Anderson v. Kriser

• Citation: 266 P.3d 819,2011 UT 66,694 Utah Adv. Rep. 9
• Decision Date: 25 October 2011
• Docket Number: No. 20091032.,20091032.
• Parties: David ANDERSON and Kristine Anderson, Plaintiffs and Petitioners, v. Matthew KRISER, Defendant and Respondent.
• Court: Supreme Court of Utah

2011 UT 66

266 P.3d 819

694 Utah Adv. Rep. 9

David ANDERSON and Kristine Anderson, Plaintiffs and Petitioners,

v.Matthew KRISER, Defendant and Respondent.

No. 20091032.

Supreme Court of Utah.

Oct. 25, 2011.

Stephen Quesenberry, Jessica Griffin Anderson, Provo, Charles L. Perschon, Salt Lake City, for plaintiffs.

Robert L. Jeffs, Randall L. Jeffs, Provo, for defendant.

Associate Chief Justice DURRANT, opinion of the Court:

INTRODUCTION

¶ 1 In 2004, David and Kristine Anderson purchased an undeveloped lot of land from Country Living Development, L.C. (Country Living), located in a subdivision owned and developed by Country Living. After constructing a home on the lot and moving into it, the Andersons began to notice several structural problems, including large cracks in the home's flooring and window frames. A short time later, the Andersons learned that these problems had resulted from excessive settling caused by unstable soil beneath their home's foundation.

¶ 2 The Andersons subsequently filed a lawsuit against Matthew Kriser, an employee and shareholder of Country Living, for fraudulent nondisclosure. Sometime after the Andersons initiated their suit, Mr. Kriser filed a motion for summary judgment, which the district court granted.

¶ 3 The Andersons appealed the district court's grant of summary judgment to the Utah Court of Appeals. The court of appeals affirmed the district court's decision after concluding that the Andersons had failed to demonstrate that Mr. Kriser had actual knowledge of the unstable soil beneath the Andersons' home. ¹ In dicta, the court of appeals also stated that “[b]ecause [Mr.] Kriser did not construct the Andersons' home,” the law imposed no duty on him. ² In support of this conclusion, the court of appeals stated that “[i]t is clear from Smith v. Frandsen, that ultimate responsibility for the settling and other damage to the Andersons' house lies” not with Mr. Kriser, but “with the builder-contractor who actually constructed it.” ³

¶ 4 On certiorari, we must resolve two issues. First, we must determine whether the court of appeals erred in concluding that a plaintiff must demonstrate that a defendant had actual knowledge of undisclosed information in order to prevail on a claim for fraudulent nondisclosure. Second, we must decide whether the court of appeals erred in stating that our opinion in Smith makes it “clear” that the law imposed no duty on Mr. Kriser because he did not construct the Andersons' home.

¶ 5 We first hold that the court of appeals correctly concluded that a plaintiff must demonstrate that a defendant had actual knowledge of undisclosed information in order to satisfy the second element of a claim for fraudulent nondisclosure. Thus, because the Andersons have failed to set forth any evidence demonstrating that Mr. Kriser actually knew of the soil conditions below their home, we affirm the district court's grant of summary judgment in favor of Mr. Kriser.

¶ 6 Additionally, to avoid future confusion, we clarify that our holding in Smith does not support the court of appeals' conclusion that the law imposed no duty on Mr. Kriser to disclose information to the Andersons simply because he did not construct the Andersons' home.

BACKGROUND

¶ 7 In 1997, Country Living began developing a thirteen-acre residential subdivision (the Development) in Pleasant Grove, Utah. As part of the Development's plat-approval process, Pleasant Grove required Country Living to obtain a geotechnical soil investigation of the property. To comply with this requirement, Country Living hired Earthtec Engineering, P.C. (Earthtec) to conduct a soil study.

¶ 8 After concluding its investigation, Earthtec prepared a report of its findings (the Report). In its conclusions section, the Report indicated that the soils throughout the Development varied and that some areas contained “slightly collapsible soils.” The Report then provided recommendations concerning site grading, “appropriate foundation types, floor slabs, and pavement design.” Once Earthtec completed the Report, it sent a copy of the Report to Mr. Kriser's brother, who was also an employee of Country Living. Despite the existence of the Report, Mr. Kriser later testified that he never saw it.

¶ 9 Approximately two months after the Report was completed, the Andersons approached Mr. Kriser and inquired about purchasing an undeveloped lot in the Development. ⁴ Sometime later, the Andersons signed a real estate purchase contract in which they agreed to buy a lot in the Development (Lot 2) for $54,400. Mr. Kriser signed the agreement, placing only his name—and no reference to Country Living—on the line requiring the seller's signature.

¶ 10 In June 1998, the transaction closed, and Lot 2 was conveyed by Country Living to the Andersons via warranty deed. Mr. Kriser signed the warranty deed with his name and indicated that he was doing so as “Manager” for Country Living. At no time prior to closing did Country Living, or Mr. Kriser, inform the Andersons of the presence of collapsible soil in the Development or provide them with a copy of the Report.

¶ 11 After the sale closed, the Andersons hired Mr. Anderson's father to build a home for them on Lot 2.

¶ 12 Several years after moving into their home, the Andersons began to notice numerous structural problems, including cracks in the home's flooring, walls, and window frames. Sometime after discovering these problems, the Andersons obtained a copy of the Report that had been prepared by Earthtec and given to Country Living in December 1997.

¶ 13 Upon learning of the Report, the Andersons filed a lawsuit against Mr. Kriser in his individual capacity. In their complaint, the Andersons alleged that Mr. Kriser knew of the Report and of its contents and that he had fraudulently concealed the existence of collapsible soils in the Development.

¶ 14 In response to the Andersons' complaint, Mr. Kriser filed a motion for summary judgment. In his motion, Mr. Kriser contended that he had acted as an agent for Country Living during his interactions with the Andersons and that he therefore could not be held personally liable to the Andersons. He also argued that, even if he could be held personally liable, the Andersons had failed to satisfy the second element of a fraudulent nondisclosure claim. Specifically, Mr. Kriser asserted that such a claim requires that a defendant have actual knowledge of the information that the defendant allegedly failed to disclose.

¶ 15 After conducting a hearing on the motion, the district court granted summary judgment in favor of Mr. Kriser. In so doing, the court concluded that the Andersons had “failed to provide any evidence that [Mr. Kriser] knew that the real property in question had collapsible soils unsuitable for the construction of a residence.”

¶ 16 The Andersons appealed the district court's grant of summary judgment to the Utah Court of Appeals. In their brief to the court of appeals, the Andersons stated that “[t]he only issue on appeal was whether [Mr. Kriser] knew about the ... Report.” They further clarified that the issue on appeal was “not ... whether [Mr. Kriser] owed a duty to disclose the ... Report.”

¶ 17 After narrowing the scope of the issues raised on appeal, the Andersons argued that the district court had erred in granting summary judgment because they had introduced evidence that Mr. Kriser had actual knowledge of the contents of the Report. Additionally, the Andersons argued that, even if Mr. Kriser did not have actual knowledge of the Report, knowledge of the presence of collapsible soils could be imputed to him because he is a developer.

¶ 18 The court of appeals rejected these arguments. Specifically, the court of appeals concluded that the Andersons had failed to satisfy the second element of a fraudulent nondisclosure claim, which requires a plaintiff to demonstrate that “nondisclosed information is known to the party failing to disclose [it].” ⁵ In support of this conclusion, the court of appeals noted that Mr. Kriser had “provided affidavit evidence that at the time of the sale he did not know about any soils testing that addressed [Lot 2's] suitability for housing construction and ... [that he] had not seen the [R]eport.” ⁶ The court of appeals also stated that, even if Mr. Kriser knew that Country Living had a general practice of obtaining soils reports, “[s]uch a theory of knowledge” would not support a claim for fraudulent nondisclosure.⁷

¶ 19 Additionally, despite the Andersons' narrow articulation of the issues raised on appeal, the court of appeals stated in dicta that “[i]t is clear from Smith v. Frandsen, that ultimate responsibility for the settling and other damage to the Andersons' house lies with the builder-contractor who actually constructed it.” ⁸ Thus, “[b]ecause [Mr.] Kriser did not construct the Andersons' home,” the court of appeals concluded that he did not have a duty to communicate material information to the Andersons.⁹

¶ 20 After the court of appeals affirmed the district court's decision, the Andersons filed a petition for certiorari, which we granted. On certiorari, the Andersons contend that the court of appeals erred in concluding that a developer must have actual knowledge of the contents of a soils report in order to be held liable for fraudulent nondisclosure. They also argue that the court of appeals erred in stating that the “ultimate responsibility for the settling and other damage to the Andersons' house lies with the builder-contractor who actually constructed it.” In opposition, Mr. Kriser argues that the court of appeals correctly concluded that the second element of a fraudulent nondisclosure claim requires a showing of actual knowledge of the information that the defendant failed to disclose. Accordingly, because the Andersons have failed to offer any evidence demonstrating that he actually knew of the Report, Mr. Kriser argues that the court of appeals' decision should be...