                                                                                                  i4 it ED
                                                                                            muR  OF APPEALS
                                                                                              DIVISION T1
                                                                                        201 SEP 23      AM 9: 33
    IN THE COURT OF APPEALS OF THE STATE OF WASHIAT


                                              DIVISION II

 ERIC and SUSIE KIM, a married couple,                                   No. 44430 -5 -II


                                 Appellants,                        UNPUBLISHED OPINION


          v.



 SHELLY and JOHN DOE FOREST,


                                 Respondents,
 And


 RE MAX PARKSIDE; BECKIE and JOHN
 DOE STEPHENS and their marital
 community; and JOHN DOES 1 - 5,

                                 Defendants.


         BJORGEN, A. C. J. —   Eric and Susie Kim appeal an order dismissing on summary

judgment their suit against Shelly Forest for fraud, negligent misrepresentation, and breach of

contract, arising out of moisture problems the Kims experienced in the new home they purchased

from Forest. The Kims argue that genuine issues of material fact remain as to whether Forest

installed a drainage system as promised in an addendum to the purchase and sale agreement


 Agreement) and whether Forest engaged in fraud or negligent misrepresentation with respect to


that system. The Kims also appeal from the trial court' s imposition of sanctions under Civil


Rule ( CR) 11 against their attorney, contending that their suit had a sufficient factual basis, that

their attorney conducted a reasonable inquiry into the underlying facts, and that they did not file

the suit for any improper purpose.

         Because the Kims presented no evidence to the trial court that Forest made a false


statement of material fact, and a one -year warranty limitation in the Agreement forecloses their

breach   of contract claim, we affirm   the   grant of   summary judgment to Forest. Because the
No. 44430 -5 -II



imposition of sanctions against their attorney did not substantially affect the Kims' rights or

interests, and their attorney did not appeal the trial court' s CR 11 order, we decline to consider

the sanctions imposed.

                                                     FACTS


        The Kims made an offer to purchase a house, then under construction, from Forest in


January 2006. The Kims' agent prepared the Agreement using preprinted Northwest Multiple

Listing Services forms with handwritten modifications. The Agreement included a " pre- closing

inspection" clause and an exclusive construction warranty limited to one year. Clerk' s Papers

 CP) at 56 -59.


        The Kims hired licensed professional inspector Kim Martin to inspect the house before


closing. Among other problems, Martin noted standing water in the crawl space and

  r] ecommend[ ed   that] this   condition   be   resolved prior   to closing."   CP at 130. Martin' s report,


dated March 27, 2006, also


        recommended that any deficiencies noted in the report and the components /systems
        related to these deficiencies be evaluated, inspected and' repaired as needed by
        licensed contractors /
                             professionals PRIOR TO THE CLOSE OF ESCROW. Further
        evaluation PRIOR to the close of escrow is [ also] recommen[ d] ed s[ o] a properly
        licensed professional can evaluate our concerns further and inspect the remainder
        of the system or component for additional concerns that may be outside our area of
        expertise or the scope of our inspection.


CP at 136. Finally, Martin' s report contained the following advisement:

        Structure has full or partial basement: Any basement may be susceptible to water
        penetration, especially when there are unprotected stair wells or window wells ... .
        Any water runoff conditions related to roof, soil or hard surfaces should be directed
        to a drainage contractor for evaluation. Follow up with the seller to determine if

        there is any past history of water in the basement, how it was mitigated and if further
        evaluation by a specialist is needed.

CP at 139.


                                                         2
No. 44430 -5 -II



           The Kims performed a " before- closing walk through inspection" with Forest on March

27. CP     at    76 -77, 121.       Following this inspection they addressed the moisture issue, along with

other deficiencies Martin had noted, in an addendum to the Agreement:


           Moisture in crawlspace will be eliminated by Stem wall was just done 3/ 25 water
           was used by builder, will dry. French drain will be installed.

           If within warranty period, crawlspace continues to retain moisture, builder will
           remedy.


CP at 77. On March 29, the Kims and Forest agreed that


          Buyers [         are]   to   confirm    the   completion          of   these items[,   including the drainage
           system]         Friday      March 31,        2006        11[ ]
                                                                a.m. so that closing can proceed as
                                                               at

           scheduled.         In the event that not all of [the agreed changes] are completed, buyer
           and seller will determine a date of closing not to exceed one week of this addendum.

CP   at   121.    The sale closed as scheduled on March 31, 2006. The Kims apparently moved into

the house immediately after closing and subsequently made various improvements to the

grounds.



           A little over two years later, in November or December 2008, the Kims discovered that

moisture had entered their basement and damaged the drywall and wood trim. They filed a claim

with their homeowner' s insurance carrier, and the insurer sent licensed professional engineer

Zdenek Trnka to investigate the problem.


           Trnka confirmed that water had seeped into the basement, observed some standing water

in the crawl space, and " did not see any conclusive evidence of the existence of a footing drain

system."         CP   at   141.    Trnka concluded that the problem resulted from a " construction defect,


possibly     combined with a             design defect," opining that "[ t]he             standing water is also an indication

that the    footing        drain   system   is   non existent or      has failed." CP at 142. Trnka did not state that




                                                                       3
No. 44430 -5 -II



he had carried out any excavation or testing to determine whether Forest had installed a drainage

system, but based his conclusions on visual observations and moisture meter readings alone.


        After receiving Trnka' s report, the insurer denied the Kims' claim. The Kims

subsequently hired professional engineer Roddy Nolten to investigate the cause of the water

seepage, assess the damage, and recommend remedial measures. Nolten' s report listed the


following " conclusions ":

        a. The sub grade was not prepared as customary in construction, using crushed rock
        sand &     a waterproof membrane.

        b. Was wire mesh installed in the slab to prevent cracking?
        c. If footing drains were installed, were they inspected to be clear of debris and able
        to drain?
        d. Was the    entire   drainage   system ...   inspected for proper installation?
        e. Was a waterproof coating applied to the concrete basement walls?
        f. From previous experiences it was determined, that a substandard drainage system
        was the cause of the water problems.


CP at 168. Nolten also did not excavate any material or conduct any test to determine whether a

drainage system existed, but based his conclusions entirely on visual observations. The Nolten

report concluded with various recommendations, including the following:

         Unearth the footing drains to see if they are functioning properly. If not, clean and
        repair pipes etc.

         Determine where the footing and roof drains lead to; if a French drain was
        installed, it could possibly be inadequate. Have a civil drainage engineer verify or
        redesign an adequate system.

         Check City inspection records for installed drainage and concrete slab installation.

CP at 168. The record does not indicate whether the Kims followed any of these

recommendations.




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No. 44430 -5 -II



            The Kims obtained an estimate of $49, 316. 16 from contractor Alaxs Kim' for the cost of

the repairs. In a subsequent sworn declaration, Alaxs Kim gave the following opinion as to the

cause of the problem:



            there was a construction and design defect in the way in which the Contractor
            installed the drain system. It appears that the drain system was never installed and
            nor did they provide water sealer on the foundation wall to prevent water intrusion
            nor    did they   provide   any                        footing. The Contractor
                                              water resistant seals on   the                          also

            did not route the drain under the house properly to allow to drain properly.

CP    at   173.    The declaration did not, however, describe any basis for these opinions other than

visual inspection.


            The Kims filed suit against Forest in May 2009, claiming intentional misrepresentation

through fraud /deceit, negligent misrepresentation, and breach of contract.2 The Kims

specifically alleged in support of their misrepresentation claims that ( 1) they had " entered into a

contract     to   purchase    the property ., ..   on the condition that [ Forest] installed a proper draining

system "; (       2) that Forest " made statements and representations to the Kims that a proper draining

system      had been installed "; (3)     that " there was not a proper draining system to allow the water to

drain properly "; (4)         that Forest " had knowledge of the falsity of [her] claims, or showed a

reckless disregard for the truth in [her] successful efforts to induce the plaintiffs into purchasing

the   subject      property ";   and ( 5) that their " right to rely on the assertions of [Forest' s] statement and

assertions were valid and justified because [ Forest was] in a superior bargaining position, and

had knowledge about the subject that the [ Kims] could not be made aware of outside of an



 1 The record does not disclose any familial relationship between Alaxs Kim and the Kims.

2 The Kims also sued Forest' s real estate agent and the company that employed the agent,
claiming professional negligence and violation of the Consumer Protection Act, chapter 19. 86
RCW. The Kims apparently settled those claims, and the parties do not contend they have any
bearing on the issues in this appeal.
                                                              5
No. 44430 -5 -II



independent    examination or     the passage of time."        CP at 277 -80. With respect to the breach of


contract claim, the Kims alleged that Forest " materially breached the contract by failing to meet

the   conditions set   forth in the   contract."   CP at 280.


         The Kims moved for summary judgment. Before the hearing on the Kims' motion,

Forest submitted declarations from several people with personal knowledge, including herself,

attesting to the installation of a foundation drainage system and " French drain" at the Kims'

house. CP at 288, 292 -96. Forest informed the Kims that she would seek sanctions under CR 11

should the Kims continue to prosecute the suit. Forest pointed out that she had adduced direct

evidence from competent witnesses with personal knowledge establishing the existence of a

drainage system, while the Kims, despite the fact that " a simple investigation could prove the


presence or absence of a      drain    system,"    had presented only speculation that the system may not

exist. CP at 239. The Kims refused to dismiss the action. The trial court denied the Kims'


motion for summary judgment.

          In October 2012, Forest sent licensed professional engineer Trent Lougheed, along with a

plumber, to investigate the problem with the drain system at the Kims' house. The plumber


inserted a camera into the exposed drain pipe in the crawl space and made a video showing the

condition of the drain system. Based on the images, Lougheed and the plumber ascertained that


the system had stopped functioning because the drain pipe had become partially crushed and

 plugged with mud" about " 14 feet downhill from the location where the French drain entered


the foundation drain line."      CP at 86, 229. The plumber marked the location on the ground


beneath which the line had become blocked. In his sworn declaration, Lougheed stated that he


could not determine the cause of the blockage without excavating the clogged portion of the


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No. 44430 -5 -II



pipe, and opined      that, in   other respects, "   the foundation appeared to be sound, intact, and


properly    constructed."     CP at 86 -87.


        Forest then moved for summary judgment and to strike portions of declarations submitted

by the Kims that Forest asserted amounted to speculation or were not based on personal

knowledge. Forest also moved for an award of attorney fees under a fee -shifting provision in the

Agreement, and for sanctions under CR 11.


        The court granted Forest' s motion to strike, because portions of the declarations

submitted    by the   Kims,      including   most of   Nolten'    s " conclusions,"   were not factual statements


and because the declarants lacked sufficient personal knowledge to assert other portions in that


they did not claim to have inspected the subsurface conditions. The court then granted Forest' s

motion for summary judgment, ruling that the Kims' evidence failed to establish a dispute as to

the existence of the drain system or whether Forest made any false statement of material fact,

and that the one -year warranty provision foreclosed their claim regarding any alleged defect in

the drain system.


        Following a subsequent hearing, the trial court granted Forest' s request for attorney fees

and CR 11     sanctions.    The     court concluded     that "[   t] he failure to make a reasonable investigation


of the contested facts before prosecuting the claims of the Kims was a violation of Civil Rule 11"

and that " a reasonable sanction for the violation is to require [ the Kims' attorney] to make

payment of the attorney' s fees and costs incurred by Forest after he was warned by Forest of her
intent to   seek   Civil Rule 11     sanctions."     CP at 273.


        The Kims timely appealed. Their attorney, however, did not file a notice of appeal in this

matter concerning the imposition of sanctions.


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No. 44430 -5 -II



                                                    ANALYSIS


          After setting forth the standard of review, we first consider the Kims' claim that the trial

court erred in granting Forest' s summary judgment motion. Concluding that summary judgment

was proper, we      then turn to the trial   court' s   imposition   of sanctions under   CR 11.   Finally, we

address Forest' s request for attorney fees and sanctions on appeal.

                                             I. STANDARD OF REVIEW


           We review a grant of summary judgment de novo and perform the same inquiry as the

trial   court.   Macias    v.   Saberhagen Holdings, Inc., 175 Wn.2d 402, 407 -08, 282 P. 3d 1069


 2012).     A party moving for summary judgment bears the burden of demonstrating that there is

no genuine issue of material fact. Atherton Condo. Apartment -Owners Ass 'n Bd. ofDirs. v.

Blume Dev. Co., 115 Wn.2d 506, 516, 799 P. 2d 250 ( 1990).                 If the moving party satisfies its

burden, the nonmoving party must present evidence demonstrating that a material fact is in

dispute. Atherton, 115 Wn.2d at 516. If the nonmoving party fails to do so, then summary

judgment is      proper.    Vallandigham v. Clover Park Sch. Dist. No. 400, 154 Wn.2d 16, 26, 109


P. 3d 805 ( 2005).


           A trial court should grant summary judgment only " if the pleadings, depositions, answers

to interrogatories, and admissions on file, together with the affidavits, if any, show that there is

no genuine issue as to any material fact and that the moving party is entitled to a judgment as a

matter of    law." CR 56( c). A material fact is one upon which the outcome of the litigation


depends in whole or in part. Atherton, 115 Wn.2d at 516.


           Summary judgment is proper only if reasonable persons could reach but one conclusion

from all the     evidence.       Vallandigham, 154 Wn.2d at 26. In reviewing a summary judgment, we


                                                            8
No. 44430 -5 -II



consider all facts, and the reasonable inferences therefrom, in the light most favorable to the


nonmoving party, here, the Kims. Vallandigham, 154 Wn.2d at 26; Atherton, 115 Wn.2d at 516.


                      II. THE TRIAL COURT' S GRANT OF SUMMARY JUDGMENT TO FOREST


          In support of their claim that the trial court erred in dismissing their suit on summary

judgment, the Kims              argue (   1) that "[   g] enuine issues of material fact are still in dispute in this

case                  whether [     Forest] properly installed the drainage            system "; ( 2)   that Forest breached
       regarding


the contract because she " promised to repair the water problem found on the inspection report

and she   failed to do      so "; (   3) that the one -year limitation on the construction warranty in the

Agreement       was    invalid because it         was not supported        by   consideration; ( 4)    that the problem with


the drain system fell within the implied warranty of habitability, and the " economic loss rule"

therefore did       not   limit Kims' remedy to the            negotiated    warranty; ( 5)   that, under the discovery

rule, the warranty period did not begin to run until the Kims discovered the water damage; and

 6) that "[ i] t is   obvious      that   fraud   was established       by the [ Kims]."   Br.   of   Appellant   at   11 - 21.   We


find none of these arguments persuasive.


A.        Fraud/Negligent Misrepresentation


          To establish their claim of fraud or intentional misrepresentation, the Kims had to


establish each of nine elements by clear, cogent, and convincing evidence:

           1)   a   representation          of                                      falsity, ( 4) the
                                                 existing fact, ( 2) its materiality, ( 3)       its
          speaker' s knowledge of its falsity, ( 5) the speaker' s intent that it be acted upon by

          the person to whom it is made, ( 6) ignorance of its falsity on the part of the person
          to    whom      the   representation      is   addressed, (   7) the latter' s reliance on the truth of the
          representation, (         8) the right to rely upon it, and ( 9) consequent damage.

Elcon Constr., Inc.         v.   E. Wash. Univ., 174 Wn.2d 157, 166, 273 P. 3d 965 ( 2012).                    Similarly, to

prevail on their claim of negligent misrepresentation, the Kims had to prove by clear, cogent, and

convincing evidence
                                                                    9
No. 44430 -5 -II



           1) That [ Forest] supplied information for the guidance of others in their business
         transactions that was false; and
          2) That [ Forest] knew or should have known that the information was supplied to
         guide [ the Kims] in business transactions; and
          3) That [ Forest] was negligent in obtaining or communicating false information;
         and

          4) That [ the Kims]           relied on   the   false information    by [ Forest]; and
                                                                                supplied

          5) That [ the Kims']            reliance on the false information supplied by [ Forest] was
         justified (that is, that reliance was reasonable under the surrounding circumstances
               and

          6) That the false information was the proximate cause of damages to [ the Kims]."

Lawyers Title Ins.        Corp.    v.   Baik, 147 Wn.2d 536, 545, 55 P. 3d 619 ( 2002) ( quoting                 ESCA Corp.

v.   KPMG Peat Marwick, 135 Wn.2d 820, 827 -28, 959 P. 2d                          651 (   1998)) (   emphasis omitted).




Thus, to prevail under either theory, the Kims had to show that they could establish by clear,

cogent, and convincing evidence at trial that Forest had told them something false.

         Affidavits on summary judgment " shall be made on personal knowledge, shall set forth

such facts as would be admissible in evidence, and shall show affirmatively that the affiant is

competent       to   testify   to the   matters stated    therein."      CR 56( e).   Mere allegations, suppositions,


unsupported opinions, and bare legal conclusions do not suffice to establish a factual dispute.

Grimwood        v.   Univ. of Puget Sound, Inc., 110 Wn.2d 355, 359 -60, 753 P. 2d 517 ( 1988).


          The only       relevant representations          Forest   made    in the Agreement        were   that the "[ m] oisture



in   crawlspace will       be   eliminated" and a "       French drain      will   be installed."     CP at 77. The Kims


never alleged that Forest made any other specific factual statement concerning the drainage

system.




          As discussed, to sustain their fraud claim, the Kims had to show that they could produce

admissible evidence that Forest had made a false statement of existing fact. With respect to

 allegations of       fraud, " a   false promise does not constitute the representation of an existing fact."

Adams     v.   King County,        164 Wn.2d 640, 662, 192 P. 3d 891 ( 2008) (               citing Stiley v. Block, 130
                                                                    10
No. 44430 -5 - II



Wn.2d 486, 505 -06, 925 P. 2d 194 ( 1996)).         The statements relied upon consist of promises of


future performance. Thus, even if proven false, they would not as a matter of law give rise to a

valid fraud claim.


         Furthermore, even viewed in the light most favorable to the Kims, the record provides no


reason to doubt the truth of either statement. The Kims do not assign error to the trial court' s


order   striking their   experts'   speculative " conclusions."   The only evidence adduced of a problem

with the drain system was the fact that it did not function properly approximately two years after

its installation. To assert from this evidence that the system did not function properly when

installed amounts to pure speculation.


         On the other hand, Forest submitted a declaration from an expert, supported by video

evidence, establishing that she did install a French drain, as well as declarations from persons

with direct knowledge who saw the entire drainage system before it was buried. The speculation


by the Kims' experts that the absence of a proper drainage system may have caused the moisture

problem does not raise any issue as to the existence of the French drain.

         The only competent evidence on the point properly before us is the Trnka report and

declaration, which established only that there was a problem approximately two years after the

installation and that the " standing water is also an indication that the footing drain system is non

existent or   has failed." CP at 142. If Forest installed a drain system that later failed, even if due


to a defect in design, materials, or workmanship, the Kims' fraud claim also fails: to establish

fraud, the Kims needed to show that they could produce " clear and convincing evidence" at trial

that Forest made a false statement that she knew to be false.




                                                        11
No. 44430 -5 -II



          The Kims' negligent misrepresentation claim fails for similar reasons. Their evidence


was entirely consistent with Forest having installed a working system that subsequently failed

due to factors beyond Forest' s control. To demonstrate a material issue of fact, the Kims had to


show the trial court some possibility that they could establish by clear and convincing evidence

at trial that Forest was negligent in communicating the assurance about the drain system to the

Kims. Without any evidence establishing the cause of the drain system' s failure, the Kims

cannot establish that Forest breached any duty of due care when she made the assurance.

Without knowing what was wrong with the system, the court could not conclude that, at the time

Forest communicated the information, it was unreasonable for her to believe that it was correct.


          The Kims have failed to demonstrate any issue as to whether Forest gave them any false

information concerning the drainage        system.   We have held that, "[ w]here there is ` a complete


failure   of proof   concerning   an essential element of     the nonmoving party'           s case,'   all other facts


become immaterial       and   the moving party is   entitled   to judgment   as a matter of         law." Fischer -


McReynolds     v.    Quasim, 101 Wn.   App.   801, 808, 6 P. 3d 30 ( 2000) ( quoting            Celotex Corp. v.

Catrett, 477 U. S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 ( 1986)).                    Thus, the trial court did


not err in granting Forest summary judgment on the fraud and negligent misrepresentation

claims.



B.        Negligent Construction/ Breach of Warranty


          The Kims attempt to avoid this conclusion by framing the factual dispute as whether

Forest " properly installed the drainage      system."    Br.   of   Appellant   at   11.    We agree that Forest' s


promise to install a drainage system implied that the system installed would function to channel


water away from the house' s foundation. Whether Forest installed the system properly,


                                                         12
No. 44430 -5 -II



however, presents an issue entirely different from fraud or misrepresentation: if Forest installed

a functioning drain system that later failed due to defects in workmanship or materials, the claim

instead implicates the construction warranty.

          Any claim based on an alleged defect in or negligent construction of the drainage system,

however, also fails as a matter of law. The warranty expressly applied to the moisture problem,

and by its terms applied only to " defects in the finished construction identified by [the Kims] in

writing   during the   one year" period       following   the   sale.   CP 57, 77 ( " If within     warranty period,

crawlspace continues      to   retain moisture,   builder   will   remedy. "). We have upheld similar time


limitations on warranties in residential real estate contracts. Griffith v. Centex Real Estate Corp.,

93 Wn.    App.   202, 210, 969 P. 2d 486 ( 1998); Southcenter View Condo. Owners' Ass' n v. Condo.


Builders, Inc., 47 Wn.     App.    767, 736 P. 2d 1075 ( 1986).          Because the Kims did not notify Forest

about the moisture problem in writing within one year of closing, the trial court also did not err

in granting summary judgment to Forest as to any claim based on the warranty provision. For

this reason, also, the trial court properly granted Forest summary judgment on the Kims' breach

of contract claim.



          The Kims, however, argue that the one year warranty limitation is invalid because it was

a subsequent modification to the Agreement not supported by consideration. We disagree.

          The argument appears to rest on the premise that Forest only demanded the warranty

limitation after the Kims insisted she address the moisture issue. The record does not support


such an assumption. The preprinted form prepared by the Kims' agent and submitted as the

original offer states   that "[   s] eller warrants that all workmanship and materials furnished by it in

the   construction of   the home     shall   be free from defects for      a period   of one   (   4) [ sic] year from the




                                                            13
No. 44430 -5 -II



date   of substantial completion of      the home."       CP   at   57 -58 (   emphasis added).    The conflicting

terms are crossed out in pen, with a handwritten notation specifying that the warranty period is

one year. The change is initialed by both parties, on a page bearing Eric Kim' s signature, and

dated January 26, 2006. The record contains no evidence that the parties had ever agreed to a

longer warranty period, and the Kims did not make that claim in their complaint.

         Furthermore, the preprinted form contains a number of handwritten modifications that


plainly benefit the Kims,        such as a $   1, 000 reduction in the purchase price, establishing that

subsequent changes resulted from negotiations supported by mutual consideration. The Kims'

argument that the one year warranty provision amounted to a subsequent modification not

supported by consideration has no basis in the record.

C.       The Implied Warranty of Habitability

         The Kims also allege that the problem with the drain system fell within the implied


warranty of habitability, and their remedy is therefore not limited to the negotiated warranty.

This argument also fails.


         Where a residential builder constructs a new residence and sells it to the first interested

buyer, " he   impliedly warrants that the foundations supporting it are firm and secure and that the

house is structurally     safe   for the buyer'   s   intended   purpose of      living   in it." House v. Thornton, 76


Wn.2d 428, 436, 457 P. 2d 199 ( 1969).            The implied warranty covers defects that " have the

potential to severely restrict the habitability of the" dwelling, Atherton, 115 Wn.2d at 520,

amount    to "   serious structural   deficiencies," or " present a substantial risk of future danger."


 Westlake View Condo. Ass 'n v. Sixth Ave. View Partners, LLC, 146 Wn. App. 760, 771 -72, 193

P. 3d 161 ( 2008).     The defects need not, however, render a dwelling completely uninhabitable or


                                                            14
No. 44430 -5 -II



actually cause the residents to move out. Westlake View, 146 Wn. App. at 771 -72; Lian v.

Stalick, 106 Wn. App. 811, 816, 25 P. 3d 467 ( 2001).

         Although "[ t]he entire realm of defects which are within the purview of this implied


warranty has     not   been precisely defined," our Supreme Court has specified that " the implied


warranty of habitability does not extend to `mere defects in workmanship' or impose upon a

builder- vendor     an obligation       to   construct a perfect residential             dwelling."   Atherton, 115 Wn.2d at


519, 522 ( quoting Stuart         v.   Coldwell Banker Comm '1              Grp.,      Inc., 109 Wn.2d 406, 417, 745 P. 2d


1284 ( 1987)).      Whether the implied warranty of habitability applies to a particular defect

generally   presents a question         for the trier   of   fact. Burbo          v.   Harley C. Douglass,   Inc., 125 Wn.


App.   684, 694, 106 P. 3d 258 ( 2005) (           noting that the question is " frequently so highly fact -

dependent that it is essentially a question of fact to be determined by the jury with careful

instructions   by   the   court").     Here, however, the factual issue does not even arise.


         First, the Kims did not plead breach of the implied warranty of habitability in their

complaint.     The     complaint contains a cause of action                 for " breach    of contract."   CP at 280. We


have held that the implied warranty of habitability is an " implied -n -
                                                                    i law, non -
                                                                               written term of a

contract of sale."        Brickler v. Myers Constr., Inc., 92 Wn. App. 269, 275, 966 P. 2d 335 ( 1998)

 emphasis omitted); accord,             Burbo, 125 Wn.        App.     at   701.       The complaint merely alleges on the

breach   of contract claim        that Forest "    fail[ ed] to   meet      the   conditions set forth   in the   contract."   CP


at   280 ( emphasis     added).      This limits the claim to breach of terms explicitly appearing in the

contract, not a term implied by law. Thus, the Kims did not properly plead the implied warranty

claim in the trial court.




                                                                  15
No. 44430 -5 -II



        Second, although the Kims raised the implied warranty of habitability in response to

Forest' s motion for summary judgment, they presented no evidence to the trial court that the

problem with the drainage system amounted to a serious structural defect, presented a substantial


risk of future harm, or had the potential to severely restrict the habitability of the dwelling, as the

precedents discussed above require. Indeed, the fact that the Kims lived there for more than two


years without noticing anything wrong strongly indicates that the problem with the drainage

system, if it even existed when the Kims moved in, did not rise to that level.3

        Finally, the policy considerations-that motivated our courts to imply the warranty of

habitability in contracts for new residential sales do not apply here. Our Supreme Court has

justified the rule on the grounds that the builder is in a better position to know of and prevent


possible defects than the buyer, who generally cannot discover such defects by inspecting the

completed structure.   House, 76 Wn.2d    at   435 -36; Atherton, 115 Wn.2d   at   521. Here, the Kims


had the opportunity to inspect the drainage system prior to completion. As discussed above, the

professional inspector the Kims hired told them about a potential problem with the system and


explicitly warned them to address it to their satisfaction prior to closing the deal. The Kims

raised this concern with Forest and negotiated a specific term in the contract assigning liability

for the risk.




3 The years that the Kims lived in the house, without complaining of any moisture problems,
included some of the heaviest precipitation ever recorded in southwest Washington, see PHILIP
MOTE, ET AL., OFFICE OF THE WASHINGTON STATE CLIMATOLOGIST, THE CHEHALIS RIVER FLOOD
 OF DECEMBER 3 -4, 2007, at 2 -3, available at http:// www . limate.washington.edu/ events
                                                           c
 dec2007floods/ OWSC_ Chehalis_ Dec08_ Flood_Report.pdf, a fact of which the trial court seems
to have taken judicial notice.
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        A buyer with actual notice of a defect has a duty to make further inquiries. Douglas v.

Visser, 173 Wn.    App.   823, 830, 295 P. 3d 800 ( 2013).        Furthermore, courts will give effect to a


waiver of a warranty, even one implied by the law for policy reasons, if it is " explicitly

negotiated between buyer and seller and set forth with particularity showing the particular

qualities and characteristics" as to which the warranty is waived. Berg v. Stromme, 79 Wn.2d

184, 196, 484 P. 2d 380 ( 1971) (     involving the warranty of fitness for a particular purpose).

        Here, the Kims had notice of a potential problem with the drainage system and either did

not investigate further prior to closing or did so and found the issue addressed to their

satisfaction. They negotiated a provision in the contract specifically assigning liability for the

risk of moisture intrusion in the basement. That provision limited their right to recover from

Forest for problems with the drainage system to problems arising within one year of closing.

        Assuming, then, that the alleged defect falls within the implied warranty of habitability,

the Kims waived any implied warranty claim by knowingly and intelligently negotiating an

express warranty covering the particular risk involved. The negotiated warranty limitation

period expired before the Kims notified Forest of the moisture intrusion. Thus, had the Kims


properly pleaded the implied warranty claim, it would have failed as a matter of law. The trial

court did not err in dismissing the claim on summary judgment.

D.      The Independent Duty Doctrine

        The Kims argue also that the " economic loss rule" did not limit their remedy to the

negotiated   warranty. Br.    of   Appellant   at   20. The "   economic   loss   rule,"   more properly called the

 independent    duty   doctrine," is "`   an analytical tool used by the court to maintain the boundary

between torts   and contract. '     Elcon Constr.,      174 Wn.2d at 165 ( quoting Eastwood v. Horse


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Harbor Found., Inc., 170 Wn.2d 380, 416, 241 P. 3d 1256 ( 2010) (                            Chambers, J., concurring).

Under this rule, the plaintiff is limited to the remedy provided by the contract where " the parties'

relationship is       governed   by    contract and   the   loss   claimed    is   an economic      loss," meaning that the


damages alleged consist of the cost of repairing the defective property itself rather than personal

injury or damage to other property. Alejandre v. Bull, 159 Wn.2d 674, 686, 153 P. 3d 864

 2007).


          The Kims apparently mention the rule in response to Forest' s argument that the

independent duty doctrine forecloses the Kims' negligent misrepresentation claim.4 While

Forest' s argument on this point may or may not have merit, see Donatelli v. D.R. Strong

Consulting Eng' rs,       Inc., 179 Wn.2d 84, 97 -98, 312 P. 3d 620 ( 2013) (                   discussing when the

independent      duty   doctrine bars     a negligent misrepresentation claim),                 the rule has no bearing on

our analysis. The Kims' negligent misrepresentation claim fails regardless of the independent


duty doctrine because, as discussed above, they point to no evidence that Forest gave them any

false information. The trial court did not err in dismissing the negligent misrepresentation claim.

E.        The Discovery Rule


          Finally, the Kims argue that, under the discovery rule, the warranty period did not begin

to run until the Kims discovered the water damage. We disagree.




4 The trial court also stated, as an alternative ground for dismissing the fraud and negligent
misrepresentation claims, that the " independent duty rule does bar the plaintiffs' tort claim."
Verbatim Report         of   Proceedings ( VRP) ( Dec. 21, 2012)             at    21.   With respect to the fraud claim,
this   appears   to   misstate   the   law. Elcon Constr., 174 Wn.2d                at   165 -66 ( " Even   in the real property
context, where we have been the least hesitant to apply the [ independent duty] doctrine, we have
repeatedly recognized a fraud claim to be outside the doctrine' s scope, allowing such claims to
be decided based         on established     tort precedent. ").         Because the trial court properly ruled that the
fraud claim fails for lack of evidence of any false statement of existing fact, the
misunderstanding concerning the independent duty doctrine is immaterial.
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         The discovery rule applies to " construction contract claims involving latent construction

defects," 1000 Virginia Ltd. Partnership           v.   Vertecs   Corp., 158 Wn.2d 566, 578 -79, 146 P. 3d 423

 2006), and provides that " a cause of action accrues when a plaintiff discovers, or in the exercise


of reasonable     diligence,   should   have discovered, the       elements of    the cause of   action,"   Stuart, 109


Wn.2d    at   415 ( emphasis   omitted). "    A latent defect is one which could not have been discovered


by   inspection."   Arrow Transp. Co. v. A. 0. Smith Co., 75 Wn.2d 843, 851, 454 P. 2d 387 ( 1969).

However, " a     plaintiff cannot    ignore   notice of possible     defects,"   and "[   a] person who has notice


of facts that are sufficient to put him or her upon inquiry notice is deemed to have notice of all

facts that    reasonable   inquiry   would    disclose."   Vertecs   Corp.,   158 Wn.2d at 581.


         Here, the Kims fail to explain why they could not have inspected the drainage system

before Forest buried it, or afterward in the same manner that Forest' s experts did.5 As discussed,

the Kims had actual notice of a potential problem with the drainage system, and their own


inspector advised them in no uncertain terms to investigate further prior to closing. If the defect

detected in the system in fact existed when the Kims bought the house, they would have

discovered the problem had they conducted a reasonable investigation. Thus, the defect was not

 latent" and the discovery rule does not apply.

                                                III. CR 11 SANCTIONS


         The Kims also argue that the trial court erred in imposing CR 11 sanctions against their

attorney. We decline to reach the issue.




5 The plumber Forest hired to diagnose the problem with the drain system charged $ 225. 72, and
estimated that it would cost $765. 95 to dig up the plugged line and clear it.
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          A   court rule specifies   that "[   o] nly an aggrieved party may seek review by the appellate

court."   RAP 3. 1.    The client of an attorney against whom a court imposes sanctions is not

aggrieved by the sanctions and thus may not appeal them: the attorney must appeal the sanctions

on his or her own behalf. Engstrom v. Goodman, 166 Wn. App. 905, 917, 271 P. 3d 959, review

denied, 175 Wn.2d 1004 ( 2012);          accord Breda v. B.P.O. Elks Lake City 1800 SO -620, 120 Wn.

App. 351, 353, 90 P. 3d 1079 ( 2004).

          The imposition of sanctions against their attorney did not aggrieve the Kims. On the

contrary, it benefitted them: their attorney will have to pay a substantial portion of Forest' s fees

in their stead. Because the Kims' attorney has not separately appealed, the CR 11 sanctions issue

is not properly before us. We decline to address the matter further.

                                                IV. ATTORNEY FEES


          Forest   requests   attorney fees    on appeal.      The Agreement      provides   that "[   i] f buyer or seller


institutes suit against the other concerning this Agreement, the prevailing party is entitled to

reasonable attorneys'     fees   and expenses."         CP at 36. When a contract provides for a fee award in


the trial court, the party prevailing before us may seek reasonable costs and attorney fees

incurred on appeal. RAP 18. 1; Reeves v. McClain, 56 Wn. App. 301, 311, 783 P. 2d 606 ( 1989).

Forest prevails here and has complied with the procedural requirements. We therefore award


Forest the reasonable costs and attorney fees she incurred in this appeal.

          Forest also asks us to impose further sanctions on the Kims' attorney under RAP 18. 9( a).

The   rule gives us   discretion to " order      a   party   or counsel ...   who uses these rules for the purpose


of delay, files a frivolous appeal, or fails to comply with these rules to pay terms or




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compensatory damages to" the party harmed. RAP 18. 9(             a).   Applying this rule, we have held

that


         i]n determining whether an appeal is frivolous and was, therefore, brought for the
        purpose of delay, justifying the imposition of terms and compensatory damages,
        we are guided by the following considerations: ( 1) A civil appellant has a right to

        appeal under     RAP 2. 2; ( 2) all doubts as to whether the appeal is frivolous should
        be resolved in favor of the appellant; (3) the record should be considered as a whole;
           4) an appeal that is affirmed simply because the arguments are rejected is not
        frivolous; ( 5) an appeal is frivolous if there are no debatable issues upon which
        reasonable minds might differ, and it is so totally devoid of merit that there was no
        reasonable possibility of reversal.

Streater   v.   White, 26 Wn.   App.   430, 434 -35, 613 P. 2d 187 ( 1980). Although we disagree with


the Kims' arguments, it is at least doubtful whether they are " so totally devoid of merit that there

was no reasonable      possibility   of reversal."   Streater, 26 Wn. App. at 435. Following Streater

and resolving all doubts in favor of the Kims, we deny Forest' s sanction request.

                                                CONCLUSION


        The trial court properly granted Forest' s motion for summary judgment as to the Kims'

fraud, negligent misrepresentation, and breach of contract claims. To the extent the Kims


claimed breach of the implied warranty of habitability, the court properly granted summary

judgment to Forest on that claim also.


        We award Forest costs and attorney fees on appeal pursuant to the Agreement, but

decline to impose further sanctions against the Kims' attorney. We also decline to address the

Kims' claims concerning the trial court' s imposition of CR 11 sanctions because they are not

 aggrieved" by the imposition of sanctions against their attorney.

           We thus affirm the trial court in all respects.




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        A majority of the panel having determined that this opinion will not be printed in the

Washington Appellate Reports, but will be filed for public record in accordance with RCW


2. 06. 040, it is so ordered.




 We concur:




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