Thorp v. Charlwood

• Citation: 501 P.3d 1166
• Decision Date: 04 November 2021
• Docket Number: No. 20190981-CA,20190981-CA
• Parties: Daniel T. THORP, Appellant, v. Timothy P. CHARLWOOD, Appellee.
• Court: Utah Court of Appeals

501 P.3d 1166

Daniel T. THORP, Appellant,

v.Timothy P. CHARLWOOD, Appellee.

No. 20190981-CA

Court of Appeals of Utah.

Filed November 4, 2021

Paul W. Jones and William B. Ingram, Salt Lake City, Attorneys for Appellant

Paxton R. Guymon and Lauren P. Johnson, Salt Lake City, Attorneys for Appellee

Judge Gregory K. Orme authored this Opinion, in which Judges Michele M. Christiansen Forster and Jill M. Pohlman concurred.

Opinion

ORME, Judge:

¶1 Timothy P. Charlwood purchased a house, remodeled it, and sold it to Daniel T. Thorp. A full ten years later, Thorp began noticing several issues with the property. Most significantly, the deck appeared to be structurally failing. Following an inspection, a contractor determined that the deck was constructed in a negligent manner.

¶2 Thorp sued Charlwood, alleging defective construction, negligent misrepresentation, and fraudulent misrepresentation. The district court dismissed the complaint on the ground that the economic loss rule barred Thorp's claims. The court later awarded attorney fees to Charlwood. Thorp appeals, and we affirm.

BACKGROUND¹

¶3 In February 2005, Charlwood purchased property located in Park City, Utah (the Property). Almost immediately, "Charlwood began a construction project of completely remodeling and expanding the square footage of the home on the Property." After completing the project, Charlwood listed the Property for sale. One listing stated, "This beautiful log home was originally built in 1991 and has been completely remodeled and expanded in 2005–2006."

¶4 In April 2007, Thorp made an offer to purchase the Property. Charlwood accepted the offer, and the two entered into a Real Estate Purchase Agreement (the REPC). The REPC expressly incorporated a Seller's Property Condition Disclosure form (the Seller's Disclosures) but indicated that Thorp's "obligation to purchase under this Contract ... IS NOT conditioned upon [his] approval of the content of all the Seller[’s] Disclosures."

¶5 The Seller's Disclosures provided that it was a "legally binding document" and that

SELLER IS OBLIGATED UNDER LAW TO DISCLOSE TO BUYERS DEFECTS IN THE PROPERTY KNOWN TO SELLER THAT MATERIALLY AND ADVERSELY AFFECT THE VALUE OF THE PROPERTY THAT CANNOT BE DISCOVERED BY A REASONABLE INSPECTION BY AN ORDINARY PRUDENT BUYER.

The Seller's Disclosures required Charlwood to disclose whether he was "aware of any past or present" problems with, among other things, the following: the roof, including repairs; interior features, including flooring; exterior features; termites, dry rot, and pests; additions and remodels; structural items and soils; use of the Property; other moisture conditions; and "violations of any local, state, or federal law or regulation." Other than indicating that he had rebuilt the roof in 2005 and engaged in a "complete remodel" of the Property, Charlwood checked "No" to each question related to the aforementioned categories. The Seller's Disclosures also indicated that by signing, Charlwood "verifies that [he] has prepared this disclosure form and that the information contained herein is accurate and complete to the best of [his] actual knowledge as of the date signed ... below."

¶6 In May 2007, the parties closed on the Property, and Thorp took possession. A little over ten years later, toward the end of 2017, Thorp noticed that "the deck on the side of the Property was drastically sloped and appeared to be failing structurally." Thorp contacted several contractors, who, based on their visual inspections, "speculated that there appeared to be an issue with the footings that was causing them to sink and thereby causing additional damage to the deck and the structure of the home." But the contractors indicated that they could not know for sure until they removed the deck. Following the deck's removal, a contractor's investigation "revealed that the construction of the deck was completed in a defective and negligent way," that the "conditions were hidden/latent," and that the conditions "were only discovered because the materials were removed to remedy the problem."

¶7 Thorp also discovered additional problems with the Property, including "incorrect pitching of the roof over the deck for water drainage, roof vents of inadequate size for the roof, flagstone facing on the exterior of the home that overlaps and covers logs (masonry to log contact creating additional rot), negligent electrical work, collapsed fireplace chimney lining where the old roof and added roofline meet, and the 130-yard added driveway sliding off the hill."

¶8 Thorp sued Charlwood in 2019, asserting three causes of action: defective construction, negligent misrepresentation, and fraudulent misrepresentation. In his complaint, Thorp alleged that "Charlwood is a real estate developer" and that he "reports through an online profile ... that he has been a professional real estate developer since January 1984." He further alleged that Charlwood did not obtain a building permit for the project, that he never obtained a certificate of substantial completion or a certificate of occupancy, and that he never used the Property as his principal residence. He also asserted that "[b]ecause Charlwood was the owner of the Property and because he performed and was responsible for the Construction Project, [his] representations [in] the Seller's Disclosures were known or should have been known to Charlwood as being untrue, false, or materially inaccurate at the time he made them to Thorp." Finally, Thorp alleged that "Charlwood fraudulently concealed the above defects and negligence from the Construction Project by making the representations in the Seller's Disclosures."

¶9 Charlwood moved to dismiss the complaint, arguing that the economic loss rule barred Thorp's claims.² Charlwood's motion also included a request for attorney fees.

¶10 In opposing the motion, Thorp argued, among other things, that the economic loss rule did not apply because there was "no contract for construction and design work made between the parties," and therefore "[t]he duty at issue is a legal duty that does not arise from any contract." Thorp further argued that the economic loss rule did not bar his claims because, as he put it, "the Seller's Disclosures were for the express purpose of Charlwood complying with his independent duty as a contractor-seller," meaning his "duties were not entirely subsumed with the REPC." Next, pointing to the provision in the REPC that stated Thorp's "obligation to purchase under this Contract ... IS NOT conditioned upon [his] approval of the content of the Seller's Disclosures," Thorp argued that a breach of contract claim was not available to him. Therefore, the application of the economic loss rule to his claims would deprive him of "a remedy by due course of law" in violation of the Open Courts Clause of the Utah Constitution. See Utah Const. art. I, § 11.

¶11 Following a hearing, the district court issued a decision (the Memorandum Decision) granting Charlwood's "Motion to Dismiss in the entirety." The court determined that the economic loss rule barred Thorp's claims because they were "not premised upon any independent duty that exists apart from the REPC." The court further ruled "that there is no legal or factual basis to support [Thorp's] theory that [Charlwood] assumed the role of a contractor-seller and the potentially heightened duties that go along with this role." In support of this conclusion, the court noted that "the Verified Complaint does not allege that [Charlwood] was the developer or original builder of the home." The court further pointed to Thorp's acknowledgement that there was no contract between the parties for construction services and stated that "[w]hile [Charlwood] is alleged to have developed other properties, his role in these other transactions has no bearing on the transaction involving [Thorp] and does not mean that [Charlwood] acted as a ‘contractor-seller’ in this instance." Next, addressing Thorp's argument that a claim for breach of contract was unavailable to him, the court noted that Thorp's "unconditional obligation to purchase the [Property] did not trigger the application of common law duties, particularly where such duties would directly contradict the terms of the REPC." Lastly, the court held that Utah Code section 78B-4-513 barred Thorp's defective construction claim because it "is undisputed that there is no contract between [the parties] that could support the claim." The Memorandum Decision concluded by stating that it "will stand as the Order of the Court and no further Order is required." Although the issue was briefed by the parties, the court did not address Charlwood's request for attorney fees in the Memorandum Decision.

¶12 Two days after the district court issued the Memorandum Decision, Thorp filed a notice of appeal. A week later, Charlwood filed a motion seeking an award of attorney fees in accordance with rule 73 of the Utah Rules of Civil Procedure. Among other things, Charlwood based his request on the REPC, which provides that "[i]n the event of litigation or binding arbitration to enforce this Contract, the prevailing party shall be entitled to costs and reasonable attorney fees."

¶13 Following a hearing, the court granted Charlwood's motion in part, awarding half the attorney fees requested.³ The court ruled that its silence on Charlwood's attorney fees request in the Memorandum Decision was "not a denial of [Charlwood's] request for attorney fees." The court further held that Charlwood's "assertion of the affirmative defense of the economic loss doctrine is an action ‘to enforce’ the [REPC] ... and, therefore, [Charlwood] is entitled to recover attorney fees related to that defense." Based on this, the court awarded half the attorney fees Charlwood incurred in bringing his motion to dismiss and all the attorney fees associated with his rule 73 motion.

¶14 Following that ruling, Thorp properly amended his notice of appeal to include the...