Court Opinion

ID: 4663824
Source: CourtListenerOpinion
Date Created: 2021-03-01 19:03:20.656542+00
Date Added: 2024-06-11T08:02:31.581825
License: Public Domain

SECOND DIVISION
                             MILLER, P. J.,
          MERCIER, J., and SENIOR APPELLATE JUDGE PHIPPS

                    NOTICE: Motions for reconsideration must be
                    physically received in our clerk’s office within ten
                    days of the date of decision to be deemed timely filed.
                               https://www.gaappeals.us/rules

                    DEADLINES ARE NO LONGER TOLLED IN THIS
                    COURT. ALL FILINGS MUST BE SUBMITTED WITHIN
                    THE TIMES SET BY OUR COURT RULES.

                                                                      March 1, 2021

In the Court of Appeals of Georgia
 A20A1902. NAPIER JR. et al. v. KEARNEY.

      MERCIER, Judge.

      William Napier, Jr., and Katherine Napier filed a lawsuit against Paul Kearney,

alleging that he falsely represented the condition of the house they purchased from

him. Specifically, they contend that Kearney failed to disclose moisture intrusion and

flooding. They sought rescission and alternatively damages for fraud, negligent

misrepresentation, and breach of contract. Kearney filed a motion for summary

judgment, which the trial court granted, and the Napiers appeal the trial court’s order.1

Finding that the Napiers waived their rescission claim and failed to show that

Kearney had knowledge of flooding in the backyard, we affirm in part. However, as

      1
       While the Napiers originally asserted additional claims regarding “settlement
movement, cracking or breakage of the structural support of the foundation,” they do
not appeal the trial court’s ruling on these claims.
there is a question of material fact as to whether Kearney concealed moisture

intrusion from the Napiers, we reverse in part.

      “On appeal, we must view the evidence, and all reasonable conclusions and

inferences drawn from it, in the light most favorable to the [Napiers] as nonmovants.”

Conway v. Romarion, 252 Ga. App. 528 (557 SE2d 54) (2001). So viewed, the

evidence shows that in July 2015, the Napiers purchased a house from Kearney. Prior

to the closing of the sale, a disclosure statement was completed by Kearney and

provided to the Napiers. In the disclosure statement, Kearney stated that based on his

knowledge and belief at the time, there had been no water intrusion into the dwelling,

nor “any flooding.”

      While the sale was pending, the Napiers retained a home inspector who

conducted an inspection. William Napier attended the inspection, during which time,

neither the inspector nor William discovered any water intrusion or flooding.

      The Napiers moved into the house in August 2015. In January 2016, they found

that the floor and subfloor in the dining room were wet and “had experienced

significant water intrusion,” and there was “significant pooling of water in the rear

                                          2
of the backyard.” On October 14, 2016, the Napiers sent a rescission letter to Kearney

and his wife, to which Kearney did not respond.

      1. The Napiers argue that the trial court erred in granting summary judgment

on their rescission claim. They claim that there was a genuine issue of material fact

as to when they learned of the problems leading to their attempted rescission. We

disagree and find that the Napiers waived rescission as a matter of law by failing to

act promptly.2

      “In general, a party alleging fraudulent inducement to enter a contract has two

options: (1) affirm the contract and sue for damages from the fraud or breach; or (2)

promptly rescind the contract and sue in tort for fraud.” Novare Group v. Sarif, 290

Ga. 186, 188 (1) (718 SE2d 304) (2011) (citation and punctuation omitted).

      In order to effect a rescission, the purchaser must act promptly and
      adhere to the intent to rescind or risk waiver of his claim: An
      announcement of the intent to rescind the contract must be made in a
      timely fashion, as soon as the facts supporting the claim for rescission
      are discovered.

      2
       The Napiers also argue that a demand letter they sent to Kearney was an
inadmissible settlement offer and could not be used as waiver evidence. However, we
need not reach that issue to determine that the Napiers waived rescission.

                                          3
Conway, supra at 530 (1) (citation and punctuation omitted). Rescission “is not

favored under the law, and courts are quick to find that the right to rescind has been

waived.” Id.

      The Napiers discovered the problems in the house in January 2016. However,

they did not attempt to rescind the contract until ten months later in a letter dated

October 14, 2016. “Waiver generally is found where the intent to rescind is not

asserted in a timely fashion[.]” Conway, supra at 530-531 (1). The Napiers argue that

they did not learn of the underlying problems until their insurance company denied

their claim in April 2016. However, William Napier averred that he observed

“significant water intrusion” in the interior of the house and “significant pooling of

water in the rear of the backyard” in January 2016. The timing of the insurance

company’s denial is immaterial as to when the “facts supporting the claim for

rescission” were discovered. See id. at 530 (1). The Napiers’ failure to announce until

10 months after the discovery of the problems amounted to waiver as a matter of law.

See Liberty v. Storage Trust Properties, 267 Ga. App. 905, 911-912 (2) (600 SE2d

841) (2004) (delay of almost nine months constituted waiver of rescission as a matter

of law); Buckley v. Turner Heritage Homes, 248 Ga. App. 793, 795 (2) (547 SE2d

373) (2001) (buyer waived her claim to rescind sales contract when she waited ten

                                          4
months to rescind following her discovery of defects in house); Orion Capital

Partners v. Westinghouse Elec. Corp., 223 Ga. App. 539, 543 (2) (b) (478 SE2d 382)

(1996) (attempt to rescind contract seven months after discovery was “too late as a

matter of law”). As such, we affirm the trial court’s grant of summary judgment

regarding the Napiers’ claim for rescission.

      2. The Napiers argue that the trial court erred by granting summary judgment

on their fraud, negligent misrepresentation, and breach of contract claims, because

Kearney made false representations in the disclosure statement as to whether he had

knowledge of moisture intrusion and flooding on the property.

      The tort of fraud has five elements: (1) a false representation or
      omission of a material fact; (2) scienter; (3) intention to induce the party
      claiming fraud to act or refrain from acting; (4) justifiable reliance; and
      (5) damages. When, as in the case at bar, the buyers allege fraudulent
      concealment, they must prove, as a factor of justifiable reliance, that
      they could not have discovered the alleged defect in the exercise of due
      diligence.

Lehman v. Keller, 297 Ga. App. 371, 372-373 (1) (677 SE2d 415) (2009) (citations

and punctuation omitted). “The only real distinction between negligent

misrepresentation and fraud is the absence of the element of knowledge of the falsity

                                           5
of the information disclosed.” Bithoney v. Fulton-DeKalb Hosp. Authority, 313 Ga.

App. 335, 343 (2) (n. 19) (721 SE2d 577) (2011) (citation and punctuation omitted).

      If a seller of real estate knows of a defect in the property of which the
      purchaser is ignorant, and which would likely influence the purchase
      decision, the seller has a duty to disclose his knowledge to the
      purchaser. Where a buyer seeks to recover from a seller who has
      passively concealed a defect, the buyer must prove that the vendor’s
      concealment of the defect was an act of fraud and deceit, including
      evidence that the defect could not have been discovered by the buyer by
      the exercise of due diligence and that the seller . . . was aware of the
      problems and did not disclose them.

Salinas v. Skelton, 249 Ga. App. 217, 221-222 (2) (547 SE2d 289 (2001) (citations

and punctuation omitted).

      (a) Claiming that Kearney misrepresented that the house had no moisture

intrusion, the Napiers point to evidence that Kearney’s placement of rugs inside the

house concealed water intrusion during the sales process. Additionally, they point to

evidence that the refrigerator was shown in one location in the listing photographs,

but had been moved to a different location before the home inspection, which

concealed evidence of water intrusion. Kearney does not dispute that there was

evidence of water intrusion under the refrigerator and the rugs, but he claims that the

                                          6
location of the refrigerator and rugs was due to “routine home design choices.”

Moreover, Kearney seems to argue that the Napiers could have moved the rugs and

refrigerator during the home inspection, and their failure to do so displayed an

absence of due diligence. However, “the question of whether a purchaser has

exercised reasonable diligence in inspecting real property is usually a jury question.”

Akins v. Couch, 271 Ga. 276, 278 (3) (b) (518 SE2d 674) (1999) (even when buyers

failed to retain a home inspector, summary judgment was improper because a jury

question existed as to whether the buyers exercised due diligence).

      Here, there is evidence that Kearney moved a refrigerator and placed rugs in

an attempt to conceal water intrusion. We cannot say that the Napiers failed to

exercise due diligence as a matter of law by failing to move the furnishings to inspect

the floors beneath. Therefore, a jury question exists as to whether Kearney actively

concealed the water intrusion and whether the Napiers exercised due diligence in

their inspection. See Conway, supra at 533 (3) (when damage may have been

concealed by the seller’s furnishings, there was a jury issue as to whether the buyers

had exercised due diligence in inspecting the house and whether the damage was

actively concealed by the seller). As such, the trial court erred in granting summary

judgment on the Napiers’ claims related to moisture intrusion.

                                          7
      (b) The Napiers also contend that Kearney falsely represented that the property

had no flooding. They argue that their backyard has flooded after heavy rains, and

that Kearney knew of the flooding but said otherwise on the disclosure statement, and

even with the exercise of due diligence they could not have discovered the defect.

      However, the Napiers have failed to show evidence that Kearney knew of the

flooding. To support their claim, the Napiers cite to their own discovery responses,

where they state: “Brenda Kearney . . . testified that a drain was installed to deal with

flooding on the side of the Property.” However, they do not cite to her deposition,

which was not part of the trial court record. Instead, the parties argue in their

appellate briefs about which party was responsible for filing the deposition. “[T]he

burden of timely filing depositions and other discovery material with the trial court

lies with the party which intends to rely upon it.” Parker v. Silviano, 284 Ga. App.

278, 281 (2) (643 SE2d 819) (2007) (citation and punctuation omitted). Since Brenda

Kearney’s deposition was not filed in the trial court, we cannot consider her

testimony on appeal. See id.; CNL Ins. America v. Moreland, 226 Ga. App. 57, 57

(485 SE2d 515) (1997) (“It is well settled that the burden on appeal is on the

appellant to show error by the record. When a portion of the evidence bearing upon

                                           8
the issues before the trial court was not filed in the trial court and not made a part of

the record on appeal, this Court may not consider such material.”)

      The Napiers also cite to the fact that a shed was located on a deck and not “in

the backyard where the flooding occurs which suggests a knowledge of the condition

and an attempt to avoid damage from the condition.” This is mere speculation and “a

motion for summary judgment cannot be denied based on

speculation and conjecture.”3 Willingham Loan & Realty v. Washington, 311 Ga.

App. 535, 536 (716 SE2d 585) (2011) (citation and punctuation omitted).

      Finally, the Napiers point to the affidavit of their engineer, who averred that

“drainage problems . . . [was a] feature[] that would be noticeable and observed by

[Kearney] for several years.” However, the engineer did not opine that the “drainage

problems” caused “flooding,” or that flooding would have been observable during

periods of heavy rain. The Napiers failed to point to evidence that the property

actually flooded while Kearney owned it or that he had knowledge of any flooding,

as such, we affirm the trial court’s ruling on the Napiers’ flooding claims. See

      3
        The Napiers’ speculation regarding the shed is noticeably different from the
evidence regarding the rugs and refrigerator placement in Division 2 (a). The Napiers
are not arguing that the shed was located on the deck to conceal flooding underneath
the shed. Instead, they claim that the shed’s placement on the deck constituted proof
that Kearney knew of flooding in a different area of the backyard.

                                           9
generally Resnick v. Meybohm Realty, 269 Ga. App. 486, 489-490 (1) (b) (604 SE2d

536) (2004).

      3. The Napiers’ claims for attorneys fees and punitive damages are derivative

of their substantive claims. “Fraud is an intentional tort for which punitive damages

may be awarded. Furthermore, where a plaintiff has set forth a valid claim for an

intentional tort, such as fraud, he may be entitled to recover the expenses of litigation,

including attorney fees.” Stephen A. Wheat Trust v. Sparks, 325 Ga. App. 673, 682

(7) (754 SE2d 640) (2014) (citations and punctuation omitted). As the trial court

erred in granting summary judgment to Kearney on the Napiers’ claims regarding

moisture intrusion, the court likewise erred in granting summary judgment to Kearney

on their request for attorney fees, costs, and punitive damages as derivative of the

Napiers’ moisture intrusion claims. See id. However, we affirm the trial court’s grant

of summary judgment to Kearney on the Napiers’ attorneys fees and punitive damage

claims that were derivative of their flooding claims.

      Judgment affirmed in part and reversed in part. Miller, P. J., and Senior

Appellate Judge Herbert E. Phipps concur.

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