Opinion
NO. 2014-CA-000627-MR NO. 2014-CA-000739-MR
05-15-2015
KMM INVESTMENTS, LLC APPELLANT/CROSS-APPELLEE v. GLENDA RITCHIE AND FIRST REALTY GROUP, INC. APPELLEES/CROSS-APPELLANTS
BRIEFS AND ORAL ARGUMENT FOR APPELLANT/CROSS- APPELLEE: Sands M. Chewning Hopkinsville, Kentucky BRIEF AND ORAL ARGUMENT FOR APPELLEES/CROSS- APPELLANTS: Dennis J. Courtney Murray, Kentucky
NOT TO BE PUBLISHED APPEAL AND CROSS-APPEAL FROM TRIGG CIRCUIT COURT
HONORABLE CLARENCE A. WOODALL III, JUDGE
ACTION NO. 06-CI-00228
OPINION
AFFIRMING
BEFORE: ACREE, CHIEF JUDGE; STUMBO AND TAYLOR, JUDGES. STUMBO, JUDGE: KMM Investments, LLC appeals, and Glenda Ritchie and First Realty Group, Inc. cross-appeal, from a Judgment and Order of the Trigg Circuit Court. The circuit court ordered that Glenda Ritchie's Offer of Judgment be entered in the sum of $500.00 for the limited purpose set out in Kentucky Rules of Civil Procedure (CR) 68. Kristin Meyer, through KMM Investments, argues that the circuit court erred in concluding that KMM could not seek recovery for the negligent misrepresentation of a licensed real estate agent, and for violation of KRS 324.160(4)(n). In their cross-appeal, Ritchie and First Realty Group maintain that the court erred in allowing KMM to recover a surveyor's fee. We find no error, and AFFIRM the Judgment and Order on appeal.
Glenda Ritchie is a licensed real estate broker and part owner of First Realty Group, Inc. In 2005, Kristin Meyer engaged Ritchie for the purpose of assisting Meyer in purchasing a parcel of lake-front property on Barkley Lake in Cadiz, Kentucky. Ritchie was to serve as Meyer's "buyer's agent". Ritchie subsequently located a parcel of residential lake-front property that included a house situated on two lots that formed a peninsula into the lake. The seller of the property was represented by a real estate agent who is not a party to this action.
Meyer would later allege that Ritchie represented to her that the unimproved Lot 473 could be subdivided from Lot 474 - upon which the home was constructed - and sold for $100,000. Based in part on this representation, Meyer then purchased the property as agent for KMM Investments, LLC, with KMM as grantee. Some time later, Meyer contacted another real estate agent for the purpose of selling Lot 473. Meyer planned to use the proceeds of the sale to renovate the home on Lot 474. KMM, through Meyer, would later allege that it was at this time that she learned from the new real estate agent that a $500.00 property survey would have to be performed. After the survey was completed, Meyer determined that the carport and driveway are constructed on both lots, thus allegedly preventing the sale of Lot 473.
Meyer and KMM subsequently filed the instant action in Trigg Circuit Court against Ritchie and First Realty Group. They alleged that Richie violated her fiduciary duty by failing to disclose pertinent facts about the real estate to Meyer, failing to act in good faith, and encouraging Meyer to purchase the parcel at an inflated price in excess of its true value. The matter proceeded in the circuit court and discovery was undertaken, whereupon Meyer's claim centered on Ritchie's alleged misrepresentation that Lot 473 could be sold by Meyer for $100,000.
Meyer and KMM were plaintiffs in this action. Meyer was later dismissed from the action because KMM rather than Meyer was the grantee. "Meyer" and "KMM" will be used interchangeably hereinafter.
Thereafter, Ritchie filed a Motion for Summary Judgment claiming that even if Meyer's allegations were true, Meyer suffered no damages. In support of this motion, Ritchie noted that Meyer's own real estate appraiser, Johnny Blane, acknowledged that Lots 473 and 474 were appraised at the contract price of approximately $329,000. On July 29, 2011, the court rendered an Order denying the Motion and finding that Meyer could possibly recover no more than a surveyor's fee in the amount of $500.00. Ritchie also filed a Motion in Limine addressing Meyer's claimed damages found in the jury instructions. This motion was addressed by way of Orders rendered on August 4, 2011, and August 19, 2011. The trial court ruled that damages would be limited to those which were "contemplated by the contact" and "arose naturally from" the alleged breach of duty.
The contract price of the parcel was $329,000. After repairs in the amount of $38,800 were deducted, KMM paid $290,200.
--------
Finally, the court rendered a Judgment and Order on April 9, 2014, in favor of Meyer which forms the basis of the instant appeal. In so doing, the court noted that Ritchie had tendered, and the court so accepted, an Offer of Judgment in the amount of $500.00 which was predicated on the court's prior Order that Ritchie could be liable, if at all, only for the $500.00 survey fee that Meyer incurred after the closing. This appeal and cross-appeal followed.
Meyer now argues that the Trigg Circuit Court erred in limiting her recovery to the $500.00 surveyor fee. She contends that she is entitled to cover all damages for Ritchie's alleged negligent misrepresentation of the parcel, and for violation of KRS 324.160(4)(n), which provides that the Kentucky Real Estate Commission may impose sanctions against a real estate agent if the agent guarantees future profits from the resale of real property. She claims entitlement to lost profits from the sale of Lot 473 in the amount of $100,000, attorney fees not to exceed $50,000, damages representing Ritchie's real estate commission of $19,200, and approximately 10 additional measures of damages ranging from title insurance to recording fees. Meyer directs our attention to extra-jurisdictional case law which she claims supports the proposition that a party can recover consequential damages arising under breach of contract if the damages were in the contemplation of the parties at the time the contract was formed. Applying this reasoning herein, Meyer argues that the sale of the second lot was contemplated by her prior to purchasing the parcel, that the profits from the sale of the second lot were anticipated for the purpose of improving the house, and that these lost profits are a proper measure of recoverable damages.
The focus of Meyer's claim of error is her assertion that the Trigg Circuit Court improperly limited damages to the $500.00 surveyor fee, and denied the recovery of potential lost profits from the resale of Lot 473 and other ancillary damages. Meyer's Complaint asserted claims of breach of fiduciary duty and negligence, to wit, that Ritchie allegedly misled her by stating that Lot 473 could be resold for $100,000. This is a claim that Ritchie wholly denies. Meyer's written argument, however, centers on extra-judicial contract law, which she employs to forward the argument that loss of profits resulting from a breach of contract may be considered in assessing damages. Yet no breach of the sales contract has been alleged, neither Ritchie nor First Realty Group were parties to the sales contract, and the record amply demonstrates that Meyer obtained the value to which the contract entitled her. Any claim for lost profits or consequential damages based on a breach of the sales contract must fail, as no breach of sales contract has been alleged or proven.
In its July 29, 2011 Order Denying Defendants' Motion for Summary Judgment, the Trigg Circuit Court addressed the elements which must be proven to prevail on a claim of fraudulent representation. Quoting Flegles, Inc. v. TruServ Corp., 289 S.W.3d 544 (Ky. 2009), the court stated:
In reversing the trial court's judgment and dismissing Flegles' fraud claim, the Court of Appeals correctly observed that in Kentucky such a claim requires proof, by clear and convincing evidence, of the following six elements: (1) that the declarant made a material representation to the plaintiff, (2) that this representation was false, (3) that the declarant knew the representation was false or made it recklessly, (4) that the declarant induced the plaintiff to act upon the misrepresentation, (5) that the plaintiff relied upon the misrepresentation, and (6) that the misrepresentation caused injury to the plaintiff. United Parcel Service Company v. Rickert, 996 S.W.2d 464 (Ky. 1999). The plaintiffs reliance, of course, must be reasonable, McHargue v. Fayette Coal & Feed Company, 283 S.W.2d 170 (Ky. 1955), or, as the Restatement states, "justifiable." Restatement (Second) of Torts § 537 (1977). The misrepresentation, moreover, must relate to a past or present material fact. "A mere statement of opinion or prediction may not be the basis of an action." McHargue, 283 S.W.2d at 172. This means, as the Court of Appeals held, that forward-looking opinions about investment prospects or future sales performance such as those involved in this case generally cannot be the basis for a fraud claim.Flegles at 548-9.
The Trigg Circuit Court went on to note that the measure of damages for fraudulent misrepresentation is to place the party back in the position he or she would have been absent the fraud. Johnson v. Cormney, 596 S.W.2d 23, 27 (Ky. App. 1979) (overruled on other grounds by Marshall v. City of Paducah, 618 S.W.2d 433 (Ky. App. 1981)). With respect to damages arising from the sale of real property, the measure is the difference between the contract price and the value received. Lawson v. Menefee, 132 S.W.3d 890, 893 (Ky. App. 2004). In the matter at bar, the record amply demonstrates that Meyer received the value to which she was entitled, and her own appraiser, Johnny Blane, so testified. Additionally, Blane stated that Lot 473 was valued at $87,000. Meyer's reliance on extra-jurisdictional case law addressing breach of contract is misplaced, and we find no error on this issue.
Meyer also contends that the circuit court erred in failing to conclude that she could seek damages arising under KRS 324.160(4)(n). This statute states that, "The [Kentucky Real Estate] commission shall impose sanctions . . . against a licensee [i.e., real estate agent or broker] for: . . . Guaranteeing, authorizing, or permitting a person to guarantee that future profits shall result from a resale of real property[.]" By its express terms, KRS 324.160(4)(n) provides for the imposition of sanctions by the Kentucky Real Estate Commission. It cannot reasonably be construed as a measure of damages to third parties, nor does it establish a cause of action in favor of third parties. Meyer has not directed our attention to any basis for concluding otherwise, and our own research has not revealed any case law or statutory basis for implicating KRS 324.160(4)(n) in the manner she now asserts. We agree with Ritchie's contention that Meyer has cited to no Kentucky authority that disrupts the logic of the trial court's prior orders. We find no error.
In her cross-appeal, Ritchie briefly argues that the trial court erred in permitting Meyer to assert a claim for the surveyor's fee. Ritchie maintains that Meyer knew she would have to spend money to prepare Lot 473 for resale after taking title to the two parcels, and that Ritchie's sole duty was to assist Meyer in the purchase of the lots. She argues that she had no duty to instruct Meyer how to sell Lot 473 at some time in the future, and where there is no duty there can be no damages.
By its Order dated August 1, 2011, the Trigg Circuit Court found that among the recovery sought by Meyer, the only damages that were "contemplated by the contract" and "arose naturally from" any breach of fiduciary duty were the survey costs of $500.00. This was not to say that Meyer was entitled to the survey costs, but rather that damages would be limited to the survey costs if the matter proceeded to trial. Based on this ruling, and some time later, Ritchie tendered her Offer of Judgment in the amount of $500.00 which was accepted by the court. In so doing, she reserved the right to appeal the ruling that the survey fee was a recoverable measure of damages.
Now on appeal, the burden rests with Ritchie to overcome the strong presumption that the trial court's rulings are correct. "The presumption is that a trial court ... renders the correct judgment under the facts developed before it." City of Jackson v. Terry, 302 Ky. 132, 135, 194 S.W.2d 77, 78 (1946). Ritchie has not met this burden. Though she makes a strong argument in equity, she has cited no case law or statutory authority in support her claim of error, and we have no basis for concluding that the Trigg Circuit Court erred in its determination that the survey fee was the only measure of damages contemplated by the contract and which arose from any alleged breach of duty. Accordingly, we find no error.
For the foregoing reasons, we AFFIRM the Judgment and Order of the Trigg Circuit Court.
ALL CONCUR. BRIEFS AND ORAL ARGUMENT
FOR APPELLANT/CROSS-
APPELLEE:
Sands M. Chewning
Hopkinsville, Kentucky
BRIEF AND ORAL ARGUMENT
FOR APPELLEES/CROSS-
APPELLANTS:
Dennis J. Courtney
Murray, Kentucky