Levy v. Outdoor Resorts of South Carolina, Inc.

• Decision Date: 19 March 1990
• Docket Number: No. 23391,23391
• Citation: Levy v. Outdoor Resorts of South Carolina, Inc., 405 S.E.2d 387, 304 S.C. 427 (S.C. 1990)
• Court: South Carolina Supreme Court
• Parties: Stanley M. LEVY and Harriett Z. Levy, Respondents, v. OUTDOOR RESORTS OF SOUTH CAROLINA, INC., Appellant. . Heard

Page 387

405 S.E.2d 387

304 S.C. 427

Stanley M. LEVY and Harriett Z. Levy, Respondents, v. OUTDOOR RESORTS OF SOUTH CAROLINA, INC., Appellant.

No. 23391.

Supreme Court of South Carolina.

Heard March 19, 1990.

Decided May 6, 1991.

Ralph E. Tupper, and Scott A. Seelhoff, both of Davis, Tupper & Griffith, P.A., Beaufort, for appellant.

James M. Herring, of Jones, Scheider & Patterson, P.A., Hilton Head Island, for respondents.

HARWELL, Justice:

Appellant Outdoor Resorts of South Carolina, Inc., appeals the order of the trial judge which granted respondents, Stanley M. Levy and Harriet Z. Levy, equitable relief in the form of rescission of a real estate purchase agreement on the ground of mutual mistake. We affirm.

I. FACTS

Outdoor Resorts is the owner of a recreational vehicle resort on Hilton Head Island. Outdoor Resorts sells lots in the resort to purchasers pursuant to a rental program; Outdoor Resorts manages the property, promotes the property in order to generate rentals, and rents the lots when the owners are not using them. In exchange for its services, Outdoor Resorts retains fifty percent of the rental income.

On November 15, 1978, the Levys entered into a contract with Outdoor Resorts to purchase a lot in the resort. The Levys testified that sales agents from Outdoor Resorts induced them to purchase the lot by representing to them that Outdoor Resorts would rent the lots in the resort on a rotating basis and that as a result, the Levys would receive a fair share of rentals and rental income. The Levys further testified that Outdoor Resorts represented to them that the ownership of the rental property would entitle them to favorable tax consequences as they could claim the property as a business deduction.

However, by 1980, the Levys had only received $10.00 in rental income from the property. As a result, the Levys wrote a letter to Outdoor Resorts and asked them why they were not receiving their fair share of rentals. Outdoor Resorts informed the Levys that they were not entitled to a fair share of the rentals; Outdoor Resorts claimed that its rental policy was to allow customers to choose their own rental sites, rather than to assign sites on a rotating basis, and thus, that it could not promise lot owners a fair share of rentals. In addition, in 1984, the Levys were informed by the Internal Revenue Service that they could not claim the property as a business expense because the property had been rented less than fifteen days per year.

As a result, the Levys commenced an action seeking to rescind the real estate agreement on the grounds of fraud, constructive fraud, and mutual mistake. At the close of the Levys' case, the trial judge granted Outdoor Resorts a directed verdict on all three causes of action. The Levys appealed to this Court, and we ordered a new trial on the mutual mistake cause of action, and affirmed the directed verdict on the fraud and constructive fraud causes of action. At the second trial, the trial judge submitted two questions of fact to the jury: (1) was there a mutual mistake of fact between the Levys and Outdoor Resorts, such mistake being a substantial mistake and material to the formation of their contract?; and (2) did Outdoor Resorts know that the tax considerations were substantial and material to the Levys? The jury answered both questions in the affirmative.

Based on this verdict, the trial judge issued an order finding that the Levys were entitled to rescind the agreement. In order to return the parties to the status quo, the trial judge ordered the Levys to convey the property back to Outdoor Resorts, and ordered Outdoor Resorts to pay the Levys $30,899.00, the sum which the Levys had expended in purchasing the property. Outdoor Resorts appeals, claiming that the trial judge erred regarding several evidentiary matters.

II. DISCUSSION

Outdoor Resorts first contends that the trial judge erred in allowing the Levys to testify regarding the importance of tax considerations in their decision to purchase the property. Outdoor Resorts argues that this testimony violated the parol evidence rule because the contract of sale constituted the entire agreement between the parties and thus, that testimony regarding pre-contractual discussions was inadmissible. We disagree. Where the terms of a contract are unambiguous, clear and explicit, parol evidence cannot be admitted to contradict or add to the terms of the contract absent fraud, accident, or mistake in its procurement. Ray v. South Carolina Nat. Bank, Inc., 281 S.C. 170, 314 S.E.2d 359 (Ct.App.1984). Here, the Levys' testimony regarding the importance of tax considerations in their decision to purchase the property was admissible because it went directly to the issue of mistake.

Outdoor Resorts next contends that the trial judge erred by allowing three documents into evidence which it claims were irrelevant. The first document was a letter from Outdoor Resorts to all buyers which stated that they could "deduct 85% of the purchase price as depreciation." The second document was a rental income summary, which showed average rentals in dollar amounts from 1981-1988 on the various lots in the resort. The third document was a...