Were the buyers entitled to rescission and/or restitution?

Putnam Construction & Realty Co. owned the University Square Business Center (USBC), an office complex with several major tenants. William Byrd and his partners (the “buyers”) entered into a contract to buy USBC. They financed the purchase with a $16.2 million loan from Northwestern Mutual Life. Northwestern’s loan was secured with a mortgage on the USBC, meaning that if the borrowers failed to repay the loan, Northwestern would own the property. Shortly after the sale closed, Byrd learned that several of the major tenants were leaving. The buyers sued Putnam, seeking rescission of the contract and restitution of their money. The trial court found that Putnam (the “sellers”) had committed fraud. It rescinded the sales contract, returning the property to the sellers. It ordered the sellers to assume full liability for the mortgage. The trial court did not, however, order restitution of the buyers’ expenses, such as the closing costs. The sellers appealed—which proved to be a big mistake.