Liability of seller and broker for defects in retaining wall and block wall for a used house

In the following case, a couple who purchased a used house with land through a broker claimed damages for defects that the retaining wall lacked quake resistance and that the block wall crossed over the border into the adjacent land, alleging seller's default in warranty against defects as well as broker's default.

The court affirmed seller's default in warranty against defects as well as default of the broker who had neglected an obligation of explanation, and ordered the seller and the broker to pay about 3,500,000 yen in total. (Judgment by the Tokyo District Court on January 31, 2013)

• Page 86 of Hanrei Jiho No.2200

Summary of the case

Plaintiff:

X (purchaser)

Defendant:

Y1 (former owner of the house with land, seller)

Y2 (broker)

Parties concerned:

A (owner of the adjacent land on the south side of X's land)

B (owner of the adjacent land on the north side of X's land at the time of concluding the sale-and-purchase contract)

C (B's next owner of the adjacent land on the north side of X's land)

After X (a couple) bought a used house (built more than 20 years ago) with land, X came to know that the retaining wall (It is a structure in the form of wall designed and constructed to prevent collapse of a slope due to lateral pressure of soil. X's house stands on the land about 1.5 meters higher than the adjacent land on the south side) as well as the concrete block wall on the retaining wall between X's house and A's house on the south adjacent land were in danger of collapse and that ownership of the block wall between X's house and the house on the north adjacent land was unclear.

1. Background of the sale-and-purchase contract

X concluded a contract with Y1 to purchase the house with land on April 30, 2009 (price: about 95,000,000 yen). The contract specified the following: (1) when the remaining balance is paid (due date: August 3), the ownership shall be transferred to the new owner, and the house with land shall be handed over to the new owner on the same day; (2) Y1 shall deliver a land survey map produced based on field survey attended by owners of the adjacent land as well as Y1 by the date of handover; (3) a border line shall be clearly shown with boundary markers on the land; (4) if the difference between the square measure on the contract and the actual square measure is less than one square meter, the balance shall not be adjusted. Concerning warranty against defects, it was specified that Y1 shall be liable only for repairing defects claimed within three months from the date of handover. The contract also stated that it was not possible to annul/cancel the contract or claim for damages. Y1 concluded a mediation contract with Y2. X concluded a general mediation contract with Y2. On April 30, Y2 delivered a disclosure statement of the house with land to X and Y1. Y1 delivered a report on property status and a list of facilities to X. The report on property status indicated that there was no written arrangement or dispute on the border or on crossing over the border.

Diagram: Visualization of X's land and house, the adjacent land
on the north and south sides, and the retaining wall

Between X's house and A's house on the south adjacent land, there was a retaining wall and a concrete fence which was constructed to protect against collapse of the retaining wall in response to A's request in January 2009. Between X's house and the house on the north adjacent land owned by B and later by C, there was a block wall, the ownership of which is unclear. X put a mailbox and a nameplate on the block wall.

2. Overview of the retaining wall next to the south adjacent land

The retaining wall was made of Oya stones. On the retaining wall, there was a concrete block wall, on which a fence was installed.

Prior to the purchase by X, it was found out that the retaining wall had moved from the original position and was in danger of collapse. A requested Y1 to repair the wall, but the request was rejected.

In January 2010, a staff member of the ward office visited there to conduct a field survey, and after the survey requested X to repair the retaining wall as soon as possible because the concrete blocks, etc. were in danger of collapse. Then, X requested Y1 to bear the repair cost by sending a notification to Y1 in March and June in the same year, twice. Y1 still didn't respond to the request, so X sent a quotation to Y1 and communicated that X would order the repair work by themselves. In the repair process, it was found out that the base of the retaining wall was partly cracked and that antiseismic reinforcement had not been applied to the retaining wall.

3. Overview of the status of the block wall on the boundary with the north adjacent land

On the land survey map produced in March 2009 prior to the purchase by X, it was not indicated that the block wall was completely in the north adjacent land. The land survey map was attached to the written contract when it was signed by X and Y1. When concluding the contract, X were told that nothing crossed over the border, including the block wall, although some of the boundary markers were missing, and that the block wall shall be shared by X and B.

In July 2009, the same land surveyor surveyed the land and produced another land survey map (hereinafter called "the land survey map in July"), installing boundary markers and identifying the boundary. The new map clarified that the block wall was mostly in the north adjacent land. However, B did not request X to remove the block wall. Y1 was told by the land surveyor that the block wall crossed over the border, but Y1 left entirely up to Y2 and did not explain the matter to X by themselves. Next month, the house and the land survey map in July were handed over from Y2 to X. In September, Y1 and B confirmed the agreed boundary based on the land survey map in July and made a written confirmation. In December 2010, C, the new owner of the north adjacent land, told X that they were planning to remove the block wall as well as the existing building. Since X had put the mailbox and nameplate on the block wall, X decided to remove the block wall at their own expense and to build a new block wall in X's land.

X claimed damages against Y1 for default in warranty against defects, default in covering the repair cost, and torts on the grounds that antiseismic reinforcement had not been applied to the retaining wall and that the north block wall had not belonged to X, and against Y2 based on default as well as torts under the mediation contract.

Reason

1. Retaining wall

Antiseismic reinforcement was not applied to the south concrete slope and the Oya stone base. The base was partly cracked. The staff member of the ward office pointed out its danger of collapse. Since data on earthquake resistance strength of the base were not calculated, it was unclear how much the base was in danger of collapse. However, those who saw the tilted block wall felt danger of collapse. The land around the base was dug down, and it was found out that antiseismic reinforcement had not been applied to the retaining wall. Therefore, it was inferable that the block wall was in much danger of collapse, although the base might not collapse. The court affirmed the defect in the retaining wall and Y1's default in warranty against defects because it was easy to predict that collapse of the block wall would endanger lives, bodies and properties of residents in the south adjacent land. Since the three-month time limit for notifying defects was short, the court construed that it was sufficient for X to clearly express, out of court, the intention to demand the seller to fulfill the warranty against defects within the time limit, and affirmed X's claim against Y1. The court did not affirm Y2's liability in this respect on the grounds that Y2 did not have an obligation to offer such expertise.

2. Block wall

No conclusive evidence was found for identifying ownership of the block wall, while it was recognized that a land owner and a wall/fence owner around the land might not always equal. The fact that the block wall was crossing over the north adjacent land precluded the applicability of Article 229 of the Civil Code: "Boundary markers, fences, walls, channels and moats installed on boundary lines shall be presumed to be co-owned by the neighbors" and made it difficult to support X's claim. Even if the block wall belonged to X, it would not be easy to prove the right of land use. It was predictable that C would request to remove the block wall, which would make X difficult to use the wall. Moreover, it was undeniable that the legal relations between X and the owner of the north adjacent land who was claiming ownership of the block wall were unstable. The court construed that these circumstances represented a defect of the subject matter of the sale, and affirmed Y1's default in warranty against defects.

Y2 had duty of care to organize the environment for informed transaction if Y2 found uncertainty in rights over the land and building. Y2 recognized at the time of final settlement of the bill that the block wall had crossed over the north adjacent land, but Y2 didn't explain the matter to X. The court construed that Y2 had not performed duty of care and that Y2 was held liable for default of duty.

Explanation

This case has a number of characteristics. First of all, the court affirmed the defect in the retaining wall based on the sale-and-purchase contract of the house with land. In the end, the court recognized lack of quake resistance in the base of the retaining wall, and affirmed the seller's default in warranty against defects. This means that if the seller is a consumer, the seller becomes liable for a defect even if the seller did not recognize danger of the retaining wall.

Secondly, unclear ownership of the block wall on the boundary with the adjacent land was regarded as a defect of the object sold. Affirming seller's default in warranty against defects based on unclear ownership may lead to redress for consumers if the purchaser is a consumer. If the seller is a consumer, it may affect the other way around.

Thirdly, the court did not approve seller's claim based on the disclaimer of warranty against defects. Concerning the clause requiring that claim for damages must be made within three months from the time when a purchased property is handed over, there is a reference precedent shown below: the Supreme Court regarded the one year time limit on Article 566 (3) (the seller's warranty in case where the subject matter of a sale is encumbered with other rights) applied mutatis mutandis to Article 570 of the Civil Code as the exercise period, and construed that it was sufficient for the purchaser to clearly express, out of court, the intention to demand the seller to fulfill the warranty against defects before the expiration of the time limit, and that the purchaser did not have to go so far as to exercise said right in court. Taking a balance in this way is understandable. In the case on this article, the court affirmed X's claim under the principle of good faith as well as Article 572 of the Civil Code (special agreement disclaiming warranty), although X did not express the intention within three months. It is unique that the court affirmed the claim for damages on the grounds that the seller had not explained the fact of crossing over the border to the purchaser after coming to know the fact. It is noteworthy that the court focused on the lack of explanation after concluding the contract, not when concluding the contract, even in the case of warranty against defects of specified properties.

Fourthly, concerning liability of the real estate broker who mediated the sale and purchase of the real estate, the court affirmed the broker's obligation of explanation when they came to know something different from the explanation they gave at the time of concluding the contract. It is natural that a broker is obligated to give explanation to a client even after concluding a contract if the broker concluded a mediation contract with the client. It is a positive example that the court affirmed an obligation of explanation in this way.

Reference precedents

• Judgment by the Supreme Court on October 20, 1992
  (Page 1129 of Minji Hanrei Shu Vol.46 No.7, website of the Supreme Court (Judgment on the time limit on Article 566 (3) applied mutatis mutandis to Article 570 of the Civil Code))