Shapiro v. Sutherland

• Decision Date: 24 June 1998
• Docket Number: No. B103078,B103078
• Citation: 76 Cal.Rptr.2d 101,64 Cal.App.4th 1534
• Court: California Court of Appeals
• Parties: , 98 Cal. Daily Op. Serv. 4978, 98 Daily Journal D.A.R. 7153 Barry D. SHAPIRO, Plaintiff and Appellant, v. David P. SUTHERLAND et al., Defendants and Respondents.

Page 101

76 Cal.Rptr.2d 101

64 Cal.App.4th 1534, 98 Cal. Daily Op. Serv. 4978,

98 Daily Journal D.A.R. 7153

Barry D. SHAPIRO, Plaintiff and Appellant, v. David P. SUTHERLAND et al., Defendants and Respondents.

No. B103078.

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

June 24, 1998.

Gill & Baldwin and John M. Carmack, Glendale, for Plaintiff and Appellant.

Davis, Punelli, Keathley & Willard, Katherine D. Keathley, Newport Beach, and Jeff C. Marderosian, Pasadena, for Defendants and Respondents.

CROSKEY, Associate Justice.

In this case, we review a summary judgment granted in favor of the defendants David and Mary Sutherland (the "Sutherlands") and Prudential Resources Management, formerly known as Prudential Relocation Management ¹ ("Prudential"; collectively, the "defendants"). ² Plaintiff, Barry D. Shapiro, seeks to overturn the summary rejection of his complaint for rescission and damages arising out of a fraudulent misrepresentation and material non-disclosure which allegedly occurred in connection with his purchase of a residential property from the defendants. The trial court granted the Sutherlands' motion for summary judgment on the ground that they were "remote" sellers and lacked privity with the plaintiff; Prudential's motion for summary judgment was granted on the ground that it had made no misrepresentation to the plaintiff and was unaware of the information which plaintiff claims should have been disclosed.

Because we conclude the Sutherlands cannot escape liability for their express misrepresentation and failure to disclose material facts, we reverse the judgment as to them. However, the ruling of the trial court that Prudential was not liable for misrepresentation and non-disclosure was correct. Nonetheless, as plaintiff is seeking rescission of the sales contract with Prudential based on the Sutherlands' alleged fraud, Prudential, as the party to whom plaintiff paid the purchase price, is a necessary party. We therefore reverse the judgment in its favor as well.

FACTUAL AND PROCEDURAL BACKGROUND ³

For a period of 15 years prior to August 31, 1992, the Sutherlands owned their home at 445 Eaton Drive, Burbank, California. David Sutherland was employed by IBM, which had an established employee relocation policy to assist employees who might be transferred to different parts of the country and be required to move. That relocation policy involved Prudential. When an employee required to move was unable to effect a timely and satisfactory sale of the family residence, Prudential would enter into an agreement with the employee (subject to certain conditions not relevant to this case) to purchase the property for a price established by three independent appraisals of the property. ⁴

In the spring of 1992, David Sutherland accepted a promotional transfer to an IBM facility in the State of Washington. Unable to conclude a satisfactory sale of their home, the Sutherlands entered into a home purchase agreement with Prudential. Under the terms of that agreement, Prudential paid the Sutherlands $349,000. That transaction was ultimately concluded on August 31, 1992. However, the Sutherlands had moved from their home and left for Washington during the first week of July 1992.

It was while the Sutherlands were in Washington that they received and executed all of the relevant legal documents in this transaction. On August 19, 1992, the Sutherlands actually signed their home purchase agreement with Prudential. On the same date, they also signed a grant deed to their home. The deed which they signed and had notarized was left blank as to the name of the grantee. ⁵ These documents were then returned to Prudential. On August 28, 1992, the Sutherlands executed the disclosure form required of real property sellers by Civil Code section 1102.6. ⁶ Included on this form was the question: "Are you aware of any ... (11) Neighborhood noise problems or other nuisances." The Sutherlands checked the "No" box and then they both signed the form right below the printed certification that the "information herein is true and correct to the best of [their] knowledge as of the date signed by [them]."

This express representation was allegedly false and untrue. The record reflects without dispute that the Sutherlands' next door neighbors (a family named Williams) were, over a period of years, a source of disturbing noises and commotion. Loud arguments and late night music had caused David Sutherland to call the police on a number of occasions. ⁷

However, Prudential did not know of these matters. It had physical control of the Sutherland home at all times after the Sutherlands had vacated it in July of 1992, but the home remained unoccupied. Prudential attempted to resell the Sutherland home but was unable to do so for several months. Finally, in the spring of 1993, Prudential entered into negotiations with plaintiff and, on June 30, 1993, a firm agreement was reached under which plaintiff would purchase the property for $250,000 ($99,000 less than Prudential had paid the Sutherlands).

In a specific written addendum to the sale agreement which he signed with Prudential, dated July 8, 1993, plaintiff acknowledged awareness of the rather special nature of this transaction and Prudential's involvement in it. A relevant part of the addendum provides: "Buyer understands that Seller is a relocation management service and has never lived on or in the Property. The Property, including the contents (fixtures, appliances and personal property), being sold and purchased are not new, and are being sold "as is," in their present condition. Neither Seller nor any of its agents make any representations concerning the Property, including but not limited to, representations regarding the size of the buildings and improvements, the presence or absence of toxic or hazardous substances, or the presence or absence of any encroachments or unrecorded easements...."

The addendum also provided that plaintiff would undertake, at his own expense, an inspection of the property "to determine the existence of defects, if any." It is not clear whether plaintiff actually conducted any inspections to satisfy himself as to the condition of the property, but he did not advise Prudential of any discovered defects and the sale transaction closed on August 9, 1993. Prior to the close of escrow, on or about July 8, 1993, Prudential had delivered to plaintiff its own disclosure statement as required by Civil Code section 1102.3. However, Prudential had made several modifications to the standard form. It added the following in the section relating to "Substituted Disclosures": "Prudential Relocation Management has not occupied the subject property. Please see the disclosure statement prepared by the previous owner. Previous owner Sutherlands dated August 28, 1992." ⁸

In order to close escrow on the sale to plaintiff, the grant deed previously executed by the Sutherlands on August 19, 1992, was filled in by Prudential with plaintiff's name as grantee and the deed was recorded with directions that, once recorded, it be mailed to plaintiff. ⁹ Plaintiff and his fiancee and her son then moved in to the home; shortly thereafter, plaintiff claims to have discovered the loud noise and disturbance problems caused by the behavior of the Williams family living next door.

Unable to resolve to his satisfaction the problems created by such disturbances, plaintiff submitted a notice of rescission of the sale transaction to the Sutherlands on September 13, 1994. A copy of his attorney's letter conveying such notice, which also included the necessary offer to restore all consideration which he had received, was also sent to Prudential.

Plaintiff's demands were either rejected or ignored and, on December 23, 1994, he filed this action. He alleged several causes of action, including (1) fraudulent misrepresentation in violation of Civil Code section 1102, et seq.; (2) fraudulent concealment; (3) negligent misrepresentation; (4) rescission of the grant deed and restitution and (5) counts for intentional and negligent infliction of emotional distress. ¹⁰ The defendants ultimately responded to this complaint by filing separate motions for summary judgment essentially on the grounds (1) as to the Sutherlands, that they were not the parties who had sold the property to plaintiff, had no contractual relationship with him, made no representations to him, and had no duty of disclosure and (2) as to Prudential, that it had no knowledge of a noisy neighbor problem or the Sutherlands' alleged misrepresentation with respect thereto and it was under no duty to conduct an investigation. The trial court agreed with the defendants and granted both motions. ¹¹ After entry of judgment in favor of the defendants, plaintiff prosecuted this timely appeal.

CONTENTIONS

Plaintiff argues that the Sutherlands had common law and statutory obligations to disclose the neighborhood noise problem and their misrepresentation as to the nonexistence of that condition breached an obligation owed to plaintiff which entitles him to both legal and equitable relief. He also argues that Prudential had a duty under Civil Code section 1102 et seq., to make a reasonable investigation of the facts and its act of simply forwarding the Sutherlands' false disclosure constituted a breach of its statutory obligations owed to plaintiff. The defendants dispute these contentions and repeat the arguments which persuaded the trial court.

DISCUSSION

1. Standard of Review

The principles which guide our review of the trial court's grant of the two summary judgment motions in this case are well settled. Summary judgment is granted when no triable issue exists as to any material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c); Villa v. McFerren (1995) 35 Cal.App.4th 733, 741, 41 Cal.Rptr.2d 719.) After examining documents supporting a summary...