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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND DARREN LAWLEY, ET AL., Plaintiffs, v. PAUL E. NORTHAM, ET AL., Defendants. MEMORANDUM OPINION This diversity case arises from a real estate transaction involving a single family home located at 5809 Worcester Highway in Worcester County, Maryland (the "Property"). On or about September 5, 2008, the Property was sold by Paul Northam and Lynn Immell, defendants, to Dona May Willoughby, plaintiff.1 Debora Hileman2 and Hileman Real Estate, Inc. ("Hileman, Inc.") (collectively, the "Hilemans"3), defendants, were the sellers' real estate brokers. Although Ms. Willoughby was the purchaser, her daughter and son-in-law, plaintiffs Misha and Darren Lawley, were to occupy the Property. Based on purported defects in the Property, allegedly discovered after the Lawleys moved into the Property, plaintiffs filed suit against Northam, Immell, and the Hilemans. Civil Action No.: ELH-10-1074

Initially, Ms. Willoughby was not named as a plaintiff. After Ms. Willoughby was sued, in a third-party complaint, she was added as a plaintiff. Ms. Hileman's first name is spelled "Deborah" in her Summary Judgment Motion and her Reply. For the most part, however, her name appears as "Debora." Throughout their submissions, both sides refer to Ms. Hileman and Hileman, Inc. collectively, as "Hileman." The Court, however, will refer to them as the "Hilemans," distinguishing between Ms. Hileman, individually, and Ms. Hileman and Hileman, Inc., collectively.
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Pending before the Court is the Hilemans' Motion For Partial Summary Judgment ("Motion," ECF 50), filed solely as to the claims lodged against them by the Lawleys.4 In particular, as to the Hilemans, plaintiffs alleged negligence (Count I), fraudulent inducement/deceit (Count III), fraud/concealment (Count IV), negligent misrepresentation (Count V), negligent supervision and retention (Count VI, against Hileman, Inc. only), respondeat superior (Count VII, against Hileman, Inc. only), civil conspiracy (Count IX), loss of consortium (Count XI), declaratory judgment (Count XII), rescission (Count XIII), and unjust enrichment (Count XIV). See Amended Complaint ("Amended Compl.," ECF 43). The issues have been fully briefed, and the Court now rules pursuant to Local Rule 105.6, as no hearing is necessary. For the reasons that follow, the Court will deny the Hilemans' Motion, in part, and grant it, in part. Factual Background Ms. Willoughby, a resident of Hawaii, purchased the Property from Northam and Immell. The sellers are the first cousins of Ms. Hileman, a real estate broker licensed in Maryland and the sole shareholder of Hileman, Inc. Motion 1; Opposition To Motion For Partial Summary

Judgment ("Opposition," ECF 52) 3. As noted, Ms. Willoughby is the mother of Ms. Lawley and the mother-in-law of Mr. Lawley, the occupants of the Property. Memorandum Of Grounds And Authorities In Support Of Motion For Partial Summary Judgment ("Hileman Memo.," ECF

The sellers recently moved for summary judgment (ECF 58). Their motion is not yet ripe, however, and their contentions are not addressed in this Opinion. Curiously, the Hilemans just filed a second motion for summary judgment (ECF 60), raising additional grounds. It is not clear why they could not have filed one motion, raising all contentions. In any event, that motion is not yet ripe, and is not addressed in this Opinion. -2-

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50-1) 2, 7; Opposition 3.5 In connection with the sale of the Property, Hileman, Inc. received a commission from the sellers in the amount of $4,811.25. Opposition 22. At the relevant time, Ms. Hileman's mother, Peggi Bortz, was Ms. Hileman's administrative assistant. Ms. Bortz has been a "licensed real estate broker" for forty years. Id. at 3-4; see Opposition Ex. 2, at 24:11. At her deposition, Ms. Bortz testified that, for about twentyeight years, she owned the house adjacent to the Property. Id. at 9:1-9:4. Her father, Otis Northam (Ms. Hileman's grandfather), had once owned the Property, as well as the adjacent Bortz property, but later subdivided and gave the portion referred to here as the Property to his son, David Northam. Id. at 17:2-17:6. In 1957, David Northam and his wife, Irene, built the subject house (i.e., the Property). Id. at 12. David Northam lived in that house until he died; Irene Northam lived there until 2003.6 After Irene Northam left the Property, the Northam children, Paul Northam7 and Lynne Immell, arranged with Hileman, Inc. to rent, and later sell, the Property. Opposition 4. Ms. Bortz testified that she was involved with managing repairs of the Property while it was a rental. Opposition Ex. 2, at 30:15-31:19. The Hilemans have used the same title for the Memorandum attached to their Motion and for their Reply (i.e., "Hileman Memo."). The Hilemans' Reply was belatedly filed on March 21, 2011, in violation of Local Rule 105.2.a. It provides, in part: All motions must be filed within deadlines set by the Court. Unless otherwise ordered by the Court, all memoranda in opposition to a motion shall be filed within fourteen (14) days of the service of the motion and any reply memoranda within fourteen (14) days after service of the opposition memoranda. Plaintiffs' Opposition was filed on February 22, 2011. Therefore, pursuant to Local Rule 105.2, defendants' Reply was due on March 11, 2011.
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Irene Northam died on June 24, 2005. Motion Ex. 3.

Unless otherwise noted, "Northam" or "Mr. Northam" shall refer to Paul Northam, not David Northam. -3-

During the time period in which the Property was a rental, the Hilemans allegedly learned about several defects with respect to the Property. Their alleged non-disclosure of those defects forms the basis of this suit. Nitrates in the Water The Property was rented between 2003 and 2008. James Kelly Carrigan was one of the persons who rented it. Opposition 4-5; Opposition Ex. 18. In a letter to Ms. Hileman dated January 23, 2007, Mr. Carrigan wrote: "[Y]our mother stated to me that she was concerned about nitrates in the water. Needless to say, we are very concerned not only about the safety of the water, but more so about the fact that your office has not previously disclosed any information to us indicating that the water might not be potable."8 Opposition Ex. 4. In an email dated February 14, 2007, Ms. Hileman wrote to Northam to discuss the Property, including the "high number of nitrates currently (14 versus a safe level [that] should be less than 10) in the water." Opposition Ex. 5. A letter addressed to Ms. Hileman from the Worcester County Department of Environmental Programs, dated March 27, 2007, indicated that a point of use system on the kitchen sink would be sufficient to address the nitrate level, but that "the well owner must notify any future owner or tenant that the water is considered potable only through the treatment system." Opposition Ex. 6. Asbestos By letter to Ms. Hileman dated January 23, 2007, Mr. Carrigan indicated that "asbestos in the basement is a huge concern." Opposition Ex. 4. In an email from Ms. Hileman's attorney to

In his letter, Mr. Carrigan indicated that he was living at the Property with his son and daughter-in-law. Id. -4-

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Ms. Hileman, dated August 16, 2007, regarding Mr. Carrigan's complaints about the Property, counsel acknowledged that asbestos was "a really big issue."9 Opposition Ex. 7. Water Infiltration The basement of the Property had a history of "water intrusion." Opposition 6.

According to Ms. Bortz's deposition testimony, the basement flooded in 1989 and, as a result, Mr. Northam arranged for installation of a sump pump. Opposition Ex. 2, at 55-56. Ms. Hileman testified at her deposition that, when the water level became high, the sump pump pumped the excess water into a ditch along Worcester Highway. Opposition Ex. 1, at 111:3111:10. In a letter dated February 28, 2007, in which Ms. Hileman requested service for the sump pump, she stated: "Just to give you a bit of information to keep in mind for your service people, this is a system that is needed on a daily basis to keep the basement dry." Opposition Ex. 8. Ms. Hileman also testified that she had seen water in the basement around the sump pump area when the backup battery was not functioning. Opposition Ex. 1, at 104:9-104:10. From 2005 to 2007, the sump pump was repaired or replaced on a number of occasions, under Ms. Bortz's watch. See Opposition Exs. 10-16. In an email dated June 20, 2005, from Ms. Bortz to Ms. Hileman and Northam, Ms. Bortz wrote that the plumber had not been able to find a sump pump with sufficient horsepower "to suit him." Opposition Ex. 11. Mold The basement of the Property suffered from mold problems. By email dated August 25, 2005, Ms. Bortz wrote Northam and Ms. Immell, stating: "I know there is mold." Opposition

In their Opposition, the Lawleys characterize this email as "an apparently nonprivileged communication." Opposition 6. In their Reply, the defendants do not assert privilege as to the email communication. -5-

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Ex. 16. The email was forwarded to Ms. Hileman "for the file." Id. On July 11, 2008, Ms. Hileman wrote to Mr. Northam and Ms. Immell, stating: "There is quite a bit of white mold spores on the joists in the basement that will be a problem with a sale if we don't spray with some bleach or mold killing product." Opposition Ex. 17. The Worcester County Department of Development Review and Permitting Letter As a result of a "Nuisance Complaint" filed by Mr. Carrigan with the Worcester County Department of Development Review and Permitting, Bruce Miller, a building inspector, inspected the Property for violations of the Worcester County Rental Housing Code. Opposition Ex. 18. Mr. Miller sent a letter on behalf of The Worcester County Department of Review and Permitting, dated August 6, 2008, to Northam and Immell, with a copy to Ms. Hileman as the listing agent. Id. He identified four potential defects with the Property: (1) high level of nitrates in the water, (2) peeling lead paint, (3) black mold growth around the windows and on the wall, and (4) asbestos siding and insulation. Id. At her deposition, Ms. Hileman indicated that she had received the letter. Opposition Ex. 1, at 135:4-135:6. With regard to the potability issue, the letter provided: "The water supply shall be maintained free of contamination . . . . Owner shall prove that the water supply is free from contamination before next tenant occupies this property." Opposition Ex. 18. The letter further required that a "state certified inspector" inspect the Property for lead paint before the next occupancy, and that "[a]ll discovered deficiencies . . . be corrected by a state certified contractor with successful inspection by a lead inspector before occupation by another tenant." Id. With respect to mold, the letter required repair of all roof and wall leaks, and said: "While not specifically addressed in the [Rental Housing] code, this inspector strongly recommends that

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owner cause to have this [P]roperty inspected for mold with subsequent abatement of affected areas by a qualified contractor."10 Id. In addition, Miller wrote: "The asbestos insulation around the pipes must be properly abated by a state certified contractor." Id. The letter acknowledged that, at the time, "the Property was vacant and listed for sale," and stated: "Corrections noted above shall be corrected before occupancy of this unit to another family." Id. Sale of the Property It is undisputed that the Property was purchased by Ms. Willoughby.11 However, Ms. Willoughby did not attend the closing. Opposition 13. Ms. Lawley testified at her deposition that Ms. Willoughby was not involved in the decision to purchase the Property. Rather, Ms. Lawley is the one who made the "decision" to buy the Property. Opposition Ex. 19, at 286:12. In addition, Ms. Lawley stated: "Dona Willoughby was not involved with the inspection

process, with any of the dealings with the house. I dealt with everything or my husband did." Id. at 363:11-363:15.

The letter cited the following anecdotal evidence: "[T]he tenant's grandson allegedly suffered from many sicknesses while residing at the house and the pediatrician found mold cultures taken from the child's nose. These illnesses disappeared after moving to a new residence. The [industrial hygienist] report supports the health hazard of the mold found at this residence." Id. Ms. Willoughby is identified by the Maryland Department of Assessments and Taxation and the deed as the owner. Motion Exs. 2-3. At her deposition, Ms. Lawley agreed that Ms. Willoughby owned the Property. Motion Ex. 1, at 393:18-393:21. She also indicated that her mother paid the property taxes for 2009 and 2010, id. at 485:19-486:1, and she "believe[d]" that her mother also paid the property taxes for 2008. Id. at 485:17-485:18. Ms. Lawley testified that these payments are a loan from her mother, to whom the Lawleys owe "[a]pproximately $60,000." Id. at 485-487. Ms. Lawley paid for the home inspection as well as the deposit of $1,000 on the Property. Id. at 289:9-289:15. However, Ms. Willoughby reimbursed Ms. Lawley for these costs. Id. at 356:16-357:4. -711

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Ms. Lawley also testified that she "was acting on behalf of Dona Willoughby from the very beginning." Id. at 363:9-363:10. Ms. Lawley signed the necessary documents, pursuant to a power of attorney ("POA").12 Opposition at 1, 5-6. The Lawleys moved into the Property on September 5, 2008, allegedly as tenants of Ms. Willoughby. Hileman Memo. 15; see Amended Compl.

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