Court: Louisiana Court of Appeal; June 16, 2014; Louisiana; State Appellate Court
Purchasers Jack and Toye Bailey filed an action in redhibition and for fraudulent/negligent misrepresentation against seller Laura DeLaCruz and her real estate agent and broker. DeLaCruz, who had relocated to Nevada, failed to respond to the lawsuit, resulting in a preliminary default judgment and subsequent trial, where the court awarded the Baileys $109,891.66 in redhibition against DeLaCruz. The real estate agent and broker were found jointly liable for negligent misrepresentation, with damages set at $66,164.88. The Baileys' motion for a new trial to increase damages was denied, leading to their appeal, while the defendants did not respond or appeal.
The Baileys purchased a house on Covington Circle, Shreveport, for $415,000 on October 29, 2004. They were represented by Coldwell Banker agent Sue White, while DeLaCruz was represented by agent Mary Bamburg of the same firm. Prior to the sale, DeLaCruz had purchased the house and conducted two inspections revealing moisture and structural issues. John Worthey, a certified inspector, concluded the house was generally well-constructed but required repairs to the exterior. After overseeing the repairs, Worthey found no signs of mold.
In the buy/sell agreement dated October 4, 2004, the Baileys received a Louisiana Residential Disclosure Form, where DeLaCruz and Bamburg denied any damage to the property. The agreement allowed the Baileys five days for a home inspection. Relying on Sue White's assurance that a valid inspection was conducted during DeLaCruz's purchase, the Baileys conducted only a walk-through and received only part of the inspection report, which did not include the complete findings.
The Building Inspection Summary identified six items requiring attention, primarily concerning the exterior structure and siding condition, which showed cracks needing sealing to prevent moisture intrusion. Other minor exterior issues were noted, but the gas furnace and cooling operations were reported as normal. The World Inspection report included 16 pages of worksheets detailing 17 categories, with a notable disclaimer stating that toxic mold detection was outside the home inspector's expertise.
At closing, the Baileys asked if the repairs listed in the summary had been completed, to which White and Bamburg confirmed they had. However, upon moving in, the Baileys discovered mold and water intrusion issues when remodeling. Their subsequent inspection revealed severe structural defects, improper installations, and multiple instances of mold.
On October 25, 2005, the Baileys filed a lawsuit against DeLaCruz, Bamburg, and Coldwell Banker, alleging breaches of property disclosure laws, fraud, and negligent misrepresentation, claiming they would not have purchased the home had the mold and water issues been disclosed. The trial court found significant structural defects, including undisclosed water intrusion and mold, and determined that DeLaCruz had knowledge of these issues but failed to disclose them. The court concluded that Coldwell Banker and Bamburg also breached their duty by not informing the Baileys of the moisture problems, despite Bamburg signing a disclosure form stating no water intrusion or mold existed in the home.
Defendants did not appeal the trial court’s ruling, which limited the remedy to a price reduction instead of rescission. The court found DeLaCruz, Bamburg, and Coldwell Banker liable for negligent misrepresentation, awarding $66,164.88 in total damages, and held DeLaCruz individually liable for $109,891.66 due to redhibition. The judgment specified that these amounts included all damages awarded, with judicial interest beginning from the date of demand. The court did not clarify how these figures were derived, but an itemized list of damages provided by the Baileys detailed various repair costs, totaling $43,726.83 for house defects and $66,164.83 for mold-related issues, leading to a combined total of $109,891.66.
Bamburg and Coldwell Banker filed a timely motion for a new trial, while the Baileys submitted theirs 14 months later. The court partially granted the defendants' motion, amending damages from $70,000 to $66,164.83. The Baileys, represented by attorney Jack Bailey, included evidence of selling their home for $430,000 with associated costs and a claimed net loss of $24,039.74 in their motion for a new trial. They argued for a vacating of the trial court’s judgment in light of new evidence, emphasizing the trial judge's authority to hear new witnesses and amend judgments as per Louisiana law. The Louisiana Code of Civil Procedure allows new evidence to be presented in non-jury cases without the need to re-summon witnesses if their prior testimony is already recorded.
Parties in a trial may introduce new witnesses and evidence, and can recall witnesses for further examination with court permission. They are not limited by previously unoffered proofs from the first trial. The case Thurman v. Star Electric Supply, Inc. established that a new trial can be granted on all issues even if requested for only a few. If seeking a new trial based on newly discovered evidence, the requesting party must show they made diligent efforts to obtain the evidence before the trial. Louisiana law (La. C.C.P. art.1972(2)) recognizes that post-trial house sales and associated losses can be new evidence, but other exhibits presented were cumulative and did not impact the outcome. The trial court did not err in denying the Baileys’ motion for a new trial based on this rationale.
The standard for reviewing findings of fact is manifest error; a court can only reverse if there’s no reasonable basis for the fact finder’s determination. Legal questions are reviewed for correctness. Louisiana civil law categorizes private law into contracts, torts, and property, with this case involving both contracts and torts. Redhibitory defects, as defined by La. C.C. art. 2520, allow a buyer to rescind a sale or reduce the purchase price if the defect diminishes the item's usefulness or value. Remedies against real estate agents involve claims of fraud or negligent misrepresentation, rather than redhibition, as established in cases such as Hollingsworth v. Choates and Davis v. Davis.
Fraud is defined as a misrepresentation or suppression of truth intended to gain an unjust advantage or cause loss to another, which can also occur through silence or inaction (La. C.C. art. 1953). A buyer may pursue a negligent misrepresentation claim against a realtor under Civil Code article 2315, requiring proof of the defendant's legal duty to provide accurate information, a breach of that duty, and damages incurred. Real estate agents have a duty to provide accurate property information to both vendors and purchasers, and a breach can lead to liability (Connell v. Davis, 06-9).
In the case discussed, the trial court found liability for negligent misrepresentation against the seller, realtor, and broker, but did not classify the conduct as fraudulent. An inspection prior to purchase indicated no mold issues, leading to the conclusion of negligent misrepresentation rather than fraud.
In terms of redhibition, La. C.C. art. 2545 holds sellers liable for undisclosed defects, allowing buyers recovery of the purchase price, expenses, damages, and attorney fees. If a defect merely diminishes value, the remedy can be limited to a price reduction (La. C.C. art. 2541). The trial court has discretion in determining the reduction amount, which should not be modified without evidence of clear abuse (La. C.C. art. 2531; Kent v. Cobb).
For immovable property, damages are calculated based on the cost to remedy defects (Dodd v. Tucker). In this case, the Baileys purchased a home for $415,000 and incurred $109,891.68 in repair costs over seven years. The trial court's decision to reduce the selling price instead of ordering rescission was upheld, affirming the award in redhibition.
In contract actions, mental distress damages are typically not recoverable unless specific conditions apply. According to La. C.C. art. 2545, a seller who knowingly fails to disclose defects may be liable for other damages, including nonpecuniary damages for mental anguish, aggravation, and inconvenience. Nonpecuniary losses, referred to as "dommage moral," relate to moral damages not affecting tangible assets. The trial court determined that DeLaCruz was aware of prior damage and failed to disclose it to the Baileys. Under La. C.C. art. 1988, damages for nonpecuniary loss can be claimed if the contract is meant to satisfy a nonpecuniary interest and the obligor knew or should have known that failure to perform would cause such loss. The Louisiana Supreme Court has recognized recovery for nonpecuniary loss in redhibition cases if the purchaser intended a significant nonpecuniary interest, which was not established in a related case involving a defective mobile home purchase. The trial court in the current case did not award nonpecuniary damages, as the plaintiffs did not demonstrate a significant nonpecuniary purpose despite purchasing the home as their primary residence.
Regarding tort damages, the trial court found that real estate agent Mary Bamburg was a servant of Coldwell Banker, making the broker vicariously liable for her negligence. The court also recognized Bamburg's negligent misrepresentation. Damages can include both actual (patrimonial) and moral (extra-patrimonial) damages, such as humiliation and loss of enjoyment. The plaintiffs experienced a reduction in property value due to non-disclosure of prior issues, with the court affirming the trial judge’s decision to accept the full restoration cost of $109,891.66 as the measure of diminution in value.
The trial court erred by holding the agent and broker solely accountable for the alleged mold damage, leading to a reversal and a finding of liability for the full amount of $109,891.66. Generally, defendants are not liable for emotional distress without accompanying physical injury; however, Louisiana courts provide exceptions where genuine emotional distress can be claimed without physical harm, particularly in circumstances likely to cause serious mental distress. In this case, no outrageous conduct by Bamburg was established, as she had no knowledge of mold issues and was informed that water intrusion problems were resolved. Consequently, the trial court correctly denied mental distress damages.
The document discusses the concept of "solidarity" under Civil Code Article 2091, indicating that debtors can be collectively liable for the same obligation, where one debtor's payment exonerates the others. A cited case illustrates that damages from multiple tortfeasors can be indivisible, meaning that all defendants are liable for the total damages without apportionment. Here, both the realtor and broker are found liable for the full damages due to their negligence, with the seller also liable for the same amount under contract law. Therefore, all defendants share joint liability for the total harm.
Lastly, plaintiff Jack Bailey, representing the family, seeks attorney fees based on a 40% contingency, despite the awarded claims being lower than anticipated. The seller's potential liability for personal injury damages in redhibition hinges on prior knowledge of the defect, which would also impose negligence liability and coverage for the buyer's attorney fees.
Thomas C. Galligan, Jr. addresses the intersection of contracts and torts in his work, while a relevant case, Richard v. McElroy, has been noted but is unpublished. In the redhibition claim against seller Laura DeLaCruz, the court awarded the plaintiffs, Jack and Toye Bailey, $25,000 in attorney fees despite a lack of detailed testimony on legal time spent. The trial court set judicial interest from the date of judicial demand rather than from the sale date, consistent with La. C.C. art 2545, since the sale was not rescinded, and damages were for repair costs rather than a return of the purchase price. Ultimately, the court ordered a judgment against DeLaCruz and co-defendants Mary Bamburg and Coldwell Banker for $109,891.66, with judicial interest from the date of judicial demand, and $25,000 for attorney fees, also with interest from the same date. Costs were assessed to the defendants, and the name of the defendant Mary Bamburg was corrected from "Bamburgh" in the original pleadings. Additionally, $286,616.37 was sought in attorney fees related to the case, and EIFS, or Exterior Insulation and Finish System, is identified as a type of exterior composite material.
