Burklund v. Fuehrer
911 N.W.2d 843
Neb.2018Background
- In August 2016 Todd and Shelly Burklund contracted to buy commercial real property from Brad Fuehrer and Structure Technologies, LLC, with a lease-back provision and addenda including a paragraph (¶7) about property condition/disclosure.
- The Burklunds intended the purchase to complete a §1031 tax-deferred exchange and needed to close by November 1, 2016.
- Sellers disclosed on September 29, 2016 that the building’s roof had sustained earlier hail damage, an insurer paid $39,000, and the roof had not been repaired; inspections revealed substantial hail damage and potential insurability problems.
- The Burklunds alleged the Purchase Agreement warranted there were no defects that were not “reasonably ascertainable” or undisclosed, and that sellers later promised to replace the roof but failed to do so before the exchange deadline.
- The Burklunds sued for breach of contract, breach of warranty, and fraudulent misrepresentation; the district court dismissed the second amended complaint with prejudice under a Rule 12(b)(6) theory that the roof damage was reasonably ascertainable and rescission was the only remedy.
- The Nebraska Supreme Court reversed, holding the complaint pleaded plausible claims and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether complaint states claim for breach of contract/warranty under ¶7 (defects “not reasonably ascertainable” or undisclosed) | Burklund: pleaded defects were not reasonably ascertainable and sellers failed to disclose; therefore ¶7 was breached | Fuehrer: damage was reasonably ascertainable from inspections, so no breach; buyers assumed risk | Court: complaint plausibly alleges facts; dismissal reversed because complaint lacks facts to show damage was reasonably ascertainable as a matter of law |
| Whether complaint states claim for fraudulent misrepresentation | Burklund: sellers misrepresented condition and promised repairs, inducing reliance and causing lost §1031 exchange | Fuehrer: buyer could and did inspect; reliance unreasonable because damage was ascertainable | Court: fraudulent-misrepresentation claim plausible; reasonableness of reliance is a factual question not resolvable on pleadings |
| Whether district court converted motion to summary judgment by considering additional addenda | Burklund: pleadings and attached instruments control; no conversion warranted | Fuehrer: court considered extra contractual materials at hearing | Court: determined receipt of addenda did not convert motion to summary judgment and proceeded on pleadings |
| Whether rescission/termination is the only available remedy | Burklund: seeks damages and other remedies for losses from failed §1031 exchange | Fuehrer: contract gives buyer option to terminate; thus rescission is the remedy | Court: did not decide remedies; held issue premature because dismissal was improper |
Key Cases Cited
- Davis v. State, 297 Neb. 955 (Neb. 2017) (standard for reviewing Rule 12(b)(6) dismissal and plausible-claim pleading)
- Rodriguez v. Catholic Health Initiatives, 297 Neb. 1 (Neb. 2017) (notice pleading standard; accept well-pled facts on review)
- Lucky 7 v. THT Realty, 278 Neb. 997 (Neb. 2009) (commercial-buyer who conducted routine inspections could not rely on seller’s representations about visible roof condition)
- InterCall, Inc. v. Egenera, Inc., 284 Neb. 801 (Neb. 2012) (reasonableness of reliance on a misrepresentation is a question of fact)