Misrepresentation. W. B. McConkey owned commercial property, including a building that, as McConkey knew, had experienced flooding problems for years. McConkey painted the building, replaced damaged carpeting, and sold the property to M&D, Inc, on an

Question

"as is" basis. M&D did not ask whether there were flooding problems, and McConkey said nothing about them. M&D leased the property to Donmar, Inc, to operate a pet supply store. Two months after the store opened, the building flooded following heavy rain. M&D and Donmar filed a suit in a Michigan state court against McConkey and others, claiming in part that McConkey had committed misrepresentation by silence. Based on this claim, will the court hold McConkey liable? Why or why not?

Answer 1

Misrepresentation
The court did not hold McConkey liable and dismissed M&D's claims. M&D appealed. The state intermediate appellate court affirmed the judgment of the lower court. The appellate court concluded that McConkey did not commit misrepresentation because he did not make any representation—the property was sold "as is." "[T]o establish a claim of silent fraud, there must be evidence that the seller made some sort of representation that was false. It is not enough that the seller had knowledge of the defect and failed to disclose it; rather, the seller must make some type of misrepresentation." Looking at other cases, the court noted that misrepresentation by silence is generally based on statements by a seller in response to "a specific inquiry by the purchaser, which statements were in some way incomplete or misleading." McConkey did not have a duty to disclose in this case, and M&D did not ask. Regarding the new paint and carpeting, the court said, "The fact that the property may have been cleaned, painted, and some carpet replaced is not sufficient evidence that the seller intended to create an affirmative impression that there was no flooding problem with the building. Sellers will often take steps to improve the property in an effort to get more money from a potential buyer. This cannot automatically lead to the conclusion that the seller is perpetrating fraud against potential buyers."