KRAMER, JUDGE.
Jerry and Jill Johnson filed suit against Jeffrey and Debbie Campbell in Knox Circuit Court, alleging that the Campbells fraudulently induced them to purchase certain real property situated on Big Indian Creek in Knox County. Following a trial, a jury determined that the Campbells did indeed defraud the Johnsons. However, the circuit court then directed a verdict in favor of the Campbells after determining that the Johnsons had presented insufficient evidence of damages. The Johnsons appeal the Campbells' directed verdict. The Campbells, for their part, cross-appeal the jury's finding of fraud. For the reasons discussed below, we affirm regarding the Campbells' cross-appeal, but reverse and remand regarding the Johnsons' appeal.
We will address the Campbells' cross-appeal first because it raises arguments which, if valid, would render analysis of the Johnsons' appeal advisory.
The jury determined the Campbells fraudulently induced the Johnsons to purchase the real property at issue. Specifically, the jury indicated in its verdict form that it was satisfied from clear and convincing evidence:
In their cross-appeal, the Campbells do not contest any of the jury's findings. Instead, they argue that the Johnsons' fraud claim should have been dismissed as a matter of law based upon three grounds they asserted in a pretrial motion for summary judgment: (1) the statute of frauds; (2) the doctrine of merger; or (3) principles of constructive notice.
As to their first two grounds, the Campbells note that the statute of frauds generally prohibits the enforcement of promises with respect to the sale of real estate that are not in writing
What the Campbells omit, however, is that a few weeks after they executed the purchase agreement and initial deed, they knowingly and voluntarily executed a "deed of correction." Importantly, the deed of correction explained that there was "also granted the right to usage of free gas from an active well" on the property, and that such right was only omitted from the initial deed "due to an oversight." This deed of correction was a sufficient "writing" for the purpose of the statute of frauds. Moreover, it rendered the doctrine of merger inapplicable; it effectively amended the prior deed to include the "right to usage of free gas from an active well."
Next, the Campbells argue that an effective review of their chain of title and various recorded leases referenced in their deed would have revealed to the Johnsons that title to the property at issue did not include a right to free natural gas. As such, the Campbells argue that the Johnsons were prohibited from suing them for fraud because the Johnsons either had constructive or inquiry notice of their misrepresentation before the purchase agreement was consummated.
However, Kentucky law has long recognized where a purchaser of real property alleges the seller has made a fraudulent misrepresentation as to the condition of title, the seller cannot defend by arguing that the purchaser should have examined the public records to ascertain the correct information. Stallard v. Adams, 312 Ky. 532, 228 S.W.2d 430 (1950); Cowles' Ex'r v. Johnson, 297 Ky. 454, 179 S.W.2d 674, 675 (1944); Sellars v. Adams, 190 Ky. 723, 228 S.W. 424 (1921); Young v. Hopkins, 22 Ky. (6 T.B. Mon.) 18 (1827).
Having reviewed the balance of the Campbells' arguments set forth in their cross-appeal, and having determined that the circuit court committed no error in rejecting them, we AFFIRM in this respect.
The focus of the Johnsons' appeal is the portion of the circuit court's judgment that immediately follows its determination that the Campbells fraudulently induced the Johnsons into purchasing the property. In relevant part, it provides:
The Johnsons acknowledge that they did not present evidence supporting their assertion that the market value of the land they purchased from the Campbells was, due to the Campbells' fraud, worth less than the $165,000 they paid for it. The Johnsons also acknowledge that, had they sought to affirm the agreement to purchase the property and then sue for damages on account of fraud, the difference between what they paid for the land and its actual market value would have been a proper measure of damages. See Young v. Vista Homes, Inc., 243 S.W.3d 352, 366 (Ky. App. 2007). The Johnsons' point of contention, however, is that they did not seek to affirm the agreement and sue for damages. Rather, they sought to rescind the agreement and to be placed back into the status quo. They contend the circuit court erred by prohibiting them, in its discretion, from seeking this remedy.
We agree. In Patel v. Patel, 706 S.W.2d 3 (Ky. 1986), which also involved fraudulent inducement to enter into a contract (in that case, a contract to purchase a motel), the sellers in that matter likewise argued that the proper remedy was merely for the aggrieved buyers to receive the difference between the fair market value of the motel (i.e., $136,000) and what was paid for it. The sellers similarly argued that because the buyers paid $136,000 for the motel, the buyers had no remedy and the case should have been dismissed as a matter of law. Id. at 5. In affirming the trial court's rejection of this argument, however, this Court explained:
Id.
Patel stands for the proposition that it is the plaintiff's election and not the circuit court's discretion that determines whether a fraudulently induced contract will be affirmed or rescinded. Id. ("In this case, the buyers did not elect to affirm the contract and sue for damages as appellants suggest, but rather chose to rescind the contract and recover the $35,000 down payment. . . ." (Emphasis added.)).
Grissom v. Moran, 154 Ind.App. 419, 292 N.E.2d 627, 629 (1973) (internal citations omitted).
Here, the Johnsons elected to rescind their contract with the Campbells. They presented evidence that would have sufficiently enabled the circuit court to determine what was necessary to return them to the status quo. This evidence included, but was not limited to: (1) the consideration they parted with to purchase the Campbells' property (i.e., $165,000); (2) improvements they made to the property shortly after purchasing it (i.e.,$4,600 for the installation of a natural gas powered heating and air conditioning system); and (3) their attorney's fees in prosecuting this matter.
ALL CONCUR.
Grant v. Wrona, 662 S.W.2d 227, 230 (Ky. App. 1983) (quoting Webb v. Verkamp Corp., 254 S.W.2d 717, 719 (Ky. 1953)). That said, the Campbells do not argue and the court did not find that this limit applied under the circumstances of this case.
Additionally, with or without the assistance of an advisory jury in balancing the equities relating to rescission, the circuit court would also have been required to make findings of fact in support of its decision. See CR 52.01.
(Quoting Twin Lakes Land & Water Co. v. Dohner, 242 F. 399 (6th Cir. 1917)).
