In connection with the sale of their residential property, defendants-sellers completed a Property Condition Disclosure Statement in which they answered "No" to certain questions, thereby indicating that there were: no material defects in the footings; no rotting or water damage; no flooding, drainage, or grading problems that resulted in standing water on any portion of the property; no seepage in the basement that resulted in standing water; and no known material defects in the plumbing system, foundation/slab, interior walls/ceilings, exterior walls or siding, floors, chimney and patio/deck, and that no radon test had been done.

Defendant-broker showed the property to plaintiff, and provided him with a copy of the Disclosure Statement. Plaintiff then contracted with defendant-inspection services to perform a home inspection. The inspection report did not state that there was any material defect in the property. The property went into contract and, subsequent to the closing, plaintiff allegedly discovered material defects in the property including: water leaking through the porch; the rear deck sinking because of excessive water and pooling of water; the roof separating from the rest of the house due to the deck sinking; improper footings on the deck; mold behind the sheetrock caused by water in the basement; the radon system blower was inoperative; a cracked chimney, rotted bathroom floors due to excessive water leakage; and evidence of long-term heavy water damage on the garage roof and walls.

Plaintiff commenced this action to recover damages, and the First Department found a cause of action in fraudulent misrepresentation, but denied a cause of action in breach of contract, in Simone v. Homecheck Real Estate Servs., which was decided on July 24, 2007.

As regards fraud, the court noted that New York adheres to the doctrine of caveat emptor and imposes no liability on a seller for failing to disclose information regarding the premises when the parties deal at arm's length, unless there is some conduct on the part of the seller which constitutes active concealment. The mere silence of the seller, without some act or conduct which deceived the buyer, does not amount to a concealment that is actionable as a fraud. To maintain a cause of action to recover damages for active concealment in the context of a fraudulent nondisclosure, the buyer must show, in effect, that the seller thwarted the buyer's efforts to fulfill the buyer's responsibilities fixed by the doctrine of caveat emptor.

The court found that that the alleged false representations by the sellers in the Disclosure Statement may be proof of active concealment.

As regards the breach of contract, however, the court said that there is no cause of action where the contract specifically disclaims the existence of warranties or representations. Here, the contract of sale specifically provided that the property had been inspected by the buyer and was being sold "as is" without any warranty as to condition, express or implied. Furthermore, a specific merger clause is contained in the rider to the contract and precludes the buyer from claiming that he relied on any of the sellers' alleged misrepresentations. In addition, because title to the property had closed and the deed was delivered, the doctrine of merger extinguished any claim the buyer may have had regarding the contract of sale.