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2004-MO-037 - Oswalk-White v. Hiott
THIS OPINION HAS NO PRECENDENTIAL VALUE

THIS OPINION HAS NO PRECEDENTIAL VALUE.  IT SHOULD NOT BE CITED OR RELIED ON AS PRECEDENT IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 239(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA
In The Supreme Court


Oswald-White and Associates, Inc.,        Respondent,

v.

Carn F. Hiott,        Appellant.


Appeal From Colleton County
Harris Beach, Special Referee


Memorandum Opinion No. 2004-MO-037
Heard June 8, 2004 - Filed July 12, 2004


REVERSED


Ronnie L. Crosby, of Peters, Murdaugh, Parker, Eltzroth & Detrick, P.A., of Hampton, for Appellant.

Elbert O. Duffie, III., of Bogoslow, Jones, Stephens & Duffie, P.A., of Walterboro, for Respondent.

JUSTICE BURNETT:  Respondent Oswald-White and Associates, Inc. (Oswald-White), a real estate company, brought this action for payment of a real estate commission from Appellant Carn F. Hiott (Hiott) under an Exclusive Right to Sell Agreement (Agreement) entered into by the parties.  The Special Referee awarded Oswald-White $20,016, the contractually agreed commission. [1]   We reverse.

FACTS

In the early 1980s, Hiott purchased a 111.2-acre tract of land located in Colleton County from his father for $400 per acre.  His father previously purchased the parcel from a neighbor who operated a service station on the property when Hiott was a child.

On September 27, 1999, Hiott and Oswald-White entered into an Exclusive Right to Sell Agreement, which was a standard form contract drafted by Oswald-White.  The Agreement provided Oswald-White was to receive a commission of 10 percent of the purchase price for its services in obtaining a purchaser. 

On November 19, 1999, John R. Hetrick (Hetrick) agreed to buy the tract for $1,800 per acre.  Three or four days before the Hetrick agreement, Hiott discovered what he thought could be contamination on the property.  This discovery reminded him that oil drums had been buried on the property when he was a child.  Hiott, by his own admission, made an anonymous telephone call to Hetrick’s office two days after Hetrick agreed to buy the property discouraging Hetrick from purchasing the tract because of the buried oil drums and potential contamination.   

Thereafter, Hetrick withdrew his offer to purchase the property.  Hiott agreed to sell the property only if Hetrick would sign a hold harmless agreement absolving Hiott of any liability for any contamination existing on the tract.  Hetrick refused and no sales contract was ever executed.     

In this action Oswald-White alleges breach of contract, fraudulent misrepresentation, negligent misrepresentation, breach of contract with fraudulent intent, and breach of implied covenant of good faith and fair dealing.  The special referee granted judgment in favor of Hiott on all claims except Oswald-White’s negligent misrepresentation claim.  Holding Hiott’s negligent misrepresentation of the condition of the land resulted in Oswald-White’s lost commission, the special referee ordered judgment in favor of Oswald-White.

ISSUE

Did the special referee err in awarding Oswald-White commission based on Hiott’s alleged negligent misrepresentation of the condition of the land?

ANALYSIS

The special referee determined Oswald-White earned its commission on the date Hetrick agreed to buy the property and paid the required earnest money.  According to the referee, Hiott’s negligent misrepresentation occurred when he discovered the potentially hazardous condition of the property and did not notify Oswald-White until two days after Oswald-White received Hetrick’s offer to purchase the property.  The referee concluded Hiott’s failure to disclose the condition of the property directly and proximately caused Oswald-White to lose the commission to which it is entitled under its contract with Hiott.  We disagree.

The elements necessary to sustain a cause of action for negligent misrepresentation are not satisfied in this case.  To establish liability for negligent misrepresentation, the plaintiff must show (1) the defendant made a false representation to the plaintiff; (2) the defendant had a pecuniary interest in making the representation; (3) the defendant owed a duty of care to see that he communicated truthful information to the plaintiff; (4) the defendant breached that duty by failing to exercise due care; (5) the plaintiff justifiably relied on the representation; and (6) the plaintiff suffered a pecuniary loss as a result of his reliance upon the representation.  Sauner v. Public Service Authority of South Carolina, 354 S.C. 397, 407, 581 S.E.2d 161, 166 (2003).  Evidence of a mere broken promise is not sufficient to prove negligent misrepresentation.  Id.

Oswald-White’s claim fails under a negligent misrepresentation theory.  An essential element of this cause of action is the defendant provide false information.  Hiott provided no false information.  Oswald-White argues Hiott’s failure to communicate the potential contamination to the agency immediately upon discovery constitutes the false statement.  While it is true silence can be a false representation, a true statement cannot give rise to a claim of fraud or negligent misrepresentation.  Hiott did what the law required him to do, i.e., tell the truth.  Although Hiott initially revealed his concerns surreptitiously through the anonymous phone call, he, nonetheless, told the truth.   In Lawson v. Citizens & Southern National Bank of S.C., 255 S.C. 517, 180 S.E.2d 206 (1971), this Court held that a duty is imposed upon the seller of land to disclose to the purchaser of land the existence of unstable conditions which are artificially created and concealed.  Hiott did so when he called Hetrick to report what he suspected could be contamination on the property.  Accordingly, we reverse.

REVERSED.

TOAL, C.J., MOORE, WALLER and PLEICONES, JJ., concur.      


                   [1] The $20,016 was computed by calculating 10 percent of the purchase price Hetrick offered to pay for the entire tract of land.