As-Is Sale is Not a Defense for Seller when Seller Commits Fraud

Last year, in Mapcor Corporation v. J.P. Morgan Chase Bank, N.A., 938 N.E.2d 1181 (2d Dist. 2010), J.P. Morgan Chase Bank lost on appeal after it claimed that it should not have to pay the amount the jury awarded to the plaintiff at trial because the plaintiff had purchased the property from J.P. Morgan Chase AS-IS.

The court, however, disagreed, based on the following background:  The bank was aware that the roof of the property needed to be torn off and completely replaced.  However, because the cost to do this was high, the bank hired a contractor to put a new roof over the original roof — against the broker’s and the contractor’s advice.  The bank fired the original broker and hired a new broker, and then falsely represented that the roof was torn off and replaced with a new roof. 

Relying in part on this representation, plaintiff purchased the property in 1996.  Over the next decade, the plaintiff had constant problems with the roof and eventually discvered that the original roof had not been torn off.  The plaintiff sued on grounds of fraud and won.  At that point, the bank appealed, arguing that the plaintiff had purchased the property AS-IS and was therefore not entitled to relief.

The appellate court stated that the jury and the trail court were correct in stating that the bank had intentionally, knowingly, or with reckless disregard for the truth made a false statement of material fact.  Furthermore, the court stated that had the plaintiff known the truth about the roof, the plaintiff may have offered far less money for the property.

Moral of the story — Just because a Buyer purchases something AS-IS, the Seller should not attempt to commit fraud against him!