Gross v. Sussex Inc.
332 Md. 247, 1993 Md. LEXIS 147, 630 A.2d 1156 (1993)
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Rule of Law:
A purchaser of real property may justifiably rely on a seller's or real estate agent's affirmative misrepresentations of material fact, and is not precluded from bringing a claim for fraud or negligent misrepresentation merely because the truth could have been discovered through an investigation of public records.
Facts:
- In early 1987, Thomas and Ann Louise Gross contracted with Sussex, Inc. to build a home in a new subdivision after being shown the property by Tim Brubaker, a sales associate for Nyman Realty, Inc.
- Prior to signing the contract, Brubaker represented that Sussex had already obtained the necessary permits to begin construction and that the house, with an August 1 settlement date, could be completed as early as June 30, 1987.
- Shortly after the contract was executed on April 6, 1987, a Sussex supervisor, William Thomas, confirmed Brubaker's representations about the permits and timeline.
- Relying on these assurances, the Grosses sold their existing home on April 17, 1987, with a settlement scheduled 120 days later.
- When construction was delayed, Sussex gave the Grosses a new completion date in September, leading them to enroll their children in St. Mary’s County schools and rent a temporary residence.
- In October 1987, the Grosses discovered that the subdivision had not been approved or recorded until October 2, 1987, and the building permits for their home were not issued until October 20, 1987.
- Evidence suggested Nyman and Sussex knew the subdivision was unrecorded long before making their representations to the Grosses.
- The house was not habitable until September 1988, more than a year after the originally scheduled settlement date.
Procedural Posture:
- Thomas and Ann Louise Gross sued Sussex, Inc. and Nyman Realty, Inc. in the Circuit Court for Prince George's County (trial court) for fraud and negligent misrepresentation, among other claims.
- The defendants moved for summary judgment on the misrepresentation and fraud counts.
- The circuit court granted summary judgment for the defendants, ruling that the Grosses failed to establish fraudulent intent and did not have a right to rely on the defendants' statements.
- The Grosses, as appellants, appealed the decision to the Court of Special Appeals of Maryland (intermediate appellate court).
- The Court of Special Appeals affirmed the trial court's judgment, holding that the Grosses' reliance was not justifiable given Thomas Gross's experience as a real estate agent and his opportunity to investigate.
- The Grosses then petitioned the Court of Appeals of Maryland (the state's highest court) for a writ of certiorari, which was granted.
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Issue:
Does a purchaser's ability to independently verify a seller's representations concerning public-record matters, such as building permits and subdivision approval, negate the purchaser's right to justifiably rely on those representations in an action for fraud or negligent misrepresentation?
Opinions:
Majority - Bell, Robert M.
No. A purchaser's ability to verify a seller's representation does not, as a matter of law, defeat the element of justifiable reliance in a fraud or negligent misrepresentation claim. The court held that Maryland law does not require a party to a transaction to deal with the other as if they were a 'liar or scoundrel,' nor does it deny legal protection to those who are victimized by fraud simply because they were trustful. A plaintiff is not required to examine public records to ascertain the truth of a seller's factual assertions. Reliance is only unjustified where the falsity of the representation is obvious from a cursory glance or where the plaintiff has discovered something that should serve as a warning of deception. The fact that Thomas Gross held a real estate license did not automatically preclude him from relying on the representations, creating a question of fact for a jury, not a matter of law for a judge on summary judgment. Furthermore, a Maryland statute governing real estate licensees imposes a duty of care on a seller's agent toward the buyer, making Nyman potentially liable for negligent misrepresentation.
Analysis:
This decision reinforces a modern, buyer-protective standard in misrepresentation cases, rejecting an older, stricter caveat emptor ('buyer beware') approach. It clarifies that the 'justifiable reliance' element is not an invitation for courts to find contributory negligence; the focus remains on the defendant's fraudulent conduct. The ruling's significance is twofold: first, it establishes that a victim's failure to investigate public records is not a per se bar to a fraud claim. Second, it interprets a professional licensing statute as creating a tort duty of care for a seller's real estate agent toward a buyer, expanding potential liability for negligent misrepresentation beyond the confines of traditional agency law where the agent's duty was owed solely to their principal.
