Real Estate: Wongs finally get it ‘right’ in court battle

By Jennifer Felten

Wayson and Susanna Wong (“Buyers”) bought a hillside home in San Carlos for $2.35 million from Ira and Toby Stoler (“Sellers”) in May of 2008. Before the close of escrow, the Sellers provided the Buyers with a transfer disclosure statement completed in 2002 by the prior owners, an updated 2008 transfer disclosure statement, and a supplemental Sellers’ checklist. These combined documents represented to the Buyers that the property was connected to a public sewer system.

Several months after they moved in, the Buyers discovered that they and 12 of their neighbors were connected to a private sewer system and were not directly serviced by the City’s public system. By this time, the Buyers had put approximately $300,000 into the home for remodeling. The Buyers first learned of the private sewer system when they received an email from a neighbor discussing it. Unbeknownst to the Buyers, this neighbor had been the coordinator of an informal homeowners’ association since 2005. That email advised the Buyers that not only was there an association and a private sewer system, but there were problems with the private sewer system which had suffered two sewage overflows in 2008.

Believing they had been deceived, the Buyers sued the Sellers and the real estate agents who brokered the sale alleging various causes of action, including rescission. After the Buyers settled their dispute with the real estate agents for $200,000, a court trial was held on the rescission claim only. Although the court found that the Sellers, with reckless disregard, made negligent misrepresentations to the Buyers, it declined to effectuate a rescission of the contract. Instead, it ordered the Sellers to be, for a limited time, indemnifiers to the Buyers for sewer maintenance and repair costs exceeding the $200,000 they obtained in their settlement with the agents. This ruling was based upon the court’s finding that rescission would place an undue burden on the Sellers.

The Buyers appealed and contended that the trial court erred in denying rescission. The appellate found for the Buyers, finding that they had properly rescinded the contract and that the trial court had abused its discretion in not awarding rescission because burden to a party committing fraud is not a factor in the determination of the viability of a rescission claim.

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Jennifer Felten

Jennifer Felten

Jennifer Felten, Esq., Partner, LLP, www.hhlawgroup.com, 699 Hampshire Road, Suite 105, Westlake Village, CA 91361, (805) 265-1031, [email protected].  Ms. Felten specializes in representing both individuals and legal entities, providing representation and guidance on a variety of real estate related matters.

 

 

 

 Upcoming Speaking Engagements for Ms. Felten

On July 10, 2015, Jennifer Felten, Esq. will be speaking at the NorCal Conference for the California Escrow Association in San Ramon.More information about the conference is available as follows: http://www.ceaescrow.org/_Calendar.asp
For more info on these events, feel free to email [email protected].

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