DR Legal News: Legal Case Studies September 2017

Harms Hartzler

Legal Case Studies

Research and analysis by Lisa Harms Hartzler, Sorling Northrup Attorneys

Nuisance claim based only on aesthetic dislike of solar panels was not actionable

In Myrick v. Peck Electric Co., 2017 VT 4, the Supreme Court of Vermont reaffirmed a rule of law first recognized in 1896—that nuisance actions based upon aesthetic disapproval alone are barred. Plaintiff landowners claimed that an array of solar panels erected by two solar energy companies negatively affected the surrounding area’s rural aesthetic, causing properties in their vicinity to lose value. They urged the court to reject the long-standing rule because a changing society has come to value scenic resources. The court declined, noting that a private nuisance is an “interference with the use and enjoyment of another’s property that is both unreasonable and substantial.” As a matter of law, an unattractive sight—without more—is not a substantial interference because it does not affect a property owner’s ability to use and enjoy his own land. Unlike the traditional bases for nuisance (noise, light, vibration, and odor), courts have rejected nuisance claims for visual objects like adjacent cell phone towers, an “unsightly wall,” and a cemetery. Not only is the “judicial branch ill-suited to be an arbiter of style or taste,” but recognizing aesthetic nuisance would, in effect, give neighbors the right to zone the surrounding property. While a diminution in property values might be a measure of damages for a proven nuisance, it cannot serve as the sole basis for a nuisance claim. 

Grocery store’s website found in violation of ADA 

In Gil v. Winn-Dixie Stores, Inc., No. 16-23020-Civ-Scola, (S.D.Fla., June 13, 2017), a federal district court in Florida held that a grocery store chain was in violation of the Americans with Disabilities Act (ADA) because it was inaccessible to visually impaired people. Winn-Dixie offered services on its website, such as online pharmacy access, access to digital coupons linked automatically to a customer’s rewards card, and the ability to find store locations. The court found that the website was heavily integrated with Winn-Dixie’s physical stores and operated as a gateway to them. As such, the website itself was a service of public accommodation covered by the ADA. The court also found that the Web Content Accessibility Guidelines (WCAG), produced by a consortium of private organizations dedicated to making websites accessible to all, were “the industry standard for accessibility.” These standards could be reasonably implemented by Winn-Dixie to remedy the violation. The court awarded attorneys’ fees to the plaintiff and imposed an injunction on Winn-Dixie, requiring it to make its website accessible, adopt a Web Accessibility Policy, provide annual training to employees, and periodically test its website for compliance with WCAG 2.0. 

Note: this case contrasts with a federal case from the Central District of California reported in the July 2017 Legal Case Studies, Robles v. Dominos Pizza LLC, which found that there were no industry standards or final rules issued by the DOJ that could justify finding a non-WCAG-compliant website in violation of the ADA. 

Broker not liable for misrepresentation where Buyer had the same information 

In Haynes v. Lunsford, (No. E2015-01686-COA-R3-CV, Ct. App. Tenn. 2017), the plaintiff purchasers sued the real estate agent that assisted them in buying a cabin in Gatlinburg, Tennessee, for negligent and/or intentional misrepresentation regarding the age of the cabin and the existence of mold. The plaintiffs learned about the cabin while looking at MLS descriptions online with the defendant, who was not the listing agent. The defendant provided all of the MLS information to the plaintiffs and visited the cabin with them. It apparently looked and smelled very good—nothing called attention to any problems, nor did an independent home inspector’s report mention any mold issues. Of course, five months after closing, when the plaintiff buyers started smelling mildew, several inspectors discovered moisture in the walls, dead mold spores, and mold growth in the basement. 

The defendant real estate agent, however, was entitled to summary judgment in her favor on the claims of misrepresentation because all of the information that she had concerning the history, condition, and value of the cabin and the property came through the MLS listing, a public record property report, the seller’s disclosures, the bank appraisal, the buyers’ own home inspection, and the seller’s warranty deed. The buyers were provided all of this information, too. The court held that a buyer in possession of material facts who proceeds to purchase real estate cannot “recover on the basis of fraud, misrepresentation, or concealment.” The defendant agent had not listed the property and had no additional information to which the buyers did not also have access. The defendant was entitled to summary judgment as a matter of law. 

U.S. Supreme Court drafts new test for 5th Amendment Takings claims

The Supreme Court of the United States again waded into the uncertainty and confusion surrounding the Fifth Amendment’s Taking’s Clause in Murr v. Wisconsin, 137 S.Ct. 1933 (2017). In this case, two adjacent but separate lots bordering the St. Croix River in Wisconsin were acquired separately in the 1960s. The plaintiffs’ parents bought Lot F and built a cabin on it. Their company bought Lot E. Both lots were transferred to the plaintiffs in the 1990s, after changes to local and state laws made each of the lots too small for development and prohibited their sale as separate lots. The plaintiffs requested a variance from the county board to move the cabin and sell Lot E, which was denied. They then claimed that the state and local regulations worked a regulatory taking by depriving them of all, or practically all, of the use of Lot E, because the lot could not be sold or developed separately. 

In a five-to-three decision (with new Justice Gorsuch not participating), the majority held that Lot E could not be considered by itself. The majority articulated a new test for determining what property should be included in a takings challenge. Under this test, courts must consider three factors: (1) the treatment of the land, including how it is bounded or divided under state and local law (but this is not determinative) and any legitimate restrictions affecting it; (2) the physical characteristics of the property, including the relationships among distinguishable tracts, the topography, and the surrounding human and ecological environment; and (3) the value of the property, “with special attention to the effect of burdened land on the value of other holdings.” In this case, the state and local regulations merging the two lots was for a specific and legitimate purpose; the two lots were contiguous along their longest edge and the river was an ecologically regulated land long before plaintiffs possessed it; and the lots combined had a greater value ($698,300) than the lots as separate parcels ($343,000 and $40,000). Consequently, Lots E and F had to be considered as a single unit. With the lots combined, the plaintiffs could not establish a compensable taking because they had not been deprived of all or nearly all economic beneficial use of the property. 

Justice Roberts dissented, although was not troubled by the ultimate holding that the Wisconsin regulations did not effect a taking in this case. In his opinion, Lot E was not deprived of all economic value because it could still be used as recreational space and as a valuable addition to Lot F. Further, the Plaintiffs knew or should have predicted that Lot E would be regulated. Justice Roberts did, however, severely criticize the new factors that were to be applied to determine what property should be included in a takings analysis. In his view, state law alone should define property interests and all of the factors raised by the majority should only be considered when deciding whether the regulation worked a taking. Instead of providing guidance for identifying whether a landowner should reasonably know whether his land will be treated as one parcel or several, “the majority’s approach will lead to definitions of the ‘parcel’ that have far more to do with the reasonableness of applying the challenged regulation to a particular landowner. The result is clear double counting to tip the scales in favor of the government.” His dissent was joined by Justices Alito and Thomas. 

Broker potentially liable for fraudulent actions of agent 

In Trevarthen v. Wilson, 219 So. 3d 69 (Ct. App. Fla. 2017), an appellate court reversed a summary judgment granted in favor of a real estate brokerage company, finding that a question of fact was raised as to whether the brokerage company could be vicariously liable for the actions of its agent. In this case, the agent represented a 93-year-old woman and convinced her to enter into a number of purchases and sales of condominium units on which he obtained commissions and at least once resulted in a financial loss for the plaintiff. Most shockingly, the agent obtained the plaintiff’s power of attorney and used her money to buy a condominium titled in a trust, which he used as his owned residence. 

The brokerage firm moved for summary judgment on the basis that whatever wrongs the agent committed were “outside the scope of his work” on behalf of the brokerage firm. The appellate court, however, thought the evidence demonstrated that the firm was possibly not so innocent. It described a number of actions by the firm’s principal that raised a question of whether it could be found vicariously liable for the agent: 

  • The principal was aware that the agent had become the plaintiff’s attorney-in-fact. 
  • The principal had advised the agent regarding creating a trust to purchase property. 
  • The principal was aware that while a purchase contract was pending on one of the units, the agent was able to wire $300,000 from the plaintiff’s account into the firm’s escrow account. 
  • The principal acted as the broker/sales agent for the purchase of the unit the agent titled in a trust and used for himself and was aware that the agent paid for the unit with cash even though the closing had been extended twice because the agent was unable come up with financing. 
  • The principal knew that the agent was borrowing money from the plaintiff, but “did not think that any financial arrangement reached between [the agent] and the [plaintiff] was any of his business.” 

Generally, a principal is responsible for the wrongful acts of its agent only if the agent was acting either (1) within the scope of his authority or (2) during the course of the agency to further a purpose or interest of the principal. However, a principal can subsequently ratify actions outside the scope of the agent’s authority “by accepting the benefit of the agent’s actions.” In this case, the principal accepted a commission on the purchase of the agent’s condominium unit. He accepted this benefit knowing that the agent was the plaintiff’s attorney-in-fact, that the agent had the ability to wire funds from the plaintiff’s account, that the agent could not obtain financing but eventually paid cash for his condo unit, and that the principal had advised the agent on taking title in a trust. This evidence raised questions as to whether the principal should be held vicariously liable for the agent’s fraudulent conduct and precluded a summary judgment in favor of the principal. 

Company formed to maintain private dam did not have to replace it 

In Chiurato v. Dayton Estates Dam & Water Co., 2017 IL App (3d) 160102, a subdivision near Ottawa, Illinois, was developed in 1973. It contained a lake formed by damming a stream running through the property. A recorded plat and declaration of covenants was amended to provide that a not-for-profit corporation (the “Company”) was to be created for the purpose of maintaining the dam. Each owner of a lot in the subdivision was automatically a member of the Company and subject to assessment for a pro-rata share of expenses. By 1997 the dam needed repairs but no action was ever taken. In 2007 the dam failed and the lake drained. The Company took out a $39,600 loan to pay for an engineering study, which concluded that rebuilding the dam would cost from nearly $500,000 to over $700,000. The project seemed cost-prohibitive and no vote was ever taken on it. Two board members who had been voted out of office filed suit against the Company claiming, among other things, that the Company was a homeowners association with a duty to rebuild the dam, that it had breached its contractual obligations to the members to repair and maintain the dam, and that its board members had breached their fiduciary duties. 

The court first determined that, although the subdivision covenants were covenants running with the land, and that a covenant is a contract to which the ordinary rules of construction apply, the clear intent of the declaration of covenants was to give the Company authority to maintain the dam. However, the court did not see anything in the covenants imposing an obligation to replace the dam or maintain its existence on a permanent basis. Second, the court concluded that the Company did not qualify as a homeowners association administering a common interest community because nothing in the covenants, articles of incorporation or bylaws of the Company specifically referred to the Company as a “homeowners association.” In addition, it was the Company that held title to the real estate on which the dam and the lake were constructed, not the members. Finally, the court found no breach of fiduciary duty by the Company’s directors. A corporate board of directors enjoys a presumption that their judgments were formed in good faith to promote the best interests of the corporation they serve. Absent evidence of fraud, bad faith, or gross overreaching, that presumption cannot be overcome. In this case, the directors hired an engineering firm to conduct a study, contacted the Illinois Department of Natural Resources, and secured financing for the study, all of which demonstrated a lack of bad faith or fraud. Summary judgment in favor of all defendants was affirmed.