REBECCA FLORA AND ALLEN FLORA v. MARC MORRIS AND JANIE MORRIS
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RENDERED: JUNE 27, 2003; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2002-CA-001692-MR
REBECCA FLORA AND
ALLEN FLORA
APPELLANTS
APPEAL FROM FRANKLIN CIRCUIT COURT
HONORABLE WILLIAM L. GRAHAM, JUDGE
ACTION NO. 99-CI-01150
v.
MARC MORRIS AND
JANIE MORRIS
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
BUCKINGHAM, GUIDUGLI AND SCHRODER, JUDGES.
GUIDUGLI, JUDGE.
Rebecca Flora and Allen Flora (hereinafter
“the Floras”) have appealed from the judgment of the Franklin
Circuit Court awarding Marc Morris and Janie Morris (hereinafter
“the Morrises”) $7300 for the cost of repairing a concealed
defect in the property the Morrises purchased from them.
affirm.
We
Most of the underlying facts in this matter are not in
dispute, so we shall only briefly summarize the relevant
information.
On January 15, 1999, the Morrises purchased real
estate at 210 Stevenson Drive, in Frankfort, Kentucky, from the
Floras for $67,500.
Allen Flora had purchased the property in
1990 prior to his marriage to Rebecca.
Upon taking possession
of the house, the Morrises discovered that a foundation wall in
the basement was cracked and bowed.
The Morrises visited the home several times prior to
the closing and hired an inspector to inspect the house.
On the
Seller Disclosure form, the Floras indicated that they did not
know whether there were any problems to the foundation or slab.
In the basement of the house, boxes and other items lined one of
the walls, while the other three were open to view.
Neither the
inspector nor the Morrises detected anything wrong with the
three visible walls, and Marc Morris assumed that the fourth
wall was in good condition as well.
In his report, the
inspector did not indicate that there were any problems with the
basement, but indicated that visibility was limited due to some
basement storage.
In any event, the Morrises did not become
aware of the problems with the basement wall until they took
possession of the house a few days following the January 15,
1999, closing when the Floras vacated it.
A civil engineer
inspected the house on February 16, 1999, and indicated that the
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bowed and cracked wall in the basement needed to be repaired
because it was a load-bearing wall.
The Morrises had the wall
repaired for $7300.
On October 4, 1999, the Morrises filed a complaint in
Franklin Circuit Court alleging fraud in that the Floras
misrepresented the condition of the basement wall, entitling
them to damages for money expended in repairing the wall as well
as punitive damages.
The matter proceeded to a bench trial on
March 25, 2002, after which the trial court allowed the parties
to submit memoranda in support of their respective positions.
On July 10, 2002, the trial court entered its judgment as set
forth below:
This matter came on for a trial before
the Court sitting without a jury on March
25, 2002. The Plaintiffs, Marc Morris and
Janie Morris, were represented by counsel,
Hon. John Baughman. The Defendants, Rebecca
Flora and Allen Flora, were represented by
counsel, Hon. James Dean Liebman.
I.
FINDINGS OF FACT
1.
The Plaintiffs purchased a home
located at 210 Stevenson Drive,
Frankfort, Kentucky from the
Defendants.
2.
The purchase price of the home was
$67,500.00.
3.
The Sellers, Allen and Rebecca
Flora, completed a seller
disclosure form. The form was
marked “unknown” as to the
condition of the
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“Foundation/Structure Basement.”
All other information on the
disclosure form regarding the
structure, foundation, or slab of
the house was marked “unknown.”
4.
Marking unknown on the seller
disclosure form meant that the
seller is without knowledge of the
current condition of the subject
matter.
5.
The Buyer, Marc and Janie Morris,
toured the home prior to closing at
least three times.
6.
A professional home inspector,
Norman Cobb, conducted an
inspection prior to the closing of
the sale of the home. The
inspector reported that he could
not establish the condition of the
front basement wall because of
boxes and other impediments stacked
in front of the front wall. It was
not the inspector’s customary
practice to move objects in a home
during an inspection.
7.
Mr. Cobb testified that the
Defendants were not cooperative in
removal of the items in front of
the wall.
8.
A material defect existed in the
front wall of the house prior to
and subsequent to the home
purchase. The wall had an inward
bulge from overstress. The bulge
had accompanying cracks which
overall compromised the wall’s load
capacity.
9.
A professional engineer, Joseph
Pyles, inspected the wall upon
request by the Plaintiffs,
subsequent to the closing date.
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Mr. Pyles’ report indicates that he
spoke with the Defendants who
indicated that the cracks were
present when the home was purchased
by them over nine years ago.
Defendants further informed Pyles
that these cracks did not leak
significantly nor did the cracks
increase in size during their nine
years of ownership.
10. The repairs to the front wall
consisted of digging out the dirt
in front of the wall. The existing
defective wall was torn down and
rebuilt with concrete block
reinforced with steel. A drain
tile and water-proofing were also
included as necessary repairs to
the wall. The total cost of the
repair to the wall was $7,300.00.
II.
CONCLUSIONS OF LAW
11. To recover from the Defendants, the
Plaintiffs must show that the
Defendants violated a legal duty.
Commonwealth of Kentucky v. Roof,
913 S.W.2d 322 (1976).
12. In real estate transactions the
rule of caveat emptor applies,
unless “the vendor does something
to prevent the prospective
purchaser from making a thorough
examination of the premises to
ascertain its nature and value.”
Osborne v. Howard, Ky., 242 S.W.
852 (1922). A purchaser must have
“sufficient opportunity to observe
the condition of the premises” in
order for caveat emptor to apply.
Fannon v. Carden, Ky., 240 S.W.2d
101, 103 (1951).
13. “In the sale of real estate the
intentional suppression of facts
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known to the seller and unknown to
the purchase is ground for an
action for deceit if the purchaser
was damaged. . .” Bryant v.
Troutman, Ky., 287 S.W.2d 918, 920
(1956). The seller must know that
the buyer is acting on the
assumption that no defect exists.
Id. at 920.
14. In a claim for fraud based upon
suppression of facts the plaintiffs
must prove that the defendants had
a duty to disclose the facts; that
the defendants failed to disclose
the facts; that the defendants’
failure to disclose material facts
induced him to act; and the
plaintiff suffered damages.
Willits v. Peabody Coal Co., U.S.
App. Lexis 21096 (6th Cir. 1999).
III. JUDGMENT
15. The Defendants knew of the defect
in the front basement wall prior to
the purchase of the house by the
plaintiffs.
16. The Plaintiffs were not given an
opportunity to fully inspect the
house due to boxes and other
impediments used to conceal the
defect.
17. The Plaintiffs have proven by clear
and convincing evidence that the
Defendants knew the defect in the
wall existed; that the Defendants
did not disclose the defect in the
wall to the Plaintiffs; that the
facts were material to the
Plaintiffs’ purchase of the home;
the Plaintiffs have been damaged by
the Defendants’ failure to disclose
the defect.
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18. The damages to the Plaintiffs are
in the amount of $7,300.00 for
repairs to the wall.
ACCORDINGLY:
19. The Plaintiffs are entitled to
Judgment in the amount of $7,300.00
WHEREFORE, the Judgment of this Court
is in favor of the Plaintiffs in the amount
of $7,300.00 plus interest at the legal rate
until paid in full.
This appeal followed.
On appeal, the Floras contend that several of the
trial court’s findings of fact were clearly erroneous, that the
Morrises did not prove a cause of action against them, and that
they were therefore entitled to a judgment as a matter of law.
On the other hand, the Morrises argue that the trial court’s
findings of fact were supported by substantial evidence so that
its findings and judgment should not be disturbed.
In addition,
the trial court properly found that the Floras were liable for
their damages.
CR 52.01 addresses the proper procedure to be followed
in bench trials:
In all actions tried upon the facts
without a jury or with an advisory jury, the
court shall find the facts specifically and
state separately its conclusions of law
thereon and render an appropriate judgment;
. . . Findings of fact shall not be set
aside unless clearly erroneous, and due
regard shall be given to the opportunity of
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the trial court to judge the credibility of
the witnesses.
In Sherfey v. Sherfey, Ky.App., 74 S.W.3d 777, 782 (2002), this
Court stated that “[a] factual finding is not clearly erroneous
if it is supported by substantial evidence.
[]
‘Substantial
evidence’ is evidence of substance and relevant consequence
sufficient to induce conviction in the minds of reasonable
people.”
(Citations omitted).
Furthermore, this Court is not
permitted to substitute its judgment for that of the trial court
regarding the weight of the evidence so long as substantial
evidence supports its decision.
997 S.W.2d 1 (1999).
Leveridge v. Leveridge, Ky.,
Therefore, we shall first determine
whether the trial court’s findings of fact are supported by
substantial evidence.
In their brief, the Floras point to three statements
in the trial court’s judgment that they contend are not
supported by the record.
As the Morrises indicate, only one of
those statements is actually a finding of fact for which
substantial evidence must exist.
That particular finding is
that “Mr. Cobb testified that the Defendants were not
cooperative in removal of the items in front of the wall.”
While we agree that Mr. Cobb did not testify in exactly this
way, we believe that the finding of fact is supported by
substantial evidence and not clearly erroneous as the Floras
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argue.
Other testimony established that the Floras had not
moved the boxes covering the wall in question to allow the
inspector a full view of the basement and that there was some
difficulty in removing boxes from a closet in order to access
the attic.
The remaining two statements the Floras contend are
not supported by substantial evidence are not findings of fact,
but rather conclusions of law.
The two statements concern the
Floras’ knowledge of the defect prior to the Morrises’ purchase
and the Morrises’ opportunity to fully inspect the house.
However, our review of the record reveals that each of the
conclusions of law is supported by the record.
Because the trial court’s findings of fact are
supported by substantial evidence, they are not clearly
erroneous.
Therefore, we shall continue with our de novo review
of the trial court’s application of the law to its findings of
fact.
We agree with the Morrises’ argument that the trial
court did not commit any error in holding the Floras liable for
damages and in awarding a judgment in favor of the Morrises.
this Commonwealth,
[T]o establish an actionable case of fraud
based upon suppression of facts, plaintiff
must demonstrate (1) that defendant had a
duty to disclose the material facts, (2)
that defendant failed to disclose same, (3)
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In
that defendant’s failure to disclose the
material facts induced him to act, and (4)
that he suffered actual damages therefrom.
Willits v. Peabody Coal Co., 1999 WL 701916 (6th Cir. 1999).1
In
order to recover, the Morrises had to establish that the Floras
violated a legal duty to them in failing to disclose the defect
in the basement wall.
Commonwealth of Kentucky v. Roof, Ky.,
913 S.W.2d 322 (1996).
It is well settled that the rule of caveat emptor is
in force in the Commonwealth.
It is an ancient rule, inherited from the
common law and well established in our
jurisprudence, that in land deals, like the
one under consideration, the rule of caveat
emptor applied, and it is only relaxed when
it is shown that the vendor does something
to prevent the prospective purchaser from
making a thorough examination of the premise
to ascertain its nature and value.
Osborne v. Howard, 195 Ky. 533, 536, 242 S.W. 852, 853 (1922).
“As a general rule where no direct representation is made by the
vendor concerning definite facts and the purchaser has
sufficient opportunity to observe the condition of the premises,
the maxim of caveat emptor is applicable.”
Ky., 340 S.W.2d 101, 103 (1951).
Fannon v. Carden,
Finally, in Bryant v.
Troutman, Ky., 287 S.W.2d 918, 920 (1956), the former Court of
Appeals held:
1
This opinion was not recommended for full-text publication.
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In the sale of real estate the intentional
suppression of facts known to the seller and
unknown to the purchaser is ground for an
action for deceit if the purchaser was
damaged by reason of the fraudulent
concealment. Where there is a latent defect
known to the seller and he remains silent
with the knowledge that the buyer is acting
on the assumption that no defect exists, the
buyer has a cause of action against the
seller for an intentional omission to
disclose such latent defect.
In the present matter, the Floras, as the sellers, had
the duty to disclose the latent defect in the basement wall that
was blocked from view by boxes and other items.
Because the
defect was not readily viewable, the Floras should have informed
the Morrises about the bulge and cracks in the wall, or at least
have moved the boxes from the wall, so that they would have been
able to properly and accurately inspect its condition.
Based
upon the circumstances of this case, the notation of “unknown”
as to the condition of the foundation or slab on the Seller
Disclosure form is not enough to allow the Floras to comply with
their duty to inform the Morrises.
Therefore, based upon the facts of this case, the
trial court did not commit any error in holding the Floras
liable for damages.
The Floras had a duty to disclose the
latent defect in the basement wall, which they did not disclose.
The failure to disclose induced the Morrises to continue with
the real estate transaction and purchase the home.
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Finally, the
Morrises suffered actual damages in the amount of $7300, the
cost to repair the defect in the wall.
For the foregoing reasons, the judgment of the
Franklin Circuit Court is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANTS:
BRIEF FOR APPELLEES:
James D. Liebman
Frankfort, KY
John B. Baughman
Frankfort, KY
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