APPEAL from a judgment of the Superior Court of Los Angeles County. Stanley Martin Weisberg, Judge. Reversed and remanded. (Los Angeles County Super. Ct. No. LC072262).
The opinion of the court was delivered by: Doi Todd, J.
CERTIFIED FOR PUBLICATION
Plaintiffs and appellants Larry and Camille Calemine appeal from a summary judgment entered in favor of defendant and respondent Walter Samuelson (Samuelson). The trial court ruled that Samuelson, the seller of a condominium purchased by appellants, met his burden to show the absence of a triable issue of fact concerning his disclosure of facts relating to water intrusion.
We reverse. While the evidence established that Samuelson disclosed the existence of previous water intrusion, it further established that he did not disclose the existence of two lawsuits relating to that water intrusion. A triable issue of fact remained as to whether the prior litigation was a material fact which should have been disclosed.
FACTUAL AND PROCEDURAL BACKGROUND
The Condominium's Water Intrusion Problems
In February 1983, Samuelson and his wife became the initial owners of a three-story condominium, unit five, located on Victory Boulevard in Woodland Hills (condominium), in building two of a development known as Jared Court. The lower level of the condominium was comprised of a three-car garage and a carpeted and windowless "bonus room" that Samuelson used as a sewing room and office. Samuelson resided in the condominium until July 2002 when he sold it to appellants.
Between 1983 and 1999, Samuelson personally observed intermittent incidents of water intrusion and flooding in the lower level of the condominium. In 1986, the Jared Court Homeowners Association (HOA) and individual unit owners, including Samuelson, brought a lawsuit against the developer alleging design and construction defects in the units and common areas (developer lawsuit).
In 1992, the HOA hired Westar Flooring (Westar) to repair and waterproof the affected areas of Jared Court. After the Westar work in 1992, the bonus room area did not suffer any further water intrusion problems. Samuelson was aware, however, that Westar's repairs were not effective throughout Jared Court, and he knew that the HOA filed a lawsuit against Westar in 1996 (Westar lawsuit). Samuelson served as president of the Jared Court Homeowners Association (HOA) board from March 1993 to June 1994 and as treasurer of the HOA from June 1994 to April 2001.
A September 1997 report prepared by a consultant retained by the HOA in connection with the Westar lawsuit, Robert Jacobs & Associates (Jacobs), estimated the cost of the waterproofing repairs at $724,516 and characterized the repair process as lengthy and extensive. A supplemental report prepared by Jacobs in November 1997 added $296,380.72 to the original estimate following testing of individual units.
The Westar lawsuit settled in 1998. Minutes from the March 24, 1998 annual meeting of the HOA indicated that the HOA received $410,000 from the settlement after payment of attorney fees. The HOA board solicited and considered bids from several contractors to perform repairs and waterproofing. It received bids from Construction Headquarters Inc. (CHI) to undertake repairs to the Jared Court common area and individual units, including the condominium, ranging from $119,800 to $305,000. CHI's lowest and ultimately accepted proposal was addressed to Samuelson in care of the HOA, and Samuelson served as the "point man" in connection with the work CHI ultimately performed. The final $119,800 CHI proposal cautioned: "It must be clearly understood that this is only one phase only of our due diligence in attempting to mitigate the water intrusion problem being encountered at this time. [¶] This proposal will only solve a portion of the problem. The remaining work is necessary to mitigate fully." Once the repairs were completed, CHI wrote to Samuelson in care of the HOA that the "next proposed phase of work will apparently involve clean up, patching, painting and 'band-aid' covering up of existing subterranean garage and storage room walls." CHI also wrote to confirm several discussions with HOA board members in which it indicated "we can take no responsibility nor give any guarantees whatsoever, that the water penetration issues, through the retaining walls, will be controlled or corrected, due to the existing hydrostatic pressures, capillary action from ground water intrusion or any other issues relating to dampness, as we are not addressing these issues in the garage/storage contract."
CHI completed its work in November 1998. After that time, Samuelson did not observe any further flooding or water intrusion into the garage area of the condominium, though occasionally damp spots would appear on the garage floor during periods of heavy rain.
The Sale of the Condominium to Appellants
During the fall of 2001, Samuelson and appellants began negotiations for the sale of the condominium.*fn1 In connection with the transaction, in November 2001 Samuelson signed a real estate transfer disclosure statement (transfer disclosure) in which he stated he was aware of "[f]looding, drainage or grading problems" and added the notation "[h]eavy rains below ground walls & slab." According to Samuelson, water came up through the cracks in the garage slab approximately five to six times during the almost twenty years he lived in the condominium. The section of the transfer disclosure to be completed by the listing agent further stated: "Water damage noted in garage. Buyer is urged to get a physical inspection from a licensed contractor."
In May 2002, appellants retained Preferred Home Inspection Service, Inc., to inspect the condominium. According to the inspection report, the inspector observed: "Evidence of below grade leakage is evident at garage south and west walls. (Moisture bubbling & efflorescence at below grade foundation walls & staining along hairline floor cracks in garage.) Moisture staining was also noted at base boards at lower level room. Status of leakage cannot be visually ascertained. Further investigate to determine if repairs have been made or will be made. Below grade leakage occurrence typically would be an H.O.A. repair. See seller for status/information." In June 2002, Carpenter Termite Control Company prepared a report after its own inspection, which noted with respect to the garage area that "[e]xcessive moisture has damaged drywall and plaster at rear and left side of garage. ...