Judgment rendered November 15, 2023. Application for rehearing may be filed within the delay allowed by Art. 2166, La. C.C.P.
No. 55,317-CA
COURT OF APPEAL SECOND CIRCUIT STATE OF LOUISIANA
*****
RYAN CHMIELEWSKI AND Plaintiffs-Appellees PATRICIA CHMIELEWSKI
versus
DEREK SOWELL, Defendants-Appellants INDIVIDUALLY AND ON BEHALF OF PROSPECTIVE REAL ESTATE, LLC OF COLORADO, AND SHREVEPORT INVESTMENT GROUP, LLC, D/B/A KELLER WILLIAMS REALTY NWLA
***** Appealed from the First Judicial District Court for the Parish of Caddo, Louisiana Trial Court No. 617,326
Honorable Michael A. Pitman, Judge
COOK, YANCY, KING & GALLOWAY APLC Counsel for Appellant, By: Bernard S. Johnson Derek Sowell, Individually And on Behalf of Prospective Real Estate, LLC of Colorado
BREAZEALE, SACHSE & WILSON, LLP Counsel for Appellant, By: Eric B. Landry Louisiana Realtors Kristin E. Oglesby
KAMMER & HUCKABAY, LTD APLC Counsel for Appellees By: Charles H. Kammer, III
Before COX, STEPHENS, and ROBINSON, JJ. COX, J.
This appeal arises out of the First Judicial District Court, Caddo
Parish, Louisiana. Ryan and Patricia Chmielewski (hereinafter referred to as
the “Plaintiffs”) filed suit against Derek Sowell (“Capt. Sowell”) and
Prospective Real Estate, LLC of Colorado (“Prospective Real Estate”)
(collectively referred to as the “Defendants”)1 for misrepresenting property
repairs in their real estate transaction. The trial court found that Capt.
Sowell was liable as the agent but not liable as the seller. Capt. Sowell has
appealed that ruling, the Plaintiffs answered the appeal, and Louisiana
Realtors filed an amicus curiae brief. For the following reasons, we affirm
the trial court.
FACTS
On July 26, 2018, the Plaintiffs purchased property at 4057 Baltimore
Avenue in Shreveport (the “Property”) through a cash sale deed from
Prospective Real Estate. The home on the Property is a two-story house; the
first floor is on the ground level of the front yard; the second level is a
basement that cannot be seen from the front, but is at ground level from the
back yard; there are walls under the ground that form the basement level.
Capt. Sowell was the agent/owner and sole member of Prospective Real
Estate. Capt. Sowell was also the real estate agent for the Property. The
Plaintiffs purchased the Property “as is” with the following waiver:
SALE AS IS WITHOUT WARRANTIES: Vendor and Vendee hereby acknowledge and recognize that the Property being sold and purchased is to be transferred in as is condition and further Vendee does hereby waive, relieve and release Vendor from any claims or causes of action for redhibition pursuant to Louisiana Civil Code Article 2520, et seq. and Article 2541, et
1 Shreveport Investment Group, LLC d/b/a Keller Williams Realty NWLA was originally named in the suit and later dismissed. seq. or for reduction of Sales Price pursuant to Louisiana Civil Code Article 2541, et seq. Additionally, Vendee acknowledges that this sale is made without warranty of fitness for ordinary or particular use pursuant to Louisiana Civil Code.
Prior to the purchase, on June 30, 2018, Capt. Sowell signed a
property disclosure document (hereinafter referred to as the “Disclosure”)
and the Plaintiffs signed the Disclosure on July 3 and 4, 2018. He marked
“yes” beside the following statement: “Has any flooding, water intrusion,
accumulation, or drainage problem been experienced with respect to the
land?” He then wrote the following on the Disclosure: “There was a water
intrusion problem before remodel. Ark-La-Tex Foundations excavated the
entire perimeter of the home, applied waterproofing, and a new tile drain.
The repair was signed off by a professional engineer. Ark-La-Tex provided
a 3-year warranty.” Capt. Sowell disclosed that there had been foundation
repair—it was waterproofed and a certified contractor inspected the
foundation and determined no repairs were required. He stated the Property
experienced damage from windstorm, flood, hail, or lightning, which was
repaired.
On June 18, 2019, the Plaintiffs filed their original petition against the
Defendants. They alleged that prior to buying the Property, the water
intrusion was not apparent, discoverable, or obvious because the defects
were hidden. They stated that they experienced water damage on November
12, 2018, December 27, 2018, and May 9, 2019. The Plaintiffs asserted that
when investigating the water intrusion, they discovered that Capt. Sowell
never fixed the problem as set forth in the disclosure because he was still
working on the flooding issues in 2017 and 2018. They alleged that Capt.
Sowell, as agent of Prospective Real Estate, fraudulently misrepresented that
2 the Property had been repaired and the flooding issue had been resolved.
They asserted that Capt. Sowell intentionally and fraudulently failed to
disclose the issues on the Property and numerous repair attempts after the
2016 engineering report. The Plaintiffs alleged that Capt. Sowell breached
his ethical duties as an agent because he had the duty to relay accurate
information about the Property.
The Plaintiffs stated that because the Defendants fraudulently
misrepresented the Property, they are not bound by the waiver of warranty
and “as is” clause. They stated that had they known of the defects or
continuous efforts to fix the problem, they would not have purchased the
Property. The Plaintiffs alleged that they have been forced to tear apart their
home; they have been displaced as a result of the repair work; they have
expended a substantial amount of time, money, and energy in discovering
the fraudulent misrepresentations made by Defendants; and, they have
expended and will continue to spend a substantial amount of time, energy,
and money on repairing the Property. The Plaintiffs alleged that they have
suffered stress, mental anguish, inconvenience, and loss of enjoyment of the
Property. They stated that they have had significant concerns regarding the
effect on their health and quality of air due to the improper management of
water intrusion remediation; they were concerned that they may lose their
home.
The Plaintiffs requested the following from the Defendants: return of
the purchase price with interest from the time it was paid; reimbursement of
reasonable expenses occasioned by the sale and those incurred for the
preservation of the house; and, damages, costs, and reasonable attorney fees.
In the event that the sale was not rescinded, the Plaintiffs requested a 3 reduction in the sale price along with all damages, costs, and attorney fees as
allowed by law.
The Defendants filed an answer and then two amended answers,
which all denied the Plaintiffs’ allegations and stated that the Plaintiffs
caused and/or contributed to water intrusion problems on the Property by
failing to maintain the premises in the following ways:
a) Damaging the waterproofing system in the course of performing yard maintenance or otherwise;
b) Permitting damaged components of the waterproofing system to remain in a damaged condition, and failing and refusing to repair them, even though the damaged sections are obviously the source of water intrusion into the house;
c) Failing to properly maintain the drainage system around the front porch of the house, allowing the intake to the drainage system there to extend well above the surface level, making it impossible for water to drain through it;
d) Failing to remedy the settling of the front porch slab, which has become tilted in the direction of the house, causing water to pool near the house;
e) Other acts and omissions to be shown at the trial of this case;
f) Allowing water from the west side of the property to pool against the house, by failing to divert water from the front of the house to the sides;
g) Failing to address the settling of the soil resulting in the separation of the drainage blanket from the foundation wall. The Defendants alleged that for these reasons, the damage was caused by the
Plaintiffs and the Plaintiffs’ failure to mitigate their damage. They stated
that the Plaintiffs specifically waived any redhibition and had the full
opportunity to inspect the house before the sale. They also argued that the
Plaintiffs were not entitled to set aside their waiver of redhibition because
they could have ascertained the facts that they claim were suppressed
“without difficulty, inconvenience, or special skill.” They asserted that if
4 the Plaintiffs are permitted to claim redhibition, then they (the Defendants)
are entitled to a credit for the Plaintiffs’ use of the house from July of 2018,
as provided in La. C.C. art. 2545.
The Defendants asserted that drainage repair was completed by Ark-
La-Tex Foundation Services. They stated that if the Plaintiffs suffered any
damages resulting from inferior materials or defective workmanship, which
result in any liability to the Defendants, then they (the Defendants) are
entitled to indemnification against Ark-La-Tex Foundation Services.
The Defendants filed a motion for summary judgment on the basis
that the Plaintiffs could not seek to rescind the sale of the Property for
redhibitory defects because the sale was made “as is, where is” with an
explicit waiver of redhibition. The Plaintiffs opposed the MSJ and a hearing
was held on October 4, 2021. The trial court found there were genuine
issues of material fact and denied the Defendants’ MSJ. The Defendants
took a writ to the Fourth Circuit, which was denied.2
After the pretrial order, witness list, and exhibit list were filed, the
Defendants filed a submission of the evidentiary deposition of John Wells.
They asserted that this testimony was offered concerning a credit for the
Plaintiffs’ use of the allegedly defective residence, in the event the trial court
determined that they had any liability to the Defendants on the basis of
redhibition.
The trial was held on June 22 and 23, 2023. Rebecca Stevens testified
that she has been a licensed real estate agent for 20 years and licensed real
2 At the time the writ was taken, all nine judges of this Court were recused because Bernard Johnson, the Defendants’ attorney, was representing the Court in an unrelated matter. He is no longer representing this Court so the recusal no longer applies.
5 estate broker since 2015. Mrs. Stevens has additional certifications in real
estate including being a military specialist. She stated that she is typically
involved in 70 to 90 home-purchase transactions a year and represented the
Plaintiffs in their purchase from the Defendants. She testified that there
were no disclosures attached to the real estate listing of the Property so she
requested them in the buy/sell agreement on June 27, 2018. She stated that
she initially received disclosures dated August 9, 2017, and requested an
updated disclosure for 2018, the year of the purchase.
Mrs. Stevens testified that the Plaintiffs had the home inspected. She
explained that home inspectors are licensed and look at “plumbing, heating,
the roof on the home, make sure we don’t have any blown shingles.
Anything that would persuade further investigations.” She then read the
disclosures regarding the waterproofing of the foundation and water
intrusion. She stated that because of the issues on the 2017 disclosure, she
requested an updated disclosure to determine if there had been any more
water intrusion. Mrs. Stevens testified that it is the seller, not the agent, who
fills out the disclosure form. She testified that when they received the
Disclosure, it stated the water intrusion had been fixed and signed off by an
engineer. Mrs. Stevens stated that they requested and received the
engineer’s letter, which was signed December 5, 2016.
Mrs. Stevens stated that based on the information from the disclosures
and engineer’s letter, they believed the water intrusion problem had been
fixed. Because of the information in the disclosures and home inspections,
she believed the house to be sound and a good deal. She testified that had
the Disclosure included that there had been water intrusions in December of
2017 or February, March, and April of 2018, she would have been unsure if 6 there was a continuing issue and does not believe her clients would have
purchased the home.
On cross-examination, Mrs. Stevens stated that as far as she knew, the
Plaintiffs signed the purchase agreement before reading any disclosure
document. She testified that she did not discuss with the Plaintiffs that the
Disclosure could not be used as a substitute for any warranties that they
could obtain. Mrs. Stevens testified that Capt. Sowell did not properly fill
out the Disclosure because he did not write in the frequency of the water
intrusion. When questioned whether she ever asked about the frequency of
water intrusion, she stated that she did not.
Capt. Sowell testified that he wanted to completely repair the
Property. He stated that based on a report from the first engineer, he wanted
to do the “superior solution” recommended, but that engineer said he could
not do it because there was a liability if something went wrong. Capt.
Sowell testified he found another engineer, Carl Smoak, who agreed with the
“superior solution” and drew up a plan. Capt. Sowell contacted Interstate
Foundation to assess the foundation and any structural issues; Interstate
Foundation said there were no issues and provided a report to Capt. Sowell,
which he provided to the Plaintiffs.
Capt. Sowell testified that the last water intrusion date was February
of 2018. He stated that after they did the initial waterproofing and before the
final repairs, the water only came into the basement during heavy rains. He
stated there would be about an eighth of an inch of water over a third of the
living room and some water in the bedroom. He stated that mops and a shop
vac would be used to clean up the water.
7 Capt. Sowell testified that in order to address the water intrusion
problem, he hired a professional engineer and multiple foundation repair and
water intrusion experts. He stated that the engineer concluded that the tile
drain on the base of the foundation was either no longer functioning or did
not exist—the only way to repair the Property fully and correctly would be
to do a complete excavation, waterproof the exterior, and install a new tile
drain.
Capt. Sowell testified that he dug a trench all the way from the ground
level to the bottom of the house, applied waterproofing to the house, and
then filled in the trench. He also stated that he performed some regrading of
the Property to push water away from the house. Capt. Sowell stated that he
thought the problem was resolved because there was no water intrusion for a
year, but in December of 2017, water again leaked into the basement. Capt.
Sowell testified that they moved a gutter that was depositing water into a
back flowerbed, where there was no waterproofing. He stated that he talked
to his engineer and foundation guy again and they thought it could be
hydrostatic pressure coming up from the floor so they installed a sump
pump. There was another water intrusion event after the sump pump was
placed. Capt. Sowell was then advised that the issue was surface water
flooding the front yard and overcoming the waterproofing because
waterproofing is not a levee. It was then recommended that he put in surface
drains to remove water from the front of the house. He stated that after the
drains were installed, his contractor checked on the house after every rain
and there was no water intrusion. Capt. Sowell testified that he believed the
water intrusion problem was resolved.
8 Capt. Sowell admitted that he did not include the dates of flooding or
frequency on the Disclosure. He read the following email he sent to his
contractor and Mr. Smoak on February 24, 2018:
Hey guys, what is your assessment of Baltimore? As you can imagine, the flooding is causing damage, and more importantly, I cannot sell a house with a water intrusion problem. We put a sump pump in because we thought it might have been hydrostatic pressure pushing water up through the slab somehow, because the water is pooling in the center of the floor. That didn’t solve the problem. I had someone in the basement soaking up the water with a shop vac as it came in. It was coming through the front wall, primarily southwest corner. The water just drains the same, because the floor slopes that way. It seems like the original problem still exist. It seems like the water is penetrating the cold joint between the slab and the concrete wall. This is happening in heavy rains. Shouldn’t the Delta joint prevent any water from reaching the cold joint. How is the water getting behind the wall with waterproofing? I assume the way the water escapes the tile drain is being exceeded by the rate the water is coming in, but shouldn’t the waterproofing prevent the water penetration?
Capt. Sowell explained that the waterproofing is not like a levee, but it is
supposed to bring the water down to the bottom and have it come out of a
drain. The problem with this house is that the water was not draining and
was pooling against the side of the house. In order to remedy that problem,
Capt. Sowell and his professionals installed six or more pickups, which are
drains about 10 inches in diameter that have an open hole so that any surface
water will drain into it and out of the pipe. He stated that he was assured
that the waterproofing was fine and the problem was the draining.
Don Durr, Jr., a civil engineer, stated that he became involved in the
Property when Mrs. Chmielewski called him with complaints of water
intrusion in the basement. He recalled seeing work done on the house
between 2016 and 2018 when he was in the neighborhood working on
another project. Mr. Durr stated that based on his initial assessment of the
9 house, the excavation and drainage work previously performed did not work.
He stated that he reviewed photographs of the previous work and noticed
that the drainage barrier did not look as though it extended to the bottom of
the wall to seal it and there was also some concern about the drainage
blanket having some waves and not being flat against the wall. He stated
that if the drainage blanket was not completely flat, water could breach it
and get to the house. He stated that the sump pump did not work because it
was installed downstream from the water but would not have fixed the water
intrusion problem in this situation anyway because the water was building
up behind the wall and not coming through the floor.
Mr. Durr stated that he recommended that the Plaintiffs excavate
down to the bottom of the wall on all three sides, remove the drains, and
reinstall the drains and drainage blanket. He believed this would be a redo
of the 2016 excavation project. He testified that the cold joint did not appear
to be sealed from the pictures because the drainage blanket stopped at the
top of the footing, which allowed any water to build up and seep through the
cold joint, into the wall, and into the interior of the house. In his second
recommendation, he told the Plaintiffs that the front porch needed to be
redone because it had settled and was sloping toward the house, which
would allow water to pool up against the house. He stated that he also
recommended a swale to divert the water away from the house, but it would
not be a permanent fix. He described a swale as a ditch and slopes that
direct water away from the house. While investigating the drainage in the
yard, he discovered that an underground drainage pipe had been crushed by
the installation of a fence, which restricted water flow.
10 Mr. Durr stated that they installed the swale but did not excavate and
fix the drainage blanket. He stated that there had been no reports of a water
intrusion since the swale was completed in November of 2020. He testified
that it was his opinion that if there was a heavy amount of water next to the
house, they would experience water intrusion.
On cross-examination, Mr. Durr admitted that the picture of the
drainage blanket, which is also called a delta drain, that he reviewed was
taken before the pipe was laid so the pipe could not have been wrapped yet.
He stated that in May or June of 2019, he began to see some separation of
the caulking, and in January of 2020, he noticed the settling of the front
porch, which would be a significant source of water infiltration. He agreed
that water ponding in the flowerbeds was a source of water intrusion as well.
He also agreed that the damaged delta drain at the surface of the flowerbed
could have been a source of water intrusion. He stated that he did not know
all the sources of the water intrusion. Mr. Durr stated that Mr. Smoak’s
design to address the protection of the walls was adequate. He also admitted
to not observing the cold joint.
Mr. Smoak testified that he is familiar with the Property and was
called to determine methods which would prevent water intrusion. He stated
that in November of 2016, he made a recommendation to apply a mastic
sealer on the outside of the exterior wall, cover with a drainage blanket,
install a perforated pipe at the bottom of the wall in a trench, and backfill the
trench with stone. He testified that the workers made the following
deviation during the installation: instead of putting the stone backfill in the
trench, they backfilled it with the excavated material. He stated that the
11 stone would have provided a drainage channel for the water to drain into the
pipe at the bottom of the trench.
Mr. Smoak testified that the letter he wrote on December 5, 2016, was
not a final approval that the work was done correctly, but a “snapshot” of the
completed recommended items. He stated that when there was more water
intrusion after the first project was completed, he did not recommend a sump
pump but recommended that the water be drained away from the house to
prevent it from pooling against the wall of the house. He testified that if the
smashed pipe was mashed so that water could not get through at all, it would
stop the water from draining away from that area, and the water would pool
around the pipe. Mr. Smoak stated that he believed the surface water was
pooling next to the house and then running down the wall and leaking into
the basement. He stated that because the soil around the home was clay, he
did not believe the water was coming through the soil into the foundation.
The trial court questioned Mr. Smoak regarding the letter he wrote on
December 5, 2016. He stated that the letter was intended for Capt. Sowell to
explain that the work had been performed. On cross-examination, Mr.
Smoak stated that Capt. Sowell never asked him to cut corners in his design
and there were other remedies that Capt. Sowell could have tried first that
would have been less expensive. Mr. Smoak agreed that the installation of
the surface drains in the front yard would be a reasonable method to fix the
ponding of water against the house. Regarding the drains installed in the
front yard in 2018, Mr. Smoak was asked, “And if, after taking that step,
[Capt.] Sowell checked and ascertained that there had been no more water
intrusion events after he did that, would it [have] been reasonable for him to
believe that he had solved the problem at that point?” Mr. Smoak replied, “I 12 think it’s reasonable.” Mr. Smoak agreed that when he observed the
Property in the Fall of 2019, the porch had settled and created a gap between
the porch and the wall, the delta drain had been damaged at the top, and a
drainage inlet had floated above the surface, all of which could have affected
the water intrusion.
Mrs. Chmielewski testified that she reviewed the Disclosure and
noticed the water intrusion issues. She stated that based on the Disclosure
and engineer’s letter, she believed there was a water intrusion problem that
had been fixed and there had not been any intrusion issues since December
of 2016, when the letter was written. Mrs. Chmielewski stated that she and
her husband decided to have the “routine” inspection performed on the
house, which included checking the light switches, garage door, faucets,
toilets, and heating and air conditioning units to make sure everything was
functioning properly. When questioned why she did not have an inspection
for water intrusion, she stated:
I had no reason to believe there was a water intrusion problem beyond December 5th of 2016. I had documentation that said, there had been a problem when the home was purchased, it was professionally fixed and signed off by a professional engineer, so I had - -and the date on that was December 5th of 2016. So I had absolutely no reason to pursue further investigation.
Mrs. Chmielewski testified that she would not have purchased the
home if she had been aware of the frequency of the water intrusion into the
home. She stated that their first water intrusion event was on November 11,
2018. She testified that they cleaned up the water and she called Mr. Smoak
on December 6, 2018, because his name was on the engineering letter they
received with the Disclosure. She stated that Mr. Smoak informed her that
he had seen a water intrusion in the home in February of 2018 and that was
13 the first time she was aware of any water intrusions after December of 2016.
She testified that they experienced more water intrusions on December 27,
2018, May 9, 2019, and January, February, and April of 2020.
Mrs. Chmielewski stated that they met with Mr. Smoak at the
Property on December 11, 2018. She testified that they have spent money
testing the air quality of their home, removing sheetrock, checking for
asbestos when the sheetrock was removed, installing new gutters, hiring a
land surveyor for the swale, constructing the swale, and hiring all the
professionals to perform the different tasks. She testified that when the
sheetrock was removed, they found what looked like mold in the downstairs
bedroom. She described pictures and videos of the water intrusion and work
progress and stated all the work on the swale was completed and the
sheetrock reinstalled by August 10, 2021. Mrs. Chmielewski testified that
they spent $51,805.56 to prevent the water intrusion. She requested that the
trial court rescind the sale and order Capt. Sowell to reimburse them for their
costs.
On cross-examination, Mrs. Chmielewski agreed that she had the
opportunity to ask questions about the house prior to purchasing but declined
to do so, even though she was aware of the house being completely
remodeled. She stated she was not aware of any problems with the porch
settling and causing a gap before purchasing the Property. She stated that
her husband has caulked over the gap, which has gotten wider over time.
Mrs. Chmielewski admitted that she had not received any untrue information
from Capt. Sowell, except the alleged defective Disclosure. She then
answered yes to the following question, “And you recognize, don’t you, that
Mr. Sowell, Captain Sowell, could have believed that the problem causing 14 the water intrusion in February of 2018 had been resolved by that additional
work?” Mrs. Chmielewski also admitted that the first money she spent on
the water intrusion problem was hiring an attorney and the first time Capt.
Sowell was notified of a problem was when he was served with this lawsuit.
The trial court questioned Mrs. Chmielewski as to why she felt she had been
lied to if she agreed that it was reasonable for the seller to think he fixed the
problem when he installed the drains. She responded that she felt she had
been lied to because Capt. Sowell chose not mention the water intrusions
after the initial repairs to remedy the issue.
Lieutenant Colonel Chmielewski testified that even though the
frequency of water intrusion was left off the Disclosure, he felt they got a
“better” answer because the Disclosure revealed that the water intrusion was
professionally repaired and signed off by an engineer. He stated that he
heard discussions about the “big dig” during closing; therefore, he asked
Capt. Sowell if it was fixed, and Capt. Sowell stated that it was. Lt. Col.
Chmielewski stated he got a “warm fuzzy” feeling when Capt. Sowell
showed up at the house before the purchase wearing his service uniform.
After the water intrusions, Lt. Col. Chmielewski now believes Capt. Sowell
“withheld the fact that the big dig didn’t work, and he gave us the disclosure
and the letter to kind of sell the fact that it was fixed.” He testified that he
would not have purchased the home had he known the last water intrusion
was months before the sale and the big dig did not work.
On cross-examination, Lt. Col. Chmielewski was asked why he did
not question the frequency of the water intrusions in the Disclosure if he was
expecting the see the frequency written out. He responded, “I did not ask. I
was convinced that it was zero because it wasn’t in there. And he had 15 mentioned it was there when he purchased it.” When asked if Capt.
Sowell’s failure to disclose the water intrusion from 2018 could have been
negligence instead of fraud, Lt. Col. Chmielewski answered, “What’s the
difference?”
Lt. Col. Chmielewski stated that after the suit was filed, Capt. Sowell
offered for him and his contractor to redo the dig at no cost. In response to
that offer, Lt. Col. Chmielewski stated that they gave a counter offer of
redoing the big dig project, redoing the front porch, and making no-interest
payments to reimburse them $51,000. Lt. Col. Chmielewski stated that
Capt. Sowell did not accept this offer. He stated that he believes they have
spent at least $80,000 on repair work.
Capt. Sowell was called to testify again. He testified that on March
28 and 29, 2018, Shreveport received 4 1/2 inches of rain, and the house did
not have any water intrusion. He stated that on April 4 and 7, a day in May,
and a day in June of 2018, Shreveport received between 1 1/2 and 2 1/2
inches of rain per day and there was no water intrusion in the house. He
stated the March 28 and 29 rain event “was very telling, because that was
such a huge amount of rain. We knew that the fix would-- like it did, in fact,
fix the problem.” He testified that he was confident that the water intrusion
problem had been resolved. Capt. Sowell stated that if he had known the
Plaintiffs experienced a water intrusion problem in November of 2018, he
would have responded and sought to fix the issue. He stated that he did not
make a profit on this house and lost money on the project.
When questioned on cross-examination whether he thought he would
have problems selling the house if he listed the water intrusions in 2017 and
2018, Capt. Sowell stated that he did not think that would cause a problem in 16 selling the house. He stated, “I think I would explain exactly what
happened, so there was, we had intrusions, we put in additional drainage,
you can talk to the engineer. We had all these events of water coming into
the property, and it was dry.”
On August 12, 2022, the trial court filed its opinion ruling in favor of
the Plaintiffs in the amount of $51,805.56 plus interest and court costs. As
to the redhibition and fraud claims, the trial court found that Capt. Sowell
omitted the frequency of the water intrusions. The trial court stated the less
clear issue was whether Capt. Sowell completed the Disclosure with “intent
to obtain an unjust advantage or to cause damage or inconvenience.” The
trial court found Capt. Sowell to be credible and he “had a sincere, albeit
mistaken, belief that the water intrusion problem was resolved.” The trial
court found that any omissions or misrepresentations made by Capt. Sowell
in the Disclosure were not made with the intent to obtain an unjust
advantage or cause damage or inconvenience to the Plaintiffs. Therefore,
the trial court found in favor of the Defendants on the redhibition, fraud,
misrepresentation, and detrimental reliance claims. However, the trial court
found in favor of the Plaintiffs on the agent liability and negligent
misrepresentation claims, stating, “[A]s the selling agent in the subject
transaction, Capt. Sowell had a duty to provide the Plaintiffs with true and
accurate information regarding the house they intended to purchase.” The
trial court awarded the Plaintiffs $51,805.56 in damages, plus judicial
interest and court costs, in accordance with the Plaintiffs’ estimate of the
costs of repairs. The judgment was signed on September 2, 2022. Both
parties appeal the trial court’s judgment, and Louisiana Realtors filed an
amicus curiae brief. 17 DISCUSSION
Liability as Seller
The Plaintiffs assert that the trial court erred in not finding fraud,
redhibition, fraud in the inducement of a contract to support a waiver of
warranty, and intentional misrepresentation as opposed to merely negligent
misrepresentation. They request that this Court reverse the trial court’s
findings and award damages.
The standard of review in cases regarding findings of fact is manifest
error. In order to reverse the factfinder’s determination of fact, the
reviewing court must review the entire record and find that a reasonable
factual basis does not exist for the finding and determine that the record
establishes that the factfinder is clearly wrong or manifestly erroneous.
Detraz v. Lee, 05-1263 (La. 1/17/07), 950 So. 2d 557; Bailey v. Delacruz,
49,032 (La. App. 2 Cir. 6/16/14), 143 So. 3d 1220. When findings of fact
are based on determinations regarding the credibility of witnesses, the
manifest error or clearly wrong standard demands great deference to the
findings, for only the factfinder is cognizant of the variations in demeanor
and tone of voice that bear on the listener’s understanding of what is said.
Murray v. Bostwick, 52,802 (La. App. 2 Cir. 8/14/19), 276 So. 3d 1120.
Louisiana’s Residential Property Disclosure Act, La. R.S. 9:3196 et
seq., requires the seller of real estate to complete a property disclosure
document. The seller shall complete the property disclosure document in
good faith to the best of the seller’s belief and knowledge as of the date the
disclosure is completed and signed by the seller. La. R.S. 9:3198(B)(1). 18 This disclosure document is not a warranty by the seller. La. R.S.
9:3198(D). La. R.S. 9:3198(E) states:
A seller shall not be liable for any error, inaccuracy, or omission of any information required to be delivered to the purchaser in a property disclosure document if either of the following conditions exists:
(1) The error, inaccuracy, or omission was not a willful misrepresentation according to the best of the seller’s information, knowledge, and belief.
(2) The error, inaccuracy, or omission was based on information provided by a public body or by another person with a professional license or special knowledge who provided a written or oral report or opinion that the seller reasonably believed to be correct and which was transmitted by the seller to the purchaser. (emphasis added).
The seller warrants the buyer against redhibitory defects, or vices, in
the thing sold. La. C.C. art. 2520. A defect is redhibitory when it renders
the thing useless, or its use so inconvenient that it must be presumed that a
buyer would not have bought the thing had he known of the defect. The
existence of such a defect gives a buyer the right to obtain rescission of the
sale. Id. A defect is redhibitory also when, without rendering the thing
totally useless, it diminishes its usefulness or its value so that it must be
presumed that a buyer would still have bought it but for a lesser price. The
existence of such a defect limits the right of a buyer to a reduction of the
price. Id.
Fraud in the inducement of a contract cannot be waived.
Shelton v. Standard/700 Associates, 01-0587 (La. 10/16/01), 798 So. 2d 60.
It is clear that a seller warrants his buyer against redhibitory defects, or
vices, in the thing sold. La. C.C. art. 2520. It is equally clear, however, that
this warranty may be excluded or limited per La. C.C. art. 2548. Under this
article, an otherwise effective exclusion or limitation of the warranty against 19 redhibitory defects is not effective if the seller commits fraud, as defined in
the civil code, upon the buyer. Thus, although the warranty against
redhibitory defects may be excluded or limited, a seller cannot contract
against his own fraud and relieve himself of liability to fraudulently induced
buyers. Shelton v. Standard/700 Associates, supra.
In sum, there are three basic elements to an action for fraud against a
party to a contract: (1) a misrepresentation, suppression, or omission of true
information; (2) the intent to obtain an unjust advantage or to cause damage
or inconvenience to another; and (3) the error induced by a fraudulent act
must relate to a circumstance substantially influencing the victim’s consent
to (a cause of) the contract. Id.
Fraud is a misrepresentation or a suppression of the truth made with
the intention either to obtain an unjust advantage for one party or to cause a
loss or inconvenience to the other. Fraud may also result from silence or
inaction. La. C.C. art. 1953. The trial court’s findings with respect to a
claim of fraud are subject to the manifest error standard of review. Benton v.
Clay, 48,245 (La. App. 2 Cir. 8/7/13), 123 So. 3d 212.
The elements of a claim for intentional misrepresentation are: (1) a
misrepresentation of a material fact; (2) made with the intent to deceive; and
(3) causing justifiable reliance with resultant injury. Murray v. Bostwick,
supra.
The trial court wrote detailed reasons for its ruling. It stated that Capt.
Sowell omitted the dates of flooding and that the 2016 remedy did not fix
the water intrusion issue. However, the reason for the rulings in favor of
Capt. Sowell, as seller, came down to a credibility call. The trial court had
20 to determine whether Capt. Sowell had the requisite intent to obtain an
unjust advantage, deceive, or make a willful misrepresentation.
The trial court stated that it found Capt. Sowell’s testimony to be
credible. It stated, “Capt. Sowell had a sincere, albeit mistaken, belief that
the water intrusion problem was resolved.” The trial court highlighted Mr.
Smoak’s testimony that Capt. Sowell’s belief was reasonable. It also noted
that Mrs. Chmielewski recognized that Capt. Sowell could have believed the
water intrusion problems had been resolved. For these reasons, the trial
court found Capt. Sowell did not have an intent to obtain an unjust
advantage, deceive, or make a willful misrepresentation. Therefore, the
Plaintiffs’ claims for redhibition, fraud, and willful misrepresentation were
rejected.
It is well settled in Louisiana that trial courts are afforded great
deference in making credibility calls. The trial court was in the best position
to evaluate the tone and demeanor of the witnesses as they testified. After
reviewing the record as a whole, we do not find this credibility call to be
manifestly erroneous. Capt. Sowell testified that he believed the last
installation of drains fixed the water intrusion problem because there were
no more problems after some heavy rains came through. Although the last
repair was done during an arguably drier season in Louisiana, weather
records indicated Shreveport had received over four inches of rain at one
point. As the trial court noted, Mrs. Chmielewski and Mr. Smoak
recognized that it was reasonable for Capt. Sowell to believe the problems
had been resolved. Although the Plaintiffs presented emails and text
messages from Capt. Sowell during the repairs, these messages do not prove
that Capt. Sowell had any ill intent to deceive or obtain an unjust advantage. 21 For these reasons, we do not find the trial court was manifestly erroneous in
its factual determination that Capt. Sowell did not have the requisite intent to
deceive, obtain an unjust advantage, or make a willful misrepresentation.
These arguments lack merit. Because we affirm the trial court on this issue,
we do not reach the issue of awarding additional damages.
Liability as Real Estate Agent
Capt. Sowell argues that the trial court erred in holding the agent to a
higher duty of disclosure than the seller himself. He questions if he can be
held liable for negligent misrepresentation as an agent if the trial court
already determined he had a reasonable and sincere belief as the seller that
the existing defect was effectively repaired. Capt. Sowell asserts that
Louisiana law does not impose a higher duty on the seller’s agent than it
does upon the seller itself. He states that the trial court committed an error
of law in basing its judgment upon the mistaken belief that the agent owes a
higher duty of disclosure than the seller himself.
Louisiana Realtors filed an amicus curiae brief in support of Capt.
Sowell, arguing no Louisiana Court has ever held that a selling real estate
agent has a higher duty of disclosure than the seller. It asserts that under the
statutory scheme, a licensed real estate agent is only liable for providing
false information if he had actual knowledge of such. It argues that although
Capt. Sowell was acting in a dual capacity, there is no basis for imposing a
higher duty on him because he is subject only to 1) an “actual knowledge”
standard as defined in the property disclosure form in his capacity as the
seller, and 2) the “actual knowledge” standard as defined in La. R.S.
9:3198(B), which is the negligent misrepresentation framework.
22 Because this matter involves the interpretation of a statute, it is a
question of law, and is thus reviewed by this Court under a de novo standard
of review. Thibodeaux v. Donnell, 08-2436 (La. 5/5/09), 9 So. 3d 120.
A buyer’s remedy against a real estate agent is not in redhibition but is
based in fraud and negligent misrepresentation. Bailey v. Delacruz, supra;
Hollingsworth v. Choates, 42,424 (La. App. 2 Cir. 8/22/07), 963 So. 2d
1089.
The buyer’s action against a realtor for negligent misrepresentation
arises ex delicto, under La. C.C. art. 2315. Bailey v. Delacruz, supra. In
order for a plaintiff to recover based upon negligent misrepresentation, 1)
the defendant must possess a legal duty to supply the correct information, 2)
there must be a breach of that duty, and 3) the plaintiff must have incurred
damages as a result of the breach. Id. A real estate agent has a duty to relay
accurate information about the property he is selling. The duty extends to
both vendor and purchaser. Id.
A licensee shall not be liable to a customer for providing false
information to the customer if the false information was provided to the
licensee by the licensee’s client or client’s agent and the licensee did not
have actual knowledge that the information was false. La. R.S. 9:3894(B)
Where the alleged misrepresentation relates to defects which are
apparent and discoverable on simple inspection, and where the buyer
inspects the property before the sale, the buyer cannot then complain of
fraud or negligent misrepresentation. Hancock v. Lauzon, 49,535 (La. App.
2 Cir. 1/14/15), 161 So. 3d 957.
The trial court highlighted, as do we, that this is a case in which the
seller is also the agent. Therefore, the agent has the exact same knowledge 23 as the seller. This dual role distinguishes this case from those cited in briefs.
We agree with Capt. Sowell and Louisiana Realtors that agents do not have
a higher duty than the seller to supply accurate information. That would
create a situation in which the agent had to independently verify information
before conveying it to the buyer. See Rabalais v. Gray, 14-552 (La. App. 5
Cir. 12/16/14), 167 So. 3d 101. In fact, agents owe a different, not higher,
duty than sellers.
La. R.S. 9:3894(B) relieves an agent of liability for providing false
information if he did not have actual knowledge that the information was
incorrect. Capt. Sowell, as agent, had a duty to supply correct information.
By providing the Disclosure, which stated the water intrusion was remedied
in 2016, Capt. Sowell allowed himself, as seller, to supply inaccurate
information. Because Capt. Sowell was acting as the seller and the agent, he
knew the water intrusion issue was not remedied in 2016. As agent, he had
actual knowledge that the home continued to have water intrusions through
2018. Therefore, by supplying the Plaintiffs with the Disclosure, he
supplied false information. The first two prongs of the negligent
misrepresentation elements have been met, i.e. duty and breach.
The third prong for negligent misrepresentation is that the Plaintiffs
incurred damages as a result of the breach of duty. The Plaintiffs incurred
damages because they would not have bought the home if they had known of
all of the water intrusion events. The purchase of the home led the Plaintiffs
to incur damages for repairs after additional water intrusion events.
An agent may be relieved of alleged negligent misrepresentation if the
defects are apparent and discoverable upon simple inspection. In this case,
there was no evidence of water intrusion because repairs were done after the 24 last event. It would have taken more than a simple inspection to ensure the
previous work was sufficient to protect the home against water intrusions.
As noted by the trial court, to this day, it is not perfectly clear whether the
problem has been resolved.
We affirm the trial court’s ruling that Capt. Sowell, as agent,
negligently misrepresented the water intrusion issue. In doing so, we
emphasize that this is not the placement of a higher burden on the agents.
Although it is rare for an agent to be liable and the seller not be liable, this is
an outlier case because the agent and seller are the same person; therefore,
the agent had actual knowledge of each water intrusion and the remedies
performed. By transmitting a Disclosure that he knew was not accurate,
Capt. Sowell, as agent, breached his duty to provide correct information to
the buyers. This case is unique in its particular set of facts and should not be
construed to place a higher burden on real estate agents, except where the
real estate agent was the seller/owner of the home and knew of the defects.
CONCLUSION
For the reasons stated above, we affirm the trial court’s ruling. Each
party bears its own costs in this appeal.
AFFIRMED.