Brumbaugh v. Westside Estate Agency

Filed 3/19/10 Brumbaugh v. Westside Estate Agency CA2/3

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION THREE

APPEAL from a judgment of the Superior Court of Los Angeles County, William F. Highberger, Judge. Affirmed.

Wasserman, Comden & Casselman, David B. Casselman, Mark S. Gottlieb and Ryan J. Stonerock for Cross-complainant and Appellant.

Morris Polich & Purdy, David L. Brandon, Penelope M. Deihl; Law Offices of Floyd A. Rappaport and Floyd A. Rappaport for Cross-defendants and Respondents.

_________________________

Cross-complainant and appellant Charles Brumbaugh (Brumbaugh) appeals a judgment following a grant of summary judgment in favor of cross-defendants and respondents Westside Estate Agency, LLC (Westside) and Kurt Rappaport (Rappaport) (sometimes collectively referred to as Westside).[1]

Brumbaugh purchased a house which later became damaged, allegedly due to improperly compacted soil.  In this action, Brumbaugh contends Westside, the sellers broker, owed him a duty to locate and provide him with copies of various soils reports on the property.  

In granting summary judgment, the trial court properly held Westside did not owe Brumbaugh a fiduciary duty because the undisputed evidence established Westside was the sellers agent, not a dual agent. The lack of a fiduciary relationship bars Brumbaughs causes of action against Westside for breach of fiduciary duty and constructive fraud.

The trial court also properly disposed of Brumbaughs causes of action for negligence and negligent misrepresentation. Brumbaugh claims Westside falsely represented to him the soil was compacted to code. However, Brumbaugh conducted his own inspection of the property. Therefore, Brumbaugh cannot show reliance on Westsides representations in this regard.

Brumbaugh also claims Westside falsely advised him that the earlier soils reports were lost, causing him to cease his investigation and approve the physical condition of the property.  However, Brumbaughs deposition testimony was that Westside told him the seller did not have the earlier soils reports, not that those reports no longer existed anywhere.  Further, Brumbaugh knew Geolabs had prepared those reports, yet Brumbaugh did not contact Geolabs to obtains copies thereof.  Because Westside did not hinder Brumbaughs investigation, and Brumbaugh chose to terminate his investigation before it was completed, Brumbaugh cannot be said to have relied on Westsides representations.

Accordingly, the grant of summary judgment in favor of Westside and Rappaport was proper.  The judgment is affirmed.

FACTUAL AND PROCEDURAL BACKGROUND

1. Facts.

In February 2004, Coldwell Banker Residential Brokerage Company, through its agent Valerie Fitzgerald (Coldwell), and Westside, through its agent Rappaport, were co-listing real estate brokers for the sale of the 18,000 square foot residence located at 534 Barnaby Road in Bel Air. Brumbaugh and his wife became aware of the property in March 2004, when they attended an open house.

Before making an offer, Brumbaugh informed Coldwell that he would not be using a broker in the transaction and he negotiated an agreement to split the brokerage commission; Coldwell and Westside agreed.

On April 14, 2004, Brumbaugh and Jedco Associates, Inc., the seller, entered into an agreement for the purchase and sale of the property for $16 million.

a. Agency relationships.

In a letter to Coldwell dated April 19, 2004, Brumbaugh acknowledged there is no dual agency in this transaction.

The escrow instructions provided for the allocation of the $800,000 brokers commission, to be paid by Jedco, as follows:  $200,000 to Coldwell; $200,000 to Westside; and $400,000 to Thomas Lingo, designated by Brumbaugh as his agent.

Because the escrow determined Thomas Lingo was not a broker and therefore not entitled to earn a commission, he was removed and replaced by Clara Brandon, who was later replaced by Benjamin Lingo. Benjamin Lingo had no involvement in the Barnaby Road transaction, but Brumbaugh directed the $400,000 to him to balance out their business arrangements.

b. Geological issues.

On April 16, 2004, two days after the formation of the agreement, Coldwell sent Brumbaugh a Transfer Disclosure Statement (TDS) which disclosed the property contained compacted fill, but provided no elaboration.

On April 19, 2004, Brumbaugh wrote Coldwell requesting further information with respect to the items disclosed on the TDS.

On April 20, 2004, Brumbaugh wrote Westside requesting a copy of the City of L.A. approved soils report and all soils related field reports, such as compaction, and also the final soils engineers certification.

On April 21, 2004, Coldwell sent Brumbaugh a revised TDS which added the following statement:  The site was recompacted to current compaction code. The revised TDS advised Brumbaugh to rely on the opinions of [his] own professional inspectors.

On April 27, 2004, not having received the reports he requested, Brumbaugh wrote to Westside, stating PLEASE HAVE THE SOILS REPORTS (initial and final) sent to my office.

On April 29, 2004, Rappaport hand delivered to Brumbaugh two soils reports for the property.

Shortly thereafter, Kip Williamson, a construction inspector, met with Brumbaugh at the property and reviewed the two soils reports. Williamson noted the two reports were limited soils reports, that they were design-type reports and did not provide any information about the actual grading of the site. Williamson advised Brumbaugh that even though he saw no obvious evidence of distress to the property, Brumbaugh should obtain additional documentation, i.e., the original grading plans, grading observation report, compaction reports and more thorough soils reports.

Based on Williamsons advice, Brumbaugh contacted Rappaport again, asking for additional soils reports.

As set forth in Brumbaughs deposition testimony, Rappaport came back, after speaking with the seller, and stated the seller specifically told me there were additional reports, that [the seller] couldnt find them. (Italics added.)  Brumbaugh also admitted in his deposition that he knew Geolabs was the soils company that had conducted the soils investigation. However, Brumbaugh did not contact Geolabs in an attempt to obtain the reports.[2]

On May 5, 2004, despite Brumbaughs awareness that additional soils reports existed, and despite Williamsons recommendation that Brumbaugh obtain additional documentation, and against [his] better judgment, Brumbaugh confirmed in writing that he had completed his investigation of the property. Thereafter, all contingencies were removed and escrow closed on June 25, 2004.

Less than one year later, cracks appeared in the house and yard and the property began moving downward toward the abutting Bel Air Country Club. Brumbaughs geotechnical experts determined there were significant problems with the fill on the property.

This litigation followed. During the litigation, Brumbaugh learned the missing soils reports did exist and were maintained by Geolabs. However, during the escrow, no request was made of Geolabs for those reports.

2. Proceedings.

a. Pleadings.

In the operative second amended cross-complaint, Brumbaugh pled causes of action against Westside and Rappaport for constructive fraud (13th cause of action); breach of fiduciary duty (14th cause of action); negligent misrepresentation (15th cause of action); and negligence (16th cause of action). The gravamen of Brumbaughs claims was that Westside had a duty to obtain all the soils reports to determine whether the soil was properly compacted, Westside failed to do so, Brumbaugh completed the purchase of the property without the benefit of the missing soils reports, after which Jedcos soil engineers produced the reports, and had the reports been produced during the escrow period, they would have led to further testing and discovery of the material soils defects.

a. Moving papers.

Westside moved for summary judgment. Westside contended the undisputed facts established there was no dual agency Westside represented only the seller and did not represent Brumbaugh in the transaction.  Because there was no dual agency, Westside did not owe Brumbaugh a fiduciary duty.

Further, the absence of a fiduciary duty in Westside also defeated the claim for constructive fraud, because the doctrine of constructive fraud requires the existence of a fiduciary or special relationship.  (Peterson Development Co. v. Torrey Pines Bank (1991) 233 Cal.App.3d 103, 116.)

With respect to the cause of action for negligent misrepresentation, Westside contended Brumbaugh could not be said to have relied on any misrepresentation because Brumbaugh conducted his own inspection, Brumbaugh was advised by his own expert of the existence of earlier soils reports and the need to examine those reports, yet Brumbaugh chose to remove the contingencies after his inspection of the property.

Finally, as to the negligence claim, Westside contended it performed its duty and disclosed to Brumbaugh all adverse property conditions that a diligent visual inspection of the property should have revealed, Brumbaugh undertook his own investigation, Westside did not assume a duty to seek out soils reports for Brumbaugh other than those which were in sellers possession, and even if a duty to seek soils reports could be established, Westside did not breach that duty and provided all reports it was able to obtain from the seller.

b. Opposition papers.

In opposition, Brumbaugh contended Rappaport owed him a fiduciary duty, at least with respect to obtaining the missing soils reports. Further, Rappaport was liable for misrepresenting the condition of the property independent of any fiduciary duty owed to Brumbaugh; also, irrespective of any fiduciary duty, Rappaport was negligent in failing to obtain the available soils reports on the property; and no claims were barred by Brumbaughs own investigation of the property.

c. Trial courts rulings.

On May 30, 2008, the matter came on for hearing. Thereafter, the trial court issued a minute order which stated in pertinent part: Since . . . Brumbaugh received the economic benefit of acting as his own buyers real estate broker on this transaction by having a buyers broker commission paid to his chosen straw man (who did not perform any actual services), Brumbaugh is not in a proper position to claim that he had concurrently formed a principal-agent fiduciary relationship with the adverse party (sellers) disclosed real estate brokers, either as a general agency relationship or a narrower alleged agency relationship for a limited purpose (e.g. the claim that it was an agency relationship for purposes of obtaining soils reports). It was so plain as to be undeniable that Brumbaugh understood that Westside . . . and Rappaport were acting at all times on behalf of his adversary Jedco and its affiliated parties during the transaction and not on behalf of himself; consistent with this Brumbaugh at all times totally lacked any right of control over the actions of Westside . . . and Rappaport, an essential element of an agency relationship (a point ignored in Brumbaughs opposition). [] . . . [] Since there was no fiduciary relationship formed, the 14th cause of action for Breach of Fiduciary Duty and the 13th cause of action for Constructive Fraud (based on alleged existence of a fiduciary relationship) must fail.

The trial court also disposed of the cause of action for negligent misrepresentation, stating:  Because Brumbaugh commenced his own soils investigation, he cannot show that there is any triable issue of fact as to his alleged reasonable reliance upon the statements of Rappaport and Westside . . . regarding the soils condition of the property or the existence or non-existence of reports related to soils. [Citation.] A close reading of Brumbaughs deposition testimony and his declaration show that Westside . . . and Rappaport did not hinder Brumbaughs ability to continue with his professional investigation of soils with his own expert had [he] wished to do so. (Italics added.)

With respect to the remaining cause of action, general negligence, the trial court requested supplemental briefing.

After hearing additional arguments, the trial court also granted summary adjudication  in favor of Westside on the negligence claim, which resulted in summary judgment for Westside. At the hearing, the trial court adopted its tentative ruling on the negligence claim as its final decision. With respect to the negligence claim, the trial courts rationale was as follows:  [T]here is no triable issue of fact as to causation given that Brumbaugh commenced his own soils investigation.  [Citation.]  A second, independent reason to grant is that any duty owed by sellers broker to buyer was limited to the duties articulated in Easton v. Strassburger (1984) 152 Cal.App.3d 90, and thereafter codified in Civil Code sec[tion] 2079, nothing more. [Citation.]

Brumbaugh filed a timely notice of appeal from the judgment in favor of Westside and Rappaport.

CONTENTIONS

Brumbaugh contends:  in granting summary judgment, the trial court erred in failing to specify the evidence supporting the motion; the motion should have been denied due to the existence of various disputed issues of material fact; Westside breached its fiduciary duty and committed constructive fraud; Westside is liable for negligent misrepresentation; and Westside is liable for negligence.

DISCUSSION

1. Standard of appellate review.

Summary judgment motions are to expedite litigation and eliminate needless trials. [Citation.] They are granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. [Citations.](PMC, Inc. v. Saban Entertainment, Inc. (1996) 45 Cal.App.4th 579, 590.)

A defendant meets its burden upon such a motion by showing one or more essential elements of the cause of action cannot be established, or by establishing a complete defense to the cause of action. (Code Civ. Proc., 437c, subd. (p)(2); Aguilar v. Atlantic Richfield Co. (2001)25 Cal.4th 826, 849.) Once the moving defendant has met its initial burden, the burden shifts to the plaintiff to show a triable issue of one or more material facts exists as to that cause of action or a defense thereto. (Id. at p. 849; Code Civ. Proc., 437c, subd. (p)(2).)

We review the trial courts ruling on a motion for summary judgment under the independent review standard. (Rosse v. DeSoto Cab Co. (1995) 34 Cal.App.4th 1047, 1050.)

2. No merit to Brumbaughs challenge to the sufficiency of the trial courts specification of reasons.

Code of Civil Procedure section 437c, subdivision (g) requires the trial court, by written or oral order, to specify the reasons for its determination in granting a motion for summary judgment, with specific reference to the applicable supporting and opposing evidence.

A statement of reasons for the grant of summary judgment is sufficient if it allows for meaningful appellate review.  (Santa Barbara Pistachio Ranch v. Chowchilla Water Dist. (2001) 88 Cal.App.4th 439, 448.) The courts failure to provide a sufficient statement of reasons is not automatic grounds for reversal, since it is the validity of the ruling which is reviewable and not the reasons therefore. (Id. at pp. 448-449.) Further, the lack of a statement of reasons presents no harm where our independent review establishes the validity of the judgment. (Id. at p. 449.)

Brumbaughs challenge to the trial courts specification of reasons is meritless. The trial courts rulings as to all four causes of action in issue, summarized ante, are sufficient for meaningful appellate review. Moreover, as discussed below, our independent review establishes the validity of the summary judgment in favor of Westside.

We now turn to the substantive issues raised by Brumbaugh.

3. No triable issue as to dual agency; because Westside only represented the seller, and not Brumbaugh, Westside did not owe Brumbaugh a fiduciary duty; in the absence of a fiduciary duty, Westside was entitled to summary adjudication on the causes of action for breach of fiduciary duty and constructive fraud.

By way of background, Brumbaugh was a highly sophisticated buyer of real estate.  The parties respective separate statements established the following undisputed facts: Brumbaugh was a real estate developer by occupation. He owned a property management and real estate development company which acts as a developer general partner. He was a licensed California attorney and was a previously licensed California real estate broker. Further, this was not Brumbaughs first purchase of a personal residence. He had owned at least two prior residential properties in California.

Brumbaugh admittedly entered into the transaction with the intent not to be represented by a broker, in order to collect one-half of the $800,000 commission. At his deposition, Brumbaugh explained he didnt hire a broker to represent him in the transaction because I would do most of [the] work myself anyways. . . . I didnt see how a broker would add $400,000 of value.

Thus, in a letter to Coldwell dated April 19, 2004, five days after the formation of the buy/sell agreement, Brumbaugh acknowledged there is no dual agency in this transaction.

Given this record, Brumbaugh recognizes there was no dual agency at the inception, but he contends a dual agency arose thereafter in that throughout the transaction, Rappaport performed services in behalf of Brumbaugh that created a relationship of trust and confidence. As a result, Brumbaugh did intend that Rappaport act as his agent for the limited purpose of obtaining the soils reports.

Brumbaugh argues a triable issue exists as to whether the conduct of Westside gave rise to an implied agency, so as to make Westside the dual agent of buyer and seller. Brumbaugh cites the various ways in which Westside assisted him in the transaction, including:  Westside obtained inspection reports for Brumbaugh that were prepared for another potential purchaser of the property; Westside obtained architectural plans for him; Westside negotiated with Jedco on a punch list of items to repair for Brumbaugh; Westside contacted third parties at Brumbaughs request, including the construction superintendent and a lawyer involved in a dispute between Jedco and Bel Air Country Club; Westside introduced Brumbaugh to a mortgage broker to help Brumbaugh obtain financing; Westside agreed to obtain soils reports for Brumbaugh and delivered the reports to him.

Brumbaugh asserts that due to this course of conduct, I began to trust Rappaport and believed he was looking out for my best interests in carrying out the tasks in which he was assisting me. Brumbaugh contends Given the relationship of trust and confidence that had been established, [he] ultimately felt that he had no choice but to rely on what Westside told him so [he] signed the release of contingency form that had been prepared by Westside. (Italics added.)

Brumbaughs theory that a triable issue exists with respect to implied agency is meritless. Agency is the relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act. (Restatement, Agency, 1.) The principal must in some manner indicate that the agent is to act for him, and the agent must act, or agree to act on his behalf and subject to his control. (Id., comment on subsec. 1.) In the absence of the essential characteristic of the right of control, there is no true agency . . . . (Edwards v. Freeman [(1949)] 34 Cal.2d [589,] 591-592, italics added. [] That control is a decisive factor is well established. [Citations.] (St. Paul Ins. Co. v. Industrial Underwriters Ins. Co. (1989) 214 Cal.App.3d 117, 122 (St. Paul), second italics added.) Control may not be inferred merely from the fact that one persons act benefits another. (Id. at p. 123.)

In moving for summary judgment on the cause of action for breach of fiduciary duty, Westside met its burden by citing evidence, including Brumbaughs April 19, 2004 acknowledgement of no dual agency, to show no fiduciary duty existed. In opposition, Brumbaugh asserted a dual agency was later created by conduct, at least for the limited purpose of Rappaport obtaining the soils reports requested by Brumbaugh. However, Westsides helpful conduct, without more, did not give rise to an agency relationship between Westside and Brumbaugh. (St. Paul, supra, 214 Cal.App.3d at pp. 122-123.) Brumbaugh makes too much of Westsides assistance. Westside cooperated with Brumbaugh merely to expedite and consummate the transaction and to enable Westside to earn its commission from the seller. In resisting summary judgment, Brumbaugh did not present any evidence that he controlled Westsides activities. Brumbaugh merely showed he made requests of Westside and that Westside cooperated with his requests. That showing by Brumbaugh was insufficient to raise a triable issue as to the existence of an agency relationship.

Because Brumbaugh failed to raise a triable issue as to the existence of an agency relationship between Westside and Brumbaugh, the trial court properly concluded no fiduciary duty was owed. Therefore, the trial court properly disposed of Brumbaughs cause of action against Westside for breach of fiduciary duty.

The absence of a fiduciary relationship is also fatal to Brumbaughs cause of action against Westside for constructive fraud. (Peterson Development Co. v. Torrey Pines Bank, supra, 233 Cal.App.3d at p. 116 [[i]t is essential to the operation of the doctrine of constructive fraud that there exist a fiduciary or special relationship].)

4. Negligent misrepresentation.

With respect to negligent misrepresentation, Brumbaugh alleged:  (1) Westside falsely represented it was unable to reasonably provide all of the soil compaction reports and (2) Westside falsely represented the soil was compacted to code and that Brumbaugh should terminate his due diligence because he had nothing to worry about concerning the soil.

An essential element of negligent misrepresentation is actual and justifiable reliance on the alleged deceit. (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.) Here, there was no justifiable reliance by Brumbaugh on Westsides alleged representations that the soil was properly compacted. As indicated, the TDS advised Brumbaugh  to rely on the opinions of [his] own professional inspectors. In accordance with the TDS, Brumbaugh pursued his own investigation of the soils issue, including consultation with Williamson, a construction inspector, who advised him to obtain further documentation. Thereafter, Brumbaugh elected to remove the contingencies despite his inability to obtain the soils reports that Williamson specified. Brumbaughs assertion he justifiably relied on the representation of Westside, a real estate broker without expertise in soils issues, that the soil was properly compacted, instead of relying on the advice of Williamson or other qualified persons, is devoid of merit.

As for Brumbaughs claim that Westside falsely represented no additional soils reports were available, we focus, as did the trial court, on Brumbaughs deposition testimony. At deposition, Brumbaugh testified Rappaport came back, after speaking with the seller, and stated the seller specifically told me there were additional reports, that [the seller] couldnt find them. (Italics added.)  Brumbaugh also admitted in his deposition that he knew Geolabs was the soils company that had conducted the soils investigation. However, Brumbaugh did not contact Geolabs in an attempt to obtain the reports.

Thus, the evidence showed Rappaport merely told Brumbaugh the seller did not possess any additional soils reports Rappaport did not tell Brumbaugh the reports could not be obtained from any source. Further, Brumbaugh knew Geolabs had authored the reports. Rappaport did not deter Brumbaugh from contacting Geolabs regarding those reports. In sum, Westside did not mislead Brumbaugh with respect to the possibility that he might obtain the reports from a source other than the seller.

For these reasons, the trial court properly granted summary adjudication on the negligent misrepresentation claim.

5. Negligence.

With respect to the cause of action for negligence, Brumbaugh pled: (1) Westside failed to act reasonably in response to his request for copies of all soil compaction reports on the property by failing to conduct a reasonably competent and diligent investigation into the whereabouts of all the soil compaction reports; (2) Westside failed to exercise reasonable care by persuading him to abandon his due diligence solely in reliance on Westsides representations that the soil had been properly compacted to code; and (3) Westside failed to exercise reasonable care to make accurate statements to Brumbaugh and to ensure there was a reasonable basis upon which to believe its representations to Brumbaugh were accurate.

However, as the trial court ruled, there was no triable issue as to causation because Brumbaugh undertook his own soils investigation. Moreover, Brumbaugh cannot expand the duty of the selling broker to the buyer beyond that set forth in Civil Code section 2079.

By way of background, in Easton v. Strassburger, supra, 152 Cal.App.3d 90, the court first pronounced the duty of the sellers broker to potential purchasers to both inspect and disclose.  [T]he duty of a real estate broker, representing the seller, to disclose facts . . . includes the affirmative duty to conduct a reasonably competent and diligent inspection of the residential property listed for sale and to disclose to prospective purchasers all facts materially affecting the value or desirability of the property that such an investigation would reveal. [Citation.] (Robinson v. Grossman (1997) 57 Cal.App.4th 634, 640 (Robinson).)

The Easton duty was codified in Civil Code section 2079 (Robinson, supra, at p. 641), as follows:  (a) It is the duty of a [licensed] real estate broker or salesperson, . . . to a prospective purchaser of residential real property . . . to conduct a reasonably competent and diligent visual inspection of the property offered for sale and to disclose to that prospective purchaser all facts materially affecting the value or desirability of the property that an investigation would reveal . . . . The brokers duty to inspect does not include or involve an inspection of areas that are reasonably and normally inaccessible to such an inspection . . . . (Civ. Code, 2079.3.)

Civil Code section 2079s disclosure duty does not include a duty to independently verify or disclaim the accuracy of the sellers representations . . . . (Robinson, supra, 57 Cal.App.4th at p. 643.) Under the post-Easton statutory scheme, once the sellers and their agent make the required disclosures, it is incumbent upon the potential purchasers to investigate and make an informed decision based thereon. In making the required disclosures, the sellers agent is required only to act in good faith and not convey the sellers representations without a reasonable basis for believing them to be true. (Id. at p. 644, italics added.)

Here, the selling broker discharged its inspection duty by making a visual inspection of the property which revealed no soils issues. The brokers determination in this regard was confirmed by Williamson, Brumbaughs own expert, who also viewed the property and found no obvious evidence of distress to the property . . . .

Further, with respect to the issue of the missing soils reports, Brumbaugh testified Rappaport came back, after speaking with the seller, and stated the seller specifically told me there were additional reports, that [the seller] couldnt find them. (Italics added.) Brumbaugh has not shown Rappaport acted in bad faith or that Rappaport had any reason to disbelieve the sellers representations in that regard.

For these reasons, Westside was entitled to summary adjudication on the negligence claim.

DISPOSITION

The judgment is affirmed.  Respondents shall recover their costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

KLEIN, P. J.

We concur:

KITCHING, J.

ALDRICH, J.

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[1] The underlying complaint, filed by Bel Air Country Club against David Murdock, Jr., is not an issue here.  The sole parties to this appeal, which relates to Brumbaughs failed cross-complaint, are Brumbaugh, Westside and Rappaport.  

[2] Thus, according to Brumbaughs deposition testimony, Rappaport stated the seller could not find the reports, but Rappaport did not rule out the possibility that the reports existed and could be obtained from Geolabs.   In contrast, Brumbaugh stated in his declaration, in opposition to summary judgment, that Rappaport told him the reports were lost and that Rappaport did not tell him the reports were available at Geolabs.