Opinion
Rehearing Granted Jan. 29, 1991.
Previously published at 226 Cal.App.3d 767
Landowners brought causes of action for fraud and negligent misrepresentation against developer, alleging developer fraudulently induced their support and acquiescence to obtain required government approval for residential development. The Superior Court of Orange County, No. X 59 82 63, Jonathan H. Cannon, J., sustained a demurrer, without leave to amend, by developer. Landowners sought review by writ of mandate. The Court of Appeal, Moore, J., held that: (1) extraordinary relief could be granted at the pleading stage; (2) landowners sufficiently pled actionable intentional misrepresentations by developer; (3) when developer sought landowners' support in land use approval process, developer had a duty to tell the truth and not negligently misrepresent nature and scope of project; (4) landowners adequately alleged they suffered injury proximately caused by developer's misrepresentations; and (5) the duty landowners relied on was not based on an unenforceable promise to protect landowners' view.
Writ issued.
Wallin, J., dissented and issued an opinion.
Darryl J. Paul, Laguna Niguel, for petitioners.
No appearance for Respondent.
Hamilton & Samuels, Paul R. Hamilton, Newport Beach and Jeffrey S. Grider, Los Angeles, for real parties in interest.
OPINION
MOORE, Associate Justice.
Petitioners Clyde and Maurine Lacher seek review of an order sustaining a demurrer, without leave to amend, to causes of action for fraud and negligent misrepresentation in an action arising out of a residential development being built near their home. They allege the developer fraudulently induced their support and acquiescence to obtain the required government approval for the project. We conclude the trial court erred in holding the facts alleged in the first amended complaint failed to establish the developer owed a duty of care to petitioners. In addition, we reject respondents' claim the amended complaint does not adequately allege justifiable reliance and injury proximately caused by their purported misrepresentations.
I
While extraordinary relief generally is not granted at the pleading stage, an appellate court can do so when it concludes the trial court has deprived a party of an opportunity to plead his or her cause of action or defense and granting the petition will prevent a needless and expensive trial and reversal. (Taylor v. Superior Court (1979) 24 Cal.3d 890, 894, 157 Cal.Rptr. 693, 598 P.2d 854. See also Freedman v. Superior Court (1989) 214 Cal.App.3d 734, 735-736, 263 Cal.Rptr. 1.) Furthermore, we are required to assume the truth of all properly pleaded material allegations contained in the amended complaint, give it a reasonable interpretation by reading the pleading as a whole and all of its parts in context, and are prohibited from considering whether petitioners will be able to prove their allegations or the possible difficulty in doing Petitioners allege they own and live on property located in Dana Point, California and are "novices in the building and development industry." Real party in interest Southwest Diversified, Inc. (Southwest) owns approximately 25 acres of land in Dana Point located across the street from and generally southeast of petitioners' residence.
Prior to the City of Dana Point's incorporation, the County of Orange (County) prepared an environmental impact report covering the Dana Point area. The report recognized one of the area's primary natural resources was its scenic views of the harbor, coast and mountains. Subsequently, County adopted the Dana Point Specific Plan (DPSP) which also recognized Dana Point's scenic views resource. Both the report and the DPSP designated the area where petitioners' property is located as having a "secondary view-potential primary inland view," facing in a generally southeasterly direction.
In conformity with the DPSP, land use regulations were adopted restricting the nature and type of development permitted in Dana Point. The regulations covering Southwest's property imposed limitations that included minimum building site area, building width and height restrictions, and building set-back requirements.
Southwest wanted to build a residential development on the Dana Point property. It filed a tentative tract map with County's Environmental Management Agency, and applied for a use permit, zoning permit, and a coastal permit. By applying for these permits, Southwest subjected its project to a public hearing review process before the DPSP Board of Review, and the Orange County Planning Commission, among others.
Southwest's development proposal requested certain concessions it was not otherwise entitled to receive and to which there was substantial opposition in the neighboring community. To achieve the necessary approval, Southwest actively solicited the support of nearby residents, including the petitioners. The neighbors' primary concerns lay in protecting their views. During the latter part of 1987 through the summer of 1988 Southwest's agents, real parties in interest Richard Garlinghouse and Mark Buell, conducted and attended several meetings with interested neighbors.
In these meetings, Southwest's agents allegedly misrepresented material facts relating to the project. At a November 1987 meeting, Buell promised he would try to satisfy petitioners' request that Southwest build on the natural, existing grade of the property along Calle La Primavera, the street between petitioners' and Southwest's lots. At a meeting held January 9, 1988, Buell stated the houses built along that street would be limited to one story above street level.
During two subsequent meetings, Southwest's agents asserted the homes built in the development would be erected on the natural, existing grade, without using fill dirt, set back from the street some 25 feet, and situated to maximize petitioners' view. On both occasions, Garlinghouse accompanied petitioners to the lots directly across the street from their property and pointed out where structures would be located.
At another meeting, Garlinghouse claimed no structure built on Southwest's property would exceed one story in height above the street level of Calle La Primavera. Also, during the permit approval process, Southwest represented to County's planning commission it would (1) provide split-level building pads and step-down units to preserve the natural form of the property's terrain, and (2) limit homes along Calle La Primavera to single-story plans using structural designs that preserved the views of nearby residents.
In reliance on defendants' representations, petitioners acquiesced in the development Petitioners allege on information and belief that if they, other residents, and the administrative review agencies had known the true facts about the development, "approval of the then proposed project would not have been obtained by ... Southwest without conditions imposed" protecting the views of nearby residents. As a result, petitioners have been deprived of "substantial ocean, coastline and mountain views from their residence that are otherwise protected under the DPSP," causing a dimunition in their property's value and severe emotional distress.
The court sustained Southwest's demurrer to the first amended complaint. Petitioners were granted leave to amend causes of action for an injunction and unfair business practices. But as to the fraud and negligent misrepresentation counts, the trial court sustained the demurrer without leave to amend, concluding Southwest owed petitioners no "duty." Petitioners seek an order directing the trial court to overrule the demurrer or, at least, allow them an opportunity to amend the complaint.
II
The trial court did not distinguish between the fraud and negligent misrepresentation causes of action, concluding both counts failed because petitioners did not establish Southwest owed them a duty of care. As we shall explain, Southwest had a duty to refrain from making intentional and negligent misrepresentations in this factual context, although the duty owed to petitioners differs between the two causes of action.
Civil Code section 1709 proscribes deceit generally: "One who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers." Civil Code section 1710 delineates four types of deceit: "A deceit, within the meaning of the last section, is either: 1. The suggestion, as a fact, of that which is not true, by one who does not believe it to be true; 2. The assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true; 3. The suppression of a fact, by one who is bound to disclose it, or who gives information of other facts which are likely to mislead for want of communication of that fact; or, 4. A promise, made without any intention of performing it."
Intentional fraud is actionable because of the knowing intent to induce someone's action to his or her detriment with false representations of fact. "Fraud is an intentional tort, and the element of fraudulent intent, or intent to deceive, distinguishes it from actionable negligent misrepresentation and from nonactionable innocent misrepresentation...." (5 Witkin, Cal. Procedure (3d ed. 1985) Pleading, § 677, p. 127. See also Gagne v. Bertran (1954) 43 Cal.2d 481, 488, 275 P.2d 15.) It is the element of intent which makes the fraud actionable, irrespective of any contractual or fiduciary duty one party might owe the other.
For example, our Supreme Court upheld an action for fraud on a representation by third parties that plaintiff had no ownership interest in property when she did. (Rogers v. Warden (1942) 20 Cal.2d 286, 125 P.2d 7.) The false representation led the plaintiff to execute a quitclaim deed in another's favor. There was admittedly no contractual or fiduciary relationship between the parties. But the court rejected the argument that absent such a relationship More recently, in Cicone v. URS Corp. (1986) 183 Cal.App.3d 194, 227 Cal.Rptr. 887, the appellate court reversed an order sustaining a demurrer to a cross-complaint filed by a defendant-attorney who was being sued by a former client for malpractice. The attorney alleged he was defrauded by the cross-defendants who were negotiating to purchase his clients' business. Specifically, the attorney alleged the cross-defendants promised they would accept a balance sheet as correct only to the seller's knowledge, when in fact that was false and the cross-defendants intended to rely on the strict warranty contained in the written purchase and sale agreement. In reliance on the false promise, the attorney advised his clients to sign the agreement. (Id., at p. 201, 227 Cal.Rptr. 887.) Thereafter, he sought damages for intentional fraud when his clients sued him for malpractice based on his advice. Cicone reiterated the above-quoted language from Rogers, and held the trial court erred in sustaining the demurrer without leave to amend because of the lack of a duty, noting "inferentially everyone has a duty to refrain from committing intentionally tortious conduct against another." (Ibid.)
In that light, the trial court's ruling on the fraud cause of action was error. Although Southwest and its agents had no duty to explain or discuss the development project with petitioners, having voluntarily done so, it was obligated to accurately explain the project. Thus, petitioners' amended complaint sufficiently pleads actionable intentional misrepresentations by respondents.
III
A contractual or fiduciary relationship is not required before liability for negligent misrepresentation may be found. (Garcia v. Superior Court, supra, 50 Cal.3d at pp. 734-735, 268 Cal.Rptr. 779, 789 P.2d 960.) A duty of care has been found in a variety of less restrictive settings.
Hanberry v. Hearst Corp. (1969) 276 Cal.App.2d 680, 81 Cal.Rptr. 519 validated a cause of action for negligent misrepresentation in awarding the Good Housekeeping seal of approval to a pair of allegedly defective shoes. "The fact Hearst is not in privity of contract with those who, relying on its endorsement, purchase the products it endorses, does not mean it is relieved from the responsibility to exercise ordinary care toward them." (Id., at pp. 684-685, 81 Cal.Rptr. 519.) The Hanberry court reiterated the rule: " ' "Privity of contract is not necessary to establish the existence of a duty to exercise ordinary care not to injure another, but such duty may arise out of a voluntarily assumed relationship if public policy dictates the existence of such a duty." ' " (Id., at p. 685, 81 Cal.Rptr. 519, quoting from Merrill v. Buck (1962) 58 Cal.2d 552, 561-562, 25 Cal.Rptr. 456, 375 P.2d 304.)
The controlling test was articulated in Biakanja v. Irving (1958) 49 Cal.2d 647, 320 P.2d 16. There, the court held a notary public who had prepared a defective will could be held liable to the beneficiary for the resulting damage although there was no privity of contract between them. "The determination whether in a specific case the defendant will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors, among which are the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to the defendant's conduct, This is a case where public policy dictates the existence of a duty of care. Southwest allegedly knew of the nearby residents' concern about the new housing project, and, specifically, the desire to protect their views. If the allegations of the amended complaint are true, the harm was forseeable and resultant injury certain. It is claimed that had the neighboring homeowners known the truth and objected to the project during the permit review process, the required government approval would not have issued without modifications to protect the homeowners' views. Thus, a close connection existed between the alleged misrepresentations and the injury purportedly suffered by petitioners. Finally, there is a definitive flavor of immorality in soliciting the homeowners' support by negligent or intentionally misleading statements. Imposing liability for deceit in this context should prevent future harm. (Compare Yanase v. Automobile Club of So. Calif. (1989) 212 Cal.App.3d 468, 473-477, 260 Cal.Rptr. 513; Hale v. George A. Hormel & Co. (1975) 48 Cal.App.3d 73, 86-87, 121 Cal.Rptr. 144.)
Adopting the controlling test from Biakanja, we conclude that when defendants sought petitioners' support in the land use approval process, they had a duty to tell the truth and not negligently misrepresent the nature and scope of the project.
Our ruling obviates the need to discuss petitioners' claim the DPSP imposes an actionable duty for the forms of deceit that they allege.
The issue was touched on, but certainly not adequately briefed, in Southwest's opposition when it argued the petitioners' only remedy was an action against the county under the Subdivision Map Act to set aside the approval of development. Such an action must be commenced within 90 days. (Gov.Code, § 66499.37.) The petitioners summarily dismissed the contention as a "throw away" argument.
IV
Next, Southwest asserts petitioners failed to adequately allege they suffered injury proximately caused by its misrepresentations. We disagree.
"A misrepresentation of fact is material if it induced the plaintiff to alter his position to his detriment. [Citation.] Stated in terms of reliance, materiality means that without the misrepresentation, the plaintiff would not have acted as he did. [Citation.] 'It must be shown that the plaintiff actually relied upon the misrepresentation; i.e., that the representation was "an immediate cause of his conduct which alters his legal relations," and that without such representation, "he would not, in all reasonable probability, have entered into the contract or other transaction." ...' [Citation.]" Okun v. Morton (1988) 203 Cal.App.3d 805, 828, 250 Cal.Rptr. 220.)
We conclude petitioners sufficiently pleaded they justifiably relied on respondents' purported misrepresentations. Petitioners alleged they were "novices in the building and development industry." The DPSP recognized the Dana Point area's scenic views resource. Although petitioners initially opposed respondents' development, material misrepresentations by Southwest's agents over a period of several months alleviated their concerns regarding the project's adverse effect on their views of the surrounding area. The agents' statements were corroborated by similar representations Southwest made to the planning commission relating to how homes would be constructed on the project. As a result, petitioners came to support the development as represented to them. The amended complaint also alleges Southwest needed concessions from the government agencies overseeing its development to proceed with the project. Given the initial opposition to it, Southwest would not have obtained the necessary approval without the support of the nearby residents. Finally, petitioners allege they did not discover respondents' fraud until after the time for objecting to the government's approval of the project had expired.
Respondents do not contend that either the Planning and Zoning Law (Gov.Code, § 65000 et seq.) or the Subdivision Map Act (Gov.Code, § 66410 et seq.) preempts a common law action for deceit based on misrepresentations by a developer seeking public support for a real property development project. Accordingly, that issue is not presently before us.
Similarly, "The Subdivision Map Act (Gov.Code, §§ 66410-66499.37) regulates the subdivision of real property and vests the power to regulate and control the design and physical improvements of a subdivision in the local governmental authority where the property is located. (California Coastal Com. v. Quanta Investment Corp. (1980) 113 Cal.App.3d 579, 588 [170 Cal.Rptr. 263].)" (Adler v. Elphick (1986) 184 Cal.App.3d 642, 646, 229 Cal.Rptr. 254.) Any action brought to challenge the approval of a subdivision must be brought within 90 days of the approval by the public agency. (Gov.Code, § 66499.37.) Any action to challenge the environmental approvals for a development project must be brought within the time periods set forth in Public Resources Code section 21167.
The plaintiff must also allege and prove pecuniary or property loss. (5 Witkin, Summary of Cal.Law (9th ed. 1988) Torts, § 718, p. 817-818.) Petitioners pleaded they suffered damages arising from a loss V
We must address one other issue raised by Southwest. It claims the duty petitioners rely on is based on an unenforceable promise to protect petitioners' view that cannot support an action for fraud because (1) petitioners have no enforceable rights to their view, and (2) even if they did, the purported agreement to protect that view is an easement which must be recorded in writing to satisfy the statute of frauds.
Southwest's first argument is without merit. Taliaferro v. Salyer (1958) 162 Cal.App.2d 685, 328 P.2d 799 correctly states "easements for light and air cannot be created by implication but only by express grant or covenant." (Id., at p. 690, 328 P.2d 799.) But petitioners are not suing to enforce an easement. They are seeking damages for injuries suffered because of Southwest's alleged misrepresentations. For example, if Southwest had merely informed petitioners that its earlier communicated intentions had changed while they still had an opportunity to resist the development, petitioners would have no basis to complain. The alleged promises conveyed no interest in the property itself.
Respondents claim that petitioners are attempting to enforce a view easement more appropriately applies to the amended complaint's third cause of action for injunctive relief. However, that cause of action is not presently before us. Therefore, we need not decide the validity of that count at this time.
To the extent Southwest's statute of frauds argument applies to the fraud cause of action, it ignores California Supreme Court authority to the contrary. In Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 216 Cal.Rptr. 130, 702 P.2d 212, the court overruled a long line of cases based on Kroger v. Baur (1941) 46 Cal.App.2d 801, 117 P.2d 50, that were consistent with Southwest's argument that an oral contract to convey a view easement is unenforceable in an action for fraud. Tenzer concluded the unenforceability of an allegedly fraudulent promise as a contract subject to the statute of frauds does not preclude an action for fraud. (Id., 39 Cal.3d at pp. 28-31, 216 Cal.Rptr. 130, 702 P.2d 212.) The court reasoned the statute of frauds was not intended to shield or protect the perpetrators of a fraud. (Id., at p. 30, 216 Cal.Rptr. 130, 702 P.2d 212.)
We are not aware of any California authority deciding whether the rule stated in Tenzer also applies to a cause of action for negligent misrepresentation. Case law in other states is in conflict on the point. (See Phil-Co Feeds v. First Nat. Bank (1989), 238 Mont. 414, 777 P.2d 1306, 1311 [cause of action not barred]; Daley v. Blood (1981) 121 N.H. 256, 428 A.2d 900, 901 [statute of frauds barred negligent misrepresentation action based on a promise within the statute]; Frame v. Boatmen's Bank (Mo.App.1989) 782 S.W.2d 117, 122-123 [cause of action not barred].) In view of our holding that petitioners are not suing to enforce an easement, we need not decide the question at this time.
Southwest's reliance on Riley v. Bear Creek Planning Committee (1976) 17 Cal.3d 500, 131 Cal.Rptr. 381, 551 P.2d 1213 is misplaced. There, the Supreme Court rejected parol evidence of an agreement between the parties that plaintiffs' property would be subject to certain building restrictions, noting a writing was necessary The alternative writ is discharged. Let a peremptory writ of mandate issue directing the superior court to vacate that portion of its February 1, 1990 order sustaining the real parties in interests' demurrer to petitioners' first and second causes of action and to enter a new and different order overruling the demurrer to the first and second causes of action.
CROSBY, Acting P.J., concurs.
WALLIN, Associate Justice, dissenting.
Read my lips! No tall houses! No blocked views! That is what petitioners, the neighborhood property owners, say Southwest promised during meetings with them to discuss Southwest's proposed development. But, say petitioners, Southwest reneged by obtaining approval of plans calling for importing fill dirt to raise the height of some building sites and by obtaining building permits for houses as tall as two stories. Petitioners are angry because their ocean views have been impacted to a greater degree than they had expected.
The majority concludes these allegations adequately state a cause of action for deceit under Civil Code sections 1709 and 1710. I believe the petitioners have not alleged justifiable reliance upon the representations of Southwest and, therefore, the demurrer was properly sustained. Furthermore, I believe the only remedies available to petitioners are those available under the Planning and Zoning Law (Gov.Code, § 65000 et seq.), the Subdivision Map Act (Gov.Code, § 66410 et seq.), and the California Environmental Quality Act (Pub. Resources Code, § 21000 et seq.).
Approval by the county of the tentative tract map, development permit, conditional use permit and variance, was an administrative or quasi-judicial act. (Horn v. County of Ventura (1979) 24 Cal.3d 605, 614, 156 Cal.Rptr. 718, 596 P.2d 1134; Topanga Assn. for a Scenic Community v. County of Los Angeles (1974) 11 Cal.3d 506, 517, 113 Cal.Rptr. 836, 522 P.2d 12.) This, however, is an appellation which merely establishes the standards applied by the governmental agency in acting on the application and the procedures for judicial review of its decision. ( Horn v. County of Ventura, supra, 24 Cal.3d at p. 614, 156 Cal.Rptr. 718, 596 P.2d 1134; Topanga Assn. for a Scenic Community v. County of Los Angeles, supra, 11 Cal.3d at p. 517, 113 Cal.Rptr. 836, 522 P.2d 12.) The designation quasi-judicial is not reflective of the procedural characteristics of the governmental agency's review and approval process. (Pacifica Corp. v. City of Camarillo (1983) 149 Cal.App.3d 168, 176, 196 Cal.Rptr. 670.)
I believe the process by which development approvals are obtained is essentially a political one. This is borne out by the actions which Southwest undertook to obtain its approvals, including incessant lobbying of the public, the legislative bodies and the county's staff. The actions of Southwest here are no different than those of any citizen seeking support for its position before a legislative body. In Chavez v. Citizens for a Fair Farm Labor Law (1978) 84 Cal.App.3d 77, 148 Cal.Rptr. 278, the court rejected the existence of a cause of action for deceit for misleading statements made in a political campaign. Unfortunately, as petitioners allege in this case, the representations of a developer seeking the required political approval of a development are often as unreliable as those of politicians or special interest groups in an election.
Even assuming Southwest misrepresented what would be presented to, and approved by, the county, petitioners had no right to rely upon those representations. In Borba v. Thomas (1977) 70 Cal.App.3d 144, 138 Cal.Rptr. 565, the court concluded the purchaser of property could not rely on the seller's representations concerning actions the public agency would take with respect to the property. "Absent some special relationship between the parties, a private person is not entitled to rely on the opinion of another private person concerning Furthermore, the legislative scheme provides the petitioners a remedy under the Planning and Zoning Law (Gov.Code, § 65000 et seq.), the Subdivision Map Act (Gov.Code, § 66410 et seq.), and the California Environmental Quality Act (Pub.Resources Code, § 21000 et seq.). While acknowledging the deceit cause of action might be preempted (see maj. opn., p. 78, fn. 2), the majority declines to address the issue because it was not raised by Southwest. 1 I believe the issue must be addressed as no deceit action lies and it would be a waste of judicial time and resources to allow the petitioners to proceed now and have their claims dismissed on this ground at a later stage.
The power to approve Southwest's project rests solely with the county's agencies subject to the applicable zoning and land use laws. Petitioners do not allege the development is illegal. Apparently it conforms to the zoning and land use laws and the approvals obtained. Rather the allegations are that the county was tricked into approving the development by Southwest's misrepresentations. Certainly the petitioners have no cause of action for damages based on misrepresentations made to a governmental agency.
Other than through enforcement of private covenants, conditions and restrictions, adjoining homeowners have no power to approve or reject a project, although their input is usually sought by the public agency so all of the impacts of the project may be considered. The Legislature has enacted a scheme which severely limits the ability of private citizens to attack approval of a development. Only those issues raised by the challenger before the public agency during the approval process may be advanced in court. (Gov.Code, § 65009.) A 90-day time limit for bringing an action is set forth. (Gov.Code, § 65907.) 2 Government Code section 65009 explains the Legislature's intent in establishing limitations: "(a)(1) The Legislature finds and declares that there currently is a housing crisis in California and it is essential to reduce delays and restraints upon expeditiously completing housing projects. [p] (2) The Legislature further finds and declares that a legal action challenging a decision of a city, county, or city and county has a chilling effect on the confidence with which property owners and local governments can proceed with projects. Legal actions filed to attack, review, set aside, void, or annul a decision of a city, county, or city and county pursuant to this division can prevent the completion of needed developments even though the projects have received required governmental approvals. [p] (3) The purpose of this section is to provide certainty for property owners and local governments The petitioners' action brought long after the time for challenging the development approvals is tantamount to a back door challenge to the approvals previously obtained. The judicial approval of such causes of actions will in essence create an entire new hurdle to be jumped in the development process. The clear intent of the Legislature in establishing strict time limits was to assure that, after the period for judicial review, development could proceed. The majority's holding means that builders who have run the gauntlet of the time-consuming planning process and the post-approval period for court challenges will now face new tort liability following completion of the project if any of the neighbors are unhappy.
The trial court's order sustaining the demurrer was correct. I would deny the writ.
The majority's ostrich-like approach to the issue is baffling. They dismiss the possibility that allowing the petitioners to proceed with a deceit action is inconsistent with the legislative scheme for approval of development because the issue has not been raised. In the past we have never hesitated to instruct the parties to submit further briefing on an issue which may be dispositive of the appeal. (Gov.Code, § 68081.) We should have done so in this case, especially when we are overturning the trial court and granting writ relief. Query: Would we refuse to address the effect the Penal Code or public policy might have on a contract to commit an illegal act simply because it was not raised by the parties?