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Gilmore v. M&B Realty Co., L.L.C.: Buyer’s Lawsuit Over Purchase of Wrong House Allowed to Proceed

An Alabama court has considered whether a lawsuit could proceed involving purchasers who learned six years after closing that the house they thought they had purchased and lived in for six years was not the actual house they had in fact purchased.

In 1993, the Department of Veteran Affairs (“VA”) foreclosed a mortgage it held for a property located at 4360 Bayou Road (“Property”) in Theodore, Alabama. The VA hired Property Realty as “management broker” for the property. Property Realty sent Hattie Clark (“Clark”) to locate and identify the property, which was identified in documents sent by the VA as “4369 Bayou Road”. Clark was not able to locate this address, as there was no property with this address. Upon investigation, Clark sent a report to the VA stating the property had multiple addresses, being identified in the courthouse as 4360 Bayou but Clark stated that the property actually had an address of 4361 Bayou, which was across the street from the Property.

Following the identification of 4361 Bayou as the property listed for sale, M&B Realty Company (“M&B”) began marketing the property. The VA allows real estate firms who register (which M&B had done) with the VA to sell all of its properties, even when the VA assigns a management broker to the property. Seeing M&B’s ad in the paper, Kevin and Therese Gilmore (“Buyers”) contacted M&B. Abigail Panayiotou (“Salesperson”), a salesperson associated with M&B, communicated with the Buyers and directed them to 4361 Bayou. When one of the Buyers questioned the Salesperson why the address had 4361 but all of the listing documents stated that the address was 4369, the Salesperson simply told the Buyers that she would look into it. The Buyers and the Salesperson had no further discussions about the discrepancy between the two addresses.

The Buyers made an offer which the VA accepted, and closing for the transaction was held. All of the purchase documents listed a street address as “4369 Bayou Drive”, but the legal description was actually for the Property. The purchase documents stated that the Buyers were responsible for all costs associated with a title search, and the Buyers chose to not conduct a title search. Following the closing, the Buyers moved into 4361 Bayou and lived there for 6 years. During that time, one of the Buyers went to the county courthouse to file for a homestead exemption. After looking at the purchase documents, the clerk came back with a document which included not only the legal description of the Property but also the Property’s address, 4360 Bayou. The Buyers also began using 4361 Bayou as their mailing address, after learning there was no such address as 4369 Bayou.

In 1999, L.K. Crenshaw arrived at 4361 Bayou and told the Buyers that he was the owner of 4361 Bayou. The Buyers then discovered that they actually owned the Property, not 4361 Bayou. The Buyers evicted the individuals who resided on the Property, but discovered that the Property was in such poor condition that it was uninhabitable. In 2000, the Buyers filed a lawsuit against Property Realty, Clark, M&B, and the Salesperson alleging negligence and wantonness, and made specific allegations against the Salesperson and M&B alleging fraudulent misrepresentation. The trial court ruled against the Buyers on all of the allegations and entered judgment in favor of the other parties. The Buyers appealed.

The Supreme Court of Alabama partially reversed the trial court and sent the fraudulent misrepresentation allegations back to the trial court. The first issue considered by the court was whether the negligence and wantonness allegations made by the Buyers were barred by the applicable statute of limitations. Alabama’s statute of limitations for negligence and wantonness was two years, meaning that all claims for such conduct needed to be made within two years of their occurrence. While all the behavior the Buyers alleged was negligent and wanton occurred before 1994 and their lawsuit wasn’t filed until 2000, the Buyers argued they were not injured until 1999 when the true owner of 4361 Bayou appeared at the door and so the statute of limitations did not start running until that time. The court rejected this argument, finding that the statute of limitations began running as soon as the Buyers were able to maintain such action, which the court determined was November 2003. Since the lawsuit was filed well outside of the statute of limitations period, the court affirmed the dismissal of the negligence and wantonness allegations.

Next, the court considered the fraudulent misrepresentation allegations against the Salesperson and M&B. For fraud claims, the statute of limitations begins to run once the fraud is discovered by the party alleging the fraud. Again, the Buyers argued that they did not discover the fraudulent behavior until 1999, when the owner of 4361 Bayou arrived on their doorstep. The fraudulent behavior alleged by the Buyers arose from the fact that the Salesperson showed the 4361 Bayou property to the Buyers, causing them to believe that was the property they were purchasing from the VA. The question before the court was whether the Buyers’ reliance on the alleged misrepresentation was reasonable and if it continued to remain reasonable thereafter.

Since reasonableness is a question of fact for a jury, the court ruled that a jury would need to consider the negligent misrepresentation allegations. M&B and the Salesperson had made a number of arguments as to why the continued reliance by the Buyers on the alleged misrepresentation was unreasonable, such as the legal description contained in the purchase documents and the correct address for the Property listed on the homestead exemption form. However, the court stated that these arguments still involved factual issues which needed to be considered by a jury. Thus, the court sent these allegations back to the trial court for further proceedings.

Gilmore v. M&B Realty Co., L.L.C., No. 1021380, 2004 WL 1475424 (Ala. July 2, 2004). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].