This case involves a dispute between the owners of adjacent commercial property located in Sunnyvale at 170 North Wolfe Road
162 LLC sued to quiet title. The Hoffmans cross-complained, alleging (among other things) that 162 LLC and its members had defrauded them by falsely advising that they had no claims or interest with respect to the 170 Wolfe property. The Hoffmans alleged two fraud claims — concealment/suppression of facts, and intentional misrepresentation. The fraud claims were based upon an alleged conversation approximately eight months before close of escrow between Hoffman and Jonathon Owens, one of 162 LLC's members. In response to Hoffman's complaint that vehicles servicing the 162 Wolfe property were crossing over onto 170 Wolfe, Owens said he "would take care of it." After this alleged conversation and for eight months before escrow closed, the vehicles servicing 162 Wolfe continued to cross onto 170 Wolfe. The Hoffmans observed these occurrences. But they neither raised the issue with the then owner of 170 Wolfe, nor complained to 162 LLC.
162 LLC and related parties successfully moved for summary adjudication of the Hoffmans' two fraud claims. The parties later settled their remaining claims, and a judgment was entered with the Hoffmans' reserving their challenge to the propriety of the summary adjudication order. The Hoffmans appealed, arguing that there were triable issues of material fact as to both the concealment/suppression of facts and intentional misrepresentation claims.
We conclude there was no error. The concealment/suppression of facts claim fails because of the absence of evidence supporting all of the requisite elements of that claim. Two elements of the claim not present were (1) a duty on the part of 162 LLC to disclose that it claimed prescriptive easement rights and (2) the Hoffmans' justifiable reliance on the facts as they understood them without such disclosure (i.e., their understanding that there were no adverse claims against the 170 Wolfe property by the owners of the adjacent property). The intentional misrepresentation claim likewise fails because of the absence of evidence that the Hoffmans justifiably relied on 162 LLC's alleged implicit representation that it did not claim any easement rights over the 170 Wolfe property. We will therefore affirm the judgment.
162 LLC, whose members are Jonathon Owens and Thomas Haverstock, is the owner of the 162 Wolfe property. Owens and Haverstock are both patent
At some time prior to June 2009, Owens and Haverstock had two conversations with Dean Chestnut, a real estate broker representing the then owner of 170 Wolfe. Chestnut inquired about Owens's and Haverstock's potential interest in purchasing 170 Wolfe. After they received information about the asking price, Owens and Haverstock both indicated to Chestnut that they were not interested in purchasing 170 Wolfe. Chestnut never told the Hoffmans about his conversations with Owens and Haverstock, and neither Owens nor Haverstock ever had any contractual, transactional, or fiduciary relationship with Chestnut.
Hoffman is and has been a licensed real estate broker since 1994. He had in the past owned a residential real estate brokerage firm, CompuRealty, as well as a medical software company, Quicksilver Systems. The Hoffmans also own BackProject, Inc. (BackProject), a company that manufactures medical exercise devices intended to provide relief for back and neck pain; Hoffman is the chief executive officer of BackProject. The Hoffmans own real estate in addition to their residence, namely, a four-unit apartment building, and a townhouse or condominium.
The Hoffmans entered into a contract to purchase 170 Wolfe on April 29, 2009. Approximately two months later (on or about June 26, 2009), Back-Project became a tenant in the building located at 170 Wolfe. The Hoffmans closed escrow on their purchase of 170 Wolfe on March 5, 2010.
Shortly after BackProject became a tenant at 170 Wolfe, Hoffman introduced himself to Owens and complained to him that the Law Firm's employees were parking in spaces in front of 170 Wolfe. Owens indicated that the Law Firm employees would cease parking there.
Hoffman had a second conversation with Owens — the one central to the Hoffmans' fraud claims — that occurred "a couple of weeks" after the first conversation. The second conversation occurred in mid- to late-July 2009, nearly eight months before the Hoffmans closed escrow. Hoffman had observed various 162 Wolfe service vehicles — United Parcel Service, Federal Express, DHL, Costco, a shredding company, and a water delivery service — using 170 Wolfe. He had also observed the Law Firm's employees backing out of parking spaces and crossing over onto 170 Wolfe. Hoffman testified in
At the time of these two conversations in mid-2009, Owens believed, based upon long-standing use, that 162 LLC held by prescriptive easement a "right to drive through the paved area" between the two properties. He did not mention this prescriptive easement right in his conversations with Hoffman because he is "not a real property attorney."
Both before BackProject's occupancy and during its occupancy of 170 Wolfe, there were instances — before the Hoffmans closed escrow — in which the area in which 162 LLC claims a prescriptive easement was temporarily, partially obstructed by vehicles or pallets. 162 LLC did not complain about these temporary obstructions. Additionally, at no time did 162 LLC repair or maintain the disputed area involved in the prescriptive easement, offer to do so, or pay taxes on the area.
After the second conversation between Hoffman and Owens and up to the time escrow closed in March 2010, the Hoffmans continued to observe vehicles that were not servicing 170 Wolfe travel over that property. For Hoffman, this was a "common occurrence." Hoffman did not complain to BackProject's landlord (i.e., the then owner of 170 Wolfe) about these vehicles traveling over 170 Wolfe. And the Hoffmans presented no evidence that they spoke to Owens or Haverstock about this issue after Hoffman's second conversation with Owens in July 2009. In his declaration filed in opposition to the summary adjudication motion, Hoffman indicated: "Although my wife and I [(after Hoffman's July 2009 conversation with Owens)] occasionally observed vehicles from 162 N. Wolfe Rd[.] crossing the property
Shortly after escrow closed in March 2010, Hoffman met with Owens and Haverstock. Hoffman said that despite his prior requests, vehicles from 162 Wolfe were still crossing over onto 170 Wolfe and he did not want it to continue. Owens responded with words to the effect of "Oh, I thought we took care of this already." Neither Owens nor Haverstock mentioned anything about 162 LLC claiming prescriptive easement rights over the 170 Wolfe property. Two months later, the Hoffmans became aware for the first time of 162 LLC's claim to a prescriptive easement over 170 Wolfe when they received a May 5, 2010 letter written by 162 LLC's counsel.
In August 2011, 162 LLC, the Law Firm, Haverstock, and Owens filed a motion for summary adjudication as to the second and third causes of action of the Hoffmans' amended cross-complaint filed October 27, 2010 (Cross-Complaint).
A judgment was entered on June 22, 2012, after a settlement of the remaining claims of the first amended complaint filed in December 2010 by 162 LLC alleging two causes of action to quiet title and for injunctive relief and Cross-Complaint. The Hoffmans filed a timely appeal.
Because "the pleadings set the boundaries of the issues to be resolved at summary judgment" (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 648 [32 Cal.Rptr.3d 266]), we first review the nature of the second cause of action of the Cross-Complaint at issue, i.e., fraud based upon concealment or suppression of fact. The Hoffmans' second cause of action is based upon 162 LLC's
162 LLC made several arguments below — reiterated on appeal — supporting its claim that summary adjudication of the second cause of action for concealment or suppression of fact was proper. We deem two of them — the absence of a relationship between 162 LLC and the Hoffmans, and the absence of justifiable reliance — to be dispositive.
162 LLC reiterates on appeal its argument below that summary adjudication of the second cause of action is proper because of the absence of a relationship between the parties. It contends that because it had no "fiduciary or other transactional relationship with the Hoffmans which would give rise to a duty to disclose material facts known to one party and not the other," it had no duty to disclose to the Hoffmans that it claimed easement rights over the 170 Wolfe property. 162 LLC contends that therefore, as a matter of law, any alleged concealment of these claimed rights was not actionable.
Thus, several cases have rejected fraud claims founded on nondisclosure where there was an absence of a relationship between the plaintiff and the defendant. For instance, in LiMandri, supra, 52 Cal.App.4th 326, the plaintiff
Similarly, in Wilkins v. National Broadcasting Co., Inc. (1999) 71 Cal.App.4th 1066, 1072-1073 [84 Cal.Rptr.2d 329] (Wilkins), the plaintiffs, representatives of "a pay-per-call provider," sued a television network and two of its producers for secretly videotaping a purported business meeting at a restaurant after portions of the videotape were aired in a program entitled "`Hardcore Hustle.'" Included among the plaintiffs' claims was a fraud claim based upon nondisclosure of the fact that they were the subject of an investigation by journalists involving hidden cameras, when the plaintiffs believed they were meeting with potential investors. (Id. at p. 1082.) The appellate court, relying in part on LiMandri, supra, 52 Cal.App.4th 326, concluded that summary adjudication of that fraud claim was proper, because the plaintiffs "have presented no evidence that they and [the producers] shared the requisite relationship which would impose upon the NBC Dateline producers a duty to disclose the use of hidden cameras. [Citations.]" (Wilkins, 71 Cal.App.4th at p. 1083; see Deteresa v. American Broadcasting Companies, Inc. (9th Cir. 1997) 121 F.3d 460, 467 (Deteresa) [fraud claim by flight attendant who was secretly audiotaped and videotaped during interview by television producer concerning 1994 flight in which O.J. Simpson was passenger was not viable; there was no relationship between her and the defendants as required under LiMandri]; Kovich v. Paseo Del Mar
The Hoffmans argue that "there was a relationship between the parties arising out of their mutual interest in the 170 [Wolfe] Property. At the time of Respondents' nondisclosure, the Hoffmans were tenants in possession of the 170 [Wolfe] Property and [were] in the process of purchasing it. 162 LLC ... claimed easement rights in the 170 Wolfe] Property." Contrary to this assertion, there is no evidence in the record that 162 LLC or its members had any relationship with the Hoffmans. 162 LLC, Owens, and Haverstock were not parties in any way to the transaction involving the Hoffmans and the sellers of the 170 Wolfe property. Thus, the Hoffmans — like the plaintiffs in LiMandri, supra, 52 Cal.App.4th 326, Wilkins, supra, 71 Cal.App.4th 1066, Deteresa, supra, 121 F.3d 460, and Kovich, supra, 41 Cal.App.4th 863 — were not involved in a transaction with the parties they claim defrauded them. Indeed, the Hoffmans' connection with 162 LLC, Owens, and Haverstock is significantly more attenuated than the respective links between the plaintiffs and the defendants in LiMandri, Wilkins, Deteresa, and Kovich. Although the Hoffmans (through their business) were tenants at 170 Wolfe and they were in contract to buy that property while 162 LLC claimed easement rights over it, these are not circumstances that constitute a transactional relationship between the parties giving rise to a duty of disclosure under LiMandri, supra, 52 Cal.App.4th at pages 336 to 337. (See, e.g., Kovich, supra, 41 Cal.App.4th at pp. 866-867.) We reject the Hoffmans' contention that because they were potential buyers in a pending sale of 170 Wolfe while 162 LLC claimed undisclosed easement rights over that property, there was a relationship between the parties triggering a duty of disclosure on the part of 162 LLC.
In support of their position that a duty of disclosure existed here, the Hoffmans cite Vega, supra, 121 Cal.App.4th 282. There, a law firm (Jones, Day, Reavis & Pogue (Jones Day)) that represented the acquiring company in
Jones Day's demurrer to the plaintiff's complaint was sustained without leave to amend on various grounds, including nonliability for the nondisclosure because the law firm had no duty to disclose. (Vega, supra, 121 Cal.App.4th at p. 289.) The appellate court reversed, concluding, among other things, that the plaintiff had adequately pleaded a claim for "`active concealment or suppression of facts.'" (Id. at p. 292, fn. omitted.) Rejecting Jones Day's contention that, as counsel for the adverse party to the merger, it had no duty to disclose the toxic terms of the financing transaction, the court observed that Jones Day "specifically undertook to disclose the transaction and, having done so, is not at liberty to conceal a material term." (Ibid.) The court explained further: "Jones Day's invocation of the principle that fraud based on nondisclosure requires an `independent duty of disclosure' is erroneous. In some but not all circumstances, an independent duty to disclose is required; active concealment may exist where a party `[w]hile under no duty to speak, nevertheless does so, but does not speak honestly or makes misleading statements or suppresses facts which materially qualify those stated.' [Citations.] Providing a disclosure schedule which deliberately omitted material facts seems clearly to fit this category." (Id. at p. 294, fn. omitted.)
Vega is distinguishable. Aside from the procedural differences between the cases — disposition at the pleading stage in Vega as contrasted with summary adjudication here — there was, in Vega, a relationship between the parties based upon a transaction (a merger). The plaintiff was a party to that merger, and Jones Day, in representing the acquiring company, played a substantial role in the transaction. We view the circumstances of the alleged nondisclosure in Vega as being significantly different from those here. In Vega, Jones Day actively communicated on the subject financing transaction in which it allegedly suppressed material information. Here, 162 LLC was not asked whether it claimed an interest in the 170 Wolfe property, and Owens's alleged statement that "we'll take care of it" cannot be reasonably construed as
The Hoffmans also rely on Pavicich v. Santucci (2000) 85 Cal.App.4th 382 [102 Cal.Rptr.2d 125] (Pavicich) in support of their position. In Pavicich, the plaintiff was persuaded to invest as a limited partner in a struggling brew pub project. (Id. at p. 386.) The project had a checkered history: a prior joint venture had been dissolved; a settlement agreement and release had been executed; and, at a later date, the former joint venturers no longer involved in the project had asserted that the release had been procured by fraud. (Id. at pp. 385-386.) In the negotiations leading up to his investment, the plaintiff asked two of the people remaining in the project (Keller and Wallace) and Santucci (the attorney for some of the parties to the transaction) whether there were circumstances surrounding the early days of the joint venture of which he should be made aware. (Id. at p. 386.) Keller and Santucci told the plaintiff that "there had been `negotiations' with `two Los Gatos businessmen' which had not been fruitful." (Ibid.) Santucci also advised the plaintiff that these "`two businessmen' had signed a legally binding release to avoid any future problems or claims." (Ibid.) Santucci did not disclose that the two businessmen had later asserted that the release had been procured by fraud and that they had threatened litigation. (Ibid.)
This court in Pavicich concluded that the plaintiff stated a viable cause of action against Santucci for conspiring with Keller to defraud the plaintiff, reasoning that the case could not be decided in Santucci's favor under a theory that he had no duty of disclosure to the plaintiff. (Pavicich, supra, 85 Cal.App.4th at p. 398.) Rather, since Santucci had spoken on the subject of the two prior investors and had indicated to the plaintiff that the releases they had signed would prevent future problems with the project, the attorney was bound by "the principle that `where one does speak he must speak the whole truth to the end that he does not conceal any facts which materially qualify those stated. [Citation.] One who is asked for or volunteers information must be truthful, and the telling of a half-truth calculated to deceive is fraud.' [Citations.]" (Ibid.)
Pavicich, like Vega, is distinguishable. In Pavicich, there was a relationship based upon a business transaction between the plaintiff and the defendant. The plaintiff was the potential investor in a limited partnership and the defendant was the attorney representing the limited partnership and its
The Hoffmans also rely on Jones v. ConocoPhilips Co. (2011) 198 Cal.App.4th 1187 [130 Cal.Rptr.3d 571] (Jones). In Jones, the appellate court concluded that at the pleading stage, the plaintiffs (family members of a deceased worker exposed to toxic chemicals) had alleged sufficient facts to support a claim of fraudulent concealment against chemical manufacturers. Specifically, they alleged that the defendants alone were aware of their products' toxicity, it was a fact not available to the decedent, and the defendants concealed that fact. (Id. at pp. 1199-1200.) A manufacturer's nondisclosure to the public of the toxic nature of its products where the toxicity is known to the manufacturer but not to others is a very different circumstance from a landowner's knowledge that it possesses prescriptive easement rights. Jones cannot be used to extend liability for concealment under the facts presented here.
In its moving papers below, 162 LLC argued that summary adjudication of the Cross-Complaint's second cause of action was proper because of the absence of justifiable reliance by the Hoffmans. It repeats this argument on appeal.
After establishing actual reliance, the plaintiff must show that the reliance was reasonable by showing that (1) the matter was material in the sense that a reasonable person would find it important in determining how he or she would act (Charpentier v. Los Angeles Rams Football Co. (1999) 75 Cal.App.4th 301, 313 [89 Cal.Rptr.2d 115]), and (2) it was reasonable for the plaintiff to have relied on the misrepresentation. (Blankenheim v. E. F. Hutton & Co. (1990) 217 Cal.App.3d 1463, 1475 [266 Cal.Rptr. 593]; see CACI No. 1908 (2013 ed.).) Although a plaintiff's negligence in failing to discover the falsity of the statement or the suppressed information is not a defense to fraud (Alliance Mortgage, supra, 10 Cal.4th at pp. 1239-1240), a plaintiff's particular knowledge and experience should be considered in determining whether the reliance upon the misrepresentation or nondisclosure was justified. (Id. at p. 1240; see CACI No. 1908 (2013 ed.).) "If the conduct of the plaintiff in the light of his own intelligence and information was manifestly unreasonable ... he will be denied a recovery." (Seeger v. Odell (1941) 18 Cal.2d 409, 414 [115 P.2d 977].) Thus, for example, where a woman, who was an attorney, signed a release of liability before sustaining injuries from a horseback riding lesson, and later claimed that she had relied on the defendant's statement that the release was "`meaningless,'" she was held under the circumstances to have not justifiably relied on that statement. (Guido v. Koopman (1991) 1 Cal.App.4th 837, 843-844 [2 Cal.Rptr.2d 437] (Guido); see Kahn v. Lischner (1954) 128 Cal.App.2d 480, 489 [275 P.2d 539] [seller did not justifiably rely on buyer's statement estimating land's value, given, among other things, fact that seller was professional of significant intelligence].)
Hinesley, supra, 135 Cal.App.4th 289, a case that involved a fraud claim by a commercial tenant of a shopping center, is instructive. There, the plaintiff tenant alleged that the landlord's agent made representations to the effect that three chain businesses would be occupying the shopping center by the end of 1998; the plaintiff alleged that he was induced by these representations to enter into the lease in July 1998. (Id. at p. 292.) Two of the tenants never leased space in the center; the third did, but not until December 2000. (Id. at p. 292, fn. 1.) The plaintiff's lease included a provision (para. 25.33) that the landlord had made no representations, and the tenant had not relied upon any representations, regarding the identities of any specific tenants that would occupy the shopping center. (Id. at p. 297.) The plaintiff, who was represented by counsel in the lease negotiations, testified that he was certain he had read that provision of the lease. (Id. at pp. 297-298.) Had the three proposed tenants occupied space in the center, their aggregate space would have constituted approximately 5 percent of the total leasable space. (Id. at p. 298.) And it was undisputed that the plaintiff never asked the landlord about the contractual status of the three proposed tenants or indicated that his decision to enter into the lease was based upon the proposed tenants' occupancy of the center. (Ibid.)
The appellate court concluded that summary judgment of the fraud claim was properly granted because the plaintiff as a matter of law had not justifiably relied on the landlord's alleged representations. (Hinesley, supra, 135 Cal.App.4th at pp. 300-303.) The court reasoned: "In the complete absence of any actions taken to question, clarify, or confirm the contractual status of the three cotenants, to notify his attorney of the representations or to modify paragraph 25.33, Hinesley could not justifiably rely on his understanding of the representations and gestures made by [the landlord's agent]." (Id. at p. 303.)
Here, the Hoffmans' nondisclosure/concealment claim is based upon a single July 2009 conversation between Owens and Hoffman. In that conversation, Hoffman — after observing various vehicles servicing 162 Wolfe and vehicles of the Law Firm's employees encroaching onto 170 Wolfe — told Owens, "I do not want your vehicles crossing the property line. I would
Owens's statement that "we'll take care of it" — in response to Hoffman's complaint about vehicles traveling onto 170 Wolfe — was arguably insufficient, of itself, for the Hoffmans to have justifiably relied upon an understanding that 162 LLC had no claimed easement rights over 170 Wolfe. We will assume, however, that this ambiguous statement was, in the abstract, sufficient for such justifiable reliance, in light of the substance of the Hoffman-Owens conversation and their prior conversation about cars owned by Law Firm employees parking in front of 170 Wolfe.
But any such reliance, under the circumstances here, was unreasonable. Hoffman was an experienced real estate agent who had owned several businesses and owned several pieces of real property; his experience and sophistication are relevant factors in determining the Hoffmans' justifiable reliance. (See, e.g., Guido, supra, 1 Cal.App.4th at pp. 843-844; Kahn v. Lischner, supra, 128 Cal.App.2d at p. 489; cf. Moody's Investors, supra, 226 Cal.App.4th at p. 673 [notwithstanding sophistication of plaintiff state public pension fund, its reliance on defendants' erroneous ratings of investments not unreasonable as matter of law; investments "existed in a `shroud of secrecy' and very few persons ... were privy to [the investments'] composition"].) His failure to make further inquiry or complaint about the trespassing vehicles was unreasonable, notwithstanding his explanation that "there were many other issues that [the Hoffmans] were dealing with and [he] thought that this particular problem would be taken care of." Moreover, we conclude
The Hoffmans — analogous to the plaintiff-tenant in Hinesley, supra, 135 Cal.App.4th 289, who was faced with a lease term that directly contradicted his claimed reliance upon the landlord's representations — observed vehicle trespasses for eight months, contradicting Owens's "we'll take care of it" statement that they claim led them to believe that 162 LLC claimed no interest in the 170 Wolfe property. And like the plaintiff in Hinesley, the Hoffmans never told anyone at 162 LLC that their decision to buy the 170 Wolfe property was based upon an understanding (from Owens's ambiguous statement) that 162 LLC made no claim against 170 Wolfe. Under the circumstances, the Hoffmans' reliance was not justifiable as a matter of law. (See, e.g., Matthews v. Kincaid (Alaska 1987) 746 P.2d 470, 472 [four-plex buyer's fraud claim against seller based on nondisclosure of absence of offstreet parking not maintainable due to absence of justifiable reliance; lack of offstreet parking was fact that would be obvious to buyer making ordinary inspection and inquiry].) Thus, even assuming there was a legal duty of disclosure on the part of 162 LLC due to the existence of a relationship with the Hoffmans, summary adjudication of the second cause of action was appropriate because of the failure of the Hoffmans to present evidence of justifiable reliance. (See, e.g., Dore, supra, 39 Cal.4th at pp. 393-394; Camp, supra, 35 Cal.App.4th at pp. 639-640.)
The Hoffmans alleged in the third cause of action, captioned as a claim for "Intentional Misrepresentation," that Owens "implicitly represented" to Hoffman that 162 LLC did not claim any rights in the 170 Wolfe property. (Italics omitted.) They argued below that Owens's statement, in response to Hoffman's complaint about vehicles servicing 162 Wolfe traveling on the 170 Wolfe property, that he'd "take care of it," was "actionable as an implicit misrepresentation." The Hoffmans contended that it was not required under the law that a misrepresentation, to constitute actionable fraud, be explicit; it "may be implied by or inferred from the circumstances." The Hoffmans also urged that Wolfe's "take care of it" statement was actionable as a false promise as well. They reiterate these positions on appeal.
The court below concluded that the alleged implied misrepresentation that "we'll take care of it" in reference to trespassing vehicles was "too vague to be enforced." (Cf. Conrad v. Bank of America (1996) 45 Cal.App.4th 133, 156 [53 Cal.Rptr.2d 336] [borrower's vague testimony of lender's statement "`[n]o problem'" concerning future loan applications, and that lender "agreed to process the loan application and said he would comply" insufficient to establish false promise to make loan].) Even assuming the statement satisfied the element of making an implied misrepresentation of fact or a false promise to support the fraud cause of action alleged, like the concealment/suppression of facts claim, the Hoffmans' misrepresentation claim fails because the record shows no justifiable reliance.
As noted, ante, for approximately eight months after Owens's "we'll take care of it" statement, the Hoffmans observed vehicles from 162 Wolfe continuing to travel over 170 Wolfe. As to Mr. Hoffman, this was a "common occurrence." Notwithstanding these continuous trespasses, as well as Hoffman's sophistication as a real estate broker, property owner, and business owner (see Guido, supra, 1 Cal.App.4th at pp. 843-844), the Hoffmans did not complain about this activity to the then owner of 170 Wolfe or to 162 LLC or its members. Their reliance was unreasonable as a matter of law and summary adjudication of the third cause of action on this ground was proper. (See Dore, supra, 39 Cal.4th at pp. 393-394.)
The judgment is affirmed.
Bamattre-Manoukian, Acting P. J., and Grover, J., concurred.
