Case Title: Fuller v. Banknorth Mortgage Co.

Citation: 173 Vt. 488, 788 A.2d 14

Docket Number: 

State: vermont

Court: Vermont Supreme Court

Date: 2001-10-29T00:00:00Z

Document:
Fuller v. Banknorth Mortgage Co. (2001-133); 173 Vt. 488; 788 A.2d 14

[Filed 29-Oct-2001]

                                 ENTRY ORDER

                      SUPREME COURT DOCKET NO. 2001-133

                             OCTOBER TERM, 2001

Elaine M. Fuller	               }	APPEALED FROM:
                                       }
                                       }
     v.	                               }	Essex Superior Court
                                       }	
Banknorth Mortgage Company and 	       }
Banknorth Group, Inc., First Vermont   }
Bank & Trust	                       }	DOCKET NO. 8-2-96 Excv

                                                Trial Judge: Merideth Wright  

             In the above-entitled cause, the Clerk will enter:

       Plaintiff Elaine Fuller appeals the judgment of the superior court in
  favor of defendant  Banknorth Mortgage Company on her claim for fraud. 
  Fuller argues that the trial court misapplied  the law concerning
  fraudulent concealment and erroneously determined that a release she signed 
  covered the actions of Banknorth.  We affirm.

       Fuller argues that the trial court erred as a matter of law and does
  not contest the factual  findings of the court.  The undisputed factual
  findings of the court are as follows.  On September 23,  1993, Fuller
  entered into a purchase and sale agreement to buy a nine-room house in
  Concord that  dated from roughly 1860.  It was her first purchase of a
  home.  The purchase and sale agreement was  contingent on, among other
  things, Fuller receiving financing for the purchase.  It contained no 
  building inspection contingency, however.

       The following day, Fuller contacted a loan originator for Banknorth
  about financing for the  home.  In the course of their meeting, the loan
  originator discussed the various options available to  Fuller as a
  low-income, first-time home buyer, including applying for a Vermont Housing
  Finance  Agency (VHFA) loan guaranteed by the federal Farmers Home
  Administration (FHA).  Fuller filled  out a loan application and wrote a
  check to cover both the application fee and a loan appraisal.  The 
  following week, the loan originator informed Fuller that her loan
  application was being placed with  the VHFA, and the loan would be
  guaranteed by the FHA if approved.  She also requested that Fuller  send
  her additional monies to cover a building inspection which was required as
  part of the loan  application process with VHFA and FHA.  The loan
  originator explained that VHFA and FHA  needed information on the value of
  the security as well as estimates regarding needed repairs, funds  for
  which would be potentially included in the loan amount.  Fuller was
  initially upset that she had to  pay for what she viewed as a "second
  inspection," but agreed when the loan originator explained that  it was a
  necessary part of the loan application process.

 

       Fuller requested to the loan originator that she be present at the
  inspection so she could receive  the estimates for the repairs. 
  Unfortunately, the realtor who had shown Fuller the house set up the 
  inspection and not the loan originator.  The realtor did not notify Fuller
  of the inspection, and,  therefore, she was not present for it.  The
  inspection was performed on October 18, but without  either the electricity
  connected or the water turned on.  The inspector filled out a form
  indicating  whether certain items were in "good," "average," or "poor"
  condition, and included additional  remarks.  The report was provided to
  the loan originator who forwarded it to the VHFA/FHA.  She  also discussed
  the results with the inspector who indicated he thought that the items
  marked "poor"  should be repaired prior to the transaction occurring.

       The loan originator contacted Fuller and informed her that both the
  appraisal and inspection  had been completed.  She told her that certain
  items needed to be repaired before a loan would be  approved.  Fuller and
  the seller executed an addendum to the purchase and sale agreement that 
  extended the closing date and provided that the needed repairs would be
  done before closing.  Fuller  took the fact that the loan approval process
  would go forward once the needed repairs were done to  mean that the house
  had "passed" the building inspection.  She never requested a copy of the 
  inspection report.

       On November 19, FHA provided the first conditional commitment for the
  loan, conditioned on  the necessary repairs being done.  The closing was
  scheduled for January 24, 1994.  Fuller and  several of her friends
  performed many of the repairs themselves because of the short timeline. 
  The  day before the closing, the appraiser reappraised the property.  The
  appraisal still exceeded the loan  amount, and the loan was approved with
  the closing occurring as scheduled.  As is the custom with  such loans, the
  loan was assigned to VHFA, and thereafter Banknorth merely serviced the
  loan on  behalf of VHFA.

       In the ensuing months, Fuller started to experience numerous problems
  with the home,  including problems with the wiring, questions about the
  soundness of the foundation, and problems  with the well pump.  Because of
  the expenses related to these problems, Fuller had trouble meeting  her
  monthly loan payments.  She also was without work or income for a period of
  time following her  purchase of the house.  Eventually, she negotiated an
  agreement with VHFA in which the  organization accepted a deed in lieu of
  foreclosure, because of her inability to make her loan  payments.  She
  vacated the home in February 1996.

       Fuller initially brought suit against the building inspector for
  negligence.  Fuller later added  Banknorth as a defendant and stipulated to
  the dismissal of her claims against the building inspector,  eventually
  adding a claim for fraud against Banknorth.  The parties proceeded to trial
  only on the  fraud claim.  Following a bench trial, the trial court entered
  judgment in favor of Banknorth.  Fuller  appeals to this Court.

       Fuller's primary argument is that, despite the trial court's
  conclusion that Banknorth did not  affirmatively misrepresent the results
  of the building inspector's report, the trial court failed to  adequately
  address the alternative basis for a claim of fraud: fraudulent concealment. 
  Fuller argues 

 

  that Banknorth failed to disclose fully the details of the inspection
  results, thereby fraudulently  inducing her to enter into the loan
  transaction.  She argues that she was misled into believing, by 
  Banknorth's silence, that the inspection found that the electrical, water
  and wastewater disposal  systems were in good working order when, in fact,
  those systems were never really examined  because neither the electricity
  nor the water were turned on.

       Our case law establishes that, in order to state a claim for fraud
  based on fraudulent  concealment, a plaintiff must demonstrate: (1)
  concealment of facts, (2) affecting the essence of the  transaction, (3)
  not open to the defrauded party's knowledge, (4) by one with knowledge and
  a duty  to disclose, (5) with the intent to mislead, and (6) detrimental
  reliance by the defrauded party.  See  Lewis v. Cohen, 157 Vt. 564, 568,
  603 A.2d 352, 354 (1991) (outlining the elements of fraud by  affirmative
  misrepresentation); Silva v. Stevens, 156 Vt. 94, 102-03, 589 A.2d 852, 857
  (1991)  (listing the elements of fraud and the elements of fraudulent
  concealment); Sutfin v. Southworth, 149  Vt. 67, 69-70,