Question: Iota Management Corporation entered into a contract to purchase the
Iota Management Corporation entered into a contract to purchase the Bel Air West Motor Hotel in the city of St. Louis from Boulevard Investment Company. The agreement contained the following warranty: “Seller has no actual notice of any substantial defect in the structure of the Hotel or in any of its plumbing, heating, air conditioning, electrical, or utility systems.” When the buyer inspected the premises, no leaks in the pipes were visible. Iota purchased the hotel for $ 2 million. When Iota removed some of the walls and ceilings during remodeling, it found evidence of prior repairs to leaking pipes and ducts as well as devices for catching water (e.g., milk cartons, cookie sheets, buckets). The estimate to repair these leaks was $ 500,000. Evidence at trial showed that Cecil Lillibridge, who was Boulevard’s maintenance supervisor for the four years prior to the motor hotel’s sale, had actual knowledge of these problems and had repaired some of the pipes. Iota sued Boulevard to rescind the contract. Is Boulevard liable? Iota Management Corporation v. Boulevard Investment Company, 731 S. W. 2d 399, 1987 Mo. App. Lexis 4027 (Court of Appeals of Missouri)
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