Judge: Loren G. Freestone, Case: 37-2021-00051680-CU-NP-CTL, Date: 2023-10-06 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - October 05, 2023

10/06/2023  10:30:00 AM  C-64 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Loren G. Freestone

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Civil - Unlimited  Non-PI/PD/WD tort - Other Summary Judgment / Summary Adjudication (Civil) 37-2021-00051680-CU-NP-CTL HEPWORTH VS KAHN [IMAGED] CAUSAL DOCUMENT/DATE FILED:

TENTATIVE RULING Defendants Green Home & Yard and Carl Kahn's motion for summary judgment, or in the alternative summary adjudication, to the complaint filed by Nick and Jessica Hepworth is DENIED.

The Hepworths' evidentiary objection to the Zillow webpage for the property is sustained.

GHY and Kahn's objection to the opposition on the ground it was late is overruled.

The Hepworths allege that GHY and Kahn failed to disclose essentially two types of issues with the property: (1) preexisting problems with the foundation, and (2) unpermitted modifications and faulty construction that were part of the flip.

The elements of fraud are well-settled: '(1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage.' (Munoz v. Patel (2022) 81 Cal.App.5th 761, 776; see also Reed v. King (1983) 145 Cal.App.3d 261, 265.) Misrepresentation GHY and Kahn argue that the Hepworths cannot satisfy the first element-a misrepresentation.

'It is fraud to suppress a fact with intent to induce a person to enter a contract to acquire realty.' (Alfaro v. Community Housing Improvement System &* Planning Assn., Inc. (2009) 171 Cal.App.4th 1356, 1383.) 'Numerous cases have found non-disclosure of physical defects and legal impediments to use of the real property are material.' (Reed, supra, 145 Cal.App.3d at p. 266.) GHY and Kahn do not argue that foundation issues and unpermitted work are immaterial. Nor do they submit evidence that the property was free from defects and that all the work they performed was permitted. Rather, they argue these issues were sufficiently disclosed, and therefore there was no misrepresentation. Specifically, GHY and Kahn submit evidence that they provided the Hepworths with a detailed Disclosure Statement, as well as a copy of the prior owners' Private Eyes Engineering Report.

However, there are triable issues on the misrepresentation element because Disclosure Statement does not accurately disclose all the alleged issues, including section II.B. (stating that the seller was not aware Calendar No.: Event ID:  TENTATIVE RULINGS

2983701  47 CASE NUMBER: CASE TITLE:  HEPWORTH VS KAHN [IMAGED]  37-2021-00051680-CU-NP-CTL of any significant defects/malfunctions with the foundation or other aspects of the property) and II.C.4 (disclosing unpermitted work by the prior owners, but not by GHY and Kahn). The Seller Property Questionnaire similarly fails to disclose all of the alleged issues in sections V.A.10 and V.C.1., and did not disclose the Private Eyes Engineering Report in section V.M.1.

Justifiable Reliance GHY and Kahn also argue that the Hepworths cannot satisfy the fourth element-justifiable reliance.

'Except in the rare case where the undisputed facts leave no room for a reasonable difference of opinion, the question of whether a plaintiff's reliance is reasonable is a question of fact.' (Alfaro, supra, 171 Cal.App.4th at p. 1383; accord Furla v. John Douglas Co. (1998) 65 Cal.App.4th 1069, 1078.) GHY and Kahn argue that even though the foundation issue was not disclosed in the Disclosure Statement or Seller Property Questionnaire, it was unreasonable to rely on those misrepresentations because the Private Eyes Engineering Report did disclose the foundation issues and a neighbor had also informed the Hepworths about the foundation issues discussed in that report. However, the Hepworths submit evidence that immediately after talking with the neighbor they had their agent (Adolfo Moreno of Terra Nova Realty) reach out to GHY and Kahn's agent (Joshua Smith of Keller Williams).

Smith told Moreno that the foundation report the neighbor was referring to was 'bogus' and assured him that 'there were no structural problems with the home and that there was nothing to disclose.' Smith's comments were relayed to the Hepworths. In light of that reassurance, whether the Hepworths' reliance on GHY and Kahn's disclosures was justifiable is an issue of fact. (See Blackman v. Howes (1947) 82 Cal.App.2d 275 [triable issue on justifiable reliance where purchaser was notified about potential issue with property by neighbor but subsequently reassured by seller's agent that no such issue existed].) GHY and Kahn also argue that the Hepworths could not have relied on anything in their disclosures because they hired an inspector whose report noted various issues (the RMH Report). GHY and Kahn rely upon Carpenter v. Hamilton (1936) 18 Cal.App.2d 69.

In Carpenter, the seller represented that 'the house and garage buildings were in good condition and were not in need of paint or repair work of any kind; that the walls were in good condition; that the floors were absolutely level; that the house had a new roof of redwood shingles; and that the garage also had a new roof.' (Id. at p. 70.) However, the 'evidence disclosed that the floors were not level; that the foundation on three sides of the house had sunk, causing a sinking of portions of the floors in the dining room, breakfast room, play room, maid's room, and garage, as well as numerous cracks in the plaster on the walls'; and the 'roof of the house was not new but had been patched with tin shingles, and the garage roof was not new.' (Ibid.) The buyers had inspected the property several times, but they claimed to not know of the defects and argued they relied on the seller's misrepresentations. (Id. at pp.

70–76.) The court stated the following rule: 'But the right to rely upon the representations, of court, does not exist where a purchaser chooses to inspect the property before purchase, and, in making such inspection, learns the true facts, for the obvious reason that he has not been defrauded unless he has been misled, and he has not been misled where he has acted with actual or imputed knowledge of the true facts.' (Id. at p. 71.) The court explained that a 'buyer who chooses to make an inspection of the property does not in every case forfeit his right to rely upon the representations.' (Id. at p. 72.) For example, a buyer may who conducts a general inspection may reasonably decide to not conduct further expert inspections, and instead justifiably rely on the seller's disclosures as to those more specialized matters.

(See ibid.) However, the court concluded that the 'defects and disrepair of the dwelling were of such a conspicuous nature that they must have been discovered in the course of a reasonably careful inspection of the premises made by one intending to purchase,' and if the buyers 'neglected to discover what was in plain sight, the law will nevertheless charge them with knowledge of what they should have discovered.' (Id. at p. 73.) Calendar No.: Event ID:  TENTATIVE RULINGS

2983701  47 CASE NUMBER: CASE TITLE:  HEPWORTH VS KAHN [IMAGED]  37-2021-00051680-CU-NP-CTL The California Supreme Court later explained that an 'independent investigation or an examination of property does not preclude reliance on representations where the falsity of the statement is not apparent from an inspection, or the person making the representations has a superior knowledge, or the party relying thereon is not competent to judge the facts without expert assistance.' (Bagdasarian v. Gragnon (1948) 31 Cal.2d 744, 748–749.) Here, there are triable issues as to whether the Hepworths learned the true facts from their inspection.

The RMH Report identifies a variety of issues with the property, but it does not identify the major issues in the Private Eyes Engineering Report (i.e., that the perimeter stem wall and intentional retaining walls of the crawl space needed to be replaced, the foundation under the family room addition needed to be repaired/replaced, and the floor of the room below the garage required a slab-on-grade foundation).

And although the RMH Report notes that the property has been renovated/remodeled, and recommends that the Hepworths request permits, it specifically states that 'no construction plans or public records were included in the inspection.' There are also triable issues as to whether the major foundation problems and lack of permitting were so readily apparent such that the Hepworths must be charged with knowledge of their existence. To that end, a simple visual inspection cannot determine whether work was permitted. It is a triable issue as to whether the Hepworths could justifiably rely on GHY and Kahn's representation that their work was permitted, without going to the City to pull the actual permits. The fact that the foundation issues were only discovered by an engineer during a specialized structural inspection similarly indicates that those issues were not conspicuous. It is therefore also a triable issue as to whether the Hepworths could justifiably rely on GHY and Kahn's representation that there were no foundation defects, without retaining their own expert to confirm that fact. (See, e.g., Burkett v. J.A. Thompson & Son (1957) 150 Cal.App.2d 523, 525–526 [even though purchaser conducted an inspection, triable issues as to whether she should have known the lot had been filled and whether she could justifiably rely on seller's representation that the house had been built on the original land].) Conclusion There are triable issues as to whether GHY and Kahn made material misrepresentations/concealed material facts, and triable issues as to whether the Hepworths justifiably relied on those misrepresented/concealed facts in deciding whether to purchase the home. The motion for summary judgment, or in the alternative summary adjudication, is therefore denied.

Cross-defendants Terra Nova Realty and Adolfo Moreno also filed a motion for summary judgment/adjudication, the notice of which indicates the motion would also be heard today. However, no such motion is on calendar. The court notes that the minute order from the June 8, 2023 ex parte, at which the hearing on GHY and Kahn's motion was continued to today, makes no mention of a separate motion by TNR and Moreno. (ROA #79.) TNR and Moreno were obligated to reserve a separate hearing date for their separate motion. (Super. Ct. San Diego County, Local Rules, rule 2.1.19.A.) However, as the matter is fully briefed and the requisite 75-days' notice was provided, the court will hear the matter on Thursday, October 19, 2023 at 10:30am.

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