Easton v. Strassburger

• Citation: 199 Cal.Rptr. 383,152 Cal.App.3d 90
• Court: California Court of Appeals
• Decision Date: 22 February 1984
• Parties: , 46 A.L.R.4th 521 Leticia EASTON, Plaintiff and Respondent, v. William F. STRASSBURGER, et al., Defendants, Valley of California, Inc., Defendant and Appellant. AO10566. Civ. 53113.

Page 383

199 Cal.Rptr. 383

152 Cal.App.3d 90, 46 A.L.R.4th 521

Leticia EASTON, Plaintiff and Respondent, v. William F. STRASSBURGER, et al., Defendants, Valley of California, Inc., Defendant and Appellant.

AO10566.

Civ. 53113.

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

Feb. 22, 1984.

Hearing Denied May 31, 1984.

W. Stephen Wilson, Buchman, Kass, Morgan & Miller, Oakland, for defendant and appellant.

Harry D. Miller, M. Janice Smith, Miller, Starr & Regalia, Oakland, for plaintiffs and respondents.

KLINE, Presiding Justice.

Valley of California, Inc., doing business as Valley Realty (appellant), appeals from a judgment for negligence entered in favor of Leticia M. Easton (respondent). Appellant was one of six defendants in the action, which was brought by respondent for fraud (including negligent misrepresentation) and negligence in the sale of residential property.

FACTS

In the case below, all defendants were found liable to respondent for negligence. However, because Valley Realty alone has appealed, we limit our review of the record only to those facts which affect the liability of that party.

Viewing the evidence in the light most favorable to respondent, as we must, the record discloses the following facts: The property which is the subject of this appeal is a one-acre parcel of land located in the City of Diablo. The property is improved with a 3,000 square foot home, a swimming pool, and a large guest house. Respondent purchased the property for $170,000 from the Strassburgers in May of 1976 and escrow closed in July of that year. Appellant was the listing broker in the transaction.

Shortly after respondent purchased the property, there was massive earth movement on the parcel. Subsequent slides destroyed a portion of the driveway in 1977 or 1978. Expert testimony indicated that the slides occurred because a portion of the property was fill that had not been properly engineered and compacted. The slides caused the foundation of the house to settle which in turn caused cracks in the walls and warped doorways. After the 1976 slide, damage to the property was so severe that although experts appraised the value of the property at $170,000 in an undamaged condition, the value of the damaged property was estimated to be as low as $20,000. Estimates of the cost to repair the damage caused by the slides and avoid recurrence ranged as high as $213,000.

Appellant was represented in the sale of the property by its agents Simkin and During the time that the property was owned by the Strassburgers there was a minor slide in 1973 involving about 10 to 12 feet of the filled slope and a major slide in 1975 in which the fill dropped about eight to 10 feet in a circular shape 50 to 60 feet across. However, the Strassburgers did not tell Simkin or Mourning anything about the slides or the corrective action they had taken.

Mourning. It is uncontested that these agents conducted several inspections of the property prior to sale. There is also evidence they were aware of certain "red flags" which should have indicated to them that there were soil problems. Despite this, the agents did not request that the soil stability of the property be tested and did not inform respondent that there were potential soil problems.

Respondent purchased the property without being aware of the soil problems or the past history of slides.

In December of 1976 respondent filed suit against appellant, the Strassburgers, and three other named defendants. ¹ As against appellant, respondent alleged causes of action for fraudulent concealment, intentional misrepresentation, and negligent misrepresentation.

Appellant filed a cross-complaint against the Strassburgers seeking full indemnity, or, in the alternative, partial indemnity.

The action was tried before a jury. As to appellant, the judge instructed the jury only as to negligent misrepresentation and simple negligence, since the actions for fraudulent concealment and intentional misrepresentation had been voluntarily dismissed. The jury returned a special verdict finding that all named defendants had been negligent, and assessed damages of $197,000. Negligence was apportioned among the parties under the principals of comparative negligence in the following percentages: Appellant--5%; Strassburgers--65%; George Sauer and San Ramon Builders--15%; H.M. Bull--10%. The jury also found a non-party (a cooperating broker) five percent responsible.

Appellant contends that the judgment must be reversed or modified for the following reasons: 1) The trial judge incorrectly instructed the jury on a real estate broker's duty to investigate and disclose defects in property; 2) no expert testimony was produced on two key issues in the case: the standard of care applicable to appellant, and appellant's failure to meet this standard of care; 3) the evidence presented at trial was insufficient to establish that appellant was negligent; 4) the jury based its award on the wrong measure of damages; and 5) appellant was improperly denied indemnity against the Strassburgers.

For reasons we shall explain, we find that none of appellant's arguments require reversal of the judgment against it. We agree, however, that appellant was improperly denied indemnification.

DISCUSSION

I.

Appellant's primary contention is that the trial judge committed error by giving the jury an instruction specifying a real estate broker's duty to investigate and disclose defects in property he lists for sale.

In analyzing the validity of this contention, it must be kept in mind that the judgment against appellant was for simple negligence only. To establish liability for such negligence, respondent was not required to show that appellant had actual knowledge of the soils problems (as would have been required to prove intentional misrepresentation or fraudulent concealment) or that a misrepresentation had been made as to the soils condition of the property (as is required to establish negligent misrepresentation.) (Carroll v. Gava (1979) 98 Cal.App.3d 892, 895, 159 Cal.Rptr. 778; Huber, Hunt & Nichols, Inc. v Moore (1977) 67 Cal.App.3d 278, 304, 136 Cal.Rptr. 603.) We are concerned here only with the elements of a simple negligence action; that is, whether appellant owed a legal duty to respondent to use due care, whether this legal duty was breached, and finally whether the breach was a proximate cause of appellant's injury. (United States Liab. Ins. Co. v. Haidinger-Hayes, Inc. (1970) 1 Cal.3d 586, 594, 83 Cal.Rptr. 418, 463 P.2d 770; 4 Witkin, Summary of Cal. Law (8th Ed.1974) Torts, § 488, p. 2749.)

Whether a defendant owes a duty of due care to a particular plaintiff is a question of law. (Peter W. v. San Francisco Unified Sch. Dist. (1976) 60 Cal.App.3d 814, 822, 131 Cal.Rptr. 854; 4 Witkin, supra, Summary of Cal. Law, Torts, § 493, p. 2756.) Appellant does not contend that it was under no duty to exercise due care to prevent injury to respondent. ² Rather, appellant objects to the manner in which this duty was characterized by the trial court. More particularly, appellant challenges the following instruction: "A real estate broker is a licensed person or entity who holds himself out to the public as having particular skills and knowledge in the real estate field. He is under a duty to disclose facts materially affecting the value or desirability of the property that are known to him or which through reasonable diligence should be known to him."

Appellant argues that this instruction elevates a broker's duty beyond the level established by the case law, contending that a broker is only obliged to disclose known facts and has no duty to disclose facts which "should" be known to him "through reasonable diligence." In effect, appellant maintains that a broker has no legal duty to carry out a reasonable investigation of property he undertakes to sell in order to discover defects for the benefit of the buyer. Appellant further argues that since this instruction indicated to the jury that a broker is under such a duty as a matter of law, the giving of the instruction constitutes reversible error.

It is not disputed that current law requires a broker to disclose to a buyer material defects known to the broker but unknown to and unobservable by the buyer. (Cooper v. Jevne (1976) 56 Cal.App.3d 860, 866, 128 Cal.Rptr. 724; Lingsch v. Savage (1963) 213 Cal.App.2d 729, 733, 29 Cal.Rptr. 201; see also regulations of the Department of Real Estate set forth in Cal.Admin.Code, tit. 10, § 2785, subd. (a)(3).) The Cooper case contains the most complete judicial articulation of the rule: "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 [1963] 213 Cal.App.2d [729, 29 Cal.Rptr. 201] ...)." (56 Cal.App.3d at 866, 128 Cal.Rptr. 724.) If a broker fails to disclose material facts that are known to him he is liable for the intentional tort of "fraudulent concealment" or "negative fraud." (Warner Const. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 293-294, 85 Cal.Rptr. 444, 466 P.2d 996; Cooper v. Jevne, supra, 56 Cal.App.3d at 866, 128 Cal.Rptr. 724; Lingsch v. Savage, supra, 213 Cal.App.2d at 735-736, 29 Cal.Rptr. 201.) As noted, however, appellant's liability was here grounded on negligence rather than fraud. The issue, then, is whether a broker is negligent if he fails to disclose defects which he should have discovered through reasonable diligence. Stated another way, we must determine whether the broker's duty of due care in a residential real estate transaction...