Opinion
NOT TO BE PUBLISHED
APPEAL from the judgment of the Superior Court of Los Angeles County. Super. Ct. No. KC043993, Robert A. Dukes, Judge.
Kirkpatrick & Lockhart Nicholson Graham, Jon Michaelson and Dylan B. Carp; Structure Law Group and Mark R. Figueiredo for Plaintiffs and Appellants.
Steiner & Libo and David J. Libo for Defendants and Appellants.
OPINION
RUBIN, ACTING P. J.
Defendants Aaron Arnold Klein and Tina Doreen Klein, as trustees of the Klein Family Revocable Trust, appeal from the judgment ordering them to pay more than $60,000 to plaintiff Lark Ellen Condominium Homeowners, Inc., for breaching a fiduciary duty to disclose the need to perform certain repairs to portions of the common area at a condominium project the trust once owned. Because defendants owed no such duty to the individual condominium buyers, and because the alleged breach of any such supposed duty could not have caused plaintiff to incur damages, we reverse. Plaintiff cross-appeals from the order granting the Kleins’s motion for judgment on three other causes of action. Because the trial court correctly determined that plaintiff had not sued the right party, we affirm.
Our statement of facts is based on findings made by the court in its statement of decision that are not disputed by the parties.
In 1982, A.R.K., Inc., (ARK) completed its development of a West Covina condominium complex. The 10-unit project (the project) consisted of five separate buildings, each of which contained two units. Aaron Arnold Klein owned two-thirds of the shares of ARK, with the remaining one-third owned by the project’s architect and general contractor, Richard Chylinski. ARK originally intended to sell the units off as condominiums and incorporated a homeowners association for that purpose. Instead, ARK rented the units out. In 1990, ARK sold the project to Klein and his wife Tina as trustees of the Klein Family Revocable Trust (the trust). Except for four units that were sold off and then reacquired by the trust in the early to mid 1990s, the trust continued to rent out the units. In early 2001, the trust organized L.E.C.H., Inc., the Lark Ellen Condominium Homeowners Association (LECH), and between 2001 and 2002 sold off all 10 units.
We will refer to Aaron Klein individually by his last name. When we refer to the Kleins, we mean Aaron and Tina Klein in their capacities as trustees of the trust.
Even though the project had been built by ARK, in 2004, LECH sued the Kleins on its behalf and on behalf of the 10 individual unit owners to recover for damages caused by construction defects in both the common areas and the individual units. The complaint alleged incorrectly that the trust was the project’s developer, and the first three causes of action were for breach of implied warranty, strict liability, and negligence stemming from the construction and design of the project. The negligence cause of action also alleged that the Kleins, as developers, did not ensure that LECH had a budget adequate to fulfill its obligations to maintain and repair the common areas. The fourth cause of action was for breach of fiduciary duty, based on the Kleins’s status as members of the LECH board of directors and their alleged failure to correct the construction defects or give notice that they existed.
A fifth cause of action on a surety bond was dismissed by LECH during the trial.
A bench trial was held in May 2005. Michael Caggiano, LECH’s expert witness, testified to numerous instances of water damage to all 10 units that he believed had been caused by the shoddy construction and design of various components of the project, including the windows, roofs, balconies, indoor spas, and outdoor grading and drainage. Caggiano reached these conclusions by performing destructive testing on four units, then extrapolating that the same defects existed in the other six units. According to Caggiano, the project did not meet building code requirements. The owners of two units also testified about several types of water damage that occurred inside their units, and claimed that Klein never disclosed any of the defects when the trust sold them their units. Chylinski countered that the project was built to the highest standards, met or exceeded the code requirements, and that the water damage was caused by normal wear and tear or by poor homeowner maintenance. Those statements were echoed by Klein, who served as the property manager and performed almost all the repairs and maintenance at the project from its inception. Klein acknowledged that the roofs had been in place beyond their expected 20-year life span and that for the past few years he had applied a patching material to help extend their use.
Midway through the trial, the trust moved for judgment (Code Civ. Proc., § 631.8) on the grounds that the 10-year limitations period for construction defect actions (Code Civ. Proc., § 337.15) had long since run, and that in any event, the construction defect claims must fail because the developer had been ARK, not the trust. The trial court granted that motion on both grounds as to the causes of action for breach of warranty, strict liability, and negligence, but not as to the fiduciary duty claim. The court also granted the motion as to the negligence cause of action’s claim for inadequate budgeting because LECH failed to prove that issue.
The statement of decision incorrectly states that the motion was granted as to only the implied warranty and strict liability claims, but the reporter’s transcript shows that it was also granted as to the negligence claim, and LECH does not dispute that point.
In regard to the remaining fiduciary duty claim, the trial court found Klein and Chylinski mostly credible and ruled that almost all of the alleged defects and the claimed damages to individual units and the common areas were the combined result of unknown latent defects, normal wear and tear, or poor homeowner maintenance. The court also found that the project had been built to meet the then-existing code requirements. However, the court noted that Klein admitted to knowing that the roofs needed replacement and found that Klein also knew about drainage problems and water and wood rot damage to the balconies, as evidenced by his periodic repairs to the balconies. The conditions of the roofs and balconies were material defects that Klein did not disclose to the buyers. Because the roofs and balconies were obligations of LECH, Klein “had a fiduciary duty to disclose their status and need for repair. This he failed to do, either directly to the association or to the individual members when he sold each their respective unit. In these two instances only, the court finds Mr. Klein breached his duty to the plaintiffs.” Based on Caggiano’s testimony that it would cost $32,000 to replace the roofs on all 10 units and $28,800 to repair the balconies, the court awarded LECH damages of $60,800. Judgment to that effect was entered in October 2005.
The trust appeals from the judgment on several grounds: (1) because the balconies were part of each owner’s unit and were not part of the common area that LECH was obligated to maintain and repair, LECH lacked standing to sue for damages to the balconies; (2) there was evidence that only some of the balconies and roofs were damaged; (3) the trust did not have a fiduciary duty to disclose any property defects to prospective purchasers; and (4) because LECH would have been obligated to repair the roofs even if Klein had disclosed their true condition, the failure to disclose did not cause LECH to incur any damages. LECH cross-appeals from the order granting the trust’s motion for judgment as to the causes of action for breach of implied warranty, strict liability, and negligence.
DISCUSSION
1. The Trust Did Not Owe the Buyers a Fiduciary Duty
The trial court appears to have based its decision in part on the existence of a fiduciary duty of disclosure that the trust, in its capacity as seller, owed to the buyers of the project’s 10 units at the time those sales took place. The trust contends that the trial court erred in finding such a duty, and we agree. It is well established that there is no fiduciary duty between a buyer and seller acting at arm’s length. (Lingsch v. Savage (1963) 213 Cal.App.2d 729, 735 [no fiduciary or confidential relationship between seller and buyer of real property]; see Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 222 [relationship between buyer and seller is ordinarily not fiduciary].) That rule is not altered by the fact that the trust was also a LECH board member. The court in Kovich v. Paseo Del Mar Homeowners’ Assn. (1996) 41 Cal.App.4th 863, held that a homeowners association has no duty to disclose the existence of construction defects to prospective buyers because it is the seller instead who has certain statutory disclosure duties. (Id. at pp. 866-867; see Civ. Code, §§ 1102, 1102.6.) If a homeowners association is not in a fiduciary relationship with prospective buyers when it comes to disclosing construction defects, then by parity of reasoning the same rule must apply to the individual directors of that association. Therefore, in their capacity as members of the LECH board, the Kleins had no duty to disclose any construction defects to prospective buyers. We alternatively reverse because LECH has implicitly conceded the issue, and because it has waived the issue by failing to address it. (Elnekave v. Via Dolce Homeonwers Assn. (2006) 142 Cal.App.4th 1193, 1199 (Elnekave).)
As made clear in Lingsch v. Savage, supra, 213 Cal.App.2d at pages 735-736, sellers of real property who know of latent material defects have a common law duty to disclose the existence of those defects despite the absence of a fiduciary relationship. Those common law duties were later supplemented by Civil Code sections 1102-1102.17, which require sellers to provide prospective buyers with a prescribed form setting forth known defects in the property. Therefore, in their capacity as sellers, the Kleins had statutory and common law duties of disclosure which, if breached, would have allowed the individual buyers to sue the Kleins in that capacity for any damages caused by the failure to disclose the existence of known material defects. (Civ. Code, § 1102.13.)
2. Any Breach of Fiduciary Duty to LECH Caused It No Harm
The governing documents of any common interest development’s homeowners association are the declaration, commonly known as the covenants, codes and restrictions (CCRs), and the bylaws, operating rules, and articles of incorporation. (Ostayan v. Nordhoff Townhomes Homeowners Assn., Inc. (2003) 110 Cal.App.4th 120, 127.) It is undisputed that under the terms of LECH’s governing documents, it was obligated to perform and pay for maintenance and repairs of the project’s common areas, including the roofs. Therefore, according to the trust, even if it had told LECH about the condition of the roofs, the outcome would have been the same – LECH would then have been obligated to pay for their replacement either from its cash reserves or by assessing the individual unit owners.
LECH challenges this contention on two grounds. First, as testified to by Caggiano, the trust’s delay of roof repairs caused additional continuing damage. Second, if the trust had made the disclosure when it first knew of the defects, then the trust would have paid for the repairs; instead, LECH lacks sufficient funds to make those repairs, leaving the individual owners to pay those costs. As to the first, LECH does not cite to where in the record we might find Caggiano’s testimony about continuing damages. Even if such testimony exists, however, LECH fails to acknowledge or address the trial court’s findings that the trust did not cause any other damages, either to the common areas or the individual units. We therefore reject this contention both on its merits and because it was waived. (Elnekave, supra, 142 Cal.App.4th at p. 1199; Del Real v. City of Riverside (2002) 95 Cal.App.4th 761, 768; Cal. Rules of Court, rule 8.2044(a)(1)(C).) As to the second, LECH introduced no evidence concerning its financial condition or supposed inability to fund the repairs, or whether the individual owners must be assessed anything at all. The trial court partially granted the trust’s motion for judgment as to the negligence claim on this ground, an issue that LECH fails to discuss or acknowledge. This argument also overlooks that LECH is a discrete entity with an existence that is separate and apart from the unit owners who comprise its membership. If LECH pays for the repairs by assessing the owners for the costs, then, as the trust observes, LECH will have ultimately paid nothing for the repairs, making the loss one that belongs to the individual owners.
LECH’s brief followed this assertion with “(RT),” which we gather was intended to designate a portion of the reporter’s transcript.
Although the trust limited this argument to the roofs, we believe it applies with equal force to the balconies. The parties make the same arguments in regard to the balconies as they did to the roofs, and, for the same reasons just stated, we hold that the trust’s failure to disclose the existence of defects in the balconies caused LECH no damage.
We asked for and received supplemental briefing from the parties on this issue. For purposes of this discussion, we assume that the balconies, which are designated in the LECH governing documents as exclusive use common areas, were in fact part of the common area that LECH was obligated to maintain and repair.
3. The Trust’s Motion for Judgment Was Properly Granted
The trust sought and obtained judgment on the implied warranty, strict liability, and negligence causes of action on two grounds: (1) because the 10-year limitations period for claims against a developer for construction defects had lapsed (Code Civ. Proc., § 337.15); and (2) because the project had been developed by ARK, not the trust. In its ruling, the court noted that the complaint did not allege that the trust was ARK’s alter ego, and that no evidence to that effect had been introduced by LECH. Although LECH notes in its appellate brief that Klein was a two-thirds shareholder of ARK, it never acknowledges, discusses, or cites authority concerning the trial court’s ruling that the construction defect claims could not stand because the trust did not construct the project. Accordingly, we deem the issue waived and affirm the order granting the trust’s motion for judgment.
DISPOSITION
For the reasons set forth above, that portion of the judgment finding the trust liable to LECH for $60,800 for breach of fiduciary duty is reversed. The judgment is affirmed to the extent the court granted the trust’s motion for judgment on the causes of action for breach of implied warranty, strict liability, and negligence. The matter is remanded to the trial court with directions to enter an amended judgment in conformity with our decision, including an award of costs. Appellant and cross-respondent trust to recover its costs on appeal.
WE CONCUR: BOLAND, J., FLIER, J.