Date: 01-12-2007

Case Style: Terry A. young and Lynn Y. Young v. Vista Homes, Inc., et al.

Case Number: 2004-CA-001618-MR

Judge: Unknown

Court: Commonwealth of Kentucky Court of Appeals on appeal from the Circuit Court of Hardin County

Plaintiff's Attorney:

C. Mike Moulton of Moulton & Long, PLLC, Elizabethtown, Kentucky

Dwight Preston of Lewis and Preston, Elizabethtown, Kentucky

Defendant's Attorney:

Allan Weiss of Ferreri & Fogle, Louisville, Kentucky for Vista Homes, Inc.

Reford H. Coleman, Robert D. Johnston and R. Keith Bond of Coleman Lochmiller & Bond, Elizabethtown, Kentucky for Re/Max Executive Group, Inc.

Description:

These are consolidated appeals and cross-appeals from separate judgments of the Hardin Circuit Court confirming jury verdicts in two related trials. In all of these cases, the homeowners entered into contracts for the construction and purchase of purported four bedroom homes. However, the septic systems for these houses only met the building code standards for three bedroom homes. For the most part, we find no reversible error on any of the issues raised in these appeals and cross-appeals. However, we conclude that the homeowners failed to present evidence of intentional fraud warranting the awards of punitive damages. Furthermore, we find that the trial court's award of attorney fees after the second trial failed to fully compensate those homeowners for the attorney fees and costs to which they are entitled by statute. Hence, we affirm in part, reverse in part, and remand for entry of a new judgment.

FACTS

James Bramblett is the president, and sole officer and stockholder of Re/Max Executive Group, Inc. (Re/Max), a real estate brokerage company located in Elizabethtown, Hardin County, Kentucky. James Bramblett is also a stockholder and president of Vista Homes, Inc., also located in Elizabethtown, Kentucky. James's father, Fred Bramblett, is the other stockholder and vice-president of Vista Homes. Vista Homes is engaged in the construction and sale of homes. Among its other endeavors, Vista Homes is the developer and primary builder in the LaVista subdivision, which is located near Rineyville in Hardin County.

Terry and Lynn Young (the Youngs), Bernard and Danielle Prevost (the Prevosts), Randall and Laura Roller (the Rollers), Willard and Michaela Suther (the Suthers), and Dean and Katy Moreland (the Morelands) each contracted with Vista Homes for the construction and purchase of homes in the LaVista subdivision. All of the homes are based on the same design. They also signed contracts with Re/Max to serve as listing agent for the transactions. All of these buyers allege that Vista Homes and Re/Max represented the homes as having four bedrooms. Vista Homes characterizes the homes as having three bedrooms with a "bonus" room. The distinction is significant because Vista Homes obtained permits for and built septic systems on the properties that are approved and suitable for three bedroom homes.

After the Youngs began having problems with their septic system, Vista Homes and the Hardin County Board of Health reached an agreement regarding the septic systems. Vista Homes agreed to install a new system appropriate for a four bedroom house. Vista Homes also contacted the other homeowners and extended the same offer. The Youngs accepted the offer but claim the new system installed by Vista Homes does not comply with applicable building codes. The other homeowners declined to have Vista Homes replace their septic systems.

Thereafter, the Youngs, the Prevosts, the Rollers, the Suthers, and the Morelands each brought separate complaints against Vista Homes, James and Fred Bramblett, and Re/Max. All of the complaints asserted claims for misrepresentation, and a private action for a code violation pursuant to KRS 198B.130. The Youngs, the Prevosts, the Rollers, and the Morelands asserted claims for negligent construction, and the Youngs and the Morelands asserted claims for breach of warranty. Finally, the Youngs also sought damages for loss of use of their property, discomfort, and annoyance.

Because the cases involved similar issues and the same defendants, the trial court ordered that they be consolidated for motion and discovery practice. However, the Youngs' case was tried first and separately. Prior to the trial in the Youngs' case, the trial court granted partial summary judgment on the Youngs' statutory claim for damages related to the replaced septic system. The trial court concluded the Youngs were precluded from recovering such damages because Vista Homes had repaired and brought the system into compliance with applicable zoning regulations and because the Youngs had not identified any witnesses who would testify regarding any additional repair costs or diminution of the value of their property.

The Youngs' remaining claims proceeded to a jury trial in June 2004. At the close of the Youngs' proof, the trial court entered directed verdicts dismissing the claims against Re/Max, James Bramblett, and Fred Bramblett. The court also granted a directed verdict on the Youngs' negligence claim against Vista Homes, but allowed the remaining claims to proceed to trial. After the close of all proof, the jury returned a verdict in favor of the Youngs on all counts, awarding $3,000.00 in nominal damages on the misrepresentation claim, $3,900.00 in punitive damages, and $600.00 for breach of warranty.

In post-verdict orders, the trial court reduced the nominal damages award to $1.00, concluding the jury did not comply with the court's instruction to award a "trivial" sum in compensatory damages. Accordingly, the trial court entered a judgment in favor of the Youngs totaling $4,501.00. The court also denied the Youngs' motion for attorney fees. The court recognized that KRS 198B.130(1) allows an award of attorney fees in an action for damages arising out of a building code violation, but the court declined to make such an award because the Youngs had failed to prove actual damages arising from the statutory violation.

The claims by the other homeowners proceeded to a jury trial in February and March of 2005. As in the Youngs' case, the trial court granted a directed verdict and dismissed the claims against Re/Max, James Bramblett, and Fred Bramblett. The court also sustained Vista Homes' motion for a directed verdict on the negligence claims, but submitted the remaining claims to the jury. After deliberating, the jury returned awards for each of the homeowners in the following amounts:

Misrepresentation Code Violation Warranty Punitive Damages Prevost $1,000.00 $3,700.00 $2,050.00 $8,000.00 Roller $1,000.00 $3,700.00 $8,000.00 $8,000.00 Suther $1,000.00 $3,400.00 $1,750.00 $8,000.00 Moreland $1,000.00 $4,200.00 $1,700.00 $8,000.00

In its post-trial order, the trial court reduced the awards for misrepresentation to $1.00, finding the homeowners had failed to present evidence of a diminution in the fair market value of the properties and that they had been awarded the cost of repair separately under the other claims. The trial court also found that the punitive damages awards were not excessive. Finally, the trial court granted the homeowners' motions for attorney fees for the code violation. However, the court only required Vista Homes to pay a percentage of the award recovered by the landowners for the building code violation. Accordingly, the court ordered Vista Homes to pay $740.00 in attorney fees to the Prevosts, $740.00 to the Rollers, $680.00 to the Suthers, and $840.00 to the Morelands.

After entry of the respective judgments, these appeals and cross-appeals followed. Considering the related facts and common issues presented, this Court ordered the appeals consolidated. But while each judgment is based upon separate facts, we recognize that the legal and factual issues are overlapping. Consequently, we will address the questions presented in these appeals by issue and then specifically apply our analysis to the facts of each case.

* * *

Outcome: Accordingly, the judgments of the Hardin Circuit Court are affirmed in part, reversed in part, and remanded for entry of new judgments as set forth in this opinion.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: None