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Reed v. Mitchell

Court of Appeals of Louisiana, Fifth Circuit

June 28, 2019




          COUNSEL FOR DEFENDANT/APPELLEE, KATHY MITCHELL WIFE OF/AND MARK MITCHELL Scott M. Galante Salvador I. Bivalacqua Lauren B. Griffin

          Panel composed of Judges Robert A. Chaisson, Stephen J. Windhorst, and John J. Molaison, Jr.


         In this civil action for rescission, breach of warranty and fraud, appellants, who purchased a home from the appellees, appeal a judgment finding in favor of appellees following a trial on the merits, as well as a subsequent award of costs to appellees. For the reasons that follow, we affirm.


         On August 13, 2015, appellants, Zozette and Bryan Adam Reed ("the Reeds"), filed a petition alleging breach of warranty and fraud by appellees, Kathy and Mark Mitchell ("the Mitchells"), related to the sale of the Mitchells' home to the Reeds. An amended petition was filed on April 22, 2016. A judge trial on the merits of this matter was held on May 8, 2018. On that same date, the court ruled in favor of appellees and dismissed appellants' claims with prejudice. On July 31, 2018, the court awarded appellees $11, 500 for reimbursement of costs. Appellants thereafter sought the instant suspensive appeal, which was granted on August 27, 2018.


         The record shows that, on or about January 10, 2015, the Reeds contacted the Mitchells for the purpose of inquiring about the Mitchells' home, located at 1009 Moss Lane, which was for sale by owner in the River Ridge area of Jefferson Parish. The Reeds subsequently made a verbal offer to purchase the Mitchells' home, and the parties entered into a written purchase agreement on January 11, 2015. Within the inspection period that followed, the Reeds sought information from the Mitchells regarding whether the home had a history of flooding. In particular, the Reeds were concerned about one feature of the home, a sunken den which was constructed below grade, and whether that part of the home was prone to flooding as well.

         Mrs. Reed testified that during the first visit to the home, the Mitchells told her and her husband that "exterior waterproofing" had been done because of "little spots of water" that had appeared on the floor of the sunken den in the past. The Reeds received a verbal disclosure from the Mitchells prior to the sale, but did not obtain a copy of the written disclosure until after the sale.[1] The information provided verbally and in writing was consistent: the home had flooded in 1995, and there had also been foundation repair/exterior waterproofing done. The Reeds had an independent inspection done on the home as well, but the inspection did not reveal that water had entered into the sunken den.

         The act of sale took place on February 26, 2015. Mrs. Reed testified that flooding issues began in April of 2015, when the den flooded after a heavy rainstorm. In trying to determine a cause of the flooding, the Reeds looked through a folder of information on the home that Mrs. Mitchell had given them, and they located a 2011 document from Dixie Waterproofing regarding interior work to the den that they were previously unaware of. After the flooding, it was discovered that the outlets in the den were rusted, indicating that water had entered through the outlets at some point in the past.

         After making a claim on their flood insurance, the Reeds' policy was canceled a week later when FEMA sent the insurer notice of prior losses on the property. The new insurance premium was $1, 300 more than the Reeds had been paying. Along with the cancelation notice, the Reeds received a copy of the home's flood history and learned that there had been five flood claims paid on the house. The Mitchells had only told them about the 1995 flood, which occurred after the Mitchells originally purchased the home.

         Mrs. Reed thereafter went to Jefferson Parish's Repetitive Loss Office and filed a public records request to learn the full history of water intrusion at the house. From that request, the Reeds learned about concrete that had been poured on the property and that the Mitchells had applied for an elevation grant to lift the home. To that point, the Reeds had not been told that concrete was poured on the slab in 2000 in an attempt to stop water intrusion, and they had not been told about an application for a FEMA grant.

         A second flooding event occurred in October of 2015, when water came through the electrical outlets into the den. On July 22, 2016, the den flooded for the third time. The Reeds insurance claim for the 2016 flood was denied. On August 5, 2017, following a large storm, the den flooded a fourth time. Damages from the 2017 flood were covered by FEMA.

         The Reeds put the house on the market in spring of 2017. In the disclosure for the house, the Reeds incorporated the entire flooding history they had learned.[2]

         By the time of trial, the Reeds had hired approximately 10 contractors and engineers to try to solve the flooding issue. Estimates to stop the flooding ranged as high as $200, 000. Mrs. Reed testified that she would not have purchased the house if she had known all of the information that she had learned after purchasing the house. Mrs. Reed indicated that she wanted the Mitchells to take the house back.

         On cross examination, Mrs. Reed reviewed the property disclosure and admitted that the house was sold to them without a warranty from the Mitchells. Mrs. Reed stated that water intrusion in the sunken den was discussed with the Mitchells from her very first visit to the home. The Reeds were not prohibited or limited in any way by the Mitchells from having the home inspected prior to the sale. The Reeds' home inspection report, which was received prior to the sale, indicated that the home had subsurface drains and a sump-pump, as well as a water proofing membrane.

         Bryan Reed testified that initially he was not verbally advised by the Mitchells about water intrusion issues. He stated that after receiving the home inspection report, he asked the Mitchells about the waterproofing membrane referenced in the report, at which time they told him about the exterior work that was done in 2011. Mr. Reed contended that the Mitchells described the water intrusion in the sunken den as a minimal amount that could be cleaned up with a towel. Over the course of several conversations, the Mitchells told Mr. Reed that the exterior waterproofing by Dixie Walls had stopped water intrusion in the den. Mr. Reed said that the Mitchells did not tell him about a terra cotta pipe under the house, floods that had occurred prior to Mitchells' ownership, their 2009 or 2011 water intrusion claims, 1998 waterproofing work, work in 2000 to add to the concrete slab in the sunken den, 2012 interior waterproofing by Mr. Charbonnet, or about their application for a 2012 FEMA grant to elevate the house.

         Kathy Mitchell testified that she and her husband decided to put their house up for sale by owner. Shortly after listing the home online she was contacted by Zozette Reed to set up an appointment to view it, and the Reeds eventually made a total of four visits before the sale.[3] Mrs. Mitchell stated that everything she told the Reeds verbally about water issues in the house was ultimately put into the written disclosure. This specifically included the 1995 flood as well as water intrusion in the sunken den. Mrs. Mitchell recalled that her husband gave Mr. Reed the FEMA document, as well as information about the 2009 and 2011 claims made for water intrusion. She personally told the Reeds about the steps that were taken to address the water intrusion issues in the den, and testified that she believed the water intrusion problem was resolved in 2012 after Peter Charbonnet installed an exterior waterproof membrane around the home. She stated that she had never seen water come through the electrical outlets as the Reeds had described. With respect to the FEMA grant to have the house raised, Mrs. Mitchell stated that she made the application because the program was available for anyone to use and many people were taking advantage of the opportunity. Mrs. Mitchell admitted that she did not provide information to the Reeds about flooding that occurred prior to the time that the Mitchells owned the house.

         Upon being recalled as a witness by the defense, Mrs. Mitchell clarified that she was never a real estate agent at the firm where she worked, but was only a receptionist who also sent out marketing materials. She emphasized that she told the Reeds about the flood of 1995, as well as the small water intrusions in the den, which the Mitchells hired Dixie to repair. Mrs. Mitchell showed the Reeds the document from Dixie that ...

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