Matthews v. Kincaid

Supreme Court of Alaska · Contracts

ContractsMisrepresentationNondisclosureReal estate transactionsfraudulent misrepresentationnegligent misrepresentationnondisclosureduty to disclose

Facts

Matthews listed his four-plex for sale through Century 21, left the listing's parking space blank, and supplied a survey and subdivision plat showing his lot had no off-street parking and did not include the neighboring lot. Kincaid dealt only with agent Diane Albert, who told her that parking for the four-plex was available in the six-plex lot next door, even though the lots were separated by a chain link fence and the neighboring lot appeared too small for both buildings. Matthews never spoke to Kincaid before the sale and, when asked by Albert about parking, said only that street parking was available 22 out of 24 hours a day. Kincaid bought the property believing the neighboring lot was available for parking, later learned it was not, and then sued Matthews for fraud, negligent misrepresentation, and responsibility for Albert's statements.

Issue

When a seller makes no affirmative misrepresentation, can the seller be liable for fraudulent or negligent misrepresentation based on failure to disclose that the property lacks off-street parking? More specifically, did Matthews owe Kincaid a duty to disclose that the neighboring fenced parking lot was not part of the property being sold?

Rule

To prevail on fraudulent or negligent misrepresentation, a plaintiff must prove either an affirmative misrepresentation or an omission where the defendant had a duty to disclose. A duty to disclose is rarely imposed in an arm's-length transaction when the undisclosed fact is the type a buyer would be expected to discover by ordinary inspection and inquiry, absent a relationship of trust and confidence or other circumstances recognized in Restatement (Second) of Torts § 551.

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

In Boise, Nina Porter sold a small apartment building to Leo Grant through brokers. Nina never spoke with Leo, but she gave the brokerage a survey and plat clearly showing that the paved area beside the neighboring building was outside the parcel, and the neighboring area was divided from Nina's lot by a metal fence. Leo assumed the paved area came with the purchase and later sued Nina for fraudulent and negligent misrepresentation based solely on her silence.

Is Leo likely to prevail against Nina on a nondisclosure theory?

Explanation. To recover for fraudulent or negligent misrepresentation based on silence, the plaintiff must show a duty to disclose. The majority opinion states such a duty is rarely imposed where the parties deal at arm's length and the fact is the type a buyer would be expected to discover by ordinary inspection and inquiry. Here, the boundary and absence of parking on the parcel are apparent from the fence and the documents, and the seller did not deal directly with the buyer. (Derived from Matthews v. Kincaid (n.d.).)