St. Denis v. Dept. of Housing and Urban Develop., A92-041 CV (JKS).

• Decision Date: 13 September 1995
• Docket Number: No. A92-041 CV (JKS).,A92-041 CV (JKS).
• Citation: 900 F. Supp. 1194
• Parties: Linda St. DENIS, Plaintiff, v. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, United States of America, and Marston Property Management, Inc., d/b/a Marston Properties, Defendants.
• Court: U.S. District Court — District of Alaska

900 F. Supp. 1194

Linda St. DENIS, Plaintiff, v. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, United States of America, and Marston Property Management, Inc., d/b/a Marston Properties, Defendants.

No. A92-041 CV (JKS).

United States District Court, D. Alaska.

September 13, 1995.

Ray R. Brown, Dillon & Findley, Anchorage, Alaska and James P. Wagner, Stafford Frey & Cooper, Seattle, Washington, for plaintiff.

James E. Torgerson, Esq., U.S. Attorney's Office, Anchorage, Alaska and Andrew Guidi, Delaney, Wiles, Hayes, Reitman & Brubaker, Anchorage, Alaska, for defendants.

DECISION

SINGLETON, District Judge.

Linda St. Denis, ("St. Denis") brought this action pursuant to the Federal Tort Claims Act. 28 U.S.C. §§ 2671-80 to recover the cost of repairing the roof of a duplex that she purchased from the United States. This Court has jurisdiction. 28 U.S.C. § 1346(a).

St. Denis claims that the government had inspected the roof prior to the sale and either discovered or should have discovered the need for repairs. Docket No. 1. She claims that because the government failed to either repair the roof or inform her of the need for repairs, she could not fairly evaluate the purchase price. St. Denis further contends that the government, having gratuitously elected to inspect the property, owed her a duty to properly conduct its inspections and inform her of the results under the Good Samaritan doctrine, Restatement (Second) of Torts 2d § 373 (1965). She seeks damages for the cost of repairs. The United States moves for summary judgment arguing that Alaska would not recognize a tort cause of action other than one for misrepresentation on these facts. Docket No. 56. This Court concludes that Alaska law limits the purchaser of real property to a contract action or to an action for deceit. Therefore, Alaska law does not recognize an independent tort action against the vendor for purely economic losses based on the Good Samaritan doctrine. Thus, the government's renewed motion for summary judgment will be granted.

St. Denis filed her complaint on January 22, 1992. She claims that she purchased a duplex from the United States Department of Housing and Urban Development with the intent to live with her family in one unit and rent the other. Docket No. 1. The government, which had financed an earlier purchase of the property, acquired it after foreclosing its security interest. St. Denis alleges that when the property was inspected by government agents, latent defects in the roof were discovered but were not disclosed by the government. She claims that she detrimentally relied on a mistaken assumption regarding the quality of the property. She argues that by relying on the assumptions she purchased the property and ultimately incurred expenses in repairing the defects. Docket No. 1. She seeks to recover damages to cover the costs of repair.

The government moved for summary judgment at Docket No. 17. It argued that St. Denis' claim was for negligent misrepresentation or, more accurately, negligent nondisclosure, which is expressly excluded from coverage under the Federal Tort Claims Act. 28 U.S.C. § 2680(h). The government also argued that St. Denis had signed a written contract providing inter alia:

purchaser will accept the property in the condition existing on the date of this contract. Seller does not warrant the condition of the property, including but not limited to mechanical systems and any basement, or compliance with code requirements and will make no repairs to the property after execution of this contract.

Docket No. 17, Exhibit 7.

The government provided two United States Supreme Court decisions to support its argument: Block v. Neal, 460 U.S. 289, 103 S.Ct. 1089, 75 L.Ed.2d 67 (1983) and United States v. Neustadt, 366 U.S. 696, 81 S.Ct. 1294, 6 L.Ed.2d 614 (1961). In Neustadt, the Court held that a claim based upon a faulty report regarding the quality of real property sold by the government was within the exclusion of misrepresentation claims. Neustadt, 366 U.S. at 702, 81 S.Ct. at 1298. However, in Block, the Court held that a claim could be characterized as within the "Good Samaritan rule," Restatement (Second) of Torts § 323 (1965), because the claim was for negligent supervision and inspection. Block, 460 U.S. at 298-99, 103 S.Ct. at 1094-95. Therefore, the Court further held that the claim not be precluded as a claim for negligent misrepresentation even though the injury flowed from failure to disclose the information that would have been discovered by a non-negligent inspection. Id. The Supreme Court carefully defined the issue it was deciding:

The question before us is a narrow one. The Government argues only that respondent's claim is a claim of "misrepresentation" within the meaning of § 2680(h). It does not seek review of the threshold determination that respondent's complaint states a claim for negligence under the Good Samaritan doctrine that is otherwise actionable under 28 U.S.C. § 2674. Thus, we need not decide precisely what respondent must prove in order to prevail on her negligence claim, nor even whether such a claim lies.

Id., 460 U.S. at 294, 103 S.Ct. at 1092.

The Court specifically declined to decide whether a state's laws, made applicable by the tort claims act, would impose liability on a private financial institution under the circumstances set out in Block,¹ whether other provisions of the FTCA, such as the discretionary function exception, would preclude liability when the Good Samaritan doctrine applied, and whether Congress has established some other exclusive remedy for the plaintiff's complaints. With these reservations, the Block court found that Good Samaritan claims based on Restatement (Second) of Torts § 323 (1965) were not within the misrepresentation exclusion in § 2680(h). Id. 460 U.S. at 298-99, 103 S.Ct. at 1094-95.

On October 23, 1992, this Court granted summary judgment addressing the issues reserved in Block. Docket No. 29. It concluded that Alaska would not recognize a separate "Good Samaritan duty" between private parties under similar circumstances. Docket No. 29. Subsequently, this Court entered judgment in favor of the government dismissing this action. Docket No. 31. The Ninth Circuit reversed, in part, concluding that St. Denis may have stated a claim under the Good Samaritan doctrine that would sound in tort. Docket No. 46 at 7-9 (citing Williams v. Municipality of Anchorage, 633 P.2d 248, 251 (Alaska 1981) and Adams v. State, 555 P.2d 235, 238 & 240 (Alaska 1976)).²

On remand, the United States renewed its motion for summary judgment. It argues that the courts of Alaska would not recognize an independent duty sounding in tort, separate from deceit, fraud or negligent misrepresentation, to inspect real property and disclose the results between contracting parties where only economic loss was suffered. Docket Nos. 56 & 62. The motion is opposed. Docket No. 59. The matter is ripe for decision and oral argument would not be helpful. D.Ak. LR 7.1(i).³

DISCUSSION

Previously in this case, the Ninth Circuit held that the courts of Alaska would recognize a duty sounding in tort between parties to a real estate contract; a duty which obligates a seller, who had inspected the property and discovered defects, to convey the results of that inspection to prospective purchasers. St. Denis v. United States, No. 93-35235, 1994 WL 603053 (9th Cir. Nov. 1, 1994), slip op. at 6-8, 1994 WL 603053 (stating that under Alaska law, once an inspection is undertaken, a duty is owed to whoever might foreseeably rely on that inspection). It is undisputed that agents of the government inspected the property, particularly the roof, and declared it satisfactory. It is also undisputed that an independent contractor employed by the government warned its agents of the defective condition of the roof. Thus, a trier of fact could conclude that the government was negligent in conducting its inspections and reporting the results.⁴ The issue remains whether, under Alaska law, such negligence is actionable by a purchaser of real property against the vendor even though the purchaser suffered only economic loss.⁵ Specifically, the query is whether Alaska has adopted the general rule that limits claims for economic loss to the law of contracts and, if so, whether there exist exceptions to the general rule that are applicable to this case.

Since the Ninth Circuit panel determined that St. Denis did state a claim, that decision is binding under the doctrine of the law of the case. See, e.g., Richardson v. United States, 841 F.2d 993, 996 (9th Cir. 1988), amended, 860 F.2d 357 (9th Cir.1988); Bell Helicopter Textron, Inc. v. United States, 755 F.Supp. 269, 272 (D.Alaska 1990), affirmed, 967 F.2d 307 (9th Cir.1992). There are, however, exceptions to that doctrine, where intervening changes in the facts or the applicable law make reliance on the earlier decision improper. Bell, 755 F.Supp. at 272-73. The gravamen of St. Denis' claim is that she purchased a defective home. Clearly, she has a potential action for breach of contract. That claim, however, would be litigated in the court of claims, not this Court.⁶ It is less clear but likely that she would have a separate claim for misrepresentation either in equity for restitution or at law for negligent or fraudulent misrepresentation. See ARCO Alaska, Inc. v. Akers, 753 P.2d 1150, 1153 (Alaska 1988); Great Western Sav. Bank v. George W. Easley Co., 778 P.2d 569, 580-81 (Alaska 1989); Turnbull v. LaRose, 702 P.2d 1331, 1334 (Alaska 1985) (non-disclosure).⁷ The United States has not consented to be sued for such claims. The issue is whether St. Denis has a tort claim separate from misrepresentation. The applicable law is the law of Alaska because, under Alaska law, the government's obligations are measured by the obligations of a private party. Bell, 755 F.Supp. at 271-72. The line between tort and contract has received significant,...