Yazd v. Woodside

2006 UT 47
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
----oo0oo----
Ali S. Yazd and Parvin Yousefi, No. 20050444
Plaintiffs and Respondents,
v.
F I L E D
Woodside Homes Corporation,
Defendant and Petitioner. September 1, 2006
---
Fourth District, Provo Dep’t
The Honorable Gary D. Stott
No. 020402197
Attorneys: Stephen Quesenberry, J. Bryan Quesenberry, Provo, for
plaintiffs
Ronald G. Russell, Timothy B. Smith, Salt Lake City,
for defendant
---
On Certiorari to the Utah Court of Appeals
NEHRING, Justice:
¶1 When Ali Yazd and Parvin Yousefi’s Lindon, Utah home
sank into the unstable soil upon which it lay, they sued. They
claimed that home-seller Woodside Homes fraudulently concealed
information contained in a report, the “Delta report,” about a
deep layer of collapsible soil present on land that Woodside
owned adjacent to the Yazd-Yousefi property.
¶2 The district court granted Woodside’s motion for
summary judgment and dismissed the Yazd-Yousefi fraudulent
concealment claims. It based its ruling on the undisputed fact
that Woodside was unaware of unsuitable soil conditions either on
the Yazd-Yousefi land or elsewhere in its development. The court
of appeals reversed.
¶3 We granted certiorari. We affirm the court of appeals’
reversal of summary judgment. However, we reverse the court of
appeals’ holding that the Delta report was material as a matter
of law. We also correct the court of appeals’ misapprehension

No. 20050444 2
that the materiality of the Delta report is relevant to whether
Woodside owed the homeowners a duty to disclose the contents to
them. Finally, we hold that a developer-builder may owe his
buyer a duty to disclose information known to him about the
composition or characteristics of any real property when that
information is material to the suitability of the property
purchased by the buyer.
BACKGROUND
¶4 In the early 1990s, Woodside undertook the development
of the Panorama Point subdivision in Lindon, Utah. The
subdivision included three parcels of land, the last of which was
purchased in 1992 from the Church of Jesus Christ of Latter-day
Saints, which we will call the “Church.” The Church had intended
to construct a large structure on the property. The Church
abandoned this plan, however, after the Delta report (named after
the firm which compiled it) revealed that an excess of moisture-
sensitive collapsible soil made the site unsuitable for the
contemplated building. The Delta report did not specifically
evaluate the suitability of the site for a single family
residence.
¶5 The Church agreed to sell the parcel of property to
Woodside. According to the sales contract, the Church was to
provide a copy of the Delta report to Woodside. Woodside claims
it never saw the report.
¶6 Before the Yazd-Yousefi home was built, Woodside
obtained its own study of the soil conditions on two other
parcels that comprised Panorama Point. The Yazd-Yousefi lot was
within the area covered by the study. The soil study indicated
the presence of collapsible soil to an average depth of
approximately two and one-half feet. Accordingly, Woodside
formulated a plan to dig out the collapsible soil and reduce the
grade of these parcels between six and eight feet. After the
work was completed, William Gordon, an engineer, inspected the
area at the behest of Woodside and pronounced the soil fit to
support a house. In 1995, Mr. Yazd and Ms. Yousefi contracted
with Woodside to purchase a lot and build a home in Panorama
Point. Woodside did not disclose the contents of the Delta or
Woodside’s own soil reports to Mr. Yazd or Ms. Yousefi.
¶7 Mr. Yazd and Ms. Yousefi moved into their home in
September 1995. By 1996, cracks appeared in the foundation and
the driveway. Doors would not open or close. Evidence of
excessive settling abounded. Mr. Yazd and Ms. Yousefi accepted
Woodside’s efforts to repair the damage until April 2002 when a
prospective purchaser of the home discovered that, owing to the

3 No. 20050444
instability of the soil, major repairs would be required to
shore-up the house and prevent additional damage.
¶8 With this discovery, Mr. Yazd and Ms. Yousefi decided
to seek legal relief. They sued Woodside. They alleged that
Woodside’s failure to disclose the presence of the collapsible
soil in the area amounted to a breach of contract and fraudulent
nondisclosure. The district court referred the Yazd-Yousefi
contract claims to arbitration; these claims do not concern us
here. The district court then dismissed the Yazd-Yousefi
fraudulent nondisclosure and concealment claims. The district
court based its ruling on a determination that Woodside had
neither real nor constructive knowledge of the continued presence
of collapsible soil on the buyers’ lot.
¶9 On appeal, the court of appeals reversed and remanded
the case to the district court. The court of appeals concluded
that the Delta report did contain material information that
Woodside had a duty to disclose to the buyers and, since the
question of whether Woodside actually had knowledge of the report
was in dispute, that summary judgment was improperly granted.
ANALYSIS
¶10 In order to prevail on a claim of fraudulent
concealment, a plaintiff must prove “(1) that the nondisclosed
information is material, (2) that the nondisclosed information is
known to the party failing to disclose, and (3) that there is a
legal duty to communicate.” Mitchell v. Christensen, 2001 UT 80,
¶ 9, 31 P.3d 572. These elements are presented in inverse order
of importance. As we will see, this reverse ordering of elements
may have led the court of appeals to apply a flawed analytical
process that nevertheless yielded the correct result: a reversal
of the district court.
I. WOODSIDE’S RELATIONSHIP WITH MR. YAZD AND MS. YOUSEFI CREATED
A LEGAL DUTY
¶11 We have stated that “[i]t is axiomatic that one may not
be liable to another in tort absent a duty.” Loveland v. Orem
City Corp., 746 P.2d 763, 765 (Utah 1987). Any analysis of a
tort claim, then, begins with an inquiry into the existence and
scope of the duty owed the plaintiff by the defendant.
¶12 The court of appeals, however, began its analysis by
examining the materiality of the Delta report following the
sequence of elements set out in Mitchell. The court of appeals
then wasted little time reaching the conclusion that “[t]here is
little question that the information contained in the Delta

No. 20050444 4
report would have been material to the Buyers in this case.”
Yazd v. Woodside Homes Corp., 2005 UT App 82, ¶ 9, 109 P.3d 393.
¶13 With its finding of materiality in hand, the court of
appeals moved on to the matter of duty. The court appeared to
link the materiality of the Delta report to the existence of
Woodside’s duty when it stated, “We can say, however, that if
Woodside possessed the Delta report, or had knowledge of its
content, prior to the sale with the Buyers, it had a duty to
disclose the information to the Buyers.” Id. ¶ 10. It is
important that the court of appeals’ opinion not be read to
suggest that the materiality of the Delta report created
Woodside’s duty to disclose the contents of the report to
Mr. Yazd and Ms. Yousefi. Indeed, materiality becomes an issue
only after a legal duty has been established.
¶14 The determination of whether a legal duty exists falls
to the court. It is a purely legal question, and since in the
absence of a duty a plaintiff will not be entitled to a remedy,
it is the first question to be answered. See Loveland, 746 P.2d
at 766.
¶15 From where does a duty arise? To properly answer the
duty question, a court must understand that the structure and
dynamics of the relationship between the parties gives rise to
the duty. “The question of whether a duty exists is a question
of law. As always, resolution of this issue begins with an
examination of the legal relationships between the parties,
followed by an analysis of the duties created by these
relationships.” Id.
¶16 A relationship that is highly attenuated is less likely
to be accompanied by a duty than one, for example, in which
parties are in privity of contract. Age, knowledge, influence,
bargaining power, sophistication, and cognitive ability are but
the more prominent among a multitude of life circumstances that a
court may consider in analyzing whether a legal duty is owed by
one party to another. Where a disparity in one or more of these
circumstances distorts the balance between the parties in a
relationship to the degree that one party is exposed to
unreasonable risk, the law may intervene by creating a duty on
the advantaged party to conduct itself in a manner that does not
reward exploitation of its advantage.
¶17 Legal duty, then, is the product of policy judgments
applied to relationships. DeBry v. Valley Mortgage Co., 835 P.2d
1000, 1003-04 (Utah Ct. App. 1992) (“Duty is not sacrosanct in
itself, but only an expression of the sum total of those
considerations of policy which lead the law to say that the

5 No. 20050444
particular plaintiff is entitled to protection.” (internal
quotation marks and brackets omitted)). A person who possesses
important, even vital, information of interest to another has no
legal duty to communicate the information where no relationship
between the parties exists.
¶18 An example which illustrates this point is the “special
relationship” doctrine in tort law. A person has no legal duty
to protect another person from the conduct of a stranger unless
the person upon whom a duty is sought to be imposed has a
“special relationship” with either the stranger or the potential
victim. Rather, “[t]he duty to control another person may arise
where a special relationship exists.” Wilson v. Valley Mental
Health, 969 P.2d 416, 419 (Utah 1998); see also Restatement
(Second) of Torts § 315 (1977) (stating that a duty is premised
on a special relationship); Higgins v. Salt Lake County, 855 P.2d
231, 236 (Utah 1993) (adopting Restatement position). Here, it
is Woodside’s status as builder-contractor that gives rise to its
legal duty to the home buyers. The communication of material
information to Mr. Yazd and Ms. Yousefi is one of the obligations
that flow from Woodside’s assumption of its legal duty.
¶19 There are occasionally instances in which a court is
called upon to make policy choices based on assessments of
social, economic, and technological conditions. To cite but one
example, the maturation of the industrial revolution and, in
particular, the ever lengthening chain of participants in the
manufacture of goods cut deeply into the doctrines of caveat
emptor and privity of contract that had served well an agrarian
and economically insular nation prior to the last century. This
changed in MacPherson v. Buick Motor Co., where Justice Cardozo
held that manufacturers must exercise reasonable care to protect
consumers and others who, despite a lack of privity or direct
contractual contact with the manufacturer, may come into contact
with their products. 217 N.Y. 382, 390 (1916).
¶20 Typically, courts cede authority over matters of policy
to the political branches of government. When policy
considerations bear on a subject lodged firmly within the court’s
sphere, like the common law, it is entirely appropriate for the
court to make the policy judgments necessary to get the law
right.
¶21 We have never explicitly recognized that a duty is owed
to buyers of homes by builder-contractors. Insofar as we have
signaled a willingness to impose this duty, it has been by
indirection and expressed in dictum. In Smith v. Frandsen, 2004
UT 55, ¶ 9, 94 P.3d 919, we turned away an attempt by the Smiths,
owners of a home that had been constructed on unsuitable soil, to

No. 20050444 6
impose a duty on the developer of the subdivision where the home
was located. Our reasons for doing so had as much to do with the
conclusions that we reached about the scope of knowledge acquired
and the responsibility assumed by the Smiths’ contractor-builder
as with the issue of whether the developer knew of the poor soil
conditions and whether that knowledge was material.
¶22 Our focus in Smith was not on whether the relationship
between the Smiths and their builder-contractor imposed a legal
duty to disclose information about soil conditions. After all,
the builder-contractor was not a party to the lawsuit. The
inquiry into the builder-contractor’s role was, instead, directed
at whether parity existed between what the builder-contractor
knew about the condition of the soil that lay beneath the Smiths’
house and the developer’s knowledge of the same soil instability.
This was relevant to our analysis of the developer’s duty because
we had formerly indicated that a remote purchaser who had no
privity of contract with a developer might nevertheless recover
for breach of the developer’s duty to disclose unsuitable soil
conditions to a previous unsophisticated purchaser who had no
knowledge of the adverse conditions. Id. ¶ 25.
¶23 Smith required us to define limits on the right to
recover from remote parties. One limiting principle that we
recognized and applied in Smith was that a duty to disclose
material information is extinguished once the information is
communicated or otherwise acquired by the party to whom the duty
was owed. Id. ¶ 17.
¶24 Modern home construction requires a high degree of
knowledge and expertise, including knowledge of soil conditions.
We have found that the disparity in skill and knowledge between
home buyers and builder-contractors leads buyers to rely on the
builder-contractor’s expertise. Based on these observations, we
chose to adopt in Loveland, 746 P.2d 763, a statement of duty
borrowed from Wyoming of “‘reasonable care to insure that the
subdivided lots are suitable for construction of some type of
ordinary, average dwelling house and he must disclose to his
purchaser any condition which he knows or reasonably ought to
know makes the subdivided lots unsuitable for such residential
building.’” Id. at 769 (emphasis omitted) (quoting Anderson v.
Bauer, 681 P.2d 1316 (Wyo. 1984)).
¶25 The imposition of this duty had the effect in Smith of
imputing to the builder-contractor the knowledge of deficient
soil conditions that the Smiths accused the developer of failing
to disclose to them. The imputation of this knowledge, however,
cut off any duty the developer may otherwise have owed to future
owners of the property, including the Smiths.

7 No. 20050444
¶26 Although we did not recognize the duty of the builder-
contractor in the context of a direct action for recovery brought
by a home buyer in Smith, we today extend its application to that
setting. To do otherwise would fatally undermine the legitimacy
of our reasoning in Smith.
II. THE MATERIALITY OF THE DELTA REPORT IS IN DISPUTE AND
PROPERLY LEFT TO THE FINDER OF FACT TO DETERMINE
¶27 The court of appeals held the Delta report to be
material as a matter of law. Woodside takes issue with this
determination for three reasons: the Delta report did not
concern the Yazd-Yousefi lot, the court of appeals misread the
Delta report in ways that led it to believe it was relevant to
the Yazd-Yousefi lot when it was not, and Woodside’s soil study
on the Panorama Point property including the Yazd-Yousefi lot
superseded any materiality to which the Delta report might make
claim.
¶28 We do not believe that the Delta report has earned the
designation of “material” as a matter of law and therefore
reverse the court of appeals on this point. Neither do we accept
Woodside’s invitation to stamp the Delta report “immaterial” as a
matter of law. Rather, we find that the question of the report’s
materiality is best suited for the finder of fact to answer.
¶29 Woodside’s contention that the Delta report cannot be
material because it describes soil conditions on land other than
the Yazd-Yousefi lot has little to recommend it. Property
boundaries are seldom drawn with soil composition in mind, and
information about the suitability of soil for supporting a
dwelling would more likely than not be relevant to predicting the
soil conditions on similar adjacent land. We decline to
categorically deem immaterial all information concerning property
not owned by the party affected by unsuitable soil conditions.
For the purpose of determining materiality in this case, property
boundaries are legally insignificant.
¶30 Whatever errors in interpreting the Delta report may
have predisposed the court of appeals to conclude that the report
was material as a matter of law were not so significant as to
persuade us to summarily rule the report immaterial. The Delta
report disclosed soil instability of a magnitude that caused the
Church to scuttle its building plans for the site. There were no
obvious physical or topographical features that would distinguish
the Church parcel from the other portions of Panorama Point. In
our view, these considerations are sufficient to place the
question of the Delta report’s materiality in dispute.

No. 20050444 8
¶31 Finally, we reject Woodside’s assertion that by
commissioning its own soil study on property that included the
Yazd-Yousefi lot, it rendered immaterial all other information
bearing on the soil conditions at Panorama Point. Woodside
insists that it had no knowledge of the Delta report. Based on
this assertion, its soil study was necessarily prepared without
the benefit of information contained in the Delta report
concerning conditions on the adjacent parcel. At this stage of
the litigation, we do not know whether knowledge of soil
conditions on the Church parcel would have affected the Woodside
soil report. Certainly, it is possible that it could. If the
finder of fact were to determine that Woodside knew of the Delta
report but failed to inform its soils expert of its existence and
contents, the weight of the Woodside soil report could be
substantially diminished.
III. WE REFINE THE DEFINITION OF “MATERIALITY” IN THE CONTEXT OF
MATTERS THAT MUST BE COMMUNICATED BY A BUILDER-CONTRACTOR
¶32 In holding that the Delta report was material as a
matter of law, the court of appeals relied on a definition of
materiality as “‘something which a buyer or seller of ordinary
intelligence and prudence would think to be of some importance in
determining whether to buy or sell.’” Yazd v. Woodside Homes
Corp., 2005 UT App 82, ¶ 9, 109 P.3d 393 (emphasis in original)
(quoting Hermansen v. Tasulis, 2002 UT 52, ¶ 29, 48 P.3d 235).
In particular, the court of appeals focused on the word “some” in
the definition. We confess that “some” as used in our
description of materiality is ambiguous. When used in a context
in which additional precision concerning quantity or quality is
sought, the word “some” is inherently ambiguous. “Some” is a
word that refers to an unspecified quantity or quality. It is a
word that diminishes precision, not adds to it. When the young
man proclaims to his mother-in-law, “That was some dinner,” we
are left with considerable uncertainty about the mother-in-law’s
talents as a chef. We believe that when the court of appeals
stated that “we cannot say as a matter of law that the
information would not have been of some interest to the Buyers,”
id., it treated “some” in a way that would permit matters of
lesser importance to qualify as material. This interpretation is
not what we intended.
¶33 We take this opportunity to clarify the definition of
materiality as the term is used as an element of fraudulent
concealment and fraudulent nondisclosure. We believe that
requisite clarity can be achieved by deleting the word “some”
from the definition we adopted in Hermansen, 2002 UT 52, ¶ 29.

9 No. 20050444
¶34 To be material, the information must be “important.”
Importance, in turn, can be gauged by the degree to which the
information could be expected to influence the judgment of a
person buying property or assenting to a particular purchase
price. In this case, we conclude that a finder of fact could
reasonably find that the contents of the Delta report meet this
definition of materiality. Therefore, we decline to pass on the
status of the Delta report as a matter of law.
CONCLUSION
¶35 The three elements of fraudulent concealment are best
described in this order: (1) there is a legal duty to
communicate information, (2) the nondisclosed information is
known to the party failing to disclose, and (3) the nondisclosed
information is material. In this case, these elements are yet to
be adjudicated and remain to be proved. The most important
element is the existence of a duty, which arises from the
relationship between the parties. We hold that a developer-
builder may owe his buyer a duty to disclose information known to
him concerning real property, including property other than that
conveyed to the buyer, when that information is material to the
condition of the property purchased by the buyer. Both knowledge
of the Delta report and its importance to the buyers remain
contested factual issues that bear on the existence of a duty.
Thus, we affirm the court of appeals’ reversal of summary
judgment.
¶36 Finally, we reverse the court of appeals’ holding that
the Delta report was material as a matter of law. We leave the
trier of fact to determine whether the Delta report was known to
Woodside and whether its content was sufficiently important such
that its disclosure would have influenced the decisions made by
the buyers with respect to this property.
---
¶37 Chief Justice Durham, Associate Chief Justice Wilkins,
Justice Durrant, and Judge Christiansen concur in Justice
Nehring’s opinion.
¶38 Having disqualified herself, Justice Parrish does not
participate herein; District Judge Terry L. Christiansen sat.