The Plaintiff sued to recover the purchase price of a parcel of land and to cancel the deed after being denied a permit for construction of a home.
The court announced the following rule: “Where a grantor conveys land subject to restrictive covenants that limit its use to the construction of a single-family dwelling, and, due to subsequent disclosures, both unknown to and not reasonably discoverable by the grantee before or at the time of conveyance, the property cannot be used by the grantee… for the specific purpose to which its use is limited by the restrictive covenants, the grantor breaches the implied warranty arising out of said restrictive covenants.
The Defendants knew the Plaintiff intended to build a home on the land, and that it would require a septic tank or onsite sewage system. When the Plaintiff was ready to begin construction, the authorities found the land was only 2.6 feet above Black Swamp and subject to flooding. Plaintiff was denied a permit for the septic tank.
The Plaintiff did not allege fraud or misrepresentation by the Defendants, and the trial court found that she was not entitled to relief. However, the court of appeals held that she was entitled to rescind the contract on the grounds of mutual mistake of fact and total failure of consideration.
Was the Plaintiff entitled to relief?
Yes. Defendant grantors breached the implied warranty announced by the court, and Plaintiff, by timely notice of the defect, was entitled to full restitution of the purchase price, provided she reconvey the land to the Defendants.
· The court refused to adopt the mutual mistake doctrine, and decided the case based upon its new implied warranty rule instead.
The deed stated that the land was to be used for a residence, and a reasonable inspection by the Plaintiff would not have disclosed that the property could not support a septic tank, so she was entitled to relief.