Janda v. Brier Realty
| Decision Date | 26 July 1999 |
| Docket Number | No. 42837-3-I.,42837-3-I. |
| Citation | 984 P.2d 412,97 Wash.App. 45 |
| Court | Washington Court of Appeals |
| Parties | James JANDA, a single person, Appellant, v. BRIER REALTY, a Washington Corporation; and Frank Young and Jane Doe Young, husband and wife, and the marital community composed thereof, Respondent. |
Eric Hultman, Seattle, WA, for Appellant.
Engel E. Lee, Seattle, WA, for Respondent.
Frank Young, a real estate agent with Brier Realty, sold James Janda two parcels of real property. Janda filed a negligent misrepresentation action against Young and Brier Realty, claiming that Young underrepresented the cost of subdividing the lots. He sought the greater profit he claims he would have realized upon the sale of the properties had the cost of subdividing been as Young represented. Also, Young procured, pursuant to an exclusive listing agreement, an offer to purchase one parcel conditioned upon Janda's completion of its subdivision. Janda accepted the offer, with its conditions, but could not afford to complete the subdivision, so the sale did not close. He claims Young breached his fiduciary duty by failing to know of Janda's financial situation. Washington law does not permit the recovery of lost profits in a negligent misrepresentation action, nor does it permit recovery on a claim of breach of fiduciary duty under Janda's theory. Accordingly, we affirm the summary judgment entered in favor of Young and Brier Realty.
James Janda engaged the services of Frank Young, an agent with Brier Realty, to help him purchase "fixer-upper" properties in the Brier, Washington area. One property Young found is referred to as the "27th Avenue West" property. A house sat on the property, and the lot was large enough to subdivide into two lots. According to Janda, Young told him that after subdividing the property, the lot on which the house sat could be sold for the same price as Janda paid for the entire lot and the newly created lot could be sold for $60,000 to $65,000. Also according to Janda, Young told him that the cost to subdivide the lot would be about $5,000.
Janda purchased the property for $133,000. Janda concedes that the property was worth $143,000, more than what he paid for it. According to Janda, the actual cost to subdivide the lot would have been $50,000, including expenses for a sewer line extension and sidewalks. As it turned out, however, Janda did not have to pay for the sewer line extension because a nearby property owner had installed a sewer line extension to serve his own property and that line was able to serve the 27th Avenue West property as well. Janda sold the parcel on which the house sat for $140,000, and the newly created lot for $37,500. The purchaser of the new lot agreed to make all the remaining necessary improvements required for subdividing. So, Janda incurred no (or, at most, minimal) subdivision costs in connection with this property.
Young showed Janda another property, referred to as the "Allview Way property," which was also large enough to subdivide. The property was particularly attractive because a sewer line had already been installed on the property. Janda purchased the Allview Way property for $132,000. According to Janda, Young told him it would cost approximately $3,000 to subdivide this property, when in actuality the cost, in Janda's estimation, would have been $35,000. Janda never subdivided this parcel, and sold the entire property for $141,000.
One issue in this appeal concerns an offer to purchase the portion of the 27th Avenue West property on which the house sat. Janda signed an exclusive sale and listing agreement with Young and Brier Realty with respect to the 27th Avenue West property. Young received an offer to purchase the property and submitted it in writing to Janda. Janda accepted the offer. The sale was conditioned upon Janda's completion of the short plat. Janda was financially unable to complete the short plat and the sale did not close.
Janda filed a complaint against Young and Brier Realty alleging negligent misrepresentation (regarding Young's statements as to the subdivision requirements and the cost of subdividing), breach of fiduciary duty (relating to the offer to purchase part of the 27th Avenue West property), violation of RCW 18.85.230, and violation of RCW 19.86.020. He sought lost profits, restitution of sums paid, damages for pain, suffering, and emotional distress, costs, and attorney fees.1
Young and Brier Realty filed a motion for summary judgment. The parties stipulated to the dismissal of Janda's claims for emotional distress damages. Janda conceded to the entry of summary judgment on his claim for violation of RCW 18.85.230 because the statute does not provide a private cause of action against a real estate agent.
Janda requested a continuance of the hearing on the defendants' motion for summary judgment pursuant to CR 56(f). He sought additional time to gather evidence as to the actual cost of subdividing the lots.
The trial court entered an order granting the defendants' motion for summary judgment, dismissing Janda's complaint with prejudice, and denying Janda's CR 56(f) motion for a continuance. On appeal, Janda does not pursue his Consumer Protection Act claim, so the issues on appeal involve only the negligent misrepresentation and breach of fiduciary duty claims, and the motion for a continuance.2
A. Standard of review
In reviewing a summary judgment, we undertake the same inquiry as the trial court, considering all facts and reasonable inferences from the facts in the light most favorable to the nonmoving party. Suquamish Indian Tribe v. Kitsap County, 92 Wash. App. 816, 827, 965 P.2d 636 (1998). We will affirm a summary judgment if reasonable minds could reach only one conclusion from the admissible facts in evidence. Suquamish, 92 Wash.App. at 827, 965 P.2d 636.
B. Negligent misrepresentation
Washington has adopted the RESTATEMENT (SECOND) OF TORTS with regard to negligent misrepresentation. See ESCA Corp. v. KPMG Peat Marwick, 135 Wash.2d 820, 826, 959 P.2d 651 (1998); see also Condor Enterprises, Inc. v. Boise Cascade Corp., 71 Wash. App. 48, 52, 856 P.2d 713 (1993) (). The tort is described as:
One who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
RESTATEMENT (SECOND) OF TORTS § 552(1) (1977).
Under the Restatement, damages for negligent misrepresentation are limited to "those necessary to compensate the plaintiff for the pecuniary loss to him of which the misrepresentation is a legal cause" and include:
RESTATEMENT (SECOND) OF TORTS § 552B. Recovery of damages for the benefit of the plaintiff's contract with the defendant is specifically not allowed under the Restatement. Id.
Assuming Young negligently misrepresented the cost to subdivide, the evidence does not establish that Janda suffered any damages that are recoverable under this provision. Janda paid $133,000 for the 27th Avenue West property. According to Janda's own declaration, the value of the property, based on a cost to subdivide of $55,000, was $143,000. Thus, there is no damage for which the Restatement permits recovery. Moreover, Janda subdivided this property and sold both lots without incurring any of the cost of subdividing.
Similarly, Janda paid $132,000 for the Allview Way property. Janda claims the value of the property, based on a $35,000 cost to subdivide, was $162,000. He sold it for $141,000. Again, he suffered no recoverable damage. The Restatement, adopted in Washington, does not permit Janda to recover, as he seeks to do, the greater profit he claims he would have realized had Young properly represented the cost of subdividing the two properties.
Janda cites no cases in which the relevant sections of the Restatement are cited, discussed, or applied. In fact, he fails to even acknowledge that the Restatement has been adopted in Washington and accordingly governs his negligent misrepresentation claim. Instead, he relies heavily on Tennant v. Lawton, 26 Wash.App. 701, 615 P.2d 1305 (1980). The purchasers in that case sued the seller and the seller's agent, a real estate company, after they purchased property they thought could support a septic tank. If it could, the property would have been worth $15,100; without a septic tank, it would have been worth $6,600. The seller had made the misrepresentation and the seller's agent communicated it to the buyers.
On appeal, the court held that the buyers were entitled to $8,500 from the seller ($15,100 minus $6,600). The court agreed with the trial court's assessment of "benefit of the bargain" damages. Tennant, 26 Wash.App. at 703, 615 P.2d 1305. The court did not, however, mention the Restatement sections dealing with negligent misrepresentation. In fact, it is unclear exactly what theory the case was decided under. The fact that the court upheld an award of benefit of the bargain damages strongly suggests, however, that it was not proceeding under the Restatement sections dealing with the tort of negligent misrepresentation, since such damages are specifically not allowed under the Restatement. As to liability of the real estate company, the court in Tenn...
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