V.S.H. Realty, Inc. v. Texaco, Inc.

United States Court of Appeals for the First Circuit · 1985 · Contracts

757 F.2d 411 (1985)

Updated July 26, 2026

Contractsmisrepresentationdisclosureas is clauseschapter 93Aencumbranceshalf-truthpartial disclosure

Facts

V.S.H. agreed to buy a used petroleum storage facility from Texaco for $2.8 million and paid a $280,000 deposit. The agreement required conveyance free of liens, encumbrances, tenancies, and restrictions, but also stated that V.S.H. had inspected the property and accepted it 'as is'; Texaco additionally disclosed one fuel-oil migration problem and stated, to the best of its knowledge and belief, that it had received no governmental notice regarding modifications or improvements to the facility. After acceptance of the offer, V.S.H. observed additional oil seepages at two ends of the property and alleged that Texaco had failed to disclose those seepages and a U.S. Coast Guard investigation despite repeated inquiries about oil leaks. When Texaco refused either to cure the problem, indemnify V.S.H., reduce the price, or return the deposit, V.S.H. filed suit.

Issue

Whether the complaint stated claims for common law misrepresentation and for violation of Massachusetts chapter 93A based on Texaco's alleged partial disclosures and nondisclosures despite an 'as is' clause, and whether the alleged environmental risks and statutory liabilities amounted to encumbrances so that Texaco breached its promise to convey title free of encumbrances.

Rule

Under Massachusetts law, a party who speaks on a subject must speak honestly and disclose all material facts bearing on that subject within its knowledge; fragmentary information and half-truths may be actionable misrepresentation even absent a fiduciary relationship. For chapter 93A, a complaint may state a claim based on failure to disclose a material fact that may have influenced the buyer not to enter the transaction, and an 'as is' clause does not automatically defeat claims based on fraud or deceptive conduct. By contrast, a breach-of-contract claim based on failure to convey title free of encumbrances requires more than speculative or merely possible future environmental liabilities; the complaint must allege facts showing a sufficiently concrete adverse claim or violation likely to expose the purchaser to title controversy.

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

In Providence, Nora Patel agreed to buy a warehouse from Harbor Line Storage LLC. During negotiations, Nora repeatedly asked about structural water intrusion, and Harbor Line disclosed only that a small leak had once appeared near a loading dock, while omitting its knowledge of recurring flooding in two other sections of the building. The contract also stated that Nora had inspected the property and accepted it "as is."

If Nora sues for common law misrepresentation after discovering the omitted flooding problems, which result is most consistent with the governing rule?

Explanation. The majority rule is that even in an arm's-length transaction, a party who speaks on a subject must speak honestly and disclose all material facts bearing on that subject within its knowledge. Fragmentary disclosures and half-truths may be actionable misrepresentation. The "as is" clause does not automatically bar such a claim.