## Facts

- Sun Company, Inc. owned a gasoline station property in Abington, Massachusetts from 1971 to 1979 and installed underground storage tanks and related piping.
- In December 1974, a leaking underground pipe released approximately 2,000 gallons of gasoline; Sun had actual knowledge of the release.
- In November 1979, Roy and Eleanor Damon purchased the property from Sun for $90,000 under an agreement giving them a right to examine the property.
- Before the sale, Sun (through station personnel) responded to inquiries about prior tank problems in a manner that denied or failed to disclose the 1974 spill and its consequences.
- The Damons operated the station for years, then leased it to a third party operator in 1991.
- During excavation for upgrades in late 1991, petroleum product was observed pooling in excavations; local authorities halted work and notified state environmental regulators.
- State regulators issued a notice requiring investigation; testing and reporting later documented contamination consistent with a significant release.
- The contamination disrupted operations and rent payments and exposed the Damons to investigation and remediation obligations and a substantial loss in property value.
- The Damons sued Sun for common-law misrepresentation and for unfair or deceptive acts in trade or commerce under Massachusetts General Laws chapter 93A, § 11; the case was tried on stipulated facts.

## Issues

1. Whether Sun’s failure to disclose a known, material prior gasoline spill—particularly in response to buyer inquiries—constituted actionable misrepresentation under Massachusetts law.
2. Whether that nondisclosure and related statements in a commercial real estate transaction constituted an unfair or deceptive act or practice under Mass. Gen. Laws ch. 93A, § 11.
3. Whether the Damons proved causation and entitlement to damages for contamination-related economic losses, and whether the district court’s damages findings were sustainable on appeal.

## Decision

- The First Circuit affirmed the judgment for the Damons.
- The court upheld findings that Sun was liable for misrepresentation based on nondisclosure and misleading responses about a known, latent, material condition.
- The court upheld liability under Mass. Gen. Laws ch. 93A, § 11, concluding the conduct was unfair or deceptive in a commercial setting.
- The court held the Damons’ reliance was reasonable notwithstanding their contractual right to examine the property because the contamination was latent and not readily discoverable by ordinary inspection.
- The court upheld the district court’s causation and damages determinations, finding no clear error in the factual findings and no legal error in the measure of damages.

## Legal Principles

- Under Massachusetts law, a seller with superior knowledge of a latent, material defect may be liable for misrepresentation where the seller conceals the defect or provides misleading assurances, especially when the buyer makes specific inquiries.
- Reasonable reliance may be found even when the buyer has a contractual right to inspect if the condition is underground or otherwise not reasonably discoverable through ordinary inspection at the time of sale.
- Knowingly withholding material information in a commercial transaction can constitute an unfair or deceptive act or practice under Mass. Gen. Laws ch. 93A, § 11.
- For misrepresentation and ch. 93A claims, damages may include contamination-related investigation and remediation exposure, lost income attributable to the contamination’s effects on use, and diminution in property value, if causally tied to the defendant’s conduct.

## Conclusion

The court held that a commercial seller who knows of a substantial, latent environmental release and fails to disclose it—while denying or minimizing prior problems in response to buyer inquiries—may be liable for both misrepresentation and a chapter 93A, § 11 violation, with damages available for contamination-driven economic losses.


Damon v. Sun Co., 87 F.3d 1467 (1st Cir. 1996)