In Sundberg v. TTR Realty, Buyers entered into a contract to purchase a home and alleged that, after the contract was signed, but before closing, the Seller and his real estate agent and brokerage withheld information and provided false information about construction that was to occur across the street. Buyers further allege that the construction reduced the value of the property and they would not have proceeded to closing had they known about the construction. The conduct, according to the Buyer, constituted violations of the D.C. Consumer Protection Procedures Act (“CPPA”) as well as a violation of the covenant of good faith and fair dealing.
The court rejected arguments made by the broker and agent that the complaint should be dismissed because the sales contract had been subsumed into the deed (which had no representations therein) and that any obligation to disclose was limited to physical conditions of the property and not the condition of other properties.
D.C. Consumer Protection Procedures Act
The trial court was more receptive to the Seller’s arguments, eventually upheld on appeal. Notwithstanding the court’s long tradition of construing the CPPA and applying it “liberally to promote its purpose”, the court held that the CPPA only covers “trade practices arising out of the consumer-merchant relationship. A “merchant” is one who, in the ordinary course of business, sells or supplies consumer goods or services. D.C. Code §28-3901(a)(3). The Seller was not in the business of selling properties and even an argument that Seller had conspired, aided, or abetted the Broker would not be enough to subject Seller to the CPPA in light of the explicit exclusion.
In so holding, the court reiterated that the tort of aiding and abetting has not been recognized in the District, nor does a claim of conspiracy to violate a statute (here, the CPPA) sound at law.
Fraudulent and Negligent Misrepresentation or Omissions
The complaint alleged both fraudulent and negligent misrepresentation or omissions were made. While both theories have elements in common, fraudulent misrepresentation requires “proof that the defendant had knowledge of the falsity of the misrepresentation or intent to deceive.” But both causes of action must be based upon a defendant’s false statement about a material issue that the defendant had to duty to disclose.
The Buyers claimed that the misrepresentations gave them the “right” to breach the contract and that this right was somehow abridged by the representations or omissions.
The Court disagreed, finding that there is no “right” to breach a contract and it can not serve as the basis for a claim of detrimental reliance.
Breach of Covenant of Good Faith and Fair Dealing
The Court recognized that all contracts contain an implied covenant of good faith and fair dealing and to state a claim for breach of this covenant, the plaintiff must allege either “bad faith or conduct that is arbitrary and capricious” noting that “bad faith may be over or consist of inaction, and fair dealing may require more than honest”.
But here, the representations made involved the house to be sold. Title was conveyed and the property was in the condition required by the contract. The contract said nothing about neighboring properties and that there was no term that imposed upon the Seller, Broker or Agent to inform the Buyer. Had there been a duty to disclose, a claim of violation of the covenant of good faith and fair dealing may sound if there were misrepresentations or omissions between the time the contract was signed and closing, but such was not the case here.