Case Name: Robert ARCHULETA, Plaintiff-Appellant, v. Carl KOPP, Defendant-Appellee
Court: Court of Appeals of New Mexico
Jurisdiction: New Mexico
Decision Date: 1977-02-01
Citations: 90 N.M. 273
Docket Number: No. 2611
Parties: Robert ARCHULETA, Plaintiff-Appellant, v. Carl KOPP, Defendant-Appellee.
Judges: SUTIN and HERNANDEZ, JJ., specially concur.
Reporter: New Mexico Reports
Volume: 90
Pages: 273–280

Head Matter:
562 P.2d 834
Robert ARCHULETA, Plaintiff-Appellant, v. Carl KOPP, Defendant-Appellee.
No. 2611.
Court of Appeals of New Mexico.
Feb. 1, 1977.
Rehearing Denied Feb. 14, 1977.
Certiorari Quashed April 12, 1977.
William E. Snead, Ortega, Snead & Dixon, Albuquerque, for plaintiff-appellant.
Jacob Carian, Robert W. Casey, Albuquerque, for defendant-appellee.

Opinion:
OPINION
LOPEZ, Judge.
Plaintiff, Robert Archuleta, originally sued in magistrate court for damages resulting from the use of a defective fireplace in a house which was purchased from the defendant. Archuleta tried the case pro se and won. On trial de novo in district court, judgment went against Archuleta. The plaintiff now appeals the adverse judgment entered by the district court sitting without a jury. We reverse and remand.
The issue is whether the defendant is liable under a theory of innocent misrepresentation, which is also known as constructive fraud.
The trial court made eighteen findings of fact which we shall summarize. The house in question was listed for sale in the multiple listing service of the Albuquerque Board of Realty and offered to the public. This listing included a picture and description of the premises. Next to a description on the printed listing form which read "WB/FP," the word "Den" was typed. Next to "remarks," the words "Large den with stone FP" were typed. The defendant and his agents made no representations other than the aforementioned listing. Nonetheless the court concluded the plaintiff had not relied on defendant's representation that there was a functioning woodburning fireplace in the house, but purchased "as is." In fact the fireplace was a fire hazard and was totally inoperative, unuseable and defective because the chimney was not of a sufficient height, there was no smoke shelf, no damper, the flue liner was too small in proportion to the opening of the fireplace, and the firebox was not made of the proper materials. The court went on to conclude as a matter of law that the plaintiff failed to establish proof of fraudulent, intentional misrepresentation or negligent misrepresentation.
Plaintiff also submitted proposed findings, which fairly stated the issue of innocent misrepresentation. The evidence is undisputed that the plaintiff is blind. When he purchased the house, the plaintiff examined the fireplace by sense of touch. As a result of the defects in the fireplace, when plaintiff lit a fire therein the house sustained smoke damage in the amount of $988.00. In order to correct the defects, it is necessary that the fireplace be reconstructed entirely at a cost of $1,258.00.
First, defendant contends that the plaintiff failed to challenge finding No. 18 which reads:
"That pursuant to paragraph 2 of the purchase agreement, Plaintiff represented that he examined said premises and purchased same 'as is' and not because of any representations by the sellers or agents."
The defendant makes this point because he says that under any theory of misrepresentation there must be justifiable reliance by the plaintiff. Plaintiff's brief did challenge finding No. 17 which reads:
"That the Plaintiff at no time relied upon any representations of the Defendant Kopp or his agents as to the fireplace in purchasing the house."
We do not believe that 17 and 18 are so inconsistent as to conclude that there was no proper challenge to the court's finding of no reliance upon the defendant's representations. The representations were material because they affected the value or desirability of the property. Moreover, plaintiff's requested findings in pertinent part stated:
"13. Plaintiff purchased the house in question relying upon the representation that the house contained a wood-burning fireplace;
"14. The representation that the house contained a wood-burning fireplace implied that the fireplace was in working order and was an operable wood-burning fireplace. Plaintiff's reliance upon the representation made in the multiple listing service that the house contained a wood-burning fireplace was a reasonable reliance under the circumstances;"
The district court's finding that plaintiff's purchase was not made in reliance upon defendant's false representation is not supported by substantial evidence. No evidence was introduced to contradict plaintiff's testimony that he did rely because he was in the market for a three bedroom house with a woodburning fireplace. Plaintiff did not purchase the house "as is." Plaintiff was induced to purchase the house by representations that it was otherwise. An "as is" clause cannot preclude recovery where the seller actively misrepresents the condition of the property. Lingsch v. Savage, 213 Cal.App.2d 729, 29 Cal.Rptr. 201, 8 A.L.R.3d 537 (1963). See also Maxey v. Quintana, 84 N.M. 38, 499 P.2d 356 (Ct.App.1972); Prosser, Strict Liability to the Consumer, 18 Hast.L.J. 9, 46 (1966).
We believe that there was a duty on the part of the defendant to disclose the condition of the fireplace to the realtors or to the plaintiffs. Two previous tenants of the house testified that they notified the defendant of the utterly worthless condition of the fireplace, but the defendant remembered nothing about these conversations. The defendant did testify that he knew the fireplace had been added to the house after its original construction. In sum, we read conflicting evidence in the record with respect to the actual knowledge by the defendant of the condition of the fireplace. We follow Everett v. Gilliland, 47 N.M. 269, 141 P.2d 326 (1943). That case says:
"[I]f one party to a contract . has superior knowledge, or knowledge which is not within the fair and reasona ble reach of the other party and which he could not discover by the exercise of reasonable diligence, or means of knowledge which are not open to both parties alike, he is under a legal obligation to speak, and his silence constitutes fraud,'especially when the other party relies upon him to communicate to him the true state of facts to enable him to judge . the expediency of the bargain."
Everett also says:
"Generally speaking, however, in the conduct of various transactions between persons involving business dealings, commercial negotiations, or other relationships relating to property, contracts, and miscellaneous rights, there are times and occasions when the law imposes upon a party a duty to speak rather than to remain silent in respect to certain facts within his knowledge and thus to disclose information, in order that the party with whom he is dealing may be placed on an equal footing with him."
See Payton v. Krupiak, (Ct.App.) No. 2537, decided December 7, 1976.
Even if there was no duty to speak, or if the defendant knew nothing, about the condition of the fireplace, the case for misrepresentation is much stronger when there is an actual representation. When the defendant speaks, liability arises in such a case because there is a duty, if one speaks at all, to give reliable information. "Once the duty to render accurate information is recognized, it seems obvious that an action for innocent misrepresentation is best suited to this situation." Green, The Communicative Torts, 54 Tex.L.Rev. 1, 21 (1975).
On appeal, the plaintiff asserts the district court should have concluded, or had no choice but to conclude as a matter of law, that there was liability on the part of the defendant based upon a theory of innocent misrepresentation or constructive fraud. We agree.
The defendant contends that there is no such thing as innocent misrepresentation or constructive fraud in the State of New Mexico. This clearly is not the law. Snell v. Cornehl, 81 N.M. 248, 466 P.2d 94 (1970) and Barber's Super Markets, Inc. v. Stryker, 84 N.M. 181, 500 P.2d 1304 (Ct.App.1972), stand for the proposition that constructive fraud is a breach of a legal or equitable duty, irrespective of the moral guilt of the fraud-feasor. It is not necessary to prove dishonesty of purpose nor intent to deceive to maintain a cause of action for constructive fraud. This has been the law in New Mexico since 1853, when the New Mexico Supreme Court, stated:
" . . . acts contrary to public policy, to sound morals, to the provisions of a statute, etc., however honest the intention with which they may have been performed, are deemed constructive frauds, or frauds in law, and are absolutely void." Leitensdorfer v. Webb, 1 N.M. (Gild.) 34, 53 (1853), affirmed 61 U.S. (20 How.) 176, 15 L.Ed. 891 (1858).
Judge Sutin, in Barber's Super Markets, elaborated on constructive fraud:
"Generally speaking, constructive fraud is a breach of a legal or equitable duty which the law declares fraudulent because of its tendency to deceive others." 84 N.M. at 186, 500 P.2d at 1309.
There is no doubt that the listing with the Albuquerque Board of Realty tended to deceive the public in general and the plaintiff in particular.
The district court considered the facts under the theory of intentional fraud, see Prudential Insurance Co. v. Anaya, 78 N.M. 101, 428 P.2d 640 (1967), and under the theory of negligent misrepresentation, see Maxey v. Quintana, supra, and Neff v. Bud Lewis Company, 89 N.M. 145, 548 P.2d 107, (Ct.App.), decided March 18, 1976. We are not convinced that there is substantial evidence to support these findings, but we will resolve any conflict in their favor.
The court did not consider whether liability existed under the theory of innocent misrepresentation or constructive fraud. We believe that under Barber's Super Markets and Snell the court should have concluded as a matter of law that liability on the part of the defendant existed.
Therefore we reverse the judgment of the district court and order it to enter a new judgment finding liability upon innocent misrepresentation or constructive fraud. The case is to be retried to determine damages and costs only. See Aragon v. Boyd, 80 N.M. 14, 450 P.2d 614 (1969).
IT IS SO ORDERED.
SUTIN and HERNANDEZ, JJ., specially concur.