State of Iowa v. Fontae Cole Buelow ( 2022 )

IN THE COURT OF APPEALS OF IOWA
No. 21-1764
Filed December 7, 2022
MICHAEL BROWNE,
Plaintiff-Appellant,
vs.
CHRISTOPHER ROTH and DEBRA ROTH,
Defendants-Appellees.
________________________________________________________________
Appeal from the Iowa District Court for Black Hawk County, Bradley J.
Harris, Judge.
Michael Browne appeals the district court’s rejection of his statutory and
breach-of-contract claims against Christopher and Debra Roth for failure to
disclose material defects in their written disclosure statement. AFFIRMED.
Adam J. Babinat of Redfern, Mason, Larsen & Moore, P.L.C., Cedar Falls,
for appellant.
Patrick C. Galles of Correll, Sheerer, Benson, Engels, Galles & Demro,
P.L.C., Cedar Falls, for appellees.
Considered by Vaitheswaran, P.J., and Greer and Schumacher, JJ.
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VAITHESWARAN, Presiding Judge.
Michael Browne bought a Cedar Falls home from Christopher and Debra
Roth, with the intent to “gut” and remodel it before moving in. While he was
stripping the basement walls, he discovered mold and moisture. Browne stopped
his demolition work and never moved into the home.
Browne sued the Roths for failure to “disclose any problems concerning
water seepage . . . [and] any known fungus or mold issues.”1 He claimed the Roths
breached statutory disclosure requirements as well as the real estate purchase
contract incorporating those requirements.2
A few months after suit was filed, a basement pipe burst. Browne
discovered the pipe on “one of [his] checkups.” Water was “[s]praying against the
drywall” and running to the floor. Browne did “not know” how long the water had
been running before he discovered it.
Years passed. The home remained unoccupied from the time of purchase
in mid-2016 through trial five years later. Following trial, the district court ruled in
favor of the Roths. In response to a posttrial motion, the court enlarged its findings
and reaffirmed its conclusions.
On appeal, Browne contends “the Roths had actual knowledge of a mold
and moisture problem,” they “failed to disclose anything which would have
informed [him] further investigation was warranted,” and “[t]he district court erred
by concluding the Roths did not violate their [statutory] disclosure duty” and by
1Browne alleged other nondisclosures that are not at issue on appeal.
2Brown additionally raised negligent and fraudulent-misrepresentation claims that
he voluntarily dismissed with prejudice.
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rejecting his contract claim. He concedes the breach-of-contract claim rises or
falls on the outcome of the statutory claim. Accordingly, we will confine our
discussion to the statutory claim.
Iowa Code chapter 558A (2021) requires a prospective seller to “deliver a
written disclosure statement to” a prospective buyer. The statement must “include
information relating to the condition and important characteristics of the property
. . . including significant defects in the structural integrity.” Iowa Code
§§ 558A.2(1), 558A.4(1)(a); Iowa Admin. Code r. 193E—14.1(6) (sample
statement); Putman v. Walther, 973 N.W.2d 857, 863 (Iowa 2022). A person who
violates the disclosure requirement is ordinarily liable for actual damages, but
“shall not be liable . . . for the error, inaccuracy, or omission in information . . .
unless that person has actual knowledge of the inaccuracy, or fails to exercise
ordinary care in obtaining the information.” Iowa Code § 558A.6(1).
We begin with the Roths’ information on water seepage. The district court
found that the Roths saw waviness in “the beadboard located in the northeast and
southeast corner of the basement.” They “removed the beadboard, and the
wallboard behind the beadboard was damp.” They removed the wallboard and
observed black mold on the wallboard, flooring strips, and the concrete block
foundation wall.” They “cleaned up the mold, caulked, replaced a piece of
wallboard in each corner with mold-resistant sheetrock, and returned the
beadboard to its original position.” The Roths do not dispute these findings. The
findings are supported by substantial evidence. See Hammes v. JCLB Props.,
LLC, 764 N.W.2d 552, 555 (Iowa Ct. App. 2008) (setting forth standard of review).
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We turn to whether the Roths disclosed the information to Browne. The
answer is unequivocally “No.” They checked “No” to the question about “[a]ny
known water, seepage or other problems”; “No” to the question about “[a]ny known
fungus or mold”; “No” to the question about “[a]ny known modifications,
remodeling, alterations, or repairs, etc., made without necessary permits or
licensed contractors”; and “No” to the question about “[a]ny known physical
problems.” When they completed the form, they had actual knowledge of seepage
and mold in the basement. Again, the Roths conceded as much. Because
disclosure of the seepage, mold and remedial measures was statutorily required,
the Roths violated the statute by failing to make the disclosures. See Yeboah v.
Emans, No. 12-0900, 2011 WL 1453231, at *2 (Iowa Ct. App. Apr. 10, 2013).3 We
are left with the question of actual damages for the mold and water seepage.
The district court found “the mold problem in the basement of the residence
had resolved at no cost to” Browne and “[t]his had occurred despite standing water
being present on the floor of the basement for several years due to an unrelated
bursting of a water pipe.” The court concluded Browne “failed to prove any
damages to remedy the undisclosed mold problem in the basement of the
residence.”
Substantial evidence supports the court’s underlying findings. Browne
testified, “The mold is gone.” When pressed with the question, “There is no mold
3 The district court found the Roths “thought they had taken care of the problem.”
The court of appeals was unpersuaded by a similar argument. See Yeboah, 2011
WL 1453231, at *3 (noting a “sunroom leak was a known problem that was
repaired” and “[t]he sellers had an obligation to disclose the leak and the repair,
notwithstanding their belief that the issue was resolved”).
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there anymore?” he responded, “The last time I was there, no. There was no
mold.” And when asked, “The mold is not an issue?” He responded, “No, sir.”
Seeking reconfirmation of this point, Browne’s attorney inquired, “Are you asking
the court for any damages related to any mold remediation you would have had to
undertake?” Browne answered, “No sir.” In light of his testimony, the district court
did not err in concluding no actual damages were warranted on the statutory claim
related to nondisclosure of mold.
We turn to Browne’s requested damages for “water seepage repair.” In its
expanded posttrial findings, the district court found the “condensation problem”
observed by the Roths “would be alleviated by the construction of energy walls.”
Because the City required these walls in connection with Browne’s remodeling of
the basement, the court determined Browne “incurred no additional costs as a
result of [the Roths’] failure to disclose the moisture problem.”
We discern a more fundamental problem with Browne’s request for water-
seepage damages—the Roths’ lack of actual knowledge of widespread water
seepage.4 The district court credited the Roths’ testimony concerning their
knowledge of this seepage, finding (1) “[a]t no time did [they] notice water on the
floor in the basement or was the basement carpet wet” and (2) the Roths “noticed
4 The Roths point to their lack of knowledge and also argue the damages were not
proximately caused by their nondisclosure. See Putman, 973 N.W.2d at 865
(evaluating a summary judgment record on a chapter 558A claim for “damages
proximately caused by the misrepresentation”); Hammes, 764 N.W.2d at 558–59
(remanding for adjustment of a damage award under chapter 558A by “deducting
an appropriate amount for the southern portion of the basement deconstruction
and remodeling necessitated by the sewer back-ups and not caused by the
undisclosed water problem”). We find it unnecessary to address the causation
issue.
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no additional moisture problems in the basement.” Substantial evidence supports
the court’s findings.
Christopher Roth agreed he saw some discoloration on the wall but said the
wall “was never wet or wet to the touch” and there was never any seepage problem
in the house. Roth also saw no water on the basement floor. His testimony was
consistent with Browne’s testimony on this point. As Browne concedes on appeal,
his home inspector did not detect water seepage and he “only learned of the mold
and moisture issues . . . after he removed the drywall.”
As for Browne’s expert, he testified certain discoloration was indicative of
“seepage through the basement walls,” but his testimony was based on pictures
taken in 2019, not 2016 when the house was sold. Significantly, he said he would
expect to see water on the floor if there were seepage. In his words, water
seepage “doesn’t have anywhere else to go other than the floor—joint of the floor
or out to the floor itself.” While Browne’s attorney attempted to rehabilitate him,
his concession bolstered Roth’s and Browne’s testimony concerning the absence
of water on the floor.
The district court was free to weigh the testimony and assign credibility as
it saw fit. See Poller v. Okoboji Classic Cars, LLC, 960 N.W.2d 496, 519 n.3 (Iowa
2021) (deferring to district court’s credibility findings in a contract case); Tim O’Neill
Chevrolet, Inc. v. Forristall, 551 N.W.2d 611, 614 (Iowa 1996) (“The trier of fact . . .
has the prerogative to determine which evidence is entitled to belief. The district
court has a better opportunity than we do to evaluate the credibility of the
witnesses. So we think factual disputes . . . are best resolved by the district
court.”). The court did just that in finding the Roths lacked actual knowledge of the
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water seepage beyond the identified corners. Without actual knowledge, the Roths
could not be liable for actual damages. Accordingly, the district court did not err in
declining to award water seepage damages.
Having concluded the district court did not err in dismissing the statutory
claim, we further conclude the court did not err in dismissing the breach-of-contract
claim.
Browne seeks appellate attorney fees. He notes that “the real estate
purchase agreement provides for the recovery of . . . attorneys’ fees in the event
of a breach.” That type of language in a purchase agreement will not support an
award of attorney fees for a chapter 558A violation unless the agreement required
the sellers to make the statutory disclosures. See Hovden v. Lemke, No. 19-0399,
2020 WL 2988531, at *4 (Iowa Ct. App. June 3, 2020) (noting the purchase
agreement made “no provisions for attorney fees relating to chapter 558A or
nondisclosures,” precluding an award of attorney fees); Payton v. Digiacomo,
No. 14-1453, 2015 WL 5285740, at *3 (Iowa Ct. App. Sept. 10, 2015) (concluding
a checkmark indicating the attachment of a disclosure form to the purchase
agreement was insufficient to incorporate “any term relating to the requirements of
chapter 558A,” precluding recovery of attorney fees); cf. Johnson v. Baum,
No. 09-1340, 2010 WL 2757192, at *3 (Iowa Ct. App. July 14, 2010) (concluding
language in the purchase agreement specifying a “legal duty to disclose [m]aterial
[d]efects” incorporated the requirements of chapter 558A and was sufficient to
trigger the attorney-fee provision).
This case is more like Hovden and Payton than Johnson. The purchase
agreement contains a check box to indicate whether the Chapter 558A disclosure
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statement is attached and does not otherwise contain any language incorporating
those disclosure duties into the contract. The remedies provision of the contract
authorizes attorney fees for failure to “timely fulfill the terms of this agreement.”
Because the terms do not include the chapter 558 disclosures except by a check-
box reference to the addendum, we conclude Browne was not authorized to obtain
attorney fees even if he prevailed.
AFFIRMED.