law-rescission of contract | repudiation of contract
RESCISSION CASES FROM THE TEXAS SUPREME COURT
Myrad Properties, Inc. v. Lasalle Bank NA, No. 08-0444 (Tex. Dec. 18, 2009)(Green)
(whether a correction deed may convey two properties when an unambiguous deed mistakenly conveyed only
one, correction deed found void, court renders judgment and orders rescission of the mistaken deed)
MYRAD PROPERTIES, INC. v. LASALLE BANK NATIONAL ASSOCIATION, AS TRUSTEE FOR THE
REGISTERED HOLDERS OF GMAC COMMERCIAL MORTGAGE SECURITES, INC., COMMERICIAL
MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1997-C1, ROBIN GREEN, AND MELISSA COBB; from
Bell County; 3rd district (03-07-00240-CV, 252 SW3d 605, 03-28-08)
The Court reverses the court of appeals' judgment and renders judgment.
Justice Green delivered the opinion of the Court. [pdf]
WHAT IS RESCISSION AS DEFINED BY TEXAS COURTS?
Rescission is an equitable remedy that extinguishes legally valid contracts that must be set aside because of
fraud, mistake, or other reasons in order to avoid unjust enrichment. Martin v. Cadle Co., 133 S.W.3d 897,
903 (Tex. App.-Dallas 2004, pet. denied); Country Cupboard, Inc. v. Texstar Corp., 570 S.W.2d 70, 73-74
(Tex. Civ. App.-Dallas 1978, writ ref'd n.r.e.). A trial court may order unilateral rescission of a contract if a
party demonstrates a breach in a material part of the contract. Costley v. State Farm Fire & Cas. Co., 894 S.
W.2d 380, 386 (Tex. App.-Amarillo 1994, writ denied); Humphrey v. Camelot Ret. Cmty., 893 S.W.2d 55, 59
(Tex. App.-Corpus Christi 1994, no writ); Ennis v. Interstate Distribs., Inc., 598 S.W.2d 903, 906 (Tex. Civ. App.
-Dallas 1980, no writ). Even partial breaches are sufficient to warrant rescission when the breach goes to the
essence of the contract. Ennis, 598 S.W.2d at 906; Atkins v. Beasley, 544 S.W.2d 505, 507 (Tex. Civ. App.-
Waco 1976, no writ).
Nevertheless, absent fraud or mistake, a party seeking rescission has the burden to show that monetary
damages are an inadequate remedy. Ferguson v. DRG/Colony N., Ltd., 764 S.W.2d 874, 886 (Tex. App.-
Austin 1989, writ denied). Under the unique circumstances presented in Smith v. National Resort
Communities, Inc., the Texas Supreme Court held that "if damages as well as rescission are essential to
accomplish full justice, they will both be allowed." 585 S.W.2d 655, 660 (Tex. 1979) (awarding special
damages for payment of taxes and annual maintenance fund bill in addition to rescission of contract).
Generally, whether to grant a request for rescission lies within the trial court's discretion. See Gentry v.
Squires Constr., Inc., 188 S.W.3d 396, 410 (Tex. App.-Dallas 2006, no pet.); Tex. Capital Sec., Inc. v.
Sandefer, 58 S.W.3d 760, 774 (Tex. App.-Houston [1st Dist.] 2001, pet. denied). An appellate court may
reverse a trial court for abuse of discretion only if the record shows that the trial court acted unreasonably or
in an arbitrary manner or, stated differently, the court acted without reference to the applicable guiding rules
or principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985); see also
Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex. 1991). In making this determination, the reviewing
court views the evidence in the light most favorable to the actions of the trial court and indulges every legal
presumption in favor of the judgment. See Nordstrom v. Nordstrom, 965 S.W.2d 575, 578 (Tex. App.-Houston
[1st Dist.] 1997, pet. denied); Camelot Ret. Cmty., 893 S.W.2d at 59.
In this case, the trial court granted both the remedies of damages and rescission for Linda's breach of the
Agreement. But, the losses that Lewis suffered because of Linda's breach were not incapable of calculation,
as the trial court calculated Lewis's damages to arrive at the amount it awarded for contract damages in the
judgment. The written judgment awards Lewis $79,000 based on his claims of lost income from the tire store
and farm operations.
The evidence does not support Lewis's claim that rescission is necessary under the facts and circumstances
of this case in order to accomplish full justice. Lewis did not demonstrate that the damages awarded to him
are inadequate or that rescission was required to fully compensate him for Linda's breach of the Agreement.
When damages are adequate, rescission is not available. Ferguson, 764 S.W.2d at 886. We conclude that
awarding both rescission and damages was not necessary to accomplish full justice under the facts and
circumstances of this case. See Smith, 585 S.W.2d at 660.
In addition, Lewis did not contend that Linda was guilty of fraud or that the parties had entered the Agreement
as a result of any mistake. Thus, rescission is not available under those theories.
Accordingly, we hold that the evidence does not support an award of both rescission and damages and that
the trial court erred when it granted both remedies. We sustain Linda's first issue and reverse the trial court's
award rescinding the Agreement.
When reversing a trial court's judgment, we must render the judgment the trial court should have rendered
except when a remand is necessary for further proceedings or the interests of justice require a remand or
another trial. Tex. R. App. P. 43.3. We may, under appropriate circumstances, modify the trial court's
judgment and affirm it as modified. Tex. R. App. P. 43.2. In this case, reforming the judgment to delete the
remedy of rescission adequately remedies the error in the trial court's judgment. Therefore, we reform the
judgment by deleting the paragraph of the judgment that contains the trial court's order of rescission.
LEWIS TURNER v. LINDA TURNER; from Montgomery County; 9th district (09‑06‑00570‑CV, ___ SW3d ___,
06‑26‑08) We sustain issue one to the extent it challenges the trial court's award of rescission and reform the
judgment to delete paragraph six. We sustain issue two in part as it relates to the trial court's award to Lewis
for intentional infliction of emotional distress and render judgment that Lewis take nothing on his claim of
intentional infliction of emotional distress. We overrule issue two to the extent it complains of the legal and
factual sufficiency of the evidence to support the bodily injury award in the amount of $150,000. We also
overrule issue three. As reformed, we affirm the trial court's judgment.
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