Lowe v. Lym

• Decision Date: 15 June 1982
• Docket Number: No. 13504,13504
• Citation: 646 P.2d 1030,103 Idaho 259
• Parties: Russell E. LOWE, aka Ed Lowe, and Caryn Lowe, husband and wife, Plaintiffs-Appellants, v. John C. LYM and Terry E. Lym, husband and wife, Defendants-Respondents, and David Ticknor and Yoshiko Ticknor, husband and wife; Robert Tripp and Larae Tripp, husband and wife; and Horizon Real Estate and Development Company, Defendants.
• Court: Idaho Court of Appeals

Page 1030

646 P.2d 1030

103 Idaho 259

Russell E. LOWE, aka Ed Lowe, and Caryn Lowe, husband and wife, Plaintiffs-Appellants, v. John C. LYM and Terry E. Lym, husband and wife, Defendants-Respondents and David Ticknor and Yoshiko Ticknor, husband and wife; Robert Tripp and Larae Tripp, husband and wife; and Horizon Real Estate and Development Company, Defendants.

No. 13504.

Court of Appeals of Idaho.

June 15, 1982.

Craig R. Jorgensen, Pocatello, for plaintiffs-appellants. Howard L. Armstrong, Jr., Pocatello, on brief.

Brent O. Roche of the firm of Vern E. Herzog, Jr., Pocatello, for defendants-respondent Lyms. Bruce S. Bistline, formerly of the firm, on brief.

John Souza, Pocatello, for defendant Horizon Real Estate and Development Co.

WALTERS, Chief Judge.

This is an appeal from a summary judgment granting rescission of a land sale transaction. We affirm the entry of the judgment in favor of the sellers but remand for redetermination of the amount of monetary recovery by the buyers.

The buyers, Russell and Caryn Lowe, purchased real property located in Bannock County from John and Terry Lym. Following payment of the purchase price and receipt of the deed, the buyers applied for a building permit for construction of a residence on the property. Issuance of the permit was denied by county authorities on the basis that the property was part of a subdivision which had not been properly platted and approved.

The buyers subsequently filed suit against the sellers, together with the sellers' predecessors in interest and the realty company which had closed the transaction. The buyers alleged that fraud and misrepresentation occurred in the sale. They sought damages and an order requiring the defendants to establish a legal subdivision, so the necessary building permit could be obtained.

The sellers moved for summary judgment pursuant to I.R.C.P. 56. The summary judgment proceedings raised the issue of whether the parties had agreed to rescind the land sale transaction before the suit was filed. The district court granted the sellers' motion. A judgment was entered decreeing that, upon tender of appropriate documents of reconveyance to the sellers, the sellers "shall pay" to the buyers the purchase price together with interest and reasonable attorney fees in an amount to be later determined. The buyers timely moved for reconsideration of the order granting summary judgment, which motion was denied. This appeal followed.

The district court's determination to grant summary judgment was based upon communications between the parties occurring subsequent to the closing of the land sale transaction, and prior to the commencement of the litigation by the buyers. The sale transaction was closed in October, 1976. By the following June, the buyers had been refused the building permit. That month the attorney for the buyers made written demand upon the sellers. After stating that the buyers were unable to obtain a building permit because the property purchased from the sellers was enclosed in an illegal subdivision, the letter recited:

Accordingly, demand is hereby made upon you for the return of all sums of money paid by Mr. Lowe, together with all interest and for damages he has incurred, including an amount for an attorney fee. You are further notified that Mr. Lowe hereby rescinds his contract of purchase. This demand is made pursuant to § 55-1819 of the Idaho Code. ¹

Your immediate reply is expected, and unless we hear from you, further legal action will be instituted. (Emphasis supplied.)

Seven months later, on January 24, 1978, the attorney for the sellers responded. His letter to the buyers' attorney stated:

I am in receipt of your letter of June 24, 1977, to Mr. John Lym whereby Mr. Ed Lowe rescinds his contract of purchase for lands purchased from Mr. Lym in the Gibson Jack area of Bannock County, Idaho. Said demand for rescission was made pursuant to Idaho Code 55-1819 which allows that Mr. Lowe should have returned to him the amount which he paid for the lot plus interest at 6 percent per year from the time of payment and any costs that he had been assessed as taxes or assessments. Additionally, a reasonable attorney's fee can be awarded; however, as I read the statute, it places a burden upon the purchaser to tender appropriate instruments for reconveyance.

Please be advised that Mr. Lym accepted the rescission of the contract of purchase and stands ready to pay over unto Mr. Lowe the amount stated above as soon as Mr. Lowe tenders proper instruments of reconveyance in favor of Mr. Lym. Mr. Lym considers the contract rescinded thereby making him the owner of said parcel of property with merely a determination of the amount of money paid to Mr. Lowe left to be made. If this sum cannot be agreed upon by March 1, 1978, we will ask a court of competent jurisdiction to determine the amount which should be paid over to Mr. Lym. (Emphasis supplied.)

In the summary judgment proceedings, the sellers contended the letter from the buyers' attorney constituted an "offer" to rescind the transaction, and that their responsive letter constituted an "acceptance" of the offer. The district court agreed.

On appeal the buyers contend it was error to grant summary judgment because of the existence of genuine issues of material fact relating to the "offer and acceptance" approach adopted by the district court. They also contest the propriety of the judgment and relief granted by the court.

We affirm the judgment of the district court, although not upon the "offer and acceptance" theory found by the court in its order granting summary judgment. Rather, we affirm on the basis of mutual consent to rescission. ²

Our analysis begins with the recognition that this case does not involve an attempted rescission of an existing, executory contract between the parties. Compare, e.g., Blinzler v. Andrews, 94 Idaho 215, 485 P.2d 957 (1971); 17A C.J.S. Contracts § 386, at 458 (1963). Here the land sale transaction was completed. The sellers had received the purchase price, the buyers had received a deed to the property, and nothing remained to be performed by either of them. Fully executed contracts, however, may be rescinded by the parties, by returning them to the status quo they occupied prior to the executed contract. Mohr v. Shultz, 86 Idaho 531, 539, 388 P.2d 1002, 1008 (1964). Executed contracts "under which the chose is vested" ordinarily can be rescinded only by mutual consent or judicial decree. 17A C.J.S. Contracts § 385, at 458 (1963).

The mutuality of assent to rescind a transaction can arise in at least two ways. It may arise from offer and acceptance, or from demand followed by agreement or acquiescence.

"Mutual assent may be by offer to rescind and acceptance by the other party, but the offer on the one side must be accepted on the other, before its withdrawal, and one party to a contract cannot abrogate or rescind it by merely giving notice to the other of its intention so to do. However, where a party, even without right, claims to rescind a contract, if the other party agrees to the rescission or does not object thereto and permits it to be rescinded, the rescission is by mutual consent."

17A C.J.S. Contracts § 389, at 466 (1963). (Emphasis supplied.)

Here the letter of the buyers did not specifically tender an offer to rescind; rather, it explicitly served notice that the buyers "hereby rescind" the contract, and it made demand for recovery of certain amounts of money. The letter did encourage a reply but did not purport to invite an acceptance of the terms stated in the letter. Although the sellers responded by "accepting" the rescission, they also specifically declared that they, too, considered the contract rescinded. This conduct falls within the rule last stated above, that where a party, without right, claims to rescind a contract and the other party agrees or does not object thereto and permits it to be rescinded, the recission is by mutual consent. Id.

Thus, there was mutual assent to rescission before the suit was filed by the buyers. ³ The terms of the rescission superceded the terms of the original contract.

The rescission of a contract is in itself a new contract; it is the substitution of a new agreement for the old. The mutual rights of the parties are determined by the terms of their rescission agreement. Where a contract has been rescinded by mutual consent, the parties are, as a general rule, restored to their original rights with relation to the subject matter, and they are entitled to be placed in status quo as far as possible. All rights under the rescinded contract are terminated, and the parties are discharged from their obligations thereunder. No claim or action for breach can be maintained thereafter....

17A C.J.S. Contracts § 392, at 471-472 (1963).

The terms of the rescission necessary to return the parties to the status quo existing before their land sale transaction are outlined in the two letters between the parties. The buyers' demand was made pursuant to I.C. § 55-1819 and entailed return to the buyers of the purchase money together with interest, damages and attorney fees. By the provisions of this statute, the recovery by the buyers of the money amounts demanded was predicated upon the buyers' "tender of appropriate instruments of reconveyance." The terms contained in the letter, in light of the statute, was unequivocal. The title to the property would be returned to the sellers in exchange for recovery of the purchase price and other amounts set forth in the letter and the statute.

The responsive letter from the sellers addressed all demands specifically made by the buyers or incorporated by reference to I.C. § 55-1819, except for the buyers' claim for recovery of damages. However, because rescission requires restoration to the status quo, the buyers would be entitled to recover such damages as would restore them, as much as possible, to the status quo. Cady...