Land seller was held liable for underground waste based on warranty against defects.

Two consumers purchased land in a villa area. While constructing the foundation of a holiday home there, the Great East Japan Earthquake occurred. In order to repair cracks in the foundation, the land was drilled. Then, it was found out that waste had been buried in the land. The consumers claimed damages against the land broker based on seller's warranty against defects.

The court recognized "a hidden defect" of the land and ordered the land broker to pay costs for removing and disposing of the waste (not including costs for removing and rebuilding the foundation).

The judgment serves as a reference for determining the presence of a defect and the scope of compensation in cases where underground waste was found in land during foundation construction.(Judgment by the Tokyo District Court on November 17, 2014, published on LEX/DB)

Summary of the case

Plaintiff:

X1 and X2 (consumers)

Defendants:

Y (land broker)

Party concerned:

A (building contractor)

On April 29, 2010, X1 and X2 purchased land 1 and its adjacent land 2 in a villa area sold in lots from Y at a price of 10,000,000 yen. Afterwards, X1 and X2 concluded a contract with A for construction of a wooden house on land 1 in accordance with the timber framework method. On November 1, 2010, the work was launched and the foundation construction was initiated. On March 11, 2011, the Great East Japan Earthquake occurred. Although the seismic intensity was 5 upper, neither building damage nor land liquefaction was found in the villa area. After the earthquake, two cracks were generated in the foundation under construction. Gutters and roads adjacent to land 1 & 2 sagged and power poles tilted. In order to repair the foundation, A's contractor drilled an area adjacent to the foundation in land 1. Then, industrial waste was found under the foundation. When digging 1.5 m in width and 2 m in depth around the foundation, about 2 tons of waste was found there (e.g. concrete blocks, big plumbing pipes, cans, bottles, stones, etc.). In April, Y visited there and observed the waste buried in the land. Later, Y sent a document titled "Notice" to X1 and X2, which stated, "In light of the depth where the waste was found, it appears that the waste was already found during the foundation construction and that the contractor continued construction considering the underground waste would not develop any problem with foundation strength. The waste will be removed and disposed of at Y's expense. However, costs for removing and rebuilding the foundation should be covered by A because A noticed the underground waste during the foundation construction and continued construction without informing the matter to X1, X2 and Y."

X1 and X2 decided to remove the waste in land 1. The foundation was demolished and removed. After the waste was removed, the foundation was rebuilt. (Another option was to jack up the foundation to remove the waste, but the method was more expensive and the former method was chosen.)

On January 11, 2012, X1 and X2 claimed about 4,020,000 yen against Y to cover costs for removing the foundation originally built, improving the surface layer, rebuilding the foundation, removing and disposing of the waste in land 1. In the lawsuit, X1 and X2 claimed about 5,000,000 yen in total against Y including costs for removing and disposing of underlying waste in land 2 on the ground that it was reasonably inferable that similar waste had been buried also in land 2 adjacent to land 1. With the right to seek damages based on seller's warranty against defects under Article 570 of the Civil Code, X1 and X2 claimed damages against Y for either (1) removing the industrial waste or (2) cracks in the foundation generated after the Great East Japan Earthquake due to the industrial waste buried in land 1.

Reason

Presence of a concealed defect

(1) Land 1

When residential land is sold, it should be construed that the land is defective when there is any foreign matter which qualitatively and quantitatively constitutes an obstacle to construction because the land lacks quality that residential land ordinarily should provide.

While the purpose for purchasing the land was to build a holiday home, a huge amount of waste including big plumbing pipes was found under the foundation. It can be said that the waste qualitatively and quantitatively constituted an obstacle to construction and it is reasonable to regard the waste as a defect. Considering the depth where the waste was found, it is construed that it was not possible to find the waste by general observation. Therefore, the waste constituted a concealed defect under Article 570 of the Civil Code.

(2) Land 2

X1 and X2 insisted that similar industrial waste should have been buried in land 2, but there was not enough evidence to support it.

Costs for removing and disposing of the waste (alternative claim 1)

Since the underground waste in land 1 constituted a defect, the costs required for removing and disposing of the waste represented damage due to the defect. Moreover, the foundation had to be demolished and rebuit in order to remove the waste. Then, X1 and X2 insisted that the costs for demolishing and rebuilding the foundation in addition to the costs for removing and disposing of the waste should be compensated by Y.

Incidentally, it is doubtful that A didn't notice the waste at all during the period of foundation construction when the waste was lying just under the foundation. It's hard to directly accept A's written statement that no industrial waste was found when drilling 30 cm in depth around the construction area before foundation construction. Neither X1 nor X2 gave a convincing explanation for this. It's not possible to deny the possibility that A constructed the foundation knowing the existence of the waste. After the contractor A conducted the foundation construction without taking any measure for the underground waste, it was difficult for Y to predict that the underground waste would constitute a defect that would require demolishing and rebuilding the foundation. Therefore, it was not reasonable to impose the costs for demolishing and rebuilding the foundation on Y. The court also construed that the costs for investigating the cause of cracks in the foundation should not be imposed on Y. Consequently, the court assessed the amount of damages as approximately 980,000 yen for drilling land 1 required for removing the waste, backfilling, improving cement (for foundation improvement) and disposing of the waste.

Costs incurred by cracks in the foundation which might have been caused by the underground waste (alternative claim 2)

X1 and X2 insisted that the foundation had been damaged due to a depression after the Great East Japan Earthquake caused by the existence of the waste or due to contact between the waste and the foundation caused by the depression after the earthquake.

However, there was not enough evidence to support the above statement by X1 and X2. It was not possible to deny that the foundation had been damaged due to the earthquake regardless of the waste buried in the land as stated by Y. Accordingly, it was not possible to accept the above statement by X1 and X2.

Explanation

There are many precedents that a buyer sought liability against a land seller when underground waste was found based on seller's warranty against defects. More often than not it is likely that the mere existence of underground waste is not recognized as a defect. On the other hand, the purpose of buying land is mostly to construct a building on it. If any obstacle to construction is found in the land, the obstacle is likely to be recognized as a defect under seller's warranty against defects. There are many precedents that the court recognized concrete blocks, building rubble, etc. buried in land as obstacles to foundation construction. The above case is one of them. In the above case, the foundation construction was almost completed despite the existence of the underground waste, so the court might have recognized no defect. While acknowledging that the foundation was constructed, the court recognized a defect on the ground that it was undeniable that the waste buried right under the foundation might have been an obstacle to constructing a building depending on the size and design of the building. In the statement, the court used the word "building" in general terms. Then, a question remains. If the shape, design, etc. of a building to be constructed was specified on a written contract for buying land, does the land have no defect as long as the building has been satisfactorily constructed ?

The above case is more characteristic than other similar precedents because the underground waste was found when the foundation construction was almost completed. In most cases in the past, underground waste was found earlier, when investigating land after purchase, launching construction or drilling land prior to foundation construction. In the above case, however, the buyers noticed the existence of waste after the big earthquake, when the foundation was almost completed. Then, the buyers sought compensation for removing and rebuilding the foundation in addition to compensation for removing and disposing of the waste. Regarding the alternative claim 1, the court stated that contractor A had probably noticed the underground waste but had not informed X1 and X2 of the matter, and denied Y's predictability. Then the court excluded the costs for removing and rebuilding the foundation from the compensation. The decision implies that A could be charged for the costs for removing and rebuilding the foundation if A recognized the underground waste as a defect and continued construction without informing X1 and X2 of the matter. Regarding the alternative claim 2, the court did not affirm the claim on the ground that there was not enough evidence to support that the cracks in the foundation generated by the depression after the big earthquake had been caused by the underground waste. In that case, if X1 and X2 verified that the underground waste had caused the cracks in the foundation when the earthquake with a seismic intensity of 5 upper had occurred, the court might have affirmed the claim. (The claim might not have been affirmed at any rate when considering that the damage had not been generated if A, who should have noticed the underground waste, had not launched the foundation construction.)

Reference precedents

1. Judgment by the Tokyo District Court on November 21, 2013 (LEX/DB)
   Concerning land sold for building a condominium, concrete piles under the ground were recognized as defects.
2. Judgment by Saitama District Court on July 23, 2010 (court's website)
   Concerning residential land with underground waste, the court did not approve the consumer's rescission request on the ground that a house had been constructed and residents there were leading normal daily lives, and just affirmed the claim for damages.