Large v. Cafferty Realty, Inc.

• Decision Date: 29 April 1993
• Docket Number: No. 19472,19472
• Parties: Patrick J. LARGE and Evelyn Ruth, Plaintiffs-Appellants, v. CAFFERTY REALTY, INC., an Idaho corporation; Diversified Properties, Inc., an Idaho corporation (doing business as Century 21 AA Realty); Danny M. Cafferty; Mike Hall; John Amyx; Charles Q. and Barbara M. Claude, husband and wife, Defendants-Respondents. Boise, January 1993 Term
• Court: Idaho Supreme Court

Page 972

851 P.2d 972

123 Idaho 676

Patrick J. LARGE and Evelyn Ruth, Plaintiffs-Appellants, v. CAFFERTY REALTY, INC., an Idaho corporation; Diversified Properties, Inc., an Idaho corporation (doing business as Century 21 AA Realty); Danny M. Cafferty; Mike Hall; John Amyx; Charles Q. and Barbara M. Claude, husband and wife, Defendants-Respondents.

No. 19472.

Supreme Court of Idaho,

Boise, January 1993 Term.

April 29, 1993.

Givens, Pursley, Webb & Huntley, Boise, for plaintiffs-appellants, Patrick J. Large and Evelyn Ruth. Patrick J. Miller argued.

Eberle, Berlin, Kading, Turnbow & McKleen, Chtd., Boise, for defendants-respondents, Diversified Properties, Inc., Mike Hall and John Amyx. Stephen A. Bradbury argued.

Ringert, Clark, Harrington, Reid, Christenson & Kaufman, Boise, for defendants-respondents, Charles Q. and Barbara M. Claude. James G. Reid argued.

Imhoff & Lynch, Boise, for defendants-respondents, Cafferty Realty, Inc. and Danny M. Cafferty. Patrick D. Furey argued.

JOHNSON, Justice.

This is a real estate case. It concerns the purchase of property that is subject to restrictive covenants providing that no structures placed on the property shall be used for commercial purposes.

In reversing the summary judgments, we hold that I.C. § 55-811 (the record as notice statute) does not preclude an action by a purchaser of real property against the seller and realtors for misrepresentation concerning the availability of the property for commercial purposes. In reversing the judgment following trial, we hold that the parol evidence rule does not exclude evidence of the relationship between a realtor and a purchaser because an earnest money agreement refers to the realtor as the seller's agent. In addition, we consider application of the "duplicates rule" contained in I.R.E. 1001, 1002, and 1003 and the foundation necessary for admission of a document under the business records exception to the hearsay rule contained in I.R.E. 803(6).

I.

THE BACKGROUND AND PRIOR PROCEEDINGS.

Patrick J. Large and Evelyn Ruth (Large) purchased the real property at issue in this case (the property) from Charles Q. and Barbara M. Claude (the Claudes). Prior to the sale, the Claudes employed Diversified Properties, Inc. (Diversified) to list the property. Mike Hall was the real estate agent who listed the property for Diversified. John Amyx was the real estate broker for Diversified. Diversified listed the property through the Multiple Listing Service (MLS), which circulates information to subscribing real estate agents concerning properties for sale. Danny M. Cafferty (Cafferty), a real estate agent for Cafferty Realty, Inc. (Cafferty Realty), was the real estate agent who effected the sale.

Large and Cafferty first met when Large went to inspect other property located in the same area as the property. Cafferty represented another potential buyer for the other property. While inspecting the other property, Large discussed his plans to locate a mini-storage unit in the area and rejected the other property as inappropriate for the mini-storage unit. The next day, Cafferty contacted Large regarding the property owned by the Claudes. Cafferty visited Large's office to discuss the property, and Cafferty and Large went to view the property.

Cafferty learned of the availability of the property through the MLS listing prepared by Hall for Diversified. The MLS listing stated that the property was zoned for residential use, but could be rezoned for commercial use. The MLS listing also had a "Y" in a blank following "Cov. & Restricins," indicating that the property was encumbered by restrictive covenants. The MLS listing did not disclose the nature of the restrictive covenants. Large did not see the MLS listing.

Cafferty knew Large intended to operate a mini-storage business on the property and informed Large that the property was currently zoned for residential use, but could be rezoned for commercial use. Cafferty then prepared an earnest money agreement to present to the Claudes. The earnest money agreement was a standard form agreement that Cafferty completed by filling in the blanks. Large initially made the purchase contingent upon a rezone of the property for commercial use. In an addendum to the earnest money agreement, Large removed the contingency in exchange for immediate access to the property. Large and the Claudes each signed the earnest money agreement and the addendum.

Large then petitioned the county planning and zoning commission (the commission) to rezone the property from residential use to commercial use. On May 25, 1989, the commission held a hearing regarding Large's request for rezoning. Large and Cafferty attended the hearing together. After the hearing, Large and Cafferty went to a local lounge for drinks. There, Cafferty presented Large with a written proposal to become a financing partner in Large's mini-storage business. Cafferty and Large disagree whether they discussed the existence of restrictive covenants that would restrict the use of the property for commercial purposes. Cafferty says they did; Large says they did not.

The closing was set for June 1, 1989. The earnest money agreement provided that the seller would provide the buyer with a preliminary title report showing the condition of the title prior to closing. Either Cafferty or Diversified contacted the title company and requested preparation of a preliminary title report. The preliminary title report disclosed the existence and content of the restrictive covenants and had a copy of these covenants attached. Large did not receive a copy of the preliminary title report. The title company delivered a copy of the preliminary title report to Diversified. Diversified did not provide a copy to Large. Cafferty testified at trial that he did not receive a copy of the preliminary title report from the title company.

The closing proceeded as scheduled on June 1, 1989, with the title company acting as closing agent. The escrow officer who presided at the closing was not the one who prepared the documents for the closing and did not provide Large with a copy of the preliminary title report at the closing. No one at the closing discussed the restrictive covenants. The Claudes produced a warranty deed for the property. The deed referred to a plat of the subdivision, but did not mention any restrictive covenants.

Large claimed he first learned of the existence of the restrictive covenants after the closing when he received a letter from an attorney representing some neighboring property owners. The letter threatened suit to enforce the covenants should Large proceed with placing the mini-storage unit on the property. Large then withdrew the petition for rezoning and later listed the property for sale.

Large sued Cafferty, Cafferty Realty, Diversified, Diversified's agents Hall and Amyx, and the Claudes, alleging negligence against Cafferty and Cafferty Realty, misrepresentation against all the defendants, and breach of contract against the Claudes.

Each defendant moved for summary judgment. The trial court granted summary judgment in favor of the Claudes and Diversified on the misrepresentation claim. The trial court ruled that the Claudes and Diversified had no duty to disclose to Large any information concerning restrictions on the use of the property unless the information was not equally obtainable by Large. The trial court ruled that the restrictive covenants in this case were equally obtainable because they were recorded, and I.C. § 55-811 gave Large constructive notice of all recorded covenants and restrictions.

The trial court initially denied the Claudes summary judgment on the breach of contract claim. Later, however, the trial court granted the Claudes summary judgment on this claim after the Claudes brought another motion, and after Large filed a consent to dismiss the claim with prejudice.

The trial court denied Cafferty and Cafferty Realty summary judgment. Although the trial court stated that summary judgment based on constructive notice under I.C. § 55-811 was appropriate for Cafferty and Cafferty Realty, the trial court ruled there was a material issue of fact whether Cafferty and Cafferty Realty were acting as Large's agent and as Large's agent owed Large a fiduciary duty of care.

Large proceeded to trial against Cafferty and Cafferty Realty. Before the trial began, Cafferty and Cafferty Realty filed a motion in limine to exclude testimony inconsistent with the agency clause in the earnest money agreement, which stated that Cafferty was representing the "Seller." The trial court ruled that the parol evidence rule barred evidence contradicting the agency clause in the earnest money agreement and prohibited Large from presenting any evidence that would tend to establish that Cafferty was an agent of Large before the agreement was signed by Large on April 1, 1989. The trial court allowed Large to introduce any evidence concerning the agency relationship between Large and Cafferty after April 1, 1989.

The jury found Cafferty was not negligent in his dealings with Large, and the trial court entered judgment in favor of Cafferty and Cafferty Realty. Large appealed.

II.

THE TRIAL COURT IMPROPERLY GRANTED SUMMARY JUDGMENT IN FAVOR OF DIVERSIFIED AND THE CLAUDES ON THE MISREPRESENTATION CLAIM.

Large asserts the trial court improperly relied on the constructive notice provisions of I.C. § 55-811 as the basis for summary judgment on the misrepresentation claim against Diversified and the Claudes. We agree.

The trial court granted Diversified and the Claudes summary judgment based on the constructive notice provisions of I.C. § 55-811. This statute provides, in part:

Every conveyance of real property acknowledged or proved, and certified, and recorded as prescribed by law, from the time it is filed with the recorder for record, is constructive notice of the contents thereof to subsequent purchasers and mortgag(e)es.

I.C. §...