Smith v. Frandsen

• Decision Date: 02 July 2004
• Docket Number: No. 20020248.,20020248.
• Citation: 94 P.3d 919,2004 UT 55
• Parties: Steve and Catherine Smith, Plaintiffs and Appellants, v. Mel Frandsen dba Mary Mel Construction Co., Defendant and Appellee.
• Court: Utah Supreme Court

2004 UT 55

94 P.3d 919

Steve and Catherine Smith, Plaintiffs and Appellants, v. Mel Frandsen dba Mary Mel Construction Co., Defendant and Appellee.

No. 20020248.

Supreme Court of Utah.

FILED July 2, 2004.

This opinion is subject to revision before final publication in the Pacific Reporter.

Stephen Quesenberry, J. Bryan Quesenberry, Provo, for plaintiffs.

Michael W. Homer, Jesse C. Trentadue, Bret S. Hayman, Thomas B. Price, Salt Lake City, for defendant.

DURHAM, Chief Justice:

INTRODUCTION

¶1 Appellants, Steve and Catherine Smith (the Smiths), filed suit against appellee, Mel Frandsen dba Mary Mel Construction Company (Mary Mel), seeking compensatory and punitive damages for negligent misrepresentation, negligence, and fraudulent concealment after the footings, foundation, and structure of their home settled, allegedly due to improper soil compaction and a general lack of lateral support.

¶2 The trial court granted Mary Mel's motion for summary judgment, and the Smiths filed a timely notice of appeal. We affirm.

FACTS

¶3 In the early 1990s, Mary Mel purchased land in Lehi City with the intention of developing the property for residential use. In the period up to 1995, Mary Mel obtained approval from local government agencies and constructed and installed the roads, curbs, gutters, sidewalk, and utilities in what is now the Summer Crest Subdivision. On October 10, 1995, Mary Mel conveyed the properties, divided and improved, to Patterson Construction (Patterson), a residential developer with whom Mary Mel had an ongoing business relationship. Patterson, in turn, conveyed a portion of the property, lot 223, on the same day to GT Investments (GT).

¶4 GT is a licensed general contractor. GT, acting through one of its employees, Joseph Sharp (Sharp), constructed a home on lot 223. During construction, Sharp "personally inspected the . . . lot and viewed the condition of the lot before purchase and before building commenced." As the Smiths assert in their complaint, despite the fact that "the soil [on lot 223] was so soft that anyone walking on it would leave an imprint," Sharp, allegedly as a result of his lack of experience in contracting, ignored this "red flag" and failed to order any soils testing or other measures that would have revealed that the soil on lot 223 was inadequately compacted. After completing construction, GT delivered a warranty deed to the Smiths on August 26, 1996.

¶5 Since occupying the home, the Smiths have experienced "significant settlement of the house, its footings, foundations and structure." In seeking recovery for damage caused by the subsidence, the Smiths argue that GT "knew, should have known, or negligently failed to determine that the House was built on inadequate soil material and/or inadequately compacted soil." They additionally claim that in subdividing and developing the property prior to its conveyance to Patterson, Mary Mel performed "certain excavation work . . . including filling in a low area or ravine" running through lot 223. As a result, the Smiths allege, Mary Mel "knew that the lot [included] unconsolidated fill, and failed to take proper steps to compact [the] lot, and in fact concealed and/or failed to disclose these facts to appropriate government entities and prospective purchasers." It is upon these facts that the Smiths assert claims against GT, Sharp, Mary Mel, and Patterson.

STANDARD OF REVIEW

¶6 In reviewing a grant of summary judgment, we give no deference to the trial court with respect to its legal conclusions. Armed Forces Ins. Exch. v. Harrison, 2003 UT 14, ¶ 13, 70 P.3d 35. Rather, we make our own determination as to whether the record shows "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Utah R. Civ. P. 56(c). Nevertheless, we may affirm the result reached by the trial court "`if it is sustainable on any legal ground or theory apparent on the record,' even though that ground or theory was not identified by the lower court as the basis of its ruling." Boud v. SDNCO, Inc., 2002 UT 83, ¶ 10, 54 P.3d 1131, (quoting Orton v. Carter, 970 P.2d 1254, 1260 (Utah 1998)).

¶7 Mary Mel, pursuant to Utah Rule Appellate Procedure 11(e)(2), urges this court to uphold summary judgment, asserting that since the appellants have failed to provide a copy of the summary judgment hearing transcript, "the district court's decisions are presumed to be valid." However, Mary Mel misconstrues the meaning of rule 11(e)(2).

¶8 The rule simply requires appellants to include "a transcript of all evidence" relevant to a challenged finding or conclusion. Utah R. App. P. 11(e)(2). In this case, neither party claims that the missing transcript contains evidence bearing on the determination of the case. See Harper v. Summit County, 963 P.2d 768, 775 n.4 (Utah Ct. App. 1998), rev'd in part and vacated in part on other grounds by Harper v. Summit County, 2001 UT 10, 26 P.3d 193. Thus, appellants had no obligation to include the transcript in the record on appeal.

ANALYSIS

I. THEORIES OF LIABILITY

¶9 Appellants seek compensatory and punitive damages against Mary Mel under three different theories of liability: negligent misrepresentation, negligence, and fraudulent concealment. In order to prevail under any of these causes of action, a plaintiff must demonstrate the existence of a duty running between the parties. For example, with respect to negligent misrepresentation, we stated in Jardine v. Brunswick Corporation, 423 P.2d 659, 662 (Utah 1967), that "[w]here one . . . carelessly or negligently makes a false representation . . ., expecting the other party to rely and act thereon, and the other party reasonably does so and suffers loss in that transaction, the representor can be held responsible if the other elements of fraud are also present."¹

¶10 Ordinarily, in order to prevail in an action for negligent misrepresentation, plaintiffs must identify a "representor [who] makes an affirmative assertion which is false." Ellis v. Hale, 373 P.2d 382, 385 (Utah 1962); see also Baskin v. Mortgage & Trust, Inc., 837 S.W.2d 743, 748 (Tex. App. 1992) (upholding summary judgment in favor of a third-party lender who made no representations to plaintiffs in connection with the purchase of their homes). Indeed, Mary Mel makes a point of claiming that it made no representations, false or true, to the Smiths. The Smiths, however, contend that by conveying the property (jointly with Patterson) without indicating that the lot was unsuitable for construction, Mary Mel effected a representation to GT, which in turn made the same representation to them.

¶11 In the past, Utah cases have acknowledged that "negligent misrepresentation is a form of fraud." Atkinson v. IHC Hosps., Inc., 798 P.2d 733, 737 (Utah 1990); see also Christenson v. Commonwealth Land Title Co., 666 P.2d 302, 305 (Utah 1983) ("Negligent misrepresentation is a tort which grew out of common-law fraud."); Robinson v. Tripco Inv., Inc., 2000 UT App 200, ¶ 31, 21 P.3d 219 (Billings, J., dissenting) (identifying negligent misrepresentation as a "species" of fraud). Thus, interpreting the elements of the tort in a manner consistent with principles of common-law fraud, we have found that in addition to affirmative misstatements, an omission may be actionable as a negligent misrepresentation where the defendant has a duty to disclose. Sugarhouse Fin. Co. v. Anderson, 610 P.2d 1369, 1373 (Utah 1980) ("Misrepresentation may be made either by affirmative statement or by material omission, where there exists a duty to speak."); DeBry v. Valley Mortgage Co., 835 P.2d 1000, 1008 (Utah Ct. App. 1992) (denying liability for an "implied" misrepresentation where the defendant mortgage company owed no duty to disclose information to purchasers of real property). Thus, a duty to disclose is a necessary element of the tort of negligent misrepresentation.

¶12 In addition, it is well-established in our law that "without a duty, there can be no negligence as a matter of law, and summary judgment is appropriate." Tallman v. City of Hurricane, 1999 UT 55, ¶ 5, 985 P.2d 892 (quoting Rocky Mountain Thrift Stores Inc. v. Salt Lake City Corp., 887 P.2d 848, 852 (Utah 1994)). Finally, in order to establish fraudulent concealment, "a plaintiff must prove the following three elements: (1) the nondisclosed information is material, (2) the nondisclosed information is known to the party failing to disclose, and (3) there is a legal duty to communicate." Hermansen v. Tasulis, 2002 UT 52, ¶ 24, 48 P.3d 235; see also Fennell v. Green, 2003 UT App. 291, ¶ 10, 77 P.3d 339; McDougal v. Weed, 945 P.2d 175, 179 (Utah Ct. App. 1997) ("Fraudulent concealment requires that one with a legal duty or obligation to communicate certain facts remain silent or otherwise act to conceal material facts known to him"). Therefore, a duty to disclose is material to each of the alleged causes of action.

¶13 The pivotal question in this case is thus whether Mary Mel owed a duty to disclose the nature and existence of any subsurface defects, not only to its immediate successors in title, Patterson and GT, but also to the subsequent and more remote purchasers, the Smiths.²

II. DUTY OF RESIDENTIAL REAL ESTATE DEVELOPERS TO REMOTE PURCHASERS

A. Defining the Limits of a Developer's Duty

¶14 "The issue of whether a duty exists is entirely a question of law to be determined by the court." Ferree v. State, 784 P.2d 149, 151 (Utah 1989). Courts consider many factors, none of which is dispositive, in determining when a duty runs between parties. Debry v. Valley Mortgage Co., 835 P.2d, 1000, 1007 ("A duty to speak will be found from `all the circumstances of the case and by comparing the facts not disclosed with the object and end in view by the contracting parties.'" (quoting Elder v. Clawson, 384 P.2d 802, 804 (Utah 1963) (citation omitted))).³

¶15 Particularly in the realm of tort law, "[t]he duty...