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Haynes v. Lunsford

Court of Appeals of Tennessee, Knoxville

February 2, 2017

JAMES R. HAYNES, III, ET AL.
v.
LESLIE E. LUNSFORD, ET AL.

          Session August 10, 2016

         Appeal from the Circuit Court for Sevier County No. 2011-0358-II Richard R. Vance, Judge.

         Purchasers of real estate brought suit against the seller as well as the real estate agent and agency that assisted the buyers, alleging, inter alia, fraudulent misrepresentation, breach of duty to disclose adverse facts related to the purchased property, and violations of the Tennessee Consumer Protection Act. The buyers argued that the defendants misrepresented the age and history of the home and did not disclose that it had a mold problem. Upon motion for summary judgment, the agent and the agency were dismissed as defendants. The trial court subsequently denied the buyers' motion to reconsider the summary judgment order. The buyers appeal. Finding no error, we affirm.

         Tenn. R. App. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed; Case Remanded.

          Alex R. Hirschfield, Birmingham, Alabama, and Scott Hall, Sevierville, Tennessee, for the appellants, James R. Haynes, III, and Sharon Hirschfield.

          Jon G. Roach and Courtney E. Read, Knoxville, Tennessee, for the appellees, Lynn Chalache and Four Seasons Realty, Inc.

          John W. McClarty, J., delivered the opinion of the court, in which D. Michael Swiney, C.J., and Frank G. Clement, Jr., P.J., M.S., joined.

          OPINION

          JOHN W. MCCLARTY, JUDGE

         I. BACKGROUND

         This case arises out of the purchase and sale of a cabin at 1431 North Arbon Lane ("the Cabin") in Gatlinburg, Tennessee, by the plaintiffs, James R. Haynes, III ("Haynes") and Sharon Hirschfield ("Hirschfield") (collectively, "Buyers"), from defendant Leslie Lunsford ("Seller").[1] Hirschfield planned to live at the Cabin; Haynes, her ex-husband, funded the purchase of the home.

         The initial ownership of the property at issue, lots 51 and 52, was in Chalet Properties, Inc. In 1969, the property was conveyed to Joseph Ridolfo and his wife, Cleone S. Ridolfo. In 2002, Mrs. Ridolfo, then a widow, sold the property to Harry V. Wilhite, Jr., and his wife, Karen M. Wilhite. The Wilhites lost the property in a foreclosure in approximately 2005, at which time it was purchased by American Home Bank ("Bank"). Seller procured the property from Bank in 2006.

         Defendant Lynn Chalache ("Chalache"), a licensed affiliate broker working at Century 21 Four Seasons Realty ("Century 21"), was contacted by Hirschfield around Thanksgiving 2009 to look at different properties in the Gatlinburg area. Hirschfield first learned about the Cabin while looking at Multiple Listing Service ("MLS") descriptions online with Chalache. David Dixon, the listing agent for the Cabin, had prepared the MLS description and the advertising flyer concerning the home. According to Chalache, she acted as a facilitator, providing all the information in the MLS to Hirschfield, and thereby relying on the listing agent and Seller to provide accurate information about the home. Upon visiting the Cabin with Chalache, Hirschfield observed that it looked new and it "smelled great."[2]

         Buyers ultimately entered into a contract to purchase the Cabin on April 30, 2010. A home inspection was performed prior to Buyers' closing. Buyers contend that they reviewed the report carefully and became aware of the inspector's comments, such as those concerning the interior and exterior walls:

Common cracks* Cracks and deterioration common to log construction noted; maintain caulking/chinking at log joints and corners. Opening cut into top log near where covered area of deck ends; uncertain reason. (??)

         Buyers did not ask for repairs, although the asterisk meant "This item or component warrants attention, repair or monitoring." Further, Hirschfield did not take any action to make sure the basement was moisture free.[3] Significantly, the inspection report made no mention of mold.

         According to Hirschfield, she believed that "everything was disclosed that was wrong with the house. I asked questions. The house was inspected. We knew what the inspector's report said and we were in agreement at that point of what the knowledge was that we had about the house to purchase it." A.L. Adams, a friend, also looked through the Cabin and reported positively. Buyers admit that there was no indication of moisture or mold in the Cabin at the time they purchased it.[4]

         After closing on the Cabin, Hirschfield moved in on June 28, 2010. Approximately five months later, but prior to Thanksgiving 2010, Buyers began smelling a mildew type odor. To address her concerns about the smell, Hirschfield first contacted a local environmental inspector, Jim Evans, who in December 2010 found moisture in the wall next to the porch and the master bedroom. Around June/July 2011, another inspector, Sean Fogarty, found dead mold spores from samples taken from the tops of the kitchen cabinets and ceiling fans. Michael Pugliesi, a certified mold inspector, later identified long term water damage to the walls and found mold growth on the joists under the Cabin, on door facings and walls in the basement, and in the living room.

         In late June 2011, Buyers filed their original complaint alleging misrepresentation/non-disclosure and simple negligence. The initial complaint only addressed the mold issue. Buyers later added a claim for violation of the Tennessee Consumer Protection Act ("TCPA"). Among their contentions, Buyers argued that Chalache failed to exercise reasonable skill and care required of realtors pursuant to Tennessee Code Annotated sections 62-13-102(2), 66-5-206, and 62-13-403.[5] They further asserted that the Cabin was presented to them as "new" and "just recently built." According to Buyers, subsequent to their purchase of the home, they discovered that it was not new, had not just recently been built, had been previously involved in a foreclosure sale, and contained mold. Specifically, Buyers argued that the Cabin "had a moisture and mold problem about which the Defendants knew or should have known." The amended complaint provided that "[d]efendants had a duty to disclose the moisture and mold problems to Plaintiffs and failed to do so." Buyers timely filed suit within a year of their purchase against the numerous defendants.[6]

         According to Chalache, she was not aware of the existence of the Cabin prior to showing it to Hirschfield. Her impression of the home when they toured it was that it appeared to be new in that "it smelled great. It looked very shiny on the inside . . . it looked very nice." Neither Chalache nor Hirschfield noticed any mold in the Cabin when they walked through it, and Chalache did not become aware of any information prior to closing that would have indicated a mold issue with the home. Chalache asserted that if she had become aware of any mold in the Cabin, she would have disclosed that information to Buyers.

         Buyers further claimed that Chalache "received notice that the Home was previously involved in a foreclosure and . . . was built four (4) to five (five) years or more prior to the date Buyers purchased the Home." Chalache testified that she only looked at the Seller's warranty deed to ascertain if both lots were on one deed, as the appraisal had revealed that the Cabin sat on two lots instead of merely one. Upon reviewing the deed at the hearing, she acknowledged the fact that Bank was the grantor perhaps meant that the property had been in foreclosure. She did not testify, however, that a foreclosure would definitively be an adverse fact. Rather, Chalache acknowledged that a prior foreclosure, the year built, and the age of a home could have a negative impact on the value of a property.

         Chalache e-mailed Seller's warranty deed to Hirschfield prior to the closing. Accordingly, Buyers had been provided the same information known to Chalache: the MLS listing, the CRS Property Report, [7] Seller's disclosures, Buyers' home inspection report, and Seller's warranty deed. Additionally, Hirschfield acknowledged that she received and read a copy of the title search report for the Cabin. Further, Haynes received a copy of the appraisal for the Cabin and Hirschfield reviewed his copy. These documents revealed the history and value of the Cabin and apparently raised no issues for Buyers.

         On July 28, 2014, Chalache and Century 21 filed their motion for summary judgment. Following a hearing on October 31, 2014, the trial court entered an order on November 21, 2014 granting the motion. The court found that there were no genuine issues of material fact concerning the following:

1. The critical issue in this lawsuit is the mold found at the Plaintiffs' cabin at 1431 N. Arbon Lane.
2. There is no evidence whatsoever that Defendants Lynn Chalache and Century 21 were aware of mold being present in this house.
3. Ms. Chalache provided everything she knew about the cabin.
4. There is no proof that Ms. Chalache had knowledge of mold or concealed mold from the Plaintiffs.
5. There is no proof that the condition of the house itself would put anyone on notice that there was mold in the house.
6. An independent home inspector conducted an inspection of the house and furnished a report.
7. This report was provided to the buyers and there was no mention of mold in that report.
8. The Plaintiffs had the same information that Ms. Chalache and Century 21 ...

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