Austin executed a real estate purchase and sale agreement for the purchase of the Ettls’ property. On the day of closing, the Ettls provided Austin with a real property transfer disclosure statement (Form 17), which disclosed two proposed local improvement districts. The Ettls’ statement did not disclose these districts’ potential costs. Austin did not seek further information from the Ettls or elsewhere regarding the districts, or their costs, and elected to close the transaction that same day. Three months after Austin purchased the property, the City of Tacoma approved the local improvement districts, and assessed their costs at over $40,000 against Austin’s property.

After the assessment, Austin sued the Ettls, alleging that the Ettls’ disclosure failed to provide the potential cost of the proposed local improvement districts. Austin claimed that such failure to disclose amounts to negligent misrepresentation and resulted in the Ettls’ unjust enrichment. In response, the Ettls filed a CR 12(b)(6) motion to dismiss Austin’s claims, which the trial court granted, reasoning that the “economic loss rule” barred both of Austin’s claims.

The Court of Appeals, Division II, affirmed:

  • Washington law does not impose a duty on a seller to disclose the potential costs of proposed encumbrances to a buyer with whom they have no special relationship.
  • A buyer’s failure to research the potential costs of an encumbrance is unreasonable.
  • A seller disclosure statement is not part of the real estate contract, and any claim for its violation sounds in tort, not contract.

The Court also awarded the Ettls attorneys fees.

In dissent, Judge Van Deren concluded that dismissal under CR 12(b)(6) was inappropriate. Because the record on appeal did not include Form 17, the dissent reasoned, whether the Ettls had an independent duty to disclose the costs of the potential encumbrances presented a matter outside the pleadings, requiring further factual development.

Read the opinion, filed October 2, 2012.