MARK ROSS AND CHRISTINE ROSS V. RALPH D. POWELL AND DEBORAH POWELL
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CORRECTED : JANUARY 31, 2007
RENDERED : NOVEMBER 22, 2006
TO BE PUBLISHED
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MARK ROSS AND
CHRISTINE ROSS
APPELLANTS
ON REVIEW FROM THE COURT OF APPEALS
2002-CA-2313-MR
FAYETTE CIRCUIT COURT NO. 99-CI-0401
RALPH D. POWELL AND
DEBORAH POWELL
APPELANTS
OPINION OF THE COURT BY JUSTICE WINTERSHEIMER
AFFIRMING
This appeal is from an opinion of the Court of Appeals affirming the summary
judgment granted in favor of the sellers, Ralph D. and Deborah Powell. The circuit
judge found that adequate and complete disclosures were made by the Powells.
Further, Mark and Christine Ross relied on their own professional inspections as the
basis of the decision to purchase the property .
The questions presented are whether the Court of Appeals was clearly
erroneous in affirming the summary judgment based on the evidence; whether the
record is sufficient for the Rosses to survive summary judgment and prevail on their
misrepresentation claim and whether the decision of the Court of Appeals is incorrect
in view of a recent decision of this Court.
Mark and Christine Ross moved to Lexington from Iowa after the husband, a
neurologist, accepted a position at the University of Kentucky Medical Center . They
had lived in Iowa for 15 years and in Chicago before that and they claimed to be
unfamiliar with termites . The sellers, Drs . Ralph and Deborah Powell are pathologists
and both were formerly employed at the University of Kentucky Medical Center . They
were selling the residence in question because Deborah Powell had accepted a job as
Dean of the University of Kansas Medical College . Ralph Powell accepted a position at
the University of Kansas Medical College as a professor of pathology.
The University of Kentucky arranged for a realtor to show Dr. Ross properties
around Lexington, one of which was the residence owned by the Powells . Ultimately
the Rosses made a written offer to purchase transmitted through their agent to the
agent of the Powells. The Powells counter offered through their agent with a purchase
price of $300,000 which was accepted by the Rosses. Because of the age of the house
involved, 20 years, the real estate agents both suggested that the residence be
professionally inspected for termites before listing. The Powells agreed.
Dr. Powell arranged for a representative of T .J . Neary Insect Technologies to
inspect the house . The inspection indicated evidence of termites but Dr. Powell was
assured that there was no evidence of damage. Neary recommended that the
residence be treated and gave Dr. Powell the names of two pest control companies.
Dr. Powell contacted B & E Pest Control . Shortly thereafter the Powells listed their
home for sale and signed a seller disclosure of property condition form pursuant to KRS
324.360. The Powells disclosed that the roof had leaked, had substantial damage and
had been repaired . They also revealed that the basement had leaked and had also
been repaired . On a form provided by the Lexington-Bluegrass Association of Realtors,
Dr. Powell also indicated that there had been evidence of termite infestation in May
1997 but no apparent damage had been found . It was also indicated that the residence
was scheduled to be inspected by B & E Pest Control on June 3, 1997. That firm
confirmed that termite activity in the debris under the house but reported only minor
visible damage . The home was treated for termites on June 27, 1997 . The Powell
family moved to Kansas during the month of June .
Upon learning that the residence had been the subject of a termite infestation,
the Powells advised their agent that they were no longer interested in the property .
However the real estate agents continued in discussions about the possible sale and
the Rosses were assured that the termite infestation was a minor problem and that it
had been professionally treated . Ultimately, the Powells rejected the offer to purchase
and made a counteroffer which the Rosses accepted . Pursuant to the inspection
provision of the real estate contract, the Rosses hired Pruitt Inspection Company for a
whole house inspection in December of 1997. Pruitt reported no visible evidence of
structural or physical damage to the house. In February 1998, Elite Pest Control
Company was employed by the Rosses to inspect the property . Elite reported that
there was visible evidence of wood destroying insect infestations by carpenter ants and
visible evidence of previous professional treatment for wood destroying organisms . The
company recommended additional treatment.
The Powells had never returned to the home after June 1997, and the Rosses
conducted a final walk-through inspection before the closing in March of 1998 .
Notwithstanding the report regarding the termite inspection in February 1998, the
transaction was closed on March 6, 1998 .
On February 3, 1999, the Rosses filed this action against the Powells, Pruitt and
Elite claiming fraud against the Powells because 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 . All claims against Pruitt
and Elite were dismissed with prejudice by an agreed order. The circuit judge granted
the motion by the Powells for summary judgment. The Rosses appealed to the Court of
Appeals which affirmed the decision of the circuit judge holding that there was
insufficient evidence to clearly and convincingly demonstrate that the Powells materially
misrepresented the condition of the property and that the Rosses relied on professional
inspections which they caused to be made on the property rather than the
representations by the Powells. This Court accepted discretionary review.
I . Summary Judgment
The Rosses argue that the circuit judge erred by granting summary judgment in
favor of the Powells . We do not agree.
Summary judgment is authorized by CR 56.01 et seq. and is intended to
expedite the disposition of cases. If the grounds provided by the rule are established, it
is the duty of the trial judge to render appropriate judgment. The basis for summary
judgments involve: 1) there is no genuine issue as to any material fact; and 2) that the
moving party is entitled to a judgment as a matter of law. As originally noted in
Paintsville Hospital Co . v. Rose, 683 S.W.2d 255 (Ky. 1985), and later in Steelvest, Inc .
v. Scansteel Service Center. Inc. , 807 S.W .2d 476 (Ky. 1991), as well as in James
Graham Brown Foundation, Inc . v. St . Paul Fire & Marine Ins. Co., 814 S.W .2d 273 (Ky.
1991), the summary judgment procedure is not a substitute for trial. See also Ci
of
Florence v. Chipman , 38 S.W .3d 387 (Ky. 2001), for an extended discussion of the
application of the summary judgment rule .
Suffice it to say that the circuit judge must examine the evidentiary matter, not to
decide any issue of fact, but to discover if a real or genuine issue exists. All doubts
must be resolved in favor of the party opposing the motion The movant should not
succeed unless a right to judgment is shown with such clarity that there is no room left
for controversy and it is established that the adverse party cannot prevail under any
circumstances .
Steelvest, supra, originally stated that the test would include the word
"impossible" for the non-moving party to prevail at trial. This Court later clarified that the
word "impossible" is used in the practical sense and not in the absolute sense . Perkins
v. Hausladen , 828 S.W .2d 652 (Ky. 1992). The party opposing a summary judgment
can defeat it with some affirmative evidence to show the existence of a genuine issue of
material fact. As noted in Chipman , supra, this Court stated in Hoke v. Cullinan , 914
S.W.2d 335 (Ky. 1995), that "contrary to the view of some, our decision in Steelvest . . .
does not preclude summary judgment." If the litigants are given an opportunity to
present evidence which reveals the existence of disputed material facts and upon the
trial court's determination that there are no such disputed facts, summary judgment is
appropriate . The differences between the federal and state approach to summary
judgment are further outlined in Chipman , SUM.
Here, the Rosses claim that the Powells committed fraud by materially
misrepresenting the condition of the leaky roof of the residence and the presence of live
termites along with extensive termite damage in order to induce them to purchase the
residence. As correctly noted by the Court of Appeals, the evidence necessary to
establish fraud is set out in United Parcel Service Co. v. Rickert, 996 S.W.2d 464 (Ky.
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 .)
Our review of the record indicates that the Powells informed the Rosses in the
completed disclosure form that the leaking roof had been repaired . They indicated that
the roof was not leaking at the time of their disclosure on June 3, 1997 . The Powells
also advised the Rosses that the evidence of termite infestation had been found in May
1997 and that remedial treatment had been scheduled . The circuit judge determined
that these disclosures were sufficient to overcome the claim of fraud by the Rosses.
The circuit judge also concluded that the Rosses could not show that false or reckless
misrepresentation had been made with respect to the alleged termite damage because
the Powells had been assured by professionals that no termite damage existed at the
time of the inspection . Thus the circuit judge held that the fraud claim failed as a matter
of law.
Upon a careful review of this extensive record we must agree with the Court of
Appeals and the circuit judge that there is insufficient evidence to clearly demonstrate in
a convincing fashion that the Powells materially misrepresented the condition of the
residence. There was no evidence to show that the disclosures were untruthful or
misleading when they were made . In addition, the Rosses paid for an independent
whole house inspection and a separate specialized professional termite inspection prior
to the closing . The Rosses also admit that they had carefully examined the premises
and that they had relied completely on their own judgment and the judgment of their
inspectors .
Consequently, the statements by the Rosses and the inspections establish that
they did not rely on representations by the Powells . The Rosses were aware that a
serious carpenter ant infestation had been observed as a result of the Elite inspection
shortly before the closing . Thus, we must conclude that the Rosses were on notice of a
potential new problem with the house before closing the deal .
Accordingly, we must conclude that it would be practically impossible by any
legal definition of those terms for the Rosses to prove the elements of fraud or
misrepresentation at a trial . The Court of Appeals and the circuit judge did not err in
regard to the summary judgment in favor of the Powells .
II . Yeaoe v. McLellan
Yeager v. McLellan, 177 S.W.3d 807 (Ky. 2005), addresses the adequacy of
disclosure where the Yeagers had disclosed occasional basement leakage . As in
Yea er, the disclosure by the seller was sufficient to require further inquiry from
professional inspection companies . In Yeager, the inspection professional noted the
cracks in the basement wall and recommended further review, but the buyer requested
no further repairs .
In this case, the buyers, the Rosses, responded to the disclosure by retaining
Pruitt Properties Inspection, Inc., which found no visible evidence of structural damage
in December of 1997, and the Elite Pest Control Company, which in February of 1998,
reported visible evidence of both carpenter ants and recommended a treatment
program. Ultimately, the treatment cost $200 . In addition, prior to the relocation by the
Powells to Kansas in June of 1997, they had retained B & E Pest Control to treat the
house for the termite problem. The Rosses, who lived in Iowa, proceeded to close the
transaction in March 1998, soon after which they discovered the extent of the real
damage. The repair cost exceeded $103,000. The Yeager case is significantly
different from this case. In Yeager the buyer voluntarily dismissed her fraud claim at
the trial level. The matter was then appealed and the motion for summary judgment
was for a breach of contract by the buyer. The claim here is one of fraud and/or
misrepresentation.
The authorities cited by the Rosses, Bowling v. Ford , 281 S.W. 178 (Ky. 1926)
and Winn v. Winn, 689 S .W.2d 608 (Ky.App. 1985), are unconvincing and
distinguishable . Neither is applicable to the situation presented by this case .
An examination of the evidence in the record indicates that it is insufficient for
the Rosses to be able to survive summary judgment and prevail on their
misrepresentation allegation . The cases presented by the Rosses relate to a situation
where a party owes a fiduciary duty or possesses some superior knowledge, neither of
which are factual issues in this case.
The Powells made full disclosure on the appropriate forms when they were
completed . The disclosure forms were not required to be filled out by the seller and any
reliance on them is specifically disclaimed within the contractual documents which are
part of this transaction .
In the final analysis, this case comes down to the sufficiency of the evidence to
support a possible jury decision as to alleged fraud on the part of the Powells . The
decision in Yeager regarding the fraud exception to the merger doctrine has no impact
on this decision . The fact that the results are different between buyer and seller in this
case, compared to the Yeageer case, is of no consequence because of the differing
factual situations.
The decision of the Court of Appeals which affirmed the granting of the summary
judgment by the circuit court is affirmed .
All concur.
COUNSEL FOR APPELLANTS:
Andrew Dail Desimone
Phillip M. Moloney
Sturgill, Turner, Barker & Moloney, PLLC
155 East Main Street
Lexington, KY 40507
COUNSEL FOR APPELANTS :
Carroll M. Redford III
Miller, Griffin & Marks,,PSC
271 West Short Street, Suite 600
Lexington, KY 40507-1292
Aup~tct Court of Amfurkg
2004-SC-0008-DG
MARK ROSS AND
CHRISTINE ROSS
V.
APPELLANTS
ON REVIEW FROM THE COURT OF APPEALS
2002-CA-2313-MR
FAYETTE CIRCUIT COURT NO. 99-CI-0401
RALPH D. POWELL AND
DEBORAH POWELL
APPELANTS
ORDER OF CORRECTION
The Opinion of the Court by Justice Wintersheimer rendered November
22, 2006, is corrected on its face by substitution of the attached pages 1 and 3 in
lieu of pages 1 and 3 of the original opinion . Said correction does not affect the
holding of the original opinion rendered by the Court .
ENTERED: January 31, 2007
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