RSB Vineyards, LLC v. Orsi
223 Cal. Rptr. 3d 458
Cal. Ct. App. 5th2017Background
- RSB Vineyards bought a vineyard and a renovated residence/ tasting room from four individual defendants in 2011; after purchase RSB discovered serious structural defects and demolished the building.
- Defendants had remodeled the house for commercial use using an architect, licensed contractor, and structural engineer; county inspections and a final certificate of occupancy for a winery/tasting room were issued.
- Defendants submitted standard disclosures and an offering memorandum identifying an active tasting room and vested winery permit; RSB waived inspection contingencies and closed the sale.
- RSB sued for breach of contract, intentional and negligent misrepresentation, fraud/deceit, and negligence based on nondisclosure of structural and code-related defects identified by RSB’s engineer, Larry Miyano.
- Defendants moved for summary judgment, submitting declarations denying any knowledge of defects; RSB relied on Miyano’s declaration (detailing many technical defects discovered largely during demolition) to argue defendants knew or should be charged with their contractors’ knowledge.
- The trial court granted summary judgment and awarded defendants contractual attorney’s fees; the appellate court affirmed, holding RSB failed to raise a triable issue of defendants’ actual knowledge and failed to show agent knowledge was imputed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether defendants had a duty to disclose defects because they knew or must have known of them | Miyano’s report: defects were numerous/severe so defendants or their construction professionals must have known | Defendants submitted declarations denying actual knowledge; defects were technical and not apparent to nonprofessionals | No triable issue of actual knowledge; circumstantial evidence did not show defendants "must have known" |
| Whether knowledge of hired construction professionals is imputed to defendants | Professionals knew or should have known defects; as agents their knowledge is imputed to principals | Professionals were retained as designers/contractors, not agents dealing with third parties about the matters; their knowledge was acquired in a non-agent role | No imputation: agent knowledge imputes only when acquired while acting as agent within scope; here professionals’ knowledge was gained as designers/contractors |
| Whether offering materials ("active tasting room," "vested winery permit") were actionable affirmative misrepresentations | Those statements implied the property was suitable for commercial tasting room use | Statements were factually true (permit issued and tasting room operating) and were descriptions, not warranties about structural compliance | Summary judgment on intentional/negligent misrepresentation: RSB failed to show falsity or actionable affirmative misstatement |
| Whether contract claims (disclosure clause and failure to provide completed SPQ) support recovery | Failure to provide or complete SPQ and contract disclosure breaches caused RSB’s loss | SPQ only required disclosure of "known" defects; RSB waived contingencies for reports/disclosures before closing; no causal link shown | Breach claims fail: no evidence defendants knew defects; SPQ would not have disclosed unknown defects and RSB waived the contingency |
Key Cases Cited
- Calemine v. Samuelson, 171 Cal.App.4th 153 (Cal. Ct. App. 2009) (summary judgment burdens on moving party and plaintiff to show triable issues)
- Yuzon v. Collins, 116 Cal.App.4th 149 (Cal. Ct. App. 2004) (circumstantial evidence must show defendant "must have known," not merely "should have known")
- Trane Co. v. Gilbert, 267 Cal.App.2d 720 (Cal. Ct. App. 1968) (agent’s knowledge imputable to principal only when agent acts within scope of agency)
- Herzog v. Capital Co., 27 Cal.2d 349 (Cal. 1945) (agent’s concealment within scope of authority imputes knowledge and duty to disclose to principal)
- Ortega v. Kmart Corp., 26 Cal.4th 1200 (Cal. 2001) (actual knowledge routinely inferred from circumstantial evidence only when inference is compelled)