Burklund v. Fuehrer , 299 Neb. 949 ( 2018 )


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  • Nebraska Supreme Court Online Library
    www.nebraska.gov/apps-courts-epub/
    06/29/2018 08:11 AM CDT
    - 949 -
    Nebraska Supreme Court A dvance Sheets
    299 Nebraska R eports
    BURKLUND v. FUEHRER
    Cite as 
    299 Neb. 949
    Todd A. Burklund and Shelly M. Burklund,
    appellants, v. Brad Fuehrer and Structure
    Technologies, LLC, appellees.
    ___ N.W.2d ___
    Filed May 11, 2018.     No. S-17-885.
    1.	 Motions to Dismiss: Pleadings: Appeal and Error. An appellate court
    reviews a district court’s order granting a motion to dismiss de novo,
    accepting all allegations in the complaint as true and drawing all reason-
    able inferences in favor of the nonmoving party.
    2.	 Motions to Dismiss: Pleadings. To prevail against a motion to dismiss
    for failure to state a claim, a plaintiff must allege sufficient facts to state
    a claim to relief that is plausible on its face. In cases in which a plaintiff
    does not or cannot allege specific facts showing a necessary element, the
    factual allegations, taken as true, are nonetheless plausible if they sug-
    gest the existence of the element and raise a reasonable expectation that
    discovery will reveal evidence of the element or claim.
    3.	 Actions: Pleadings: Notice. Civil actions are controlled by a liberal
    pleading regime; a party is only required to set forth a short and plain
    statement of the claim showing that the pleader is entitled to relief and
    is not required to plead legal theories or cite appropriate statutes so long
    as the pleading gives fair notice of the claims asserted.
    4.	 Actions: Pleadings. The rationale for a liberal notice pleading standard
    in civil actions is that when a party has a valid claim, he or she should
    recover on it regardless of a failure to perceive the true basis of the
    claim at the pleading stage.
    Appeal from the District Court for Lancaster County:
    Darla S. Ideus, Judge. Reversed and remanded for further
    proceedings.
    Elizabeth Ryan Cano and John P. Weis, of Wolfe, Snowden,
    Hurd, Luers & Ahl, L.L.P., for appellants.
    - 950 -
    Nebraska Supreme Court A dvance Sheets
    299 Nebraska R eports
    BURKLUND v. FUEHRER
    Cite as 
    299 Neb. 949
    Brian S. Kruse, of Rembolt Ludtke, L.L.P., for appellees.
    Heavican, C.J., Miller-Lerman, Cassel, Stacy, and Funke,
    JJ., and R iedmann, Judge, and M artinez, District Judge.
    Miller-Lerman, J.
    NATURE OF CASE
    This appeal arises from a disputed real estate transac-
    tion. Appellants, Todd A. Burklund and Shelly M. Burklund,
    sought damages for breach of contract, breach of warranty,
    and fraudulent misrepresentation after discovering exten-
    sive hail damage to the roof of a real property they were
    under contract to purchase from appellees, Brad Fuehrer and
    Structure Technologies, LLC (the sellers). The district court
    for Lancaster County granted the sellers’ joint motion to
    dismiss for failure to state a claim and dismissed the sec-
    ond amended complaint with prejudice and without leave to
    amend based on the “fact” that the damage was reasonably
    ascertainable by the Burklunds. The Burklunds appeal. We
    reverse the district court’s dismissal and remand the cause for
    further proceedings.
    FACTS
    On August 11, 2016, the Burklunds entered into a real
    estate purchase agreement (the Purchase Agreement) with the
    sellers for the purchase of real property in Lincoln, Nebraska
    (the Property). The Purchase Agreement included a lease-back
    provision whereby the Burklunds agreed to lease the Property,
    including a building located on the premises, to the sellers for
    a period of 1 year, with a 1-year renewal option, in consider-
    ation for monthly rent in the amount of $4,000. The Purchase
    Agreement included several addendums which were executed
    on the same day.
    The Burklunds planned to purchase the Property, in
    part, to use it as part of a tax-deferred exchange under the
    Internal Revenue Code, I.R.C. § 1031 (2006) (i.e., a like-kind
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    Nebraska Supreme Court A dvance Sheets
    299 Nebraska R eports
    BURKLUND v. FUEHRER
    Cite as 
    299 Neb. 949
    exchange). In May 2016, the Burklunds had sold a different
    property, the proceeds of which sale they placed into escrow to
    accomplish the like-kind exchange. To complete the like-kind
    exchange, the Burklunds needed to close on a new property no
    later than November 1. The Burklunds selected the Property
    for that purpose, and arranged for an initial closing date of
    October 6. To this end, addendum No. 4 to the Purchase
    Agreement provides, in relevant part:
    A material part of the consideration for [the Burklunds’]
    purchasing the Property is that [the Burklunds] intend[]
    to qualify this transaction as part of a tax-deferred
    exchange under Section 1031 of the Internal Revenue
    Code. . . . No additional expense or liability will be
    incurred by the [sellers] as a result of this like-kind
    exchange.
    On September 29, 2016, the sellers informed the Burklunds,
    for the first time, that the roof of the building on the Property
    sustained hail damage earlier in the year; that Structure
    Technologies, LLC, received $39,000 from an insurance claim
    for that hail damage; and that the roof was not repaired. The
    hail damage occurred and the insurance claim was resolved
    before the parties executed the Purchase Agreement. The
    Burklunds requested to delay closing to inspect the roof.
    The Burklunds’ subsequent inspections revealed that the
    roof had received substantial hail damage. The Burklunds
    learned that while they could obtain insurance for the build-
    ing, future damage to the roof would not be covered. The
    Burklunds alleged that the inability to fully insure the building
    would prevent them from renting the Property at an agreed-
    upon amount of $4,000 per month.
    The Burklunds alleged that in the Purchase Agreement,
    the sellers warranted that they had already disclosed to the
    Burklunds “all defects that would ‘significantly alter’ the
    ‘desirability’” of the building. Brief for appellants at 7. The
    relevant contract provisions are as follows:
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    Nebraska Supreme Court A dvance Sheets
    299 Nebraska R eports
    BURKLUND v. FUEHRER
    Cite as 
    299 Neb. 949
    7. Condition of Property. This Agreement is based
    upon the [Burklunds’] inspection or investigation of
    [the] Property. [They] agree[] to accept [the] Property
    in its present condition, except as provided in this
    Agreement. [The sellers] represent[] that to the best of
    [their] knowledge, there are no defects in the Property
    that (1) are not reasonably ascertainable and which sig-
    nificantly affect the desirability or value of the Property,
    or (2) which the [sellers have] not disclosed to [their]
    Agent in writing.
    Addendum No. 1 provides, in relevant part:
    1. Due Diligence. Prior to closing [the Burklunds] shall
    have the right to conduct any inspections, and/or tests
    [they] deem[] necessary . . . . In the event that [they] dis-
    cover[] any condition or circumstance with respect to the
    [P]roperty which is unacceptable to [them] in [their] sole
    discretion, [they] may terminate the Purchase Agreement
    at any time.
    Following the discovery of the extensive roof damage and
    its impact on insurability, the Burklunds asked to proceed with
    closing due to the requirements of the like-kind exchange,
    but demanded that the sellers either replace the roof with the
    insurance funds or escrow the funds for repairs. According to
    the second amended complaint, on October 6, 2016, Fuehrer
    represented to the Burklunds’ real estate agent that he would
    replace the roof. No such action was taken by November 1,
    and the closing did not occur. The Burklunds did not ben-
    efit from their planned tax-deferred exchange and thereafter
    filed suit.
    The Burklunds’ initial complaint filed in 2016 against
    Fuehrer; Structure Technologies, LLC; and Pamela A. Manske
    was dismissed after a hearing on February 14, 2017. The dis-
    trict court granted leave to the Burklunds to file an amended
    complaint within 20 days. The Burklunds filed a first amended
    complaint on March 3. On March 8, the sellers filed a motion to
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    Nebraska Supreme Court A dvance Sheets
    299 Nebraska R eports
    BURKLUND v. FUEHRER
    Cite as 
    299 Neb. 949
    dismiss under Neb. Ct. R. Pldg. § 6-1112(b)(6). The Burklunds
    then sought leave to file a second amended complaint under
    Neb. Ct. R. Pldg. § 6-1115 by stipulation of the parties. The
    district court granted leave, and the Burklunds filed a sec-
    ond amended complaint on April 20. The second amended
    complaint named only Fuehrer and Structure Technologies as
    defendants, and the district court dismissed Manske without
    prejudice. The second amended complaint alleged breach of
    contract, breach of warranty, and fraudulent misrepresentation.
    The Purchase Agreement and addendum No. 4 were attached to
    the second amended complaint.
    The sellers reinitiated their joint motion to dismiss in which
    they contended that the second amended complaint should
    be dismissed with prejudice for failure to state a claim upon
    which relief can be granted. At the hearing on the motion
    to dismiss, the district court received additional addendums
    executed simultaneously with the Purchase Agreement.
    In a July 21, 2017, order, the district court first determined
    that the receipt of addendums to the contract that was the sub-
    ject of the suit did not convert the motion to a motion for sum-
    mary judgment. The district court then sustained the motion
    to dismiss with prejudice for failure to state a claim. The
    district court reasoned that the Purchase Agreement “clearly
    states it is based upon the [Burklunds’] inspection or investi-
    gation of the [P]roperty and [the Burklunds] agreed to accept
    the [P]roperty in its present condition unless otherwise pro-
    vided in the Agreement” and that “the damage was obviously
    reasonably ascertainable as a subsequent roof inspection by
    [the Burklunds] disclosed the hail damage.” Finally, the dis-
    trict court determined that the remedy of damages sought by
    the Burklunds was unavailable under the contract because,
    according to the district court, the “[Purchase] Agreement
    specifically gives [the Burklunds] the option to terminate the
    [Purchase] Agreement.”
    The Burklunds appeal.
    - 954 -
    Nebraska Supreme Court A dvance Sheets
    299 Nebraska R eports
    BURKLUND v. FUEHRER
    Cite as 
    299 Neb. 949
    ASSIGNMENTS OF ERROR
    On appeal, the Burklunds claim that the district court erred
    when it (1) dismissed the second amended complaint based on
    its determination that the complaint failed to state a claim for
    fraudulent misrepresentation, breach of contract, and breach of
    warranty and (2) determined that rescission is the only rem-
    edy available.
    STANDARDS OF REVIEW
    [1,2] An appellate court reviews a district court’s order
    granting a motion to dismiss de novo, accepting all allega-
    tions in the complaint as true and drawing all reasonable
    inferences in favor of the nonmoving party. Davis v. State,
    
    297 Neb. 955
    , 
    902 N.W.2d 165
    (2017). To prevail against a
    motion to dismiss for failure to state a claim, a plaintiff must
    allege sufficient facts to state a claim to relief that is plausible
    on its face. 
    Id. In cases
    in which a plaintiff does not or cannot
    allege specific facts showing a necessary element, the factual
    allegations, taken as true, are nonetheless plausible if they
    suggest the existence of the element and raise a reasonable
    expectation that discovery will reveal evidence of the element
    or claim. 
    Id. ANALYSIS R
    eview of Orders of Dismissal
    The Burklunds claim that the district court erred when it
    granted the motion to dismiss with prejudice for failure to state
    a claim. When reviewing an order dismissing a complaint, an
    appellate court accepts as true all facts which are well pled and
    the proper and reasonable inferences of law and fact which
    may be drawn therefrom, but not the plaintiff’s conclusions.
    Rodriguez v. Catholic Health Initiatives, 
    297 Neb. 1
    , 
    899 N.W.2d 227
    (2017). Accordingly, for the purpose of review-
    ing the court’s dismissal of the second amended complaint,
    the facts that we have set out in this opinion are the facts as
    alleged by the Burklunds, which we accept as true.
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    Nebraska Supreme Court A dvance Sheets
    299 Nebraska R eports
    BURKLUND v. FUEHRER
    Cite as 
    299 Neb. 949
    [3,4] Nebraska is a notice pleading jurisdiction. Civil actions
    are controlled by a liberal pleading regime; a party is only
    required to set forth a short and plain statement of the claim
    showing that the pleader is entitled to relief and is not required
    to plead legal theories or cite appropriate statutes so long
    as the pleading gives fair notice of the claims asserted. 
    Id. The ration­ale
    for this liberal notice pleading standard in civil
    actions is that when a party has a valid claim, he or she should
    recover on it regardless of a failure to perceive the true basis
    of the claim at the pleading stage. 
    Id. As we
    explain below, we determine that the Burklunds’
    second amended complaint contains allegations of facts which
    are sufficient to state a claim for relief which is plausible
    on its face. Accordingly, we reverse the district court’s order
    of dismissal.
    Breach     ofContract, Breach of Warranty,
    and  Fraudulent Misrepresentation
    In their second amended complaint, the Burklunds alleged
    breach of contract, fraudulent misrepresentation, and breach of
    warranty. The Burklunds’ claims are based on their interpreta-
    tion of paragraph 7 of the Purchase Agreement. As set forth
    above, paragraph 7 provides, “[The sellers] represent[] that
    to the best of [their] knowledge, there are no defects in the
    Property that (1) are not reasonably ascertainable and which
    significantly affect the desirability or value of the Property, or
    (2) which the [sellers have] not disclosed to [their] Agent in
    writing.” The Burklunds contend that they are entitled to relief
    both because (1) there are defects in the Property which were
    not reasonably ascertainable and which significantly affect
    the desirability of the Property and (2) the sellers had not
    disclosed defects in the Property. Without commenting on
    the Burklunds’ reading of paragraph 7, we conclude that the
    Burklunds’ claims are plausible.
    In its July 21, 2017, order, the district court character-
    ized the second amended complaint as admitting the “fact”
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    Nebraska Supreme Court A dvance Sheets
    299 Nebraska R eports
    BURKLUND v. FUEHRER
    Cite as 
    299 Neb. 949
    that the roof damage was “reasonably ascertainable” by the
    Burklunds because it was ascertained upon subsequent inspec-
    tions. Contrary to the district court’s reading of the second
    amended complaint, the Burklunds’ allegation that they ulti-
    mately ascertained the extent of the roof damage before closing
    does not necessarily mean they admitted the defect was “rea-
    sonably” ascertainable.
    In their second amended complaint, the Burklunds alleged
    only that “[t]hrough the course of the [Burklunds’] inspection,
    it was determined that the roof had received substantial hail
    damage.” The Burklunds further described an “investigation”
    into the Property’s insurability following the sellers’ disclo-
    sure of unrepaired hail damage and collection on an insurance
    claim. The reasonable inferences of the second amended com-
    plaint lack any indication of whether these inspections were
    the same or beyond what would ordinarily be conducted by a
    buyer of commercial property.
    The sellers urge us to follow Lucky 7 v. THT Realty, 
    278 Neb. 997
    , 
    775 N.W.2d 671
    (2009), a commercial real estate
    case with similar facts in which a buyer claimed damages for
    fraudulent and negligent misrepresentation after discovering
    that an office building’s roof was partially deteriorated in two
    sections although areas visible from the ground were recently
    replaced. After a bench trial, the evidence showed that a visual
    inspection of the weathered and aging roof sections would
    have made the buyer aware of the deteriorating condition of
    the building. 
    Id. We noted
    that the record showed that the
    buyer routinely examined heating and air-conditioning units
    on roofs, so an inspection of this roof did not pose a hardship
    and was reasonable under the circumstances for an experienced
    purchaser of commercial buildings. 
    Id. In that
    case, we con-
    cluded that a commercial buyer was not justified in forgoing
    routine visual real estate inspections and relying on a seller’s
    representations about a property.
    Although the allegations here resemble many facts devel-
    oped after trial in Lucky 7, we lack the facts at this stage
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    Nebraska Supreme Court A dvance Sheets
    299 Nebraska R eports
    BURKLUND v. FUEHRER
    Cite as 
    299 Neb. 949
    from which we may draw conclusions about whether the
    contract was breached by the sellers. And contrary to the
    district court’s apparent “finding,” the second amended com-
    plaint does not contain factual allegations from which a court
    can determine that the damage to the roof was “reasonably
    ascertainable” under paragraph 7 of the Purchase Agreement,
    because, as we have noted above, the nature and extent of
    the inspections conducted by the Burklunds and the back-
    ground on ordinary business practice are not contained within
    that pleading.
    The centerpiece of the Burklunds’ case is the allegation that
    contrary to the truth, the sellers promised that the Property was
    free from defects because either the defects were reasonably
    ascertainable or the sellers had disclosed the defects, and in
    addition, the sellers represented they would repair the roof, but
    failed to do so.
    As we read the second amended complaint, it contains
    allegations of facts which are sufficient to state a claim for
    relief under breach of contract or breach of warranty primarily
    related to paragraph 7 of the Purchase Agreement. Likewise,
    the Burklunds’ claim for fraudulent representation as alleged
    is plausible on its face. See InterCall, Inc. v. Egenera, Inc.,
    
    284 Neb. 801
    , 815, 
    824 N.W.2d 12
    , 23 (2012) (“[w]hether a
    party’s reliance upon a misrepresentation was reasonable is a
    question of fact”). Accordingly, we reverse the district court’s
    order of dismissal.
    Availability of R emedies
    For their second assignment of error, the Burklunds claim
    that the district court erred when it determined that even if the
    Burklunds were successful on one of their claims, their only
    remedy was to terminate the Purchase Agreement. We make
    no comment on the correctness of the district court’s conclu-
    sions concerning the availability of remedies. Because the
    district court incorrectly concluded that the second amended
    complaint failed to state a cause of action and its decision is
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    Nebraska Supreme Court A dvance Sheets
    299 Nebraska R eports
    BURKLUND v. FUEHRER
    Cite as 
    299 Neb. 949
    reversed, the district court’s reasoning about damages falls
    with the order and the consideration of availability of damages
    is premature.
    CONCLUSION
    Accepting the facts in the second amended complaint as
    true, we determine that the Burklunds alleged sufficient facts
    to state claims which are plausible on their face. Thus, we
    determine that the district court erred when it granted the sell-
    ers’ motion to dismiss and dismissed the Burklunds’ case. We
    reverse the decision of the district court and remand the cause
    for further proceedings.
    R eversed and remanded for
    further proceedings.
    

Document Info

Docket Number: S-17-885

Citation Numbers: 299 Neb. 949

Filed Date: 5/11/2018

Precedential Status: Precedential

Modified Date: 6/28/2019