## Facts

- The Alexanders sold rural residential property (about forty acres with a residence and mobile-home office) to the Medunas; Mrs. Alexander also acted as the listing broker.
- Before contract formation, Mrs. Alexander provided a written property condition statement that was attached to offers exchanged between the parties.
- The Alexanders represented there was no groundwater seepage or structural defect in the residence and characterized prior water issues as repaired.
- The Medunas stated the Alexanders knew they intended to grow and sell produce from the property’s garden; the Alexanders represented the garden was viable for that use.
- The Alexanders represented a hookup to the Northwest Rural Water District would cost about $3,500.
- The purchase agreement provided the buyers an opportunity to inspect; the Medunas did not obtain professional inspections.
- After closing and taking possession, the basement flooded; an engineer found evidence of long-term groundwater migration causing structural damage concealed by finishes.
- The Medunas discovered the garden had been treated with a sterilizing weed killer, making it effectively nonproductive.
- The Medunas learned the water-district hookup cost exceeded $8,000.
- The district court (bench trial) found the Alexanders fraudulently induced the purchase and awarded compensatory and punitive damages.

## Issues

1. Whether clear and convincing evidence supported findings of fraudulent misrepresentation regarding basement water/structural condition, garden viability, and water-hookup costs.
2. Whether the buyers’ reliance was justified despite an inspection clause and their failure to obtain professional inspections.
3. Whether punitive damages were supported under Wyoming standards for fraud-based punitive awards.
4. Whether compensatory damages for the Northwest Rural Water District hookup were correctly calculated.

## Decision

- The Wyoming Supreme Court affirmed the finding that the Alexanders made material fraudulent misrepresentations that induced the Medunas to purchase.
- The court affirmed that the Medunas could justifiably rely on the Alexanders’ representations despite the inspection opportunity and lack of professional inspection, particularly as to latent or concealed conditions.
- The court affirmed the punitive damages award based on evidence of knowing misrepresentation and concealment.
- The court reversed in part and remanded solely to correct the compensatory damages calculation tied to the Northwest Rural Water District hookup costs.

## Legal Principles

- Fraudulent misrepresentation must be proven by clear and convincing evidence, including a false material representation made knowingly or recklessly, intended to induce reliance, justifiable reliance, and resulting damage.
- An inspection clause and the opportunity to investigate do not automatically defeat reliance where the seller makes specific representations or conceals material facts, especially latent defects not readily discoverable by reasonable inspection.
- Punitive damages may be awarded for fraud when the defendant’s conduct reflects willful and wanton misconduct or a culpable mental state beyond negligence, including deliberate misrepresentation or concealment.
- When damages are based on a misrepresented cost, the proper measure requires a supported calculation consistent with the proved difference between represented and actual costs.

## Conclusion

The court upheld liability for fraud and punitive damages arising from misrepresentations and concealment in a real-estate sale, held the buyers’ reliance could remain justified despite an inspection clause, and remanded only to correct the compensatory damages figure for the water-district hookup component.


Alexander v. Meduna, 47 P.3d 206 (Wyo. 2002)