may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1998).
STATE OF MINNESOTA
IN COURT OF APPEALS
David P. Mayavski, et al.,
Duane Bemboom, et al.,
Dale Landwehr, et al.,
Filed June 1, 1999
Stearns County District Court
File No. C3964143
Robert G. Haugen, Johnson & Lindberg, P.A., Suite 1610, 8500 Tower, 8500 Normandale Lake Boulevard, Minneapolis, MN 55437-3828 (for appellants)
Considered and decided by Crippen, Presiding Judge, Amundson, Judge, and Shumaker, Judge.
Having discovered immediately after purchasing their house that the septic system did not function, respondents Julie and David Mayavski brought suit against appellants, the real estate agent (Dale Landwehr) and brokerage that assisted respondents in their search for a new home. The trial court, in proceedings without a jury, found that both appellants and respondents negligently contributed to the purchase of the property without a county-certified septic system, with appellants, the realtors, being 70% at fault and respondents, the buyers, 30% at fault. The trial court found that damages amounted to the cost of replacing the septic system and apportioned the damages according to each party's percentage of fault.
Appellants, who also challenge the sufficiency of evidence regarding their negligence, challenge whether damages are sufficiently shown by proof of the cost of a new septic system. Because the proof of damages is inadequate, we reverse.
In the Multiple Listing Service listing for the home respondents purchased, the sellers represented the house as having a functioning septic system, claiming that the "newer septic system is up to code." Respondents agreed to purchase the house for $75,900. But the purchase agreement, drafted April 22, 1995, did not include a provision that the offer was contingent on county certification of the septic system. Instead, the purchase agreement stated that "this offer is subject to buyers' approval of seller [sic] disclosure statement and sewer and well system disclosures."
On April 24, 1995, appellant Landwehr reviewed the sellers' Private Sewer System Disclosure with Julie Mayavski. The document revealed that the installation date of the septic system was "unknown." Despite the contradiction between the MLS listing and the sewer disclosure, Julie Mayavski signed the sewer disclosure, indicating her approval. On June 24, 1995, the sellers and the Mayavskis signed a new purchase agreement extending the closing date. The closing on the property occurred on July 31, 1995. The next day, the Mayavskis discovered that the septic system did not work. A subsequent investigation determined that the septic system was not up to code and needed to be replaced.
Respondents brought suit against Landwehr and Century 21 for professional negligence. The trial court found that Landwehr negligently breached "his duty to include the requirement of county certification of the septic system in the Purchase Agreement as a condition of the [respondents'] offer" and attributed 70% of respondents' damages to this negligence.
As proof of damages, the Mayavskis offered only evidence of the purchase price of the property, $75,900, and the cost to replace the septic system, $7,353.04. They presented no evidence regarding any change in market value due to the non-functional septic system. The trial court found that damages equaled the cost of replacing the septic system. This appeal follows denial of appellant's motion for amended findings and a new trial.
There is evidence supporting the trial court's finding that the buyers chose to ignore the inconsistency between the MLS listing and the sewer disclosure. But evidence also sustains the finding that Landwehr was negligent in concluding the purchase agreement, finalized when the Mayavskis accepted the disclosure forms, in the face of the inconsistent documents. Landwehr testified that he asked Julie Mayavski to read over the disclosure documents. When asked at trial whether he discussed with Julie the conflicting information in the MLS and sewer disclosure, Landwehr replied:
I don't recall ever having any conversation other than she said everything looked okay to her.
Question: So you didn't provide any additional input other than "Here are the disclosures, take a look at them and sign them?"
Answer: That I recall.
This evidence permitted the trial court to find that appellant Landwehr breached his duties regarding demands to be made upon the sellers. Although the evidence does not indicate the extent of Landwehr's duty to persuade a client to require certification in the face of the client's determination to do otherwise, the trial court could find that the established duty of agent to client included something more than silence in the face of conflicting information about the condition of the septic system.
It is not necessary to decide if the case should be treated as one for misrepresentation. Even if this case clearly sounded in negligence, damages could not exceed the difference between the price paid for the property and the actual value of the property as received. Rinkel v. Lee's Plumbing & Heating Co., 257 Minn. 14, 20, 99 N.W.2d 779, 783 (1959) (upon determining negligent damage of a home, permitting recovery for replacement costs and loss of value not restored; determining that ordinary measure of damages is lowest of restoration costs or loss of value); Lawin v. City of Long Prairie, 355 N.W.2d 764, 767 (Minn. App. 1984) (determining that compensation for tortious injury to property is the lesser of diminution in value or cost of restoration).
Appellants' arguments suggest, given the indifference of the buyers to county certification of the system--after several suggestions that the system was not as represented--"newer" and "up to code"--that there is cause to believe that the price they offered reflects the value of the property, in effect, as is, or simply with a functioning septic system. Stated differently, the buyers may have avoided extra cost that would have been paid for the demand that the septic system be certified or replaced. The same consideration could be taken into account by assuming that the purchase price represented the value of the property with a certifiable septic system but inquiring as to the comparative market value of the property as it was found in fact, without a functioning system.
It is undisputed that, but for negligence, respondents would have purchased a house with a functioning, certifiable septic system. As appellants suggest, respondents have failed to offer evidence stating the value of the house with a certifiable system. The purchase price, $75,900, evidently represented the value of the property with a septic system that had an unknown life. Alternatively, even if the purchase price evidence were useable to determine the market value with a certifiable system, respondents presented no evidence indicating the value of the property without a functioning septic system.
As appellants contend, respondents' showing of the cost of a new septic system does not meet their burden of proof. This evidence does not suffice to overcome appellants' objections on the lack of evidence of diminished market value. Loeb Enters., 360 N.W.2d at 371 (on a false claim that a building for sale had a new roof, affirming denial of relief where buyer showed replacement cost but did not show diminution of value of the property). The record does not suggest that the cost of a new system was equal to, or less than, the difference between what should have been obtained and what was received--even if it assumed that respondents were entitled to receive the property with a certifiable septic system. Moreover, even as replacement-cost evidence, proof of the new-system cost is problematic. The record does not suggest how this evidence could be used to determine the value of an older system. Even if it were concluded that respondents were entitled to the value of a certifiable system, the record furnishes too little information to suggest how the new-system cost helps to show this value.
Because the respondents did not meet their burden to prove damages, we reverse.
 Respondents also brought suit against the sellers of the house and the listing realtors for misrepresentation. But the sellers filed for bankruptcy and the trial court found that any fault of the listing realtors was not a proximate cause of respondents' harm. None of those parties is involved in the appeal process.
 In addition to evidence on Julie Mayavski's acceptance of a disclosure that the septic tank age was "unknown," the trial court found that Julie Mayavski, before agreeing to purchase the property, "sensed something was amiss," having "noticed that there were no white pipes sticking out of the [sellers'] back yard near the septic system as they were in the neighbor's yards" and that "while the neighbors all had mounds near their septic systems, the [sellers] had none." The record also includes evidence that the option of demanding county certification was specifically discussed with the buyers; commenting on the choice to not make such a demand, respondent Landwehr explained that respondents "wanted the house that bad."