Opinion
Civil Action No. 04-2295, Section "K" (5).
June 10, 2005
ORDER AND REASONS
Before the court are two Motions for Summary Judgment. ( See Rec. Doc.28 and Rec. Doc.29). Both defendants, Federal Home Loan Mortgage Corporation ("Freddie Mac"), and Investment Realty Partners, Inc. D/b/a Century 21 Investments Realty ("Century 21") seek judgment against plaintiff, Jan P. Jumonville, for failure to raise any issue of material fact. Having considered the pleadings, memoranda in support and opposition to the motion for summary judgment, supplemental memoranda, and relevant case law, the Court, for the reasons stated herein, hereby DENIES summary judgment as to the fraud and negligence claims and GRANTS summary judgment as to the emotional distress claim.
BACKGROUND
Plaintiff, Jan Jumonville purchased a home and a lot located at 139 Crepe Myrtle Drive, Covington, LA ("the property") on or about April 15, 2003, for the sum of $100,000 from defendant, Freddie Mac. Defendant Century 21 was agent and realtor for Freddie Mac at the time of sale. In May 2003 plaintiff discovered the house was prone to flooding, the severity of which is unclear. Plaintiff filed suit on April 15, 2004 seeking damages for breach of warranty and other tort claims arising from the failure to disclose that the property was susceptible of flooding.The property came into possession by Freddie Mac through a cash sale by Washington Mutual Bank, FA, Successor to North American Mortgage Company on January 2, 2003. This latter company had foreclosed on Jeanne McNeil. Ms. McNeil had purchased the property from the Nunez family. The property was put on the Multi Listing Service by Century 21 stating that a structural report was on file and no repairs would be done. Plaintiff, prior to the act of sale, obtained a report made for Ms. McNeil in November of 2002 that estimated the cost of making foundation repairs at approximately $35,000. Plaintiff made an offer for the property "AS IS" with full waiver of redhibitory rights on March 25, 2003 for $95,000 cash. The letter containing her offer also stated that based on her inspection, the overall conditions of the house structure rendered it uninhabitable and cost ineffective to repair. At the end of the letter, plaintiff said that she had obtained the cost for demolition and removal of the house including insurance, and that the lot values in the neighborhood were in the $70,000 range. In response to the submission of third party bid for the property, plaintiff submitted an offer to buy the property for $100,000, which Freddie Mac accepted.
Plaintiff's opposition to MSJ has attached an affidavit of Jeanne Lecorgne McNeil. ( See Rec. Doc.30, Exhibit P3). In addition, there is a copy of the Act of Sale by Nunezes to McNeil. ( Id., Exhibit P7). Finally, there is an Act of Foreclosure by Washington Mutual Bank against McNeil's property at Crepe Myrtle. ( Id., Exhibit P8).
See Rec. Doc.30, Exhibit P7.
On or about March 26, 2003, Plaintiff signed the Contract of Sale, and on April 7, 2003, signed an Addendum to the Contract of Sale ("Addendum"). The Addendum contained language indicating that buyer purchased the property on an "AS IS" basis, in its condition as of the date of the act of sale, including any hidden defects or environmental conditions affecting the property, known or unknown, and acknowledged that neither the seller nor its agents had made any express or implied warranties regarding the condition of the property. It also indicated that the seller obtained the property by foreclosure, and thus, had little or no direct knowledge regarding the condition of the property. ( See Rec. Doc.29, Exhibit E).
On or about April 2, 2003, plaintiff also signed a Real Estate Closure Addendum and Release (hereafter "Release") that contained language indicating purchaser acknowledged receipt of the Cable Lock foundation repair report and her awareness that: mold or mildew might be present; that the property was being sold "AS IS"; that the purchase price reflected the agreed upon value of the property "AS IS"; and that the seller is not making any express or implied warranties of any kind with respect to the environmental condition of the subject property. ( See Rec. Doc.29, Exhibit B1).
On or about April 15, 2003 the parties signed an Act of Cash Sale, conveying the subject property to plaintiff for $100,000. This document also contained language indicating purchaser bought the property on an "AS IS" basis, with no warranties made, express or implied, as to the property's condition. It also contained language indicating that buyer released the sellers and prior owners from any liability for any claims made for any vices or defects in the property, particularly for any claim or cause of action for redhibition, pursuant to La. Civ. Code arts. 2520, et seq and 2541, et seq. ( See Rec. Doc.29, Exhibit F).
Plaintiff filed suit alleging there were severe latent vices and defects in the home not discovered until May 2003. Particularly, plaintiff refers to the susceptibility of the property to severe flooding. Plaintiff alleges that defendants did not disclose an engineering inspection report dated March 9, 1999 by Gilbert Engineering, L.L.C, in the possession of Trey Henry, employed by Freddie Mac as a Sales Specialist in the HomeSteps Unit. The report contains language indicating that the inspector found standing water in the garage and porch.
HomeSteps was the branch of Freddie Mac handling the Crepe Myrtle property. Trey Henry was the individual managing the property. See Rec. Doc.30 Exhibit P5.
Plaintiff also alleges that defendants should have known of two property disclosure documents that indicated flooding problems because they were accessible to the defendants. She acknowledges that defendants did not have either disclosures in their immediate possession. Plaintiff points to a Property Disclosure prepared by McNeil for Scoggin (realtor) dated 7-23-01 regarding Crepe Myrtle home. This disclosure indicated that the lot/land had flooded stating, "During heavy rains back yard will hold water but will drain." The disclosure also indicated that the home and/or outbuildings flooded, stating, "Garage only." The disclosure indicated as well that the property had drainage problems and had a flood zone classification of 'C'.
See Rec. Doc.30, p. 3 Exhibit 11.
Id.
Id.
A property disclosure report was also prepared by the Nunezes prior to their sale to Mrs. McNeil. This report indicated that the both the land and home and/or outbuildings have flooded, saying, "During heavy rains the back yard will hold water but will drain within hours." This report did indicate a flood zone classification of 'C', but did not indicate drainage problems. The disclosure also says, "During torrential rains, water has gotten into garage but immediately drains at it slows down. No water ever in house."
See Rec. Doc.30, p. 3-4 Exhibit P3.
Plaintiff also submits the affidavit of Susan Kelly listed as Susan Legere, who lives at 121 Belle Terre adjacent to the Crepe Myrtle house. Susan Kelly attests to flooding of her property and plaintiff's property that has occurred a number of times since July 4, 1991.
Plaintiff alleges that both defendants (1) knew or should have known of the severe flooding and failed to present or tell plaintiff of this defect; (2) negligently misrepresented the severe flooding with the intention of gaining unjust advantage over the plaintiff, which in turn, substantially induced plaintiff to consent to the contract of sale; (3) caused emotional distress, mental anguish connected with the loss of use of the property due to its susceptibility to flooding; and (4) breached the express or implied warranty of merchantability, as well as for breach of the express and implied warranty of fitness for intended purpose. Plaintiff filed in a state court in St. Tammany Parish, Louisiana. Defendant, Freddie Mac, removed to this court pursuant to 12 U.S.C. § 1452(f).
In support of their motions for summary judgment, Freddie Mac and Century 21 contend that 1) all express and implied warranties were waived by plaintiff, 2) defendants did not have knowledge that the Crepe Myrtle property was subject to flooding, and 3) plaintiff's level of emotional distress does not warrant recovery under the law.
LEGAL STANDARD
Summary judgment should be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L.Ed.2d 538 (1986). Substantive law determines the materiality of facts, and "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L.Ed.2d 202 (1986).The moving party "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed.2d 265 (1986). Once the movant meets this burden, the burden shifts to the non-movant "to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Id. at 322. "[M]ere allegations or denials" will not defeat a well-supported motion for summary judgment. Fed.R.Civ.P. 56(e). Rather, the non-movant must come forward with "specific facts" that establish an issue for trial. Id. When deciding a motion for summary judgment, the Court must avoid a "trial on affidavits. Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts" are tasks for the trier of fact. Anderson, 477 U.S. at 255. To that end, the Court must resolve disputes over material facts in the non-movant's favor. "The party opposing a motion for summary judgment, with evidence competent under Rule 56, is to be believed." Leonard v. Dixie Well Service Supply, Inc. 828 F.2d 291, 294 (5th Cir. 1987). However, the burden of demonstrating the existence of a genuine issue is not met by "metaphysical doubt" or "unsubstantiated assertions." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (quoting Matsushita, 475 U.S. at 574).
The Court must "resolve factual controversies in favor of the nonmoving party, but only where there is an actual controversy, that is, when both parties have submitted evidence of contrary facts." Id. The Court does not, "in the absence of proof, assume that the nonmoving party could or would prove the necessary facts." Id. "[T]he mere existence of some factual dispute will not defeat a motion for summary judgment; Rule 56 requires that the fact dispute be genuine and material." Willis v. Roche Biomedical Laboratories, Inc., 61 F.3d 313, 315 (5th Cir. 1995).
ANALYSIS
For purposes of clarity, the Court organizes this opinion as follows. First, the Court will address whether the "AS IS" provisions signed by plaintiff are valid waivers of all express and implied warranties, thus barring any action in redhibition. Second, the Court will examine whether defendant's fraudulent misrepresentation invalidates the plaintiff's waiver of warranties. Third, the Court will determine whether a claim for negligent misrepresentation can sustain when the plaintiff has signed a waiver of redhibition or "AS IS" clause. Finally, the Court will determine whether plaintiff has produced enough evidence to support a claim for emotional distress related to the damage of property.
A. Breach of Warranties and Waiver
The first question is whether plaintiff's signing of an "AS IS" clause and waiver of redhibition precludes her claims for breach of warranty. Generally, the seller of real estate warrants to the purchaser that the property does not possess redhibitory vices and is reasonably fit for its intended use. La.Civ. Code arts. 2475, 2520. The buyer has an action in redhibition when the thing sold possesses a vice or defect such that the buyer would not have bought the thing had she known of the vice or defect. La.Civ. Code art. 2520. However, a buyer may waive the seller's warranty against redhibitory defects through an express and explicit waiver. See Comment (c), La.Civ. Code art 2520; see also Williams v. Ring Around Products, Inc., 344 So.2d 1125 (La.App. 3d Cir. 1977). A waiver of warranty against redhibitory defects can only occur if 1) the waiver is written in clear and unambiguous terms, (2) the waiver is contained in the sale, and (3) the waiver is brought to the attention of the buyer or explained to him. La.Civ. Code art. 2548; Prince v. Paretti Pontiac Co., 281 So.2d 112 (La. 1973).
Here, plaintiff signed the Release, the Addendum, and the Act of Cash Sale, all of which contain a waiver of redhibition clause and indicated that plaintiff purchased the property on an "AS IS" basis. Louisiana courts have found a breach of warranty despite an "AS IS" provision when the contract did not explicitly provide for waiver of express and implied warranties. Creger v. Robertson, 542 So.2d 1090 (La.App. 2 Cir. 1989); Williams v. Federal Savings and Loan Insurance Co., 1992 WL 202317 at *1 (E.D. La. 1992). In this way, the Court must look to the particular waiver language in the contract and the circumstances surrounding the signing of the waiver. See also Tarifa v. Reiss, 856 So.2d 21 (La.App. 4 Cir. 2003); Roddy v. Crawford, 618 So.2d 1229, (La.App. 3d Cir. 1993).
Here, Plaintiff signed the Addendum which reads:
"Purchaser accepts the property in "AS IS" condition at the date of the Contract of Sale, including, without limitation, any hidden defects or environmental conditions affecting the Property, known or unknown. To the extent Seller makes any repairs or upgrades to the condition of the Property, Purchaser accepts such items in "AS IS" condition at the date of closing. PURCHASER ACKNOWLEDGES THAT NEITHER SELLER NOR ITS AGENTS HAVE MADE ANY WARRANTIES, IMPLIED OR EXPRESSED RELATING TO THE CONDITION OF THE PROPERTY." ( See Rec. Doc.29, Exhibit E).
The language of the Addendum explicitly provides for a waiver of express and implied warranties, and it is part of the contract of sale. Id. Plaintiff acknowledges that she reviewed everything that she signed; however, she claims that she may not have specifically understood everything. ( See Rec. Doc.28, Jumonville Deposition, p. 38).
It is evident that the waiver is clear and unambiguous and it is contained in the contract of sale; however, there may be a question as to whether it was brought to the attention of the buyer. In assessing whether the third prong of Prince is satisfied, Louisiana courts have paid particular attention to the form of the contract and the circumstances surrounding its signature. Ross v. Premier Imports, Inc., 704 So.2d 17 (La.App. 1 Cir. 1997). In this case, plaintiff read the contract and the waiver was written in block letters. According to Ross, this is sufficient to meet the third prong of Prince.
Plaintiff's profession as an attorney supports the conclusion that the waiver was sufficiently brought to her attention. Plaintiff is an experienced attorney, and though she is not a real estate lawyer, she can be charged with knowing the importance of reading a contract carefully. There is no evidence to suggest that the waiver language was read to her or affirmatively pointed out. However, she acknowledges that understood she was purchasing the property "AS IS" and in accordance with the terms provided in the Addendum. ( See Rec. Doc.28, Jumonville Deposition, p. 39).
Also, plaintiff's letter containing her initial offer can be seen as direct evidence of an intent to waive all warranties and redhibitory actions, as it contains language that she would purchase the property "AS IS". ( See Rec. Doc.29, Exhibit C). Plaintiff argues that she intended those statements to negotiate for a lower price. Determining plaintiff's intentions in the letter perhaps involves credibility questions not appropriate for summary judgment. Regardless of the meaning of the letter, the facts that the waiver language was in block letters and plaintiff read the contract are sufficient to establish that the waiver was brought to the attention of plaintiff. Therefore, the Court finds that plaintiff has not offered sufficient evidence to suggest that she did not waive all express and implied warranties in the contract of sale.
B. Intentional Misrepresentation/Fraud
A seller's fraud in the inducement of a waiver prevents the seller from excluding or limiting a warranty against redhibitory defects. Roby Motors Co. v. Price, 173 So. 793, 796 (La.App. 2d Cir. 1937). Plaintiff does not plead fraud with the requisite particularity as is required by Rule 9(b) of the Federal Rules of Civil Procedure. However, in the Complaint Part VIII and IX, plaintiff claims that defendants "knew or should have known of the vices and defects of said home and did not inform the plaintiff of the same." ( See Rec. Doc. 1, p. 2). The Fifth Circuit requires that a pleading of fraud set out the time, place, and contents of false representation, including the identity of the person making the misrepresentation and the harm that occurred. Williams v. WMX Technologies, Inc., 112 F.3d 175 (5th Cir. 1997). Here, it is clear from the Complaint that plaintiff is attempting to show that defendants knowingly failed to inform plaintiff of the property' susceptibility to flooding. Although fraud is not expressly pled, the Court finds the language in the Complaint sufficient to sustain a claim of fraud.
The question before the Court is whether defendants intentionally or fraudulently misrepresented that the property did not have flooding problems. Fraud is a misrepresentation or suppression of the truth made with the intention either to obtain an unjust advantage over another or to cause loss or inconvenience to another. La.Civ. Code art. 1953. In order to establish fraud, the plaintiff must show: (1) a misrepresentation, suppression, or omission of true information; (2) the intent to obtain an unjust advantage or to cause damage or inconvenience to another; and (3) the error induced by fraud must relate to a circumstance substantially influencing the victim's consent to the contract. La.Civ. Code arts. 1953, 1955; Shelton v. Standard/700 Associates, 798 So.2d 60, 78 (La. 2001).
In order to establish the intent prong, plaintiff must proffer evidence that suggests defendants at least had knowledge of the flood problem. Id. at 65. In Shelton, the court granted summary judgment for the defendants because plaintiff did not offer sufficient evidence to show that defendants knew of the redhibitory defect. The court reasoned that if plaintiff could not establish knowledge, she necessarily could not establish intent to fraudulently induce; thus, the waiver language in the contract barred the redhibitory action.
Here, both defendants were in possession of the Gilbert engineering report. While plaintiff also alleges defendants should have known of the flooding because they had access to two property disclosure documents that indicated flooding problems, she admits that defendants did have these documents in their immediate possession. Both defendants also withheld the report from plaintiff. The Gilbert engineering report says "it appears that water runs on to and stands on the front porch [of the property]," and "water [was] standing in the garage near the side door." ( See Rec. Doc.30, Exhibit P6). Plaintiff argues that this language is sufficient to establish that the property had a flooding problem. Defendant Freddie Mac, on the other hand, maintains that the reference to water is taken out of context and the standing water is attributable to other factors. Defendant Century 21 argues that the Gilbert report is inapplicable because it is outdated.
While plaintiff also alleges defendants should have known of the flooding because they had access to two property disclosure documents that indicated flooding problems, she admits that defendants did not have these documents in their immediate possession. The Court does not address whether defendants had access to these reports or whether they should have known about them.
The Court finds that this question is one for the factfinder and cannot be decided upon a motion for summary judgment. Indeed, the standing water may in fact indicate flooding or drainage problems. Moreover, the withholding of Gilbert report may circumstantially establish that the defendants intended to misrepresent the condition of the property. See La.Civ. Code art. 1957; Thomas v. North 40 Land Development, Inc., 894 So.2d 1160 (La.App. 4 Cir. 2005). In this way, it would be inappropriate for the Court to grant summary judgment when a reasonable factfinder could find that defendants fraudulently misrepresented that the property was not prone to flooding.
Accordingly, the Court denies summary judgment as to the fraud claim.
C. Negligent Misrepresentation
The Louisiana Supreme Court recognizes a tort claim for negligent misrepresentation under La.Civ. Code art. 2315 and 2316. In order to recover for negligent misrepresentation the a court must find the following: 1) the defendant has a legal duty to supply correct information; (2) the defendant breached that duty; and (3) the breach caused damages to plaintiff. Barrie v. V.P. Exterminators, Inc., 625 So.2d 1007 (La. 1993). Whether or not a duty exists is a question of law. Id. at 1015 ( citing Harris v. Pizza Hut of Louisiana, Inc., 455 So.2d 1364 (La. 1984)). For purposes of clarity, the Court will analyze the negligent misrepresentation claims as to each defendant separately.
1. Century 21
In Louisiana, a purchaser of real estate can maintain an action for negligent misrepresentation against a real estate agent under La.Civ. Code art. 2315 when the real estate agent breaches her legal duty to supply correct information to the purchaser. Smith v. Remodeling Service, Inc., 648 So.2d 995 (La.App. 5 Cir. 1994). The legal duty to disclose to a buyer a material defect regarding the condition of real estate of which the broker or salesperson has knowledge is among the agent's duties legally imposed by La.R.S. 37:1455 and the customs and practices of real estate brokers in general. See La.R.S. 37:1455 A(27); Hughes v. Goodreau, 836 So.2d 649 (La.App. 1 Cir. 2002). Century 21, as a real estate broker, owes a duty to communicate correct information to a purchaser regarding any known material defect, and it may be liable for negligent misrepresentation for breach of this duty. Verdin v. Rogers, 873 So.2d 804 (La.App. 5 Cir. 2004); Reeves v. Weber, 509 So.2d 158, 160 (La.App. 1 Cir. 1987).
If Century 21 knew that the property had a flooding problem, they would be liable for negligently misrepresenting this material defect. In this way, the question for the Court is whether there is a genuine issue of material fact whether Century 21 had knowledge of the property's susceptibility to flooding. Plaintiff alleges that Century 21 knew or should have known that the property was prone to flooding. She supports this allegation with a Property Disclosure Report prepared by a previous seller, i.e. not Freddie Mac, and an engineering report that allegedly indicates the property's susceptibility to flooding. She claims that both documents were withheld from her. She also argues that Century 21 should have known of the flooding because it was common knowledge in the neighborhood. The motion for summary judgment hinges on whether this offer of proof is sufficient for a reasonable factfinder to find Century 21 knew of the property's susceptibility to flooding.
Plaintiff alleges that Century 21 had knowledge of the property's propensity to flood because it had access to Property Disclosure Addendums prepared by Ralph and Madeleine Nunez and Jeanne Lecorgne McNeil, previous owners of the property. The Nunez Property Disclosure prepared in November 1998, indicates that "during heavy rains the back yard will hold water but will drain within hours." ( See Rec. Doc.30, Exhibit P3, Attachment). Also, the disclosure says, "During torrential rains water has gotten into the garage but immediately drains as it slows down . . . No water ever in house." Id. The McNeil Property Disclosure prepared in July 2001, indicates that the property has flooded, and that "during heavy rains [the] back yard will hold water but will drain." ( See Id., Exhibit P11). Plaintiff alleges that these disclosures were submitted to Scoggin Properties, Inc., an agency who listed the property, and available to Century 21. Defendant responds by saying that property disclosure addendums are not accessible to the public by law, but are kept in the corporate files of real estate brokers who list the property. Century 21 cites La.R.S. 37:1499(D) as its authority; however, this statute only requires certain records be kept by the listing agents, and does not seem to say that the file is not accessible to the public. While the Court does not address whether Century 21 has some duty to attain these disclosure statements, the facts as presented by the plaintiff do not indicate that Century 21 had knowledge of the property's propensity to flood.
Plaintiff's strongest offer of proof is an engineering report that she claims was withheld by Century 21 and indicated the property's flooding problems. The Gilbert engineering report says "it appears that water runs on to and stands on the front porch [of the property]," and "water [was] standing in the garage near the side door." ( See Rec. Doc.30, Exhibit P6). The Court notes that there is a question as to whether this report even indicates that the property is prone to flooding. However, as discussed above, the Court recognizes this is a question for the factfinder and cannot be resolved on summary judgment. Therefore, as is appropriate at the summary judgment stage, the Court does not resolve this factual dispute, but denies summary judgment and leaves it for the factfinder.
While not addressing what the Gilbert report indicates, Century 21 responds by claiming that the Gilbert report was outdated being that it was prepared in March of 1999. Rather, defendant suggests that the Cable Lock report, which was provided to plaintiff and prepared in December 2002 more accurately reflected the state of the property. ( See Rec. Doc.35, p. 3; Rec. Doc.29, Exhibits B, B1). However, plaintiff submits evidence which indicates that the Gilbert Report was attached to a Broker Price Opinion submitted by Patti Palermo, agent for Century 21, in November 2002. ( See Rec. Doc.30, Exhibit P12). This suggests that the usefulness of the Gilbert report was not completely outdated. Moreover, the Cable Lock report seems only to have evaluated the structural condition of the house located on the property, and was not as comprehensive as the Gilbert report.
Finally, plaintiff suggests that it is common knowledge in the neighborhood that the property is susceptible to flooding. To support this claim, she submits an affidavit of an owner of an adjacent lot and notes news stories of floods from the past. ( See Rec. Doc.30, Exhibit P4). The Court finds that this evidence, standing alone, does not permit a trier of fact to conclude that Century 21 knew of the property's propensity to flood because it is not sufficiently related to the actual knowledge of the real estate agents of Century 21.
For these reasons, the Court finds that plaintiff's introduction of the Gilbert report together with the circumstances surrounding its omission could permit a reasonable factfinder to conclude that Century 21 had knowledge of the property's susceptibility to flooding. Such a finding would give rise to a legal duty, and consequently, a claim for negligent misrepresentation. Accordingly, summary judgment with respect to this issue is denied.
2. Freddie Mac
Plaintiff claims that Freddie Mac negligently misrepresented that the property had no flooding problems, and Freddie Mac argues that it had no knowledge of the defect. The Court has already dealt with the issue of whether plaintiff has proffered sufficient evidence to support a finding that defendant had knowledge of the defect ( See Part B above). Yet, the question remains as to whether a claim for negligent misrepresentation can be brought against a seller when there is a waiver of warranty against redhibitory defects. The Court notes that Louisiana case law does not squarely address this issue.
A claim of negligent misrepresentation arises in tort as opposed to contract. Merlin v. Fuselier Construction, Inc., 789 So.2d 710 (La.App. 5 Cir. 2001). Liability for negligent misrepresentation will arise when the defendant has a legal duty to supply correct information, and he breaches that duty causing damages to the plaintiff. Barrie v. V.P. Exterminators, Inc., 625 So.2d 1007 (La. 1993). The pertinent question here is whether Freddie Mac as seller has a duty to supply correct information. The Louisiana Supreme Court has examined this legal duty in Barrie v. V.P Exterminators, Inc., 625 So.2d 1007 (La. 1993).
In Barrie, the court found that a termite inspection company that provided an inspection report to seller saying that there were no termites was liable to the buyer who relied on the report in purchase of the home. The Barrie court reasoned that a tortfeasor's foreseeability of the harm was not the only factor in finding a legal duty, but that "the thrust or proper reach of the rule rests upon policy considerations." David v. Guidry, 645 So.2d 1234 (La.App. 1 Cir. 1994). The court described these policy considerations saying,
"The obligation for the liability is imposed by law based upon policy considerations due to the tortfeasor's knowledge of the prospective use of the information which expands the bounds of his duty of reasonable care to encompass the intended user." Barrie, 625 So.2d at 1016.
In this way, a seller has a delictual obligation under La.Civ. Code art. 2315 that arises when the seller has knowledge of a defect that would prevent a buyer from purchasing the thing had he known of the defect. That is, the seller can be liable under article 2315 for negligent misrepresentation when she fails to exercise a reasonable standard of care in conveying information which she possesses about the thing that is the object of the transaction.
The obligations of the seller under article 2315 are distinct from those obligations that exist conventionally or implicitly under the law. A seller's obligations are set forth in La.Civ. Code arts. 2474 et seq. Among these obligations imposed by the Code, is that duty that arises when the seller breaches her warranty that the thing is free from redhibitory defects. La.Civ. Code art. 2520. In order to achieve a waiver of these warranties, the waiver must be clear and unambiguous and be brought the attention of the buyer. La.Civ. Code art. 2548. See Prince v. Paretti Pontiac Co., 281 So.2d 112 (La. 1973). It is these obligations that a seller discharges through an "AS IS" clause and waiver of redhibition, and not those obligations that exist under article 2315. Given also that any waiver of warranties must be strictly construed, Harris v. Automatic Enterprises of La., 145 So.2d 335 (La.App. 4 Cir. 1962), it is evident that an "AS IS" provision and a waiver of warranties do not dispose of the obligations that arise under 2315.
Here, Freddie Mac was in possession of, and withheld from plaintiff, the Gilbert report, which may have indicated that the property was susceptible of flooding. Freddie Mac also obtained a waiver of redhibition, and plaintiff signed the Release, Addendum, and Act of Cash Sale, all of which have "AS IS" clauses. The Court finds that this waiver or discharge of obligations applies to those warranties that are implied by law under La.Civ. Code arts. 2474 et. seq. The Court finds that the obligations that arise under La.Civ. Code art. 2315 are not discharged by the contractual waiver. While it is certainly true that the "AS IS" provision implies that plaintiff is purchasing the property with all faults, the provision does not allow the seller to be free from liability for his own faults.
One might argue as well that the Court is lowering the standards set in Roby Motors ( See Part B above) from one of fraud to negligence. However, the Court here is not deviating from the fraud standard set in Roby Motors. That is, the Court is not saying that seller's negligence will vitiate consent to the discharge of implied warranties. Rather, the Court is recognizing that there is a wholly separate obligation that arises under article 2315 to exercise a reasonable standard of care when providing or omitting information about any potential defect in the thing that is the object of a sale.
In this way, the Court finds that plaintiff may bring a negligent misrepresentation claim against defendants despite the "AS IS" clause and waiver of redhibitory actions. Moreover, the Court finds that plaintiff has provided sufficient evidence to support a finding that defendants negligently misrepresented that the property did not have flood problems. Accordingly, summary judgment with regard to this issue is denied.
D. Emotional Distress
Generally, there are four situations where Louisiana courts permit recovery for emotional distress related to property damage. A court may also permit recovery of damages for emotional distress that stems from the damage to property: "(1) when the property is damaged by an intentional or illegal act; (2) when the property is damaged by acts for which the tort-feasor will be strictly or absolutely liable; (3) when the property is damaged by acts constituting a continuing nuisance, and (4) when the property is damaged at a time in which the owner thereof is present and situated nearby and the owner experiences trauma as a result." Trim v. South Eastern Exp., Inc., 562 So.2d 26 (La.App. 5 Cir. 1990).
The level of emotional distress cannot be mere worry over the property damage. Robertson v. Geophysical Service, Inc., 469 So.2d 22 (La.App. 1 Cir. 1985). As noted by Louisiana Second Circuit:
"Every incident of property damage is necessarily accompanied by some degree of worry and consternation over such things as possible financial loss, settlement of insurance claims, and discomfort or inconvenience while awaiting and undergoing the repair. The owner of the damaged property may not recover for mental anguish unless he or she proves the psychic trauma in the nature of or similar to a physical injury, directly resulting from the property damage." Thompson v. Simmons, 499 So.2d 517 (La.App. 2 Cir. 1986).
Here, plaintiff's "degree of worry and consternation," as evidenced by her deposition testimony, does not warrant recovery of damages due to emotional distress. Plaintiff characterized her emotional character as stressful or worrisome. ( See Rec. Doc.28, Jumonville Deposition, p. 83-86). She further admits that she received no medical treatment for the alleged distress. Id. Therefore, the Court finds that plaintiff has not offered sufficient proof to permit a reasonable factfinder to conclude that she suffered a level of emotional distress that would warrant recovery under the law.
Accordingly,
IT IS ORDERED that the motions for summary judgment filed by defendants, Federal Home Loan Mortgage Corporation and Investment Realty Partners, Inc. d/b/a Century 21 Investment Realty, ( See Rec. Doc.28 and Rec. Doc.29) are hereby GRANTED with respect to the claims for emotional distress and DENIED in all other aspects.