Mariah Investments, Ltd. v. McCabe

LANDAU, J.,

dissenting.

The concurrence would hold that Wright is entitled to rescind her agreement to sell her property for $5,000, because she mistakenly thought that taxes were owing and that foreclosure was imminent. The concurrence concludes that, although her failure to ascertain the tax status of her own property certainly was negligent, it was not so negligent as to prohibit rescission. In so concluding, the concurrence neglects to apply controlling precedent to the contrary and, in the process, would significantly expand the grounds for i .-’Scission of a contract. I dissent.

*109I take the facts as reported by the concurrence. I therefore assume for the purposes of this opinion: (1) that “McCabe did not pressure [Wright] into the selling the property, but that she understood that [McCabe] was in a hurry to conduct business with her ‘right then’ so that he could return to Portland,” 163 Or App at 96; (2) that Wright did not know of the tax status of her property, indeed, that “the exact amount of taxes owed on the house did not matter to her,” 163 Or App at 96; and (3) that Wright and McCabe did not finally sign the transaction papers until the following day, 163 Or App at 97.1 also note that the trial court found no evidence of fraud and that Wright does not assert claims of duress or unconscionability in this case. The question before the court thus is a narrow one: In the absence of fraud, unconscionability, and duress, is it gross negligence for a property owner to sell her property without knowing or attempting to ascertain its value or condition? In my view, the answer is clearly yes. No reasonable person would sell her property without making the slightest effort to inform herself about the nature of what she is selling.

The law is that a mistaken party is not entitled to rescission on the basis of the mistake if he or she was “guilty of gross negligence in making the mistake.” Gardner v. Meiling, 280 Or 665, 675, 572 P2d 1012 (1977). It is for the mistaken party to prove the negative, that is, that he or she was not grossly negligent. Jensen v. Miller, 280 Or 225, 230, 570 P2d 375 (1977).

At the outset, it bears emphasis that it is Wright’s burden to prove the negative, that she was not grossly negligent. I emphasize the point, because, in this case, Wright made no effort to satisfy that burden. Indeed, of the entirety of her brief on appeal, she devotes three paragraphs to the issue. She first asserts that she was not grossly negligent because she assumed there was no way to ascertain the relevant information. Of course, that is mere question-begging. The very point at issue is whether she was grossly negligent in making such an assumption. She then argues that, in any event, the sort of negligence of which she was guilty was not the sort that bars equitable relief, because it did not involve the violation of an affirmative legal duty. That argument is simply incorrect as a matter of law. The cases do not require *110the violation of an affirmative duty before gross negligence will bar equitable relief. See, e.g., Main v. Howard, 52 Or App 797, 804, 629 P2d 870 (1981) (reformation not available because, among other things, the plaintiff was grossly negligent in failing to read relevant transaction documents).

Thus, without proceeding any further in the analysis, it is clear that Wright cannot prevail. She has failed in her burden. She has made no attempt to demonstrate that she was not grossly negligent in failing to ascertain the facts about her property before selling it.

The concurrence ignores that point and attempts to satisfy her burden for her. The concurrence reasons that, under the “unique circumstances” of this case, Wright was negligent, but not grossly so. The “unique circumstances” boil down to the fact that Wright relied on McCabe’s representations as to the tax status of her property. The concurrence’s reasoning does not bear careful examination, however.

In assessing whether the mistaken party was grossly negligent, we look to the extent to which the correct information was readily available. Instructive in that regard is our decision in Walcutt v. Inform Graphics, Inc., 109 Or App 148, 817 P2d 1353 (1991), rev den 312 Or 589 (1992). In that case, we held that the plaintiff could not rescind a release on the basis of a mistake of fact when the information about which she was mistaken was readily available to her. More to the point, we held that the plaintiff had no right to rely on information supplied by the other party to the agreement when she had ready access to the same information. Id. at 152.

Whether correct information is “readily available” depends on whether it would have been unreasonably difficult for the mistaken party to obtain it. For example, in Rosboro Lumber Co. v. Apsel, 144 Or App 298, 926 P2d 329, adhered to 146 Or App 333, 932 P2d 110 (1996), rev dismissed 326 Or 530 (1997), the owners of timber property relied on representations of the buyer as to the quantity of harvestable timber on the land. When the buyer’s estimates turned out to be incorrect, the owners refused to permit the buyer to fell the timber on their land. The buyer sued for specific performance, and the owners alleged as an affirmative defense their *111mistake as to the quantity of harvestable timber on their land. We held that the owners could not avail themselves of that defense, because

“there is a complete absence of evidence that it would have been unreasonably difficult for [them] to conduct an investigation to determine the harvestable timber on their own property.”

144 Or App at 304.

This case is not materially different from either Walcutt or Rosboro Lumber. There is no question but that the correct information about the value and tax status of Wright’s property was readily available to her and that it would not have been unreasonably difficult for her to conduct an appropriate investigation to ascertain the true state of affairs as to her own property. Indeed, it is generally presumed that an owner is aware of the value and condition of his or her property. See, e.g., Mitchell v. Chernedir, 286 Or 285, 291-92, 593 P2d 1163 (1979) (property owner presumed to know of applicability of zoning ordinance); Hobgood v. Sylvester, 242 Or 162, 166, 408 P2d 925 (1965) (personal jurisdiction over nonresident property owners based on “presumption that a person ordinarily keeps track of his property’); Lewis v. Worldwide Imports, Inc., 238 Or 580, 584, 395 P2d 922 (1964) (property owner is permitted to render opinion as to property value because of presumption that owner is familiar with the property and its uses); Slak v. Porter, 128 Or App 274, 279, 875 P2d 515 (1994) (adverse possession may lie against owner who, in fact, does not know of adverse use if use is such as to put on notice a reasonable property owner who would keep track of the condition and use of his or her property).

Moreover, as to the tax status of property, the law imposes an affirmative obligation to remain informed. Grant County v. Guyer, 296 Or 14, 672 Or 702 (1983), well illustrates the point. At issue in that case was the constitutionality of notice of tax foreclosure by publication. In holding that publication sufficed, the court commented:

“ ‘Taxes, as has been many times stated, are a very practical matter. They are the lifeblood of the state, and the property owner’s most intimate liaison — although often a *112waspish one — with the state. In construing tax statutes, it must be borne in mind that the law of taxation places upon property owners the duty to keep themselves informed about the recurrent liability of their property for taxes, and charges them with knowledge that neglect to pay a tax will result in foreclosure proceedings.’ ”

Id. at 21 (quoting Knapp v. Josephine County, 192 Or 327, 353, 235 P2d 564 (1951)) (emphasis added).

Wright offers neither argument nor evidence that she made any effort to ascertain the value or condition of her property, much less that it would have been unreasonably difficult — indeed, difficult at all — to obtain the relevant information. Accordingly, she has failed in her burden and is not entitled to rescission.

The concurrence ignores the general point — and the cases in support of it — and seizes on my mention of the tax statutes. It argues that an owner is not obliged to remain informed about the tax status of her property unless foreclosure proceedings are pending, because only then are taxes owed. 163 Or App at 106. It is a makeweight argument, however.

To begin with, it seems to me a matter of common sense that either a property owner has a duty to keep apprised of her property or not. Indeed, to conclude that one does not have to ascertain whether taxes are owing until foreclosure proceedings already have begun has a sort of Alice in Wonderland quality to it. In any event, the law is to the contrary. The duty is not limited to ascertaining whether taxes already are owed. The statute provides that owners of real property have “a continuing duty to investigate and ascertain whether [their] real property did become or hereafter shall become” subject to foreclosure proceedings. ORS 312.214(1) (emphasis added).

Even assuming that tax law imposes no affirmative obligation to remain abreast of the tax status of one’s property, the fact remains that Wright’s failure to ascertain such information before selling the property finds no excuse in the record. She made absolutely no attempt to inquire and offers no argument that the information could not readily have been ascertained with a minimum of effort.

*113The concurrence offers two justifications of its own for concluding that Wright was not grossly negligent. First, the concurrence complains at length about McCabe’s sophistication and about his mercenary intentions. I am prepared to accept, for the purposes of this opinion, that McCabe was as venal as the concurrence suggests. It still does not change the fact that accurate information was readily available to Wright. As the trial court held, this is not a case in which there is evidence of duress, fraud, or coercion. The fact is that nothing that McCabe did or said prevented Wright from ascertaining the accurate status of her property.

Second, the concurrence suggests that, because of the lateness of the hour and McCabe’s demands for an immediate decision, Wright realistically had no opportunity to determine the status of her property. The concurrence never explains why, in the absence of fraud or duress, a buyer’s insistence on a speedy decision excuses a seller from knowing the facts about his or her own property. That, so far as I am aware, is an entirely novel proposition of law.

Aside from that, on the record of this case, the concurrence’s excuse makes no sense. There is no question that McCabe said that he was in a hurry. But the fact remains that, although the parties agreed to the sale the evening of April 19, the papers were not finally signed until the following day. I do not understand, and the concurrence never explains, what prevented Wright from calling an attorney or otherwise ascertaining the true status of her property the morning of April 20.

The concurrence’s reasoning thus boils down to the proposition that Wright’s negligence was excused by McCabe’s bad intentions. I know of no such rule of law and do not believe that the facts of this case warrant its adoption. The fact is that Wright was ignorant of the status of her property, and nothing that McCabe said or did prevented her from remedying her ignorance. Under the circumstances, she should not be heard to complain that she could have obtained a better deal had she but known the facts.

Buyer’s or seller’s remorse in real estate transactions is common. Individuals easily may form mistaken impressions about value, property condition, even hens and *114tax liabilities. But the law does not afford a remedy for such remorse except on very narrow circumstances. The concurrence’s opinion would change that, and, in my view, such a change would be ill-advised.

Edmonds, Linder, Kistler, and Brewer, JJ., join in this dissent.