Buist v. C. Dudley De Velbiss Corp.

• Decision Date: 30 June 1960
• Citation: 182 Cal.App.2d 325,6 Cal.Rptr. 259
• Court: California Court of Appeals Court of Appeals
• Parties: Ronald L. BUIST and Leona M. Buist, Plaintiffs and Respondents, v. C. DUDLEY DE VELBISS CORPORATION, Defendant, Cross-Complainant and Appellant, and Woodward-Clyde and Associates, Cross-Defendants and Respondents Civ. 18387.

Page 259

6 Cal.Rptr. 259

182 Cal.App.2d 325

Ronald L. BUIST and Leona M. Buist, Plaintiffs and Respondents, v. C. DUDLEY DE VELBISS CORPORATION, Defendant, Cross-Complainant and Appellant and Woodward-Clyde and Associates, Cross-Defendants and Respondents

Civ. 18387.

District Court of Appeal, First District, Division 2, California.

June 30, 1960.

MacDonald, Brunsell & Walters, Harry D. Miller, Oakland, for appellant.

Philip M. Madden, Wallace, Garrison, Norton & Ray, San Francisco, for respondents.

John M. Roberts, Hall, Henry, Oliver & McReavy, San Francisco, for Woodward-Clyde & Associates.

Allan L. Sapiro and Arthur N. Ziegler, San Francisco, for Ronald L. Buist & Leona M. Buist.

KAUFMAN, Presiding Justice.

The respondents, Ronald L. Buist and Leona M. Buist, husband and wife, sued the appellant, C. Dudley DeVelbiss Corporation, for damages for fraud, breach of contract and failure of consideration, in the sale to them of a hillside house and lot in the Hawthorne Terrace area of the Tiburon peninsula. DeVelbiss filed a cross-complaint alleging that the injury to the respondents' property was caused by the negligence and carelessness of Woodward-Clyde and Associates, the soil engineers, retained by DeVelbiss to report on the condition of soil. The court, after a non-jury trial, found for the respondents on the grounds of fraud and dismissed the cross-complaint.

On this appeal, which is from both the judgment in favor of the respondents and the judgment dismissing the cross-complaint the appellant argues that: 1) the trial court's finding of fraud is not supported by the evidence; 2) the award of damages was impossible and unsupportable; 3) the dismissal of the cross-complaint is not supported by the evidence. There is no merit in any of these contentions.

The trial court found the following facts: on October 6, 1954, the appellant, a subdivider and contractor, was in the course of constructing a residence on its lot 36 Hawthorne Terrace in Tiburon; on October 6 1954, the house and lot were sold to the respondents for $14,000; that appellant completed construction and delivered possession of the property on December 30, 1954. At the time of the sale, lot 36 was not suitable for the construction of a residence as the lot was in the area of an ancient slide and in an area of underground water, and the house was constructed on fill placed on the lot without adequate compaction or compaction tests. Appellant knew these facts about the lot and failed to disclose the true condition of lot 36 and its unsuitability for building purposes. At the time of sale to the Buists, the property was of a nominal value only and not worth $14,000. After taking possession of the property, respondents expended labor and materials for landscaping terracing and gardening in the amount of $3,452.68. By reason of the subsidence caused by the unsuitability of the lot for building purposes, these improvements were substantially damaged and destroyed. From these facts, the trial court concluded that the appellant committed fraud upon the Buists by failing to disclose the true condition of the property to them, in misrepresenting the condition to them, and negligence in the construction of a residence thereon, and that, therefore, the Buists were entitled to damages in the amount of $17,452.68.

The first argument on appeal is that the evidence does not support the finding of fraud. It is our duty on appeal to view the evidence in the light most favorable to the party who was successful in the trial court, and if there is any substantial evidence to support the findings, then the findings must remain as the facts in the case. Where the appellant urges the insufficiency of the evidence to sustain the findings, the rule is that he must demonstrate that there is no substantial evidence to support the challenged findings. When two or more inferences can reasonably be deduced from the facts, the reviewing court is without power to substitute its deduction for those of the trial court. Ashburn v. Miller, 161 Cal.App.2d 71, 326 P.2d 229.

The trial court here found four separate acts of fraud committed by the appellant: (1) an affirmative representation by appellant's agent that lot 36 was on cut when in fact it was on fill; (2) that appellant knew but failed to disclose that the lot was in the area of an ancient slide; (3) that the appellant knew but failed to disclose that the lot was known to be in an area of underground water; (4) that appellant knew but failed to disclose that fill was knowingly placed on the lot without proper compaction.

The evidence adequately supports each of these findings. As to the finding of an affirmative representation that the lot was constructed on cut, the appellant argues that no representation was made, or in the alternative, that if made, the respondents did not rely thereon. The uncontroverted evidence shows that the Southern Marin Realty Company was the exclusive agent for the area where respondents' home is located. Southern Marin solicited offers and brought them to the appellant for its approval. No agreement could become binding until the purchaser was approved by the appellant. On October 3, 1954, the Buists discussed the purchase of real estate in Tiburon, with a representative of Southern Marin. When the salesman took the Buists to lot 36 on October 3, the foundation and subflooring of the house were already in place. Mr. and Mrs. Buist made no examination of the premises other than the view. In reply to their questions, the salesman said that the lot was a cut and on hard ground. It is not denied that the appellant was responsible for the representations of its agent, the real estate salesman. Wilbur v. Wilson, 179 Cal.App.2d 314, 3 Cal.Rptr. 770; Worthen v. Jackson, 139 Cal.App.2d 615, 293 P.2d 797.

There was some conflicting evidence from appellant's employees that only a portion of the lot was on fill. Mr. Clyde, one of the cross-defendants, however, testified that there was fill on lot 36 starting with O at the front of the premises to a depth of 10' in the rear. A profile sketch of the house and lot showed there was fill on lot 36 under the house and above the original grade. It is up to the trial court to resolve conflicts in the evidence. New v. New, 148 Cal.App.2d 372, 306 P.2d 987.

Under these circumstances, appellant's duty of disclosure is clear. The rules were well stated in Rothstein v. Janss Investment Corp., 45 Cal.App.2d 64 at page 68, 113 P.2d 465, at page 467.

'* * * When and where the action by the purchaser is based on conditions that are visible and that a personal inspection at once discloses and, when it is admitted that such personal inspection was in fact made, then manifestly it cannot be successfully contended that the purchaser relied upon any alleged misrepresentations with regard to such visible conditions. But personal inspection is no defense when and where the conditions are not visible and are known only to the seller, and 'where material facts are accessible to the vendor only and he knows them not to be within the reach of the diligent attention and observation of the vendee, the vendor is bound to disclose such facts to the vendee'. Clauser v. Taylor, 44 Cal.App.2d 453, 112 A.2d 661. * * *'

On October 3, the Buists made a deposit of $1.00 and thereafter signed a deposit receipt which stated in paragraph 10: 'No representations, guarantees or warranties of any kind or character have been made by any party hereto, or their representatives, which are not herein expressed.' Appellant argues that this statement on the deposit receipt shows that no representations were made. The evidence of fraudulent representations inducing the execution of a contract is admissible as an exception to the parole evidence rule. Mooney v. Cyriacks, 185 Cal. 70, 195 P. 922. It is equally well established that a principal is under a positive duty to make a disclosure and cannot escape liability for failure to do so by relying on a contract provision to the effect that there are no other representations than those made in the written agreement. Herzog v. Capital Co., 27 Cal.2d 349, 354, 164 P.2d 8.

Appellant also argues that the misrepresentation was not material, but this likewise was a matter for the trial court. Ashburn v. Miller, 161 Cal.App.2d 71, 326 P.2d 229. A misrepresentation or concealment of the known fact of a fill in a lot sold to another constitutes material inducement which works fraud upon the buyer, who is ignorant of the fact. Ashburn v. Miller, 161 Cal.App.2d 71, 79, 326 P.2d 229; Worthen v. Jackson, 139 Cal.App.2d 615, 293 P.2d 797; Blackman v. Howes, 82 Cal.App.2d 275, 185 P.2d 1019, 174 A.L.R. 1004; Rothstein v. Janss Investment Corp., 45 Cal.App.2d 64, 113 P.2d 465.

As to the finding that the appellant failed to disclose the fact that the lot was in the area of an ancient slide and underground water, and that the fill was improperly compacted, the evidence indicates that Woodward-Clyde and Associates were retained by the appellant to make soil investigations in the area in question in order to comply with the FHA requirements. About May 3, 1954, the soil engineers made compaction tests on lots 34, 35, 36, 37 and 38. Before this time, two compaction tests had been made on lot 36, when there was very little fill on the lot. These tests did not come up to standard. Because of the poor results, no further tests were undertaken on these lots. About ten tests were usually required before a grading operation could be accepted by the soil engineer. On May 13, 1954, an excavation on lot 38 uncovered a water seepage condition and the soils did not look good. Lots 36, 37 and 38 were found to be on the toe of an ancient slide. On the same date, Woodward-Clyde told the appellant to discontinue grading in the area of these lots until further advised by the soil engineers. Clyde notified Woodward of the water, ancient slide and soil conditions. On Ma...