501 P.3d 1166
Utah Ct. App.2021Background
- In 2005 Charlwood purchased and substantially remodeled a Park City home; he sold it to Thorp in 2007 under a Real Estate Purchase Contract (REPC) that expressly incorporated a Seller’s Property Condition Disclosure form.
- The Seller’s Disclosures required the seller to disclose known material defects not discoverable by a reasonable inspection; Charlwood signed the disclosures and checked “No” to multiple defect-related questions.
- Around late 2017 Thorp discovered a severely failing deck; removal revealed latent, negligent construction defects. He also discovered other latent problems (roof pitch, rot, electrical, driveway).
- Thorp sued in 2019 for defective construction, negligent misrepresentation, and fraudulent misrepresentation; Charlwood moved to dismiss invoking the economic loss rule and sought contractual attorney fees.
- The district court dismissed Thorp’s complaint, holding the economic loss rule barred his tort claims because the duties alleged overlapped with contract duties in the REPC/Seller’s Disclosures, and later awarded Charlwood partial attorney fees under the REPC.
- The Utah Court of Appeals affirmed dismissal and the fee award, and remanded to calculate appellate attorney fees for Charlwood.
Issues
| Issue | Thorp's Argument | Charlwood's Argument | Held |
|---|---|---|---|
| Whether the economic loss rule bars Thorp’s negligent misrepresentation and fraudulent misrepresentation claims | The duties at issue are common-law duties independent of the REPC (duty to disclose; developer/contractor-seller duties), so tort claims survive | The alleged duties arise from and overlap with the REPC and Seller’s Disclosures, so the economic loss rule bars tort recovery | Affirmed: economic loss rule bars both negligent and fraudulent misrepresentation because the alleged duties duplicate contractual duties in the REPC/Seller’s Disclosures |
| Whether a developer- or contractor-seller duty applied (supporting an independent tort duty) | Charlwood’s background as a real-estate developer and his remodel of the home support an inference he owed heightened developer/contractor-seller duties | The cited authority applies to new construction/developers; remodeler/seller status not plausibly alleged to impose that heightened duty here | Affirmed: Thorp failed to show Charlwood was a developer/contractor-seller for purposes of that heightened duty |
| Whether the dismissal violated Utah’s Open Courts Clause by depriving Thorp of an adequate remedy | Dismissal eliminated Thorp’s tort remedies and no effective alternative exists because REPC allegedly precludes breach claims | Economic loss rule merely channels remedy to contract law; adequate alternative (breach of contract) exists and plaintiff may not import tort remedies into a contract dispute | Affirmed: no Open Courts violation; contract remedy is adequate and alleged duties overlapped with contract |
| Whether the district court had jurisdiction to award attorney fees after Thorp’s notice of appeal and whether Charlwood was entitled to fees under the REPC | The court’s failure to address fees in the Memorandum Decision was a deliberate denial and post-appeal action was untimely; Charlwood didn’t enforce the contract so fees are improper | The memorandum did not finally adjudicate fees; the district court retained jurisdiction; invoking the economic loss rule enforced the REPC’s terms and thus qualifies as litigation to enforce the contract | Affirmed: court had jurisdiction and award was proper — invoking economic loss rule constituted enforcement of the REPC, so contractual fee clause applied |
Key Cases Cited
- SME Indus., Inc. v. Thompson, Ventulett, Stainback & Assocs., 28 P.3d 669 (Utah 2001) (describes economic loss rule as boundary between contract and tort)
- Reighard v. Yates, 285 P.3d 1168 (Utah 2012) (economic loss rule prevents tort recovery where contract covers the dispute)
- Davencourt at Pilgrims Landing Homeowners Ass’n v. Davencourt at Pilgrims Landing, LC, 221 P.3d 234 (Utah 2009) (duty analysis and privity discussion in construction context)
- HealthBanc Int’l, LLC v. Synergy Worldwide, Inc., 435 P.3d 193 (Utah 2018) (clarifies overlap principle: intentional torts barred when they completely overlap contract claims)
- Hermansen v. Tasulis, 48 P.3d 235 (Utah 2002) (seller’s common-law duty to disclose known latent defects)
- Yazd v. Woodside Homes Corp., 143 P.3d 283 (Utah 2006) (developer-contractor disclosure duty in new construction)
- Loveland v. Orem City Corp., 746 P.2d 763 (Utah 1987) (developer disclosure duty for subdivided lots/new residential construction)
- Chase v. Scott, 38 P.3d 1001 (Utah Ct. App. 2001) (defending against tort-based efforts to avoid a contract can qualify as litigation to enforce the contract)