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F. DUTY TO DISCLOSE

Striker v. Graham Pest Control & Veronica Lynch (179 A.D.2d 984) buyer sues listing broker and inspection company regarding inspection prior to closing, which did not reveal infestation by carpenter ants. Question of fact presented regarding listing broker's failure to pass along information that inspection company included (regarding conditions conducive to carpenter ants) with its report that the house had "passed" the inspection.

2. Off Campus v. Steinhauser (180 A.D.2d 482) prospective tenant sues to recover sums paid to defendants in effort to obtain lease of premises. Complaint sufficiently alleges fraud, mistake and violations of RPL §442-a (as defendant was a sales associate).

3. Northeast General Corporation v. Wellington Advertising (151 Misc.2d 389) a finder is obligated to disclose to his client whatever adverse information he has concerning a buyer he finds. Test is materiality - adverse information which a reasonable businessman would consider material in considering whether or how to engage in a transaction.

4. Yellot v. Poritzky (170 A.D.2d 676) listing broker properly purchased listed premises for own account upon full disclosure and at fair and reasonable price. Listing broker's undisclosed purchase of unrelated, contiguous parcel was not in breach of fiduciary duty.

5. Sauerhoff-Kessler Realty Corp. v. Roma Shopping Plaza (201 A.D.2d 477) summary judgment for broker affirmed; claim of breach of fiduciary duty by procuring insolvent, non-viable tenant rejected.

6. Sleasman v. Sherwood (212 A.D.2d 868) non-jury trial, court concludes noise level on property was not loud and unusual; no excessive industrial noise at or before time of contract; no failure to disclose material fact.

7. Coldwell Banker Residential Real Estate v. Berner (202 A.D.2d 949) summary judgment for defendant properly denied where record presents triable issues of fact as to commission entitlement for negotiating lease; ambiguity in brokerage agreement (regarding "procuring" of lease within 60 days) drafted by defendant/seller is resolved against draftsman (an attorney); questions of fact whether broker should forfeit commission because of failure to disclose material condition or dual agency.

8. Matter of Roberts Real Estate v. DOS (171 A.D.2d 217) - Third Department reverses DOS finding of failure to disclose (51 DOS 90) based upon Real Property Law §442-c, where representative brokers did not have actual knowledge of the alleged incident New York Court of Appeals (80 N.Y.2d 116, October 20, 1992) affirms, with modification that the relevant "actual knowledge" is that of corporate officers, directors and representative brokers; applies RPL §442-c to prohibit suspension or revocation on vicarious basis, and remands to DOS to reconsider lesser sanctions.

9. Stambovsky v. Ackley (169 A.D.2d 254) - "ghost house" case. Broker as agent for seller is under no duty to disclose to the potential buyer that premises in question have a reputation of being haunted; seller's silence is not actionable. Contract rescission granted under unusual facts of case.

10. Criscuoli v. PASNY (81 N.Y.2d 649) - fear of electromagnetic frequency ("cancerphobia") even if irrational, can affect the market value of premises adjacent to power transmission lines.

11. Slavin v. Hamm (210 A.D.2d 831) - dual agency; disclosure - condition of premises; broker becomes agent of salesperson/seller when salesperson acting solely as owner; broker not liable for representation of salesperson acting solely as owner; seller's attorney under no duty to disclose a servitude on land to buyer; seller has no duty to disclose information regarding property unless fiduciary relationship; seller cannot participate in active concealment; buyer's attorney's duty to disclose to client matter of fact.

12. Casey v. Masullo Brothers Builders, Inc. (218 A.D.2d 907) - Buyer sues seller for fraud, misrepresentation, mistake of fact and breach of contract where buyer purchased residence based upon representations by seller through newspaper advertisements and representations by seller’s Realtor regarding the school district within which the property was located; Realtor’s statement based upon own investigation, loan profile sheet from an abstract company prepared prior to the closing, and town tax rolls which confirmed placement of the property within the disclosed school district; unless the facts are matters peculiarly within one party’s knowledge, the other party must make use of means available to him to ascertain, by the exercise of ordinary intelligence, the truth of such representations; question of fact exists whether a reasonable inquiry would have revealed the correct school district; order dismissing seller’s motion for summary judgment affirmed.

13. Vandervort v. Higginbotham (222 A.D.2d 831) - fraudulent misrepresentation; summary judgment for seller granted against purchaser on claim of fraudulent misrepresentation upon post closing discovery of underground oil storage tank and dry well where (i) purchaser was aware of prior use of property (motor vehicle repair shop) and floor drains to dry well, (ii) there is no indication purchaser was prevented from conducting inspections or tests, and (iii) no suggestion seller concealed anything that could not readily be discovered through reasonable inspection; purchaser may not rely on “conscious ignorance.”

14. Marshall v. Gallinger Real Estate Co. (222 A.D.2d 1101) - fraudulent misrepresentation; fraud cause of action fails where purchaser (i) noticed defective condition upon first visit to property, (ii) hired an engineer to inspect the property, and (iii) where there was no active concealment of defect.

15. Troiano v. Tuccio (227 A.D.2d 467) - fraud; disclaimer provision in sales contract between purchaser and seller does not inure to benefit of broker; complaint against broker alleging broker fraudulently induced purchaser to purchase property is reinstated.

16. Bando v. Achenbaum (234 A.D.2d 242) - order denying broker’s and seller’s motions for summary judgment dismissing complaint reversed; prior to closing, buyers were on notice of an ongoing termite infestation at the subject premises and availed themselves of the opportunity to have the premises inspected; where the buyer has the means available to him of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation, and such facts represented are not matters particularly within the knowledge of the seller, the buyer must make use of such reasonable means; facts allegedly not revealed could have been discovered by buyers through the exercise of reasonable diligence; contract of sale contains a specific disclaimer and therefore parol evidence as to those representations will not be admitted.

17. Bethka v. Jensen (250 A.D.2d 887) - fraudulent misrepresentation; questions of fact exist whether seller made material misrepresentation which induced buyer to purchase the property and whether a reasonable inquiry by buyers would have revealed the undisclosed condition (sewer system special assessment).

18. Bichoupan v. Bichoupan (251 A.D.2d 613) - buyer commences action against broker for misrepresentation as to legal use of premises; broker commences third party action against the seller for indemnification, asserting that seller represented the property to be a legal four-family dwelling in the listing agreement; third party complaint dismissed as seller made no representation in the contract of sale concerning the status of the property and did not authorize the broker to make any such representation with respect to the property.

19. Stephens v. Sponholz (251 A.D.2d 1061) - purchaser’s causes of action against seller for fraud and negligent misrepresentation stand; the “as is” and general merger clauses of the purchase agreement are not specific disclaimers and do not preclude a cause of action based upon fraud in the inducement of the contract; issues of fact remain as to whether seller made express fraudulent representations concerning water in the basement of the house or actively concealed the problem and whether purchaser could have discovered the defect by the exercise of reasonable diligence.

20. Sirles v. Harvey (256 A.D.2d 1227) - disappointed buyer’s complaint against seller and broker for fraud and breach of contract and against the seller for unjust enrichment and negligence; seller’s agent has duty not to conceal or misrepresent known facts, but no duty to investigate unknown facts and report them to buyer; broker’s motion for summary judgment dismissing breach of contract cause of action granted as an agent dealing on behalf of a disclosed principal is not liable for its principal’s breach of contract absent evidence that the agent intended to be bound personally on the contract; summary judgment dismissing fraud cause of action against broker reversed, as broker failed to sustain her burden of demonstrating her entitlement to judgment as a matter of law on said cause of action.

21. Venezia v. Coldwell Banker Sammis Realty (270 A.D.2d 480) - buyer’s action against seller for fraud for failing to disclose toxic contamination of untapped ground water beneath the property and surrounding area dismissed; cause of action against brokers severed; buyer’s claim of fraud against seller was extinguished upon closing as a result of specific merger clause in contract of sale; moreover, buyer’s failed to allege that seller made any representation about the condition of the land’s subsurface or groundwater and did not allege that seller engaged in concealment or otherwise deceitful conduct designed to prevent the discovery of such contamination; seller is under no duty to speak; salesperson of one of the defendant real estate agencies represented to buyer that the house was in good condition

22. Mosca v. Kiner (277 A.D.2d 937) - broker’s, salesperson’s and owner’s motion for summary judgment dismissing buyer’s complaint affirmed; where property was advertised as having deeded lake rights and the MLS indicated that the property had access to a private dock, buyer’s post closing fraud cause of action fails where buyer had the means available to him of knowing, by the exercise of ordinary intelligence, the truth concerning the description and boundary of the land and failed to make use of such means; the presence or absence of deeded lake rights was a mater of public record, was not particularly within broker’s, salesperson’s or owner’s knowledge and could have been ascertained by buyer by means available to him through the exercise of ordinary intelligence; specific merger clause in the contract defeats fraud cause of action

23. Platzman v. Morris (283 A.D.2d 561) - seller has no duty to disclose any information concerning the premises when the parties deal at arms length, unless there is some conduct on the part of the seller that constitutes active concealment; to show active concealment, the buyer must show that the seller thwarted buyer’s efforts to fulfill his responsibilities to investigate; no evidence that purchaser made any effort to investigate and no evidence that the circumstances were peculiarly within the seller’s knowledge; sales contract contained specific merger clause and therefore purchaser cannot claim fraud

24. Pais-Built Homes, Inc. v. Beckett (297 A.D. 2d 726) – buyer’s claim that they had been fraudulently induced into signing purchase contract due to seller’s and broker’s failure to disclose level of radon gas on the property fails; level of radon present in the house was not a matter peculiarly within the seller’s or broker’s knowledge; buyers fail to show that they could not ascertain the truth of the representation through the exercise of due diligence

25. Malach v. Chuang (194 Misc. 2d 651) – remedies provision of the Property Condition Disclosure Act are unenforceable beyond the requirement to give a $500 credit at closing should the seller refuse to provide the form, thereafter, common law or statutory remedies, if any, are available; information contained in the disclosure statement survives neither contract nor closing; seller answering “unknown” on the disclosure form triggers a duty to inquire on the part of the buyer and relieves the seller of any potential liability for defects that arise in regard to the part of the premises covered by the question; any information disclosed during the sale of the property merges into the contract and does not exist on its own basis of a common law cause of action; buyer’s action based on breach of the disclosure statement is dismissed on the grounds that no such cause of action is created by RPL Article 14; buyer’s relief exists under common law contract theories and buyers have not proven their prima faciecase under those theories

26. Bishop v. Graziano (10 Misc.3d 342) – sellers are still subject to common law liability in accordance with RPL Sec. 467 of the Property Condition Disclosure Act providing that nothing therein shall be considered as limiting any existing cause of action or remedy at law; no cause of action against seller exists in fraud where seller elects not to provide PCDS, provides buyer with $500.00 credit at closing and makes no representation upon which buyer could rely; court does not adopt reasoning in Malach v.Chuang (194 Misc. 2d 651) reasoning that the tendering of a proper disclosure statement vitiates common law and statutory remedies.

27. Delano v. Umbreit (10 Misc.3d 1054A) – cause of action exists against seller in fraud where seller elects not to provide PCDS and provides $500.00 credit and after such election makes a false representation about the heating system and concealed the true condition of the heating system (seller installed dummy heating vents in walls, lied about it post contract and later admitted knowing about the subterfuge).

28. Gabberty v. Pisarz (10 Misc. 3d 1010)- court fails to adopt reasoning in Malach v. Chaung (194 Misc. 2d 651) holding that no cause of action exists under the Property Condition Disclosure Act; court finds buyer entitled to $500.00 credit under RPL §465 (1) where seller delivered an incomplete Property Condition Disclosure Statement; seller failed to perform the duty to deliver a Disclosure Statement pursuant to the PCDA when the statement was incomplete; cause of action exists under RPL §462 (2) for willful failure to perform the requirements of the PCDA where (i) a deliberate misstatement or misstatements in a fully completed and timely delivered PCDS regarding the defective condition complained of (ii) that would tend to assure a reasonably prudent buyer that no such condition existed, and (iii) which a professional inspector might not discover upon an inspection of the premises that would meet generally accepted standards in the trade; definition of “willful failure to perform” acknowledges legislative intent not to alter the respective burdens of the buyer and seller in the transactions; statutory cause of action replaces buyer’s burden of having to plead and prove the seller’s active physical concealment of the condition with proof that the misstatement about the condition on the PCDS was deliberate

29. Renkas v. Sweers (10 Misc. 3d 1076A)- buyers contracted to and purchased property in “as is” condition, subject to inspections; buyers performed inspections of their choice and decided to continue with the purchase of the property in “as is” condition; seller’s oral statements and statements in the Property Condition Disclosure Statement did not thwart the ability of the buyer to asses and determine the condition of the property and did not alter the contract between the parties to convey the property “as is;” buyer cannot establish justifiable reliance based upon statements in PCDS where PCDS supports and reinforces the common law position of caveat emptor and the buyer’s need to inspect and investigate the property prior to purchase; representations of seller in the PCDS regarding the condition of the basement were peculiarly within in the seller’s knowledge and the buyers had the means available to them to ascertain the truth or the real quality of the representations; incorporation of the PCDS into the sale contract is consistent with and does not override or supersede the purchase and sale contract terms to purchase the property “as is;” the term to purchase the property “as is” is a specific contract disclaimer as to the condition of the property to be purchased and thwarts the breach of contract claim; buyers do not have a claim for breach of contract based on the representations made by the seller in the PCDS; there is no independent private cause of action by buyers against sellers under the PCDA nor a basis for a negligence cause of action

30. Fleischer v. Morreale (11 Misc. 3d 1004) – court fails to follow reasoning in Malach v. Chuang (194 Misc. 2d 651) and Renkas v. Sweers (10 Misc. 3d 1076A) that Property Condition Disclosure Act did not create a new cause of action; court adopts the first two elements of the working definition of the phrase “willful failure to perform the requirements of the Article” as set forth in Gabberty v. Pisarz (10 Misc. 3d 1010) as (i) a deliberate misstatement regarding the defective condition (ii) that would tend to assure a reasonably prudent buyer that no condition existed; court declines to adopt the third element of the Gabberty court definition requiring a “professional inspector discovery standards;” RPL §465 (2) is plain and clear on its face that it provides a “remedy” for willful misrepresentations making the “seller liable for the actual damages suffered by the buyer” in addition to any other existing equitable or statutory remedy; PCDA is cast by the legislative history in the nature of a “consumer protection” statute indicating that the newly created cause of action would have a lower standard of proof than the existing common law remedy; the Gabberty second element of a “reasonably prudent buyer” appears to “relax” the common law “reliance test”

  1. Calvente v. Levy (12 Misc. 3d 38)- Appellate Term, Second Department upholds Justice Court judgment in small claims action awarding $1,500.00 to purchaser for seller’s willful failure to disclose a prior flooding problem on the PCDS, entitling buyer to actual damages; court does not adopt the reasoning in Malach v. Chauang (194 Misc. 2d 651) that the PCDA does not create a cause of action

32. Middleton v. Calhoun (821 NYS 2d 444 [Rens. Co., 2006])- County Court affirm dismissal of small claim alleging failure to disclose defective conditions on real property in “as is” transaction, ruling that there is no cause of action under RPL 465 (2) and plaintiff failed to prove a cause of action under the common law. The PCDA was held not to create a strict liability cause of action or any cause of action for willful misrepresentation in the PCDS. The term “willful fails to perform the requirement of this article” is unenforceable. Moreover, there is insufficient proof that seller’s negative answer to the question of any known defects was in fact false. Nor was there any proof of fraud in the inducement. The buyer entered into an “as is” contract and there is no evidence whether the seller had the sewage system inspected prior to the deed transfer.

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