| Pettis v Haag |
| 2011 NY Slip Op 03944 [84 AD3d 1553] |
| May 12, 2011 |
| Appellate Division, Third Department |
| Jody Pettis et al., Respondents, v Bryan Haag et al.,Appellants. |
—[*1] James J. Devine, Oneida, for respondents.
Garry, J. Appeal from an order of the Supreme Court (Cerio Jr., J.), entered January 5, 2010in Madison County, which denied defendants' motion for, among other things, summaryjudgment dismissing the complaint.
In April 2007, defendants listed their residence in the Town of Canastota, Madison Countyfor sale, and executed a property condition disclosure statement in accord with Real PropertyLaw article 14. Within this statutory disclosure document the sellers asserted, among otherthings, that there were no material defects in the roof or electric service of the residence, and noflooding, drainage or grading problems that resulted in standing water on any portion of theproperty. Plaintiffs contracted to purchase the property and hired an inspection service toexamine the residence. The inspection report listed several areas of concern—includingmissing shingles on the roof, incorrect wires in a breaker box and evidence of water seepage inthe basement that could require grading work—prompting the parties to execute anaddendum to the purchase contract, in which defendants agreed to repair and replace the missingshingles, remove the incorrect wires and add electrical breakers as necessary prior to the closing.In August 2007, plaintiffs performed a walk-through inspection, and closed on the propertyshortly thereafter.
Plaintiffs discovered in October 2007 that defendants had not remedied the electricalproblems listed in the addendum. In February 2008, they found additional wiring problems thathad been concealed behind the basement ceiling. The property suffered extensive floodingrepeatedly. The roof lost approximately 40 shingles annually due to wind. In May 2009, [*2]plaintiffs commenced this action presenting these issues, andalleging that defendants had knowingly made fraudulent material representations about thecondition of the property relative to these flooding, roof and electrical problems. Prior to joinderof issue, defendants sought dismissal of the complaint for failure to state a cause of action and adefense based on the documentary evidence or, in the alternative, summary judgment. SupremeCourt denied the application on both grounds, and defendants appeal.
To establish their cause of action for fraud, plaintiffs must demonstrate that defendantsknowingly misrepresented a material fact upon which plaintiffs justifiably relied, causing theirdamages. "Although New York traditionally adheres to the doctrine of caveat emptor in an arm'slength real property transfer," a seller may be liable for failing to disclose information if theconduct constitutes active concealment (Klafehn v Morrison, 75 AD3d 808, 810 [2010]; see Simone v Homecheck Real EstateServs., Inc., 42 AD3d 518, 520 [2007]). A false representation in a disclosure statementmay constitute active concealment (seeAnderson v Meador, 56 AD3d 1030, 1035 [2008]; Simone v Homecheck Real EstateServs., Inc., 42 AD3d at 520-521). To prevail upon such a claim, plaintiffs must demonstratethat the false representation prevented fulfillment of their own obligations imposed by thedoctrine of caveat emptor and that they justifiably relied upon the false representation (seeKlafehn v Morrison, 75 AD3d at 810). "Justifiable reliance does not exist [w]here a party hasthe means to discover [a falsehood] by the exercise of ordinary intelligence, and fails to make useof those means" (Kurtz v Foy, 65AD3d 741, 743 [2009] [internal quotation marks and citations omitted]).
As to the condition of the roof and the breaker box wiring, although defendants' disclosurestated that there were no material defects in these areas, plaintiffs' home inspection report putthem on notice of the existing problems. In light of this notice, plaintiffs cannot prove justifiablereliance on those representations by defendants, and these claims should have been dismissed.However, we reach a different conclusion as to the flooding and the additional electrical issues.Defendants asserted in their disclosure that there were no flooding issues on any portion of theland. The home inspection report merely noted that the basement was subject to water seepageand that grading might be necessary to prevent this, with no mention of problems with standingwater elsewhere on the property. Reviewing this motion as one for summary judgment, we findthat defendants satisfied their initial burden by supplying affidavits denying actual knowledge ofthe flooding problems, together with the documents comprising the underlying transaction (see e.g. Killough v Shiels, 45 AD3d1159, 1160-1161 [2007]). The burden then shifted to plaintiffs, who submitted affidavitsfrom various neighbors describing prior flooding they had observed upon the property. Thisevidence presented factual issues as to defendants' knowledge and active concealment of theflooding (compare id. at 1161). While defendants assert that these affidavits may alsopose issues regarding plaintiffs' diligence, this is a factual inquiry to be determined by a jury (see Boyle v McGlynn, 28 AD3d994, 996 [2006]; Gizzi v Hall, 300 AD2d 879, 881-882 [2002]).
Similarly, defendants asserted in the disclosure form that there were no electrical problemsand denied actual knowledge of such problems in their affidavits; plaintiffs' inspection onlyrevealed the problems with the breaker box and the electrical intake, as the additional electricalissues hidden behind the basement ceiling—and apparently related to renovation work bydefendants—were not discovered until the ceiling covering them collapsed. In theiropposition, plaintiffs submitted an invoice from a construction company describing thehazardous electrical conditions allegedly created during the course of the basement renovations.Thus, we agree with Supreme Court that there are factual issues posed as to defendants' [*3]knowledge and active concealment of those problems.
Finally, defendants argue that the general disclaimer of warranties and representations in theclosing documents negates any allegations of fraudulent misrepresentation by plaintiffs. Suchallegations based upon the statutory disclosure form, however, survive general, "as is"disclaimers in the closing documents (see Real Property Law § 465 [2]; Daly v Kochanowicz, 67 AD3d78, 87-88 [2009], quoting Ayres vPressman, 14 Misc 3d 145[A], 2007 NY Slip Op 503097[U], *2 [2007]; Calvente v Levy, 12 Misc 3d 38,40-41 [2006]).
Peters, J.P., Rose, Lahtinen and Malone Jr., JJ., concur. Ordered that the order is modified,on the law, without costs, by reversing so much thereof as denied defendants' motion seekingdismissal of the claims relative to the electric breaker box and roof problems; motion granted tothat extent and said claims dismissed; and, as so modified, affirmed.