Kent Homes, Incorporated v. Frankel
| Decision Date | 14 January 1957 |
| Docket Number | No. 1879.,1879. |
| Citation | 128 A.2d 444 |
| Parties | KENT HOMES, Incorporated, and Michnick-DiMalo Corporation, Appellants, v. Marvin E. FRANKEL, Appellee. |
| Court | D.C. Court of Appeals |
Irving B. Yochelson Washington, D. C., with whom Solomon Grossberg and Isadore Brill, Washington, D. C., were on the brief, for appellants.
Before ROVER, Chief Judge, and HOOD and QUINN, Associate Judges.
On February 12, 1955, appellee and his wife contracted to purchase from appellant Kent Homes, Incorporated, an affiliate of Michnick-DiMaio Corporation, a house to be built by it in Fairfax County, Virginia. The terms of the contract provided that in the event the house was not completed and ready for occupancy within one year, appellee would have the right to rescind the contract and recover his deposit of $500. In February 1956, more than a year after the contract date, appellee learned that the State of Virginia was considering the construction of a four-lane highway which would pass directly in front of the property he had contracted to purchase. Feeling that such a highway would make the house undesirable as a home for himself and his family, he notified appellant that he was exercising his right to rescind the contract because of failure of completion of the house within the one-year period. Appellant thereupon returned the $500 deposit.
Subsequently appellee learned that appellant had knowledge of the proposed highway at the time the contract was entered into. On April 2, 1956, he filed this suit alleging that when the lot was being selected appellant's agent assured him that the vacant land in front of the lot was to be either developed into a park or divided into plots upon which residences would be built. Appellee claimed that such assurances, made with knowledge of the proposed highway, way, amounted to material misrepresentations which induced him to sign the contract, and resulted in an expenditure of $416.50 which he would not otherwise have made.
The $416.50 consisted of sums paid by appellee to subcontractors, to whom appellant had referred him, for certain additions and improvements to the house, and also expenses entailed by reason of driving to and from the site while the house was in the process of construction. The trial judge found that appellee had been fraudulently induced to enter into the contract and that the expenditure was a direct result of the fraud. Judgment was entered for appellee in the amount of $416.50. This appeal is from that judgment.
The first question presented is whether a party who has rescinded a contract on some ground other than fraud or misrepresentation can thereafter, upon discovering that he had been fraudulently induced to enter into the contract, sue the other party for damages. Appellant contends that this cannot be done; appellee claims that it is entirely proper. In a sense, both parties are correct, the apparent anomaly being the result of the different meanings attributed to the word "damages."
It is well established that a party to an executed contract who discovers that material misrepresentations were made to him may either affirm the contract and sue for damages, or he may repudiate the contract and recover that with which he has parted. These remedies are said to be mutually exclusive, so that if a party chooses to rescind he cannot also recover damages for the fraud.1 However, it has been stated by this court, and others, that when a defrauded party rescinds the contract, he is entitled to recover damages "incidental to the contract and caused directly by the fraud."2 These damages have been referred to as "special damages,"3 and are not to be confused with the damages recoverable when an election is made to affirm the contract.
Upon affirmance, in those jurisdictions adhering to the "Federal Rule," the damages recoverable constitute the difference between the value of that which was contracted for and the value of that which was received.4 The special damages recoverable upon rescission are given to compensate the defrauded party for those expenditures made in reliance upon the...
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