MURDOCK, Justice.
Ross Teer and Wylene Sue Teer appeal from a summary judgment in favor of Judith A. Johnston by the Mobile Circuit Court on their action against Johnston arising out of their purchase of real property from Johnston.
In 2001, Mobile County placed a road near the residence then owned by Johnston. In conjunction with the road construction,
The Teers placed an offer to purchase Johnston's property. On December 15, 2004, Johnston executed and submitted to the Teers a Seller's Property Disclosure Statement ("disclosure statement"), which provided, among other representations, that there were no "flooding, drainage or grading problems" with the property and that the property had never flooded. In her deposition, Johnston claimed that she filled out the disclosure statement per the instructions of her real-estate agent and that she had expected her agent to make sure that the document conformed to what the agent knew to be the case about her property.
On March 29, 2005, the Teers signed a purchase agreement for the property, agreeing to buy the property for $149,500. The first paragraph of the purchase agreement stated, in pertinent part: "This contract constitutes the sole agreement between the parties and any modification hereto and any modifications of this contract shall be signed by all parties to this agreement. No representation, promise, or inducement not included in this contract shall be binding upon any party hereto." Additionally, the purchase agreement contained the following clause:
(Capitalization in original.) The Teers contend that they signed the purchase agreement based on the representations set forth in the disclosure statement. It is undisputed that neither the disclosure statement nor the representations made in the disclosure statement were added as an addendum to the purchase agreement.
The sale of the property closed on April 25, 2005, and the Teers subsequently moved onto the premises. The Teers allege that the property flooded several times after they started living on the property, despite Johnston's representations in the disclosure statement that the property had no flooding problems.
On June 8, 2007, the Teers sued Johnston, seeking rescission of the purchase agreement and damages for the costs the Teers incurred in purchasing and moving into the residence. The Teers alleged that Johnston committed intentional fraud by representing that the property had no flooding problems when she knew otherwise and that she thereby induced the Teers into signing the purchase agreement.
On May 22, 2008, Johnston filed a motion for a summary judgment, which the trial court subsequently denied on August 4, 2008, following a response from the Teers. On April 23, 2009, Johnston filed a renewed motion for a summary judgment. On June 8, 2009, the trial court granted Johnston's renewed motion for a summary judgment, explaining, in pertinent part, in its order:
The Teers appeal.
Ex parte Newton, 895 So.2d 851, 854 (Ala. 2004).
The Teers contend that the trial court's ruling contradicts the "concept" of the statement in Fennell Realty Co. v. Martin, 529 So.2d 1003 (Ala. 1988), that
529 So.2d at 1005.
As Johnston observes, however, the Teers presented no evidence indicating that the condition complained of in this case—flooding of the rear of the property—constitutes a "material defect . . . that affects health or safety." In Blaylock v. Cary, 709 So.2d 1128, 1131 n. 4 (Ala.1997), this Court stated that the "`health and safety' exception" to the general rule of caveat emptor is a "narrow" one, and that, in order for it to be invoked, the complaining party must make "a sufficient showing" that the defect "posed a direct threat to [his or her] health or safety." There is no such evidence in the record in this case.
The Teers also contend that the trial court's judgment conflicts with the fraud exception to the general rule that a contract for the sale of real property merges into the deed given in fulfilment of that contract:
Jones v. Dearman, 508 So.2d 707, 709 (Ala.1987) (quoting Alger-Sullivan Lumber Co. v. Union Trust Co., 207 Ala. 138, 142, 92 So. 254, 257 (1922) (emphasis added)). The Teers argue that because there is evidence in this case indicating that Johnston committed fraud, the purchase agreement is not the sole memorial of the agreement between the parties and that they have a right under the disclosure statement to be compensated for Johnston's misrepresentation.
The Teers' argument is misdirected. Because of the nature of their claims, the Teers never get to the question of whether they have rights under the terms of their contract that survive the execution and delivery to them of the deed. Rather, the Teers seek to recover for an alleged fraudulent misrepresentation. To do so, they must establish that the fraudulent misrepresentation survived the execution and delivery of their contract. For the reasons explained by the trial court, it did not.
In Massey v. Weeks Realty Co., 511 So.2d 171 (Ala.1987), this Court stated:
511 So.2d at 173 (quoting Ray v. Montgomery, 399 So.2d 230, 233 (Ala.1980)). Thus, in Massey the Court concluded that an "as is" clause contained in a purchase agreement or deed for sale of used property is not negated by fraud.
Several cases followed Massey in upholding this rule, including O'Connor v. Scott, 533 So.2d 241, 243 (Ala.1988) (acknowledging that "a vendor or purchaser may protect himself by limiting his liability
949 So.2d at 897-98 (some citations omitted).
There is no dispute that the Teers purchased used real property and that the rule of caveat emptor applies to such sales. See, e.g., Blaylock, 709 So.2d at 1130 (stating that "Alabama adheres to the caveat emptor rule in the sale of used residential property," and, therefore, "a seller ordinarily has no duty to disclose to the purchaser any defects in the property"). It is also undisputed that the Teers signed the purchase agreement, which contained both a merger clause and an "as is" clause, three months after Johnston executed the disclosure statement. The Teers did not incorporate the disclosure statement into the purchase agreement, and, thus, they did not "`protect [themselves] by express agreement in the . . . contract for sale.'" Massey, 511 So.2d at 173 (quoting Ray, 399 So.2d at 233). Under the rule enunciated in the Massey line of cases, the Teers' fraud claim against Johnston is precluded by the "as is" clause contained in the purchase agreement.
The Teers have expressly asked us to overrule Massey and its progeny, citing a dissent by then Chief Justice Hornsby in Leatherwood as support for this request. In Moore, this Court summarized Chief Justice Hornsby's dissent, explaining:
Moore, 849 So.2d at 925.
The Moore Court provided its summary of Chief Justice Hornsby's dissent in the course of discussing whether to overturn Massey and its progeny. The Court acknowledged that it had ruled in at least one case released after Massey—Boswell v. Coker, 519 So.2d 493 (Ala.1987)—that an "as is" clause did not preclude the plaintiff's claim of fraud. The Moore Court summarized Boswell as follows:
Moore, 849 So.2d at 925 (emphasis omitted). The Moore Court declined to overrule the Massey line of cases based on Boswell, reasoning:
849 So.2d at 925-26.
Employing reasoning similar to that in Moore, the Court in Clay Kilgore Construction declined to overrule the Massey and its progeny because
949 So.2d at 898 (emphasis omitted).
In Nesbitt v. Frederick, 941 So.2d 950 (Ala.2006), the plaintiffs expressly asked the Court
941 So.2d at 956. The Court declined the invitation, however, because it determined that the plaintiffs had "failed to present sufficient evidence to overcome the Fredericks' summary-judgment motion on their claims of fraudulent misrepresentation and fraudulent suppression." Id.
The Moore, Nesbitt, and Clay Kilgore Construction Courts overlooked this Court's decision in Cruse v. Coldwell Banker/Graben Real Estate, Inc., 667 So.2d 714 (Ala.1995). In Cruse, the Court concluded:
667 So.2d at 716-17. Justice Houston, citing Leatherwood, Haygood, and Massey, dissented in Cruse, stating that "the Cruses could not have justifiably relied on the representations of Coldwell Banker/Graben." 667 So.2d at 717 (Houston, J., dissenting).
Unlike the plaintiffs in Moore and Clay Kilgore Construction, the plaintiffs in this case have expressly requested that we overrule Massey and its progeny. Also, unlike Nesbitt, the Teers have presented substantial evidence of their fraud claim. Therefore, we are faced directly with the choice of following Massey and its progeny or abandoning it for the reasons provided by Chief Justice Hornsby in his dissent in Leatherwood.
Chief Justice Hornsby's first reason for abandonment of the Massey rule was that "[v]irtually every other state that has addressed the effect of an `as is' provision in a contract for the purchase of used residential real estate has held that the `as is' provision does not insulate a vendor from liability for fraud." Leatherwood, 619
Chief Justice Hornsby argued that the Massey rule "permits a vendor to contract away liability for intentional wrongdoing." Leatherwood, 619 So.2d at 1276 (Hornsby, C.J., dissenting). In fact, what the Massey rule does is place the onus on the buyer to protect his interest through his own investigation and inspection of the property being purchased. This should not be surprising, given that "[t]he rule of caveat emptor — `let the buyer beware' — applies to sales of used residential real estate in Alabama." Hays v. Olzinger, 669 So.2d 107, 108 (Ala.1995). The buyer's awareness should be heightened even more when the buyer is signing a purchase agreement or deed that contains a disclaimer as ubiquitous as an "as is" clause in a residential real-property transaction. It is because such a clause serves as a clear and common disclaimer of any previous representations that "an `as is' clause negates the element of reliance essential to any claim of fraud and/or fraudulent suppression." Clay Kilgore Constr., 949 So.2d at 898. Moreover, as the Court noted in Massey, the buyer is not without recourse in preserving the viability of previous representations by simply negotiating for the inclusion of such representations in the deed or contract for sale.
In short, we are not persuaded by the arguments in Chief Justice Hornsby's Leatherwood dissent that Massey and its progeny should be abandoned. The vast majority of our cases concerning this issue decided since Massey have followed its course; thus, the rule has been clear and consistent. Boswell, as the Moore Court noted, failed to discuss "the import on its analysis of the `as is' language." Moore, 849 So.2d at 925. The majority in Cruse declined to discuss Leatherwood, Haygood, and Massey, despite Justice Houston's prominent citation of those cases in his dissent in that case. Thus, Boswell and Cruse have been, at best, outlying cases concerning the effect of "as is" clauses in agreements involving the sale of used real property, and we overrule Boswell and Cruse to the extent that they stand for a proposition different than that expressed in Clay Kilgore Constr., Nesbitt, Moore, Leatherwood, Haygood, O'Connor, and Massey.
Because the "as is" clause in the purchase agreement negated any reliance the Teers may have had on previous representations made by Johnston in the disclosure statement concerning the property in question, the Teers cannot establish their fraud claim against Johnston. Accordingly, the trial court did not err in entering a summary judgment in favor of Johnston and against the Teers in this action. The judgment of the trial court therefore is affirmed.
AFFIRMED.
COBB, C.J., dissents.
COBB, Chief Justice (dissenting).
I respectfully dissent. The facts of this case are straightforward — the seller sought to sell her house because the property was prone to flooding; she included a document with the material promoting the sale of the property stating that there were no problems with drainage or flooding; the Teers purchased the house in reliance on that document, among others, and then sued the seller when the intentional fraud was discovered. The majority opinion is founded on the outdated legal concept of "caveat emptor" that is presently the law of this State for purchases of used residential property and holds that the Teers have no remedy. That law permits a seller of used real estate to commit intentional fraud in order to induce a buyer to purchase the real estate and to avoid any liability for that fraud by inserting the words "as is" into the purchase contract. This legal concept permits dishonest sellers to lie about the condition of the property they seek to sell and protects them from any consequence of their dishonest action — it promotes fraud. I strongly believe that this Court should recognize the injustice that is promoted by the rule established in Leatherwood, Inc. v. Baker, 619 So.2d 1273, 1274 (Ala.1992); Haygood v. Burl Pounders Realty, Inc., 571 So.2d 1086, 1089 (Ala.1990); and Massey v. Weeks Realty Co., 511 So.2d 171 (Ala. 1987), and their progeny and overrule those cases.
In his dissent in Leatherwood, Chief Justice Hornsby recognized that most jurisdictions in America refuse to permit the words "as is" in a purchase contract for the sale of real property to insulate a seller from intentional fraud:
619 So.2d at 1276. The dissent backed up this statement with an extensive list of cases from different jurisdictions holding that the words "as is" in a real-estate contract do not insulate a dishonest seller from liability for intentional fraud.
In the 18 years since Chief Justice Hornsby's dissent in Leatherwood, Alabama has remained in the erroneous position of being one of the few jurisdictions to apply caveat emptor in "as is" contracts of the purchase of used residential property to exempt a vendor from liability for intentional fraud. Additional cases from other jurisdictions that have held that an "as is" real-estate contract does not protect a dishonest seller from intentional fraud include Mulkey v. Waggoner, 177 Ga.App. 165, 338 S.E.2d 755 (1985); Ferguson v. Cussins, 713 S.W.2d 5 (Ky.Ct.App.1986); Grube v. Daun, 173 Wis.2d 30, 496 N.W.2d 106 (1992); Clemens v. Lesnek, 200 Mich.App. 456, 505 N.W.2d 283 (1993); Gibb v. Citicorp Mortgage, 246 Neb. 355, 518 N.W.2d 910 (1994); Richey v. Patrick, 904 P.2d 798 (Wyo.1995); Black v. Cosentino, 117 Ohio App.3d 40, 689 N.E.2d 1001 (1996); Fimbel v. DeClark, 695 N.E.2d 125 (Ind. Ct.App.1998); Dyke v. Peck, 279 A.D.2d 841, 719 N.Y.S.2d 391 (2001); and Fletcher v. Edwards, 26 S.W.3d 66 (Tex.Ct.App. 2000). Many more cases on this point exist. See, generally, Annot., "Construction and effect of provision in contract for sale of realty by which purchaser agrees to take property `as is' or in its existing condition," 8 A.L.R. 5th 312 (1992 and Cum. Supp.2010).
It is plain that the rule relied upon by the majority in this case protects the seller from an intentional lie in a written document that was perpetrated to promote the sale of the property in question. Moreover, this is not a situation in which some structural defect was present that could have been ascertained by an inspection; no inspection of the property during dry conditions would have revealed the flooding problem. In spite of its assertion otherwise, the majority opinion does shield the seller from intentional wrongdoing, and imposing a duty of inspection on the buyer fails to remedy that wrong where an inspection cannot discover the fraud. In this case, the overwhelming majority of American jurisdictions would hold that the "as is" term in this contract would not shield the seller as a matter of law on a motion for a summary judgment. This Court should overrule Massey and its progeny and hold that such contracts do not shield a vendor from liability for fraudulent inducement as a matter of law. Therefore, I must dissent.