Daily Development for Tuesday, October 13, 2009
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Husch Blackwell Sanders
Kansas City, Missouri
dirt@umkc.edu
VENDOR/PURCHASER; MISREPRESENTATION; DISCLAIMERS: Broker and Seller may be liable for affirmative misrepresentations as to size of house notwithstanding disclaimers contained in sale agreement that state that there are no warranties by Broker as to size and that Seller or Buyer will hold Broker harmless with respect to defects, and notwithstanding acknowledgment at closing that Buyer had either inspected or waived inspection.
Bowman v. Presley, 212 P.3d 1210 (Okla., 2009)
Buyers alleged that they shopped for a house larger than their own, and that broker and seller each represented to them that the house that seller was offering was 2800 square feet. In fact, a post closing appraisal received by buyers indicated that the house was 2100 square feet. Buyers alleged that Sellers and Broker knew that the house was smaller than they told Buyers, and that Buyers had computed the value of the house, and the price that they would offer, based upon a value “per square foot.”
Defendants moved for summary judgment, first, on the grounds that the Buyers got what they bargained for, as the appraised value of the house equaled what they paid for it. Court responded that the Buyer’s claimed that they had computed a “price per square foot,” and expected something other than they got. In light of the “warring appraisals,” the court concluded that the Buyers’ claim survived summary judgment on this score.
Defendants then argued that the fact of the size of the house was within Buyers’ competence to ascertain and that the size was in fact the size listed in the multiple listing service and on the appraiser’s records.
Apparently there is some Oklahoma authority that when there is a representation of “opinion” made by a Seller or Seller’s representative, Buyer has the duty under the doctrine of “caveat emptor” to make reasonable investigation. But the court concluded that such authority has no application where the alleged misrepresentation was as to a matter of fact, even though the buyer still could have checked the facts himself. The buyer is entitled to rely upon the representation.
Defendants also pointed to language in the contract absolving Broker, at least from liability:
“h) * * * Buyer is purchasing the Property based on Buyer's own inspection, unless waived, and NO WARRANTIES are expressed or implied by [Broker and licensees] that shall be deemed to survive the Closing in reference to the condition of the Property * * *.
15. DISCLAIMER AND INDEMNIFICATION: It is expressly understood by Seller and Buyer that [Broker and licensees]do not warrant the present or future value, size by square footage, condition, structure, or structure systems of the Property or any building, nor do they hold themselves out to be experts in quality, design and construction. Seller and Buyer shall hold [Broker and licensees] harmless in the event of losses, claims or demands by or against Seller or Buyer.* * * “
Buyer also executed documents at closing providing waivers relating to inspections:
“1. Inspection. Buyer has either inspected the Property in accordance with the Contract or by acceptance of the Deed to the Property. Buyer waives Buyer's right to inspect. In either event, the Property is accepted in its present condition.
3. Waiver and Release. Buyer hereby waives all claims to repair, replace, or remedy any defects in the Property and does hereby forever release and discharge the Seller, the "Listing Broker"), the "Selling Broker", their respective affiliated licensees, employees, representatives from all claims, demands, charges, losses, and liability whatsoever arising out of the contract and from the purchase of the Property.***
Broker, incidentally, was listed as both the listing Broker and the Selling Broker and also was selling Broker’s daughter’s house.
The court ruled that public policy required that these waivers be ignored when the charge is one of fraud or intentional misrepresentation:
“A whisper of fraud can topple the pillars of even the most impregnable contract, for to base a contract upon fraud is to build it upon sand . . . “Fraud vitiates everything it touches, and a contract obtained thereby is voidable. And evidence is always admissible to show that contracts have been fraudulently obtained. . . . the public policy fostering the certainty and stability of contracts gives way to the public policy against fraud.”
As to the argument that the appraiser’s office and multiple listing service also erred as to the size of the house, the court simply responded that in this action for fraud, where the Defendants were charged with knowing the true facts and misrepresenting them, the fact that the same wrong information appeared elsewhere was of no consequence, at least on a motion for summary judgment.
Comment: This is a simple fraud case, and the most important language, to the editor, is the court’s refusal to honor the waivers contained in the contract, even where they stated expressly that the waiver was given as to any representations as to size. This would contradict some commercial contract cases in other jurisdictions, but the editor believes the conclusion is correct when the language appears in form documents introduced, undoubtedly, to the Buyer as “routine.” The Editor is especially incensed when waivers and disclaimers favoring the Broker appear in form sale contracts prepared by the broker for use of the Buyer and Seller in documenting their agreement of sale. Brokers have an ethical responsibility, in the editor’s view, to provide documents that simply are consistent with the best interests of the parties to the sale and not to sneak in language that serves the interest of only the broker, not a party to the contract, or to the closing.
Items reported here and in the ABA publications
are for general information purposes only and
should not be relied upon in the course of
representation or in the forming of decisions in
legal matters. The same is true of all
commentary provided by contributors to the DIRT
list. Accuracy of data and opinions expressed
are the sole responsibility of the DIRT editor or
individual contributors and are in no sense the
publication of the ABA.
Parties posting messages to DIRT are posting to a
source that is readily accessible by members of
the general public, and should take that fact
into account in evaluating confidentiality
issues.
ABOUT DIRT:
DIRT is an internet discussion group for serious
real estate professionals. Message volume varies,
but commonly runs 5 to 15 messages per work day.
DIRT Developments are posted periodically, as supply dictates.
To subscribe, send the message
subscribe Dirt [your name]
to
listserv@listserv.umkc.edu
To cancel your subscription, send the message
signoff DIRT to the address:
listserv@listserv.umkc.edu
for information on other commands, send the message
Help to the listserv address.
DIRT has an alternate, more extensive coverage that includes not only
commercial and general real estate matters but also focuses specifically upon
residential real estate matters. Because real estate brokers generally find
this service more valuable, it is named “BrokerDIRT.” But residential
specialist attorneys, title insurers, lenders and others interested in the
residential market will want to subscribe to this alternative list. If you
subscribe to BrokerDIRT, it is not necessary also to subscribe to DIRT, as
BrokerDIRT carries all DIRT traffic in addition to the residential discussions.
To subscribe to BrokerDIRT, send the message
subscribe BrokerDIRT [your name]
to
listserv@listserv.umkc.edu
To cancel your subscription to BrokerDIRT, send the message
signoff BrokerDIRT to the address:
listserv@listserv.umkc.edu
DIRT is a service of the American Bar Association
Section on Real Property, Probate & Trust Law and
the University of Missouri, Kansas City, School
of Law. Daily Developments are copyrighted by
Patrick A. Randolph, Jr., Professor of Law, UMKC
School of Law, but Professor Randolph grants
permission for copying or distribution of Daily
Developments for educational purposes, including
professional continuing education, provided that
no charge is imposed for such distribution and
that appropriate credit is given to Professor
Randolph, any substitute reporters, DIRT, and its sponsors.
All DIRT Developments, and scores of other cases, arranged topically, are reported in hardcopy form in the ABA Quarterly Report. This is a limited subscription service, available to ABA Section Members, ACMA members and members of the NAR. Qualified subscribers may Subscribe to this Report ($30 for Two Years) by Sending a Check to Ms. Bunny Lee, ABA Section on Real Property, Trust & Estate Law, 321 N. Clark Street, Chicago, Il 60610. Contact Bunny Lee at (312) 988-5651, Leeb@staff.abanet.org ABA members also can access prior and current editions of this report on the ABA RPTE section website.
DIRT has a WebPage at:
http://dirt.umkc.edu/
-----