Daily Development for Monday: March 20

Daily Development for Wednesday, April 5, 1995

By: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
prandolph@cctr.umkc.edu

Think caveat emptor is dead? Chew on these:

VENDOR/PURCHASER; MISREPRESENTATION; "AS IS" CLAUSES: Even where seller's broker has stated that VA inspection and home warranty would take care of defects, abrogating the need for an inspection, buyers have no claim for discoverable defects because such statements are mere matters of opinion and contract stated that failure to inspect meant buyers take property "as is." Cato v. Lowder Realty Company, 630 So.2d

378 (Ala. 1993). It is important to note that the reasoning on this point supported a directed verdict for the broker - the buyers didn't even get to the jury on the point.

Comment: Southeastern states traditionally have been a stronghold for caveat emptor theory, and this case is no exception. On a related aspect of the case, the court held that the sellers were not liable for breach of contract when they warranted that the furnace was in good working order and it later developed that the furnace had been improperly installed. Again, the court held that the buyers waived the defect even though covered by warranty when they took the property without inspecting.

VENDOR/PURCHASER; MISREPRESENTATION; "AS IS" CLAUSES:

Purchaser could not rescind contract to purchase a condominium unit under construction on the grounds that seller made false oral representations about the apartment's design when the contract provided that purchaser had not relied on seller's representations, or any drawings or written specifications concerning the unit. Risbano v. 3rd & 60th Associates, 606 N.Y.S.2d 335 (App. Div. 1994).

Comment: Although the appeals court decision, characteristic for New York, is so devoid of factual development as to defy careful analysis, a question arises in this case as to exactly what the court thought did induce the buyer to purchase the condominium unit. It did not exist when the contract was signed, so clearly the buyer had to listen to a description or look at some plans. Here the buyer argued that the seller had told buyer that the unit would have floor to ceiling windows. Buyer withdrew when it noted that such windows were not being installed. Is it appropriate to bar a consumer purchaser of a condomium unit from a remedy based upon misrepresentation due to exculpating language in a form contract that cannot possibly describe the true relationship between the parties?

Try this one as an antidote:

VENDOR/PURCHASER; MISREPRESENTATION; DISCOVERABLE DEFECTS:

Purchasers of real property may recover against a builder-seller and its agent in an action for fraud and negligent misrepresentation based on false statements, the accuracy of which the purchasers did not immediately investigate. Gross v. Sussex Inc., 630 A.2d 1156 (Md. 1993). The lower courts had granted a motion for summary judgment in favor of the builder. At issue was whether there was either fraud or negligent misrepresentation as to the existence of building permits and subdivision approval. At the time of the execution of the contract, final subdivision approval had not been granted to the builder, and obviously building permits could not be issued. The purchaser, a licensed real estate agent, alleged that both the builder's representative and the construction site foreman had repeatedly assured him that construction would be completed in a timely manner per the contract. The court on appeal reversed the lower court ruling in favor of the builder. In its opinion, the court distinguished fraud from negligent misrepresentation, noting that fraud required scienter on the part of the allegedly defrauding party. In any event, both theories require nondisclosure or misrepresentation of a material fact. Taken in the light most favorable to the purchaser, the court found that there was either a dispute of material fact as to whether the builder and its agent made the critical misrepresentation, or a material dispute of fact as to the intent with which the representation was made. This was sufficient to overcome a motion for summary judgment. In addition, the court found that the purchaser's status as a licensed real estate agent did not matter in its assessment. Unlike the law in some other jurisdictions, in Maryland a person in a superior position to know or ascertain the truthfulness of representations made to him is not charged with an affirmative duty to investigate. In other words, the purchaser in this case was entitled to rely on representations made to him as to the status of subdivision approval and building permit issuance.

Readers are urged to respond, comment, and argue with the daily development or the editor's comments about it.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 1‑6, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 5590 or mtabor@staff.abanet.org

Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. The same is true of all commentary provided by contributors to the DIRT list. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.

Parties posting messages to DIRT are posting to a source that is readily accessible by members of the general public, and should take that fact into account in evaluating confidentiality issues.

ABOUT DIRT:

DIRT is an Internet discussion group for serious real estate professionals. Message volume varies, but commonly runs 5 ‑ 10 messages per workday.

Daily Developments are posted every workday.

To subscribe to Dirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Subscribe Dirt [your name]

To cancel your subscription to Dirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Signoff Dirt

For information on other commands, send the message Help to the listserv address.

DIRT has an alternate, more extensive coverage that includes not only commercial and general real estate matters but also focuses specifically upon residential real estate matters. Because real estate brokers generally find this service more valuable, it is named "Brokerdirt." But residential specialist attorneys, title insurers, lenders and others interested in the residential market will want to subscribe to this alternative list. If you subscribe to Brokerdirt, it is not necessary also to subscribe to DIRT, as Brokerdirt carries all DIRT traffic in addition to the residential discussions.

To subscribe to Brokerdirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Subscribe Brokerdirt [your name]

To cancel your subscription to Brokerdirt, send an e-mail to:

To:	ListServ@listserv.umkc.edu
Subject:	[Does not matter]
Text in body of message	Signoff Brokerdirt

DIRT is a service of the American Bar Association Section on Real Property, Probate & Trust Law and the University of Missouri, Kansas City, School of Law. Daily Developments are copyrighted by Patrick A. Randolph, Jr., Professor of Law, UMKC School of Law, but Professor Randolph grants permission for copying or distribution of Daily Developments for educational purposes, including professional continuing education, provided that no charge is imposed for such distribution and that appropriate credit is given to Professor Randolph, DIRT, and its sponsors.

DIRT has a WebPage at: http://www.umkc.edu/dirt/