Title: Rancourt v. Verba

State: vermont

Issuer: Vermont Supreme Court

Document:

Rancourt v. Verba  (95-029); 165 Vt 225; 678 A.2d 886

[Opinion Filed 15-Mar-1996]

[Motion for Reargument Denied 20-May-1996]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                                 No. 95-029


Shane and Deborah Rancourt                          Supreme Court

                                                    On Appeal from
     v.                                             Grand Isle Superior Court

John and Susan Verba                                September Term, 1995

Brian L. Burgess, J.

W. Owen Jenkins, Essex Junction, for plaintiffs-appellees

L. Randolph Amis, Burlington, for defendants-appellants


PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


       ALLEN, C.J.   Defendants sold plaintiffs a parcel of land in North
  Hero, which the parties subsequently learned was unsuitable for lakeshore
  development.  Plaintiffs sued to rescind, but the court allowed defendants
  to elect rescission or pay damages to plaintiffs for the diminished value
  of the property.  It awarded plaintiffs attorney's fees, but denied
  plaintiffs' claim for prejudgment interest and consequential damages.  Both
  parties appealed.  We reverse.

       In November 1989, defendants sold a ten-acre, lakeshore lot in North
  Hero to plaintiffs for $115,000.  Defendants knew that plaintiffs intended
  to build a residence on the lot in close proximity to the lakeshore. 
  Plaintiffs prepared the lakeshore building site by adding fill, but because
  this site preparation was done without permits, it violated state and
  federal wetland regulations.  The trial court found that "[a]s a practical
  matter, a federal permit could not be obtained to place fill on or
  otherwise develop this wetland building site" and that the state permits
  were similarly "unavailable."  Plaintiffs were later ordered to remove all
  fill placed on the building site, which included the fill placed by them
  after closing and by defendants prior

 

  to closing.(FN1)

       On learning that they could not build near the lake, plaintiffs
  demanded that defendants rescind the transaction, refund the purchase
  price, and pay consequential damages resulting from the purchase.  After
  defendants refused, plaintiffs brought this rescission action, which is
  based on a claim of mutual mistake regarding the suitability of the lot for
  lakeshore development.  In the alternative, plaintiffs requested
  compensatory damages.

       The court found that the agreement was based upon a mutual mistake of
  fact resulting from "mutual, but innocent, misunderstanding."  It concluded
  that defendants did not breach their contract with plaintiffs or their
  warranties of title, did not commit fraud, and did not violate Act 250.(FN2)
  The court gave defendants the option of (1) paying plaintiffs $55,000 (the
  difference between the $60,000 fair market value of the lot at closing and
  the $115,000 purchase price), plus the cost of removing the fill which
  defendants had placed on the building site prior to closing, or (2)
  rescinding the transaction and refunding the purchase price of $115,000,
  less the cost of removing the fill which plaintiffs had placed on the
  building site after closing.  It awarded attorney fees to plaintiffs under
  the Vermont Consumer Fraud Act,  9 V.S.A. §§ 2451-2480g.

       Both parties moved for modification of the trial court's order, and
  the court concluded that defendants did not violate the Vermont Consumer
  Fraud Act.  It nevertheless granted plaintiffs attorney's fees on equitable
  grounds.  It declined to award prejudgment interest on the $55,000,
  concluding in its modification order that the judgment amount had not been
  readily ascertainable and that plaintiffs' contribution to the parties'
  mutual mistake barred prejudgment interest as a matter of equity.  The
  court also declined to credit defendants with the $5,000 that

 

  plaintiffs received in settlement of a potential claim against their
  attorney, noting that there was no evidence that the settlement was
  intended to mitigate plaintiffs' financial loss from the mutual mistake.(FN3)

       Defendants advised the court of their election to pay the plaintiffs
  damages rather than rescind the transaction.  Judgment was entered in
  plaintiffs' favor for $55,000, plus defendants' pro rated portion of the
  cost of removing the fill and attorney's fees. 

       Defendants appealed, arguing that the court should not have awarded
  attorney fees and should have credited them for the $5,000 that plaintiffs
  received from their attorney.  Plaintiffs cross-appealed the court's
  failure to order rescission, award prejudgment interest on the total
  purchase price, and award damages for other costs and expenses incurred. 
  In the alternative, plaintiffs have cross-appealed the court's failure to
  award prejudgment interest on the $55,000 and failure to award
  consequential damages for the land gains tax assessed against the lot.

       The central issue in the case is when is rescission the proper remedy
  for mutual mistake.  Plaintiffs argue that the trial court erred when it
  granted a remedy other than rescission.  We agree. 

       The usual remedies applied to mutual mistake in contract formation are
  rescission and reformation.  Paradise Restaurant, Inc. v. Somerset
  Enterprises, Inc., 6 Vt. L. Wk. 355, 356 (1995).  "Where a contract has
  been entered into under a mutual mistake of the parties regarding a
  material fact affecting the subject matter thereof, it may be avoided . . .
  at the insistence of the injured party, and an action lies to recover money
  paid under it."  Enequist v. Bemis, 115 Vt. 209, 212, 55 A.2d 617, 619
  (1947); see also 13 Williston on Contracts § 1557, at 240 (3rd ed. 1970)
  ("[W]here the error is in the substance of the bargain . . . rescission
  with restitution of whatever has been parted with is the only permissible
  relief . . . .").   In Moonves v. Hill, 134 Vt. 352,