Austin v. Ettl

• Decision Date: 02 October 2012
• Docket Number: No. 42256–5–II.,42256–5–II.
• Citation: 286 P.3d 85,171 Wash.App. 82
• Court: Washington Court of Appeals
• Parties: Matthew D. AUSTIN, Appellant, v. Lance ETTL and Mandy Ettl, husband and wife, and the marital community comprised thereof, Respondents.

171 Wash.App. 82

286 P.3d 85

Matthew D. AUSTIN, Appellant,

v.Lance ETTL and Mandy Ettl, husband and wife, and the marital community comprised thereof, Respondents.

No. 42256–5–II.

Court of Appeals of Washington, Division 2.

Oct. 2, 2012.

David James Britton, Britton & Russ, PLLC, Tacoma, WA, for Appellant.

Robert G. Casey, Attorney at Law, Tacoma, WA, Chrystina R. Solum, Eisenhower & Carlson, PLLC, Tacoma, WA, for Respondents.

QUINN–BRINTNALL, P.J.

[171 Wash.App. 84]¶ 1 Matthew Austin appeals the trial court's CR 12(b)(6) dismissal of his negligent misrepresentation and unjust enrichment claims against Lance and Mandy Ettl arising from a dispute over the Ettls' disclosure of potential local improvement districts (LIDs) ¹ on the property they sold to Austin.² Austin argues that his negligent misrepresentation claim for damages based on the Ettls' failure to disclose the cost of the proposed LIDs may proceed based on the independent duty doctrine and that both claims should have survived the Ettls' CR 12(b)(6) motion. We disagree.

¶ 2 Although the parties' confusion over the shifting sands of our Supreme Court's independent duty doctrine' jurisprudence is understandable, we need not be caught up in the quagmire. This case is straightforward. As required by former RCW 64.06.020(1) (2009), the Ettls disclosed that potential LIDs were being considered on the property they sold to Austin. This disclosure contained no false information and, contrary to Austin's claims, the common law does not impose a duty on a seller to disclose the likely costs of potential encumbrances—particularly when no “special” relationship exists between the parties. Accordingly, we affirm the trial court's dismissal of Austin's claims because Austin failed to plead a prima facie case for either negligent misrepresentation or unjust enrichment. In addition, we award the Ettls statutory attorney fees.

FACTS

¶ 3 On July 19, 2007, Austin executed a real estate purchase and sales agreement (REPSA) ³ for the purchase of the Ettls' Tacoma property. Mutual acceptance of the REPSA occurred on July 30, with a closing date set for August 24. On the closing date, the Ettls provided Austin' with a real property transfer disclosure statement (Form 17),⁴ disclosing the two proposed LIDs and their proposed LID numbers, but not the potential costs of each LID assessment. Austin did not request more information about the LIDs, nor did he request to extend the closing date; he signed the closing documents and concluded the purchase. Almost three months later, on November 13, the City of Tacoma approved the LIDs and assessed the LIDs' costs at over $40,000 against Austin's property.

[171 Wash.App. 86]¶ 4 On March 12, 2010, Austin sued the Ettls, alleging that the Ettls' disclosure of the proposed LIDs on the closing date and their failure to disclose the potential cost of the proposed LIDs amounted to negligent misrepresentation and resulted in unjust enrichment to the Ettls. Austin claimed damages in “the amount of [the LIDs] plus interest as charged by the City of Tacoma.” Clerk's Papers (CP) at 14.

¶ 5 The Ettls filed a CR 12(b)(6) motion to dismiss Austin's suit for failure to state a claim for which relief could be granted, arguing in part that the “economic loss rule” barred Austin's negligent misrepresentation claim. CP at 20. And in their reply to Austin's response brief, the Ettls argued that even assuming the asserted facts in Austin's complaint were true, they met their duty to disclose because (1) they disclosed the LIDs' potential existence on the seller disclosure form as required by former RCW 64.06.020(1),⁵ and (2) no independent tort duty required them to disclose the potential costs of the proposed LIDs.

¶ 6 The trial court granted the Ettls' motion to dismiss, reasoning that under our Supreme Court's analysis of “the interaction of tort damages ... with contract damages” in Eastwood v. Horse Harbor Foundation, Inc., 170 Wash.2d 380, 241 P.3d 1256 (2010) (plurality opinion), and Alejandre v. Bull, 159 Wash.2d 674, 153 P.3d 864 (2007), the “economic loss rule” barred Austin's negligent misrepresentation and unjust enrichment claims. Report of Proceedings at 6–7. Austin appeals.

DISCUSSION

Standard of Review

¶ 7 We review de novo a trial court's CR 12(b)(6) dismissal of a cause of action. San Juan County v. No New Gas Tax, 160 Wash.2d 141, 164, 157 P.3d 831 (2007). To prevail, the moving party in a CR 12(b)(6) motion bears the burden to establish “beyond doubt that the claimant can prove no set of facts [ ] consistent with the complaint” that would justify recovery. No New Gas Tax, 160 Wash.2d at 164, 157 P.3d 831. And although a trial court must consider any hypothetical facts asserted by the complaining party when entertaining a motion to dismiss under CR 12(b)(6), a proffered hypothetical will only “ ‘defeat[ ] a CR 12(b)(6) motion if it is legally sufficient to support [a] plaintiff's claim.’ ” Bravo v. Dolsen Cos., 125 Wash.2d 745, 750, 888 P.2d 147 (1995) (emphasis added) (quoting Halvorson v. Dahl, 89 Wash.2d 673, 674, 574 P.2d 1190 (1978)).

Negligent Misrepresentation

¶ 8 Austin argues that the trial court erred in granting the Ettls' motion to dismiss because the Ettls had an independent duty “to avoid negligent misrepresentation in one's business transactions by clarifying vague or incomplete disclosures.” Br. of Appellant at 22. Because the common law does not require a seller of real property to disclose the potential cost of proposed encumbrances, this argument fails.

¶ 9 Washington law recognizes the tort of negligent misrepresentation.⁶Haberman v. Wash. Pub. Power Supply Sys., 109 Wash.2d 107, 161–62, 744 P.2d 1032, 750 P.2d 254 (1987). A plaintiff claiming negligent misrepresentation

must prove by clear, cogent, and convincing evidence that (1) the defendant supplied information for the guidance of others in their business transactions that was false, (2) the defendant knew or should have known that the information was supplied to guide the plaintiff in his business transactions, (3) the defendant was negligent in obtaining or communicating the false information, (4) the plaintiff relied on the false information, (5) the plaintiff's reliance was reasonable, and (6) the false information proximately caused the plaintiff damages.

Ross v. Kirner, 162 Wash.2d 493, 499, 172 P.3d 701 (2007). Moreover, “[a]n omission alone cannot constitute negligent misrepresentation, since the plaintiff must justifiably rely on a misrepresentation.” Ross, 162 Wash.2d at 499, 172 P.3d 701.

¶ 10 Here, Austin acknowledged in his complaint that the Ettls disclosed the potential LIDs. CP at 12 (“[The Ettls] waited until the August 24 closing had actually commenced before faxing [Austin] a completed Seller Disclosure Statement (Form 17). For the first time, [the Ettls] disclosed the existence of a Local Improvement District (“LID”) affecting the property.”). Thus, Austin does not actually assert that the Ettls provided him with false information. Instead, he takes issue with the Ettls' failure to disclose the potential amount of the LIDs, arguing that this omission constituted a negligentmisrepresentation. This claim has no legal merit as Washington law does not impose a duty on a seller to disclose not-yet-extant encumbrances and, in any case, Austin's failure to research the potential costs of the proposed LIDs disclosed by the Ettls was entirely unreasonable.

¶ 11 In Van Dinter v. Orr, 157 Wash.2d 329, 331, 138 P.3d 608 (2006), our Supreme Court addressed an analogous situation: whether a seller of unimproved real property “had a duty to disclose whether a capital facilities rate could be imposed upon the property if developed.” ⁷ In 2001, the Orrs “listed their vacant land for sale, noting that the land had a sewer system available.” Van Dinter, 157 Wash.2d at 331, 138 P.3d 608. The Orrs did not disclose that to use the county's sewer system, building owners were required to pay a monthly capital facilities rate surcharge in addition to the sewer bill. The Van Dinters purchased the vacant land and began constructing an automobile dealership on it. Van Dinter, 157 Wash.2d at 331, 138 P.3d 608. After the Van Dinters connected their building to the county's sewer system, the “county issued a sewer inspection report” and shortly thereafter, the first monthly sewer bill including the monthly capital facilities rate. Van Dinter, 157 Wash.2d at 331, 138 P.3d 608. The Van Dinters sued the Orrs, arguing that they negligently misrepresented the property by “failing to disclose that the property was encumbered by the capital facilities rate.” Van Dinter, 157 Wash.2d at 332, 138 P.3d 608.

¶ 12 The trial court “correctly concluded that the capital facility rate does not constitute an encumbrance on property unless the ratepayer fails to pay his or her sewer bill and the county files a lien on the property” and, further, that the “Orrs did not provide false information or misrepresent existing facts” and granted summary judgment to the Orrs. Van Dinter, 157 Wash.2d at 333, 138 P.3d 608 (emphasis added). Division Three of this court, in an unpublished decision, disagreed, believing that the Orrs “may, however, have negligently misrepresented the existence of the. [capital facilities rate] by not disclosing it” because Washington has adopted the Restatement (Second) of Torts § 551 (1977), “Liability for Nondisclosure.” ⁸Van Dinter v. Orr, noted at 128 Wash.App. 1055, 2005 WL 1796965, at *2, rev'd in part,157 Wash.2d 329, 138 P.3d 608. Our Supreme Court rejected this reasoning.

¶ 13 In its per curiam decision, the Van Dinter court explained,

The duty to disclose in a business transaction arises if imposed by a fiduciary relationship or other similar relationship of trust or confidence or if necessary to prevent a partial or ambiguous statement of facts from being misleading. Colonial Imports [ v. Carlton Nw., Inc.], 121 Wash.2d [726,] 731, 853 P.2d...