Lopata v. Miller

KENNEY, Judge. Appellants, Marcia and Edward Lopata, present questions arising from a lawsuit instituted by them against multiple defendants in the Circuit Court for Anne Arundel County. The lawsuit pertained to appellants’ purchase of a parcel of real property with improvements known as “The Terraces” in Arnold, Maryland. Appellees, Mildred and Eugene Miller, real estate agents associated with the real estate brokerage, Champion Realty, Inc., coordinated the purchase.

Appellants’ complaint made the following claims against appellees: deceit by overt false representation, deceit by concealment, injurious falsehood, negligent misrepresentation, strict liability in tort, negligence, and breach of warranty. All counts related to the alleged discrepancy between the actual acreage of the proper ⁸⁰ ty and the acreage communicated to appellants by appellees during the course of the sale. The only counts at issue on appeal are the negligent misrepresentation, strict liability, and negligence claims. On appellees’ motion for summary judgment, the trial court entered judgment on the injurious falsehood, negligent misrepresentation, and strict liability counts.

The court denied appellees’ motion for summary judgment on the two deceit counts of the complaint. The court later granted appellees’ Motion to Dismiss the negligence and strict liability counts. Appellants thereafter voluntarily dismissed the deceit counts and filed this timely appeal. Appellants present a single question for our review, which we have divided and rephrased as follows: I. Did the trial court err by granting summary judgment in favor of appellees on the negligent misrepresentation count, and dismissing the negligence count, of appellants’ complaint?

II

Did the trial court err by dismissing the strict liability count of appellants’ complaint? FACTS In 1987, appellants decided to relocate from their home in Colechester, Maryland, to a comparable home on waterfront property. Their stated goals were to find a “nice home” with “some privacy” and a deep-water slip to accommodate their sailboat. To facilitate their new home search, they enlisted the aid of appellees, real estate sales agents whom appellants knew socially.

Appellees obtained information about available houses from a multiple listing service (MLS) and attempted to select homes that met appellants’ criteria. Appellees then showed various waterfront properties to appellants with the hope of finding a suitable match. Most of the homes selected from the MLS were in the range of $500,000 to $600,000. Around August or September, 1987, appellees discovered, and brought to appellants’ attention, a listing for a waterfront property called “The Terraces” in Arnold, Maryland.

Al ⁸¹ though the seller of the property asked a higher price than appellants originally sought to pay, the home met appellants’ other criteria. Appellees showed the house to appellants, and relayed the data obtained from the MLS. One piece of information provided by the seller, reported in the MLS by the listing agent, and relayed to appellants by appellees, was the representation that The Terraces contained three acres of land. Appellants had an opportunity to view the actual printout of the MLS before deciding to purchase the property.

The representations on the MLS were qualified by the following admonition: “ALL INFORMATION DEEMED RELIABLE BUT NOT GUARANTEED — EQUAL HOUSING OPPORTUNITY.” After several visits to the property, appellants decided to purchase The Terraces. The sale closed after a series of contract negotiations over the course of two years. The final contract of sale included the following language: CONDITION OF PROPERTY. It is mutually understood and agreed between the parties that the property is sold in “AS IS” condition unless otherwise specified in this agreement and the Purchaser(s) have personally examined the property to their satisfaction and do not rely upon any warranties or representations not contained in this contract.

ENTIRE CONTRACT. This contract contains the final and entire agreement between the parties, and neither they nor their agents will be bound by any terms, conditions, statements, warranties, or representations, oral or written, not herein contained. The parties to this contract mutually agree that it is binding upon them, their heirs and each of their respective heirs, executors, administrators, personal representatives, successors, and assigns and that its provisions will survive the execution and delivery of the deed and will not be merged therein. NOTICE TO PURCHASERS.

THE LISTING AND SELLING BROKERS, THEIR AGENTS AND EMPLOY ⁸² EES, MAKE NO REPRESENTATIONS TO THE PURCHASERS WITH RESPECT TO THE FOLLOWING: 3. Lot size and exact location. If the subject property is part of a recorded subdivision, the Purchaser can review the plat upon request at the County record office. If the subject property is not part of a recorded subdivision, the Purchaser may verify exact size and location through a survey by a registered engineer or land surveyor.

Although the contract language did not specify the acreage of the lot, an addendum explicitly provided that the seller would convey “property with all riparian rights to the waterfront — approximately] 440 feet on the water.” Appellants moved into the home and had lived there for more than three years when they first discovered that The Terraces contained only 1.87 acres, instead of three acres as they previously believed. They subsequently filed the suit from which this appeal is taken. I. Negligent Misrepresentation and Negligence Counts Appellants argue that the trial court erred by granting appellees’ Motion for Summary Judgment as to the negligent misrepresentation count of appellants’ complaint. They make a similar argument with respect to the trial court’s dismissal of their negligence claim.

Appellants contend that appellees, as licensed real estate agents assisting appellants in the purchase of a home, owed a duty of care to appellants, which they breached by failing to verify the accuracy of the information provided in the MLS. Appellants argue that the trial court was legally incorrect in concluding that appellees did not owe this duty of care. According to appellants, the trial court based its grant of summary judgment on an incorrect legal principle, and thus, the entry of judgment should be reversed. Appellees’ first defense is that they did not owe appellants a duty to verify the information contained in the MLS because the listing and the contract of sale both expressly disclaimed such a duty.

According to appellees, the contract of sale, ⁸³ which did not contain any representation concerning the parcel’s acreage, explicitly put appellants on notice that they had the option of hiring a land surveyor to ascertain the exact location, size, and boundaries of the property. Appellees further respond that because appellants omitted to make a specific inquiry as to the precise size of the property, appellees were under no obligation to conduct an independent investigation to determine the acreage. They assert that, while a tort duty may arise between a buyer and a selling agent under some circumstances, no such duty exists requiring a selling agent to conduct an independent investigation of representations set forth in the MLS. According to appellees, if the buyer does not indicate that lot size is material to the sale, or make specific inquiry into the acreage contained in the lot, no tort duty arises and, thus, no action in negligence or negligent misrepresentation will lie. “In granting a motion for summary judgment, the trial court does not resolve factual disputes, but is instead limited to ruling as a matter of law.” Sheets v. Brethren Mut.

Ins. Co., 342 Md. 634, 638-39 , 679 A.2d 540 (1996)(citing Heat & Power v. Air Products, 320 Md. 584, 591 , 578 A.2d 1202 (1990)). The standard for appellate review of a trial court’s grant or denial of a summary judgment motion is whether the trial court was legally correct. Id.

This Court reviews the same material from the record and decides the same legal issues as the circuit court, namely whether appellees had a duty to investigate the information provided to them by the seller. Nationwide Mut. Ins. Co. v. Scherr, 101 Md.App. 690, 695 , 647 A.2d 1297 (1994), cert. denied, Scherr v. Nationwide, 337 Md. 214 , 652 A.2d 670 (1995).

In making our analysis, we do not accord deference to the trial court’s legal conclusions. Post v. Bregman, 112 Md.App. 738, 748 , 686 A.2d 665 (1996), rev’d on other grounds, 349 Md. 142 , 707 A.2d 806 (1998). In determining whether the trial court erred in granting a motion to dismiss, we accept as true all well-pleaded facts and allegations in the complaint, together with reasonable inferences properly drawn therefrom. Simms v. ⁸⁴ Constantine, 113 Md.App. 291, 296-97 , 688 A.2d 1 (1997) (quoting Faya v. Almaraz, 329 Md. 435, 443 , 620 A.2d 327 (1993)). “ ‘Dismissal is proper only if the facts and allegations, so viewed, would nevertheless fail to afford plaintiff relief if proven.’ ” Id. “In Maryland, the prima facie elements of the tort of negligent misrepresentation are: ‘(1) the defendant, owing a duty of care to the plaintiff, negligently asserts a false statement; (2) the defendant intends that his statement will be acted upon by the plaintiff; (3) the defendant has knowledge that the plaintiff will probably rely on the statement, which, if erroneous, will cause loss or injury; (4) the plaintiff, justifiably, takes action in reliance on the statement; and (5) the plaintiff suffers damage proximately caused by the defendant’s negligence.’ ” Sheets, 342 Md. at 656-57 , 679 A.2d 540 (quoting Gross v. Sussex, 332 Md. 247, 259 , 630 A.2d 1156, 1162 (1993)).

Negligent misrepresentation is a form of negligence. Sheets, 342 Md. at 646 , 679 A.2d 540 . In order to maintain an action in negligence, “a plaintiff must prove the existence of four elements: a duty owed to him, a breach of that duty, a causal connection between the breach and the injury, and damages.” Montgomery Cablevision Ltd. Partnership v. Beynon, 116 Md.App. 363, 392 , 696 A.2d 491 (1997), cert. granted, 347 Md 683, 702 A.2d 291 , cert. denied 347 Md. 683 , 702 A.2d 292 (1997) (quoting Southland Corp. v. Griffith, 332 Md. 704, 712 , 633 A.2d 84 (1993) (citations omitted)). Appellants’ complaint listed “Facts Common to All Counts” in fourteen numbered paragraphs.

The factual allegations most pertinent to our discussion are: 4. Prior to entering into the contract to purchase “The Terraces,” material factual representations, which were relied on by [appellants] in purchasing the property, were ⁸⁵ made in writing and orally to the plaintiffs that the real estate known as “The Terraces” was comprised of, inter alia, three (3) acres of land. [Appellants] learned on November 5,1992 that the statements of fact that the property contained three (3) acres were false. 6. [Appellees] ... showed and described the property to [appellants] and were the selling agents for “The Terraces”, and thus, agents for [the seller]. At all times relevant to this claim, [appellees] represented to [appellants] that they were the agents for [the seller], 7. [Appellees] ..., prior to [appellants]’ purchase of “The Terraces”, stated as a fact to [appellants] that the property contained three (3) acres of land. 10. ... [Appellants], relying on the representations of fact that the property contained three (3) acres of land made by ... [appellees], thereafter purchased “The Terraces” from [the seller], 12. [Appellees] intended that their statements of fact, that “The Terraces” contained three (3) acres of land would be relied and acted upon by [appellants]. [Appellees] knew that if said statements were false that [appellants] would suffer losses and damages. The negligent misrepresentation count of appellants’ complaint maintained that appellees “owed [appellants] a duty of care to truthfully relate the true acreage of ‘The Terraces[,’] but negligently failed to determine the true acreage and/or to relate the true acreage to [appellants].” It also asserted that appellees “misrepresented their agency relationship” with the seller, and that they “violated § 16-322 [now § 17-322] of the Maryland Code (1989, 1992 Cum.Supp.) of the Business Occupation and Professions Article.” Appellants averred that appellees intended that they rely on the representations of the acreage with the knowledge that appellants’ reliance on those ⁸⁶ representations, if false, “would cause damage and injury” to them.

Finally, the complaint stated that appellants “would not have purchased or paid the purchase price they paid for the property if they had known the truth that ‘The Terraces’ contained only 1.87 acres____” The negligence count of the complaint contended that appellees “each owed a duty to the public and to [appellants] to exercise due diligence and reasonable care as licensed real estate agents” and that each owed appellants “a duty to comply with the applicable laws of Maryland, ... codes of conduct and/or ethics, and the industry standards.... ” Because of appellees’ “conduct or lack of conduct” with regard to appellants and “as a direct result of their negligencef,]” appellants claimed to be damaged to the extent of $600,000. For particular instances of appellees’ negligent conduct, appellants referred to the deposition testimony of expert real estate witnesses. In granting appellees’ Motion for Summary Judgment on the negligent misrepresentation count, the trial court suggested that the statutory disciplinary provisions for licensed real estate brokers may provide the basis for a legal standard of care. Bus.

Occ. & Prof. § 17-322(a)(4); Gross, 332 Md. at 273-74 , 630 A.2d 1156 . The court qualified that suggestion by clarifying that “duties imposed by statute do not necessarily create duties of care for purposes of negligence cases.” Jacques v. First National Bank of Maryland, 307 Md. 527 , 515 A.2d 756 (1986). The trial court cited Herbert v. Saffell, 877 F.2d 267 (4th Cir.1989), as recognizing the possibility that Maryland real estate brokers someday might be required to conduct “a reasonable investigation of the conditions of the property they market,” although it noted “that such a sweeping change in Maryland law had not yet been made.” After observing that Gross acknowledged a real estate broker’s “duty to the general public,” the court distinguished that general duty from the tort duty “to conduct an independent investigation to discover defects,” concluding that there was no intent in Gross to depart from the general rule that an ⁸⁷ independent investigation by a realtor is not required under the circumstances of appellants’ case. In particular, the court noted that “The Terraces” was “irregularly shaped and wooded,” and that it would “seem excessive to require the realtor to take independent steps to ascertain the lot size for the buyer’s benefit, while not requiring at least the same of the buyer himself.” The trial court also highlighted language from the contract of sale, in which the agents “expressly stated” that they made “no representations to the purchasers regarding lot size.” Finally, the court stated that appellees had “provided sufficient basis ... to show that they each represented the seller, that they did nothing beyond relating the information provided to them by the seller, and that the agents did not otherwise know the property did not contain three (3) acres.” Concluding that appellants “failed to show facts in detail and with precision to demonstrate that a genuine dispute of material fact exists,” the trial court granted summary judgment in appellees’ favor.

The court subsequently signed an Order granting appellees’ Motion to Dismiss appellants’ negligence claim without making further findings of fact or conclusions of law. None of the prior Maryland cases involving the potential liability of real estate agents to purchasers of property have addressed factual circumstances directly analogous to those presented by the instant case. In Ward Development Co., Inc. v. Ingrao, 63 Md.App. 645 , 493 A.2d 421 (1985), the appellant was a developer who had been sued by thirteen homeowners in a Montgomery County subdivision. The homeowners convinced a jury that the developer, its real estate broker, and its selling agent misrepresented the cost of water and sewer connection charges in the course of selling the homes in the subdivision.

On appeal to this Court, Ward argued that the homeowners’ proof was legally deficient in that it did not establish misrepresentation of material, past or existing fact. After reviewing the origins of the tort of negligent misrepresentation in Maryland, the Court concluded that the homeowners presented testimony from which the jury could find that the cost of water and sewer connection was ⁸⁸ material to the individual homeowner’s decision to purchase a home in that subdivision. With regard to the “past or