Opinion ID: 2624019
Heading Depth: 3
Heading Rank: 2

Heading: The Disclosure Statement

Text: On April 5, 2001, before the septic tank's floats and pumps were replaced, Marcy completed a residential real property disclosure statement that contained this inquiry: To the best of your (Transferor (Seller)'s) knowledge, are there any defects or malfunctions in the [sewage system?] Marcy checked the No box. The April 16 purchase agreement stated: Buyer has entered into this agreement relying [on] . . . the information contained in the Alaska Residential Real Property Disclosure Statement, as required in AS 34.10. (The statutory reference probably should have been to AS 34.70.010.) The agreement also contained an as is clause stating: Buyer offers to purchase the property in its present condition. Diblik advances statutory and common law theories to support his contention that Marcy's disclosure statement gave rise to liability, and that the trial court erred in finding for Marcy. First, Diblik argues that the trial court erred in finding that Marcy's statement that the septic tank was not defective was neither a fraudulent nor a negligent misrepresentation. Second, because the no defect statement was contained in a disclosure statement required by statute, Diblik argues that Marcy violated AS 34.70.040(a) by not amending or supplementing the disclosure statement after he replaced the floats and pump. [9]
The trial court indicated that the purchase agreement's as is clause would not preclude liability for a defect or condition that Marcy failed to disclose. The trial court then considered whether Marcy was liable for misrepresenting the condition of the property. It found that he was not. The trial court found that Marcy did not know, and had no reason to know, at the time of closing that there was a problem with the septic tank. The court found by a preponderance of the evidence that the problem grew worse after Mr. Marcy moved out, so he would not have noticed a problem. Hence the court concluded that Marcy was not negligent in stating that the tank was not defective. Diblik argues that after the floats and pump were replaced Marcy knew, or reasonably should have known, that [Marcy was] wrong in his statutorily required disclosure statements that there were no problems with the sewage system. Diblik seems to argue that the superior court, in resolving his misrepresentation claims, erroneously relied on the as is clause. He asserts the trial court erred when it gave effect to an `as is' clause in a contract for the sale of realty, when the contract was based on substantial and material misrepresentations about the . . . condition of the property. Thus, Diblik is implicitly arguing that the trial court clearly erred in finding that Marcy's disclosure statement did not contain a fraudulent or negligent misrepresentation. One element of fraudulent misrepresentation is scienter, that is, knowledge of the misrepresentation's untrue character. [10] One element of negligent misrepresentation is the failure to exercise reasonable care or competence in obtaining or communicating the misinformation. [11] Therefore, for Diblik to prevail under either theory, he had to establish that Marcy was at least negligent in communicating an erroneous statement about the condition of the septic tank. The trial court found that because a professional engineer certified that the septic [tank] met the applicable standards after the floats and pump were replaced, Marcy had no reason to know that there was an existing problem with the tank at the time of closing. Marcy's testimony that he relied on the engineer's certification to conclude that the problems were fixed is sufficient to demonstrate lack of clear error as to this finding. Diblik's failure to persuade the trial court that Marcy acted at least negligently is fatal to his claims for fraudulent and negligent misrepresentation. We therefore conclude that the superior court did not clearly err in resolving these theories of liability against Diblik and that its discussion of the as is clause did not erroneously affect its analysis of the controlling liability issues.
Alaska Statute 34.70.040(a) requires sellers to amend a residential real property disclosure statement if information in the disclosure statement becomes inaccurate as a result of an act or agreement after the disclosure statement is delivered to the transferee. Diblik argues that Marcy was statutorily required to amend his disclosure form when Marcy discovered that the floats and pump had to be replaced. This argument is seemingly based on two theories. Both lack merit. First, Diblik argues that Marcy was required to amend his disclosure form after Marcy discovered, before closing, that [his] previous assertion that there was no defect[s] in the sewage system had been false. But as we discuss above, the trial court did not clearly err in finding that Marcy had no reason to know that this assertion was, in fact, false. Thus, Marcy's duty to amend the disclosure statement was never triggered. Second, Diblik seems to argue that Marcy was required to amend his disclosure form to list the repairs made to the floats and pump. But as Marcy points out, Diblik received a written report before closing that informed him that a new pump had been installed. Before closing, Diblik also discussed the repairs directly with the engineer hired by Marcy. Diblik seems to argue that the report and his discussion with the engineer were insufficient because they were not a supplement to the disclosure form. Assuming the statute required the disclosure form to be amended or supplemented under these circumstances, Diblik's receipt of a copy of the written report was sufficient disclosure for the purposes of the statute. Moreover, Diblik has not explained how receiving a report rather than a supplement could have possibly caused him damage.