Opinion
2021-CA-0012-MR
06-24-2022
AJAYKUMAR PARIKH AND PALAK PATEL APPELLANTS v. THE CECILIAN BANK APPELLEE
BRIEFS FOR APPELLANT: Michael A. Valenti Hayden A. Holbrook Louisville, Kentucky BRIEF FOR APPELLEE: William T. Repasky Griffin Terry Sumner Carrie M. Mattingly Louisville, Kentucky
NOT TO BE PUBLISHED
APPEAL FROM HARDIN CIRCUIT COURT HONORABLE KEN M. HOWARD, JUDGE ACTION NO. 19-CI-00507
BRIEFS FOR APPELLANT: Michael A. Valenti Hayden A. Holbrook Louisville, Kentucky
BRIEF FOR APPELLEE: William T. Repasky Griffin Terry Sumner Carrie M. Mattingly Louisville, Kentucky
BEFORE: ACREE, CETRULO, AND TAYLOR, JUDGES.
OPINION
ACREE, JUDGE:
Appellants Ajaykumar Parikh and Palak Patel appeal the Hardin Circuit Court's order granting Appellee The Cecilian Bank summary judgment and dismissing their claims. For the reasons stated below, we affirm.
BACKGROUND
This appeal involves a dispute arising from a single transaction between Appellee The Cecilian Bank (the Bank) and Appellants Ajaykumar Parikh and Palak Patel (collectively Buyers). The transaction consisted of the Bank's sale and Buyers' purchase of a promissory note and related documents (collectively the Loan) from VR Innkeepers, Inc. (VR) to Leitchfield Deposit Bank in the principal amount of $2,350,000. (Record (R.) 21-22.) The note was secured in part by a mortgage on a former Quality Inn hotel (the Hotel) owned by VR. (R. 13-19.) The Hotel is located in Vincennes, Indiana.
The certified record on appeal consists of 148 numbered pages and various documents contained in a "Brown Wallet" and a "Blue Confidential Wallet." The Blue Confidential Wallet contains documents that were filed under seal pursuant to an Agreed Protective Order entered on April 2, 2020. The Brown Wallet contains the Bank's motion for summary judgment, its memorandum in support, and exhibits A through H to the memorandum. The Brown Wallet also contains exhibits A, B, F, G, H, and I to Buyers' response in opposition to the Bank's motion for summary judgment. The Blue Confidential Wallet contains exhibits C, D, E, and F to Buyers' response in opposition to the Bank's motion for summary judgment.
The Bank obtained the Loan through its acquisition of Leitchfield Deposit Bank in April 2016. (R., Brown Wallet, Bank's Ex. C, p. 15; Buyers' Ex. A, p. 52.) Included in Leitchfield's Loan file was a January 21, 2011 appraisal report determining the value of the Hotel to be $3,100,000 as of December 22, 2010. (R., Brown Wallet, Buyers' Ex. A, p. 28.) At that time, the Hotel was operating, but VR subsequently closed the business and defaulted on the note.
By the end of April 2016, the Bank had inspected the Hotel and was aware that, among other things, it had roof leaks resulting in standing water in several places. Repairs to the Hotel were estimated to be in the $200,000 to $300,000 range at that time. (R., Blue Wallet, Buyers' Ex. D.)
A subsequent inspection by the Bank in May 2017 confirmed that the roof was still leaking, resulting in fallen ceiling tiles and standing water on the floor in several places. (R., Blue Wallet, Buyers' Ex. E.) The report stated the Hotel's condition was better than expected, but a sale was needed as soon as possible.
In February 2017, the Bank obtained an appraisal of the Hotel. (Id., Ex. C.) The Hotel was vacant then and no longer operating as a hotel. The appraisal said the Hotel had been vacant for more than twelve months and gave the appearance of a distressed property because of recent vandalism and theft including broken windows, broken room locks, broken room doors, broken/stolen amenities, graffiti, and broken restaurant equipment. The appraisal determined the value of the Hotel to be $890,000 as of February 14, 2017.
At some point, the Bank contacted Keith Fisher and hired his company, Going Green Lawn Care, to provide security and preventative maintenance at the Hotel. Employees of Going Green lived in the Hotel, and they cleaned up any standing water from the roof leaks as it occurred. They also kept doors open and the air circulating throughout the Hotel. (R., Brown Wallet, Buyers' Ex. A, p. 43.)
The Bank's President, Greg Pawley, subsequently visited the Hotel. He saw evidence of water leaking from the roof in the Hotel's common area but noted that Going Green was doing a good job of keeping it cleaned up. He observed that the doors to the rooms were open, and the rooms were dry. He observed that the electricity was on, and the air was circulating. He did not see any environmental concerns in the Hotel. (R., Brown Wallet, Bank's Ex. C, p. 51.)
Mr. Pawley was the Bank's representative at its Kentucky Rule of Civil Procedure (CR) 30.02(6) deposition.
On June 15, 2017, the Bank filed a lawsuit against VR to recover amounts due under the promissory note. (Id., Bank's Ex. E.) The lawsuit did not proceed as quickly as the Bank expected, and the Bank was concerned about the Hotel's roof leaks. In August 2017, it began requesting estimates to repair or replace the roof. The estimates ranged from $245,060 to $500,000. (R., Brown Wallet, Buyers' Ex. F.) The Bank was reluctant to spend this much money on property it did not own but realized that not correcting the Hotel's roof leaks risked further damage to the Hotel. (Id., Buyers' Ex. G, p. CB00929.)
The Bank asked Hilco Real Estate for ideas, and its representative suggested that the Bank sell the Loan. (Id., Buyers' Ex. A, p. 65; Ex. G, p. CB00929.) In this scenario, the Loan's buyer would step into the Bank's shoes and acquire the Bank's rights against VR under the Loan and in the lawsuit. The Bank approved this course of action in September 2017, and Hilco prepared materials for a 10- to 14-day marketing effort to sell the Loan at auction. (Id., Buyers' Ex. G, p. CB000933.)
The Bank informed Hilco of the Hotel's status and instructed Hilco to tell interested parties the story regarding the Hotel's roof. (Id., Buyers' Ex. A, pp. 37, 88.) It is unclear whether the Bank provided Hilco all the roof estimates or just the estimate containing the lowest repair cost. (Id., p. 88.) It is also unclear whether the Bank gave Hilco a copy of the 2017 appraisal, but Mr. Pawley believed it would not have been made public outside the Bank. (Id., pp. 39, 40, 86.)
Included in the marketing materials was a two-page brochure titled "Bank-Directed Note Sale." (R., Brown Wallet, Buyers' Ex. B.) The Hotel was prominently featured in the brochure, which stated the Hotel had an appraised value of $3,100,000 and was an "Immediate Value-Add Opportunity" with "Tremendous Upside Potential." The brochure stated a date and time for on-site inspections of the Hotel, and it also referenced a "Virtual Data Room" that included "detailed property information and other applicable information." The Bank did not know what information Hilco included in the Virtual Data Room. (Id., Buyers' Ex. A, pp. 86, 87.) It is undisputed that Buyers did not access the information in the Virtual Data Room. (R. 119; Brown Wallet, Bank's Ex. D, p. 95.) The trial court granted the Bank's motion for summary judgment before the deposition of any Hilco representative was taken.
The $3,100,000 appraisal value is from the January 21, 2011 appraisal report. (R., Brown Wallet, Buyers' Ex. A, pp. 77-78.) The Bank approved the marketing brochure and relied upon Hilco to market the Loan. (Id., pp. 77, 79.)
The deadline for offers was October 18, 2017. By October 16, 2017, Hilco informed the Bank that numerous parties had responded to the marketing, but some chose not to participate in the sale because of the Hotel's condition and the anticipated cost of bringing it back to operational condition. (R., Brown Wallet, Bank's Ex. E.)
Buyers learned of the Loan sale from their broker, who told them there was a hotel valued at three million dollars coming for auction. (Id., Bank's Ex. D, p. 49, 57.) They had previously used him as a broker to acquire a different business. They own and operate several business and commercial real estate investments. (Id., pp. 18-24.) Neither they nor their businesses held accounts with the Bank. (Id., p. 43.)
Buyers, by agreement of counsel, were deposed concurrently.
Buyers inspected the Hotel for the first time around October 17, 2021. (Id., p. 58.) Buyers noted that some places in the Hotel were very dark, that the electricity was on in some places but not others, and that some doors were closed. (R. 114.) They stated that the Hotel "looked scary." (Id.) After the inspection, their attorney prepared a letter of intent conveying their offer to purchase the Loan for $700,000. (R., Brown Wallet, Bank Ex. D, pp. 73-74.)
The Bank did not accept their offer, and Buyers inspected the Hotel a second time on or about October 25, 2017 with their broker. (Id., pp. 190-192.) Inside the Hotel, Buyers observed broken ceiling tiles and water damage from the ceiling tiles. They also noted areas where the carpet was wet. Their broker did not feel safe inspecting the Hotel's second floor, so they did not do so and were inside the Hotel for only about ten or eleven minutes during their second inspection. (R., Brown Wallet, Bank's Ex. D, pp. 89, 90.)
After this inspection, Buyers' broker told them they were the right buyers, but they needed to increase their offer to $1,100,000. (Id., p. 92.) Based upon his advice, they conveyed a $1,100,000 offer to the Bank in an October 28, 2017 letter of intent. (R. 24-27; Brown Wallet, Bank's Ex. D, p. 92.) Buyers did not engage in any due diligence of their own prior to purchasing the Loan and relied upon their broker to "take care of everything, make sure everything [was] good to go ...." (R., Brown Wallet, Bank Ex. D, p. 113.)
The broker received a $77,000 commission on this sale.
Buyers did not read the Loan prior to closing. (R., Brown Wallet, Bank's Ex. D., pp. 97-98.)
The Bank accepted Buyers' offer, and Buyers' attorney then drafted the Loan Purchase and Sale Agreement (the Agreement), which was executed by the parties remotely on November 15, 2017. (R. 29-34.) In the Agreement, the Bank sold the Loan and its related security interests, without recourse, to Buyers for $1,100,000. The Bank also assigned Buyers its interest as the plaintiff in the lawsuit against VR. The parties adopted the terms of the October 28, 2017 letter of intent, which included the Bank's agreement to maintain the Hotel in its current condition until the closing. The Agreement also included certain representations by the Bank to Buyers, but the Bank made no representations in the letter of intent or in the Agreement relating to the Hotel's condition.
At no point prior to the closing did Buyers communicate directly with the Bank with respect to the Loan sale. (R., Brown Wallet, Bank's Ex. C, p. 15, 23; Ex. D, pp. 99-100.) They communicated only with their broker and attorney. Upon completion of the closing, Buyers had full possession and control of the Hotel. Buyers did not hire anyone to repair the roof or to maintain the inside of the Hotel prior to their subsequent purchase of the Hotel in June 2018. (Id., Ex. D, pp. 220, 229-230.)
In January 2018, Buyers were substituted for the Bank as plaintiffs in the lawsuit against VR. In March 2018, they obtained a judgment against VR in an amount exceeding $2,500,000. (Id., Ex. F, p. PP0038, PP0040-PP0048.) The Hotel was sold at a sheriff's sale on June 14, 2018. Buyers bid $1,400,000 at the sheriff's sale and were the high bidders. After purchasing the Hotel, they started the repair process.
Around the time the roof repairs started, someone told Buyers they should get the Hotel tested for mold. (Id., Ex. D, pp. 249-250.) They contacted Crane Environmental Services, LLC, and on August 28, 2018, Crane inspected the Hotel. (R., Brown Wallet, Buyers' Ex. I.) Buyers were not permitted inside the Hotel during the inspection because of the mold and testified they had not seen mold at the Hotel before then. (Id., p. 253.) They also testified that they had not smelled the musty smell noted in Crane's report on prior visits to the Hotel. (Id., pp. 255-256.) Crane's report confirmed the presence of mold throughout the Hotel, and Buyers state the cost to remove and remediate the mold inside the Hotel is approximately $1,000,000.
Buyers filed a verified complaint against the Bank on March 28, 2019. (R. 3.) They claimed the Bank breached the Agreement by failing to transfer certain insurance relating to the Hotel and by failing to maintain the Hotel in a habitable condition prior to the closing. They also asserted a claim for fraud by omission based upon the Bank's failure to disclose unpaid past due taxes on the Hotel and the presence of mold and other contaminants existing at the Hotel. The Bank filed its answer on April 29, 2019 and served written discovery the same day. (R. 43-56.) Written discovery by both parties was completed in August 2019. The parties' depositions were taken in early March 2020. (R. 55-61.) The Bank filed its motion for summary judgment on July 2, 2020.
Buyers' verified complaint did not allege that a duty to disclose existed because of the Bank's superior knowledge of information relating to the Hotel's physical condition other than mold or that its partial disclosures of information relating to the Hotel created a duty to disclose, as the parties argued to the trial court and again on appeal. The Bank does not argue on appeal that Buyers' fraud by omission claim is insufficiently pleaded, so we decline to further address this issue on appeal. See CR 15.02 ("When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings.").
The trial court entered its order granting summary judgment on November 30, 2020, and dismissed all claims asserted by Buyers against the Bank with prejudice. (R. 125.) Buyers appeal from this order.
The Bank filed its motion for summary judgment over a year and three months after Buyers filed their verified complaint. This is a sufficient time for Buyers to have completed discovery. Hartford Ins. Group v. Citizens Fidelity Bank & Trust Co., 579 S.W.2d 628, 630 (Ky. App. 1979). Buyers argue that summary judgment was entered before the depositions of Mr. Fisher and another person who allegedly advised the Bank to have the Hotel inspected for mold prior to the closing. Buyers claim these individuals would testify that the Bank knew of mold in the Hotel prior to the closing. Even if that were true, it would not change the outcome of this case. As explained below, Buyers conducted no due diligence and relied exclusively upon their broker, so their reliance, if any, on any duty to disclose by the bank was unreasonable, and summary judgment was properly entered. See Martin v. Pack's, Inc., 358 S.W.3d 481, 485 (Ky. App. 2011) (stating the appellant had ample opportunity to obtain discovery, and the specific discovery shortcomings referenced had no bearing on the case).
STANDARD OF REVIEW
Our standard of review for a grant of summary judgment is "whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law." Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App. 1996). Summary judgment is properly granted under CR 56.03 "if the pleadings, depositions, answers to interrogatories, stipulations, 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." The record must be viewed in a light most favorable to the non-moving party, and all doubts are to be resolved in its favor. Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). "Because summary judgment involves only legal questions and the existence of any disputed material issues of fact, an appellate court need not defer to the trial court's decision and will review the issue de novo." Lewis v. B &R Corp., 56 S.W.3d 432, 436 (Ky. App. 2001).
ANALYSIS
Before addressing Buyers' arguments, we must first discuss their violation of CR 76.12(4)(c)(v), which requires an appellant's brief to contain at the beginning of each argument "a statement with reference to the record showing whether the issue was properly preserved for review and, if so, in what manner." "It is not the function or responsibility of this court to scour the record on appeal to ensure that an issue has been preserved." Koester v. Koester, 569 S.W.3d 412, 415 (Ky. 2019). We require a statement of preservation:
so that we, the reviewing Court, can be confident the issue was properly presented to the trial court and therefore, is appropriate for our consideration. It also has a bearing on whether we employ the recognized standard of review, or in the case of an unpreserved error, whether palpable error review is being requested and may be granted.Oakley v. Oakley, 391 S.W.3d 377, 380 (Ky. App. 2012).
"Our options when an appellate advocate fails to abide by the rules are: (1) to ignore the deficiency and proceed with the review; (2) to strike the brief or its offending portions, CR 76.12(8)(a); or (3) to review the issues raised in the brief for manifest injustice only[.]" Hallis v. Hallis, 328 S.W.3d 694, 696 (Ky. App. 2010). "The decision as to how to proceed in imposing such penalties is a matter committed to our discretion." Roberts v. Bucci, 218 S.W.3d 395, 396 (Ky. App. 2007). In this case, we choose to look past this violation of CR 76.12 and proceed without sanction against Buyers. Counsel is reminded, however, that compliance with CR 76.12 is mandatory. Failure to comply with the civil rules is an unnecessary risk appellate advocates should not chance. Petrie v. Brackett, 590 S.W.3d 830, 834-35 (Ky. App. 2019).
We now address the trial court's dismissal of Buyers' fraud by omission claim. To prevail on a fraud by omission claim in Kentucky, the plaintiff must prove the following: (1) the defendant had a duty to disclose the material fact at issue; (2) the defendant failed to disclose that fact; (3) the defendant's failure to disclose the fact induced the plaintiff to act; and (4) the plaintiff suffered actual damages as a consequence. Rivermont Inn, Inc. v. Bass Hotels &Resorts, Inc., 113 S.W.3d 636, 641 (Ky. 2003). The information that Buyers argue the Bank failed to disclose includes the 2017 appraisal, the roof's condition and need for immediate repair, the cost to repair or replace the roof, the fact that the Bank hired someone to remove standing water from the inside of the Hotel after it rained, and the Bank's alleged knowledge of mold in the Hotel.
We first examine whether the Bank had a duty to disclose the information at issue because a fraud by omission claim is grounded in a duty to disclose. Giddings &Lewis, Inc. v. Industrial Risk Insurers, 348 S.W.3d 729, 747 (Ky. 2011). Kentucky recognizes a duty to disclose when there is a fiduciary relationship; when the duty is provided by statute; when a defendant has partially disclosed material facts to the plaintiff but created the impression of full disclosure; and when the defendant has superior knowledge and is relied upon to disclose such knowledge. Id. at 747-48.
Buyers do not claim a fiduciary relationship with the Bank. Nor do they claim that a statute required the Bank to disclose information relating to the Hotel. Instead, they argue that the Bank owed a duty to disclose the information at issue because the Bank partially disclosed information about the Hotel but created the impression of full disclosure.
The Bank's marketing brochure's first page stated: "BANK-DIRECTED NOTE SALE." It is clear, however, that the Loan's main selling feature was the mortgage on the Hotel. The Hotel was prominently featured in the brochure, which stated: "59-ROOM FORMER QUALITY INN (Property Not Currently Operating)." It displayed six pictures of the Hotel that were taken while it was operating as a Quality Inn. The brochure also listed the Hotel's main features such as its fitness center, banquet space, enclosed pool atrium, Huddle House restaurant, Marquee Lounge bar, and its convenient location on 5.24 acres. It also provided a date and time for interested parties to inspect the Hotel, and it described how to access a "Virtual Data Room" that included "detailed property information and other applicable information."
The brochure also addressed the Hotel's value. It stated that the Hotel had an appraised value of $3,100,000 and that the current principal due on the note was $2,137,051. This, according to the brochure, created an "Immediate ValueAdd Opportunity - Tremendous Upside Potential."
"Fraud is not to be presumed. The presumption of innocence, fair dealing, and good faith attends all lawful transactions among men." Dennis v. Thompson, 240 Ky. 727, 736, 43 S.W.2d 18, 22 (1931). Here, the brochure created the misleading impression that the Hotel had a current appraised value of $3,100,000. Id. at 23 (stating that the disclosure "should be interpreted by the effect it has on the ordinary mind"). Even so, Buyers have not established that the Bank had a duty to disclose the value information at issue. To find that the Bank owed a duty, it is not enough to show more information could have been expressed. The Bank's partial disclosures must have created the impression of full disclosure. Rivermont, 113 S.W.3d at 641. That is not so here.
The brochure consists of only two pages. It does not claim to fully disclose all material facts relating to the Hotel. Instead, it states that "detailed property information and other applicable information" may be accessed in a Virtual Data Room, which Buyers admit they did not visit. It also contains a disclaimer stating that its information "is subject to inspection and verification by all parties[.]" The brochure also made no specific statements regarding the Hotel's condition and instead provided a date and time for on-site inspections. The same is true regarding the October 28, 2017 letter of intent and the Agreement. Neither document contained representations regarding the Hotel's condition.
Buyers also argue the Bank had a duty to disclose the abovereferenced information because of its superior knowledge. We disagree. This duty would arise only if the Bank had superior knowledge of material facts, did not disclose them, and Buyers had no alternative but to rely upon the Bank to disclose more. However, mere silence "does not constitute fraud where it relates to facts open to common observation or discoverable by the exercise of ordinary diligence, or where means of information are as accessible to one party as to the other." Bryant v. Troutman, 287 S.W.2d 918, 920-21 (Ky. 1956). As described below, even if the Bank possessed the information that Buyers claim was fraudulently omitted, it had no duty to disclose such information because it was either open to observation or discoverable by Buyers if they had exercised ordinary diligence.
Buyers rely upon Smith v. General Motors Corporation, 979 S.W.2d 127 (Ky. App. 1998), to support their argument that the Bank should have disclosed the information they claim was fraudulently omitted. An action under the Consumer Protection Act, KRS 367.110, et seq., Smith involved the sale of a new vehicle by a dealership whose agents performed pre-sale repairs. The dealership failed to disclose the defects such repairs made impossible to discover. The Court found the dealership owed both common law and statutory duties to disclose the defects. 979 S.W.2d at 129. This appeal has almost nothing in common with Smith.
Buyers also rely upon Lawley v. Northam, No. ELH-10-1074, 2011 WL 6013279 (D. Md. Dec. 1, 2011). Lawley is easily distinguished. It, among other things, involved claims arising from a residential real estate transaction governed by Maryland law.
Kentucky Revised Statutes.
Buyers also argue that this case is like Waldridge v. Homeservices of Kentucky, Inc., 384 S.W.3d 165, 171 (Ky. 2011), and the Bank owed a duty to disclose latent defects because the Hotel was an important part of the Loan sale. Unlike Waldridge, this is not a real estate transaction regardless of the Hotel's status as collateral for the Loan, and the duty to disclose recognized in Waldridge does not apply here.
Buyers are sophisticated businessmen who regularly used an agent to facilitate the brokering of their business acquisitions. This was not the purchase of a new car or a first home. It was not even the purchase of the Hotel in the first instance but the acquisition of the Loan. Buyers do not allege any "defects" with the Loan, and we see no evidence of any.
Smith is also distinguishable because unlike this case, the buyer in Smith was justified in assuming his new car was free of defects, theoretically fresh off the assembly line. Smith, 979 S.W.2d at 129 (stating a duty to disclose may arise when one party to a contract has superior knowledge and is relied upon to disclose same). There is no equivalent justifiable reliance occasioned here. Buyers were purchasing a Loan; the security for the loan, the Hotel, was never represented as new construction or even in the condition shown in the brochure photographs. It was a distressed property that Buyers were allowed to inspect on more than one occasion after which they themselves described the property as "scary."
Next, the Bank argues Buyers' fraud by omission claim fails as a matter of law because of Buyers' lack of due diligence in buying the Loan. In a fraud by omission claim, a plaintiff is injured by relying on the defendant to have fulfilled its duty to disclose. Republic Bank &Trust Co. v. Bear, Stearns &Co., Inc., 707 F.Supp.2d 702, 710 (W.D. Ky. 2010). That reliance must be reasonable, and plaintiffs are required to exercise common sense to protect themselves. Id. Also, "if a party could have learned of the basis of the fraud, or if he could have uncovered it 'by ordinary vigilance and attention,' his failure to do so deprives him of a remedy." Id. (quoting Mayo Arcade Corp. v. Bonded Floors Co., 41 S.W.2d 1104, 1109 (Ky. 1931)). Whether reliance is reasonable is ordinarily a question of fact for the jury, but Buyers have failed to offer affirmative evidence sufficient to create the existence of a genuine issue of material fact regarding the justification for their reliance. See Steelvest, 807 S.W.2d at 482 (stating that "a party opposing a properly supported summary judgment motion cannot defeat it without presenting at least some affirmative evidence showing that there is a genuine issue of material fact for trial.").
Here, the record is clear that Buyers performed insufficient due diligence prior to the closing. For example, they complain of the Bank's failure to disclose its 2017 appraisal; yet, Buyers relied solely upon their broker's advice to offer $1,100,000 to purchase the Loan. They did not visit the Virtual Data Room. They did not request information about the appraised value referenced in the brochure, and they did not obtain their own appraisal or similar information even though the marketing brochure contained a disclaimer stating that its information should be verified. Disclaimers do not insulate a party from its provable fraud; however, they do put the opposing party on notice that the information at issue should not be relied upon without risk or impunity. Flegles, Inc. v. TruServ Corp., 289 S.W.3d 544, 550 (Ky. 2009).
The same is true regarding the Hotel's physical condition. Buyers argue that the Bank fraudulently omitted the extent of repairs needed for the roof, that it was cleaning up water inside the Hotel after it rained, and that it allegedly knew or suspected that mold was present inside the Hotel. Buyers, however, had multiple opportunities to inspect the Hotel, and the fact that the Hotel was a distressed property was a secret to no one. It had been vacant for well over a year and had been the subject of vandalism and theft.
Even Buyers, after what they describe as two cursory inspections, were aware of water damage inside the Hotel, but they failed to act on such knowledge. They did not hire a building inspector. They did not request cost estimates. They did not ask the Bank about what maintenance was performed at the Hotel. They did not retain a single professional to help them evaluate the Hotel's physical condition or the cost to repair. They also did not visit the Virtual Data Room, which, according to the brochure, contained "detailed property information and other applicable information." Instead, they simply factored in potential costs to get the Hotel operational based upon their own and their broker's assumptions, and they chose to make no further inquiries.
Under these facts, Buyers' claim for fraud by omission fails as a matter of law. They have identified no information, physical condition, or alleged defect in the Hotel prior to the closing that they did not or could not have discovered on their own through ordinary care and diligence. In this respect, even if the Bank had knowledge relating to the Hotel that it did not disclose to Buyers, such knowledge was not "superior" and did not give rise to a duty legally imposable on the Bank to disclose based on this record. Having concluded that any reliance by Buyers upon the Bank's failure to disclose material information relating to the Hotel was unreasonable as a matter of law, we need not address the other elements of Buyers' fraud by omission claim.
Last, Buyers argue that the trial court erred in dismissing their claim for breach of contract. They claim the Bank breached its obligation to maintain the Hotel in its condition on October 28, 2017 until the closing. In support of their argument, Buyers state that it is an "uncontested fact that the condition of the Property was deteriorating every single day due to the deplorable condition of the roof causing ongoing water damage leading to mold infestation." The Bank argues that the trial court properly dismissed the claim because there is no evidence that the Hotel's condition deteriorated during that time period.
Paragraph 8 of the letter of intent contains the contract term at issue. It states: "8. Condition of the Property: The Seller shall be obligated to maintain the Collateral Property in its current condition until the Closing."
On page 2 of the Agreement, the parties agreed to "adopt the terms and conditions of the LoI [the October 28, 2017 letter of intent] as a binding contract between the parties, notwithstanding the language contained in the LoI that it is not legally-binding or a legally-binding contract."
The letter of intent is dated October 28, 2017. The closing occurred on November 15, 2017. The Bank, therefore, agreed to maintain the Hotel in the same condition for 18 days. Despite including paragraph 8 in the letter of intent, Buyers made no effort to document the Hotel's condition on the relevant dates to see if the Bank performed its obligations:
Q. You visited the property twice. Using the October 28th date, do you remember when that second visit was? Like a week before, days before? Do you remember?
A. Maybe October 26th or 27th.
Q. Real close to the 28th?
A. Yeah.
Q. Okay. And while you were up there, did you take any photographs or videotape anything?
A. No, I no did [sic].
Q. Do you know of anybody who took pictures or videotape of the hotel at that time?
A. I don't think so.
Q. Okay. Between October 28th and November 15th, can you describe how the property deteriorated in any way during that time period?
A. I don't know because we are not going there.
Q. On the closing date, November 15th, there was no objection noted that I've seen as to the condition of the property, correct?
A. Means I not been there, just we are by the email.
Q. You hadn't been there, so you had no reason to object that it had deteriorated in some way between October 28th and November 15th?
A. Uh-huh.
Q. Okay. And also during that time period you had not sent any other representative up there to look at the property?
A. No.(R., Brown Wallet, Bank Ex. D, pp. 190-191.) It is vital that persons entering into a contract exercise ordinary care for their own protection. McClure v. Young, 396 S.W.2d 48, 51 (Ky. 1965). It is clear from the record that Buyers failed to do so, and the trial court properly dismissed their breach of contract claim. "Designed to be narrow and exacting so as to preserve one's right to trial by jury, summary judgment is nevertheless appropriate in cases where the nonmoving party relies on little more than 'speculation and supposition' to support his claims." Blackstone Mining Co. v. Travelers Ins. Co., 351 S.W.3d 193, 201 (Ky. 2010) (citing O'Bryan v. Cave, 202 S.W.3d 585, 588 (Ky. 2006)).
Even if, as Buyers speculate, the Hotel's condition worsened every day because the roof needed repairs, there is no evidence identifying which areas worsened or the degree to which they worsened between October 28, 2017 and the closing.
CONCLUSION
Based on the foregoing, we affirm the Hardin Circuit Court's November 30, 2020 order granting the Bank's motion for summary judgment and dismissing the Seller's claims with prejudice.