Cooper v. Jevne

• Decision Date: 31 March 1976
• Citation: 128 Cal.Rptr. 724,56 Cal.App.3d 860
• Parties: Dale COOPER et al., Plaintiffs and Appellants, v. Jack JEVNE et al., Defendants and Respondents. Civ. 45289.
• Court: California Court of Appeals Court of Appeals

Page 724

128 Cal.Rptr. 724

56 Cal.App.3d 860

Dale COOPER et al., Plaintiffs and Appellants, v. Jack JEVNE et al., Defendants and Respondents.

Civ. 45289.

Court of Appeal, Second District, Division 3, California.

March 31, 1976.

Hearing Denied May 26, 1976.

Blumberg & Zommick and Myron Blumberg, Gayle Posner, Long Beach, for plaintiffs and appellants

Gelfand, Malamed, Susman & Benjamin and Harold H. Benjamin, Beverly Hills, for defendants and respondents Jack Jevne, Glenn S. Evans and Mammoth Properties.

Cox, Castle, Nicholson & Weekes and Lawrence Teplin, Los Angeles, for defendants and respondents William Clark, Robert Hedrick and Clark-Hedrick Architects.

Shield & Smith and Anthony B. Drewry, Los Angeles, for defendants and respondents COBEY, Acting Presiding Justice.

Robert W. Sandy, Robert Thomas, Walter Brown and Ed Wells.

Plaintiffs, Dale Cooper, et al. (hereafter generally purchasers), appeal from judgments of dismissal (Code Civ.Proc., § 581d) of their action against Jack Jevne, Glenn S. Evans, and Mammoth Properties (hereafter generally sales agents); William Clark and Robert Hedrick, dba Clark-Hedrick Architects (hereafter generally architects); and Robert W. Sandy, Robert Thomas, Walter Brown and Ed Wells (hereafter generally county building inspectors).

These dismissals were made pursuant to Code of Civil Procedure section 581, subdivision (3), following the sustaining, without leave to amend, of the general demurrers of these defendants to relevant portions of purchasers' second amended complaint. Briefly, in this pleading purchasers seek to rescind or affirm with damages their contracts of purchase of certain condominiums in Chamonix, a 100 unit residential project at Mammoth Lakes, Mono County, California, on the ground of a fraudulent conspiracy among the builderseller of Chamonix, East Sierra Development Corporation (hereafter generally East Sierra), and these demurring defendants, among others, to conceal from the purchasers of condominiums within the project the fact that the project was defectively, illegally and dangerously constructed. Although initiated as a class action, the class aspects of the actions are not involved in this appeal.

Since we are here passing upon the sufficiency of a pleading to state a cause of action, or to be amended to so state, we must deem for these purposes that all of its material allegations are true. (See Alcorn v. Anbro Engineering, Inc., 2 Cal.3d 493, 496, 86 Cal.Rptr. 88, 468 P.2d 216; Maxon v. Security Ins. Co., 214 Cal.App.2d 603, 610, 29 Cal.Rptr. 586).

Dismissal of Sales Agents

Essentially purchasers' action against the sales agents rests solely upon the allegations contained in the second cause of action of the second amended complaint. ¹ Therein purchasers allege that at and before the purchase of their condominiums within the Chamonix project, the sales agents, orally and by means of advertising brochures, made certain specified affirmative factual misrepresentations to them, for the purpose of inducing their purchases, generally regarding the luxurious nature of the condominiums and their outstanding investment potential.

Purchasers allege in some detail that the sales agents knew (but purchasers did not know) that Chamonix was constructed in a substandard manner with poor workmanship in violation of various minimum requirements of the Uniform Building Code and in significant deviation from the county-approved plans and specifications with the result that the project, as built, was hazardous to personal safety due to the possibility of structural failure of portions of the building and because of inadequate safeguards from fire. Purchasers allege further that they were ill equipped in both experience and means to discover these very serious building deficiencies.

These alleged statements of the sales agents are clearly statements of opinion.

As such, they ordinarily cannot constitute actionable fraud or deceit. (See Rendell v. Scott, 70 Cal. 514, 11 P. 779, and Schonfeld v. City of Vallejo, 50 Cal.App.3d 401, 412, 123 Cal.Rptr. 669.) [56 Cal.App.3d 866] But if a person advances an opinion in which he does not honestly or cannot reasonably believe, then an action for affirmative fraud will lie if the remaining elements of the tort are present. (See Pacesetter Oil & Gas, etc. Corp., 132 Cal.App.2d 206, 211, 85 Cal.Rptr. 39; Bank of America v. Hutchinson, 212 Cal.App.2d 142, 148, 27 Cal.Rptr. 787; Ogier v. Pacific Oil & Gas, etc., corp., 132 Cal.App.2d 496, 506, 282 P.2d 574.)

If the sales agents knew of the alleged substantial structural defects in the condominiums, they could not honestly have held the opinion that these homes were luxurious or outstanding investments. Even if the sales agents stated their opinions sincerely, it was reckless and unreasonable to do so in light of their alleged knowledge. (See Stowe v. Fritzie Hotels, Inc., 44 Cal.2d 416, 422, 282 P.2d 890.) Thus the complaint now before us is sufficient to state a cause of action for misrepresentation by false opinion.

We think purchasers have also stated a cause of action against the sales agents for Negative fraud or deceit. Civil Code section 1710, subdivision (3), defines deceit as including '(t)he suppression of a fact, by one who is bound to disclose it . . ..' It is the law of this state that where a real estate broker or agent, representing the seller, knows facts materially affecting the value or the desirability of property offered for sale and these facts are known or accessible only to him and his principal, and the broker or agent also knows that these facts are not known to or within the reach of the diligent attention and observation of the buyer, the broker or agent is under a duty to disclose these facts to the buyer. (Lingsch v. Savage, 213 Cal.App.2d 729, 735--736, 29 Cal.Rptr. 201.) Stated more succinctly, a real estate broker or agent in the sale or real estate is liable for damages caused by nondisclosure to the buyer of defects known to him and unknown to and unobservable by the buyer. (Saporta v. Barbagelata, 220 Cal.App.2d 463, 474, 33 Cal.Rptr. 661; see also Warner Constr. Corp. v. City of Los Angeles,2 Cal.3d 285, 294, 85 Cal.Rptr. 444, 466 P.2d 996.)

Since purchasers have alleged that the sales agents knew of purchasers' ignorance of the structural deficiencies, their complaint is sufficient to state a cause of action on this alternative theory of negative fraud.

Therefore, the order sustaining the sales agents' general demurrer to this cause of action should be vacated and an order entered overruling their demurrer.

Dismissal of Architects

Though the second cause of action is directed against the architects, among other defendants, they are not alleged to have made any of the misrepresentations claimed and the duty to disclose, that we have just enunciated in connection with the sales agents, obviously has no application to the architects.

We turn therefore to the third cause of action--negligence--which runs against both the structural engineer (who is not a party to this appeal) and the architects. According to this cause of action, the architects were licensed partners in the architectural firm bearing their names. This firm prepared and furnished to the builder-seller, East Sierra, architectural drawings and plans and specifications for the construction and other improvements within the Chamonix project and acted as supervising architects in the construction of the buildings within the project. They did this professional work for a fee under written contracts, presumably with East Sierra.

Purchasers further allege in this cause of action that the architects were under a duty to exercise ordinary care as architects to avoid reasonably foreseeable injury to purchasers and that the architects knew or The architects contend that a cause of action in negligence cannot be stated against them by purchasers for economic loss alone. They concede that an architect may be held liable for bodily injury to a third person not in privity of contract with him even though that injury occurs after the architect's work has been accepted by the one who has employed him. (Montijo v. Swift, 219 Cal.App.2d 351, 353, 33 Cal.Rptr. 133.) But they point to a statement in Seely v. White Motor Co., 63 Cal.2d 9, 18, 45 Cal.Rptr. 17, 23, 403 P.2d 145, 151, a strict liability case, reading as follows: 'Even in actions for negligence, a manufacturer's liability is limited to damages for physical injuries and there is no recovery for economic loss alone.' ³

                should have foreseen with reasonable certainty that purchasers would suffer the specific monetary damages alleged if they failed to perform this professional duty. 2  Purchasers then allege that the architects failed to perform this duty in doing the aforementioned professional work under their written contracts, presumably with East Sierra, to the already specified damage to purchasers
                

Unfortunately for the architects, the liability at issue in this case is the malpractice liability of a professional for negligence in the rendition of his services and not that of a manufacturer for defects in his product. In Heyer v. Flaig, 70 Cal.2d 223, 226, 74 Cal.Rptr. 225, 449 P.2d 161, our Supreme Court held that an attorney who negligently fails to fulfill a client's testamentary directions incurs a liability in tort for monetary loss for violating a duty of care owed directly to the intended beneficiaries. (See also Lucas v. Hamm, 56 Cal.2d 583, 588, 15 Cal.Rptr. 821, 364 P.2d 685; Biakanja v. Irving, 49 Cal.2d 647, 648--650, 320 P.2d 16; Barbera v. State Farm Mut. Automobile Ins. Co., 71 Cal.2d 659, 674--676.) Under Heyer this right of recovery against the professional by those not in privity of contract with him extends clearly to the various items of property damage and economic loss purchasers allege that they suffered by reason of the architects' negligence. Compare Connor v. Great Western Sav. &...