993 F.3d 1212
10th Cir.2021Background
- In 2015 Michael and Sonja Saltman sold a vacant Park City, Utah lot to Curt Marcantel for $1,775,000; the Saltmans knew a 10-foot sewer easement (with a buried sewer pipe) crossed the property and had unsuccessfully sought its relocation.
- The Easement was publicly recorded in 1989 but was indexed incorrectly by the county recorder; multiple title companies therefore failed to find it in title searches.
- The REPC contained seller-disclosure obligations, including (a) a contract clause requiring disclosure of known, material, non-discoverable defects, (b) a catchall request for a survey "if one has been done," and (c) a Seller Disclosures Form asking whether the seller was aware of any surveys (the Saltmans answered "no").
- The Saltmans did not tell Marcantel about the Easement or provide the Survey; Marcantel learned of the Easement only when a prospective buyer heard about it from a neighbor and then reneged, and Marcantel later sold at a large loss.
- Marcantel sued for fraudulent nondisclosure, fraudulent misrepresentation, breach of contract, and breach of the implied covenant; the district court granted summary judgment for the Saltmans (adopting the Saltmans’ proposed order), and Marcantel appealed.
- The Tenth Circuit affirmed in part, reversed in part, and remanded: it held the sewer pipe/easement can be a "defect," reversed summary judgment on the fraudulent-nondisclosure and certain contract-disclosure issues, affirmed summary judgment rejecting the Trust’s obligation to produce a survey it did not possess, and upheld the district court’s adoption of the proposed order (no reversible abuse of discretion).
Issues
| Issue | Plaintiff's Argument (Marcantel) | Defendant's Argument (Saltmans / Trust) | Held |
|---|---|---|---|
| Whether the underground sewer easement (and pipe) qualifies as a "defect" triggering disclosure | Easement (and the pipe within it) is a physical imperfection that impaired development utility and thus is a defect | Easement is a legal/zoning-type encumbrance, not a "defect" sellers must disclose | Held: easement/pipe can be a defect under Utah common law because it materially impaired property quality, function, and utility |
| Whether sellers owed a duty to disclose when they did not know the buyer was unaware of the defect | Duty to disclose attaches to sellers of real property for known, material, non-discoverable defects regardless of whether seller knew buyer was unaware | No duty unless seller knew buyer lacked knowledge; duty arises only when seller knows buyer is mistaken | Held: Utah law does not require proof that seller knew buyer was unaware; duty exists where seller knew of a material, non-discoverable defect |
| Whether constructive notice from recording (indexing issues aside) defeats a fraudulent-nondisclosure claim | Constructive notice does not bar the claim here given indexing error and title-company failures; even if constructive notice existed, Utah precedent does not require it to defeat fraud | Recording imparts constructive notice; Marcantel should be charged with notice and claim is barred | Held: indexing error casts doubt on constructive notice; even if constructive notice existed, Utah cases (e.g., Christenson) support that constructive notice does not necessarily defeat a fraud claim — summary judgment on this basis was error |
| Contract claims under the REPC: (a) §10.2 disclosure clause, (b) §7(h) "Survey if one has been done," and (c) Seller Disclosures Form §6(D) ("aware of any survey?") | (a) §10.2 obliged Trust to disclose the Easement if it was not discoverable; (b) §7(h) and §6(D) required production and truthful disclosure of the Survey | (a) trust had no obligation because buyer had constructive notice; (b) §7(h) required only production of a survey in seller's possession, and Trust did not possess one; (c) Seller Disclosures Form was satisfied by returning the form | Held: (a) summary judgment improper — factual dispute whether easement discoverable; (b) affirmed for Trust — no breach of §7(h) because Trust did not have the Survey in its possession; (c) reversed as to §6(D) — a genuine fact issue exists whether Trust was aware of the Survey and thus whether its "no" answer breached the contract |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (summary-judgment burden principles)
- Anderson v. Liberty Lobby, 477 U.S. 242 (1986) (summary-judgment evidentiary standard; view evidence in light most favorable to nonmoving party)
- Mitchell v. Christensen, 31 P.3d 572 (Utah 2001) (limited caveat emptor where defects not discoverable; cited for reasonable-inspection standard)
- Hermansen v. Tasulis, 48 P.3d 235 (Utah 2002) (seller duty to disclose known material defects that are not discoverable)
- Yazd v. Woodside Homes Corp., 143 P.3d 283 (Utah 2006) (expands disclosure duty to builder-contractors and recognizes materiality may involve adjacent-property conditions)
- Anderson v. Kriser, 266 P.3d 819 (Utah 2011) (seller must have actual knowledge of defect for fraudulent nondisclosure)
- Christenson v. Commonwealth Land Title Ins. Co., 666 P.2d 302 (Utah 1983) (constructive notice and fraud: failure to examine public records does not necessarily defeat fraud claim)
- Amoco Prod. Co. v. United States, 619 F.2d 1383 (10th Cir. 1980) (doctrine of constructive notice should be applied reluctantly)
- Flying J Inc. v. Comdata Network, Inc., 405 F.3d 821 (10th Cir. 2005) (district courts may adopt prevailing party’s proposed findings but should be cautious)
- Burke v. Regalado, 935 F.3d 960 (10th Cir. 2019) (abuse-of-discretion review for district court’s adoption of opposing party’s proposed pretrial order)