Plaintiff excepted to the signing and entry of the foregoing judgment and this constitutes her only assignment of error on appeal. An exception to a judgment rendered by the trial court, without an exception to the evidence or to the court’s findings of fact, presents for appellate review the sole question of whether the facts found support the judgment.
See, e.g., St. George v. Hanson,
G.S. 1A-1, Rule 52(a) (1) provides that “[i]n all actions tried upon the facts without a jury or with an advisory jury, the court shall find the facts specially and
state separately its conclusions of law thereon
and direct the entry of the appropriate judgment.” (Emphasis supplied.) This rule has been interpreted by this Court to require the trial judge to do the following three things in writing: “(1) to find the facts on all issues of fact joined on the pleadings; (2) to declare the conclusions of law arising on the facts found; and (3) to enter judgment accordingly.”
Coggins v. City of Asheville,
The problems engendered by non-compliance with Rule 52(a) (1) are readily apparent in the instant case. We do not know what law or legal theory the trial court applied to the facts in denying plaintiff the relief prayed for. We can only assume that the trial court found none of plaintiff’s legal theories to be persuasive. Plaintiff states in her sole assignment of error that she relies on the following legal points in support of her exception to the judgment:
“1. That the stipulated facts show that there was a mutual mistake of an existing material fact, common to both parties, and by reason thereof each has done what neither intended, coupled with a failure of consideration.
“2. That in a conveyance of land by deed containing restrictions therein which restrict the use of the property for a certain purpose, the grantor thereby warrants that the property so conveyed and restricted can be used for the specific purpose to which its use is restricted by the deed of conveyance.”
In general, we are bound by the findings of fact unless such facts are not supported by any competent evidence.
See, e.g., Blackwell v. Butts,
Based on these uncontroverted facts, the Court of Appeals held that plaintiff was entitled to rescind the contract on the grounds of “mutual mistake of material fact” coupled with a “total failure of consideration.”
In attempting to determine whether the aggrieved party is entitled to some kind of relief in these mistaken assumption cases, courts and commentators have suggested a number of factors as relevant. E.g., was the mistake bilateral or unilateral; was it palpable or impalpable; was one of the parties unjustly enriched; was the other party unjustly impoverished; was the risk assumed by one of the parties (i.e., subjective ignorance) ; was the mistake fundamental or collateral; was the mistake related to present facts or to future expectations; etc. See Rabin, A Proposed Black-Letter Rule Concerning Mistaken Assumptions in Bargain Transactions, 45 Tex. L. Rev. 1273 (1967) (hereinafter cited as Rabin). See also D. Dobbs, Remedies 716-84 (West 1973).
Our research has failed to disclose a prior North Carolina case applying the doctrine of mutual mistake pertaining to a physical condition of real property as a ground for rescission.
But see MacKay v. McIntosh,
In
Blythe v. Coney,
Likewise, in
Davey v. Brownson,
One court has held that there were sufficient grounds for rescission of a sale of realty where both the vendor and the vendee were mistaken as to the suitability of the soil or the terrain for agricultural purposes.
See, e.g., Binkholder v. Carpenter,
The closest mistaken assumption case we have found to our fact situation is
A & M Land Development Co. v. Miller,
354
Mich. 681,
There are, however, several important distinguishing factors between the
Miller
case and our case. First, the purchaser in
In our view, the difficulty with the above listed factors and with the decisions we have examined is that in any given case several factors are likely to be present, and each may point toward a different result. For example, in
A & M Land Development Co. v. Miller, supra,
the mistake appears to have been mutual and it also appears to have been induced by misrepresentations of the vendor (i.e., vendor furnished reports of privately engaged engineers and local public sanitation officials indicating that the character of the soil was suitable for the use of individual septic tank systems). Yet, the court held that rescission would be improper since the purchaser received the property for which he had contracted. Perhaps the court felt that since the vendee was a developer-speculator he assumed the risk of soil defects. In short, the relation of one factor to another is not clear.
Compare Vickerson v. Frey,
Is plaintiff therefore without a remedy? Did plaintiff buy this property “at the end of the halter” (an expression of horse traders) ? At this moment, plaintiff has naked legal title to a tract of real estate whose use to her is limited by the restrictive covenants and by the facts as stipulated to what she calls “the dubious pleasure of viewing the same.” On the other hand, defendants have $3,500 of plaintiff’s money. There can be no question but that the parties to this transaction never contemplated this particular use of the subject property. In fact, the deed, by its very terms, makes it clear that the intended use was for the construction of a single-family residence, strictly limited as to costs and as to design. The stipulation further indicates that both prior to and at the time of the conveyance neither defendants nor plaintiff knew that the property would not support a septic tank or on-site sewage disposal system.
In the face of these uncontroverted facts, defendants rely upon the doctrine of caveat emptor as a legal defense to plaintiff’s action for rescission.
The common law doctrine of
caveat emptor
historically applied to sales of both real and personal property. Its application to personal property sales, however, has been restricted by the Uniform Commercial Code.
See
G.S. 25-2-314, et. seq. Over the years, as to real property, the number of cases that strictly apply the rule of
caveat emptor
appears to be diminishing, while there is a distinct tendency to depart therefrom, either by way of interpretation, or exception, or by simply refusing to adhere to the rule where it would work injustice.
See, e.g.,
7 Williston, Contracts §§ 926 and 926A (3d ed. 1963) ; 77 Am. Jur. 2d Vendor and Purchaser §§ 329-37 (1975) ; 67 Am. Jur. 2d Sales § 462 (1973) ; Haskell, The Case for an Implied Warranty of Quality in Sales of Real Property, 53 Geo. L.J. 633 (1965) (hereinafter cited as Haskell); Seavey, Caveat Emptor as of 1960, 38 Texas L. Rev. 439 (1960).
See generally,
Annot.,
In recent years the rule of
caveat emptor
has suffered severe inroads in sales of houses to be built or in the course of con
struction.
See generally
Bearman, Caveat Emptor in Sales of Realty — Recent Assaults Upon the Rule, 14 Vand. L. Rev. 541 (1961) ; Bixby, Let the Seller Beware: Remedies for the Purchase of a Defective Home, 49 J. Urban Law 533 (1971) ; Haskell,
supra;
Jaeger, The Warranty of Habitability, 46 Chi-Kent L. Rev. 123 (1969) (Part I) ; 47 Chi-Kent L. Rev. I (1970) (Part II) ; Roberts, The Case of the Unwary Home Buyer: The Housing Merchant Did It, 52 Cornell L. Q. 835 (1967) ; Comment, Buyer’s Remedies in the Sale of Real Property in California, 53 Calif. L. Rev. 1062 (1965) ; Note, Implied Warranties in the Sale of New Houses, 27 Md. L. Rev. 299 (1967). Today, it appears that a majority of the states imply some form of warranty in the purchase of a new home by a first purchaser from a builder-vendor.
See, e.g.,
Annot.,
During the course of this litigation, and subsequent to the oral arguments of this case in the Court of Appeals, this Court decided the case of
Hartley v. Ballou,
“[I]n every contract for the sale of a recently completed dwelling, and in every contract for the sale of a dwelling then under construction, the vendor, if he be in the business of building such dwellings, shall be held to impliedly warrant to the initial vendee that, at the time of the passing of the deed or the taking of possession by the initial vendee (whichever first occurs), the dwelling, together with all its fixtures, is sufficiently free from major structural defects, and is constructed in a workmanlike manner, so as to meet the standard of workmanlike quality then prevailing at the time and place of construction ; - and that this implied warranty in the contract of sale survives the passing of the deed or the taking of possession by the initial vendee.”
Id.
at 62,
We believe that many of the mutual mistake cases discussed supra were in fact embryo implied warranty cases. For example, in
Davey v. Brownson, supra,
the purchaser obtained rescission because of termities on the ground of mutual mistake. Although the court denied its decision was based on implied warranty, it is difficult to understand the application of the mutual mistake doctrine.
See also Blythe v. Coney, supra. See generally
Freid-man,
supra,
at 30-37. In this context,
Hartley
could easily be classified as a mutual mistake case, i.e., both parties assumed that the basement wall was sufficiently free from structural defects so as to prevent any water leakage. But, in
Hartley
we recognized the implied warranty as a limited exception to the general rule of
caveat em/ptor;
if we had elected to totally abolish the doctrine, then perhaps application of the mutual mistake theory
Concededly, this is not the Hartley fact situation. Hartley involved a builder-vendor of new homes and a consumer-vendee. Nonetheless, we believe that Hartley provides the legal precedent for deciding this case. The basic and underlying principle of Hartley is a recognition that in some situations the rigid common law maxim of caveat emptor is inequitable. We believe this is one of those situations. As a result, we hold that 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, or by any subsequent grantees through mesne conveyances, for the specific purpose to which its use is limited by the restrictive covenants, the grantor breaches an implied warranty arising out of said restrictive covenants.
Defendant contends that if plaintiff is permitted to rescind, then any contract or conveyance can be set aside under a set of circumstances rendering the land no longer attractive to a purchaser. If we applied the mutual mistake doctrine, then there might be some merit to this argument. But, under the rule we have announced, a purchaser is bound by patent defects or by facts a reasonable investigation would normally disclose. In the instant case, it is clear that a reasonable inspection by the grantee either before or at the time of conveyance would not have disclosed that the property could not support a septic tank or on-site sewage disposal system.
Therefore, under the facts of this case, we hold that defendant grantors have breached the implied warranty, as set out above, and that plaintiff, by timely notice of the defect, once it was discovered, is entitled to full restitution of the purchase price; provided that she execute and deliver a deed reconveying the subject lot to defendants. The judgment of the Court of Appeals, as modified herein, is thus affirmed.
Modified and affirmed.