Hess v. Canberra Dev. Co.

• Decision Date: 14 June 2011
• Docket Number: No. 20090266.,20090266.
• Citation: Hess v. Canberra Dev. Co., 2011 UT 22, 254 P.3d 161, 681 Utah Adv. Rep. 15 (Utah 2011)
• Parties: Mark HESS and Marilyn Hess, Plaintiffs and Appellees,v.CANBERRA DEVELOPMENT COMPANY, LC and David J. Allen, Defendants and Appellants.
• Court: Utah Supreme Court

254 P.3d 161

681 Utah Adv. Rep. 15

2011 UT 22

Mark HESS and Marilyn Hess, Plaintiffs and Appellees,

v.CANBERRA DEVELOPMENT COMPANY, LC and David J. Allen, Defendants and Appellants.

No. 20090266.

Supreme Court of Utah.

April 26, 2011.Rehearing Denied June 14, 2011.

Stephen Quesenberry, Charles L. Perschon, Provo, for plaintiffs.Bruce R. Baird, Dallis A. Nordstrom, Salt Lake City, for defendants.Associate Chief Justice DURRANT, opinion of the Court:

INTRODUCTION

¶ 1 In 2004, Appellees, Mark and Marilyn Hess (collectively, the “Hesses”) purchased an undeveloped lot of land from Canberra Development Company, LC (“Canberra”), located in a subdivision owned and developed by Canberra. After constructing a home on the lot and moving into it, the Hesses began to notice several structural problems, including large cracks in the home's floor. A short time later, the Hesses learned that these problems resulted from excessive settling of the home caused by unstable soil beneath its foundation. Subsequently, the Hesses discovered that Canberra and its chief executive officer, David Allen (collectively, the “Developers”), had failed to inform them of a soils report the Developers had received seven years prior to selling the lot. This report indicated the presence of collapsible soil within the development and, specifically, within a test pit located in the Hesses' back yard.

¶ 2 Upon learning of this report and the Developers' failure to disclose its findings, the Hesses filed a lawsuit against the Developers seeking compensatory and punitive damages for fraudulent nondisclosure and fraudulent misrepresentation. At the conclusion of a jury trial, the Developers were found liable on both claims, and the Hesses were awarded $536,750.50 in economic damages and $2,625,000 for pain and suffering. No punitive damages were awarded. After the trial, the Developers filed several post-verdict motions, including a motion for judgment notwithstanding the verdict (“JNOV”) on the fraudulent nondisclosure claim and a motion for a new trial or remittitur on the amount of damages awarded by the jury. The district court ultimately denied these motions.

¶ 3 Although the Developers purport to raise numerous issues on appeal, only three are adequately briefed, and we address only those three. First, we must determine whether the district court erred when it denied the Developers' motion for JNOV on the Hesses' fraudulent nondisclosure claim. Second, we must decide whether the district court erred when it declined to give the jury an instruction that the Developers proposed concerning intervening and superseding causes. Finally, we must determine whether the district court erred when it denied the Developers' motion for remittitur or a new trial based on the amount of economic damages awarded by the jury.

¶ 4 We first hold that the jury had sufficient evidence to find the Developers liable to the Hesses for fraudulent nondisclosure. Accordingly, we affirm the district court's denial of the Developers' motion for JNOV on the Hesses' fraudulent nondisclosure claim. Second, because intervening and superseding causes are not a defense to intentional torts, we hold that the district court did not err when it declined to give the jury the Developers' proposed instruction. Finally, because the damages awarded by the jury exceeded the amount of damages proven by the Hesses at trial, we hold that the district court erred when it denied the Developers' motion for a new trial or remittitur on the amount of economic damages. Thus, to accurately reflect the evidence presented by the Hesses, we reduce the amount of economic damages awarded by the jury from $536,750.50 to $330,057.30.

BACKGROUND

¶ 5 “ ‘On appeal, we recite the facts from the record in the light most favorable to the jury's verdict.’ ” ¹ In 1997, Canberra, headed by David Allen—its CEO, manager, registered agent, and majority owner—began developing a thirty-five-acre residential subdivision (the “Development”) in Lindon City, Utah. As part of the Development's plat-approval process, Lindon City required that the Developers obtain a geotechnical soil investigation of the property. To comply with this requirement, the Developers hired Applied Geotechnical Engineering Consultants, Inc. (“AGEC”).

A. The AGEC Report

¶ 6 After concluding its investigation, AGEC prepared a report of its findings (the “AGEC Report” or “Report”). At the time the AGEC Report was prepared, the layout of the Development—including the individual lots, streets, and parks—had not yet been established. Although the AGEC Report included a general assertion that Canberra's land was suitable for the proposed residential development, it specifically warned of an erratic occurrence of highly collapsible soil in the Development and set forth precautions owners should take when building homes on this soil. The Report's conclusions section included the following statements: (1) “Moisture sensitive soils have been reported in the area. Precautions with respect to constructing in moisture sensitive soil areas are included in this report”; and (2) “The site is suitable for the proposed residential development. Recommendations contained in this report should be carefully followed.”

¶ 7 Additionally, another section of the Report, titled “Collapsible Soil Considerations,” indicated that “[t]he collapse potential of the soils at the project site” ranged from “ very low to high,” with “localized areas of collapsible soils.” The AGEC Report also indicated that the moisture-sensitive clay and silt soils were spread throughout the Development with “known erratic occurrence” and that owners should be “aware of the potentially moisture sensitive soils in the area.”

¶ 8 While most of the AGEC Report related to the Development as a whole, the Report included a figure identifying the location and soil composition of twelve “test pits” AGEC used to conduct its study. One of these test pits—test pit twelve—was drilled in an area that would later become the backyard of Lot 41. AGEC's analysis indicated that test pit twelve contained layers of clayey and silty soil, which the Report warned were susceptible to collapse because of their sensitivity to moisture.

¶ 9 After receiving the AGEC Report, Mr. Allen “read through [it]” and paid particular attention to the conclusions section, which he was “very interested in.”

B. The Hesses Purchase Lot 41 and Build a Home

¶ 10 In early 2004, the Hesses drove through Lindon City looking for a place to purchase land to build their dream home. During their search, the Hesses obtained a brochure that contained a map of the Development and listed lots that were for sale. After reviewing the brochure, the Hesses contacted Canberra's vice president and exclusive real estate agent, Steven Tanner. In February 2004, the Hesses met with Mr. Tanner and negotiated to purchase Lot 41 from Canberra for $150,000. On February 21, 2004, Mr. Hess signed a real estate purchase contract (“REPC”) and a Seller Property Condition Disclosure form (the “Disclosure Form”). Mr. Allen initialed and signed both the REPC and the Disclosure Form two days later.

¶ 11 In addition to addressing Lot 41's desirability generally, the Disclosure Form included two questions specifically relating to Lot 41's subsurface soil conditions. First, the Disclosure Form asked, “Is there any fill or expansive soil on the property?” In response to this question, Mr. Tanner marked a box indicating that the answer was “[u]nknown.” Second, the Disclosure Form asked whether there was “anything else which [the sellers] should disclose to the Buyer because it may materially or adversely affect the value or desirability of the property.” Mr. Tanner did not respond to this question, instead leaving this section of the Disclosure Form blank.

¶ 12 In April 2004, the transaction closed, and the Developers conveyed Lot 41 to “Mark and Marilyn Hess, husband and wife, as joint tenants” via warranty deed. At no time prior to closing did Canberra, Mr. Allen, or Mr. Tanner provide a copy of the AGEC Report to the Hesses or inform them of the presence of collapsible soil in the Development or test pit twelve.

¶ 13 In March 2004, the Hesses hired GTS Construction (“GTS”) to build a home for them on Lot 41. In January 2005, GTS completed construction on the home, and the Hesses moved in.

C. The Hesses' Home Settles

¶ 14 Shortly after moving into their home, the Hesses began to notice several structural problems. Initially, these problems appeared to be minor and included mostly sticking doors, but with time the problems became more severe. For example, in March 2005, Mr. Hess noticed large cracks in the home's flooring that spanned the length of its foundation. The Hesses also began to hear various noises in the house, which Mrs. Hess described as being similar to the sound of children slamming cupboard doors. These problems grew worse every time it rained or the ground became wet. As a result of the home's structural damage, the Hesses endured countless heating and cooling issues, pest infestations, midnight explosions of shattering windows, and a significant financial strain caused by efforts to keep their home habitable.

¶ 15 In April 2005, after several failed attempts to fix the damage, the Hesses hired Earthtec Testing and Engineering (“Earthtec”) to investigate the source of the home's problems. During its investigation, Earthtec excavated two test pits to examine the soil conditions below the Hesses' home and discovered that part of the house was built on collapsible soil. After concluding its investigation, Earthtec informed the Hesses that “[t]he most likely cause of the differential movement the home ha[d] experienced [was] the collapse and consolidation in the clay soils which [were] observed approximately two feet below the bottom of the footings on the west side of the home.” Additionally, sometime during its investigation, Earthtec learned of...