Summary
The Kentucky Supreme Court considered whether a deed should be reformed or rescinded because the property contained substantially less acreage than stated in the deed. The court held that the transaction was a sale by tract, that the purchaser knew of the acreage deficiency before closing, and that the 10% rule did not apply absent fraud or mistake. It reversed the Court of Appeals and reinstated the trial court's judgment for the appellants.
Topics
Practice areas
Questions Presented
- Whether Kentucky's 10% rule for acreage deficiencies applied to permit reformation or rescission when the buyer knew of the deficiency before closing and the property was sold by tract rather than acreage.
- Whether the buyer was entitled to equitable relief after knowingly proceeding with the purchase despite notice that the property did not contain the stated acreage.
Holdings
- The 10% rule did not apply to provide relief because the transaction was, at most, a sale in which the estimated acreage was stated for description and the parties assumed the risk of the actual quantity; reformation was unavailable absent fraud or mistake.
- Lewis was not entitled to rescission, reformation, or other equitable relief because he knew before closing that the property was deficient in acreage and nevertheless chose to complete the purchase after being told he could walk away.
Key quotations
“It cannot be disputed that Appellee was fully aware that he was not purchasing 300 acres of property.” (400 S.W.3d at 740-741)
“The 10% Rule was established to protect purchasers from entering into a contract which unbeknownst to them was inequitable; it was not established to protect those who simply make unwise decisions.” (400 S.W.3d at 741)
“The law simply cannot and should not protect people who choose to purchase property under these circumstances by allowing them to prevail.” (400 S.W.3d at 742)
Factual background
The parties entered a contract for the sale of real estate whose deed description stated 300 acres but expressly provided that the property was sold by tract, not acreage. Before and at closing, Lewis received disclosures and signed a survey waiver stating that the sellers did not warrant the acreage, learned from a property assessment and a surveyor that the tract did not contain 300 acres, and was told he could decline to close. Despite that knowledge, Lewis insisted on closing, and a later survey showed the tract contained 44.329 acres.
Procedural history
Lewis purchased property described in the deed as 300 acres, although the property was sold by tract rather than by acreage. After closing, a survey showed that the tract contained 44.329 acres, and Lewis sued for fraud, rescission, and reformation. The trial court found no fraud and denied relief. The Court of Appeals reversed and remanded for consideration of reformation with a partial refund or voiding the deed. The Supreme Court of Kentucky reversed the Court of Appeals and reinstated the trial-court judgment.