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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

Diblik v. Marcy (08/31/2007) sp-6154, 166 P3d 23

     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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