Real Estate Intern., Inc. v. Buggay

• Decision Date: 30 January 1996
• Docket Number: No. A95A1927,A95A1927
• Citation: 469 S.E.2d 242,220 Ga.App. 449
• Parties: REAL ESTATE INTERNATIONAL, INC. et al. v. BUGGAY.
• Court: Georgia Court of Appeals

Page 242

469 S.E.2d 242

220 Ga.App. 449

REAL ESTATE INTERNATIONAL, INC. et al. v. BUGGAY.

No. A95A1927.

Court of Appeals of Georgia.

Jan. 30, 1996.

Reconsideration Denied March 6, 1996.

Certiorari Denied May 10, 1996.

Gwinnett Superior Court. Before Judge Winegarden.

Lefco & Blumenthal, Stanley M. Lefco, Ned Blumenthal, Atlanta, for appellants.

Donald E. Dyches, Savannah, for appellee.

BIRDSONG, Presiding Judge.

After the grant of authority for an interlocutory appeal, Real Estate International, Inc. ("REI"); Dagmar Sands, REI's broker; and Pil Ja Kim, REI's listing agent (collectively "Real Estate International") appeal the denial of their motion for summary judgment in Larry Dwayne Buggay's action for fraud and negligent misrepresentation arising from Buggay's purchase of a house from Eun Chung and Agnes Chung, clients of Real Estate International. Buggay's complaint alleged that Real Estate International represented that visible water damage and water standing under a house Buggay intended to buy was caused by a poor rainwater drainage system from a hill on the property, that repair modification, or correction of the drainage system would cure any future water damage, and that the property was in sound structural condition. Buggay asserts that the real reason for the water problems, however, was an underground spring under the house, that repairs to the drainage system did not cure the problems, and that the property was not structurally sound. Buggay further contends that Real Estate International misrepresented these facts with knowledge that these misrepresentations were false, or with reckless disregard for whether the representations were false, or intentionally actively or passively concealed material facts concerning the condition of the property, or innocently and negligently concealed facts concerning the condition of the property.

A realtor who is not a party to this action called the house to Buggay's attention. With a friend, Buggay visited the vacant house on a rainy day. He noted that the house generally needed repairs and the roof was leaking. He stated later that "water was running down the wall. The fireplace had moisture all over it. The floor around the fireplace would--you could step through it. The carpet was all mildewed and, you know, smelly. We just looked at it in a general thing, you know, 'Hey, we can make this house livable.' " Buggay also saw that the outside deck was rotting.

Nevertheless, Buggay, through the agent who brought the house to his attention, made an offer on the house that included a provision that the sellers would make repairs to the leaks. This provision was rejected by the sellers, and, with Buggay's assent, a provision was added to the contract that stated Buggay would purchase the house in an "as-is condition, with no further repairs."

With the assistance of the realtor who brought the house to his attention, Buggay arranged for a building inspector to examine the house. The inspector's report noted that the roof leaked, the floor was rotting, water was leaking into the house from the chimney, the lot grade was inadequate, and there was water standing under the house in the crawl space. Moreover, the first page of the report stated, "Home is built on a sloping lot. Grade at foundation appears to be inadequate. Rear yard slopes toward house. Standing water in crawl space. Suggest further evaluation by a drainage specialist." Buggay did not, however, arrange any further evaluation.

Although he did not speak to them directly, Buggay received information through his friend and the realtor that the previous owners said the water under the house was run-off from a hill in the backyard. Further, Buggay knew before he closed on the property that repairs by the Chungs to divert the supposed run-off were not keeping water from under the house and that there was a continuing water problem.

Despite this knowledge, Buggay continued with plans to purchase the house. Even though he spoke with the person who sold the house to the Chungs regarding assuming a second mortgage, he did not question this person about the water problems. Further, at the closing on the house, Buggay learned that the termite inspection report had not been completed because the termite inspector could not get under the house because of the standing water in the crawl space. When this problem was worked out through the assistance of Real Estate International, the closing was completed and Buggay purchased the house. Buggay ultimately filed suit against the Chungs, REI, Sands, Kim, and the person who sold the house to the Chungs.

After Buggay filed this action, Real Estate International denied liability and later moved for summary judgment contending that Buggay did not justifiably rely on any representations by Real Estate International because Buggay was aware of the water problem and was advised by the inspector that he hired to have the source of the water investigated. Moreover, Real Estate International contends that a clause in the sales contract disclaimed that Buggay relied upon representations made by Real Estate International when he purchased the property.

During the course of the litigation Buggay reached a settlement with the Chungs and summary judgment was granted to the person who sold the house to the Chungs. After Real Estate International's motion for summary judgment was denied, this appeal was initiated.

On appeal, Real Estate International contends the trial court erred by denying summary judgment because there is no evidence there was an underground spring or that Real Estate International knew there was such a spring, no evidence of an intent to defraud, and no evidence of justifiable reliance by Buggay on any representations made by Real Estate International. Real Estate International further contends the trial court erred by denying summary judgment because Buggay failed to rescind the purchase and sale agreement and because the suit is barred by the "merger" and "entire agreement" clauses in the purchase and sale agreement. Held:

1. The standards applicable to motions for summary judgment are announced in Lau's Corp. v. Haskins, 261 Ga. 491, 405 S.E.2d 474. We review the trial court's action on a motion for summary...