Teter v. Old Colony Co.

Citation441 S.E.2d 728,190 W.Va. 711
Decision Date18 February 1994
Docket Number21534,Nos. 21533,s. 21533
CourtSupreme Court of West Virginia
PartiesDonald F. TETER and Charlotte Jean Teter, Plaintiffs Below, Appellees, v. OLD COLONY COMPANY, a Corporation; Kelley, Gidley, Blair & Wolfe, Inc., a Corporation; and Francis Divita and Wanda J. Divita, Individually, Defendants Below. Old Colony Company, a Corporation; and Kelley, Gidley, Blair & Wolfe, Inc., a Corporation, Appellants.

Syllabus by the Court

1. A vendor's real estate broker may be liable to a purchaser if the broker makes material misrepresentations with regard to the fitness or habitability of residential property or fails to disclose defects or conditions in the property that substantially affect its value or habitability, of which the broker is aware or reasonably should be aware, but the purchaser is unaware and would not discover by a reasonably diligent inspection. It also must be shown that the misrepresentation or concealment was a substantial factor in inducing the purchaser to buy the property.

2. "An agent in the restricted and proper sense is a representative of his principal in business or contractual relations with third persons; while a servant or employee is one engaged, not in creating contractual obligations, but in rendering service, chiefly with reference to things but sometimes with reference to persons when no contractual obligation is to result." Syllabus Point 3, State ex rel. Key v. Bond, 94 W.Va. 255, 118 S.E. 276 (1923).

3. One of the essential elements of an agency relationship is the existence of some degree of control by the principal over the conduct and activities of the agent.

4. " 'When the plaintiff's evidence, considered in the light most favorable to him, fails to establish a prima facie right of recovery, the trial court should direct a verdict in favor of the defendant.' Syllabus Point 3, Roberts v. Gale, 149 W.Va. 166, 139 S.E.2d 272 (1964)." Syllabus Point 5, Adkins v. INCO Alloys International, Inc., 187 W.Va. 219, 417 S.E.2d 910 (1992).

5. "There are four general factors which bear upon whether a master-servant relationship exists for purposes of the doctrine of respondeat superior: (1) Selection and engagement of the servant; (2) Payment of compensation; (3) Power of dismissal; and (4) Power of control. The first three factors are not essential to the existence of the relationship; the fourth, the power of control, is determinative." Syllabus Point 5, Paxton v. Crabtree, 184 W.Va. 237, 400 S.E.2d 245 (1990).

6. "Where a cause of action is based on tort or on a claim of fraud, the statute of limitations does not begin to run until the injured person knows, or by the exercise of reasonable diligence should know, of the nature of his injury, and determining that point in time is a question of fact to be answered by the jury." Syllabus Point 3, Stemple v. Dobson, 184 W.Va. 317, 400 S.E.2d 561 (1990).

7. " 'Statutes in derogation of the common law are allowed effect only to the extent clearly indicated by the terms used. Nothing can be added otherwise than by necessary implication arising from such terms.' Syllabus Point 3, Bank of Weston v. Thomas, 75 W.Va. 321, 83 S.E. 985 (1914)." Syllabus Point 6, City of Fairmont v. Retail, Wholesale, and Department Store Union, AFL-CIO, 166 W.Va. 1, 283 S.E.2d 589 (1980).

8. W.Va.Code, 37-14-1, et seq., is not designed to prevent an expert otherwise qualified under Rule 702 of the West Virginia Rules of Evidence from testifying with regard to the value of real property or the damages that may have resulted to it.

9. "Under article eight, section three of our Constitution, the Supreme Court of Appeals shall have the power to promulgate rules for all of the courts of the State related to process, practice, and procedure, which shall have the force and effect of law." Syllabus Point 1, Bennett v. Warner, 179 W.Va. 742, 372 S.E.2d 920 (1988).

10. " 'Under Article VIII, Section 8 [and Section 3] of the Constitution of West Virginia (commonly known as the Judicial Reorganization Amendment), administrative rules promulgated by the Supreme Court of Appeals of West Virginia have the force and effect of statutory law and operate to supersede any law that is in conflict with them.' Syl. Pt. 1, Stern Brothers, Inc. v. McClure, 160 W.Va. 567, 236 S.E.2d 222 (1977)." Syllabus Point 2, Bennett v. Warner, 179 W.Va. 742, 372 S.E.2d 920 (1988).

11. " 'We will not, in every case, refrain from sorting out errors involving prejudgment interest, but when the defendant fails to submit a special jury interrogatory asking the jury to set forth special or liquidated damages this Court's attention to such errors is entirely a matter of grace and if the subject is deliberately obfuscated by counsel or error is invited, this Court will summarily dismiss the assignment.' Syl. Pt. 7, Miller v. Monongahela Power Co., 184 W.Va. 663, 403 S.E.2d 406 (1991)." Syllabus Point 2, Beard v. Lim, 185 W.Va. 749, 408 S.E.2d 772 (1991).

John S. Haight, Patricia J. Loehr, and Carol P. Smith, Kay, Casto, Chaney, Love & Wise, Charleston, for appellees.

William E. Hamb and Robert W. Kiefer, Jr., Hamb, Poffenbarger & Bailey, Charleston, for appellant Old Colony Co.

James R. Watson, Steptoe & Johnson, Charleston, for appellant Kelley, Gidley, Blair & Wolfe, Inc.

McHUGH, Justice:

These appeals are brought by the Old Colony Company (Old Colony), a real estate broker corporation, and Kelley, Gidley, Blair & Wolfe, Inc., (Kelley, Gidley), a civil engineering corporation. It involves questions as to their duties to purchasers of a home, Donald F. and Charlotte Jean Teter, who were the plaintiffs below.

In December 1985, the Teters purchased a home located in Charleston, which was listed by Old Colony. Prior to the purchase of the home, the Teters who lived in Franklin, West Virginia, contacted Old Colony regarding available real estate in Charleston. They made arrangements to meet a Mrs. Kracker who worked for Old Colony. They were shown a number of residential properties and finally decided to purchase the property at issue.

During their inspection of the residence, Mr. Teter expressed some concern about a crack in the backyard retaining wall and what appeared to be stone and other rubble below the retaining wall. The backyard sloped rather sharply down to the retaining wall and a barbecue pit was located near it. A system of decks and wooden steps was constructed from the back of the house down to this area. Due to this concern, Mrs. Kracker agreed to secure an engineer to examine the wall and also the house to determine their structural soundness. Contact was made by Mrs. Kracker with Kelley, Gidley, and, on December 2, 1985, a Mr. Wolfe inspected the property. Subsequently, a written report which indicated that the property was in good condition and the retaining wall was sound was sent to Mrs. Kracker. A copy of the report was not sent to the Teters, rather Mrs. Kracker telephoned Mrs. Teter and advised that the report indicated everything was okay. A copy of the report was given to the Teters at the closing of the real estate transaction on December 18, 1985.

After the Teters occupied the property for several years, a landslide occurred on the back of the property. The retaining wall collapsed and substantial damage was done to the decking and steps on the back of the property. It was discovered by another engineer who was retained by the Teters that a large quantity of fill dirt was placed in the slope of the backyard extending to the retaining wall. The Teters filed suit, and, ultimately, the jury awarded the Teters $170,731 in damages plus prejudgment interest. Both Old Colony and Kelley, Gidley appeal contending that the trial court committed numerous errors in setting liability against them. We first address the liability errors asserted by Old Colony.


Liability of Realty Company


The Teters sought to establish liability against Old Colony on two theories. 1 First, they contended that Old Colony should be liable because it had a duty to make a reasonably diligent inspection of the premises, which would have disclosed the defective condition of the retaining wall. Second, they asserted that because Old Colony contacted Kelley, Gidley to make the engineering inspection of the property, Kelley, Gidley then became Old Colony's agent. Thus, as the principal, Old Colony is liable for Kelley, Gidley's negligent acts in making the inspection and subsequent report to the effect that the retaining wall was in a good condition.

For the initial proposition that a real estate broker has a duty to disclose not only those known defects which substantially affect the value of the property, but also those defects that a reasonably diligent inspection would reveal, the Teters cite Bevins v. Ballard, 655 P.2d 757 (Alaska 1982); Easton v. Strassburger, 152 Cal.App.3d 90, 199 Cal.Rptr. 383 (1984); Berryman v. Riegert, 286 Minn. 270, 175 N.W.2d 438 (1970); Gouveia v. Citicorp Person-to-Person Fin. Ctr., Inc., 101 N.M. 572, 686 P.2d 262 (1984); Hughes v. Holt, 140 Vt. 38, 435 A.2d 687 (1981). However, we find that except for Easton, supra, these cases turn on a factual pattern in which the real estate broker made affirmative misrepresentations to the prospective purchaser that were factually untrue. 2 In this case, the real estate broker is not claimed to have made representations that were untrue. Consequently, we find the foregoing cases not particularly helpful in resolving the real estate broker's liability in this case.

The Easton case, supra, presents a factual situation rather similar to this case. Shortly after the house was purchased, there was substantial earth movement on the property which caused extensive damage to the house and the driveway. Expert testimony indicated that the earth movement was caused by fill placed on the property which was not properly engineered and compacted....

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