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Leep v. Werline

Court of Common Pleas of Delaware, New Castle

January 3, 2018

KATHRYN LEEP, Appellant/Plaintiff,
CLIFF WERLINE, Appellee/Defendant

          Submitted: November 8, 2017

          Olga K. Beskrone, Esquire Community Legal Aid Society, Inc. Attorney for Appellant

          Brian T. Murray, Esquire Brian T. Murray, P.A. Attorney for Appellee


          Alex J. Smalls, Chief Judge

          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 Inspection Department of the City of Wilmington; Jesse Walker, owner of J.R. Walker Roofing; and Appellee. 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.


         On December 21, 2016, Appellant filed her Notice of Appeal and Complaint on Appeal in this Court as a pro se litigant. Appellant asserted that she purchased 224 W. 20thStreet, 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."[2] Plaintiff sought judgment for the cost of the new roof and partial payment to replace the wooden structural supports underneath the roof.

          On January 6, 2017, Brian T. Murray, Esquire entered his appearance on behalf of Appellee, and filed an Answer on January 27, 2017. In 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 Is."[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"). In 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. In 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 Memorandum. On November 8, 2017, Appellant filed her Reply Memorandum.


         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, Wilmington, Delaware 19802 (the "Property") from Appellee. Appellant signed the Agreement of Sale for Delaware Residential Property ("Agreement of Sale") on June 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] In 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 "VII. 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]

         In 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 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 "flipping 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 "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 Inspector ("Inspector") to investigate the Property. Regarding the roof, the Inspector 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 Inspector's visual observations, Appellant did not acquire a roof certification.

         Appellant ultimately purchased the Property for $113, 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 J.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 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. Walker Roofing was one of those roofing companies and submitted an estimate of $11, 100 to replace the flat roof.[22] Appellant hired J.R. Walker Roofing because its bid was the lowest, and she was impressed with Walker's repair of the mansard roof. After J.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 J.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]


         In 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 Del. C. § 2752, which requires a seller of residential real property 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 Wilmington 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 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]

          In 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 Del. 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 Inspector "recommend[ing]" that Appellant receive a roof certification from a local roofing company, Appellee believes Appellant had an equal, if not greater, duty to investigate.[38] 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] Likewise, 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]

          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 roofs condition was a "material inducement."[42]


         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 conflicting testimony, then the Court must determine which portions of the testimony deserve more weight in its final judgment.[45] In 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]


         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] Indeed, 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] I will address both arguments below.

         Second, contrary to the assertions of both parties' supplemental memoranda, and affording Appellant's pro se Complaint the appropriate deference[53] it also asserts a fraudulent 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 misrepresentation[56]-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."[58] As Appellant has alternatively argued that Appellee's statements were "misleading, " intentional misrepresentation is implicated.[59] Nevertheless, because I find that Appellee breached the contract by failing to adhere to the implied covenant of good faith and fair dealing, I will not address intentional misrepresentation in the present case.

          For the reasons discussed below, I 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. I find that the testimony presented at trial and documentary evidence support Plaintiffs claim for damages; therefore, I 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. First Alleged Breach - Failure to Disclose Known Material 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 properly 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 properly that are known at the time the properly is offered for sale or that are known prior to the time of final settlement." The Seller's Disclosure of Real Property Condition Report ("Disclosure") is not a warranty and is not a substitute for any inspection or warranties that either party may wish to obtain. The Disclosure is intended to be a good faith effort to comply with the Act.
A Disclosure signed by both the buyer and seller, however, becomes a part of the parties' purchase agreement. Accordingly, claims that a seller failed to disclose such material defects have been treated as breaches of contract by Delaware Courts.[62]

         "The breach will be deemed material if it concerns the 'root or essence of the agreement between the parties, or [is] one which touches the fundamental purpose of the contract and defeats the object of the parties in entering into the contract.' "[63] I find that the condition of the roof is material to the contract, as it is an essential part of the contract's subject-that is, the Property.[64] I also find that the condition of the roof is a material defect because it violates Delaware law.[65] As I find that the roofs condition in this case constitutes a material defect, I will proceed to the final consideration-knowledge.

         The case law surrounding this issue requires the seller to have actual knowledge of the material defect.[66] Yet, this precedent involves individual homeowners, not regular business market participants.[67] Appellee has failed to present a case, and the Court has not found one, with a factual posture similar to the case sub judice. As noted above, a seller is required to accurately complete the Seller's Disclosure with a "good faith effort."[68] This requirement erases the prior common law axiom of caveat emptor.[69] That is, the buyer is not blamed for her failure to investigate the quality of the purchase she is making.[70]

         It strikes the Court as quite logical that the common law requires actual knowledge for individual homeowners so as not to hold the seller liable for all potential problems with the property. Requiring less than actual knowledge in cases involving individual homeowners would overcorrect the law, swinging the pendulum too far away from caveat emptor. However, if the actual knowledge standard was also applied to sellers who regularly sold residential real estate, the pendulum would return to a caveat emptor model. That is, the unsuspecting buyer would be responsible for laborious investigation and research, and the sophisticated seller could feign ...

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