Judge Elaine W. Mandel, Case 21SMCV01961 2023-03-10 Tentative Ruling

Judge: Elaine W. Mandel, Case: 21SMCV01961, Date: 2023-03-10 Tentative Ruling

Case Number: 21SMCV01961 Hearing Date: March 10, 2023 Dept: P

Tentative Ruling

Jones, et al. v. The Farmer Limited Partnership et al., Case No. 21SMCV01961

Hearing Date March 10, 2023

Defendants’ Motion for Summary Judgment or Summary Adjudication

Plaintiffs Jones attempted to purchase property from seller defendants Brian Farmer, the Farmer Limited Partnership and Wallace (collectively “Farmer”) pursuant to an option contract. The initial version of the option included a copy of a real estate purchase agreement (RPA) that would govern the sale following an exercise of the purchase option. Later, the option contract was amended and the RPA deleted. Defendant Kelly Phelps, plaintiffs’ realtor, initially worked for defendant R&LS Investments, Inc. dba Keller Williams and later began working for defendant Pacific Union. Plaintiffs allege the realtor defendants failed to uphold their duties of care during formation and execution of the option contract, causing the purchase to fall through.

Defendants’ Objections:

Rodino Declaration: Objections 1 – 5 SUSTAINED (legal conclusion)

Veronica Jones Declaration: Objections 1-5 OVERRULED; objection 6 SUSTAINED (speculation, lack of foundation); objection 7 SUSTAINED (speculation, opinion)

Kyle Jones Declaration: Objections 1- 6 OVERRULED: objection 7 SUSTAINED (speculation, lack of foundation); objection 8 SUSTAINED (speculation, opinion)

A defendant moving for summary judgment has the initial burden to show one or more elements of a cause of action cannot be established or that an affirmative defense exists. If defendant makes that showing, the burden shifts to plaintiff to show a triable issue of fact. Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768. A defendant moving for summary judgment need only address issues raised by the complaint. The plaintiff cannot bring up new, unpleaded issues in opposing papers. Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1253.

Breach of Fiduciary Duty

The breach of fiduciary duty claim is based on allegations that Phelps (1) failed to disclose that Farmer believed the property increased in value and he wanted it back, and (2) incorrectly exercised the purchase option by failing to direct plaintiffs to execute a written notice of exercise.

As to the first allegation, plaintiffs’ written discovery responses admit that in May 2021 Veronica Jones found out from Farmer’s real estate broker Russell Grether that Farmer believed the value of the property increased and he wanted it back, rather than selling it to plaintiffs. Defendants’ Separate Statement (DSS) 13-16. These admissions demonstrate plaintiffs found out about Farmers’ designs on the property in 5/21, before defendants did. The Joneses cannot have been harmed by defendants’ subsequent failure to disclose a fact they already knew.

As to the second allegation, plaintiffs delivered a timely unconditional notice of exercise on November 22, 2021. Defendants argue any prior failure by Phelps to properly exercise her clients’ option rights was timely cured. This evidence indicates that even if Phelps failed to correctly exercise plaintiffs’ purchase option, plaintiffs were not injured because they filed the proper notice in time. DSS 23 and 24. This is sufficient to fulfill defendants’ initial burden.

Plaintiffs present evidence Phelps falsely told them she had a lawyer review and approve the option contract, told them the amended option contract was acceptable despite the absence of an RPA and discouraged them from hiring their own counsel to review the agreement. Plaintiff’s separate statement no. 27. They provide evidence Phelps knew plaintiffs’ lenders and Farmers’ escrow company required an RPA before the agreement could close but failed to disclose those facts to the Joneses, causing the sale to fall through. Plaintiff’s additional material facts 29-33.

The FAC alleges Phelps breached her fiduciary duty by incorrectly exercising the option and failing to disclose Farmer’s desire to get the property back. FAC ¶78, 81. Defendants provided evidence plaintiffs already knew about Farmer’s intention to recover the property and did not suffer damages as a result of the incorrect option exercise. Plaintiffs have not provided evidence to refute either point. A motion for summary judgment is framed by the pleadings, and plaintiffs’ evidence regarding Phelps’ breaches surrounding the RPA is outside the scope of the FAC’s allegations. Based on the FAC’s allegations, plaintiffs failed to show a triable issue of fact as to breach of fiduciary duty. GRANTED.

Negligence/Negligent Misrepresentation

Defendants’ arguments regarding the negligence cause of action are duplicative of the arguments on the fiduciary duty claim. Unlike the breach of fiduciary duty claim, the negligence claim alleges defendants failed to use reasonable care with regard to the inclusion of an RPA in the option contract, which allegedly caused the purchase to fall through. FAC at ¶89. Plaintiffs provided evidence which creates a triable issue of fact as to this allegation (see analysis above).

Phelps and Keller argue the failure to include an RPA in the option agreement did not damage plaintiffs because the underlying option contract was valid under the statute of frauds, and Farmers’ withdrawal constituted an unforeseeable breach. This is conclusory. Regardless of the validity of the option contract, plaintiffs provided evidence Phelps knew or should have known the failure to include an RPA as part of the purchase agreement would cause difficulty with the lender and escrow company, potentially causing the agreement to fall through. There is a triable issue of fact as to the realtor defendants’ failure to advise plaintiffs as to the necessity of an RPA in the option agreement and the causal link between that failure and Farmer’s failure to sell the property. DENIED.

Unfair Business Practices

The claim is in part based on the alleged RPA breaches detailed above. FAC ¶101-102. As explained, plaintiffs presented evidence creating a triable issue of fact as to these breaches. DENIED.

Pacific Union Joinder

Defendant Pacific Union, who employed defendant Phelps after June 2021, joins the other defendants’ motion, but files a separate reply which mirrors the arguments made by the other defendants; see analysis above.