Townhouse full of water and mold.

The courts in Georgia were forced to follow a confusing paper trail to try to unravel exactly what happened after a woman bought a townhouse fraught with water and mold problems. She accused a real estate agent and listing broker of intentionally concealing the issues, but they insisted they provided her with all the necessary disclosure forms. What did the courts find? Read on.

When the papers got shuffled around in a townhouse purchase in Atlanta, the buyer somehow failed to receive a mold report indicating prior water damage and mold contamination. She sued the listing broker and real estate agent who handled the deal, but lost her case in the trial court.

The Court of Appeals of Georgia affirmed all but one claim in favor of the defendants in its ruling on July 14.

Plaintiff Udeme Asuamah bought a townhouse in Atlanta from Cendant Mobility Financial Corporation — which provides real estate relocation services to transferred employees — on June 28, 2005.

After moving in, Asuamah discovered waterlogged carpets and falling sheetrock in the dining room. The buyer contacted real estate agent Shelly Gee, who handled the transaction for her, and Barbara Haley, the agent and listing broker with Coldwell Banker Residential Real Estate Inc.

Haley claimed she had provided Asuamah with a 20-page mold screening inspection report indicating “extensive water stains and mold” throughout the property. Asuamah claimed she did not see the report before she bought the home.
Townhouse tangled in prior litigation

Before Asuamah bought the townhouse, it had been sold to Beverly McCannon in 2001, who sued the same defendants for allegedly failing to disclose water leaks that led to mold contamination. She settled her suit in 2004 and Cendant took control of the property. The property listing was reassigned to Haley, who hired a contractor to conduct remediation. She then listed the townhouse for sale.

Haley had left a set of blank contract forms, the seller real estate disclosure form, the mold report, a lead paint disclosure form on the townhouse’s kitchen counter. The mold report noted extensive water stains and mold, and indicated water damage was previously remediated.

After Asuamah made her offer, Haley received a seller’s real estate disclosure form that was signed and initialed by the buyer and a witness stating that the buyer had received all of the disclosure documents. Asuamah had the property inspected and received a report indicating minor issues.

Gee claimed that when she showed the property to Asuamah’s brother, Philip Asuamah, she picked up a stack of documents from the kitchen counter and gave them to him to give to his sister, however, testified that he never received the mold report. Asuamah claimed her initials and signature were forged on the seller’s real estate disclosure form and that she was never given the mold report.

Asuamah didn’t sue Gee, but filed a complaint against Coldwell Banker, Haley and Cendant. She alleged that material facts and defects had been withheld from her, such as the previous litigation, and that the defendants conspired to defraud her.

Asuamah sought rescission of the contract, damages and attorney fees. She later amended her complaint to add claims of breach of contract and negligence against Cendant. The trial court granted summary judgment in favor of the defendants, and Asuamah appealed.

Disclosure was evident, fraud wasn’t

The appellate court said Asuamah failed to meet the requirements of evidence to support her fraud claim.

“Even viewed with every inference indulged in favor of Asuamah … the evidence demonstrates conclusively that [the defendants] disclosed the mold report and that Gee had the mold report and failed to disclose it to Asuamah,” the appellate court said.

Asuamah argued that the defendants failed to disclose the previous McCannon litigation and attempted to conceal the property’s defects, but the appellate court found the McCannon case was not applicable to Asuamah’s complaint.

“Even if a question of fact exists concerning concealment of the McCannon litigation, it does not affect the outcome, because it is undisputed that the defendants did not conceal the mold report, and the report and the McCannon litigation relate to the same defects: water and mold,” explained the court of appeals. “The report was issued after Cendant reacquired the property from McCannon and disclosed that water damage had been remediated. … Haley disclosed the mold report by leaving a copy of it in the property for all prospective purchasers.”

Furthermore, Gee admitted to taking a stack of documents from the kitchen and that the mold report was in her file, the appellate court said.
“Had Asuamah received the mold report, she would have been charged with notice of any problem or defect to which her subsequent inquiry might have led. … Thus, through the mold report, the defendants disclosed the defects in the property,” said the appellate court.

It was Gee, the court said, who had the responsibility of disclosing the report to Asuamah, according to the duties of a real estate agent as described by the Brokerage Relationships in Real Estate Transactions Act (BRRETA).
The buyer claimed Gee was Cendant’s agent, and that Cendant and Coldwell Banker were bound by Haley’s and Gee’s representations. Asuamah allegedly believed Gee represented the seller, but the defendants claimed — and Gee testified — that she was acting as the transaction broker. A transaction broker is one who has not entered into a client relationship with any parties to a real estate transaction and performs only ministerial acts.

Gee had not entered into a written agreement with the buyer or Cendant, and therefore neither party was her client. Instead, it appeared Asuamah was Gee’s “customer,” which BRRETA defines as one who is not represented by a real estate broker in an agency capacity but for whom a broker may perform ministerial acts.

“Asuamah argues that Gee cannot be deemed a transaction broker as a matter of law because she was required to exercise professional judgment in negotiating the contract. We disagree,” the appellate court stated. “We find that the evidence establishes that Asuamah was Gee’s ‘customer,’ so that Gee was a transaction broker. As such, Gee was required to disclose to Asuamah the mold report, which was clearly disclosed on the (seller’s real estate disclosure form) and which Gee admitted having in her file.”

Broker, agent fulfilled obligations to buyer

Since Haley placed the mold report in the home and later received the seller’s real estate disclosure which was allegedly signed by Asuamah, she fulfilled her obligations under BRRETA, the appellate court said. And although the buyer argued that her signature and initials were forged, she failed to provide evidence that would contradict Haley’s statements that she did not forge Asuamah’s signature. Gee had also testified that she watched Asuamah sign the document.

Asuamah’s breach of contract claim against Cendant fell short as well. She claimed the company failed to disclose all material facts concerning ownership of the property. But since she also alleged fraud, in this particular count of the complaint she affirmed the contract and sought damages. She was therefore bound by the terms of the contract and would be subject to any defenses asserted based on that contract.

The contract had contained an “entire agreement” clause noting that it constituted the entire agreement between the parties and no representations or promises not included in the agreement would be binding. Thus, that clause operated to bar a claim based on representations made on that form, the appellate court said.

Engineer: Repairs were improper

Asuamah did make some headway with her claim that Cendant negligently repaired the property or ratified the negligent actions of Haley acting as its general contractor. She pointed to testimony from an engineer who inspected the property in 2003 and 2007, finding the same defects each time.

The engineer claimed it appeared there was no attempt made to correct structural deficiencies causing water leakage and that defects were concealed behind sheetrock and were not observable until removed. He also said the work performed by Cendant’s contractors was below standard. Haley’s alleged sole reliance on contractors instead of an engineer led to “improper repairs,” the engineer claimed.

“Here, there is evidence that Cendant ignored the advice of an engineer in having the defects repaired; that indeed, such defects were not repaired; and that the defects were latent and could not be observed absent removal of the sheetrock. … Under these circumstances, it could be argued that Cendant was ‘in superior position to know or discover latent defects which [it] created, and which the buyer could not reasonably discover.’ Thus, we hold that the trial court erred in granting summary judgment to Cendant on Asuamah’s claim for negligent repairs,” the appellate court stated.

The negligent repairs claim was reversed and remanded, but the summary judgment in favor of Haley and Coldwell Banker was affirmed.

Asuamah v. Haley.