Teer v. Johnston, 1081613.

• Citation: 60 So.3d 253
• Decision Date: 30 September 2010
• Docket Number: 1081613.
• Parties: Wylene Sue TEER and Ross Teerv.Judith A. JOHNSTON.
• Court: Supreme Court of Alabama

60 So.3d 253

Wylene Sue TEER and Ross Teer
v.
Judith A. JOHNSTON.

1081613.

Supreme Court of Alabama.

Sept. 30, 2010.

[60 So.3d 254]

John W. Parker, Daphne, for appellant.John T. Bender of McFadden, Lyon & Rouse, LLC, Mobile, for appellee.MURDOCK, Justice.

Ross Teer and Wylene Sue Teer appeal from a summary judgment in favor of Judith A. Johnston by the Mobile Circuit Court on their action against Johnston arising out of their purchase of real property from Johnston.

I. Facts and Procedural History

In 2001, Mobile County placed a road near the residence then owned by Johnston. In conjunction with the road construction,

[60 So.3d 255]

the county installed culverts across her property to direct water runoff from the road into a creek behind Johnston's property. Johnston complained several times to the county that the culverts were causing flooding on her property. She testified by deposition that water from the flooding never entered her residence but that the back lot of her property routinely flooded. After the county informed Johnston that it could not do anything about the flooding, Johnston decided to sell her property.

The Teers placed an offer to purchase Johnston's property. On December 15, 2004, Johnston executed and submitted to the Teers a Seller's Property Disclosure Statement (“disclosure statement”), which provided, among other representations, that there were no “flooding, drainage or grading problems” with the property and that the property had never flooded. In her deposition, Johnston claimed that she filled out the disclosure statement per the instructions of her real-estate agent and that she had expected her agent to make sure that the document conformed to what the agent knew to be the case about her property.

On March 29, 2005, the Teers signed a purchase agreement for the property, agreeing to buy the property for $149,500. The first paragraph of the purchase agreement stated, in pertinent part: “This contract constitutes the sole agreement between the parties and any modification hereto and any modifications of this contract shall be signed by all parties to this agreement. No representation, promise, or inducement not included in this contract shall be binding upon any party hereto.” Additionally, the purchase agreement contained the following clause:

“The BUYER accepts this property in its as is condition, except as may be specified herein. HEATING, COOLING AND AIR CONDITIONING EQUIPMENT INCLUDING ANY WINDOW UNITS, PLUMBING AND ELECTRICAL SYSTEMS and all INCLUDED APPLIANCES shall be warranted by the Seller to be in working order by the time of conveyance.”

(Capitalization in original.) The Teers contend that they signed the purchase agreement based on the representations set forth in the disclosure statement. It is undisputed that neither the disclosure statement nor the representations made in the disclosure statement were added as an addendum to the purchase agreement.

The sale of the property closed on April 25, 2005, and the Teers subsequently moved onto the premises. The Teers allege that the property flooded several times after they started living on the property, despite Johnston's representations in the disclosure statement that the property had no flooding problems.

On June 8, 2007, the Teers sued Johnston, seeking rescission of the purchase agreement and damages for the costs the Teers incurred in purchasing and moving into the residence. The Teers alleged that Johnston committed intentional fraud by representing that the property had no flooding problems when she knew otherwise and that she thereby induced the Teers into signing the purchase agreement.

On May 22, 2008, Johnston filed a motion for a summary judgment, which the trial court subsequently denied on August 4, 2008, following a response from the Teers. On April 23, 2009, Johnston filed a renewed motion for a summary judgment. On June 8, 2009, the trial court granted Johnston's renewed motion for a summary judgment, explaining, in pertinent part, in its order:

“The rule of caveat emptor applies on the sale of used real estate.

[60 So.3d 256]

Blaylock v. Cary, 709 So.2d 1128 (Ala.1997). Although there are several exceptions to the general rule of caveat emptor, the facts of this case do not support any of those generally recognized exceptions. Because the purchase agreement signed by the parties contained an ‘as is' clause, and because this transaction involves used real estate, the rule of caveat emptor applies in this case. Therefore, Plaintiffs' fraud claims are foreclosed due to the fact that the Plaintiff accepted the property in its ‘as is' condition. The rule having been recently upheld in the case of ERA Class.Com, Inc. v. Stoddard, [987 So.2d 1130] (Ala.Civ.App.2007).”

The Teers appeal.

II. Standard of Review

“ ‘We review a summary judgment by the same standard the trial court uses when it rules on a motion for summary judgment. Long v. Bankers Life & Cas. Co., 294 Ala. 67, 70, 311 So.2d 328, 329 (1975). A trial court should grant a motion for summary judgment where there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Rule 56, Ala. R. Civ. P.; Pitts v. Beasley, 706 So.2d 711, 712 (Ala.1997). If the movant makes a prima facie showing that there is no genuine issue of material fact, then the burden shifts to the nonmovant to present substantial evidence creating such an issue. Bass v. SouthTrust Bank of Baldwin County, 538 So.2d 794 (Ala.1989); Bean v. Craig, 557 So.2d 1249, 1252 (Ala.1990).’

“ Ex parte Martin, 733 So.2d 392, 394 (Ala.1999). Substantial evidence is ‘evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved.’ West v. Founders Life Assur. Co. of Florida, 547 So.2d 870, 871 (Ala.1989).”

Ex parte Newton, 895 So.2d 851, 854 (Ala.2004).III. Analysis

The Teers contend that the trial court's ruling contradicts the “concept” of the statement in Fennell Realty Co. v. Martin, 529 So.2d 1003 (Ala.1988), that

“if [an] agent (whether of the buyer or of the seller) has knowledge of a material defect or condition that affects health or safety and the defect is not known to or readily observable by the buyer, the agent is under a duty to disclose the defect and is liable for damages caused by nondisclosure. This duty is also placed on the seller.”

529 So.2d at 1005.

As Johnston observes, however, the Teers presented no evidence indicating that the condition complained of in this case—flooding of the rear of the property—constitutes a “material defect ... that affects health or safety.” In Blaylock v. Cary, 709 So.2d 1128, 1131 n. 4 (Ala.1997), this Court stated that the “ ‘health and safety’ exception” to the general rule of caveat emptor is a “narrow” one, and that, in order for it to be invoked, the complaining party must make “a sufficient showing” that the defect “posed a direct threat to [his or her] health or safety.” There is no such evidence in the record in this case.

The Teers also contend that the trial court's judgment conflicts with the fraud exception to the general rule that a contract for the sale of real property merges into the deed given in fulfilment of that contract:

“ ‘[O]rdinarily, in the absence of fraud or mistake, when a contract to convey

[60 So.3d 257]

has been consummated by the execution and delivery of the deed, the contract becomes functus officio, and the deed becomes the sole memorial and expositor of the agreement between the parties, and upon it thereafter the rights of the parties rest exclusively....’ ”

Jones v. Dearman, 508 So.2d 707, 709 (Ala.1987) (quoting Alger–Sullivan Lumber Co. v. Union Trust Co., 207 Ala. 138, 142, 92 So. 254, 257 (1922) (emphasis added)). The Teers argue that because there is evidence in this case indicating that Johnston committed fraud, the purchase agreement is not the sole memorial of the agreement between the parties and that they have a right under the disclosure statement to be compensated for Johnston's misrepresentation.

The Teers' argument is misdirected. Because of the nature of their claims, the Teers never get to the question of whether they have rights under the terms of their contract that survive the execution and delivery to them of the deed. Rather, the Teers seek to recover for an alleged fraudulent misrepresentation. To do so, they must establish that the fraudulent misrepresentation survived the execution and delivery of their contract. For the reasons explained by the trial court, it did not.

In Massey v. Weeks Realty Co., 511 So.2d 171 (Ala.1987), this Court stated:

“ ‘Alabama retains the caveat emptor rule with regard to the resale of used residential real estate. Druid Homes, Inc. v. Cooper, 272 Ala. 415, 131 So.2d 884 (1961). Although we have abrogated the caveat emptor rule in sales of new residential real estate by a builder/vendor, Cochran v. Keeton, 287 Ala. 439, 252 So.2d 313 (1971), we have not extended the Cochran rule to the sale of used homes, and we are not inclined in this case to depart from a long-standing rule which provides certainty in this area of the law. A purchaser may protect himself by express agreement in the deed or contract for sale. 272 Ala. at 417, 131 So.2d 884. Here, the contract expressly provided “no warranties” and “as is” clauses to which the [purchasers] agreed. They had ample opportunity to inspect the bearing timbers of the house before purchasing it.’

“....

“One of the four elements of actionable fraud is justifiable reliance. [ ¹] Lucky Manufacturing Co. v. Activation, Inc., 406 So.2d 900 (Ala.1981). On the basis of Marshall v. Crocker, 387 So.2d 176 (Ala.1980), and Holman v. Joe Steele Realty, Inc., 485 So.2d 1142 (Ala.1986), under the undisputed facts in this case, as a matter of law, Massey did not have the right to rely on the oral representations of Ms. Goodson made prior to the execution by Massey of the form...