Opinion
A129042
01-09-2012
ZINA HENDERSON, Plaintiff and Appellant, v. RYAN K. NATHAN, Plaintiff and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Alameda County Super. Ct. No. RG07327155)
After plaintiff Zina Henderson bought a residential rental property from defendant Ryan K. Nathan, she brought this action alleging Nathan failed to disclose that a tenant had the right to occupy the largest unit at a below-market rate. She contends the trial court erred in ruling against her on her causes of action for breach of contract, fraud, and deceit. We affirm the judgment.
I. BACKGROUND
Nathan owned a three-unit residential rental property in Oakland. The property had two one-bedroom apartments (Units A and B), and one two-bedroom apartment (Unit C). The tenant in Unit C, Theressia Wilson, paid $650 a month in rent. While Nathan was carrying out renovations on Unit C, Wilson agreed to move temporarily to Unit B. She moved into Unit B around May 13, 2004, and back into Unit C by the first week of June, 2004. On July 21, 2004—after the parties entered into the purchase agreement at issue in this case—Nathan and Wilson signed a Residential Tenancy Agreement, agreeing on a rent of $650 a month for Unit C.
Nathan's real estate agent, Anne Ayankoya, prepared the Multiple Listing Service (MLS) listing for the property, dated June 4, 2004. The listing stated that the projected rents for the one-bedroom units were $650 and $725 per month, and $1275 for the two-bedroom unit. There is evidence that Ayankoya relied on market rates to determine the projected income. The MLS listing stated: "This information is deemed reliable, but not guaranteed."
Nathan put the rental property on the market at a list price of $385,000. Henderson viewed the property with her agent and Nathan's agent. When she viewed the property, the two one-bedroom units were occupied. No one was living in the two-bedroom unit, which was being renovated. Nathan's agent did not tell Henderson Unit C would soon have a tenant.
Henderson made an offer on the property for the asking price, and the parties entered into a purchase agreement on June 20, 2004. The purchase agreement required Nathan, within seven days of acceptance, to make available to Henderson, among other things, all current leases, rental agreements, and other agreements pertaining to the operation of the property and a rental statement including names of tenants, rental rates, periods of rental, and date of last rent increase. It also required Nathan to make subsequent disclosures if he became aware, before the close of escrow, of any adverse conditions affecting the property or any material inaccuracy in the disclosures previously provided. The agreement provided that before the close of escrow—subject to Henderson's cancellation rights—Nathan could rent or lease any vacant unit or alter any existing rental or lease agreement, but that he must give seven days notice to Henderson before making any proposed changes.
Nathan testified that he told his real estate agent, Anne Ayankoya, to provide the necessary disclosures. Ayankoya testified that during escrow, she provided a variety of documents to Henderson's agent. Those documents included a "Tenant Estoppel Certificate," which listed Wilson as a tenant, but did not indicate the unit she lived in; correspondence with the East Bay Community Law Center indicating that Wilson would move to a smaller unit during renovations, then return to her own unit; a letter from Robinson dated April 24, 2004, addressed to Wilson in Unit C, giving Wilson two weeks' notice to move out of Unit C and into Unit B so that Unit C could be renovated, and explaining the improvements that would be made to Unit C; handwritten notes stating Wilson's rent was $650, and that she would move to the lower unit while her apartment, Unit C, was being renovated; a notice to Wilson that repairs and alterations would be made on her apartment, dated April 24, 2004; and the residential tenancy agreement with Wilson indicating her rent was $650 per month.
Although Ayankoya did not recall the exact date she provided the disclosures, she testified that it would have occurred within a seven to seventeen day period after the purchase contract was signed on June 20, 2004. The disclosures were normally sent in one group, not piecemeal.
Nathan testified that during the escrow period, when Henderson was visiting the property, he told Henderson that Wilson was in Unit B temporarily and would be moving back into Unit C when the renovations were complete. The conversation occurred before Wilson had moved back into the two-bedroom unit.
Nathan's property manager, Lisbet Ghiselli, testified that in late July or early August 2004, at Nathan's request, she showed the property to a man and woman who told them they represented Henderson. She showed the pair the downstairs units, which were empty. She did not show him the upstairs unit, which was occupied.
Units A and B were downstairs; Unit C, the two-bedroom unit, was upstairs.
Henderson testified that she first saw the property in the first or second week of June, 2004. At the time, workers were renovating the property. Henderson saw that tenants were occupying Units A and B. She was interested in the property in part because the price was considerably lower than a lot of other similar rental properties in the area. She expected the two-bedroom unit, "fully renovated and available," to be her "main moneymaker." Henderson said her agent "may have" shown her the MLS listing on the way to view the property.
Henderson testified that before escrow closed, she saw the estoppel certificate, but not the April 24, 2004 letter to Wilson or the tenancy agreement with Wilson. She did not receive any disclosure documents directly from Nathan or his agent; the transactions instead took place between her agent and Nathan's, and Henderson's agent then passed documents along to her. Henderson's agent did not testify.
Shortly before the close of escrow, Henderson visited the property and found that Wilson was occupying Unit C. She remembered Wilson from her previous visit as the tenant in one of the smaller units. According to Henderson, this was the first time she realized Wilson would be moving to Unit C.
Henderson thought the visit took place about a day and a half before the close of escrow.
After Henderson bought the property, she sought to increase Wilson's rent, which was below the market rate, but the Rent Adjustment Board at first allowed her to raise the rent by only 3.2 or 3.3 percent, and she then had to wait a year before raising the rent again. She was only able to increase the rent substantially in 2009 after engaging in a petition process. Wilson continued paying $650 a month until sometime in 2008.
Henderson brought this action against Nathan alleging causes of action for breach of contract, fraud, and deceit. After a bench trial, the trial court issued a statement of decision ruling in favor of Nathan on all causes of action. On the breach of contract cause of action, the trial court found that Henderson had failed to prove Nathan breached his duties under the contract, which required him to disclose all current lease agreements, service contracts, and other agreements pertaining to the operation of the property, and in particular that Henderson had failed to show by a preponderance of the evidence that the tenancy agreement was not disclosed. On the fraud and deceit cause of action, the trial court found that Henderson had not proved she justifiably relied on any misrepresentation or nondisclosure of Nathan in buying the property.
II. DISCUSSION
A. Breach of Contract
Henderson contends the trial court's conclusion that Nathan did not breach the purchase agreement was premised on a legal error; that is, on the conclusion that Nathan did not have a duty to disclose a lease entered into after the purchase agreement was signed and the initial disclosures had been provided. She bases this argument on a discrepancy in the dates at issue: The parties entered into the purchase agreement on June 20, 2004. Ayankoya testified that she was not sure when she sent the disclosure documents to Henderson's agent, but it had probably occurred within seven to seventeen days of that date, and that her practice was to send documents in one group, not piecemeal. The tenancy agreement with Wilson was not signed until July 21, more than 17 days after the date of the purchase agreement, and presumably after Ayankoya sent the disclosure packet. Therefore, Henderson argues, the July 21 tenancy agreement must not have been disclosed to plaintiff.
Contrary to Henderson's assertion, the trial court did not limit the disclosure requirement to documents in existence at the time the disclosure packet was sent. Rather, the trial court found that, "although Ayankoya was unclear on the details of the disclosure, it is likely that the lease was disclosed prior to the close of escrow. At a minimum, Plaintiff has failed to show, by a preponderance of the evidence, that the tenancy agreement was not disclosed to her agent, as defendant alleged." (Italics added.)
Thus, the question before us is one of fact, and our task is to determine whether there is any substantial evidence, contradicted or uncontradicted, that supports the findings below. (Bickel v. City of Piedmont (1997) 16 Cal.4th 1040, 1053.) Under this standard, "all conflicts in the evidence must be resolved in favor of the prevailing party; second, all reasonable inferences from the evidence (all conflicts already having been properly resolved) must be drawn in favor of the prevailing party. [Citation.]" (Le v. Pham (2010) 180 Cal.App.4th 1201, 1205-1206.)
Such evidence exists here. Nathan testified that he gave the residential tenancy agreement with Wilson to Ayankoya, and Ayankoya testified that she recognized the residential tenancy agreement between Nathan and Wilson and that she had delivered it to Henderson's agent. We recognize—as did the trial court—that the dates on which the disclosures took place are unclear; it is perhaps not surprising that Ayankoya was uncertain of the precise dates, since trial took place nearly six years after the transactions in question and Ayankoya did not have access to the facsimile cover sheets that accompanied the disclosures. We conclude, however, that the evidence is sufficient to support the trial court's conclusion that Henderson did not meet her burden to show the tenancy agreement was not disclosed.
B. Justifiable Reliance
The trial court likewise rejected Henderson's attempts to hold Nathan liable under three alternative theories of fraud and deceit: intentional misrepresentation, negligent misrepresentation, and nondisclosure or concealment of a material fact. The court concluded that whether or not Nathan misrepresented or concealed any fact, Henderson had not met her burden to prove justifiable reliance or causation.
The strongest evidence of a misrepresentation before the parties entered into the purchase agreement is the MLS listing, which projected the rent for the two-bedroom unit as $1275 a month, and the rent for the two one-bedroom units as $650 and $725 respectively. Henderson testified, however, only that her agent "may have" shown her the MLS listing before she viewed the property, and there is no other evidence she saw it or relied on it before entering into the purchase agreement. It appears that when Henderson first visited the property, the two-bedroom unit was vacant, and was being renovated. However, the purchase agreement provided for further inspections and disclosures, as well as contemplating that Nathan could make new lease arrangements, and there is evidence that during this time, Henderson learned of the terms of Wilson's return to Unit C. For instance, Nathan testified that while the renovations were going on, Nathan told Henderson that Wilson was living in Unit B temporarily and that she would be returning to Unit C. Moreover, there is evidence that the disclosures included the residential tenancy agreement, and correspondence and documents showing Wilson would be returning to Unit C.
As the trial court pointed out, the MLS listing included in the record is partially redacted: there are three unexplained black marks on the line stating that the rent for one of the one-bedroom units is $650.
It appears that this conversation occurred after Henderson entered into the purchase agreement.
Henderson argues the trial court improperly relied on events that occurred during escrow—and particularly the fact that she found Wilson in Unit C when she visited the property shortly before escrow closed—to conclude she did not justifiably rely on any misrepresentations. She relies on Jue v. Smiser (1994) 23 Cal.App.4th 312 (Jue). There, the plaintiff bought a home that had been advertised as having been designed by the celebrated architect Julia Morgan. Before escrow closed, the buyer was informed that Julia Morgan could not be verified as the designer of the house. The buyer proceeded with the sale, and sued the sellers and their realtor on a number of different theories, including fraud. (Id. at pp. 313-315.) Division Four of the First Appellate District held that "a purchaser of real property who learns of potential material misrepresentations about the property after execution of a purchase agreement—but before consummation of the sale—[may] close escrow and sue for damages[.]" (Id. at p. 313.) The court went on to note that where the purchase agreement for the sale of an ongoing business allows the buyer to make an independent examination of the business's finances, "a buyer will face a difficult burden of establishing that he, in fact, relied on a seller's representations when the original agreement was struck." (Id. at p. 318, fn. 6.)
Jue is distinguishable from this case. As we have explained, not only is it unclear that Henderson relied on the MLS listing before entering into the purchase agreement, but the agreement itself contemplated that there would be further disclosures and that Nathan might make further rental arrangements during escrow. The trial court found Nathan provided the tenancy agreement to Henderson, and there is evidence that the physical inspections during escrow carried out by Henderson—and apparently by her agents—as well as items in the disclosures provided pursuant to the purchase agreement, would have informed Henderson of Wilson's tenancy of Unit C. In the circumstances, we will not disturb the trial court's finding that Henderson did not reasonably rely on any misrepresentation or concealment.
Ghiselli testified that the man and woman who inspected the property in late July or August represented Henderson. Respondent argues the evidence is insufficient to show they were her agents. The evidence appears to us sufficient to show they were in fact Henderson's agents. Whatever the resolution of this issue, however, the evidence of the disclosures fully supports the trial court's finding that Henderson did not reasonably rely on any misrepresentations.
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III. DISPOSITION
The judgment is affirmed.
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RIVERA, J.
We concur:
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RUVOLO, P. J.
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SEPULVEDA, J.