Lobdell v. Miller

Victor Lobdell and his wife (plaintiffs) purchased property from William Miller (defendant) in July 1947. Frank O’Farrell (defendant) was Miller’s agent. The property contained a hotel and other attractions needing significant renovation and refurnishing. O’Farrell and Miller falsely represented the property’s monthly income. The Lobdells paid the purchase price of $28,000 in part with a $23,000 promissory note to Miller secured by a deed of trust on the property and a chattel mortgage on the furniture and furnishings. The Lobdells spent the next two years significantly remodeling and refurnishing the property. The Lobdells refinanced their loan from Miller to borrow an additional $9,057. Nonetheless, the property operated at a loss. In July 1949, Miller sued to foreclose the deed of trust on the property and the chattel mortgage, and the Lobdells filed suit against Miller and O’Farrell for fraudulent misrepresentation, seeking rescission of the property sale. The trial court found for the Lobdells, ordered rescission, and awarded the Lobdells $37,772.90. The court calculated the damages by adding up the following: the Lobdells’ down payment, the payments they made on the promissory note, their operating losses, and their improvement costs, including personal property. From that total, the court deducted the following: the reasonable rental value of the property while the Lobdells had possession, the proceeds from the sale of personal and real property, depreciation of real and personal property, and Miller’s contribution to refinancing the Lobdells’ loan. Miller appealed, arguing in part that he should not have to pay for personal property the Lobdells voluntarily purchased, and that the trial court’s award forced Miller to take the personal property and reimburse the Lobdells for it, which did not return the parties to the status quo. The appellate court considered whether the trial court used the proper measure of damages for rescission.