Court Awards Realtor Commission and Attorney’s Fees Despite Breach of Purchase Agreement

In the recent case of Riedel v. Fenasci,2018-0540 (La. App. 1 Cir. 12/28/18), _______ So. 3d _______, 2018 WL 6818716,home buyers sued the sellers and the involved real estate agents after mold wasdiscovered shortly following the sale. This is a common fact pattern in humidSouth Louisiana. The buyers lost in the trial court when there was no evidencethat the sellers or the agents knew of the problem. The result was affirmed bythe First Circuit Court of Appeal.

The Riedels identified mold weeks afterthe closing and filed a claim with their homeowner’s insurer. But the claim wasdenied when the insurer’s inspection revealed long- term damage, rot, anddeterioration in a ceiling due to water damage. That finding prompted thesuit.

Against the sellers, the Riedels contendedthat they “had to have known” about the moisture and mold in the home prior tothe sale. Because the home was sold “as is,” they had to establish fraudto recover. However, the sellers had not lived in the home for years and hadreceived no complaints from tenants over this time. Under such facts, the claimof fraud was not supported.

The Riedels also sued both agents for negligent misrepresentation, and their own agent for breach of fiduciary duty. In assessing the claim against the agents, the Riedel Court agreed that real estate agents are liable for negligent misrepresentation when they fail to disclose hidden defects in the property which were known or should have been known to them. The Court also agreed that a purchaser’s real estate agent owes a fiduciary duty, the highest duty of care recognized by law. Nevertheless, when the plaintiffs’ own inspector found no visible evidence of mold prior to the sale and there was no indication that the agents possessed prior knowledge of the mold, the claim against the agents was also dismissed.

Marty Golden has been practicing law based in Baton Rouge, Louisiana for over thirty years, concentrating in civil litigation primarily involving injuries, property damage, insurance coverage, and contract disputes. Much of his practice is defending and advising real estate agents in suits by property buyers and sellers, but Marty also defends other professionals, insurance companies, manufacturers, and business owners. Marty has a special interest in all things procedural, because they are the rules of the road for litigators and knowing them better than his opponent gives him a leg up in court.

Louisiana’s New Home Warranty Act (“NHWA”) provides remedies to homeowners forcertain construction defects once the new home construction is complete. La. R.S. 9:3141 et seq. These protections can prove crucial to a homeowner’s ability to remedy defects that appear in their home, but the statutes providing these remedies establish strict guidelines that must be followed for the protections to apply. This generally post sets forth some of the key protections and obstacles/defenses that often arise. However, each specific claim should be considered under its own facts.

PROTECTIONS

The NHWA provides specific protections to homeowners. Each protection expires if not advanced within a set time-period.

Noncompliance/Defects- The NHWA protects against “any defect due to noncompliance with the building standards or other defects in materials or workmanship not regulated by building standards.” La. R.S. 9:3144(A)(1). This category includes defective construction or materials used in the construction. Even seemingly minor issues such as cracked plaster, yellowing paint, and “rubbing off” of new paint can give rise to a valid claim for recovery under this portion of the NHWA. See Bynog v. MRL, LLC, 05-122 (La. App. 3 Cir. 6/1/05), 903 So.2d 1197. Deviations from the “plans and specifications” for a home may also be recoverable. See Thorn v. Caskey, 32-310 (La. App. 2 Cir. 9/22/99), 745 So.2d 653.

Because this first protection is so broad, it also provides the shortest time-period to assert a claim: one year from the “warranty commencement date,” which is either the date legal title to the home is conveyed to its initial purchaser or the date the home is first occupied, whichever occurs first. La. R.S. 9:3142(7).

Plumbing/Electrical/HVAC- The NHWA also protects the homeowner from defects in the plumbing, electrical, heating, cooling, and ventilating systems. These protections exclude equipment or appliances. A homeowner must bring a claim under this second category within two years of the warranty commencement date. La. R.S. 9:3144(A)(2).

Major Structural Problems- the NHWA allows recovery for major structural defects up to five years following the warranty commencement date. La. R.S. 9:3144(A)(3). For instance, recovery was allowed for a failing foundation under this provision in Campo v. Sternberger, 15-53 (La. App. 5 Cir. 11/19/15),179 So.3d 908.

PITFALLS

The most obvious – and probably most prevalent – pitfall is the timeliness of the claim. Courts do not hesitate to dismiss a claim if it is not timely filed.

The NHWA also requires that the homeowner give the builder written notice (via certified mail) of the defect before the homeowner attempts a repair, or before filing suit under the NHWA. La. R.S. 9:3145(A). This notice must be sent to the builder within one year after the homeowner has knowledge of the defect. Therefore, the one-year “clock” may begin to run when the homeowner gains knowledge of the problem even if the NHWA provides a longer time-period to advance the claim.

A failure by the homeowner to give timely notice can also diminish the claim even if it is brought within the deadlines. Under La. R.S. 9:3144(B)(4)(c), any damages caused by the homeowner’s failure to give the builder notice of the defect are not recoverable. In that circumstance, builders often contend that the severity of the problem could have been lessened had they been made aware.

RECOVERABLE DAMAGES

With some exceptions, damages under the NHWA are limited to the actual damages incurred by the homeowner, including attorney fees and court costs arising out of the builder’s violation. La. R.S. 9:3149. The actual damages cannot exceed the reasonable cost of repair or replacement necessary to cure the defect. If there are multiple defects across the home, damages are limited to the original purchase price of the home.

Consequential damages such as pain and suffering, mental anguish, or loss of use are generally not recoverable. See La. R.S. 9:3144(B); Iteld v. Four Corners Const., L.P., 12-1504 (La. App. 4 Cir. 6/5/13), 157 So.3d 702. However, there may be exceptions to this general rule under certain factual circumstances beyond the scope of this post.

CONCLUSION

The NHWA provides important remedies to homeowners. But, the New Home Warranty Act is complex and balances the competing interests of the homeowners and the builders. For this reason, a failure to follow the notice and timeliness requirements will often defeat the claim.

John Grinton, is a partner at Keogh Cox whose practice areas include commercial and construction litigation. When he is not practicing law, John spends most of his time with his wife and son, and their two dogs.

Lawsuits begin in the trial court. For that reason, the immediate focus remains in the trial court where the case will be decided by the jury or the trial judge. However, once the judgment is entered or the verdict reached, the focus quickly shifts to the appeals court. In many cases, what happens in the trial court is just “round one” and cases are often truly decided on appeal. This post will help to identify the types of issues considered when there is an appeal.If you’ve received a negative ruling in the trial court, you are not out of options. State and federal trial court decisions are subject to review by a court of appeals. Generally, when an appellate court reviews a decision, it looks for two things: 1) legal error; or 2) an improper finding of fact. Your chance of success on appeal increases when there is a significant legal error because a reviewing court will give a de novo review of the issue. In other words, you get a brand new “trial” on the issue presented when it involves a legal issue and not merely an interpretation of the evidence offered at trial.The chance of success on appeal decreases when there are no significant legal questions to resolve. In this situation, the trial court’s findings of fact will be respected unless “manifest error” is found. However, other grounds for an appeal do exist including, but not limited to, refusal to admit relevant evidence, refusal to admit an expert’s testimony, providing improper jury instructions or, in some cases, judicial bias toward a party.It is also important to know that your right to seek appellate relief is not only available after a trial. When a party can show that the trial court has made an error which will cause prejudice if not corrected before trial or demonstrate that a reversal of the ruling would resolve the entire claim against that party, they can file a “writ application.” While similar to an appeal, a writ is a streamlined process. When the case presents a new or novel issue of law, the chances of having the appellate court consider the writ increases dramatically.The written brief--the appellate brief (for final judgments) and the writ application (for pre-trial rulings)–is the centerpiece of any request for appellate relief. It is critical that the brief be well-reasoned and persuasive. Appeals often involve oral argument, but, even then, the arguments typically center around issues addressed in the written briefs.When you are in the throes of the fight in the trial court, it is important to remember that another “round” may be coming. Keeping this focus helps to preserve and develop arguments and evidence that may be needed on appeal. Whether you won or lost in the trial court, know that the real fight may just be beginning.Reynolds LeBlanc is an Associate Attorney with Keogh Cox heavily involved in appellate practice. The attorneys at Keogh Cox have decades of combined experience representing clients in federal, state, and administrative appeals. The appeals practice by Keogh Cox attorneys has resulted in positive, landmark rulings in a variety of settings to include: the proper scope of who can administer interventional pain management (Spine Diagnostics Ctr. of Baton Rouge, Inc. v. Louisiana State Bd. of Nursing ex rel. Louisiana Dep't of Health & Hosps., 2007-0183 (La. 3/16/07), 952 So. 2d 702, handled by John P. Wolff III,Chad A. Sullivan and Nancy Brehm Gilbert); the extent to which employers will be protected by the immunity provided by worker’s compensation (Reeves v. Structural Pres. Sys., 98-1795 (La. 3/12/99), 731 So. 2d 208, handled by Gracella Gail Simmons and Collin J. LeBlanc); the establishment of mitigation defenses available to attorneys in legal malpractice claims (MB Indus., LLC v. CNA Ins. Co., 2011-0303 (La. 10/25/11), 74 So. 3d 1173, handled by Gracella Gail Simmons and Collin J. LeBlanc); and, the preservation of water rights under the Federal Powers Act (Simmons v. Sabine River Auth. of Louisiana, 134 S. Ct. 1876, 188 L. Ed. 2d 912 (2014), handled by John P. Wolff III and Nancy Brehm Gilbert), along with others.