Supreme Court No. 898286 Court of Appeals No. 68067-6-I IN THE SUPREME COURT OF THE STATE OF WASHINGTON MARY P. DUNPHY AND MARK L. DUNPHY, Appellants/Petitioners v. SHANE AND AMY WATTS Appellees/Respondents ON APPEAL FROM THE COURT OF APPEALS, DIVISION ONE RESPONSE TO PETITION FOR REVIEW Craig Jonathan Hansen WSB24060 Attorney for Appellee/Respondent Hansen Law Group, PS 12000 NE 8th St. Ste 202 Bellevue, WA 98007 Email: jhansen@hansenlaw .com Voice: 425.709.6762 Fax: 425.451.4931 TABLE OF CONTENTS I. INTRODUCTION ................................................................................................ 1 II. RESPONSE TO ISSUES FOR REVIEW ........................................................... 1 III. FACTUAL BACKGROUND ............................................................................ 1 IV. THE APPELLATE COURT ANALYZED THE CASE CORRECTLY .......... 6 V. WHY THE REVIEW SHOULD BE REJECTED .............................................. 9 VI. REQUEST FOR FEES ..................................................................................... : 14 VII. CONCLUSION ................................................................................................ 14 TABLE OF AUTHORITIES STATE CASES Alejandre v. Bull, 159 Wn.2d 674, 689, 153 P.3d 864 (2007) ............................................ 2, 7, 8, 10, 12, 14 Douglas v. Visser, 173 Wash.App. 823, 295 P.3d 800 (2013) ............................................ 2, 8, 10, 11, 12, 14 Puget Sound Serv. Corp. v. Dalarna Mgmt. Corp .. 51 Wn. App. 209,214-15, 752 P.2d 1353 (1988)) ......................................................................................................... 8, 10 Jackowski v. Borchelt. 151 Wn. App. 1, 209 P.3d 514 (2009),) ......................................... 10 COURT RULES RAP 13.4(b)(4) .................................................................................................................... 9 RAP 13.4(b)(3) ................................................................................................................... 10 ii TABLE OF EXHIBITS Ex. No. Exhibits 1 Bankruptcy Court Order Granting Summary Judgment/Denying Dischargeability 2 Watts v. Dunphy-Final Unpublished Opinion on Appeal -Div I (12/23/13) 3 King County Sup. Ct. Findings of Fact (Case No. 10-2-07806-1 SEA) 4 King County Sup. Ct. Judgment and Order (Case No. 10-2-07806-1 SEA) 5 Watts v. Dunphy-Appellate Court Denying Reconsideration/Awarding Fees-Div I 6 Report of Proceedings (RP) -Extract -Trial Day 1 ( 10/17111) 7 Report of Proceedings (RP) -Extract -Trial Day 2 ( 10 118111) 8 Report of Proceedings (RP) -Extract -Trial Day 3 (1 0/19111) 9 Report of Proceedings (RP) -Extract -Trial Day 4 ( 10/20/11) 10 Report of Proceedings (RP)- Superior Court Trial (Selected Exhibits) 11 Report of Proceedings (RP) -Oral Ruling ( 10 /26/11) 12 Declaration of Attorney Re Exhibits iii COMES NOW Respondents/Apellees, Shane and Amy Watts, by and through counsel of record, and responds to the Petition for Review. I. INTRODUCTION Respondent respectfully asks the court to deny the Petition in its entirety, and award attorney fees. This is because (1) the case fails to meet the considerations under RAP 13.4; (2) the decision by the trial court and the analysis by the Court of Appeals was correct. We should note that Mary Dunphy filed for Chapter 7 Bankruptcy, subsequent to the Appeals Court Opinion. The Watts filed for summary judgment on the issue of the judgment's dischargeability. Dunphy contested that as well. The Watts' motion was granted on February 7, 2014. See Exhibit 1. At this point - barring any appeal in the bankruptcy court - this claim is non-dischargeable!. The court should also note that Ms. Dunphy changed her last name in her divorce to Pong, and is known by that in her bankruptcy case. With no disrespect, we refer to Ms. Pong as Dunphy throughout this Response. II. RESPONSE TO ISSUES FOR REVIEW BRIEF OF RESPONDENTS RE: PETITON FOR REVIEW Respondent's response to Dunphy's issues is as follows: Whether a buyer's duty to inquire is triggered, where notice of a specific defect in their specific property, under Alejandre and Douglas, does not exist, is a factual question; the duty was not triggered in this case. III. FACTUAL BACKGROUND This case started as a King County Superior Court case for fraud. In 2006, Mary and Mark Dunphy, then wife and husband (but now divorced), bought a condominium at 13020 102"d Lane NE, Unit #3, Kirkland W A 98034. This was a condominium conversion project. Mary Dunphy was a realtor trained and experienced in selling condominium conversions. Dunphy Testimony, RP, Ex. 7, pages 349-351. Ms. Dunphy volunteered to be the Vice-President of the Kirkland Village HOA. Findings at Exhibit 3, page 2, para b. She was the Vice- President from the inception of the HOA until she sold her unit to the Watts in June 2007. As the Vice-President, she arranged for a number of inspections of the project, starting with an inspection by Safe & Sound Inspection (Darrel Hay) in October 2006. See Findings at Exhibit 3, page 2, para c. She knew about problems with missing WRB then. Ex. 7, page 389. The Village had a number of problems, and ultimately the HOA Board decided to undertake an "envelope study". This was an intrusive BRIEF OF RESPONDENTS RE: PETITON FOR REVIEW 2 study which, among other things, took the siding off most of the buildings. See Findings at Exhibit 3, page 2, paras e-h; Mary Dunphy was integral to the inspection. She attended the meetings of the HOA at which the inspection was discussed. See Findings at Exhibit 3, paras f-h; Ex. 7, page 400. When the inspection was done, before any siding was put back on the buildings, she and Craig Cleaver (the HOA President) walked through the complex with the lead inspectors on May 4, 2007. See Findings at Exhibit 3, pages 2-3; Photographs at Exhibit 10 (Trial Ex. 9), Dunphy Testimony at RP, Ex. 8, pages 414-415; Craig Cleaver Testimony at RP, Ex. 6, page 73; Mark Cress Testimony at RP, Ex 6, pages 161, 170. Mark Cress, the project lead inspector, led the walk-through, and showed them all ofthe problems with the complex. Trial Testimony of Cress, Exhibit 6, Pages 161-175. Also Findings at Ex. 3, pages 2-3; Exhibit 10, Trial Exhibit 9, page 039, showing photographs ofthe complex with siding off, as well as Dunphy's unit #13020 with the siding off.) The core problem at the complex was a lack of Water Resistant Barrier ("WRB") on the buildings. 70% of the units had missing WRB. RP, Ex. 6, pages 167-168. This was defective construction; had to be replaced, and was going to cost a great deal of money. (In the millions of dollars.) This was a significant material problem. Findings, Ex. 3, page 3, BRIEF OF RESPONDENTS RE: PETITON FOR REVIEW 3 para 1; also Cress testimony at RP, Ex. 7, pages 197-217. Mary Dunphy's own unit had missing WRB. She saw this and knew it was missing. See Findings at Exhibit 3, pages 2-3. Trial Testimony of Dunphy, Exhibit 8, RP, page 411-412; Trial Exhibits at Ex. 10, exhibits 9-11. The only members of the HOA Board that went on the walkthrough, and saw all of the problems, were Mary Dunphy and Craig Cleaver. See Findings at Exhibit 3, page 2-3. Mary Dunphy was well aware that there were significant material problems with the m1ssmg WRB. See Findings at Exhibit 3, page 2-3.; Ex. 8, pages 413-416 Dunphy was also well aware that CAl would produce a report; that report would detail the problems; and once that report was produced she would have to disclose it. See Findings at Exhibit 3, page 3. It is notable that Dunphy did not know what was in the HOA Minutes, had not looked at them before she left them on the counter for the Watts to pick up, and could not have relied on them to provide notice. Exhibit 9, RP, pages 498-500. Dunphy testified that she did not create the Minutes and did not see them after they were created. Exhibit 7, RP, page 379-380. She could not recall having read them at all. Exhibit 7, RP, page 379. Judge Lum found, as a Finding of Fact, that the mention of inspections, etc., in the Minutes BRIEF OF RESPONDENTS RE: PETITON FOR REVIEW 4 were not sufficient to put the Watts on notice. See Findings at Exhibit 3, The appellant court agreed with him. Unpublished Opinion at Ex. 2, pages 22-23. A month after the inspection, and before the formal report was sent to the HOA, Dunphy put her condo on the market. Right after the inspection, she had started shopping for a single family home, and had found one in Juanita. Ex. 8, RP, page 427. To close the sale, she needed to sell the condo, and quickly. She did not have the cash for a down payment and needed to sell her condo, at full market value, and close the sale. See Findings at Exhibit 3, page 3; Dunphy Testimony, Ex. 8, RP, pages 432- 438; Bank Accounts at Exhibit 10, Trial Exhibit 28. She listed her unit for sale in June 2007. Dunphy did not disclose anything about any problems; she did not disclose that there had been an inspection and there were major problems. See Findings at Exhibit 3, page 3-4. The Watts were a young family and first time buyers. Amy Watts testimony at Ex. 7, RP, page 281. They liked the unit and made a full price offer. They were risk-averse. They had backed out of other offers when they found the units had problems. Ex. 7, RP, page 282. Dunphy accepted immediately. She then lied on two Form 17's (Disclosure Forms), about whether there had been any inspections, BRIEF OF RESPONDENTS RE: PETITON FOR REVIEW 5 problems, etc. See Findings at Exhibit 3, pages 3-4; Ex. 10, Trial Exhibits 16; Ex. 8, RP, pages 444-448. She never told them anything about the problems with the complex or her own unit. That was intentional. She agreed at trial that the defects had to be disclosed. Ex. 7, RP, pages 356; 357; Ex. 8, RP, pages 386-387. She agreed the missing WRB was a defect. Ex. 7, RP, pages 364-366. She agreed- finally- that she had seen the siding off her own unit, and missing WRB, during the May inspection. Ex 8, RP, pages 411-413. Some time after closing, the Watts found out that the complex had very serious problems. The HOA had filed a multi-million dollar claim and then a lawsuit against the developers. The Watts sued Mary Dunphy, alleging that she had purposely, fraudulently lied to them in order to sell the unit for full price, so she could buy her new house. Watts v. Dunphywent to trial on October 17, 2011, in King County, with Judge Dean Lum. It was a bench trial. Judge Lum found that the Dunphys had committed fraud. Mary Dunphy intentionally lied on the mandatory disclosure form ("Form 17'') and otherwise purposely, intentionally, and with intent to defraud, did not disclose any of the problems with the complex, which she knew about, to the Plaintiffs. See Oral Ruling at Exhibit 11; Findings at Exhibit 3, pages 6-7. BRIEF OF RESPONDENTS RE: PETITON FOR REVIEW 6