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HomeMy WebLinkAbout00-2841 CivilCARMEN F1NESTRA CANDACE AUSTIN EITLER, JACK GAUGHEN, INC. t/d/b/a JACK GAUGHEN REALTOR ERA,: Or its successor in interest, and HOUSE MASTER OF AMERICA, INC. M.C. WALKER REALTY, MICHAEL G. BENNETT, and PAULA CAMPLESE-LEADER IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA NO. 2000-2841 CIVIL CIVIL ACTION - LAW IN RE: MOTION FOR SUMMARY JUDGMENT OF DEFENDANT JACK GAUGHEN, INC. BEFORE BAYLEY, GUIDO, JJ. OPINION AND ORDER OF COURT This action arises out of the sale of residential real estate located at 205 North 34th Street in the Borough of Camp Hill (hereinafter "the property"). Shortly after settlement the basement flooded. The purchaser (Plaintiff Finestra) filed suit against both the seller (Defendant Eitler) and her agent (Defendant Gaughen). The action against Defendant Gaughen alleges fraud and misrepresentation as well as violations of the Unfair Trade Practices and Consumer Protection Law ("UTPCPL"). ~ Currently before us is the motion for summary judgment filed by Defendant Gaughen. For the reasons hereinafter set forth, the motion will be denied. ~ 73 P.S. § 201-1, et. seq. NO. 2000-2841 CIVIL follows: STANDARD OF REVIEW Pennsylvania Rule of Civil Procedure 1035.2 provides, in relevant part, as Rule 1035.2 After the relevant pleadings are closed, but within such time as not to unreasonably delay trial, any party may move for summary judgment in whole or in part as a matter of law (1) (2) whenever there is no genuine issue of any material fact as to a necessary element of the cause of action or defense which could be established by additional discovery or expert report, or if, after the completion of discovery relevant to the motion, including the production of expert reports, an adverse party who will bear the burden of proof at trial has failed to produce evidence of facts essential to the cause of action or defense which in a jury trial would require the issues to be submitted to a jury. Pa. R.C.P. 1035.2. In determining whether to grant a motion for summary judgment we must view the record in the light most favorable to the non-moving party. Ertel v. Patriot News, Co., 544 Pa. 93 674 A.2d 1038 (1966). Summary judgment may only be granted in cases that are clear and free from doubt, d.H. Ex Re/. Hoffman v. Pellak, 764 A.2d 64 (Pa. Super. 2000). FACTUAL BACKGROUND We will summarize the facts in the light most favorable to the plaintiff. Gaughen's agent Beth Williamson was a long time friend of Defendant Eitler. Williamson acted as her agent when she purchased the property in 1996. As part of the agreement of sale for that transaction, a professional home inspection was conducted. The inspection report noted "extensive water accumulation in family room basement.''2 It went on to provide: Plaintiff's Appendix, Exhibit 5, p. 5. NO. 2000-2841 CIVIL Need 2-3 estimates on waterproofing basement. Water penetration from poor surface drainage because of oversized decking and landscaping and window wells. (emphasis added).3 Armed with those results, Williamson negotiated an addendum to the contract which resulted in a substantial reduction of the purchase price.4 When Defendant Eitler decided to sell the property in 1999, she again sought the assistance of her friend Beth Williamson. Williamson provided her with a form entitled "Seller's Property Disclosure Statement.''5 Defendant Eitler completed the form and returned it to Williamson, who eventually provided it to plaintiff' s agent as part of the transaction at issue. Paragraph 4 of the Disclosure Statement required the disclosure of any dampness or water problems in the basement. Defendant Eitler answered paragraph 4, in relevant part, as follows: Previous owner had water in basement. Was due to improper installation of down spouts. Problem fixed and no further water problem since 1996. (emphasis added).6 Williamson was aware of the above response. Furthermore, although she was aware that none of the measures recommended in the 1996 home inspection report had been taken, Williamson provided the Disclosure Statement to plaintiff' s agent without any mention of those problems or reference to that report. A heavy rain occurred within two months after settlement. Plaintiff experienced severe flooding in the basement. According to his expert, the flooding resulted in large part because of the oversized deck, the same condition identified in the 1996 home inspection report. Plaintiff s Appendix, Exhibit 5, p. 5. Plaintiff s Appendix, Exhibit 3. Defendant's Appendix, Exhibit 4. Defendant's Appendix, Exhibit 4. NO. 2000-2841 CIVIL DISCUSSION Plaintiff' s claims against Defendant Gaughen are all based upon the alleged fraudulent actions of its agent Williamson.7 The elements of fraud have been set forth by our Supreme Court as follows: (1) a representation; (2) which is material to the transaction at hand; (3) made falsely, with knowledge of its falsity or recklessness as to whether it is true or false; (4) with the intent of misleading another into relying on it; (5) justifiable reliance on the misrepresentation; and (6) the resulting injury was proximately caused by the reliance. Gibbs v. Ernst, 538 Pa. 193, 207, 647 A.2d 882, 889 (1994). Defendant Gaughen argues that it is entitled to summary judgment because the record is devoid of any evidence that its agent knowingly misrepresented any aspect of the property. It also contends that plaintiff could not justifiably rely on the Seller' s Disclosure. Defendant Gaughen's first argument is easily dismissed. Upon close examination of the law and evidence, we find the "lack of reliance" argument to be equally without merit. In the instant case, the evidence viewed in the light most favorable to plaintiff clearly establishes that Gaughen's agent was aware of a significant water problem on the property in 1996. She was also aware that the problem was caused by the oversized deck. At the time of the transaction at issue, she knew the deck still existed and that the basement had not been waterproofed. Yet she delivered the Seller's Disclosure Statement which, while acknowledging the water problem, made no mention of the 7 Count 2 of the complaint sounds in common law fraud while Count 3 alleges a violation of the UTPCPL, which is also based upon fraud. "In order to state a claim under the catchall provision of the Unfair Trade Practices and Consumer Protection Law, a plaintiff must prove the elements of common law fraud." Booze v. Allstate Insurance Co. 750 A.2d 877, 880 (Pa. Super. 2000). NO. 2000-2841 CIVIL previously identified cause and suggested remedies. To the contrary, it affirmatively led plaintiff to believe that the problem had been remedied by replacing the downspouts. The Superior Court recently noted; In real estate transactions, fraud arises when (one) knowingly makes a misrepresentation, undertakes a concealment calculated to deceive, or commits non-privileged failure to disclose. Sewak v. Lockhart, 699 A.2d 755, 759 (Pa. Super. 1997). "Fraud is a generic term used to describe anything calculated to deceive, whether by single act or combination, or by suppression of truth, or suggestion of what is false, whether it be by direct falsehood or by innuendo, by speech or silence, word of mouth, or look or gesture." Id. (quotation omitted). Blumenstock, v. Gibson, 811 A.2d 1029, 1034 (Pa. Super. 2002). We are satisfied that there is sufficient evidence to allow the jury to conclude that the actions of Gaughen' s agent Williamson met the above definition of"fraud". Whether there is sufficient evidence of plaintiff' s justifiable reliance is somewhat more problematic. We start by noting that plaintiff claims to have relied on the assurances contained in the Seller' s Disclosure Statement to the effect that the water problem had been resolved with the repair of the downspouts. Under normal circumstances, this would be sufficient to create a jury question as to whether the reliance was justifiable. 8 However, we are dealing with an agreement which contained release 8 We are not impressed by defendant's argument that plaintiff's reliance is disproved by the fact that he had an independent home inspection performed. This is evidence favorable to the defendant which may be considered by a jury in reaching the ultimate verdict. However, it may not be considered by us in ruling upon this motion for summary judgment. NO. 2000-2841 CIVIL inspection, and integration clauses.9 Pennsylvania Case Law "clearly holds that a party cannot justifiably rely upon prior oral representations yet sign a contract denying the existence of those representations." Blumenstock v. Gibson, supra. 811 A.2d at 1036. On the other hand, "an exception to this general formulation.., has been created and followed by the so-called real estate inspection cases; i.e., LeDonne v. Kessler, 256 Pa. Super. 280, 389 A.2d 1123 (1978), and its progeny." Id. These cases deal with the type of release, inspection and integration clauses which are present in the case at bar. As the Blumenstock Court noted: The test enunciated for this type of case, as stated by the LeDonne court, requires a balancing of the extent of the parties' knowledge of objectionable conditions derived from a reasonable inspection against the extent of the coverage of the contract's integration clause in order to determine whether that party could justifiably rely upon oral representations without insisting upon further contractual protection or the deletion of an overly broad integration clause. 811 A.2d at 1037 (quoting from 1726 Cherry Street Partnership v. Bell At/antic Properties, Inc. 439 Pa. Super. 141,653 A.2d 663, at 669-70 n, 6). 9 Paragraph 26 of the Agreement provides in relevant part as follows: Buyer hereby releases, quit claims and forever discharges SELLER, ALL AGENTS, their SUBAGENTS, EMPLOYEES, and any OFFICER or PARTNER of any one of them and any other PERSON, FIRM, or CORPORATION who may be liable by or through them, from any and all claims, losses or demands, including, but not limited to, personal injuries and property damage and all of the consequences thereof, whether now known or not, which may arise from.., any defects or conditions on the Property. This release shall survive settlement. (emphasis in original). Paragraph 27 goes on to state: (A) Buyer understands that any representations, claims, advertising, promotional activities, brochures or plans of any kind made by Seller, Agents of their employees are not a part of this Agreement, unless expressly incorporated or stated in this Agreement. (B) It is understood that Buyer has inspected the Property before signing this Agreement of Sale ·.. or has waived the right to do so, and has agreed to purchase it in its present condition unless otherwise stated in this Agreement. Buyer acknowledges that the Agents have not made an independent examination or determination of the structural soundness of the Property,... (C) It is further understood that this Agreement contains the whole agreement between Seller and Buyer and there are no other terms, obligations, covenants, representations, statements or conditions, oral or otherwise of any kind whatsoever concerning this sale. (emphasis in original). NO. 2000-2841 CIVIL We note that Le Donne, Cherry Street Partnership, and Blumenstock cases, supra, all involved oral representations which were not made part of the contract. The central question in those cases dealt with the admissibility of those oral representations. Normally, they would be inadmissible under the parol evidence rule. l0 Applying the test enunciated in that line of cases, we are satisfied that the parol evidence rule would not preclude the admissibility of the representations contained in the Seller's Disclosure Statement. ~ ~ In any event, we cannot hold as a matter of law that the plaintiff could not justifiably rely upon the representations made in the Seller's Disclosure Statement. Certainly, the evidence of water damage in the basement should have put him and/or his inspectors on notice that a problem existed. However, the fact that the seller and her agent represented that the problem had been fixed by replacing the downspouts is sufficient to create a jury question as to whether his reliance was justifiable. lO Black's Law Dictionary, 5a~ Edition, defines the "parol evidence rule" as follows: This evidence nde seeks to preserve integrity of written agreements by refusing to permit contracting parties to attempt to alter import of their contract through use of contemporaneous oral declarations... Under this rule, when parties put their agreement in writing, all previous oral agreements merge in the writing and a contract as written cannot be modified or changed by parol evidence, in the absence of a plea of mistake or fraud in the preparation of the writing. (emphasis added). However, Pennsylvania law does not appear to limit the parol evidence rule to oral representations. The nde seems to encompass a "extrinsic or parol evidence." See In re: Estate of Hale, 517 Pa. 115, 535 A.2d 47, 55 (1987). "Extrinsic evidence" is a broad term, defined as "external evidence, or that which is not contained in the body of an agreement, contract and the like." Black's Law Dictionary, 5a~ Edition. 11 There is another basis for holding that the parol evidence rule does not bar the representations at issue. Not only was the Seller's Disclosure Statement in writing, it was referenced several times in the contract. Therefore, the representations contained therein were, arguably, incorporated by reference into the contract. NO. 2000-2841 CIVIL AND NOW, this Summary Judgment is DENIED. ORDER OF COURT day of JUNE, 2003, Defendant Gaughen's Motion for By the Court, /s/Edward E. Guido Edward E. Guido, J. Paige Macdonald-Matthes, Esquire Sharon M. O'Donnell, Esquire J. Jay Cooper, Esquire James L. Goldsmith, Esquire Patricia Carey Zucker, Esquire :sld