Home Savers, Inc. v. United Sec. Co., 17249

• Decision Date: 27 August 1987
• Docket Number: No. 17249,17249
• Citation: 103 Nev. 357,741 P.2d 1355
• Parties: HOME SAVERS, INC., and Ray Bailey, Appellants, v. UNITED SECURITY COMPANY, and United Mortgage Company, Respondents.
• Court: Nevada Supreme Court

Page 1355

741 P.2d 1355

103 Nev. 357

HOME SAVERS, INC., and Ray Bailey, Appellants, v. UNITED SECURITY COMPANY, and United Mortgage Company, Respondents.

No. 17249.

Supreme Court of Nevada.

Aug. 27, 1987.

John Peter Lee and Barney C. Ales, Las Vegas, for appellants.

Deaner & Deaner, Las Vegas, for respondents.

OPINION

PER CURIAM:

Respondent United Mortgage Company is in the business of brokering loans secured by real property. Respondent United Security Company acts as trustee in the Deeds of Trust securing the loans brokered by United Mortgage. These companies appear to be essentially different divisions of the same business, and for purposes of this opinion we will refer to them collectively as "United." Appellant Home Savers, Inc. ("Home Savers") is in the business of buying real property at foreclosure sales and reselling the property for a profit.

In May, 1983, United, acting as a trustee, gave notice of a trustee's sale. Home Savers saw the notice, investigated the property, and purchased the property at the foreclosure sale for $64,285.00, an amount approximately one dollar greater than United's opening bid on behalf of the beneficiaries.

Based on its investigation, Home Savers believed it had purchased a 2,000 square foot home situated on a one-half acre lot. Mike and Ray Bailey had inspected the property on Home Savers' behalf and estimated the property's value at approximately $90,000.00 to $100,000.00. Shortly after the foreclosure sale, however, Home Savers discovered that it had actually bought a parcel located in back of the parcel it believed it had purchased. This parcel included a 600 square foot home in poor condition and was valued at approximately $17,000.00. Originally, both parcels were encumbered by the Trust Deed. However, the front parcel had been released and only the back parcel was sold at the trustee's sale.

After discovering the mistake, Home Savers attempted to persuade United to buy the property back. United refused. Home Savers then brought this lawsuit seeking rescission and damages, and the trial court found in United's favor. We conclude that Home Savers is entitled to rescission by virtue of a unilateral mistake, and we therefore reverse.

It is evident that United was not mistaken concerning the property to be sold at the trustee's sale. The legal notices and the trustee's deed contained accurate legal descriptions. However, it is also evident that Home Savers was mistaken, and we have recognized that a unilateral mistake may be a basis for rescission. Allenbach v. Ridenour, 51 Nev. 437, 461, 279 P. 32, 37 (1929). We adopt the unilateral mistake rule found in the Restatement:

Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in § 154, and

* * *

* * * (b) the other party had reason to know of the mistake or his fault caused the mistake.

Restatement (Second) of Contracts § 153 (1981). In the instant case, the doctrine of unilateral mistake requires reversal.

The notice published by United was misleading in that it included the street address for the front parcel, the parcel which Home Savers believed it was purchasing. The back parcel...