Mecham v. Benson, 15649
| Decision Date | 02 January 1979 |
| Docket Number | No. 15649,15649 |
| Parties | Craig MECHAM and John Hedman, Plaintiffs and Appellants, v. Myron L. BENSON and Ellen Benson, Defendants and Respondents. |
| Court | Utah Supreme Court |
Steven F. Alder, Salt Lake City, for plaintiffs and appellants.
Mark S. Miner, Salt Lake City, for defendants and respondents.
This is an action on a mobile home sales contract. Appellants Mecham and Hedman (hereinafter called "Sellers") sued for the unpaid balance of the purchase price after Respondents Bensons (hereinafter called "Buyers") defaulted and after Sellers had repossessed and sold the home in accordance with the seller remedies provisions of the Agreement and had applied the net proceeds from the sale against the contract debt. The Buyers counterclaimed charging fraud in the inducement. From a jury verdict of "no cause of action on Sellers' complaint" and an award to Buyers of the return of their down payment, plus attorney's fees, Sellers appeal.
We are obliged to view the evidence in the light most favorable to sustaining the jury verdict; and the evidence, although vigorously disputed, supports the following statement of facts: On October 29, 1975, Buyers signed an Assignment Sale and Security Agreement (hereinafter the "Agreement") for the purchase of a mobile home from Sellers. 1 The Agreement was a form instrument supplied by a bank with a number of blanks to be filled in to cover the details of the sale. When the Buyers signed it, there were several blanks still to be completed including those relating to the finance charge, the annual rate of finance charge, the number of monthly installments to be paid, the amount of each installment, and the total which would have been paid at the conclusion of the Agreement. The Buyers trusted the Sellers to fill in the blanks in accordance with a verbal understanding that the annual rate of finance charge would be 8.5%.
As part of the negotiations leading up to the sale, the Sellers responded to Buyers' question about whether the home had ever been blown over by saying that it had Not, to their knowledge. The center section of the home had, in fact, been blown over in a storm, and the toppled section had been reincorporated into the structure. The Agreement characterizes the home as "new," although both parties knew it had been shown to prospective buyers as an example of the model.
The buyers made a $7,400 down payment on the $27,000 purchase price and took possession of the home on or about the contract date. Shortly afterwards, they received from Walker Bank and Trust Company (to which Sellers had assigned the agreement with recourse) a payment book and a copy of the Agreement on which the finance charge information had not been filled in. The Buyers remained in possession of the home at least through June of 1976 and made monthly payments of $245.82 during that period. While in possession, they brought to Sellers' attention a number of defects in the home which were not all repaired to Buyers' satisfaction.
After having made seven of the monthly installment payments. Buyers consulted with bank personnel and became aware that the annual rate of finance charge was 13.6% And not 8.5% As they had believed. Buyers then stopped making payments. They did not, at that time or ever, give notice to Sellers that they rejected the home as defective nor did they undertake to exercise their rights under Sections 70A-2-711 et seq. of the Uniform Commercial Code. Moreover, upon learning that the annual rate and total amount of finance charge was in excess of their understanding or of any written disclosure to them, Buyers did not undertake to exercise their rights under Section 70B-5-203 of the Uniform Consumer Credit Code. Sellers repossessed and sold the home in accordance with the terms of the Agreement, with actual notice to Buyers; but Buyers still gave no notice of rejection that the home was less than represented nor did they give notice of rescission for fraud.
It cannot be determined from the record as to When Buyers vacated the home, but they clearly occupied it for eight months. At some time during that eight months they became aware, or at least suspicious, that the home had been wind-damaged before they purchased it. 2 The record does not reveal, however, they ever gave notice of intent to rescind the Agreement because they had been fraudulently induced to enter into it by Sellers' misrepresentation as to its previously undamaged state.
When Sellers sued on the Agreement, Buyers counterclaimed on a fraud theory and asserted no other kind of claim. Buyers pleaded fraud with the requisite specificity required under Rule 9(b), U.R.C.P. and prayed for general and punitive damages. In reply to the counterclaim, Sellers filed a general denial but did not assert any defense based on waiver, laches, or estoppel.
Traditionally, a person who has been fraudulently induced to enter into a contract has either of two remedies; he could rescind the transaction tendering back what he has received and suing for what he has parted with; or, he may affirm the transaction and maintain an action in deceit. The Uniform Commercial Code makes damages available in an action for rescission, 3 but it does not otherwise change the traditional theory of election of remedies. 4
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