Eric & Susie Kim v. Shelly & John Doe Forest ( 2014 )

i4 it ED
muR OF APPEALS
DIVISION T1
201 SEP 23 AM 9: 33
IN THE COURT OF APPEALS OF THE STATE OF WASHIAT
DIVISION II
ERIC and SUSIE KIM, a married couple, No. 44430 -5 -II
Appellants, UNPUBLISHED OPINION
v.
SHELLY and JOHN DOE FOREST,
Respondents,
And
RE MAX PARKSIDE; BECKIE and JOHN
DOE STEPHENS and their marital
community; and JOHN DOES 1 - 5,
Defendants.
BJORGEN, A. C. J. — Eric and Susie Kim appeal an order dismissing on summary
judgment their suit against Shelly Forest for fraud, negligent misrepresentation, and breach of
contract, arising out of moisture problems the Kims experienced in the new home they purchased
from Forest. The Kims argue that genuine issues of material fact remain as to whether Forest
installed a drainage system as promised in an addendum to the purchase and sale agreement
Agreement) and whether Forest engaged in fraud or negligent misrepresentation with respect to
that system. The Kims also appeal from the trial court' s imposition of sanctions under Civil
Rule ( CR) 11 against their attorney, contending that their suit had a sufficient factual basis, that
their attorney conducted a reasonable inquiry into the underlying facts, and that they did not file
the suit for any improper purpose.
Because the Kims presented no evidence to the trial court that Forest made a false
statement of material fact, and a one -year warranty limitation in the Agreement forecloses their
breach of contract claim, we affirm the grant of summary judgment to Forest. Because the
No. 44430 -5 -II
imposition of sanctions against their attorney did not substantially affect the Kims' rights or
interests, and their attorney did not appeal the trial court' s CR 11 order, we decline to consider
the sanctions imposed.
FACTS
The Kims made an offer to purchase a house, then under construction, from Forest in
January 2006. The Kims' agent prepared the Agreement using preprinted Northwest Multiple
Listing Services forms with handwritten modifications. The Agreement included a " pre- closing
inspection" clause and an exclusive construction warranty limited to one year. Clerk' s Papers
CP) at 56 -59.
The Kims hired licensed professional inspector Kim Martin to inspect the house before
closing. Among other problems, Martin noted standing water in the crawl space and
r] ecommend[ ed that] this condition be resolved prior to closing." CP at 130. Martin' s report,
dated March 27, 2006, also
recommended that any deficiencies noted in the report and the components /systems
related to these deficiencies be evaluated, inspected and' repaired as needed by
licensed contractors /
professionals PRIOR TO THE CLOSE OF ESCROW. Further
evaluation PRIOR to the close of escrow is [ also] recommen[ d] ed s[ o] a properly
licensed professional can evaluate our concerns further and inspect the remainder
of the system or component for additional concerns that may be outside our area of
expertise or the scope of our inspection.
CP at 136. Finally, Martin' s report contained the following advisement:
Structure has full or partial basement: Any basement may be susceptible to water
penetration, especially when there are unprotected stair wells or window wells ... .
Any water runoff conditions related to roof, soil or hard surfaces should be directed
to a drainage contractor for evaluation. Follow up with the seller to determine if
there is any past history of water in the basement, how it was mitigated and if further
evaluation by a specialist is needed.
CP at 139.
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The Kims performed a " before- closing walk through inspection" with Forest on March
27. CP at 76 -77, 121. Following this inspection they addressed the moisture issue, along with
other deficiencies Martin had noted, in an addendum to the Agreement:
Moisture in crawlspace will be eliminated by Stem wall was just done 3/ 25 water
was used by builder, will dry. French drain will be installed.
If within warranty period, crawlspace continues to retain moisture, builder will
remedy.
CP at 77. On March 29, the Kims and Forest agreed that
Buyers [ are] to confirm the completion of these items[, including the drainage
system] Friday March 31, 2006 11[ ]
a.m. so that closing can proceed as
at
scheduled. In the event that not all of [the agreed changes] are completed, buyer
and seller will determine a date of closing not to exceed one week of this addendum.
CP at 121. The sale closed as scheduled on March 31, 2006. The Kims apparently moved into
the house immediately after closing and subsequently made various improvements to the
grounds.
A little over two years later, in November or December 2008, the Kims discovered that
moisture had entered their basement and damaged the drywall and wood trim. They filed a claim
with their homeowner' s insurance carrier, and the insurer sent licensed professional engineer
Zdenek Trnka to investigate the problem.
Trnka confirmed that water had seeped into the basement, observed some standing water
in the crawl space, and " did not see any conclusive evidence of the existence of a footing drain
system." CP at 141. Trnka concluded that the problem resulted from a " construction defect,
possibly combined with a design defect," opining that "[ t]he standing water is also an indication
that the footing drain system is non existent or has failed." CP at 142. Trnka did not state that
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No. 44430 -5 -II
he had carried out any excavation or testing to determine whether Forest had installed a drainage
system, but based his conclusions on visual observations and moisture meter readings alone.
After receiving Trnka' s report, the insurer denied the Kims' claim. The Kims
subsequently hired professional engineer Roddy Nolten to investigate the cause of the water
seepage, assess the damage, and recommend remedial measures. Nolten' s report listed the
following " conclusions ":
a. The sub grade was not prepared as customary in construction, using crushed rock
sand & a waterproof membrane.
b. Was wire mesh installed in the slab to prevent cracking?
c. If footing drains were installed, were they inspected to be clear of debris and able
to drain?
d. Was the entire drainage system ... inspected for proper installation?
e. Was a waterproof coating applied to the concrete basement walls?
f. From previous experiences it was determined, that a substandard drainage system
was the cause of the water problems.
CP at 168. Nolten also did not excavate any material or conduct any test to determine whether a
drainage system existed, but based his conclusions entirely on visual observations. The Nolten
report concluded with various recommendations, including the following:
Unearth the footing drains to see if they are functioning properly. If not, clean and
repair pipes etc.
Determine where the footing and roof drains lead to; if a French drain was
installed, it could possibly be inadequate. Have a civil drainage engineer verify or
redesign an adequate system.
Check City inspection records for installed drainage and concrete slab installation.
CP at 168. The record does not indicate whether the Kims followed any of these
recommendations.
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No. 44430 -5 -II
The Kims obtained an estimate of $49, 316. 16 from contractor Alaxs Kim' for the cost of
the repairs. In a subsequent sworn declaration, Alaxs Kim gave the following opinion as to the
cause of the problem:
there was a construction and design defect in the way in which the Contractor
installed the drain system. It appears that the drain system was never installed and
nor did they provide water sealer on the foundation wall to prevent water intrusion
nor did they provide any footing. The Contractor
water resistant seals on the also
did not route the drain under the house properly to allow to drain properly.
CP at 173. The declaration did not, however, describe any basis for these opinions other than
visual inspection.
The Kims filed suit against Forest in May 2009, claiming intentional misrepresentation
through fraud /deceit, negligent misrepresentation, and breach of contract.2 The Kims
specifically alleged in support of their misrepresentation claims that ( 1) they had " entered into a
contract to purchase the property ., .. on the condition that [ Forest] installed a proper draining
system "; ( 2) that Forest " made statements and representations to the Kims that a proper draining
system had been installed "; (3) that " there was not a proper draining system to allow the water to
drain properly "; (4) that Forest " had knowledge of the falsity of [her] claims, or showed a
reckless disregard for the truth in [her] successful efforts to induce the plaintiffs into purchasing
the subject property "; and ( 5) that their " right to rely on the assertions of [Forest' s] statement and
assertions were valid and justified because [ Forest was] in a superior bargaining position, and
had knowledge about the subject that the [ Kims] could not be made aware of outside of an
1 The record does not disclose any familial relationship between Alaxs Kim and the Kims.
2 The Kims also sued Forest' s real estate agent and the company that employed the agent,
claiming professional negligence and violation of the Consumer Protection Act, chapter 19. 86
RCW. The Kims apparently settled those claims, and the parties do not contend they have any
bearing on the issues in this appeal.
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No. 44430 -5 -II
independent examination or the passage of time." CP at 277 -80. With respect to the breach of
contract claim, the Kims alleged that Forest " materially breached the contract by failing to meet
the conditions set forth in the contract." CP at 280.
The Kims moved for summary judgment. Before the hearing on the Kims' motion,
Forest submitted declarations from several people with personal knowledge, including herself,
attesting to the installation of a foundation drainage system and " French drain" at the Kims'
house. CP at 288, 292 -96. Forest informed the Kims that she would seek sanctions under CR 11
should the Kims continue to prosecute the suit. Forest pointed out that she had adduced direct
evidence from competent witnesses with personal knowledge establishing the existence of a
drainage system, while the Kims, despite the fact that " a simple investigation could prove the
presence or absence of a drain system," had presented only speculation that the system may not
exist. CP at 239. The Kims refused to dismiss the action. The trial court denied the Kims'
motion for summary judgment.
In October 2012, Forest sent licensed professional engineer Trent Lougheed, along with a
plumber, to investigate the problem with the drain system at the Kims' house. The plumber
inserted a camera into the exposed drain pipe in the crawl space and made a video showing the
condition of the drain system. Based on the images, Lougheed and the plumber ascertained that
the system had stopped functioning because the drain pipe had become partially crushed and
plugged with mud" about " 14 feet downhill from the location where the French drain entered
the foundation drain line." CP at 86, 229. The plumber marked the location on the ground
beneath which the line had become blocked. In his sworn declaration, Lougheed stated that he
could not determine the cause of the blockage without excavating the clogged portion of the
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No. 44430 -5 -II
pipe, and opined that, in other respects, " the foundation appeared to be sound, intact, and
properly constructed." CP at 86 -87.
Forest then moved for summary judgment and to strike portions of declarations submitted
by the Kims that Forest asserted amounted to speculation or were not based on personal
knowledge. Forest also moved for an award of attorney fees under a fee -shifting provision in the
Agreement, and for sanctions under CR 11.
The court granted Forest' s motion to strike, because portions of the declarations
submitted by the Kims, including most of Nolten' s " conclusions," were not factual statements
and because the declarants lacked sufficient personal knowledge to assert other portions in that
they did not claim to have inspected the subsurface conditions. The court then granted Forest' s
motion for summary judgment, ruling that the Kims' evidence failed to establish a dispute as to
the existence of the drain system or whether Forest made any false statement of material fact,
and that the one -year warranty provision foreclosed their claim regarding any alleged defect in
the drain system.
Following a subsequent hearing, the trial court granted Forest' s request for attorney fees
and CR 11 sanctions. The court concluded that "[ t] he failure to make a reasonable investigation
of the contested facts before prosecuting the claims of the Kims was a violation of Civil Rule 11"
and that " a reasonable sanction for the violation is to require [ the Kims' attorney] to make
payment of the attorney' s fees and costs incurred by Forest after he was warned by Forest of her
intent to seek Civil Rule 11 sanctions." CP at 273.
The Kims timely appealed. Their attorney, however, did not file a notice of appeal in this
matter concerning the imposition of sanctions.
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No. 44430 -5 -II
ANALYSIS
After setting forth the standard of review, we first consider the Kims' claim that the trial
court erred in granting Forest' s summary judgment motion. Concluding that summary judgment
was proper, we then turn to the trial court' s imposition of sanctions under CR 11. Finally, we
address Forest' s request for attorney fees and sanctions on appeal.
I. STANDARD OF REVIEW
We review a grant of summary judgment de novo and perform the same inquiry as the
trial court. Macias v. Saberhagen Holdings, Inc., 175 Wash. 2d 402, 407 -08, 282 P.3d 1069
2012). A party moving for summary judgment bears the burden of demonstrating that there is
no genuine issue of material fact. Atherton Condo. Apartment -Owners Ass 'n Bd. ofDirs. v.
Blume Dev. Co., 115 Wash. 2d 506, 516, 799 P.2d 250 ( 1990). If the moving party satisfies its
burden, the nonmoving party must present evidence demonstrating that a material fact is in
dispute. Atherton, 115 Wash. 2d at 516. If the nonmoving party fails to do so, then summary
judgment is proper. Vallandigham v. Clover Park Sch. Dist. No. 400, 154 Wash. 2d 16, 26, 109
P.3d 805 ( 2005).
A trial court should grant summary judgment only " if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits, if any, show 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." CR 56( c). A material fact is one upon which the outcome of the litigation
depends in whole or in part. Atherton, 115 Wash. 2d at 516.
Summary judgment is proper only if reasonable persons could reach but one conclusion
from all the evidence. Vallandigham, 154 Wash. 2d at 26. In reviewing a summary judgment, we
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No. 44430 -5 -II
consider all facts, and the reasonable inferences therefrom, in the light most favorable to the
nonmoving party, here, the Kims. Vallandigham, 154 Wash. 2d at 26; Atherton, 115 Wash. 2d at 516.
II. THE TRIAL COURT' S GRANT OF SUMMARY JUDGMENT TO FOREST
In support of their claim that the trial court erred in dismissing their suit on summary
judgment, the Kims argue ( 1) that "[ g] enuine issues of material fact are still in dispute in this
case whether [ Forest] properly installed the drainage system "; ( 2) that Forest breached
regarding
the contract because she " promised to repair the water problem found on the inspection report
and she failed to do so "; ( 3) that the one -year limitation on the construction warranty in the
Agreement was invalid because it was not supported by consideration; ( 4) that the problem with
the drain system fell within the implied warranty of habitability, and the " economic loss rule"
therefore did not limit Kims' remedy to the negotiated warranty; ( 5) that, under the discovery
rule, the warranty period did not begin to run until the Kims discovered the water damage; and
6) that "[ i] t is obvious that fraud was established by the [ Kims]." Br. of Appellant at 11 - 21. We
find none of these arguments persuasive.
A. Fraud/Negligent Misrepresentation
To establish their claim of fraud or intentional misrepresentation, the Kims had to
establish each of nine elements by clear, cogent, and convincing evidence:
1) a representation of falsity, ( 4) the
existing fact, ( 2) its materiality, ( 3) its
speaker' s knowledge of its falsity, ( 5) the speaker' s intent that it be acted upon by
the person to whom it is made, ( 6) ignorance of its falsity on the part of the person
to whom the representation is addressed, ( 7) the latter' s reliance on the truth of the
representation, ( 8) the right to rely upon it, and ( 9) consequent damage.
Elcon Constr., Inc. v. E. Wash. Univ., 174 Wash. 2d 157, 166, 273 P.3d 965 ( 2012). Similarly, to
prevail on their claim of negligent misrepresentation, the Kims had to prove by clear, cogent, and
convincing evidence
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No. 44430 -5 -II
1) That [ Forest] supplied information for the guidance of others in their business
transactions that was false; and
2) That [ Forest] knew or should have known that the information was supplied to
guide [ the Kims] in business transactions; and
3) That [ Forest] was negligent in obtaining or communicating false information;
and
4) That [ the Kims] relied on the false information by [ Forest]; and
supplied
5) That [ the Kims'] reliance on the false information supplied by [ Forest] was
justified (that is, that reliance was reasonable under the surrounding circumstances
and
6) That the false information was the proximate cause of damages to [ the Kims]."
Lawyers Title Ins. Corp. v. Baik, 147 Wash. 2d 536, 545, 55 P.3d 619 ( 2002) ( quoting ESCA Corp.
v. KPMG Peat Marwick, 135 Wash. 2d 820, 827 -28, 959 P.2d 651 ( 1998)) ( emphasis omitted).
Thus, to prevail under either theory, the Kims had to show that they could establish by clear,
cogent, and convincing evidence at trial that Forest had told them something false.
Affidavits on summary judgment " shall be made on personal knowledge, shall set forth
such facts as would be admissible in evidence, and shall show affirmatively that the affiant is
competent to testify to the matters stated therein." CR 56( e). Mere allegations, suppositions,
unsupported opinions, and bare legal conclusions do not suffice to establish a factual dispute.
Grimwood v. Univ. of Puget Sound, Inc., 110 Wash. 2d 355, 359 -60, 753 P.2d 517 ( 1988).
The only relevant representations Forest made in the Agreement were that the "[ m] oisture
in crawlspace will be eliminated" and a " French drain will be installed." CP at 77. The Kims
never alleged that Forest made any other specific factual statement concerning the drainage
system.
As discussed, to sustain their fraud claim, the Kims had to show that they could produce
admissible evidence that Forest had made a false statement of existing fact. With respect to
allegations of fraud, " a false promise does not constitute the representation of an existing fact."
Adams v. King County, 164 Wash. 2d 640, 662, 192 P.3d 891 ( 2008) ( citing Stiley v. Block, 130
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Wn.2d 486, 505 -06, 925 P.2d 194 ( 1996)). The statements relied upon consist of promises of
future performance. Thus, even if proven false, they would not as a matter of law give rise to a
valid fraud claim.
Furthermore, even viewed in the light most favorable to the Kims, the record provides no
reason to doubt the truth of either statement. The Kims do not assign error to the trial court' s
order striking their experts' speculative " conclusions." The only evidence adduced of a problem
with the drain system was the fact that it did not function properly approximately two years after
its installation. To assert from this evidence that the system did not function properly when
installed amounts to pure speculation.
On the other hand, Forest submitted a declaration from an expert, supported by video
evidence, establishing that she did install a French drain, as well as declarations from persons
with direct knowledge who saw the entire drainage system before it was buried. The speculation
by the Kims' experts that the absence of a proper drainage system may have caused the moisture
problem does not raise any issue as to the existence of the French drain.
The only competent evidence on the point properly before us is the Trnka report and
declaration, which established only that there was a problem approximately two years after the
installation and that the " standing water is also an indication that the footing drain system is non
existent or has failed." CP at 142. If Forest installed a drain system that later failed, even if due
to a defect in design, materials, or workmanship, the Kims' fraud claim also fails: to establish
fraud, the Kims needed to show that they could produce " clear and convincing evidence" at trial
that Forest made a false statement that she knew to be false.
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No. 44430 -5 -II
The Kims' negligent misrepresentation claim fails for similar reasons. Their evidence
was entirely consistent with Forest having installed a working system that subsequently failed
due to factors beyond Forest' s control. To demonstrate a material issue of fact, the Kims had to
show the trial court some possibility that they could establish by clear and convincing evidence
at trial that Forest was negligent in communicating the assurance about the drain system to the
Kims. Without any evidence establishing the cause of the drain system' s failure, the Kims
cannot establish that Forest breached any duty of due care when she made the assurance.
Without knowing what was wrong with the system, the court could not conclude that, at the time
Forest communicated the information, it was unreasonable for her to believe that it was correct.
The Kims have failed to demonstrate any issue as to whether Forest gave them any false
information concerning the drainage system. We have held that, "[ w]here there is `` a complete
failure of proof concerning an essential element of the nonmoving party' s case,' all other facts
become immaterial and the moving party is entitled to judgment as a matter of law." Fischer -
McReynolds v. Quasim, 101 Wn. App. 801, 808, 6 P.3d 30 ( 2000) ( quoting Celotex Corp. v.
Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 ( 1986)). Thus, the trial court did
not err in granting Forest summary judgment on the fraud and negligent misrepresentation
claims.
B. Negligent Construction/ Breach of Warranty
The Kims attempt to avoid this conclusion by framing the factual dispute as whether
Forest " properly installed the drainage system." Br. of Appellant at 11. We agree that Forest' s
promise to install a drainage system implied that the system installed would function to channel
water away from the house' s foundation. Whether Forest installed the system properly,
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No. 44430 -5 -II
however, presents an issue entirely different from fraud or misrepresentation: if Forest installed
a functioning drain system that later failed due to defects in workmanship or materials, the claim
instead implicates the construction warranty.
Any claim based on an alleged defect in or negligent construction of the drainage system,
however, also fails as a matter of law. The warranty expressly applied to the moisture problem,
and by its terms applied only to " defects in the finished construction identified by [the Kims] in
writing during the one year" period following the sale. CP 57, 77 ( " If within warranty period,
crawlspace continues to retain moisture, builder will remedy. "). We have upheld similar time
limitations on warranties in residential real estate contracts. Griffith v. Centex Real Estate Corp.,
93 Wn. App. 202, 210, 969 P.2d 486 ( 1998); Southcenter View Condo. Owners' Ass' n v. Condo.
Builders, Inc., 47 Wn. App. 767, 736 P.2d 1075 ( 1986). Because the Kims did not notify Forest
about the moisture problem in writing within one year of closing, the trial court also did not err
in granting summary judgment to Forest as to any claim based on the warranty provision. For
this reason, also, the trial court properly granted Forest summary judgment on the Kims' breach
of contract claim.
The Kims, however, argue that the one year warranty limitation is invalid because it was
a subsequent modification to the Agreement not supported by consideration. We disagree.
The argument appears to rest on the premise that Forest only demanded the warranty
limitation after the Kims insisted she address the moisture issue. The record does not support
such an assumption. The preprinted form prepared by the Kims' agent and submitted as the
original offer states that "[ s] eller warrants that all workmanship and materials furnished by it in
the construction of the home shall be free from defects for a period of one ( 4) [ sic] year from the
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date of substantial completion of the home." CP at 57 -58 ( emphasis added). The conflicting
terms are crossed out in pen, with a handwritten notation specifying that the warranty period is
one year. The change is initialed by both parties, on a page bearing Eric Kim' s signature, and
dated January 26, 2006. The record contains no evidence that the parties had ever agreed to a
longer warranty period, and the Kims did not make that claim in their complaint.
Furthermore, the preprinted form contains a number of handwritten modifications that
plainly benefit the Kims, such as a $ 1, 000 reduction in the purchase price, establishing that
subsequent changes resulted from negotiations supported by mutual consideration. The Kims'
argument that the one year warranty provision amounted to a subsequent modification not
supported by consideration has no basis in the record.
C. The Implied Warranty of Habitability
The Kims also allege that the problem with the drain system fell within the implied
warranty of habitability, and their remedy is therefore not limited to the negotiated warranty.
This argument also fails.
Where a residential builder constructs a new residence and sells it to the first interested
buyer, " he impliedly warrants that the foundations supporting it are firm and secure and that the
house is structurally safe for the buyer' s intended purpose of living in it." House v. Thornton, 76
Wash. 2d 428, 436, 457 P.2d 199 ( 1969). The implied warranty covers defects that " have the
potential to severely restrict the habitability of the" dwelling, Atherton, 115 Wash. 2d at 520,
amount to " serious structural deficiencies," or " present a substantial risk of future danger."
Westlake View Condo. Ass 'n v. Sixth Ave. View Partners, LLC, 146 Wash. App. 760, 771 -72, 193
P.3d 161 ( 2008). The defects need not, however, render a dwelling completely uninhabitable or
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No. 44430 -5 -II
actually cause the residents to move out. Westlake View, 146 Wash. App. at 771 -72; Lian v.
Stalick, 106 Wash. App. 811, 816, 25 P.3d 467 ( 2001).
Although "[ t]he entire realm of defects which are within the purview of this implied
warranty has not been precisely defined," our Supreme Court has specified that " the implied
warranty of habitability does not extend to ``mere defects in workmanship' or impose upon a
builder- vendor an obligation to construct a perfect residential dwelling." Atherton, 115 Wash. 2d at
519, 522 ( quoting Stuart v. Coldwell Banker Comm '1 Grp., Inc., 109 Wash. 2d 406, 417, 745 P.2d
1284 ( 1987)). Whether the implied warranty of habitability applies to a particular defect
generally presents a question for the trier of fact. Burbo v. Harley C. Douglass, Inc., 125 Wn.
App. 684, 694, 106 P.3d 258 ( 2005) ( noting that the question is " frequently so highly fact -
dependent that it is essentially a question of fact to be determined by the jury with careful
instructions by the court"). Here, however, the factual issue does not even arise.
First, the Kims did not plead breach of the implied warranty of habitability in their
complaint. The complaint contains a cause of action for " breach of contract." CP at 280. We
have held that the implied warranty of habitability is an " implied -n -
i law, non -
written term of a
contract of sale." Brickler v. Myers Constr., Inc., 92 Wash. App. 269, 275, 966 P.2d 335 ( 1998)
emphasis omitted); accord, Burbo, 125 Wn. App. at 701. The complaint merely alleges on the
breach of contract claim that Forest " fail[ ed] to meet the conditions set forth in the contract." CP
at 280 ( emphasis added). This limits the claim to breach of terms explicitly appearing in the
contract, not a term implied by law. Thus, the Kims did not properly plead the implied warranty
claim in the trial court.
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Second, although the Kims raised the implied warranty of habitability in response to
Forest' s motion for summary judgment, they presented no evidence to the trial court that the
problem with the drainage system amounted to a serious structural defect, presented a substantial
risk of future harm, or had the potential to severely restrict the habitability of the dwelling, as the
precedents discussed above require. Indeed, the fact that the Kims lived there for more than two
years without noticing anything wrong strongly indicates that the problem with the drainage
system, if it even existed when the Kims moved in, did not rise to that level.3
Finally, the policy considerations-that motivated our courts to imply the warranty of
habitability in contracts for new residential sales do not apply here. Our Supreme Court has
justified the rule on the grounds that the builder is in a better position to know of and prevent
possible defects than the buyer, who generally cannot discover such defects by inspecting the
completed structure. House, 76 Wash. 2d at 435 -36; Atherton, 115 Wash. 2d at 521. Here, the Kims
had the opportunity to inspect the drainage system prior to completion. As discussed above, the
professional inspector the Kims hired told them about a potential problem with the system and
explicitly warned them to address it to their satisfaction prior to closing the deal. The Kims
raised this concern with Forest and negotiated a specific term in the contract assigning liability
for the risk.
3 The years that the Kims lived in the house, without complaining of any moisture problems,
included some of the heaviest precipitation ever recorded in southwest Washington, see PHILIP
MOTE, ET AL., OFFICE OF THE WASHINGTON STATE CLIMATOLOGIST, THE CHEHALIS RIVER FLOOD
OF DECEMBER 3 -4, 2007, at 2 -3, available at http:// www . limate.washington.edu/ events
c
dec2007floods/ OWSC_ Chehalis_ Dec08_ Flood_Report.pdf, a fact of which the trial court seems
to have taken judicial notice.
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A buyer with actual notice of a defect has a duty to make further inquiries. Douglas v.
Visser, 173 Wn. App. 823, 830, 295 P.3d 800 ( 2013). Furthermore, courts will give effect to a
waiver of a warranty, even one implied by the law for policy reasons, if it is " explicitly
negotiated between buyer and seller and set forth with particularity showing the particular
qualities and characteristics" as to which the warranty is waived. Berg v. Stromme, 79 Wash. 2d
184, 196, 484 P.2d 380 ( 1971) ( involving the warranty of fitness for a particular purpose).
Here, the Kims had notice of a potential problem with the drainage system and either did
not investigate further prior to closing or did so and found the issue addressed to their
satisfaction. They negotiated a provision in the contract specifically assigning liability for the
risk of moisture intrusion in the basement. That provision limited their right to recover from
Forest for problems with the drainage system to problems arising within one year of closing.
Assuming, then, that the alleged defect falls within the implied warranty of habitability,
the Kims waived any implied warranty claim by knowingly and intelligently negotiating an
express warranty covering the particular risk involved. The negotiated warranty limitation
period expired before the Kims notified Forest of the moisture intrusion. Thus, had the Kims
properly pleaded the implied warranty claim, it would have failed as a matter of law. The trial
court did not err in dismissing the claim on summary judgment.
D. The Independent Duty Doctrine
The Kims argue also that the " economic loss rule" did not limit their remedy to the
negotiated warranty. Br. of Appellant at 20. The " economic loss rule," more properly called the
independent duty doctrine," is "`` an analytical tool used by the court to maintain the boundary
between torts and contract. ' Elcon Constr., 174 Wash. 2d at 165 ( quoting Eastwood v. Horse
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Harbor Found., Inc., 170 Wash. 2d 380, 416, 241 P.3d 1256 ( 2010) ( Chambers, J., concurring).
Under this rule, the plaintiff is limited to the remedy provided by the contract where " the parties'
relationship is governed by contract and the loss claimed is an economic loss," meaning that the
damages alleged consist of the cost of repairing the defective property itself rather than personal
injury or damage to other property. Alejandre v. Bull, 159 Wash. 2d 674, 686, 153 P.3d 864
2007).
The Kims apparently mention the rule in response to Forest' s argument that the
independent duty doctrine forecloses the Kims' negligent misrepresentation claim.4 While
Forest' s argument on this point may or may not have merit, see Donatelli v. D.R. Strong
Consulting Eng' rs, Inc., 179 Wash. 2d 84, 97 -98, 312 P.3d 620 ( 2013) ( discussing when the
independent duty doctrine bars a negligent misrepresentation claim), the rule has no bearing on
our analysis. The Kims' negligent misrepresentation claim fails regardless of the independent
duty doctrine because, as discussed above, they point to no evidence that Forest gave them any
false information. The trial court did not err in dismissing the negligent misrepresentation claim.
E. The Discovery Rule
Finally, the Kims argue that, under the discovery rule, the warranty period did not begin
to run until the Kims discovered the water damage. We disagree.
4 The trial court also stated, as an alternative ground for dismissing the fraud and negligent
misrepresentation claims, that the " independent duty rule does bar the plaintiffs' tort claim."
Verbatim Report of Proceedings ( VRP) ( Dec. 21, 2012) at 21. With respect to the fraud claim,
this appears to misstate the law. Elcon Constr., 174 Wash. 2d at 165 -66 ( " Even in the real property
context, where we have been the least hesitant to apply the [ independent duty] doctrine, we have
repeatedly recognized a fraud claim to be outside the doctrine' s scope, allowing such claims to
be decided based on established tort precedent. "). Because the trial court properly ruled that the
fraud claim fails for lack of evidence of any false statement of existing fact, the
misunderstanding concerning the independent duty doctrine is immaterial.
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The discovery rule applies to " construction contract claims involving latent construction
defects," 1000 Virginia Ltd. Partnership v. Vertecs Corp., 158 Wash. 2d 566, 578 -79, 146 P.3d 423
2006), and provides that " a cause of action accrues when a plaintiff discovers, or in the exercise
of reasonable diligence, should have discovered, the elements of the cause of action," Stuart, 109
Wash. 2d at 415 ( emphasis omitted). " A latent defect is one which could not have been discovered
by inspection." Arrow Transp. Co. v. A. 0. Smith Co., 75 Wash. 2d 843, 851, 454 P.2d 387 ( 1969).
However, " a plaintiff cannot ignore notice of possible defects," and "[ a] person who has notice
of facts that are sufficient to put him or her upon inquiry notice is deemed to have notice of all
facts that reasonable inquiry would disclose." Vertecs Corp., 158 Wash. 2d at 581.
Here, the Kims fail to explain why they could not have inspected the drainage system
before Forest buried it, or afterward in the same manner that Forest' s experts did.5 As discussed,
the Kims had actual notice of a potential problem with the drainage system, and their own
inspector advised them in no uncertain terms to investigate further prior to closing. If the defect
detected in the system in fact existed when the Kims bought the house, they would have
discovered the problem had they conducted a reasonable investigation. Thus, the defect was not
latent" and the discovery rule does not apply.
III. CR 11 SANCTIONS
The Kims also argue that the trial court erred in imposing CR 11 sanctions against their
attorney. We decline to reach the issue.
5 The plumber Forest hired to diagnose the problem with the drain system charged $ 225. 72, and
estimated that it would cost $765. 95 to dig up the plugged line and clear it.
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No. 44430 -5 -II
A court rule specifies that "[ o] nly an aggrieved party may seek review by the appellate
court." RAP 3. 1. The client of an attorney against whom a court imposes sanctions is not
aggrieved by the sanctions and thus may not appeal them: the attorney must appeal the sanctions
on his or her own behalf. Engstrom v. Goodman, 166 Wash. App. 905, 917, 271 P.3d 959, review
denied, 175 Wash. 2d 1004 ( 2012); accord Breda v. B.P.O. Elks Lake City 1800 SO -620, 120 Wn.
App. 351, 353, 90 P.3d 1079 ( 2004).
The imposition of sanctions against their attorney did not aggrieve the Kims. On the
contrary, it benefitted them: their attorney will have to pay a substantial portion of Forest' s fees
in their stead. Because the Kims' attorney has not separately appealed, the CR 11 sanctions issue
is not properly before us. We decline to address the matter further.
IV. ATTORNEY FEES
Forest requests attorney fees on appeal. The Agreement provides that "[ i] f buyer or seller
institutes suit against the other concerning this Agreement, the prevailing party is entitled to
reasonable attorneys' fees and expenses." CP at 36. When a contract provides for a fee award in
the trial court, the party prevailing before us may seek reasonable costs and attorney fees
incurred on appeal. RAP 18. 1; Reeves v. McClain, 56 Wash. App. 301, 311, 783 P.2d 606 ( 1989).
Forest prevails here and has complied with the procedural requirements. We therefore award
Forest the reasonable costs and attorney fees she incurred in this appeal.
Forest also asks us to impose further sanctions on the Kims' attorney under RAP 18. 9( a).
The rule gives us discretion to " order a party or counsel ... who uses these rules for the purpose
of delay, files a frivolous appeal, or fails to comply with these rules to pay terms or
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No. 44430 -5 -II
compensatory damages to" the party harmed. RAP 18. 9( a). Applying this rule, we have held
that
i]n determining whether an appeal is frivolous and was, therefore, brought for the
purpose of delay, justifying the imposition of terms and compensatory damages,
we are guided by the following considerations: ( 1) A civil appellant has a right to
appeal under RAP 2. 2; ( 2) all doubts as to whether the appeal is frivolous should
be resolved in favor of the appellant; (3) the record should be considered as a whole;
4) an appeal that is affirmed simply because the arguments are rejected is not
frivolous; ( 5) an appeal is frivolous if there are no debatable issues upon which
reasonable minds might differ, and it is so totally devoid of merit that there was no
reasonable possibility of reversal.
Streater v. White, 26 Wn. App. 430, 434 -35, 613 P.2d 187 ( 1980). Although we disagree with
the Kims' arguments, it is at least doubtful whether they are " so totally devoid of merit that there
was no reasonable possibility of reversal." Streater, 26 Wash. App. at 435. Following Streater
and resolving all doubts in favor of the Kims, we deny Forest' s sanction request.
CONCLUSION
The trial court properly granted Forest' s motion for summary judgment as to the Kims'
fraud, negligent misrepresentation, and breach of contract claims. To the extent the Kims
claimed breach of the implied warranty of habitability, the court properly granted summary
judgment to Forest on that claim also.
We award Forest costs and attorney fees on appeal pursuant to the Agreement, but
decline to impose further sanctions against the Kims' attorney. We also decline to address the
Kims' claims concerning the trial court' s imposition of CR 11 sanctions because they are not
aggrieved" by the imposition of sanctions against their attorney.
We thus affirm the trial court in all respects.
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A majority of the panel having determined that this opinion will not be printed in the
Washington Appellate Reports, but will be filed for public record in accordance with RCW
2. 06. 040, it is so ordered.
We concur:
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