Opinion ID: 449457
Heading Depth: 2
Heading Rank: 1

Heading: Common Law Misrepresentation

Text: 7 V.S.H. bases its count for common law misrepresentation on Texaco's partial disclosure of oil seepages, the deliberate concealment of other leaks and the failure to acknowledge the U.S. Coast Guard investigation of the spills. The failure to disclose is actionable, V.S.H. argues, because it repeatedly asked Texaco about oil leaks on the premises, yet Texaco knowingly made only partial disclosure of them. V.S.H. alleges that Texaco's fragmentary disclosures induced it to enter into the contract, and caused it damage in the form of the $280,000 down payment which it otherwise would not have made. 8 The district court dismissed the misrepresentation count because 9 [t]here was no fiduciary duty here. The parties dealt at arm's length with each other, and there was no peculiar duty to speak. There were no material misrepresentations on which the buyers relied. 10 What we face here, however, are allegations of partial or incomplete statements that may by their incompleteness be actionable. Restatement of Torts (Second), Secs. 529, 551(2)(b). There is much case law in Massachusetts supporting the proposition that a party who discloses partial information that may be misleading has a duty to reveal all the material facts he knows to avoid deceiving the other party. 11 Although there may be 'no duty imposed upon one party to a transaction to speak for the information of the other ... if he does speak with reference to a given point of information, voluntarily or at the other's request, he is bound to speak honestly and to divulge all the material facts bearing upon the point that lie within his knowledge. Fragmentary information may be as misleading ... as active misrepresentation, and half-truths may be as actionable as whole lies....' See Harper & James, Torts, Sec. 7.14. See also Restatement: Torts, Sec. 529; Williston, Contracts (2d ed.) Secs. 1497-1499. Kannavos v. Annino, 356 Mass. 42, 48, 247 N.E.2d 708 (1969). 12 See also Maxwell v. Ratcliffe, 356 Mass. 560, 562-63, 254 N.E.2d 250 (1969) (Because the question of the dryness of the cellar had been raised expressly, there was special obligation on the brokers to avoid half truths and to make disclosure at least of any facts known to them or with respect to which they had been put on notice.); Nei v. Boston Survey Consultants, Inc., 388 Mass. 320, 322, 446 N.E.2d 681 (1983) ([T]here is no suggestion that the defendants made a partial disclosure or stated a half truth which may be tantamount, under certain conditions, to a falsehood if there is no further expatiation.); Nei v. Burley, 388 Mass. 307, 446 N.E.2d 674 (1983); Catalina Yachts v. Old Colony Bank & Trust Co., 497 F.Supp. 1227 (D.Mass.1980). 13 This duty to avoid misrepresentations is so strong that the deceived party is not charged with failing to discover the truth. Snyder v. Sperry & Hutchinson Co., 368 Mass. 433, 446, 333 N.E.2d 421 (1975) ([I]f the seller's representations are such as to induce the buyer not to undertake an independent examination of the pertinent facts, lulling him into placing confidence in the seller's assurances, his failure to ascertain the truth through investigation does not preclude recovery.). 14 We believe the allegations in V.S.H.'s complaint regarding partial and ambiguous statements satisfy the requirements for stating a claim of misrepresentation. V.S.H. has alleged that it made repeated inquiries about oil leaks on the property, to which Texaco failed to fully respond. In addition, Texaco stated in an acknowledgement attached to the contract that it had not received any notice, demand, or communication from any local county, state or federal department or agency regarding modifications or improvements to the facility or any part thereof. 2 Even if it is technically correct that Texaco had received no governmental communication specifically related to modifications or improvements to the facility, its failure to disclose the Coast Guard investigation of the property is arguably an actionable misrepresentation. The district court also recognized the ambiguity in Texaco's assertion, noting that the question whether that [the Coast Guard investigation] is a notice regarding modifications or improvements of the facility is a matter of argument. Finally, and significantly, we note that Texaco affirmatively stated (with some implication of exclusivity) the existence of one leak. The combination of Texaco's affirmative disclosure of one leak, its failure to disclose the others, and its failure to acknowledge alleged Coast Guard investigation of the seepages, at a minimum, makes this case a stronger one of misrepresentation than Nei v. Burley, 388 Mass. 307, 310, 446 N.E.2d 674, where the Supreme Judicial Court held that the defendants did not convey half truths nor did they make partial disclosure of the kind which so often requires a full acknowledgement to avoid deception. It is our conclusion, therefore, that the district court erred in dismissing the claim for common law misrepresentation.