This section contains the nature of the case and procedural background.

Davis (P) bought a house from Johnson (D) for $310,000. P was to make a total deposit of $31,000 in $5,000 and then $26,000 five days later. Before P made the $26,000 deposit payment, P noticed buckling and peeling plaster around the corner of a window frame in the family room and stains on the ceilings in the family room and kitchen of the home. D told P that the window had had a minor problem that had long since been corrected and that the stains were wallpaper glue and the result of ceiling beams being moved. Two roofers hired by D's broker concluded that for under $1,000 they could 'fix' certain leaks in the roof and by doing so make the roof 'watertight.' Three roofers hired by P found that the roof was inherently defective, that any repairs would be temporary because the roof was 'slipping,' and that only a new $15,000 roof could be 'watertight.' D knew that the roof leaked, but falsely represented to P that it did not. P wanted rescission of the sale and the return of his deposit. D counterclaimed for liquidated damages. The court rescinded the sale and awarded P $26,000. D was awarded $5,000. Both appealed. The appellate court reversed the trial award to D. D appealed.

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