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Utah’s highest court considers whether home developer had a duty to give purchasers a prior soil analysis report finding that the property’s soil could not support a large structure.
Woodside Homes Corporation (“Developer”) purchased land to develop into the “Panorama Point” subdivision (“Subdivision”). One of the lots was purchased from the Church of Jesus Christ of the Latter-day Saints (“Church”). The Church had intended to build a large structure on the property, but abandoned its plans upon receiving the so-called “Delta Report”. This report found that the soil was collapsible because it contained an excessive amount of moisture and so was unsuitable to support the structure that the Church wanted to build. Therefore, the Church sold its lot to the Developer in the early 1990s and allegedly provided a copy of the Delta Report to the Developer, although the Developer claimed to have never received the Delta Report.
The Developer commissioned its own study of the soil in the Subdivision. This study also indicated the presence of collapsible soil down to about 2.5 feet deep. Therefore, the Developer dug out between six and eight feet of soil from the Subdivision. Following the regrading, an engineer inspected the property for the Developer and found that the soil was now adequate to support a house.
In 1995, Ali Yazd and Parvin Yousfi (“Buyers”) contracted to purchase a home in the Subdivision from the Developer. The Developer did not disclose to the Buyers either of the soil analysis reports. The Buyers moved into their home, and by 1996 their home had cracks in the foundation and driveway. Signs of the house’s excessive settling continued to appear over the years. The Developer attempted to remedy these problems for the Buyers. However, a home inspection by a prospective purchaser in 2002 revealed that major repairs would be needed to their home.
The Buyers filed a lawsuit against the Developer, alleging that its failure to disclose the presence of collapsible soil was a breach of contract and a fraudulent misrepresentation. The breach of contract claims were sent to arbitration, and so those claims are being separately resolved. The trial court dismissed the fraudulent misrepresentation claims. The appellate court reversed, finding that the Delta report contained material information and the Developer had a duty to disclose this information to the Buyers. The Developer appealed.
The Supreme Court of Utah partially affirmed the appellate court’s rulings and sent the case back to the trial court for further proceedings. A party making fraudulent concealment allegations must show that the nondisclosed information is material, that the nondisclosed information is known to the party failing to disclose, and that there is a legal duty to communicate the nondisclosed information. To be material, the court stated that the information must be “important”, with important being defined as information which would likely influence the judgment of a party making a purchase.
The court considered whether the Developer had a duty to disclose the Delta Report to the Buyers. The Developer had a legal duty to disclose material information to the Buyers, and so the question before the court was whether the Delta Report was material to the transaction. The Developer argued that it had never received the report and that the Delta Report was not material because the report described a larger area of land than the Buyer’s purchased.
The court found that whether or not the Developer received the report was a fact issue which needed to resolved by the lower court. The court rejected the argument that the Delta Report was immaterial because it covered a larger land area, finding that the report could have contained relevant information about the property’s soil quality. The court also found the fact that the Developer had conducted its own soil analysis did not negate that the Delta Report may have been material to the transaction. Thus, the court sent the case back to the lower court for a determination whether the Delta Report was a material fact which should have been disclosed to the Buyers.
Yazd v. Woodside Homes Corp., 143 P.3d 283 (Utah 2006).