Bauer v. Beamon

• Docket Number: CV-20-265
• Decision Date: 21 December 2023
• Parties: DONNELL BAUER AND MARILYN BAUER APPELLANTS/CROSS-APPELLEES v. JESSE LEE BEAMON, JR., AND MARY A. BEAMON, INDIVIDUALLY AND AS TRUSTEES OF THE JESSE LEE BEAMON, JR. AND MARY A. BEAMON FAMILY TRUST DATED 13TH OCTOBER 2015; AND THE JESSE LEE BEAMON, JR. AND MARY A. BEAMON FAMILY TRUST DATED 13TH OCTOBER 2015 APPELLEES/CROSS-APPELLANTS
• Court: Arkansas Supreme Court

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2023 Ark. 194

DONNELL BAUER AND MARILYN BAUER APPELLANTS/CROSS-APPELLEES
v.
JESSE LEE BEAMON, JR., AND MARY A. BEAMON, INDIVIDUALLY AND AS TRUSTEES OF THE JESSE LEE BEAMON, JR. AND MARY A. BEAMON FAMILY TRUST DATED 13TH OCTOBER 2015; AND THE JESSE LEE BEAMON, JR. AND MARY A. BEAMON FAMILY TRUST DATED 13TH OCTOBER 2015 APPELLEES/CROSS-APPELLANTS

No. CV-20-265

Supreme Court of Arkansas

December 21, 2023

APPEAL FROM THE CRAWFORD COUNTY CIRCUIT COURT [NO. 17CV-17-549] HONORABLE MICHAEL MEDLOCK, JUDGE

Kenneth W. Cowan, PLC, by: Kenneth W. Cowan, for appellants/cross-appellees.

Daily & Woods, P.L.L.C., by: Jerry L. Canfield, for appellees/cross-appellants.

BARBARA W. WEBB, JUSTICE

This matter arises from a real estate transaction between appellants Donnell and Marilyn Bauer and appellees Jesse Lee and Mary A. Beamon. The Bauers appeal the Crawford County Circuit Court's judgment awarding damages in favor of the Beamons. They argue that the circuit court erred by (1) denying their jury-trial demand; (2) awarding damages on a breach-of-contract claim that was not alleged in the Beamons' complaint; and (3) awarding attorney's fees and costs. The Beamons cross-appeal, arguing that the circuit court erred by denying their request for rescission of the real estate contract. We reverse on direct appeal and affirm on cross-appeal.

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I. Facts

This case concerns Lot 24A and Lot 18 of the Highland Hills subdivision in Van Buren. The residence on Lot 24A sits on a hillside above the adjacent parcel, Lot 18. The Bauers purchased Lot 24A and Lot 18 in 2004. They lived in the residence on Lot 24A and constructed a metal barn and driveway on Lot 18. Shortly after the barn was built, Mr. Bauer noticed that water began to seep downhill toward the barn. To address the problem, the Bauers used a bulldozer to open a drainage ditch and, later, rented a mini excavator to further help water drainage on the hillside above the barn. The Bauers also hired a contractor to reshape the hill and remove a dead tree.

In 2013, the Bauers listed Lot 18 for sale and executed a seller property disclosure wherein they acknowledged drainage and erosion problems on the hillside straddling Lot 24A and Lot 18. John Will purchased Lot 18 later that same year. After the sale, Mr. Bauer told Mr. Will that he had twice pushed dirt up the hill and rain had washed it back out. Throughout Mr. Will's ownership of Lot 18, he observed the hillside would become unstable with heavy rain, and soil would accumulate against the barn. In 2016, Mr. Will hired a contractor to work on the soil on the hillside above the barn.

The Bauers also listed Lot 24A for sale and in 2015 executed a seller property disclosure wherein they asserted no knowledge of "any settling from any cause, or slippage, sliding or other poor soil conditions at the Property or at adjacent properties." They also asserted no knowledge of "any facts, circumstances or events on or around the Property which, if known to a potential buyer, could adversely affect in a material manner the value or desirability of the Property." Further, the Bauers denied any knowledge of "any other defects in the Property."

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On April 1, 2016, the Beamons visited Lot 24A with their real estate agent. They also drove up the driveway on Lot 18 and viewed the downslope portion of Lot 24A. Mr. Beamon observed "off on the downhill side there was some disturbed ground and bare ground" and what appeared to be "dirt work to control the surface erosion." Despite the apparent conditions of the hillside, the Beamons purchased Lot 24A for $315,000 in reliance on the Bauers' written disclosures.

The Beamons had a survey of Lot 24A performed on April 28, 2016. During this time, Mr. Bauer exchanged text communications with Mr. Will regarding the survey. Both men acknowledged in this exchange the poor soil conditions on the hillside and their failed efforts to remediate the problem. The Beamons were not advised of this information, and the Bauers did not amend their disclosure form to reflect the soil conditions on Lot 18.

The sale closed on May 26, 2016. Mr. Bauer came out to the property that day to explain the operating systems in the house. During their discussion, Mr. Beamon asked about the soil conditions on the hillside, and Mr. Bauer disclosed for the first time that he had uncovered a water seep on Lot 18 when he built the metal barn.

The Beamons began moving into the residence on Lot 24A on June 17, 2016. The following day, Mr. Beamon noticed a mold-like substance in the master bedroom. Mr. Beamon contacted his real estate agent to discuss the mold situation and erosion concerns on the hillside. At this point, the Beamons began moving their possessions out of the house and took up temporary residence nearby. They also had their home inspector, Lowell Coomer, test the substance, which he confirmed to be mold. Mr. Coomer recommended EGIS, a mold-remediation firm. EGIS's testing revealed extensive mold in the master bedroom. The inspection further revealed high humidity throughout the residence, which

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is conducive to mold growth. EGIS determined the culprit was a condensate line that was improperly installed in the return air plenum, resulting in humidity distribution throughout the residence. This condition would not have been discoverable in a routine home inspection. The Beamons paid $20,716.16 for mold remediation and HVAC repair.

Due to the mold remediation, the Beamons did not move into the Lot 24A residence until September 1, 2016. Thereafter, the geotechnical engineering firm GTS, Inc., was retained to resolve the instability issues on Lot 24A. Upon investigation, GTS concluded that if not remediated, the slope's instability would progress up gradient to the residence on Lot 24A. GTS recommended stabilizing the hillside by re-sloping and compacting the soil and placing a fabric lining and stone riprap over the subject area.

The Beamons hired a contractor to perform the slope-stabilization work. The contractor re-graded and compacted the slope and was prepared to lay the fabric and riprap when a rain caused tension cracks to form. The plan to lay fabric lining and riprap was abandoned. The Beamons then requested a report from GTS regarding what actions should be taken next to address the hillside. GTS issued a preliminary report on September 26, 2017, concluding that the slope failure could not be remediated from Lot 24A. The Beamons paid the contractor $30,950 for the work completed and paid GTS $5,900.

Based on the GTS report, the Beamons' counsel sent the Bauers a rescission letter on September 29, 2017. In pertinent part, the letter stated that the Beamons had

investigated and, based on engineering advice, have attempted repair work regarding the water seep on the property (and resulting erosion) of which you informed Mr. Beamon after the closing of the real estate transaction. Your real estate disclosures regarding the property did not disclose the water and erosion problems, and the disclosures did not reveal the previous repair actions apparently attempted by you and others on adjacent property and on the subject property. The recent August rains

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made obvious the attempted repair work has failed to solve the water/erosion problems.

The Beamons "concluded the appropriate action is a rescission of the real property sale/purchase" and sought "return of the money paid for...