Here is a short summary of the law in New York regarding rescission of transactions consummated by fraud –
In Bloomquist v. Farson et al., 222 N.Y. 375, 380; 118 N.E. 855; 1918 N.Y. LEXIS 1467 (1918), the Court of Appeals long ago held that a transaction should be rescinded when it has been consummated through misrepresentation, even if fraud has been alleged but the facts do not rise to the level of actionable fraud:
“An action may be maintained in equity to rescind a transaction which has been
consummated through misrepresentation of material facts not amounting to fraud.
Unlike an action at law for damages, intentional misstatements need not be proved.
(Hammond v. Pennock, 61 N. Y. 145, 152; Carr [***10] v. Nat. Bank & Loan Co. of
Watertown, 167 N. Y. 375; Squiers v. Thompson, 73 App. Div. 552; affd., 172 N. Y. 652;
Lyon v. James, 97 App. Div. 385; affd., 181 N. Y. 512; Schank v. Schuchman, 212 N. Y.
352; Canadian Agency, Ltd., v. Assets R. Co., 165 App. Div. 96; Cook on Corp. sec.
The fact that the plaintiffs have alleged fraud and deceit is not fatal to the action provided the proof establishes misrepresentations and that these are material,influencing the bargain. (Hammond v. Pennock, 61 N. Y. 145, and the report of the casein the General Term at 5 Lans. 358; Lamphere v. Lang, 213 N. Y. 585; Graves v. Waite,59 N. Y. 156; Churchill v. St. George Dev. Co., 174 App. Div. 1; Novotny v. Kosloff, 214 N. Y. 12.) Equity will administer such relief as the exigencies of the case demand at the close of the trial. (Lightfoot v. Davis, 198 N. Y. 261, 273.)”
When a real estate transaction is predicated on misrepresentations and a party has not received what he bargained for, the entire transaction should be rescinded. Meck v. Allen Properties, Inc., 206 Misc. 251; 132 N.Y.S.2d 674; 1954 N.Y. Misc. LEXIS 2668 (Sup. Ct., Spec. Term, Queens Co. 1954).
If you have any legal questions or need help with a fraud case, please contact Attorney Scott Lanin at (212) 764-7250 x 201 or use the contact form in the right sidebar.