Svendsen v. Stock
Supreme Court of the State of Washington
Opinion Information Sheet
Docket Number: 69283-1
Title of Case: David E. Svendsen
v.
Gregg N. Stock and Randi R. Stock, et al.
File Date: 05/17/2001
Oral Argument Date: 11/16/2000
SOURCE OF APPEAL
----------------
Appeal from Superior Court,
King County;
96-2-10174-5
Honorable Jeffrey M. Ramsdell, Judge.
JUSTICES
--------
Authored by Gerry L. Alexander
Concurring: Charles Z. Smith
Charles W. Johnson
Barbara A. Madsen
Richard B. Sanders
Faith E Ireland
Bobbe J. Bridge
Richard P. Guy
Philip A. Talmadge
COUNSEL OF RECORD
-----------------
Counsel for Petitioner(s)
Charles K. Wiggins
Wiggins Law Office
241 Madison Ave N
Bainbridge Is, WA 98110
George A. Purdy
Simburg Ketter Sheppard & Purdy P.S.
999 3rd Ave Ste 2525
Seattle, WA 98104-4089
Counsel for Respondent(s)
Douglas S. Tingvall
Attorney At Law
Ste 450
3380 146th Pl SE
Bellevue, WA 98007-6472
IN THE SUPREME COURT OF THE STATE OF WASHINGTON
DAVID E. SVENDSEN, )
) No. 69283-1
Petitioner, )
)
v. )
) En Banc
GREGG N. STOCK and RANDI R. STOCK, )
husband and wife, and their marital community, )
)
Defendants, . )
)
CONNIE EDWARDS; JOHN L. SCOTT, INC., )
)
Respondents, )
)
GREENWOOD POINT HOMEOWNERS )
ASSOCIATION; SEATTLE/EASTSIDE )
BUILDING INSPECTIONS, INC.; and )
DAVID M. IRVINE, )
)
Defendants. )
) Filed May 17, 2001
ALEXANDER, C.J. - We granted David Svendsen's petition to review a
Court of Appeals' decision (1) affirming a judgment, based on a jury
verdict, for damages in favor of Svendsen and against John L. Scott, Inc.
and one of its agents, Connie Edwards, for Edwards' fraudulent concealment
of a defect, but (2) reversing an award to Svendsen of additional damages
and attorney fees under the Consumer Protection Act (CPA), chapter 19.86
RCW. The primary issue before us is whether a provision in chapter 64.06
RCW (the 'seller disclosure statute') exempts a real estate agent or broker
from liability to a home buyer under the CPA for fraudulently concealing
matters that are to be disclosed in a seller's disclosure statement. We
conclude that the Court of Appeals correctly determined that the statute
precludes an action against a real estate agent or broker in cases where
the claim for fraudulent concealment arises directly from the completion of
the disclosure statement. We hold, however, that it incorrectly held that
the fraudulent concealment verdict was not separable from the seller
disclosure statute violation. Because the fraudulent concealment by the
real estate agent was separate and apart from the seller's completion of
the disclosure statement, we conclude that Svendsen established the
elements of an independent cause of action against Scott and Edwards under
the CPA. Accordingly, we reverse the Court of Appeals and reinstate the
trial court's award of damages under the CPA and remand for a recalculation
of attorney fees.
I.
In August 1995, Gregg and Randi Stock listed their Lake Sammamish home
for sale with real estate agent Connie Edwards of John L. Scott, Inc. In
listing their home, the Stocks were required to prepare a statutorily
required real property transfer disclosure statement (seller disclosure
form), the purpose of which is to disclose to buyers of real estate certain
matters relating to the property which are known to the seller. See RCW
64.06.020. One of the matters that is to be disclosed is whether the
seller's property has any 'standing water{} or drainage problems on the
property.' RCW 64.06.020(I) ('SELLER'S DISCLOSURES' at *A of section '7.
GENERAL').
The Stocks were aware as early as 1991 that their property had water
problems. In that year and the succeeding year, water flowed onto their
property when a storm drain on an adjoining uphill property became blocked.
In April 1994, the drain on the adjoining property again became blocked and
caused water to back up. The water did not, however, come onto the Stocks'
property on that occasion. On all three occasions, King County workers
cleared the storm drain in response to complaints from the Stocks and other
neighbors.1 Between November 1994 and August 1995, no additional work was
undertaken by the county to assure that the water problem would not
reoccur.
While completing the seller disclosure form, the Stocks were
confronted with the question of whether the property had any 'standing
water, or drainage problems.' Ex. 6, at 4. Mr. Stock testified that he
initially answered 'yes' to this question, but changed his answer to 'no'
based on instructions from Edwards.2 The change was made after Mr. Stock
told Edwards about the past flooding problems and the activities of
employees of King County. Mr. Stock said that Edwards told him that he
could change his answer because he was not required to disclose a past
defect that had been corrected. Specifically, Edwards told him not to
disclose the history of the flooding because it 'is not happening right
now.' Verbatim Report of Proceedings (RP) (Sept. 18-19, 1997) at 146.
Although Mr. Stock deferred to Edwards in filling out the form, he asked
Edwards to disclose the prior instances of flooding to any prospective
buyers, and to tell them that 'if the drain in the neighbor's yard plugged
up to call the county.' RP (Sept. 18-19, 1997) at 254-55.
The seller disclosure form was given to Svendsen after he made an offer to
purchase the Stock's home. Despite Mr. Stock's request that Edwards
disclose the prior flooding problems to prospective buyers, Edwards failed
to make any such disclosures to Svendsen or his agent. Although Svendsen
had the home inspected, the inspector failed to note any potential
flooding problems. Consequently, in October 1995, Svendsen purchased the
Stocks' home.
In November 1995 and February 1996, the storm drain on the neighboring
property again became clogged and, as a consequence, water flowed onto
Svendsen's property. This flooding caused substantial damage to the
property. Although King County workers again cleared the drain, a county
engineer testified that the drainpipe could again become blocked by
'sticks, logs, basketballs, just about anything.' RP (Sept. 17, 1997) at
335.
Svendsen sued John L. Scott, Inc. and Edwards, together with the Stocks, a
homeowners association, and a King County building inspector. At the time
of trial, only Edwards and Scott (collectively referred to as 'Scott')
remained as defendants. Svendsen's claims against them were for liability
for fraudulent concealment, liability for negligent misrepresentation, and
violation of Washington's CPA, chapter 19.86 RCW.
Testimony was presented at trial that Edwards had independent knowledge of
the water drainage problems on the neighboring property on which the storm
drain was located. This testimony revealed that Edwards learned about
these problems in 1994 when she represented buyers of that property. Mr.
Stock testified that when he discussed the instances of prior flooding with
Edwards, she told him that she had 'seen it.' RP (Sept. 17, 1997) at 259,
285. In addition, Edwards conceded that she had witnessed 'water standing
in the {uphill neighbor's} back yard' from a clogged storm drain. RP
(Sept. 17, 1997) at 374. Edwards also testified that the buyers of that
property later told her that they had called officials at King County who
sent workers to the property to clear an obstruction from the drain pipe on
the property. She went on to say that she relied on those buyers'
assurances in forming her belief that the county had remedied the problem.
A jury found that although Scott fraudulently concealed the existence of
water and drainage problems and violated the CPA, it did not engage in
negligent misrepresentation. The jury assessed damages at $38,298, finding
Scott 95 percent at fault and the Stocks 5 percent at fault. The trial
judge thereafter entered a judgment against Scott in the amount of the jury
verdict and, in addition, entered findings of fact and conclusions of law
in support of an award to Svendsen of $6,500 in additional damages pursuant
to the CPA, RCW 19.86.090. Although Svendsen sought attorney fees under
the CPA in the amount of $27,478, the trial court only awarded him fees in
the amount of $17,500.
Scott appealed to the Court of Appeals, Division One. That court reversed
the trial court in part and affirmed it in part. Although it determined
that substantial evidence supported the jury's finding of fraudulent
concealment, it concluded that Scott had no liability under the CPA. It,
therefore, held that the Stocks were not entitled to an award of additional
damages or attorney fees. Both parties petitioned for review. We granted
Svendsen's petition, but denied Scott's petition.3
II. Analysis
Svendsen contends that the Court of Appeals erred in holding that his CPA
claim is
expressly barred by a provision in the seller disclosure statute. He
argues, additionally, that even if we hold that this statute precludes his
CPA claim insofar as it was based on Scott's involvement in preparing the
seller disclosure form, another provision in the seller disclosure statute
preserves his separate cause of action under the CPA based on Edwards'
failure to disclose to the buyer its independent knowledge of drainage
problems on the subject property. Svendsen contends, in addition, that the
trial court erred in 'failing to follow the lodestar analysis in computing
attorney fees under the CPA.'4 Pet. for Review at 18.
A. Consumer Protection Act Claim
'{T}he question of whether particular actions gave rise to a violation of
the Consumer Protection Act is reviewable as a question of law.' Keyes v.
Bollinger, 31 Wn. App. 286, 289, 640 P.2d 1077 (1982). Under Washington's
CPA, '{u}nfair methods of competition and unfair or deceptive acts or
practices in the conduct of any trade or commerce' are unlawful. RCW
19.86.020. To establish a claim under the CPA, five elements must be
established: '(1) unfair or deceptive act or practice; (2) occurring in
trade or commerce; (3) public interest impact; (4) injury to plaintiff in
his or her business or property; (5) causation.' Hangman Ridge Training
Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 780, 719 P.2d 531
(1986).
The Court of Appeals held here that a provision in the seller disclosure
statute, RCW 64.06.060, prevents Svendsen from establishing the 'public
interest element' of the CPA. It provides that 'the practices covered by
this chapter are not matters vitally affecting the public interest for the
purpose of applying the consumer protection act.' RCW 64.06.060. The
Court of Appeals read that provision to mean that because Scott's liability
stemmed from Edwards' participation in filling out the disclosure form, its
acts and omissions in this regard do not affect the public interest and
thus are not subject to the CPA .
Svendsen makes two primary arguments in support of his contention that
RCW 64.06.060 does not insulate Scott from liability under the CPA.
Svendsen first contends that the Court of Appeals misconstrued RCW
64.06.060 in concluding that Scott's actions are 'practices covered by' the
seller disclosure statute. He contends, additionally, that the Court of
Appeals erred in failing to reconcile the aforementioned statute with RCW
64.06.070, which expressly preserves a buyer's remedies 'otherwise existing
pursuant to common law, statute, or contract.'
Turning to Svendsen's first argument, Svendsen contends that the language
of RCW 64.06.060 applies only to the actions of sellers, not actions of
real estate agents or brokers. He posits that because Scott's actions, as
a broker/agent, are not 'practices covered by' the seller disclosure
statute, the statutory exemption from the CPA has no application to Scott.
In furtherance of this argument, Svendsen suggests that RCW 64.06.020
imposes a disclosure obligation on sellers only, not on agents. He points
to language in that statute indicating that the seller's disclosure
statement is 'only a disclosure made by the seller, and not any real estate
licensee involved in the transaction.' RCW 64.06.020(2). Consistent with
this mandate, the disclosure form must state that 'THE FOLLOWING ARE
DISCLOSURES MADE BY THE SELLER AND ARE NOT THE REPRESENTATIONS OF ANY REAL
ESTATE LICENSEE OR OTHER PARTY.' RCW 64.06.020(1).
Svendsen's argument is unpersuasive. We say that because it does not
take into consideration the fact that although RCW 64.06.020 applies only
to sellers, certain actions of real estate brokers and agents are practices
covered by chapter 64.06 RCW. We note in this regard that another statute
within chapter 64.06 RCW recognizes the role that agents often play in the
preparation of disclosure forms, the statute indicating that '{a}ny
licensed real estate salesperson or broker involved in a residential real
property transaction is not liable for any error, inaccuracy, or omission
in the real property transfer disclosure statement if the licensee had no
actual knowledge.' RCW 64.06.050(2) (emphasis added). By implication, it
would follow that brokers or agents would have liability, absent another
statutory provision providing an exemption from liability, if they have
knowledge that the seller made errors or omissions in the disclosure
statement.
More significantly, the fact the legislature made a point of exempting
brokers and agents from liability under the CPA for the 'practices covered
by' the seller disclosure statute, suggests it had agents and brokers in
mind. We reach that conclusion because it is unlikely that the conduct of
a single private seller would ever be within the sphere of trade and
commerce and, thus, fall under the CPA. Consequently under Svendsen's
interpretation of RCW 64.06.060-that the statute does not encompass real
estate agents or brokers-the language of the statute would be essentially
unnecessary and meaningless. Statutes must not be construed in a manner
that renders any portion thereof meaningless or superfluous. Stone v.
Chelan County Sheriff's Dep't, 110 Wn.2d 806, 756 P.2d 736 (1988) (citing
Avlonitis v. Seattle Dist. Court, 97 Wn.2d 131, 138, 641 P.2d 169, 646 P.2d
128 (1982)). In sum, it is our view that RCW 64.06.060 reflects the intent
of the legislature to preclude agents and brokers from liability under the
CPA for fraudulent concealment arising directly from their conduct in
completing the seller disclosure statement.
Svendsen's second argument has more merit. He contends that RCW
64.06.070 preserves an independent cause of action under the CPA against a
real estate agent when the fraudulent concealment is not connected to the
seller disclosure statute. That statute provides:
Except as provided in RCW 64.06.050, nothing in this chapter shall
extinguish or impair any rights or remedies of a buyer of real estate
against the seller or against any agent acting for the seller otherwise
existing pursuant to common law, statute, or contract; nor shall anything
in this chapter create any new right or remedy for a buyer of residential
real property other than the right of recision exercised on the basis and
within the time limits provided in this chapter.
RCW 64.06.070. Svendsen claims that this statute evidences the
legislature's intent to preserve for the buyer of residential property all
remedies that such a buyer would have at common law, or by virtue of
statute or contract. The remedy that is preserved, according to Svendsen,
is an independent common law cause of action under the CPA based on
fraudulent concealment by the agent/broker that arose apart from filling
out the seller disclosure form. In furtherance of this argument, Svendsen
cites to several cases that were decided prior to the adoption of the
seller disclosure statute, that stand for the proposition that an agent's
failure to disclose a known material defect in the sale of real property is
a violation of the CPA. See McRae v. Bolstad, 101 Wn.2d 161, 676 P.2d 496
(1984) (holding that a real estate agent's failure to disclose chronic
sewage and drainage problems violated CPA); Robinson v. McReynolds, 52 Wn.
App. 635, 762 P.2d 1166 (1988) (holding that a real estate agent's failure
to disclose property's lack of income potential was a violation of the
CPA); Luxon v. Caviezel, 42 Wn. App. 261, 710 P.2d 809 (1985) (holding that
the listing of a house in multiple listing service as a four bedroom house
when the septic system permit allowed only two bedrooms was a violation of
the CPA).
The Court of Appeals disagreed with Svendsen's contention that he had
a valid CPA claim that arose independently of Edwards' activities
surrounding the seller disclosure statute. In reaching its decision, that
court reasoned:
We hold that, under the facts of this case, the fraudulent concealment
verdict is not separable from the Form 17 violation. The seller disclosure
statute establishes an affirmative duty on the part of the seller to
disclose the information requested on Form 17; question 7A specifically
requests disclosure of any drainage problems. See RCW 64.06.020(1).
Moreover, Connie Edwards learned that the Stocks had experienced flooding
on their property, and advised them not to disclose the problem, while she
was assisting them in filling out the form. Had the form been filled out
properly, this lawsuit would not have arisen. In other words, the events
at issue in this lawsuit are 'practices covered by {the seller disclosure
statute.}' RCW 64.06.060.
Svendsen v. Stock, 98 Wn. App. 498, 506, 979 P.2d 476 (1999) (alteration in
original), review granted, 140 Wn.2d 1028, 10 P.3d 407 (2000).
Had the fraudulent concealment in this case occurred only as a
consequence of Edwards' participation in filling out the seller disclosure
form, the Court of Appeals would have been correct in concluding that RCW
64.06.060 bars his CPA claim. The fraudulent concealment claim, which
underlies his CPA claim, was not, however, so narrowly based. As we have
observed above, Svendsen presented evidence to the jury that Edwards
fraudulently concealed her independent knowledge of the flooding problem on
the subject property. Edwards, according to the record, became aware of
the drainage problem on the uphill property prior to the time Svendsen
purchased the Stock's home. Edwards indicated that she knew of this
problem because of her representation of the buyers of the uphill property.
Indeed, Mr. Stock and Edwards both testified that Edwards had 'seen {the
flooding problem}' during the time she represented the buyers of that
property. RP (Sept. 17, 1997) at 259, 285. Faced with this evidence, the
jury found that Scott did 'commit fraudulent concealment,' a finding that
the Court of Appeals determined was supported by substantial evidence.
Clerk's Papers at 92. The fact that Edwards had knowledge of the water
problems, independent of Edwards' involvement in preparing the seller
disclosure form, and failed to disclose this knowledge to Svendsen or his
agent provides support for the jury's determination that Scott committed
fraudulent concealment.5 That being the case, we hold that the Court of
Appeals erred when it concluded that '{h}ad the {seller disclosure} form
been filled out properly, this lawsuit would not have arisen.' Svendsen,
98 Wn. App. at 506.
Being satisfied that there was substantial evidence that the fraudulent
concealment occurred independently from the seller disclosure violation,
the next question before us is this: did Scott's fraudulent concealment, as
a matter of law, constitute a violation of the CPA, as the jury determined?
As we observed above, cases that predated the seller disclosure statute
have uniformly held that an agent or broker violates the CPA when they
knowingly fail to disclose a known material defect in the sale of real
property. The Court of Appeals distinguished these cases on the grounds
that they were decided before the seller disclosure statute took effect.
We find this distinction inapposite. While it appears the seller
disclosure statute exempts agents and brokers from liability under the CPA
for fraudulent concealment arising directly from the seller disclosure
statute, it is difficult to believe that the Legislature intended to
eviscerate preexisting protections afforded to home buyers prior to the
adoption of the seller disclosure statute. A more reasonable
interpretation of the legislature's intent is that it expressly reserved
all existing remedies for residential purchasers in RCW 64.06.070. In that
regard, our interpretation is in accord with the goal of the CPA that it
'shall be liberally construed that its beneficial purposes may be served.'
RCW 19.86.920. Indeed, Scott seems to agree with us when it concedes that
'RCW 64.06.050 does not prevent homebuyers from establishing the public
interest element of a CPA violation by other means in the context of a
fraudulent concealment claim where the concealment exists independent of
the seller disclosure statement.' Cross-Pet. & Answer to Pet. for Review
at 12.
Finally, we turn to the legal question of whether Svendsen established the
public interest requirement of the CPA. The public interest requirement is
established by evaluating several factors: (1) whether the acts were
committed in the course of defendant's business; (2) whether the defendants
advertised to the public; (3) whether the defendant actively solicited the
plaintiff, indicating other potential solicitation of others; and (4)
whether the parties occupied unequal bargaining positions. Hangman Ridge,
105 Wn.2d at 790-91. We have held that none of these factors is
dispositive nor is it necessary that all be present. Id. at 791. We
conclude that the public interest requirement of the CPA was established.
The record shows that Scott's conduct in concealing its knowledge of the
drainage problems on the property occurred in the course of Scott's
business. It also shows that Scott advertised the subject property to the
public by listing it in the multiple listing service directory. Under the
circumstances, it cannot be said that the parties occupied equal bargaining
positions.
B. Attorney Fees
Svendsen asserts that the trial court abused its discretion in not
employing a 'lodestar' analysis in determining the amount of fees he was to
be awarded under the CPA. Washington courts use the lodestar method in
determining the reasonableness of attorney fees under the CPA. Wash. State
Physicians Ins. Exch. & Ass'n v. Fisons Corp., 122 Wn.2d 299, 334, 858 P.2d
1054 (1993). Under this method, the fee is calculated by multiplying the
reasonable hourly rate by the reasonable number of hours incurred, and may
in rare instances be adjusted upward or downward at the court's discretion.
Here, Svendsen supported his request for an award of attorney fees by
submitting a declaration from his attorney in which he detailed the hours
worked, the type of work performed, the category of the attorney who
performed the work, and the fees for nonlawyer services. The attorney
calculated fees at $42,422, but segregated out the cost of pursuing the CPA
claim. This resulted in a fee request of $27,478. Svendsen contends that
the trial court appears to have rejected a lodestar analysis and instead
awarded him about one-third of his attorney fees ($16,500).6
The record is simply insufficient for us to determine how the trial court
determined the amount of attorney fees to be awarded to Svendsen. It did
not enter written findings of fact or conclusions of law to explain the
analysis it employed in determining the fee award. Faced with this record,
we remand to the trial court to enter findings of fact and conclusions of
law, which set forth the manner in which attorney fees were computed.
C. Attorney Fees on Appeal under RCW 19.86.090
Svendsen also asks us to award him attorney fees incurred on appeal.
Attorney fees are recoverable at trial and on appeal under the CPA. See
RCW 19.86.090; RAP 18.1. Having prevailed as to the merits of his CPA
claim, we conclude Svendsen is entitled under RCW 19.86.090 to be awarded
reasonable attorney fees on appeal. The clerk of this court will determine
a reasonable fee upon Svendsen's compliance with the requirements of RAP
18.1(d).
III. Conclusion
For reasons stated above, we reverse the Court of Appeals and reinstate the
judgment the trial court entered for additional damages under the CPA. We
remand the matter for a recalculation of the award of attorney fees to
Svendsen in accordance with this opinion. We also award Svendsen attorney
fees on appeal.
WE CONCUR:
1Mr. Stock testified that the flooding had caused 'three or four
inches of water' to accumulate in their garage and that water ponded in
front of their garage as much as '20 feet in diameter' and 'two and a half
feet' deep. RP (Sept. 17, 1997) at 257, 261.
2A similar change was made to question 8, which reads, 'Are there any
other material defects affecting this property or its value that a
prospective buyer should know about?' Ex. 6, at 4.
3The only issue Scott raised in its cross-appeal was its claim that
the jury's finding of fraudulent concealment was not supported by
substantial evidence.
4Because the Court of Appeals reversed the judgment in favor of
Svendsen for additional damages and attorney fees under the CPA, it did not
reach this issue.
5Our determination is buttressed by the trial's courts unchallenged
instruction to the jury on the fraudulent concealment claim to the effect
that the plaintiff need only show that an agent or broker had knowledge of
the existence of a concealed defect in the property and the agent failed to
disclose such knowledge to the buyer or the buyer's agent.
6The trial judge later increased the fees by $1,000 for services
Svendsen's attorney provided at Svendsen's motion for reconsideration.