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Ryan v. Weiner - 610 A.2d 1377 (Del. Ch. 1992)

Rule:

Generally, a party may rescind an agreement based on its unilateral mistake if the following conditions are met: (1) the enforcement of the agreement would be unconscionable; (2) the mistake relates to the substance of the consideration; (3) the mistake occurred regardless of the exercise of ordinary care; and (4) it is possible to place the other party in the status quo.

Facts:

Plaintiff Robert Ryan fell behind in the mortgage payments on his home, and the mortgage lender instituted foreclosure proceedings. At that time, the house had a fair market value of $ 19,800, and the balance of the loan secured by the mortgage was less than $ 8,000. Default judgment in the amount of $ 7,843.26 was entered in the foreclosure proceedings, and a sheriff's sale was scheduled. Before the sale, defendant Norman Weiner, a real estate broker, arrived unannounced at Ryan's home and told Ryan that he could help Ryan "keep his home." Ultimately, Ryan executed a deed transferring his home to Weiner. Ryan later filed a lawsuit in Delaware chancery court seeking to rescind the deed. Ryan claimed that Weiner deceived him into believing that he was transferring a deed to Weiner only as  a security interest to pay off the outstanding mortgage of Ryan's loan.

Issue:

Was Ryan entitled to the remedy of rescission?

Answer:

Yes.

Conclusion:

The court rescinded the deed. The court found that Weiner took advantage of Ryan. The court found that Ryan transferred ownership of his property without adequate consideration because he did not receive any part of the financial value of the then equity in the property. Ryan remained personally liable for paying off the mortgage balance under the mortgage bond and note. The court found that Weiner did not give Ryan time to seek legal advise or consider alternatives, that Ryan did not understand the nature and effect of the papers he signed, that the transaction involved shockingly unconscionable financial terms and that Weiner used predatory practices. The facts of the case were equivalent of cases in which courts set aside land transfers as fraudulent or constructively fraudulent.

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