Summary
applying the clear and convincing proof standard to a fraud by omission claim
Summary of this case from Biszantz v. Stephens Thoroughbreds, LLCOpinion
NO. 2012-CA-000486-MR
01-23-2015
AARON AND ANITA ARNSPERGER APPELLANTS v. DEBRA BECKER APPELLEE
BRIEFS FOR APPELLANT, APPELLANTS, AARON AND ANITA ARNSPERGER: James Y. Moore Cincinnati, Ohio BRIEF FOR APPELLEE, DEBRA BECKER: K. Roger Schoeni Megan B. Hall Cincinnati, Ohio
NOT TO BE PUBLISHED APPEAL FROM KENTON CIRCUIT COURT
HONORABLE PATRICIA M. SUMME, JUDGE
ACTION NO. 10-CI-01935
OPINION
AFFIRMING
BEFORE: LAMBERT, NICKELL, AND TAYLOR, JUDGES. NICKELL, JUDGE: Aaron and Anita Arnsperger (collectively "Arnsperger") appeal from the November 16, 2011, order of the Kenton Circuit Court granting summary judgment in favor of Debra Becker. We affirm.
Sanitation District No. 1 ("SD1") currently operates in the Kentucky counties of Boone, Campbell and Kenton. At issue in this appeal is the presence of an odor emanating from the Dry Creek Wastewater Treatment Plant operated by SD1 which is located on Amsterdam Road in Villa Hills, Kentucky, and whether the presence of such odor constitutes a latent defect affecting surrounding residential properties. The plant, opened in 1979, treats industrial, commercial and residential wastewater. Eleven years later, in 1990, a residential area known as Brookville Court was developed off Amsterdam Road within two miles of the treatment facility. Thirty years after the plant opened, Aaron Arnsperger and his wife, Anita Arnsperger, purchased a home from Becker in Brookville Court in October of 2009 and began occupying it in late December of that year.
Shortly after purchasing the home, the Arnspergers began noticing strong chemical odors. Allegedly unaware of the plant's existence and close proximity to their new home, they began making inquiries of neighbors. When they learned the likely source of the odors was the treatment plant, the Arnspergers requested and received records from SD1 related to previous complaints about odors. They discovered Debra Becker—their immediate predecessor in title—was one of the persons who had registered a complaint with SD1.
Evidence adduced below revealed the Arnspergers had resided in the area near the treatment plant—perhaps as close as two miles away—for some time prior to purchasing the home from Becker. Mr. Arnsperger testified he had driven past and observed a roadside sign for the treatment plant on several occasions but he could not see the treatment plant from the road and did not know what activities were conducted at the site.
On June 16, 2010, the Arnspergers filed suit against Becker and SD1 seeking damages and injunctive relief. They presented claims for fraudulent concealment and representation, negligence, and unjust enrichment against Becker and for fraud, negligence and nuisance against SD1. Following completion of a substantial amount of discovery, on April 11, 2011, Becker moved for summary judgment on all claims levied against her. Arnsperger filed a response in opposition to the motion, to which Becker filed a reply.
The fraud and negligence claims against SD1 were later dismissed on sovereign immunity grounds but the nuisance claim was permitted to proceed. This Court concluded the trial court's decision on the latter was correct in Sanitation District No. 1 v. Arnsperger, 2011-CA-001748-MR, 2014 WL 4520177, rendered September 14, 2014 (unpublished).
Following oral argument, the trial court entered an order granting summary judgment to Becker on all claims on November 16, 2011. Therein, it concluded Becker was under no duty to disclose the existence of the wastewater treatment plant nor the odor emanating therefrom; the provisions of KRS 324.360 were inapplicable under the circumstances and did not independently create a statutory duty to disclose; an odor encroaching on the property a few days per month did not constitute a latent defect in the property of which Becker would have superior knowledge because its presence was ascertainable through ordinary diligence; and, Becker's silence as to the presence of the treatment plant or the offending odor did not constitute fraudulent concealment nor did her actions amount to a partial disclosure. The trial court concluded Arnsperger had failed to present credible evidence to support the allegations and had thus failed to show existence of a genuine issue of material fact. Therefore, the trial court concluded Becker was entitled to judgment as a matter of law on Arnsperger's fraudulent concealment and negligence claims. Further, the trial court found Arnsperger had failed to present any affirmative evidence of actual damages in support of the claim for unjust enrichment, thereby entitling Becker to judgment in her favor. This appeal followed.
Kentucky Revised Statutes.
Summary judgment is a device utilized by courts to expedite litigation. Ross v. Powell, 206 S.W.3d 327, 330 (Ky. 2006). It is deemed a "delicate matter" because it "takes the case away from the trier of fact before the evidence is actually heard." Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 482 (Ky. 1991). In Kentucky, the movant must prove no genuine issue of material fact exists, and he "should not succeed unless his right to judgment is shown with such clarity that there is no room left for controversy." Id. The trial court must view the evidence in favor of the non-moving party. City of Florence v. Chipman, 38 S.W.3d 387, 390 (Ky. 2001). The non-moving party must present "at least some affirmative evidence showing the existence of a genuine issue of material fact[.]" Id.
On appeal, our standard of review is "whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law." Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996). Furthermore, because summary judgments do not involve fact-finding, our review is de novo. Pinkston v. Audubon Area Community Services, Inc., 210 S.W.3d 188, 189 (Ky. App. 2006). With these standards in mind, we turn to the allegations of error presented.
Arnsperger contends the trial court committed four errors in granting summary judgment to Becker. First, Arnsperger insists KRS 324.360—a statute related to seller's disclosure forms—is applicable under the facts presented and the trial court's decision to the contrary is infirm. Next, Arnsperger alleges the trial court's determination that the offending odor could have been discovered through ordinary diligence is erroneous. Third, Arnsperger avers Becker made a partial disclosure when she completed a property disclosure form in conjunction with placing a listing for the home on a website known as "forsalebyowner.com" and the trial court erred in not so finding. Finally, Arnsperger insists the trial court erred in concluding Becker was not unjustly enriched by selling the home without disclosing the alleged defect. Because they are closely related and intertwined, we shall address Arnsperger's first three allegations together before turning to the final claim of error.
Dispensing with Arnsperger's first three arguments requires discussion of the elements of a claim for fraudulent concealment or omission in the context of real estate transactions. In Waldridge v. Homeservices of Kentucky, Inc., 384 S.W.3d 165, 171-72 (Ky. App. 2011), a panel of this Court undertook a detailed analysis of the requirements for succeeding on such claims.
To prevail on a claim of fraudulent omission, a plaintiff must prove: (a) a duty to disclose a material fact; (b) a failure to disclose a material fact; and (c) that the failure to disclose a material fact induced the plaintiff to act and, as a consequence, (d) to suffer actual damages. Rivermont Inn, Inc. v. Bass Hotels & Resorts, Inc., 113 S.W.3d 636, 641 (Ky. App. 2003). A caveat to the
necessary elements under [such a] claim is that "mere silence does not constitute fraud where it relates to facts open to common observation or discoverable by the exercise of ordinary diligence, or where means of information are as accessible to one party as to the other." Bryant v. Troutman, 287 S.W.2d 918, 920-921 (Ky. 1956).Waldridge, 384 S.W.3d at 171-72. Further, the elements of a claim for fraud must be shown by clear and convincing evidence. United Parcel Service Co. v. Rickert, 996 S.W.2d 464, 468 (Ky. 1999) (citing Wahba v. Don Corlett Motors, Inc., 573 S.W.2d 357, 359 (Ky. App. 1978)).
In the context of real estate transactions, it is the general rule that "where no direct representation is made by the vendor concerning definite facts and the purchaser has sufficient opportunity to observe the condition of the premises, the maxim of caveat emptor is applicable[.]" Fannon v. Carden, 240 S.W.2d 101, 103 (Ky. 1951). However, the maxim does not exonerate the seller from liability for common law fraud.
In the sale of real estate the intentional suppression of facts known to the seller and unknown to the purchaser is ground for an action for deceit if the purchaser was damaged by reason of the fraudulent concealment. Where there is a latent defect known to the seller and he remains silent with the knowledge that the buyer is acting on the assumption that no defect exists, the buyer has a cause of action against the seller for an intentional omission to disclose such latent defect. 23 Am.Jur. 'Fraud and Deceit,' § 78, p. 854; Highland Motor Transfer Co. v. Heyburn Bldg. Co., 237 Ky. 337, 35 S.W.2d 521 [(1931)], and the several authorities cited therein on page 523; Kaze v. Compton, Ky., 283 S.W.2d 204 [(1955) ]. However, mere silence does not constitute fraud where it relates to facts open to common observation or discoverable by the exercise of ordinary diligence, or where means of information are as accessible to one party as to the other. 23 Am.Jur. 'Fraud and Deceit,' § 84, p. 863.
Bryant, 287 S.W.2d at 920-921.
Under these authorities, it is clear that because Becker remained silent as to the presence of the wastewater treatment plant and the odors it occasionally emitted, the threshold determination must be whether the presence of the odor was open to common observation or discoverable with the exercise of ordinary diligence. If it was, the inquiry comes to an end as no action for fraud will lie, and Arnsperger's claims must fail.
Arnsperger raises no challenge on appeal to the trial court's determination regarding the negligence claim against Becker and any such claims are, therefore, presumed to be waived. Nevertheless, as a negligence claim is dependent on many of the same elements as a fraudulent omission claim—i.e., existence of a duty, a breach of that duty, and consequent injury—our analysis herein would apply with equal force to the trial court's grant of summary judgment on the negligence claim.
Conversely, if the question is answered in the negative, we must then determine whether Becker owed a duty to disclose the presence of the offending odor to Arnsperger in relation to the sale of the property at issue and whether her silence worked to perpetrate a fraud upon Arnsperger. To that end, we note "[a] duty to disclose facts is created only where a confidential or fiduciary relationship between the parties exists, or when a statute imposes such a duty, or when a defendant has partially disclosed material facts to the plaintiff but created the impression of full disclosure." Rivermont Inn, 113 S.W.3d at 641 (citing Dennis v. Thomson, 240 Ky. 727, 43 S.W.2d 18 (1931). It is undisputed that no fiduciary relationship existed between the parties. Thus, to prevail on the claims levied, Arnsperger must prove the existence of either a statutory duty or partial disclosure.
Our review need not go so far, however, because, as the trial court correctly found, Arnsperger has failed to show the offending odors were not readily ascertainable through the exercise of ordinary diligence, nor that Becker possessed information inaccessible to the general public. In fact, except for self-serving testimony and bald speculations, Arnsperger has presented absolutely no proof on this issue. Thus, we hold that under the facts adduced below, the occasional presence of unpleasant odors cannot be said to constitute a latent defect in the home triggering imposition of any duty of disclosure on Becker. Absent a duty to disclose, Arnsperger's claim of fraudulent concealment or omission must fail as a matter of law as the trial court correctly found. Our review of the record further reveals Arnsperger's contentions regarding presence of a duty to disclose under KRS 324.360 and the alleged partial disclosure occasioned by Becker's completion of a Seller's Disclosure Form in connection with the sale of the residence are without merit for the reasons previously stated.
Taken to its logical conclusion, Arnsperger's position would require sellers to disclose any and all conditions of the property another might find unpleasant or offensive—whether patent or latent—even when such conditions do not materially affect the habitability or value of the property being offered for sale. We cannot countenance such an expansive and unreasonable interpretation of the law.
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In addition, even were we to ignore the precedents cited above—which we are not permitted to do—and conclude Arnsperger had satisfied the burden of proving existence of a duty, our examination indicates the record is devoid of credible evidence of injury or actual damages, thereby lending further credence to the trial court's grant of summary judgment in favor of Becker. Having concluded Becker owed no duty to Arnsperger in relation to disclosure of the odors emanating from the wastewater treatment facility, we discern no error in the trial court's grant of summary judgment on Arnsperger's fraudulent omission claim.
Finally, Arsperger argues the trial court erred in concluding Becker was not unjustly enriched by selling the home without disclosing presence of the odors. We disagree.
A claim for unjust enrichment arises when a party receives a sum of money "without consideration, and for which the law implies a duty to repay." Salkeld v. Davis, 247 S.W.2d 517, 520 (Ky. 1952). "For a party to prevail under the theory of unjust enrichment, they must prove three elements: (1) benefit conferred upon defendant at plaintiff's expense; (2) a resulting appreciation of benefit by defendant; and (3) inequitable retention of benefit without payment for its value." Jones v. Sparks, 297 S.W.3d 73, 78 (Ky. App. 2009) (citation omitted).
It is undisputed that Arnsperger paid Becker $35,000.00 less than the asking price for the home. It is also undisputed that the home appraised for $10,000.00 more than the purchase price near the time of the Arnsperger's purchase, the appraiser was aware of the plant at the time the appraisal was conducted, and the appraiser did not believe proximity of the treatment plant to the home was a negative factor warranting notation or disclosure in the appraisal report. In her deposition, Mrs. Arnsperger indicated her belief that the price paid for the home was reasonable. The realtor who represented Arnsperger testified that in her professional opinion the home was not overpriced. No evidence was presented indicative of a diminution in value of the home based on existence of the plant or the occasional presence of unpleasant odors. As the trial court correctly found, Arnsperger has simply failed to prove any damages arising from the purchase or that Becker unjustly received more than she was due. Thus, Arnsperger has not shown permitting Becker to retain the benefits received in conjunction with the sale of her home would be unjust. Bryan Bros. Packing Co. v. Garrand, 386 S.W.2d 469, 474 (Ky. 1964). The trial court's entry of summary judgment was proper.
For the foregoing reasons, the judgment of the Kenton Circuit Court is affirmed.
ALL CONCUR. BRIEFS FOR APPELLANT,
APPELLANTS, AARON AND
ANITA ARNSPERGER:
James Y. Moore
Cincinnati, Ohio
BRIEF FOR APPELLEE, DEBRA
BECKER:
K. Roger Schoeni
Megan B. Hall
Cincinnati, Ohio