## Facts

- A landowner leased commercial property to Friendly Ice Cream Corporation in 1976 for operation of a retail ice cream store, with a 15-year term and five 5-year renewal options.
- The lease required monthly base rent plus annual “percentage rent” equal to 2% of gross sales exceeding $275,000.
- By 2001, the lease produced $1,105 per month in base rent and $7,984.68 in annual percentage rent.
- Friendly and its operator, FriendCo, decided to close the store while substantial time remained under the lease if renewals were exercised.
- A bank sought an assignment of the lease to redevelop the site and offered Friendly about $800,000, conditioned on eliminating the percentage-rent obligation.
- FriendCo’s vice president and in-house counsel, a licensed attorney, contacted the elderly lessor to obtain consent to assign the lease and amend it to remove percentage rent for bank use.
- After communications involving the lessor’s designated attorney and other advisers, the parties executed a written lease amendment eliminating percentage rent and increasing base rent by about $700 per month to approximately $1,805, a figure the lessor requested.
- The lessor later alleged the amendment was far below fair market value and resulted from pressure and exploitation of her age and condition.

## Issues

1. Whether the lessor proved by clear and convincing evidence that the lease amendment resulted from undue influence sufficient to justify rescission.
2. Whether clear and convincing evidence established a prima facie case of undue influence through “great weakness of mind” plus grossly inadequate consideration or suspicious circumstances, and whether the defendants rebutted that showing.

## Decision

- The Supreme Court of Virginia affirmed the decree rescinding the lease amendment.
- The Court held the evidence supported findings that the lessor had “great weakness of mind” and that the transaction involved grossly inadequate consideration and suspicious circumstances.
- The Court concluded the defendants failed to rebut the resulting inference that the lessor’s free agency was destroyed, warranting equitable rescission.
- The Court gave substantial deference to the chancellor’s ore tenus factual findings and would not disturb them absent clear error.

## Legal Principles

- Equity will not set aside an agreement merely because it is a hard bargain; rescission is available when circumstances support an inference of imposition, deception, or undue influence that destroys the party’s free agency.
- Undue influence is a species of fraud and must be proved by clear and convincing evidence.
- A prima facie case of undue influence is shown by clear and convincing evidence of (1) great weakness of mind and (2) grossly inadequate consideration or suspicious circumstances surrounding the transaction.
- Once a prima facie case is established, the burden shifts to the proponent of the instrument to rebut the inference of undue influence.
- On appellate review of an equity decree based on live testimony, a chancellor’s factual findings are given great weight and are reversed only if plainly wrong or unsupported by evidence.

## Conclusion

The court upheld rescission of the lease amendment because the lessor proved, by clear and convincing evidence, mental weakness coupled with a markedly one-sided exchange and suspicious circumstances, and the defendants did not rebut the inference that undue influence overcame her free agency.


Friendly Ice Cream Corp. v. Beckner, 268 Va. 23, 597 S.E.2d 34 (Va. 2004)