Misleading or Deceptive Disclosures In Real Estate Transactions May Constitute Fraud

There is at least one example in California case law to support the position that proving a deceptive answer to a buyer’s disclosure-related inquiry may constitute fraud. [See Brady v. Carman, (1960) 179 Cal. App. 2d 63, 68  – “A representation need not be a direct falsehood to constitute fraud. It may be a deceptive answer or other indirect but misleading language.”] In the Brady case, the plaintiff buyer sued the defendant listing agent who represented a developer, the property’s seller. The suit was for concealment of material facts regarding the terms of an easement. [See Brady supra 179 Cal. App. 2d at 65-66.] While in escrow, the buyer was aware an easement existed, but unaware of the nature of the easement. Id. at 68. When the buyer asked the listing agent for further details, the Brady Court held that “[t]he defendant’s answers were evasive, and misleading, and were such as to discourage further investigation by the purchasers.” Id. In defining the agent’s breach of his duty to disclose, the Brady Court stated:

“It was not sufficient for the defendant to simply tell the plaintiffs that they ‘had nothing to worry about’ and ‘[i]t is these water pipes that you find on the curb of the street.’ ‘That is all it is.’ The inquiry having been made, and the defendant having undertaken to answer, he was obliged as a professional man to obtain information about the easement and make a full disclosure of the burdens it imposed on the land.”