## Facts

- Trustees selling several Springfield, Massachusetts houses had converted single-family residences into multi-family apartment units.
- The properties were located in a Residence A zoning district where multi-family use was prohibited, and the zoning classification remained unchanged during the relevant period.
- The conversions were made without required building permits, and the trustees knew both that no permits had been obtained and that the multi-family use violated zoning.
- In 1965, the trustees retained a broker who advertised the buildings as multi-family, income-producing apartment properties and provided income and expense figures to prospective purchasers.
- The purchasers sought income-producing multi-family real estate, and the sellers knew the purchasers intended to operate the properties as multi-family rentals.
- The purchasers did not know the multi-family use was illegal, that the conversions lacked permits, or that the city could seek to abate the use; the factfinder determined they would not have purchased had they known.
- After the sales, Springfield initiated proceedings to abate the nonconforming multi-family use, and the properties’ value as lawful single-family homes was substantially less than their apparent value as multi-family income properties.
- The purchasers filed bills in equity seeking rescission based on fraudulent misrepresentation and concealment; a master’s report was confirmed and decrees ordered rescission.

## Issues

1. Whether sellers commit actionable fraud warranting rescission when they market property as multi-family income real estate while knowingly concealing zoning and permit violations making that use unlawful.
2. Whether a seller who chooses to speak about a material feature of property must disclose related material facts to avoid misleading half-truths.
3. Whether the buyers’ ability to discover zoning and permit defects from public sources bars rescission where sellers’ statements induced reliance.

## Decision

- The Supreme Judicial Court held that rescission was available because the sellers’ selective statements and advertising about multi-family income use, combined with knowing nondisclosure of illegality, constituted fraud.
- The court reaffirmed that a seller generally has no duty to volunteer information, but once the seller speaks on a material point, the seller must disclose material facts necessary to keep the statements from being misleading.
- The court concluded the omitted zoning and permit information was material and that the purchasers relied on the misleading portrayal of lawful, stable income-producing use.
- The court rejected the argument that the purchasers’ ability to investigate public records necessarily precluded reliance or equitable relief.
- The court affirmed the grant of rescission but ordered the final decrees modified to account for subsequent events affecting the properties, and affirmed as modified.

## Legal Principles

- A party may remain silent, but if the party speaks regarding a transaction, the party must speak truthfully and disclose material facts on that subject within the party’s knowledge.
- Fraud may consist of half-truths and intentional concealment when partial disclosures create a misleading impression about a material matter.
- Misrepresentations or deceptive omissions that go to the essence of the bargain and induce reliance may justify equitable rescission.
- The mere existence of publicly available information does not, by itself, bar a defrauded buyer from relying on a seller’s misleading representations.

## Conclusion

The court allowed rescission because the sellers affirmatively marketed the properties as multi-family income real estate while knowingly concealing zoning and permit defects that made the advertised use unlawful; having chosen to speak, the sellers were required to disclose the material facts necessary to prevent their statements from misleading buyers.


Kannavos v. Annino, 356 Mass. 42 (1969)