Anne Stouffer v. Kralicek Realty Company

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March 16, 2005



[NO. CV01-1120]






Olly Neal, Judge

This case is before us a second time, appellant's first appeal having been dismissed for lack of a final order. Stouffer v. Kralicek, No. CA02-621 (Feb. 26, 2003). Appellant has now obtained a final order, and she appeals from a summary judgment in favor of appellee Kralicek Realty. We affirm.

Kralicek was the listing agent on a home owned by Frances Brody. On August 21, 2000, Brody filled out an Owner Property Disclosure Form that contained the following question: "Has there been any settling from any cause, or slippage, sliding or other poor soil conditions at the Property or to adjacent properties?" Brody answered "Yes" to this question but explained, in a part of the form provided for such, that she was referring to "minor settling resulting in cracks in sheetrock, which have been repaired." No foundation problems with the house were mentioned.

Appellant, after viewing the disclosure form, purchased the home on November 8, 2000. Thereafter, she discovered that the foundation was shifting, and she obtained a repair estimate from a company called Power Lift. In the course of doing so, she learned that both Power Lift and another company had given repair estimates to Brody shortly before the sale.

On December 14, 2001, appellant sued Kralicek and Brody for fraud, alleging that they had concealed the problems with the foundation and that Kralicek falsely stated in a listing publication that the house was in "better than new condition." Kralicek moved for summary judgment, arguing that it had no knowledge of any defect in the home and that the phrase "better than new condition" was mere sales puffing and not actionable as fraud. Attached to the motion was the affidavit of its listing agent Jerome Flusche, who stated that he had nothing to do with filling out the owner's disclosure form; that he had no knowledge of any undisclosed defects in the property; that he was neither told by Brody about any defects in the foundation nor saw anything that would lead him to believe there were such defects; and that he had never met or talked with appellant in connection with the sale.

In response, appellant argued that a fact question existed as to whether Kralicek had misled her and was in fact part of a "scheme to intentionally defraud" her. She contended that Flusche's affidavit was subject to attack on several fronts. First, she said, Flusche's affidavit was contradicted by her own, which read in pertinent part:

2. I am not an expert in the condition of used houses. In making my decision to buy the house at 8807 South Fresno in Fort Smith, Arkansas, I relied upon the information in the Realtor's multi-list book, in which the advertisement of Kralicek Realty Company, Inc., for this house stated that it was in "Better than new condition ...." I also met Jerome Flusche, of Kralicek Realty Company, Inc., at the house at 8807 South Fresno in Fort Smith, Arkansas.


4. The evidence I have seen indicates to me that Jerome Flusche and Kralicek Realty Company, Inc., either knew of this damage and helped hide it from me, or they should have known about it. Whether or not they actively participated in this fraud against me, there is no debating that this house was not in "Better than new condition" as they advertised it to be.

Second, she claimed that Flusche's affidavit was contradicted by one of Brody's interrogatory answers, which read as follows:

INTERROGATORY NO. 9: Please state whether you made any employee of Kralicek Realty Company, Inc., aware of the foundation problems of this house at any time from July 1, 2000, through November 10, 2000. If the answer is in the affirmative, please give the name of each employee of Kralicek Realty, and for each, state the nature of the information which you gave to that employee.

ANSWER: There was no problem with the foundation. She [sic] discussed the cracks in the house with Jerome Flusche.

Third, she argued that, if Flusche was truly ignorant of the foundation problems, it would indicate that he was not in compliance with certain real-estate regulations requiring an agent to deal honestly with all parties to the transactions and to exert reasonable efforts to ascertain facts that are material to the value or desirability of the property for which he accepts agency. See Arkansas Real Estate Regulations 8.5 and 10.6.

On March 12, 2002, the trial court granted summary judgment to Kralicek. The court ruled that the statement "better than new condition" was mere puffery and that appellant had failed to set forth any evidence, other than a conclusory statement in her affidavit, that Kralicek had any knowledge of the foundation problems. Appellant took her first appeal from that order.

Following our dismissal of the appeal on February 26, 2003, appellant returned to circuit court on December 17, 2003, and amended her complaint against Kralicek. In doing so, she set forth the same facts as the original complaint but deleted the fraud count in favor of counts for breach of the implied warranty of habitability, civil conspiracy, and what she termed "three forms of negligence": 1) negligent misrepresentation as the result of Kralicek's "making statements that the house was in `better than new condition' when it knew, or should have known, the falsity of that statement"; 2) negligent concealment by virtue of Kralicek's "assisting with the cover-up and non-disclosure of the cause and extent of the deteriorated condition" of the house; 3) "simple negligence" whereby Kralicek breached its "duty to ascertain and disclose" the foundation problem.

On December 29, 2003, Kralicek moved for summary judgment on the warranty, conspiracy, and negligence counts. It argued that appellant's negligence and conspiracy claims were barred by the three-year statute of limitations; that the warranty claim was barred by appellant's purchase of the house "as is"; that appellant failed to state facts to show a civil conspiracy; that Arkansas law did not require a realtor to research and discover hidden defects in a home; and that the court had already found in its first summary judgment that the statement "better than new condition" constituted puffery and that Kralicek had no knowledge of the condition of the foundation.

Appellant responded to the motion with a brief in which she made the following statement:

[S]ince this [trial] Court has found that Kralicek did not intentionally defraud this Plaintiff, as there was no proof that it knew of this damage cover-up when it claimed that the house was in better than new condition, the fraud claim was dropped. However, as real estate professionals with extensive experience in construction and remodeling, Kralicek was in a position that, even if it did not know about this damage, it should have discovered it and made potential buyers in general, and this buyer in particular (Plaintiff), aware of such damage. By definition, those facts establish a cause of action for negligence.

If the facts as stated by Plaintiff are true, Kralicek was guilty of negligence by failing to determine the true condition of the house before advertising that it was in "better than new condition."

Appellant then went on to address the statue of limitations issue, asserting that her amended complaint related back to her original complaint. No further argument was made and no further exhibits or affidavits were provided with regard to her warranty, conspiracy, or negligence claims.

On January 13, 2004, the trial court granted summary judgment to Kralicek. The court ruled first that appellant's implied-warranty claim was waived when she purchased the house "as is." As for the negligence and conspiracy counts, the court, relying primarily on its previous ruling that, as per Flusche's affidavit, Kralicek had no knowledge of the defects in the property, granted summary judgment on those counts as well. Appellant now appeals from that order.

Our standard of review in summary-judgment cases is well established. We will approve the granting of summary judgment only when the state of the evidence as portrayed by the pleadings, affidavits, discovery responses, and admissions on file is such that the nonmoving party is not entitled to its day in court because there are no genuine issues of material fact remaining. See Flentje v. First Nat'l Bank of Wynne, 340 Ark. 563, 11 S.W.3d 531 (2000). All proof submitted must be viewed in the light most favorable to the nonmoving party, and any doubts must be resolved against the moving party. Id. However, once the moving party has established a prima facie entitlement to summary judgment, the burden shifts to the nonmoving party to meet proof with proof and demonstrate the existence of a material fact. Id.

With these standards in mind, we first address the trial court's grant of summary judgment on the breach-of-warranty claim. The real-estate contract in this case recited that appellant agreed to accept the property "as is," providing only that a crack in the master bedroom would be repaired and that the home's electrical, plumbing, heating and air conditioning systems, and other appliances and mechanical devices would be in normal working order. In light of this clause, the trial court ruled that the implied warranty of habitability was waived. See Morris v. Rush, 77 Ark. App. 11, 69 S.W.3d 876 (2002) (recognizing that, as a rule, an implied warranty of habitability is waived when the buyer purchases the property "as is"). Appellant argues that the additional provisos in her "as-is" clause remove it from the general rule. However, appellant's response to the motion for summary judgment did not address the application of the "as-is" clause to the breach-of-warranty claim; in fact, it did not address the warranty claim at all except to briefly mention it in the conclusion. Thus, appellant is making this argument for the first time on appeal, and we decline to address it. See Parker v. Perry, 355 Ark. 97, 131 S.W.3d 338 (2003).1

Next, we address the summary judgment on appellant's civil-conspiracy count. Civil conspiracy requires proof that two or more persons have combined to accomplish a purpose that is unlawful or oppressive, or to accomplish some purpose - not in itself unlawful, oppressive, or immoral - but by unlawful, oppressive, or immoral means, to the injury of another. Seachange Int'l, Inc. v. Putterman, 79 Ark. App. 223, 86 S.W.3d 25 (2002). Civil conspiracy is not actionable in and of itself, but a recovery may be had for damages caused by acts committed pursuant to the conspiracy. Id. Civil conspiracy is an intentional tort, requiring a specific intent to accomplish the contemplated wrong. Chambers v. Stern, 347 Ark. 395, 64 S.W.3d 737, cert. denied, 536 U.S. 940 (2002).

Appellant argues on appeal that a fact question exists as to whether Brody and Kralicek conspired to make fraudulent representations on the property disclosure form. Again, appellant did not make this argument regarding her conspiracy claim in her response to Kralicek's second motion for summary judgment. In fact, she expressly stated that "since this Court has found that Kralicek did not intentionally defraud this Plaintiff, as there was no proof that it knew of this damage cover-up when it claimed that the house was in better than new condition, the fraud claim was dropped." Her claims against Kralicek are therefore, in her own words, premised on Kralicek's negligence and not on intentional wrongdoing. Because civil conspiracy requires a specific intent to commit a wrong, appellant's allegations of negligence cannot support this cause of action.

Finally, we address the grant of summary judgment on appellant's negligence count, which, as pled by her, averred causes of action for negligent misrepresentation, negligent concealment, and "simple negligence" for failure to ascertain and disclose the defects in the property. We quickly dispose of the negligent misrepresentation and concealment counts. Our supreme court has stated that Arkansas does not recognize a cause of action for negligent misrepresentation. South County, Inc. v. First W. Loan Co., 315 Ark. 722, 871 S.W.2d 325 (1994). Appellant has advanced no argument as to why either this cause of action or the similar cause of action for negligent concealment should now be recognized. See id. (recognizing that misrepresentation is a fraud-based claim, and fraud requires a showing of intent rather than negligence).2

As for appellant's remaining negligence claim, we note that her brief makes the following sub-arguments: 1) the trial court erroneously weighed the credibility of Flusche's affidavit against her proof, given that Flusche had an interest in the outcome of the case; 2) her affidavit and Brody's answer to Interrogatory No. 9 created a fact question as to Kralicek's knowledge of the house's defects; 3) Flusche's affidavit contained inadmissible hearsay because it stated, in part, that appellant was told by an agent from another real-estate company that it was appellant's responsibility to inspect the property; 4) Flusche's affidavit contains statements that, if true, indicate a violation of his duty as a real-estate agent as evidenced by the previously mentioned Arkansas real-estate regulations; 5) the statement "better than new condition" was not mere puffing.

Our reading of appellant's response to Kralicek's second motion for summary judgment indicates that, of the first four sub-arguments listed above, she made only the second one. Her response did not contend that Flusche's affidavit should be considered disputed by virtue of his interest in the case, that his affidavit contained hearsay, or that his affidavit evidenced a violation of the real-estate regulations.3 Thus, appellant is making these arguments for the first time on appeal, and we will not consider them.4

As for the argument that appellant did make below - that her affidavit and Brody's answer to the interrogatory created a fact question as to Kralicek's knowledge of the foundation defects - we agree with the trial court that summary judgment was proper. Flusche's affidavit set forth that he had neither knowledge of any problems with the foundation nor any indication that they existed. When a defendant makes a prima facie case for summary judgment, the plaintiff must discard the cloak of formal allegations and meet proof with proof by showing that a genuine issue of fact exists. See Hodges v. Huckabee, 338 Ark. 454, 995 S.W.2d 341 (1999); J.M. Prods., Inc. v. Arkansas Capital Corp., 51 Ark. App. 85, 910 S.W.2d 702 (1995). Appellant did not meet proof with proof in this case. Brody's interrogatory answer said only that she discussed the cracks in the house with Flusche. Any inference that Flusche knew about the foundation problems simply because he knew about the cracks is mere conjecture, which is insufficient to rebut a prima facie showing of entitlement to summary judgment. See generally Browning v. Browning, 319 Ark. 205, 890 S.W.2d 273 (1995). This is especially true in light of the fact that the cracks were mentioned in the owner's disclosure form and presumably were known to any person who viewed the form.

Similarly, appellant's affidavit does not contradict Flusche's in any meaningful way. She relies in particular on her bare statement that she met Flusche at the house. However, her affidavit does not say when the two met or what was discussed. Further, the affidavit as a whole merely contains appellant's suspicions about Kralicek's participation in a scheme to defraud her. A party's suspicions do not give rise to a question of material fact. See Biedenharn v. Hogue, 338 Ark. 660, 1 S.W.3d 424 (1999).

In light of the foregoing, we affirm the trial court's grant of summary judgment. Our holding makes it unnecessary to address appellant's argument regarding the trial court's characterization of the statement "better than new condition" as puffery. We also find it unnecessary to address appellant's argument that it was unfair to release Kralicek from the lawsuit because if she decides to rescind the contract in her suit against Brody, Kralicek would be able to retain the sales commission. No authority is cited for this argument, and, in any event, appellant has dismissed her claim against Brody.


Hart and Glover, JJ., agree.

1 Even if we were to consider the merits, and even if an implied warranty of habitability existed under the facts of this case, in O'Mara v. Dykema, 328 Ark. 310, 942 S.W.2d 854 (1997), virtually the same "as-is"clause was held to constitute a waiver of the implied warranty of habitability.

2 Although the trial court did not assert this ground as a reason for granting summary judgment, we may affirm on a different basis than that employed by the trial court, so long as the correct result is reached. See R.J. Jones Excavating Contr. v. Fireman's Ins. Co., 324 Ark. 282, 920 S.W.2d 483 (1996).

3 Although appellant made some of these arguments in her response to Kralicek's first motion for summary judgment on the fraud claim, she has not made them with regard to Kralicek's second motion for summary judgment on the negligence claim.

4 Even if we were to address them we would find no reversible error. Flusche's affidavit was sufficient to create a prima facie case for summary judgment and appellant, as plaintiff, had the burden of meeting proof with proof to show a genuine issue of material fact. See Ark. R. Civ. P. 56(e) (2004); see also Hodges v. Huckabee, 338 Ark. 454, 995 S.W.2d 341 (1999); Hyde Wholesale Dry Goods v. Edwards, 255 Ark. 211, 500 S.W.2d 85 (1973). As for the hearsay argument, even if the offending statement were redacted, it would not change the substance of Flusche's affidavit. Finally, with regard to the real-estate regulations, appellant states in her brief that "there is no proof in the record about this ... discrepancy" between Flusche's proclaimed lack of knowledge and the regulations' requirements. Further, she has offered no convincing argument or authority on appeal, nor did she offer in proof other than speculation below, that Flusche's lack of knowledge violated the regulations.