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Prima Partners, LLC v. Waterhouse

United States District Court, D. Colorado

May 1, 2018

PRIMA PARTNERS, LLC, Plaintiff/Counter Defendant,
v.
LINDA L. WATERHOUSE, in her individual capacity and in her capacity as executor of the Estate of Stephen L. Waterhouse, ESTATE OF STEPHEN L. WATERHOUSE, STEPHEN E. TISMAN, in his capacity as executor of the Estate of Stephen L. Waterhouse, Defendants/Counter Claimants.

          ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

          Michael E. Hegarty, United States Magistrate Judge.

         Defendants/Counter Claimants Linda L. Waterhouse, Stephen E. Tisman, and Estate of Stephen L. Waterhouse (collectively “the Waterhouses”) seek summary judgment on Plaintiff/ Counter Defendant Prima Partners, LLC's claims for breach of contract, fraudulent misrepresentation, fraudulent concealment, attorney's fees, and exemplary damages. Prima Partners' claims arise from the Waterhouses' purported failure to disclose extensive mold, a history of water intrusion, and a roof leak prior to closing on property Prima Partners purchased.

         Disputed issues of material fact exist as to Prima Partners' breach of contract claim for all of the purportedly undisclosed issues. Regarding Prima Partners' fraud claims, I grant summary judgment as to the mold and water intrusion problems, because the evidence undisputedly demonstrates that, prior to closing, Prima Partners knew of these issues. However, I find that disputed issues of material fact exist as to Prima Partners' knowledge that the roof would leak once snow and ice formed. Accordingly, I grant in part and deny in part the Waterhouses' Motion for Summary Judgment.

         Additionally, Prima Partners seeks summary judgment on the Waterhouses' counterclaim for attorney's fees under Colorado Revised Statute § 13-17-102. I find that the Waterhouses improperly assert this counterclaim as a substantive cause of action. Accordingly, I dismiss this claim with prejudice. However, I deny Prima Partners' motion to the extent it asks me to enter judgment on this claim. Therefore, I grant in part and deny in part Prima Partners' Motion for Summary Judgment on the Waterhouses' Counterclaims.

         BACKGROUND

         I. Factual Background

         The evidence submitted by the parties reveals the following undisputed material facts.

1. The Waterhouses owned real property in Vail, Colorado until September 22, 2016, when they sold it to Prima Partners. Defs.' Statement of Facts ¶¶ 1, 4, ECF No. 58; Pl.'s Resp. to Defs.' Mot. for Summ. J. 4, ECF No. 64.
2. Prima Partners is a Colorado limited liability company owned by James Butterworth and his wife, Dr. Sarah Smith (“Dr. Smith” or “Sallie Smith”). Defs.' Statement of Facts ¶ 3; Pl.'s Resp. to Defs.' Mot. for Summ. J. 4.
3. The Waterhouses' residence was built in 1967 as a stand-alone home. However, subsequent renovations added an adjoining residence, resulting in a duplex. Defs.' Statement of Facts ¶ 2; Pl.'s Resp. to Defs.' Mot. for Summ. J. 4.
4. In September 2011, Mr. Waterhouse discussed fixing a “basement water problem” with his property manager, Diane Milligan. This involved “outside drain work” and inside work, such as “caulking the foundation wall and also sealing it with a water repellant product.” ECF No. 64-5, at 3.
5. In 2013, Steven Schwartzreich considered purchasing the Waterhouses' property. While conducting an informal inspection of the house, Mr. Schwartzreich noticed “substantial water staining on the drywall on at least the western wall of the lower level of the House.” Decl. of Steven Schwartzreich ¶ 5, ECF No. 64-7.
6. In March 2015, the Waterhouses sent an email to their property manager stating that a water leak occurred in the “small bedroom.” ECF No. 64-5, at 2.
7. In May 2016, a different property manager, Glen Susmilch, informed Mr. Waterhouse that he “found a small amount of mold on the ceiling next to the exhaust fan in the east bathroom down stairs.” After further investigation, Mr. Susmilch discovered “considerable condensation” in the ceiling, and he came to the conclusion that “water is seeping into the house from the deck directly under the living room windows . . . .” Id. at 14.
8. Mr. Susmilch also had someone inspect the roof on the Waterhouses' property, and he noted that the roof was in “critical” condition. Id. at 13.
9. Two months later, on July 11, 2016, Prima Partners entered into a contract to purchase the Waterhouses' property for $5, 400, 000.00. Defs.' Statement of Facts ¶ 5; Pl.'s Resp. to Defs.' Mot. for Summ. J. 4; Contract to Buy and Sell Real Estate, ECF No. 58-4.
10. Provision 10.2 of the parties' contract required the Waterhouses to disclose “any latent defects actually known by [them].” Contract to Buy and Sell Real Estate 10.
11. The Waterhouses timely delivered their property disclosures to Prima Partners on July 15, 2016. Defs.' Statement of Facts ¶ 7, Pl.'s Resp. to Defs.' Mot. for Summ. J. 4.
12. Among other statements, the Waterhouses informed Prima Partners that “moisture and/or water problems” have never existed in the house, the roof should be replaced within the next one to two years, there was a minor leak in the northwest corner of the dining room due to an “ice block on roof, ” there are no present roof leaks, and the property has experienced only minor flooding or drainage problems. Property Disclosures, ECF No. 58-5.
13. After receiving the disclosures, Prima Partners hired Ron Amass to perform an inspection on July 20, 2016. Among other issues, the inspection revealed that the roof was near or at the end of its service life and that mold was growing on the lower east bedroom wall. Mr. Amass recommended that Prima Partners conduct a further review to gain a better understanding of the condition. Amass Inspection Report 21, 48, ECF No. 58-8.
14. The Waterhouses hired SteamMaster to remediate the mold growing on the lower east bedroom wall. Dep. of Gary Gilman, 44:17-45:6, May 19, 2017 (“Gilman dep.”), ECF No. 58-74.
15. Mr. Amass subsequently informed Mr. Butterworth that it would “be advisable . . . to get back in and reinspect [the remediated] area and any other areas that potentially could have mold.” Dep. of James Butterworth, 99:19-100:12, September 15, 2017 (“Mr. Butterworth dep.”), ECF No. 58-63.
16. Mr. Butterworth then told Ron Byrne (the real estate broker for the sale) that he would like to further inspect the property, because SteamMaster was not asked to diagnose the cause of the mold and it closed the affected area before Mr. Amass could further inspect it. Additionally, Mr. Butterworth stated that the insulation SteamMaster removed was damp, which might be caused by compromised deck flashing or waterproofing. ECF No. 58-10, at 3.
17. Mr. Byrne responded that they “can get Ron Amass back in after a heavy rain after the Waterhouses departure for further inspection.” Id.
18. On August 2, 2016, Josh Yandle performed an inspection on the roof. Mr. Yandle stated that the “[e]xisting cedar shake roof is in poor condition but may be able to go a few more years with repairs. . . . Prior to winter I would suggest blowing all debris off the roof and clearing the gutter/downspouts with water. This will be a very high priority to try to eliminate the potential for ice/dam accumulation.” Mr. Yandle proposed making $2, 250.00 in repairs. Yandle Inspection Report 2, ECF No. 58-11.
19. Despite the issues Mr. Yandle found, he did not “know for sure [when], and if [the roof is] going to leak.” Dep. of Josh Yandle, 76:15-:22, August 31, 2017 (“Yandle dep.”), ECF No. 58-12.
20. After receiving Mr. Yandle's report, Mr. Butterworth emailed Mr. Byrne to discuss outstanding issues with the property. Mr. Butterworth stated that “several rooftop separations . . . need to be sealed with a roofing mastic to prevent moisture intrusion” and “several missing shingles need to be replaced.” Mr. Byrne agreed to pay for these repairs. ECF No. 58-10, at 2.
21. On August 4, 2016, Mr. Butterworth discussed proposed renovations with his architect, Mike Suman. Among other plans, the architect noted that Mr. Butterworth planned to “[f]ix waterproofing over lower bedroom” and “[r]eplace roof finish.” Suman Proposal 3, ECF No. 58-16.
22. Prima Partners did not submit an inspection objection before the August 9, 2016 deadline. Defs.' Statement of Facts ¶ 13-14, Pl.'s Resp. to Defs.' Mot. for Summ. J. 5.
23. At a baby shower in August 2016, Dr. Smith learned that “there might be a larger mold problem in the basement.” Specifically, Ms. Schwartzreich informed Dr. Smith that she and her husband were considering buying the house in 2013, and they discovered probable mold around the basement interior walls. Dep. of Sarah Smith, 34:17-36:3, September 14, 2017 (“Dr. Smith dep.”), ECF No. 58-23.
24. On August 21, 2016, Mr. Butterworth explained to Mr. Suman the details of Dr. Smith's conversation with Ms. Schwartzreich. Dr. Smith learned that Ms. Schwartzreich and her husband “found mold in multiple places in the basement, ” “the dining room was constructed . . . in a way that creates a leak, ” and “[t]heir ...

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