Eckert v. Flair Agency, Inc. , 909 P.2d 1201 ( 1995 )

MEMORANDUM OPINION

JOPLIN, Judge:

Appellants seek review of judgment on jury verdict for Appellees John H. and Linda D. Eckert (the Eckerts) and against Appellants Flair Agency, Inc., and Flair’s agent, Don Garrigan, in the Eckerts’ action for negligence and fraud against Flair, Garrigan and his wife Ruth, Robert F. and Brenda N. Autry — the record owners of the property— and Mr. Autry’s employer, Kretehmar Brands, Inc. — the equitable owner of the property. We find insufficient evidence adduced by Appellees to support the jury verdict based on fraud and awarding actual and punitive damages against Flair and Don Gar-rigan, and reverse the trial court’s judgment.

The Autry’s owned and resided in a house in Edmond situated on a small, down-sloped acreage backed by a creek and with the first floor built partly below ground level. Mrs. Autry, a realtor, listed the house for sale in 1986, which listing was subsequently transferred to another realtor in the same agency. Upon the property’s failure to sell, Mr. Au-try’s employer took over the house and listed it for sale through Appellants Flair and Gar-rigan. In March 1987, Garrigan discovered water on the first floor of the house. The record suggests Garrigan contacted the company which carried the home insurance, and an adjuster therefrom inspected the property. Garrigan also contacted Kretehmar which authorized repairs through a local contracting firm, including installation of “french drains” to improve drainage and a two year warranty on the work.

At the same time, the Eckerts first viewed the house. The Eckerts noticed the house was uninhabited, and carpet was pulled out of the house and drying outside. Thereafter, repairs were completed and a house-sitter moved in with instructions to monitor the “water” situation. Shortly after the installation of the new drainage system, the house-sitter noticed a very small amount of water in the bottom of one vent on the partially underground first floor. The contractor was notified and “adjusted” the system. The house-sitter found no other water in the house during the following five months in which he lived there.

The Eckerts viewed the house again in the summer of 1987 and in the early fall. On one of these occasions, Garrigan informed the Eckerts of the March 1987 incident, offered his explanation of the cause thereof, and advised the Eckerts of and directed them to the newly installed “french drain” system. The Eckerts subsequently signed a purchase contract for the house in September 1987. Prior to closing, the Eckerts were afforded an opportunity to — and did — conduct an inspection, which specifically included a plumbing inspection; however, the Eckerts never spoke with the inspector either before or after the inspection. The Eckerts closed the sale the following month, executing certain disclaimers (by which the realtors disclaimed warranties of “present or future value, size by square footage, condition, structure, or structure systems of the Property or any building, nor do they hold themselves out to be experts in quality, design and construction”), waivers (by which the Eckerts unconditionally acknowledged “either inspect[ion] [of] the [house] in accordance with the Contract or by acceptance of the Deed to the [house] ... accepting [the house] in its present condition”), and indemnifications, and accepting a warranty deed from the Autrys. (Emphasis added).

Some two years after closing, the Eckerts discovered a small area of wet carpet in the partially underground first floor of the house but sustained no damage of any significance and did not report the event to the contractor which installed the “french drain” system, although the system was still under warranty. In March 1990, three years after the March 1987 incident, the Eckerts experienced a severe flooding problem on the partially underground first floor, necessitating major repair work.

The Eckerts then commenced the present action against the Autrys as record owners, Kretchmar as equitable owner, Don and Ruth Garrigan as agents of the seller, and Flair as the realty company listing the house, claiming negligence and fraud. The trial court dismissed the action against Ruth Gar-rigan and granted summary judgment in favor of the Autrys; Kretchmar filed for bankruptcy protection. The trial court denied Flair’s and Garrigan’s motions for directed verdict and, upon submission to the jury, entered judgment on jury verdict for both actual and punitive damages against Flair and Garrigan based on fraud. Flair and Garrigan appeal.

In order to establish actionable fraud, the plaintiff must prove (1) a false (2) material misrepresentation (3) made with knowledge that it is false, or made as a positive assertion without knowledge of whether it is true or false and (4) made with the intent to induce action in another (5) which does in fact induce such action, and (6) proximately causes injury or damage to another. D & H Co. v. Shultz, 579 P.2d 821, 824 (Okla.1978). Stated otherwise, the statement must either be known to be false, or the speaker must make a positive assertion on a subject about which he or she knows little or nothing. 76 O.S.1991 § 3(2) deceit includes an assertion as a fact of that which is not true, by one who has no reasonable ground for believing it to be true. See also, Dawson v. Tindell, 733 P.2d 407, 408 (Okla.1987);. Fraud may not be predicated on a mere expression of opinion. Hall v. Edge, 782 P.2d 122, 126 (Okla.1989).

In the present case, the Eckerts point to three statements allegedly made by Garrigan as fraudulent: First, that the water Garrigan discovered in March 1987 constituted a onetime occurrence; second, that the water in the house was the result of a newly installed gas line ditch running from the top of the property down to the house; and third, that remedial measures had been taken to assure the problem would not re-occur.

As to the first “one-time-occurrence” statement, the Eckerts asserted that statement was false, and arguably adduced evidence at trial suggesting other water problems prior to their purchase of the property to show falsity of Garrigan’s characterization of the March 1987 water in the house as an isolated occurrence.¹ The dissent characterizes the “one-time-occurrence” statement as “clearly false.” However, the record contains no direct evidence that Garrigan was aware of anything other than a remedied surface water problem when the Eckerts bought the property, and Garrigan reported the March 1987 incident and remedial efforts to the Eckerts. Moreover, the record reflects that Garrigan took special efforts to show the Eckerts the newly installed french drain system, and assisted the Eckerts in inspecting same.

Additionally, the record reflects the trial court granted summary judgment in favor of the Autrys, finding as a matter of law, the record:

barren of evidence that would tend to indicate [the Autrys] had notice of the alleged flooding defect. Although the evidence does tend to indicate that the Autrys on one occasion experienced water problems, puddling in the front yard and some water in the lower level of the home, there has been no evidence that would tend to establish that the cause of the Autrys’ experience is the cause of the Eckerts’ alleged flooding problems.

We agree with the trial court: After reviewing the record in its entirety, we find no competent — much less clear and convincing — evidence either that Garrigan was aware prior to the Eckerts’ purchase of the home of any previous non-surface water problems experienced by the Autrys or that the Autrys knew of and communicated to Garrigan that the property had a defect pertaining to water. In that regard, the record reflects that knowledge, if any, Garrigan may have had of a previous flooding problem during the time period the Autrys owned the property was gained well after the fact of the flooding experienced by the Eckerts. And, as the trial court aptly observed, the record was barren of any evidence that the Autrys knew of a “flooding defect,” much less that the Autrys communicated that information to Garrigan. To the contrary, the record reflects that Mrs. Autry, as the initial realtor, indicated on the listing agreement for the property no water or flooding problems, as did her colleague who was the second realtor to list the property. Based on this evidence, Garrigan’s statement that the water problem he observed in March of 1987 was a one-time occurrence cannot constitute a fraudulent statement or misrepresentation — nor one upon which the Eckerts were entitled to rely. On the record tendered for our review, we therefore find no competent evidence to support a finding that Garrigan was aware of a “flooding defect” and/or non-surface water problems in the property prior to its sale to the Eckerts as to constitute an actionable misrepresentation.

The second statement at issue arises from the Eckerts’ testimony that Garrigan positively asserted that the incident observed by the Eckerts in March 1987 was caused by the installation of a gas line from the top or front of the property down to the house. In that regard, an essential element of actionable fraud is the knowledge of the falsity of the statement made or negligence in making the statement without a reasonable ground for believing it to be true. Dawson v. Tindell, 738 P.2d 407, 408 (Okla.1987).

In the present case, Garrigan’s un-controverted testimony showed that at the time he discovered water in the house in the spring of 1987, Garrigan could deduce no change in the property other than the installation of the gas line, and the record suggests the insurance adjuster in March 1987 attributed that incident to a surface water problem. It is also uncontroverted that Garrigan could not have ascertained a water table/insufficient foundation problem with the house absent having either the ability to see through the walls of the house or being trained in hydrology. In that regard, we also note the Eckerts’ expert — a hydrologist — while opining the Eckert’s flood was caused by underground water and an insufficient foundation, agreed that surface water could have contributed to the problem. Moreover, Garrigan was assured by the contractor which installed the “french drains” that the problem had been alleviated.

Accordingly, we find Garrigan’s statement attributing the one-time discovery of water in the house to installation of the gas line was not unreasonable and, thus, cannot, as a matter of law, support a finding of actionable misrepresentation — contrary to the dissent’s characterization of this statement as “textbook fraud.” To hold otherwise would be to impose strict liability on a realtor for any latent defect and, at the same time, allow a buyer to avoid any responsibility for failure to inspect an apparent defect of which the buyer had actual knowledge. In this regard, the theory of the “blind” buyer has long been discredited in this jurisdiction:

Where the means of knowledge are at hand and equally available to both parties, and the subject of the purchase is alike open to their inspection, if the purchaser does not avail himself of these means and opportunities, he will not be heard to say that he had been deceived by the vendor’s misrepresentations. If, having eyes, he will not see matters directly before them, where no concealment is made of attempted, he will not be entitled to favorable consideration when he complains that he has suffered from his own voluntary blindness and been misled by overconfidence in the statements of another.

See, e.g., Onstott v. Osborne, 417 P.2d 291, 293 (Okla.1966) As the Oklahoma Supreme Court elsewhere aptly noted in a case similar to the one at bar:

It is a matter of common knowledge that water will flow down hill and that if water flows toward a building it will flow and accumulate thereunder if the lower portion of the vents in the foundation are at or below the level of soil surrounding the foundation and vents.

Gutelius v. Sisemore, 365 P.2d 732 (Okla.1961).

In that regard, fraud related to the purchase of real property may not be predicated on an alleged false statement when the truth of such statement could have been ascertained with reasonable diligence by the buyer. Dawson, 733 P.2d at 409. It is un-controverted that Garrigan advised the Ec-kerts of water in the house in March 1987, that Garrigan showed the newly-installed drain system to the Eckerts and gave the Eckerts ample opportunity to inspect, or have inspected, the system (which they did), the property itself (which they did), and/or to inquire of the house-sitter regarding any water problems. However, the Eckerts failed to avail themselves of any opportunity after observing the water damage to ascertain the possible source of the water problem, if any. The Eckerts may not therefore claim they had been deceived by Garrigan’s alleged misrepresentation. Dawson, 733 P.2d at 409 (citation omitted).²

Finally, the Eckerts maintain Gar-rigan assured them there would be no water problem in the future. However, fraud may not be predicated upon a representation or assurance:

which in the nature of things [is] impossible of performance and in regard to which no one having the capacity to contract at all could be deceived, or where from the nature of the representation it is incredible that the person to whom it was made could have been deceived.

Onstott v. Osborne, 417 P.2d 291, 294 (Okla.1966). Stated otherwise, such a statement must be considered as “an expression of the seller’s opinion only, which is to be discounted as such by the buyer, and on which no reasonable man would rely.” Hall v. Edge, 782 P.2d 122 (Okla.1989), citing Prosser and Keeton on the Law of Torts, § 109 at 757 (5th ed. 1984). We find Garrigan’s alleged assurance or representation that the property would never flood in the future constitutes such an indefinite and extravagant statement upon which reasonable persons such as the Eckerts are not entitled to rely for the purpose of establishing actionable fraud. Fraud must be proved by clear and convincing evidence, Steiger v. Commerce Acceptance of Oklahoma City, Inc., 455 P.2d 81 (Okla.1969), and a jury verdict thereon must be reasonably supported by competent evidence. Walker v. St. Louis-San Francisco Ry. Co., 646 P.2d 593 (Okla.1982).

In the present ease, the Eckerts’ evidence showed the water problems attributable to the local water table and/or foundation of the home, and that Garrigan had no information indicative of anything other than a reasonable belief of a remedied surface water disposal problem. We therefore find the remaining evidence, even viewed in the light most favorable to the Eckerts, does not support the jury verdict finding Garrigan guilty of actionable fraud or misrepresentation. Accordingly, we hold the trial court erred in failing to direct a verdict in favor of Flair and Garrigan. We therefore reverse the judgment against Appellants Flair and Garrigan. Having so held, we need not reach the issue raised on the Eckerts’ counter-appeal regarding imposition of the “cap” on punitive damages under 23 O.S. § 9.

The judgment on jury verdict against Appellants Flair and Garrigan is therefore REVERSED.

CARL B. JONES, P.J., dissents with separate opinion. GARRETT, C.J., concurs.

1 . For example, the trial court allowed, inter alia, the testimony of a neighbor that the Autrys did, in fact, have flooding problems, notwithstanding the neighbor’s testimony that he had not spoken with Garrigan.

2 . We note Mr. Justice Opala’s concurring opinion in Dawson that the facts in that case did not impose upon the realtor an affirmative duty to independently inspect the premises for flaws in order to inform the purchaser of “all reasonably discoverable defects'-' in the property. 733 P.2d at 409. In that regard, we note in the present case Garrigan, as the realtor, discovered an apparent problem, contacted the owner, and relied upon the contractor hired to repair the problem. Thereafter, Garrigan specifically informed the Eckerts of the problem and the steps taken to rectify the situation, directing and encouraging &e Eckerts to inspect same.