V.S.H. Realty, Inc. v. Texaco, Inc. - 757 F.2d 411 (1st Cir. 1985)

Rule:

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. 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.

Facts:

Appellant V.S.H. Realty, Inc. and appellee Texaco, Inc. entered a contract for the sale of a bulk storage petroleum facility. Appellant visited the property and observed oil seeping from the ground. Appellant notified appellee that it would not go through with the sale unless appellee fixed the problem, provided full indemnification, or reduced the purchase price. Appellee refused, and appellant sued. The district court dismissed the complaint for failure to state a claim. Appellant challenged the decision.

Issue:

Did the district court err in holding that the appellant failed to state a claim?

Answer:

Yes, with regard to appellant’s misrepresentation claim.

Conclusion:

The court stated that appellee's affirmative disclosure of one leak, its failure to disclose the others, and its failure to acknowledge alleged Coast Guard investigation of the oil seepage, stated a claim of misrepresentation. The court agreed with appellee's contention that appellant's experience in the real estate business and the "as is" clause in the contract was relevant to the state law unfair and deceptive trade practices allegation, but that neither factor made appellant's claim insufficient as a matter of law. Pursuant to the contract, appellee had to deliver title free of encumbrances, but appellant failed to allege enough facts to demonstrate that appellee could not deliver title in accordance with the contract. Accordingly, the dismissal of the contract count was affirmed and the dismissal of the misrepresentation and deceptive trade practice allegations were reversed.