Reckless comments incriminate sellers in home siding suit

[Nick Gromicko]

Issue Date: RealLawCentral.com - March 17, 2008, Posted On: 2/26/2008
Case Law

A potential home siding defect was dismissed by a set of Ohio sellers when buyers asked about a possible problem. When the issue was later uncovered by the new owners, they sued. Did the sellers have a duty to disclose the problem if a contractor who gave them a siding replacement estimate never expressly stated the siding was defective? Read on to see what the courts decided.

Defective siding issues came back to haunt a pair of sellers in Ohio who apparently tried to dodge fixing the issue themselves before selling the house to another couple. A municipal court was convinced that the previous owners acted fraudulently, and on Feb. 15, the Court of Appeals of Ohio, Sixth District, Lucas County agreed.

Defendants Michael and Susie M. Crooks put their house on the market in 2003, first with the assistance of a real estate agent, then as a For Sale by Owner. They were eventually sued by the buyers, Raymond and Dianne Babiuch, for alleged fraudulent misrepresentation.

In 2002, the Crooks received a flyer distributed throughout the neighborhood by Height Construction which notified residents that some homes built with Louisiana-Pacific Inner-Seal siding may show signs of cracking, swelling and mold.

Ignoring the estimate

Height Construction sent out the flyers titled “How to Identify Louisiana-Pacific Inner-Seal Siding” in July 2003, offering free inspections. Ronald Height, the construction company’s owner, inspected the Crooks’ home in October 2002 and gave the couple a replacement estimate. Height would later testify that he only provided estimates to customers whose siding was defective, unless otherwise requested. The Crooks allegedly didn’t contact Height again to discuss the estimate.

The Babiuches visited the Crooks’ home in fall 2003, and during one discussion, Raymond Babiuch allegedly told Michael Crooks he noticed homes in the neighborhood had been undergoing siding replacement, and asked about his property’s condition. Crooks allegedly replied that his house had “been inspected a year ago and was OK,” but added that if the Babiuches had any doubt they should have a professional home inspection performed. Crooks didn’t tell Babiuch about the Heights Construction estimate.

The Babiuches decided against the home inspection and signed a purchase agreement on Oct. 27, 2003, which indicated the Crookses had no knowledge of structural or latent defects. The Crooks also provided the buyers with a real estate disclosure form which indicated no problems with the siding.

The underlying problem

After the Babiuches moved in, they tried to get an estimate to have the house painted and were told the siding had to be replaced. Upon contacting Height Construction, the Babiuches learned that the Crookses had previously received an estimate for the replacement. The Babiuches claimed they spent $7,800 to replace the siding.

The Sylvania Municipal Court found that the buyers relied on fraudulent misrepresentation by the Crookses, but determined the defendants’ conduct was not egregious or aggravated, and thus denied the Babiuches’ request for punitive damages and attorney fees. The Babiuches were awarded damages of $7,800 for the cost of repairs.

The Crookses appealed, arguing that the “manifest weight of the evidence does not support a finding of fraudulent misrepresentation,” and that there wasn’t sufficient evidence to support the damages award.

The defendants claimed the court should have applied the doctrine of caveat emptor in their case, which bars recovery by a buyer for a structural defect in real estate property if the condition is “open to observation or discoverable upon reasonable inspection,” if the buyer had the opportunity to examine the premises and if the vendor committed no fraud.Reckless comments?

The appellate court noted that although the doctrine of caveat emptor relieves a seller from a nondisclosure claim, it doesn’t relieve the seller of the responsibility to refrain from making a fraudulent misrepresentation. When the trial court applied the elements to prove fraud, it determined that Michael Crooks “possessed substantial evidence that the siding was, in fact, defective,” and as a result his statements to Raymond Babiuch that there were no problems “were made recklessly, since he disregarded (and chose not to mention) the Height Construction estimate he obtained, the flyer he received about the defective siding, and the fact that ‘hundreds’ of homes in his subdivision had defective siding,” the appellate court said.

The Crookses also claimed they did not know for certain that the siding was defective, since the Height Construction estimate gave only a cost to replace the siding rather than a specific statement that it was defective. Despite that argument, the appellate court determined the municipal court properly held that the Babiuches weren’t required to prove the Crookses actual knowledge in order to state their claim. The fact that Height never gave a written estimate to a homeowner unless the siding was defective was “significant,” the court wrote.

Additionally, the appellate court agreed with the trial court’s finding that the Babiuches’ reliance on Michael Crooks’ statement about the home’s siding was justifiable. The appellate court found support of this in the fact that the Crookses did not dispute that the siding defect was only ascertainable by an expert. Citing Brewer v. Brothers, the appellate court also pointed out that a buyer’s duty to inspect a property ends when a seller makes representations in response to the buyer’s direct inquiry.

No documents, no problem

In the second part of their appeal, the Crookses claimed that the award of $7,800 to the buyers was improper because the only evidence of the cost of the siding replacement was Raymond Babiuch’s testimony. Although the appellate court agreed that there were no documents or other evidence submitted, the written estimates that had been provided to both the buyers and the sellers were amounts ranging from approximately $10,600 to $11,600.

“The amount claimed is significantly less than the written estimates in evidence, and appellees do not dispute that the amount they claimed placed them in the same position had the house not had defective siding,” the appellate court wrote. “The second assignment of error is therefore not well-taken.”

The municipal court’s ruling was thus affirmed, and the Crookses were ordered to pay appeal costs to the Babiuches.

Raymond and Dianne Babiuch v. Michael and Susie M. Crooks.

[Ian A. Niquette]

guess they should have went with the new siding.

[Doug Edwards, CMI]

Probably just "cosmetic" to use a phrase I hear often.