Court Opinion

ID: 4696737
Source: CourtListenerOpinion
Date Created: 2021-06-18 00:00:33.700146+00
Date Added: 2024-06-11T08:05:42.154374
License: Public Domain

Case: 20-30700     Document: 00515904275         Page: 1     Date Filed: 06/17/2021

              United States Court of Appeals
                   for the Fifth Circuit
                                                                     United States Court of Appeals
                                                                              Fifth Circuit

                                                                            FILED
                                                                        June 17, 2021
                                  No. 20-30700                         Lyle W. Cayce
                                Summary Calendar                            Clerk

   Todd Novak; Kate Novak,

                                                           Plaintiffs—Appellants,

                                       versus

   Jenny Tilbury; Michael Tilbury,

                                                         Defendants—Appellees.

                  Appeal from the United States District Court
                     for the Eastern District of Louisiana
                           USDC No. 2:16-CV-6835

   Before Davis, Stewart, and Dennis, Circuit Judges.
   Per Curiam:*
          This case involves a redhibition claim related to the sale of a
   condominium. It returns to us after we remanded the case for the district
   court to determine whether there were, in fact, redhibitory defects on the

          *
            Pursuant to 5th Circuit Rule 47.5, the court has determined that this
   opinion should not be published and is not precedent except under the limited
   circumstances set forth in 5th Circuit Rule 47.5.4.
Case: 20-30700       Document: 00515904275             Page: 2      Date Filed: 06/17/2021

                                        No. 20-30700

   property. Finding no redhibitory defects, the district court granted summary
   judgment in favor of Defendants. We AFFIRM.
                                     I. Background 1
           The Novaks purchased a one-bedroom condominium in New Orleans
   from the Tilburys, through the Tilburys’ listing agent in March 2015. The
   Novaks, schoolteachers living in California, planned to spend their summers
   in New Orleans and rent out the condominium the other nine months of the
   year. The condominium was one of five in the St. Maxent-Wimberly House
   Condominiums complex (“St. Maxent”). When asked before the sale if there
   were any defects in the property, the Tilburys marked “no” on the Property
   Disclosure Form.
           The Novaks’ plans to lease their condominium never came to fruition.
   Soon after completing the sale, the Novaks learned that in 2006, St. Maxent’s
   Homeowners’ Association (HOA) had changed the minimum lease length
   from six months to one year—a change the Novaks alleged highlighted
   rampant managerial dysfunction within the condominium association. The
   Novaks also claimed to have discovered redhibitory (latent) defects in the
   condominium, citing to a 2011 engineering report and a report the Novaks
   commissioned a year after their purchase. They subsequently filed suit
   against their real estate agent, St. Maxent, St. Maxent’s board members in
   their individual capacity, the Tilburys, the Tilburys’ real estate agent, and
   the insurance companies. Their claims against all defendants except the
   Tilburys were dismissed after settlement or summary judgment.
           The remaining claims against the Tilburys were initially dismissed on
   summary judgment and were the subject of the Novaks’ prior appeal. The

           1
            Much of the background facts of this case are taken verbatim from the court’s
   previous opinion in this matter. See Novak v. Tilbury, 815 F. App’x 755 (5th Cir. 2020).

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   Novaks argued then that the Tilburys made negligent and intentional
   misrepresentations by failing to disclose St. Maxent’s alleged “managerial
   disarray” and by obscuring the condominium’s redhibitory defects. They
   also brought a claim of detrimental reliance. 2 The misrepresentation and
   detrimental reliance claims were based on the Tilburys’ alleged failure to
   disclose redhibitory defects on the property by selecting “no” on a Property
   Disclosure Form regarding knowledge of defects on the property. The
   district court found that the Tilburys had no personal knowledge of the
   condominium’s alleged mismanagement, nor did they have knowledge of the
   redhibitory defects.
           We affirmed the district court’s grant of summary judgment in part
   on the Novaks’ claims of negligent and intentional misrepresentation of
   alleged managerial disarray. 3 We vacated and remanded the district court’s
   judgment on the misrepresentation and detrimental reliance claims on the
   narrow ground that the Louisiana Supreme Court in Valobra v. Nelson4
   precluded defendants who check “no” on property disclosure forms 5 from
   later claiming a genuine lack of knowledge to avoid liability for intentional
   misrepresentation. 6 We specifically remanded the case for the parties to

           2
            The Novaks also alleged the Tilburys violated Rule 10b-5 of the Securities and
   Exchange Commission in selling them the condominium. The district court granted
   summary judgment for the Tilburys on this claim, and this claim was not the subject of the
   prior appeal nor is it the subject of the present appeal.
           3
               Novak, 815 F. App’x at 759.
           4
               136 So.3d 793 (La. 2014) (per curiam).
           5
             See LA. STAT. ANN. § 9:3198(E) (“A seller shall not be liable for any error,
   inaccuracy, or omission of any information required to be delivered to the purchaser in a
   property disclosure document” if the error “was not a willful misrepresentation according
   to the best of the seller’s information, knowledge, and belief.”).
           6
               Novak, 815 F. App’x at 759.

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   litigate whether there were, in fact, any redhibitory defects, and if so whether
   the Novaks demonstrated justifiable reliance and changed their position to
   their detriment as a result. 7
          On remand the district court found no genuine issue of material fact
   that the alleged defects in the property were not hidden, but rather open,
   obvious, and discoverable upon inspection, and that the defects did not exist
   at the time of sale. The district court also found that LA. STAT ANN § 9:3198
   precluded negligent misrepresentation claims and detrimental reliance under
   the facts of this case.
                                         II. Discussion
          We review a grant of summary judgment de novo. 8 Summary
   judgment is appropriate when “the movant shows that there is no genuine
   dispute as to any material fact and the movant is entitled to judgment as a
   matter of law.” 9
          The Novaks’ misrepresentation and detrimental reliance claims are
   based on the Tilburys’ failure to disclose redhibitory defects. Louisiana law
   provides, “The seller warrants the buyer against redhibitory defects, or vices,
   in the thing sold.” 10 “A defect is redhibitory when it renders the thing
   useless, or its use so inconvenient that it must be presumed that a buyer
   would not have bought the thing had he known of the defect,” or when it
   “diminishes its usefulness or its value so that it must be presumed that a

          7
              Id.
          8
              In re Louisiana Crawfish Producers, 852 F.3d 456, 462 (5th Cir. 2017).
          9
              FED. R. CIV. P. 56(a).
          10
               LA. CIV. CODE ANN. art. 2520.

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   buyer would still have bought it but for a lesser price.” 11 A defect is not
   redhibitory when it is “known to the buyer at the time of sale” or when it
   “should have been discovered by a reasonably prudent buyer.” 12
   Additionally, “[t]he warranty against redhibitory defects covers only defects
   that exist at the time of delivery.” 13 In other words, redhibition requires (1) a
   defect (2) that exists at the time of sale (3) that renders the thing useless or
   so inconvenient that the buyer would have either not bought it or paid much
   less for the thing, and (4) a defect of which the buyer was unaware (hidden). 14
           In evaluating whether there were redhibitory defects, the district court
   examined four inspection reports relied upon by the Novaks. First, the
   district court considered the Henry & Hatchett inspection report from
   February 2015. This inspection was done for the Novaks just prior to the sale.
   The district court correctly found that this report identifies only obvious
   defects that were discovered or should have been known to the Novaks right
   before the sale. 15
           In addition, the district court found that two reports, the Gurtler and
   Kotter reports, were based on inspections that took place at least one year
   after the sale of the property, and thus any defects that existed at the time of
   this inspection were not shown to have existed at the time of sale. We agree.

           11
                Id.
           12
                LA. CIV. CODE ANN. art. 2521.
           13
                LA. CIV. CODE ANN. art. 2530.
           14
                See Stone Energy Corp. v. Nippon Steel, 475 F. Supp. 3d 563, 571 (W.D. La. 2020).
           15
             See LA. CIV. CODE ANN. art. 2521. The Henry & Hatchett report identified a
   junction box in the kitchen with no cover, a faulty GFCI socket, a missing vent cover in the
   bedroom, and a door that did not close properly.

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           The Gurtler inspection occurred on March 30, 2016, and the Kotter
   inspection occurred in the summer of 2017. The findings in these reports
   occurred more than one year after the March 2015 sale and are well outside
   the presumption provided by Louisiana law that defects appearing three days
   post-delivery existed at the time of delivery. 16 Neither the Gurtler nor the
   Kotter inspection reports indicate that the issues found on the property
   existed at the time of sale in 2015. In addition, the Novaks have not argued
   that the defects in the property are the types of defects for which a court
   could infer that they existed at the time of delivery. 17
           Finally, the district court examined a third inspection report by H&H
   Engineering Inc. dated May 2011, four years before the sale. This report
   outlined three visible issues including (1) the fire escape, (2) water
   penetration in the lower floors, and (3) wood rot on the second-floor balcony.
   The district court concluded that the uncontradicted evidence showed that
   these issues were either fixed before the sale or the report did not conclude
   that certain potential issues such as a shifting foundation did, in fact, exist.
           The H&H report was made at the request of the St. Maxent
   Condominium Association. Michael Skinner, a member of the St. Maxent
   Board, testified that the three issues outlined in the H&H report were fixed
   in 2013. Moreover, the H&H report did not find that the building was shifting
   or had a foundation problem; rather, it recommended another inspection to
   determine if the building was shifting at all. Finally, the H&H report was an

           16
             LA. CIV. CODE ANN. art. 2530 (“The defect shall be presumed to have existed at
   the time of delivery if it appears within three days from that time.”).
           17
             Id. at rev. cmt. c. See also Rey v. Cuccia, 298 So.2d 840, 843 (La. 1974) (statutorily
   overruled on other grounds); Guillot v. Doughty, 142 So. 3d 1034, 1043 (La. Ct. App. 2014).

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   investigation of “several visible problem areas,” thus indicating that any
   issues related to the H&H report were not hidden.
                                  III. Conclusion
          Based on the foregoing, the district court did not err in finding no
   genuine issues of material fact regarding the existence of redhibitory defects.
   Without    redhibitory   defects,   there   is    no   claim   for   intentional
   misrepresentation, negligent misrepresentation, or detrimental reliance
   based on the Tilburys’ disclosure of no defects on the Property Disclosure
   Form. For these reasons and those advanced in the district court’s careful
   order and reasons of October 5, 2020, the judgment of the district court is
   AFFIRMED.

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