Failure to Disclose Defects in House was Misrepresentation Despite “As Is” Clause

Lewis v. Rula, 293 So. 3d 317 (Miss. Ct. App. 2020). The Lewises purchased a house in Madison County. During the time they owned the house, the Lewises paid a contractor to make numerous repairs to a parapet wall and the connection of the wall to the roof of the property. After four years, the Lewises put the house on the market. The Lewises entered into a contract to sell the property to the Rulas. In the disclosure statement required by Miss. Code Ann. Sections 89-1-501 to -523 in the sale of residential property, the Lewises left blank the portions of the disclosure statement that addressed problems with wall, leaks and the roof. The contract provided that the Rulas accepted the existing condition of the home. After the closing, the Rulas discovered the defects in the parapet wall and roof and paid a contractor to replace the wall. The Rulas filed an action against the Lewises in the County Court of Madison County alleging intentional and negligent misrepresentation. At trial the jury awarded the Rulas damages of $235,000. On appeal, the Court of Appeals, in a decision by Justice Westbrooks, affirmed. The Lewises argued that the acceptance by the Rulas of the house “as is” relieved them from any statutory disclosure requirements and any liabilities to the buyers. Justice Westbrook wrote, “Not answering questions on the disclosure form does not equate to a lack of misrepresentation,” especially since the Lewises had actual knowledge of the defects in the parapet wall and roof.

Note 1: A case that the Lewis court discussed at length and relied upon was Stribling Investments, LLC v. Mike Rozier Construction Co., 189 So. 2d 1216 (Miss. 2016). The property in the Stribling case was a Dollar General store in Gluckstadt that Rozier built and sold to Stribling. The contract of sale provided that the property was being conveyed “as is” and without any representation or warranty about the condition of the property. After the sale, the parking lot suffered cracks. Stribling brought an action against Rozier claiming that Rozier breached the common-law duty of a contractor under Mississippi law to disclose defects in fills and subsoils. Rozier argued that the “as is” clause in the contract absolved it of any duty to disclose defects in the subsoil. The Mississippi Supreme Court wrote that the contractor’s duty to disclose defects in the subsoil applied regardless of the “as is” clause in the contract. The Lewis court relied on the Stribling case in holding that the “as is” clause in the contract between the sellers and the purchasers did not relieve the sellers from their affirmative obligation to disclose the defects in the wall and roof.

Note 2: To support their argument that the “as is” clause in the contract absolved them from any responsibility for the defects, the Lewises relied on two cases in which the Mississippi Supreme has held that an “as is” clause protected the seller from a claim by the purchaser based on the condition of the property. The Lewis court distinguished these cases on the purchasers were told about the problems but proceeded with the purchase anyway. The Lewis court distinguished another case in which the disclosure statement did not identify a problem, but the seller didn’t have personal knowledge of the problem before the sale. The opinion does not identify any cases in which the Mississippi courts have enforced an “as is” clause to protect the seller when the seller knew about the problem and the purchaser was not informed about the problem before the sale.

Note 3: In the Lewis case the sellers breached a statutory duty to disclose in residential sales. In the Stribling case the seller breached a common-law duty imposed on contractors to disclose. Are there any cases in which the Mississippi courts have addressed the enforceability of an “as is” clause when no duty to disclose exists?

To learn more about the co-authors, Rod Clement and Lindy Brown, visit Rod’s member profile or firm profile or Lindy’s firm profile.