Unpublished Disposition, 877 F.2d 64 (9th Cir. 1989)

MEMORANDUM^* 

Kenneth, Kirby, and Peggy Johnson appeal the dismissal of their claims against Kelso School District No. 453. The Johnsons' action claimed breach of contract, breach of the duty of good faith and fair dealing, and tortious failure to advise of hazardous conditions. After three days of trial, the district court dismissed their action on the ground that they had failed to prove a prima facie case. We affirm.

FACTS

In 1980, the Kelso School District offered an old, unused school building for sale. Kenneth and Kirby Johnson came from California to inspect the building. They were given a walking tour of the building by William Mitchell, the School District's operations manager. The walking tour included the school's boiler room. Mitchell informed the Johnsons that the water flow to the building was not sufficient to meet the fire code.

After the tour of the building, the Johnsons were given a Notice of Sale. The notice included language identifying the sale as "as is."

The Johnsons eventually made an offer to purchase the building. Their bid, however, was conditional:

Above bid is contingent upon approval by necessary government bodies, planning commission, city council, and/or any other government bodies or offices, for the above proposed use of property [conversion of the building "to high quality rental and/or condominium apartments"]; and also conditional upon bidder not being liable for any additional expense necessary to bring water main lines to property for servicing the contemplated additional regular water use and/or fire protection that may be required under the above proposed use of property.

The School District accepted the Johnsons' bid:

The qualifications in your bid relative to appropriate permits and availability of sufficient water supply do not appear to be formidable obstacles .... the availability of an adequate water supply does not appear to be prohibitably expensive in that an eight inch main is but a block away and a twelve inch main is no more than three blocks away.

The Johnsons did nothing with the building for four years. In 1984, in response to pressure from the City of Kelso, the Johnsons informed the School District of their reduced development plans and asked for performance of the School District's obligation to install the water main. The School District refused.

Two years later, again under pressure from the City,¹  the Johnsons undertook to demolish the building. The Johnsons then learned that the building contained asbestos, which would require special handling and would add substantially to the cost of demolition.

The Johnsons brought suit against the School District. They alleged breach of the contractual agreement for the School District to provide water flow, failure to disclose the existence of asbestos, and breach of the duty of good faith and fair dealing. After the Johnsons presented their case in chief at trial the district court dismissed their complaint with prejudice, ruling that the Johnsons had failed to prove a prima facie case. Dismissal pursuant to Federal Rule of Civil Procedure 41(b) is treated as a judgment on the merits. Findings of fact are reviewed for clear error and questions of law de novo. Great American Houseboat Co. v. United States, 780 F.2d 741, 746 (9th Cir. 1986).

DISCUSSION

The district court held that the contract between the Johnsons and the School District contained an unambiguous condition precedent. A district court's interpretation of contract language is reviewed de novo. Taylor-Edwards Warehouse & Transfer Co. v. Burlington Northern, Inc., 715 F.2d 1330, 1333 (9th Cir. 1983).

The district court found the condition precedent in this language:

Above bid is ... conditional upon bidder not being liable for any additional expense necessary to bring water main lines to property for servicing the contemplated additional regular water use and/or fire protection that may be required under the above proposed use of property.

The district court held that the only possible reading of this language was that the School District's obligation to put in a water main is conditioned upon the Johnsons actually initiating development of the land. There are two phrases in the above language that justify such a reading. " [A]ny additional expense" contemplates an expense that may or may not occur. " [T]hat may be required under the above proposed use " contemplates only expenses triggered by actual development of the property.

Simple logic leads us to the same conclusion as the district court. Until the Johnsons actually initiated development, for example by submitting plans for approval, it would be impossible for the School District to know whether to install an eight inch or a twelve inch main, or whether any additional water would be required at all. See generally Ross v. Harding, 64 Wash. 2d 231, 236, 391 P.2d 526, 530-31 (1964).

The district court was also correct in not submitting the question to a jury. "The construction of written instruments generally and a determination of the legal duties imposed by such instruments is a question of law for the trial court and not for the jury." Hull v. Enger Constr. Co., 15 Wash. App. 511, 518, 550 P.2d 692 (1976).

The district court also dismissed the Johnsons damage claim against the School District for failure to disclose the existence of asbestos. In Washington, failure to disclose a material fact known to the seller of real property and not readily ascertainable by the buyer constitutes fraud. Obde v. Schlemeyer, 56 Wash. 2d 449, 452, 353 P.2d 672, 674-75 (1960).

A material fact is one that "substantially affect [s] adversely the value of the property or operate [s] to materially impair or defeat the purpose of the transaction." Mitchell v. Straith, 40 Wash. App. 405, 411, 698 P.2d 609, 613 (1984). The Johnsons failed to show that the presence of asbestos was material. The only cost that was associated with the asbestos arose in conjunction with demolition; demolition was not the purpose for which the Johnsons purchased the building. Furthermore, the asbestos was used only on the boiler and on pipes connected to the boiler; the Johnsons' bid stated that " [b]idder understands that the present plumbing and electrical system does not meet present codes for the proposed use of property; and intends to bring same up to standard requirements in compliance when conversion is made."

CONCLUSION

The district court is AFFIRMED.