Facts: Billy Stevens owned a paint company and on several occasions he ordered employees to dump 55-gallon paint drums and pallets of old paint cans on property that he owned. Employees notified the Environmental Protection Agency (EPA) of this dumping and the EPA began an investigation. (Stevens later served time for environmental crimes.)

Stevens defaulted on his mortgage for the property and Chase initiated foreclosure proceedings. During those proceedings Chase learned of the EPA investigation. Chase put the property up for sale “as is.” The bank did not inform interested buyers of the investigation. Hess bought the property for $52,000.

Hess later learned of the illegal waste and sued Chase for failing to disclose the EPA investigation. The jury awarded Hess $52,000. Chase appealed.

Questions:

1. Did Chase have a duty to disclose to Hess the ongoing investigation?

2. What is the issue in this case?

3. I thought we had a rule called “caveat emptor”—let the buyer beware. 

4. What is the difference between fraud in the inducement of a contract and fraud in the execution of a contract?

5. Why does Hess win?