Can buyers recover interest payments in rescission cases? Anderson v. Doms Explained

In a significant ruling on rescission remedies, the Utah Court of Appeals clarified when buyers can recover interest payments made during a failed real estate transaction. The case of Anderson v. Doms provides important guidance for practitioners handling contract rescission matters.

Background and Facts

This long-running dispute involved a Park City property sale where the seller, Anderson, breached warranty provisions regarding encroachments and easements. The buyer, Doms, stopped making payments under the trust deed note due to Anderson’s breach and sought rescission of the contract. After multiple appeals spanning nearly two decades, the trial court finally ordered rescission but denied Doms recovery of interest-only payments he had made on the trust deed note during the contract period.

Key Legal Issues

The primary issue was whether rescission remedies should include recovery of interest payments made by the buyer. The seller cross-appealed, arguing the trial court erred in denying him fair rental value for the buyer’s possession of the property and in awarding prejudgment interest.

Court’s Analysis and Holding

The Court of Appeals reversed the trial court’s denial of interest payment recovery. Examining cases from other jurisdictions, the court established that rescission remedies generally include recovery of interest paid, as these constitute “out-of-pocket costs to finance a transaction.” The court distinguished cases where interest recovery was denied due to buyer fraud, noting no such circumstances existed here. Regarding the cross-appeal, the court affirmed the trial court’s denial of rental value offset, finding Anderson presented no evidence that the unimproved land had any use or occupation value.

Practice Implications

This decision reinforces that rescission aims to restore the status quo by returning parties to their pre-contract positions. Practitioners should understand that interest payments are generally recoverable unless equitable factors justify denial. However, parties seeking offsets must present adequate evidence to support their claims, as trial courts cannot speculate without evidentiary support. The ruling also demonstrates the importance of the law of the case doctrine in preventing relitigation of previously decided issues.