Richards v. Cook , 745 Utah Adv. Rep. 51 ( 2013 )

2013 UT App 250_________________________________________________________
THE UTAH COURT OF APPEALS
ALEXANDER RICHARDS,
Plaintiff and Appellant,
v.
LINDA PETERSON COOK, GAYLE BENDINELLI, AND THE CLARENCE R.
PETERSON REVOCABLE TRUST,
Defendants and Appellees.
Memorandum Decision
No. 20120764‐CA
Filed October 18, 2013
Second District Court, Ogden Department
The Honorable Michael D. DiReda
No. 100902475
Brandon R. Richards and Jason B. Richards,
Attorneys for Appellant
Keith M. Backman, Attorney for Appellees
JUDGE JAMES Z. DAVIS authored this Memorandum Decision, in
which JUDGES GREGORY K. ORME and MICHELE M. CHRISTIANSEN
concurred.
DAVIS, Judge:
¶1 Alexander Richards appeals the trial court’s grant of
Defendants’ motion for involuntary dismissal of Richards’s breach
of contract and fraudulent nondisclosure claims. We affirm.
¶2 In 2009, Raul Barrios made an offer to buy a house owned
by Defendants. When Barrios was unable to obtain financing, his
wife’s cousin, Richards, agreed to finance the purchase in his own
name. Barrios and his family planned to live in the house, maintain
it, and make payments on the loan. While inspecting the house,
Barrios and his real estate agent observed that the linoleum floor in
Richards v. Cook
the basement of the house exhibited signs of warping and
bubbling. They also thought it was odd that a sub‐floor had been
installed in the basement1 and were concerned that the sub‐floor
might conceal water damage. Defendants’ disclosures indicated
that there was some water seepage from a leaky toilet, but
Defendants did not disclose the existence of any other water
problems in the house. One of the defendants, Gayle Bendinelli,
later testified that she was not aware of any water leaks apart from
the toilet during the thirty‐six years she lived in the house and that
she did not know why her father, who passed away in 2006, had
installed the sub‐floor. Barrios hired a home inspector2 to do a
“visual inspection” of the basement, and the inspector concluded
that although “he didn’t know” whether there was a water
problem, he “couldn’t see any water that was visible” and detected
no “dampness smell.” Despite these concerns, Richards and
Defendants entered into a real estate purchase contract (REPC) and
closed on the house in August 2009. Richards himself was unaware
of “any concerns or problems or issues with the house” prior to
closing.
¶3 After the purchase was finalized, Barrios began remodeling
the basement of the house and discovered extensive water damage
beneath the sub‐floor and behind the paneling on the walls. He also
discovered that water from the outdoor sprinkler system had been
leaking into the basement through a seam in the house’s
foundation. Richards hired a second home inspector, Michael
Fisher, to assess the water damage. Fisher discovered that a land
drain system installed on the property had become inoperable and
1. Barrios’s real estate agent and Michael Fisher, a home inspector,
both testified at trial that they had never before seen a sub‐floor in
a basement on top of a concrete floor.
2. This was not the same home inspector who testified at the trial.
See supra note 1.
20120764‐CA 2 2013 UT App 250Richards v. Cook
surmised that the leakage had been going on for approximately ten
years.
¶4 Richards filed a complaint against Defendants in March
2010, asserting claims of breach of contract and fraudulent
nondisclosure. A bench trial was held on April 23, 2012. After
Richards presented his case, which included calling one of the
Defendants as a witness, Defendants moved for involuntary
dismissal pursuant to rule 41(b) of the Utah Rules of Civil
Procedure. The trial court granted the motion, finding that
Defendants did not have actual knowledge of the water damage
and that Richards had failed to exercise due diligence in inspecting
the house. The trial court made detailed subsidiary findings in
support of this determination. The trial court also awarded
Defendants attorney fees in the amount of $18,027.30 in accordance
with the provisions of the REPC. Richards appeals.
¶5 Rule 41(b) of the Utah Rules of Civil Procedure provides,
“After the plaintiff, in an action tried by the court without a jury,
has completed the presentation of his evidence, the defendant . . .
may move for a dismissal on the ground that upon the facts and
the law the plaintiff has shown no right to relief.” Utah R. Civ. P.
41(b). A trial court may grant a motion for involuntary dismissal
under rule 41(b) “when the trial judge finds that the claimant has
either failed to make out a prima facie case or when the trial judge
is not persuaded by the evidence presented by the claimant.”
Lemon v. Coates, 735 P.2d 58, 60 (Utah 1987).
The trial court is not precluded from granting [a rule
41(b)] motion merely because the plaintiff has made
out a prima facie case, as it is when ruling upon a . . .
motion for a directed verdict in a case tried to a jury.
Rather, the rule expressly states that once the motion
is made, “[t]he court as trier of the facts may then
determine [the facts] and render judgment against
the plaintiff or may decline to render any judgment
until the close of all the evidence.”
20120764‐CA 3 2013 UT App 250Richards v. Cook
Wessel v. Erickson Landscaping Co., 711 P.2d 250, 252 (Utah 1985)
(second and third alterations in original) (citations omitted)
(quoting Utah R. Civ. P. 41(b)). Because the trial court in this case
made findings of fact and granted the rule 41(b) motion based on
its determination that it was unpersuaded by the evidence, we
defer to the court’s decision insofar as its findings are not clearly
erroneous.3 See Lemon, 735 P.2d at 60 (explaining that because it is
the trial court’s prerogative when acting as the trier of fact in a
bench trial to assess credibility and make factual findings, we
review a dismissal pursuant to rule 41(b) for clear error); Petty v.
Gindy Mfg. Corp., 404 P.2d 30, 31 (Utah 1965) (explaining that where
“the trial court granted [the] defendant’s motion to dismiss and
3. Richards asserts that Bair v. Axiom Design, LLC, 2001 UT 20, 20
P.3d 388, requires that we review the court’s decision for
correctness and consider only whether the evidence he presented
meets the initial threshold of making out a prima facie case “in the
absence of contrary evidence.” See id. ¶ 14. While the trial court did
state that Richards had failed to make out a prima facie case on
each of his claims, its decision is stated in terms of Richards’s
failure to “establish” certain factors rather than his failure to
present evidence pertaining to those factors. The court made
extensive findings of fact, weighed the evidence based on the
applicable burden of proof for each claim, and even observed that
it considered one of the claims to present a “close[] question for the
court.” This is not the type of analysis undertaken in examining
only the existence of a prima facie case but is a discussion of the
persuasiveness of the evidence. Bair recognized that a rule 41(b)
motion may be granted not only where a plaintiff fails to make out
a prima facie case, but also where the trial court “‘is not persuaded
by the evidence presented by the claimant’” so long as the trial
court makes findings explaining why the court found the evidence
unpersuasive. Id. ¶¶ 12, 19–20 (quoting Lemon v. Coates, 735 P.2d
58, 60 (Utah 1987)). This is precisely what the trial court did here.
Thus, we review the trial court’s decision under a clearly erroneous
standard rather than a correctness standard.
20120764‐CA 4 2013 UT App 250Richards v. Cook
elected to make findings as authorized by Rule 41(b) . . . we review
the evidence in the light most favorable to the findings”).
¶6 In order to prove fraudulent nondisclosure, a plaintiff must
demonstrate by clear and convincing evidence, see Anderson v.
Kriser, 2011 UT 66, ¶ 22, 266 P.3d 819, that “(1) there is a legal duty
to communicate information, (2) the nondisclosed information is
known to the party failing to disclose, and (3) the nondisclosed
information is material,” Yazd v. Woodside Homes Corp., 2006 UT 47,
¶ 35, 143 P.3d 283. A seller’s legal duty to disclose is limited to
defects “not discoverable by reasonable care.” Mitchell v.
Christensen, 2001 UT 80, ¶ 11, 31 P.3d 572 (citation and internal
quotation marks omitted). Moreover, the second element of
fraudulent nondisclosure requires actual knowledge on the part of
the seller. See Anderson, 2011 UT 66, ¶ 24.
¶7 “The elements of a prima facie case for breach of contract are
(1) a contract, (2) performance by the party seeking recovery,
(3) breach of the contract by the other party, and (4) damages.” Bair
v. Axiom Design, LLC, 2001 UT 20, ¶ 14, 20 P.3d 388. Richards
maintains that Defendants breached the REPC by failing to disclose
the existence of the water damage in accordance with paragraph
10.3 of the REPC, which provides, “Seller agrees to . . . disclose in
writing to Buyer defects in the Property known to Seller that
materially affect the value of the Property that cannot be discovered
by a reasonable inspection by an ordinary prudent Buyer . . . .”
(Emphasis added.)
¶8 Thus, both of Richards’s causes of action required him to
demonstrate that Defendants had actual knowledge of the water
damage and that the damage could not have been discovered
through his exercise of due diligence in inspecting the house. The
trial court found that Richards had failed to establish either of these
factors and that he had therefore failed to establish either
fraudulent nondisclosure or breach of contract. Richards does not
challenge the evidentiary basis for the trial court’s factual findings.
Rather, Richards attempts to reargue the facts on appeal, asserting
20120764‐CA 5 2013 UT App 250Richards v. Cook
that his inspection of the house was reasonable and that
Defendants had actual knowledge of the water damage. We are
required to defer to the trial court’s findings unless they are clearly
erroneous. See Lemon, 735 P.2d at 60. Because we see no error in the
trial court’s findings, and because those findings support a
determination that Richards failed to establish essential elements
of his claims, the trial court’s decision to grant Defendants’ rule
41(b) motion is not clearly erroneous.
¶9 The trial court’s finding that Defendants did not have actual
knowledge of the water damage is supported by Bendinelli’s
testimony that she was not aware of any water problems apart
from the leaky toilet and that she did not know why her father had
installed the sub‐floor. Although Richards asserts that water
damage to the extent of that found in the house “must have been
accompanied by smells of rotting wood and mildew” such that
anyone living in the house would have been aware of the water
damage, neither Barrios nor his real estate agent noticed any smells
in the three to five times they visited the house before closing, and
the first inspector did not notice any smells when he visited the
house. Furthermore, Fisher testified that sewage smells from the
leaky toilet could have masked smells from the other water
damage and made it difficult for someone living in the house to
detect a separate water problem. In light of this evidence, the trial
court’s finding that Defendants did not have actual knowledge of
the water damage was not clearly erroneous.4
4. Defendants were admittedly aware that some of the linoleum in
the basement was “warping, bubbling, or becoming soft,” but they
believed that this was natural deterioration typical of a forty‐year‐
old linoleum floor and did not suspect that it was the result of
water damage. Because the problem with the linoleum was
obvious, Defendants did not explicitly disclose it to Richards.
Barrios’s real estate agent indicated that he was aware of the
warping prior to closing and that it was one of the factors that led
him and Barrios to hire the first inspector. Thus, the warping is
(continued...)
20120764‐CA 6 2013 UT App 250Richards v. Cook
¶10 The trial court’s determination that Richards could have
discovered the water damage by using “reasonable care in
conducting his due diligence” is also supported by the evidence.
Richards did not personally take any steps to ensure that a home
inspection was conducted and, at the time of trial, was not even
sure whether such an inspection had ever been conducted. In
addition to his own observations, Barrios arranged only for a
“visual inspection” of the basement after observing the warping in
the linoleum and becoming concerned that the sub‐floor might
have been installed to cover water damage. Although the first
inspector conducted no tests and ultimately determined that he did
not know whether there was water damage, Barrios and his real
estate agent relied on the fact that the inspector could not detect
any water damage. Fisher testified at trial, after reviewing pictures
of the utility room, that peeling and bubbling evident in the paint
on the walls showed “obvious water damage” that would have
concerned him as a home inspector and that it would have been
evident prior to closing. Fisher testified that if he had conducted
the original inspection, he would have “recommend[ed] that [the
buyers] negotiate some removal of some wall board to expose some
framing members to dig into a little bit further before purchase.”
And, as the trial court pointed out, the REPC provided for the
buyer to conduct potentially damaging tests in the course of
inspections as long as the buyer paid for the damage. Thus, the trial
court did not clearly err in finding that there were obvious signs of
water damage that would have led a reasonable buyer conducting
due diligence to investigate further and eventually uncover the
damage. See Mitchell, 2001 UT 80, ¶¶ 12–13 (explaining that
although “an ordinary prudent person” need not “hire numerous
expert home inspectors to search for hidden defects,” “inspection
by someone with sufficient expertise to appraise [a] defect” may be
necessary where the buyer is “put on notice that a possible defect
exists”).
4. (...continued)
something that could have been—and indeed was—discovered
through the exercise of due diligence.
20120764‐CA 7 2013 UT App 250Richards v. Cook
¶11 In sum, the trial court found that Richards failed to establish
essential elements of his claims, and its findings are supported by
the evidence. Accordingly, we affirm the trial court’s grant of
Defendants’ rule 41(b) motion to dismiss. We also affirm the trial
court’s award of attorney fees,5 and because Defendants have
prevailed on appeal and have complied with rule 24(a)(9) of the
Utah Rules of Appellate Procedure, see Utah R. App. P. 24(a)(9)
(requiring that a party seeking fees on appeal “state the request
explicitly and set forth the legal basis for such an award”), we
remand for the trial court to calculate an award of fees reasonably
incurred on appeal, see Valcarce v. Fitzgerald, 961 P.2d 305, 319 (Utah
1998) (“[W]hen a party who received attorney fees below prevails
on appeal, the party is also entitled to fees reasonably incurred on
appeal.” (citation and internal quotation marks omitted)).
5. Richards has not challenged the trial court’s award of fees apart
from arguing that the award should be reversed in conjunction
with reversing the trial court’s dismissal of his claims. Because we
affirm the trial court’s dismissal, we need not further evaluate the
propriety of the fee award.
20120764‐CA 8 2013 UT App 250