Kathryn Leep v. Cliff Werline ( 2018 )

IN THE COURT OF COMMON PLEAS FOR THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
)
KATHRYN LEEP, )
)
Appellant/Plaintiff, )
)
V. ) C.A. No. CPU4-16-003910
)
CLIFF WERLINE, )
)
Appellee /Defendant. )
Subrnitted: Novernber 8, 2017
Decided: january 3, 2018
Olga K. Beskrone, Esquire Brian T. Murray, Esquire
Community Legal Aid Society, Inc. Brian T. Murray, P.A.
100 W. 10th Street, Ste. 801 903 S. College Avenue
Wilmington, DE 19801 Newark, DE 19713
Al¢om@/jbrAppe//ant Al¢omgj/j@rAppe//ee
DECISION AFTER TRIAL
sMALLS, c.J.
This is an appeal from the Justice of the Peace Court concerning the purchase of real
estate. On December 21, 2016, the Plaintiff-below/Appellant, Kathryn Leep (“Appellant”),
filed an appeal from a judgment below awarded in favor of the Defendant-below/Appellee,
Cliff Werline (“Appellee”). On October 5, 2017, trial was convened in the Court of Common
Pleas and the Court reserved its decision. The Court heard testimony from Appellant; Hugh
Lindo, a Building Inspector with the License and lnspection Departrnent of the City of
Wilmington;]esse Walker, owner ofJ.R. Walker Roofing; and Appe]lee. In lieu of oral closing
arguments, the Court ordered written post-trial memoranda Supplemental briefing was
completed on November 8, 2017. This is the Court’s final decision after consideration of the
pleadings, oral and documentary evidence submitted at trial, arguments made at trial, post-trial
submissions, and the applicable law.
PROCEDURAL POSTURE
On December 21, 2016, Appellant filed her Notice of Appeal and Complaint on
Appeal in this Court as a pro fe litigant Appellant asserted that she purchased 224 W. 20th
Street, Wilmington, Delaware 19802 (the “Property”) from Appellee in August 2013.
Appellant further asserted that Appellee indicated in the Seller’s Disclosure of Real Property
Condition Report (“Seller’s Disclosure”) that a “new roof had been installed in about 2010.”1
Appellant argued that this indication was factually inaccurate, as “there were 5 layers of roofing
and no new roof had been installed.’72 Plaintiff sought judgment for the cost of the new roof
and partial payment to replace the wooden structural supports underneath the roof.
1 Appellant’s Cornplaint on Appeal 11 4.
2 566 z`d. 11 5.
On January 6, 2017, Brian T. Murray, Esquire entered his appearance on behalf of
Appellee, and filed an Answer on January 27, 2017. ln his Answer, Appellee denies the
substance of Appellant’s Complaint. Appellee disagreed with Appellant’s assertion that “no
new roof had been installed.”3 Alternatively, Appellee stated that he did not know how many
layers of roof were on the Property, but it was irrelevant because Appellant purchased the
Property “As ls.”4
On February 3, 2017, Olga K. Beskrone, Esquire entered her appearance on behalf of
Appellant. On April 4, 2017, Appellant filed her Pre-trial Worksheet (“Worksheet”). ln the
Worksheet, Appellant summarized her position as: “The seller’s disclosure statement stated
that a “new roof was installed in ~ 2010.’ While another layer may have been installed in 2010,
no new roof was installed.”
On October 5, 2017, trial was held in this matter. The Court reserved its decision. ln
lieu of oral closing arguments, the Court ordered written post-trial memoranda On October
20, 2017, Appellant filed her Post-Trial Memorandum. On November 2, 2017, Appellee filed
his Post-Trial Memorandurn. On November 8, 2017, Appellant filed her Reply Mernorandum.
FACTUAL HISTORY
Based on the testimony and evidence presented at trial, the Court finds the relevant
facts to be as follows.
In August 2013, Appellant purchased 224 W. 20th Street, Wi]inington, Delaware 19802
(the “Property”) from Appellee. Appellant signed the Agreement of Sale for Delaware
3 Appellee’s Answer at 11 5.
4 See z`d.
Residential Property (“Agreement of Sale”) on ]une 28, 2013, and Appellee signed the
Agreement of Sale on June 29, 2013.5 In accordance with Delaware law, the Agreement of
Sale incorporated the Seller’s Disclosure of Real Property Condition Report (“Seller’s
Disclosure”), which both parties had signed.6 ln the Seller’s Disclosure, Appellee stated that
he purchased the Property in September 2012.7 Appellee also stated that he had “never lived”
at the Property, as he testified at trial that he purchased the Property at a Sheriff Sale.8
Relevant to this proceeding, Appellee indicated in Question #28, under the section
titled “IV. MISCELLANEOUS,” that there were no “violations of local, state or federal laws
or regulations relating to this property.”9 For Question #63, under the section titled “Vll.
STRUCTURAL ITEMS,” Appellee indicated that water leakage had occurred in the house in
the “past.”10 Under Question #65 (“Have there been any repairs or other attempts to control
the cause or effect of problems described in questions 63 and 64? If Yes, describe in XVI”),
Appellee checked “Yes.”11 Under the section titled “X. ROOF,” Appellee answered Question
#76 (“Date last roof surface installed”) by handwriting the phrase “estimated 2010.”12
ln response to Question #77 (“How many layers of roof material are there (e.g. new
shingles over old shingles)?”), Appellee wrote “U” for “Unknown.”13 Under the last section,
titled “XVI. ADDITIONAL INFORMATION,” Appellee wrote “There was a previous roof
5 ]oint Exhibit 2.
Gjoint Exhibit 5.
7 566 2d
8 566 z`d.
9 5 66 z'd.
10 566 z`a'.
11 566 Zd.
12 5 66 z'd.
13 566 z`d. Appellee testified at trial that he would check “No” if he “did not know,” and would indicate
“Unknown” if he “absolutely did not know something.”
4
leak, and then a new roof was installed in ~ 2010.”14 He wrote “63 & 65” next to this response,
indicating that his statement was an elaboration on Questions #63 and #65.15 Appellee
testified that his answers to the above questions were based on a brief discussion with the
previous owner of the Property.
After purchasing the Property at a Sheriff Sale, Appellee noticed evidence of water
damage in the interior of the Property below a section of the flat roof. He proceeded to climb
onto the roof and testified that the roof looked new. Despite having recently engaged in
litigation to evict the previous owner from the Property, Appellee asked him about the water
damage and whether there was a new roof on the property.16 The previous owner informed
Appellee that a new roof had been placed on the Property. Appellee described his occupation
as an owner and manager of rental properties who has also been involved in the business of
“fiipping houses” for the past seven years. He testified that he has purchased approximately
twenty-four properties from Sheriff Sales over those past seven years. Even with Appellee’s
extensive knowledge and experience regarding the sale of residential real estate_specifically
those sold at Sheriff Sales_Appellee did not verify that a permit had been issued for the “new
roof.”17
Appellant expressly relied on the Seller’s Disclosure to determine whether she should
purchase the Property, as well as the appropriate value of the Property. She was also
influenced by other sensory factors, including the Property’s location, backyard, and the
14 566 z'd.
15 566 z`d.
16 Appellee testified that the litigation involved the previous owner’s Delaware Supreme Court appeal.
17 Appellee testified that he was aware of the permit process and had, in fact, obtained permits for repairs on
previous occasions.
“general state” of the Property. She was particularly concerned about the state of the roof
since she did not possess sufficient funds to purchase the Property and replace the roof, or
generally afford extensive repairs on the Property.
During the process of purchasing the Property, Appellant hired a Housing lnspector
(“lnspector”) to investigate the Property. Regarding the roof, the lnspector informed
Appellant that there appeared to be a new “surface” on the flat roof, but he was unable to
determine how many layers were underneath the surface because there was a seal around the
roofs edges. The Inspector issued a report (the “Report”) on his findings The Report
included boilerplate language which recommended that Appellant contact a licensed roofing
company to review the Property’s roof and issue a certificate. Relying on the Seller’s
Disclosure and the lnspector’s visual observations, Appellant did not acquire a roof
certification
Appellant ultimately purchased the Property for 3113,900, which included a $3,000
buyer’s credit.18 After purchasing the Property, Appellant became aware that a large hole
existed in the Property’s mansard roof which needed to be replaced.19 Because the hole in the
mansard roof had not been discovered before Appellant purchased the Property, she asked
Jesse Walker (“Walker) from ].R. Walker Roofing, who was subcontracted to repair the
mansard roof, to also inspect the flat roof.20 After an employee cut into the flat roof down to
18 ]oint Exhibit 2.
19 Appellant understood that the statement “new roof” in the Seller’s Disclosure was not referring to the
mansard roof, but the “flat roof.” Appellant testified regarding the difference between the two roof types and
submitted a l\/Iortgage Survey Plan for the Property that diagramed the different roof sections. Appellant’s
Exhibit 2.
211 Jesse Walker testified that he has worked in the roofing business for approximately twenty-five years. He
also testified that he has owned and solicited business as J.R. Walker Roofing for the past seven years. He
6
the wood deck, Walker was presented with a “core sample” from the roof. The sample
evidenced that the Property’s flat roof contained five layers of roofing material, violating the
City of Wilmington Code.21
Based on Walker’s findings, Appellant was concerned about future interior damage and
approached three different roofing companies for financial estimates to replace the flat roof.
J.R. \X/alker Roofing was one of those roofing companies and submitted an estimate of 351 1,100
to replace the flat roof.22 Appellant hired ].R. Walker Roofing because its bid was the lowest,
and she was impressed with Walker’s repair of the mansard roof. After ].R. Walker Roofing
began the repairs, it became apparent that wooden structural supports under the flat roof
needed to be replaced because of extensive rotting. Appellant paid ].R. Walker Roofing
$15,400 to replace the flat roof: $11,100 originally quoted for labor and materials to replace
the flat roof, $500 in additional materials for the flat roof replacement, and $3,800 for labor
and materials to replace the rotting structural supports.23
PARTIES’ CONTENTIONS
ln Appellant’s Post-Trial Memorandum, and at trial, Appellant asserts that the language
of the contract is not ambiguous.24 She argues that Appellee’s statement that a “new roof was
installed in ~ 2010” violates 6 De/. C. § 2752, which requires a seller of residential real property
further testified that he is certified by three different roofing manufactures He estimates having performed
“thousands” of roof replacements during his tenure as a roofer.
21 Hugh Lindo, a Building Inspector who has been employed with the License and lnspection Department of
the City of \X/ilmington for thirteen years, testified that the flat roof violated the City of \X/ilmington Code
(“Code”). He testified that the Code only allows two layers of roofing material, presuming that the allowance
was based on weight concerns. To properly replace a roof, he testified that the individual should obtain a
building permit, have the property inspected, remove every roofing layer above the wood, apply a new layer,
and request a final inspection.
22 Joint Exhibit 4.
23 joint Exhibit 1.
24 Appellant’s Post-Trial Memorandum at 3.
to disclose all known material defects of that property.25 She states that Appellee should have
qualified his statement with facts evidencing that he did not have first-hand knowledge of the
installation of the roof.26
She also notes that Appellee should have at least contacted the City of Wilrnington to
review the permit that is required for the installation of a new roof instead of relying on one
statement from the prior owner of the Property.27 Essentially, Appellant asserts that Appellee
had an affirmative duty to investigate the prior owner’s assertion before filling out the Seller’s
Disclosure. At the very least, Appellant argues that Appellee’s statement regarding a new roof
was misleading (i.e. a “material misrepresentation of fact”) since the “new roof’7 was simply a
layer added to four pre-existing layers.28 She notes that the “plain meaning” of roof_“one
layer of roofing material”_should be adopted when interpreting the Seller’s Disclosure.29
Alternatively, if this Court were to deem the contact ambiguous then Appellant argues
it should be interpreted against Appellee as the drafter.30 Relying on the Delaware Uniform
Commercial Code, Appellant argues that Appellee failed to complete the Seller’s Disclosure
in “good faith.”31 That is, without “honesty in fact” or “observance of reasonable commercial
standards of fair dealing.”32
25 6 D6/. C. § 2572 (“seller transferring residential real property shall disclose, in writing, to the buyer, agent and
subagent, as applicable, all material defects of that property that are known at the time the property is offered
for sale or that are known prior to the time of final settlement”).
26 Appellant’s Post-Trial Memorandum at 4.
27 566 2'6¢1.
28 566 z'd. at 2 n.3.
29 566 z'a'. at 5.
30 566 z'd. at 5-6.
31 566 2d
32 566 z`d. (internal quotation marks omitted) (quoting 6 De/. C. § 1-201(20)).
8
ln Appellee’s Post-Trial Memorandum, Appellee asserts that the issue before the Court
should be bifurcated.33 He argues that the first question is whether 6 De/. C. § 2572 was
violated, and the second question is whether “Appell[ee] failed to disclose a known material
defect [and] Appell[ant] reasonably rel[ied] upon that failure.”34 Relevant to the issue here,
Appellee argues that his new roof notation in section XVI cannot be read in a vacuum.35 He
notes that his answers to Questions #76 and #77 under section X, regarding “roof surface”
installation, should be considered a notification to Appellant that his statement “new roof”
was not referring to a completely new roof, but a “new roof surface.”36
Appellee also takes issue with the implication that he had a duty to investigate the prior
owner’s claims about the roof.37 Based on the Housing lnspector “recommend[ing]” that
Appellant receive a roof certification from a local roofing company, Appellee believes
Appellant had an equal, if not greater, duty to investigate38 Based on Appellant’s own
investigative duty, Appellee believes he is not at fault for relying on the prior owner’s statement
and his own visual observations that the top layer was “new.”39 Like-wise, Appellee notes that
even Appellant’s own roofing contractor, Walker, could not determine how many roofing
layers were on the Property without dissecting the roof`.40
33 Appellee’s Post-Trial Memorandum at 1.
34 566 z`d. Similar to Appellee’s arguments at trial, Appellee is conflating a violation of § 2572 with a claim of
fraud. The Court will distinguish this conflation z`nfm.
35 566 z`d. at 2. Appellee also argues that the testimony evidences that the “new roof” was installed in
approximately 2010; however, this issue is not in contention. Appellant is not arguing that the timeframe of
installation is incorrect, but that the term “new roof” is misleading, as the underlying layers had not been
removed.
36 566 z'd.
37 566 z'd. at 1-2.
38 566 z`d.
39 566 z'd. at 2.
411 566 z`d. at 2.
Finally, Appellee argues that any claim of fraudulent inducement is moot because
Appellant failed to plead fraud in her Complaint.41 However, even if she had, Appellee argues
she failed to establish that the roof s condition was a “material inducement.”42
STANDARD OF REVIEW
As trier of fact, the Court is the sole judge of the credibility of each fact witness and
any other documents submitted to the Court for consideration.43 If the Court finds that the
evidence presented at trial conflicts, then it is the Court's duty to reconcile these conflicts_if
reasonably possible_in order to find congruity.44 If the Court is unable to harmonize the
confiicting testimony, then the Court must determine which portions of the testimony deserve
more weight in its final judgment.45 ln ruling, the Court may consider the witnesses’
demeanor, the fairness and descriptiveness of their testimony, their ability to personally
witness or know the facts about which they testify, and any biases or interests they may have
concerning the nature of the case.46
In civil actions, the burden of proof is by a preponderance of the evidence.47 “The
side on which the greater weight of the evidence is found is the side on which the
preponderance of the evidence exists.”48
41 566 z`d.
42 566 id.
43 566 Naf’/ Gmn2000 WL 33275030, at *4 (Del. Com. Pl. Feb. 9, 2000).
44 566 z'a'.
45 566 z'd.
46 566 5161!6 I). ij[a//, 2008 WL 2855030, at *3 (Del. Com. Pl. Apr. 22, 2008).
47 566 Grte2010 WL 4262030, at *1 (Del. Com. Pl. Oct. 8, 2010).
48 566 R@wo/a{f v. R@wo/dt, 237 A.2d 708, 711 (Del. 1967).
10
DISCUSSION
Because the parties’ categorization of this case has fluctuated, the Court will comment
on the nature of the claims before proceeding First, Appellant’s claim concerns a breach of
contract The contract is comprised of the Agreement of Sale and Seller’s Disclosure, which
merges by law.49 lndeed, the Seller’s Disclosure expressly recites this facet of Delaware law in
its preamble.50 The primary breach alleged is Appellee’s failure to disclose known material
defects in the Seller’s Disclosure; a disclosure which is required by the Buyer Property
Protection Act (“BPPA”).51 Yet, a secondary breach is implicated here based on Appellee’s
failure to complete the Seller’s Disclosure pursuant to the implied covenant of good faith and
fair dealing.52 l will address both arguments below.
Second, contrary to the assertions of both parties’ supplemental memoranda, and
affording Appellant’s pro 66 Complaint the appropriate deference53 it also asserts a fraudulent
49 6 D6/. C. § 2573.
50 Joint Exhibit 5.
51 6 De/. C. § 2572; J66 alto Ia¢‘ono 1/. B¢m`¢z`, 2006 WL 3844208, at *4 (Del. Super. Dec. 29, 2006) (“The language
of the Buyer Property Protection Act creates a statutory duty of disclosure which may form the basis of a breach
of contract claim.” (citing Galt?':{.ge 6. Ij%zmz’, 889 A.2d 283, 2005 WL 3454129 (Del. Dec. 15, 2005) 617 ABLE))).
Neither Plaintist pro J6 Complaint nor her current counsel, have asserted a private cause of action under the
BPPA, hence, the Court will not address this ancillary argument 566 16160%0, 2006 WL 3844208, at *4 (dismissing
the plaintiffs claim for an individual action under the BPPA while noting that such an action would “completely
overlap” the breach of contract action). In fact, the Court interprets Appellant’s statement in her Reply
Memorandum_“Plaintiff has not alleged or argued that Defendant violated the terms of the Buyer Property
Protection Act”_that she is not asserting an individual claim under the BPPA. Appellant’s Post-trial Reply
Memorandum at 1-2. Indeed, whether a plaintiff can even assert a private cause of action under the BPPA is
unclear. 566 Bromu)z`¢'/? 6. Hanbj/, 2010 WL 8250796, at *6-7 (Del. Super. ]uly 1, 2010) (“it is not immediately clear
whether the [BPPA] creates a private right of action”); award 16160110, 2006 WL 3844208, at *4 & n.7.
52 566 MLC@/ 6. Cox, 2007 WL 1677536, at *9 (Del. Super. June 11, 2007) (noting that the covenant of good faith
and fair dealing does not create a separate cause of action, but is inherent in a contract concerning a residential
real estate sale) (quoting Gz`/bm‘ 6. E/ Pmo Co., 490 A.2d 1050, 1055 (Del. Ch. 1984), afd, 575 A.2d 1131 (Del.
1990)).
53 566 A/,rl‘on a Ha¢im/¢, ]0)16§, ]@/u/or/é, Il"':`fffrw;§ 67 Lz<'guotz', 748 A.2d 406, 2000 \X/L 275673, at *3 (Del. l\/lar. 7,
2000) (TABLE).
11
inducement claim.54 However, fraudulent inducement is preempted in this case because
Appellant has claimed a breach of contract, and the fraud claim is not premised on conduct
which is “separate and distinct from the,conduct constituting [the] breach.”55 Nevertheless, a
claim of common law fraud_that is, intentional misrepresentation56_can be asserted
alongside a breach of contract claim.57 An element of intentional misrepresentation requires
Appellant to show that Appellee’s misrepresentations were made with knowledge or “reckless
indifference to the truth.’758 As Appellant has alternatively argued that Appellee’s statements
were “misleading,” intentional misrepresentation is implicated.59 Nevertheless, because l find
that Appellee breached the contract by failing to adhere to the implied covenant of good faith
and fair dealing, l will not address intentional misrepresentation in the present case.
54 566 z`d. (“To state a valid claim for fraud, a plaintiff must allege: a) a false representation, usually one of fact,
made by the defendant; b) the defendant's knowledge or belief that the representation was false, or was made
with reckless indifference to the truth; c) an intent to induce the plaintiff to act or to refrain from acting; d) the
plaintiffs action or inaction taken in justifiable reliance upon the representation; and e) damage to the plaintiff
as a result of such reliance.”); Hz'/l6r e’?’Ar/%w, LLC 6. R616m61 Mgmt., LLC, 2016 WL 3678544, at *4 (`Del. Super.
July 1, 2016) (quoting Ab{y P'ri V, I_.P. 6. F 67 WA¢'q. I_.I_.C, 891 A.2d 1032, 1050 (Del. Ch. 2006)) (“At the
very least, a plaintiff must allege “(1) the time, place, and contents of the false representation; (2) the identity
of the person making the representation; and (3) what the person intended to gain by making the
representations.”).
55 Hz'//6r e’?’Ar/mn, LLC, 2016 \X/L 3678544, at *4 (internal quotation marks omitted) (quoting ITW G/ob. Inw.
Im‘. 6. AM. Imz’m. P'm Ca]_‘)z`m/ szd IV, LP., 2015 \X/L 3970908, at *6 (Del. Super. June 24, 2015))
56 5 66 johnston a Pnj%rmd Ijiqkri'z`omz/ Im. Co., 91 A.3d 994, 1017 (Del. Super. 2014) (“Though this was not a topic
specifically addressed in briefing, it would appear that common law fraud and intentional misrepresentation are
essentially the same things.”).
57 566 Dm`ybm‘/a v. Wa/Zon, 2014 \X/L 4352100, at *3-4 (Del. Super. Aug. 29, 2014).
53 566 z`a'. at *4.
59 The Court will not address whether Appellant’s claims sound in negligent misrepresentation, as the Court of
Chancery has sole jurisdiction over such a claim. 5 66 ]0/6/160)1, 91 A.3d at 1017. The Court also notes that general
misrepresentation, which can be fraudulent or innocent and is often cited as an affirmative contractual defense
against the sale of real property, is not applicable since Appellant is not seeking to render the contract voidable.
5 66 gumz/y 'l iir!ei:frmr Enw‘/. 5 6m‘., lm'. 6. 5 mem, 2012 WL 1813684 (Del. Com. Pl. l\/lay 11, 2012); M666dz'l‘/y 6. Gz`6i‘,
2006 WL 8427232 (Del. Com. Pl. Dec. 28, 2006); Kz'n'hmr I/. 512`6]§ 2001 WL 1555313 (Del. Com. Pl. July 13,
2001); accord DRR, LLC. 6. 56ari, R066616/é Q'?’ Co., 949 F. Supp. 1132, 1138 (D. Del. 1996) (“the plaintiff here is
not seeking to rescind the sales contract . . . Rather, as in Wo% this is an action in common law fraud.”).
12
For the reasons discussed below, l find that Appellee has breached the contract To
prevail on a claim for breach of contract, the plaintiff must establish by a preponderance of
the evidence that: (1) a contract existed between the parties; (2) defendant breached an
obligation imposed by the contract, and (3) plaintiff suffered damages as a result of that
breach.60
Based on the straightforward case law regarding disputes of this kind and the facts of
this case, it is clear that a contract_comprised of the Agreement of Sale and Seller’s
Disclosure_existed in this case. Likewise, Plaintiff has alleged that she suffered $15,400 in
damages based on Defendant’s alleged failure to appropriately complete the Seller’s
Disclosure. l find that the testimony presented at trial and documentary evidence support
Plaintiff s claim for damages; therefore, l find that she has proven damages by a
preponderance of the evidence.61 Hence, the remaining question for this Court’s
consideration is whether Plaintiff has proven by a preponderance of the evidence that
Defendant breached the contract
I. H'tst A[[eged Breach - Failure to Disclose Known Matetial Defects.
When the breach of contract action is premised on an incorrect statement in the Seller’s
Disclosure, the Delaware Superior Court has held:
A seller of residential real property is required by statute to disclose all the
property's known material defects. “[A] seller transferring residential real
property shall disclose, in writing, to the buyer, agent and subagent, as
applicable, all material defects of that property that are known at the time the
property is offered for sale or that are known prior to the time of final
60 Gre840 A.2d 606, 612 (Del. 2003).
61 Appellant appropriately mitigated her damages by soliciting multiple roofing estimates and choosing the
lowest bid. 566 Tu.mj/ a Fz'm¢e2007 WL 1677536, at *1 (footnotes omitted).
63 I_.66-560lz‘ a 5 hara 2017 WL 1201158, at *4 (Del. Com. Pl. Jan. 30, 2017) (internal quotation marks omitted)
(quoting 2009 Caz'a/ai'"}z)))s:l§; Tmrt a PWA, LLC, 2015 WL 6007596, at *18 (Del. Ch. Oct. 14, 2015)).
64 Delaware precedent also suggests that unlicensed construction work can constitute a material defect;
however, since Appellee did not perform the work, the Court will not address this precedent 566 Wa/z‘on, 2014
WL 4352100, at *3.
65 566 31 D6/. C. § 4113 (“(a) In general.--The exterior of a structure shall be maintained structurally sound and
sanitary so as not to pose a threat to the health and safety of the occupants and so as to protect the occupants
from the environment . . . (f) Roofs.--The roof shall be structurally sound, tight and not have defects which
might admit rain, and roof drainage shall be adequate to prevent rain water from causing dampness in the walls
or interior portion of the building.”).
66 5 66, 6.889 A.2d 283, 2005 WL 3454129, at *5 (Del. Dec. 15, 2005) (TABLE) (“Even giving
the Buyer the benefit of favorable inferences as to the nature and timing of the sewage back-up, without some
evidence that the Sellers actually knew of the plumbing problem, the Buyer's claim must fail.”); Wa/ton, 2014
\X/L 4352100, at *3 (“Plaintiffs argue that Defendants should have known of the defect However, the Court
finds that the burden placed upon the Defendants is only to act in good faith to disclose adaa/y knwz/n defects.
The Court finds that Defendants met this burden.” (footnote omitted)); at‘¢vrd]z`zy[a Ma, 2012 \X/L 1416089, at
*20-24; D’A2006 WL 3844208, at *4.
69 566 lacaao, 2006 WL 3844208, at *4.
76 566 ]z'cy§¢ Ma a Pz'a6aa/z‘, 2012 WL 1416089, at *23 (Del. Com. Pl. Apr. 10, 2012) (“whether the buyer
independently discovers a defect prior to settlement does not abrogate the seller's statutory duty to disclose all
known material defects in writing”).
71 lmportantly, this enhanced duty is not an accusation of knowledge based on the seller’s failure to disclosure
other defects. 566 Gairidg6, 889 A.2d 283, 2005 \X/L 3454129, at *5 (“Buyer also argues that because the Sellers
15
here evidence a sophisticated seller: (1) a seller who is involved in the business of owning and
renting properties, (2) a seller who “flips” properties, and (3) a seller who regularly purchases
real estate from Sheriff Sales, Therefore, applying this heightened standard of inquiry to
Appellee seems appropriate.72 Accordingly, any reliance on the defense that Appellee’s failure
to adequately reside in the Property akin to an individual homeowner absolves him of liability
is misplaced As previously noted, this duty to investigate places Appellee on a uniform plane
with individual homeowners who are selling properties where they have actually resided.
Likewise, his argument that he is not liable because he sold the Property “As is” is similarly
unpersuasive.`73 Both arguments are reminiscent of caveat emptor.
Notwithstanding, as neither party addressed this facet of the case law at trial, or in the
supplemental briefing, the Court will not determine whether Appellee has met this heightened
standard of inquiry here. Further, a determination of whether Appellee has satisfied this
heightened standard is unnecessary, because l find below that Appellee failed to complete the
Seller’s Disclosure according to the lmplied Covenant of Good Faith and Fair Dealing For
this reason, l find that Appellant does not prevail on this breach of contract claim.
admitted making other significant misrepresentations on the disclosure report, it is reasonable to infer that they
would have failed to disclose known sewage problems. . . . These arguments are without merit.”); accam' McFa//
c. Marz`oaz`, 2005 WL 8150136, at *1-2 (Del. Com. Pl. Mar. 29, 2005) (“Plaintiffs also point to a failure by the
l\/[arionis to disclose a fire in October 2000, as evidence of a mindset to prove negligence and misrepresentation,
. . . The issue of failure to note a minor fire in the inspection report adds nothing to Plaintiffs' claim.”).
72 Moreover, at the very least, a sophisticated seller cannot solely rely on the word of a former owner whom the
seller evicted and litigated against to the Delaware Supreme Court to solidify the eviction. Such a reliance
strikes this Court as not credible.
73 In fact, the United States District Court for the District of Delaware has noted, “[p]laintiff is correct in its
assertion that an “as is” clause in a sales contract will not insulate a seller from suit for its fraudulent
misrepresentations.” DRR, LLC., 949 F. Supp. at 1137.
16
II. Second Al]eged Bteach - Failute to Completc the Se]ler’s Disclosure
Accord!hg to the Imp]ied CoVenant of Good Faith and Fair Dea!ing.
Appellee breached the contract by failing to complete the Seller’s Disclosure according
to the lmplied Covenant of Good Faith and Fair Dea]ing In Delaware, the implied covenant
of good faith and fair dealing
requires parties to a contract “to refrain from arbitrary or unreasonable
conduct” which deprives a party “from receiving the fruits of the bargain.” To
state a claim for breach of the implied covenant, a plaintiff must allege: (1) a
specific implied contractual obligation; (2) a breach of that obligation; and (3)
resulting damage. lmportantly, the covenant “seeks to enforce the `parties'
contractual bargain by implying only those terms that the parties would have
agreed to during their original negotiations if they had thought to address
them.”74
In other words, the covenant is “invoked only ‘when the contract is truly silent with respect
to the matter at hand, and when the expectations of the parties were so fundamental that
it is clear that they did not feel a need to negotiate about them.’ ”75 The Superior Court has
¢((
characterized the covenant as a judicial tool used to imply terms in a contract that protect
the reasonable expectations of the parties [there]to.’ ”76 If applicable, the court must engage
in a fact-intense inquiry, focusing on “fairness.”77
74 Markou) c. 5 yaqqe:)a Bz'ophama Colp., 2016 WL 1613419, at *7 (Del. Super. Mar. 3, 2016).
75 K/Jai/aaz'az 1). Ta//ou/ Iac., 2016 WL 3594752, at *4 (Del. Super. ]une 27, 2016) (quoting A//z`6d C`af).€{a)' Cmp. a.
GC_5aa Hofc§);gi‘, LP., 910 A.2d 1020, 1032-33 (Del. Ch. 2006)).
76 T/)6 C/96az0ar§ C0. Tl`, LLC c. A'IY Tz`l‘aaz`afa LLC, 2016 WL 4054936, at *9 (Del. Super. july 27, 2016) (quoting
Daa/ap a 5tal6 fiawa Fz're Q'?° Cay. Co., 878 A.2d 434, 442 (Del. 2005)). Notably, “recent case law reflects a
willingness to allow implied covenant claims to survive, despite the presence of relevant contractual language,
where a defendant failed to ‘uphold the plaintist reasonable expectations under that provision’ or failed to
exercise discretion under the contract wm'r)aab§).” Mar/eou/, 2016 WL 1613419, at *7.
77 K/aar/yaz'm, 2016 WL 3594752, at *4 (internal quotation marks omitted) (quoting Cz'mz'aaafz` 5M5A Ltd. P'J/yzjt) c.
Cz`aa`aaaz‘z' B6// Ce//a/ar 5}§. Ca., 708 A.2d 989, 992 (Del. 1998)).
17
In M¢'C@/ a Cox, the Delaware Superior Court applied the covenant to an alleged breach
based on a seller’s disclosure form.78 Because the court was analyzing whether the seller had
0022`¢‘2‘66{ information from the seller’s disclosure form, the court ultimately found the argument
moot79 However, McCo} held that the covenant applied to a seller’s disclosure form because
the covenant “arises in relation to the enforcement of contractual conditions when one party
has the sole discretion to determine the scope or occurrence of a condition.”80 l find no
reason to diverge from this precedent when the claims involve an inclusion instead of an
omission. lndeed, recently in Dr6z`saach a Wa/z‘oa, the Superior Court again applied the
covenant to claims involving statements made in a seller’s disclosure form.81
l find that the contract at issue here is silent on the definition of “new roof”_the crux
of the dispute in this case. In addition, the separate expectations of the parties were so
fundamental that neither party felt a need to negotiate how the phrase “new roof’ should be
defined. Hence, the present case strikes the Court as involving “developments that could not
be anticipated.”82 Appellant reasonably relied on a seller’s statement that the roof was new,
believing that the condition of the roof satisfied the City of Wilmington Code and would not
require further repairs. That is, she interpreted the phrase based on the expectation of a
reasonable person.83
78 566 MLC@/ c. Cox, 2007 \X/L 1677536, at *9.
79 566 z'a’. at *6-9.
86 566 z`a’. (internal quotation marks omitted) (quoting Gz`/bm‘, 490 A.2d at 1055 (Del. Ch. 1984), aj’a’, 575 A.2d
1131 (`Del. 1990)) (finding the defendants to be forthright in completing the seller’s disclosure form, except for
a broken ceiling fan).
81 Wa/l‘oa, 2014 WL 4352100, at *5-6.
82 566 z'a’. at *5.
83 Pointedly, Appellant’s insurance company, Liberty Mutual Insurance, applied a “New Roof Discount” to
Appellant’s insurance policy partly based on its interpretation of the Seller’s Disclosure. 566 Appellant’s Exhibit
1; Appellant’s Exhibit 3.
18
Conversely, even though Appellee witnessed water stains in the Property’s interior, he
did not question the former owner’s statement concerning the “new roof.” This is particularly
curious since Appellee had to evict the prior owner from the Property as well as litigate the
eviction to the Delaware Supreme Court. Appellee’s reliance strikes the Court as
unreasonable Not only does Appellee own and manage real estate properties, but he has
purchased approximately twenty-five properties from Sheriff Sales. ln evaluating the tenets
of fairness, Appellant, as the unsuspecting buyer, cannot be expected to bear the burden of
Appellee’s failure to adequately investigate the roof. Even if the Court where to find that
Appellee did not possess superior knowledge in this case based on his experience in the real
estate market, Question #77 (“How many layers of roof material are there (e.g. new shingles
over old shingles)?”) would have triggered some reflection from a reasonable person regarding
the use of the term “new roof.”
The Court refuses to accept the implicit requirements of Appellee’s position. l decline
to arbitrarily and unreasonably find that an unsuspecting buyer is accountable for a seller’s
unreasonable use of a common term. Such a finding would tacitly revive the maxim of caveat
empc‘ev. Accordingly, l find that Appellant is entitled to the “fruits of [her] bargain” based on
a preponderance of the evidence.34
64 Markevv, 2016 \X/L 1613419, at *7.
19
CONCLUSION
For the foregoing reasons, l find that Appellant has proven by a preponderance of the
evidence that Appellee breached the contract in_ this case by failing to complete the Seller’s
Disclosure in accordance with the implied covenant of good faith and fair dealing Therefore,
damages are awarded to Appellant in the amount of $15,400; costs of these proceedings and
post-judgment interest at the legal interest rate until paid.
n 15 go oRDERED. Mé% %XDB/
/