California Appellate Court Orders Rescission of a Seven-Year-Old Purchase Agreement Due to Seller’s Misrepresentations

In Wong v. Stoler, a California Appellate Court ordered the rescission of a seven-year-old purchase agreement because the sellers misrepresented the property was connected to the city sewer system. In Wong, plaintiffs purchased the property and undertook an extensive remodeling project. A few months later, plaintiffs learned the home was connected to a private sewer system without a formal association in place to pay for maintenance. Plaintiffs brought suit seeking rescission of the purchase agreement.

At trial, the court found the sellers acted with reckless disregard in negligently misrepresenting material facts about the true nature of the sewer system, and the plaintiffs would not have purchased the home had they known of the circumstances. However, the trial court denied rescission of the purchase agreement because of the burden it would place on the sellers, who had already purchased a new property and spent money to improve it.

The court of appeal reversed holding that the plaintiffs were entitled to rescission of the purchase agreement. The court stated that the seller’s undue burden is not to be considered when that party attempts to profit from her misrepresentations. It also found no “insurmountable obstacles” in rescinding a seven-year-old purchase agreement despite many changes being made to the property.

Shannon B. Jones, Partner, sbj@sbj-law.com Mark Chuang