Cousineau v Walker
S Ct AK 613 P 2d 608 [1980]
Author:- Sam Biers

Avoidance of the K : Fraud

Relevant Facts: Df Walker purchased 9.1 acres for $140 K, then listed it w/ a realtor stating that “Engineer Report says over 1 million in Gravel on Prop,” and requested $245K.   A sale under that listing failed.  The subsequent listing stated “minimum 80K cubic yds of gravel,” 580 ft of Hwy frontage, and 2.6 acres had been zoned for commercial use.  The price was increased to $470K.   Df specifically requested that the appraiser not mention the gravel in assessing the value of the property, and the hwy frontage was also omitted. Pl, Cousineau a contractor also engaged in gravel extraction discussed w/ Df the possibility of extracting gravel from the property(Df denies) the determined that $385K was the sale price.  That price was contingent upon zoning. After zoning was approved extraction began.  Only 6K cubic yds were unearthed and no more was available on the property.  Pl notified Df of their intent to rescind.

Legal Issue(s): Whether Buyers of property under a land sales K are entitled to rescission b/c of false statements made by the Seller?

Court’s Holding: Yes

Procedure: Sup Ct C: buyers did not rely on misrep; misreps were not material; and reliance by Buyers was not justified. Deed of trust foreclosure sale granted property back to Df;  S. Ct AK Reversed and remanded to determine damages.

Law or Rule(s): A K may be rescinded if there was a misrepresentation, which was fraudulent or material; and which induced the recipient to make the K; the recipient must have been justified in relying on the misrepresentation

Court Rationale: 1^st the Pl must have relied on the misrep.  Pl is in the gravel business and came across the property by its listing “1 million in gravel,” and the following listing “80K cubic yds.”  Pl purchased equipment and entered into K for the removal of the gravel.

2^nd the statements must be material to the transaction such that it would cause a R P to enter into K.  A R P would likely consider the existence of gravel an important piece in developing property. Df’s agent testified that the statements were placed b/c gravel was this property’s best points and a selling point. 

3^rd the Pl must have been justified in relying upon the material misrep.  A buyer is entitled to rely on an express warranty when factual statements are provided as to specific attributes. A purchaser of Land may rely on material misreps made by the Seller and is not obligated to ascertain whether such reps are truthful. Pl may have exhibited poor judgment, he was not so unreasonable in view of Df’s description of the prop that recovery should be denied.

Plaintiff’s Argument: Df’s description which Pl relied upon was a material misrep of facts known by the Df which caused the Pl to enter into a K.

Defendant’s Argument: Pl’s reliance on Df’s and Df’s real estate agent’s was imprudent and unreasonable.  Pl failed to obtain or review the engineer’s report, the survey or examine the plat.  Pl failed to make calculations, or measure the frontage.  Pl is an experienced business person who frequently bought and sold real estate.