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Goldner v. Kreft

Superior Court of Rhode Island, Providence

June 6, 2018


          For Plaintiff: Jeffrey H. Gladstone, Esq.

          For Defendant: Scott Partington, Esq. Jeffrey S. Brenner, Esq. (Attorney for non-party witness)



         This matter came before this Court, sitting without a jury, on Buyers Brian Goldner and Barbara Goldner's (Plaintiffs) complaint against Sellers Robert Kreft and Mary Ann Kreft (Defendants) for breach of contract, breach of good faith and fair dealing, and for declaratory judgment. Plaintiffs' claims arise out of an alleged breach of a Purchase and Sales Agreement (the PSA) for real property and release of Plaintiffs' deposit of $326, 250 (the Deposit). In response, Defendants counterclaimed for breach of contract, breach of good faith and fair dealing, and specific performance of the PSA. At the conclusion of their case, Defendants moved for judgment as a matter of law pursuant to Super. R. Civ. P. 52(a). This Court reserved Decision and at the conclusion of testimony instructed the parties to file post-trial memoranda. Decision is herein rendered. Jurisdiction is pursuant to G.L. 1956 §§ 8-2-13, 8-2-14, and 9-30-1 et seq., and Super. R. Civ. P. 52(a).

         Facts and Travel[1]

         On or about November 4, 2014, Plaintiffs and Defendants entered into the PSA for the purchase of Defendants' residence located at 306 Rumstick Road in Barrington, Rhode Island (the Rumstick Property). See Trial Ex. 1; Trial Tr. 15:21-16:16. During their search for a property and the closing, they worked with Midge Berkery (Berkery), a real estate agent. Trial Tr. 12:20-13:13. Section 3 of the PSA provided that the purchase price for the Rumstick Property was $4, 350, 000 of which the Deposit was to be paid on or before November 4, 2014. Id. Plaintiffs paid the Deposit on or before November 4, 2014, and a notice of wire transfer to the escrow account was sent to the realtors on November 5, 2014. See Trial Ex. 6. The Deposit is still in escrow due to Defendants' refusal to authorize its release to Plaintiffs. See Trial Tr. 31:2-20. Pursuant to the PSA, the closing on the Rumstick Property was to be held on March 2, 2015. See Trial Ex. 1.

         As part of the PSA, § 16 granted Plaintiffs a right to cancel the PSA if issues related to the inspections of the Rumstick Property had not been resolved by the Inspections Contingency deadline set forth therein. See Trial Ex. 1. In full, § 16 provides:

"Inspection Contingency: Time is of the essence as it applies to Section 16.
"(a) Buyers shall have a ten (10) day period, exclusive of Saturdays, Sundays and holidays ("Inspections Contingency Deadline"), from the date of this Agreement to conduct and complete inspections, obtain inspection reports, deliver to Seller or listing Licensee any and all requests relating to inspections, obtain Seller's response, and resolve all such requests with Seller in writing or this contingency shall be deemed waived.
"(b) The inspections shall be conducted at Buyer's expense by a recognized inspector(s) or inspection company of Buyer's choice. Inspections may include, but are not limited to, pest, cesspool/septic/sewer, radon, well water, lead, physical/mechanical, hazardous substances, wetlands and flood plain.
"(c) If Buyer wishes to terminate this Agreement because of the following:
"(1) Buyer is not satisfied with the results of the inspections; or
"(2) Buyer and Seller have not resolved any and all issues relating to inspections to Buyer's satisfaction; or
"(3) Seller has not responded to Buyer's requests on or before the Inspections Contingency Deadline,
"then Buyer shall deliver a written notice of termination to Seller or Listing Licensee on or before the Inspections Contingency Deadline or any mutually agreed extensions of such Deadline. If Buyer fails to deliver such notice, this Contingency shall be deemed waived and Buyer will forfeit Buyer's right to terminate this Agreement based on the Inspections Contingency." Id.

Section 16 also included an "Additional Provisions" subsection which provided that "[n]ot withstanding the 10 day inspection period terms set forth herein, the inspection period shall be extended through and including November, 22nd, 2014." Id.

         In accordance with § 16 of the PSA, Plaintiffs hired Cornerstone Home Inspection (Cornerstone) to conduct an inspection of the Rumstick Property. Trial Tr. 17:1-22. Plaintiffs were very specific with Berkery that they wanted an inspection both of the main house as well as of a barn on the Rumstick Property because the barn appeared to be very old and was a very large structure. Trial Tr. 17:17-22; 24:21-25:2.

         The Rumstick Property was inspected by Chip Grassie (Grassie), the owner of Cornerstone, on November 12, 2014. Trial Tr. 69:12-21. Grassie is a professional home inspector with over twenty-five years of experience, during which time he has completed over 15, 000 home inspections. Trial Tr. 68:10-11; 69:5-7. He produced the Cornerstone Inspection Report (the Inspection Report). See Trial Ex. 3; Trial Tr. 70:12-71:5. In all of his inspection reports, Grassie identifies items as fitting within one of five categories: acceptable, not present, not inspected, marginal, or defective. See Trial Ex. 3; Trial Tr. 70:12-71:5. The Inspection Report revealed several items that needed to be repaired, including the foundation of the barn situated on the Rumstick Property. Trial Ex. 3. Subsequently, at trial, Plaintiff Brian Goldner (Mr. Goldner) testified that he was concerned with the defects listed in the Inspection Report and had discussions with Grassie after the Inspection Report was made to discuss the barn and its foundation. Trial Tr. 24:21-25:2. Specifically, it was Mr. Goldner's understanding that the barn's foundation "had very loose stone, that it was dilapidating and that [Grassie] could pull stones out from the foundation of the barn and felt that it needed to be addressed and that it was a defective item." Trial Tr. 22:6-14.

         On page six of the Inspection Report and listed as item (7) in the summary report attached to the Inspection Report, the barn's foundation was checked as "defective." Trial Ex. 3. Grassie also provided an explanation in addition to the grade, which stated the following: "Foundation: Stone Loose stone noted. A qualified masonry contractor is recommended to evaluate and estimate the cost of parging the foundation walls." Id. In the definitions section of the Inspection Report, "defective" is defined as "[i]tem needs immediate repair or replacement. It is unable to perform its intended function." Id. In addition to the barn, there were also other items on the Rumstick Property that were labeled "defective."[2] See id.

         In response to the findings of the Inspection Report, Plaintiffs and Defendants executed a "Repair Addendum" on November 21 and 22, 2014 (the Repair Addendum).[3] See Trial Ex. 4; Trial Tr. 25:3-26:12. The Repair Addendum, under a section titled "Other, " stated the following: "Items 2, 3 . . . 6, 7, 8, 10, 11, 12, 13, 14, 15, 16 found on the attached inspection summary report from Cornerstone Inspection to be completed by seller by December 1st, 2014."[4] Id. Item (7) listed in the "Other" section to the Repair Addendum refers to the barn's foundation. See id.; Trial Ex. 3; Trial Tr. 25:3-26:12. The Repair Addendum further provided:

"The Buyer has the right to have the work inspected within 5 calendar days after Seller notifies Buyer in writing that the work has been completed, or prior to closing, whichever comes first. If Buyer fails to reinspect, Buyer accepts the work in its repaired condition 'as is' and waives his right to reinspect." Id.

         At trial, Defendant Robert Kreft (Mr. Kreft) testified that prior to the signing of the Repair Addendum, he advised his real estate agent Marybeth Frye (Frye) in an email that the "barn items are not getting fixed. It's a barn from 1860." Trial Ex. 7; see also Trial Tr. 112:6-13. However, according to Defendants, his refusal to repair was based on the fact that in 2013, Mr. Kreft had an engineer assess the stability of the barn since it was his intention to store motor vehicles on the first floor and furniture on the second floor. Trial Tr. 226:11-23. Steven A. Bogle, P.E. produced an engineering report for that assessment (the Bogle Report). See Trial Ex. 12. Meridian Custom Homes (Meridian)-the contractor charged with renovating the barn at that time-received the Bogle Report and created a change order (the Change Order) to include the barn as part of the work to ensure its stability. See Trial Tr. 226:19-23; 229:1-3; Trial Ex. 17. The Change Order reported approximately $60, 000 in renovations that Defendants performed on the barn's foundation in 2013. See Trial Ex. 17. According to Defendants, Mr. Kreft forwarded both ...

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