Opinion
G059535
09-02-2021
CHRISTOPHER DUONG BUI et al., Plaintiffs and Appellants, v. JALD ENTERPRISES, INC., Defendant and Respondent.
Theresa A. Jones for Plaintiffs and Appellants. Wood, Smith, Henning & Berman, Tracy M. Lewis and Alice C. Vega for Defendant and Respondent.
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County No. 30-2018-01036688, Gregory H. Lewis, Judge. Affirmed in part and reversed in part. Motion to augment granted.
Theresa A. Jones for Plaintiffs and Appellants.
Wood, Smith, Henning & Berman, Tracy M. Lewis and Alice C. Vega for Defendant and Respondent.
OPINION
ZELON, J. [*]
Plaintiffs Christopher Duong Bui and Christine Bui-Tran appeal from summary judgment entered against them and in favor of defendant Jald Enterprises, Inc., a termite inspection company which had performed a preclosing inspection on a home being purchased by plaintiffs. After purchasing the home, plaintiffs discovered substantial termite damage that was not reflected on defendant's termite inspection report. Plaintiffs sued defendant, which obtained summary judgment, arguing it had no duty to plaintiffs, plaintiffs did not reasonably rely on defendant's report, and declaratory relief was not available.
Because there are disputed issues of material fact with respect to duty and reliance, we affirm the dismissal of the declaratory relief cause of action and otherwise reverse.
FACTUAL AND PROCEDURAL HISTORY
Plaintiffs purchased a home in Newport Coast. The purchase agreement required the sellers of the home to pay for and provide a termite inspection report prior to the close of escrow; the sellers obtained a termite inspection report through their real estate agent, Jason Bradshaw. Plaintiffs paid the termite inspection company $2, 400, but the company refunded this money to them after the sellers paid. Plaintiffs never met defendant's owner or employees, and did not hire defendant.
Plaintiff wife testified that she paid the bill sent by Accurate for the inspection; after sellers also paid, she called Accurate and they issued a refund. Donnelly, Accurate's owner, testified he believed the payment was for the repairs, but conceded it had been paid by, and later refunded to, the plaintiffs.
After purchasing the property, plaintiffs began remodeling the home and their contractor discovered extensive termite damage that was not disclosed in the termite inspection report. Plaintiffs sued the sellers (who are not parties to this appeal) and defendant, the termite inspection company. Against defendant, plaintiff alleged causes of action for negligence, negligent misrepresentation, violation of Business and Professions Code section 17200, and declaratory relief.
Defendant moved for summary judgment or, in the alternative, summary adjudication of each of the causes of action. Defendant argued it owed no duty to plaintiffs, had caused them no damages, and had made no representations upon which plaintiffs had relied. Defendant also argued plaintiffs could establish no present or future controversy between the parties sufficient to support declaratory relief and could not establish recoverable damages under Business and Professions Code section 17200. Plaintiffs opposed the motion, but dismissed their cause of action under Business and Professions Code section 17200.
The trial court granted defendant's motion. On the negligence cause of action, the trial court concluded defendant owed no duty to plaintiffs. On the negligent misrepresentation cause of action, the trial court found plaintiffs did not rely on defendant's report, but instead relied on their real estate agent, who reviewed the report for them. Finally, on the declaratory relief cause of action, the trial court concluded the cause of action could not stand in view of the failure of plaintiffs' other causes of action. Plaintiffs appealed.
DISCUSSION
Plaintiffs challenge every aspect of the trial court's ruling on appeal. On the negligence cause of action, plaintiffs argue defendant owed a duty to plaintiffs because triable issues of facts exist over whether they were intended beneficiaries of the defendant's work and whether defendant caused damage to plaintiffs. On the negligent misrepresentation cause of action, plaintiffs argue there exist triable issues of fact regarding their review of and reliance upon defendant's report. And on the declaratory relief cause of action, plaintiffs argue declaratory relief is available because there exists a controversy between the parties regarding real property.
As this is a summary judgment case, our review is de novo and we liberally construe the evidence in support of the party opposing summary judgment and resolve any doubts concerning the evidence in favor of that party. (Miller v. Department of Corrections (2005) 36 Cal.4th 446, 460.) In the context of a summary judgment motion, we must “consider all of the evidence and all of the inferences reasonably drawn therefrom, and must view such evidence and such inferences in the light most favorable to the opposing party.” (Caloroso v. Hathaway (2004) 122 Cal.App.4th 922, 926 (Caloroso).) If no triable issue of fact exists, but only an issue of law, we determine the issue of law. (Shipp v. Western Engineering, Inc. (2020) 55 Cal.App.5th 476, 488-489.)
1. Negligence
Defendant asserted it owed no duty of care to plaintiffs because it did not contract or interact with them. Plaintiffs assert they were the intended beneficiaries of the contract, and that there are triable issues of material fact concerning defendant's knowledge of the transaction. Plaintiffs are correct. (Hardy v. Carmichael (1962) 207 Cal.App.2d 218 (Hardy).) In Hardy, the plaintiffs were the purchasers of a house, who sued the sellers and a termite inspector alleging severe termite damage that was not disclosed in the termite inspector's report. (Id. at p. 219-220.) The termite inspector argued he owed no duty to the plaintiffs because he was retained by the sellers' agent to perform the inspection, not by the plaintiffs. (Id. at p. 227.)
The Court of Appeal disagreed. “There was evidence that [the inspector], who was employed by a real estate agent (on behalf of the owners) to make a report, delivered his report to a bank, and at that time he knew that the property was ‘changing hands' or being sold, but he did not know the names of those who were to be benefited by the report. It could be inferred that he knew that his report was for the benefit or information of persons who were concerned with the purchase and sale transaction involving the property. It could also be inferred that the plaintiffs were of a class of persons for whose benefit the report was made.... Plaintiffs were entitled to rely upon the report.” (Hardy, supra, 207 Cal.App.2d at p. 227.)
Hardy is directly on point here. Just as in Hardy, defendant was hired by the sellers' agent to perform a termite inspection of the property and failed to report certain termite damage in the property. If, as was the case in Hardy, there is a reasonable inference from the facts that defendant knew the property was to be sold, then defendant owed plaintiffs (the buyers of the property) a duty of care because buyers of the property are within the class of persons for whose benefit defendant's report was made. And because the issue is raised in a summary judgment motion, plaintiffs need only show a triable issue of fact concerning defendant's knowledge.
Only two undisputed facts proposed by defendant address defendant's knowledge as it pertains to the duty analysis. These statements assert that it was the real estate agent who ordered the report, and that Donnelly, Accurate's owner and the inspector on this job, did not interact with the plaintiffs. Defendant failed, however, to assert that it was unaware that this was a sales transaction, and failed to shift the burden to plaintiffs to demonstrate that knowledge.
The record demonstrates that Donnelly had contact with the real estate agent who ordered the report, and had worked with him before. In fact, Donnelly responded to a question in his deposition about the contact for this job, and identified that contact as a real estate agent, and only later by name. Thus, as in Hardy, there is a reasonable inference, and a triable issue of fact, that defendant knew there was a sales transaction. While defendant contends the individual who inspected the property never interacted with the plaintiffs, that contention is irrelevant. Whether defendant may have owed a duty of care to the buyers did not depend on whether the defendant knew the identity of the buyers.
The cases defendant relies on for a contrary conclusion are inapposite. Formet v. The Lloyd Termite Control Co. (2010) 185 Cal.App.4th 595 (Formet) and FSR Brokerage, Inc. v. Superior Court (1995) 35 Cal.App.4th 69 (FSR) both involved claims brought by injured guests in homes with termite damage or other structural problems, not by buyers of the property. In Formet, we concluded a termite inspector did not owe a duty of care to a guest in a home inspected by the inspector. (Formet, supra, 185 Cal.App.4th at p. 601.) And in FSR, the Court of Appeal concluded real estate brokers owed no duty of care to guests injured in a home sold by the brokers. (FSR, supra, 35 Cal.App.4th at pp. 73-74.) Both cases, however, indicated such a duty did exist as to intended beneficiaries of the information provided by the inspector or broker. (Formet, supra, 185 Cal.App.4th at p. 601; FSR, supra, 35 Cal.App.4th at p. 73.) Formet, citing FSR, also cites language specifically concluding that duties arising from information disclosed as part of a sale of real estate are owed to the buyer. (Formet, supra, 185 Cal.App.4th at pp. 599-600.)
Defendant also argues that defendant did not cause damages to plaintiffs because the termites caused the damage to the property, not defendant. The measure of damages in a negligent termite inspection case, however, is the diminution in value of the property, not the cost of repair. (Formet, supra, 185 Cal.App.4th at p. 600, citing Greenberg v. Hastie (1962) 202 Cal.App.2d 159, 176-177.) Here, plaintiffs' damages arise from the fact that they were misled about the condition of the property, not from the damage to the property itself. Had plaintiffs known of the damage before finalizing their purchase, they could have negotiated a lower purchase price or avoided the sale entirely. Their inability to do so, and resulting economic injury, arose directly from defendant's report, not from the termites.
2. Negligent Misrepresentation
Plaintiffs argue a triable issue of fact exists as to reliance because plaintiff Christopher Bui testified both that he thoroughly reviewed defendant's report and that plaintiffs also received the information contained in the report from their real estate agent. We agree.
The trial court concluded plaintiffs “admitted they did not rely on [defendant's] representation. Instead, Plaintiffs relied on their real estate agent... to advise them after receipt of [defendant's] report.... Plaintiffs do not submit any evidence to dispute this fact.” Defendant raised these assertions in their separate statement of material facts. Plaintiffs disputed these facts, citing plaintiff Christopher Bui's testimony that he “read through [defendant's report] thoroughly.” Plaintiffs also asserted this fact (that Christopher Bui read defendant's report thoroughly) in their portion of the separate statement of material facts, and defendant failed to dispute this fact, asserting only improper evidentiary objections that the trial court overruled. Both plaintiffs testified they received information about the contents of the report relayed through their real estate agent, and relied on that information. These facts create a triable issue of fact on reliance.
Defendant also argues defendant made no material misrepresentation with respect to the existence of termite damage at the time of defendant's inspection. But it is undisputed that, after taking possession of the property, plaintiffs discovered termite damage that was omitted from defendant's report. Two inferences are possible from these facts: (1) the termite damage existed at the time of the report and defendant failed to discover it; or (2) the termite damage arose after defendant's inspection but before plaintiffs discovered it. In reviewing a summary adjudication, we must “consider all of the evidence and all of the inferences reasonably drawn therefrom, and must view such evidence and such inferences in the light most favorable to the opposing party.” (Caloroso, supra, 122 Cal.App.4th at p. 926.) The burden therefore falls on defendant, as the moving party, to provide evidence to rebut the inference that the termite damage existed at the time of the report and was not reported.
The only evidence defendant offers on this point is the testimony of the inspector. The inspector testified that he entered the crawlspace and found nothing, but also testified he could not remember whether he saw the crawlspace and that he remembered nothing about the inspection. This evidence is not sufficient to overcome the inference that the termite damage existed at the time of the report.
Defendant also contends defendant's report was not made to induce plaintiffs' reliance. But again, Hardy compels a different conclusion. As discussed above, there is at least a triable issue of fact concerning defendant's knowledge. Because this was a sales transaction, plaintiffs, as buyers, “were entitled to rely upon the report.” (Hardy, supra, 207 Cal.App.2d at p. 227.)
3. Declaratory Relief
The trial court concluded plaintiffs' declaratory relief claim failed because of the failure of plaintiffs' other claims. This rationale does not support the dismissal, as we have reversed the trial court's ruling on those claims. However, “we are not bound by the trial court's stated reasons for its ruling on [a summary judgment] motion; we review only the trial court's ruling and not its rationale.” (Gafcon, Inc. v. Ponsor & Associates (2002) 98 Cal.App.4th 1388, 1402 (Gafcon).)
Defendant correctly contends plaintiffs' claim for declaratory relief fails because there is no controversy that is a proper subject of declaratory relief. Declaratory relief “‘“operates prospectively, and not merely for the redress of past wrongs.”‘“ (Gafcon, supra, 98 Cal.App.4that p. 1403.) Rights or duties relating to present or future conduct must be at stake for a declaratory relief action to lie; “‘there is no basis for declaratory relief where only past wrongs are involved.'” (Osseous Technologies of America, Inc. v. DiscoveryOrtho Partners LLC (2010) 191 Cal.App.4th 357, 366.)
Here, there is no contract between the parties, no disputed item of property, and no legal rights with respect to one another other than a potential right to recover damages under a tort theory. Plaintiffs' case is entirely about “past wrongs, ” not about prospective rights and duties. While Plaintiffs argue the action relates to a sale of real property, which is a proper subject of declaratory relief under Code of Civil Procedure section 1060, defendant has never held any interest in the property. Consequently, we affirm the trial court's dismissal of the declaratory relief cause of action.
DISPOSITION
The judgment is affirmed as to the dismissal of declaratory relief cause of action and otherwise reversed. Plaintiffs shall recover their costs on this appeal.
WE CONCUR: O'LEARY, P. J.FYBEL, J.
[*]Retired Justice of the Court of Appeal, Second Appellate District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.