Summary
In Wall v Zynda, 283 Mich 260, 264; 278 NW 66 (1938), our Supreme Court adopted the description of rescission provided by 1 Black, Rescission and Cancellation (2d ed), § 1: "To rescind a contract is not merely to terminate it, but to abrogate and undo it from the beginning; that is, not merely to release the parties from further obligation to each other in respect to the subject of the contract, but to annul the contract and restore the parties to the relative positions which they would have occupied if no such contract had ever been made.
Summary of this case from Smith v. Auto Club Grp.Opinion
Docket No. 24, Calendar No. 39,785.
Submitted January 5, 1938.
Decided February 24, 1938. Rehearing denied April 4, 1938.
Appeal from Macomb; Spier (James E.), J. Submitted January 5, 1938. (Docket No. 24, Calendar No. 39,785.) Decided February 24, 1938. Rehearing denied April 4, 1938.
Bill by James E. Wall against Anna Zynda and others to obtain rescission of land contracts and for a money decree. Motion to dismiss by defendants. Motion granted. Plaintiff appeals. Affirmed.
Stanley E. Beattie, for plaintiff.
Alton H. Noe and Butler Dougherty, for defendants.
Plaintiff filed a bill to obtain rescission of two land contracts and repayment of the purchase price. By these contracts plaintiff had agreed to purchase from John Zynda, Sr., trustee, certain lots in a Macomb county subdivision. Defendants, claiming plaintiff's suit was barred by statutory limitations, moved to dismiss the bill of complaint. This motion was granted and plaintiff has appealed.
The land contracts were entered into April 12, 1926. The total purchase price was $3,450. Approximately one-half was paid prior to December 28, 1927, on which date John Zynda, Sr., died. He left an estate in excess of $350,000. The individual defendants are the legatees each of whom received upwards of $19,000 from the estate. Defendants Anna Zynda and Joseph Zynda were appointed executors and plaintiff paid to these executors the balance of the contract price. The final payment was made October 9, 1929. Plaintiff resided in Massachusetts. After payment in full of the contracts, from time to time he made inquiry and demand, by letter and other means, of the executors for performance of the vendor's obligations under the land contracts, and he was advised that performance could not be tendered for the reason, among others, that the Zynda estate was in process of administration and that title could not be made until some future date, but that ultimately the contract obligations of the vendor would be performed in full.
By the terms of these contracts, upon payment in full, the vendor was to convey by warranty deed a marketable title and provide vendee with an abstract for each lot. The vendor also agreed "to gravel streets and to lay cement sidewalks." In April, 1936, an abstract of title was tendered to plaintiff's counsel but it disclosed that the lots were incumbered. On or about September 15, 1936, plaintiff's counsel was notified that the incumbrance had been removed and that defendants would soon be able to deed the property. About this time plaintiff ascertained that the streets had not been graveled and the cement walks had not been laid. He informed defendants that he would not accept conveyance of the lots until the agreed improvements were made. Defendants Joseph and John Zynda requested further delay until the return of the widow, Anna Zynda, from Germany. An adjustment not having been accomplished, plaintiff started suit March 10, 1937. Defendants have never conveyed title nor tendered conveyance thereof.
The reasons assigned by defendants in support of their motion to dismiss are that the plaintiff's cause of action is barred by the six-year statute of limitations (3 Comp. Laws 1929, § 13976) and by plaintiff's failure to file a claim against the estate of John Zynda, Sr., in accordance with statutory requirements. The trial judge sustained defendants' motion to dismiss on the ground that plaintiff's cause of action was barred by the six-year statute of limitations, and also on the further grounds that plaintiff did not present his claim against the Zynda estate within two years after the granting of letters testamentary (3 Comp. Laws 1929, § 13981) and that he did not file a contingent claim as provided by statute (3 Comp. Laws 1929, § 15708).
If the trial court was correct in holding that the six-year statute of limitations barred plaintiff's suit, his holding is decisive of this appeal. However, appellant asserts that the six-year limitation is not applicable because this suit is one "founded" upon covenant, and therefore comes within the statutory provision which in part reads:
"Actions founded upon covenants in deeds * * * may be brought at any time within 10 years from the time * * * when the cause of action accrued on such * * * covenant." 3 Comp. Laws 1929, § 13976.
We cannot agree with appellant that his suit is one which comes within the above quoted statutory limitation. His bill is one for rescission of the two contracts. Neither fraud nor mistake is alleged. Instead vendor's failure to fulfill the terms of the contracts is alleged as the ground for rescission. Such failure was known at all times to plaintiff, or at least would have been known to him had he exercised anything like reasonable diligence in ascertaining the facts. A bill for rescission of a contract, even though under seal, is not founded upon covenant in such contract, i. e., it is not a bill asking affirmative relief based upon a covenant. Instead the rescission here sought is relief of directly the opposite character. The prayer in plaintiff's bill for rescission is that the entire contract be abrogated and moneys paid by him under the contract be decreed to be repaid.
"To rescind a contract is not merely to terminate it, but to abrogate and undo it from the beginning; that is, not merely to release the parties from further obligation to each other in respect to the subject of the contract, but to annul the contract and restore the parties to the relative positions which they would have occupied if no such contract had ever been made. Rescission necessarily involves a repudiation of the contract and a refusal of the moving party to be further bound by it. But this by itself would constitute no more than a breach of the contract or a refusal of performance, while the idea of rescission involves the additional and distinguishing element of a restoration of the status quo." 1 Black on Rescission and Cancellation (2d Ed.), § 1.
As contradistinguished from rescission, a suit founded on covenant seeks affirmatively to enforce the terms of the covenant by way of specific performance or by recovery of damages for a breach of the covenant by one who relies upon the covenant and asserts his rights thereunder.
Not only is rescission the opposite of covenant in the character of the relief sought, but of necessity the results which follow the respective actions are opposite or at least distinctly different. Rescission wholly abrogates the contract and restores the parties to a status quo; but covenant perpetuates the contract and affords the moving litigant his rights thereunder. Because of this difference courts have uniformly required a plaintiff in rescission to assert his right to rescind without any unnecessary delay. Otherwise he will be denied the relief. In many cases the right to have rescission has been held to have been lost by laches within a much shorter period than the six-year statute of limitations. It is obvious that a prolonged period of time within which to bring an action for rescission would be quite incompatible with the character of the relief sought. A party asking restoration of the status quo for obvious reasons should be required to move promptly. Equity will not permit one possessed of a right of rescission to delay unduly in the exercise of that right and while so doing speculate on the outcome of the transaction at the risk of his adversary.
"The form of action fixes the bar rather than the cause of action. For instance, if plaintiff has a choice between two forms of action, the one brought by him determines the period of limitation applicable." 1 Green's Michigan Practice (Nichols' 3d Ed.), p. 165.
To the same effect, see Christy v. Farlin, 49 Mich. 319; Avery, for the use of Aultman, v. Miller, 81 Mich. 85; Stringer v. Stevens' Estate, 146 Mich. 181 (8 L.R.A. [N. S.] 393, 117 Am. St. Rep. 620, 10 Ann. Cas. 337).
Plaintiff's cause of action accrued when he paid in full the contract price in October, 1929. But he did not start his suit for rescission until March 10, 1937. The circuit judge was right in dismissing the bill of complaint on the ground that the suit was barred by the six-year statute of limitations.
It should be noted that we do not pass upon appellees' contention that executory land contracts are not "deeds" in the sense in which that word is used in 3 Comp. Laws 1929, § 13976, hereinbefore quoted. In part this contention is based upon 3 Comp. Laws 1929, § 13309, which provides that such executory contracts are not embraced in the term "conveyance" as used in chapter 260, 3 Comp. Laws 1929, under the title of "conveyances of real property." See 3 Comp. Laws 1929, § 13278 et seq.
We are not in accord with appellant's contention that notwithstanding rescission is sought in the instant case, plaintiff may (under his prayer for general relief) be granted specific performance. The latter is wholly inconsistent with the former and the right to such relief might depend upon wholly different facts and circumstances. Disposition of the instant case can be made without prejudice to plaintiff's right, if any, to institute suit for specific performance. 1 Black on Rescission and Cancellation (2d Ed.), § 12.
Dismissal by the circuit court of the bill of complaint is affirmed, with costs to appellees.
WIEST, C.J., and BUTZEL, BUSHNELL, SHARPE, POTTER, CHANDLER, and McALLISTER, JJ., concurred.