Reilley v. Richards

632 N.E.2d 507, 69 Ohio St. 3d 352

Opinions

Francis E. Sweeney, Sr., J.

The issue presented to this court is whether rescission of a real estate purchase contract is proper when there was a mutual mistake as to the character of the real estate that was material to the contract and where the complaining party was not negligent in failing to discover the mistake. For the following reasons, we answer “yes” and, accordingly, reverse the judgment of the court of appeals.

This court recognizes the doctrine of mutual mistake as a ground for the rescission of a contract under certain circumstances. In Irwin v. Wilson (1887), 45 Ohio St. 426, 15 N.E. 209, we held that a buyer is entitled to rescission of a real estate purchase contract where there is a mutual mistake as to a material part of the contract and where the complaining party is not negligent in failing to discover the mistake. A mistake is material to a contract when it is “a mistake * * * as to a basic assumption on which the contract was made [that] has a material effect on the agreed exchange of performances.” 1 Restatement of the Law 2d, Contracts (1981) 385, Mistake, Section 152(1). Thus, the intention of the parties must have been frustrated by the mutual mistake.

If the judgment of the trial court is supported by some competent, credible evidence, going to the essential elements of the case, the judgment will not be reversed unless it is against the manifest weight of the evidence. C.E. Morris Co. v. Foley Constr. Co. (1978), 54 Ohio St.2d 279, 8 O.O.3d 261, 376 N.E.2d 578.

In the present case, the judgment of the trial court was supported by competent, credible evidence going to the elements of the case. The evidence shows that appellant had intended to build his family home on the property, which was located at the end of a cul-de-sac with a stream bordering it on the southwest. The parties signed a real estate purchase contract on July 28, 1988. Subsequent to closing, appellant discovered that a portion of the property lies in a flood hazard area designated by the Federal Emergency Management Agency. Both parties testified that, at the time of contracting, they were unaware that the property was in a floodplain. Paul Willis, the Dublin City Engineer, testified that it is illegal to build or place any fill in the floodway or within twenty feet of the boundaries of the floodway, defined by Dublin ordinance. While building might be permitted elsewhere in the flood hazard area, permission depends upon the nature of the development and the impact it would have on the stream. In addition, David Norman, a professional engineer, testified that more than half of the property is in the flood hazard zone.

Further, Michael Kennedy, the builder who was to build appellant’s residence, testified that, having seen the drawings showing where the floodplain and flood hazard zone are on the lot, he would not want to build on the lot because he could not warrant the property for one year, as is standard building practice.

Based upon the above, we find that the lack of knowledge that a significant portion of the lot is located in a floodway is a mistake of fact of both parties that goes to the character of the property such that it severely frustrates the appellant’s ability to build a home on the property. Thus, it is a mutual mistake that is material to the subject matter of the contract. Therefore, the trial court’s finding that the mutual mistake was material to the subject matter of the contract was supported by competent, credible evidence and, accordingly, was not against the manifest weight of the evidence.

Additionally, while appellant did have an escape clause in his first contract with appellee allowing him “sixty days from acceptance of this contract to satisfy himself that all soil, engineering, utility and other site related considerations are acceptable,” this inspection provision does not mean that appellant assumed a duty to discover the floodplain, the violation of which precludes rescission of the contract. Appellant was a lawyer but he had no experience in real estate law and, thus, was an unsophisticated party at the time of the transaction. Appellant did have his builder inspect the property but he did not discover, and could not have discovered, the floodplain by looking at the property. The court of appeals wrongly concluded that appellant’s failure to hire engineers to discover the floodplain within the sixty days constituted negligence. We agree with the trial court that appellant, an unsophisticated buyer, was not negligent in failing to discover that the lot was in a designated floodplain.

Accordingly, we conclude that rescission of the contract is proper, as a mutual mistake existed as to the character of the property which is material to the subject matter of the contract and the appellant was not negligent in failing to discover the mistake.

Judgment reversed.

Douglas, Weight and Resnick, JJ., concur. Moyer, C.J., A.W. Sweeney and Bryant, JJ., dissent. Thomas F. Bryant, J., of the Third Appellate District, sitting for Pfeifer, J.