Friday, March 6, 2020
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Unilateral Mistake of Fact Doesn’t Justify Rescission—C.A.
By a MetNews Staff Writer
A man and his company are not entitled to rescission where they purchased a deed of trust at a nonjudicial foreclosure sale, not knowing that the lien was in second position and that the deed was not worth the $502,000 that was bid, Div. One of the Fourth District Court of Appeal held yesterday.
Plaintiff Matthew Matson learned about the foreclosure sale from software called “PropertyRadar.” He gained the impression that the deed constituted a first-priority lien.
In an opinion affirming a summary judgment for defendants S.B.S. Trust Deed Network, the trustee, and Bank of Southern California, N.A., Acting Presiding Justice Patricia D. Benke said:
“Plaintiffs claim they are entitled to a judgment of rescission because they made a unilateral mistake of fact that resulted in an unconscionable loss to them and a corresponding unconscionable windfall to defendants. We conclude that plaintiffs are not entitled to rescission of the nonjudicial foreclosure sale because there was no irregularity in the sale. Under the common law claim of unilateral mistake, plaintiffs bore the risk of mistake, and thus relief cannot be granted on that ground.”
Supreme Court Case
Benke differentiated the situation from that present in Donovan v. RRL Corp., decided by the California Supreme Court in 2001. There, it was held that an automobile dealer was not obliged to sell a vehicle at the advertised price because the price that was published in a newspaper was inconsistent with the copy that was provided, as the result of faulty proofreading.
The jurist wrote:
“The Donovan court set forth the following grounds for a party to establish rescission based upon unilateral mistake (changing the identification of parties to fit the facts of this case); ‘Where the [defendant] has no reason to know of and does not cause the [plaintiffs] unilateral mistake of fact,... : (1) the [plaintiff] made a mistake regarding a basic assumption upon which the [plaintiff] made the contract; (2) the mistake has a material effect upon the agreed exchange of performances that is adverse to the [plaintiff]; (3) the [plaintiff] does not bear the risk of the mistake; and (4) the effect of the mistake is such that enforcement of the contract would be unconscionable.’…”
Buyer Bears Risk
She continued:
“Plaintiffs here concentrate their argument on claiming that enforcement of the contract would be unconscionable as to them, because the price they paid substantially exceeded the fair market value of the deed of trust. They cannot, however, meet the third requirement, that they do not bear the risk of mistake.”
Benke went on to say:
“Acting with limited knowledge was not the error in Donovan. The court granted relief to the car dealer because he acted with the care common to a “reasonable and cautious businessperson” in delegating to the newspaper the printing of the car price in the advertisement….Matson, on the other hand, did not act as a cautious businessperson in deciding to bid at a nonjudicial foreclosure sale in full reliance on a private software application, without his own thorough investigation of the liens on the property.
“Here, Matson intended to make an offer of $502,000, in order to submit the highest bid over two other bidders. He did not make a mere clerical error. Plaintiffs were not entitled to relief under the common law principle of a unilateral mistake of fact due to their error in judgment in intentionally making that high offer.”
The case is Matson v. S.B.S. Trust Deed Network, D074442.
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