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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Diblik v. Marcy (08/31/2007) sp-6154
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| MARTIN J. DIBLIK, | ) |
| ) Supreme Court No. S- 11557 | |
| Appellant, | ) |
| ) Superior Court No. 3PA-02-702 CI | |
| v. | ) |
| ) O P I N I O N | |
| SCOTT C. MARCY, | ) |
| ) No. 6154 - August 31, 2007 | |
| Appellee. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District, Palmer,
Eric B. Smith, Judge.
Appearances: Danny W. Burton, Wasilla, for
Appellant. Kenneth D. Albertsen, Palmer, for
Appellee.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Bryner, and Carpeneti, Justices.
EASTAUGH, Justice.
I. INTRODUCTION
Martin Diblik sued Scott Marcy after Marcy sold him a
house with a defective underground septic tank. Before closing,
Marcy signed a statutory disclosure statement in which he stated
that, to the best of [his] knowledge, there were no defects in
the septic system. Marcy also signed an addendum in which he
incorrectly answered none when he was asked to list all repairs
done in the last two years. Following a bench trial, the
superior court entered judgment for Marcy. Diblik argues that
the court erred, because Marcy is liable for his misstatements
and for violating AS 34.70.040(a) by failing to supplement his
residential real property disclosure statement after the tanks
floats and pump were repaired. We conclude that the trial court
did not clearly err in finding that the no defects disclosure
statement assertion was not a negligent misrepresentation and
that the no repairs addendum misstatement was both innocent and
immaterial. And given these findings, Marcy had no duty to amend
the disclosure statement and consequently did not violate AS
34.70.040(a). We therefore affirm.
II. FACTS AND PROCEEDINGS
Scott Marcy bought a new house in 1999. Unbeknownst to
him, it was connected to a used underground septic tank. During
the first year he owned the house, a minor problem with the tanks
wiring required workers to untangle some jumbled wires. In
November 2000 Marcy had workers replace a broken outflow pipe on
the tank. A worker who performed this repair later testified
that as of November 2000 when the workers dug it up and fixed
[the pipe], there were no holes in the septic tank.
Marcy listed the house for sale and then entered into a
purchase agreement with Martin Diblik in April 2001. On April 5
Marcy filled out and gave Diblik a residential real property
disclosure statement in which he stated that to the best of [his]
knowledge, there were no defects or malfunctions in the septic
tank. At the same time, Marcy also gave Diblik an addendum to
his disclosure statement, answering none when the addendum asked
him to list all repairs done in the last two years. The purchase
agreement stated that the buyer relied on the information
contained in the disclosure statement.
On April 26 an inspector hired by Diblik inspected the
house and noted no problems with the septic system. On April 27
an engineer hired by Marcys real estate agent began a series of
inspections of the septic system to see if it was functioning
adequately. The engineer concluded that the system was
functioning adequately, but noticed that the septic system pump
seemed to be cycling continuously; he reported this problem to
the real estate agent. Around the end of April and the beginning
of May, the floats that controlled the septic pump were replaced
and a short time later the septic pump itself was replaced. The
worker who replaced the floats and pump testified at trial but
was not asked about the condition of the tank itself. He did
explain that when he removed the top of the tank: [Y]ou couldnt
see the floats, nothing. Everything was just under water.
After the pump was replaced, the engineer tested the
system to make sure that the pump was cycling properly. The
engineer concluded that the system was operating normally and
that the new pump was not cycling continuously, as the old pump
had before it was replaced. Marcys real estate agent provided
Diblik with copies of the engineers reports that explained that
the septic pump had been replaced. The real estate agent also
provided Diblik with the telephone number of the company that
replaced the pump and invited Diblik to call the company if he
wanted more information about the repairs to the septic system.
Diblik testified that some time in mid-May he went to the house
and discussed the septic problem with the engineer hired by
Marcys realtor, but Diblik testified that he never inspected the
septic system personally, and that he did not arrange to have his
own inspection done after the pump was replaced.
The sale closed on May 31 and Diblik moved in on June
9. The same day he moved in, Diblik noticed that the pump was
cycling constantly. Workers then discovered that the tank was
rusted through with holes, one the size of a golf ball. Ground
water was seeping into the tank and causing the pump to activate.
Diblik sued Marcy, claiming that Marcy had violated the
residential real property disclosure statement statute1 and made
material misrepresentations in contract and tort.
Superior Court Judge Eric B. Smith held a two-day bench
trial and heard testimony from Diblik, Marcy, and five other
witnesses. Following trial, the superior court ruled that Marcy
was not liable to Diblik for the cost of replacing the tank.
Diblik appeals.
III. DISCUSSION
A. Standard of Review
If there is no genuine dispute of material fact, the
existence and scope of a legal duty are questions of law.2
Whether a misstatement was negligently made is a question of
fact.3 Whether a misrepresentation is material is a mixed
question of law and fact.4 We review questions of law de novo.5
We review findings of fact for clear error.6 A fact finding is
not clearly erroneous unless the reviewing court has a definite
and firm conviction that a mistake has been made.7 We do not
weigh the evidence anew on appeal, but only determine whether the
trial courts findings are supported by the record.8
B. The Disclosure Statement
On April 5, 2001, before the septic tanks floats and
pumps were replaced, Marcy completed a residential real property
disclosure statement that contained this inquiry: To the best of
your (Transferor (Seller)s) knowledge, are there any defects or
malfunctions in the [sewage system?] Marcy checked the No box.
The April 16 purchase agreement stated: Buyer has entered into
this agreement relying [on] . . . the information contained in
the Alaska Residential Real Property Disclosure Statement, as
required in AS 34.10. (The statutory reference probably should
have been to AS 34.70.010.) The agreement also contained an as
is clause stating: Buyer offers to purchase the property in its
present condition.
Diblik advances statutory and common law theories to
support his contention that Marcys disclosure statement gave rise
to liability, and that the trial court erred in finding for
Marcy. First, Diblik argues that the trial court erred in
finding that Marcys statement that the septic tank was not
defective was neither a fraudulent nor a negligent
misrepresentation. Second, because the no defect statement was
contained in a disclosure statement required by statute, Diblik
argues that Marcy violated AS 34.70.040(a) by not amending or
supplementing the disclosure statement after he replaced the
floats and pump.9
1. The trial court did not clearly err in finding
that Marcy did not commit fraudulent or negligent
misrepresentation.
The trial court indicated that the purchase agreements
as is clause would not preclude liability for a defect or
condition that Marcy failed to disclose. The trial court then
considered whether Marcy was liable for misrepresenting the
condition of the property. It found that he was not. The trial
court found that Marcy did not know, and had no reason to know,
at the time of closing that there was a problem with the septic
tank. The court found by a preponderance of the evidence that
the problem grew worse after Mr. Marcy moved out, so he would not
have noticed a problem. Hence the court concluded that Marcy was
not negligent in stating that the tank was not defective.
Diblik argues that after the floats and pump were
replaced Marcy knew, or reasonably should have known, that
[Marcy was] wrong in his statutorily required disclosure
statements that there were no problems with the sewage system.
Diblik seems to argue that the superior court, in resolving his
misrepresentation claims, erroneously relied on the as is clause.
He asserts the trial court erred when it gave effect to an as is
clause in a contract for the sale of realty, when the contract
was based on substantial and material misrepresentations about
the . . . condition of the property. Thus, Diblik is implicitly
arguing that the trial court clearly erred in finding that Marcys
disclosure statement did not contain a fraudulent or negligent
misrepresentation.
One element of fraudulent misrepresentation is
scienter, that is, knowledge of the misrepresentations untrue
character.10 One element of negligent misrepresentation is the
failure to exercise reasonable care or competence in obtaining or
communicating the misinformation.11 Therefore, for Diblik to
prevail under either theory, he had to establish that Marcy was
at least negligent in communicating an erroneous statement about
the condition of the septic tank.
The trial court found that because a professional
engineer certified that the septic [tank] met the applicable
standards after the floats and pump were replaced, Marcy had no
reason to know that there was an existing problem with the tank
at the time of closing. Marcys testimony that he relied on the
engineers certification to conclude that the problems were fixed
is sufficient to demonstrate lack of clear error as to this
finding.
Dibliks failure to persuade the trial court that Marcy
acted at least negligently is fatal to his claims for fraudulent
and negligent misrepresentation. We therefore conclude that the
superior court did not clearly err in resolving these theories of
liability against Diblik and that its discussion of the as is
clause did not erroneously affect its analysis of the controlling
liability issues.
2. Marcy did not violate AS 34.70 by failing to amend
his disclosure statement.
Alaska Statute 34.70.040(a) requires sellers to amend a
residential real property disclosure statement if information in
the disclosure statement becomes inaccurate as a result of an act
or agreement after the disclosure statement is delivered to the
transferee. Diblik argues that Marcy was statutorily required to
amend his disclosure form when Marcy discovered that the floats
and pump had to be replaced. This argument is seemingly based on
two theories. Both lack merit.
First, Diblik argues that Marcy was required to amend
his disclosure form after Marcy discovered, before closing, that
[his] previous assertion that there was no defect[s] in the
sewage system had been false. But as we discuss above, the trial
court did not clearly err in finding that Marcy had no reason to
know that this assertion was, in fact, false. Thus, Marcys duty
to amend the disclosure statement was never triggered.
Second, Diblik seems to argue that Marcy was required
to amend his disclosure form to list the repairs made to the
floats and pump. But as Marcy points out, Diblik received a
written report before closing that informed him that a new pump
had been installed. Before closing, Diblik also discussed the
repairs directly with the engineer hired by Marcy. Diblik seems
to argue that the report and his discussion with the engineer
were insufficient because they were not a supplement to the
disclosure form. Assuming the statute required the disclosure
form to be amended or supplemented under these circumstances,
Dibliks receipt of a copy of the written report was sufficient
disclosure for the purposes of the statute. Moreover, Diblik has
not explained how receiving a report rather than a supplement
could have possibly caused him damage.
C. The Addendum
It is now undisputed that Marcy was incorrect in
asserting in the document entitled Addendum to Residential Real
Property Transfer Disclosure Statement that there were no repairs
in the two years before the sale. Marcy admits on appeal that
this assertion was incorrect because the septic tanks pipe and
wiring had been repaired in the two years before the sale.
The trial court found that a reasonable buyer in
Dibliks position would not have attached importance to the prior
repairs to the pipe and wiring, and consequently ruled that any
misrepresentation with regard to them was immaterial. It also
found that those repairs were unrelated to the actual problem
with the system the tanks defective condition. Diblik argues
that the trial court clearly erred in making these findings
because, he asserts, Marcy is liable for his misstatement under
the common law tort of misrepresentation. Diblik seems to
contend that there are three theories under which Marcy is liable
for his misrepresentation: fraud, negligence, and strict
liability.
With regard to his strict liability theory, Diblik
argues that the addendum was not required by AS 34.70 and was not
part of the statutory disclosure statement. He therefore argues
that the statute does not apply and that Marcy is strictly liable
at common law for his misrepresentation under Cousineau v.
Walker.12 Marcy responds that because the addendum was
incorporated into the disclosure statement, under Amyot v.
Luchini,13 any innocent misrepresentation claim regarding
information contained therein is precluded by AS 34.70.010 et
seq. For the reasons discussed below, we do not need to decide
whether the addendum in this case, or the particular misstatement
about prior repairs, should be considered part of the disclosure
statement for purposes of applying AS 34.70.
Despite the addendums undisputed inaccuracy, under any
misrepresentation theory, Diblik can succeed only if Marcys
misstatement was material. In a common law tort action for
misrepresentation there must be justifiable reliance on the false
information supplied.14 Because an immaterial representation
cannot induce justifiable reliance,15 Diblik had to prove that
Marcys misrepresentation with regard to the two prior repairs was
material.
The trial court found following trial that a reasonable
buyer in Dibliks position would not have attached importance to
the two prior repairs. The court found that even if Mr. Diblik
had known that there was an electrical problem and a pipe problem
prior to [the engineers certification], when the engineer gave
his certification a reasonable buyer would have said Im good to
go, Ill buy the house.16 Diblik appears to contest this finding.
He argues that [t]he trial court erred as a matter of fact and
law because the court failed to appreciate that the contract was
based on substantial and material misrepresentations about the
history and condition of the property. Diblik argues that the
false statement regarding prior repairs was material because had
he known about the repairs he might have done more investigation
and altered his negotiation strategy. Diblik also asserts that
knowledge of prior repairs would lead a person to suspect the
workmanship and competence of the person who installed the sewage
system.
The plaintiff in a misrepresentation case bears the
burden of establishing by a preponderance of the evidence that
the misrepresentation was material.17 We have described a
material fact as one to which a reasonable man might be expected
to attach importance in making his choice of action. It is a
fact which could reasonably be expected to influence someones
judgment or conduct concerning a transaction.18
The trial courts finding is supported by the evidence
and reasonable inferences permissibly drawn from the evidence.
Diblik testified at trial that he could have more thoroughly
investigated whether the septic system was working properly had
he known of the prior repairs. Also, Dibliks agent testified
that if he had known about the prior repairs he would have
recommended that Diblik get his own engineer to check out what
was going on before he went further with the transaction. But
the trial court found that once the septic tank was certified by
the engineer a reasonable buyer in Dibliks position would have
attached no importance to the repairs to the pipe and wires.
This finding establishes that the misstatement about prior
repairs was immaterial. Diblik has not convinced us that this
finding was clearly erroneous.
Absent clear error as to this finding, we conclude that
the trial court did not err in failing to hold Marcy liable for
the misstatement in the addendum.
IV. CONCLUSION
For these reasons, the superior court judgment is
AFFIRMED.
_______________________________
1 See AS 34.70.090 (addressing effect of disclosure
statement for real property sales).
2 See Arctic Tug & Barge, Inc. v. Raleigh, Schwarz &
Powell, 956 P.2d 1199, 1204 (Alaska 1998).
3 Beaux v. Jacob, 30 P.3d 90, 101 (Alaska 2001) (Whether
particular conduct is negligent is a question of fact.). Cf.
Edgington v. Fitzmaurice, (1885) 29 Ch. Div. 459, 483 (U.K.)
([T]he state of a mans mind is as much a fact as the state of his
digestion.).
4 Cousineau v. Walker, 613 P.2d 608, 613 (Alaska 1980).
5 Forshee v. Forshee, 145 P.3d 492, 497 (Alaska 2006).
6 Keturi v. Keturi, 84 P.3d 408, 412 (Alaska 2004).
7 Id.
8 Id.
9 AS 34.70.040(a) states: If information in a disclosure
statement becomes inaccurate as a result of an act or agreement
after the disclosure statement is delivered to the transferee,
the resulting inaccuracy does not violate this chapter and the
transferor is required to deliver an amendment for the disclosure
statement to the transferee.
10 Lightle v. State, Real Estate Commn, 146 P.3d 980, 983-
84 (Alaska 2006).
11 Reeves v. Alyeska Pipeline Serv. Co., 56 P.3d 660, 670
(Alaska 2002).
12 Cousineau v. Walker, 613 P.2d 608, 616 (Alaska 1980).
13 Amyot v. Luchini, 932 P.2d 244, 247 (Alaska 1997).
14 See Anchorage Chrysler Ctr., Inc. v. DaimlerChrysler
Corp., 129 P.3d 905, 914 (Alaska 2006) (regarding fraudulent
misrepresentation); Valdez Fisheries Dev. Assn v. Alyeska
Pipeline Serv. Co., 45 P.3d 657, 671 (Alaska 2002) (regarding
negligent misrepresentation); Bevins v. Ballard, 655 P.2d 757,
761-62 (Alaska 1982) (regarding innocent misrepresentation).
15 See Restatement of Torts 538(1) (1938) (Reliance upon
a fraudulent misrepresentation of fact in a business transaction
is justifiable if, but only if, the fact misrepresented is
material.); 2 Dan B. Dobbs, Law of Torts 476, at 1363 (2001)
(Courts agree that the plaintiff is not justified in relying upon
representations that are not material to the transaction.).
16 The trial court actually stated that when the engineer
said its good to go, I find it hard to believe that any
reasonable buyer under those circumstances would have said Im
good to go, Ill buy the house. This sentence must be read in
context of the previous paragraph of the trial transcript, in
which the court rejected Dibliks prior repair theory. The
sentence must also be read in context of the judgment entered
against Diblik, resolving all claims against him. We are
convinced that the trial court unintentionally omitted the word
not between would and have in that sentence. In other words, we
are convinced that the trial court determined that Marcys failure
to disclose the prior repairs was immaterial.
17 See Nelson v. Progressive Corp., 976 P.2d 859, 864-65
(Alaska 1999) (noting that preponderance of evidence is standard
of proof to establish that defendant engaged in knowing
misrepresentation); see also Schlesinger v. Herzog, 2 F.3d 135,
141 (5th Cir. 1993) (In order to prevail, Plaintiffs must show
that the Defendants engaged in fraudulent practices or made
material omissions or misrepresentations . . . upon which
Plaintiffs relied, and which ultimately resulted in damages to
Plaintiffs.).
18 Cousineau, 613 P.2d at 613 (quoting W. Prosser, Law of
Torts 108, at 719 (4th ed. 1971)).
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