## Facts

- Wanda Brown purchased a house in Columbia, Missouri from Brent and Angela Bennett, who were in the home-construction business; closing occurred April 20, 2001.
- In the sales contract, the Bennetts represented they had no knowledge of past uncorrected defects and denied any settling, flooding, drainage, grading, or soil problems.
- The backyard was prone to flooding due to defective subdivision grading that directed runoff from multiple lots into the yard; the intended drainage improvements were not fully installed.
- Before the sale, the Bennetts repeatedly complained to the City of Columbia that the backyard was “completely flooded” and nearly entered the house; the City indicated the problem would not be promptly addressed.
- The Bennetts did not disclose the flooding problem during negotiations, despite their knowledge.
- Brown, her real estate broker, and a professional inspector inspected the property multiple times, but did not observe pooling; Brown discovered the flooding a few weeks after closing.
- The flooding impaired ordinary use of the yard and limited gardening, mowing, and recreational use.
- At trial, evidence showed the property was worth $140,000 as-is and $163,000 with a normal backyard; an engineer testified a recommended remedial plan would cost $17,825, while Mr. Bennett asserted a $220 fix would suffice.

## Issues

1. Whether Brown could justifiably rely on the Bennetts’ contractual representations and nondisclosure about flooding and grading problems despite conducting inspections.
2. Whether the trial court erred by awarding repair-cost damages rather than limiting recovery to diminution in value, and whether the repair-cost award was supported by the evidence.
3. Whether the evidence supported an award of punitive damages for intentional misrepresentation and concealment.

## Decision

- The Missouri Court of Appeals affirmed the bench-trial judgment for Brown.
- The court held substantial evidence supported each fraud element, including Brown’s right to rely on the Bennetts’ specific contractual misrepresentations.
- The court upheld $17,825 in compensatory damages based on repair costs supported by expert testimony and consistent with restoring the property to the represented condition.
- The court affirmed $10,000 in punitive damages based on evidence the Bennetts knowingly misrepresented and concealed a serious, recurring defect.

## Legal Principles

- Fraud requires proof of a false, material representation made with knowledge (or reckless ignorance) and intent to induce action, justifiable reliance by an ignorant hearer, and resulting damages.
- A buyer’s independent investigation may bar reliance, but reliance remains permissible when the investigation is partial, the parties lack equal footing to learn the truth, or the seller makes a specific and distinct misrepresentation.
- In property-related fraud, compensatory damages may be measured by benefit-of-the-bargain or by reasonable repair costs when supported by the evidence and when the award does not create overcompensation relative to value-based measures.
- Punitive damages may be awarded where the defendant’s conduct shows intentional, knowing misrepresentation or concealment warranting punishment and deterrence.

## Conclusion

The court affirmed a fraud judgment against homebuilder-sellers who denied known flooding and grading problems in contractual disclosures, holding the buyer could justifiably rely despite inspections; it also upheld repair-cost compensatory damages supported by expert testimony and punitive damages based on deliberate concealment.


Brown v. Bennett, 136 S.W.3d 552 (Mo. Ct. App. W.D. 2004)