Background
Joan Catalino and Joseph Catalino Jr. bought a residential property from Justin C. Watson and Annemarie C. Watson under a February 2022 contract. The property adjoined a municipal right-of-way. Their written contract required the sellers to disclose “any adverse material facts actually known to” them when the contract was created or that became known to them before closing.
Several days before the contract, Colorado Springs Utilities sent subcontractor Jerimiah Smith to conduct a site visit for the proposed Loch Fyne Gas Pipeline Replacement Project. A few days after the contract was signed, CSU selected a final route through the right-of-way adjacent to the property. Before closing, the parties walked the property and discussed a potential city road along its southern border. The transaction closed in March 2022.
The buyers alleged that CSU contacted them in May 2022 and told them that an engineering subcontractor had communicated with the sellers about the project earlier that year. They also alleged that a subcontractor representative confirmed Smith had contacted the sellers. The buyers sued for breach of contract and fraud, asserting that the sellers disclosed only awareness of a planned road and actually knew about, but failed to disclose, the pipeline project. The district court denied the sellers’ Rule 12(b)(5) motion to dismiss, rejecting the argument that disclosure duties covered only physical conditions on the property itself and finding the nondisclosure allegation plausible.
The Court’s Holding
After discovery, the sellers sought summary judgment and submitted affidavits denying actual knowledge of the project before closing. They argued that the buyers’ supporting material amounted to a hearsay allegation from an unnamed individual identified as staff from the subcontractor’s office and was insufficient to create a genuine factual dispute. The district court agreed. Because it resolved the motion solely on the actual-knowledge theory, the Court of Appeals confined its analysis to that theory as well.
Reviewing summary judgment de novo, the court explained that the sellers could satisfy their initial burden by showing an absence of evidence supporting an element on which they would not bear the trial burden. The burden then shifted to the buyers to establish a triable issue through admissible materials, including affidavits based on personal knowledge. The buyers pointed to photographs, work papers, correspondence reporting that others had heard the sellers met with the subcontractor or knew of the project, minutes from meetings the sellers did not attend, and Smith’s site visit seven days before contracting. None included affidavits or other Rule 56(e) materials from participants affirming that they told the sellers about the project before closing. The court therefore held that the buyers failed to counter the sellers’ affidavits with admissible evidence of actual knowledge. It also noted that the buyers had not sought additional discovery under Rule 56(f).
The court treated the buyers’ two remaining arguments differently. Their claim that the district court failed to draw favorable inferences from subcontractor contact was unpreserved because it first appeared in their Rule 59 reply brief, denying the sellers an opportunity to respond and leaving the district court without findings on that contention. Their claim that the court improperly weighed the sellers’ evidence was preserved in the Rule 59 motion itself. Reviewing the denial of that motion, characterized as a new-trial motion under Rule 59(d)(4), for abuse of discretion, the court found none: weighing conflicting evidence at summary judgment would be error, but there was no admissible evidence of actual knowledge to weigh. The judgment was affirmed.
Key Takeaways
- Sworn denials of actual knowledge shifted the burden to the buyers to produce admissible evidence creating a genuine factual dispute.
- Reports of what nonparties heard, planning documents, and evidence of project activity did not establish that anyone informed the sellers before closing.
- The inference argument was forfeited by its first appearance in a Rule 59 reply brief, while the preserved weight argument failed on abuse-of-discretion review.
Why It Matters
The unpublished decision illustrates the difference between surviving a motion to dismiss and surviving summary judgment. Plausible allegations of a seller’s preclosing knowledge may suffice at the pleading stage, but once the seller supplies sworn denials, the buyer must identify admissible, personal-knowledge evidence rather than rely on hearsay, project documents, or argument.
It also underscores issue-specific preservation. Raising an argument for the first time in a district-court reply brief did not preserve the inference challenge, although the weight challenge remained reviewable because it appeared in the Rule 59 motion. The court’s rulings were tied to this record and did not suggest that subcontractor contact could never support an inference of knowledge when supported by admissible evidence.