Daily Development for
Monday, February 8, 1999

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu

VENDOR/PURCHASER; MISREPRESENTATION; HOME RELOCATION: Seller who delivers deed to home relocation service is liable to ultimate purchaser for common law and statutory failure to disclose material latent defects in form of noisy neighbors.

Shapiro v. Sutherland, 76 Cal. Rptr. 2d 101 (Cal. App. 1998).

Seller was transferred by his employer and was unable to sell his house in a timely fashion. The employer had on contract an employee relocation service that facilitated such transfers by paying the employee for the house and later reselling it. The facts to not indicate whether the service or the employer realized any profit or loss from such sales. In this case, in fact, the property was eventually sold a year later at a price of almost $100,000 less than the service had paid plaintiff.

The gist of the case is that the seller had filled out a statutory disclosure form, listing the relocation service as the buyer, that had a space to be checked for "neighborhood noise problems or other nuisances." Apparently it was undisputed that the next door neighbors had caused difficulties for the sellers in the past with loud music and loud arguments, and that in fact plaintiffs had called the police to quell these disturbances on "a number of occasions."

The house remained vacant for a year while the relocation service attempted to sell it, and when it eventually did sell the house the relocation service passed on to the buyer the (now one year old) statutory disclosure statement given to it by seller. The relocation company did not separately indicate any neighborhood noise problems because it had no knowledge of any such problems. It further disclosed to the buyers that it had not been in occupancy of the house and was not in a position to report on a number of items that an ordinary seller might have to disclose.

When the neighbors started acting up again, the buyer discovered the long standing nature of the problem and brought suit against the relocation service and the seller. The trial court dismissed as to both defendants.

On appeal: held: Reversed as to sellers, but affirmed as to the relocation company. The relocation company stays in the case, however, because the buyer also sued to rescind based upon the misrepresentation by the seller.

The court held that the seller could be found liable for the tort of "deceit by indirection" as described in Section 533 of the Restatement of Torts, 2d. The seller knew or should have known that its misrepresentation would be passed on to others by the relocation company and that these others might rely upon it. It did not matter that the seller did not know who these others might be. The court emphasized that the seller executed and delivered to the relocation company a deed with the grantee's name blank. This does not, however, appear to be a critical issue, because the overall circumstances of the transaction otherwise would have put the seller on notice that the disclosure form would be relied upon by others.

The relocation company had no statutory or common law duty to look behind the representations made by the seller and had no independent knowledge of the noise problems, so it had no duty of disclosure itself.

Comment 1: Although, on its face, the case seems to proceed logically, we must keep in mind that the seller filled out the disclosure statement at a certain time and place, and that it was used much later and under circumstances over which the seller had no control. This leaves a tremendous amount of "play in the joints" in terms of both causal links and foreseeability. The court paints one picture of the facts for us here, but of course there were many other possibly relevant facts occurring over the course of the year since the seller filled out its form. Shouldn't there be some formal limit on the degree to which persons who receive statutory disclosure forms can transmit them to relying parties?

Comment 2: Another problem is the matter to be disclosed itself. The court points to another California case that requires disclosure of noise problems that amounted to a common law nuisance. But it does not rule here that the noise problems alleged in this case had to reach that level. Shouldn't it have done so? Every little dispute between neighbors ought not to be construed as a significant issue affecting value of real estate. Neighbors and attitudes come and go. One owner's loud neighbor may turn out to be the perfect party playmate for the next owner. Only when the noise problems amount to such an offense that they are independently actionable as a nuisance is it appropriate to conclude that they are so offensive to the average landowner that they warrant disclosure. There should be a "case within a case" in the trial court on that issue here.

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