Brennan v. Kunzle

• Decision Date: 16 March 2007
• Docket Number: No. 94,273.,94,273.
• Citation: 154 P.3d 1094
• Parties: Derek H. BRENNAN and Catherine M. Brennan, Husband and Wife, Appellees/Cross-appellants, v. Christian W. KUNZLE and Janet L. Kunzle, et al., Appellants/Cross-appellees.
• Court: Kansas Court of Appeals

154 P.3d 1094

Derek H. BRENNAN and Catherine M. Brennan, Husband and Wife, Appellees/Cross-appellants, v. Christian W. KUNZLE and Janet L. Kunzle, et al., Appellants/Cross-appellees.

No. 94,273.

Court of Appeals of Kansas.

March 16, 2007.

Michael E. Whitsitt, of Westwood, for appellants/cross-appellees.

Gary A. Schafersman, Eldon Shields, and James L. MowBray, of Wallace, Saunders, Austin, Brown and Enochs, Chartered, of Overland Park, for appellees/cross-appellants.

Before GREEN, P.J., MARQUARDT, J., and BRAZIL, S.J.

GREEN, J.

This is a summary judgment case involving an allegedly fraudulent sale of a house. Christian and Janet Kunzle purchased a house from Derek and Catherine Brennan for approximately $1,000,000. The central issue in this case involves a failure by the Brennans to disclose a professional inspection report to the Kunzles. This report revealed potential latent defects in the house. The Kunzles argue that the failure to disclose this report constituted fraud by silence. Nevertheless, the Brennans contend that the Kunzles would have discovered the hidden defects if they had inspected for water leaks before the sale. Although acknowledging that the Kunzles had conducted a number of inspections of the house, the trial court implicitly determined that had the Kunzles hired professional inspectors specifically for water leak issues, they would have learned of the defects. Consequently, the trial court granted summary judgment for the Brennans.

The Kunzles, however, had presented expert evidence that the defects were not discoverable through a reasonable inspection. As a result, the Kunzles maintain that the trial court inappropriately granted summary judgment because a genuine issue of material fact remained at issue. We agree, holding that the reasonableness of the Kunzles' inspections was a question of fact. Accordingly, we reverse and remand for trial on the Kunzles' fraud by silence counterclaim.

The Kunzles also appeal from the trial court's grant of summary judgment on their counterclaims of fraudulent and negligent misrepresentations, negligence, and breach of implied warranties in favor of the Brennans. We find no error in the grant of summary judgment on those counterclaims. Based on language in the buyers' acknowledgment of the sellers' disclosure statement, the Kunzles' failure to specifically indicate the representations on which they were relying barred them from maintaining a cause of action for affirmative or negligent misrepresentations. Moreover, the Kunzles have abandoned their arguments on their counterclaims of negligence and breach of implied warranties. We therefore affirm the trial court's summary judgment for the Brennans on the following counterclaims: affirmative and negligent misrepresentations, negligence, and breach of implied warranties.

Further, the Kunzles appeal from the trial court's judgment foreclosing their mortgage held by the Brennans. The Kunzles maintain that their mortgage should not have been foreclosed until their counterclaims of fraud and misrepresentation had been resolved. Because the Kunzles provide no relevant authority for their argument, they have essentially abandoned this issue. Moreover, we find no error and affirm the trial court's entry of judgment on the Brennans' mortgage foreclosure action because the Kunzles' counterclaims did not provide a defense to and would not have affected the mortgage foreclosure.

Finally, the Brennans cross-appeal the trial court's award of attorney fees and the calculation of interest under the promissory note. The Brennans argue that the trial court erred in ruling that the parties did not agree to reimbursement for attorney fees incurred in defending the Kunzles' counterclaims. Nevertheless, we determine that the promissory note and mortgage allow the Brennans to recover attorney fees incurred in enforcing the promissory note and in foreclosing the mortgage but does not allow for attorney fees in defending the counterclaims asserted by the Kunzles. In addition, the Brennans contend that the trial court erred in determining that the interest rate on default should fluctuate monthly based on the statutory rate published by the Secretary of State under K.S.A.2006 Supp. 16-207. We agree. We interpret the promissory note as requiring the interest rate on maturity to be the statutory rate published by the Secretary of State on that maturity date and that such rate shall continue until the unpaid principal balance is paid in full. Therefore, we reverse the award of interest and remand the case for the trial court to recalculate interest at the fixed rate of 7.93%. Accordingly, we affirm in part, reverse in part, and remand for trial; and reverse in part and remand with directions.

Facts

The Kunzles entered into a real estate sales contract to purchase a house from the Brennans for approximately $1,000,000. The Kunzles partially financed the house by taking out a mortgage for $435,000 with the Brennans and signing a promissory note. The real estate contract contained a provision allowing the Kunzles to conduct property inspections. Moreover, the contract stated that if the buyers failed to conduct inspections, the buyers "shall have waived any right to cancel or renegotiate this Contract pursuant to the inspection provisions."

As part of the contract, the Kunzles also signed a sellers' disclosure statement that had been filled out by the Brennans. In the "ROOF" category of the disclosure statement, the Brennans checked the box "Yes" as to whether any insurance claims had been made in the past 5 years; they also checked "Yes" as to whether repairs were made from the claims. The contract required the Brennans to list the name of the company that did the repairs. The Brennans wrote "Reeds' Restoration" in the space provided. The contract also required the Brennans to explain in detail any answers that were marked "Yes." The Brennans wrote in the space furnished: "3 windows leaked—solution caulking. Chimney flashing repaired to eliminate 4th window leak."

Christian Kunzle testified that before signing the disclosure statement, he asked Derek Brennan about the written disclosures. Regarding the insurance claim, Christian testified that Derek told him there had been some wind damage and that some ridges had broken off of the roof but that he had it repaired. When Christian asked about the four window leaks, Derek explained the caulking and grouting process that had been done to repair the leaks. Christian testified that after going over the disclosure statement with Derek, he asked Derek if there was anything else to add in terms of repairs, modifications, or other issues that would affect a buyer of his home, but Derek replied, "`No.'"

Before closing on the house, the Kunzles hired Larry L. Vaught Roofing to inspect the roof of the house. In his roof inspection report, Vaught noted that he had examined two leaks in the house, one above the kitchen and one in the master bedroom. Vaught stated that both of the leaks were likely attributable to roof flashing detail and submitted a proposal of recommended roof repairs. Vaught's opinion was that the roof was predominantly installed per accepted standards and would continue to provide several years of service. The Kunzles also hired Bruce Bird, a structural engineer, to perform a structural inspection of the house. During his inspection, Bird found no evidence of a structural problem but did advise that the patio be regraded so that water would drain away from the house.

In addition, the Kunzles had inspections performed on the heating and cooling system, the chimney, and the septic system. The property was also inspected for termites and tested for radon. Moreover, Christian Kunzle made several personal inspections of the house, taking notes of the things that he wanted fixed. The Kunzles also had their friend, Jim Lambie, a developer of single family residences, walk through the house to look for potential problems.

While walking through the house with Lambie, Christian discovered water and mold on the carpet in a study and water on the floor of the media wiring closet in the basement. In his deposition, Derek Brennan indicated that he discovered these leaks when he returned to the house in June 2001. In a document titled "Statement of Condition—Update 8/2/01," the Brennans disclosed the leak in the study and the leak in the wiring closet and another leak that they had discovered at the top of a laundry room window. The Brennans set forth the corrective actions that they had taken to repair the leaks, which included professional caulking, mending of the carpet, and installation of step flashing.

On July 11, 2001, the Kunzles delivered an "Inspection Notice" to the Brennans and initialed the option of "Offer to Renegotiate," indicating that they had found unacceptable conditions from the written opinions of professionals who had inspected the property. They attached an "Addendum A" setting forth a list of the unacceptable conditions.

During a meeting discussing a list of the proposed repairs to the residence, Christian specifically asked Derek if there was anything else they needed to know about the house. According to Christian, Derek stated that the disclosure statement was complete and that he did not want to add anything else.

On July 25, 2001, the parties signed an amendment to the contract. Attached to the amendment was "Addendum A," a list of 41 unacceptable conditions. Under the amendment, the Brennans agreed to pay the Kunzles $1,475 for 7 of the items listed in Addendum A. The Brennans agreed to correct the remaining items in Addendum A.

The Kunzles closed on the house on August 3, 2001. The Kunzles took out a $435,000 mortgage with the Brennans and signed a promissory note. Several days after the Kunzles moved into the house, they discovered water infiltration in an interior wall in the house. The problem was discovered when a painter...