A federal court in North Carolina has determined that a real property seller may be liable to the property purchaser for fraud if the seller fails to disclose all of the hazardous substances present on the property.Metro. Group, Inc. v. Meridian Indus., Inc., No. 09-440 (W.D.N.C. 12/6/10).
Plaintiff purchaser sued the seller for breach of contract, fraud and unfair and deceptive trade practices for allegedly failing to disclose the presence of asbestos, a leaking fuel tank and hazardous chemicals on the property, even though seller knew about these issues at the time of sale. According to the complaint, seller falsely represented that the only hazardous substance on the property was a substance in the groundwater identified by state agency authorities.
Defendant sought to have the fraud claim dismissed, arguing that plaintiff failed to plead intent to deceive and reasonable reliance. The court rejected defendant’s argument, holding that, under North Carolina law, a complaint satisfies the element of scienter in a fraud claim if fraudulent intent may be inferred from the facts alleged. Here, the court said, plaintiff alleged that defendant knew of the other hazardous substances but intentionally made false representations that were “reasonably calculated to deceive.” As to defendant’s argument that “reasonable reliance” was lacking, the court held that the issue was for the jury to decide.