Cengage Advantage Books: Business Law Today, The Essentials 10th Edition by Roger LeRoy Miller

تمرين 6

Fazio v. Cypress/GR Houston I, LP
FACTS Peter Fazio began talks with Cypress/GR Houston I, LP, to buy retail property. The property's main tenant was a Garden Ridge store. In performing a background investigation, Fazio and his agents became concerned about Garden Ridge's financial health. Nevertheless, after being assured that Garden Ridge had a positive financial outlook, Fazio sent Cypress a letter of intent to buy the property for $7.67 million "[b]ased on the currently reported absolute net income of $805,040.00." Cypress then agreed to provide all information in its possession, but it failed to disclose that (1) a consultant for Garden Ridge had recently requested a $240,000 reduction in the annual rent as part of a restructuring of the company's real estate leases and (2) Cypress's bank was so concerned about Garden Ridge's financial health that it had required a personal guaranty of the property's loan. The parties entered into a purchase agreement, but Garden Ridge went into bankruptcy shortly after the deal closed. Fazio sued Cypress for fraud after he was forced to sell the property for only $3.75 million. A jury found in Fazio's favor, but the trial court awarded judgment n.o.v. (see Chapter 3 page 84) to Cypress. Fazio appealed.
ISSUE Was Fazio fraudulently induced to enter into the purchase agreement ?
DECISION Yes. The Texas appellate court reversed the trial court and held that Cypress was liable to Fazio for fraud.
REASON The court found that Cypress had engaged in fraud as a matter of law. Before the parties entered into the purchase agreement, Cypress had agreed to provide all information in its possession. Cypress knew that Fazio had been concerned about Garden Ridge's financial health and that he had based the purchase price on the anticipated income from the property. Nevertheless, it withheld information about Garden Ridge's request for a rent reduction and about the fact that Cypress had been required to provide a personal guaranty of the property's loan-information to which a reasonable person in Fazio's position would have attached importance. Finally, in the purchase agreement, Fazio did not disclaim his reliance on Cypress's misrepresentations or waive possible claims for fraud.
CRITICAL THINKING-Ethical Consideration Was Cypress's conduct unethical ? Why or why not ?