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Joseph Bolognese and Dorothy Bolognese, Husband and Wife, Sunset Pecos Limited Partnership, A Nevada Limited Partnership v. Paul Forte and Suzanne Forte

November 19, 2012


Appeal from the District Court of the First Judicial District of the State of Idaho, in and for Kootenai County. The Hon. Steven C. Verby, District Judge.

The opinion of the court was delivered by: Eismann, Justice.

2012 Opinion No. 141

Stephen W. Kenyon, Clerk

The judgment of the district court is affirmed.

This is an appeal out of Kootenai County from a jury verdict in favor of the sellers of real property in an action by the buyers to recover damages or be granted rescission of the sale contract on the ground that the sellers made misrepresentations and breached the contract and the Idaho Property Condition Disclosure Act. The buyers also sought to raise the issue of mutual mistake. We affirm the judgment of the district court.

I. Factual Background.

Pursuant to a written contract dated October 13, 2005, Joseph and Dorothy Bolognese (Buyers) purchased from Paul and Suzanne Forte (Sellers) for the sum of $675,000 residential property on the shore of Hayden Lake. The property consisted of about 1.7 acres on the shallow, marshy end of the lake, and it included a remodeled home that had been originally constructed in 1934, a detached three-car garage, and a small guest cabin. The sale closed on October 28, 2005.

Buyers lived in Las Vegas, Nevada. In August 2006, one of their adult daughters moved from Florida to Idaho to live in the house. She intended to live there indefinitely, but moved out about eleven months later because of various issues including the water pipes to the living quarters above the garage freezing, the water in the garden hose that provided water to the guest cabin freezing, the need to put a space heater under the kitchen sink in the house to keep the water pipes from freezing, the floors in the house being very cold in the winter, the smell of mold in one bedroom, and the need to keep the creek on the property from overflowing during the spring runoff so that it would not flood the house.

About a year after purchasing the property, Buyers hired a contractor to see if the garage could be enlarged. He discovered that the building permit obtained to construct the garage had not been finalized, so that it had lapsed. The permit had been issued in 2000 to construct a garage with storage space above it. Before the structure was completed, Sellers obtained permission from the county to build an accessory living unit consisting of a bonus room and a partial bathroom above the garage instead of the storage space. By letter dated May 30, 2001, an employee of the county building department notified Sellers that he had met with Sellers' contractor and inspected the garage structure and that some additional items needed to be completed and a certificate of occupancy obtained. Sellers were living in Washington, and Mr. Forte testified that although he signed for the letter, he did not recall receiving it. The required items were not completed, and the building permit lapsed.

Buyers' contractor also contacted the health district and learned that the permit for the septic system had been issued in 1998 for a two-bedroom home and that the septic system was not approved for the property as it existed in 2005. Approval of the septic system was based upon the number of bedrooms on the property. Sellers had hired the man from whom they purchased the property to construct the 120-square-foot guest house, which included a sleeping area and a bathroom. According to Mr. Forte, he had told them they did not need a permit for that size of structure. Sellers had also remodeled the interior of the house, so that it contained three bedrooms instead of two. The septic system was not approved for the guest house and the additional bedroom, and there was not adequate space on the property to expand the leach field so that it could be approved.

In connection with the sale, Sellers completed and delivered to Buyers a property disclosure form as required by the Idaho Property Condition Disclosure Act, I.C. §§ 55-2501 to 55-2518. When completing that form, Sellers answered "No" to the question, "Have any substantial additions or alterations been made without a building permit?"

On October 12, 2007, Buyers filed this lawsuit against Sellers seeking damages for breach of the Disclosure Act, misrepresentation, and breach of contract.*fn1 They also sought, in the alternative, to have the real estate contract rescinded. The matter was tried to a jury on February 22-26, 2010, on the three theories seeking damages. The jury returned a special verdict finding that Buyers had failed to prove a violation of the Disclosure Act, had failed to prove misrepresentation, and had failed to prove a breach of contract.

On the second day of trial, Sellers moved to prevent Buyers from raising the issue of mutual mistake of fact, which Buyers had apparently discussed in their pretrial brief.*fn2 The matter was argued, and the district court ruled that Buyers could not present evidence regarding mutual mistake because it had not been pled. On February 25, 2010, and again on March 8, 2010, Buyers moved to amend their complaint to conform to the evidence by adding a request for rescission based upon mutual mistake. On March 8, 2010, Buyers moved to have the real estate contract rescinded, and on August 30, 2010, they moved for a new trial. The district court denied those motions, and Buyers timely appealed.


Did the District Court Err in Granting Sellers' Motion In Limine Precluding Evidence of Mutual Mistake?

On the second day of trial, Sellers filed a motion in limine asking that "Plaintiffs not be able to pursue questions or arguments before the court or jury with respect to 'mutual mistake' in this case . . . ." The stated ground for the motion was that mutual mistake was not pled in Buyers' amended complaint. The alleged mutual mistake was apparently that both parties were unaware of the need for permits with respect to the structures that the Sellers had constructed or remodeled on the real property. During argument on the motion, Buyers' counsel contended that the failure to specifically allege mutual mistake in their amended complaint was simply a typographical error.

To resolve this assignment of error, we need not address whether the district court erred in holding that mutual mistake had not been pled. "The guaranty [in Article 1, § 7, of the Idaho Constitution] that 'the right to trial by jury shall remain inviolate' has no reference to equitable cases." Christensen v. Hollingsworth, 6 Idaho 87, 93, 53 P. 211, 212 (1898). A claim of mutual mistake invokes the equitable jurisdiction of the court, 27A Am. Jur. 2d Equity § 45 (2008), whether the party alleging mutual mistake is seeking reformation of a document, Palmer v. Highway Dist. No. 1, Bonner County, 49 Idaho 596, 599, 290 P. 393, 393 (1930), Christensen, 6 Idaho at 91-94, 53 P. at 211-12, or rescission of a contract, O'Connor v. Harger Const., Inc., 145 Idaho 904, 909, 188 P.3d 846, 851 (2008).

The sole purpose for offering evidence of mutual mistake of fact was to support the equitable remedy of rescission. As Buyers' counsel argued in opposition to the motion in limine, "And if I gather right from [Sellers'] counsel, he wants to prevent us from trying to show that the contract fails, that there's grounds for rescission." Because Buyers would not have been entitled to a jury trial on the issue of mutual mistake, there was no error in refusing to permit them to present evidence in support of that issue during the jury trial. Even had the district court submitted equitable theories to the jury for an advisory verdict, which it did not, the court would still be required to make independent findings of fact and conclusions of law on the equitable theories. Bach v. Bagley, 148 Idaho 784, 796, 229 P.3d 1146, 1158 (2010). Because the jury could not decide any issue of mutual mistake, the district court did not err in refusing to permit Buyers to submit such evidence to the jury.


Did the District Court Err in Denying Buyers' Motion in Limine?

On the third day of trial, Buyers filed a motion in limine. Although the motion is not in the record on appeal, from the argument on the motion it appears that Buyers sought to exclude any evidence that the Sellers mistakenly believed that any required permits had been obtained on the ground that ...

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