Richey v. Patrick

• Decision Date: 18 October 1995
• Docket Number: No. 94-50,94-50
• Citation: 904 P.2d 798
• Parties: Douglas B. RICHEY and Loretta M. Richey, husband and wife, Appellants (Defendants), v. Scott Robert PATRICK and Deborah Ann Patrick, husband and wife, Appellees (Plaintiffs).
• Court: Wyoming Supreme Court

Page 798

904 P.2d 798

Douglas B. RICHEY and Loretta M. Richey, husband and wife, Appellants (Defendants), v.Scott Robert PATRICK and Deborah Ann Patrick, husband and wife, Appellees (Plaintiffs).

No. 94-50.

Supreme Court of Wyoming.

Oct. 18, 1995.

Rehearing Denied Nov. 7, 1995.

Sky D. Phifer of Phifer Law Office, Lander, for Appellants.

John T. Pappas of Western Law Associates, Lander, for Appellees.

Before GOLDEN, C.J., and THOMAS, MACY, TAYLOR and LEHMAN, JJ.

LEHMAN, Justice.

This case concerns the effect of a nondisclosure of sediment in a well system by the seller of realty under an "as is" contract.The district court concluded that the sellers' failure to disclose was negligent and amounted to a misrepresentation.

We reverse.

The sellers raise eight issues:

1.Did the Trial Court err in finding the contract void ab initio?

2.Did the Trial Court err in finding a fraudulent inducement?

3.Did the Trial Court err in failing to find that the purchasers had waived their right to claim there were misrepresentations which induced them to purchase the property?

4.Did the Trial Court err in failing to find that the purchasers were estopped to assert a misrepresentation, which misrepresentation was in contravention of the terms of purchasers' offer which was then accepted by the sellers?

5.Did the Trial Court err in finding a negligent misrepresentation?

6.Did the Trial Court err in failing to consider contributory negligence after finding that there had been a negligent misrepresentation?

7.Did the Trial Court err in awarding damages which included new replacements for the Culligan water treatment system, the reverse osmosis system and the water heater which were all operable?

8.Did the Trial Court err in failing to award the sellers attorney's fees for purchasers' breach of contract in bringing this lawsuit?

The purchasers state three issues:

1.What is the standard for reviewing the sufficiency of the evidence when the [sellers] argue that the District Court erred in its factual findings or in failing to find for the [sellers] in support of their positions?

2.Do the Trial Court's findings of fact and all other relevant evidence in this case support the conclusions of law made by the Court with regard to fraud in the inducement of the subject real estate contract by negligent misrepresentation and non-disclosure of material facts concerning the water supply?

3.When a ruling is made that there was fraud in the inducement which precedes the affirmance of a real estate contract, can the subsequently made terms of the contract itself be of any relevance or otherwise constitute a defense for the perpetrator of the fraud?

FACTS

In June of 1990, Scott and Deborah Patrick(the Patricks) became interested in purchasing a home owned by Douglas and Loretta Richey(the Richeys) in Lander, Wyoming.A well supplied the home with water.Since the water was hard, the home was equipped with a Culligan water treatment unit.Mrs. Patrick looked at the home on June 21, and they made an offer on June 22.Three days later that offer was accepted by the Richeys.

Unbeknownst to the Patricks, the Richeys had experienced problems with black sediment coming through the well system.Twice the sediment had oozed out of the outside spigots when they were left on for long periods of time.Once the Richeys' renter had black sediment come into the bathtub, apparently because she had failed to maintain the Culligan unit.After each incident the sediment problem went away after the Culligan man cleaned the treatment unit and replaced its filters.

Prior to making their offer on the house, the Patricks asked the real estate agent how the water was; and the agent told them that it was hard.¹ The Patricks did not ask the real estate agent or attempt to contact the Richeys prior to closing on the house about the well, the Culligan system or ask if there had been any problems with sediment.

The contract signed by the Patricks contained the following provisions:

IX.CONDITION OF THE PROPERTY.

A.Seller represents that upon execution of this Contract:

1.There are no known violations of applicable city, county and/or state subdivision, zoning, building and/or public health codes, ordinances, laws, rules and regulations and any recorded covenants in force and effect as of that date except: none known

2.Property Condition Statement.(check a. or b.)

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xx b. A Property Condition Statement is not available.Purchasers are purchasing said property upon their own judgment and inspection in its present condition, and hereby waive any defects in the condition of the property, known or unknown.

3.Seller agrees to permit all electrical, mechanical, structural and/or environmental inspections of the property by Purchaser or third persons acting on behalf of Purchaser, at reasonable times and upon that notice required by Section X, Paragraph 1, below.Any such inspections shall be without expense to Seller unless otherwise agreed in writing.

B.Purchaser acknowledges and agrees that, upon execution of this Contract:

1.Purchaser is not relying upon any representations of the Seller or Seller's agents or sub-agents as to any condition which Purchaser deems to be material to Purchaser's decision to purchase this property; and

2.Purchaser has been advised by Seller's agents of the opportunity to seek legal, financial, construction, environmental and/or home inspection professional services regarding this purchase.

3.Purchaser has received a copy of and hereby approves all covenants of record.

X.INSPECTIONS.

1.Purchasers may obtain, at Purchaser's option and expense and upon the notice required herein, electrical, mechanical, structural and/or environmental inspections of the property.Purchaser or Purchaser's agents or inspectors shall not have access to the property for such inspections unless and until Purchaser has provided written notice to Broker of the type(s) of inspections, name(s) of inspectors and the date upon which such inspection(s) shall be performed.Purchaser must provide such notice on or before the 9th day of July, 1990, or it shall be deemed that the Purchaser approves and accepts the conditions of the property and waives any defects thereof.

2.If Purchaser does have any inspection performed, Purchaser agrees to provide a copy of any written report of such inspection to Broker and to pay for any damage to the property caused by such inspection.Purchaser shall provide any written objections to the condition of the property on or before the 16th day of July, 1990.If no written objections are received by Broker within such period it shall be deemed that Purchaser approves and accepts the condition of the property and waives any defects thereof.

3.If written notice of any objection to the condition of the property, signed by Purchaser, is delivered to Broker within such period and if Seller and Purchaser have not executed a written agreement which satisfies and resolves such objection(s) on or before the 23rd day of July, 1990, this contract shall be void and the earnest money deposit shall be returned to Purchaser.

4.Other than written objections raised by Purchaser as set out above, or in the event no inspections are required by Purchaser, Purchaser acknowledges that he has not been denied any opportunity to inspect property and has done so to his satisfaction.Purchaser accepts the property in its entirety in "as is, where is" condition without any implied or express warranty by Seller or Agent.

(Underlined type in original.)The Patricks admitted that they did not, or attempt to, do any inspections of any kind on the property.

After closing, the Patricks discovered black sediment in the water when they attempted to clean the carpet.An inspection of the Culligan unit disclosed that it was clogged with the sediment.The Patricks contacted a plumber who replaced the Culligan unit with one made by Kinetico.It took several more months before the plumber was finally able to solve the problem, and in the interim the Patricks had to have water brought to the house.The Patricks encountered another problem with the sediment shortly before trial which took six weeks to correct.

The Patricks brought this action raising claims of breach of contract, fraud, deceit, misrepresentation and nondisclosure.The district court found for the Patricks and awarded damages for costs incurred in fixing the sediment problem.The court also found that the Patricks were "fraudulently induced" into entering the contract and declared the contract void ab initio.The Richeys appeal.

DISCUSSION

The resolution of this case depends upon a determination of which of several interrelated but distinct torts should be the basis of reviewing the lower court's judgment since that judgment does not articulate the theory upon which it was found the Patricks should recover.The Patricks raised claims based on fraud, misrepresentation and nondisclosure.Thus our first task is to attempt to discern from the judgment which theory was the basis of the Patricks' judgment.

The district court found the following:

2.The [Richeys] failed to disclose material facts concerning the water system that they knew might justifiably induce a purchaser to enter into a contract into which he might not otherwise enter.The omission of the material facts amounts to a misrepresentation as though the defendants had actually misstated the nonexistence of the matter they failed to disclose.

3.The [Patricks] justifiably and reasonably relied upon the omitted facts concerning the true nature of the water system of the subject premises and were thereby induced into entering into the subject contract with the defendants.

4.The facts omitted by the [Richeys] regarding the true nature of the water system were negligent.

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9.The [Patricks] were fraudulently induced into entering into the aforesaid contract with the [Richeys], and,...