Real Property – South Carolina Residential Property Condition Disclosure Act – Negligent Misrepresentation

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Buyers in a residential real estate transaction failed to create an issue of fact regarding their reliance on a real estate agent’s statement.

We reversed the court of appeals and reinstated the circuit court’s grant of summary judgment to the real estate agent.

The Isaacs, buyers in a residential real estate transaction, brought this action against sellers Jacqueline and Thomas C. Onions’s real estate agent, Laura Kopchynski, for her failure to disclose reports indicating a high level of moisture in the crawl space of the Onionses’ house and her mischaracterization of a wood infestation report as “good” when the report revealed high moisture levels. The circuit court granted Kopchynski summary judgment on the Isaacs’ claims for fraud, fraud in the inducement, negligent misrepresentation, civil conspiracy, and violation of the South Carolina Residential Property Condition Disclosure Act. The court of appeals reversed the grant of summary judgment on the negligent misrepresentation and Disclosure Act claims and affirmed the grant of summary judgment on the remaining claims. Kopchynski argued the court erred in the “mere scintilla” standard to an order granting summary judgment; finding an issue of material fact existed as to the Isaacs’ negligent misrepresentation claim; and finding an issue of material fact existed as to the Disclosure Act claim.

Kopchynski argues the court of appeals erred in reversing the grant of summary judgment on the negligent misrepresentation claim. We agreed. As a real estate licensee, Kopchynski owed the Isaacs a duty to be truthful. However, “[a] licensee is not obligated to discover latent defects or to advise parties on matters outside the scope of the licensee’s real estate expertise.” Further, the Isaacs had a duty to inspect the Property. The Isaacs’ agent, Kimbrough, recognized the Isaacs had the duty to inspect the Property and verify the repairs had resolved the issues. Although he stated that if Kopchynski had reported that the June 18, 2018 CL-100 was bad, he probably would have asked to see it, he was adamant that he did not rely on Kopchynski’s representation that the June CL-100 was “good.” In his deposition, Kimbrough testified he did not want the June CL-100 report “because it’s our responsibility to do it. It was going to be on our terms, not on their terms or anybody else’s terms.” He related, “I thought when she said ‘good,’ I thought, perfect. We’re not going to have an issue on that. We will order our own CL-100 and we’ll verify the information that we need to see regarding repairs.” He also stated, “I wouldn’t say I wouldn’t care about [the June CL-100], but the fact is it was reported that it was good and it was up to us to verify that it was good and the only way to verify it was to . . . take responsibility for the CL-100 ourselves, which is what we planned to do all along.” He asserted the July CL-100 “would have verified and confirmed that the repairs . . . were working. That being the vapor barrier, reducing the moisture by the use of a fan system.” He further stated he discussed this matter with the Isaacs. Considering Kimbrough’s testimony, and Kopchynski’s provision to the Isaacs of the Cornerstone Report, giving them notice of the crawl space moisture issues, and the repair list informing them of the repairs the Onionses made in response to the report, we found the Isaacs failed to create a genuine issue of material fact that they reasonably relied on any representation by Kopchynski concerning the June CL-100. Accordingly, because the Isaacs cannot create a genuine issue of material fact as to an element of negligent misrepresentation, their claim failed as a matter of law. Therefore, we held the circuit court properly granted Kopchynski summary judgment on this claim.

Kopchynski next argued the court of appeals erred in reversing the circuit court’s grant of summary judgment on the Isaacs’ Disclosure Act claim. We agreed because the Disclosure Act does not create a private cause of action against real estate licensees. The Disclosure Act creates a private cause of action against an owner who knowingly violates or fails to perform any duty prescribed by the Act. In contrast, while the Disclosure Act provides for immunity for real estate licensees when they did not know or have reason to know about issues, it does not provide for a cause of action against them. However, it does recognize that other causes of action may be brought against licensees. Thus, considering the plain language of the Disclosure Act, we held the legislature did not intend to create a cause of action for violation of the Disclosure Act against real estate licensees. We reversed the court of appeals and reinstated the circuit court’s grant of summary judgment on this claim.

Reversed.

Isaac v. Onions (Lawyers’ Weekly No. 010-024-25, 10 pp.) (Letitia H. Verdin, J.) Appealed from Georgetown County Circuit Court (Benjamin H. Culbertson, J.) Steven Raymond Kropski, of Earhart Overstreet, LLC, of Charleston, for Petitioner; George W. Redman, III, of Bellamy, Rutenberg, Copeland, Epps, Gravely & Bowers, P.A., of Myrtle Beach, for Respondents. South Carolina Supreme Court