This Deal Stinks: Erroneously Issued Vermont Sewage Certificate Not Sufficient Basis For Negligent Misrepresentation

In Glassford v. Dufresne & Associates, P.C., 2015 VT 77 (June 12^th, 2015), the Vermont Supreme Court affirmed the trial court’s grant of summary judgment against the plaintiff’s negligent misrepresentation and Vermont Consumer Protection Act claims.

Issue: Plaintiffs purchased their home directly from the builder. Defendant’s employee signed off on a permit certifying that the property’s sewage system was in good working order and complied with the Vermont Agency of Natural Resources’ regulations. A year after closing on the property, the sewage system failed. The plaintiffs filed suit in superior court, alleging negligent misrepresentation and a violation of the Consumer Protection Act (“CPA”). The plaintiffs argued they would not have purchased the property were they aware of the defects in the sewage system. The issue before the Supreme Court was did the superior court err in granting summary judgment against the plaintiff’s tort and statutory claims?

Holding: The Supreme Court noted that the Restatement only allows negligent misrepresentation claims if the plaintiff directly relied on the certificate. Although the plaintiffs contended their lawyer considered the sewage certificate as part of the conveyance of good title, the Court stressed the plaintiffs had never actually viewed the certificate, and that the builder did not use the sewage certificate as part of their sales pitch. “Indirect reliance” was not a sufficient nexus to establish the plaintiffs had actual and justifiable reliance on the sewage certificate. Although agency law imparts the attorney’s knowledge of the certificate to his client, the Court held that was insufficient to constitute reliance. Next, the Court also upheld the trial court’s grant of summary judgment against the CPA claim. For liability to exist under the CPA, the defendant must be directly involved in the real estate transaction. The Court held that the defendant merely certified that the sewage system was in good working order with the state and was not directly involved with the transaction. The motion of summary judgment against the plaintiff’s claims was upheld.

Dissent: Justice Robinson’s dissent argues that the lawyer’s reliance (if any) on the certificate at closing should be imputed to the client, and is a sufficient basis to establish a negligent misrepresentation claim.