Leko v. Cornerstone Home Inspection

• Citation: 86 Cal.App.4th 1109,103 Cal.Rptr.2d 858
• Decision Date: 31 January 2001
• Docket Number: No. B137570,B137570
• Court: California Court of Appeals
• Parties: (Cal.App. 2 Dist. 2001) BLAGO LEKO et al., Cross-Complainants and Appellants, v. CORNERSTONE HOME INSPECTION, et al., Cross-Defendants and Respondents; GREGORY C. PYFROM, Objector and Appellant. 2d Civil Filed

103 Cal.Rptr.2d 858 (Cal.App. 2 Dist. 2001)

BLAGO LEKO et al., Cross-Complainants and Appellants, v. CORNERSTONE HOME INSPECTION, et al., Cross-Defendants and Respondents;

GREGORY C. PYFROM, Objector and Appellant.

2d Civil No. B137570

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION SIX

Filed 1/31/01

(Super. Ct. No. SC021290), (Ventura County)

Randall J. Kelley and Natalie Blake for Cross-complainants and Appellants Blago Leka dba Century 21 Adobe Realty, Joe Pallat and Sherry Oyler.

June Babiracki Barlow, Greines, Martin, Stein & Richland, Kent L. Richland, Edward L. Zanders for Amicus Curiae California Association of Realtors.

Gaglione & Dolan, Jeffrey S. Kaplan for Cross-defendant and Respondent, Cornerstone Building Inspection Service.

Blatz, Pyfrom & Associates, Lendsay Joachim and Gregory C. Pyfrom for Cross-defendants and Respondents, D-Way Fireplace Inspections, Crystal Home Inspections.

Blatz, Pyfrom & Associates, Gregory C. Pyfrom for Objector and Appellant, Gregory C. Pyfrom.

CERTIFIED FOR PUBLICATION

COFFEE, J.

May a realtor who is sued for negligent nondisclosure of defects in real property obtain equitable indemnity from a home inspection company that allegedly breached its duty to the purchaser to discover and disclose the same defects? Yes. May that same realtor seek equitable indemnity when the home inspection company prepared its report for a different prospective purchaser, in connection with a previous transaction involving the same property? Yes, so long as the home inspection company intended or knew with substantial certainty that its report would be used in subsequent transactions involving the property.

FACTS AND PROCEDURAL HISTORY

In 1997, plaintiffs Jeffrey and Joan Lee (Purchasers) purchased an Agoura Hills home from defendants Jae Tae, Sun Min, Lauren, Kyung and Samuel Lim (Sellers).¹ Purchasers' real estate agent was defendant/cross-complainant Joe Pallat (Pallat), and sellers' agent was defendant/cross-complainant Sherry Oyler (Oyler). Both Pallat and Oyler were affiliated with the same broker, defendant/cross-complainant Blago Leko doing business as Century 21 Adobe Realty (Adobe) (collectively, "Realtors").

In 1998, Purchasers filed a complaint against Sellers and Realtors, alleging that they had failed to disclose defects in the property and had actively concealed major structural damage caused by the Northridge earthquake in 1994. The complaint included causes of action for fraud, breach of statutory duties, breach of fiduciary duties, negligence, and negligent and intentional infliction of emotional distress. The complaint did not name any home inspection companies as defendants.

Realtors filed a cross-complaint for equitable indemnity, contribution and declaratory relief against several home inspection companies, including cross-defendants Cornerstone Home Inspection (Cornerstone), Crystal Home Inspection (Crystal) and Dale Feb doing business as D-Way Inspection (D-Way) (collectively, "Inspectors"). Cornerstone had been retained by Purchasers to perform a general inspection of the property, and had prepared a report before the sale was consummated. Approximately one month before Purchasers made their offer on the property, Crystal and D-Way had inspected the property and prepared reports for an unrelated prospective purchaser.

Cornerstone filed a motion for judgment on the pleadings on the ground that the cross-complaint did not state a cause of action for equitable indemnity or the related theories of contribution and declaratory relief. Cornerstone argued that equitable indemnity is available only between tortfeasors who are jointly and severally liable, and posited that it could not be jointly and severally liable for any breach of Realtors' duty of care to Purchasers. Crystal and D-Way filed a motion for summary judgment on similar grounds. They argued that their involvement in the transaction was even more attenuated because they lacked contractual privity with Purchasers or any other party to the transaction.

The trial court granted both motions. In its oral ruling, it explained that "under these circumstances, it isn't fair to allow an agent and broker to point the finger at an inspection company when the agents and brokers have a separate and independent duty to disclose all known and readily observable defects with respect to a piece of real property." Realtors appeal from the judgment of dismissal entered in favor of Cornerstone and the summary judgment entered in favor of Crystal and D-Way. Additionally, counsel for Crystal and D-Way has appealed a $950 sanctions order entered against him.

DISCUSSION

I. Equitable Indemnity Between Realtors and Home Inspection Companies

Standard of Review

A motion for judgment on the pleadings, like a general demurrer, tests the allegations of the complaint or cross-complaint, supplemented by any matter of which the trial court takes judicial notice, to determine whether plaintiff or cross-complainant has stated a cause of action. (Briggs v. Lawrence (1991) 230 Cal.App.3d 605, 610.) Because the trial court's determination is made as a matter of law, we review the ruling de novo, assuming the truth of all material facts properly pled. (Berry v. City of Santa Barbara (1995) 40 Cal.App.4th 1075, 1082.) A ruling on a summary judgment motion is reviewed de novo to determine whether there are any triable issues of material fact. (Code Civ. Proc., 437c, subd. (c); Artiglio v. Corning Inc. (1988) 18 Cal.4th 604, 612.)

Cornerstone's motion for judgment on the pleadings and Crystal's and D-Way's motion for summary judgment present several common issues relating to a realtor's right to seek equitable indemnity from a home inspection company. The pertinent facts are essentially undisputed, and our review focuses on the legal significance of those facts. (See Providence Washington Ins. Co. v. Valley Forge Ins. Co. (1996) 42 Cal.App.4th 1194, 1199; O'Neil v. General Security Corp. (1992) 4 Cal.App.4th 587, 606.)

Introduction

On appeal, Realtors contend they were entitled to seek equitable indemnity from Inspectors. They argue that Inspectors were jointly and severally liable for any injuries suffered by Purchasers as a result of Realtors' alleged nondisclosures, and submit that the trial court erred when it determined that public policy barred joint and several liability. We agree that public policy does not preclude a realtor from seeking equitable indemnity against a home inspection company in an appropriate case.

Joint and Several Liability

Joint and several liability is a prerequisite for equitable indemnity. (Yamaha Motor Corp. v. Paseman (1990) 219 Cal.App.3d 958, 964.) As a threshold matter, Realtors' claim for equitable indemnity depends on whether a home inspection company and a realtor may be jointly and severally liable for the failure to disclose defects to a purchaser of residential real property.

When the negligent acts of two tortfeasors are both a proximate cause of an indivisible injury, the tortfeasors are jointly and severally liable for that injury. (American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 586-588.) Joint tortfeasors may act in concert or independently of one another. (Id. at p. 587.) "There seems to be no logical reason why the application of [joint and several liability] should turn on the relationship of the tortfeasors to each other. What is important is the relationship of the tortfeasors to the plaintiff and the interrelated nature of the harm done." (Jaffe v. Huxley Architecture (1988) 200 Cal.App.3d 1188, 1192.)

Joint and several liability does not depend on whether the tortfeasors owe a duty to one another. "'It would be unfair to require one tortfeasor to bear a loss disproportionate to his relative culpability simply because a tortfeasor who contributed to the loss owed a duty to the plaintiff but not to the defendant.'" (GEM Developers v. Hallcraft Homes of San Diego, Inc. (1989) 213 Cal.App.3d 419, 429, fn. 2.) Nor must joint tortfeasors owe the same duty of care to the plaintiff. "[A] defendant/indemnitee may in an action for indemnity seek apportionment of the loss on any theory that was available to the plaintiff upon which the plaintiff would have been successful." (Id. at p. 430; see also Yamaha Motor Corp. v. Paseman, supra, 219 Cal.App.3d at p. 968.)

Real estate agents and brokers involved in the sale of a residential property owe the purchaser of that property a statutory duty to conduct a "reasonably competent and diligent visual inspection of the property offered for sale and to disclose to [a] prospective purchaser all facts materially affecting the value or desirability of the property that an investigation would reveal . . . ." (Civ. Code, 2079, subd. (a); 2079.16; see also Civ. Code, 1106.) The purchaser's agent also owes the purchaser a higher fiduciary duty to act with the utmost care, integrity, honesty and loyalty. (Brown v. FSR Brokerage, Inc. (1998) 62 Cal.App.4th 766, 773-777.)² A home inspection company retained by the purchaser owes the purchaser a statutory duty to "conduct a home inspection with the degree of care that a reasonably prudent home inspector would exercise." (Bus. & Prof. Code, 7196.)

Each of these duties includes an obligation to discover and disclose certain defects in the property. When two or more parties have an obligation to discover and disclose the same defect, the failure of each to do so may be a proximate cause of a single indivisible injury to the person to whom the disclosure should have been made. In such cases, realtors and home inspectors will be jointly and severally liable to the purchaser for that injury.

This conclusion is supported by Kohn v. Superior Court (1983) 142 Cal.App.3d 323, in which a purchaser of real property sued the seller, the seller's realtors and a pest control company for nondisclosure of fire damage to the property. The purchaser also sued...