Kevin Reber v. Priscilla Walls

• Court: Court of Appeals of Kentucky
• Decided: July 21, 2022
• Docket: 2021 CA 000279
• Status: Unknown

Opinion

RENDERED: JULY 22, 2022; 10:00 A.M. NOT TO BE PUBLISHED

Commonwealth of Kentucky Court of Appeals

NO. 2021-CA-0279-MR

KEVIN REBER AND BEVERLY REBER APPELLANTS

APPEAL FROM SCOTT CIRCUIT COURT v. HONORABLE BRIAN K. PRIVETT, JUDGE ACTION NO. 16-CI-00416

PRISCILLA WALLS AND JEFF GREEN APPELLEES

OPINION AFFRIMING

** ** ** ** **

BEFORE: ACREE, COMBS, AND MAZE, JUDGES.

MAZE, JUDGE: Kevin and Beverly Reber (the Rebers) appeal from a summary

judgment by the Scott Circuit Court dismissing their claims against Priscilla Walls

(Walls) and Jeff Green (Green). The Rebers’ claims in this case arise from Walls’

and Green’s alleged failure to disclose repairs to real property as part of the Sales

and Purchase Contract. We agree with the trial court that the Rebers failed to show that there were genuine issues of material fact on essential elements of their claims

against Walls and Green for negligence, negligent misrepresentation, fraud and

fraudulent misrepresentation, breach of contract, and violation of the Kentucky

Consumer Protection Act (KCPA). Hence, we affirm.

I. Facts and Procedural History

Except where noted, the underlying facts of this matter are not in

dispute. In 2005, Walls purchased a home and land located at 606 Woodduck

Lane in Georgetown, Scott County, Kentucky. The property was situated on a

hillside. In 2007, Walls contracted with United Structural Systems (USS), an

engineering firm, to install twenty steel piers at points around the back wall of the

house. In her deposition, Walls stated that there had been no structural issues with

the foundation. Rather, she had the piers installed to prevent any future structural

instability due to the house’s location on a steep slope.

In 2013, Walls retained Green, a licensed real estate agent, to list and

sell the property. In her initial Seller’s Disclosure Statement, dated April 15, 2013,

Walls checked “Yes” next to the question “Any defects or problems, current or

past, to the foundation of slab?” She also included the handwritten notation,

“Fixed” next to the question. Thereafter, on May 27, 2013, Walls prepared a

second Disclosure Statement which checked “No” to the question. Walls states

that she altered the disclosure because the initial answer was not accurate, as there

-2- had been no prior issues with the foundation. However, the Rebers allege that

Walls had told a prior potential purchaser that “[d]oors were sticking due to house

settling[,]” and that the piers were installed “to correct and prevent future settling.”

On July 31, 2013, the Rebers entered into a real estate purchase

contract to purchase the property from Walls for $210,000.00. The Rebers were

represented by Paige Brown, a licensed real estate agent affiliated with BMR

Realty Group. Prior to the closing, the Rebers hired JDG Home Inspections to

conduct the home inspection. The inspection report did not note the presence of

the piers or indicate any foundation issues.

Following the closing, the Rebers took possession of the property.

Over the next several years, the Rebers made numerous improvements. They

removed trees from the front yard, removed and replaced the driveway, installed a

retaining wall and concrete pad, installed concrete steps from the garage down the

side of the house to the backyard, and installed concrete steps from the concrete

pad to the front door.

In February 2016, the Rebers discovered a leak in the front right

portion of the basement. In the process of investigating the leak, the Rebers

learned of the piers that Walls had installed. The Rebers hired USS to fix the leak

and paid USS to extend the warranty on the piers.

-3- Thereafter, on July 18, 2016, the Rebers filed the current complaint

against Walls, Green, and JDG Home Inspections. In pertinent part, the Rebers

asserted claims against Walls and Green for negligence, negligent

misrepresentation, fraud and fraudulent misrepresentation, breach of contract,

breach of duties of good faith and fair dealing, and violations of the KCPA. Their

complaint sought compensatory damages for the cost of the repairs, costs of future

repairs, and the diminution of the value of the property. The Rebers also sought

punitive damages for the misrepresentation, fraud, good faith and fair dealing, and

KCPA claims.

Following a period of discovery, Walls and Green moved for

summary judgment. The Rebers responded with a cross-motion for summary

judgment. Thereafter, on February 8, 2021, the trial court granted Walls’ and

Green’s motions for summary judgment. The court found that there were genuine

issues of material fact on whether Walls and Green misrepresented the existence of

prior repairs to the foundation. However, the Court noted that the Rebers failed to

present any expert witness stating that the installation of the piers caused the leak.

Consequently, the court concluded that the Rebers had failed to establish an

essential element of their negligence claims. The trial court separately found that a

claim for negligent misrepresentation is only available in matters involving

business transactions, not in a private sale of residential property.

-4- Next, the court concluded that the Rebers’ claims for fraud and

fraudulent misrepresentation must fail because there was no evidence that Walls

installed the piers to correct any existing foundation issues. Consequently, the

court held that Rebers failed to establish that the representations in the Seller’s

Disclosure were materially false at the time they were made. Likewise, the court

found that the Rebers failed to establish that any misrepresentations about the piers

caused the injury. The court also determined that these factors precluded the

contract claims. Finally, the trial court held that the Rebers could not recover

compensatory damages given the absence of any evidence of actionable fraud or

gross negligence. The trial court designated its order granting summary judgment

to Walls and Green as final and appealable pursuant to CR1 54.02. This appeal

followed.

II. Standard of Review

The issues on appeal concern whether the trial court properly granted

summary judgment dismissing the Rebers’ claims against Walls and Green.

“[T]he proper function of summary judgment is to terminate litigation when, as a

matter of law, it appears that it would be impossible for the respondent to produce

evidence at the trial warranting a judgment in his favor.” Steelvest, Inc. v.

Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 480 (Ky. 1991). Summary judgment is

1 Kentucky Rules of Civil Procedure.

-5- appropriate “if the pleadings, depositions, answers to interrogatories, stipulations,

and admissions on file, together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party is entitled to a

judgment as a matter of law.” CR 56.03.

“The record must be viewed in a light most favorable to the party

opposing the motion for summary judgment and all doubts are to be resolved in his

favor.” Steelvest, 807 S.W.2d at 480. “The trial [court] must examine the

evidence, not to decide any issue of fact, but to discover if a real issue exists.” Id.

On the other hand, “a party opposing a properly supported summary judgment

motion cannot defeat it without presenting at least some affirmative evidence

showing that there is a genuine issue of material fact for trial.” Id. at 481. Since a

summary judgment involves no fact-finding, this Court’s review is de novo, in the

sense that we owe no deference to the conclusions of the trial court. Scifres v.

Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996).

III. Negligence Claims

As the trial court correctly noted, the Rebers were required to show

four elements to establish their claims for negligence: the existence of a duty,

breach thereof, proximate causation, and damages. Boland-Maloney Lumber Co.,

Inc. v. Burnett, 302 S.W.3d 680, 686 (Ky. App. 2009) (citing Illinois Central R.R.

v. Vincent, 412 S.W.2d 874, 876 (Ky. 1967); Mullins v. Commonwealth Life Ins.

-6- Co., 839 S.W.2d 245, 247 (Ky. 1992)). The existence of a duty is a question of

law for the court, while breach and injury are questions of fact for the jury.

Pathways, Inc. v. Hammons, 113 S.W.3d 85, 89 (Ky. 2003). Causation presents a

mixed question of law and fact. Id.

The Rebers argue that Walls and Green had a duty to disclose the

piers installed by USS and that they breached that duty by negligently failing to

disclose the prior repairs to the foundation. The trial court found there was a

genuine issue of material fact whether Walls actually disclosed the existence of the

piers. Specifically, the court noted Walls’ testimony that she left the materials

from USS in the house during the showings and that she discussed USS’s warranty

on the piers with the Rebers prior to the closing. Since the Rebers deny ever being

informed about the piers, the trial court concluded that summary judgment was not

appropriate on this issue.

However, the trial court further noted that the Rebers declined to

consult with a structural engineer. Consequently, there was no evidence that the

piers played any role in causing the leak in the foundation. The Rebers respond

that they were not seeking damages caused by the leak. Rather, they state that they

were seeking either the difference in the fair market values of the property as it was

disclosed at the time of sale and with the undisclosed prior foundation work. In the

-7- alternative, the Rebers contend that they may be entitled to rescission of the

contract.

But as the trial court held, expert testimony is typically required to

prove both the breach of a duty and proximate causation of damages. Blankenship

v. Collier, 302 S.W.3d 665, 671 (Ky 2010) (citing Perkins v. Hausladen, 828

S.W.2d 652, 655-56 (Ky. 1992)). Expert testimony is not required where “the jury

may reasonably infer both negligence and causation from the mere occurrence of

the event and the defendant’s relation to it.” Perkins, 828 S.W.2d at 656 (quoting

RESTATEMENT (SECOND) OF TORTS cmt. b, p. 157)). See also Celina Mut. Ins. Co.

v. Harbor Ins. Agency, 332 S.W.3d 107, 109-10 (Ky. 2010). In this case, the

Rebers rely only on the existence of a general statutory duty to disclose “other

matters the [Kentucky Real Estate] Commission deems appropriate.” KRS2

324.360(3)(f). The Rebers did not offer any expert testimony that the mere

installation of the piers is the type of repair which the Commission would require

to be disclosed.

Moreover, the Rebers do not identify any expert testimony stating that

their claimed damages were caused by the failure to disclose. Even assuming that

Walls and Green had a duty to disclose the piers and that they violated that duty,

the Rebers do not identify any expert testimony that the fair market value of the

2 Kentucky Revised Statutes.

-8- property was diminished as a result. We agree with the trial court that these are

matters which are outside of the scope of lay knowledge and therefore require

expert testimony.

The Rebers assert that they “intended to retain an expert to compare

the fair market value[.]” However, a party “cannot complain of the lack of a

complete factual record when it can be shown that the respondent has had an

adequate opportunity to undertake discovery.” Leeds v. City of Muldraugh, 329

S.W.3d 341, 344 (Ky. App. 2010) (quoting Cargill v. Greater Salem Baptist

Church, 215 S.W.3d 63, 69 (Ky. App. 2006)). In addition, the Rebers did not

request additional time to obtain an expert. Celina Mut. Ins. Co. v. Harbor Ins.

Agency, 332 S.W.3d at 113. Since the Rebers do not contend that they were

deprived of a reasonable opportunity to obtain further discovery on this issue, we

must conclude that the absence of expert testimony is fatal to their claims.

In the alternative, the Rebers argue that expert testimony is not

necessary to support their claim for rescission of the contract. The Rebers concede

that their original complaint did not seek rescission and the trial court did not rule

on their motion to file an amended complaint seeking that remedy. The Rebers do

not appeal from the trial court’s failure to rule on that motion. Consequently, the

rescission claim is not before this Court on appeal. In any event, rescission is a

-9- remedy under the contract, not for negligence. Therefore, we will address that

issue below.

IV. Negligent Misrepresentation

In Presnell Construction Managers, Inc. v. Eh Construction, LLC, 134

S.W.3d 575, 580 (Ky. 2004), the Kentucky Supreme Court adopted the

RESTATEMENT (SECOND) OF TORTS § 552, which outlines the elements of negligent

misrepresentation as follows:

(1) One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

(2) Except as stated in Subsection (3), the liability stated in Subsection (1) is limited to loss suffered

(a) by the person or one of a limited group of persons for whose benefit and guidance he intends to supply the information or knows that the recipient intends to supply it; and

(b) through reliance upon it in a transaction that he intends the information to influence or knows that the recipient so intends or in a substantially similar transaction.

(3) The liability of one who is under a public duty to give the information extends to loss suffered by any of the class of persons for whose benefit the duty is created, in any of the transactions in which it is intended to protect

-10- them.

In Kentucky Farm Bureau Mutual Insurance, Company v. Blevins,

268 S.W.3d 368, 372 (Ky. App. 2008), this Court focused on the phrase, “for the

guidance of others in their business transactions” in Subsection (1). Based on this

language, the Court held that private sale of residential property from one set of

homeowners to another is not the type of transaction covered by the tort of

negligent misrepresentation as set forth in Section 552. Id. at 373. The Rebers

take issue with this interpretation, noting that Section 552(3) extends liability to a

“person who is under a public duty to give the information.” However, Blevins

remains the controlling authority concerning the scope of Section 552.

The Rebers also point to Waldridge v. Homeservices of Kentucky,

Inc., 384 S.W.3d 165 (Ky. App. 2011), as imposing liability on a real estate agent

for failure to disclose known defects in listed property. However, Waldridge is

clearly distinguishable, as it was based upon claims for fraudulent

misrepresentation and breach of fiduciary duties, not claims for negligent

misrepresentation under Section 552. Id. at 171. Therefore, we must agree with

the trial court that summary judgment was appropriate on the Rebers’ claims for

negligent misrepresentation.

-11- V. Fraud and Fraudulent Misrepresentation

Under Kentucky law, a party claiming harm “must establish six

elements of fraud by clear and convincing evidence as follows: a) material

representation b) which is false c) known to be false or made recklessly d) made

with inducement to be acted upon e) acted in reliance thereon and f) causing

injury.” United Parcel Service Co. v. Rickert, 996 S.W.2d 464, 468 (Ky. 1999).

As previously noted, there is a genuine issue of material fact whether the

installation of the piers constituted a repair to the foundation. However, the trial

court concluded that the Rebers could not prove that the representation was false at

the time it was made because they had no expert testimony so showing. For

similar reasons, the trial court found that the Rebers could not prove that their

claimed injury was caused by the failure to disclose the piers. Finally, the trial

court also found that the Rebers had not shown reliance on the representation

because they hired their own expert to inspect the property prior to the closing.

Under the circumstances presented in this case, we agree with the trial court’s

analysis.

As previously discussed, expert testimony is typically required to

establish both breach of a duty and causation of damages. The Rebers contend that

expert testimony was not required to establish that the statement was false because

Walls had previously disclosed the piers as a repair in her first Seller’s Disclosure

-12- Statement. But even if there is a genuine issue of material fact on this issue, the

Rebers presented no expert testimony that their claimed damages were caused by

the failure to disclose the installation of the piers. As noted, there was no

testimony that the leak was caused by the installation of the piers or that the fair

market value of the property was reduced as a result. Likewise, there was no

testimony supporting the Rebers’ claim for rescission of the contract. Therefore,

the trial court properly found that the Rebers failed to establish an essential

element of their claim for fraudulent misrepresentation.

On the reliance issue, the trial court found the analysis in Ross v.

Powell, 206 S.W.3d 327 (Ky. 2006), to be controlling. In that case, the sellers of a

home disclosed the existence of prior termite damage but failed to disclose the

extent of the damage or the treatments. However, the buyers paid for an

independent whole house inspection and a separate specialized professional termite

inspection prior to the closing. The buyers also admitted they had carefully

examined the premises and had relied completely on their own judgment and the

judgment of their inspectors. Id. at 331. Consequently, the Supreme Court found

that the buyers could not establish their reliance on the seller’s statements. Id.

The Rebers argue that Ross is distinguishable because the repairs to

the foundation were latent and were actively concealed by Walls and Green. We

agree with the Rebers that their hiring of an independent home inspector would not

-13- preclude a finding that they relied on the representations in the Seller’s Disclosure

Form. In Ross, the inspection report obtained by the buyers revealed the existence

of prior insect damage. In contrast, the inspection report obtained by the Rebers

did not identify the existence of the piers or any foundation damages. But since

the Rebers failed to establish other essential elements of fraudulent

misrepresentation, the trial court’s holding on this issue did not affect the outcome

of the motion for summary judgment. And in the absence of any viable claims for

negligence or fraud, the trial court properly dismissed the Rebers’ claims for

punitive damages.

VI. Breach of Sales and Purchase Contract

The Rebers next argue that the trial court erred by dismissing their

claims for breach of the Sales and Purchase Contract because Walls’ failure to

disclose the installation of the piers constitutes a breach of the contractual duty to

disclose repairs. Walls and Green argue that the purchase contract merged with the

deed upon delivery and acceptance of the deed. Harrodsburg Indus. Warehousing

v. MIGS, LLC, 182 S.W.3d 529, 532 (Ky. App. 2005). However, that case also

makes it clear that fraud claims are not merged into the deed. Id. (citing 77 Am.

Jur. 2d Vendor and Purchaser § 286 (1997)).

But as the trial court noted, the essence of the claim is that the failure

to disclose the installation of the piers to buttress the structures’ stability

-14- constitutes a repair as contemplated by the contract and thus a breach. The trial

court found that the Rebers failed to produce any evidence that the piers were

actually a repair to the property subject to disclosure. There was no evidence of

any prior leaks or damage to the foundation. At most, Walls had observed sticking

doors. Other than Walls’ assumption, there was no evidence that the sticking doors

were caused by a settling foundation. Thus, the Rebers failed to establish that

Walls violated any specific contractual duty or general duty of good faith and fair

dealing.

VII. Consumer Protection Act Claim

Finally, the Rebers argue that the trial court erred in dismissing their

KCPA claim against Green. The Rebers note that the Act only protects “[a]ny

person who purchases or leases goods or services primarily for personal, family or

household purposes . . . .” KRS 367.220. As a result, the Rebers concede that

Walls is not subject to liability under the KCPA. On the other hand, the Rebers

maintain that Green was providing a service, and that his actions may be the basis

for a violation of the KCPA.

However, there is no authority holding that the KCPA is applicable to

real estate transactions. Craig v. Keene, 32 S.W.3d 90, 91 (Ky. App. 2000).

Furthermore, the language of KRS 367.170 only contemplates an action by a

purchaser of goods or services against his or her immediate seller. Potter v. Bruce

-15- Walters Ford Sales, Inc., 37 S.W.3d 210, 213 (Ky. App. 2000) (citing Skilcraft

Sheetmetal v. Kentucky Machinery, Inc., 836 S.W.2d 907, 909 (Ky. App. 1992)).

In the absence of privity of contract between the Rebers and Green, the trial court

properly granted summary judgment on their CPA claims.

VIII. Conclusion

Based on the foregoing, we conclude that the trial court properly

granted summary judgment on the Rebers’ claims against Walls and Green.

Therefore, we affirm the judgment of the Scott Circuit Court.

ALL CONCUR.

BRIEFS FOR APPELLANTS: BRIEF FOR APPELLEE JEFF GREEN: Matthew S. Goeing Lexington, Kentucky Virginia L. Lawson Zachary C. Webster Lexington, Kentucky

-16-