Jue v. Smiser

In Jue v. Smiser (1994) 23 Cal.App.4th 312, the plaintiffs entered into an agreement to purchase a home that was advertised as having been designed by a famous architect. Before escrow closed, they learned it could not be confirmed whether the architect designed the home, but they chose to close escrow and sue the sellers for damages. (Id. at p. 318.) The First District held the trial court erred in granting summary judgment to the defendants. "'When a party learns that he has been defrauded, he may, instead of rescinding, elect to stand on the contract and sue for damages, and, in such case his continued performance of the agreement does not constitute a waiver of his action for damages. '" (Id. at p. 316.) Otherwise, a buyer of real property who learned of a misrepresentation after a purchase contract was struck but before escrow closed would be faced with "an extraordinarily difficult choice: (a) consummate the purchase and waive any claim for damages or (b) rescind and deal with the consequences of that choice. Among those consequences may be (1) problems in securing a return of moneys deposited with the escrow holder; (2) the loss of moneys spent to secure a loan and to meet other costs of acquisition, such as escrow fees; and (3) the risk of being sued by the seller and/or the seller's representatives. One who may be the victim of another's fraud should not be forced to make such a choice. That policy is especially strong where, as here, it is unclear whether or not a particular representation was (is), in fact, false at the time a choice is required, and the time period in which to choose is extraordinarily short." (Id. at p. 319.)