Superior Court Holds Defendant Who Sold Home Built On Easement Violated Deceptive Trade Practices Act

| Aug 13, 2013 | Firm News

The Rhode Island Superior Court has held that a defendant, a certain Miller, who sold a house built partially on a utility company’s easement violated Rhode Island’s Deceptive Trade Practices Act, among other claims.

A defendant developer acquired the property in 1995.  A defendant engineer developed an ISDS plan and marked the lot’s boundary points with four-foot high stakes with a red plastic caps saying “survey marker.”  The defendant Miller’s ex-wife purchased the subject lot so the Miller could use her “good credit” to start a business and be able to pay child support for their daughter.  She provided Miller with a limited power of attorney to be able to buy and sell lots in the development but otherwise had no involvement with the project.  Miller was responsible for telling various contractors where to do their work on the lot.

Plaintiffs, a husband and wife, signed a purchase and sale agreement that named “Joseph Miller Construction” as the seller even though title was in the name of Miller’s ex-wife.  The P&S required the seller to provide “good, clear and marketable title” through a warranty deed. During the construction of the house plaintiff husband inquired about the boundaries of the property.  He could only find one three-foot high stake with an orange flag at the top.  Miller eventually showed him several “dowels” that stuck a few inches out of the ground and had green tops.

Miller subsequently told plaintiffs they would have to execute a second P&S due to a clerical error in the first one.  The second P&S listed Miller’s ex-wife as the seller and included a signature that purported to be hers.  She testified it was not her signature.

In 1998, plaintiffs closed on the property and received a warranty deed purporting to convey the lot and “all buildings and improvements thereon.”  Plaintiffs did not have the property surveyed and did not obtain title insurance.  Miller and his ex-wife provided an affidavit that there were “no encroachments on the premises…nor have the undersigned encroached on any property of adjoining owners.”  Four years later, plaintiffs received a letter from National Grid informing them that their house, deck and well encroached on its easement.  However, it has not taken any action with respect to the property.

Plaintiffs filed suit against Miller, his ex-wife, the developer corporation that sold the lot to the Millers, the sole shareholder of the developer, and the engineer.  They variously alleged negligence, breach of contract, breach of warranty of title, fraud, wrongful concealment and violation of the Deceptive Trade Practices Act by Miller.  Miller filed a third-party complaint against his insurer for failing to defend and indemnity him.  During the course of discovery, the engineer died.  Plaintiffs did not substitute a personal representative for the estate.  Miller filed for Chapter 7 bankruptcy and obtained a discharge that limited his personal liability in the Superior Court action to intentional torts.  Plaintiff then amended the complaint to assert a direct action against Miller’s insurer.  The Superior Court held a non-jury trial resulting in a slip opinion.

The Court dismissed the negligence claims against Miller based on his bankruptcy discharge.  The Court dismissed the negligence claims against the development corporation and its shareholder because plaintiffs failed to present any expert testimony as to their standard of care, if any, in allowing Miller’s actions.   The Court dismissed the negligence claims against the engineer because plaintiffs had not substituted a personal representative of his estate after he died.  The Court dismissed the negligence claims against Miller’s ex-wife because plaintiffs did not press that claim in their post-trial memorandum and there was no evidence at trial to support a negligence claim.

The Court dismissed plaintiff’s breach of contract claim against Miller’s ex-wife.  The claim was based on the P&S Agreement and the affidavit provided at the closing.  The Court said the claim based on the P&S was barredby the doctrine of merger by deed.  Once the deed is accepted, it “becomes the final statement of the agreement between the parties and nullifies all provisions of the purchase-and-sale agreement.”  The Court also found the affidavit was not a contract.  However, the Court found that Miller’s ex-wife did breach the covenants in the warranty deed.

The Court found that Miller had made fraudulent representations based on a duty to disclose required by the Real Estate Sales Disclosure Act and common law.  Miller was aware of the property’s boundaries based on the stakes the engineer had placed.  Moreover, there were other circumstances that would indicate the house had not been placed on the lot where the engineer’s plans provided.  Also, Miller’s ex-wife credibly denied that her signature was on the second P&S agreement.  In addition, the engineer’s stakes disappeared and were replaced by the small dowels with green tops that Miller identified when plaintiff asked to be shown the boundaries.  The Court found Miller had attempted to conceal the problem that the house was built on the easement.  Moreover, the Court found Miller had attempted to insulate himself from the consequences of his actions by inserting his ex-wife into the transactions.  Based on the same facts, the Court found Miller had wrongfully concealed that the house encroached on National Grid’s easement.

The Court found that Miller had violated the Deceptive Trade Practices Act.  An “unfair” practice is one that “(1)…offends public policy as it has been established by statutes, the common law or other established concept[s] of unfairness; (2)…is immoral, unethical, oppressive or unscrupulous; and (3)…it causes substantial injury to consumers (or competitors or other businessmen.”  The Court said the facts that supported the fraud and wrongful concealment claims also supported a finding that Miller violated the Act.

Finally, the Court dismissed the claims against Miller’s insurer because its commercial general liability policies did not provide coverage for the claims against Miller.  The policies only covered physical damage to property, not economic losses.  For this and other reasons, the claims against Miller fell outside the scope of the policies.

Boisse v. Miller, W.C. No. 2003-0281, slip op. (R.I. Super. Aug. 8, 2013).

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