A jury has found a North Dakota Realtor and a brokerage guilty of fraud and breach of contract in the sale of a home that had structural problems.
MoreLaw.com, a public access litigation digest, reported that a couple who purchased the home from Realtor Wesley “Wes” J. Bailey “discovered a false wall in the three-bedroom home that concealed a ‘bowing, cracking and shifting’ wood foundation.” Thomas and Arel Axtmann, the Mandan, N.D., couple who purchased the home from Bailey, bought it for $59,500 in July 1999, and their complaint sought $59,550 in repair costs.
A jury this month awarded the Axtmanns $75,000 in economic damages and $65,000 in exemplary damages.
The litigation was complicated by an earlier lawsuit filed in 1995, also related to foundation problems, which led to a settlement in which Bailey took ownership of the home.
“The issue really was the failure to fully disclose latent defects that the buyers were not likely to discover because of the false wall in the basement. The jury decided that there wasn’t full disclosure and there should have been,” said Lawrence R. Klemin, a Bismarck lawyer who represented the Axtmanns in the case.
This case is noteworthy because it involves two similar disclosure lawsuits on the same house, and the house was owned by a Realtor who took title to it as a consequence of the settlement in the first lawsuit. The $140,000 judgment is significantly larger than the sales price of the house itself.
Klemin said the Axtmanns don’t currently reside in the home they purchased from Bailey.
“The house, as far as I’m concerned, is probably worthless,” he said.
Bailey, a Realtor for Main & Co. Realtors in Bismarck, said he clearly was “out-attorneyed” in the lawsuit, which was heard in Morton County District Court. He said he believes he provided sufficient disclosure about the condition of the property.
“That was the most complete disclosure statement I’ve ever made up. I’ve been in this business over 20 years,” he said.
“We were really disappointed with the jury decision because we didn’t expect to lose this thing but we did,” he added. “We were sure we had a strong case.”
Bailey said he disclosed the condition of the home to the Axtmanns’ Realtor, June Barnhardt. But the jury didn’t find her at fault for her part in the sales transaction. Barnhardt, who previously worked at Logan Hill GMAC Real Estate in Bismarck, is now an agent at Bianco Realty in Bismarck. She said she had no comment about the Axtmanns’ case.
Home buyers Glen and Michelle Ternes purchased the same home in 1995 and “discovered problems with the basement walls which were bowed and cracked,” according to an account by the North Dakota Real Estate Commission. The foundation wall, which had been exposed a year earlier, “had been covered with sheetrock throughout the basement,” the commission also reported.
The commission issued a letter of reprimand to Bailey in 1997. The commission found he “failed to meet the generally accepted standards of expertise, care or professional ability expected of real estate brokers or salespersons in North Dakota.” The commission also noted that “no property disclosure statement was provided to the buyers even though the broker testified that it is his usual practice to provide such a statement.”
In 1994 another couple reportedly backed out of a written contract for the purchase of the same home “because of concerns raised over the condition of the wood foundation.”
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