Cousineau v. Walker
613 P.2d 608 (1980)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A purchaser of land may justifiably rely on a seller's material misrepresentations, even if innocent, and is not obligated to independently verify their truthfulness. A buyer is barred from rescission only if their failure to discover the misrepresentation was wholly irrational, preposterous, or in bad faith.
Facts:
- In 1975, Devon Walker purchased 9.1 acres of land in Eagle River, Alaska.
- In 1976, Walker listed the property for sale, with advertisements stating it had 580 feet of highway frontage and over 1 million, later revised to a minimum of 80,000 cubic yards, of gravel based on an 'Engineer Report'.
- Wayne Cousineau, a contractor in the gravel extraction business, became interested in the property after seeing the listing.
- Cousineau visited the property while it was covered in snow and discussed gravel extraction with Walker.
- Walker admitted he had never actually seen the engineer report he referenced.
- In February 1977, the parties signed an earnest money agreement for $385,000, which included provisions for Cousineau to extract gravel.
- After the sale closed, Cousineau began developing the property and discovered the highway frontage was only 415 feet and that there were no significant gravel deposits.
- Upon these discoveries, Cousineau and his partners stopped making payments and informed Walker of their intent to rescind the contract.
Procedural Posture:
- After Cousineau stopped payments, Walker initiated a deed of trust foreclosure sale and reacquired the property.
- Cousineau and his partners sued Walker in the superior court (the trial court) seeking rescission of the contract and restitution of the $99,000 they had paid.
- After a bench trial, the superior court found for the defendant, Walker, denying rescission and restitution.
- The trial court concluded that the plaintiffs (Cousineau et al.) did not rely on any misrepresentations, that the statements were not material, and that any reliance was not justified.
- Cousineau and his partners, as appellants, appealed the superior court's judgment to the Supreme Court of Alaska.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Is a purchaser of land entitled to rescission of the contract due to a seller's material, albeit innocent, misrepresentations, even if the purchaser did not independently verify the truthfulness of those representations?
Opinions:
Majority - Justice Boochever
Yes, a purchaser of land is entitled to rescission under these circumstances. To obtain rescission for innocent misrepresentation, a party must show that they relied on a material misrepresentation and that their reliance was justified. The court found the trial judge's conclusion of no reliance was clearly erroneous; Cousineau was in the gravel business, the advertisements highlighted gravel, the sales documents provided for gravel extraction, and he immediately invested in gravel equipment. The statements about the quantity of gravel and amount of highway frontage were material as a matter of law because a reasonable person would attach importance to them. Most importantly, the court rejected the traditional doctrine of caveat emptor (buyer beware), holding that a land purchaser may rely on a seller's material representations without an independent duty to investigate. A buyer's reliance is considered unjustified only if their failure to discover the truth was 'wholly irrational, preposterous, or in bad faith.' Cousineau's failure to get a survey or demand the engineer's report did not meet this high standard.
Analysis:
This decision significantly curtails the traditional doctrine of caveat emptor in Alaskan real estate law, aligning it more closely with modern commercial standards found in the Uniform Commercial Code for the sale of goods. It shifts the burden away from the buyer to discover defects and places a greater responsibility on the seller to ensure the accuracy of their representations. By establishing that a buyer's reliance is justified unless 'wholly irrational, preposterous, or in bad faith,' the court created a strong, pro-buyer precedent that protects purchasers from even innocent misstatements by sellers, thereby encouraging more transparent dealings in land sale transactions.
Unlock the full brief for Cousineau v. Walker