The elements of fraudulent inducement are: (1) The defendant made false representations as a statement of existing and material fact; (2) the defendant knew the representations to be false or made them recklessly without knowledge concerning them; (3) the defendant made the representations intentionally for the purpose of inducing another party to act upon them; (4) the other party reasonably relied and acted upon the representations; (5) the other party sustained damages by relying upon the representations. A representation is material when it relates to some matter that is so substantial as to influence the party to whom it is made.
Jennings hired several people to fix the leaks in his home. He decided later on to sell the said house. He completed and signed a "Seller's Disclosure and Condition of Property Addendum" form. Jennings answered "No" to question 7(d) regarding whether there was "any water leakage or dampness in the house, crawl space[,] or basement?" He also answered "No" to 7(i) regarding any repairs or other attempts to control the cause or effect of any problem described in Section 7, including water leakage or dampness in the home. Plaintiff husband and wife Daniel J. Stechschulte, Jr., and Satu S.A. Stechschulte toured Jennings' home and signed a contract to purchase it and a "Buyer Acknowledgment" form. The Stechschultes had not noticed any water leakage during their visits to the home, and they signed and dated the Buyer Acknowledgment. A few weeks later, the Stechschultes discovered extensive water infiltration, including a 6- to 8-foot-wide pool of water in front of a basement window. Water was also running down the wall in front of the window, from a basement light switch, and down the sides of a sliding glass door in the living room with pools of water nearby. Water was leaking in one of the windows in the master bedroom, and water was dripping from a window in an upstairs bedroom. The Stechschultes contacted Jennings, and showed him the sites of water intrusion and asked Jennings to rescind the contract, but Jennings refused. The Stechschultes filed this lawsuit against Jennings, the Jennings Trust, Golson, and PHB in district court in Johnson County. The trial court granted summary judgment in favor of the defendants. The Stechschultes appealed.
Does a "Buyer Acknowledgment" in a real estate transaction, form signed by buyers, relieve the sellers from any legal responsibility to the buyers in their action claiming fraudulent inducement?
The court held that with regard to their claim of fraudulent inducement, the buyers advanced ample evidence to support an inference that the seller intentionally or recklessly made false representations of existing and material facts upon which they relied to their detriment; the seller answered "no" when asked if there was any water leakage or dampness in the house, crawl space, or basement; -With regard to their claim of fraud by silence, the buyers advanced sufficient evidence to demonstrate the existence of genuine issues of material fact; the seller did not give them a receipt for the window caulking until after the sale closed; -With regard to the buyers' negligent misrepresentation claim, there was sufficient circumstantial evidence in the record of the seller's lack of reasonable care in communicating the information called for in the seller's disclosure form. The court held that that the district court judge's summary judgment in favor of all defendants on all claims must be reversed and the entire case remanded for further proceedings.