Lisa M. Brown, Respondent, v. Diana G. (Miller) Johnson, Appellant.
[1] Costs - Attorney Fees - Contractual Right - Tort Claim. Attorney fees may be awarded to the prevailing party on a tort claim if the claim is based on a contract containing an attorney fees clause.
[2] Costs - Attorney Fees - Contractual Right - Action on a Contract - What Constitutes - Test. For purposes of awarding attorney fees to a prevailing party on the basis of a contractual attorney fees clause, an action is on a contract if the action arose out of the contract and the contract is central to the dispute.
[3] Costs - Attorney Fees - Contractual Right - Action on a Contract - Purchase and Sale Agreement for Real Property - Misrepresentation of Condition of Property. An action for misrepresentation of the condition of property sold under a purchase and sale agreement based on a duty created by the agreement constitutes an action on the agreement for purposes of an attorney fees clause contained in the agreement.
[4] Vendor and Purchaser - Earnest Money Agreement - Merger - Into Deed - In General. In general, the terms of a real estate purchase and sale agreement merge with the fulfillment deed and have no independent effect after the deed is executed and delivered.
[5] Vendor and Purchaser - Earnest Money Agreement - Merger - Into Deed - Exceptions. The merger doctrine, under which the terms of a real estate purchase and sale agreement merge with the fulfillment deed and have no independent effect after the deed is executed and delivered, does not apply (1) in regard to an action on the agreement based on fraud or mistake or (2) where the agreement provisions are not contained in or performed by the execution and delivery of the deed, are not inconsistent with the deed, and are independent of the obligation to convey title to the property.
[6] Vendor and Purchaser - Earnest Money Agreement - Merger - Into Deed - Attorney Fee Provision. An attorney fee clause in a real estate purchase and sale agreement remains enforceable in regard to an action based on the agreement for misrepresentation of the condition of the property sold thereunder notwithstanding the execution and delivery of a deed in fulfillment of the agreement. For purposes of such an action, the attorney fee clause does not merge with and is not extinguished by the deed.
Nature of Action: A purchaser of residential real property sought damages from the seller for misrepresentation Nov. 2001 BROWN v. JOHNSON 57
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Matthew F. Davis (of Demco Law Firm), for appellant.
Gary W. Brandstetter, for respondent.
Baker, J. - Diana Miller Johnson appeals a judgment entered on a verdict that she misrepresented the condition of her home when she sold it to Lisa Brown. Brown cross-appeals her limited award of attorney fees. Because Johnson concedes that Brown proved some acts of misrepresentation and substantial evidence supports the award of damages, we affirm on those issues. However, we reverse the refusal to award attorney fees based on the parties' purchase and sale agreement.
I
After a long search, Lisa Brown found her dream house listed for sale by Diana Miller Johnson. It was described as a completely remodeled three-bedroom, two-and-a-half bath home on five acres with a three-story barn and possible mother-in-law apartment in another outbuilding. Included were a central vacuum system, master suite with private bath, picture-perfect deck, and beautiful landscaping.
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Brown purchased the property. After taking possession, she discovered substantial defects in the house, including water leaking in her front room and in the basement, exposed wiring, and a second-story addition, built without the benefit of permits, that rendered the house structurally unsound. She reported her discoveries to the real estate agent and was advised that neither the agent nor Johnson would take any remedial action.
Unable to make the necessary repairs, Brown eventually left the house to her mortgagee, which later sold it at short sale for just over half of Brown's purchase price. Brown sued Johnson for misrepresentation. The jury awarded Brown $105,000 in damages. Johnson appeals. Brown cross-appeals the trial court's limited award of attorney fees.
II
Brown argues that the trial court erred in limiting her attorney fee award to only those fees relating to misrepresentations about the septic system. She contends that she is entitled to fees because the parties' purchase and sale agreement provided for attorney fees to the prevailing party in the event of a dispute. We agree.
[1-3] If an action in tort is based on a contract containing an attorney fee provision, the prevailing party is entitled to attorney fees.«1» An action is "on a contract" if (a) the action arose out of the contract; and (b) if the contract is central to the dispute.«2» In Edmonds v. John L. Scott Real Estate, Inc., we upheld an award of attorney fees to a plaintiff who sued for breach of fiduciary duty and other tort claims when her real estate broker failed to return her earnest money on termination of a transaction, and instead disbursed it to
«1» Edmonds v. John L. Scott Real Estate, Inc., 87 Wn. App. 834, 855, 942 P.2d 1072 (1997).
«2» Edmonds, 87 Wn. App. at 855.
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himself and to the seller.«3» We concluded that her action was on a contract because her claims arose out of the duty created by her buyer/broker agreement and the broker's drafting of the earnest money agreement.«4» Because the agreement contained an attorney fee provision, Edmonds was entitled to fees.
Here, the purchase and sale agreement between Brown and Johnson stated at paragraph 28:
If Buyer, Seller, Listing Agent or Selling Licensee institutes suit concerning this Agreement, including, but not limited to claims brought pursuant to the Washington Consumer Protection Act, the prevailing party is entitled to court costs and a reasonable attorney's fee. In the event of trial, the amount of the attorney's fee shall be fixed by the court.
Brown's action for misrepresentation arises out of the parties' agreement to transfer ownership of Johnson's home to Brown.«5» Moreover, the purchase and sale agreement was central to her claims.
[4] Johnson argues that Brown is not entitled to fees because the purchase and sale agreement merged with the deed upon transfer and the deed does not provide for attorney fees. The doctrine of merger in the context of real property transfers deals with the transfer of title and accompanying covenants.«6» Under the doctrine, the terms of a real estate purchase and sales agreement merge into a deed.«7» This recognizes parties' rights to change the terms of
«3» Edmonds v. John L. Scott Real Estate, Inc., 87 Wn. App. 834, 842, 855-56, 942 P.2d 1072 (1997).
«4» Edmonds, 87 Wn. App. at 855.
«5» Johnson's contention that Brown's claim arises solely out of the disclosure statement is not accurate. In fact, the action is a common law action for misrepresentation of which Johnson's failure to disclose on the disclosure statement was but one act among several acts and omissions by Johnson culminating in the jury's verdict for Brown.
«6» See generally 18 William S. Stoebuck, Washington Practice: Real Estate: Transactions § 13.2 (1995). See, e.g., Harris v. Ski Park Farms, Inc., 62 Wn. App. 371, 814 P.2d 684 (1991) (in construing the meaning of a deed and resolving issue of right of way, provisions of the sale agreement merged into the deed).
«7» Barber v. Peringer, 75 Wn. App. 248, 251, 877 P.2d 223 (1994).
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their contract at any time prior to performance.«8»
In Barber v. Peringer,«9» we held that the attorney fees spent by the buyer of real property in quieting title to a section of the driveway across the property could not be recovered against the seller because all issues concerning title had merged upon execution and delivery of the deed. Likewise, in Barnhart v. Gold Run, Inc.,«10» the court affirmed the trial court's denial of fees to plaintiffs, who sued to establish their right to use a strip of land held by adverse possession by their neighbors. The court held that because the dispute involved terms central to the deed, the purchase and sale agreement merged into the deed and the parties could no longer rely on the agreement to recover attorney fees.«11»
[5, 6] But the doctrine of merger has its exceptions, one of which includes actions based on fraud or mistake.«12» The rule also does not apply where terms of a purchase and sale agreement are not contained in or performed by the execution and delivery of the deed, are not inconsistent with the deed, and are independent of the obligation to convey.«13» In this case, Brown's action for misrepresentation does not relate to title or any other terms contained in the deed and therefore falls within the doctrine's exceptions. We reverse and remand to the trial court for an award of reasonable attorney fees to Brown.
The remainder of this opinion has no precedential value and will not be published.«14»
Grosse and Ellington, JJ., concur.
«8» Barber, 75 Wn. App. at 251.
«9» 75 Wn. App. 248, 877 P.2d 223 (1994).
«10» 68 Wn. App. 417, 843 P.2d 545 (1993).
«11» Barnhart, 68 Wn. App. at 424.
«12» Davis v. Lee, 52 Wash. 330, 331, 100 P. 752 (1909).
«13» Barber, 75 Wn. App. at 251-52.
«14» RCW 2.06.040.