## Facts

- Michael J. Petrucelli and Margaret C. Petrucelli bought a small vacation/weekend home in Connecticut from Jeannine J. Palmer.
- The sales contract represented that the “building and septic system” were located entirely within the lot boundaries (no encroachments).
- After closing, a survey showed that a corner of the house encroached beyond the rear boundary and most or all of the septic system lay outside the lot on land controlled by a power company.
- The power company refused to permit the septic-system encroachment, leaving the residence unable to lawfully function with its existing septic system configuration.
- The buyers sued for, among other claims, rescission, return of the purchase price, reimbursement of purchase-related expenses (e.g., taxes and insurance), and attorney’s fees under a contractual fee-shifting provision.
- Palmer conceded the representation was materially false but disputed fraudulent intent.
- The case came to the court on cross-motions for summary judgment.

## Issues

1. Whether the buyers were entitled to rescission based on a materially false contractual representation about boundary encroachments, regardless of the seller’s intent.
2. If rescission was granted, whether the buyers could obtain restitution for expenses reasonably incurred due to the purchase (such as taxes and insurance).
3. Whether the buyers could recover attorney’s fees under a contract clause allowing fees for litigation over the contract.

## Decision

- The court granted summary judgment for the buyers on rescission.
- The court held the contract’s representation about the location of the house and septic system was materially false and induced the purchase, warranting rescission even absent intentional deception.
- The court permitted restitutionary recovery associated with unwinding the transaction, including reimbursement of reasonable purchase-related expenses.
- The court held the buyers were entitled to reasonable attorney’s fees under the contract’s fee-shifting clause because the litigation was over the contract and the buyers prevailed on the contract-based rescission claim.
- Further proceedings were contemplated to determine specific amounts owed.

## Legal Principles

- A material misrepresentation in a real estate sales contract that induces reliance can justify rescission even if the misstatement is innocent rather than fraudulent.
- A representation about whether improvements and a septic system are within parcel boundaries is material when it substantially affects the property’s usability and the buyer’s expected bargain.
- Rescission aims to restore the parties to the status quo ante through restitution, including return of the purchase price and reimbursement of reasonable reliance expenses.
- A contractual attorney’s-fee clause covering litigation “over the contract” may apply to an action seeking rescission when the dispute concerns rights and obligations arising from the contract.

## Conclusion

The court ordered rescission of the real estate sale because the seller’s contractual assurances about boundary lines and septic-system location were materially false and induced the buyers’ purchase, and it allowed restitution for related expenses and recovery of attorney’s fees under the contract.


Petrucelli v. Palmer, 596 F. Supp. 2d 347 (D. Conn. 2009)