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In Binette v. Dyer Library Association, the Supreme Court of Maine addressed a buyer’s claims against the seller and real estate agent and agency for negligent misrepresentation and violation of the Maine Unfair Trade Practices Act (MUPTA) for failure to disclose the existence of an underground storage tank (UST). The court reversed summary judgment for the defendants on all claims except the MUPTA claim as it applied to the seller.
In 1987, the Dyer Library Association (Seller) was bequeathed residential property. The property contained a 3000-gallon underground heating oil storage tank registered by the deceased with the State Department of Environmental Protection. Seller listed the property for sale with Vacationland Realty (VR), in which Purvis (Broker) was a partner. In addition to being a licensed real estate broker, Broker was a trustee for Seller. Under the terms of the listing agreement, VR would market the property, but Broker would forego his share of the commission. In July 1988, Binette bought the property for $351,000. Seller paid VR $8775, half its usual sales commission. The check was deposited in VR’s account and the funds were immediately withdrawn by Broker’s partner.
Binette alleged that he learned of the tank only after closing, when the first oil delivery was made. Binette contended he was forced to have the tank removed because it allowed oil to leak into the ground and to contaminate the property. It also allowed water to leak into the fuel oil and to destroy the heating system. Binette sued Seller, VR, and Broker alleging negligent misrepresentation and violations of MUPTA. The superior court granted the defendants summary judgment and Binette appealed.
The Court first addressed the negligent misrepresentation claims. Regarding Broker, the court found that summary judgment was granted on the basis of “charitable immunity.” The court stated that a “volunteer” providing services for a charitable organization is entitled to immunity from a negligence claim if the cause of action arises from a personal act that “occurs within the course and scope of the activities of the charitable organization” and the act is “without compensation.” The court found that Broker was acting within the course and scope of his activities of the Seller when he sold the property. However, the court found that the “without compensation” element was still at issue. Thus, the court found that summary judgment was improper as to Broker.
Regarding Seller’s liability, the Court stated that the elements of negligent misrepresentation included: (1) a transaction in which the defendant had a pecuniary interest; (2) supplying false information to the buyer; (3) without exercising reasonable care or competence; and (4) the buyer justifiably relied on the false information in their purchase. The court found that Seller had a pecuniary interest in the transaction. Regarding element (2), the court noted that for purposes of negligent misrepresentation, silence rises to the level of supplying false information when such failure to disclose constitutes the breach of a statutory duty. Under a specific Maine statute, a seller of property has an absolute duty to disclose the presence of UST’s, whether known or unknown to the seller. The court found that elements (1) and (2) were satisfied, and noted that issues of fact remained as to elements (3) and (4). Thus, it held summary judgment was improper as to Seller.
Regarding VR’s liability, the court stated that state regulations in effect at the time of sale required a licensed listing broker to inform himself of hazardous materials on property for sale, expressly including UST’s, and to convey information pertinent to such materials in writing to the buyer prior to or during preparation of an offer. However, unlike the disclosure rules applicable to vendors, there was no absolute duty for brokers to disclose. Rather, a broker had a duty to disclose material defects of which he had knowledge or should have had knowledge given the exercise of reasonable care. The court held that issues of fact existed as to whether Broker and VR exercised reasonable care in light of the regulatory requirements. Thus, it found summary judgment improper as to VR.
The Court then addressed the MUPTA claims. MUPTA declares “deceptive acts or practices in the conduct of any trade or commerce” unlawful. Regarding the “deceptive acts or practices” segment, the court noted that the withholding of material information is a type of unfair commercial practice, even though the defendant had no purpose to deceive and acted in good faith. In addition to the good faith failure to disclose known information, the court found that, in some cases, the failure to disclose unknown information may also violate MUPTA. It stated that “when there is a duty to disclose, unawareness is no shield against . . . liability.” The court found that the Seller was under an absolute duty to disclose the UST, and that VR and Broker were subject to regulatory duties designed to prevent a non-disclosure. The court also found that each failed to comply with their duties, and that good faith or lack of knowledge could not shield them from MUPTA liability.
Regarding the “conduct of . . . trade or commerce” element, the Court noted that Broker and VR did not dispute that they acted in the conduct of a trade or business. As for Seller, the court stated that MUPTA included the sale of real property and that an isolated transaction may constitute the “conduct of a trade or commerce” for MUPTA purposes. Factors to consider for whether a transaction took place in a business context include the nature of the transaction, the character of the parties, whether the parties had engaged in similar activities in the past, whether the transaction is motivated by business as opposed to personal reasons, and whether the parties played an active part in the transaction. The court found that although Seller occasionally sold donated property, its activities in this transaction were similar to a residential homeowner listing a residence for sale with a professional real estate agency. Thus, it was not in a business context. The court affirmed summary judgment for Seller on this claim, but reversed summary judgment as to VR and Broker.
Binette v. Dyer Library Association, 688 A.2d 898 (Me. 1996).
Editor's Note:
To see pre-1990 Broker Liability cases organized by jurisdiction, click here.
To see cites to pre-1990 cases applying State Consumer Protection Acts to Broker Liability, click here.