Judge Jill Feeney, Case Number: 18STCV06411, Date: 2023-08-07 Tentative Ruling

This is an action arising from a real estate nondisclosure dispute. The Second Amended Complaint (“SAC”) alleges as follows. Plaintiff Roza Ranjbar (“Plaintiff”) purchased a residential property located at 20418 Califa Street in Woodland Hills, California (“Property”) from Defendants Vasil L. Rakov (“Rakov”) and Lyubka P. Rakova (“Rakova”). (SAC ¶ 9.) Defendants Margreit Asanad (“Asanad”) and Landco Realty and Appraisal, Inc. (“LRA”) acted as Plaintiff’s agents. (Id.) Defendants Mariana Vassilev (“Vassilev”) and Coldwell Banker Residential Brokerage Company (“Coldwell”), the movants in the instant motion, acted as Rakov and Rakova’s agents. (Id.) Plaintiff alleges that Defendants failed to properly disclose material defects that were noted in a 2014 Precision Inspection Services Inspection Report (“PIS Report”) on the property, and fraudulently misrepresented the state of the Property by concealing known defects. (SAC ¶¶ 20-23, 47.)

A party may move for summary judgment “if it is contended that the action has no merit or that there is no defense to the action or proceeding.” (Code Civ. Proc. § 437c, subd. (a).) “[I]f all the evidence submitted, and all inferences reasonably deducible from the evidence and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law,” the moving party will be entitled to summary judgment. (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) A motion for summary adjudication may be made by itself or as an alternative to a motion for summary judgment and shall proceed in all procedural respects as a motion for summary judgment. (Code Civ. Proc. § 437c, subd. (f)(2).)

The moving party bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact, and if he does so, the burden shifts to the opposing party to make a prima facie showing of the existence of a triable issue of material fact. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850; accord Code Civ. Proc. § 437c, subd. (p)(2).)

Pursuant to Civil Code § 1102, et seq., a seller is obligated to inspect and disclose all material facts that affect and relate to the condition of a property. In complying with this statutory duty of disclosure, a transfer disclosure statement form must be used. (Civ. Code § 1102.6.) Specifically, the form provided in Civil Code § 1102.6 requires the seller to disclose whether the seller is aware of any significant defects with the windows, foundation, or other parts of the house. Agents are required to make their disclosures based on inquiry of the sellers and diligent visual inspection of the accessible areas of the property.

A seller’s real estate agent has a statutory duty under Civil Code § 1102 to disclose only what a reasonably competent and diligent visual inspection would reveal and that the disclosures be made in good faith. (Peake v. Underwood (2014) 227 Cal. App. 4th 428, 442 (citing Robinson v. Grossman (1997) 57 Cal.App.4th 634, 642-643).)

No transfer subject to the article shall be invalidated solely because of a violation of Civ. Code § 1102, et seq. (Civ. Code § 1102.13.) However, any person who willfully or negligently violates or fails to perform under these sections are liable for the amount of actual damages suffered by the transferee. (Id.)

Here, the SAC alleges that Defendants covered up and concealed defects with the property prior to offering it for sale in 2016. (SAC ¶21.) On November 2, 2016 Plaintiff’s inspectors noted that the ceilings, walls, and windows were largely in good condition. (SAC ¶13.) Shortly after moving in, cracks in the exterior walls and ceilings began to appear. (SAC ¶19.)

Vassilev testifies that she obtained a Precision Inspection Services (“PIS”) report dated May 13, 2014. (Vassilev Decl., ¶6; Motion, Exh. A.) Around November 2016, Vassilev completed an Agent Visual Inspection Form (“AVID”) showing that she conducted a visual inspection of the property on October 30, 2016 and noted uneven flooring in two of the bedrooms. (Vassilev Decl., ¶11; Motion, Exh. L.) In the AVID, on page CBHB0104, Vassilev noted unevenness in the floor in two bedrooms and cracks on the garage floor. (Motion, Exh. L.) Vassilev indicated there was nothing noted in any of the closets or in the common area. (Id.) Vassilev alleges she identified the conditions that she believed warranted disclosure. (Vassilev Decl., ¶11.) On November 4, 2016, Vassilev emailed a copy of the PIS report to Plaintiff’s agent, Defendant Asanad, that noted several red flags in the Property’s soil and foundation system. (Vassilev Decl., ¶12; Motion, Exh. C.) Plaintiff signed her acknowledgment that she received the seller’s disclosures, including the PIS report, and her agent emailed the signed acknowledgement to Vassilev in November 2016. (Vassilev Decl., ¶23; Motion, Exh. C.)

The PIS report states that that the inspector recommended that the entire house and foundation be evaluated by an engineer before the close of escrow because there were visible cracks in the foundation slabs, uneven flooring in the master bedroom and bathroom, walls, and ceilings. (Motion, Exh. A.) The report reads a follows:

“We recommend having the entire house and foundation evaluated by an engineer before the close of escrow. Visible cracks noted on the slab in the hallway closet. Unlevel flooring in the master bedroom and bathroom. All rooms have cracks in the wall and on some ceilings. Some doors don’t swing smoothly. Cracks noted on the garage slab. Cracks noted on the exterior siding.” (Motion, Exh. A. p. Ranjbar 0047.)

Here, the evidence shows that Vassilev disclosed that there were uneven floors in two bedrooms and that there were cracks in the garage slab. The allegations of the Complaint also show that there were no cracks in the interior or exterior walls or ceilings because they only appeared after Plaintiff moved into the property. However, Vassilev did not disclose the visible cracks located in the foundation slab in a hallway closet. Because visible cracks to a foundation slab would affect and relate to the condition of the property, Vassilev was required to disclose it if it was discoverable through reasonably competent and diligent inspection.

Vassilev’s declaration is insufficient to show whether the cracks in the closet foundation slab were discoverable through a visible inspection because it does not state facts showing what was and was not visible during Vassilev’s inspection. The declaration merely states she identified conditions she “believed warranted disclosure” and does not contain details about whether she inspected the closet in question, whether cracks were visually accessible, or any other facts which would show whether Vassilev could have discovered the cracks during her inspection. The PIS report additionally states the cracks were accessible readily visible during the 2014 inspection, meaning there are no facts to suggest that the slab is located in an inaccessible area. Movants offer no other evidence of Vassilev’s inspection.

Movant argues that Vassilev made all the required disclosures because Plaintiff received a copy of the PIS report. However, Civ. Code §1102.6 requires that the disclosure be made on the statutorily provided form. Regardless of whether the PIS report was disclosed, if a disclosure was required under section 1102.6, it must be made on the correct form. Because there is no evidence of whether the cracks to the slab were visible at the time of Vassilev’s inspection, there is a triable fact as to whether the cracks were visible defects that were required to be disclosed under section 1102.6. Movants fail to meet their burden of showing no triable issue of material fact exists over whether Vassilev made the required disclosures under Civ. Code §§ 1102, et seq.

Movants cite Robinson v. Grossman (1997) 57 Cal.App.4th 634, in which the plaintiff there, a real estate buyer, argued that the defendant, the seller’s agent, breached her statutory duties of good faith by telling the plaintiff that cracks in the property’s stucco were merely cosmetic and not cause for larger concern, based on her conversations with the seller. There, the court ruled that the agent had no duty to verify the accuracy of a seller’s representations and that it was incumbent on the purchasers to investigate and make an informed decision based on the disclosures.

Here, the issue is not whether Vassilev was required to independently verify a seller’s representations, but whether she made the disclosures required under Civ. Code § 1102, et seq. Vassilev’s duty to disclose what a reasonably competent and diligent visual inspection would reveal about the condition of the property under section 1102, et seq. is different from an agent’s common law disclosure duties. With respect to section 1102, the relevant consideration is whether the cracks were visible during a reasonably competent and diligent visual inspection. Whether the cracks were visible during the inspection Vassilev conducted on October 30, 2023 is an issue of fact. Movants fail to meet their burden of showing no triable issues of material fact remain over whether the closet foundation slab cracks were required to be disclosed on the AVID under Civ. Code, section 1102.6.

The elements of a cause of action for negligent misrepresentation are “misrepresentation of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another’s reliance on the fact misrepresented; ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed; and resulting damage.” (Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1154, quotation marks omitted.)

The elements of fraud are: “(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.)

Here, Plaintiff’s SAC states that during Plaintiff’s own inspection of the property, her inspectors could not access the foundation slabs due to floor coverings blocking access. (SAC ¶13.) Prior to the sale, Defendants had remodeled, made repairs, and painted the home. (SAC ¶11.) As a result, Plaintiff’s inspectors noted that the ceilings, walls, and windows were largely in good condition. (SAC ¶13.) Based on the inspectors’ visual inspection of the home, they did not make recommendations to have the property further evaluated. (SAC ¶13.) Plaintiff alleges that Defendants took major steps to cover up and conceal the damage to the property, including covering damage to a back patio with potted plants. (SAC ¶¶21-22.) Plaintiff also alleges that Defendants concealed the PIS report. (SAC ¶20.)

Movants’ evidence only shows that Plaintiff did receive a copy of the PIS report. However, this fact does not completely dispose of Plaintiff’s causes of action for negligent misrepresentation and fraud because the SAC also alleges Defendants misrepresented the condition of the property by concealing the alleged defects. The SAC alleges that the home was remodeled to conceal cracks in the walls and ceiling. Additionally, the foundation slabs were covered with floor coverings so that Plaintiff’s own inspectors could not see the condition of the slabs. Plaintiff’s inspectors allegedly relied on these misrepresentations about the condition of the house to make their recommendations. Movants fail to address these alleged misrepresentations in their motion.

Even if Plaintiff did receive the PIS report and was aware that a previous inspector had recommended an inspection by an engineer, there is an issue over whether Plaintiff justifiably relied on the alleged concealments Defendants made on the property when she purchased the property. For example, in Calemine v. Samuelson, 171 Cal. App. 4th 153, 158 (2009), the seller there did disclose water intrusion before the buyer purchased the property. However, the seller also represented that repairs had been effective and failed to disclose that repairs to other areas of the house had failed or that there were previous lawsuits over failed repairs. (Calemine at p. 166.) There, the court ruled that the seller’s partial disclosure in the absence of providing information about the context in which those repairs were made created a triable issue of whether the balance of information should have been disclosed because the missing information could seriously affect both the desirability and the value of the property. (Id.)

Here, the PIS report does disclose that there were defects with the foundation that caused cracking throughout the property and that the previous inspector recommended assessment by an engineer. However, the report was two years old at the time Plaintiff received it. Moreover, Defendants allegedly covered and concealed the defects so that by the time Plaintiff’s own inspectors inspected the property, the inspectors deemed that the walls were in good condition and no further inspection was necessary. It is reasonable to infer that had Plaintiff known about the concealed defects in conjunction with the PIS report, the balance of the information here would have seriously affected the desirability and value of the property because the concealed cracks would have shown that the foundation defects identified in the PIS had not been remedied. Like Calemine, where a seller’s failure to disclose the context surrounding repairs to the property concealed ongoing defects with other parts of the property and led the buyers to believe the repairs were effective, here, Defendants’ failure to disclose the repaired defects and their context concealed more serious foundation defects such that Plaintiff’s inspectors reasonably relied on the lack of damage and did not recommend further inspection. Therefore, a triable issue of material fact remains over whether the balance of information should have been should have been disclosed and whether Plaintiff justifiably relied on Defendants’ alleged misrepresentations.

Evidence that Plaintiff did receive the PIS report alone is insufficient to show that there are no triable issues of material fact over whether Defendants, including Movants, made misrepresentations by concealing defects and whether the concealed defects should have been disclosed. Movants provide no evidence of whether they concealed defects on the property. Even if Movants did meet their burden, Plaintiff provides evidence that Defendants extensively repaired the property in 2014, 2015, and 2016 to patch cracks and perform other repairs. Defendants did not properly disclose these repairs to Plaintiff. (PAMF Nos. 2-9, 13-20, 28-44.)