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V.S.H. Realty, Inc. v. Texaco, Inc.

Citation: 15 ELR 20420
No. No. 84-1531, 757 F.2d 411/22 ERC 2144/(1st Cir., 03/15/1985)

The court rules that a seller who allegedly misrepresented the severity of an oil spill on a property may be liable to the buyer under common law fraud and statutory deceptive business practices theories, but has not breached its promise to sell the property free of encumbrances. Applying Massachusetts law, the court first holds that the buyer's common law claim should not have been dismissed below. The buyer has alleged that the seller incompletely disclosed the extent of the spill in response to its inquiry, and partial disclosure, if misleading, may be actionable. Given the seller's statements, the buyer did not have a duty to independently investigate the problem. The buyer may also have a claim under Massachusetts' unfair or deceptive business practices statute, which, according to the state attorney general's interpretive regulations, makes nondisclosure of a material fact actionable. The action may lie even though buyer was experienced, had opportunity to inspect, and agreed to an "as is" clause in the contract.

The court holds that the buyer has no cause of action for breach of the contractual promise to convey the property free of all encumbrances, restrictions, and liens. Although state law imposes liability on a property owner for spill cleanup, provides for placing a lien on the property to secure reimbursement of cleanup costs, and may require removal of a dam constructed by seller to halt the spread of oil, any litigation that may result from these laws is at this point too speculative to constitute an encumbrance.

A separate opinion agrees with the majority's common law holding but would rule that between sophisticated buyers and sellers, and in the absence of any affirmative misrepresentation, an "as is" clause precludes statutory liability.

Counsel for Appellant
Allan van Gestel
Goodwin, Procter & Hoar
28 State St., Boston MA 02109
(617) 523-5700

Counsel for Appellee
Robert M. Gault
Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, P.C.
Suite 600, One Center Plaza, Boston MA 02108
(617) 742-5800

Before COFFIN and BREYER, Circuit Judges, and WYZANSKI,* Senior District Judge.