Holloman v. DR Horton, Inc.

• Decision Date: 09 November 1999
• Docket Number: No. A99A1532-A99A1534.
• Citation: 524 S.E.2d 790,241 Ga. App. 141
• Parties: HOLLOMAN et al. v. D.R. HORTON, INC. et al. D.R. Horton, Inc. et al. v. Holloman et al. Lawler v. Holloman et al.
• Court: Georgia Court of Appeals

524 S.E.2d 790

241 Ga. App. 141

HOLLOMAN et al. v. D.R. HORTON, INC. et al.

D.R. Horton, Inc. et al. v. Holloman et al.

Lawler v. Holloman et al.

Nos. A99A1532-A99A1534.

Court of Appeals of Georgia.

November 9, 1999.

Reconsideration Denied November 30, 1999.

Certiorari Denied April 28, 2000.

Certiorari Denied May 5, 2000.

Wilson, Strickland & Benson, Warner R. Wilson, Jr., Sara L. Doyle, Atlanta, for Holloman et al.

Johnson, Matte & Hobgood, Thomas T. Hobgood, Timothy W. Johnson, Atlanta, for D.R. Horton, Inc. et al.

McCullough Sherrill, Kirk R. Fjelstul, Victor A. Ellis, Atlanta, for Lawler. SMITH, Judge.

These three related appeals arise from a dispute between a homebuilder and its dissatisfied customers. Carol H. Holloman and James L. Holloman filed an action against D.R. Horton, Inc., the homebuilder, David Mackey, Horton's representative and construction manager, and John M. Lawler, Community Development Director for the City of Norcross. The Hollomans' complaint sought damages for breach of contract and violation of the Fair Business Practices Act against Horton, for negligent construction against Horton and Mackey, and for negligent inspection, fraudulent concealment of defects, fraud, and violation of the Racketeer Influenced & Corrupt Organizations Act (RICO) against Horton, Mackey, and Lawler.

Lawler filed a motion for summary judgment on the basis of official immunity, among other grounds. That motion was denied, and Lawler filed an application for an interlocutory appeal but later withdrew it. Horton and Mackey filed a joint motion to dismiss or for partial summary judgment, later amended to seek full summary judgment, and Lawler filed a motion to dismiss.

The trial court entered a lengthy and thorough order dealing with all pending motions, as well as an additional order on motion for reconsideration elaborating on its reasoning in the earlier order. The trial court determined that a genuine issue of material fact existed as to the Hollomans' claims for breach of contract but found that the Hollomans had waived any claim for rescission. The trial court also found material issues of fact with respect to the allegations of fraud but granted summary judgment on the Hollomans' claims of negligent construction and negligent inspection. From these decisions the parties appeal.¹ After reviewing the record and the contentions of all the parties, we find that the trial court correctly allowed the Hollomans' breach of contract and fraud claims to proceed and correctly concluded that any rescission claim was waived. The trial court erred, however, in relying on the "economic loss rule" to grant summary judgment to the defendants on the Hollomans' negligence claims. The trial court also erred in refusing to grant summary judgment to Lawler on the ground of official immunity. We therefore affirm the trial court's judgment in part and reverse it in part.

Case No. A99A1533

We first consider the appeal of Horton and Mackey, in which they assert that the trial court erred in denying their motions for summary judgment on the Hollomans' breach of contract² and fraud claims. We find no error and affirm.

1. (a) First, we address Horton's contention that a paragraph in its printed one-page "agreement of sale" excludes all express and implied warranties other than that in the Home Owner's Warranty Corporation (HOW) booklet.³ But when a contract is partly printed and partly handwritten or typed, the written or typed portions are given greater weight in construing the parties' intent. Grier v. Brogdon, 234 Ga. App. 79, 81(2), n. 10, 505 S.E.2d 512 (1998). The agreement between the parties in this case includes a nine-page typewritten addendum drafted by Mr. Holloman. The closing documents expressly provide that all terms of the contract shall survive closing. "It is well established that a court should avoid an interpretation of a contract which renders portions of the language of the contract meaningless." (Citations and punctuation omitted.) State Farm &c. Ins. Co. v. Terry, 230 Ga.App. 12, 15(2), 495 S.E.2d 66 (1997), aff'd, 269 Ga. 777, 504 S.E.2d 194 (1998). Horton's proposed interpretation of the agreement between the parties would render most if not all of the addendum meaningless, and the rules of construction do not allow us to interpret the contract in that manner.

(b) We next consider the trial court's determination that material issues of fact exist. The standards applicable to motions for summary judgment generally are well established.

When ruling on a motion for summary judgment, the opposing party should be given the benefit of all reasonable doubt, and the court should construe the evidence and all inferences and conclusions therefrom most favorably toward the party opposing the motion. Further, when reviewing the grant or denial of a motion for summary judgment, this [c]ourt conducts a de novo review of the law and the evidence.

(Citations omitted.) Supchak v. Pruitt, 232 Ga.App. 680, 682(1), 503 S.E.2d 581 (1998).

The typewritten addendum to the contract contains numerous special stipulations, including a provision that, if a HOW warranty is unavailable, "builder will provide a 2 year warranty on everything and a 10 year warranty on the structure." While Horton contends that the Residential Warranty Corporation (RWC) warranty it provided at closing fulfilled this obligation, the Hollomans contend that it did not, pointing to significant omissions and exclusions in the RWC coverage. The addendum also provides specifications regarding the construction of the house and the materials used, which the Hollomans contend were breached by Horton. Giving the benefit of all reasonable doubt to the Hollomans and construing the evidence and all inferences and conclusions drawn from it in their favor, we agree with the trial court that material issues of fact remain regarding Horton's obligations under the contract and whether it breached them. The trial court did not err in refusing to grant summary judgment on this issue. 2. We agree with the trial court that genuine issues of material fact also remain on the Hollomans' fraud claims. Fraud in the sale of real estate may be based upon several theories:

[F]raud in the sale of real estate may be predicated upon a wilful misrepresentation, i.e., the seller tells a lie; upon active concealment where the seller does not discuss the defect but takes steps to prevent its discovery by the purchaser; and thirdly a passive concealment where the seller does nothing to prevent the discovery but simply keeps quiet about a defect which though not readily discernible, is known to the seller.

(Punctuation omitted.) Fincher v. Bergeron, 193 Ga.App. 256, 258(1), 387 S.E.2d 371 (1989). Georgia law has placed a special duty of disclosure on the builder-seller that markets its new homes to consumers. The "passive concealment" exception to the general rule of caveat emptor

places upon the seller a duty to disclose in situations where he or she has special knowledge not apparent to the buyer and is aware that the buyer is acting under a misapprehension as to facts which would be important to the buyer and would probably affect his decision. Wilhite v. Mays, [140 Ga.App. 816, 818(3), 232 S.E.2d 141 (1976), aff'd, 239 Ga. 31, 235 S.E.2d 532 (1977) ]. See also PBR Enterprises v. Perren, 243 Ga. 280(4), 253 S.E.2d 765 (1979); Worthey v. Holmes, [249 Ga. 104, 105(2), 287 S.E.2d 9 (1982) ].

(Punctuation omitted.) Perrett v. Dollard, 176 Ga.App. 829, 830(2), 338 S.E.2d 56 (1985).

The Hollomans provided expert testimony that the house was defective in many respects, such as improper installation of the manufactured floor system, framing defects, and other construction defects, including improper installation of stucco, siding, and windows. The Hollomans' expert witness concluded that the house had so many structural defects that it was unsound and not suitable for its intended use. He attributed the defects to "a general performance failure at all levels of the construction process." It is undisputed that Horton is a builder-seller chargeable with special knowledge of the alleged defects. See Wilhite, supra; Worthey, supra.

The Hollomans also allege by affidavit that they "have ... been informed" that Horton was notified by a floor joist manufacturer of certain necessary structural corrections but failed to make them. We do not consider this allegation because evidence on summary judgment is held to the same standards of admissibility as evidence at trial, and inadmissible hearsay has no probative value unless an exception to the hearsay rule applies. Hardee's Food Systems v. Green, 232 Ga.App. 864, 866(1), 502 S.E.2d 738 (1998). But the Hollomans' expert also relied upon the written reports of the manufacturer's representative to testify that defects were identified but corrections were not made. An expert witness may base his opinion on hearsay and may be allowed to testify as to the basis for his findings. King v. Browning, 246 Ga. 46, 47, 268 S.E.2d 653 (1980).

With respect to defendant Mackey, although he was not a party to the contract between the Hollomans and Horton, he acknowledged that he was Horton's representative and supervised the construction of the Hollomans' house on Horton's behalf. Moreover, evidence was presented that he was the only representative of Horton who attended both the inspection of the house prior to closing and the inspection at which the Hollomans pointed out their specific complaints regarding construction. At the latter inspection, Mackey was the representative who indicated which items would and would not be repaired by Horton. Mackey therefore was in a position of superior knowledge to the Hollomans with regard to the condition of the house and chargeable with knowledge of the alleged defects.

Even a third party who is not an employee or representative of the builder may be chargeable with negligent...