Crow Wing County District Court File No. C7-03-404.
I. A seller who represents to a buyer that a septic system complies with applicable sewage-treatment-system rules and who has reason to know that the representations are false is liable to the buyer under the mandatory-disclosure provisions of Minn. Stat. § 115.55, subd. 6 (2004).
II. When a seller's liability under Minn. Stat. § 115.55, subd. 6(b), results from a third party's breach of contract, the seller may recover damages caused by the breach, including reasonable attorneys' fees paid to the buyer under the disclosure statute.
The opinion of the court was delivered by: LANSING,Judge
Affirmed in part, reversed in part, and remanded
Considered and decided by Lansing, Presiding Judge; Klaphake, Judge; and Parker, Judge.*fn1
The district court entered judgment against William Woods for violating the mandatory-disclosure requirements for individual sewage-treatment systems set forth in Minn. Stat. § 115.55, subd. 6 (2004). Woods appeals, arguing that the district court misinterpreted the statute, that the record does not support the district court's findings that the system was noncompliant when he sold the property and that he had reason to know of the noncompliance, and that the district court improperly limited damages for the septic-system inspector's breach of contract. Because the district court correctly applied section 115.55, subdivision 6, and the findings supporting the judgment are not clearly erroneous, we affirm Woods's liability to the buyers under section 115.55. But because the district court erred in its legal determination of the scope of damages for a negligent septic-system inspection, we reverse and remand for further proceedings on damages.
William Woods purchased a lake cabin in the fall of 1996 for seasonal use. Because his family rarely used the cabin, he decided to sell it in 2000. James and Tari Kellogg signed a purchase agreement for the property in March 2001 and closed on the sale in April 2001. An addendum to the purchase agreement stated that the "[s]eller agrees to provide buyers with a current septic inspection and warrants its compliance."
Jim Christensen, Woods's real estate agent, contracted with Wayne Anderson to inspect the septic tank, and on March 28, 2001, Anderson deemed it compliant. Anderson testified that he removed the cover from the septic tank and visually examined the tank with a flashlight. He then used a piece of rebar to comb across the bottom of the tank two or three times. He testified that gray-colored water prevented him from seeing the bottom of the tank, but, because the rebar did not catch on the bottom of the tank, he determined that it was not cracked.
The inspection was consistent with a previous disclosure statement, signed by Woods and issued in September 2000. The disclosure statement represented that the tank was in compliance with applicable laws and rules, had a 500-gallon capacity, was pumped three times a year, and had last been emptied in September 1999.
Shortly after signing the purchase agreement, the Kelloggs arranged to have the tank emptied because they had noticed, when first viewing the property, that the tank level-indicator showed that the tank was full. According to James Kellogg, the company he hired went to the site on March 28, and Anderson, who was inspecting the tank, said that it did not need emptying. Anderson disputes this claim. Between March 28 and June 4, 2001, the Kelloggs used the cabin twice. They first emptied the tank on June 4, removing 750 gallons. Although the cabin was not used between June 4 and June 22, the indicator again showed that the tank was full on June 22. On July 19 the Kelloggs had 700 gallons removed from the septic tank at 10:00 a.m. At 10:00 p.m., with no intervening activity at the cabin, the tank had ten inches of water in it.
The Kelloggs hired Arlen Sergent to inspect the septic tank in August 2001. Sergent found that the bottom of the tank was cracked and that the septic system was failing. The Kelloggs later sold the property and, for purposes of the sale, removed the septic tank in May 2002 and installed two 750-gallon tanks. When removing the old tank, Sergent noted in his report that, when the tank was emptied for the August 2001 inspection, it had ...