Pepsi-Cola Bottling Co. v. Handy

Handy (Defendant), Ginsburg (Defendant) and McKinley (Defendant) had a contract of sale for a tract of undeveloped land they were interested in developing. Before commencing development, they learned from an environmental study firm that the land had wetlands, which negatively affected the land’s value and development potential. Therefore, they abandoned their plans to develop and decided to sell the property after they acquired it. The Pepsi-Cola Bottling Company of Salisbury, Maryland (Plaintiff) expressed interest in purchasing the land. Unaware that wetlands existed on the property, Plaintiff acquired an option to purchase the property from Handy (Defendant), who was acting on his and the other sellers’ behalf. During the option period, Handy (Defendant) was deceptive in falsely responding to an environmental investigation questionnaire indicating that there were no wetlands on the land, and not disclosing that another environmental study firm had already performed a written preliminary wetlands determination in the prior month. In addition, when he responded to the question whether any analytical tests or inspections had been performed on the property previously, Handy (Defendant) falsely indicated that “no analytical tests or inspections [had] been conducted on the groundwater, surface water, or soil of the Property.” Two weeks after Plaintiff acquired its option, Handy (Defendant), Ginsburg (Defendant) and McKinley (Defendant) formed Willow Creek Estates, LLC (Defendant) for the purpose of selling the property. Willow Creek (Defendant) purchased the property for $174,000 and then sold the property to Plaintiff for $455,000. The Defendants, Willow Creek’s (Defendant) members profited $281,000 on the sale. After Plaintiff learned that the property contained wetlands, it brought an action for rescission and damages, claiming, inter alia, claims of fraud and unjust enrichment based on the facts that none of the defendants informed Plaintiff that the land contained wetlands and that the defendants knew that if Plaintiff had been informed about the wetlands, Plaintiff would not have paid as much for the property as it did. The defendants moved to dismiss, arguing that even if the claims were legally sufficient, no relief could be granted because there could be no recovery against individual members of the LLC in this particular case, as they never individually held legal or equitable title to the land.