In response to RSB's lawsuit claiming misrepresentations and omissions in connection with the sale of the residence, defendants moved for summary judgment, offering evidence they had no knowledge of the various deficiencies in the building. While RSB provided no evidence to suggest defendants had actual knowledge of the problems, it did demonstrate that the deficiencies were so severe that defendants' construction professionals should have been
BACKGROUND
This action grows out of RSB's August 2011 purchase from defendants of a vineyard and building located in Healdsburg. Following the purchase, RSB discovered structural and other problems with the building that were not disclosed by defendants at the time of the sale. RSB's complaint (complaint), filed in September 2013, contains causes of action for breach of contract, intentional misrepresentation, negligent misrepresentation, fraud, and negligence.
Barely seven months after the filing of the complaint, defendants moved for summary judgment, arguing RSB's claims failed because RSB could not demonstrate defendants had actual knowledge of the building's flaws or made false representations. The motion was supported by declarations from each of the four defendants and excerpts from the deposition testimony of Robin Black, designated by RSB as its person most knowledgeable.
According to the evidence submitted in support of the motion, the four defendants, members of two families engaged in the business of viticulture and wine-making, purchased the real property in 2009. At the time, the main building on the property was a single family home, and defendants planned to convert it into a commercial wine tasting room. They also considered building a winery. Following the purchase, defendants hired an architect to design a remodel of the home and applied for a commercial use permit, which issued in April 2010 for a winery and tasting room. Once the use permit issued, defendants submitted the architect's plans to the County of Sonoma (county), which approved the plans after requiring some changes. Defendants, none of whom is a construction professional or possesses the skills of such a person, relied on their architect and county officials to insure the plans conformed to applicable building codes, and they had no reason to believe the plans were non-conforming.
The construction work was performed by a licensed contractor, in consultation with a structural engineering firm, and
Soon after commencing business, the four defendants "decided that operating a joint tasting room was not to our liking so we decided to sell the property." During the sales process, they continued to conduct business. By August 2011, they had listed the property with a licensed real estate broker, who prepared an offering memorandum and placed an ad in a local paper. The offering memorandum stated that the property had a "vineyard-vested winery permit" and an "active tasting room" and attached a table describing the various permits issued for the property. The ad described the parcel as "[e]xceptional 19 acre vineyard parcel with operating tasting room, vested 20,000 case winery permit and 12 acres planted to vineyard." RSB submitted a proposed purchase agreement soon after, which defendants accepted subject to a counter-offer. Defendants provided to RSB a termite addendum, buyer's and seller's advisories, and other disclosures and documents, and they gave RSB the names of their architect, general contractor, and structural engineer. RSB waived all contingencies and inspection rights, and the sale closed the following month.
Each of the declarations submitted by defendants contained essentially the same affirmation. As two of the declarations stated, "[a]t no time before the sale to plaintiff did any person connected to the County or any of our own professionals ever inform me that the finished construction did not comply with any building codes or standards, that the plans or work were substandard or deficient in any regard, or not to code, or even just to the level of good construction practices, or that the building was in any way unsuitable or unsafe for use as a tasting room, nor did I have any such knowledge from any other source, including my own observations." All declarants believed the work "met all applicable codes and standards." Each defendant specifically denied any knowledge, at the time of the sale to RSB, of the defects in the property alleged in the complaint and claimed no knowledge of any material defects in the property, either from personal observation or on information by others.
In her deposition, Black stated that RSB had no information to suggest that any of the defendants had actual knowledge of the deficiencies in the property cited in the complaint. She also could not recall any false representations made to her by defendants in connection with the property.
In a detailed written decision, the trial court granted the motion for summary judgment. The court reasoned that RSB was required to provide evidence creating a triable issue of fact regarding defendants' actual knowledge of the alleged defects in the property and failed to do so. The court rejected RSB's claim that knowledge of the defects could be imputed to defendants from the presumed knowledge of their construction professionals, concluding that an agent's knowledge cannot be imputed when actual knowledge is required. The court found a number of other arguments unavailing.
Following the grant of summary judgment, the trial court granted defendants' motion for contractual attorney's fees, awarding defendants the full amount of fees and expenses requested, $262,400 and $4,868, respectively, without further explanation.
DISCUSSION
A. Summary Judgment.
"A defendant moving for summary adjudication or summary judgment bears the initial burden to show that a cause of action has no merit by establishing that 'one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense
1. The Trial Court's Purported Evidentiary Rulings.
Before considering the various causes of action, we first address RSB's contention that the trial court erred when it determined: that Black's testimony constituted a "binding admission" that defendants did not make an omission or misrepresentation and that Miyano's declaration was inadmissible. The record before us does not clearly establish the trial court
2. Intentional Concealment, Fraud and Deceit, and Negligence.
RSB's primary theory of recovery is that defendants knew or possessed constructive knowledge of the various defects uncovered by Miyano and failed to disclose those defects while under a duty to do so.
" '[T]he elements of a cause of action for fraud based on concealment are: " '(1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known
"A real estate seller has both a common law and statutory duty of disclosure. ... 'In the context of a real estate transaction, "[i]t is now settled in California that where the seller knows of facts materially affecting the value or desirability of the property ... and also knows that such facts are not known to, or within the reach of the diligent attention and observation of the buyer, the seller is under a duty to disclose them to the buyer. [Citations.]" [Citations.] Undisclosed facts are material if they would have a significant and measurable effect on market value. [Citation.]' ... Where a seller fails to disclose a material fact, he may be subject to liability 'for mere nondisclosure since his conduct in the transaction amounts to a representation of the nonexistence of the facts which he has failed to disclose [citation]' [citation]." ( Calemine , supra ,
a. Defendants' Actual Knowledge.
There seems little doubt that defendants were under a duty to disclose the deficiencies mentioned in Miyano's declaration, since they affected "the value or desirability of the property" and were not necessarily apparent to a diligent buyer. The obligation to disclose, however, only arose if defendants had actual or constructive knowledge of the deficiencies. ( Shapiro v. Sutherland (1998)
Defendants carried their initial burden of demonstrating that RSB could not prevail on a theory of intentional nondisclosure
RSB did not provide any direct evidence of defendants' knowledge, but this is not unusual. ( Blanchard v. DIRECTV, Inc. (2004)
RSB's sole evidence of knowledge was Miyano's declaration, but the statements in that declaration are not sufficient to create a triable issue of fact regarding defendants' actual knowledge of the deficiencies. With the exception of the first two defects cited, the deck and floor structure, the deficiencies were discovered only during the process of demolition. There is no reason to think defendants would have known of them. Further, Miyano does not suggest that any of the defects would have been apparent to a non-professional. By Miyano's own concession, the defects he cited would have been apparent only to a professional who was familiar with structural engineering and commercial building code requirements. Even as to such professionals, he stated only that they "should" have known of the deficiencies, not that they "must" have known. Accordingly, Miyano's declaration does not provide circumstantial evidence sufficient to create a triable issue of fact that defendants either did or must have known of the defects in the property.
RSB argues that the "sheer number and severity" of the structural defects "could well give rise to an inference that Defendants knew that there were multiple defects with the Property." We do not agree. As noted, in order to create an inference of actual knowledge, circumstantial evidence must suggest that the defendant must have known of the matter to be disclosed. ( Yuzon , supra ,
RSB argues that it was not required to demonstrate defendants' actual knowledge of the defects because the construction professionals defendants employed knew of some or all of the defects and, because the professionals were defendants' agents, their knowledge is imputed to defendants. We find RSB's contention unavailing. As discussed below, a principal is charged only with the knowledge of an agent acquired while the agent was acting in that role and within the scope of his or her authority as an agent. Because there is no evidence to suggest that defendants' construction professionals would have acquired information about the residence while acting as defendants' agents, RSB failed to create a triable issue of fact regarding the imputation of the professionals' knowledge.
RSB contends that "knowledge possessed by the professionals hired by a principal is imputed to the principal," citing Trane Co. v. Gilbert (1968)
The court noted that, "[a]s a general rule, an architect, as far as the preparation of plans and specifications is concerned, acts as an independent contractor; but so far as the performance of his supervisory functions with respect to a building under construction is concerned, he ordinarily acts as an agent and representative of the person for whom the work is being done." ( Trane, supra,
Any knowledge acquired by defendants' construction professionals about the renovated residence is not imputed to defendants because there is no evidence to suggest those professionals were acting in the role of agent
The distinction is illustrated in the Supreme Court's ruling in Herzog v. Capital Co. (1945)
As is clear from the foregoing description, the knowledge gained by the agent in Herzog was gained while acting as the defendants' representative and within the scope of that representation. For that reason, the agent had a fiduciary duty to reveal his knowledge to the defendants, and the defendants,
Because RSB's fraud and deceit and negligence claims are similarly based on the duty of disclosure, summary adjudication of these claims was appropriate under the same rationale.
3. Intentional and Negligent Misrepresentation.
To the extent RSB contends defendants made affirmative misrepresentations about the property, they have identified only the statements made in the offering memorandum that the property had a "vineyard-vested winery permit" and an "active tasting room."
RSB treats these statements as constituting a representation that the property was suitable for use as a commercial tasting room. We find no basis for such a reading. Both are simple statements of fact about (1) an on-going activity at the property and (2) the issuance of a regulatory permit by the county. Neither statement constitutes a warranty about the propriety of the activities on the site. That a property is being used for a particular activity does not necessarily imply that the property satisfies all regulatory requirements for the activity. In any event, a cause of action for misrepresentation requires an affirmative statement, not an implied assertion. ( Apollo Capital Fund , LLC v. Roth Capital Partners, LLC (2007)
RSB's claim for breach of contract is based on the contract of sale for the property. The primary contractual provisions underlying RSB's claim for breach of contract are those concerning disclosure, such as the provision requiring defendants to disclose "known material facts and defects" and make "other disclosures required by law." Because we conclude there is no triable issue of law regarding a failure to disclose by defendants, there is similarly no triable issue regarding a breach of such provisions.
RSB also claims defendants breached a provision of the contract requiring them to provide a Seller Property Questionnaire (SPQ), a standard-form disclosure document. The SPQ requires disclosure of a number of specific potential problems of which the seller is "aware," such as chemical contamination and insurance claims, material repairs to the property, structural and other defects, mold, boundary disputes, and other matters of concern. The record contains a blank SPQ form drawn up for the property, which was apparently never completed and submitted.
This claim fails because RSB cannot demonstrate a causal connection between the alleged breach and its claimed damages. ( Amelco Electric v. City of Thousand Oaks (2002)
In any event, RSB waived defendants' provision of a SPQ when it removed the sale contingencies prior to being provided with the SPQ. The two contingency removal forms executed by RSB include a number of specific contingencies to be removed by the seller, including "reports/disclosures." In executing a form on August 31, 2011, RSB stated it was removing "ALL Buyer contingencies," except "Acceptance of survey north line of property by Adobe Associates." A later contingency removal form, executed by RSB on September 7, 2011, "removes any and all buyer contingencies." Necessarily, once RSB released a contingency for reports and disclosures, it waived defendants' obligation to provide the SPQ.
B. Attorney's Fees.
DISPOSITION
The appeal from the judgment, filed October 8, 2014, is dismissed. The amended judgment, filed April 13, 2015, is affirmed. Defendants are awarded costs on appeal.
We concur:
McGuiness, P.J.
Pollak, J.
Notes
We dismiss plaintiff's appeal from an October 8, 2014, judgment as that judgment was superseded by an amended judgment entered on April 13, 2015. The issues raised on the dismissed appeal are considered on the appeal from the amended judgment. (Code Civ. Proc., § 906.)
Regarding the Miyano declaration, the trial court found summary judgment appropriate "[e]ven if Miyano's declaration is considered by the court."
The parties' contract did not impose any additional disclosure requirements beyond those imposed by law, since it expressly required only "disclos[sure of] known material facts and defects" and "any and all other disclosures required by law."
Perhaps the leaky deck could have alerted defendants, but RSB has provided no evidence that the nature of the deck leaks would have led a non-professional to discover the structural inadequacy of the deck.
Technically, an independent contractor can be an agent, but we understand Trane 's reference to architects as "independent contractors" in this context to mean that they do not act in the role of an agent when "prepar[ing] plans and specifications." (Trane, supra,
While it is conceivable that some of the professionals' knowledge might have been gained in response to inquiries by local planning officials, and therefore while acting in the role of agent, there is no evidence in the summary judgment record to this effect. We cannot find a triable issue of fact on this ground merely on the basis of speculation.
In her deposition, Black testified that she was not aware of any affirmative misrepresentations by any of the defendants, and the summary judgment record contains no evidence of any statements by any of them. In its brief, RSB contends defendants' agent "prepared an Offering Memorandum concerning the property and its suitability as a winery and active tasting room." RSB does not specifically discuss any statements other than those cited in the text.
See footnote *, ante.
