Court Opinion

ID: 9741599
Source: CourtListenerOpinion
Date Created: 2023-08-26 20:58:47.972844+00
Date Added: 2024-06-11T07:24:24.915853
License: Public Domain

VAIDIK, Judge,
dissenting.
1 respectfully dissent. However, I wholeheartedly join with my colleagues in asking that our Supreme Court examine the common law rule that a residential real estate buyer may not rely upon a seller's assertions regarding the property where the buyer has the reasonable opportunity to inspect the property in light of Indiana's disclosure form statute.
The majority is correct that Indiana common law long placed the burden upon buyers of real property to inspect the property and bear the risk when they fail to do so:5 "It is well settled that 'a purchaser of property has no right to rely upon the representations of the vendor of the property as to its quality, where he has a reasonable opportunity of examining the property and judging for himself as to its qualities'" McCutchan v. Blanck, 846 N.E.2d 256, 265 (Ind.Ct.App.2006) (quoting Kashman v. Haas, 766 N.E.2d 417, 422 (Ind.Ct.App.2002)). See also Shepherd v. Goben, 142 Ind. 318, 39 N.E. 506, 507 (1895), reh'g denied; Cagney v. Cuson, 77 Ind. 494, 497 (1881); Pennycuff v. Fetter, 409 N.E.2d 1179, 1180 (Ind.Ct.App.1980); Anderson Drive-In Theatre, Inc. v. Kirkpatrick, 123 Ind.App. 388, 110 N.E.2d 506, 508 (1953). Nevertheless, in some cases, we have recognized that a seller has the duty to disclose material facts about the property "where the buyer makes inquiries about a condition on, the qualities of, or the characteristics of the property," Fimbel v. DeClark, 695 N.E.2d 125, 127 (Ind.Ct.App.1998), trans. denied, and that, once a seller undertakes to disclose facts within his or her knowledge, the seller must disclose the whole truth, Thompson v. Best, 478 N.E.2d 79, 84 (Ind.Ct.App.1985) (citing Ind. Bank & Trust Co. v. *717Perry, 467 N.E.2d 428, 481 (Ind.Ct.App.1984)), reh'g denied.
Against this backdrop of difficult-to-ree-oncile approaches, in 1993 the Indiana Legislature enacted Indiana Code §§ 24-4.6-2-1 to -18, creating a statutory obligation for sellers of certain residential real estate to complete disclosure forms informing prospective buyers of certain types of defects in the property. See P.L. 209-1993, See. 1 (1998). Later recodified at Indiana Code §§ 32-21-5-1 to -18, this legislation requires sellers of certain residential real estate 6 to provide prospective buyers with a written form disclosing known conditions of the property's foundation, mechanical systems, roof, structure, water and sewer systems, and any other appropriate components required by the Indiana Real Estate Commission. ILC. § 32-21-5-7. In other words, this statute requires disclosure of the kinds of defects that will most significantly affect the value and use of a home. While Indiana Code § 32-21-5-9 provides that "[a] disclosure form is not a warranty by the owner ... and the disclosure form may not be used as a substitute for any inspections or warranties that the prospective buyer or owner may later obtain[,]" sellers nonetheless have the affirmative duty to disclose relevant conditions about which they are aware. 1.C. § 32-21-5-7(1) (requiring disclosure of "known" conditions). Further, a seller must affirm the representations made in the disclosure form at the time of closing, which leaves no opportunity for the buyer to subsequently inspect the property. Ind.Code § 32-21-5-12(a). And our Legislature expressly contemplated that the disclosure form statute would create liability for sellers under certain cireumstances:
The owner is not liable for any error, inaccuracy, or omission of any information required to be delivered to the prospective buyer under this chapter if:
(1) the error, inaccuracy, or omission was not within the actual knowledge of the owner or was based on information provided by a public agency or by another person with a professional license or special knowledge who provided a written or oral report or opinion that the owner reasonably believed to be correct; and
(2) the owner was not negligent in obtaining information from a third party and transmitting the information.
Ind.Code § 82-21-5-11. Thus, for transactions covered by § 32-21-5-1, Indiana's disclosure form statute abrogates the common law rule that buyers cannot rely upon sellers' representations regarding the absence of defects in those things included in Indiana Code § 32-21-5-7(1) and places the onus on a seller to refrain from knowingly making misrepresentations about those conditions.
Since the legislative creation of the disclosure form requirement, cases from different panels of this Court have analyzed a seller's liability under it in several ways. In Reum v. Mercer, 817 N.E.2d 1267, 1272 *718(Ind.Ct.App.2004), and Verrall v. Machura, 810 N.E.2d 1159, 1162-64 (Ind.Ct.App.2004), trans. denied, we recognized a buyer's statutory cause of action in cases where the buyer alleges that a seller made misrepresentations on the form, and we did not deem the seller's resulting liability affected by the buyer's traditional common law duty to inspect. On the other hand, in Kashman v. Haas, 766 N.E.2d 417, 422 (Ind.Ct.App.2002), the panel held that a seller was precluded from liability based upon the buyer's common law duty to inspect the property and the bar upon buyers relying upon sellers' representations, even though the panel also wrote that, "Because Buyers failed to designate evidence demonstrating that Sellers had actual knowledge of termite damage, Ind[ianal Code § [82-21-5-11] excuses Sellers from any liability based upon their answers on the Disclosure Form." Kashman, 766 N.E.2d at 423. Finally, in McCutchan, 846 N.E.2d at 264-65, a panel of this Court cited the disclosure form statute but did not reach the question of whether the sellers had actual knowledge of a defect, instead denying relief to the buyers based upon the buyers' duty to inspect the property.
From my reading of Indiana Code §§ 32-21-5-1 to -18, I agree with Reum, 817 N.E2d at 1272, and Verrall, 810 N.E.2d at 1162-64, that the relevant question now is whether the seller of covered residential real estate actually knew about the property's defects when filling out the disclosure form. Pursuant to the plain language of Indiana Code § 82-21-5-11, this should be the relevant inquiry in evaluating the sellers' liability in the case before us. A contrary reading of Indiana Code § 32-21-5-11 would contradict the Legislature's intent to protect buyers, in limited cireumstances, as they purchase what is typically one's largest and most important asset: a home. Because the record in this case reflects a genuine issue of fact regarding whether Donna Strand and Gloria German, the sellers, had actual knowledge of the structural damage to the property at the time they completed the disclosure form,7 I believe that summary judgment in favor of the sellers was improperly granted. I would reverse the trial court's grant of summary judgment and remand for further proceedings.

. In 1972, our Supreme Court expressly held that the rule of caveat emptor does not apply to purchases of residential real estate from a builder-vendor. Theis v. Heuer, 264 Ind. 1, 280 N.E.2d 300, 306 (1972).

. My a reading of the disclosure form statute should not be construed to open a floodgate of litigation. The disclosure form requirement "applies only to a sale of, an exchange of, an installment sales contract for, or a lease with option to buy residential real estate that contains not more than four (4) residential dwelling units." Ind.Code § 32-21-5-1(a) (emphasis added). A number of different kinds of residential real estate transfers are excluded, including the purchase of a new home that has not yet been inhabited. IC. § 32-21-5-I(b)(8). Further, the disclosure requirement is limited to those components of a home that most affect its habitability. Ind. Code § 32-21-5-7(1). Neither will my reading of the statute discourage buyers from inspecting property before a closing. After all, most buyers do not purchase a home with an eye toward creating legal problems.

. The record reveals that although Strand and German were made aware of termite damage to the house through an inspection performed by Central Indiana Home Inspections, and the professional inspector listed this damage under the heading "Major Structural Defects," the only repairs made by Strand and German after this inspection cost $92. Appellant's App. p. 162, 186.