Calland et al v. Carr et al
Filing
33
ORDER granting 21 Motion for Summary Judgment Signed by Honorable David C Norton on 5/6/15.(akob, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
ALBERT M. CALLAND III and
CYNTHIA K. CALLAND,
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Plaintiffs,
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vs.
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LLOYD H. CARR, personally and as
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Trustee of the Lloyd H. Carr Trust dated
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June 17, 1998, LAURIE K. CARR, and
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LLOYD H. CARR TRUST, dated June 17, )
1998,
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Defendants.
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No. 9:14-cv-0420-DCN
ORDER
This matter is before the court on defendants’ motion for summary judgment. For
the reasons stated below, the court grants defendants’ motion.
I. BACKGROUND
This case is more notable for its illustrious cast of characters than for its mundane
storyline. That cast includes plaintiffs Albert M. Calland III (“Albert”) and his wife
Cynthia K. Calland (“Cynthia”) (collectively, the “Callands”), who purchased a Hilton
Head Island home from defendants Lloyd Carr (“Lloyd”) and his wife Laurie K. Carr
(“Laurie”) (collectively, the “Carrs”). Albert served in the United States Navy for 33
years, during which he served as the commander of all Special Operations Forces in
Afghanistan, commanding officer of the Naval Special Warfare Command, and
ultimately Deputy Director of the CIA. Lloyd was the head football coach at the
University of Michigan for thirteen years, leading the Wolverines to 122 wins, five Big
Ten championships, and the 1997 national championship. The dispute between the
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Callands and the Carrs arises from a musty odor in the home allegedly resulting from
water infiltration, mold, and mildew.
The Carrs had experienced a variety of problems with the home prior to putting it
on the market. In 2007, Laurie noticed moisture around one of the windows. Laurie
Dep. 16:3-13. After testing revealed the presence of black fungi and moisture readings of
20% near the windows, Pls.’ Resp. Ex. B, the Carrs hired a contractor to remove and
replace the stucco. Laurie Dep. 18:7-10. Following a rainstorm in 2008, a friend of the
Carrs, Spain Kelley, observed a leak in the kitchen ceiling. Laurie Dep. 22:9-10. The
Carrs hired a contractor to replace the roof, gutter system, and a portion of the kitchen
ceiling. Laurie Dep. 22:1-8.
Finally, as they were preparing to sell the house, in the summer of 2010, their real
estate agent Kevin King suggested that they make some repairs prior to putting the home
up for sale. Laurie Dep. 25:3-8. ServPro did remediation in the garage area, and after
remediation was done, the Carrs had foam insulation and microbial preventive spray
sprayed on it as a preventive measure. Laurie Dep. 25:22-26:3. The Carrs also retained a
specialist to test the home for mold and mildew. On November 1, 2010, SanAir
Technologies produced a report, which indicated a presence of mold in the garage, the
HVAC room, storage room, and the basement/family room. Pls.’ Resp. Ex. H. ServPro
used these tests to see where they needed to perform remediation work. Neumann Dep.
53:16-55:10. There is no evidence that the Carrs ever received the SanAir report.
As Albert’s career was wrapping up, the Callands decided to look for a retirement
home on Hilton Head Island. Cynthia Dep. 10:18-25. At the recommendation of their
friends Lori and Jim Queen (“the Queens”), who lived on Hilton Head Island, the
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Callands sought the services of real estate agent Steve Timperman (“Timperman”) of
Charter One Realty. Id. at 11:16-12:2. In late 2010, Timperman showed them a number
of homes, including the Carrs’ home at 57 Yorkshire Drive. 1 Timperman Aff. ¶¶ 2, 4;
Cynthia Dep. 12:16-13:16. While visiting the Carrs’ home, Albert and Lloyd spoke for
between five and ten minutes, mostly about football and not the condition of the house.
Albert Dep. 14:16-15:23. The Callands came back later in the day after the Carrs had
left. Cynthia Dep. 14:7-15:18. The Callands spent between 10 minutes and an hour on
this initial visit to the home. Cynthia Dep. 21:11-18; Albert Dep. 17:15-24. Though the
Callands liked the house, the first thing they noticed was a musty odor that “smelled like
mold or mildew.” Cynthia Dep. 15:22-16:4.
The Callands made an offer on the house without returning for another visit.
Cynthia Dep. 26:21-23. The offer was contingent on the Carrs addressing the musty odor
to the Callands’ satisfaction before closing and the Callands being satisfied with the
results of a home inspection. Cynthia Dep. 69:5-70:18. The Carrs contacted ServPro,
who recommended that foyer wood flooring be taken up and replaced. Cynthia Dep.
113:14-115:8; Timperman Aff. ¶ 6. The Carrs ultimately contracted with RCH
Construction to replace the foyer subfloor and seal and treat the foyer floor with a
lacquer. Timperman Aff. ¶¶ 6, 12. RCH Construction also installed new hydrostatic
vents in the lower level of the home. Timperman Aff. ¶ 6. In addition, ServPro cleaned
and treated the air conditioning ducts with a disinfectant. Timperman Aff. ¶ 6. The Carrs
paid for all of the repairs. Cynthia Dep. 118:6-13.
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The home was owned by the Lloyd H. Carr Trust with Lloyd as the trustee.
Defs.’ Mot. Ex. 28.
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On November 22, 2010, the Carrs filled out a South Carolina Residential
Disclosure Statement. Defs.’ Mot. Ex. 22. The Carrs indicated on the disclosure
statement that they had no knowledge of any problem (malfunction or defect) with the
“foundation, slab, fireplaces/chimneys, floors, windows, doors, ceilings, interior and
exterior walls, attached garage, patio, deck, or other structural components” of the home.
Id. Additionally, they indicated that they had no knowledge of any “leakage or other
problem” with the roof, and no knowledge of any “water seepage, leakage, dampness or
standing water, or water intrusion from any source in any area of th[e] structure.” Id.
Finally, they indicated that had no knowledge of any “environmental hazards,” including
“toxic mold or other hazardous or toxic material.” Id. The Callands acknowledged
receiving the disclosure statement on February 1, 2011. Id.
Cynthia testified that at the time of closing, she was satisfied with the condition of
the home, including the requirement that the musty mildew odor in the foyer had been
addressed and eliminated. Cynthia Dep. 28:13-29:5, 70:13-18, 95:16-25. Although
Cynthia expressed concerns that the odor would return, she did not seek to delay the
closing to see if it would. Cynthia Dep. 29:6-30:5. Instead, she relied on Timperman’s
opinion that ServPro had “got it” and that the house was in appropriate condition for
them to close. Cynthia Dep. 30:8-13, 95:20-23.
At the recommendation of the Queens, the Callands hired Lynes Home Inspection
to inspect the home. Cynthia Dep. 89:12-90:13. Brad Tholen, the inspector from Lynes,
found a number of areas with mold and mildew, found moisture trails indicating that
water had leaked from behind the stucco, noted that the two ventilation fans in the
foundation area were not functioning, observed the foyer undergoing a treatment
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involving humidifier, and noted that drywall had been removed for the application of
spray foam insulation. Tholen Aff. ¶ 10. Tholen included his observations in a report, in
which he recommended that the Callands hire a professional to determine the extent of
the problems before closing. Tholen Aff. ¶¶ 10, 11; Defs.’ Mot. Ex. 6. The Callands
decided not to have the issues further evaluated. Cynthia Dep. 99:11-25; Tholen Aff. ¶ 9.
Rather, they simply asked the Carrs to address the mold discovered, which Cynthia
indicated was remedied to her satisfaction. Cynthia Dep. 106:12-107:13.
Timperman visited the home after Tholen issued the inspection report and found
additional areas of moisture damage that he called to Tholen’s attention. Timperman Aff.
¶ 8. Tholen returned to the house, confirmed the additional water damage, and advised
the Callands to have additional evaluation done by a licensed building contractor before
closing. Tholen Aff. ¶¶ 12-13. Tholen included his findings in an addendum inspection
report. Defs.’ Mot. Ex. 24. The Callands did not contact a building contractor following
this supplemental report. Cynthia Aff. 110:19-111:2.
In addition to the inspection report, the Callands also received an Official South
Carolina Wood Infestation Report (“CL-100”) before closing. Defs.’ Mot. Ex. 23;
Cynthia Dep. 79:2-80:17. The CL-100 indicated evidence of “active wood destroying
fungi (wood moisture content 28% or above)” and “excessive moisture conditions below
the first main floor (20% or above, wood moisture content, standing water, etc.).” Id.
The CL-100 notes that “fungi damage” is commonly called “water damaged wood, rot or
decay.” Id. The Callands relied on Timperman’s advice that “most of the houses in the
lowcountry have some degree of wood rot and moisture” and did not delay closing
because of the CL-100. Cynthia Dep. 86:1-87:21.
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On March 25, 2011, the Callands closed on the house. They went back to
Virginia following closing, leaving the house vacant. Cynthia Dep. 119:4-9. The next
time the Callands visited was in June 2011. Cynthia Dep. 121:5-7. Between March and
June, Lori stopped by the home occasionally to check on it. Cynthia Dep. 122:5-11.
Cynthia does not remember Lori reporting any issues with the house. Cynthia Dep.
123:12-20. When the Callands returned in June, Cynthia could “smell the smell” again.
Cynthia Dep. 124:20-24.
The Callands moved into the home permanently in July 2012, after having
renovation work done between February and June 2012. Cynthia Dep. 133:14-134:5,
148:20-149:17. At some point in 2012, the Callands discovered mold in two rooms in the
basement. Cynthia Dep. 130:21-131:2. Additionally, a contractor found “a little bit” of
mold behind a piece of molding. Cynthia Dep. 153:3-8.
In October 2013, the Callands’ attorney wrote to the Carrs, seeking to rescind the
sale on a claim that the Carrs had concealed “prior floods at the Home of which [they
were] aware and which [they] failed to disclose.” Defs.’ Mot. Ex. 10. When the Carrs
did not respond to the letter, the Callands filed suit in South Carolina state court on
January 10, 2014, claiming negligent misrepresentation and seeking damages and
rescission of the sales contract. Defendants removed the case to federal court on
February 18, 2014. On October 20, 2014, defendants moved for summary judgment.
The Callands responded on November 17, 2014, and defendants replied on November 24,
2014. This matter has been fully briefed and is ripe for the court’s review.
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II. STANDARDS
Summary judgment is proper “if the movant shows that there is no genuine
dispute as to any material fact and that the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a). “By its very terms, this standard provides that the mere
existence of some alleged factual dispute between the parties will not defeat an otherwise
properly supported motion for summary judgment; the requirement is that there be no
genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48
(1986). “Only disputes over facts that might affect the outcome of the suit under the
governing law will properly preclude the entry of summary judgment.” Id. at 248.
“[S]ummary judgment will not lie if the dispute about a material fact is ‘genuine,’ that is,
if the evidence is such that a reasonable jury could return a verdict for the nonmoving
party.” Id.
“[A]t the summary judgment stage the judge’s function is not himself to weigh
the evidence and determine the truth of the matter but to determine whether there is a
genuine issue for trial.” Id. at 249. The court should view the evidence in the light most
favorable to the non-moving party and draw all inferences in its favor. Id. at 255.
III. DISCUSSION
The Carrs argue that dismissal is appropriate because there is no genuine dispute
of material fact as to whether they made any false representations on the disclosure
statement. Defs.’ Mot. 22. The Carrs further contend that dismissal is warranted because
the Callands cannot show that they reasonably relied on any alleged misrepresentations.
Id.
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“[N]egligent misrepresentation is predicated upon the transmission of a
negligently made false statement.” McLaughlin v. Williams, 665 S.E.2d 667, 670 (S.C.
Ct. App. 2008) (citing Armstrong v. Collins, 621 S.E.2d 368, 375–76 (S.C. Ct. App.
2005)). To maintain a claim for negligent misrepresentation, a plaintiff must show by a
preponderance of the evidence:
(1) the defendant made a false representation to the plaintiff; (2) the
defendant had a pecuniary interest in making the statement; (3) the
defendant owed a duty of care to see that he communicated truthful
information to the plaintiff; (4) the defendant breached that duty by failing
to exercise due care; (5) the plaintiff justifiably relied on the
representation; and (6) the plaintiff suffered a pecuniary loss as the
proximate result of his reliance upon the representation.
Id. (citation omitted).
A.
False Representation
As an initial matter, the court finds that the Callands have not established a
genuine dispute of material fact as to whether the Carrs made any false representations
about the condition of the house. In their brief, the Callands assert that the Carrs
misrepresented information about “prior repairs and problems” with the house by
representing that they had no knowledge of such issues on the disclosure statement. Pls.’
Resp. 25–26. The Carrs respond that the disclosure statement “concern[ed] only current
problems, not prior repairs.” Defs.’ Reply 11. Because they had no knowledge of any
current problems with the home, the Carrs argue, they did not make any
misrepresentations on the disclosure statement. Defs.’ Mot. 29. In support, they note
that the disclosure statement form was later amended in 2013 to explicitly state that,
when it asks generally whether the owner has “any actual knowledge of any problem”
with the home, “[p]roblem includes present defects, malfunctions, damages, conditions,
or characteristics.” Id. at 30; Ex. 26 at 2 (emphasis added).
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Here, the Callands have failed to put forth sufficient evidence that the Carrs knew
of current problems with the house when they filled out the disclosure statement on
November 22, 2010. Accordingly, the court finds that the Carrs’ responses on the
disclosure form did not constitute false representations warranting a negligent
misrepresentation claim. See Fields v. Melrose Ltd. P’ship, 439 S.E.2d 283, 285 (S.C.
Ct. App. 1993) (“To be actionable, the representation must . . . be false when made.”)
(citation omitted).
B.
Justifiable Reliance
However, even if the Carrs’ responses on the disclosure statement could be
construed as false representations, the Court finds that the Callands could not have
justifiably relied on those representations.
“[I]ssues of reliance and its reasonableness going as they do to subjective states of
mind and applications of objective standards of reasonableness, are preeminently factual
issues for the trier of facts.” McLaughlin, 665 S.E.2d at 670–71 (citation omitted).
Additionally, “a buyer has the right in South Carolina to rely on a seller of a home to
disclose latent defects or hidden conditions which are not discoverable on a reasonable
examination of the property and of which the seller has knowledge.” Id. at 671.
“However, while issues of reliance are ordinarily resolved by the finder of fact, ‘there can
be no reasonable reliance on a misstatement if the plaintiff knows the truth of the
matter.’” Id. (quoting Gruber v. Santee Frozen Foods, Inc., 419 S.E.2d 795, 800 (S.C. Ct.
App. 1992). In other words, “if the undisputed evidence clearly shows the party asserting
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reliance has knowledge of the truth of the matter, there is no genuine issue of material
fact.”2 Id.
This case is nearly identical to McLaughlin. In McLaughlin, the defendants
indicated on a disclosure statement that they were “not aware of a malfunction or defect
due to ‘water seepage, leakage, dampness or standing water or water intrusion from any
source in any area of the structure.’” Id. (emphasis in original). Following the receipt of
the disclosure statement, the buyer received a home inspection report “indicating
moisture damage to the exterior of the Subject Property” and a CL-100 indicating “the
presence of wood-destroying fungi and a wood moisture content of 28% or more below
the first main floor.” Id. at 699. Despite having the home inspection report and the CL100, the buyer closed on the property. Id. Approximately six weeks following closing,
the plaintiff learned of defects in the structure of the property due to prior water intrusion
and sued, arguing that the defendants’ answers on the disclosure statement constituted
negligent misrepresentations. The trial court granted summary judgment, holding that
because the information contained in the home inspection report and CL-100 placed the
plaintiff on notice of potential moisture problems, no reasonable jury could conclude that
he had a right to rely on the disclosure statement. Id. at 671.
The South Carolina Court of Appeals affirmed, finding as a matter of law that
because “[the plaintiff] had knowledge that directly contradicted the representations
found in the Disclosure Statement, . . . he failed to establish the necessary element of
reliance” for his negligent misrepresentation claim. Id. at 671. Similar to the Callands
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The South Carolina Supreme Court quoted McLaughlin’s language on reliance
in granting summary judgment. Quail Hill, LLC v. Cnty. of Richland, 692 S.E.2d 499,
509 (S.C. 2010). The court determined that the plaintiff could not have relied on the
defendant’s representations because he could have ascertained the correct information
through the exercise of due diligence. Id.
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here, the plaintiff in McLaughlin argued that there was an issue of fact about what level
of knowledge could be gained from the two reports because the home inspection report
did not indicate water damage to the interior of the home and the CL-100 only indicated
the presence of active wood destroying fungi. Id. The court rejected both arguments and
held that because the home inspection informed the plaintiff that there was “[s]ome
moisture damage,” even on the outside of the home, and because the CL-100 noted that
“fungi damage to wood” is “commonly called water damage,” “[b]oth the Home
Inspection Report and the CL-100 clearly show [the plaintiff] had information that
directly contradicted the Disclosure Statement.” Id.
Just as the plaintiff in McLaughlin “could not rely on the Disclosure Statement
because the Home Inspection Report and CL-100 gave him knowledge contradicting the
Disclosure Statement,” id. at 671-72, the Callands cannot show reliance on the disclosure
statement. Here, the Callands had notice of moisture problems not only from the same
two sources as in McLaughlin, but also had additional notice of moisture from their
friend Lori, their real estate agent, their own detection of a musty odor, and their
knowledge that mold remediators were working on the house prior to closing. Albert
himself testified that, in hindsight, they were “knuckleheads.” Albert Dep. 28:24-29:3.
The Callands argue that the defendants in McLaughlin refused to answer a
number of questions on the disclosure statement, whereas here the Carrs marked “no” on
the relevant items. Pls.’ Resp. 26. It is not exactly clear what the situation was in
McLaughlin. At one point the court notes that “several of the items [on the disclosure
statement] were left blank and there were no explanations for certain items,” id. at 699,
and later the court notes that the sellers were “not aware of a malfunction or defect.” Id.
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at 671. Regardless, the holding of McLaughlin is clear—once a buyer is put on notice by
a Home Inspection Report and CL-100 of “some moisture damage” in a home, the buyer
cannot, as a matter of law, claim reliance on the disclosure statement which contains
contradictory representations. Id. Accordingly, the court finds that the Callands’
negligent misrepresentation claim fails as a matter of law.
IV. CONCLUSION
For the foregoing reasons, the court GRANTS the Carrs’ motion for summary
judgment.
AND IT IS SO ORDERED.
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DAVID C. NORTON
UNITED STATES DISTRICT JUDGE
May 6, 2015
Charleston, South Carolina
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