Marcantel v. Michael & Sonja Saltman Family

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS April 6, 2021
Christopher M. Wolpert
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
CURT A. MARCANTEL, an individual,
Plaintiff - Appellant,
v. No. 19-4055
MICHAEL AND SONJA SALTMAN
FAMILY TRUST; MICHAEL A.
SALTMAN, an individual; SONJA
SALTMAN, an individual,
Defendants - Appellees.
_________________________________
Appeal from the United States District Court
for the District of Utah
(D.C. No. 2:16-CV-00250-DBP)
_________________________________
Paxton R. Guymon (Lauren Parry Johnson with him on the briefs), of York Howell &
Guymon, South Jordan, Utah, for Plaintiff-Appellant.
Eric P. Lee (Justin J. Keys with him on the briefs), of Hoggan Lee Hutchinson, Park City,
Utah, for Defendants-Appellees.
_________________________________
Before HARTZ, PHILLIPS, and EID, Circuit Judges.
_________________________________
PHILLIPS, Circuit Judge.
_________________________________
In 2015, Michael and Sonja Saltman sold a vacant lot in Park City, Utah, to
Curt Marcantel. Eager to develop the property or otherwise turn a profit, Marcantel
pushed to close the deal quickly. But at the time of the sale, the Saltmans knew
something that Marcantel didn’t: a ten-foot wide sewer easement (including a sewer
pipe within it) ran under a portion of the property, rendering infeasible the most
lucrative development designs. Worse still, the Saltmans and the owner before them
had both lobbied the city to relocate the sewer easement, all to no avail.
The Saltmans told Marcantel none of this. Nor did the title company that
Marcantel hired discover the easement. And that title company wasn’t the first or the
last to miss the easement. Because of an indexing error by the county recorder, at
least three different title companies on four separate occasions failed to find and note
the sewer easement on the property. Marcantel first heard about the easement when
his prospective buyer alerted him to it; that buyer fortuitously learned of the
easement from a neighboring property owner. The prospective buyer then balked at
Marcantel’s asking price. Marcantel eventually sold the lot at a significant loss.
Marcantel sued the Saltmans for, among other things, fraudulent nondisclosure
and breach of the parties’ real estate purchase contract. He argued that the Saltmans’
mum’s-the-word approach breached their contractual and common-law duties to
disclose the easement. For their part, the Saltmans claimed they had assumed
Marcantel knew about the easement, and in any event, Marcantel had constructive
notice of the easement because it was publicly recorded. Adopting almost verbatim
the Saltmans’ proposed order, the district court granted the Saltmans summary
judgment on all Marcantel’s claims.
2
On appeal, Marcantel argues that the district court repeatedly misapplied Utah
law and disregarded summary-judgment procedure that required it to draw inferences
in Marcantel’s favor. We agree. Exercising jurisdiction under 28 U.S.C. § 1291, we
affirm in part, reverse in part, and remand for further consideration consistent with
this opinion.
BACKGROUND
I. Factual Background
In early 2007, Michael and Sonja Saltman purchased a mostly vacant lot (the
“Property”) in Park City, Utah, hoping to develop it. 1 They bought the Property from
Old Town Partners, LLC (“Old Town”) through the Michael and Sonja Saltman
Family Trust (the “Trust”) for $1,700,000. Though the Saltmans’ title commitment
and title policy hadn’t identified any encumbrances, Old Town informed them prior
to closing that it had been working with Park City officials to try to relocate a ten-
foot wide sewer line easement (the “Easement”) that crossed under the Property.
In May 1989, the Summit County Recorder’s Office recorded a document
titled “Grant of Easement,” naming Verna Thorn as Grantor and the Snyderville
Basin Sewer Improvement District as Grantee. The Grant of Easement contained a
metes-and-bounds legal description, rather than a reference to the parcel or tax serial
1
Not long after the Saltmans purchased the property, Park City approved their
application to deem the single existing structure on the Property “non-historic.” The
Saltmans then had the structure demolished.
3
number. 2 Unfortunately, the county recorder indexed the recorded Easement
incorrectly. 3 The abstracts mistakenly recorded the Easement on the wrong section of
the relevant city block. 4
As part of Old Town’s efforts to relocate the Easement, it commissioned an
existing-conditions survey (the “Survey”) of the Property (depicted below with the
Easement highlighted in yellow):
2
The Easement was described as follows: “A 10.00 foot wide sanitary sewer
easement lying 5.00 feet on each side of the following described centerline:
beginning at a point on the north line of Grantor’s property and south line of 11th
Street, also known as Crescent Street, said point being . . . 2883.76 feet along the
section line and south 1318.04 feet from the southwest corner of section 9, Township
2 south, range 4 east S.L.B.&M., said point also being . . . 141.32 feet and . . . 15.05
feet from the city monument at the intersection of 11th Street and Park Avenue, and
running thence . . . 60.0 feet more or less to the south line of Grantor’s property and
terminating.” App. vol. 1 at 51.
3
In addition to maintaining “an entry record,” Utah Code § 17-21-6(1)(a),
Utah law requires county recorders to “keep a tract index” that, among other things,
describes “the kind of instrument [recorded], the time of recording, and the book and
page and entry number[,]” id. § 17-21-6(1)(f). This process by which the county
recorder copies recorded instruments into the tract index is known as “abstraction.”
See id. § 17-21-6(3)(b) (requiring that “[a] recorder shall abstract an instrument in the
tract index” unless the instrument is deficient in one of the ways the statute
specifies). Utah law requires a tract index to be kept “so that it shows a true chain of
title to each tract or parcel, together with each encumbrance on the tract or parcel,
according to the records of the office.” Id. § 17-21-6(3)(a) (emphasis added). The
purpose of the tract index is to make it easier for the public to find recorded
instruments. See Boyer v. Pahvant Mercantile & Inv. Co., 287 P. 188, 191 (Utah
1930) (noting that “the purpose” of the tract index is to “afford[] a correct and easy
reference to the books of record” and “is designed . . . for the convenience of those
searching the records” (quotation marks and citation omitted)).
4
As discussed below, this error caused several title companies to miss the
Easement in their title reports. The Easement wasn’t identified despite title searches
by professional title agents when Old Town, the Saltmans, or Marcantel purchased
the Property, nor when Marcantel was in the process of selling the property.
4
App. vol. 8 at 2221–22.
Like Old Town before them, the Saltmans wanted to develop the Property. So
they engaged Elliot Workgroup Associates (“Elliot Workgroup”) to prepare needed
predevelopment applications to submit to Park City. Specifically, they hoped to
subdivide the Property into three lots to build a residential property on each as shown
below (the Easement is again highlighted in yellow).
5
Id. at 2223.
Elliot Workgroup submitted those applications to Park City on April 30, 2007.
At some point, Elliot Workgroup had acquired the Survey from Old Town and
included it in the applications. The Saltmans contemporaneously applied to the sewer
district to have the Easement relocated. Mr. Saltman signed the applications, each of
which included the Survey. The applications to Park City also contained an
“Acknowledgement of Responsibility” by which Mr. Saltman verified that he
understood the application instructions and that the documents submitted were “true
and correct.” Id. vol. 4 at 1056, 1081, 1108, 1134. The sewer district never approved
the Saltmans’ plan to relocate the Easement. Ultimately, the Saltmans didn’t pursue
the development plans contemplated in their applications and abandoned all plans to
develop the Property after the 2007 financial crisis and ensuing recession.
In 2014, under what his daughter described as “financial distress,”
Mr. Saltman decided to sell the Property to pay off a $1,461,000 loan. Id. vol. 2 at
6
539:18–540:2; id. vol. 4 at 890–91. In early 2015, the Saltmans listed the Property
for sale. Soon after, the Saltmans entered into a Real Estate Purchase Contract
(“REPC”) for the Property’s sale with Lakeland Homes, Inc. (through Marcantel, its
president). Marcantel agreed to buy the Property for $1,775,000.
Three provisions of the REPC are relevant here. First, REPC Section 10.2
provided:
Seller agrees to: (a) 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[.]
Id. vol. 2 at 407. Second, REPC Section 7 (“Seller Disclosures”) stated:
No later than the Seller Disclosure Deadline . . . , Seller shall provide to
Buyer the following documents in hard copy or electronic format which
are collectively referred to as the “Seller Disclosures”: . . . (h) Other
(specify): Survey if one has been done.
Id. at 405–06. Third, Section 6(D) of the “Seller’s Property Condition Disclosure”
(incorporated into the REPC by Sections 7(a) and 10.2) included the following:
Are you aware of any survey(s) that have been prepared for the Property
or any adjoining property or properties? If ‘Yes,’ please provide a copy
of any such survey(s) in your possession.
Id. vol. 4 at 877. The Saltmans marked “no,” and they never provided Marcantel with
a copy of the Survey. Id. at 877, 897.
At no time did the Saltmans tell Marcantel about the Easement or their efforts
to relocate it. Although Marcantel commissioned a title search through Coalition
Title and Stewart Title, neither company identified the Easement. So when Marcantel
closed on the Property, he didn’t know about the Easement.
7
In fall 2015, Marcantel contracted to sell the Property to Joe Kelly for
$1,995,000—what would have been a profit of over $200,000. U.S. Title prepared the
title commitment for Kelly, and it too failed to identify the Easement. But while at
the Property one day, Kelly learned of the Easement when a “purported neighbor”
commented to him about it. 5 Id. at 898. Kelly cancelled the purchase contract and
made two reduced offers of $1,250,000 and $1,400,000, both of which Marcantel
rejected. In March 2018, Marcantel finally sold the Property to a different buyer for
$1,450,000, suffering a loss of over $300,000.
II. Procedural History
In March 2016, Marcantel sued Stewart Title Guaranty Co., Coalition Title,
Michael Saltman, Sonja Saltman, and the Trust in the United States District Court for
the District of Utah. The case was assigned to a magistrate judge and all parties
consented.
In March 2018, the district court granted summary judgment to Coalition Title
and dismissed it from the case. A few months later, Marcantel stipulated to
dismissing Stewart Title from the case after it settled with him for $272,500.
That left three defendants—the Trust and Michael and Sonja Saltman.
Marcantel asserted claims for fraudulent nondisclosure and fraudulent
misrepresentation against the Saltmans, claiming they had breached their duty to
disclose the Easement and Survey and had misrepresented the Property’s
5
The record tells us little about the circumstances or content of this
conversation.
8
development potential. He also brought claims for breach of contract and breach of
the implied covenant of good faith and fair dealing against the Trust, claiming it had
similarly breached its obligations under the REPC by failing to disclose the Easement
and to produce the Survey.
At the close of discovery, the Saltmans and the Trust jointly moved for
summary judgment on all Marcantel’s claims. Because the Easement was recorded,
the Saltmans argued that Marcantel had constructive notice of it, barring his claim for
fraudulent nondisclosure. They also maintained that they didn’t know that Marcantel
was unaware of the Easement and didn’t possess the Survey (or even know that it
existed until this litigation). Marcantel moved for partial summary judgment on his
claims for breach of contract and fraudulent nondisclosure. Marcantel argued that the
Trust and the Saltmans “concealed and failed to disclose the Sewer Easement” and
did not provide him a copy of the Survey as required by the REPC. Id. at 882. He
maintained that he wouldn’t have purchased the Property had he known about the
Easement and that he learned of it only when the sale to Kelly fell through.
In February 2019, the district court held a hearing on the parties’ cross-
motions for summary judgment during which it asked the parties numerous questions
regarding the fraud and contract claims. At the end of the hearing, the court shared its
preliminary conclusions, explaining that it intended to grant the Saltmans’ motion for
summary judgment and to deny Marcantel’s partial motion for summary judgment.
Additionally, the court asked the Saltmans to prepare a proposed order (the
“Proposed Order”) consistent with its preliminary ruling.
9
Marcantel objected to the Saltmans’ Proposed Order as “inconsistent with the
Court’s findings of fact, conclusions of law and oral rulings announced at the
hearing[.]” Appellant’s Principal Br., Ex. 4 at 1. He requested that the court edit the
Proposed Order “so that it is consistent with the oral findings and rulings.” Id. at 2.
Although the district court modified the “undisputed facts” section of its
memorandum decision and order (“Memorandum Decision”), it left the remainder
unchanged. Appellant’s Principal Br. at 51. In adopting the Proposed Order, the court
noted Marcantel’s objection but determined that it “accurately reflects the decision of
the court.” App. vol. 8 at 2220 n.3.
On March 19, 2019, the court entered final judgment and dismissed the case
with prejudice. Marcantel timely appealed from the final judgment and Memorandum
Decision. Marcantel appeals only the district court’s grant of summary judgment for
the Saltmans on his fraudulent-nondisclosure claim and its grant of summary
judgment for the Trust on his breach-of-contract claim.
DISCUSSION
Marcantel argues that the district court committed numerous errors—both
procedural and substantive—in granting the Saltmans’ motion for summary
judgment. We address Marcantel’s arguments in the following order. First, we
consider whether the district court improperly granted summary judgment on
Marcantel’s fraudulent-nondisclosure claim. Second, we consider whether the district
court improperly granted summary judgment on Marcantel’s breach-of-contract
10
claim. And third, we consider whether the district court reversibly erred by adopting
almost verbatim the Saltmans’ Proposed Order. 6
I. Standard of Review 7
“We review summary judgment de novo, applying the same legal standard as
the district court.” Gutierrez v. Cobos, 841 F.3d 895, 900 (10th Cir. 2016) (citation
omitted). Summary judgment is warranted “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). “When applying this standard, we review the
evidence and draw reasonable inferences therefrom in the light most favorable to the
nonmoving party.” Gutierrez, 841 F.3d at 900 (quoting Ribeau v. Katt, 681 F.3d
1190, 1194 (10th Cir. 2012)).
In moving for summary judgment, the Saltmans asserted that Marcantel
“fail[ed] to make a showing sufficient to establish the existence of an element
essential to [his] case, and on which [he] will bear the burden of proof at trial.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). This required Marcantel to
6
Marcantel raises as a separate issue a claim that the district court erred by
failing to draw inferences in his favor. But “[b]ecause our review is de novo, we need
not separately address arguments that the district court erred by viewing evidence in
the light most favorable to [the Saltmans] and by treating disputed issues of fact as
undisputed.” Simmons v. Sykes Enter., Inc., 647 F.3d 943, 947 (10th Cir. 2011)
(citation omitted).
7
We address here only our standard of review governing summary judgment
orders. We consider below what standard of review applies to Marcantel’s argument
that the district court erred by adopting in its entirety the legal analysis contained in
the Saltmans’ Proposed Order.
11
“designate ‘specific facts showing that there is a genuine issue for trial.’” Id. at 324
(quoting Fed. R. Civ. P. 56(e)).
Further, we review the evidence “through the prism of the substantive
evidentiary burden.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254 (1986).
Here, that burden is clear and convincing evidence on Marcantel’s fraudulent-
nondisclosure claim and a preponderance of the evidence on his breach-of-contract
claims. See Anderson v. Kriser, 266 P.3d 819, 823 (Utah 2011) (fraudulent
nondisclosure); Turtle Mgmt., Inc. v. Haggis Mgmt., Inc., 645 P.2d 667, 670 (Utah
1982) (breach of contract).
II. Fraudulent Nondisclosure
This appeal requires us to confront several nuances in Utah’s fraudulent
nondisclosure law as it relates to real-estate transactions. “Because this is a diversity
action, we apply the substantive law of the forum state.” MTI, Inc. v. Emp’rs Ins. Co.
of Wausau, 913 F.3d 1245, 1248–49 (10th Cir. 2019) (internal quotation marks and
citation omitted). When interpreting Utah’s law, we “must look to rulings of the
highest state court, and, if no such rulings exist, must endeavor to predict how that
high court would rule.” Amparan v. Lake Powell Car Rental Cos., 882 F.3d 943, 947
(10th Cir. 2018) (quoting Stickley v. State Farm Mut. Auto. Ins. Co., 505 F.3d 1070,
1077 (10th Cir. 2007)). Decisions of a state’s intermediate court of appeals may also
aid us in this process. See Stickley, 505 F.3d at 1077 (“The decision of an
intermediate appellate state court is a datum for ascertaining state law which is not to
be disregarded by a federal court unless it is convinced by other persuasive data that
12
the highest court of the state would decide otherwise.” (internal quotation marks and
citation omitted)). And “[a] federal court performing an Erie analysis may also
consider ‘appellate decisions in other states with similar legal principles . . . and the
general weight and trend of authority in the relevant area of law.’” Amparan, 882
F.3d at 948 (quoting Wade v. EMCASCO Ins. Co., 483 F.3d 657, 666 (10th Cir.
2007)).
To prevail on a claim for fraudulent nondisclosure under Utah law, the
plaintiff “must prove by clear and convincing evidence that (1) the defendant had a
legal duty to communicate information, (2) the defendant knew of the information he
failed to disclose, and (3) the nondisclosed information was material.” Anderson, 266
P.3d at 823 (internal quotation marks and citation omitted). On the first element,
Utah common law imposes on sellers of real property “a duty to disclose material
known defects that cannot be discovered by a reasonable inspection by an ordinary
prudent buyer.” 8 Hermansen v. Tasulis, 48 P.3d 235, 242 (Utah 2002) (citing
Mitchell v. Christensen, 31 P.3d 572, 575 (Utah 2001)). As to the second element, the
8
Utah is among the minority of states that hasn’t codified the common-law
disclosure duty. See 10A Real Estate Brokerage Law and Practice § 15.01 (2020)
(“[A] majority of states and the District of Columbia have adopted laws or
regulations expressly requiring the seller to disclose specified information about the
features or condition of the property.”). The only disclosure duty Utah imposes by
statute relates to properties “contaminated by methamphetamines.” See id. at
Appendix 3A-1 (Utah); Utah Code § 57-27-201.
13
plaintiff must show that the defendant possessed actual knowledge of the material
defect that the defendant allegedly failed to disclose. Anderson, 266 P.3d at 825.
Before reaching those elements, however, the Saltmans urge us to find that, as
a threshold matter, the Easement isn’t a “defect” under Utah common law. We thus
begin with that question.
A. The Easement Constitutes a Defect
The Saltmans argue that we needn’t examine the merits of Marcantel’s
fraudulent-nondisclosure claim because we should find in the first instance that the
Easement isn’t a defect. They assert that “[i]n the nondisclosure context, defects are
tangible things or conditions,” which necessarily excludes easements. Appellees’ Br.
at 39. Marcantel counters that the “sewer pipeline . . . installed within the Easement”
constitutes “a physical, tangible intrusion in the subsurface of the Property.” Reply
Br. at 1–2. The district court sided with Marcantel. Although the district court
acknowledged that not every easement qualifies as a “defect,” it ruled that the
physical intrusion of the sewer pipe on the Property “was a defect” “[u]nder the
specific facts and circumstances of this case.” App. vol. 8 at 2261. We agree.
Though the parties agree that Utah common law governs this claim, neither
side identified controlling authority from Utah’s highest courts resolving—or even
addressing—this issue. Lacking any binding decisions from the Utah Supreme Court,
we must predict how that court would rule. See Amparan, 882 F.3d at 947. That is,
we must decide whether the Utah Supreme Court would classify the sewer pipe
14
running under the Property as a defect that could be subject to a real-property seller’s
disclosure obligations. We conclude that it would.
To start, we must define “defect.” But the REPC offers no definition, nor does
any relevant statute set out its meaning. Further, Utah’s courts haven’t yet explored
the term’s scope. So we follow the parties’ lead—and the Utah Supreme Court’s
preferred approach—by consulting dictionary definitions as a starting point. See State
v. Bagnes, 322 P.3d 719, 723 (Utah 2014) (“The term ‘lewdness’ is not defined by
statute. We must accordingly look elsewhere to derive . . . the ordinary meaning of
the word . . . . A starting point for our assessment of ordinary meaning is the
dictionary.”); Mind & Motion Utah Invs., LLC v. Celtic Bank Corp., 367 P.3d 994,
1001–02 (Utah 2016) (explaining that “when interpreting a contract, we generally
give each term its plain and ordinary meaning” and using Black’s Law Dictionary to
determine the ordinary meaning of “shall”); see also South Ridge Homeowners’ Ass’n
v. Brown, 226 P.3d 758, 759 (Utah Ct. App. 2010) (“In interpreting contracts, the
ordinary and usual meaning of the words used is given effect, which ordinary
meaning is often best determined through standard, non-legal dictionaries.” (internal
quotation marks, ellipsis, and citation omitted)).
Black’s Law Dictionary defines “defect” as “[a]n imperfection or shortcoming,
esp. in a part that is essential to the operation or safety of a product.” Defect, Black’s
Law Dictionary (11th ed. 2019). Merriam-Webster defines “defect” similarly as “an
imperfection or abnormality that impairs quality, function, or utility.” Defect,
Merriam-Webster, https://www.merriam-webster.com/dictionary/defect (last visited
15
Oct. 5, 2020). Thus, as relevant here, a defect is any condition that renders a property
imperfect or impairs its quality, function, or utility.
Under this broad formulation, a defect encompasses a host of property
imperfections from the nearly unnoticeable to the obvious. The dictionary definitions
would include, for example, conditions that almost every homeowner has faced:
leaky faucets and clogged drains, linoleum cracks and warped hardwood, blemished
walls and doors that stick. Each of these conditions, though perhaps benign, in some
sense impairs a property’s quality, function, and utility.
But broken light switches and creaky stairwells won’t trigger common-law
disclosure obligations. Notwithstanding the broad definition of defect, we aren’t
expanding what defects a seller must disclose. That’s because Utah law requires
sellers to disclose only defects that (1) they have actual knowledge of, (2) are
material, (3) and aren’t discoverable upon a reasonable inspection. See Hermansen,
48 P.3d at 242. Minor or obvious defects won’t meet that test.
Utah’s fraudulent-nondisclosure caselaw supports defining “defect” broadly.
Indeed, in considering home defects, the Utah Supreme Court has taken an expansive
view of a seller’s disclosure obligations. The court first articulated the elements a
plaintiff must establish to prevail on a fraudulent-nondisclosure claim involving
home defects in Mitchell v. Christensen, 31 P.3d 572, 574 (Utah 2001). There, after
purchasing a home from the defendants, the plaintiff discovered several leaks in the
swimming pool’s piping and body. Id. at 573. Relying in part on the doctrine of
caveat emptor, the lower courts granted the defendants summary judgment, ruling
16
that the plaintiff had an opportunity to inspect the home before closing and that she
should have sought an “in-depth inspection” of the pool. Id. at 574. The Utah
Supreme Court reversed. Id. at 576.The court refused to “force purchasers to hire
numerous home inspectors to search for hidden defects.” Id. at 575. Instead, the court
cabined the doctrine of caveat emptor “where a defect is not discoverable by
reasonable care.” Id. at 574 (internal quotation marks and citation omitted). And “in
determining what constitutes reasonable care in the discovery of defects, the proper
standard is whether the defect would be apparent to ordinary prudent persons with
like experience, not to persons with specialized knowledge in the field of
construction or real estate.” Id. at 575.
A year later, the Utah Supreme Court extended the disclosure obligation to
licensed real estate professionals and reversed a lower court’s grant of summary
judgment to the defendant. See Hermansen, 48 P.3d at 241. The court also defined
“materiality” broadly to include anything “which a buyer or seller of ordinary
intelligence and prudence would think to be of . . . importance in determining
whether to buy or sell.” 9 Id. at 242 (internal quotation marks and citations omitted).
Then in Yazd v. Woodside Homes Corp., 143 P.3d 283 (Utah 2006), the Utah
Supreme Court further expanded defendants’ disclosure obligations in two ways.
9
The full quote defined materiality as anything “which a buyer or seller of
ordinary intelligence and prudence would think to be of some importance in
determining whether to buy or sell.” Id. at 242 (emphasis added) (quotation omitted).
In a later decision, the Utah Supreme Court deleted the word “some” to “clarify the
definition of materiality as the term is used as an element of . . . fraudulent
nondisclosure.” Yazd v. Woodside Homes Corp., 143 P.3d 283, 289 (Utah 2006).
17
First, it extended the disclosure obligation to builder-contractors. Id. at 287 (“Here, it
is Woodside’s status as builder-contractor that gives rise to its legal duty to the home
buyers.”). Second, the court ruled that a defendant may be required to disclose known
material defects affecting the plaintiff’s property even when those defects fall outside
the boundaries of the plaintiff’s property. Id. at 288. In Yazd, the defendant argued
that a report detailing unstable soil conditions in a property adjacent to the plaintiff’s
property couldn’t be “material” because it described soil conditions on land other
than the plaintiff’s. Id. The court disagreed, declining “to categorically deem
immaterial all information concerning property not owned by the party affected by
unsuitable soil conditions.” Id.From these decisions, we understand the Utah Supreme Court to have
expressed a clear preference for holding sellers of real property accountable when
they fail to disclose known material defects.
Against this backdrop, we consider whether the Easement qualifies as an
imperfection or abnormality that impairs the quality, function, or utility of the
Property. We have no doubt that it does. Because developers couldn’t build on top of
the sewer easement, it significantly limited the available options to develop the
18
Property. Consider the Saltmans’ preferred development plan (the highlighted
segment depicts the Easement):
In this iteration, the Property would be divided into three lots, with a residential
home built on each lot. But this three-lot subdivision was feasible only by relocating
the sewer easement to the perimeter of the property. The quality, function, and utility
of a pre-development property is determined in large measure by the freedom with
which a developer can develop the property. Indeed, the Saltmans marketed the
Property this way: “Most development opportunities in old town come with major
constraints, but this parcel is vacant and ready for your ideas . . . . [A]t 6900 SF this
parcel may be able to accommodate up to 5 residential units.” App. vol. 8 at 2224.
But the Easement significantly inhibited development of the Property by limiting
19
available design concepts. In this way, the Easement constitutes an imperfection that
impaired the quality, function, and utility of the Property.
None of the Saltmans’ arguments persuade us otherwise. Contrary to the
Saltmans’ contention, we wouldn’t be the first court to find that a sewer easement
may constitute a defect. See Moseley v. All Things Possible, Inc., 694 S.E.2d 43, 45–
46 (S.C. Ct. App. 2010), aff’d, 719 S.E.2d 656 (2011) (affirming lower court’s ruling
that defendant was liable for fraud for failing to disclose an underground drainage
easement even though the easement was publicly recorded); Fancher v. Lawrence,
No. 1962, 1992 WL 42793, at *6–7 (Ohio Ct. App. Mar. 6, 1992) (upholding lower
court’s finding that “the existence of a main sewer line [easement] buried under a
portion o[f] the premises” constituted a “substantial latent defect[] in the property”
that was known to the defendants but wasn’t discoverable by reasonable inspection).
To be sure, some courts considering similar claims have concluded that a
seller’s failure to disclose an easement didn’t give rise to a claim for fraud. See, e.g.,
Schottland v. Brown Harris Stevens Brooklyn, LLC, 968 N.Y.S.2d 90, 92 (N.Y. App.
Div. 2013); Stevenson v. Baum, 75 Cal. Rptr. 2d 904, 907–08 (Cal. Ct. App. 1998);
Bache v. Owens, 929 P.2d 217, 222 (Mont. 1996). But none of those courts
considered, let alone held, that the relevant easement wasn’t a defect. Rather, those
cases concluded that liability didn’t attach because the easements were discoverable,
and a seller needn’t disclose known defects if an ordinary prudent buyer could
discover them upon reasonable inspection. See Schottland, 968 N.Y.S.2d at 92;
20
Stevenson, 75 Cal. Rptr. 2d at 907; Bache, 929 P.2d at 221–22. Those decisions
therefore have little bearing on the issue before us.
And even if we agreed with the Saltmans that Utah law limits defects to
tangible imperfections, 10 the sewer pipe fits under that rubric. The Saltmans assert
that “[i]n the nondisclosure context, defects are tangible . . . conditions like the leaks
in the swimming pool in Mitchell, the cracks in the foundation in Shiozawa v. Duke,
and the unstable soil under the foundation in Hermansen v. Tasulis.” Appellees’ Br.
at 39 (citations omitted). A tangible sewer pipe runs beneath the Property. We see no
reason why that pipe is less of a physical defect than the cracks in Mitchell’s
swimming pool or Hermansen’s unstable soil.
Still, the Saltmans insist that the Easement is more akin to “a height
limitation[] and other zoning regulations” than to “an imperfection or shortcoming in
the Property itself.” Id. According to the Saltmans, if we conclude that the sewer pipe
installed within the Easement is a defect, “every zoning regulation governing where
and how much building can occur (e.g., setback requirements and height limits) is a
defect.” Id. at 40. But, as just discussed, the physical component of the Easement—
the sewer pipe—distinguishes it from the purely legal restrictions the Saltmans cite.
10
Although Utah courts appear not to have considered the issue, many states
require sellers of real property to disclose intangible (sometimes dubbed
“psychological”) defects. See, e.g., Van Camp v. Bradford, 623 N.E.2d 731, 736
(Ohio Com. Pleas 1993) (holding that “[t]he stigma” arising from a recent, unsolved
rape that occurred in the home constituted an “intangible . . . defect” the seller was
required to disclose); Stambovsky v. Ackley, 169 A.D.2d 254, 257–59 (N.Y. App.
Div. 1991) (holding that caveat emptor didn’t excuse a seller’s failure to disclose that
the home at issue was allegedly haunted).
21
Besides, even if under our definition those zoning regulations could also be
considered “defects,” (a proposition we find doubtful) they would rarely, if ever,
trigger a seller’s disclosure obligations because, ordinarily, they would be readily
discoverable.
In sum, the ordinary meaning of “defect” encompasses the underground sewer
pipe as a material imperfection in the Property, that is, one that indisputably impaired
its quality, function, and utility. We thus proceed to consider the merits of
Marcantel’s fraudulent nondisclosure claim.
B. The District Court Erred in Concluding That Marcantel’s
Fraudulent Nondisclosure Claim Failed as a Matter of Law
On appeal, the parties don’t dispute the second or third elements of
Marcantel’s fraudulent-nondisclosure claim; the Saltmans acknowledge that they
possessed actual knowledge of the Easement, and the district court didn’t reach the
materiality question. Rather, Marcantel challenges the district court’s ruling that the
Saltmans owed Marcantel no duty to disclose the Easement and that he failed to
demonstrate the Saltmans’ fraudulent intent. The Saltmans contend that the district
court correctly concluded that Marcantel’s claim failed because (1) the Saltmans had
no duty to disclose the Easement and (2) Marcantel failed to adduce sufficient
evidence of the Saltmans’ allegedly fraudulent intent. We disagree.
1. Duty to Disclose
Under Utah law, “sellers of real property owe a duty to disclose material
known defects that cannot be discovered by a reasonable inspection by an ordinary
22
prudent buyer.” Hermansen, 48 F.3d at 242 (quoting Mitchell, 31 P.3d at 575).
Because the Saltmans were sellers of real property, Utah law imposed on them a duty
to disclose the Easement (1) if it was material, (2) if it was known to them (which is
undisputed), and (3) if it couldn’t be discovered by a reasonable inspection by an
ordinary prudent buyer.
Notwithstanding those clear criteria, the Saltmans argue that no duty to
disclose arises if (1) the seller doesn’t know that the buyer is unaware of the defect,
or (2) the buyer has constructive notice of the defect. Finding no basis in Utah law
for the exceptions the Saltmans would have us carve out, we conclude that the district
court erred in granting the Saltmans summary judgment on this element.
a. Sellers’ Disclosure Obligations Apply Even If
They Don’t Know a Buyer Is Unaware of
Material Defects
The Saltmans contend that the duty to disclose a material defect “arises,
initially, from knowledge that the other party to the transaction is unaware of the
defect.” Appellees’ Br. at 27. That is, the Saltmans argue that, unless Marcantel can
prove that they knew he didn’t know about the Easement, no liability attaches. But
the Saltmans derive this extra requirement from an erroneous reading of Mitchell.
Mitchell nowhere suggests that a buyer can’t prevail on a fraudulent-
nondisclosure claim without first proving that the seller knew that the buyer was
unaware of the relevant defect. As the third authority listed in a string citation, the
court quoted the following portion of the Restatement (Second) of Torts: “A knows
that B is not aware of the defect, that he could not discover it by an ordinary
23
inspection, and that he would not make the purchase if he knew it.” Mitchell, 31 P.3d
at 575 (brackets omitted). But as the court’s emphasis makes clear, the court quoted
the Restatement not for the proposition that a duty arises only if the seller knows the
buyer is not aware of the defect, but as support for its explanation of “what
constitutes reasonable care in the discovery of defects.” Id. Indeed, the nub of the
dispute in Mitchell was whether the buyer had performed an adequate inspection of
the property sufficient to preclude applying the doctrine of caveat emptor. Id. at 575–
75. In that case, the parties assumed for purposes of the appeal that the sellers had the
requisite knowledge—i.e., that they knew about the cracks in the pool—so the court
had no reason to announce the rule that the Saltmans impute to that decision.
Moreover, the Utah Supreme Court later explicated the knowledge element of
a claim for fraudulent nondisclosure, but it never suggested that, to prevail, the buyer
must prove that the seller knew the buyer was unaware of the alleged defect. In
Anderson v. Kriser, the parties disputed whether a seller’s constructive knowledge of
a material defect was sufficient to satisfy the second element of a nondisclosure
claim. 266 P.3d at 824. The court held that the seller must have actual knowledge of
the defect to satisfy the second element. Id. at 825. In detailing what a plaintiff must
prove that the seller knew, the court didn’t require the more detailed showing that the
Saltmans urge us to adopt. And we decline the Saltmans’ invitation to add a
requirement that the Utah Supreme Court (or any Utah court to our knowledge)
24
hasn’t imposed. 11 See Amparan, 882 F.3d at 948 (citation omitted) (“[W]e are
generally reticent to expand state law without clear guidance from [the state’s]
highest court.”).
Finally, the Saltmans quote this sentence from Elder v. Clawson: “Knowledge
that the other party to a contemplated transaction is acting under a mistaken belief as
to certain facts is a factor in determining that a duty of disclosure is owing.” 384 P.2d
802, 805 (Utah 1963) (quoting 23 Am. Jur. 857, Fraud and Deceit, IV Concealment,
Sec. 80). They ignore the next sentence:
There is much authority . . . that if one party to a contract or transaction
has superior knowledge, or knowledge which is not within the fair and
reasonable reach of the other party and which he could not discover by
the exercise of reasonable diligence, or means of knowledge which are
not open to both parties alike, he is under a legal obligation to speak, and
his silence constitutes fraud, especially when the other party relies upon
him to communicate to him the true state of facts to enable him to judge
the expediency of the bargain.
Id. (emphasis added) (quoting 23 Am. Jur. 857, Fraud and Deceit, IV
Concealment, Sec. 80). In other words, the Utah Supreme Court has recognized that a
seller’s silence concerning his “superior knowledge” can subject the seller to liability
11
Although Mitchell may seem inconsistent with Restatement (Second) of
Torts § 551 (1977), the Third Restatement endorses the decision. See Restatement
(Third) of Torts: Liab. For Econ. Harm § 13, cmt. d, illus. 8 (2020); id. rep.’s note d.
25
regardless of whether he knows the buyer is unaware of critical facts. Id. So too
here. 12
The dissent contends that Utah law requires Marcantel to prove that the
12
Saltmans knew he was unaware of the Easement. It asserts that Utah creates a duty of
disclosure “only when the seller knows of the buyer’s ignorance of a defect.” Dissent
at 1. But it acknowledges that Elder identifies an instance in which a seller could be
liable for nondisclosure despite being unaware that the buyer is operating under a
mistaken view about a material fact, that is, when the seller has “superior
knowledge” that he fails to disclose (like the Saltmans here). 384 P.2d at 805. We see
no basis under Utah law to require Marcantel to show that he relied on the Saltmans
“to communicate to him the true state of facts” and that the Saltmans had been
“aware that [the Saltmans] knowledge [was] superior.” Dissent at 3. Those additional
requirements exceed Elder.
Nor are we persuaded by the dissent’s reliance on Barber Bros. Ford, Inc. v.
Foianini, No. 20070700-CA, 2008 WL 5257123 (Utah Ct. App. Dec. 18, 2008)
(unpublished). That decision quotes Elder only in passing and, like the Saltmans,
fails to discuss the sentence in Elder explaining that “much authority” holds that
silence may constitute fraud when the seller withholds “superior knowledge” from a
buyer. Elder, 384 P.2d at 805.
In addition, Marcantel should prevail even under the dissent’s view of Utah
law. To defeat summary judgment, Marcantel needs to show a genuine dispute of
material fact about whether the Saltmans knew that he was unaware of the Easement.
He did so. A jury can consider whether the Saltmans could have realistically been
unaware that an experienced real estate purchaser like Marcantel would have paid
over $1.7 million for the Property had he known about the Easement and its resulting
limitations on development.
26
b. Marcantel’s Illusory Constructive Notice Doesn’t
Defeat His Fraudulent Nondisclosure Claim
The Saltmans further maintain that they had no duty to disclose the Easement
because Marcantel had constructive notice of it. We disagree. 13
As an initial matter, under the facts of this case, we’re skeptical that Marcantel
had constructive notice of the Easement. Utah’s recording statute provides that
“[e]ach document executed, acknowledged, and certified, in the manner prescribed by
[Title 57] . . . shall . . . impart notice to all persons of their contents.” Utah Code
§ 57-3-102(1). “In effect, Utah law presumes that because documents properly filed
with a county recorder are available for inspection by the general public, every
person has the ability to examine these documents and thus has notice of the contents
in these documents.” In re Hiseman, 330 B.R. 251, 256 (Bankr. D. Utah 2005). But
while Utah law is clear that “[c]onstructive notice is imparted when documents are
properly recorded[,]” Johannessen v. Canyon Rd. Towers Owners Ass’n, 57 P.3d
1119, 1123 (Utah Ct. App. 2002) (emphasis added) (quoting U.P.C., Inc. v. R.O.A.
Gen., Inc., 990 P.2d 945, 953 (Utah Ct. App. 1999)), it’s unclear what “properly”
recorded means. Without citing any caselaw, the district court ruled that Utah’s
13
If Marcantel had received actual notice of the Easement, that would likely
preclude recovery on his fraudulent-nondisclosure claim. See Loveland v. Orem City
Corp., 746 P.2d 763, 769 (Utah 1987) (“We do not interpret this [disclosure] duty to
extend to deficiencies in residential building lots that are easily discernible during an
ordinary and reasonable investigation by a purchaser and that are in fact known of by
the purchaser . . . . [P]urchasers are often willing to accept known deficiencies in
land in exchange for a lower purchase price.” (emphasis added)). But it’s undisputed
that Marcantel lacked actual knowledge of the Easement when he purchased the
Property.
27
recording statute “requires only a correct ‘legal description of the real property.’”
App. vol. 8 at 2235 (quoting Utah Code § 57-3-105(2)). But the district court failed
to consider in any depth whether an instrument that is incorrectly indexed is
“properly” recorded.
Here, though recorded, the Easement was indexed incorrectly. The abstracts
mistakenly recorded the Easement on the wrong section of a city block. This error
produced profound consequences. On four separate occasions, at least three different
title companies tasked with identifying encumbrances on the Property failed to locate
the Easement. Attaching copies of the Summit County abstracts, a representative of
Coalition Title—Marcantel’s title company—explained why:
[The abstracts] show[] that instead of the easement being posted to the
Block 55 Snyder’s Addition to Park City, where i[t] belongs, it was posted
to the Section . . . under the Block 55. This is how the easement was
missed.
Id. vol. 5 at 1431 (emphasis added).
If, as we have previously noted, “[t]he doctrine of constructive notice proceeds
from a theory that a party who neglects a duty to search a title record should be
imputed with notice of anything that would have been discovered upon a proper
search,” Amoco Prod. Co. v. United States, 619 F.2d 1383, 1388 n.3 (10th Cir. 1980),
imposing constructive notice on Marcantel makes little sense.
[T]he prime purpose of the recording acts is to give subsequent
purchasers information regarding the title of the property that they
propose to acquire. If a prior instrument is properly recorded, subsequent
purchasers have an obligation to find it on the record and are considered
to have constructive notice of it, even if they do not locate it. However, it
defies reason to assert that subsequent purchasers should have an
28
obligation, no less the ability, to find an unknown instrument lodged in
thousands of volumes of records, when it is not properly indexed in the
first place.
14 Powell on Real Property § 82.03 (2020) (emphasis added). This applies with
particular force here, when multiple professional title companies—not just an
ordinary buyer—failed to locate the Easement. See Amoco Prod. Co., 619 F.2d at
1388 (“The doctrine of constructive notice . . . is a harsh doctrine which should be
resorted to reluctantly and construed strictly.”). Indeed, many states decline to impute
constructive notice to subsequent purchasers when abstracting errors render futile a
search of public records. See 14 Powell on Real Property § 82.03 n.29 (collecting
cases); Dyer v. Martinez, 54 Cal. Rptr. 3d 907, 910 (Cal. Ct. App. 2007) (“[R]eal
property purchasers . . . cannot be charged with constructive notice of documents
they cannot locate . . . [T]he conclusive imputation of notice of recorded documents
depends upon proper indexing because a subsequent purchaser should be charged
only with notice of those documents which are locatable by a search of the proper
indexes.” (internal quotation marks and citation omitted)). 14 Although Utah’s courts
14
Based on their particular recording statutes, a majority of states continue to
impute constructive notice to subsequent purchasers even when a document is
improperly indexed (or not indexed at all). 14 Powell on Real Property § 82.03. But
Utah isn’t one of those states.
29
haven’t resolved this issue, 15 we have difficulty believing they would find that
Marcantel had constructive notice here when no reasonable search of Utah’s public
records would have revealed the Easement’s presence.
Regardless, we needn’t decide that question because we conclude that, even if
Marcantel had constructive notice, that wouldn’t defeat his fraudulent-nondisclosure
claim. Because the Saltmans direct us to no decisions of the Utah Supreme Court
15
Nearly a century ago, a sharply divided Utah Supreme Court considered a
related question. See Boyer, 287 P. at 191. In Boyer, the plaintiff—the trustee of a
bank—filed a mortgage with the county recorder in conformance with Utah’s then-
existing recording statute. Id. at 189. The county recorder entered the mortgage in the
“entry book.” Id. The mortgage was then “timely recorded, or copied, at length in the
Book E of Mortgages” and “indexed in the indices of grantors, grantees, and
mortgagors and mortgagees of the records.” Id. But the entry in the index didn’t
describe the property; instead, it read “See record for description.” Id. Further, the
county failed to record the mortgage in the abstract record. Id. at 190. The mortgaged
property was later conveyed to the defendant, who believed it had obtained the
property unencumbered (the defendant had commissioned a title search, which failed
to identify the mortgage). Id. at 189. The plaintiff sued, asserting that its claim to title
was superior because the defendant had constructive notice of the mortgage. Id. The
defendant argued that it lacked constructive notice because the county had failed to
record the mortgage in the abstract record. Id. at 190. Although the court suggested in
dicta that indexing errors “do[] not invalidate the notice afforded by a record
otherwise properly made,” it declined to “align [itself] with either the majority or
minority rule on that question.” Id. at 191. Instead, it concluded that “[i]rrespective
of whether the index is considered essential to complete recording or not, the rule is
that it will be sufficient if enough is disclosed by the index to put an ordinarily
prudent examiner upon inquiry.” Id. (citations omitted). Because the court concluded
that the index contained sufficient information, it ruled that the defendant had
constructive notice of the mortgage. Id. at 193.
But this case provides little help here. Our case turns not on whether the index
contained a sufficient description of the Easement (it did), but whether recording the
Easement in the wrong place precludes finding that Marcantel had constructive
notice. Boyer left that question open. See id. at 190 (noting that “failure to correctly
index” could affect whether a party had constructive notice but that the parties agreed
the mortgage was indexed in the correct place).
30
holding that a buyer’s constructive knowledge of a defect defeats a fraudulent-
nondisclosure claim, we must again predict how Utah’s highest court would rule. See
MTI, Inc., 913 F.3d at 1249.
Considering the circumstances of this case, our review of Utah’s caselaw
persuades us that the Utah Supreme Court wouldn’t apply Utah’s recording statute as
a bar to Marcantel’s claim. In Christenson v. Commonwealth Land Title Ins. Co., 666
P.2d 302 (Utah 1983), the Utah Supreme Court rejected an argument similar to the
one the Saltmans advance here. In that case, the defendant-debtor represented that it
had several properties that it would eventually sell to pay the debt it owed the
plaintiff-creditor. Id. at 304. So the defendant assigned its interest in the sale of those
properties to the plaintiff. Id. But the assignment erroneously included five properties
that had already been sold, meaning the defendant in fact had no interest in those
properties to assign. Id. When the plaintiff realized the error, it sued the defendant for
unjust enrichment and negligent misrepresentation. Id. The defendant asserted that
the plaintiff “had constructive notice that the trust deed notes had been paid off
because deeds of reconveyance were on file with the Salt Lake County Recorder’s
office and therefore were a matter of public record, imparting ‘notice to all persons of
the contents thereof’ under U.C.A., 1953, § 57–3–2.” Id. at 307.
The Utah Supreme Court was unmoved. After noting that the defendant
“cite[d] no legal authority for the proposition that [the plaintiff] had a duty to inspect
those records or was bound by constructive notice,” it stated that “[g]enerally a
failure to examine public records does not defeat an action for a false representation
31
because in most cases there is no duty to make such an examination.” Id. (citation
omitted). At least in fraud cases, the court explained that “a plaintiff who contracts to
buy property is under no duty to examine public records to ascertain the true state of
title claimed by the seller.” Id. (collecting cases). Having previously noted that
negligent misrepresentation is a subset of fraud, id. at 305, the court concluded that
the plaintiff’s constructive notice didn’t bar its claim, id. at 307. The Utah Court of
Appeals later recognized this general rule that constructive notice will “not
necessarily defeat a fraud claim.” Helfrich v. Adams, 299 P.3d 2, 6 (Utah Ct. App.
2013) (citing Christenson, 666 P.2d at 307).
Though the Saltmans attempt to distinguish these cases on grounds that, unlike
the defendant in Christenson, the Saltmans didn’t make any affirmative
misrepresentations, we remain unpersuaded that the Utah Supreme Court would rule
that Marcantel’s constructive notice would bar his fraudulent-nondisclosure claim.
First, in Christenson, the Utah Supreme Court rejected the defendant’s constructive-
notice argument even though the misrepresentation had been made negligently,
without fraudulent intent. 666 P.2d at 307. In contrast, here, if Marcantel prevails on
his claim, he will have proved that the Saltmans acted with an intent to deceive. If the
Utah Supreme Court declined to apply constructive notice to bar a plaintiff’s claim
when the defendant made an erroneous, but unintentional, misrepresentation, we
doubt that it would rule that constructive notice bars Marcantel’s claim when, as
here, the defendants allegedly engaged in intentionally fraudulent behavior.
32
Second, any constructive notice to Marcantel is hard to see. Unlike the
plaintiff in Christenson, who never attempted to check the public records, Marcantel
performed his due diligence. He engaged a title company to verify whether any
easements encumbered the property. But like several others before it, the title
company he hired didn’t discover the Easement. Under these circumstances, we are
hard-pressed to believe that the Utah Supreme Court would conclude that
Marcantel’s supposed constructive notice relieved the Saltmans of their common-law
duty to disclose. 16
2. Intent to Deceive
Even if the Saltmans owed Marcantel a duty to disclose the Easement, the
Saltmans insist that his claim still fails because Marcantel failed to adduce evidence
proving that they acted with fraudulent intent. To the extent that the Saltmans argue
that a plaintiff asserting a fraudulent-nondisclosure claim must establish fraudulent
intent as a fourth, separate element, we reject that reading of Utah law. The Utah
Court of Appeals recently clarified that the Utah Supreme Court’s decision in
Anderson v. Kriser didn’t graft a fourth element onto the traditional three elements
that must be proved to prevail on a fraudulent nondisclosure claim. Jensen v.
Cannon, 473 P.3d 637, 644 (Utah Ct. App. 2020) (“We have not added a fourth
16
At best, Utah’s law is ambiguous on this point. In such cases, we have
declined to impute constructive notice to defeat a party’s claim. See Amoco Prod.
Co., 619 F.2d at 1388–89 (refusing to impute constructive notice to Appellee because
“Utah law on constructive notice from stray deeds is inconclusive and ambiguous”).
33
element to the tort of fraudulent nondisclosure any more than the supreme court did
in Anderson.”).
It’s true that, for Marcantel to prevail on his fraudulent-nondisclosure claim,
he must present evidence from which the factfinder could at least infer the
defendant’s fraudulent intent. See Anderson, 266 P.3d at 825 (explaining that because
“fraudulent intent is often difficult to prove by direct evidence[,]” it’s “often inferred
based on the totality of the circumstances”). But this burden is incorporated into the
second and third elements of a nondisclosure claim: “For instance, fraudulent intent
may be inferred for purposes of a fraudulent nondisclosure claim when a plaintiff
demonstrates that a defendant had actual knowledge of a material fact and that the
defendant failed to disclose that fact.” Id.; see also Jensen, 473 P.3d at 651 (Harris,
J., concurring) (“I read Anderson as explaining that the three elements, as listed, have
an intent requirement already baked into them[.]”). And the reason is obvious.
Knowing nothing else except that a homeowner knew of a material defect—say, a
34
termite infestation—and failed to disclose that information to a prospective buyer, a
rational jury could well conclude that the seller intended to deceive the buyer. 17
Here, it’s undisputed that the Saltmans knew of the Easement and failed to
disclose it to Marcantel. Under a plain reading of Anderson, Marcantel thus adduced
all the evidence he needed to demonstrate fraudulent intent.
With little explanation and no citation to Utah authority, the district court
reached the opposite result:
Mr. Marcantel argues that intent to deceive may be inferred in this case
by showing that [the Trust] had actual knowledge of a material fact and
failed to disclose that fact. This may be true in certain cases, but in this
case, that the Trust knew of the easement and did not disclose it is, by
itself, not enough to draw the inference that the Trust intended to defraud
Mr. Marcantel.
App. vol. 8 at 2231 (internal quotation marks and citation omitted). This directly
contradicts the Utah Supreme Court’s reasoning in Anderson. Indeed, the district
court supported its conclusion in part by relying on a single decision from the Federal
Circuit Court of Appeals, reasoning that “inferring deceptive intent is appropriate
17
Nothing in Jensen compels a different result. See 473 P.3d at 642–45. That
court confronted an issue not now before us, namely whether the second element of a
fraudulent nondisclosure claim requires the plaintiff to prove that the defendant
possessed specific knowledge. See id. at 644 (noting that “the specific question the
district court (and now this court) have been called on to resolve” concerned
“whether satisfaction of the knowledge element requires that Cannon knew of the
Option Agreement and the Riverton Corners property in the abstract or that he knew
that the properties were assets as defined by Jensen’s discovery requests.”). Because
it’s undisputed that the Saltmans knew about the Easement, Jensen has little
application here. At any rate, the divided panel agreed that “fraudulent intent for
purposes of a fraudulent nondisclosure claim may be inferred when a plaintiff shows
that a defendant had actual knowledge of a material fact and failed to disclose that
fact.” Id.
35
only where it is the ‘single most reasonable inference that may be drawn from any
nondisclosure.’” Id. (quoting Am. Calcar, Inc. v. Am. Honda Motor Co., 651 F.3d
1318, 1334 (Fed. Cir. 2011)). But Utah courts have never imposed such constraints
on the factfinder tasked with assessing the defendant’s alleged fraudulent intent. The
district court thus erred by imposing such a requirement.
Finally, the district court further erred when it weighed the evidence and
reached a conclusion based on its assessment of that evidence. It stated: “The court is
not persuaded that the Trust deliberately decided to withhold information about the
easement for the specific purpose of deceiving Mr. Marcantel . . . . Rather, the most
reasonable deduction from all of the undisputed evidence . . . is that the [Saltmans]
had no intent to defraud Mr. Marcantel.” Id. at 2232. Although the Saltmans’
evidence apparently persuaded the district court that they lacked fraudulent intent,
Marcantel presented sufficient evidence from which a reasonable jury could reach the
opposite conclusion. This issue presents a genuine dispute of material fact that should
have been reserved for a jury. We thus reverse the district court’s grant of summary
judgment on this basis.
III. Breach of Contract
To prevail on his breach-of-contract claim, Marcantel must show: “(1) a
contract, (2) performance by the party seeking recovery, (3) breach of the contract by
the other party, and (4) damages.” Richards v. Cook, 314 P.3d 1040, 1043 (Utah Ct.
App. 2013) (quoting Bair v. Axiom Design, LLC, 20 P.3d 388, 392 (Utah 2001),
abrogated on other grounds by Gillett v. Price, 125 P.3d 861 (Utah 2006)). On
36
appeal, the parties dispute only whether the Trust breached the REPC. Marcantel
asserts that the Trust breached three provisions of the REPC: (1) Section 10.2, (2)
section 7(h), and (3) Section 6(D) of the Disclosure Form. We address each provision
in turn. 18
A. REPC Section 10.2
REPC Section 10.2 states, “Seller acknowledges . . . that in reference to the
physical condition of the Property, 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[.]” App. vol. 2 at 407. Citing virtually no legal authority, the district court
rejected Marcantel’s Section 10.2 claim on essentially the same grounds it denied
18
The Saltmans assert that Marcantel didn’t appeal the district court’s
disposition of his Section 10.2 claim, arguing that “Marcantel mentions section 10.2
only in the context of his argument that the seller disclosure form created contract
duties.” Appellees’ Br. at 14. That’s incorrect. Marcantel also advances that claim on
page twelve of his opening brief when he discusses the Utah common-law duty to
disclose material defects: “Paragraph 10.2 of the REPC incorporated a very similar
(but slightly different) standard, requiring the Trust to disclose, in writing, ‘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.’”
Appellant’s Principal Br. at 12. He continues, “[t]he District Court erred when it
failed to apply the correct standard under both Utah law and the REPC in determining
whether the Sewer Easement was discoverable by the reasonable inspection of the
ordinary prudent buyer.” Id. Marcantel says the court “ruled that constructive record
notice eradicated both common law and contractual duties to disclose the known
material defect” and asserts that this “is an incorrect application of Utah law.” Id. at
12–13. And, though Marcantel doesn’t specifically name REPC Section 10.2 again
later in his argument, his discussion of contractual obligations on pages twenty-
seven, twenty-nine, and thirty clearly references that section. Accordingly, Marcantel
hasn’t waived his argument concerning REPC Section 10.2.
37
him relief on his fraudulent-nondisclosure claim. The court concluded that the
“obligation to disclose was never triggered because the Trust had no reason to
believe the easement was undiscoverable[,]” and “the Trust had no obligation to
disclose the [Easement] because Mr. Marcantel already had notice of the easement as
a matter of law.” Id. vol. 8 at 2261–62. We disagree.
First, Section 10.2 nowhere predicates the seller’s disclosure obligations on
whether it had a “reason to believe” a defect could not be discovered. 19 Rather, the
contract imposes the disclosure obligation based on an objective assessment of
whether the defect would be discovered “by a reasonable inspection by an ordinary
prudent Buyer.” Id. vol. 2 at 407. The district court’s order didn’t consider that issue.
Accordingly, the Trust wasn’t entitled to summary judgment based on any alleged
subjective belief about whether the Easement was discoverable.
Second, the Trust wasn’t entitled to summary judgment based on Marcantel’s
alleged constructive notice of the Easement. Although the district court cited
authority for the proposition that Utah’s recording statute afforded Marcantel
constructive notice, it cited none holding that constructive notice suffices to defeat a
contract claim like the one at issue here. Absent such a legal basis, the district court
erred in granting summary judgment on this alternative basis.
19
The district court’s Memorandum Decision simply states without
explanation or authority that a “reason to believe” the buyer wouldn’t discover the
defect is “a condition precedent to [the seller’s] disclosure obligation.” App. vol. 8 at
2261.
38
Moreover, a genuine dispute of material fact exists concerning whether the
Easement was discoverable by a reasonable inspection by an ordinary prudent buyer.
The Saltmans are free to argue—as a factual matter—that the Easement was
discoverable even though the county recorder indexed it incorrectly. But Marcantel
can challenge that assessment with his evidence that four professional title companies
missed the Easement notwithstanding its accurate legal description. In short, a jury
must ultimately decide this issue.
B. REPC Section 7(h)
REPC Section 7 required the Trust to provide Marcantel with several
enumerated documents, including, among other things, the Seller Disclosures Form, a
commitment for title insurance, and a copy of any restrictive covenants affecting the
Property. Section 7(h) served as a catchall “other” provision, allowing the buyer to
specify any additional documents the buyer desired. Marcantel added, “Survey if one
has been done.” Id. at 406. Marcantel argues that the Trust breached this provision by
failing to provide him with the Survey. The Trust responds that, in 2015, it had no
survey to disclose and that it was unable to locate one despite its best efforts.
The parties offer competing interpretations of what the contract means by the
Trust’s obligation to provide a survey “if one has been done.” Marcantel maintains
that the contract should be read as requiring the Trust to provide a survey “if one
exists.” Appellant’s Principal Br. at 39. Because it’s undisputed that Old Town
commissioned the Survey that was eventually used by Elliott Workgroup, Marcantel
asserts that Section 7(h) obligated the Trust to produce the Survey. The Trust,
39
however, argues that the contract should be read as requiring it to provide a survey
“if one has been done by or for the Trust.” App. vol. 7 at 1947. It never
commissioned a survey, so it contends it couldn’t have breached Section 7(h). The
Trust has the better argument here.
Applying Utah principles of contract interpretation, “we first look at the plain
language [of the contract] to determine the parties’ meaning and intent.” Brady v.
Park, 445 P.3d 395, 407 (Utah 2019). “If the language within the four corners of the
contract is unambiguous, the parties’ intentions are determined from the plain
meaning of the contractual language, and the contract may be interpreted as a matter
of law.” Cent. Fla. Invs., Inc. v. Parkwest Assocs., 40 P.3d 599, 605 (Utah 2002)
(citation omitted). “A contract is facially ambiguous if its terms are capable of more
than one reasonable interpretation because of uncertain meanings of terms, missing
terms, or other facial deficiencies.” Mind & Motion Utah Invs., LLC v. Celtic Bank
Corp., 367 P.3d 994, 1001 (Utah 2016) (internal quotation marks and citation
omitted). That both parties propose competing interpretations of a contract doesn’t
necessarily mean the contract is ambiguous. See id. Rather, “a reasonable
interpretation is an interpretation that cannot be ruled out, after considering the
natural meaning of the words in the contract provision in context of the contract as a
whole, as one the parties could have reasonably intended.” Brady, 445 P.3d at 408
(footnote omitted).
Considering the natural meaning of the words “Survey if one has been done”
in the context of the contract as a whole, we conclude that Marcantel’s interpretation
40
isn’t reasonable. Reading the relevant language as requiring the Trust to provide a
survey “if one exists” would have imposed an extreme burden on the Trust. The Trust
would have been forced to identify and contact every prior owner of the Property to
determine whether any survey had ever been prepared. And it would have had to do it
under significant time constraints: The REPC required the Trust to provide the
required documents in Section 7 within three days from acceptance of the contract.
App. vol. 2 at 405 (providing that Seller must provide to Buyer the documents “[n]o
later than the Seller Disclosure Deadline referenced in Section 24(a)); id. at 409
(providing that the Seller Disclosure Deadline is “3 days from acceptance”).
Moreover, Marcantel’s interpretation would have required the Trust to produce a
survey regardless of how recently it was commissioned. But we don’t believe the
parties intended for this requirement to force the Trust to produce any survey
previously commissioned no matter how outdated.
Instead, we read Section 7(h) together with Section 6.D. of the Seller
Disclosures Form—the only other provision discussing surveys—to determine its
meaning. That provision asks whether the seller is “aware of any survey(s)” prepared
for the Property. Id. vol. 4 at 877. If “yes,” the Form requests that the seller “provide
a copy of any such survey(s) in your possession.” Id. (emphasis added). Read in
conjunction with Section 6.D., Section 7(h) requires the seller to provide a survey “if
one has been done and is in your possession.” In short, the relevant question isn’t
whether the Trust had ever commissioned a survey—or whether any prior owner
41
had—but whether the Trust had one in its possession that it could provide to the
buyer.
Under this reading, the Trust didn’t breach its Section 7(h) obligation. While it
appears the Trust likely possessed the Survey at one time, 20 the undisputed evidence
shows that it didn’t have the Survey when the sale of the property closed. When the
Trust’s realtor informed Mr. Saltman that Marcantel was asking for a survey if one
had been done, Mr. Saltman responded the same day, copying Marcantel’s two
realtors:
No survey in my files.
Please check with Steve Bruemmer—Elliott Workgroup Architects—to
see if he or they have one. I don’t think so but worth inquiring as we have
worked on various preliminary development ideas from time-to-time.
Id. vol. 7 at 1961. The Trust’s realtor contacted Bruemmer and learned that
Bruemmer had already “provided everything [Elliott Workgroup Architects] had via
the Dropbox link” he had sent a week earlier. Id. vol. 8 at 2258 n.90. The materials in
the Dropbox link didn’t include a survey. Because the Trust didn’t possess a survey,
it didn’t breach Section 7(h) of the REPC. The district court properly granted
summary judgment on this claim. 21
20
See infra Section III.C.
Because we conclude that Marcantel’s Section 7(h) claim fails on this basis,
21
we decline to consider the Trust’s alternative argument that the merger doctrine
forecloses Marcantel’s claim.
42
C. Seller Disclosures Form Section 6(D)
The Seller Disclosures Form, incorporated as part of the REPC through
paragraphs 7(a) and 10.2 of the REPC, required the Trust to answer the question,
“Are you aware of any survey(s) that have been prepared for the Property or any
adjoining property or properties? If ‘Yes,’ please provide a copy of any such
survey(s) in your possession.” Id. vol. 4 at 877. Acting for the Trust, Mr. Saltman
marked “no.” Id. Because Marcantel argues that the Trust was aware of the Survey
prepared for the Property, he maintains that its answer breached the contract.
In response, the Trust offers two defenses. First, the Trust contends that the
Seller Disclosures Form doesn’t create contractual duties. Second, it argues that, even
if the Form creates contractual duties, it answered accurately that it wasn’t aware of
any surveys. We reject the Trust’s first argument as a matter of law. As for the
Trust’s second argument, we conclude that a genuine dispute of material fact exists
concerning whether it was aware of the Survey.
The Trust’s assertion that the Seller Disclosures Form creates no contractual
duties is puzzling. The REPC incorporates the Form into the contract, and the seller
can’t fully perform under the REPC without completing the Form. The top of the
Form clearly states, “This is a legally binding document.” Id. at 875. Additionally,
both Mr. Saltman and Marcantel signed and dated the Form and initialed each page.
And Mr. Saltman was required to sign and date a verification statement that the
representations in the form were accurate. Each of these indicators supports our
conclusion that the Form imposed legally binding contractual duties on both parties.
43
And while it appears that the Utah Supreme Court hasn’t squarely addressed
this issue, its caselaw suggests that seller disclosure forms do impose contractual
obligations. In Reighard v. Yates, homebuyers sued the seller of their home for
breach of contract related to the seller’s representations that he wasn’t aware of any
mold or other moisture issues in the house. 285 P.3d 1168, 1173 (Utah 2012). The
claim was based on a disclosure form like the one Mr. Saltman signed here. Id. The
disclosure form required the seller “to disclose his actual knowledge regarding the
condition of the property[,]” including “sections for mold, other moisture conditions,
and exterior and exterior features, in which [seller] represented that he was not aware
of” any concerns. Id. (internal quotation marks omitted). Although it concluded that
the economic-loss rule barred the plaintiff’s claim, the court acknowledged that the
disclosure form otherwise imposed contractual duties on the seller. See id. at 1177–
78 (internal quotation marks omitted) (noting that under the disclosure form the seller
“was required to disclose his actual knowledge regarding . . . mold and other
moisture conditions” and that “[a]ny tort duties that [seller] owed [buyer] . . . overlap
with [seller’s] contract duties”). Like the court in Reighard, we thus conclude that the
44
Seller Disclosures Form imposed contractual duties on the Trust related to its
answers. 22
We also conclude that the Trust wasn’t entitled to summary judgment on this
claim because Marcantel presented sufficient evidence to create a genuine dispute of
material fact concerning whether the Trust was aware of the Survey. Marcantel
submitted evidence that the Trust had made several applications to the Park City
Planning Department outlining its proposed three-lot subdivision of the Property. Mr.
Saltman signed the applications, each of which included the Survey. Additionally,
each of the applications contained the following language in an “Acknowledgement
of Responsibility”:
22
Though not clear in the Answer Brief, at oral argument the Trust’s counsel
suggested that, even if the Seller Disclosures Forms created contractual duties, the
duty extended only to answering the questions and returning the form. That is,
counsel argued that the REPC didn’t obligate the Trust to answer the questions
honestly. That argument is a non-starter. We refuse to endorse a view that would
render the Form meaningless—what purpose would the Form serve if the seller is
free to answer dishonestly? In any event, the Seller Disclosures Form itself imposes a
duty to respond accurately. The Form requires the seller to sign the following
verification:
Seller verifies that Seller has completed this disclosure form and that the
information contained herein is accurate and complete to the best of
Seller’s actual knowledge as of the date signed by Seller below. SELLER
UNDERSTANDS AND AGREES THAT SELLER WILL UPDATE
THIS DISCLOSURE FORM IF ANY INFORMATION CONTAINED
HEREIN BECOMES INACCURATE OR INCORRECT IN ANY WAY.
App. vol. 4 at 878 (emphasis added).
45
This is to certify that I am making an application for the described action
by the City and that I am responsible for complying with all City
requirements with regard to this request . . . . I have read and understood
the instructions supplied by Park City for processing this application. The
documents and/or information I have submitted are true and correct to the
best of my knowledge.
App. vol. 4 at 1056, 1081, 1108, 1134.
Notwithstanding Mr. Saltman’s acknowledgment here that the documents he
submitted—including the Survey—were true and correct, the Trust contended that he
had never seen or heard about the Survey before being deposed in this case.
Moreover, the Saltmans argue that, despite signing the applications, Mr. Saltman
didn’t review all the documents submitted together with them.
Here, the procedural posture of the case makes all the difference. We’re
required to draw all reasonable inferences in the non-movant’s (Marcantel’s) favor.
Mr. Saltman signed the pre-development applications. He certified that the Trust had
complied with the city’s rules and that the contents of the applications were accurate.
From this, we can—and must—draw the reasonable inference that as part of Mr.
Saltman’s due diligence, he reviewed the Survey before signing off on the
applications. Further, based on this evidence, a reasonable jury could find that the
Trust was aware of the Survey. The district court thus erred in granting the Trust
summary judgment on this claim.
IV. The District Court’s Adoption of the Saltmans’ Proposed Order
Marcantel contends that the district court erred by entirely adopting in its
Memorandum Decision the Saltmans’ legal analysis from their Proposed Order,
46
without modifying it to reflect the court’s earlier oral ruling. In response, the
Saltmans maintain that “[t]he practice of soliciting and using input from counsel for
the prevailing party is allowed by this court’s precedent.” Appellees’ Br. at 55. We
conclude that the district court didn’t reversibly err by adopting the Saltmans’
Proposed Order.
A. Standard of Review
Because we haven’t done so previously, we must decide which standard of
review applies when a party challenges a district court’s adopting almost verbatim a
proposed order granting summary judgment over an opposing party’s objection that
the proposed order conflicts with the court’s earlier oral ruling. Marcantel asserts that
our abuse of discretion standard applies, and we agree.
In Burke v. Regalado, we had to decide what standard of review applied to “a
district court’s acceptance of a party’s proposed pretrial order over an opposing
party’s objection.” 935 F.3d 960, 1005 (10th Cir. 2019). There, we decided we would
review the district court’s decision for an abuse of discretion. Id. We settled on that
standard in part “[b]ecause the district court is in the best position to interpret its
pretrial order.” Id. (quoting Tyler v. City of Manhattan, 118 F.3d 1400, 1403 (10th
Cir. 1997)). Though we recognize the differences between a proposed pretrial order
and the proposed summary judgment order at issue here, we similarly conclude that
the district court is best positioned to assess whether a party’s proposed order
accurately reflects the court’s disposition. So we review the district court’s adoption
of the Saltmans’ Proposed Order for an abuse of discretion and will reverse only if
47
we have “a definite and firm conviction that the lower court has made a clear error of
judgment or exceeded the bounds of permissible choice in the circumstances.” United
States v. Hargrove, 911 F.3d 1306, 1316 (10th Cir. 2019) (citation omitted).
B. The District Court Didn’t Abuse Its Discretion in Adopting the
Saltmans’ Proposed Order
Marcantel challenges both the procedure by which the Memorandum Decision
came about and its substance. Marcantel argues that the district court solicited
proposed orders from the parties before hearing oral argument and then adopted the
Saltmans’ Proposed Order without making any substantive changes to reflect the
court’s preliminary oral ruling. For instance, Marcantel points to the district court’s
colloquy with the Trust’s counsel about its having answered “no” to the question,
“Are you aware of any survey(s) that have been prepared for the Property or any
adjoining property or properties?” App. vol. 4 at 877. At the hearing, the district
court expressed serious concerns about the accuracy of that answer: “It strikes me as
an odd answer in light of the trust and Mr. Saltman.” Id. vol. 9 at 2288–89. The court
queried whether it could fairly draw the inference that the Trust’s answer to that
question was “just flat-out not true.” Id. But the Memorandum Decision finds no fault
in the Trust’s response to that question, concluding that the Trust “satisfied its
contract-based obligations” “[b]y answering the question and returning the form.” Id.vol. 8 at 2256. Marcantel argues that this and other examples prove that the district
court “rubber-stamped” the Saltmans’ proposed analysis and that the Memorandum
48
Decision fails to “accurately reflect the District Court’s analysis and rulings from the
bench.” Appellant’s Principal Br. at 52.
Although we hesitate to approve the district court’s carte blanche adoption of
thirty-six pages of the Saltmans’ Proposed Order, we conclude that the district court
acted within its discretion. We have generally permitted district courts to adopt a
prevailing party’s proposed findings of fact and conclusions of law. See Flying J Inc.
v. Comdata Network, Inc., 405 F.3d 821, 830 (10th Cir. 2005) (“Though not made by
the district judge himself, the findings are formally his; they are not to be rejected
out-of-hand, and they will stand if supported by evidence.” (internal quotation marks
and citations omitted)); Blankenship v. Herzfeld, 721 F.2d 306, 310 (10th Cir. 1983)
(upholding the district court’s ruling even though it “drew heavily on defendants’
articulation of the facts and the law, and its findings and conclusions are brief”).
And, contrary to Marcantel’s characterization, the district court didn’t “rubber-
stamp” the Proposed Order. In response to Marcantel’s objection, the district court
modified the Memorandum Decision’s recitation of the undisputed facts. Moreover,
consistent with its preliminary oral ruling, the district court required the Saltmans to
modify the Saltmans’ original proposed order to reflect the court’s conclusion that
the Easement constituted a defect. True, the final Memorandum Decision went into
much greater depth than the district court’s preliminary oral ruling. But that isn’t out
of the ordinary. District courts often provide a summarized version of their
preliminary thoughts at a hearing before memorializing them in a written decision.
That the final written decision covers additional issues not explicitly addressed at the
49
hearing doesn’t mean the decision contradicts the earlier preliminary findings. 23 In
short, we lack a firm conviction that the district court exceeded the bounds of
permissible choice in these circumstances.
Even so, while we permit district courts to adopt proposed orders, our
precedents warn that they probably shouldn’t. Parties naturally draft proposed orders
from an adversarial stance; that stance all but guarantees that the resulting orders
won’t take the balanced, thoughtful approach that nuanced legal issues require. See
Flying J Inc., 405 F.3d at 830 (“The court’s wholesale adoption of one party’s
proposed findings of fact and conclusions of law provides little aid on appellate
review, . . . particularly in the likely event that the adopted submission takes an
adversarial stance.” (citation omitted)); Blankenship, 721 F.2d at 310 (“[E]ven
though we may not summarily reject findings adopted verbatim, we must view the
challenged findings and the record as a whole with a more critical eye to insure that
the trial court has adequately performed its judicial function.” (internal quotation
marks and citation omitted)). Accordingly, when district courts elect to adopt a
23
Besides, even if we accepted Marcantel’s argument that some of the court’s
conclusions in its written decision contradict its oral ruling, at least in civil cases, a
court’s written decision generally controls over any apparent inconsistency with an
earlier oral ruling. See Healix Infusion Therapy, Inc. v. Heartland Home Infusions,
Inc., 733 F.3d 700, 705 (7th Cir. 2013) (explaining that “[i]n civil suits, the opinion
and judgment are conclusive” and that district courts aren’t “bound by [their]
statements at oral argument” but by their written opinions); Hong v. United States,
363 F.2d 116, 120 (9th Cir. 1966) (finding that the court “need not, and should not”
address the appellant’s qualms with the district court’s oral ruling “[s]ince the
District Court made and entered formal and detailed findings of fact and conclusions
of law”).
50
party’s proposed order, they should do so cautiously, keeping in mind the inherent
risks just noted.
CONCLUSION
For the foregoing reasons, we affirm in part, reverse in part, and remand for
further consideration consistent with this opinion.
51
19-4055, Marcantel v. Michael and Sonja Saltman Family Trust, et al.
EID, J., concurring in part and dissenting in part.
According to the Saltmans, they did not know that Marcantel was unaware of the
sewer easement. Aplt. App’x Vol. 1 at 259. Yet the majority concludes that they owed
Marcantel a duty of disclosure regardless. Because Utah creates such a duty only when
the seller knows of the buyer’s ignorance of a defect, I respectfully dissent from section II
of the majority’s discussion. 1
I reach this conclusion on the basis of three decisions of the Utah Supreme Court.
First, in Elder v. Clawson, 384 P.2d 802 (Utah 1963), the Utah Supreme Court instructed
that “[k]nowledge that the other party to a contemplated transaction is acting under a
mistaken belief as to certain facts is a factor in determining that a duty of disclosure is
owing.” Id. at 805 (internal quotation mark omitted) (quoting 23 Am. Jur. Fraud and
Deceit § 80 (1939)). Second, in First Security Bank of Utah N.A. v. Banberry
Development Corp., 786 P.2d 1326 (Utah 1990), the court relied on § 551 of the
Restatement (Second) of Torts 2 to illustrate “classifications of transactions or relations
1
Specifically, I disagree with the duty analysis contained in section II.B.1.a. of the
majority’s discussion. I would assume, without deciding, that the sewer easement
constituted a defect and therefore would not reach the issue of defect addressed in section
II.A. Also, because I conclude that Utah law requires the seller to know of the buyer’s
ignorance, I would not reach the Saltmans’ alternative grounds for affirmance, addressed
by the majority in sections II.B.1.b. (constructive notice) and II.B.2. (intent to deceive).
Thus, I do not join section II of the majority’s discussion, but join the remainder of the
majority opinion.
2
“[A] majority of jurisdictions have either accepted § 551 [of the Second
Restatement of Torts] or cited it with approval.” Lee v. LPP Mortg. Ltd., 74 P.3d 152,
163 (Wyo. 2003).
1
which may give rise to a duty of disclosure,” id. at 1330, such as when “[o]ne party to a
business transaction . . . knows that the other is about to enter into [the transaction] under
a mistake as to [facts basic to it], and that the other . . . would reasonably expect a
disclosure of those facts,” id. at 1330–31 (emphasis added) (quoting Restatement
(Second) of Torts § 551(2)(e) (Am. L. Inst. 1977)). And third, in Mitchell v. Christensen,
31 P.3d 572 (Utah 2001), the court again cited § 551 of the Second Restatement for the
proposition that a “duty to disclose defects exists where ‘A knows that B is not aware of
[the defect], that he could not discover it by an ordinary inspection, and that he would not
make the purchase if he knew it.’” Id. at 575 (alteration in original) (emphasis altered)
(quoting Restatement (Second) of Torts § 551 cmt. l, illus. 9). These cases make clear
that under Utah law, a seller who does not realize the buyer lacks knowledge of a defect
owes no duty of disclosure.
The majority reads Elder and Mitchell differently. 3 With respect to Elder, the
majority contends that the key sentence is not the one I quote, but the one that follows it,
which reads:
There is much authority . . . that if one party to a contract or transaction has
superior knowledge, or knowledge which is not within the fair and
reasonable reach of the other party and which he could not discover by the
exercise of reasonable diligence, or means of knowledge which are not open
3
The majority does not address Banberry, despite the fact that the Utah Court of
Appeals has cited Banberry to justify its own reliance on § 551 of the Second
Restatement. See Maack v. Res. Design & Constr., Inc., 875 P.2d 570, 578–79 (Utah Ct.
App. 1994) (citing Banberry, 786 P.2d at 1330–31), abrogated on other grounds by
Davencourt at Pilgrims Landing Homeowners Ass’n v. Davencourt at Pilgrims Landing,
LC, 221 P.3d 234 (Utah 2009); see also id. at 575–82 (relying on the Second Restatement
of Torts to also resolve issues concerning fraudulent concealment, strict liability, and
application of the parol evidence rule in the fraud context).
2
to both parties alike, he is under a legal obligation to speak, and his silence
constitutes fraud, especially when the other party relies upon him to
communicate to him the true state of facts to enable him to judge the
expediency of the bargain.
Maj. Op. at 25 (omission in original) (quoting Elder, 384 P.2d at 805). According to the
majority, this sentence confirms its view: the only inquiry we make regarding the
knowledge of the seller is whether the seller knows of the defect itself. See id. at 25–26.
Elder is not so cabined. The majority is correct that we must not “ignore” the
sentence it spotlights. Id. at 25. Yet the majority chooses to disregard the sentence that
conflicts with its holding. Rather than pick one sentence or the other, we must give effect
to both. Under Elder, a seller can be liable when he possesses “superior knowledge” that
he does not disclose. 384 P.2d at 805 (quoting 23 Am. Jur. Fraud and Deceit § 80). But
a duty of disclosure does not automatically apply in that circumstance. For instance, as is
made clear by the very sentence the majority quotes, a court needs to further consider
whether the buyer “relies upon [the seller] to communicate to him the true state of facts to
enable him to judge the expediency of the bargain.” Maj. Op. at 25 (quoting Elder, 384
P.2d at 805). And similarly, a court must determine whether the seller is aware that its
knowledge is superior, because “[k]nowledge that the other party to a contemplated
transaction is acting under a mistaken belief as to certain facts is a factor in determining
that a duty of disclosure is owing.” Elder, 384 P.2d at 805 (internal quotation mark
omitted) (quoting 23 Am. Jur. Fraud and Deceit § 80). 4
4
Relying on this paragraph, the majority contends that I “acknowledge[] that
Elder identifies an instance in which a seller could be liable for nondisclosure despite
3
As for Mitchell, the majority dismisses that case’s reliance on the Second
Restatement of Torts as irrelevant to the issue at hand. It points out that there the Utah
Supreme Court cited the Second Restatement “not for the proposition that a duty arises
only if the seller knows the buyer is not aware of the defect, but as support for its
explanation of ‘what constitutes reasonable care in the discovery of defects.’” Maj. Op.
at 24 (quoting Mitchell, 31 P.3d at 575). Thus, the majority contends that Mitchell
provides no guidance as to how to answer the question before us. See id.
The majority makes a valid point, but the conclusion it draws goes too far. True,
Mitchell did not concern the issue that the parties raise here. But the Utah Supreme Court
nevertheless quoted a sentence from the Second Restatement that addresses this question.
I would not be so quick to presume that that sentence is of no value as we predict how the
Utah Supreme Court would rule. And critically, Mitchell does not stand alone. Mitchell,
Elder, and Banberry together lead to the conclusion that we must consider a seller’s
awareness of what the buyer knows before a duty to disclose a defect is imposed. 5
being unaware that the buyer is operating under a mistaken view about a material fact,
that is, when the seller has ‘superior knowledge’ that he fails to disclose.” Maj. Op. at 26
n.13 (quoting Elder, 384 P.2d at 805). As noted above, however, I understand Elder not
to impose a disclosure duty automatically when a seller fails to disclose superior
knowledge, but, rather, to call for courts to also consider other factors, including,
critically, whether the seller is aware of the buyer’s ignorance.
5
The majority says that its reading of Mitchell “may seem inconsistent with” the
Second Restatement of Torts, but that inconsistency is of no moment because the more
recent Restatement (Third) of Torts has “endorse[d]” Mitchell. Maj Op. at 26 n.12. The
majority is correct that the Third Restatement uses Mitchell as the basis for an
illustration. See Restatement (Third) of Torts: Liability for Economic Harm § 13 cmt. d,
illus. 8 & reporter’s note d (2020). Yet the Third Restatement, unlike the majority,
interprets Mitchell to require a buyer to demonstrate more than just the seller’s
4
Taking a different tack, the majority turns to Anderson v. Kriser, 266 P.3d 819(Utah 2011), which the majority construes as setting the limits as to what a buyer must
show about a seller’s knowledge to hold that seller liable for fraudulent nondisclosure
under Utah law. In Anderson, the Utah Supreme Court addressed fraudulent
nondisclosure’s second element—whether “the defendant knew of the information he
failed to disclose,” 266 P.3d at 823 (emphasis omitted)—and held that to satisfy this
element, a seller must have actual, not just constructive, knowledge of the defect, id. at
824–25. The majority maintains that “[i]n detailing what a plaintiff must prove that the
seller knew, the [Utah Supreme Court in Anderson] didn’t require the more detailed
showing that the Saltmans urge us to adopt.” Maj. Op. at 24. Thus, we should “decline
the . . . invitation to add a requirement that the Utah Supreme Court . . . hasn’t imposed.”
Id. at 24–25.
The majority’s reliance on Anderson is misplaced. As noted, Anderson concerned
the second element of a nondisclosure claim—whether the seller knew the defect existed.
Anderson, 266 P.3d at 823–24. The first element—whether the seller owed a duty of
disclosure—was not contested. Id. at 822. The Utah Supreme Court, therefore, had no
knowledge of the defect itself, for the relevant illustration provides that a seller owes a
duty to disclose when he “knew of the defects before the sale, knew they would be of
great importance to Buyer, and knew they were not discoverable by the use of reasonable
care.” Id. § 13 cmt. d, illus. 8 (emphasis added). More generally, the Third Restatement
states that a duty of disclosure exists only when a seller “knows that the other party to
[the] transaction is mistaken about a basic assumption behind it.” Id. § 13(c) (emphasis
added). Thus, both the Second and Third Restatements repudiate the conclusion the
majority reaches.
5
cause in Anderson to opine on the extent to which a seller’s knowledge bears on the
existence of a duty to disclose. 6 And more importantly, notwithstanding the majority’s
claim to the contrary, the Utah Supreme Court has indicated that we should consider a
seller’s knowledge as part of the duty-to-disclose inquiry—in Elder, Banberry, and
Mitchell.
Even if the decisions of the Utah Supreme Court left doubt as to how to answer the
question presented, I would follow the lead of the Utah Court of Appeals, which held in
Barber Bros. Ford, Inc. v. Foianini, 2008 UT App 463, No. 20070700-CA, 2008 WL
5257123 (Utah Ct. App. Dec. 18, 2008) (McHugh, J.) (unpublished), that a party to a
transaction who is unaware of the other party’s ignorance owes no duty of disclosure.
See Stickley v. State Farm Mut. Auto. Ins. Co., 505 F.3d 1070, 1077 (10th Cir. 2007)
(“The decision of an intermediate appellate state court ‘is a datum for ascertaining state
law which is not to be disregarded by a federal court unless it is convinced by other
persuasive data that the highest court of the state would decide otherwise.’” (quoting
West v. Am. Tel. & Tel. Co., 311 U.S. 223, 237 (1940)). 7 In Barber Bros., a father
cosigned his son’s application for an auto loan. 2008 WL 5257123, at *1. But the son, as
6
Even though the parties in Anderson did not dispute the duty-of-disclosure
element, the Utah Court of Appeals stated in dicta that a builder-contractor categorically
owes no duty of disclosure when it sells a lot to a buyer but another developer
subsequently builds a home on the lot. Anderson, 266 P.3d at 823. This statement was
error, so the Utah Supreme Court corrected the court of appeals. Id. at 827. But that
issue has no relation to whether and how a seller’s knowledge affects a seller’s duty to
disclose.
7
Although Barber Bros. is unpublished, under the Utah Rules of Appellate
Procedure “unpublished decisions of the Court of Appeals issued on or after October 1,
1998[] may be cited as precedent.” Utah R. App. P. 30(f).
6
part of the transaction, traded in a truck that “had previously been chipped,” an “event[]
that voided the factory warranty.” Id. Rather than disclose this issue, the son represented
that the truck had no defect. See id. at *2. After the buyer realized it had been misled, it
attempted to hold the father liable for the son’s deceit by asserting a claim for fraudulent
nondisclosure. Id. at *1.
The Utah Court of Appeals rejected the buyer’s claim. Even though the father had
cosigned the application, the court explained that “[k]nowledge that the other party . . . is
acting under a mistaken belief . . . is a factor in determining that a duty of disclosure is
owing.” Id. at *2 (alteration and omissions in original) (internal quotation marks
omitted) (quoting Elder, 384 P.2d at 805). And in this instance, “there [was] nothing to
suggest that [the father] knew [his son] had told [the buyer] that the truck had not been
chipped.” Id. Thus, the father owed no duty of disclosure to the buyer. Id. at *1–2. The
same logic applies here.
The majority disagrees. It says that even if we follow Barber Bros., a genuine
dispute of material fact remains because “[a] jury can consider whether the Saltmans
could have realistically been unaware that an experienced real estate purchaser like
Marcantel would have paid over $1.7 million for the Property had he known about the
Easement and its resulting limitations on development.” Maj. Op. at 26 n.12. Yet “[i]n a
response to a motion for summary judgment, a party cannot rest . . . on speculation, or on
suspicion.” Conaway v. Smith, 853 F.2d 789, 794 (10th Cir. 1988); see also, e.g., Genzer
v. James River Ins. Co., 934 F.3d 1156, 1160 (10th Cir. 2019) (same). And that is all that
Marcantel offers here.
7
In sum, under Utah law, a seller who is unaware that a buyer lacks knowledge of a
defect owes no duty to disclose. I respectfully dissent from section II of the majority’s
discussion holding otherwise.
8