Cushman v. Kirby

Supreme Court of Vermont · Contracts

ContractsMisrepresentationFraudNondisclosureDamagesfraudmisrepresentationpartial disclosure

Facts

Plaintiffs agreed to buy defendants' home after asking about a basement water-treatment apparatus labeled "water conditioner." Mrs. Kirby answered that the water was "good," "fine," and only "a little hard," and that the system took care of it, while Mr. Kirby was present and said nothing. After closing, plaintiffs discovered the well water was sulfur water with a strong rotten-egg smell; a plumber explained sulfur water is different from hard water and testified that even with rehabilitation the system would only produce treated sulfur water at a tolerable level of drinkability. Plaintiffs ultimately joined neighbors to connect to city water at a cost of about $5,000 plus annual bills.

Issue

Whether the evidence was sufficient to support actionable fraud against Mrs. Kirby based on her statements and against Mr. Kirby based on his silence, and whether the trial court erred in trying the case jointly and instructing the jury that damages could be measured by either repair cost or difference in value depending on whether repair would fully remedy the harm.

Rule

A seller commits actionable fraud when, having full information, the seller discloses only part of that information and by words or conduct leads the buyer to believe full disclosure has been made, with intent to deceive, overreach, and prevent investigation, and the buyer relies on it. Silence alone is not fraud unless there is a duty to speak; such a duty exists as a matter of law when a real-estate seller has superior knowledge of a material fact not within the purchaser's diligent attention, observation, and judgment. For fraud damages, if restoration can fully cure a temporary injury, reasonable repair cost may be used; if the injury is permanent or beyond full repair, the proper measure is the difference between the property's value as represented and its value as it actually existed.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Portland, Maine, Dana Holt asked seller Erica Nolan about a humming treatment unit attached to a home's private well. Erica knew the well water had high iron bacteria levels that stained fixtures and remained unpleasant even after treatment, but she replied only, "The water is fine—just a little mineral-heavy, and the unit handles it," causing Dana to stop asking questions.

If Dana later sues for fraud after discovering the true condition, which is the strongest argument that Erica can be held liable?

Explanation. The governing rule is that actionable fraud can arise from partial disclosure. A seller who has full information and reveals only part of it, while leading the buyer to believe full disclosure has been made, acts fraudulently if done with intent to deceive and prevent investigation, and the buyer relies on it. Here, Erica knew a material water defect existed, but described the problem only in a limited way that could induce Dana to stop investigating. (Derived from Cushman v. Kirby (n.d.).)