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Watts v. Dunphy

Court of Appeals of Washington, Division 1

December 23, 2013

SHANE and AMY WATTS, Respondents,
v.
MARY P. DUNPHY and MARK L. DUNPHY, Appellants.

ORDER DENYING APPELLANTS' MOTION FOR RECONSIDERATION AND/OR TO PUBLISH AND ORDER WITHDRAWING OPINION FILED AUGUST 26, 2013 AND SUBSTITUTING AMENDED OPINION

On August 26, 2013, this court filed its unpublished opinion in the above-entitled action. Appellants have moved for reconsideration and/or to publish the opinion. The panel has decided to deny the motion for reconsideration and/or to publish. The panel has also decided to withdraw the opinion filed August 26, 2013 and replace it with the amended opinion attached hereto.

IT IS HEREBY ORDERED that the appellants' motion for reconsideration and/or to publish is denied;

IT IS FURTHER ORDERED that the unpublished opinion of this court filed in the above-entitled action on August 26, 2013, be withdrawn and that the amended opinion be substituted in its place.

In all other respects, the appellant's motion to reconsider and/or to publish is denied.

Lau, J.

Generally, a home buyer's duty to inquire further of a seller about a home's defect arises upon notice of the defect. Mary Dunphy, an experienced real estate agent, sold her condominium unit to Shane Watts. Dunphy knew her unit's lack of weather resistant barrier (WRB) made it vulnerable to water leaks and damage. She intentionally lied about it on the form 17 disclosure statement.[1] As part of the sale documents, Watts reviewed homeowners' association Board meeting minutes that mentioned "inspections, " "envelope studies, " a "defect attorney, " and other issues but made no mention of particular defects, Dunphy's unit, or any other individual unit. Watts discovered the defect after the sale closed and sued Dunphy. The trial court found Dunphy liable for fraudulent concealment and fraud. Because the meeting minutes triggered no duty flowing to Watts to inquire further under these circumstances, we affirm and award Watts attorney fees and costs under the purchase and sale agreement.

FACTS

The trial court's factual findings are undisputed. In 2006, Mary Dunphy purchased a condominium unit at 13020 102nd Lane Northeast #3, in Kirkland, Washington. On July 27, 2006, Dunphy became vice president of the Kirkland Village Homeowners' Association (HOA).

In October 2006, Dunphy arranged for Darrel Hay to inspect the buildings in Kirkland Village. Hay checked three buildings and found that all three lacked tar paper or weather resistant barrier (WRB). Hay opined that the lack of WRB was problematic because it made the buildings vulnerable to water leaks and damage. He noted no specific damage. Hay gave his report to Dunphy, who read it.

Dunphy attended all HOA Board meetings—some of which were held in her home—through May 2007. In February 2007, the Board asked construction inspection firm Corke Amento Inc. (Corke) to prepare a presentation regarding Kirkland Village. During its February 2007 meeting, the Board heard Corke's presentation and discussed Hay's report.

Based on the information it received, the Board decided to further pursue its ongoing disputes with Kirkland Village's developer, Center Bay. The Board hired a new property manager, Suhrco Management, which recommended a thorough inspection of the complex so that the Board could give Center Bay a list of problems that needed to be fixed. The lack of WRB was one of the issues to consider.

In March 2007, Corke prepared a "Scope of Limited Investigation" showing its plan for inspecting the complex. Among other things, the plan showed that Dunphy's unit would have its siding removed. The proposal was circulated among the Board members, and Dunphy read it.

In April 2007, the Board hired Corke to inspect the complex. This decision was discussed and approved by all Board members, including Dunphy. Lack of WRB was among the problems Corke was hired to investigate. The inspection began on May 1, 2007. Corke removed siding on the majority of the complex buildings, and 75 percent of the buildings either lacked WRB altogether or had incorrectly installed WRB. Removal of siding on Dunphy's unit revealed that it lacked WRB. Dunphy saw that her unit lacked WRB.

On May 4, 2007, Corke (including Corke's lead engineer Mark Cress and president Steven Amento), defects attorney David Onsager (hired by the Board to recommend legal action against Center Bay), Board president Craig Cleaver, and Dunphy met to walk through the Kirkland Village complex and view the buildings. Some portions of the buildings still had siding removed, so that the Board and its attorney could see what was underneath the siding. The walk through revealed that the majority of the buildings lacked WRB. Dunphy witnessed the lack of WRB. To summarize, Dunphy—as a member of the Board who participated in the walk through—was aware of significant material problems with the missing WRB under the siding on the buildings throughout the complex, including her own unit. Dunphy was also aware that Corke would soon produce a written report that, when given to the Board, would have to be disclosed to potential buyers.

The next month (June 2007), Dunphy and her husband purchased a single family home in Juanita for $473, 000. Dunphy needed cash to close the sale. The only way for her to close the sale and move was to sell her Kirkland Village unit at full market value. Buyer Shane Watts signed a purchase and sale agreement for Dunphy's unit, providing for attorney fees to the prevailing party in case of a dispute involving the agreement. As part of the agreement, Dunphy completed a seller's disclosure statement (form 17), as required under chapter 64.06 RCW. Around July 23, 2007, the parties agreed that Watts would purchase the unit for $273, 000.

Watts hired a home inspector to inspect the unit. The inspector did not look under the siding or inspect any other buildings in the complex. The inspection did not reveal the missing WRB on Dunphy's unit or the problems with the buildings in the rest of the complex. The evidence was uncontroverted that a normal, routine home inspection of a condominium would not have revealed any of the problems in the complex or the missing WRB in Dunphy's unit. The trial court found that Watts did a reasonably diligent inspection of the property.

Dunphy filled out two form 17s on July 9 and 25.[2] In the July 25 form 17, in response to question 4(F), "Are there any defects with the following: . .. Siding . . . Interior Walls . . . Exterior Walls . . . Other", Dunphy answered, "No." This was a lie. Dunphy knew about the missing or incorrectly installed WRB in multiple buildings in the complex—including her own unit—but she represented that there were no defects in the siding or external and internal walls. No evidence indicated any defect in the siding itself, but a substantial question existed regarding whether the lack of vapor barrier or moisture barrier was a defect. Notices, studies, and oral reports well known to Dunphy indicated the moisture barrier did not exist and that future damage was likely if the problem went untreated.

Also in the July 25 form 17, in response to question 10(A) "Are there any other existing material defects affecting the property that a prospective buyer should know about?", Dunphy answered, "Don't know." This was also a lie. Dunphy was well aware of the Corke inspection and the problems pointed out during the May 2007 walk through. Dunphy's misstatements were intentional. Dunphy intended to mislead Watts to ensure the condominium sale closed for full price in a timely manner.[3]

Dunphy arranged for property manager Suhrco to produce a resale certificate and a series of required documents. These documents included a copy of the HOA Board's meeting minutes for the past 6 to 12 months.[4] Watts received the minutes and read them enough to comment on the parking situation. The minutes contain a list of the issues the Board addressed in its monthly meetings. Included among those issues are mentions of inspections, envelope studies, Hay's report, and other items. The meeting minutes were admitted at trial as exhibit 3.

The October 16, 2006 meeting minutes mention "[c]oncerns about the moisture barrier under siding." Ex. 3 at 7. The December 12, 2006 meeting minutes state, "Vinyl siding is held off until the rain is more cooperative, so large portions can be pulled back to insure no damage underneath." Ex. 3 at 8.

The February 13, 2007 meeting minutes contain the following notations:

1. Envelop[e] Study was discussed by Mark Cress; an overview of the independent inspection report by Darrell Hays was commented by Mark.
2. Mark Cress presented his findings with photo of the property which included siding, moisture barrier.
3. Discussed options on how to proceed depending on what the POS states about envelop[e] study. Two options are proposed: 1. Intrusive Investigation or 2. Envelop[e] Study
4. Envelop[e] study was the recommendation
5. David Onsager (another attorney) at Stafford Frie Law Firm was mentioned as another option.
.....

Ex. 3 at 11.

The March 13, 2007 meeting minutes include the notation, "Update on inspection. Deferred until next meeting, no response from Mark W. of Corke-Amento." Ex. 3 at 12. The minutes also note, "Inspection—find a second company." Ex. 3 at 14.

The April 10, 2007 meeting minutes include the notation, "Craig/Terry spoke to Corke Amento and we are moving ahead with the envelope/invasive inspection. Center [B]ay wanted to use their inspector, Craig declined that offer, but accepted the offer for Center [B]ay to pay 50% of the cost." Ex. 3 at 15.

The May 8, 2007 meeting minutes include the ...


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