Trial Court Decision Affecting Property Disclosure Document Reversed
LOUISIANA REALTORS • January 25, 2019
By: Patricia B. McMurray, JD
Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
450 Laurel Street, Chase Tower North, 20th Floor
Baton Rouge, Louisiana 70801
Background
In Valobra v. Nelson, the buyer sued the seller alleging the seller misrepresented the condition of the property by checking the "no" box on the Property Disclosure Document ("PDD") instead of the "no knowledge" box as to questions regarding the condition of the property.[1] The buyers allege because of this misrepresentation by the sellers on the PDD, the buyers agreed to buy the property "as is" and waive redhibition rights in the Act of Sale. Redhibition is a warranty required by state law to be given to a buyer unless waived by the buyer. Redhibition means the buyer can sue to return the property to the seller or get a refund of a portion of the purchase price after the sale if the buyer discovers a defect in the property that if the buyer had known about prior to the sale he would not have bought the property.[2] The Valobra buyers alleged that the sellers checked the box marked "no" in response to questions on the PDD regarding whether the property had certain defects. Defects in the property were later discovered. The sellers then claimed they did not know of the defects in the property.[3] The buyers argued that the sellers checking the box marked "no" instead of the box marked "no knowledge" on the PDD and therefore intentionally misled the buyers into believing that the sellers had knowledge that there were no defects in the property. The buyers alleged the sellers were in bad faith and fraudulently induced the sellers to execute a waiver of redhibition contained in the Act of Sale by stating "no" instead of "no knowledge" of the defects.[4]
24th Judicial District Court
The trial court, the 24th Judicial District Court denied the motion for summary judgment filed by the Seller on March 25, 2018. The Seller alleged in the motion that there appears to be no controversy over whether the Buyer was aware of the alleged "defects" at the time of execution of the waiver of redhibition included in the Act of Sale as the Seller and Buyer had agreed to a price concession to compensate the Buyer for the "defects" noted by the home inspection prior to sale. The Seller filed a Writ to the Court of Appeal requesting the Court of Appeal revise the trial court's denial of the motion for summary judgment.
Louisiana REALTORS® filed an amicus brief in support of the Seller's Writ. The Court of Appeal held that the
"Plaintiff's (Buyers) argument failed to recognize that the Property Disclosure required by the RPDA (property disclosure form) does not provide a guaranty that no defects exist in the property, but rather requires disclosures of known defects to the best of the seller's information, knowledge or belief. La. R.S. 9:3198(D) specifically states a property disclosure document is not a warranty and is not part of any contract between the buyer and seller. In addition, buyers, such as plaintiffs, cannot rely on the property disclosure document as a substitution for inspections. Therefore, plaintiffs cannot use their alleged reliance on the Property Disclosure as an excuse for failing to obtain a comprehensive home inspection or failing to follow the advice of the inspectors to obtain more extensive inspections." (explanation supplied)
The Writ was granted by the Court of Appeal and the reversal of the denial of the motion for summary judgment was granted. All claims against the Seller by the Buyers were dismissed. A full copy of the Court of Appeal's Judgment can be found here.
Louisiana Supreme Court
The Buyers filed an Application for Writ of Certiorari with the Louisiana Supreme Court on January 16, 2019 requesting a review of the Fifth Circuit Court of Appeal Judgment. We will provide information on the outcome of the appeal to the Louisiana Supreme Court when available.
[1] Nancy Williams wife of/and Franco Valobra vs. Robert Allan Nelson and Jerome Garfield Smith, III as Co-Trustees of the Allan R. & Louise S. Nelson Revocable Trust & The Allan R. Nelson Marital Trust, Suit No. 720-048, 24th Judicial District Court for Jefferson Parish
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[2] La. Civil Code 2520
[3] Id.
[4] Id.
NAR’s latest consumer guide, “10 Tips for Unpacking Smartly After a Move,” was developed to help ease the burden buyers may feel when surrounded by boxes. For your clients on the cusp of a move, the guide suggests establishing a priority unpacking order, wiping down each room before unpacking, discarding boxes quickly, having garbage and donation bags at the ready, and more. Share the new guide along with the companion guide “10 Tips for Packing Smartly for a Move.” As a reminder, all guides in this series are available for download—in both English and Spanish—on facts.realtor . Please allow up to two weeks for the Spanish version of the latest resource to be translated and uploaded. For ease of reference, below is a list of the most recent guides: NEW: 10 Tips For Unpacking Smartly After A Move UPDATED : Multiple Listing Services Overcoming Roadblocks to a Sale or Purchase How Solar Impacts a Real Estate Transaction Navigating Interest Rate Shifts Thank you for your continued engagement with the “Consumer Guide” series and for sharing the resources with prospective clients to ensure they have the information they need to find success in their home buying or selling journey. Remember that these guides are for informational purposes only and are not meant to enact or change any existing NAR policy. Check out the next consumer guide on identifying homebuying wants vs. needs.
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From the Louisiana Department of Insurance: During a press conference today with Governor Jeff Landry, Insurance Commissioner Tim Temple announced that registration for the next round of the Louisiana Fortify Homes Program (LFHP) will open at 8 a.m. on Monday, June 1, and will include 3,000 grants. The registration period for this lottery will be open for three weeks, closing at 5 p.m. on Friday, June 19. During the press conference, Gov. Landry signed HB 1187 by Rep. Paul Sawyer, which will allow Louisiana Citizens Property Insurance Corporation to transfer $50 million in additional Katrina bond assessment funds to the LFHP. Combined with the $30 million in funding the program will receive through taxes and fees on insurance entities, the LFHP will receive a total of $80 million this year. “By lowering overall losses, we can reduce insurance and reinsurance costs, draw more insurers into the market, motivate existing companies to write additional policies and lower insurance premiums,” said Commissioner Temple. “That is exactly what the Louisiana Fortify Homes Program is designed to do.” The list of coastal parishes that are eligible to participate is expanding to include Acadia, Jefferson Davis and Lafayette parishes. Additionally, homeowners who live in the portions of Ascension, Calcasieu, Iberia, Livingston, St. Martin, St. Tammany, Tangipahoa and Vermilion parishes that were previously not included in the program will now be eligible to participate. A map showing the full list of eligible parishes is available on FortifyHomes.La.Gov . “Louisiana is the fastest growing state in the country for Fortified roofs, and that growth is not by accident—it is the result of strong support from Governor Landry and legislators like Chairman Talbot, Chairman Firment and Representative Sawyer, targeted program design, and a clear recognition that strengthening homes is one of the most effective ways to reduce insurance losses,” said Commissioner Temple. “At the end of the day, this program is about more than just roofs. It is about protecting families, it is about strengthening communities, and it is about putting Louisiana in a stronger position—both physically and economically—to face the challenges ahead.” To participate in the lottery, homeowners must register during the June registration period. Homeowners who registered for a previous round but were not selected must register again to participate. People who register on the last day of the registration period have the same chance of being selected as those who register on the first day, so there is no need to rush to register as soon as the period opens. When registering, homeowners will need to upload their homestead exemption, insurance policy declarations page that includes wind coverage, and flood insurance declarations page if the residence is in a flood zone. Homeowners who need assistance obtaining a copy of their homestead exemption should contact their parish tax assessor. Homeowners can contact their homeowners and flood insurance companies or agents for a copy of their policy declarations page. Homeowners are required to create a profile in the LFHP system before registering for the lottery and may do so by visiting the LFHP website and clicking the Login button. Homeowners who previously created a profile may use the same one for this and future rounds. Once the lottery registration period closes, the LFHP will randomly select 3,000 participants and send email notifications to registrants about whether they were selected to participate. These selection notices will be sent via email beginning on Monday, June 22. There are several program requirements that homeowners should be aware of before registering. Those interested in the program are encouraged to review eligibility information and frequently asked questions at FortifyHomes.La.Gov to determine whether their home meets the requirements for the program. If selected to participate in the grant program, homeowners will be financially responsible for having the home evaluated by a FORTIFIED-certified Evaluator as well as costs for the roof upgrade including permits, inspections and construction costs beyond the amount of the grant The LFHP provides grants of up to $10,000 for homeowners to upgrade their roofs to standards set by the Insurance Institute for Business & Home Safety. The program helps Louisiana homeowners strengthen their roofs to better withstand hurricane-force winds.
