Jamie Paul Ledbetter and wife, Charlene Ledbetter v. Donald L. Schacht

Citations: 395 S.W.3d 130; 2012 WL 3775969; 2012 Tenn. App. LEXIS 604Docket: W2011-01857-COA-R3-CV

Court: Court of Appeals of Tennessee; August 31, 2012; Tennessee; State Appellate Court

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Jamie and Charlene Ledbetter purchased a home in Lexington, Tennessee, in December 2008 and subsequently sued the sellers and the sellers’ real estate agent, Linda Lipscomb, in November 2009. They claimed non-disclosure of foundation defects and prior repairs, leading to various structural issues in their home. The Ledbetters alleged that Lipscomb violated the Tennessee Residential Property Disclosure Act by failing to disclose her knowledge of these defects. In response, Lipscomb filed a motion for summary judgment, asserting she had no knowledge of any defects and provided evidence including a favorable home inspection report and an engineer's evaluation indicating the house was structurally sound. The trial court granted Lipscomb summary judgment, ruling she had no knowledge of any adverse facts. The Ledbetters appealed, but the appellate court affirmed the trial court's judgment, with only Lipscomb's claims considered on appeal, while other claims including fraud, negligence, and violations of the Tennessee Consumer Protection Act were not addressed.

The appeal focuses on whether the trial court correctly dismissed the Ledbetters’ claim regarding a violation of the Tennessee Residential Property Disclosure Act. The Ledbetters contended that Ms. Lipscomb, the listing agent, was aware of existing structural defects and necessary repairs before the property sale. They presented a November 2007 inspection report identifying various structural issues and recommended repairs, including the installation of an 'LVL' support, replacement of wooden shims, and securing the foundation. Two follow-up inspections occurred in early 2008. Ms. Lipscomb acknowledged knowledge of the inspection and that some work was needed but claimed she had not seen the reports or knew the full extent of the necessary repairs, referring to them as 'code upgrades.' She did not inform the Ledbetters or their agent about these issues. The Ledbetters argued that this created a genuine issue of material fact regarding Ms. Lipscomb's knowledge of adverse conditions impacting the property's structural integrity. The trial court granted summary judgment to Ms. Lipscomb, concluding she had no adverse knowledge of material facts. The Ledbetters appealed, asserting the court erred by finding a lack of genuine issues of material fact, while Ms. Lipscomb argued that she either had no knowledge of adverse facts or was protected by an 'as is' clause in the sales contract. The standard for summary judgment requires that no genuine issue of material fact exists for a ruling to be granted in favor of the moving party.

Evidence permitting only one reasonable conclusion indicates no material factual dispute, allowing resolution as a matter of law. The burden of proof for summary judgment lies with the moving party, who must demonstrate the absence of genuine material fact disputes and entitlement to judgment. This can be achieved by negating essential elements of the opposing party's claim or showing the latter's inability to prove these elements at trial. If the moving party fails to meet this burden, the motion for summary judgment is denied. Conversely, the nonmoving party must produce evidence establishing the existence of material fact disputes, which can include highlighting overlooked evidence, rehabilitating challenged evidence, providing additional evidence, or submitting an affidavit justifying further discovery.

The nonmoving party's evidence is presumed true, and any doubts regarding material fact disputes are resolved in their favor. The court reviews summary judgment matters de novo, favoring the nonmoving party and drawing reasonable inferences in their support.

In this case, the Ledbetters allege that Ms. Lipscomb failed to disclose adverse facts about the property, specifically foundation and structural defects, violating the Tennessee Residential Property Disclosure Act. This Act mandates that property owners provide a disclosure statement detailing the property's condition, including known material defects. The licensee must inform clients of their rights and obligations under this Act, clarifying that the disclosure statement reflects the owner's representations rather than those of the licensee.

The Act stipulates that if a real estate licensee fulfills their duties to inform parties in a residential transaction, they are not liable for any violations of the Act or for failing to disclose information about the property. However, licensees can be held liable for intentionally misrepresenting or defrauding a purchaser, or for not disclosing adverse facts they are aware of. "Adverse facts" refer to conditions that significantly affect the property's structural integrity or pose health risks to occupants.

Furthermore, the Act specifies that a licensee cannot be held responsible for information in a disclosure statement unless they are a signatory to it. Nevertheless, this does not exempt licensees from their disclosure obligations under related statutes, which require the disclosure of adverse facts known to the licensee.

Both the Tennessee Real Estate Broker License Act of 1973 and the Act define "adverse facts" similarly, focusing on their impact on structural integrity and health risks. However, the Broker License Act adds a criterion regarding the negative impact on the property's value. In the current case, there is a disagreement between the parties about which definition of "adverse facts" applies, with the Ledbetters advocating for the broader definition from the Broker License Act, while Ms. Lipscomb argues against its applicability based on prior case law.

The Tennessee Residential Disclosure Act establishes that homebuyers have a specific remedy against real estate licensees under Tenn. Code Ann. 66–5–206. Ms. Lipscomb contends that this Act is the exclusive means for recovery against such licensees. However, the Act does not negate the obligations imposed by the Real Estate Broker License Act of 1973, specifically referencing its duties in section 62-13-403. Section 66-5-208(d)(2) clarifies that real estate licensees must still fulfill disclosure requirements under the latter Act, and the Residential Property Disclosure Act does not limit available legal remedies for failure to disclose.

The Middle Section of the Court previously rejected a similar argument in Konop v. Henry, emphasizing that the broader definitions of duties and adverse facts from the Real Estate Broker License Act apply when specific statutory duties are not referenced in complaints. In the current case involving the Ledbetters, the complaint directly accuses Ms. Lipscomb of violating the Residential Disclosure Act by failing to disclose known defects, distinguishing it from the Konop case where allegations were more generalized.

The conclusion is that while the Residential Disclosure Act provides remedies, it does not serve as the sole avenue for recovery against real estate licensees, who remain accountable for disclosures mandated by the Real Estate Broker License Act.

The Ledbetters alleged a violation of the Residential Property Disclosure Act, which the trial court correctly addressed by applying its specific duties and definitions. Under section 66-5-208(d), the Ledbetters could have claimed a violation of the Real Estate Broker License Act, as the Residential Property Disclosure Act does not exempt real estate licensees from disclosures required by the latter. However, their complaint did not mention the Real Estate Broker License Act and focused solely on the Residential Property Disclosure Act. During the summary judgment hearing, their attorney argued for the application of definitions from the Real Estate Broker License Act, but there is no authority mandating this. The appeal will also adhere to the definitions within the Residential Property Disclosure Act, specifically section 66-5-206, which holds licensees accountable for failing to disclose adverse facts known to them.

Ms. Lipscomb's motion for summary judgment included her affidavit stating she was unaware of any defects in the property and highlighted that the Ledbetters had inspected the property and received a favorable home inspection report. Additionally, she submitted an engineer's report from May 2008 confirming structural soundness. In contrast, the Ledbetters presented evidence, including a November 2007 structural inspection report identifying significant issues and repairs, asserting that Ms. Lipscomb was aware of past defects and repairs. Although she referred to necessary work as "code upgrades" and claimed that repairs were completed by May 2008, she acknowledged knowledge of prior structural inspections and repairs.

The Ledbetters contended that a genuine issue of material fact existed concerning Ms. Lipscomb's knowledge of adverse conditions that should have been disclosed prior to their home purchase. Under section 66-5-206, the critical inquiry was whether Ms. Lipscomb was aware of any conditions that significantly compromised the home’s structural integrity. The conclusion reached was that she was not aware of such conditions. Evidence presented by Ms. Lipscomb supported her summary judgment motion, disproving essential claims made by the Ledbetters and shifting the burden of proof. The Ledbetters failed to show that prior defects and repairs significantly affected the home's structural integrity. Inspections conducted by an engineer and a second engineering firm confirmed that the home was structurally sound. Additionally, the Ledbetters’ inspector rated the foundation as "acceptable," the highest possible rating. Mr. Ledbetter also admitted he believed the house was structurally sound at the time of purchase. Thus, it was determined that reasonable conclusions supported that Ms. Lipscomb lacked knowledge of any adverse conditions. The Ledbetters' appeal argument that structural soundness at closing was irrelevant was dismissed due to a lack of supporting evidence for their claims of subsequent defects. Consequently, the circuit court's decision was affirmed, with costs of the appeal assigned to the Ledbetters and their surety.