2010-624 Stephen C. Wyle v. Scott Lees & a.

No. 2010-624

Carroll

decision of the Trial Court (Houran DUGGAN, J. The defendants, Scott and Christina Lees, appeal a

Conway. The defendants lived in one unit and rented the other for income. In Cooper Cargill Chant, P.A. purchased a two-unit apartment building located at 38 Oak Street in North The trial court found the following facts. In 2002, the defendants

Melendy & Lee, P.A.

for negligent misrepresentation. We affirm. damages to the plaintiff, Stephen C. Wyle, following a bench trial on his claim , J.) finding in favor of and granting

brief and orally), for the defendants.

for the plaintiff.

page is: http://www.courts.state.nh.us/supreme. a.m. on the morning of their release. The direct address of the court's home reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00 to press. Errors may be reported by E-mail at the following address: editorial errors in order that corrections may be made before the opinion goes Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any Readers are requested to notify the Reporter, Supreme Court of New well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule 22 as to purchase, the plaintiff met with Lees, who assured him that he had done p. 2 permits?” The defendants answered, “No.” During visits to the property prior “Are you aware of any modifications or repairs made without the necessary they completed a property disclosure statement, which included the question, The defendants listed the property for sale in 2007. As part of the listing,

requirements have been satisfied.” defendants that “[s]ave for acceptable field changes[,] the site plan defendants’ bond money for the project on July 6, 2007, and informed the required by the site plan approval. Nonetheless, the town returned the related to whether there were fewer parking spaces on the property than officials visited the property a number of times in 2006 and 2007. These visits After the completion of construction, town planning and zoning board

required by the site plan approval. construction reduced the number of parking spaces below the minimum defendants again failed to secure the necessary building permits and the the renovation did not meet building and life safety codes. Additionally, the necessary permitting. However, the construction methods used to complete 2 Lees again hired the contractor both to complete construction and obtain any recommended transforming one of the two new garage bays into a bedroom. regarding the possibility of adding more space to the new unit. The contractor In the summer of 2004, the defendants approached the contractor

new unit. construction in the spring of 2004, at which point the defendants occupied the town’s building inspector never inspected the unit. The contractor completed Additionally, because the defendants did not obtain a building permit, the the defendants did not obtain either prior to building or occupying the unit. selectman’s certificate of occupancy were required prior to any use. However, January 2004. Both notices of approval provided that a building permit and a unit, was granted in November 2003 and final approval was obtained in provided for six parking spaces including the two-car garage underneath the permit for the garage only. Conditional approval for the site plan, which that site plan review was necessary prior to adding a third unit and issued a breezeway attached to existing [building].” The town informed the contractor application for a “28 x 28 2 car garage with upstairs apartment with a 10 x 8 In August 2003, Lees and the contractor submitted a building permit

necessary permitting. hired the contractor to accomplish all construction work, including the property. This new unit was to include a two-car garage underneath it. Lees approached a contractor to add a third, larger apartment to the back of the 2002 or 2003, the defendants sought to expand the building and Scott Lees pursuant to RSA 507:7-d (2010), a DeBenedetto p. 3 asked.” The defendants filed a special plea asserting comparative negligence permits; and (2) Lees’s verbal representation that, “I did everything the town which provided that all building modifications were done with the necessary misrepresentations: (1) statements on the defendants’ property disclosure form, negligent misrepresentation. The plaintiff based his claim upon two alleged The plaintiff then brought a single claim against the defendants for

2008, which was granted on October 21. violations, the plaintiff requested a conditional occupancy permit on October 7, and made the site compliant with site plan regulations. After correcting the plaintiff was ordered not to occupy the unit until he corrected the violations revealed numerous building and life safety code violations. As a result, the by the town building inspector and fire chief in September 2008, which removal of a garage door from the new unit. The entire property was inspected commercial arena.” Id the town code enforcement officer raising questions regarding the legality of the. (quotation omitted); see Barton, Drowning in a Sea of better suited than tort law for dealing with purely economic loss in the Approximately six weeks after closing, the plaintiff received a letter from understanding that contract law and the law of warranty, in particular, is N.H. 791, 794 (2007) (quotation omitted). The doctrine “is based on an with the contract relationship.” Plourde Sand & Gravel v. JGI Eastern, 154 pursuing tort recovery for purely economic or commercial losses associated remedies principle that operates generally to preclude contracting parties from from recovering damages. The economic loss doctrine is a “judicially-created Specifically, they argue that the economic loss doctrine precludes the plaintiff The defendants first challenge the trial court’s award of damages.

damages to the plaintiff. This appeal followed. Following a two-day bench trial, the trial court issued an order awarding The defendants deeded the property to the plaintiff on July 1, 2008. also filed a motion in either remedied by the defendants or waived by the plaintiff prior to closing. limine seeking to preclude economic loss damages. apportionment to a number of parties, including the plaintiff. The defendants specific concerns regarding the property to the defendants. The concerns were CLD Consulting Eng’rs comprehensive home inspection performed and sent a thirty-one item list of, 153 N.H. 793 (2006), and a motion in limine seeking May 1, 2008. After entering into the agreement, the plaintiff had a statement, see DeBenedetto v. The defendants and plaintiff executed a purchase and sale agreement on

tax card for the property prior to purchase. “everything the Town asked me to do.” The plaintiff also reviewed the property p. 4 4

those that focus upon performance of the contract. Id claims that center upon an alleged inducement to enter into a contract from

Many courts have distinguished those negligent misrepresentation differentiates between negligence claims based merely upon the breach of a consistent with the principles behind the economic loss doctrine. Indeed, it performance”), aff’d, 2 p. 4 41 F.3d 915 (7th Cir. 2001). This approach is entirely matter of the contract or otherwise relate to the offending party’s expected representations . . . do not concern the quality or characteristics of the subject misrepresentations which induce them to enter into a contract, so long as the (explaining that a plaintiff may plead tort claims “stemming from issue. See contracting parties. Courts in various jurisdictions have struggled with this Products Corp. v. Kemutec, Inc., 66 F. Supp. 2d 937, 977 (E.D. Wis. 1999) whether the economic loss doctrine bars recovery for such a claim between two. at 1815; see Rich parties to a contract, we have never addressed the issue presently before us – a negligent misrepresentation claim when the plaintiff and defendant are not While we have recognized an exception to the economic loss doctrine for loss in tort.” Barton, supra at 1814 (footnote omitted). pecuniary loss, and the economic loss rule, which forbids recovery of economic “between negligent misrepresentation, which allows for the recovery of that have faced the issue). The source of this struggle is the inherent tension F.3d 477, 480 n.3 (9th Cir. 1995) (noting the lack of consensus among courts Barton, supra at 1814; see also Apollo Group, Inc. v. Avnet, Inc., 58

As we explained in Plourde Sand & Gravel

defendant who is in the business of supplying information. Id contract. Plourde Sand & Gravel. duty owed by the defendant; or (2) a negligent misrepresentation made by a in tort unless he is owed an independent duty of care outside the terms of the “special relationship” between the plaintiff and the defendant that creates a As such, the rule precludes a harmed contracting party from recovering loss recovery may be permitted in such a situation only where there is: (1) a Plourde Sand & Gravel, 15 p. 4 4 N.H. at 795. However, we noted that economic the doctrine to apply even in the absence of a contract between the parties. , many courts have expanded

of the most confusing doctrines in tort law. Barton, supra at 1789. have expanded its application to other tort cases. Id. However, it remains one with the advent of products liability, many states, including New Hampshire,

sale or each party’s duty to the other” (quotation and ellipsis omitted)). remedy where “it is impractical or impossible to negotiate either the terms of a to allocate risks and costs of the potential nonperformance,” tort law provides a (explaining that while contract law presumes that contracting parties “are able Misrepresentation Claims, p. 4 41 Wm. & Mary L. Rev. 1789, 1796-97 (2000) Contract: Application of the Economic Loss Rule to Fraud and Negligent p. 5 5

United Intern. Holdings v. Wharf (Holdings)

Such allegations would be barred by the economic loss doctrine. See recharacterize a breach of contract claim as a negligent misrepresentation. breached promise to perform the terms of the contract or attempt to misrepresentations. when purchasing the unit. The plaintiff’s allegations do not merely relate to a to shield liability in tort for the party’s deliberate or negligent purchase and sale agreement and that he relied upon these representations of real property with an agreed upon closing date and the defendant situation also is a tortfeasor and may not utilize the law of contract established that these representations induced the plaintiff to enter into the (barring plaintiff’s fraud claim where parties entered into a contract for the sale transaction with a third party. The breaching party in this latter that the defendants had obtained all necessary permits. The evidence further claim”); Home Valu, Inc. v. Pep Boys other party would act in reliance on that information in a business, 213 F.3d 960, 964-6 p. 5 5 (7th Cir. 2000) misrepresented that the premises were licensed for immediate occupancy and as the relevant promises” and was thus “indistinguishable from the contract into a multi-part deal because the complaint “name[d] the terms of the contract Here, the evidence at trial established that the defendants negligently the plaintiff’s tort claim based upon the defendant’s alleged promise to enter Corp. v. Eastern Ohio Paving Co., 139 F.3d 1080, 1088 (6th Cir. 1998) (barring situation where it appears GBJ naturally flow from the breach. It is an altogether different party, but limits the breaching party’s liability to damages that duty, the law of contract rightly does not punish the breaching

has negligently given false information with knowledge that the intentionally failed to disclose a material past or present fact, or

2000), aff’d, p. 5 532 U.S. 588 (2001).

Where a negligence claim is based only on breach of a contractual

material false representations of past or present fact, has into a contract but, in actuality, one party has deliberately made

not duplicitous of the breach of contract claim.” Id. at 891. misrepresentation of present fact serves as an inducement for the contract, it is failure to perform under the contract”). In other words, “[w]here the the basis for the breach of contract claim or reiterate the breaching party’s frequently barred by the doctrine “either restate the underlying defect that is dissenting in part) (collecting cases and explaining that the misrepresentations Industries, 223 F.3d 873, 894 (8th Cir. 2000) (Lay, J., concurring in part and the material terms of the agreement. See Marvin Lumber and Cedar Co. v. PPG their agreement, and those claims that are entirely separate and distinct from contractual duty, the risks of which could have been allocated by the parties in p. 6 6

plaintiff proved the elements of a negligent misrepresentation claim, including comparative negligence. See The defendants next argue that the trial court erred in finding that the implicitly concluded that the defendants failed to prove their allegations of Based upon this determination and the record before it, the trial court II

the trial court failed to address their request for apportionment of damages. court may consider it). Accordingly, we reject the defendants’ argument that

including the plaintiff. The defendants filed both a pre-trial DeBenedetto their request for apportionment of damages among all negligent parties, The defendants also argue that the trial court erred by failing to address comparative negligence must be supported by “adequate evidence” before a defendant “may not easily shift fault” under RSA 507:7-e and allegations of (quotation omitted)); see also DeBenedetto, 153 N.H. at 804 (explaining that a a court is presumed to have made all findings necessary to support its decree” Inc., 122 N.H. 757, 7 p. 6 61 (1982) (noting that “in the absence of specific findings,

found the defendants alone liable. building inspector, and the defendant’s contractor.” Instead, the trial court basis among all negligent parties, including the plaintiff himself, the plaintiff’s requested ruling of law that damages “must be apportioned on a percentage negligence of any other parties, the court did not adopt the defendants’ While the trial court did not make specific factual findings regarding the defendant in accordance with the proportionate fault of each of the parties.” amount of damages to be awarded to each claimant and against each 507:7-e, I(a) (2010) provides that “if there is no jury [the court] shall find, the performance of the contract. Marvin Lumber and Cedar Co. statement and motion in limine seeking apportionment of damages. RSA alleged “independent, affirmative misrepresentations unrelated” to the induced him to enter into the agreement. In other words, the plaintiff’s claim unrelated to any material terms of the actual purchase and sale agreement, Instead, the plaintiff alleged that the defendants’ misrepresentations, the plaintiff economic loss damages. breach of contract claim). Accordingly, the trial court did not err in awarding that its electronic transmitter had received FCC-type approval – from his (distinguishing the plaintiff’s fraud claim – that the defendant misrepresented Amer. v. Jerrold Electronics, 42 p. 6 6 F. Supp. 361, 364 (E.D. Pa. 1977) (Lay, J., concurring in part and dissenting in part); see Closed Cir. Corp. of , 223 F.3d at 895

work because the obligation to construct the house was created by contract). (N.M. Ct. App. 1994) (dismissing plaintiff’s claim for negligent construction subsequently backed out of the sale); Kreischer v. Armijo, 884 P.2d 82 p. 7 7, 829 7

and that such reliance was justified. See undertake further investigation because of the defendants’ representations, following his purchase. Accordingly, we uphold the trial court’s findings. record, the trial court could reasonably have found that the plaintiff did not necessary permits required the plaintiff to make the property compliant that the plaintiff proved causation, as the defendants’ failure to obtain the which showed that they were being taxed and occupied. Based upon this building inspection performed and also relied upon tax bills for the units, Snierson, 145 N.H. at p. 7 78. The record also supports the trial court’s finding concluding that the plaintiff justifiably relied upon the written disclosures. See justifiably relied on the misrepresentations. The plaintiff had a professional The record also supports the trial court’s finding that the plaintiff constitute warranties, such a warning does not preclude the finder of fact from purchase and sale agreement and disclosure form warned that they did not own knowledge.”). Additionally, while the defendants claim that both the material statements of fact concerning matters peculiarly within the seller’s 116 N.H. 690, 691 (1976) (“A purchaser generally is justified in relying on

When viewed in the light most favorable to the plaintiff, see

representations. Cf. Snierson, 145 N.H. at p. 7 78. found, the defendants knew or should have known of the falsity of their are lacking in evidentiary support or tainted by error of law. Guyotte v. O’Neill certificate of occupancy were required prior to any use. Thus, as the trial court matter of law and uphold the findings and rulings of the trial court unless they approval and final approval for the site plan stated that a building permit and a support the plaintiff’s claim. We review sufficiency of the evidence claims as a The defendants essentially contend that the evidence was insufficient to without the required permits, the trial court found that both the conditional that they were not actually aware of any modifications or repairs accomplished evidence was sufficient to support his claim. Although the defendants claim id., the

Id. judgments on the credibility of witnesses and the weight to be given testimony. 15 p. 7 7 N.H. 616, 623 (2008). We accord considerable weight to the trial court’s

them. Id. exercise reasonable care to verify the truth of his statements before making not having equal knowledge, with the intention that he will act upon it, to N.H. p. 7 73, 7 p. 8 8 (2000). It is the duty of one who volunteers information to another defendant and justifiable reliance by the plaintiff. Snierson v. Scruton, 145 such a claim are a negligent misrepresentation of a material fact by the justifiably relied upon those representations, and causation. The elements of that the defendants negligently made false representations, that the plaintiff 8

Affirmed

conclude is not sufficiently developed to warrant appellate review. See defendants devoted only one sentence of their brief to this argument, which we shield them from liability for their written misrepresentation. Moreover, the merger clause at issue applies only to verbal representations and would not DALIANIS, C.J., and HICKS, CONBOY and LYNN, JJ., concurred. herein.” We first note that even if we were to agree with the defendants, the representation, statements and agreements are not valid unless contained

misrepresentation. whether a merger clause may shield a party from liability for a negligent Blackmer, 149 N.H. 47, 49 (2003). Accordingly, we express no opinion as to State v.

misrepresentations. The merger clause provided that “[a]ny verbal purchase and sale agreement shields them from liability for any oral Finally, the defendants briefly contend that a merger clause in the