The Supreme Court of Rhode Island has ruled that an extreme soil erosion problem on waterfront property could require disclosure under the state's property condition disclosure law.
Thomas Stebbins ("Buyer") retained Miriam Scott ("Broker") to act as his representative in finding a summer/retirement home in Little Compton, Rhode Island. During his search, the Buyer rejected an oceanfront property shown to him by the Broker because he was concerned about that property's potential for soil erosion problems. Eventually, the Buyer purchased a brackish riverfront property not far from the Atlantic Ocean. The sales contract stated that the property was being sold "as is," and, prior to closing, the Buyer viewed the property personally and also had three professional inspections performed on the property. The Broker had owned this property previously, having sold the property to the seller, Melinda Blauvelt Wells ("Seller"). Upon taking possession of the property, the Buyer learned from the Seller's handyman that the Seller had removed foliage from the property which had increased the rate of soil erosion caused by the river, and that the property had experienced ten feet of soil erosion in the past ten years. The Buyer filed a multicount lawsuit against the Broker and the Seller alleging violations of the state's property condition disclosure law, fraud, breach of contract, negligence, and deceptive trade practices. The trial court entered judgment in favor of the Broker and Seller, and the Buyer appealed.
The Supreme Court of Rhode Island reversed the trial court and sent the case back to the trial court for further proceedings. The court first considered the fraud claims. To prevail on a fraud claim, a party must allege that the defendant made a false statement which he/she intended the party to rely upon to his/her detriment. The court ruled that the Buyer had not alleged that the Broker and/or the Seller had ever made a false statement about the erosion on the property and so neither could have committed fraud. Therefore, the court ruled that the trial court had properly entered judgment in favor of the Broker and Seller on the fraud claims.
The court next considered the property condition disclosure statute. The Rhode Island property condition disclosure law requires a "truthful, good-faith disclosure." The court stated that the issue was whether the erosion constituted a "deficient condition" which required disclosure. A "deficient condition" is defined as "any land restrictions, defect, malfunction, breakage, or unsound condition" on the property. Looking to cases from Georgia and Oregon, the court stated that the property's riverfront location put the Buyer on notice about potential erosion and therefore ordinary erosion was not a "deficient condition" within the meaning of the state's property condition disclosure law. However, the court ruled that the Buyer had alleged that the erosion was much more serious than ordinary soil erosion and also that both the Seller and the Broker knew the seriousness of the erosion problem. Therefore, the question of the erosion's severity was a question of fact that needed to be resolved by the trial court, and so the court reversed the judgment of the trial court and sent the case back to the trial court to conduct further proceedings to determine whether the seriousness of the erosion problem on the property constituted a defect that needed to be disclosed under the state's property condition disclosure statute.
Stebbins v. Wells, 766 A.2d 369 (R.I. 2001), on remand to No. Civ.A. NC95-324, 2001 WL 1255079 & 1452789 (R.I. Super. Ct. Oct. 12 & 26, 2001). [Note: This opinion was not published in an official reporter and therefore should not be cited as authority. Please consult counsel before relying on this opinion.]