PH West Dover Property, LLC. v. Lalancette Engineers

¶ 1.

Skoglund, J.

Plaintiff buyers in this consumer fraud action appeal from a summary judgment order in favor of defendant realtor who represented the seller in the sale of an inn. Plaintiffs argue that the trial court erred in concluding that defendant’s alleged misrepresentation and omission were immaterial as a matter of law. We affirm.

¶ 2. For purposes of our review, we consider the relevant facts in the light most favorable to the nonprevailing party — in this case, plaintiffs. Chase v. Agency of Human Servs., 2011 VT 31, ¶ 14, 189 Vt. 613, 19 A.3d 167 (mem.). Based on the evidence presented in connection with the parties’ cross-motions for summary judgment, those facts are as follows. Defendant Barbara Walowit Realty, Inc. was the listing agent for an inn in West Dover.² After Ms. Walowit secured the listing for the inn, she contacted a prior-prospective purchaser to renew discussions about a potential sale. The prior-prospective purchaser claims she told defendant during their conversation that she had witnessed flooding in the parking lot and had learned of “major problems with the roof and that there was a possibility of collapse.” The prospective purchaser stated in her affidavit that defendant told her that flooding was a common occurrence. There is no evidence that the prior-prospective purchaser provided any information about the specific claimed problems with the roof or a description of any flooding, or any information about the source or basis for her complaints.

¶ 3. Following this exchange, defendant asked the seller, who had himself performed much of the carpentry work at the inn, about the condition of the roof. In her deposition, defendant stated that the seller said he believed the roof to be satisfactory. Again, in her deposition testimony, defendant testified she recommended that the seller “secure[ ] an estimate” because “this issue might be raised in an inspection and he should be prepared to be able to either compensate, fix, or do something.” In response, the seller gave defendant a document labeled “Roof Materials List” reflecting the materials cost for shingles, flashing, and nails for 6,600 square feet of roof. The estimated cost of the materials was $5000.

¶ 4. In the meantime, plaintiffs Mitchell Frankenberg and Jennifer Fredreck formed PH West Dover Property, LLC (hereinafter plaintiffs) for the purpose of buying an inn. They contacted defendant, who showed them the property in West Dover. Defendant did not disclose to plaintiffs the substance of her conversation with the prior-prospective purchaser, the $5000 materials estimate for roof repairs, or any concerns about the condition of the roof.

¶ 5. Before entering into a purchase-and-sale agreement with the seller, plaintiffs received a written disclosure from the seller concerning the condition of the property. The “Seller’s Property Information Report” states “[t]his report is not a warranty of any kind by the seller or by any real estate agent representing the seller. This report is not a substitute for a property inspection.” The Report stated that the seller was aware of no “current problems with the roof,” and that there was no “flooding, drainage or grading problems on the property.” Plaintiffs entered into a purchase-and-sale agreement with the seller in December 2007. The agreement contained an inspection contingency.

¶ 6. At the recommendation of defendant, plaintiffs then hired Lalancette Engineers to perform a prepurchase structural inspection of the property, and received an inspection report in late January 2008. The report included a statement that “[t]he visible portion of the upper roof on the main inn is showing signs of wear and should be kept under observation. Resurfacing of this portion of the roof should be planned for within the next three to five years.” Specifically, the report recommended replacement of “torn and missing shingles at a few locations . . . and repair of active roof leaks that were noted in the right attic at the right front plumbing vent and right rear metal chimney.”

¶ 7. The sale closed in May 2008. In September 2008, after encountering various problems relating to the condition of the inn, plaintiffs sued defendant for negligence and consumer fraud for defendant’s alleged misrepresentations and omissions concerning the condition of the inn.³ Plaintiffs and defendant filed cross-motions for summary judgment.

¶ 8. On the claim of negligence, the trial court granted summary judgment to defendant. That ruling is not before us on appeal. As to the claim of consumer fraud, the court considered, among other things, defendant’s alleged failure to disclose the contents of her conversation with the prior-prospective purchaser and to disclose the estimate of roof repair costs that was in her files. The court concluded that the statements from the prior-prospective purchaser were “simply too vague and foundationless to give rise to knowledge of specific material facts that [defendant] would have a duty to disclose” under the Consumer Fraud Act.⁴ The court further concluded that defendant’s failure to disclose the roof-repair estimate was not a material omission because plaintiffs “already knew the roof needed repairs” from the Lalancette report, and disclosure “would have left them in the same position in which the report placed them; needing to make further inquiry.” Thus, the court concluded that the estimate “cannot be considered material as a matter of law,” and granted judgment to defendant. Plaintiffs appealed.

¶ 9. We review de novo a motion for summary judgment, applying the same standard of review as the trial court. Madowitz v. Woods at Killington Owners’ Ass’n, 2010 VT 37, ¶ 9, 188 Vt. 197, 6 A.3d 1117. Summary judgment is appropriate only when “the record clearly shows that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law.” Id. (quotation omitted); see V.R.C.P. 56(a). Therefore, we afford the nonmoving party “the benefit of all reasonable doubts and inferences.” Doe v. Forrest, 2004 VT 37, ¶ 9, 176 Vt. 476, 853 A.2d 48.

¶ 10. We have recognized that “[r]eal estate brokers and agents are marketing agents, not structural engineers or contractors. They have no duty to verify independently representations made by a seller unless they are aware of facts that tend to indicate that such representations are false.” Provost v. Miller, 144 Vt. 67, 69-70, 473 A.2d 1162, 1164 (1984) (quotation omitted). They can, however, be liable under the consumer protection statute for misrepresenting or omitting facts known to them that are important enough to affect' a reasonable buyer’s conduct. Vastano v. Killington Valley Real Estate, 2007 VT 33, ¶¶ 8-10, 182 Vt. 550, 929 A.2d 720 (mem.); see also 9 V.S.A. § 2453(e) (affirming that consumer protection requirements apply in real estate transactions).

¶ 11. To establish an unfair or deceptive act pursuant to the consumer protection statute, 9 V.S.A. § 2453(a), plaintiffs must show: (1) a representation, omission, or practice likely to deceive them; (2) that they interpreted the message reasonably under the circumstances; and (3) that the omission was “material, that is, likely to affect [their] conduct or decision.” Vastano, 2007 VT 33, ¶ 8 (alteration in original) (quotation omitted). The question of whether a misrepresentation or omission is material is “generally measured by an objective standard, premised on what a reasonable person would regard as important in making a decision.” Id. ¶ 9 (quotation omitted).

¶ 12. We first consider the statements from the prior-prospective purchaser to defendant about the condition of the roof and the flooding. ‘We have distinguished statements of fact from statements of opinion in the consumer-fraud context, holding that misrepresentations of the former may constitute fraud while misrepresentations of the latter cannot.” Heath v. Palmer, 2006 VT 125, ¶ 14, 181 Vt. 545, 915 A.2d 1290 (mem.). While the prior-prospective purchaser’s statements to defendant do not fall neatly in either category, we agree with the trial court that they were not sufficiently specific to impute knowledge of defects in the property to defendant, nor to require disclosure of material information that might affect a reasonable consumer’s conduct or decision.

¶ 18. The prior-prospective purchaser’s statements to defendant, given as a reason for declining an earlier opportunity to make a purchase, are second-hand reports — unsupported by evidence or foundation — which are either too unreliable or too vague to require disclosure: To require the realtor to relate every nonspecific and unattributed rumor to subsequent buyers would be unreasonable. The mischief of such a requirement is obvious from this case. Although the roof shingles required replacement, no one with real knowledge about the condition of the inn has claimed that the roof structure was at risk of collapse. The record contains no evidence that the prior-prospective purchaser was qualified to offer a reliable assessment of the roof. The prior-prospective purchaser’s statements provided no basis to impose a duty on defendant to investigate.

¶ 14. Similarly, the report of flooding in the parking lot was too vague. Does “flooding” mean that puddles formed when it rained, or does it mean that customers’ cars were routinely immersed in deep water? The first condition is too minor to bear repetition; the second — although inherently improbable — would obviously require disclosure. Although we join the trial court in accepting plaintiffs’ facts to be true for purposes of summary judgment, neither court may extend and embroider upon the affidavits. We assume that plaintiffs have provided the strongest and most complete evidence available to support the claim of misrepresentation. The claim is limited to a nonspecific complaint of “flooding,” which was too vague to require disclosure to other customers.⁵ Before the severe consequences of the consumer protection statute fall upon a realtor, the trial court must be satisfied that the information offered by third parties has sufficient reliability and specificity to require that the realtor pass the information along to anyone else who expresses interest in the property. The prior-prospective purchaser’s statements — accepted on their face as true — did not meet this standard.

¶ 15. We now consider defendant’s failure to disclose the written estimate of roof repair costs to plaintiffs. The trial court awarded summary judgment to defendant on the ground that her omission of the estimate was not material because plaintiffs had independent knowledge of the information. Unlike the statements by the prior-prospective purchaser, this estimate is the type of concrete, specific information that is material and should be disclosed to a potential buyer. The omission of this information, as well as the affirmative representation that seller was aware of “no current problems with the roof’ could give rise to a violation of the consumer protection statute. To the extent that the trial court concluded that information subsequently acquired by plaintiffs rendered this representation and omission immaterial, we part ways with the trial court. However, our own analysis leads to the same conclusion as that of the trial court, albeit through a slightly different path. See In re Cabot Creamery Coop., 164 Vt. 26, 29, 663 A.2d 940, 941-42 (1995) (explaining that this Court can affirm on different grounds than relied upon by trial court). In our view, the plaintiffs’ case fails for lack of proof on the element of causation and not because the information withheld was immaterial.

¶ 16. As the trial court recognized, plaintiffs received essentially the same information from their own engineer. This information was received within the time allowed for cancellation of the purchase-and-sale agreement. Plaintiffs closed on the transaction knowing that the shingled portion of the roof needed replacement within a few years and that roof leaks around a chimney required immediate attention.

¶ 17. [6] Courts in other jurisdictions have consistently held that a buyer of real estate who has independent knowledge of material information that the realtor fails to disclose cannot recover under applicable consumer protection statutes because the omission did not cause the buyer’s injury. See Graham v. Muldoon, No. L-2240-07, 2010 WL 4940041, at *2-3 (N.J. Super. Ct. App. Div. Dec. 7, 2010) (unpub.) (holding that buyer of refurbished house could not show that sellers’ marketing statements caused buyer’s damages resulting from backup of antiquated sewer system where buyer admitted that he was aware prior to closing that sewer was not newly constructed); Camden Mach. & Tool, Inc. v. Cascade Co., 870 S.W.2d 304, 312-13 (Tex. App. 1993) (holding that, because buyer knew of problems with foundation of house prior to closing, realtor’s misrepresentations that cracks in foundation were insignificant were not “producing cause” of his injury); Dubow v. Dragon, 746 S.W.2d 857, 860-61 (Tex. App. 1988) (holding that buyers of house with faulty foundation could not recover against sellers under consumer protection act where buyers hired inspector who informed them of foundation problems prior to closing and buyers decided to go ahead with purchase anyway).

¶ 18. Courts have reached similar conclusions with regard to transactions not involving real estate. In Lord v. Commercial Union Insurance Co., 801 N.E.2d 303 (Mass. App. Ct. 2004), the trial court found that the plaintiffs automobile insurer committed a deceptive act by failing to send him timely notice of the suspension of his coverage. It ruled, however, that because the plaintiff had independent knowledge of the cancellation, the lack of required notice from the insurer was not a cause of his loss. Despite this ruling, it awarded the plaintiff nominal damages and attorney’s fees. The Massachusetts Appeals Court reversed the damages award because damages were not available “absent a finding of at least some causation of injury.” Id. at 314.

¶ 19. Although Lord was later overruled on other grounds by the Massachusetts Supreme Judicial Court, the high court agreed with Lord’s observation that the legislature did not intend for plaintiffs to recover under the consumer protection act for deceptive acts that did not cause injury. See Aspinall v. Philip Morris Cos., 813 N.E.2d 476, 491 (Mass. 2004) (“[This proposition] states nothing more than what our own decisions have made perfectly clear — causation is a required element of a successful [consumer protection],claim”). The requirement of causation is the general rule in cases where consumers have independent knowledge of false statements and omissions. See, e.g., Zekman v. Direct Am. Marketers, Inc., 695 N.E.2d 853, 861-62 (Ill. 1998) (holding that plaintiff could not recover from AT&T for consumer fraud where he knew that he would be charged for calling “900” numbers because AT&T’s allegedly deceptive acts did not proximately cause his damage); McGraw v. Loyola Ford, Inc., 723 A.2d 502, 512 (Md. Ct. Spec. App. 1999) (holding that car dealer was not liable for consumer fraud for checking box indicating that car sold to buyer was “new,” where buyer knew that car was demonstration model with 6100 miles on it prior to consummating the transaction, because buyer could not prove that the representation caused him any injury or loss).

¶ 20. We follow these decisions in holding that a buyer may not recover under Vermont’s consumer protection statute for omission of information by the seller or his agent when, as in the circumstances of this case, the buyer has independent knowledge of the same information prior to the completion of the sale. Vermont’s consumer protection statute provides a private cause of action for a consumer “who contracts for goods or services in reliance upon false or fraudulent representations or practices . . . or who sustains damages or injury as a result of [such] representations or practices.” 9 V.S.A. § 2461(b) (emphasis added). Because the record is undisputed that the information about the need to replace the roof was known to plaintiffs, we agree with the trial court that defendant’s failure to provide the seller’s estimate of repair costs to plaintiffs cannot satisfy the requirements for liability under the consumer protection act.

Affirmed.

¶ 21.

2 For ease of use in the opinion, we refer to defendant as the individual rather than the company.

3 Plaintiffs also sued Lalancette Engineers, but those claims are not before us in this appeal.

4 The Legislature has since amended the statute to substitute the term “consumer protection” for “consumer fraud.” See 9 V.S.A. § 2453.

5 The prior-prospective purchaser’s affidavit states that defendant advised her that flooding was a common occurrence. Plaintiffs did not rely upon this statement as an independent basis for liability under the consumer protection statute in their memoranda submitted to the trial court or in the briefs filed in this appeal. To the extent that defendant’s statement substantiates the prior-prospective purchaser’s statements, it adds little to the summary judgment analysis because we accept as true plaintiffs’ claim that the prior-prospective purchaser made the statements described in her affidavit. See Forrest, 2004 VT 37, ¶ 9 (explaining that nonmoving party is entitled to benefit of all reasonable doubts and inferences on review of motion for summary judgment).