Kincaid v. Dess

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No. 107,970

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

MATT KINCAID and JULIE KINCAID,
Appellants,

v.

DAVID DESS, et al.,
Appellees.


SYLLABUS BY THE COURT

1.
When the pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits, show that there is no genuine issue as to any material
fact and that the moving party is entitled to judgment as a matter of law, summary
judgment is appropriate. The trial court is required to resolve all facts and inferences
which may reasonably be drawn from the evidence in favor of the party against whom the
ruling is sought. When opposing a motion for summary judgment, an adverse party must
come forward with evidence to establish a dispute as to a material fact. In order to
preclude summary judgment, the facts subject to the dispute must be material to the
conclusive issues in the case. On appeal, the same rules apply; summary judgment must
be denied if reasonable minds could differ as to the conclusions drawn from the evidence.

2.
The legal effect of a written instrument is a question of law.

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3.
The primary rule for interpreting written contracts is to ascertain the parties' intent.
If the terms of the contract are clear, the intent of the parties is to be determined from the
contract language without applying rules of construction.

4.
When interpreting written contracts, the contract should not be interpreted by
isolating one particular sentence or provision, but by construing and considering the
entire contract. If the terms of the contract are clear, the parties' intent is determined from
the contract itself without applying rules of construction. A contract is ambiguous when
the words in the contract expressing the intent of the parties may be understood in two or
more ways.

5.
Regardless of a trial court's construction of a written contract, an appellate court
may construe it and determine its legal effect.

6.
Standing is a requirement for a court to have jurisdiction to hear a case, so the
existence of standing is a question of law over which an appellate court's scope of review
is unlimited.

7.
Privity of contract is the connection or relationship which exists between two or
more contracting parties. It is essential to the maintenance of a lawsuit based on a
contract that there is privity between the plaintiff and the defendant.

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8.
To determine whether a particular person is an intended beneficiary of a contract,
the court applies the general rules for construction of contracts.

9.
Third-party beneficiaries of a contract are divided into intended beneficiaries and
incidental beneficiaries, and only intended beneficiaries have standing to sue for damages
resulting from the breach of a contract.

10.
The burden of establishing standing to bring suit as a third-party beneficiary rests
with the party asserting it.

11.
Before a third party may enforce a contract from which he or she would benefit,
the claimant must show the existence of some provision in the contract that operates to
his or her benefit.

12.
A third-party beneficiary does not need to be personally named in the contract to
have standing, as long as he or she is a member of a designated class or identifiable as a
benefitted person.

13.
It is not essential to the creation of a right in an intended beneficiary that he or she
be identified when a contract containing the promise is made.

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14.
When a writing is incorporated by reference, it becomes a part of the contract only
so far as to effectuate the specific purpose intended.

15.
Unilateral rescission is generally available as an equitable remedy to the victim of
fraud who ceases to accept the benefits of a contract and promptly gives notice to the
other party.

Appeal from Johnson District Court; GERALD T. ELLIOTT, judge. Opinion filed March 8, 2013.
Affirmed in part, reversed in part, and remanded.

Louis C. Accurso, of The Accurso Law Firm, of Kansas City, Missouri, for appellants.

R. Scott Beeler, of Lathrop & Gage LLP, of Overland Park, for appellees.

Before ARNOLD-BURGER, P.J., GREEN, J., and HEBERT, S.J.

GREEN, J.: Matt Kincaid and Julie Kincaid appeal from a summary judgment
granted in favor of David Dess and Sandra Dess involving the Kincaids' breach of
contract, fraud, negligent misrepresentation, civil conspiracy, and rescission claims. The
Kincaids purchased a house from Sirva Relocation LLC (Sirva) for approximately
$1,040,000. The bases of the Kincaids' claims involve the alleged failure of the Desses to
disclose the true condition of their home before they sold it to Sirva. Nevertheless, the
Desses moved for summary judgment. The Desses sought dismissal of the action on
grounds that the Kincaids purchased the house from Sirva so there was no privity
between the Desses and the Kincaids. The Desses maintained that the Kincaids' claims
for fraud and negligent misrepresentation, breach of contract, and rescission should fail
because of a lack of privity. The Desses further maintained that the Kincaids' civil
conspiracy claim should fail because the Kincaids failed to show a meeting of the minds.
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The trial court agreed and granted summary judgment in favor of the Desses on all of the
Kincaids' claims.

On appeal, the Kincaids contend that the trial court erred in granting summary
judgment on their breach of contract, fraud, and negligent misrepresentation claims. We
agree. The Kincaids further contend that the trial court erred in granting summary
judgment on their civil conspiracy and rescission claims. We disagree. Accordingly, we
reverse and remand for trial on the Kincaids' breach of contract, fraud, and negligent
misrepresentation claims. We affirm the trial court's grant of summary judgment in favor
of the Desses on the Kincaids' civil conspiracy and rescission claims.

The Desses entered into an option to purchase contract in the spring of 2007 with
Sirva which gave Sirva the exclusive right to list the Desses' house for sale. The Kincaids
entered into a real estate contract with Sirva to purchase the Desses' home.

As part of their contract with Sirva, the Desses completed two separate "Seller's
Disclosure" statements, one was the local form (local disclosure statement) and one was
Sirva's form (Sirva disclosure statement). Sirva then provided these disclosure statements
to the Kincaids. The Sirva disclosure statement indicated that the type of exterior material
on the home was "unknown." The Desses also denied any knowledge of mold or mildew
or any dampness or leaks in the walls. The Desses further denied that they were aware of
any wood rot or any other conditions that might adversely affect the value or desirability
of their home.

The Kincaids signed a rider to the sales agreement with Sirva. The rider contained
numerous clauses which explained that the disclosure statements were completed by the
Desses and that Sirva was not making any representations about the condition of the
property. The rider stated the following:
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"Buyer must acknowledge receipt of the disclosure forms identified below. Said
forms are informational only and represent only the opinions of the individuals or firms
which prepared them and SIRVA makes no representation or recommendation
concerning said reports. Buyer further acknowledges that the home owner disclosure
forms were completed by the owner of the Property previous to SIRVA, that said
disclosures fulfill any obligation of SIRVA to disclose conditions of the Property to
Buyer and that SIRVA may not complete an independent investigation and/or disclosure
for the Property."

The rider also stated the following:

"It is acknowledged that SIRVA has never occupied the property and, as such,
the Property is being sold in 'as is' condition to the maximum extent allowed by law.
Neither Seller or any of its agents make any representations concerning the Property,
including but not limited to, representations regarding the size of the buildings and
improvements, the presence or absence of toxic or hazardous substances, or the presence
or absence of any encroachments or unrecorded easements."

The rider further stated the following:

"SIRVA makes no representations or warranties of any sort whatsoever regarding
the Property, its condition, value or surrounds and may not be held liable or responsible
for any damages or liability to Buyer or any other person or entity. Buyer is agreeing to
fully rely on its right to inspections, tests and surveys granted herein to discover any
undesirable or latent conditions regarding this property, and acknowledges that Sirva has
made no representations thereon upon which Buyer may rely. The provisions herein shall
survive closing and delivery of the deed. The closing of this transaction shall constitute
buyer's full and complete acceptance and release of claims for all conditions and
inspection matters herein."

The Kincaids had an inspection done on the home which informed the Kincaids
that the exterior of the property did not consist of an exterior insulation and finish system
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(EIFS), also known as synthetic stucco. EIFS is a multi-layered exterior finish system
that looks similar to traditional stucco but is soft and sounds hallow when tapped. The
problem with EIFS is when moisture is present behind the covering it can become
trapped behind the layers and can lead to wood rot. The Kincaids testified that the Desses'
realtor assured them that the exterior of the home was not EIFS. The fact that the exterior
of the home was not EIFS was particularly important to the Kincaids because they were
aware of the problems that can arise with an EIFS exterior if it is not installed properly.
The Kincaids testified that they would not have purchased the home if they knew that the
exterior was EIFS. As a result of the inspection, the Kincaids requested that some repairs
be made before they would close on the house. The Desses paid for and completed the
requested repairs. The Kincaids closed on the house on August 9, 2007.

In September 2007, 1 month after closing on the house, the Kincaids discovered
numerous defects that had not been disclosed by the Desses. The Kincaids discovered (1)
that the exterior of the home was EIFS; (2) that the property had prior water damage; (3)
that some of the exterior and interior walls had dampness problems; (4) that many
windows were defective and rotten; and (5) that the home was contaminated with mold.
As a result of those defects, the Kincaids were not allowed to live in the home for a year
while the defects were being repaired.

In April 2009, the Kincaids sued the Desses, Reece & Nichols Realtors, Inc., and
Tricia Wolfe, the Desses' realtor, for breach of contract, fraud and negligent
misrepresentation, and civil conspiracy. The Kincaids did not include Sirva in the
lawsuit. The Kincaids sought damages of $350,000 to pay for the cost to repair the
property, the diminution in value to the property, and the cost of additional living
expenses during the repairs.

The Desses moved for summary judgment on all counts. On November 17, 2010,
the trial court issued a memorandum opinion granting summary judgment in favor of the
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Desses on the claims of breach of contract and fraud and negligent misrepresentation.
The trial court held that there was a lack of privity between the Kincaids and the Desses,
and therefore, the Kincaids' breach of contract claim failed. The trial court further held
that the Kincaids failed to come forward with any evidence that they reasonably relied on
any statements made by the Desses. The trial court allowed the claims for civil
conspiracy and rescission to proceed to discovery.

On January 10, 2011, the Desses filed a second motion for summary judgment.
The Desses filed an amended motion for summary judgment on October 17, 2011, which
asked the court to dismiss the remaining claims. After a hearing, the trial court granted
summary judgment in favor of the Desses on the remaining claims. Only the Dess
defendants are involved in this appeal.

Standard of Review

When the pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits, show that there is no genuine issue as to any material
fact and that the moving party is entitled to judgment as a matter of law, summary
judgment is appropriate. The trial court is required to resolve all facts and inferences
which may reasonably be drawn from the evidence in favor of the party against whom the
ruling is sought. When opposing a motion for summary judgment, an adverse party must
come forward with evidence to establish a dispute as to a material fact. In order to
preclude summary judgment, the facts subject to the dispute must be material to the
conclusive issues in the case. On appeal, the same rules apply; summary judgment must
be denied if reasonable minds could differ as to the conclusions drawn from the evidence.
O'Brien v. Leegin Creative Leather Products, Inc., 294 Kan. 318, 330, 277 P.3d 1062
(2012).

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Additionally, for this court to determine whether the trial court erred, it must
interpret the sales contract. The legal effect of a written instrument is a question of law. It
may be construed and its legal effect determined by the appellate court regardless of the
construction made by the trial court. Osterhaus v. Toth, 291 Kan. 759, 768, 249 P.3d 888
(2011). "The primary rule for interpreting written contracts is to ascertain the parties'
intent. If the terms of the contract are clear, the intent of the parties is to be determined
from the contract language without applying rules of construction. [Citation omitted.]"
Carrothers Constr. Co. v. City of South Hutchinson, 288 Kan. 743, 751, 207 P.3d 231
(2009).

Did the trial court err in granting summary judgment on the Kincaids' breach of contract
claim?

In granting the Desses' motion for summary judgment on the breach of contract
claim, the trial court ruled that privity is essential to maintain an action on a contract and
that such privity did not exist between the Kincaids and the Desses in the residential real
estate contract.

On appeal, the Kincaids make numerous arguments that privity did exist between
them and the Desses. For example, the Kincaids argued: (1) that the facts of the case
alone established privity; (2) that as a matter of law the signed disclosure statements
established privity; (3) that the disclosure statements were incorporated by reference to
the contract and therefore established privity; and (4) that privity was established because
they were intended third-party beneficiaries. We will first address the third-party
beneficiary argument.

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Third-Party Beneficiary

The Kincaids argue that the trial court erred in granting the Desses' motion for
summary judgment on their breach of contract claim because they are intended third-
party beneficiaries of the contract of sale between Sirva and the Desses under the
identifiable class called prospective buyers. The Desses respond that the Kincaids are
merely incidental third-party beneficiaries and that they do not have the necessary privity
of contract.

In the present case, the trial court granted the Desses' motion for summary
judgment because it ruled the Kincaids did not have privity of contract, and therefore, no
standing to sue. Standing is a requirement for the court to have jurisdiction to hear the
case, so the existence of standing is a question of law over which an appellate court's
scope of review is unlimited. Board of Sumner County Comm'rs v. Bremby, 286 Kan.
745, 751, 189 P.3d 494 (2008). Moreover, a lack of standing was based on the residential
real estate contract, and the interpretation and legal effect of written instruments are
matters of law over which appellate courts exercise unlimited review. Miller v. Westport
Ins. Corp., 288 Kan. 27, 32, 200 P.3d 419 (2009). Regardless of a trial court's
construction of a written contract, an appellate court may construe it and determine its
legal effect. City of Arkansas City v. Bruton, 284 Kan. 815, 828-29, 166 P.3d 992 (2007).

Here, privity turns on whether Sirva and the Desses intended to create an
identifiable class of third-party beneficiaries, called prospective buyers, whom Sirva and
the Desses intended to benefit by the contract of sale and to which the Kincaids belong.

To determine whether a particular person is an intended beneficiary of a contract,
the court applies the general rules for construction of contracts. Gray v. Manhattan Med.
Center, Inc., 28 Kan. App. 2d 572, 580-81, 18 P.3d 291 (2001). When interpreting
written contracts, the contract should not be interpreted by isolating one particular
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sentence or provision, but by construing and considering the entire contract. If the terms
of the contract are clear, the parties' intent is determined from the contract itself without
applying rules of construction. A contract is ambiguous when the words in the contract
expressing the intent of the parties may be understood in two or more ways. Fasse v.
Lower Heating & Air Conditioning, Inc., 241 Kan. 387, 388-91, 736 P.2d 930 (1987).

Third-party beneficiaries of a contract are divided into intended beneficiaries and
incidental beneficiaries, and only intended beneficiaries have standing to sue for damages
resulting from the breach of a contract. See State ex rel. Stovall v. Reliance Ins. Co., 278
Kan. 777, 793, 107 P.3d 1219 (2005) (finding the State was not an intended third-party
beneficiary of a subcontract). The burden of establishing standing to bring suit as a third-
party beneficiary rests with the party asserting it. See Stovall, 278 Kan. at 793. See also
Byers v. Snyder, 44 Kan. 2d 380, 386-87, 237 P.3d 1258 (2010).

Before a third party, in this case the Kincaids, may enforce a contract from which
they would benefit, the Kincaids must show the existence of some provision in the
contract that operates to their benefit. A third-party beneficiary does not need to be
personally named in the contract to have standing, as long as he or she is a member of a
designated class or identifiable as a benefitted person. Hartford Fire Ins. Co. v. Western
Fire Ins. Co., 226 Kan. 197, 210, 597 P.2d 622 (1979).

In the case before us, the trial court incorrectly held that the third-party beneficiary
needed to be specifically named:

"Plaintiffs reference no provisions in any of the several contracts referred to which
include a promise or the specific intention to benefit them nor any provisions made
directly and primarily for their benefit.

". . . The disclosure statement given to SIRVA signed by the defendants Dess . . .
states it is intended to provide full disclosure to potential buyers but that is not the
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document plaintiffs claim to be third party beneficiaries of and even if it were, the use of
'potential buyers' eliminates any suggestion of an intent to benefit this specific buyer
plaintiff."

The Desses support this interpretation, arguing that "there is no reference to
Plaintiffs [the Kincaids], or to any other individual potential buyers, whatsoever. Without
such stated intent, Plaintiffs cannot sustain any claim under a third-party beneficiary
theory as a matter of law."

Nevertheless, as explained earlier, a third-party beneficiary does not need to be
personally named in the contract to have standing, as long as he or she is a member of a
designated class or identifiable as a benefitted person. See Hartford Fire Ins. Co. 226
Kan. at 210; see also Restatement (Second) of Contracts § 308 (1981) ("It is not essential
to the creation of a right in an intended beneficiary that he be identified when a contract
containing the promise is made."). Thus, it is sufficient that he or she can be identified
when performance is due and the promisor fails to perform his or her promise.

As a result, the key inquiry is whether the Kincaids were intended to be benefited
by the contract provision in question. Here, the Desses contracted with Sirva to assist in
selling their home. In the contract between the Desses and Sirva, the Desses promised
Sirva to be liable for any damages for an "action brought by any purchaser from the
Buyer [Sirva] relating to . . . the condition of the Property . . . which the Seller [the
Desses] would otherwise be liable to Buyer [Sirva]."

Thus, the Desses are the promisors, the ones who make the promise to be
enforced. Sirva is the promisee, the one to whom the promise is made. The Desses agreed
to fully disclose all information about the property on a seller's disclosure statement
furnished by Sirva. It was further agreed between Sirva and the Desses that Sirva and
"other prospective buyers" could rely on the seller's (the Desses') disclosure statement in
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determining "whether and on what terms to purchase the Property." Although the
Kincaids are not a party to the contract between Sirva and the Desses, the Kincaids are
intended by both Sirva and the Desses to be the third-party beneficiary of the contract.

In the contract between the Desses and Sirva, the Desses promised to do the
following: "Fully disclose all information about the Property on a Seller Disclosure
Statement provided by Buyer [Sirva] upon which Buyer and other prospective buyers
may rely in deciding whether and on what terms to purchase the Property." (Emphasis
added.) It was not necessary that the Kincaids be named as third-party beneficiaries when
the contract was made between Sirva and the Desses. It was sufficient that the Kincaids
were a member of an identified class. Here, the Kincaids were sufficiently described or
designated as "other prospective buyers" of the property in question. Thus, the Kincaids
are intended by both Sirva and the Desses to be the third-party beneficiaries of the
contract and are intended by Sirva and the Desses to have enforceable rights against the
Desses, the promisors, under the contract based on their alleged failure to "[f]ully
disclose all information about the Property."

Incorporation by reference

Next, the Kincaids maintained that the signed disclosure statements formed a
contract between the parties and that because the disclosure statements were incorporated
by reference into their contract with Sirva, they had privity. To support their argument,
the Kincaids relied on this court's decision in Osterhaus v. Toth, 39 Kan. App. 2d 999,
187 P.3d 126 (2008), aff'd 291 Kan. 759, arguing that the Osterhaus court held that
disclosure statements are contracts. The trial court rejected this argument:

"The first argument is that the disclosure statement signed by the Dess
defendants March 20, 2007 and by the plaintiffs [Kincaids] April 25, 2007 (Ex. 3 of
Kincaids), is a contract between them relying on the authority of Osterhause [sic] v. Toth,
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39 Kan. App. 2d 999, 1006, 187 P.3d 126 (2008). The disclosure signed March 20, 2007
and April 25, 2007, referred to is entirely different than the documents relied on in the
Osterhause [sic] case and it contains no language indicating it to be a contract. The
plaintiffs [the Kincaids] signed it acknowledging receipt, but nowhere is there language
referring to it as a contract or justifying that implication or inference. In addition, of
course, it is not the 'contract' sued upon, and cannot provide 'privity' for the contract sued
upon."

Clearly, the primary issue here is whether the Kincaids and the Desses have privity
of contract. Privity of contract is the connection or relationship which exists between two
or more contracting parties. It is essential to the maintenance of a lawsuit based on a
contract that there is privity between the plaintiff and the defendant. State ex rel. Stovall
v. Reliance Ins. Co., 278 Kan. 777, 793, 107 P.3d 1219 (2005).

In this case, the Kincaids further argue that under the rider sales agreement, the
disclosure statements provided by the Desses were incorporated into their agreement with
Sirva. When a writing is incorporated by reference, it becomes a part of the contract only
so far as to effectuate the specific purpose intended. Starr v. Union Pacific Ry. Co., 31
Kan. App. 2d 906, 910, 75 P.3d 266 (2003). The Kincaids argue that the purpose of the
disclosure statement was to inform prospective buyers of the conditions of the property.
The Kincaids contend that the Desses knew that the disclosure statements would be
provided to prospective buyers of their house and knew that the prospective buyers would
be relying on the disclosure statements. The Kincaids further maintain that Sirva was
simply a "straw man" in the transaction and that the Desses should not be allowed to
make false representations in their disclosure statements and then be protected by the
"straw man."

Alternatively, the Desses deny that they were a party to the real estate contract
between the Kincaids and Sirva. The Desses acknowledge that although the original
residential real estate contract had the Desses listed as the sellers, their name was later
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crossed out by the Kincaids who then listed Sirva as the sellers of the property. The
Desses argue that their disclosure statement was given to Sirva who then provided it to
the Kincaids. The Desses maintain that this disclosure statement does not create any
contractual relationship between them and the Kincaids. The Desses contend that the
Kincaids are simply trying to substitute the Desses into their contract with Sirva because
the Kincaids voluntarily waived their right to hold Sirva liable.

To determine the specific purpose of incorporating the disclosure statements, we
must interpret the language of the disclosure statements. In reviewing the disclosure
statements completed by the Desses, it is readily apparent that the Desses knew: (1) that
the disclosure statements would be provided to prospective buyers; (2) that prospective
buyers would rely on the information; and (3) that they needed to make an honest effort
to fully reveal the information requested.

Additionally, under the Sirva disclosure statement, it is clear that Sirva denies any
knowledge of the property and that Sirva cannot be held responsible for the content or
accuracy of the disclosure statement. The Sirva disclosure statement states: "Seller(s) [the
Desses] agree to indemnify and hold SIRVA Relocation LLC (SIRVA Relocation)
harmless from any claim made against SIRVA Relocation regarding conditions of the
property, which are not disclosed to SIRVA Relocation herein." This means that the
Desses knowingly agreed to be held liable to any claim regarding the conditions of the
property based on their disclosure statement.

While the Desses argue that the Kincaids are simply trying to substitute the Desses
into their contract with Sirva because they waived the right to sue Sirva, the Desses
ignore the fact that they also agreed to hold Sirva harmless from any claim regarding the
conditions of the property, leaving the Desses as the responsible party.

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After reviewing the disclosure statements, it is readily apparent that the disclosure
statements were incorporated into the contract for two specific purposes: (1) to inform the
Kincaids of the condition of the house, and (2) to place liability for the condition of the
house on the Desses. Thus, because the disclosure statements were incorporated by
reference, they became a part of the contract between Sirva and the Kincaids and provide
the required privity between the Kincaids and the Desses.

In summary, privity was established because the Kincaids were intended third-
party beneficiaries and because the disclosure statements were incorporated by reference
into the contract between Sirva and the Kincaids.

Did the trial court err in granting summary judgment on the Kincaids' fraud and
negligent misrepresentation claim?

In granting the Desses motion for summary judgment, the trial court ruled that the
Kincaids failed to establish reasonable reliance which is an essential element of fraud and
negligent misrepresentation. The trial court stated:

"Reasonable reliance is essential for negligent misrepresentation as well as fraud;
movants [the Desses] have pointed out the absence of evidence of any reliance and non-
movants [the Kincaids] have not come forward with any facts to support the claim.
Therefore, the claims of fraud and negligent misrepresentation fail."

Based on the trial court's ruling, it seems that the trial court wanted the Kincaids to
provide a separate document containing the seller's disclosures relied upon by the
Kincaids to prove reliance. This argument was rejected in Osterhaus v. Toth, 291 Kan.
759, 249 P.3d 888 (2011). In Osterhaus, our Supreme Court held that it was error to
require a separate writing to prove reliance because the separate writing would essentially
make the disclosure statement have no legal effect. 291 Kan. at 777-79.
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In addition to not having a separate writing to show reliance, the Desses argue that
the Kincaids cannot show reasonable reliance because they specifically affirmed that they
were not relying on any representations when they signed the disclosure statements and
the rider sales agreement. The Desses maintain that the Kincaids represented in their
contract that they were relying solely on their own opinions and inspections and that this
representation negates any alleged reliance on the Desses' disclosure statement.

The rider sales agreement contains a "Buyer Beware Clause" which states:

"Sirva makes no representations or warranties of any sort whatsoever regarding the
property, its condition, value or surrounds and may not be held liable or responsible for
any damages or liability to buyer or any other person or entity. Buyer is agreeing to fully
rely on its right to inspections, tests and surveys granted herein to discover any
undesirable or latent conditions regarding this property, and acknowledges that Sirva has
made no representations thereon upon which Buyer may rely. The provisions herein shall
survive closing and delivery of the deed. The closing of this transaction shall constitute
Buyer's full and complete acceptance and release of claims for all conditions and
inspection matters herein."

The Desses maintain that the Kincaids knowingly waived their rights to rely on any
representations when they signed the rider sales agreement.

In arguing that the Kincaids failed to show reasonable reliance, the Desses present
the same arguments that were rejected by our Supreme Court in Osterhaus. In Osterhaus,
the purchasers of a house sued the seller after discovering defects that were not disclosed
by the seller. The seller moved for summary judgment arguing that the buyer could not
show reasonable reliance because the buyer had waived its right to rely upon the seller's
representations by signing the buyer's acknowledgement. Our Supreme Court rejected
that argument and held that a contractual waiver does not bar breach of contract or
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fraudulent misrepresentation claims as a matter of law where a buyer's reasonable
inspection before purchasing the house did not reveal a seller's false representations and
later defects are discovered.

Therefore, based on Osterhaus, the trial court erred in holding that the Kincaids
could not show reasonable reliance. As a result, we reverse the trial court's grant of
summary judgment to the Desses on the Kincaids' claims for fraud and negligent
misrepresentation which were based on the rationale that the reliance element could not
be met as a matter of law due to the Kincaids' signature on the rider sales agreement.

Next, we must determine whether the Desses' alleged misrepresentations or their
alleged failure to disclose the defects could have been reasonably relied on by the
Kincaids, or whether a reasonable inspection would have revealed the defects complained
of.

In this case, the Kincaids had an inspection done on the house but did not discover
the defects until a month after closing. The Kincaids maintain that numerous items were
not disclosed by the Desses or were concealed by them and their realtor. The Kincaids
discovered the following defects: (1) that the exterior of the home was EIFS; (2) that the
property had prior water damage; (3) that some of the exterior and interior walls had
dampness problems; (4) that many windows were defective and rotten; and (5) that the
home was contaminated with mold.

Because the trial court granted summary judgment on this issue, we cannot
conclude from the record whether a reasonable inspection would have revealed the
defects about which the Kincaids complain. Moreover, our court has previously held that
the reasonableness of an inspection was a question of fact. See Brennan v. Kunzle, 37
Kan. App. 2d 365, 386, 154 P.3d 1094 (2007) ("The determination of whether the defects
were discoverable through a reasonable inspection was a function of the trier of fact.").
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Thus, we reject the Desses' arguments that, as a matter of law, the Kincaids could not
have relied on the Desses' representations because the Kincaids were relying on their own
inspections. We determine that summary judgment was improperly granted in favor of
the Desses.

The "as is" and release provisions in the contract do not bar the Kincaids' claim for
breach of contract and fraud and negligent misrepresentation.

Next, the Desses argue that they are entitled to summary judgment because the
amendment titled "Resolution of Unacceptable Conditions" contains an "as is" provision.
Specifically, paragraph 1 of the amendment states that "Buyer now agrees to accept the
Property 'as is' without correction of, or other action by the Seller." Paragraph 3 also
states in relevant part that "Seller and Licensees assisting in the sale of the Property are
released from any further obligation or liability related to the condition of the Property."

This exact argument was made in Osterhaus. The amendment in Osterhaus
contained similar language to the amendment in this case. In rejecting this argument, the
Osterhaus court held that the "as is" clause must be read in context. 291 Kan. at 786. Our
Supreme Court noted that the amendment clearly dealt with the issue of unacceptable
conditions revealed by the buyer's inspection and that it did not extend to defects that
were for some reason not discovered during the inspection. Therefore, this "as is"
language did not extend to the defects that were not discovered during the Kincaids'
inspection and does not preclude the Kincaids' claim for fraud and negligent
misrepresentation.

Did the trial court err in granting summary judgment on the Kincaids' civil conspiracy
claim?

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Next, the trial court also granted summary judgment on the Kincaids' civil
conspiracy claim based on a lack of evidence of a meeting of the minds. The Kincaids
argue that the evidence was sufficient to support a civil conspiracy claim that the Desses,
along with their realtor Tricia Wolfe, conspired to defraud the Kincaids by omitting
known defects in the house in order to finalize the sale of the house.

Our Supreme Court has held that civil conspiracy is an actionable tort in Kansas.
Stoldt v. City of Toronto, 234 Kan. 957, 967, 678 P.2d 153 (1984). The elements of a civil
conspiracy are:

"'(1) two or more persons; (2) an object to be accomplished; (3) a meeting of the minds in
the object or course of action; (4) one or more unlawful overt acts; and (5) damages as
the proximate result thereof.' [Citation omitted.] Conspiracy is not actionable without
commission of some wrong giving rise to a cause of action independent of the
conspiracy." 234 Kan. at 967.

The Kincaids assert that the independent wrong giving rise to the cause of action is
the Desses' decision to defraud them. In response, the Desses maintain that the trial court
properly granted them summary judgment on this issue because the Kincaids failed to
establish the underlying unlawful act of fraud. Nevertheless, we have reversed the grant
of summary judgment on the fraud and negligent misrepresentation claim and remanded
the issue to the trial court. Therefore, the Kincaids' civil conspiracy claim does not fail
simply because they could not establish the underlying crime of fraud.

In addition to proving the underlying crime of fraud, the Kincaids also must show
a meeting of the minds to prove civil conspiracy. The Kincaids argue that "Wolfe and the
Dess Defendants knew of the problems, had a financial interest in selling the property for
as much as possible, and knowingly sold the property without disclosing the defects."
The problem with this argument, however, is that the record does not contain evidence
that there was ever an agreement or meeting of the minds between the Desses and Wolfe
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to defraud the Kincaids. A party cannot avoid summary judgment on the mere hope that
something may develop later during discovery or at trial. U.S.D. No. 232 v. CWD
Investments, 288 Kan. 536, 559, 205 P.3d 1245 (2009). Mere speculation is similarly
insufficient to avoid summary judgment. Unified Gov't of Wyandotte County v. Trans
World Transp. Svcs., 43 Kan. App. 2d 487, 490, 227 P.3d 992 (2010). Moreover, as the
trial court correctly stated, anyone who sells a house has a financial interest in selling the
property for as much as possible, so that is not evidence of a conspiracy. As a result, the
trial court properly granted summary judgment to the Desses on the Kincaids' civil
conspiracy claim.

Did the trial court err in granting summary judgment on the Kincaids' rescission claim?

Finally, the Kincaids argue that the trial court erred in granting summary judgment
to the Desses on their rescission claim based on a lack of privity and a lack of reliance.
As explained earlier, there was privity between the Kincaids and the Desses and the
Kincaids did not need to provide any additional documents to prove that they relied on
the Desses' disclosure statement. Thus, the trial court's reasoning for granting summary
judgment was incorrect. We also reject the Desses' contention that the Kincaids cannot
maintain an action for rescission because they cannot prove fraud. Again, as explained
earlier, the trial court improperly granted summary judgment on the Kincaids' fraud and
negligent misrepresentation claim.

In Dreiling v. Home State Life Ins. Co., 213 Kan. 137, 147, 515 P.2d 757 (1973),
our Supreme Court defined rescission as follows:

"Rescission of a contract is the annulling or abrogation or unmaking of the
contract and the placing of the parties to it in status quo. It necessarily involves a
repudiation of the contract and a refusal of the moving party to be further bound by it.
(Black's Law Dictionary 4th Ed. p. 1472.) It is said to be the unmaking or an undoing of
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the contract from the beginning, and not merely a termination. [Citation omitted.]
Rescission is described in Cleaves v. Thompson, 122 Kan. 43, 46, 251 P. 429, as follows:
'Rescission is an equitable remedy designed to afford relief from contracts
entered into through mistake, fraud, or duress. Ordinarily, the nature of relief asked in
such cases must be such as to place the parties in their original situation. . . .'"

In their brief, the Kincaids rely on the rule stated in Sharp Electronics Corp. v.
Lodgistix, Inc., 772 F. Supp. 540, 546 (D. Kan. 1991), which stated "unilateral rescission
is generally available . . . as an equitable remedy to the victim of fraud who ceases to
accept the benefits of the contract and promptly gives notice to the other party."
(Emphasis added.)

Here, the Kincaids maintained possession of the property after discovering the
defects in the home rather than rescinding the contract. The Kincaids began repairing the
defects long before they filed suit against the Desses where they sought damages.
Further, the Kincaids' failed to give the Desses prompt notice of their intent to rescind the
contract. Thus, the Kincaids claim for rescission fails. See Morse v. Kogle, 162 Kan. 558,
560, 178 P.2d 275 (1947) (one who seeks to rescind a contract on the grounds of fraud
must do so with reasonable promptness after discovery of the fraud). As a result, the trial
court properly granted summary judgment in favor of the Desses on the Kincaids'
rescission claim. See Hockett v. The Trees Oil Co., 292 Kan. 213, 218, 251 P.3d 65
(2011) (If a trial court reaches the correct result, its decision will be upheld even though it
relied upon the wrong ground or assigned erroneous reasons for its decision.).

Affirmed in part, reversed in part, and remanded for trial.