Swinton v. Whitinsville Savings Bank

Supreme Judicial Court of Massachusetts · 1942 · Contracts

ContractsFraudNondisclosureSale of real propertycaveat emptornondisclosureconcealmentfraud

Facts

The plaintiff alleged that the defendant sold him a house to be occupied as a family dwelling and that, at the time of sale, the house was infested with termites. He claimed the termite condition was not readily observable on inspection, that the defendant knew of the internal destruction being caused, and that the defendant concealed the house's true condition. The declaration did not allege any false statement, half-truth, interference with the plaintiff's ability to investigate, or any fiduciary or dependent relationship between the parties. The plaintiff later discovered the termites and incurred substantial repair and termite-control expenses.

Issue

Is a seller of a house liable for fraud based solely on knowingly failing to disclose a latent termite infestation to a buyer in an arm's-length transaction, where there was no false representation, half-truth, prevention of inquiry, or fiduciary duty to speak?

Rule

A seller is not liable for fraud for bare nondisclosure of a nonapparent defect known to the seller when the parties deal at arm's length and there is no false statement, no half-truth tantamount to a falsehood, no conduct preventing the buyer from acquiring information, and no fiduciary or similar duty requiring disclosure.

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

In Columbus, Olivia Mercer sold a duplex to Daniel Kim after a routine negotiation. Olivia knew that hidden rot had seriously weakened the floor joists, but she said nothing about the condition, made no statements about structural soundness, and did not interfere with Daniel's inspection.

If Daniel later discovers the rot and sues Olivia for fraud based solely on her silence, what is the most likely result?

Explanation. The majority rule is that bare nondisclosure of a latent defect is not actionable fraud where the parties are dealing at arm's length and there is no false statement, no half-truth, no prevention of inquiry, and no fiduciary or similar duty to speak. Here, the seller merely remained silent. That is insufficient to state fraud under the doctrine established by the case.