Opinion ID: 1090792
Heading Depth: 2
Heading Rank: 1

Heading: Fraudulent Misrepresentation as to Rogers

Text: To survive a motion for a summary judgment on a claim for fraudulent misrepresentation, the Moores needed to establish the existence of a genuine issue of material fact as to four elements: `(1) a false representation, (2) concerning a material existing fact, (3) [reasonably] relied upon by the plaintiff (4) who was damaged as a proximate result.' Fisher v. Comer Plantation, Inc., 772 So.2d 455, 463 (Ala. 2000) (quoting Baker v. Bennett, 603 So.2d 928, 935 (Ala.1992)). See also Foremost Ins. Co. v. Parham, 693 So.2d 409, 422 (Ala.1997). Although Alabama has abrogated the rule of caveat emptor in the sale of new real estate, that rule still applies in the sale of used real estate. Blaylock v. Cary, 709 So.2d 1128, 1130 (Ala.1997); Ray v. Montgomery, 399 So.2d 230, 233 (Ala.1980). Thus, in the sale of used real estate, a seller or the seller's agent generally has no duty to disclose to the purchaser any defects in the property. Blaylock, 709 So.2d at 1130; Cato v. Lowder Realty Co., 630 So.2d 378, 382 (Ala.1993). However, this Court has recognized exceptions to this rule: Under § 6-5-102, Ala.Code, 1975, the seller has a duty to disclose defects to a buyer if a fiduciary relationship exists between the parties. In addition, if the buyer specifically inquires about a material condition concerning the property, the seller has an obligation to disclose known defects. Commercial Credit Corp. v. Lisenby, 579 So.2d 1291, 1294 (Ala.1991). Moreover, if the agent (whether of the buyer or of the seller) [or the seller] has knowledge of a material defect or condition that affects health or safety and the defect is not known to or readily observable by the buyer, the agent [or seller] is under a duty to disclose the defect and is liable for damages caused by nondisclosure. Fennell Realty Co. v. Martin, 529 So.2d 1003, 1005 (Ala.1988). See also Blaylock, 709 So.2d at 1131. The Moores argue that Rogers had a duty to disclose defects in the property because, they say, they specifically inquired about water problems in the house, and that Rogers breached this duty by misrepresenting to them that the house had no water problems. The Moores also argue that Rogers misrepresented to them that all relevant repairs that were required according to the previous inspections had been made. They do not argue that either the Lundys or Rogers had knowledge of a material defect or condition that affects health or safety and the defect is not known to or readily observable by the buyer. Fennell Realty Co., 529 So.2d at 1005. They also do not argue that any of the defendants owed them a fiduciary duty. Lisenby, 579 So.2d at 1294. Where a purchaser's direct inquiry would otherwise impose a duty of truthful disclosure, this Court has held that a purchaser's fraud claim is precluded by language in a sales contract stating that the purchase is as is. Leatherwood, Inc. v. Baker, 619 So.2d 1273, 1274 (Ala.1992); Haygood v. Burl Pounders Realty, Inc., 571 So.2d 1086, 1089 (Ala.1990); Massey v. Weeks Realty Co., 511 So.2d 171, 173 (Ala. 1987). In Massey, after the purchaser noted damage to some exterior columns, the real estate agent stated that the damage was caused by dry rot and that the damage was inexpensively remedied. The purchaser then signed an as is contract for the purchase of the house without having the house inspected for termites. The contract further provided that the realtor did not warrant or guarantee the condition of the property. After he moved into the house, the purchaser found that the house was infested with termites. This Court held that the purchaser did not have the right to rely on the oral representations of [the agent] made prior to the execution by [the purchaser] of the form containing the `as is' provision and the purchase agreement that provided that the realtor did not warrant or guarantee the condition of the property. Massey, 511 So.2d at 173. In Haygood, the buyers asked the sellers, themselves real estate agents, if the basement had ever leaked, and the sellers replied, [N]o, it is well constructed. There was evidence, however, indicating that the sellers had had repair work performed in the basement because of cracks in the foundation walls that had permitted water to penetrate the basement. The buyers signed an as is contract for the purchase of the house. The sales contract also contained a clause that stated: `Neither the Seller nor the Broker have made or make any other representations about the condition of the property and the Purchaser agrees that he has not relied on any other representation....' 571 So.2d at 1089. After holding that the Haygoods had not alleged that they had relied on the misrepresentations, this Court concluded that even if they had made such an allegation, the plaintiffs' signing of the two documents that indicated no reliance would have made the summary judgment ... proper. 571 So.2d at 1089. In Leatherwood, the purchasers asked a real estate agent to inquire about the foundation of a house they were interested in purchasing. The real estate agent contacted the agent who had previously listed the house, and that agent informed her that the sellers knew of only one crack around the air-conditioning system. The Bakers then signed an as is sales contract for the property. After the Bakers moved into the house, they discovered severe problems; the house began to crack in several places. The realty company had documents in its possession that indicated that the house had structural problems. This Court held that the Bakers' signing of an as is contract prohibited them from pursuing both their negligence and fraud claims against the realty company. Leatherwood, 619 So.2d at 1274. Chief Justice Hornsby dissented in Leatherwood. He reviewed the law of other states and concluded that [v]irtually every other state that has addressed the effect of an `as is' provision in a contract for the purchase of used residential real estate has held that the `as is' provision does not insulate a vendor from liability for fraud. Leatherwood, 619 So.2d at 1276 (Hornsby, C.J., dissenting). After citing numerous cases from other jurisdictions holding that an as is clause does not preclude a fraud claim, the dissent stated: I would abandon the position this Court adopted in Massey, because it distorts the law of this state and permits a vendor to contract away liability for intentional wrongdoing. Instead, I would adopt the position that an `as is' purchase contract does not shield a vendor from liability for fraudulent inducement. 619 So.2d at 1276. The Moores primarily rely upon Boswell v. Coker, 519 So.2d 493 (Ala.1987), decided before Leatherwood, for the proposition that a fraud claim is not precluded by as is language and contract language stating that no representations were made as to the condition of the property. In Boswell, the purchaser, after signing the sales contract, complained to the seller's real estate agent about the roof. The seller, a bank, instructed the real estate agent to have the roof inspected. After an inspection, the roofer informed the real estate agent that comparing the cost of repairing the roof to what it would cost to reroof the house, it would be better to reroof the house entirely. 519 So.2d at 494. The seller did not want to put a new roof on the house, but instead instructed the real estate agent to have minor repairs made. The buyer was not told that the roofer had stated that, considering the comparative costs, it would be better to reroof the house. The buyer also claimed that the real estate agent stated that the roof was in excellent condition. After moving into the house, the buyer discovered that the roof leaked. This Courtwithout citing Massey, which had been decided six months earlierreviewed cases holding that a real estate agent has a duty to speak truthfully when responding to direct inquiries. Without discussing the import on its analysis of the as is language, this Court reversed the summary judgment in favor of the real estate agent, holding that jury questions existed as to whether the real estate agent's failure to respond completely to the purchaser's questions was a breach of her duty to disclose and whether the purchaser's reliance on the real estate agent's statements was reasonable. Boswell, 519 So.2d at 496. Neither the majority opinion nor the dissent in Leatherwood cites Boswell; neither does the opinion in Haygood. We are unable to reconcile Boswell with Leatherwood, Haygood, and Massey. Even if we were sympathetic to Chief Justice Hornsby's argument that an as is statement in a contract should not preclude a fraud claim, at least where such a claim is predicated on an affirmative misrepresentation by the seller or seller's agent, the Moores do not ask us to overrule Haygood, Leatherwood, or Massey. In fact, the Moores do not cite any of these three cases, and no party cites Massey. Given the state of the briefs in this appeal, including the fact that the Lundys are acting pro se and that they have not filed a brief with this Court, and the fact that the Moores are a former real estate agent and an insurance adjuster with experience in evaluating water damage to houses, we decline on this occasion to revisit the rule from Haygood and Leatherwood, cases decided after Boswell, holding that as is language in a contract for the purchase of used residential real estate precludes a fraud claim. Stare decisis commands, at a minimum, a degree of respect from this Court that makes it disinclined to overrule controlling precedent when it is not invited to do so. Furthermore, Rogers was also entitled to a summary judgment because the Moores presented no evidence indicating that Rogers knew that the house had any water problems. In fact, it is undisputed that the Lundys told Rogers that the house was in good condition and that Rogers was not aware of any water-related problems with the house. As previously noted, the general rule is that a real estate agent has no duty to disclose defects in used residential real estate. Blaylock, 709 So.2d at 1130; Cato, 630 So.2d at 382. However, if the buyer specifically inquires about a material condition concerning the property, the seller has an obligation to disclose known defects. Lisenby, 579 So.2d at 1294 (emphasis added). Because there is no evidence indicating that Rogers knew about the water problems, Rogers had no duty to disclose such defects, and she was entitled to a summary judgment. Similarly, a real estate agent cannot be held liable for either fraud or negligence where the agent serves as a conduit of information between the seller and the buyer. Fisher, 772 So.2d at 463; Speigner v. Howard, 502 So.2d 367 (Ala.1987). In Fisher, this Court held that a real estate agent who told a buyer that the roof of a house was in good condition was not liable for fraud `for merely conveying the statements of [the seller] to the agent of the [plaintiffs]' without evidence of bad faith. 772 So.2d at 464 (quoting Speigner, 502 So.2d at 371). The uncontroverted evidence is that the Lundys told Rogers that the house had no water problems, and the Moores presented no evidence of bad faith on Rogers's part. There is no evidence indicating that any of the repairs called for by the two inspection reports were not made (except the addition of the fire wall), much less that Rogers knew that any of the repairs noted on the two inspection reports had not been made. The Moores have not produced either the missing inspection report or the list of requested repairs based on that inspection report. The Moores even state in their brief that the undisputed evidence in this matter reveals that Rogers may not have been privy to [the] inspection. The Moores' argument appears to be that the missing inspection report might have indicated water problems with the house, and, if so, Rogers's statement that all repairs had been made gave a false impression. However, this argument is purely speculative, because the Moores were unable to produce the missing inspection report. We affirm the trial court's summary judgment in favor of Rogers on all the fraudulent-suppression claims.