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Marsh v. Wallace - 666 F. Supp. 2d 651 (S.D. Miss. 2009)

Rule:

To establish a prima facie case of intentional misrepresentation, a plaintiff must show each of the following elements, by clear and convincing evidence: (1) a representation (2) that is false (3) and material (4) that the speaker knew was false or was ignorant of the truth (5) combined with the speaker's intent that the listener act on the representation in a manner reasonably contemplated (6) combined with the listener's ignorance of the statement's falsity (7) and the listener's reliance on the statement as true (8) with a right to rely on the statement, and (9) the listener's proximate injury as a consequence.

Facts:

In 2006, plaintiffs Kirk David Marsh, Kirk Russel Marsh and Marsh Investment Group, LLP entered into a $4.9 million transaction with defendant Alden "Bubber" Wallace for the purchase of approximately 150 residential rental properties which Wallace owned in Meridian and Quitman, Mississippi. After their purchase, plaintiffs came to believe they had been duped into purchasing the properties based on misrepresentations by Bubber Wallace, his wife Priscilla "Missy" Wallace, and by defendant Richard O'Dom, as to the historical monthly income of the properties, contained in certain Trailing 12 documents. They filed the present lawsuit seeking to recover damages against these three defendants for fraud, negligent misrepresentation and conspiracy. In addition, they have sued O'Dom for violating Mississippi Code Annotated § 73-35-1, which prohibits acting as a real estate broker without a license, and they have sued John Howell, the closing attorney for the transaction, alleging claims for breach of fiduciary duty and negligence.

Issue:

Was there a basis to award plaintiffs damages for the alleged fraud and misrepresentation committed by the defendants?

Answer:

No.

Conclusion:

The court rejected the investors' misrepresentation and conspiracy claims, finding that they failed to prove that the figures reported in the Trailing 12s were inaccurate, that defendants knew or had any reason to know that they were inaccurate, or that defendants concealed any inaccuracies. The court also rejected the § 73-35-1 claim against John Howell, finding that he acted as a financial advisor to the owners and received compensation relating to the transaction for his services as a financial advisor. Assuming he acted as a real estate broker, the investors failed to establish that they were aggrieved by his alleged violation of § 73-35-1 since they did not pay his fee. However, the court found that the attorney was liable to the investors for operating under a conflict of interest in preparing various documents for the transaction, and awarded the investors recovery.

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