Case Number: KC068411 Hearing Date: January 26, 2018 Dept: J

Re: Ruth Xiaoyu Zhang, et al. v. Nestor H. Llerena, et al. (KC068411)

MOTION FOR SUMMARY JUDGMENT OR, ALTERNATIVELY, FOR SUMMARY ADJUDICATION OF ISSUES AS TO PLAINTIFFS’ FIRST AMENDED COMPLAINT (X2)

Moving Parties: (1) Defendants Nestor H. Llerena and Myrna T. Llerena; (2) Defendants US National Investment Group dba US National Realty and Jenny Kong

Respondents: (1) and (2) Plaintiffs Ruth Xiaoyu Zhang and Hong Jun Lu

POS: (1) Moving OK; Opposing OK; Reply OK; (2) Moving OK; Opposing OK; Reply OK

Plaintiffs allege that defendants concealed a series of material facts as to the actual condition and defects of the property located at 924 Avenida Loma Vista in San Dimas (“Subject Property”) prior to the close of escrow. Plaintiffs commenced this action on 5/2/16. The First Amended Complaint, filed on 5/23/16, asserts causes of action for:

1. Fraud

2. Negligent Misrepresentation

3. Negligence

4. Breach of Civil Code § 2079

5. Breach of Contract

The Final Status Conference is set for 7/30/18. A jury trial is set for 8/7/18.

(1) MOTION OF NESTOR H. LLERENA AND MYRNA T. LLERENA:

Defendants Nestor H. Llerena and Myrna T. Llerena (“The Llerenas”) move the court for an order, per CCP 437c, granting summary judgment in their favor against Plaintiffs Ruth Xiaoyu Zhang and Hong Jun Lu (“plaintiffs”) on their First Amended Complaint (“FAC”); in the alternative, The Llerenas seek summary adjudication as follows:

Issue No. 1: The first cause of action (i.e., for Fraud) fails, because plaintiffs cannot demonstrate the necessary elements of reliance on any alleged misrepresentation by the Llerenas or lack of awareness of any allegedly concealed facts;

Issue No. 2: The second cause of action (i.e., for Negligent Misrepresentation) fails, because plaintiffs cannot demonstrate the necessary element of reliance on any alleged misrepresentation by the Llerenas;

Issue No. 3: The fifth cause of action (i.e., for Breach of Contract) fails because of plaintiffs’ waiver, which defeats the necessary element of causation on the part of the Llerenas of the plaintiffs’ alleged damages; and

Issue No. 4: The fifth cause of action (i.e., for Breach of Contract) fails because of plaintiffs’ failure to mitigate damages by not cancelling the subject transaction when they had a right to do so.

The Llerenas contend that Plaintiffs cannot prevail on any cause of action against them, because it is undisputed that plaintiffs’ agents were on actual notice, prior to the close of escrow and within the contractual time to cancel the transaction, of the alleged defects and problems with the house plaintiffs purchased.

EVIDENTIARY OBJECTIONS:

Plaintiffs’ Objections to the Declaration of Paul J. Gutierrez:

Exhibit 3: Overruled

Exhibit 4: Overruled

The remainder of plaintiffs’ objections fail to quote or set forth the objectionable statement or material as required by CRC 3.1354(b) and are overruled.

The Llerena’s Objections:

1. Overruled

2. Overruled (Statements in a Separate Statement of not “evidence.”)

3-8. Sustained

9-13. Overruled

14-16. Overruled

17-22. Sustained

PUNITIVE DAMAGES:

At the outset, the court notes that The Llerenas purport to seek summary adjudication of the issue of punitive damages. See Notice, 2:28. A claim for punitive damages is specifically set forth as an area which may properly be the subject of summary adjudication. See CCP § 437c(f)(1) (i.e., “[a] party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty…”). California Rules of Court (“CRC”) Rule 3.1350(b), however, provides that “[i]f summary adjudication is sought, whether separately or as an alternative to the motion for summary judgment, the specific cause of action, affirmative defense, claims for damages, or issues of duty must be stated specifically in the notice of motion and be repeated, verbatim, in the separate statement of undisputed material facts.”

The Llerenas have not identified punitive damages as an issue for adjudication on pages 2:7-23 of their notice of motion. Additionally, the Llerenas have not “repeated, verbatim” the issue of punitive damages in their moving separate statement; accordingly, the court declines to entertain their request for summary adjudication on the issue of punitive damages.

CRC RULE 3.1116 NON-COMPLIANCE:

The court admonishes counsel for plaintiffs for failing to comply with CRC Rule 3.1116(c) (i.e., “[t]he relevant portion of any testimony in the deposition must be marked in a manner that calls attention to the testimony”).

REQUEST FOR JUDICIAL NOTICE:

The Llerenas’ request for judicial notice (“RJN”) is granted, to the extent that the court takes judicial notice of the pleadings requested as to their existence and filing dates.

“A defendant or cross-defendant has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action. Once the defendant or cross-defendant has met that burden, the burden shifts to the plaintiff or cross-complainant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto. The plaintiff or cross-complainant shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto.” CCP § 437c(p)(2).

Plaintiffs have asserted causes of action for Fraud, Negligent Misrepresentation and Breach of Contract against The Llerenas. More specifically, plaintiffs allege that they, as purchasers, entered into a real estate purchase contract on/about 10/9/13, with The Llerenas, as sellers, for the residential property located at 924 Avenida Loma Vista in San Dimas (“Property”). (FAC, ¶¶ 2 and 10). Plaintiffs claim that “[u]nknown to [them] and undisclosed by defendants, the Property was in a seriously defective condition that was not apparent to a visual inspection because of ongoing kitchen improvement construction work,” and that the Property contains the following defects: (1) a “significant floor slope…trending downhill to the west edge of the building. A color level survey of the dining room and kitchen areas indicated a change in the floor elevation of up to 2.8 inches;” (2) interior finishes exhibiting signs of distress. “Cracking in the finishes was served primarily in the western half of the building, displaying crack widths of up to 0.2 inches. Door jambs were showing signs of distortion and were out of plumb up to 0.2 inches. Some doors would not open easily as a result of the distortion. Cabinets were detached from their ceiling fasteners or exhibited warped and buckled features; and (3) exterior plaster finishes on the exterior walls were cracked in areas near the foundation and roof. “The concrete foundation showed cracking between panel sections. Built up wooden posts located near the front door lean and show distortion between the individual members.” (Id., ¶¶ 11-14). Plaintiffs assert that engineers have “concluded that the west portion of the concrete foundation has settled from 2-4 inches.” (Id., ¶ 15).

“’”The elements of fraud, which give rise to the tort action for deceit, 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.”’ (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638).” Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 Cal.App.4th 221, 234. “The elements of negligent misrepresentation are ‘(1) the misrepresentation of a past or existing material fact, (2) without reasonable ground for believing it to be true, (3) with intent to induce another’s reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5) resulting damage.’ (Apollo Capital Fund LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243).” National Union Fire Ins. Co. of Pittsburgh, PA v. Cambridge Integrated Services Group, Inc. (2009) 171 Cal.App.4th 35, 50. “’A cause of action for damages for breach of contract is comprised of the following elements: (1) the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to plaintiff.’ (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388).” Rutherford Holdings, LLC, supra, 223 Cal.App.4th at 228.

Co-Defendants Jenny Kong (“Kong”) and U.S. National Investment Group dba US National Realty (“U.S. National Realty”) were solely plaintiffs’ agents representing them in plaintiffs’ purchase of the Property. (UMF No. 5). The escrow closed on the Property on 11/13/13. (UMF No. 8). Prior to closing escrow, Plaintiff Ruth Xiaoyu Zhang (“Zhang”) and Kong viewed the property several times; on their second visit, Defendant Nestor H. LLerena (“N. Llerena”) disclosed to Kong that he had constructed an addition to the Property, enlarging the kitchen/dining room areas. (UMF No. 9). Prior to closing escrow, Kong hired Robbie Hett (“Hett”) with The Elite Group Inspection Service on behalf of Zhang to perform a home inspection of the Property for the plaintiffs. (UMF No. 10). On 10/9/13, Hett performed an inspection of the Property. (UMF No. 11). During his inspection of the Property, the kitchen caught Mr. Hett’s attention, as Hett believed some type of add-on had been done to the kitchen. (UMF No. 12). The “Summary Page” prepared by Hett was a summary of what Hett found during his inspection of the property pertaining to issues of health, safety, heavy preventative maintenance and any damages. (UMF No. 14). The full Inspection Report prepared by Hett was sent to is issued within 24 to 48 hours after the date of inspection. (Gutierrez Decl., ¶ 2, Exhibit “3,” 15:4-19).

The Summary Page and Inspection Report indicate Hett discovered heavy patching in the dining room and evidence of settling. (UMF No. 16). The Summary Page and Inspection Report indicate Hett discovered cracking in the ceilings, cracked floors, large gaps and settling in the counter tops and cabinets separating at the bar. (UMF No. 18). Hett’s Inspection Report contains a picture of a horizontal gap at a granite counter surface. (UMF No. 19). Hett’s Inspection Report contains a picture of a kitchen cabinet pulling away from an adjacent cabinet and counter surface. (UMF No. 20). The Summary Page and Inspection Report indicate Hett discovered cracks and loose tiles at the roof. (UMF No. 21). The Summary Page and Inspection Report indicate Hett’s inspection of the slab foundation found evidence of cracking at interior walls, settling and he recommended a licensed contractor for further evaluation. (UMF No. 22). Zhang testified that Kong gave her the Inspection Report in person and that she reviewed it with Kong, “page by page.” (Gutierrez Decl., ¶ 1, Exhibit “2,” 58:4-17). It is undisputed that Kong received the Inspection Report and Summary Page prior to the close of escrow for the sale of the Property and within the contractual period of cancellation without penalty. (See UMF No. 24).

“[T]he principal is chargeable with, and is bound by the knowledge of, or notice to, his agent, received while the agent is acting within the scope of his authority, and which is in reference to a matter over which his authority extends.” Trane Co. v. Gilbert (1968) 267 Cal.App.2d 720, 727; see also, Civil Code § 2330 (i.e., “[a]n agent represents his principal for all purposes within the scope of his actual or ostensible authority, and all the rights and liabilities which could accrue to the agent from transactions within such limit, if they had been entered into on his own account, accrue to the principal”) and Civil Code § 2332 (i.e., “[a]s against a principal, both principal and agent are deemed to have notice of whatever either has notice of, and ought, in good faith and the exercise of ordinary care and diligence, to communicate to the other”). “So long as the agent was under a duty to disclose certain information, the principal is bound by the agent’s knowledge of that information whether or not the agent communicated it to the principal.” Santillan v. Roman Catholic Bishop of Fresno (2008) 163 Cal.App.4th 4, 10-11.

Again, it is undisputed that Kong and U.S. National Realty were solely plaintiffs’ agents in this transaction. It is likewise undisputed that Kong received the Inspection Report and Summary Page prior to the close of escrow for the sale of the Property and within the contractual period of cancellation without penalty. Even if Kong failed to communicate to Zhang the material facts known to her, her knowledge is imputed to plaintiffs, even if plaintiffs lacked actual knowledge of the imputed fact.

Plaintiffs contend that The Llerenas misrepresented the defective conditions of the property in their Seller Property Questionnaire, and that they relied upon these statements to their detriment. There can be no justifiable reliance here; as such, plaintiffs’ first and second causes of action, for Fraud and Negligent Misrepresentation, respectively, fail. “When one undertakes an investigation and proceeds with it without hindrance it will be assumed that he continued until he had acquired all the knowledge he desired and was satisfied with what he had learned. He cannot be heard to say that he relied on the representations of the other party. (Carpenter v. Hamilton [(1936)], 18 Cal.App.2d 69, 71-72). If he becomes aware of facts that tend to arouse his suspicion, or if he has reason to believe that any representations made to him are false or only half true, it is his legal duty to complete his investigation and he has no right to rely on statements of the other contracting party. (Idem, p. 75.).” Cameron v. Cameron (1948) 88 Cal.App.2d 585, 593-594.

Plaintiffs’ fifth cause of action, for Breach of Contract, likewise fails against The Llerenas. Waiver “is the intentional relinquishment of a known right after knowledge of the facts.” Roesch v. De Mota (1944) 24 Cal.2d 563, 572. Accepting the benefits of a contract after knowledge of a breach can be a waiver of the breach. See Kern Sunset Oil Co. v. Good Roads Oil Co. (1931) 214 Cal. 435, 440-441. “Waiver is ordinarily a question for the trier of fact; ‘[h]owever, where there are no disputed facts and only one reasonable inference may be drawn, the issue can be determined as a matter of law.’ (Gill v. Rich (2005) 128 Cal.App.4th 1254, 1264).” DuBeck v. California Physicians’ Service (2015) 234 Cal.App.4th 1254, 1265. The above undisputed facts reflect that plaintiffs had imputed knowledge of the allegedly concealed facts which they contend for the substance of the breach of contract. Plaintiffs obtained knowledge of the allegedly concealed facts while they had a right to cancel the transaction; instead of cancelling the transaction, they proceeded with same and thus waived any alleged breach by The Llerenas with respect to any non-disclosures of defective conditions at the Property

The Llerenas’ motion for summary judgment is granted.

(2) MOTION OF US NATIONAL INVESTMENT GROUP dba US NATION REALTY AND JENNY KONG:

Defendants US National Investment Group dba US National Realty (“U.S. National Realty”) and Jenny Kong (“Kong”) move for an order, per CCP 437c, granting them summary judgment in their favor and against Plaintiffs Ruth Xiaoyu Zhang and Hong Jun Lu (“plaintiffs”) on their First Amended Complaint (“FAC”); in the alternative, U.S. National Realty and Kong seek summary adjudication as follows:

Issue No. 1: The first cause of action (i.e., for Fraud) fails, because one or more of the elements cannot be separately established;

Issue No. 2: The second cause of action (i.e., for Negligent Misrepresentation) fails, because one of more of the elements cannot be separately established;

Issue No. 3: The third cause of action (i.e., for Negligence) fails, because one of more of the elements cannot be separately established; and

Issue No. 4: The fourth cause of action (i.e., for Breach of Civil Code §2079) fails, because one of more of the elements cannot be separately established.

PLAINTIFFS’ OBJECTIONS TO THE DECLARATION OF WARREN K. MILLER:

Plaintiffs fail to quote or set forth the objectionable statement or material as required by CRC 3.1354(b). The objections are overruled.

DEFENDANTS’ EVIDENTIARY OBJECTIONS:

Declaration of Ruth Xiaoyu Zhang:

1-8. Sustained

Declaration of Hong Jun Lu:

1-14: Sustained

Declaration of Jason Yang:

1-8: Overruled

Declaration of Jay Kumar:

1-4: Overruled

PUNITIVE DAMAGES:

At the outset, the court notes that U.S. National Realty and Kong purport to seek summary adjudication of the issue of punitive damages. See Notice, 3:4. A claim for punitive damages is specifically set forth as an area which may properly be the subject of summary adjudication. See CCP § 437c(f)(1) (i.e., “[a] party may move for summary adjudication as to one or more causes of action within an action, one or more affirmative defenses, one or more claims for damages, or one or more issues of duty…”). California Rules of Court (“CRC”) Rule 3.1350(b), however, provides that “[i]f summary adjudication is sought, whether separately or as an alternative to the motion for summary judgment, the specific cause of action, affirmative defense, claims for damages, or issues of duty must be stated specifically in the notice of motion and be repeated, verbatim, in the separate statement of undisputed material facts.”

U.S. National Realty and Kong have not “repeated, verbatim” the issue of punitive damages in their moving separate statement; accordingly, the court declines to entertain U.S. National Realty’s and Kong’s request for summary adjudication on the issue of punitive damages.

CRC RULE 3.1116 NON-COMPLIANCE:

The court again admonishes counsel for plaintiffs for failing to comply with CRC Rule 3.1116(c) (i.e., “[t]he relevant portion of any testimony in the deposition must be marked in a manner that calls attention to the testimony”).

REQUEST FOR JUDICIAL NOTICE:

U.S. National Realty’s and Kong’s request for judicial notice is granted as to Exhibits “1” and “2,” to the extent that the court takes judicial notice of the pleadings as to their existence and filing dates, and is granted as to Exhibits “3”-“6.”

Plaintiffs have asserted causes of action for Fraud, Negligent Misrepresentation, Negligence and Breach of Civil Code § 2079 against Kong and U.S. National Realty. The elements for Fraud and Negligent Misrepresentation are set forth above. “Actionable negligence is traditionally regarded as involving the following:(a) a legal duty to use due care; (b) a breach of such legal duty; (c) the breach as the proximate or legal cause of the resulting injury.” Seo v. All-Makes Overhead Doors (2002) 97 Cal.App.4th 1193, 1202. Civil Code § 2079(a) provides that “[i]t is the duty of a real estate broker or salesperson, licensed under Division 4 (commencing with Section 10000) of the Business and Professions Code, to a prospective purchaser of residential real property comprising one to four dwelling units, or a manufactured home as defined in Section 18007 of the Health and Safety Code, to conduct a reasonably competent and diligent visual inspection of the property offered for sale and to disclose to that prospective purchaser all facts materially affecting the value or desirability of the property that an investigation would reveal, if that broker has a written contract with the seller to find or obtain a buyer or is a broker who acts in cooperation with that broker to find and obtain a buyer.”

Kong’s and U.S. National Investment’s request for summary judgment or, alternatively, summary adjudication is denied in full. There are triable issues of material fact as to whether or not Zhang, who was deposed in this action with the assistance of an interpreter and who testified that she “can speak a little [English], but [she] rarely had to read English” (Miller Decl., ¶ 5, Exhibit “23,” 7:4-7) and that she does “[n]ot really” read English (Id., 7:2-3) adequately understood the contents of the Summary Page and Inspection Report provided to her. Further, although Kong attests that she discussed the Summary Page with Hett and Zhang at the conclusion of the 10/9/13 inspection “in detail,” she does not specifically state whether or not the defects with the foundation were discussed. (See Kong Decl., ¶ 13). Kong also attests that she provided the Inspection Report to Zhang and that Zhang “never asked [her] any questions about [it].” (Id., ¶ 21).