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Daniel J. v. A. Drue Jennings

April 12, 2013

DANIEL J. STECHSCHULTE, JR., SATU S.A. STECHSCHULTE, AND THE DANIEL J. STECHSCHULTE, JR., REVOCABLE TRUST, APPELLANTS,
v.
A. DRUE JENNINGS, A. DRUE JENNINGS REVOCABLE TRUST DATED OCTOBER 31, 2002, EMILY A. (GOLSON) JENNINGS, AND PHB REALTY COMPANY, L.L.C., APPELLEES.



Appeal from Johnson District Court; JAMES CHARLES DROEGE, judge.

SYLLABUS BY THE COURT

SYLLABUS BY THE COURT 1. A district court judge may not decide disputed issues of material fact on summary judgment, even if the claims sound in equity rather than law. 2. Summary judgment is appropriate 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. The trial court is required to resolve all facts and inferences that 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 court applies the same rules. When the appellate court finds that reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied. 3. The Buyer Acknowledgment in the residential real estate seller's disclosure form at issue in this case merely protects the seller and his or her broker from the buyer's later argument that the seller made oral representations upon which the buyer relied. It does not protect a seller or broker from the buyer's lawsuit based on representations and failure to disclose in the form itself or relieve a seller of the obligation to make accurate and complete disclosures, and both contract and reliance-based tort and Kansas Consumer Protection Act claims are not subject to summary judgment. 4. A buyer of residential real estate may qualify as an "aggrieved consumer" under the Kansas Consumer Protection Act. K.S.A. 50-634. 5. The reasonableness of a home inspection, as true of the existence of fraud generally, poses a question of fact for trial. 6. New opinions of the Kansas Supreme Court generally are binding on all other future cases and all cases still pending on appeal when the new opinions are filed. An exception may be made when (1) the new opinion establishes a new rule of law; (2) retroactive application would not further the principle on which the new opinion is based; and (3) retroactive application would cause substantial hardship or injustice. Neither the decision in Osterhaus v. Toth, 291 Kan. 759, 249 P.3d 888 (2011), nor the defendant seller in this case qualify for application of the exception. 7. In this case, genuine issues of material fact exist on the plaintiff buyers' fraudulent inducement, fraud by silence, negligent misrepresentation, and breach of contract claims against the defendant seller and against the defendant trust. 8. The Brokerage Relationships in Real Estate Transactions Act (BRRETA), K.S.A. 58-30,101 et seq., does not eliminate the possibility of a common-law cause of action against a real estate agent or broker for negligent misrepresentation. It merely requires evidence of the agent's or broker's actual knowledge of an otherwise undisclosed adverse material fact about the subject property; that knowledge need not have been acquired through personal observation or experience, as one also has actual knowledge sufficient to meet the statutory requirement when the knowledge is acquired from another person or document. The agent or broker is not charged with responsibility for acquiring adverse information independently, only with competently passing on what is known. In this way, BRRETA does protect agents and brokers from common-law liability arising out of negligent acquisition of information but not negligent communication or failure to communicate information. In this case, the common-law duty under Restatement (Second) of Torts § 552 (1976) and Mahler v. Keenan Real Estate, Inc., 255 Kan. 593, 876 P.2d 609 (1994), was reinforced by the duty undertaken by the defendant real estate agent in her agency agreement with seller, in which the agent promised to inform potential buyers of material defects in the home of which she had actual knowledge. Genuine issues of material fact exist on the plaintiff buyers' negligent misrepresentation claim against the agent and the respondeat superior liability of her defendant broker. 9. K.S.A. 50-625(a) provides that a consumer cannot waive or forego rights under the Kansas Consumer Protection Act. 10. In this case, genuine issues of material fact exist on the plaintiff buyers' Kansas Consumer Protection Act claims against the defendant real estate agent for seller and against the defendant brokerage company. 11. Standing is a component of subject matter jurisdiction that may be raised for the first time on appeal. An inadequate record on appeal to support challenges to plaintiffs' standing may be developed on remand to the district court and the challenges renewed by one or more defendants or sua sponte by the judge.

The opinion of the court was delivered by: Beier, J.:

Review of the judgment of the Court of Appeals in 43 Kan. App. 2d 47, 222 P.3d 507 (2010).

Judgment of the Court of Appeals affirming in part, reversing in part, and remanding to the district court is affirmed in part and reversed in part. Judgment of the district court is reversed and remanded.

The opinion of the court was delivered by

The core issue of this appeal is the legal effect of a "Buyer Acknowledgment" in a residential real estate seller's disclosure form. Does it limit or destroy the buyer's ability to pursue the seller, the seller's agent, and the agent's brokerage firm for breach of contract, fraudulent inducement and fraud by silence, negligent misrepresentation, and/or violations of the Kansas Consumer Protection Act (KCPA)? As we detail below, our resolution of this question picks up where we left off in Osterhaus v. Toth, 291 Kan. 759, 249 P.3d 888 (2011), and we hold that the district court judge's summary judgment in favor of all defendants on all claims must be reversed and the entire case remanded for further proceedings.

EVIDENCE IN RECORD

The record before us contains evidence to support the following:

In May 1998, defendant A. Drue Jennings purchased a new home in Leawood. He began residing in the house in October 1998.

Four years later, in August 2002, Jennings contacted the builder of the home, William Brimacombe, about water leaks. Jennings told Brimacombe about a leak in the living room ceiling, and Brimacombe contacted Gentry Roofing to inspect the roof. Brimacombe also visited the house and observed water stains on the ceiling. The roofing inspection did not reveal a source of the leaks, and Brimacombe advised Jennings to have the windows of the home inspected.

By late October 2002, defendant A. Drue Jennings Revocable Trust took title to the home. Jennings served as trustee.

In January 2003, Jennings contacted Brimacombe again about another water leak, and Brimacombe came out to the home to inspect it, along withrepresentatives of Gentry Roofing. The Gentry representatives observed water stains on the window sills in an upstairs loft. Brimacombe told Jennings again to have the home's windows inspected.

Jennings contacted the window subcontractor, Morgan-Wightman Supply Company, who in turn hired Excel Window & Door, Inc., to inspect the windows. Excel made eight visits to the home between August 2002 and September 2004 to evaluate leaks and/or repair windows in the home.

In August 2002, Jennings told Chris Whorton from Excel that he had noticed leaking all over the home and pointed out three areas he believed had experienced the worst leaks. Whorton observed water and dirt stains from the water leakage. During another visit, Jennings showed Whorton water stains under a section of carpet that extended approximately 2 feet from a window, along with another stain several feet from the window. Whorton told Jennings he could either caulk all the windows or remove the trim from the home to find the source of the water problems. Jennings elected to caulk all the windows. Whorton informed Jennings that caulking the windows was a temporary "Band Aid" solution.

Excel performed two water tests on the home, one in August 2002 and another in September 2003. Jennings was present during both tests. The August 2002 test showed one window leaked between the casing and trim. The September 2003 test showed that window frame corners were leaking.

In September 2002, Jennings paid Excel $2,650 to caulk all of the windows and doors in the home, to caulk between the cedar and stucco exterior, and to caulk between the cedar and the doors and windows. Whorton testified that Jennings paid for the caulking because it was "a maintenance issue."

In May 2003, Jennings hired and paid a painter to paint the area on the living room ceiling and trim where water had leaked the prior year.

Whorton again visited the home in September 2003, and Jennings told him that all of the windows were defective and needed to be replaced. Whorton told Jennings that he would pass the information along to Morgan-Wightman, but that it was not up to Whorton whether the windows would be replaced. Excel did not make any repairs to the windows in September 2003.

Jennings testified in his deposition that, after the September 2003 testing, another round of repairs was made to the windows, but he did not indicate who performed the repairs. Jennings stated that he did not pay for this second round of repairs.

In February 2005, Jennings listed the home for sale. Jennings' fiancee, defendant Emily Golson, of defendant PHB Realty Company, L.L.C. (PHB), was the listing agent for the home. (Jennings and Golson married in April 2005, and Golson changed her surname to Jennings; to avoid confusion, we refer to her throughout this opinion as Golson.)

Golson had been a licensed real estate agent since 1992. Jennings and Golson entered into an agency agreement requiring Golson, among other things, to inform potential buyers of material defects in the home of which she had actual knowledge.

Golson was in Jennings' home a couple of times a week from August 2004 to the spring of 2005, but she never noticed any evidence of water damage or leaks.

In anticipation of the home's sale, Jennings completed and signed a "Seller's Disclosure and Condition of Property Addendum" form, dated February 28, 2005.

Section 1 of the disclosure, "SELLER'S INSTRUCTIONS," states: "SELLER agrees to disclose to BUYER all material defects, conditions and facts OF WHICH SELLER IS AWARE which may materially affect the value of the Property. This disclosure statement is designed to assist SELLER in making these disclosures. Licensee(s), prospective buyers[,] and buyers will rely on this information."

Section 2, "NOTICE TO BUYER," states:

"This is a disclosure of SELLER'S knowledge of the condition of the Property as of the date signed by SELLER and is not a substitute for any inspections or warranties that BUYER may wish to obtain. It is not a warranty of any kind by SELLER or a warranty or representation by the BROKER(S) or their licensees."

In Section 7, "STRUCTURAL, BASEMENT AND CRAWL SPACE ITEMS," Jennings answered "No" to question 7(d) regarding whether there was "any water leakage or dampness in the house, crawl space[,] or basement?" He also answered "No" to 7(i) regarding any repairs or other attempts to control the cause or effect of any problem described in Section 7, including water leakage or dampness in the home. Had Jennings answered "Yes" to questions 7(d) or 7(i), he would have been required to explain in detail in a space provided after Section 7, where the form instructed: "When describing repairs or control efforts, describe the location, extent, date, and name of the person who did the repair or control effort and attach any inspection reports, estimates or receipts."

In Section 14(f), "OTHER MATTERS," Jennings represented that he was not "aware of any general stains or pet stains to the carpet, the flooring, or sub-flooring." Had he indicated that he was aware of such stains, he would have been required to provide additional details.

In the paragraph preceding Jennings' signature line, the disclosure form provides:

"Disclose any material information and describe any significant repairs, improvements or alterations to the property not fully revealed above. If applicable, state who did the work. Attach to this disclosure any repair estimates, reports, invoices, notices or other documents describing or referring to the matters revealed herein:"

In the space provided, Jennings wrote: "Several windows leaked after construction; full warranty repairs were performed, and correction is complete." The form then provides:

"The undersigned Seller represents that the information set forth in the foregoing Disclosure Statement is accurate and complete. Seller does not intend this Disclosure Statement to be a warranty or guarantee of any kind. Seller hereby authorizes [his] agent to provide this information to prospective Buyers of the property and to real estate brokers and salespeople. Seller will promptly notify Licensee assisting the Seller, in writing, if any information in this disclosure changes prior to Closing, and Licensee assisting the Seller will promptly notify Licensee assisting the Buyer, in writing, of such changes."

Under Jennings' signature on the form disclosure statement is a "BUYER ACKNOWLEDGMENT AND AGREEMENT," which states:

"1. I understand and agree that the information in this form is limited to information of which SELLER has actual knowledge and that SELLER need only make an honest effort at fully revealing the information requested.

"2. This property is being sold to me without warranties or guaranties of any kind by

SELLER or BROKER(S) or agents concerning the condition or value of the Property.

"3. I agree to verify any of the above information, and any other important information provided by SELLER or BROKER (including any information obtained through the multiple listing service) by an independent investigation of my own. I have been specifically advised to have the property examined by professional inspectors.

"4. I acknowledge that neither the SELLER nor BROKER is an expert at detecting or repairing physical defects in the property.

"5. I specifically represent that there are no important representations concerning the condition or value of the property made by SELLER or BROKER on which I am relying except as may be fully set forth in writing and signed by them."

After completing the disclosure form, Jennings reviewed the form with Golson and discussed the prior leaks with her. Golson testified that Jennings told her about leaking, staining, and window repairs; that the builder had been contacted; and that the repairs were complete. Golson did not verify the information in the disclosure statement or review any of Jennings' paperwork related to the repairs.

On April 3, 2005, plaintiff husband and wife Daniel J. Stechschulte, Jr., and Satu

S.A. Stechschulte toured Jennings' home and, on April 5, they again toured the home and signed a contract to purchase it. The Stechschultes had not noticed any water leakage during their visits to the home, and they signed and dated the Buyer Acknowledgment on April 5.

According to Jennings, the Stechschultes came over to the home several times before closing. He recalled one instance, in particular, when Satu Stechschulte came over with ...


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