Court Opinion

ID: 9761476
Source: CourtListenerOpinion
Date Created: 2023-08-29 01:43:41.358467+00
Date Added: 2024-06-11T07:29:22.551291
License: Public Domain

James R. Cooper, Judge, dissenting. I respectfully dissent from the result reached by the majority in this case. Mr. Rector listed the property in question and attempted to sell it for about ten months. Mr. Rector then organized a group of investors, including himself, and they purchased the property in May of 1977. Twenty thousand dollars was paid down and the balance of the purchase price was secured by a promissory note and vendors lien. In September of 1978, the property flooded and a substantial amount of damage was done to the house in question. After that flood Mr. Rector investigated the potential for flooding on the property and in April of 1979, the property again flooded. In July of 1979, Mr. Rector and his group of investors sued for rescission, claiming that appellants misrepresented the property by claiming that it did not flood during periods of rain. Appellants denied the misrepresentation and counterclaimed for foreclosure. The trial court rescinded the sale and dismissed the counter-claim and ordered $23,790.92 to be returned to appellees by appellants. In order to grant a rescission of a contract for a sale of property for misrepresentation, a court must find that (a) there was a misrepresentation of a material fact, (b) the plaintiffs relied on the material fact, (c) the plaintiffs were induced thereby to make the contract, (d) the information relied upon by the plaintiffs would not be derived by their observation and experience, and (e) the misrepresentations injured the plaintiffs. English v. North, 112 Ark. 489, 166 S.W. 577 (1914). The trial court found that Mr. Ballard had represented that the property did not and would not flood and that those representations were made to induce the sale of the property. The court also found that appellees were not aware of the history of flooding and relied on those statements; further the court found that Mr. Ballard knew the representations were not true and that the flooding did damage appellees by reducing the value of the property. So that we might have a perspective as to the degree to which Mr. Rector may have relied on Mr. Ballard’s representations, I have included in this dissent a copy of defendants’ exhibits *\ and *7. These exhibits show two views of the house with a foundation which raises it several feet off the ground. The ventilation ducts under the house are approximately six feet off the ground as is the air conditioning unit which is mounted on a pedestal. There are nine steps leading up to the front and rear doors of the residence. Further it is unquestioned that this property is located in the vicinity of Fourche Creek. Mr. Rector testified that he was aware that Ballard had owned the property over 30 years and that he relied on Mr. Ballard’s representations that the property was not subject to flooding. Even if Mr. Ballard misrepresented this fact, I find it impossible to believe that a person who is a licensed real estate broker and who has had prior experience in real estate matters in Pulaski County would not be under some duty to further investigate when faced with a house constructed as this one was. I also note that Mr. Rector testified that he had discussed the matter of flooding on the south end of the property with several potential buyers and that he believed the potential flooding was a factor in their decision not to buy the property. The majority quotes from Herrick v. Robinson, 267 Ark. 576, 595 S.W. 2d 637 (1980) which holds that a person who wishes to rescind must, as soon as he discovers the truth, act with reasonable diligence to restore the parties to their original position. That case also indicates that if the individual continues to treat the property as his own then he may be held to have waived the objection. I think that is exactly the situation we are faced with here. Mr. Rector viewed the property some three years prior to the time suit was brought when he originally listed the property for sale. The manner in which the house is constructed was enough to put any reasonable man under considerable suspicion (if not to convince him totally) that the property was subject to flooding or, at the very least, that the person who built the house was terrified of the possibility of flooding. I then note that after Mr. Rector had purchased the property, the house did flood in September of 1978. Between September of 1978 and July of 1979, the appellees gave no notice of an intent to rescind nor did they complain of any fraud or deceit which had induced them into purchasing the property. It was only after the property had flooded again in April of 1979, that suit was finally brought. It seems obvious that appellees did not really consider the property to be subject to flooding until it had flooded a second time and they realized additional expenses were going to be necessary from time to time when the property did flood. I would hold that there is simply no credible evidence that Mr. Ballard’s misrepresentation, even if there was one, was sufficient to induce Mr. Rector to purchase the property. Further, a preponderance of the evidence does not support a finding that Mr. Rector relied on Ballard’s representation in the face of the appearance of the house and its location in the city of Little Rock. Thirdly, I would reverse the Chancellor’s decision because it is not possible in this case to restore the parties to the original position. Mr. Rector and his real estate firm charged a commission of $9,000.00 on the sale of this house to a group of investors headed by Mr. Rector. Mr. Rector personally retained $4,500.00 of that commission and Rector, Phillips, Morse, Inc., which was not a party to this lawsuit, received the balance. The Chancellor ordered that the $4,500.00 Mr. Rector received was to be accredited to Mr. Ballard, but no credit was allowed for the balance of the commission paid. Therefore, we have a situation where Mr. Ballard has paid $9,000.00 in commission through a broker who was the vendee, and now since the vendee has been successful in rescinding the contract, he must still stand the loss of half the commission he paid. This is a totally inequitable result, and I disagree with it. I would reverse and remand the case with instructions to allow appellees the alternative of bringing the payments current and continuing under their contract or granting a foreclosure on the counter-claim to appellants. I am authorized to state that Judge Cloninger joins in this dissenting opinion. [[Image here]] DEFENDANTS’ EXHIBIT NO. 1 [[Image here]] DEFENDANTS’ EXHIBIT NO. 7