Opinion ID: 3155754
Heading Depth: 2
Heading Rank: 1

Heading: The February 2011 Lease is Void

Text: We begin with the fourth lease, signed by plaintiff Mr. Hickman in February 2011. The circuit court ruled that the entire February 2011 lease “was procured due to a mistake in fact and misrepresentation on the part of [defendants] Chesapeake, Red Sky and Murphy, and is therefore void and unenforceable as a matter of law.” We affirm the circuit court’s ruling. The plaintiff, in his complaint, specifically alleged that his signature on the February 15, 2011, lease had been procured by false representations from Chesapeake and its agents, Red Sky and Mr. Murphy, or by a mutual mistake of fact. When Chesapeake sought arbitration of the question (while citing the January 2011 arbitration clause, rather than the February 2011 clause), the plaintiff properly severed and challenged the enforceability of the arbitration clause. 26 The plaintiff asserts he was induced to sign the February 2011 lease by fraudulent conduct. “Fraud in the procurement of a deed or contract always renders it voidable.” Syllabus Point 1, Jones v. Comer, 123 W.Va. 129, 13 S.E.2d 578 (1941). See also North v. W.Va. Bd. of Regents, 175 W.Va. 179, 183, 332 S.E.2d 141, 145 (1985) (“[I]t is settled doctrine that fraud in the procurement of an agreement or the obtaining of some benefit vitiates any right to receive the fruits of the contract or the benefits.”); Syllabus Point 2, Engeman v. Taylor, 46 W.Va. 669, 33 S.E. 922 (1899) (“Any contract, the making of which is induced by fraud of either party practiced upon the other at the time the contract is made, or while negotiations in regard to it are being carried on, is voidable, and may be rescinded at the election of the party defrauded.”). “A party that is misled as to the essential terms of a contract does not technically agree to the contract, as no assent to its terms has been formulated due to the misrepresentation.” Herrod v. First Republic Mortgage Corp., 218 W.Va. 611, 625-26, 625 S.E.2d 373, 387-88 (2005). The plaintiff also asserts he signed the February 2011 lease while laboring under a mistake of fact. “As a general rule, one who enters into a contract or performs some act while laboring under a mistake of material fact is entitled to have the transaction or the act set aside in a court of equity[.]” Syllabus Point 1, in part, Webb v. Webb, 171 W.Va. 614, 301 S.E.2d 570 (1983). “A mistake of fact consists of an unconscious ignorance or forgetfulness of a material fact, past or present, or of a mistaken belief in the past or present existence of a material fact which did not or does not actually exist.” Syllabus Point 2, in part, Id. See also, Brannon v. Riffle, 197 W.Va. 97, 101, 475 S.E.2d 97, 101 (1996) (“Accordingly, if the parties were suffering under a mutual mistake 27 regarding the validity of the . . . lease at the time they entered into the . . . agreements and consequently, the resulting ‘written instrument . . . does not embody the “bargained-for” agreement of the parties[,]’ the law treats what would otherwise be viewed as a mistake of law as a mistake of fact.”). As a procedural aside, we note that the circuit court failed to sever the arbitration clause from the remainder of the February 2011 lease. The circuit court merely found the entire lease to be invalid. While this is technically improper under the FAA, we do not find this problematic,17 for an obvious reason: Chesapeake never asserted it was entitled to arbitration under the February 2011 arbitration clause. Chesapeake failed to raise the arbitration clause even after the plaintiff challenged the validity of the entire February 2011 lease. Instead, Chesapeake asserted it was entitled to 17 We recently considered the confounding nature of such technical improprieties in a footnote to Schumacher Homes of Circleville, Inc., 235 W.Va. at 342 n. 6, 774 S.E.2d at 8 n. 6, where we discussed Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967). In Prima Paint, the plaintiff and defendant entered into a consulting agreement that contained an arbitration clause. The plaintiff later sued the defendant, claiming the entire agreement was procured by fraud. The Supreme Court ruled that, under the FAA, the arbitration clause was presumed valid and enforceable unless the plaintiff proved that, separately from the rest of the consulting agreement, the clause had also been procured by fraud. Because the plaintiff did not sever the arbitration clause from the overall contract and challenge it exclusively, the Supreme Court ordered that the case be sent to arbitration. Id., 388 U.S. at 401-404.