Opinion
A099653.
7-8-2003
RONALD GIAMPAOLI et al., Plaintiffs and Appellants, v. PHILIP M. WRIGHT et al., Defendants and Respondents.
INTRODUCTION
Ronald Giampaoli and Diana Giampaoli (the Giampaolis), purchasers of a residential property, brought an action against the sellers, Philip Wright and Penelope Wright (the Wrights), for intentional and negligent misrepresentation. The alleged misrepresentation consisted of the nondisclosure by the Wrights of extensive dry rot damage to the wood deck on the property at issue. The Giampaolis appeal from the grant of summary judgment in favor of the Wrights. Finding triable issues of fact as to whether the sellers adequately fulfilled their duty of disclosure to the buyers, we shall reverse the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
The Wrights originally purchased the property at 21390 Heron Drive, Bodega Bay, on or about February 15, 1998. During the course of the Wrights 1998 purchase, the National Building Inspectors (NBI) prepared four inspection reports concerning the property. While the first two reports indicated damage observed by the inspectors, including dry rot in the wood deck, the last two showed that the identified problems had been repaired. The existence of these reports was disclosed during the escrow period relating to the 2000 sale to the Giampaolis.
In 1998, shortly after they purchased the property, the Wrights hired landscape contractor Roberto Lomelli to perform drainage work at the property. When Lomelli removed four or five boards from the deck, he saw "extensive wood rot" underneath. Lomelli alerted Mr. Wright to the problem and suggested removal of all the deck boards in order to learn the full extent of the dry rot. Mr. Wright responded that he was unwilling to spend any more money to repair the deck, and he did not authorize Lomelli to open the remaining deck boards. The Wrights did not disclose to the Giampaolis what they learned from Lomelli.
During escrow in 2000, Clark Pest Control prepared a termite report (the Clark report) for the Giampaolis. The report reflected minimal dry rot on the surface of the deck and estimated a repair cost of $ 3,100. The portion of the Clark report concerning the deck area reads, "Note: On wood decks, only exposed sides of wood members can be inspected. Damage between wood members cannot be detected. Clark Pest Control offers no opinion on these areas. If further inspection is desired, remove planks as necessary to permit further inspection."
Without disclosing Lomellis warning about the extensive dry rot he found beneath the deck, the Wrights represented to the Giampaolis that the deck was in good condition and had no significant dry rot. In the transfer disclosure statement required by law (Civ. Code, § 1102.6), the Wrights also affirmatively indicated no awareness of any significant defects/malfunctions on the property. Based upon the Wrights representation, and with knowledge of the Clark report, the Giampaolis took a $ 3,100 credit for the house and closed escrow on September 21, 2000.
In October 2000, the Giampaolis hired a contractor to perform deck repair, which they expected would cost around $ 3,000. However, after the contractor removed the deck boards, he found extensive dry rot. The cost to the Giampaolis for repair of the deck was $ 17,360.
Shortly after the Giampaolis filed this action, the Wrights moved for summary judgment on the grounds that the Giampaolis failed to allege misrepresentation, an essential element of their claim. The Wrights claimed they made full disclosure of the condition of the deck and that no triable issue existed as to any material fact. In opposition, the Giampaolis submitted declarations of Diana Giampaoli and Roberto Lomelli. In response, the Wrights maintained they were not required to disclose "the opinion of an unqualified landscape contractor made one month after the Wrights had purchased the property . . . and two and one-half years prior to the [Clark report]."
On May 10, 2002, the trial court granted the motion for summary judgment, stating as follows: "The dry rot damage in the unexposed areas was disclosed to Plaintiffs, and the existence and extent of dry rot damage were facts accessible to Plaintiffs and could have been discovered by them prior to close of escrow by reason of the Clark Report. Plaintiffs have failed to raise a triable issue of fact on the issue of misrepresentation or concealment by the Declaration of Roberto Lomelli."
The Giampaolis filed a timely notice of appeal.
DISCUSSION
A. Standard of Review
The principles governing review of a summary judgment are well settled. Summary judgment is granted when there is no triable issue as to any material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c, subd. (c).) Whether all the documents submitted to the trial court raise a triable issue of material fact "is reviewed de novo by the appellate court, unbound by the trial courts decision." (Furla v. Jon Douglas Co. (1998) 65 Cal.App.4th 1069,1077, italics added.)
"The moving party must demonstrate that under no hypothesis is there a material factual issue requiring a trial. [Citations.] [P] When the defendant, as the moving party, makes that showing, the burden of proof shifts to the plaintiff, as the opposing party, to show, by responsive separate statement and admissible evidence, that triable issues of fact exist. [Citations.]" (Shapiro v. Sutherland (1998) 64 Cal.App.4th 1534, 1543.)
"Because a summary judgment denies the adverse party a trial, it should be granted with caution. [Citation.] Declarations of the moving party are strictly construed, those of the opposing party are liberally construed, and doubts as to whether a summary judgment should be granted must be resolved in favor of the opposing party." (Oliver v. County of Los Angeles (1998) 66 Cal.App.4th 1397, 1403.)
B. Sellers Duty to Disclose
In California, the seller of a residence has both a common law and statutory duty of disclosure to the buyer, and compliance with the statutory duty does not excuse the common law duty. (1 Miller & Starr, Cal. Real Estate (3d ed. 2000) § 1:140, p. 464.) "Where the seller knows of facts materially affecting the value or desirability of the property which are known or accessible only to him and also knows that such facts are not known to, or within the reach of the diligent attention and observation of the buyer, the seller is under a duty to disclose them to the buyer." (Lingsch v. Savage (1963) 213 Cal. App. 2d 729, 735, 29 Cal. Rptr. 201.) "A breach of this duty of disclosure will give rise to a cause of action for both rescission and damages. [Citation.]" (Shapiro v. Sutherland, supra, 64 Cal.App.4th at p. 1544.)
Moreover, effective January 1, 1987, California imposed a specific disclosure requirement upon residential real estate sellers. Civil Code section 1102.6 specifies the precise disclosure form, known as the Real Estate Transfer Disclosure Statement (TDS), to be used in the transaction. The form, in pertinent part, asks the seller whether he or she is "aware of any significant defects/malfunctions" in any structural component of the house and, if so, to describe them. As the record shows, the Wrights answered this question in the negative on the TDS.
C. Application of Disclosure Principles to This Case
The Wrights concede their obligation to disclose any material defects of which they were aware. They argue, however, that they properly fulfilled this duty by providing the Giampaolis with the four NBI reports. As this is undisputed, the Wrights claim the necessary element of misrepresentation is missing. The Giampaolis answer that the misrepresentation consists of the failure to inform them of the warnings the Wrights received from Lomelli, a failure that breached the duty of disclosure.
The sole issue is whether the record raises a disputed issue as to the question of disclosure justifying trial. We conclude it does.
The Wrights advance two arguments. First, they argue that the warning they received from Lomelli did not constitute knowledge that would create a duty to disclose. Because Lomelli was "an individual with no qualified expertise in wood rot or structural problems" who was hired to repair drainage rather than to advise about wood rot, the Wrights had no obligation to disclose his "opinion" concerning dry rot. We are unpersuaded.
Detection of dry rot does not require highly specialized expertise. Lomelli was in the business of, among other things, installing drainage systems, one of the chief purposes of which is to prevent dry rot. It is therefore reasonable to assume Lomelli was familiar with dry rot and knew what it looked like. His statement that there was "extensive wood rot" underneath the deck, therefore, cannot reasonably be dismissed. Lomellis warning constituted adequate notice to the Wrights, thereby creating a duty to disclose. Mr. Wrights alleged response to Lomellis warning-that he "did not want to spend any more money"-suggests that the Wrights refusal to heed the warning was based upon financial considerations, not Lomellis lack of expertise or credibility.
The Wrights also suggest they had no duty to disclose the information provided by Lomelli because they obtained it after the NBI reports, which indicated a minimum problem that had been fixed. We cannot agree. The NBI reports predated Lomellis warning and are therefore insufficient to show absence of a disputed issue of material fact.
In Shapiro v. Sutherland, supra, where a summary judgment in favor of the seller in a material nondisclosure claim was reversed on appeal, the court held that whether the seller has actual knowledge of an undisclosed fact is a question of fact (64 Cal.App.4th at p. 1544). Here, Lomellis warning clearly raised a disputed issue as to whether the Wrights had knowledge of the material defect on the property that gave rise to a duty to disclose. This is a question of fact best resolved at trial.
The Wrights second argument is that the Clark report put the Giampaolis adequately on notice, thereby excusing them from disclosing to the Giampaolis the real conditions of the wooden deck. We disagree with the trial courts acceptance of this claim.
The Clark report explicitly stated that the only dry rot problem discovered was in the limited area that was inspected. The report made clear that it offered no opinion with respect to areas of the deck that were not inspected, nor did the report recommend further inspection. Contrary to the Wrights reading of the Clark report, we find that it did not induce a reasonable buyer to believe there was more serious damage that needed to be evaluated. Furthermore, when there is a duty to disclose, the seller must voluntarily disclose the material facts. (1 Miller & Starr, Cal. Real Estate, supra, § 1:140, p. 465.) "It is not a defense to a failure to disclose that the buyer neither inquired nor expressed any concerns about the particular aspect of the property." (Ibid.) Even if we accepted the Wrights position that the Giampaolis were at fault for failing to protect themselves by not discovering the true conditions, summary judgment would still not be the appropriate measure, because whether or not the buyer unreasonably relied on the sellers misrepresentation "depends upon all the circumstances" and "presents an issue of fact for the trier of fact." (Furla v. Jon Douglas Co., supra, 65 Cal.App.4th at p. 1079.)
The Wrights claim of no duty rests solely upon two very old cases, neither of which is apposite. In Heifetz v. Bell (1950) 101 Cal. App. 2d 275, 225 P.2d 231, the court held that where an experienced parking lot operator bought a parking lot business for $ 2,500 after an independent investigation of the neighborhood and existing business, he would be denied relief for alleged fraud against the broker for representing to him that the owner would not sell for less while the owner actually listed the property for $ 1,000. Heifetz is clearly distinguishable, because the buyer did not allege a material defect in the parking lot. The courts finding-that the broker has no duty to voluntarily disclose the amount of his commission to an experienced buyer-sheds very little light on the topic of the sellers duty to disclose a material defect in residential property. The century-old opinion in Lady Washington C. Co. v. Wood (1896) 113 Cal. 482, 45 P. 809 is similarly beside the point. The issue in that case was what constituted "knowledge" for purpose of determining when the statute of limitations pertaining to a fraud case began to accrue.
In sum, we conclude the trial court erred by underrating the implication of the Lomelli warning while overrating the significance of the Clark report in deciding the motion for summary judgment. Construing the record independently and resolving all doubts in favor of the opposing party, we find that the moving parties failed to meet their burden of establishing the lack of a disputed issue as to any material fact. When there is still room for a reasonable difference of opinion regarding an issue of fact, the granting of summary judgment is inappropriate. (Shapiro v. Sutherland , supra, 64 Cal.App.4th at p. 1543.)
DISPOSITION
The judgment is reversed. The matter is remanded for further proceedings consistent with the views expressed herein. Plaintiffs Giampaoli shall recover their costs on appeal.
We concur: HAERLE, J., and LAMBDEN, J. --------------- Notes: See Civil Code section 1102.6, "Sellers Information," part B.