Watterud v. Gilbraith

October 6 2015
DA 15-0234
IN THE SUPREME COURT OF THE STATE OF MONTANA Case Number: DA 15-0234
2015 MT 288
COREY WATTERUD, LISA WATTERUD, Personally
and as parent and general guardian of J.F., E.W.,
and KENDALL WATTERUD,
Plaintiffs and Appellants,
v.
JOSHUA GILBRAITH, JANET GILBRAITH,
AMBER UHREN, HOMEFRONT PROPERTY
INSPECTIONS, LLC and STEVE SMITH,
Defendants and Appellees.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and For the County of Yellowstone, Cause No. DV 14-0850
Honorable Ingrid G. Gustafson, Presiding Judge
COUNSEL OF RECORD:
For Appellants:
Tucker Gannett, Donald L. Harris, Harris & Associates, PLLC, Billings,
Montana
For Appellees:
Richard E. Gillespie, Keller, Reynolds, Drake, Johnson & Gillespie, P.C.,
Helena, Montana
Submitted on Briefs: August 26, 2015
Decided: October 6, 2015
Filed:
__________________________________________
Clerk
Justice Patricia Cotter delivered the Opinion of the Court.
¶1 Joshua and Janet Gilbraith hired Amber Uhren as their real estate agent to sell
their home in Billings. Two days later, the Gilbraiths entered into a buy-sell agreement
with potential buyers Corey and Lisa Watterud. The parties signed several property
disclosure statements in which the Gilbraiths disclosed to the Watteruds that the
basement of the property had flooded in 2005 but had been redone in 2008, and that no
further problems had arisen. The Gilbraiths also disclosed that the home had not been
tested or treated for mold. The Gilbraiths did not mention that they had performed the
flood remediation work themselves. The disclosures affirmatively stated that seller and
seller’s agent made no representations or warranties about the presence or absence of
mold, and both parties agreed it was the responsibility of the buyers to obtain a mold
inspection by a qualified inspector. The Watteruds obtained a home inspection, but chose
not to obtain a mold inspection.
¶2 After the sale of the property closed and the Watteruds moved into the home, they
became ill and discovered mold growing in the basement. The Watteruds sued the
Gilbraiths, Amber Uhren, the home inspection company, and the home inspector for
negligence. The Gilbraiths, the home inspection company, and the home inspector were
eventually dismissed from the action. The Watteruds maintained that Amber was
obligated to discover adverse material facts about the property—including the existence
of mold in the basement and details about the remediation efforts undertaken by the
Gilbraiths—and to disclose those facts to the Watteruds. Amber filed a motion for
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summary judgment, arguing that the Watteruds’ negligence claim was premised upon
inspection and discovery duties that do not exist. The District Court granted Amber’s
motion for summary judgment. We affirm.
ISSUE
¶3 We restate the issue on appeal as follows:
¶4 Did the District Court err in granting summary judgment in favor of Amber Uhren
because the Watteruds’ negligence complaint against her was premised upon alleged
duties that do not exist?
FACTUAL AND PROCEDURAL BACKGROUND
¶5 On September 3, 2013, Joshua and Janet Gilbraith retained Amber Uhren as their
real estate agent to sell their home at 4109 Murphy Avenue in Billings. That day the
parties signed a “Relationships/Consents in Real Estate Transactions” agreement and a
“Residential Listing Contract.” In the latter, the Gilbraiths disclosed that the property
had not been tested for mold and had not received mitigation or treatment for mold.
¶6 On September 5, 2013, Corey and Lisa Watterud entered into a “Buy-Sell
Agreement” with the Gilbraiths, and both couples signed an “Owner’s Property
Disclosure Statement” and a “Mold Disclosure” form. The property disclosure statement
required the Gilbraiths to describe any adverse material facts about various features of the
property. Under the heading “Basement: (Leakage, Flooding, Moisture, or Evidence of
Water, and Fuel Tanks),” the Gilbraiths wrote “back in 2005 issue has been handled &
taken care of.” The Gilbraiths also checked the box next to “Flooding, draining, grading
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problems, or French drains,” to indicate that those items occurred or existed on the
property. On additional lines they wrote, “water damage to carpet and walls sheetrock
whole basement redone back in 2008 been fine since.” The Gilbraiths had undertaken to
repair the water damage themselves instead of hiring professionals, although this fact was
not included in the disclosures.
¶7 Above the sellers’ signatures on the mold disclosure form is the sentence: “[t]he
seller, landlord, seller’s agent, buyer’s agent, or property manager cannot and does not
represent or warrant the absence of mold. It is the buyer’s or tenant’s obligation to
determine whether a mold problem is present. To do so, the buyer or tenant should hire a
qualified inspector . . . .” And above the buyers’ signatures on the mold disclosure, the
form reads “[t]he undersigned Buyer/Tenant agrees that it is their responsibility to hire a
qualified inspector to determine if a significant mold problem exists or does not exist on
the property.” The Watteruds requested various inspections in the buy-sell agreement,
including a home inspection, a covenant and easement inspection, and a radon inspection,
but they did not request a mold inspection.
¶8 Steve Smith of Homefront Property Inspections, LLC inspected the property. As a
result of the inspection, the Watteruds requested and the Gilbraiths agreed to make
several repairs, including covering an exposed wire, fixing a broken garage door opener,
and painting exposed wood over the basement door. The Watteruds did not request any
repairs related to flood damage, restoration, or mold.
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¶9 The sale of the property closed on October 16, 2013. After the sale had closed and
the Watteruds had moved into the home, the Watteruds became ill and discovered mold
growing in the basement of the property. The Watteruds sued the Gilbraiths, Amber
Uhren, Homefront Property Inspections, LLC, and Steve Smith for negligence and
negligent misrepresentation. The Gilbraiths, Homefront Property Inspections, LLC, and
Steve Smith were later dismissed from the action. Amber Uhren attests that she had no
personal knowledge about the existence of mold on the property or any repair or
treatment efforts undertaken to eradicate the mold. Amber filed a motion for summary
judgment, arguing that she had no duty to the Watteruds to discover adverse material
facts about the property. The District Court granted Uhren’s motion, and the Watteruds
filed a timely appeal.
STANDARD OF REVIEW
¶10 We review summary judgment rulings de novo. Estate of Willson v. Addison,
2011 MT 179, ¶ 11, 361 Mont. 269, 258 P.3d 410 (citing Goettel v. Estate of Ballard,
2010 MT 140, ¶ 10, 356 Mont. 527, 234 P.3d 99). Applying the same M. R. Civ. P. 56
criteria as the district court, we determine whether the moving party has established both
the absence of any genuine issues of material fact and entitlement to judgment as a
matter of law. Estate of Willson, ¶ 11 (citing Goettel, ¶ 10).
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DISCUSSION
¶11 Did the District Court err in granting summary judgment in favor of Amber Uhren
because the Watteruds’ negligence complaint against her was premised upon alleged
duties that do not exist?
¶12 The Watteruds argued to the District Court and now on appeal that as the sellers’
agent, Amber Uhren owed a duty of care to discover and disclose to them adverse
material facts about the property. The Watteruds cite the REALTOR® Code of Ethics
and testimony from another realtor in an attempt to establish a common law duty of a
seller’s agent to discover adverse material facts about a property and disclose those facts
to the buyer. However, the Montana Code abolished all common law duties:
[t]he provisions of this chapter and the duties described in this section
govern the relationships between brokers or salespersons and buyers or
sellers and are intended to replace the duties of agents as provided
elsewhere in state law and replace the common law as applied to these
relationships. . . . The duties of a broker or salesperson vary depending
upon the relationship with a party to a real estate transaction and are as
provided in this section.
Section 37-51-313(1), MCA.
¶13 The duties a seller’s agent owes a buyer are now codified:
[a] seller agent is obligated to the buyer to:
(a) disclose to a buyer or the buyer agent any adverse material facts that
concern the property and that are known to the seller agent, except that the
seller agent is not required to inspect the property or verify any statements
made by the seller; [and]
(b) disclose to a buyer or the buyer agent when the seller agent has no
personal knowledge of the veracity of information regarding adverse
material facts that concern the property . . . .
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Section 37-51-313(3), MCA. Nevertheless, the Watteruds contend that the principles of
the common law were incorporated into administrative regulations and case law and
eventually into the current statute as § 37-51-313(13).1 Subsection (13) says,
“[c]onsistent with the licensee’s duties as . . . a seller agent, . . . a licensee shall endeavor
to ascertain all pertinent facts concerning each property in any transaction in which the
licensee acts so that the licensee may fulfill the obligation to avoid error, exaggeration,
misrepresentation, or concealment of pertinent facts.” Section 37-51-313(13), MCA.
According to the Watteruds, subsection (13) imposes an affirmative duty to discover
adverse material facts and subsection (3) imposes a duty to disclose those facts to the
buyer. This is the first time we have been asked to interpret these subsections in
conjunction.
¶14 In interpreting these subsections, we are guided by canons of statutory
construction:
[i]n the construction of a statute, the office of the judge is simply to
ascertain and declare what is in terms or in substance contained therein, not
to insert what has been omitted or to omit what has been inserted. Where
there are several provisions or particulars, such a construction is, if
possible, to be adopted as will give effect to all.
Section 1-2-101, MCA. Also, “[w]ords and phrases used in the statutes of Montana are
construed according to the context . . . .” Section 1-2-106, MCA. In this case, we must
give effect to subsections (1), (3), and (13) together. Subsection (1) did away with the
common law duties of realtors and replaced them with codified duties. Among those
1
The parties discuss § 37-51-313(12) MCA, in their briefs, but the statute was amended in 2015,
and the former §§ (10) through (12) were redesignated as (11) through (13).
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codified duties are those listed in subsection (3), including the duty to disclose to a buyer
any adverse material facts about the property that are known to the seller’s agent. This
duty is followed by an important limitation: the seller’s agent is not required to inspect
the property or verify statements made by the seller. However, a seller’s agent must
disclose when he or she has no personal knowledge of the veracity of statements about
the property made by the seller. Consistent with these duties to disclose, but not in
addition to or instead of these duties, a seller’s agent must “endeavor to ascertain all
pertinent facts” concerning the property so as to avoid “error, exaggeration,
misrepresentation, or concealment of pertinent facts.” Section 37-51-313(13), MCA.
¶15 Read in the context of the preceding subsections, the duty to “endeavor to
ascertain all pertinent facts” is not a reinstatement of common law duties or a
contradiction of the limitation in subsection (3)(a) that a seller’s agent need not inspect
the property or verify the seller’s statements. Rather, it is a duty to acquire enough
information about any adverse material facts concerning the property to fulfill the
agent’s disclosure obligation under subsection (3)(a). According to the statute then, a
seller’s agent need not inspect the property herself and need not verify the seller’s
statements about the property, but she must disclose any adverse material facts about
which she is aware (and she must ascertain enough about these facts to avoid error,
exaggeration, misrepresentation, or concealment), and she must inform a buyer when
she has no personal knowledge of the veracity of the seller’s statements.
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¶16 In this case, Amber Uhren, as the sellers’ agent, had a duty to disclose to the
Watteruds any adverse material facts concerning the property about which she was
aware and a duty to disclose when she had no personal knowledge of the veracity of the
Gilbraiths’ statements. We analyze this two-part duty as it applies to the mold problem
before us. First, Amber has sworn under oath that she was not aware of any adverse
material facts concerning mold in the home, nor have the Watteruds claimed that she
was. Turning to her second duty, this absence of knowledge regarding the presence of
mold was disclosed to the Watteruds in the mold disclosure form which stated that the
seller’s agent “cannot and does not represent or warrant the absence of mold” and
advised that it was the buyer’s obligation to determine whether mold was present.
Amber thus squarely complied with her statutory duty. Amber had no duty to inspect
the property, to independently discover adverse material facts about the property, or to
verify the Gilbraiths’ statements.
¶17 The existence of a legal duty and the scope of that duty are questions of law.
Willden v. Neumann, 2008 MT 236, ¶ 14, 344 Mont. 407, 189 P.3d 610 (citing Webb v.
T.D., 287 Mont. 68, 72, 951 P.2d 1008, 1011 (1997)). If a defendant owes no duty to a
plaintiff, the defendant is entitled to judgment as a matter of law. Willden, ¶ 14. The
District Court in this case correctly determined that the scope of Amber’s duty to the
Watteruds is prescribed by § 37-51-313, MCA, and that Amber did not owe the
Watteruds a duty to inspect the property or to discover any adverse material facts about
it, including the existence of mold or the fact that the Gilbraiths attempted to remediate
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the water damage in the basement themselves instead of hiring a professional. Amber is
entitled to judgment as a matter of law on the question of duty because the Watteruds’
negligence claim against her is premised upon inspection and discovery duties that do
not exist under the statute setting forth the duties of a seller’s agent to a buyer.
CONCLUSION
¶18 For the foregoing reasons, we affirm the District Court’s October 15, 2014 Order
granting Uhren’s motion for summary judgment.
/S/ PATRICIA COTTER
We Concur:
/S/ MIKE McGRATH
/S/ BETH BAKER
/S/ JAMES JEREMIAH SHEA
/S/ MICHAEL E WHEAT
/S/ LAURIE McKINNON
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