Assume a commercial dispute in which a plaintiff brings a count for breach of contract (with a request for compensatory damages) along with a fraud-related count (which seeks rescission of the subject contract). In such a situation, the plaintiff is attempting to affirm the contract by seeking damages for breach while simultaneously attempting to disavow the contract by seeking rescission. Because these two remedies are inconsistent and mutually exclusive, it is well established that the plaintiff is required to elect the remedy it wishes to pursue. However, there is a circuit split in Florida on whether such an election must be made prior to the entry of judgment or prior to trial.
The doctrine of election of remedies is an application of the doctrine of estoppel, and operates on the idea that a party electing one course of action should not be permitted to avail itself of an incompatible course. For the doctrine of election of remedies to apply, the remedies at issue must be coexistent and inconsistent. If two remedies are inconsistent or mutually exclusive such that one implies negation of the underlying facts necessary for the other, then the choice of one remedy operates as an election. In particular, it is well established that the remedies for breach of contract and rescission are inconsistent. The reason these remedies are inconsistent is because the remedy of damages for breach of contract is based on an affirmance of a contract, while the remedy of rescission is premised on the disavowal of a contract.
As noted by the Florida Supreme Court, and premised on the distinction between cases heard in equity and at law, so long as the elected remedy is appropriate and effectual,
They [plaintiffs] cannot, of course, pursue to a final conclusion both the remedy in equity and that at law, there being a patent inconsistency between a suit in equity to rescind and cancel a contract for fraud or other cause and an action at law to recover damages for breach thereof. Thus, when a party takes legal steps to enforce a contract, he relies upon its provisions as a basis for recovery and it is generally held that he thereby makes a conclusive election not to rescind. By the same token, it is the general rule that the choice of the equity remedy by way of rescission and cancellation operates as an election of remedies and bars a subsequent action at law for damages.
As such, benefit of the bargain damages are not available to a party who repudiates (rather than affirms) a contract due to the doctrine of election of remedies.
In the Third District, a plaintiff may be required to elect its remedy prior to trial. In all other Florida Districts, however, a plaintiff is only required to elect its remedy prior to the entry of judgment. Accordingly, there is an inter-circuit split amongst Florida courts as to whether a plaintiff is required to elect its remedy prior to trial or merely prior to the entry of judgment.
The Third District should eschew the rule which may require a plaintiff to elect its remedy prior to trial and instead should follow the lead of other Florida districts such that election of remedies is only required prior to the entry of judgment. In addition to providing a more uniform standard throughout the state, a change in the Third District’s rule requiring election prior to trial will allow for resolution of the entirety of a dispute and will eliminate the risk that a plaintiff, having elected a remedy prior to trial, be forced to try the majority of the case again in search of an alternative remedy in the event that the first trial is unsuccessful. The concepts of fairness to litigants and judicial economy demand no less.
Update:
A trial judge recently dismissed a plaintiff’s complaint which sought relief under both survival and wrongful death damages, and directed that she file an amended complaint which chose between one theory or the other. In other words, the judge required that the plaintiff elect its remedy at the pleading stage.
The appellate court upheld the trial court’s action, finding that the plaintiff would not be irreparably harmed by electing the remedy at the pleading stage and that any error in the trial court’s ruling could be corrected in a postjudgment appeal. In doing so, the Second District Court of Appeal basically followed the Third District Court of Appeal’s minority position which allows a court to require a plaintiff to elect its remedy prior to judgment, thereby exacerbating the District Court split as to the timing of an election of remedies.
One of the appellate judges reluctantly concurred with the majority opinion, but felt that the trial court order itself was erroneous because it is more reasonable that an election of remedies take place after the jury returns its verdict. While noting that trying one theory of recovery first would not foreclose a later action available under the other theory, the appellate court ruling basically countenances a waste of judicial resources (not to mention an inordinate delay in justice for the plaintiff) when it would be more logical to try all of the issues and theories in one case, at one time, and allow the plaintiff to elect its remedy postjudgment.
This article was first published in the April 2007 issue of the Dade County Bar Association Bulletin.
__________________________________________
Related posts:
Tags: Misc’l
