Lorenzo v. Noel

Per Curiam. This case involves the sale of an allegedly defective home. Plaintiff appeals as of right from the trial court’s order granting defendant’s motion for summary disposition under MCR 2.116(0(10). We reverse. Plaintiff bought defendant’s home in 1988 without having it inspected. The basement started leaking in 1989. In 1991, she had the paneling removed from the basement walls and discovered that the walls were bowed-in and cracked. She sued. Plaintiff’s amended complaint alleged fraud and misrepresentation by nondisclosure and, in a separate count, fraud and mutual mistake. She prayed for either rescission or damages. Plaintiff argues that the trial court erred in finding that there were no questions of material fact and that defendant was entitled to judgment as a matter of law. 1 We agree in part. The beginnings of the "silent-fraud” doctrine alleged by plaintiff have been traced as far back as 1886: " 'A fraud arising from the suppression of the truth is as prejudicial as that which springs from the assertion of a falsehood, and courts have not hesitated to sustain recoveries where the truth has been suppressed with the intent to defraud.’ ” Williams v Benson, 3 Mich App 9, 18-19; 141 NW2d 650 (1966), quoting Tompkins v Hollister, 60 Mich 470, 483; 27 NW 651 (1886). Thus, "the suppression of a material fact, which a party in good faith is duty-bound to disclose, is equivalent *685 to a false representation and will support an action in fraud.” Williams at 19. In Williams, the sellers failed to inform the buyers that the premises had once been infested by termites. Id. at 13. When the sellers themselves purchased the motel, four years earlier, they had been informed of the infestation by the previous owner. Id. at 12-13. It was this previous owner who had discovered and assertedly exterminated the termites. Id. This Court held that the trial court properly granted summary disposition to the buyers regarding the question of liability premised on the "silent-fraud” doctrine; the Supreme Court reversed and remanded for trial in 378 Mich 721 (1966). In Ball v Sweeney, 354 Mich 616; 93 NW2d 298 (1958), the sellers of a resort neglected to inform the buyers that they had been having problems with the Department of Health because the sewer system had been installed improperly. Although the Court did not discuss the "silent-fraud” doctrine, it noted that the plaintiffs’ complaint alleged fraud on the basis of the sellers’ "failure to inform” the buyers of the sewer problem. Id. at 618. The Supreme Court affirmed the trial court’s decision to permit rescission of the contract. A similar doctrine has been applied in the negligence area in the context of determining whether the former owner of land owes a duty to subvendees injured by a dangerous condition (contaminated water) that the seller failed to disclose to the original buyer. See Christy v Prestige Builders, Inc, 415 Mich 684, 693-694; 329 NW2d 748 (1982). The Christy Court noted that, at "common law, a land vendor who surrenders title, possession, and control of property shifts all responsibility for the land’s condition to the purchaser. Caveat emptor prevails in land sales, and the vendor, with two *686 exceptions, is not liable for any harm due to defects existing at the time of sale.” Id. at 694. "The first exception is the vendor’s duty to disclose to the purchaser any concealed condition known to him which involves an unreasonable danger.” Id. "Failure to make such a disclosure or efforts to actively conceal a dangerous condition render the vendor liable for resulting injuries.” Id. "The second exception is that a vendor is liable to those outside the land for a dangerous condition on the land after the sale until the purchaser discovers or should have discovered it.” Id. "Once the purchaser discovers the defect and has had a reasonable opportunity to take precautions, third parties such as subvendees have no further recourse against the vendor. Under both exceptions, then, knowledge of the defect on the part of the purchaser relieves the vendor of any duty or liability.” Id. at 694-695. This language has been relied upon in real estate cases that involve neither negligence claims nor third-party buyers. See, e.g., Clemens v Lesnek, 200 Mich App 456, 459; 505 NW2d 283 (1993); Conahan v Fisher, 186 Mich App 48; 463 NW2d 118 (1990); Farm Bureau Mutual Ins Co v Wood, 165 Mich App 9, 16; 418 NW2d 408 (1987); Stewart v Isbell, 155 Mich App 65, 75; 399 NW2d 440 (1986). Wood and Stewart involved arguably dangerous conditions: an improperly installed wood-burning stove and an improperly capped artesian well. Conahan involved termites but was decided on other grounds. However, Clemens involved improper roof repairs and a defective septic system. The Clemens Court, without discussion, held that a buyer need not establish that a defect was unreasonably dangerous in order to show liability. Id. at 460-461. We agree with Clemens that, in the con *687 text of a real estate action between a buyer and a seller based on fraud, not negligence, an unreasonable danger need not be shown. 2 Defendant argues, however, that the "as is” clause in the purchase agreement bars plaintiffs action in this case. We disagree. "As is” clauses allocate the risk of loss arising from conditions unknown to the parties. See Lenawee Co Bd of Health v Messerly, 417 Mich 17, 32-33; 331 NW2d 203 (1982). Thus, plaintiffs mutual mistake claim is therefore barred. "As is” clauses also transfer the risk of loss where the defect should have reasonably been discovered upon inspection, but was not. See Conahan, supra at 49-50. They do not, however,, transfer the risk of loss where "a seller makes fraudulent representations before a purchaser signs a binding agreement.” Clemens, supra at 460. That is, at least arguably, what happened here. Plaintiff submitted the affidavit of Leon Mancour, a licensed contractor, who indicated that he inspected plaintiffs leaky basement after the wall paneling was removed. 3 He found that the stud wall onto which the paneling was nailed had been built two inches away from the wall to accommodate the inward bowing of the basement walls. He found large cracks in the walls behind the paneling that had been filled and painted over before the installation of the stud wall. Some of the studs had been shimmed to accommodate the bowing of the walls. Mr. Mancour further found evidence that the walls had continued to bow since the *688 installation of the paneling, including separation of the caulk and paint previously applied, damage to the studs, and evidence of movement in the furring strips to which the paneling was nailed. Theodore Dziurman, a civil engineer, also inspected the house after the paneling was removed. He found severe cracks and bowing in the basement walls and considerable evidence of long-term water leakage. He also observed evidence that the cracks had been caulked and painted over before the paneling was installed. He concluded that "[t]he wall failure had existed for at least thirty (30) years” and that the "basement walls [were] structurally unsound and should be repaired as soon as possible.” Defendant’s claim that she knew nothing of the defective condition of the basement walls, rather than entitling her to summary disposition, creates a question of fact. The same is true of conflicting evidence given by two of defendant’s experts. One indicated that there were cracks and bowing above grade that were obvious from outside the house. The other indicated that the home looked good and fully square from the outside. The trial court erred in granting defendant’s motion for summary disposition regarding the claim of misrepresentation by nondisclosure. 4 Reversed and remanded. We do not retain jurisdiction. Gribes, P.J., concurred in the result only._ Footnotes [1] Plaintiff has abandoned any claims relating to the allegedly defective condition of the attic. [2] We note, however, that the bowing of the basement walls involved in this case could result in the collapse of the structure and therefore is, at least arguably, an unreasonably dangerous condition. [3] Contrary to defendant’s assertions, signed and notarized originals of affidavits by Leon Mancour and Theodore Dziurman submitted by plaintiff were filed with the trial court before the hearing regarding defendant’s motion. [4] Counsel acknowledged at oral argument that some exhibits presented to this Court were not a part of the record below. Such documents were not considered. MCR 7.210(A)(1).