Your Seller has a Duty to Update the Seller’s Disclosure

In Domel v. Birdwell, 2014 WL 4347815 (Tex. App. –Eastland 2014), Birdwell
sued Domel for negligent misrepresentation and other claims that arose out of Birdwell’s
purchase of Angel Fire Ranch. Waite was Domel’s listing agent. The Domels
had lived there for several years, but wanted to move closer to Austin because of
their business interests. Waite had the Domels fill out of Seller’s Disclosure, sign it
and then return it to him. The notice indicated that the seller agreed to amend any
applicable notices in disclosures during the listing period. The notice also contained
the statement that there had been no prior flooding, no prior insurance settlements,
and no prior damage to the roof.
Birdwell had the property inspected again after the closing and discovered that
the entire roof needed to be replaced. Upon being contacted by the real estate
broker, Waite, the Domels did not deny that they had filed an insurance claim
and lied on the Seller’s Disclosure when they checked “no” on the insurance
settlements disclosure. In fact, they had received a check for $114,650.04 in a
settlement.
Later, Birdwell discovered that there was also prior flooding on the property that
also was not disclosed. The Domels admitted that they never amended the notice
and didn’t think they had a duty to amend the notice even though the notice was
over a year old.
One of the key issues discussed by the appellate court was whether or not the
Domels had a duty to update the Seller’s Disclosure form. The court noted that
Section 5.008 of the Property Code does not, in itself, create a continuing duty or
obligation to update matters on the form. The court did hold, however, that there is
such a duty to disclose in four situations:
1. where there is a confidential or fiduciary relationship;
2. when one voluntarily discloses information, the whole truth must be
disclosed;
3. when one makes a representation, new information must be disclosed when
that new information makes the earlier representation misleading or untrue;
and
4. when one makes a partial disclosure and conveys a false impression.
The court also cited a corollary principle: when there is a duty to speak, silence
may be as misleading as a positive misrepresentation of existing facts. The appellate
court then affirmed $264,926 in damages, $67,000 in attorney’s fees, and
$19,161.77 in prejudgment interest.