co. v. Elliott & Cox, 211 Iowa, 1068 (local citation, 1071), 233 N. W. 669, 670. “No rights accrue to either party under the terms or provisions of the contract so rescinded.” Bringolf v. Parkhurst Auto Co., 192 Iowa, 1038 (local citation, 1041), 186 N. W. 11, 12. See, also, Mortensen v. Frederickson Brothers, 190 Iowa, 832, 180 N. W. 977. Generally, however, the courts will not allow a rescission, unless the parties can be placed in statu quo.

[1] “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.” Butler Mfg. Co. v. Elliott & Cox (211 Iowa, reading on page 1072, 233 N. W. 669, 671), supra.

[2][3][4] When the court allows a rescission, it founds its action, generally speaking, upon a previous mutual agreement to rescind or a fraud on the part of one party of the contract and the election to rescind therefor by the other party thereto.

“A court is not privileged to impose by judicial fiat an agreement of rescission upon the parties when it appears there was in fact no such agreement.” Bringolf v. Parkhurst Auto Co. (192 Iowa, 1038, local citation 1041, 186 N. W. 11, 12), supra.

Hence a court of equity, when entering a decree of rescission, must recognize the foregoing legal principles, and, so far as possible, do equity between the parties. Before the buyer, however, can rescind the contract, he “must restore, or offer to restore, the status quo. Until restoration or offer to make restoration is made, there is ordinarily * * * no rescission.” Butler Mfg. Co. v. Elliott & Cox (211 Iowa, 1068, local citation 1072, 233 N. W. 669, 670), supra. To the same effect see Mortensen v. Frederickson Brothers (190 Iowa, 832, 180 N. W. 977), supra; Smith v. Eells, 191 Iowa, 1307, 184 N. W. 385;Stauffer v. Mathison Motor Co., 207 Iowa, 1038, 221 N. W. 918;Rickman v. Houck, 192 Iowa, 340, 184 N. W. 657;Fowler v. Dieleman, 192 Iowa, 563, 185 N. W. 79;Bringolf v. Parkhurst Auto Co. (192 Iowa, 1038, 186 N. W. 11), supra; Continental National Bank v. Greene, 200 Iowa, 568, 203 N. W. 9;Granette Products Co. v. Arthur H. Neumann & Co., 200 Iowa, 572, 203 N. W. 935, 205 N. W. 205;Reiger v. Turley, 151 Iowa, 491, 131 N. W. 866;Creveling v. Banta, 138...