Todd Novak v. St. Maxent-Wimberly House, et ( 2020 )

Case: 19-30789 Document: 00515422548 Page: 1 Date Filed: 05/20/2020
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 19-30789 May 20, 2020
Summary Calendar
Lyle W. Cayce
Clerk
TODD NOVAK; KATE NOVAK,
Plaintiffs - Appellants
v.
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, SMITH, and HIGGINSON, Circuit Judges.
PER CURIAM:*
In this diversity action, Plaintiffs Todd and Kate Novak filed suit against
Defendants Michael and Jenny Tilbury, alleging negligent and intentional
misrepresentation regarding defects in the condominium the plaintiffs
purchased from the Tilburys. Because we determine the district court erred in
dismissing the Novaks’ claims against the Tilburys for negligent and
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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intentional misrepresentation of redhibitory defects in the purchased property,
we AFFIRM IN PART, VACATE IN PART, and REMAND for further
proceedings.
I. BACKGROUND
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 during
the school 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 condo, 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 are now before
us on appeal.
The Novaks argued 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
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brought a claim of detrimental reliance. 1 Both parties submitted motions for
summary judgment, and the district court granted summary judgment in favor
of the Tilburys. It found that the Tilburys had no personal knowledge of the
condominium’s alleged mismanagement, nor did they have knowledge of the
redhibitory defects. The Novaks timely appealed.
II. DISCUSSION
We review a grant of summary judgment de novo. In re Louisiana
Crawfish Producers, 852 F.3d 456, 462 (5th Cir. 2017). 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.”
FED. R. CIV. P. 56(a).
A. Negligent and Intentional Misrepresentation
For a plaintiff to recover under a negligent misrepresentation theory,
Louisiana law dictates that “there must be a legal duty on the part of the
defendant to supply correct information, there must be a breach of that duty,
and the breach must have caused plaintiff damage.” Barrie v. V.P.
Exterminators, Inc., 625 So. 2d 1007, 1015 (La. 1993). Intentional
misrepresentation, which amounts to fraud, occurs when there is a
“misrepresentation or a suppression of the truth made with the intention
either to obtain an unjust advantage for one party or to cause a loss or
inconvenience to the other. Fraud may also result from silence or inaction.” LA.
CIV. CODE ANN. art. 1953; see also Shelton v. Standard/700 Assocs., 2001-0587
(La. 10/16/01), 798 So. 2d 60, 64.
1The Novaks also accused the Tilburys of violating 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 it is not on appeal before this court.
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1. Managerial Disarray
The Novaks first argue that the Tilburys intentionally misrepresented
the HOA’s state of affairs by failing to inform them of the alleged “disarray.”
Yet they point to no evidence showing that the Tilburys sought to hide the
HOA’s managerial dealings. The Novaks cite to an email thread dated October
2015, when the Tilburys’ real estate agent, discussing the Novaks’ struggles
with the HOA, remarked, “I’m glad we got you guys out of there!” Jenny Tilbury
replied, “They ought to sue him [a St. Maxent board member]. He is required
by the by-laws to disclose that information.” But nothing about these emails—
sent months after the sale was completed—suggests the Tilburys intentionally
hid information from the Novaks before the sale.
The Novaks’ negligence claim also fails. The Novaks argue that the
Tilburys withheld important HOA documents, including financial certificates
and the revised bylaws that forbid nine-month leases. They rely on
§ 9:1124.107 of the Louisiana Condominium Act (LCA), which requires unit
owners provide these documents.
The district court held that a plaintiff may not seek damages under a
negligent misrepresentation theory for a unit seller’s noncompliance with the
LCA. Section 9:1124.107(C) explains that the consequence of non-compliance
is that “the contract to purchase is voidable by the purchaser until a certificate
has been provided and for five days thereafter or until conveyance, whichever
first occurs.” The court stressed that this language makes no reference to
damages, and that it actually discourages other remedies by stating that a
“unit owner is not liable to a purchaser for the failure or delay of the association
to provide the certificate in a timely manner.” § 9:1124.107(C).
The district court is correct that the LCA’s language prevents the Novaks
from arguing months after the sale that they were not provided financial
certificates. The remedy was clear: they could have voided the contract, and
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they chose not to. With respect to the bylaws, however, the Novaks do not
allege that the Tilburys failed to provide a copy but rather an accurate copy, a
fact they only discovered months after the sale. The LCA cannot be read as
forbidding a claim for negligent misrepresentation in this instance.
Even so, the Novaks’ claim still fails. As the Novaks argued in their
lawsuit against St. Maxent, the bylaws were not properly amended in 2006
because the amendment was not filed in Orleans Parish’s conveyance records
as required by law. The district court agreed, concluding that the amendment
was not properly filed until April 2016. Because the amendment was
unrecorded, the Tilburys were not negligent for failing to provide the Novaks
the amended bylaws. Summary judgment was therefore appropriate on this
claim.
2. Redhibitory Defects
The Novaks also argue the Tilburys negligently and intentionally
represented that the condominium had no redhibitory defects. The district
court held that the Novaks waived their claims during the purchase and failed
to show the Tilburys knew of any alleged defects and purposefully lied on their
disclosure form. Indeed, a buyer may waive redhibitory defects, so long as the
waiver is clear, unambiguous, and brought to the buyer’s attention. LA. CIV.
CODE ANN. art. 2548. But if the seller “has declared that the thing has quality
that he knew it did not have,” thereby intentionally committing fraud, the
buyer is not bound by the waiver. Art. 2548; see Shelton, 798 So. 2d at 64.
Louisiana’s Residential Property Disclosure Act requires that sellers of
real property answer questions about defects by checking boxes marked “yes”
(a defect exists), “no” (a defect does not exist), and “no knowledge” (the seller
does not know whether a defect exists). LA. STAT. ANN. § 9:3198. “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
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“was not a willful misrepresentation according to the best of the seller’s
information, knowledge, and belief.” LA. STAT. ANN. § 9:3198(E).
The Louisiana Supreme Court, however, added an important exception
to this rule in Valobra v. Nelson, 2014-164 (La. 4/11/14), 136 So. 3d 793, 794
(per curiam). There, the sellers relied on Article 2548 to argue the buyers failed
to state a claim alleging redhibitory defects, because the buyers had waived
any such claim and the sellers were never in a position to know of any defects.
The buyers stressed that the sellers failed to advise them that they were not
in a position to know one way or another whether there were defects and, in
checking “no,” intentionally misled them into believing that there were in fact
no defects. Id. The supreme court agreed with the buyers: the sellers could not
avoid their representation of no defects by claiming “we really didn’t know.” Id.The court held that a seller cannot “represent a thing to have no defects in
order to procure a waiver of redhibition and then claim that they were not in a
position to know whether there were defects or not . . . while using the waiver
of redhibition to require the buyer to prove actual knowledge of the defect by
the seller.” Id. at 795. Thus, despite the apparent tension with § 9:3198(E), the
Louisiana Supreme Court allowed a buyer to bring a claim for redhibitory
defects when a seller incorrectly attested that there were no defects on the
property disclosure form rather than claiming “no knowledge”—regardless of
whether the seller believed the disclosure to be true. 2
The district court was correct that the Novaks have shown no evidence
that the Tilburys knew of any alleged redhibitory defects when they selected
“no.” Indeed, nothing suggests the Tilburys had access to the 2011 engineering
2 In response to Valobra, the Louisiana Real Estate Commission’s Standardized
Forms Committee removed all “no” response check boxes on the form on March 1, 2018. See
Effect of the Property Disclosure Document, 1 LA. PRAC. REAL EST. § 10:107 (2d ed.). The
Commission further revised the form on January 1, 2020. See Form § 9:123. The forms in this
matter, however, predate the revisions.
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report St. Maxent commissioned that allegedly revealed defects; the Tilburys
only bought the condominium in 2013 and never served on the HOA.
Nevertheless, Valobra makes clear that by marking “no” on their property
disclosure form, the Tilburys cannot now rest on their genuine lack of
knowledge to avoid any liability for intentional misrepresentation. Because the
district court granted summary judgment on the narrow ground that the
Tilburys lacked any knowledge of redhibitory defects, we vacate summary
judgment on this claim. As the parties have not yet fully litigated whether
there were, in fact, any redhibitory defects prior to the condominium’s sale, we
remand for further proceedings. 3
B. Detrimental Reliance
The Novaks also brought a claim of detrimental reliance with regard to
the Novaks’ Property Disclosure document. Detrimental reliance requires “(1)
a representation by conduct or word; (2) justifiable reliance; and (3) a change
in position to one’s detriment because of the reliance.” Luther v. IOM Co. LLC,
2013-0353 (La. 10/15/13), 130 So. 3d 817, 825; see LA. CIV. CODE ANN. art. 1967.
The Novaks contend that the Tilburys misrepresented the property’s condition
by checking “no,” and that they justifiably relied on that.
Again, Valobra dictates that the Tilburys cannot maintain ignorance to
avoid liability, their waiver notwithstanding. Since the district court dismissed
this claim on the narrow grounds that the Novaks made no knowing
misrepresentations, we vacate and remand this claim so that the parties may
litigate whether the Novaks have demonstrated justifiable reliance and
whether they changed their position to their detriment as a result. 4
3 The parties in the district court did not join issue on what, if any, defects actually
existed that made the property unsuitable for use, and the district court made no ruling on
the issue.
4 It is, of course, clear that there can be no double recovery based on a claim of
negligent or intentional misrepresentation and detrimental reliance. See Albert v. Farm
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III. CONCLUSION
For the reasons stated above, we AFFIRM IN PART the district court’s
grant of summary judgment on claims for negligent and intentional
misrepresentation of alleged managerial disarray. We VACATE IN PART the
grant of summary judgment on claims for intentional and negligent
misrepresentation of redhibitory defects and detrimental reliance, and
REMAND for further proceedings.
Bureau Ins. Co., 2005-2496 (La. 10/17/06), 940 So. 2d 620, 622 (“Louisiana law does not allow
for double recovery of the same element of damages.”).
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