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Jennings v. Smith: Vice President of Home Building Company May Be Personally Liable for Negligent Construction and Fraudulent Concealment

This Georgia case involved the purchase of a new home from Roswell Properties by Maneola Jennings. After closing, Jennings claimed she discovered a variety of structural defects in the house, including a cracked driveway, leaks and soil erosion near a retaining wall. She also claimed there was serious settling of the property, including cracked and shifted walls and floors and a defective deck. Jennings asked Roswell to correct the problems, but the corrections were not satisfactory to her, so she sued Roswell and Mark Smith, Roswell’s vice president and a 50% shareholder, claiming negligent construction and fraudulent concealment. She contended that Roswell buried construction debris under her property which, upon settling, caused the damage to the house. The lower court held that Smith could not be personally liable and granted him summary judgment.

Jennings appealed, claiming that Smith can be held personally liable. Under the common law (case law) of Georgia, if a corporate officer takes part in the corporation’s commission of a tort, that officer is personally liable for the tort; if the officer takes no part in a tort committed by the corporation, then the officer is not personally liable. Jennings claimed that Smith took part in or supervised the corporation’s negligent acts. She submitted an affidavit from a neighbor who stated that he had seen Roswell workers, directed by Smith, dump trash and debris from other construction sites on the property prior to Jennings’ home being built. Jennings also testified that she had seen Smith directing workers performing repairs. There also was testimony from engineers and soils experts who stated that they found evidence of construction debris and trash underneath the area, and that the property defects were caused by settlement due to inadequate soil compaction.

The Court of Appeals of Georgia concluded that given the evidence, if a jury found Roswell negligent in building or repairing the property, then Smith also could be found personally liable because of his personal involvement in the construction and repairs.

As far as Jennings’ claim of fraudulent concealment, the appellate court also reversed the lower court’s finding that Smith could not be held liable. The court explained that "Fraud in the sale of real estate may be predicated upon...a passive concealment where the seller does nothing to prevent the discovery but simply keeps quiet about a defect which though not readily discernible, is known to the seller...the seller has a duty to disclose a defect of which he knows but is aware that the purchaser is ignorant of the condition and which probably would affect the decision of the purchaser to close the transaction." The court stated that there was evidence in this case that Smith personally had been involved in dumping the debris on the property. Since buried debris is not the type of fact which readily would be discernible by a purchaser, if a jury found that the debris caused the settlement and contributed to the damage, Smith also could be liable for fraudulent concealment.

Jennings v. Smith , 226 Ga. App. 765, 487 S.E.2d 362 (Ga. Ct. App. 1997 ).