Opinion
H035628
12-29-2011
JOHN DEPALMA, Cross-Complainant and Appellant, v. CAROL JEANS, et al., Cross-Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Santa Clara County Super. Ct. No. 1-06-CV075836)
After being sued for selling defective real property, appellant John DePalma filed a cross-complaint against the real estate agents and broker who had facilitated the transaction. The broker and two of the agents obtained summary judgment. Appellant seeks review of that ruling as to the two agents, Carol Jeans and Chris Ray. We will affirm the judgment.
Background
Appellant and his wife, Anne DePalma, had owned the subject property, located in Los Gatos, since 1988. In March 1993 appellant began construction of a home on the property, but while the home was still being constructed he and his wife decided to sell the property. In April 2004 the DePalmas signed a listing agreement with Coldwell Banker (Coldwell) to sell the property for $15 million. The DePalmas also gave Coldwell their written consent to the "possibility" that Coldwell might act as a dual agent for both seller and buyer. The consent form contained the acknowledgment that "a Dual Agent is obligated to disclose known facts materially affecting the value or desirability of the property to both parties."
John Little purchased the property on August 12, 2005, through an entity named JDP Trust, with his attorney, Stanley Doty, as trustee. The purchase price was $14 million, and the property was sold "as is." Respondents Carol Jeans and Chris Ray were agents for Coldwell. Margie Archer, also a Coldwell agent, represented the buyer.
At some point during the negotiations, Archer agreed to reduce her commission, on the condition that the buyer consent to a "hold harmless" clause. On July 20, 2005 Doty executed a "Hold Harmless Agreement," in which JDP Trust agreed to hold Archer harmless in the transaction; in exchange, Archer agreed "to uphold her fiduciary duties and ethical standards, as well as act in good faith as Buyer's Realtor in the purchase transaction of [the property] for a discounted brokerage fee of 2% to Coldwell Banker."
In consultation with Little and Doty, Archer arranged for multiple property inspections, all of which took place after August 12, 2005. The report of the termite inspector indicated water stains to the subfloor and floor joist "due [to] being opened," to the foundation and the roof, and to "wood members "due to being open to elements." A.C. & H. Civil Engineers, Inc. (ACE) found the structure to be well designed, but it noted that windows had not yet been installed, and the window frames had water stains. Likewise, ACE noted water stains on the back of the firebox in each fireplace, as well as a serious leak around one of the chimneys, which caused water to run into the basement garage over the main electrical panel.
Archer put a copy of the inspection reports in Jeans's box as she received them. At her deposition Jeans testified that she would typically review inspection reports. It was her custom and practice to have her assistant send the reports to the sellers, but she had no specific recollection of any delivery or discussions with the DePalmas about the reports she had received. In this case she was not concerned about anything in the termite report regarding the condition of the property. Ray likewise was not concerned; he understood the water stains to have resulted from the structure being open to the elements.
On August 18, 2005, the DePalmas signed the PRDS Real Estate Transfer Disclosure Statement in which they disclosed only one significant defect, "minor cracks re: Limestone Surrounds." Jeans testified that neither she nor Ray was aware of any other defects or problems. She did, however, note on the disclosure statement that the property was "unfinished construction," without building permits and not yet in compliance with safety codes. She added, "Buyer is advised to complete any/all inspect[io]ns to determine prop[erty] condition to Buyer's satisfaction."
Appellant testified that he did not ask for a copy of the ACE report, because "[t]hose inspections were not made for me." Nor was he concerned that he had not received any information from the buyer regarding the condition of the property: "My attitude has always been if the property checks out to your liking, you are going to buy it. If it doesn't, fine, we'll call it a day. I had no problem with that." He believed that the as-is clause protected him from having to defend himself; yet he said, "I thought I did disclose everything that I should disclose. . . . I disclosed everything I knew." Doty signed the PRDS Removal of Contingencies on September 9, 2005.
On September 30, 2005, appellant signed a number of documents in anticipation of the close of escrow four weeks later. Among them were the inspection reports, which the DePalmas both signed as "Read and Approved." Escrow closed on October 28, 2005. Jeans, Archer, and Coldwell received a total of $530,000 in commissions.
Appellant expected to be in Europe at the close of escrow; hence, he signed the closing papers early.
On December 4, 2006, Doty, acting as trustee for the JDP Trust, brought suit against appellant and several construction companies that had inspected or worked on the site. Among the multiple claims against appellant was the allegation that he was a "contractor, builder, and seller" of the property, and that he, along with other defendants, had negligently designed and built the property. Doty also accused appellant of deliberately failing to disclose defects in the property, including water intrusion and damage.
Appellant then filed a cross-complaint which brought the real estate agents into the litigation. Of the 19 causes of action in his third amended cross-complaint, nine were asserted against Coldwell, Jeans, and Ray: fraudulent concealment of the inspection reports, the Hold Harmless Agreement, and the structural defects; breach of fiduciary duty to disclose these "material facts"; breach of fiduciary duty to investigate the structural defects; breach of fiduciary duty to be "honest and truthful"; constructive fraud; negligence in inspecting the property; breach of the listing agreement; breach of the implied covenant of good faith and fair dealing; and unfair business practices in violation of Business and Professions Code section 17200. Appellant requested damages to compensate him for (a) the real estate commissions he paid to these cross-defendants, (b) the cost of repairing the construction defects in the property, and (c) the amount he could have received but for the cross-defendants' conduct, as he "could have fixed the alleged defects and sold the Property for a higher price." In the 13th cause of action he further sought a judicial declaration that he was entitled to equitable indemnity for any damages he might be compelled to pay as a result of the buyer's claims.
Coldwell was sued in the name of "Valley of California, Inc., a California corporation dba Coldwell Banker Residential Brokerage."
Archer was named in seven of those nine claims.
Coldwell, Jeans, and Ray moved for summary judgment, or alternatively, summary adjudication of the nine causes of action alleged against them and the claim of equitable indemnity. Archer brought a separate motion, which was granted in part, and which is not before us in this appeal. The superior court addressed each of the nine causes of action against Coldwell, Jeans, and Ray and determined that they had negated at least one element of each. As appellant had failed to raise a triable issue of material fact on any of his claims, the court granted summary judgment to Coldwell, Jeans, and Ray. From the ensuing judgment on March 26, 2010, appellant timely filed this appeal.
The superior court summarily adjudicated all causes of action against Archer in her favor, except the ninth, for unfair business practices, because she had failed to submit argument, facts, or evidence material to that cause of action. The court also agreed with appellant that the 13th cause of action for equitable indemnity could not be summarily adjudicated because it had not yet been determined that DePalma had engaged in fraudulent conduct; hence, there was nothing to indemnify.
Appellant has not sought review from the summary judgment ruling in favor of Coldwell. Indeed, the judgment from which he appeals did not even include Coldwell. In the ensuing discussion, however, we often refer, for convenience only, to "respondents" when the context encompasses Coldwell as well as Jeans and Ray.
Discussion
1. Scope and Standard of Review
The parties appear to be familiar with the standards by which summary judgment motions are reviewed in the superior court and appellate court. Summary judgment is appropriate "if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Code Civ. Proc., § 437c, subd. (c).) A defendant who moves for summary judgment bears the initial burden to show that the action has no merit--that is, for each cause of action one or more elements "cannot be established, or that there is a complete defense to that cause of action." (Code Civ. Proc., § 437c, subds. (o), (p)(2); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (Aguilar); Truong v. Glasser (2009) 181 Cal.App.4th 102, 109.) When the burden of proof at trial will be on the plaintiff by a preponderance of the evidence, the moving defendant "must present evidence that would preclude a reasonable trier of fact from finding that it was more likely than not that the material fact was true [citation], or the defendant must establish that an element of the claim cannot be established, by presenting evidence that the plaintiff 'does not possess and cannot reasonably obtain, needed evidence' " to support a necessary element of the cause of action. (Kahn v. East Side Union High School Dist. (2003) 31 Cal.4th 990, 1003, quoting Aguilar, supra, 25 Cal.4th at p. 854; Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.)
If the moving defendant makes a prima facie showing that justifies a judgment in that defendant's favor, the burden then shifts to the plaintiff to make a prima facie showing that there exists a triable issue of material fact. (Aguilar, supra, 25 Cal.4th at p. 850.) "The plaintiff . . . may not rely upon the mere allegations or denials of its pleadings to show that a triable issue of material fact exists, but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to that cause of action . . . ." (Code Civ. Proc., § 437c, subd. (p)(2).)
On appeal, we conduct a de novo review of the record to "determine with respect to each cause of action whether the defendant seeking summary judgment has conclusively negated a necessary element of the plaintiff's case, or has demonstrated that under no hypothesis is there a material issue of fact that requires the process of trial, such that the defendant is entitled to judgment as a matter of law." (Guz v. Bechtel National, Inc., supra, 24 Cal.4th at p. 334; Daly v. Yessne (2005) 131 Cal.App.4th 52, 58.) We apply the same procedure used by the trial court: We examine the pleadings to ascertain the elements of the plaintiff's claim; the moving papers to determine whether the defendant has established facts justifying judgment in its favor; and, if the defendant did meet this burden, plaintiff's opposition to decide whether he or she has demonstrated the existence of a triable issue of material fact. (Knapp v. Doherty (2004) 123 Cal.App.4th 76, 84-85; Varni Bros. Corp. v. Wine World, Inc. (1995) 35 Cal.App.4th 880, 887.) "We need not defer to the trial court and are not bound by the reasons for the summary judgment ruling; we review the ruling of the trial court, not its rationale." (Knapp v. Doherty, supra, 123 Cal.App.4th at p. 85.)
2. Appellant's Pleading
Because summary judgment review is defined by the issues raised in the pleadings, we first direct our attention to the material allegations of appellant's third amended cross-complaint. The first and fifth causes of action were for fraudulent concealment and constructive fraud, respectively. The fourth was for breach of the "fiduciary duty to be honest and truthful during the purchase and sale of the Property." All of the allegations in these three claims were similar.
In the first cause of action appellant alleged that Coldwell and respondents Jeans and Ray, along with Archer, "suppressed and concealed" the Hold Harmless Agreement and the inspection reports "with the intent to induce DePalma to enter into the Purchase Contract and ultimately complete the sale of the Property." Had he been aware of these documents, "DePalma would not have entered into the Purchase Contract." Appellant further alleged that respondents and Archer were aware of water damage due to leaks and building code violations both before and after the execution of the purchase contract; they "suppressed and concealed these defects" from appellant, with the intent to induce him to enter into the contract and complete the sale. In the fourth and fifth causes of action, respondents were alleged simply to have failed to provide the Hold Harmless Agreement and the inspection reports and failed to disclose the defects.
The second cause of action alleged breach by respondents and Archer of their "fiduciary duty to make the fullest disclosure of all material facts"—namely, the existence of the Hold Harmless Agreement, the inspection reports, and the water damage caused by the structural defects. Respondents' failure to disclose the defects was the sole basis of the third cause of action for breach of the "fiduciary duty to investigate all material facts in the purchase and sale of the Property that might affect DePalma's decision to enter into the Purchase Contract and ultimately sell the Property."
In all of these claims appellant alleged that the result of respondents' conduct was that he "entered into the Purchase Contract and ultimately completed the sale of the Property." His damages consisted of "(i) the amount of the commission paid to Coldwell, Jeans, Ray and Archer . . . (ii) the sum equal to the amount required to repair these alleged defects and (iii) further amounts, according to proof, in that DePalma could have fixed the alleged defects and sold the Property for a higher price . . . ."
The sixth cause of action was for negligence, arising from respondents' and Archer's failure "to conduct reasonably competent and diligent inspections of the Property and disclose to DePalma certain alleged defects in the Project, or the likely presence thereof, including without limitation the presence of water damage due to leaks and potential building code violations." The result of this failure was again that appellant entered into the contract and completed the sale, and his damages were the costs of repairing the "alleged defects" in the property.
The seventh and eighth causes of action, for breach of contract and breach of the covenant of good faith and fair dealing, were based in part on respondents' failure to list the property "on an 'as-is' basis and in [a] manner [that] would insulate DePalma from liability of any kind (except . . . fraud)." Appellant further alleged that in undertaking dual representation of appellant and the buyer, respondents should have advised appellant to retain an attorney to draft the purchase contract but instead drafted it themselves, thereby engaging in the unauthorized practice of law and without the requisite skill and care. Respondents also allegedly failed to procure appropriate expert inspections, failed to conduct "reasonably competent and diligent" inspections themselves, and (again) failed to provide the inspection reports to appellant. The harm resulting from these (and other) breaches of the listing agreement and the breach of the covenant of good faith and fair dealing was the same as in the first cause of action: the amount of the commissions appellant paid the agents; the cost of repairing the defects; and some unspecified amount he would have had if he had not entered into the contract but instead fixed the defects and sold the property for a higher price.
Appellant combined all of the previous allegations into his ninth cause of action (which added Doty and Little to the list of cross-defendants) for "unlawful, unfair, or fraudulent business acts or practices." Here he re-alleged suppression and concealment of material facts, intentional failure to perform contractual obligations, and misrepresentation, all with the intent to harm him and deprive him of his "property and legal rights." Appellant asserted entitlement to damages for the "cruel and unjust hardship" he had suffered for the cross-defendants' "intentional, willful, and wanton" conduct.
Finally, in the 13th cause of action for declaratory relief appellant claimed that respondents, along with Archer and a mechanical contractor, were obligated to "indemnify and protect" him against claims asserted by Doty as trustee for the purchaser.
3. Respondents' Showing
In their summary judgment motion respondents asserted that there was no evidence to support the allegations of concealment; no duty by respondents for the benefit of the seller (as opposed to the buyer) to inspect the property or discover and disclose defects; no duty to insulate the seller from liability; no facts indicating that respondents had ever provided legal advice; and no allegations of any misrepresentation by respondents.
Respondents' best arguments for summary judgment purposes were those that did not depend on their assertion of insufficient evidence to support the allegations, but rather raised the questions of whether they owed a duty to appellant and whether he alleged any legally recognizable harm from their conduct—both of which were amenable to resolution by summary adjudication. (See, e.g., Holmes v. Summer (2010) 188 Cal.App.4th 1510, 1518 [existence of a legal duty is a question of law]; Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 515 [sufficiency of factual allegations to constitute a cause of action is predominantly a question of law]; cf. Burger v. Pond (1990) 224 Cal.App.3d 597, 602 [where summary judgment motion depended not on the resolution of disputed facts but on whether the factual allegations stated a sufficient basis for recovery of damages, motion presents issues of law, not fact.])
Our focus is on the latter question, the legal sufficiency of appellant's allegations of causation and damages. For example, the fourth cause of action (breach of the "fiduciary duty to be honest and truthful") did not identify how respondents' withholding of the Hold Harmless Agreement and the inspection reports caused him harm. Likewise, the ninth cause of action alleged no specific harm but only "cruel and unjust hardship" from respondents' unfair business practices.
In the first, second, third, fifth, and sixth causes of action appellant alleged that respondents' conduct "materially affected [his] decision to enter into the Purchase Contract and ultimately sell the Property." In the seventh and eighth causes of action he claimed that respondents' breach of the listing agreement and the good-faith covenant caused him harm "in that [he] would not have entered into the Purchase Contract, but would have fixed the alleged defects and sold the Property for a higher price." It is readily apparent that these claims are fatally defective.
While appellant does not challenge summary adjudication of the third and sixth causes of action, we have included them in our collective discussion for convenience and readability.
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As to the Hold Harmless Agreement between Archer and the buyer, appellant alleged no facts that could have supported a finding that he was harmed by the buyer's promise not to sue Archer or that respondents had a duty to inform appellant of this agreement. Indeed, the Hold Harmless Agreement apparently benefited appellant by reducing the commission Archer was to receive. The mere assertion that appellant would not have entered into the $14 million purchase contract is insufficient, particularly in light of his admission that he "couldn't say" that he would have refused to go through with the transaction had he known about the agreement between the buyer and Archer. At most he could only say that he would have inquired about the document.
On appeal, appellant changes his rationale. Now he asserts that the Hold Harmless Agreement was relevant to his consent to dual agency. No facts are offered for this belated argument, nor any showing of how his consent to dual agency would have altered the relationship between him and the buyer. Appellant fails to explain how the decision to enter into and complete the transaction suddenly becomes immaterial while the decision to consent to the dual agency becomes paramount.
The alleged failure—whether negligent or intentional—to provide the inspection reports was also the proper subject of summary adjudication. Because the inspection reports were written after the purchase contract was signed by both parties, appellant cannot logically claim that he would not have entered into the contract had he known about the reports. His concomitant allegation that he would not have completed the sale is unsupported by and inconsistent with the position he took during discovery. According to his deposition testimony, appellant believed that the as-is condition of the contract already protected him from litigation; and he was not concerned that he had not received a copy of an inspection report or that he had received no information from the buyer about the condition of the property. Appellant offered no evidence to support the allegation that he would not have completed the sale. On the contrary, he felt that he was "locked in" and therefore could not back out of the transaction even if he had wanted to do so-- and in any event, he did not want to back out at any time.
Thus, neither in the superior court nor on appeal has appellant pointed to any evidence raising a triable issue of material fact on the issues of causation and damages. He concedes that he could not have withdrawn from the contract by the time the inspection reports were completed. Appellant did not claim as damages any amount he was obligated to pay the buyer, except in the 13th cause of action for declaratory relief. As the appellate record contains no indication of the ultimate outcome of the buyer's lawsuit against appellant, there appears to be no basis beyond speculation for the right to indemnification asserted in that claim. Appellant does not argue otherwise.
Appellant offers an alternative allegation of harm in his opening brief: If Jeans or Ray had given the inspection reports to him when issued, appellant "[might] have suggested to Little that he must do further inspections and, if Little refused, [appellant] would have proposed that they sign a new agreement that specified that Little was on his own based upon the different situation. . . . Alternatively, [appellant] [might] have suggested that Little and he split the cost of repairs that were necessary, according to the inspection reports." Or, appellant adds, he "could have amended the property condition disclosures in the seller's [PRDS] to provide notice of the water damage so that the buyer could not later claim, as he did, that [appellant] failed to disclose a known defect." Then, appellant suggests, either party could have rescinded the deal.
There is absolutely no evidence supporting these hypothetical scenarios; and in fact, appellant's deposition testimony contradicts his current speculation. Appellant clearly stated that it was up to the buyer to raise any problem he found with the condition of the property. Had Little first brought any concerns to him, appellant and the buyer "could have" agreed to contribute money to resolve the problem. Otherwise, his own attitude was "if the property checks out to your liking, you are going to buy it. If it doesn't, fine, we'll call it a day. I had no problem with that."
All of the causes of action asserted against respondents included the allegation that respondents had failed to disclose the defects in the property, particularly the water damage. By conceding summary adjudication of the third and sixth causes of action appellant seems to have abandoned the claim that respondents should have inspected and discovered the property defects before they received the inspection reports. He continues to argue, however, that respondents had a duty to inform him of the water damage once they received the reports. The same result attends this position. Appellant has pointed to no evidence raising a triable issue of fact as to whether and how the escrow period would have ended differently. This does not involve the pleading of mere evidentiary facts, but manifests the ultimate issues of causation and damage. As appellant was unable to raise a triable issue on these elements of his causes of action, the superior court properly disposed of them by summary judgment.
None of the cases on which appellant relies alters this conclusion, as none involved comparable factual or legal issues. In Roberts v. Lomanto (2003) 112 Cal.App.4th 1553, for example, the broker, who agreed to buy the property from her client, could not escape from her role as fiduciary by assigning her purchase rights to a third party, and she therefore breached her duty to her client by refusing to disclose the amount of the assignment fee paid by the assignee. The reversal of summary judgment in Brown v. FSR Brokerage (1998) 62 Cal.App.4th 766 was based on the broker and agent's failure to disclose their dual representation of seller and buyer, to the clear detriment of the seller. Field v. Century 21 Klowden-Forness Realty (1998) 63 Cal.App.4th 18, pertained to the fiduciary duty of a broker and agent to learn and disclose information about property to the prospective purchaser whom they exclusively represented. Michel v. Moore & Associates (2007) 156 Cal.App.4th 756 similarly involved negligent nondisclosure of known defects to the purchaser, the defendant broker's client. Contini v. Western Title Insurance Co. (1974) 40 Cal.App.3d 536 was a lawsuit against a title company, brought by purchasers of land with a defective title. Likewise, the plaintiff seller in Spaziani v. Millar (1963) 215 Cal.App.2d 667 obtained a reversal of a judgment of nonsuit obtained by a title company, which was alleged to have been negligent in performing its duty as escrow holder. These cases have no application to the situation before us.
Appellant does not dispute that he received the inspection reports and acknowledged having "read and approved" them well before the close of escrow. Instead, disregarding his own lack of interest in the outcome of the inspections, he insists that respondents should bear the responsibility for his own failure to examine or act on the reports. Appellant has cited no authority compelling a seller's agent to review the inspection reports and advise the seller of the findings made by the inspectors. Neither Alfaro v. Community Housing Improvement System & Planning Assn (2009) 171 Cal.App.4th 1356 nor Holmes v. Summer, supra, 188 Cal.App.4th 1510 imposes or implies such a duty.
In summary, appellant's insufficient allegations of causation and damages doomed his third amended cross-complaint against respondents. Appellant does not suggest that his pleading could be amended to state viable causes of action. Accordingly, we agree with the superior court that summary judgment was warranted in this case.
Disposition
The judgment is affirmed.
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ELIA, J.
WE CONCUR: ____________
PREMO, Acting P. J.
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MIHARA, J.