Evergreen Land Co. v. Gatti, 74-229

• Decision Date: 11 March 1977
• Docket Number: No. 74-229,74-229
• Citation: 554 S.W.2d 862
• Parties: EVERGREEN LAND COMPANY, Appellant, v. Lawrence GATTI, Appellee. . Opinion of
• Court: Kentucky Court of Appeals

Page 862

554 S.W.2d 862

EVERGREEN LAND COMPANY, Appellant, v. Lawrence GATTI, Appellee.

No. 74-229.

Court of Appeals of Kentucky.

Opinion of March 11, 1977 Withdrawn.

Opinion Reissued As Modified On Denial of Rehearing Aug. 12, 1977.

William W. Lawrence, Lawrence & Lawrence, Louisville, for appellant.

Bernard B. Davis, Handmaker, Weber & Meyer, Louisville, for appellee.

Before HOWERTON, GANT and REYNOLDS, JJ.

HOWERTON, Judge.

By written contract of July 18, 1972, Appellant agreed to sell and Appellee agreed to purchase a 3.01 acre tract of land for $165,000.00. By its terms, the contract stated, "Seller represents the site is presently zoned C-1, Commercial." In fact, 2.86 acres was zoned C-2, and .15 acre or approximately 5% of the tract was zoned R-4. Little significance is placed on the C-2 zoning. From the record it appears that the C-2 classification incorporated all allowable uses under C-1. The controversy in this case, and the basis for Appellee's rescission of the agreement, was the fact that a portion of the property was zoned R-4 which imposed more restrictions on the property than C-1.

The property in question was located on Shelbyville Road, and the price for the tract was based upon the front footage of the property on that road. The tract was rectangular in shape, except for a spur which extended into an adjoining parcel of land. The 2.86 acre rectangular-portion of the tract in question was zoned C-2, and the .15 spur had no frontage on Shelbyville Road, and it was otherwise land-locked.

On August 17, 1972, the Appellee made known to Mr. Thomas Fisher, president of Appellant's corporation, that he would not accept title by reason of the discrepancy in the zoning. The Appellee testified that his only reason for not closing the transaction was the zoning discrepancy. He affirmed that there was no other condition in the contract which was not complied with by the Appellant. The Appellee also stated that he did now know the "spur" was a part of the land, and that he decided not to comply with the contract when he was informed by his attorney that there was a "wedge" in the property which was zoned R-4, rather than C-1. He did not know how much of the property was not zoned for commercial purposes, but he testified that he envisioned there was a "pie-shaped kind of formation . . ." that was zoned R-4 and that this formed a "pie-shaped kind of deal going right through the piece of property." It was not until after he had tendered his cancellation of the contract that he discovered that it was only the "spur" that was zoned R-4.

All parties were aware of the fact that the property was the subject of a foreclosure action, and the property was subsequently sold at public auction on September 11, 1972.

Appellant brought suit to recover damages, namely the difference between the contract price and the price the land brought at the public auction. The only proof presented was that the property sold for $121,000.00 and that there was an additional $3,000.00 of court costs incurred because of the sale giving a total net loss to the Appellant of $47,000.00.

Conflicting evidence was presented as to whether or not the Appellee had knowledge of the R-4 zoning regulation prior to signing the contract. The Appellee had learned about the property through an advertisement and was otherwise represented by a real estate broker. The trial court, however, found that after the contract was signed "matters took their normal course until a point in time that it was discovered by the defendant, through his lawyers, that a small portion of the three acres, more precisely .15 acre, was zoned R-4, Residential." The Appellant argues that the Appellee's allegations of misrepresentation had no basis because there existed substantial evidence that the Appellee was fully aware of the facts before he executed the subject's sales contract. We must, however, take the finding by the court that the Appellee was not made aware of the R-4 zoning prior to executing the contract. Such a finding was not manifestly against the weight of the evidence.

The Appellant presents several arguments, but only one is decisive in this case. The Appellant argues that even if there was a misrepresentation within the written contract, such misrepresentation was not material. The trial court made no specific determination as to the materiality of the misrepresentation except to provide,

The written contract will stand as is, and the court will not tamper with its meaning. The contract speaks for itself . . . .

By not accepting the various contentions of either side, the court will strictly rely on the contract itself.

This court will not attempt to decide in this case whether or not the misrepresentation regarding zoning was material or not. We do conclude, however, that the misrepresentation in this situation was not material per se. Generally, a misrepresentation regarding zoning will not be material per se unless the variance is such that the buyer will obviously be unable to use the property for its intended purposes. For a court to determine that a zoning discrepancy in a land contract is a material misrepresentation, it must make specific findings based upon evidence presented by an offended party seeking to rescind the contract or recover damages.

On several occasions the Kentucky Supreme Court has been faced with land purchase contracts in which the amount of land actually conveyed proved to be less than that, specified in the contract. The case of Wallace v. Cummins, 334 S.W.2d 904 (Ky.1960) is an example of the court's adoption of a standard whereby the court has refused to allow relief for misrepresentation, unless the deficiency in the land described in the contract is more than 10% of the total land being conveyed. Both rescission and damages have been denied. See also, Parsons v. Lunsford, 21 Ky.Law Rep. 1536, 55 S.W. 885 (1900); Burkholder v. Farmers' Bank of Kentucky, 23 Ky.Law Rep. 2499, 67 S.W. 832 (1902); and Page v. Hogan, 150 Ky. 726, 150 S.W. 801 (1912). The 10% rule, however, is based on the idea that in cases where sales are by the tract or where quantity is mentioned merely as descriptive the parties intended to take some risk on quantity. In other cases where the circumstances have made it plain that no risk was intended or could not be tolerated, or where sales were found to be truly by the acre, rescission or damages have been allowed. See, Anthony v. Hudson, 131 Ky. 185, 114 S.W. 782 (1908). An example of a situation where size could be vital and a variance material would be where a minimum size lot would be required for installing a septic tank. If a person purchased a lot to establish a dwelling where sanitation would require the installation of a septic tank, the purchaser should not be bound to the purchase contract, if the agreement called for conveyance of an amount of land equal to or greater than the minimum required and the area was deficient.

The Appellant argued that since the portion zoned R-4 represented only 5% of the total area, rescission should not be allowed, because it would not have been allowed if the spur had not existed. Even though zoning may relate to quality, whereas size relates to quantity, there...