Gavora, Inc. v. City of Fairbanks
502 P.3d 410
| Alaska | 2021Background:
- Gavora, Inc. purchased a municipal mall property in 2002 that had long‑term dry‑cleaning tenants; PCE/TCE groundwater contamination occurred prior to and during Gavora’s involvement.
- ADEC identified the site as potentially liable and placed the property on its contaminated sites list in 2000; ADEC later notified Gavora and the City of possible remediation responsibility.
- Gavora sued the City in federal court under CERCLA; the district court found the City and Gavora jointly and severally liable and apportioned fault (City 55%, Gavora 45%), finding most contamination arose from Gavora’s dry‑cleaning tenants through 2001.
- Gavora then sued the City in Alaska superior court for misrepresentation, nondisclosure, breach of contract and covenant of good faith, implied indemnity, and negligence, alleging the City failed to disclose known contamination during the 2002 sale.
- The superior court found no duty to disclose under Restatement (Second) of Torts §§ 551 or 353, concluded Gavora had reason and opportunity to discover the contamination (including public ADEC records and an as‑is sale), found no active deception, and denied post‑trial relief.
- The Alaska Supreme Court affirmed the superior court, holding (1) no duty to disclose under §§ 551(2)(a) or (e); (2) no seller liability under § 353 for post‑sale physical harm; and (3) no independent disclosure duty under the implied covenant (contract theory was waived).
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to disclose based on a fiduciary or special trust (Restatement §551(2)(a)) | Gavora: City had a special relationship/joint venture and thus a duty to disclose contamination. | City: transaction was arm’s‑length, as‑is sale; no fiduciary relation or special trust. | No duty under §551(2)(a); parties dealt at arm’s‑length and Gavora presented no evidence of a fiduciary relationship. |
| Duty to disclose facts basic to the transaction when buyer is mistaken (Restatement §551(2)(e)) | Gavora: City knew appraisal assumed environmental cleanliness and should have corrected buyer’s mistake. | City: as‑is clause, equal access to public ADEC records, and no reason to know Gavora was mistaken. | No duty under §551(2)(e); buyer had opportunity to discover facts, as‑is clause and professional representation weigh against imposing duty. |
| Seller liability for undisclosed dangerous condition (Restatement §353) | Gavora: contamination caused ongoing harm after purchase; seller must disclose latent dangerous conditions. | City: no active deception; Gavora had reason to know contamination; most physical harm occurred before sale. | No liability under §353; court found no active deception, Gavora had reason/opportunity to discover contamination, and physical harm occurred prior to possession. |
| Implied covenant of good faith and contract‐based disclosure (§161/contract theory) | Gavora: covenant or contract law creates independent disclosure duty and remedy even if tort duty fails. | City: covenant does not create new duties; contract disclosure theory was not timely pursued and was waived. | Covenant does not create an independent disclosure duty; contract disclosure theory under §161 was waived and, in any event, foreclosed by factual findings. |
Key Cases Cited
- Arctic Tug & Barge, Inc. v. Raleigh, Schwarz & Powell, 956 P.2d 1199 (Alaska 1998) (adopted Restatement rule on nondisclosure liability in business transactions)
- Deptula v. Simpson, 164 P.3d 640 (Alaska 2007) (as‑is clause and arm’s‑length commercial transactions undermine a §551(2)(e) duty)
- Matthews v. Kincaid, 746 P.2d 470 (Alaska 1987) (buyer expected to discover information available by ordinary inspection/inquiry)
- Laybourn v. City of Wasilla, 362 P.3d 447 (Alaska 2015) (no special relationship giving rise to disclosure duty; public records available to buyers)
- Alaska Fur Gallery, Inc. v. Hwang, 394 P.3d 511 (Alaska 2017) (implied covenant of good faith does not create duties where none exist under law)
- Turnbull v. LaRose, 702 P.2d 1331 (Alaska 1985) (discussing misrepresentation by omission principles)