Alejandre v. Bull

• Decision Date: 05 October 2004
• Docket Number: No. 22348-5-III.,22348-5-III.
• Citation: 123 Wn. App. 611,98 P.3d 844,123 Wash. App. 611
• Court: Washington Court of Appeals
• Parties: Arturo ALEJANDRE and Norma Alejandre, husband and wife, Appellants, v. Mary M. BULL, a single person, Respondent.

98 P.3d 844

123 Wn. App. 611

123 Wash. App. 611

Arturo ALEJANDRE and Norma Alejandre, husband and wife, Appellants, v. Mary M. BULL, a single person, Respondent.

No. 22348-5-III.

Court of Appeals of Washington, Division 3, Panel Eight.

October 5, 2004.

Ronald K. McAdams, McAdams, Ponti & Wernette, Walla Walla, for Appellants.

Albert J. Golden, Walla Walla, for Respondent.

KURTZ, J.

Mary M. Bull sold a house with a defective septic system to Arturo and Norma Alejandre. The Alejandres sued Ms. Bull for fraudulently or negligently misrepresenting the condition of the septic system. The Alejandres' case proceeded to trial and, after they rested their case, the trial court dismissed their claims. The court ruled as a matter of law that they had failed to prove their claims and the court further ruled that their claims were barred by the economic loss rule. We reverse the court's order dismissing the Alejandres' claims and remand their claims for trial. We conclude the Alejandres presented sufficient evidence to establish their claims. We further hold their claims are not barred by the economic loss rule because Ms. Bull and the Alejandres were not parties to a contract that allocated risk for fraudulent or negligent misrepresentation claims.

FACTS

In September 2001, Ms. Bull agreed to sell her residence to the Alejandres. The parties signed an earnest money agreement. In that agreement, Ms. Bull represented that the property was served by a septic system. The agreement contained no other representations regarding the septic system. In the agreement, Ms. Bull promised to have the septic tank pumped prior to closing.

The earnest money agreement contained an inspection addendum which provided, among other things, that the sale was contingent upon an inspection of the septic system. It further provided that "[a]ll inspection(s) must be satisfactory to the Buyer, in the Buyer's sole discretion." Ex. 4. Before closing, the Alejandres received a copy of a bill from Walt's Septic Tank Service. It stated that the tank had been pumped and that the septic system's back baffle could not be inspected but that there was no obvious malfunction of the system at the time the tank was pumped. The Alejandres did not object to the information contained in the document, indicating their acceptance of it.

Prior to closing, Ms. Bull provided the Alejandres with the disclosure statement mandated by RCW 64.06.020. Chapter 64.06 RCW, entitled "Residential Real Property Transfers — Seller's Disclosures," applies to residential property sales and requires sellers to make certain disclosures about the sale property. If a buyer is unhappy with those disclosures, in the buyer's sole discretion, the buyer may rescind the earnest money agreement, provided the buyer does so within three days after the receipt of the disclosure statement. RCW 64.06.030. In other words, the effect of this statute is to give the buyer a three-day option to change his or her mind about the sale. Conversely, a buyer may expressly waive the buyer's rights of rescission, after receipt of the disclosure statement. RCW 64.06.030. Significantly, RCW 64.06.070 expressly provides that nothing in chapter 64.06 RCW extinguishes or impairs any rights or remedies of a buyer of real estate against the seller and it further provides that nothing in the chapter creates a new right or remedy for the buyer of residential real property.

In her disclosure statement, Ms. Bull was required to disclose to the Alejandres whether there were "any other material defects affecting this property or its value that a prospective buyer should know about." She responded "no." Ex. 5. She further disclosed that the house was serviced by a septic system, which had last been pumped in the fall of 2000. She further stated that the septic system had last been inspected in the fall of 2000, and that "Walt Johnson Jr. replaced broken line between house and septic tank." Ex. 5. Additionally, Ms. Bull disclosed that she was aware of changes or repairs to the septic tank system.

The Alejandres received and accepted Ms. Bull's disclosures. The disclosure statement included a provision that provided that the buyer had a duty to "pay diligent attention to any material defects which are known to Buyer and can be known to Buyer by utilizing diligent attention and observation." Ex. 5. The Alejandres signed the section of the disclosure statement entitled "BUYER'S WAIVER OF RIGHT TO REVOKE OFFER." Ex. 5. By signing this section, they waived their right to revoke their offer to purchase based upon the RCW 64.06.020 disclosures.

Before the sale could be closed, the Alejandres' bank required an inspection of the property. The report's general inspection summary stated that the purpose of the inspection was to notify the client of all defects or potential problems. Regarding the septic system, the report stated "everything drains OK" and "Performs Intended Function." Ex. 7.

The sale was closed on December 10, 2001. The Alejandres moved into the property on or about December 17.

In late January 2002, the Alejandres began experiencing problems with their septic system. Inside their home, they detected an odor. They heard "water gurgling like it was coming back up." Report of Proceedings (RP) at 15. Outside their home, they noticed another foul odor. They associated this odor with the ground around the septic tank, which they described as soggy.

By February, the Alejandres realized the problem with their septic system required professional assistance. They called William Duncan of Gary's Septic Tank Service. He informed them that he could pump the tank, but he could not fix the problem. He informed them that he had looked at the septic system for Ms. Bull and had told her the drain fields for the septic tank were not working. He further stated he had informed Ms. Bull that she needed to hook up with the city sewer system.

At Mr. Duncan's recommendation, the Alejandres contacted Ronald Johnson who excavated septic systems. From him, they learned that he had examined the septic system for Ms. Bull and had informed her that the septic system was too deep for his equipment. He reported that he had advised Ms. Bull that the job would require heavy equipment and would be costly.

Eventually, the Alejandres hired another excavating company, with larger equipment, to excavate and fix their septic system. The excavation revealed that the baffle to the outlet side of the septic system was gone, which allowed sludge from the septic tank to enter the drain field, plugging it. According to the Alejandres, their costs and damages totaled nearly $30,000. They sued Ms. Bull for fraud, constructive fraud, and negligent misrepresentations.

At trial, Ms. Bull testified that she had called William Duncan of Gary's Septic Tank Service approximately one year before she sold her residence. She called him because the ground around the septic tank was "`squishy.'" RP at 204. Mr. Duncan quoted her a fee of $500 to inspect the system and stated that he could not promise that his inspection would produce a remedy for her problems. Put off by this statement, Ms. Bull did not hire Mr. Duncan to inspect her septic system, but she did hire him to pump the septic tank. For a time, she had been doing the laundry outside her home in order to lessen the load on her septic system.

Later, Ms. Bull contacted Walt Johnson of Walt's Septic Tank Service. Mr. Johnson also pumped Ms. Bull's septic tank. Additionally, Ms. Bull testified that she had observed a Walt Johnson employee using a rotorooter. She stated that she believed the employee fixed a break in the pipe leading from the septic tank to the drain field. Because the septic system worked after these repairs, Ms. Bull believed it had been fixed.

At trial, Mr. Duncan testified that he was familiar with the Bulls' septic system because he had serviced it on another occasion. He characterized the system as sluggish. After meeting with Ms. Bull, he pumped the tank but advised her that she needed to hook up to the city sewer. He explained that the drain field was saturated and was not working properly. He further advised her that city guidelines required her to hook up to the city sewer due to the failed septic system.

In April 2000, Ms. Bull applied for a city sewer hookup, as recommended by Mr. Duncan. At that time, she learned the city's hookup fee was $5,000. Ms. Bull did not hook up to the city sewer.

In June 2001, she listed her property for sale. In information she supplied to her realtor, she stated that there was no defect in the operation of her septic system. At trial, she explained that her septic system was working when she completed the realtor's form.

The Alejandres' case was tried to a jury. After they rested their case, the trial court took the case from the jury and dismissed all of the Alejandres' claims. The court ruled as a matter of law that the Alejandres had failed to meet the requisite burdens on all of their claims and the court further ruled that their tort claims were barred by the economic loss rule.

ANALYSIS

Standard of Review. A trial court may issue a judgment as a matter of law when it finds, after reviewing the evidence in the light most favorable to the nonmoving party, that there was no legally sufficient evidence or reasonable inference to support the jury's verdict in favor of the nonmoving party. CR 50; Goodman v. Goodman, 128 Wash.2d 366, 371, 907 P.2d 290 (1995). An appellate court applies the same standard of review as the trial court when it reviews the grant of a judgment as a matter of law. Indus. Indemnity Co. v. Kallevig, 114 Wash.2d 907, 915, 792 P.2d 520 (1990).

Fraudulent Concealment or Misrepresentation. The Alejandres contend Ms. Bull fraudulently failed to disclose the problems with her septic system. There are two ways to establish fraudulent concealment or misrepresentation. First, the plaintiff may affirmatively plead and prove...