CHAPTER XXXIV

RESTITUTION OR RESTORATION OF STATUS QUO

§ 616. Restoration of Former Status in General.

617.

Necessity of Tender or Restoration of Property.

618. Where Restoration is Impossible.

619.

Property Accidentally Destroyed or Lost.

620. Property Sold or Hypothecated to Third Person.

621. Exception as to What Rescinding Party is Legally Entitled to Hold.

622. Exception as to Property Entirely Worthless.

623.

624.

625.

Effect of Refusal to Accept Return of Property.

To Whom Restoration or Tender Should be Made.
Time to Make or Offer Restoration.

626. Mode, Sufficiency, and Extent of Restoration.

627. Payment or Tender of Value in Lieu of Specific Restoration. 628. Holding Property Subject to Seller's Demand or Order. 629. Resale of Goods by Buyer for Seller's Account.

630.

631.

Reconveyance of Land.

Restoration of Possession of Land.

632. Liability for Interest on Consideration Received. 633. Liability for Waste or Deterioration of Property.

634. Accounting for Rents or Rental Value.

635. Allowance for Cost of Keeping and Expense of Restoration. 636. Allowance for Improvements and Repairs.

637. Allowance for Taxes and Incumbrances Paid.

§ 616. Restoration of Former Status in General.-Rescission of a contract does not involve the claim or award of compensation to the injured party on account of fraud or other vice inherent in the contract, nor does it imply a readjustment of the rights of the parties after a recognized breach of the contract, but it means the undoing of the contract, the making of it as if it had never been. Hence the first and prime essential of rescission is the "restitutio in integrum," that is, the restoration of each of the parties to the position, with reference to his property and his rights, which he occupied immediately before the making of the contract. And to this end, it is necessary that the party seeking a rescission should offer or tender such a restoration to the other, and that the court, if appealed to, should be able to accomplish that result by its judgment or decree.1 It is

1 In re Morgantown Tin Plate Co. (D. C.) 184 Fed. 109; Garland v. Bowling, Hempt. 710, Fed. Cas. No. 5,242; Jemison v. Woodruff,

said: "The rule that he who seeks to rescind a contract of sale must first offer to return the property received, and place the other party in the position he formerly occupied, so far as practicable, prevails equally at the civil and the common law. It is a rule founded in natural justice, and requires that the offer shall be made by the purchaser to his

34 Ala. 143; Kant v. Atlanta, B. & A. R. Co., 189 Ala. 48, 66 South. 598; Barnett v. Stanton, 2 Ala. 181; Hoover v. Brinkley, 66 Ark. 645, 51 S. W. 73; Johnson v. Walker, 25 Ark. 197; Desha v. Robinson, 17 Ark. 228; Bennett v. Owen, 13 Ark. 177; Sullivan v. California Realty Co., 142 Cal. 201, 75 Pac. 767; Central Life Assur. Soc. v. Mulford, 45 Colo. 240, 100 Pac. 423; Hirzel v. Schwartz, 17 Colo. App. 470, 68 Pac. 1056; Lane v. Latimer, 41 Ga. 171; Smith v. Brittenham, 109 Ill. 540; Ellington v. King, 49 Ill. 449; Rigdon v. Walcott, 141 Ill. 649, 31 N. E 158; Duncan v. Humphries, 58 Ill. App. 440; City of Litchfield v. Litchfield Water Supply Co., 95 Ill. App. 647; Musselman v. Cravens, 47 Ind. 1; Norris v. Scott, 6 Ind. App. 18, 32 N. E. 103, 865; Watson Coal & Min. Co. v. Casteel, 68 Ind. 476; Colson v. Smith, 9 Ind. 8; Bonniwell v. Madison, 107 Iowa, 85, 77 N. W. 530; Anderson v. Haskell, 45 Iowa, 45; Carneal v. May, 2 A. K. Marsh. (Ky.) 587, 12 Am. Dec. 453; Hawkins v. Brown, 80 Ky. 186; Caddo Oil & Min. Co. v. Producers' Oil Co., 134 La. 701, 64 South. 684; Stewart v. Presley, 22 La. Ann. 514; Getchell v. Kirkby, 113 Me. 91. 96 Atl. 1007; Dockray v. Thurston, 43 Me. 216; Potter v. Titcomb, 22 Me. 300; Gassett v. Glazier, 165 Mass. 473, 43 N. E. 193; Conner v. Henderson, 15 Mass. 319, 8 Am. Dec. 103; National Bank of Sturgis v. Levanseler, 115 Mich. 372, 73 N. W. 399; Galvin v. O'Brien, 96 Mich. 483, 56 N. W. 85; Jewett v. Petit, 4 Mich. 508; Hanson v. Field, 41 Miss. 712; Wood v. Kansas City Home Telephone Co., 223 Mo. 537, 123 S. W. 6; Robinson v. Siple, 129 Mo. 208, 31 S. W. 788; Jarrett v. Morton, 44 Mo. 275; Ungerer & Co. v. Louis Maull Cheese & Fish Co., 155 Mo. App. 95, 134 S. W. 56; Swobe v. New Omaha Thomson-Houston Electric Light Co., 39 Neb. 586, 58 N. W. 181; Clark v. Tennant, 5 Neb. 549; Robinson v. Kind, 25 Nev. 261, 59 Pac. 862, 62 Pac. 705; Young v. Stevens, 48 N. H. 133, 2 Am. Rep. 202, 97 Am. Dec. 592; Manahan v. Noyes, 52 N. H. 232; Mincho v. Bankers' Life Ins. Co., 124 App. Div. 578, 109 N. Y. Supp. 179; Pullman v. Alley, 53 N. Y. 637; Gillet v. Moody, 5 Barb. (N. Y.) 185; Wheaton v. Baker, 14 Barb. (N. Y.) 594; Bedell v. Bedell, 3 Hun (N. Y.) 580; J. I. Case Threshing Mach. Co. v. Feezer, 152 N. C. 516, 67 S. E. 1004; Moore v. Reed, 37 N. C. 580; Tecumseh State Bank v. Maddox, 4 Okl. 583, 46 Pac. 563; Vaughn v. Smith, 34 Or. 54, 55 Pac. 99; Miles v. Hemenway, 59 Or. 318, 111 Pac. 696, 117 Pac. 273; Bell v. Hartman, 9 Phila. (Pa.) 1; Fleming v. Hanley, 22 R. I. 251, 47 Atl. 387; King v. Doolittle, 1 Head (Tenn.) 77; Brady v. Oliver, 125 Tenn. 595, 147 S. W. 1135, 41 L. R. A. (N. S.) 60, Ann. Cas. 1913C, 376; Mills v. Alexander, 21 Tex. 154; Corbett v. McGregor (Tex. Civ. App.) 131 S. W. 422; Hammond v. Buckmaster, 22 Vt. 375; Poor v. Woodburn, 25 Vt. 234; Christian v. Vance, 41 W. Va. 754, 24 S. E. 596.

vendor upon the discovery of the defects for which the rescission is asked. The vendor may then receive back the property and be able by proper care and attention to preserve it, or he may have recourse upon other parties, the remedies against whom might be lost by delay. He must be permitted to judge for himself what measures are necessary for his interest and protection, and if the purchaser by delay deprives him of the opportunity of thus protecting himself, he cannot demand a rescission of the contract." 2 It has even been said that the rescinding party must be "eager, ready, and willing" to place the other party to the contract in statu quo. And an application for the rescission of a contract, when made to a court, is addressed to its sound discretion and is governed by equitable principles, and will not be granted unless the court can and does, by its decree, restore the parties substantially to the position which they occupied before making the contract. But the rule does not mean that there must be an absolute and literal restoration of the exact previous condition, but such a restoration as is substantial, without material difference, and reasonably practicable, or, where fraud is involved, as nearly complete as the fraud of the opposite party will permit. Further, the rule does not apply in cases where the contract is rescinded by the mutual consent or agreement of the parties, since, in such cases, they are at liberty to arrange their own terms, nor in cases where the contract remains wholly executory, with nothing given or performed on either side."

5

7

2 Andrews v. Hensler, 6 Wall. 254, 18 L. Ed. 737.

3 Cheuvront v. Cheuvront, 54 W. Va. 171, 46 S. E. 233.

4 Ferry v. Clarke, 77 Va. 397; Bonsal v. Camp, 111 Va. 595, 69 S. E. 978; Bankston v. Owl Bayou Cypress Co., 117 La. 1053, 42 South. 500.

5 Fairbanks, Morse & Co. v. Walker, 76 Kan. 903, 92 Pac. 1129, 17 L. R. A. (N. S.) 558; Bell v. Keepers, 39 Kan. 105, 17 Pac. 785. De Ford v. Urbain, Wils. (Ind.) 67.

7 Fay v. Oliver, 20 Vt. 118, 49 Am. Dec. 764; Fleming v. Hanley, 21 R. I. 141, 42 Atl. 520.

8 Roberts v. James, 83 N. J. Law, 492, 85 Atl. 244, Ann. Cas. 1914B, 859.

§ 617. Necessity of Tender or Restoration of Property. In pursuance of the rule set forth in the preceding section, and on the principle that he who seeks equity must do equity, it is well settled that any person demanding the rescission of a contract to which he is a party must restore or offer to restore to the other party whatever he may have received under the contract in the way of money, property, or other consideration or benefit. It is only by doing this

Gay v. Alter, 102 U. S. 79, 26 L. Ed. 48; Chicago-Texas Land & Lumber Co. v. Robertson, 169 Fed. 287, 94 C. C. A. 577; The Ernest M. Munn, 66 Fed. 356, 13 C. C. A. 510; Courtright v. Burnes (C. C.) 48 Fed. 501; Hafer v. Cole, 176 Ala. 242, 57 South. 757; Birmingham Ry., Light & Power Co. v. Jordan, 170 Ala. 530, 54 South. 280; Duy v. Higdon, 162 Ala. 528, 50 South. 378; Ellis v. Ellis, 84 Ala. 348, 4 South. 868; Robertson v. Bradford, 73 Ala. 116; McCracken v. McBee, 96 Ark. 251, 131 S. W. 450; Hick v. Thomas, 90 Cal. 289, 27 Pac. 208, 376; More v. Calkins, 85 Cal. 177, 24 Pac. 729; Herman v. Haffenegger, 54 Cal. 161; Bohall v. Diller, 41 Cal. 532; Miller v. Steen, 30 Cal. 402, 89 Am. Dec. 124; Tutt v. Davis, 13 Cal. App. 715, 110 Pac. 690; McMahon v. Plummer, 6 Dak. 42, 50 N. W. 480; Couch v. Crane, 142 Ga. 22, 82 S. E. 459; Walker v. Walker, 139 Ga. 547, 77 S. E. 795; Cleckley v. Mutual Fidelity Co., 117 Ga. 466, 43 S. E. 725; Bazemore v. Davis, 55 Ga. 504; Miller v. Roberts, 9 Ga. App. 511, 71 S. E. 927; Bowman v. Ayers, 2 Idaho (Hasb.) 465, 21 Pac. 405; Mortimer v. McMullen, 202 Ill. 413, 67 N. E. 20; Burnham v. Kidwell, 113 Ill. 425; Shores v. Barker, 88 Ill. 212; Bowen v. Schuler, 41 Ill. 192; Jennings v. Gage, 13 Ill. 610, 56 Am. Dec. 476; Drosdoff v. Fetzer, 178 Ill. App. 336; American Educational Co. v. Taggert, 124 Ill. App. 567; Robertson v. Merriam, 106 Ill. App. 610; Duncan v. Humphries, 58 Ill. App. 440; Boyer v. Berryman, 123 Ind. 451, 24 N. E. 249; Worley v. Moore, 97 Ind. 15; Johnson School Tp. v. Citizens' Bank, 81 Ind. 515; Cates v. Bales, 78 Ind. 285; Shepherd v. Fisher, 17 Ind. 229; State Life Ins. Co. v. Nelson, 46 Ind. App. 137, 92 N. E. 2; Stotts v. Fairfield, 163 Iowa, 726, 145 N. W. 61; Hendrickson v. Hendrickson, 51 Iowa, 68, 50 N. W. 287; Sell v. Compton, 91 Kan. 151, 136 Pac. 927; State v. Williams, 39 Kan. 517, 18 Pac. 727; Gribben v. Maxwell, 34 Kan. 8, 7 Pac. 584, 55 Am. Rep. 233; Burlington Tp. v. Cross, 15 Kan. 74; Sneed v. Waring, 2 B. Mon. (Ky.) 522; Abel v. Cave, 3 B. Mon. (Ky.) 159; Perkins v. Rice, Litt. Sel. Cas. (Ky.) 218, 12 Am. Dec. 298; Ackerman v. McShane, 43 La. Ann. 507, 9 South. 485; Byrne v. Hibernian Nat. Bank, 31 La. Ann. 81; Blake v. Nelson, 29 La. Ann. 245; Kleinwort v. Klingender, 14 La. Ann. 96; Sharp v. Ponce, 76 Me. 350; Houghton v. Nash, 64 Me. 477; Tisdale v. Buckmore, 33 Me. 461; Ayers v. Hewett, 19 Me. 281; Renshaw v. Lefferman, 51 Md. 277; Ewing v. Composite Brake Shoe Co., 169 Mass. 72, 47 N. E. 241; Commonwealth v. Lynn, 123 Mass. 218; Hinchman v. Matheson Motor Car Co., 151 Mich. 214, 115 N. W, 48; Crippen v. Hope, 38 Mich. 344; Dunks v. Fuller, 32 Mich. 242; Nolan v. Snod

that he can entitle himself to the return of what he, on his part, may have given or paid, and to be released from the obligation of the contract. The rule has been expressed in the statutory law of some of the states as follows: "Rescission, when not effected by consent, can be accomplished only by the use, on the part of the party rescinding, of reasonable diligence to comply with the following rules: (1) He must rescind promptly, upon discovering the facts which entitle him to rescind, if he is free from duress, menace, undue influence, or disability, and is aware of his right to rescind, and (2) he must restore to the other party everything of value which he has received from him under the contract, or must offer to restore the same upon condition

grass, 70 Miss. 794, 12 South. 583; Robinson v. Siple, 129 Mo. 208, 31 S. W. 788; Wiggins Ferry Co. v. Chicago & A. R. Co., 73 Mo. 389, 39 Am. Rep. 519; Knight v. Orchard, 92 Mo. App. 466; Waite v. Vinson, 14 Mont. 405, 36 Pac. 828; Brown v. Waters, 7 Neb. 424; Spiller v. Cass, 58 N. H. 489; Rogers v. Miller, 62 N. H. 131; Spencer v. St. Clair, 57 N. H. 9; Sanborn v. Batchelder, 51 N. H. 426; Redrow v. Sparks, 76 N. J. Eq. 133, 79 Atl. 450; Russell v. Russell, 63 N. J. Eq. 282, 49 Atl. 1081; Doughten v. Camden B. & L. Ass'n, 41 N. J. Eq. 556, 7 Atl. 479; Putney v. Schmidt, 16 N. M. 400, 120 Pac. 720; Weill v. Malone, 159 N. Y. 523, 53 N. E. 1133; Gould v. Cayuga County Nat. Bank, 86 N. Y. 75; Hedges v. Pioneer Iron Works, 166 App. Div. 208, 151 N. Y. Supp. 495; Hearn v. Schuchman, 80 Misc. Rep. 311, 141 N. Y. Supp. 242; Weill v. Malone, 91 Hun, 261, 36 N. Y. Supp. 114; Stumpf v. Halstead Land & Development Co., 59 Misc. Rep. 529, 110 N. Y. Supp. 838; Williams v. Dunn, 151 N. C. 107, 65 S. E. 754; Chesley v. Soo Lignite Coal Co., 19 N. D. 18, 121 N. W. 73; Railroad Co. v. Steinfeld, 42 Ohio St. 449; Brown v. Witter, 10 Ohio, 142; Reed v. McGrew, 5 Ohio, 376; Pierson v. Fisher, 48 Or. 223, 85 Pac. 621; Whitney v. Bissell, 75 Or. 28, 146 Pac. 141, L. R. A. 1915D, 257; Babcock v. Case, 61 Pa. 427, 100 Am. Dec. 654; Cooper v. Rutland, 99 S. C. 83, 82 S. E. 994; Sullivan v. Bromley, 26 S. D. 147, 128 N. W. 586; Lovell v. McCaughey, 8 S. D. 471, 66 N. W. 1085; Cates v. Sparkman, 73 Tex. 619, 11 S. W. 846, 15 Am. St. Rep. 806; Mills v. Alexander, 21 Tex. 154; Teas v. McDonald, 13 Tex. 349, 65 Am. Dec. 65; May v. Cearley (Tex. Civ. App.) 138 S. W. 165; Duluth Music Co. v. Clancy, 139 Wis. 189, 120 N. W. 854, 131 Am. St. Rep. 1051; Van Trott v. Wiese, 36 Wis. 439; Weed v. Page, 7 Wis. 503. As to restoration of consideration on cancellation of contracts made by insane persons, see, supra, § 276. As to restitution of property or consideration on disaffirmance of a contract by an infant, see, supra, § 310. Tender or restoration of consideration received, as requisite to cancellation or repudiation of release, compromise, or settlement, see, supra, § 396. Restoration or refund of unearned premium on cancellation of insurance policy, see, supra, § 483.