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Matt Kincaid and Julie Kincaid v. David Dess

March 8, 2013

MATT KINCAID AND JULIE KINCAID, APPELLANTS,
v.
DAVID DESS, ET AL., APPELLEES.



Appeal from Johnson District Court; GERALD T. ELLIOTT, judge.

SYLLABUS BY THE COURT

SYLLABUS BY THE COURT 1. When the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law, summary judgment is appropriate. The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal, the same rules apply; summary judgment must be denied if reasonable minds could differ as to the conclusions drawn from the evidence. 2. The legal effect of a written instrument is a question of law. 3. The primary rule for interpreting written contracts is to ascertain the parties' intent. If the terms of the contract are clear, the intent of the parties is to be determined from the contract language without applying rules of construction. 4. When interpreting written contracts, the contract should not be interpreted by isolating one particular sentence or provision, but by construing and considering the entire contract. If the terms of the contract are clear, the parties' intent is determined from the contract itself without applying rules of construction. A contract is ambiguous when the words in the contract expressing the intent of the parties may be understood in two or more ways. 5. Regardless of a trial court's construction of a written contract, an appellate court may construe it and determine its legal effect. 6. Standing is a requirement for a court to have jurisdiction to hear a case, so the existence of standing is a question of law over which an appellate court's scope of review is unlimited. 7. Privity of contract is the connection or relationship which exists between two or more contracting parties. It is essential to the maintenance of a lawsuit based on a contract that there is privity between the plaintiff and the defendant. 8. To determine whether a particular person is an intended beneficiary of a contract, the court applies the general rules for construction of contracts. 9. Third-party beneficiaries of a contract are divided into intended beneficiaries and incidental beneficiaries, and only intended beneficiaries have standing to sue for damages resulting from the breach of a contract. 10. The burden of establishing standing to bring suit as a third-party beneficiary rests with the party asserting it. 11. Before a third party may enforce a contract from which he or she would benefit, the claimant must show the existence of some provision in the contract that operates to his or her benefit. 12. A third-party beneficiary does not need to be personally named in the contract to have standing, as long as he or she is a member of a designated class or identifiable as a benefitted person. 13. It is not essential to the creation of a right in an intended beneficiary that he or she be identified when a contract containing the promise is made. 14. When a writing is incorporated by reference, it becomes a part of the contract only so far as to effectuate the specific purpose intended. 15. Unilateral rescission is generally available as an equitable remedy to the victim of fraud who ceases to accept the benefits of a contract and promptly gives notice to the other party.

The opinion of the court was delivered by: Green, J

Affirmed in part, reversed in part, and remanded.

Before ARNOLD-BURGER, P.J., GREEN, J., and HEBERT, S.J.

Matt Kincaid and Julie Kincaid appeal from a summary judgment granted in favor of David Dess and Sandra Dess involving the Kincaids' breach of contract, fraud, negligent misrepresentation, civil conspiracy, and rescission claims. The Kincaids purchased a house from Sirva Relocation LLC (Sirva) for approximately $1,040,000. The bases of the Kincaids' claims involve the alleged failure of the Desses to disclose the true condition of their home before they sold it to Sirva. Nevertheless, the Desses moved for summary judgment. The Desses sought dismissal of the action on grounds that the Kincaids purchased the house from Sirva so there was no privity between the Desses and the Kincaids. The Desses maintained that the Kincaids' claims for fraud and negligent misrepresentation, breach of contract, and rescission should fail because of a lack of privity. The Desses further maintained that the Kincaids' civil conspiracy claim should fail because the Kincaids failed to show a meeting of the minds.

The trial court agreed and granted summary judgment in favor of the Desses on all of the Kincaids' claims.

On appeal, the Kincaids contend that the trial court erred in granting summary judgment on their breach of contract, fraud, and negligent misrepresentation claims. We agree. The Kincaids further contend that the trial court erred in granting summary judgment on their civil conspiracy and rescission claims. We disagree. Accordingly, we reverse and remand for trial on the Kincaids' breach of contract, fraud, and negligent misrepresentation claims. We affirm the trial court's grant of summary judgment in favor of the Desses on the Kincaids' civil conspiracy and rescission claims.

The Desses entered into an option to purchase contract in the spring of 2007 with Sirva which gave Sirva the exclusive right to list the Desses' house for sale. The Kincaids entered into a real estate contract with Sirva to purchase the Desses' home.

As part of their contract with Sirva, the Desses completed two separate "Seller's Disclosure" statements, one was the local form (local disclosure statement) and one was Sirva's form (Sirva disclosure statement). Sirva then provided these disclosure statements to the Kincaids. The Sirva disclosure statement indicated that the type of exterior material on the home was "unknown." The Desses also denied any knowledge of mold or mildew or any dampness or leaks in the walls. The Desses further denied that they were aware of any wood rot or any other conditions that might adversely affect the value or desirability of their home.

The Kincaids signed a rider to the sales agreement with Sirva. The rider contained numerous clauses which explained that the disclosure statements were completed by the Desses and that Sirva was not making any representations about the condition of the property. The rider stated the following: "Buyer must acknowledge receipt of the disclosure forms identified below. Said forms are informational only and represent only the opinions of the individuals or firms which prepared them and SIRVA makes no representation or recommendation concerning said reports. Buyer further acknowledges that the home owner disclosure forms were completed by the owner of the Property previous to SIRVA, that said disclosures fulfill any obligation of SIRVA to disclose conditions of the Property to Buyer and that SIRVA may not complete an independent investigation and/or disclosure for the Property."

The rider also stated the following:

"It is acknowledged that SIRVA has never occupied the property and, as such, the Property is being sold in 'as is' condition to the maximum extent allowed by law. Neither Seller or any of its agents make any representations concerning the Property, including but not limited to, representations regarding the size of the buildings and improvements, the presence or absence of toxic or hazardous substances, or the presence or absence of any encroachments or unrecorded easements."

The rider further stated the following:

"SIRVA makes no representations or warranties of any sort whatsoever regarding the Property, its condition, value or surrounds and may not be held liable or responsible for any damages or liability to Buyer or any other person or entity. Buyer is agreeing to fully rely on its right to inspections, tests and surveys granted herein to discover any undesirable or latent conditions regarding this property, and acknowledges that Sirva has made no representations thereon upon which Buyer may rely. The provisions herein shall survive closing and delivery of the deed. The closing of this transaction shall constitute buyer's full and complete acceptance and release of claims for all conditions and inspection matters herein."

The Kincaids had an inspection done on the home which informed the Kincaids that the exterior of the property did not consist of an exterior insulation and finish system (EIFS), also known as synthetic stucco. EIFS is a multi-layered exterior finish system that looks similar to traditional stucco but is soft and sounds hallow when tapped. The problem with EIFS is when moisture is present behind the covering it can become trapped behind the layers and can lead to wood rot. The Kincaids testified that the Desses' realtor assured them that the exterior of the home was not EIFS. The fact that the exterior of the home was not EIFS was particularly important to the Kincaids because they were aware of the problems that can arise with an EIFS exterior if it is not installed properly. The Kincaids testified that they would not have purchased the home if they knew that the exterior was EIFS. As a result of the inspection, the Kincaids requested that some repairs be made before they would close on the house. The Desses paid for and completed the requested repairs. The Kincaids closed on the house on August 9, 2007.

In September 2007, 1 month after closing on the house, the Kincaids discovered numerous defects that had not been disclosed by the Desses. The Kincaids discovered (1) that the exterior of the home was EIFS; (2) that the property had prior water damage; (3) that some of the exterior and interior walls had dampness problems; (4) that many windows were defective and rotten; and (5) that the home was contaminated with mold. As a result of those defects, the Kincaids were not allowed to live in the home for a year while the defects were being repaired.

In April 2009, the Kincaids sued the Desses, Reece & Nichols Realtors, Inc., and Tricia Wolfe, the Desses' realtor, for breach of contract, fraud and negligent misrepresentation, and civil conspiracy. The Kincaids did not include Sirva in the lawsuit. The Kincaids sought damages of $350,000 to pay for the cost to repair the property, the diminution in value to the property, and the cost of additional living expenses during the repairs.

The Desses moved for summary judgment on all counts. On November 17, 2010, the trial court issued a memorandum opinion granting summary judgment in favor of the Desses on the claims of breach of contract and fraud and negligent misrepresentation. The trial court held that there was a lack of privity between the Kincaids and the Desses, and therefore, the Kincaids' breach of contract claim failed. The trial court further held that the Kincaids failed to come forward with any evidence that they reasonably relied on any statements made by the Desses. The trial court allowed the claims for civil conspiracy and rescission to proceed to discovery.

On January 10, 2011, the Desses filed a second motion for summary judgment. The Desses filed an amended motion for summary judgment on October 17, 2011, which asked the court to dismiss the remaining claims. After a hearing, the trial court granted summary judgment in favor of the Desses on the remaining claims. Only the Dess defendants are involved in this appeal.

Standard of Review

When the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law, summary judgment is appropriate. The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal, the same rules apply; summary judgment must be denied if reasonable minds could differ as to the conclusions drawn from the evidence. O'Brien v. Leegin Creative Leather Products, Inc., 294 Kan. 318, 330, 277 P.3d 1062 (2012).

Additionally, for this court to determine whether the trial court erred, it must interpret the sales contract. The legal effect of a written instrument is a question of law. It may be construed and its legal effect determined by the appellate court regardless of the construction made by the trial court. Osterhaus v. Toth, 291 Kan. 759, 768, 249 P.3d 888 (2011). "The primary rule for interpreting written contracts is to ascertain the parties' intent. If the terms of the contract are clear, the intent of the parties is to be determined from the contract language without applying rules of construction. [Citation omitted.]" Carrothers Constr. Co. v. City of South Hutchinson, 288 Kan. 743, 751, 207 P.3d 231 (2009).

Did the trial court err in granting summary judgment on the Kincaids' breach of contract claim?

In granting the Desses' motion for summary judgment on the breach of contract claim, the trial court ruled that privity is essential to maintain an action on a contract and that such privity did not exist between the ...


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