Judge: Kevin C. Brazile, Case: 20STCV37014, Date: 2022-08-09 Tentative Ruling

Hearing Date: August 9, 2022

Case Name: Daneshrad v. Coldwell Banker Residential Brokerage Company, et al.

Case No.: 20STCV24883 

Matter: Motion for Summary Judgment/Adjudication

Moving Party: Defendant Nick Danesh

Responding Party: Plaintiff Michelle Daneshrad

Notice: OK

Ruling: The Motion is continued or denied (see below).

Moving party to give notice.

If counsel do not submit on the tentative, they are strongly 

encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic. 

On December 3, 2020, Plaintiff Michelle Daneshrad filed the operative First Amended Complaint (“FAC”) for (1) negligent misrepresentation, (2) constructive fraud, (3) breach of fiduciary duty, (4) professional negligence, (5) non-disclosure of material facts, (6) concealment, (7) intentional misrepresentation, and (8) professional negligence.  

“This action arises from the omissions and misrepresentations made by the defendants in connection with the sale to Petitioner of a real property commonly known as 14818 Round Valley Drive, Sherman Oaks, California (the ‘Property’). Listed and advertised as an investor’s dream, with multiple parcels, permitted construction plans and an existing single-family home on one of the lots, right in Sherman Oaks, nothing about the Property (other than its location) turned out to be true. Following her purchase, Plaintiff learned that the one of the parcels she thought she was buying was not included in the sale, there were no permitted plans, the supposed single family residence was in fact a guest house that could not be leased or sold, and perhaps most significantly, the ‘multiple lots’ were tied, meaning they could not be separately developed. The Property Plaintiff was promised was not remotely the Property she purchased.”  (FAC ¶ 1.)

Defendant Nick Danesh, the seller of the subject property, seeks summary judgment or, alternatively, summary adjudication of each of the causes of action asserted against him—the first, fifth, sixth, and seventh causes of action.  Defendant makes a myriad of arguments, including that Plaintiff has suffered no damages; Plaintiff is a sophisticated buyer, who could not have reasonably relied on Defendant’s alleged representations/omissions; Plaintiff could have discovered the true facts relating to the transaction through diligent investigation; there was no misrepresentation, and Defendant never communicated directly with Plaintiff, but rather through Defendant’s broker, who is merely an independent contractor whose statements Defendant cannot be liable for; the economic loss rule bars Plaintiff’s claims; and Plaintiff failed to mitigate her damages.  

The law of summary judgment provides courts “a mechanism to cut through the parties’ pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.”  (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.)  In reviewing a motion for summary judgment or adjudication, courts employ a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent’s claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.”  (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294.)  The moving party bears the initial burden of production to make a prima facie showing of the nonexistence of any triable issue, in which case the burden shifts to the opposing party to make a prima facie showing of the existence of a triable issue.  (Code Civ. Proc. § 437c(p)(2).)  To show a triable issue of material fact exists, the opposing party may not rely on the mere allegations or denials of the pleadings, but instead must set forth the specific facts showing that a triable issue exists as to that cause of action or a defense thereto.  (Aguilar, at p. 849.)  Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.”  (Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389.)

The core of Plaintiff’s allegations as to Defendant Nick Danesh relate to his negligent/fraudulent misrepresentations and omissions as to various circumstances and matters relating to the subject property.  Specifically, the FAC alleges that the following representations were false: “a. The Property being sold contained an additional parcel of land, which was actually not included in the sale; b. The Property sale would be accompanied by permitted plans, making the project ‘shovel-ready’; c. The Property contained a single-family residence; d. The Property was already ‘subdivided’ enabling Plaintiff to readily develop the multiple parcels separately, for sale.”  (FAC ¶ 43.)

Defendant first argues that Plaintiff cannot point to any damages because “plaintiff signed an appraisal opining that the value of the Property was $1,900,00[0] (Sep. St. 11), after plaintiff purchased the property in 2018 for $1,854,000. Plaintiff then refinanced the property in August 2019 for $1,297,000. (Sep. St. 10, and RJN 1 to Request for Judicial Notice.) Thus, either the Property was worth $1[.]2 million dollars, or plaintiff defrauded her lender. [¶] Plaintiff also listed the property on the MLS for 2.8 million in February 2020.”

There are triable issues because Plaintiff contends that the aforementioned listing, appraisal, and refinance occurred before she confirmed (in or around August 2019) that the lots at issue were tied and that the structure on the subject property was a guest house that would have to either be upgraded or demolished in order to build a single family home on the property.  (SSUF nos. 6, 11.)  Plaintiff points to an appraisal stating that, with these restrictions, the value of the subject property is closer to $600,000, although she purchased it for over $1.8 million.  (See SSUF no. 12.)  Defendant argues this appraisal is hearsay, but Defendant himself states as undisputed fact no. 12 that “plaintiff hired an appraiser as part of an earlier dismissed arbitration proceeding who opined that the value of the Property was $600,000 based upon the raw land since he assumed the ALQ structure was illegal and did not take into account any income generated.”  The probative value of the appraisal is a factual issue.  Further, there is evidence as to the existence of damages: “the liability of having to demolish a ALQ without a single family residence on the Property; (3) the cost of either the demolition the ALQ or the building of a 20’ driveway with retaining walls, shorings and caissons to be able to build even one house on the property; (4) the cost to untie the parcels; (5) the cost of obtaining a permitted plan for a single family residence on the Property as promised by the Defendants, together with . . . mortgage interest payments . . . .”  (Daneshrad Decl. ¶ 34.)  

As additional notes, Defendant seems to state that the $600,000 appraisal was done in December 2018, but, as far as the Court understands, the appraisal was prepared retrospectively for December 2018 (when escrow closed), while actually being prepared in May 2020.  (See Daneshrad Decl., Exhibit H.)  Defendant also states in his memorandum of points and authorities that Plaintiff listed the subject property in February 2020 for $2.8 million, but his separate statement provides that this actually occurred in May 2019.  (SSUF no. 6.)

Defendant next argues that Plaintiff’s sophistication as an attorney and real estate broker is paramount. This is just a factual issue, especially as Plaintiff points out: “While she has a law license, she does not practice real estate law, and while she obtained her real estate license because it was an easy thing to do as a lawyer, she’s never worked in real estate. Finally, she’s never purchased real estate for development prior to this transaction. ASUF, 116-117.”

Defendant further argues that he never communicated with Plaintiff directly; rather, his broker, who was an independent contractor, handled all communications.  Defendant argues that he cannot be liable for his broker’s statements.  This is a somewhat perplexing argument.  At times, Defendant refers to his broker as an agent, which makes sense as “[t]he relationship between a real estate broker and the client is that of principal and agent. The broker is an agent of the party or parties by whom he or she is employed; the noncontractual rights and liabilities that arise between the broker and principal, between the broker and third persons, and between the principal and third persons are governed and determined by the general rules of agency . . . .”  (2 Cal. Real Est. § 3:5 (4th ed.).)

Defendant next argues that documents provided to Plaintiff clearly indicated that there was no omitted parcel.  This theory seems to have been abandoned by Plaintiff.  In any case, this misrepresentation is only a component of Plaintiff’s causes of action. 

Defendant further argues that “[a]s the five parcels were clearly indicated on the voluminous documentation, the fact that the building was an Accessory Dwelling Unit (‘ADU’) was clearly indicated on documentation provided to the plaintiff, including documents from the City of Los Angeles, which included the aforementioned Certificate of Occupancy (Sep.St.46).”  As discussed, however, Plaintiff contends that she did not obtain these documents until August 2019, after the purchase date for the subject property.  Indeed, Defendant’s own separate statement provides, “One of the documents in the City of Los Angeles file which plaintiff received in 2019 is a Certificate of Occupancy from March 11, 1982 showing that the structure at 14818 Round Valley Drive is 2-story, 29' x 29' accessory living quarters (‘ALQ’), and not a single-family residence.”  (SSUF no. 46 (emphasis added).)

Defendant also seems to argue that Plaintiff could have investigated to determine the true facts relating to the structure (guest house) on the subject property as well as any tie between certain lots.  Defendant contends that Plaintiff ignored many disclaimers in failing to do so. But, “whether a party's reliance was justified may be decided as a matter of law if reasonable minds can come to only one conclusion based on the facts. . . . Negligence on the part of the plaintiff in failing to discover the falsity of a statement is no defense when the misrepresentation was intentional rather than negligent.”  (All. Mortg. Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239–40.)  Here, there is some evidence of an intentional misrepresentation in that the listing for the subject property stated there was a “Unique and charming 1 bedroom 1 bathroom home with stone walls, fireplace in master, wood floors, [and] walls of glass” on the property, but in reality there was an accessory living quarter.  Whether “home” refers generally to many structures or to a single-family home is a factual issue for the jury.  Thus, there are triable issues as to whether Plaintiff’s failure to investigate should preclude her claims.  

Defendant further argues that under Civ. Code § 1088 only the broker is liable for misrepresentations on the MLS.  The language of this statute, however, does not limit liability to brokers—it simply states they can be responsible for statements within listings.  Also, Civ. Code § 1088 was raised for the first time in reply.

Defendant seems to further contend there were no omissions, but a jury could decide it is misleading to call something a “home” when it is a guest home.  It might also be misleading that Defendant stated in his listing that “Plans for 5,000 sq ft house on top section of property in addition to the already existing house” and “Also room for an additional 3rd house on the property”, when designations and ties on the property raised the costs of development beyond what a reasonable person would expect.  

Defendant argues that the tying covenant between lots 54-56 was terminated in 1985, but the termination document (RJN, Exhibit 5), suggests termination occurred due to the recording of an “amended” document, the effect of which the Court is unaware of.  Additionally, Plaintiff asserts she applied to terminate the tie, but her application was rejected.  (SSUF no. 77.) 

Defendant further contends there is no evidence of knowledge of falsity, but Plaintiff points to some evidence that Defendant chose to sell the property when he learned that “the existing dwelling on the Property was an ‘accessory living quarter’ or ALQ, and as a result would either have to be demolished or upgraded to an ‘accessory dwelling unit’ or ADU, before a single family home could be built on the Property. (ASUF, 103-104).”

Without much explanation, Defendant also argues that Plaintiff’s claims are barred by the economic loss rule, presumably because a contract provided for the sale of the subject property.  This is meritless.  Under Defendant’s logic, anyone can defraud another in a real estate transaction because there was an underlying contract for the property.  This is obviously not the law.  Indeed, fraudulent inducement, whether through misrepresentation or omission, is not ordinarily subject to the economic loss rule.  (See Robinson Helicopter Co., Inc. v. Dana Corp. (2004) 34 Cal.4th 979, 989-90; see also NuCal Foods, Inc. v. Quality Egg LLC (E.D. Cal. 2013) 918 F.Supp.2d 1023, 1031.)  

Finally, Defendant argues that Plaintiff has failed to mitigate her damages, but this too is a factual issue as Plaintiff points out that she “attempt[ed] to dissolve the lot tie and find a work around the unpermitted ALQ. As these efforts have failed to bear fruit, Plaintiff has attempted to Airbnb the Property in the interim in order to attempt to keep up with the mortgage payments.”

The Requests for Judicial Notice are granted.  

All objections are overruled, except those as to the declaration of Fernald on the ground that the declaration was not executed “under penalty of perjury under the laws of the State of California”.  (Code Civ. Proc. § 2015.5(b).)  Thus, the Court can continue the Motion to obtain an amended declaration resolving this issue.  If a proper declaration is submitted, the Motion will be denied.  Alternatively, if Defendant consents, the Court can deny the Motion now so as to promote efficiency.  If the Motion is continued, no further briefing will be allowed.  

Moving party to give notice.

If counsel do not submit on the tentative, they are strongly encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic.