Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 22

Fraudulent Misrepresentation. Charter One Bank acquired a fifteen-story commercial building in Cleveland, Ohio, through a foreclosure proceeding. Kaczmar Architects, Inc., inspected the building and recommended changes to the sprinklers, fire standpipe, fire hose cabinet, and fire pump system. No action was taken. Charter One hired Ehle Morrison Group, Ltd. (EMG), to sell the building. Tenants complained to EMG about the taste and odor of the water. A fire inspector told EMG that the fire standpipe was cut and capped, that there was no fire pump, that the drinking-water and fire-suppression systems were linked, and that the water gauge on the top floor showed the pressure was not sufficient to run the sprinklers on that floor. EMG sold the building to Northpoint Properties, Inc., without disclosing Kaczmar's recommendations or the fire inspector's report. Northpoint spent $280,000 to repair the water and fire-suppression systems and then filed a suit in an Ohio state court against Charter One, alleging fraud. Is the seller liable for not disclosing the building's defects? Discuss. [ Northpoint Properties, Inc. v. Charter One Bank ,-Ohio App.3d __, __ N.E.2d __ (8 Dist. 2011)]