William Napier Jr. v. Paul Kearney

SECOND DIVISION
MILLER, P. J.,
MERCIER, J., and SENIOR APPELLATE JUDGE PHIPPS
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
https://www.gaappeals.us/rules
DEADLINES ARE NO LONGER TOLLED IN THIS
COURT. ALL FILINGS MUST BE SUBMITTED WITHIN
THE TIMES SET BY OUR COURT RULES.
March 1, 2021
In the Court of Appeals of Georgia
A20A1902. NAPIER JR. et al. v. KEARNEY.
MERCIER, Judge.
William Napier, Jr., and Katherine Napier filed a lawsuit against Paul Kearney,
alleging that he falsely represented the condition of the house they purchased from
him. Specifically, they contend that Kearney failed to disclose moisture intrusion and
flooding. They sought rescission and alternatively damages for fraud, negligent
misrepresentation, and breach of contract. Kearney filed a motion for summary
judgment, which the trial court granted, and the Napiers appeal the trial court’s order.1
Finding that the Napiers waived their rescission claim and failed to show that
Kearney had knowledge of flooding in the backyard, we affirm in part. However, as
1
While the Napiers originally asserted additional claims regarding “settlement
movement, cracking or breakage of the structural support of the foundation,” they do
not appeal the trial court’s ruling on these claims.
there is a question of material fact as to whether Kearney concealed moisture
intrusion from the Napiers, we reverse in part.
“On appeal, we must view the evidence, and all reasonable conclusions and
inferences drawn from it, in the light most favorable to the [Napiers] as nonmovants.”
Conway v. Romarion, 252 Ga. App. 528 (557 SE2d 54) (2001). So viewed, the
evidence shows that in July 2015, the Napiers purchased a house from Kearney. Prior
to the closing of the sale, a disclosure statement was completed by Kearney and
provided to the Napiers. In the disclosure statement, Kearney stated that based on his
knowledge and belief at the time, there had been no water intrusion into the dwelling,
nor “any flooding.”
While the sale was pending, the Napiers retained a home inspector who
conducted an inspection. William Napier attended the inspection, during which time,
neither the inspector nor William discovered any water intrusion or flooding.
The Napiers moved into the house in August 2015. In January 2016, they found
that the floor and subfloor in the dining room were wet and “had experienced
significant water intrusion,” and there was “significant pooling of water in the rear
2
of the backyard.” On October 14, 2016, the Napiers sent a rescission letter to Kearney
and his wife, to which Kearney did not respond.
1. The Napiers argue that the trial court erred in granting summary judgment
on their rescission claim. They claim that there was a genuine issue of material fact
as to when they learned of the problems leading to their attempted rescission. We
disagree and find that the Napiers waived rescission as a matter of law by failing to
act promptly.2
“In general, a party alleging fraudulent inducement to enter a contract has two
options: (1) affirm the contract and sue for damages from the fraud or breach; or (2)
promptly rescind the contract and sue in tort for fraud.” Novare Group v. Sarif, 290
Ga. 186, 188 (1) (718 SE2d 304) (2011) (citation and punctuation omitted).
In order to effect a rescission, the purchaser must act promptly and
adhere to the intent to rescind or risk waiver of his claim: An
announcement of the intent to rescind the contract must be made in a
timely fashion, as soon as the facts supporting the claim for rescission
are discovered.
2
The Napiers also argue that a demand letter they sent to Kearney was an
inadmissible settlement offer and could not be used as waiver evidence. However, we
need not reach that issue to determine that the Napiers waived rescission.
3
Conway, supra at 530 (1) (citation and punctuation omitted). Rescission “is not
favored under the law, and courts are quick to find that the right to rescind has been
waived.” Id.
The Napiers discovered the problems in the house in January 2016. However,
they did not attempt to rescind the contract until ten months later in a letter dated
October 14, 2016. “Waiver generally is found where the intent to rescind is not
asserted in a timely fashion[.]” Conway, supra at 530-531 (1). The Napiers argue that
they did not learn of the underlying problems until their insurance company denied
their claim in April 2016. However, William Napier averred that he observed
“significant water intrusion” in the interior of the house and “significant pooling of
water in the rear of the backyard” in January 2016. The timing of the insurance
company’s denial is immaterial as to when the “facts supporting the claim for
rescission” were discovered. See id. at 530 (1). The Napiers’ failure to announce until
10 months after the discovery of the problems amounted to waiver as a matter of law.
See Liberty v. Storage Trust Properties, 267 Ga. App. 905, 911-912 (2) (600 SE2d
841) (2004) (delay of almost nine months constituted waiver of rescission as a matter
of law); Buckley v. Turner Heritage Homes, 248 Ga. App. 793, 795 (2) (547 SE2d
373) (2001) (buyer waived her claim to rescind sales contract when she waited ten
4
months to rescind following her discovery of defects in house); Orion Capital
Partners v. Westinghouse Elec. Corp., 223 Ga. App. 539, 543 (2) (b) (478 SE2d 382)
(1996) (attempt to rescind contract seven months after discovery was “too late as a
matter of law”). As such, we affirm the trial court’s grant of summary judgment
regarding the Napiers’ claim for rescission.
2. The Napiers argue that the trial court erred by granting summary judgment
on their fraud, negligent misrepresentation, and breach of contract claims, because
Kearney made false representations in the disclosure statement as to whether he had
knowledge of moisture intrusion and flooding on the property.
The tort of fraud has five elements: (1) a false representation or
omission of a material fact; (2) scienter; (3) intention to induce the party
claiming fraud to act or refrain from acting; (4) justifiable reliance; and
(5) damages. When, as in the case at bar, the buyers allege fraudulent
concealment, they must prove, as a factor of justifiable reliance, that
they could not have discovered the alleged defect in the exercise of due
diligence.
Lehman v. Keller, 297 Ga. App. 371, 372-373 (1) (677 SE2d 415) (2009) (citations
and punctuation omitted). “The only real distinction between negligent
misrepresentation and fraud is the absence of the element of knowledge of the falsity
5
of the information disclosed.” Bithoney v. Fulton-DeKalb Hosp. Authority, 313 Ga.
App. 335, 343 (2) (n. 19) (721 SE2d 577) (2011) (citation and punctuation omitted).
If a seller of real estate knows of a defect in the property of which the
purchaser is ignorant, and which would likely influence the purchase
decision, the seller has a duty to disclose his knowledge to the
purchaser. Where a buyer seeks to recover from a seller who has
passively concealed a defect, the buyer must prove that the vendor’s
concealment of the defect was an act of fraud and deceit, including
evidence that the defect could not have been discovered by the buyer by
the exercise of due diligence and that the seller . . . was aware of the
problems and did not disclose them.
Salinas v. Skelton, 249 Ga. App. 217, 221-222 (2) (547 SE2d 289 (2001) (citations
and punctuation omitted).
(a) Claiming that Kearney misrepresented that the house had no moisture
intrusion, the Napiers point to evidence that Kearney’s placement of rugs inside the
house concealed water intrusion during the sales process. Additionally, they point to
evidence that the refrigerator was shown in one location in the listing photographs,
but had been moved to a different location before the home inspection, which
concealed evidence of water intrusion. Kearney does not dispute that there was
evidence of water intrusion under the refrigerator and the rugs, but he claims that the
6
location of the refrigerator and rugs was due to “routine home design choices.”
Moreover, Kearney seems to argue that the Napiers could have moved the rugs and
refrigerator during the home inspection, and their failure to do so displayed an
absence of due diligence. However, “the question of whether a purchaser has
exercised reasonable diligence in inspecting real property is usually a jury question.”
Akins v. Couch, 271 Ga. 276, 278 (3) (b) (518 SE2d 674) (1999) (even when buyers
failed to retain a home inspector, summary judgment was improper because a jury
question existed as to whether the buyers exercised due diligence).
Here, there is evidence that Kearney moved a refrigerator and placed rugs in
an attempt to conceal water intrusion. We cannot say that the Napiers failed to
exercise due diligence as a matter of law by failing to move the furnishings to inspect
the floors beneath. Therefore, a jury question exists as to whether Kearney actively
concealed the water intrusion and whether the Napiers exercised due diligence in
their inspection. See Conway, supra at 533 (3) (when damage may have been
concealed by the seller’s furnishings, there was a jury issue as to whether the buyers
had exercised due diligence in inspecting the house and whether the damage was
actively concealed by the seller). As such, the trial court erred in granting summary
judgment on the Napiers’ claims related to moisture intrusion.
7
(b) The Napiers also contend that Kearney falsely represented that the property
had no flooding. They argue that their backyard has flooded after heavy rains, and
that Kearney knew of the flooding but said otherwise on the disclosure statement, and
even with the exercise of due diligence they could not have discovered the defect.
However, the Napiers have failed to show evidence that Kearney knew of the
flooding. To support their claim, the Napiers cite to their own discovery responses,
where they state: “Brenda Kearney . . . testified that a drain was installed to deal with
flooding on the side of the Property.” However, they do not cite to her deposition,
which was not part of the trial court record. Instead, the parties argue in their
appellate briefs about which party was responsible for filing the deposition. “[T]he
burden of timely filing depositions and other discovery material with the trial court
lies with the party which intends to rely upon it.” Parker v. Silviano, 284 Ga. App.
278, 281 (2) (643 SE2d 819) (2007) (citation and punctuation omitted). Since Brenda
Kearney’s deposition was not filed in the trial court, we cannot consider her
testimony on appeal. See id.; CNL Ins. America v. Moreland, 226 Ga. App. 57, 57
(485 SE2d 515) (1997) (“It is well settled that the burden on appeal is on the
appellant to show error by the record. When a portion of the evidence bearing upon
8
the issues before the trial court was not filed in the trial court and not made a part of
the record on appeal, this Court may not consider such material.”)
The Napiers also cite to the fact that a shed was located on a deck and not “in
the backyard where the flooding occurs which suggests a knowledge of the condition
and an attempt to avoid damage from the condition.” This is mere speculation and “a
motion for summary judgment cannot be denied based on
speculation and conjecture.”3 Willingham Loan & Realty v. Washington, 311 Ga.
App. 535, 536 (716 SE2d 585) (2011) (citation and punctuation omitted).
Finally, the Napiers point to the affidavit of their engineer, who averred that
“drainage problems . . . [was a] feature[] that would be noticeable and observed by
[Kearney] for several years.” However, the engineer did not opine that the “drainage
problems” caused “flooding,” or that flooding would have been observable during
periods of heavy rain. The Napiers failed to point to evidence that the property
actually flooded while Kearney owned it or that he had knowledge of any flooding,
as such, we affirm the trial court’s ruling on the Napiers’ flooding claims. See
3
The Napiers’ speculation regarding the shed is noticeably different from the
evidence regarding the rugs and refrigerator placement in Division 2 (a). The Napiers
are not arguing that the shed was located on the deck to conceal flooding underneath
the shed. Instead, they claim that the shed’s placement on the deck constituted proof
that Kearney knew of flooding in a different area of the backyard.
9
generally Resnick v. Meybohm Realty, 269 Ga. App. 486, 489-490 (1) (b) (604 SE2d
536) (2004).
3. The Napiers’ claims for attorneys fees and punitive damages are derivative
of their substantive claims. “Fraud is an intentional tort for which punitive damages
may be awarded. Furthermore, where a plaintiff has set forth a valid claim for an
intentional tort, such as fraud, he may be entitled to recover the expenses of litigation,
including attorney fees.” Stephen A. Wheat Trust v. Sparks, 325 Ga. App. 673, 682
(7) (754 SE2d 640) (2014) (citations and punctuation omitted). As the trial court
erred in granting summary judgment to Kearney on the Napiers’ claims regarding
moisture intrusion, the court likewise erred in granting summary judgment to Kearney
on their request for attorney fees, costs, and punitive damages as derivative of the
Napiers’ moisture intrusion claims. See id. However, we affirm the trial court’s grant
of summary judgment to Kearney on the Napiers’ attorneys fees and punitive damage
claims that were derivative of their flooding claims.
Judgment affirmed in part and reversed in part. Miller, P. J., and Senior
Appellate Judge Herbert E. Phipps concur.
10