MARK ROSS and CHRISTINE ROSS v. RALPH D. POWELL
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RENDERED:
DECEMBER 5, 2003; 2:00 p.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2002-CA-002313-MR
MARK ROSS and
CHRISTINE ROSS
APPELLANTS
APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE SHEILA R. ISAAC, JUDGE
ACTION NO. 99-CI-00401
v.
RALPH D. POWELL
and DEBROAH POWELL
APPELLEES
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
BUCKINGHAM, COMBS, and DYCHE, Judges.
COMBS, JUDGE.
Mark and Christine Ross appeal from an October
14, 2002, order of the Fayette Circuit Court granting summary
judgment to Ralph and Deborah Powell in an action in which the
Rosses alleged misrepresentation and fraudulent concealment of
conditions in a residential real estate transaction.
We affirm.
In late 1996, Deborah Powell, a medical doctor with
the University of Kentucky Medical School in Lexington, accepted
a position as Dean of the University of Kansas Medical School.
Her husband, Dr. Ralph Powell, also accepted a position at the
medical school.
Deborah relocated to Kansas on April 15, 1997.
Ralph remained in Lexington with their children until June 30,
1997.
Just weeks before moving to Kansas, Ralph Powell
talked with several prospective real estate agents.
Based in
part upon the age of the house on Overbrook Lane in Lexington,
the agents each suggested that the residence be professionally
inspected for termites before listing.
The Powells agreed.
On May 22, 1997, Dr. Powell arranged for a
representative of T. J. Neary Insect Technologies (“Neary”) to
inspect the house.
Neary’s inspection revealed evidence of
termites, but Dr. Powell was assured that there was no evidence
of damage to the home.
Neary recommended that the house be
treated and gave Dr. Powell the names of two pest control
companies that could perform the service.
Dr. Powell contacted
B & E Pest Control.
A few days later, on May 26, 1997, the Powells listed
their house for sale with Louise Bonner of Turf Town Properties.
On June 3, 1997, Ralph Powell completed and signed a Seller
Disclosure of Property Condition form as required by KRS1
324.360.
1
On the form, the Powells disclosed that the roof had
Kentucky Revised Statutes.
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leaked, had sustained damage, and had been repaired.
They also
revealed that the basement had leaked and had been repaired.
Ralph Powell completed and signed a Seller’s Real
Property History form as requested by the Lexington-Bluegrass
Association of Realtors.2
The Real Property History form
included a checklist relating to various aspects of the
property.
It asked the prospective sellers, “[a]re you aware of
any present or past wood infestation, i.e., termites, bores,
carpenter ants, fungi, etc”
elaborated separately:
Mr. Powell marked “yes.”
He
that “….[e]vidence of termite
infestation found in May ’97.”
Next, the disclosure form asked
the prospective sellers, “[a]re you aware of any damage due to
wood infestation.”
Mr. Powell marked “no,” indicating “no
apparent damage found.”
Finally, the disclosure form asked,
“[h]ave the house and/or other improvements ever been treated
for wood infestation?
If yes, when and by whom.”
Mr. Powell
marked “unknown,” noting that the house was “[s]cheduled to be
treated in next 1-2 weeks.”
Dr. Powell had the house inspected by B & E Pest
Control (B & E) on June 3, 1997.
B & E confirmed termite
activity in debris under the house but reported only minor
visible damage.
On B & E‘s recommendation, the home was treated
2
The information provided by the prospective seller on this form is
not required to be disclosed by state law.
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for termites on June 27, 1997.
Dr. Powell and the children
moved out of the house and on to Kansas during the month of
June.
In June 1997, Dr. Mark Ross first toured the Powells’
home at 3345 Overbrook Drive.
The Rosses were contemplating
relocating to Lexington from Iowa City, Iowa, in order that
Mark, a neurologist, might accept a position with the University
of Kentucky Medical Center.
In September 1997, months after the
Powells had vacated the residence, Mark returned to Lexington
with his wife, Christine, and the couple toured the Powells’
house together with their agent, Carita Arnold.
Several months
later, the Rosses made an offer from Iowa to purchase the
Powells’ house.
It was at or near this time (December 17, 1997) that
the Rosses claim to have first seen the Powells’ disclosure
forms.3
Upon learning that the house had been subject to a
termite infestation, they advised their realtor that they were
no longer interested in the property.
Arnold persisted,
however, and discussed the issue with Louise Bonner, the
Powells’ agent.
Bonner contacted the Powells in Kansas and
talked again with Arnold.
Following her discussion with Bonner,
Arnold contacted the Rosses in Iowa and assured them that the
3
The Rosses’ realtor, Cartita Arnold, stated in her deposition that
she gave the Rosses copies of each of the completed disclosure forms
in September 1997.
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termite infestation had been a minor problem that had surfaced
back in May or June of 1997 and that it had been treated
professionally.
Dr. Ross explained that he understood from the
conversation with his realtor that the termites were “considered
a remote and closed matter, that this was not any problem at the
present time.”
M. Ross deposition at 23-24.
The Powells
rejected the Rosses’ offer to purchase and made a counteroffer;
the Rosses accepted their counteroffer.
Closing was scheduled
for early March.
The parties’ sale and purchase contract contained a
provision allowing for inspection of the property by the buyer.
Pursuant to this provision, the buyer may report to the seller
any substantial defect found by the buyer’s inspection that the
buyer wishes to be remedied by the seller.
The seller then has
the opportunity to correct or to repair the reported defect.
Pursuant to the inspection provision contained in
their contract, the Rosses hired Pruitt Inspection Company
(“Pruitt”) to conduct a whole-house inspection of the property
on December 18, 1997.
Pruitt conducted its inspection and
reported no visible or obvious evidence of structural or
physical damage to the aging house.
In February 1998, Elite Pest Control Company (“Elite”)
was retained to inspect the property on the Rosses’ behalf.
Elite reported that there was visible evidence of a wood-
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destroying insect infestation (carpenter ants) and visible
evidence of a previous professional treatment for wooddestroying organisms.
The company recommended additional
treatment.
The Powells had never returned to the house after June
1997, nor did the Rosses conduct a final walk-through inspection
before their closing in March of 1998.
Despite the bad report
contained in the termite inspection of February 1998, the
transaction closed without incident on March 6, 1998.
On February 3, 1999, the Rosses filed this action
against the Powells, Pruitt, and Elite.
The claim of fraud
against the Powells was based in part on the allegation that
they had “failed to disclose their knowledge that the subject
home had termite damage and further failed to have the home
properly treated for termite infestation as represented.”
Complaint at 3.
The Rosses also alleged that at the time they
sold the property, the Powells “had experienced and were aware
that the roof on the subject house leaked and that moisturerelated problems were occurring and affecting the interior of
the subject home.”
Id.
The Rosses claimed that Elite had breached its
agreement with them and that it had acted negligently by failing
to inspect, locate, and report the presence of active termites
and termite damage.
The Rosses alleged that Pruitt, too, had
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breached its agreement with them and that it had acted
negligently by failing “to perform an appropriate and thorough
inspection of the subject home thereby locating and discovering
visible and obvious evidence of structured (sic) or physical
damage.”
Complaint at 7.
The Rosses sought to recover costs
that they had paid for the repair of the alleged defects at the
house along with consequential and punitive damages.
On September 8, 2000, by agreed order, Pruitt was
dismissed with prejudice.
On January 14, 2002, by agreed order,
Elite was dismissed with prejudice.
On October 14, 2002, based
on the voluminous record amassed in this case, including seven
bound volumes of pleadings and fourteen depositions, the Fayette
Circuit Court granted the Powells’ motion for summary judgment.
This appeal followed.
The Rosses contend that the circuit court erred by
granting summary judgment in favor of the Powells.
Summary
judgment is appropriate when it would be impossible for the nonmovant to produce evidence at trial warranting a judgment in his
favor.
Steelvest, Inc. v. Scansteel Service Center, Inc., Ky.,
807 S.W.2d 476 (1991).
The Rosses allege that the Powells committed fraud by
materially misrepresenting the state of the house’s leaky roof
and the presence of live termites along with extensive termite
damage in order to induce them to purchase the home at Overbrook
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Drive.
The elements necessary to establish fraud are set out in
United Parcel Service Company v. Rickert, Ky., 996 S.W.2d 464
(1999), where the court held as follows:
[T]he party claiming harm must establish six
elements of fraud by clear and convincing
evidence as follows: a) material
representation b) which is false c)known to
be false or made recklessly d)made with
inducement to be acted upon e)acted in
reliance thereon and f)causing injury.
(Citation omitted).
Id. at 468.
In their completed disclosure forms, the Powells
informed the Rosses that the roof had leaked in the past and
that it had been repaired.
They indicated that the roof was not
leaking as of the time of their disclosure on June 3, 1997.
(The house had been empty for more than ten months by the time
that the Rosses moved in and began discovering defects in the
house.)
The Powells also clearly informed the Rosses that
evidence of termite infestation had been found in May 1997 and
that professional treatment had been scheduled.
The circuit
court found that these disclosures alone were sufficient to
overcome the Rosses’ claims of fraud.
Moreover, the court
concluded that the Rosses could not show that false or reckless
misrepresentations had been made with respect to the alleged
termite damage since the Powells had been assured by
professionals that no termite damage existed at the time of
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inspection.
The court held that the fraud claims must fail as a
matter of law.
Having reviewed the record in this case, we agree that
there is not sufficient evidence to demonstrate clearly and
convincingly that the Powells materially misrepresented the
condition of the house on Overbrook Drive.
There is no evidence
to indicate that their disclosures were untruthful or misleading
when they were made.
Moreover, the Rosses paid for an
independent whole-house inspection and a separate specialized,
professional termite inspection prior to closing.
The Rosses
also acknowledged that they had carefully examined the premises
and that they had relied completely on their own judgment and
the judgment of their inspectors.
The inspections and the statement of the Rosses
together establish that the Rosses did not rely upon any
representations by the Powells.
Additionally, by virtue of
Elite’s inspection just weeks before the closing, the Rosses
were aware that a serious carpenter ant infestation had been
observed – a problem that heretofore had not come to light.
Before closing the sale, the Rosses were clearly on notice of
potential new problems with the house.
“[The law will not] come
to the relief of those who with their eyes open understandingly
and freely make a bad bargain.”
Mathis v. O’Brien, 137 Ky. 651,
126 S.W. 156, 158 (1910).
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Since it would be impossible for the Rosses to prove
the elements of fraud at trial, the trial court did not err by
granting summary judgment in favor of the Powells.
The judgment
of the Fayette Circuit Court is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANTS:
Phillip M. Moloney
Andrew DeSimone
Lexington, Kentucky
BRIEF AND ORAL ARGUMENT FOR
APPELLEES:
Carroll M. Redford, III
Lexington, Kentucky
ORAL ARGUMENT FOR APPELLANTS:
Phillip M. Moloney
Lexington, Kentucky
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