Following is a very good analysis on common law rescission as applied in the case of Wong v Stoler (2015) 237 CA 4th 1375. One of the more interesting comments by the appellate court is that the chief error committed by the trial court was its refusal to effectuate the rescission because of a perceived prejudice to the sellers. The same is true in a TILA rescission. The courts have bought the banks’ arguments that following the strict language and procedures under TILA will prejudice the banks. The banks’ must be protected at all costs even if it means re-writing a Congressional statute.
The basic facts are that the purchasers of a hillside residence in San Carlos rescinded their completed contract because of misstatements made by the sellers to the effect that the property was served by a public sewer, when in fact the system was privately owned by the 13 residents of the area, who all had to share its maintenance costs. The trial court found that the sellers’ statements were negligent misrepresentations, but it declined to order rescission because of the complications involved in unwinding the deal. Instead, it ordered the sellers to indemnify the purchasers for their sewer maintenance costs over the next decade.
The complications that deterred the trial court from granting recessionary relief included that this contract had been completed in 2008. In the seven years since then, the purchasers had spent $300,000 on remodeling the property, including rebuilding the garage and the kitchen and removing much of the landscaping, before giving up attempting to get their neighbors to take the steps the city was requiring about the sewer. Meanwhile, the sellers had spent $100,000 on improving their new house. Would you want to be the judge who had to untangle a mess like that?