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Satrap Properties Ii, LLC et al. v. Pc Real Estate

December 30, 2010


(Solano County Super. Ct. No. FCS029484)

The opinion of the court was delivered by: Sepulveda, J.

Satrap Properties II v. PC Real Estate



California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

A buyer of rental properties alleged he was deceived about the terms of the underlying leases and sued his real estate agent and the seller. The buyer charged the seller with negligent misrepresentation and fraud in concealing, or failing to disclose, the lease terms and charged his real estate agent with professional negligence, breach of fiduciary duty, and constructive fraud for failing to verify the accuracy of the seller's representations. The trial court granted summary judgment to the real estate agent on statute of limitations grounds.

The court found that the buyer knew or should have known about the agent's alleged negligence no later than January 2006, when a dispute over the lease terms arose, and exceeded the two-year statute of limitations in waiting until April 2008 to sue the agent for negligence. (Code Civ. Proc., § 339.) The court further held that professional negligence was the gravamen of all causes of action and applied the two-year statute of limitations to all of the buyer's causes of action. The buyer appeals. He denies discovery of the agent's negligence until May 2006, less than two years before he sued the agent. Alternatively, the buyer argues that his claims for breach of fiduciary duty and constructive fraud are distinct from his negligence claim and timely even if negligence was discovered more than two years before bringing suit against the agent.

We conclude that the trial court was correct in determining that the negligence cause of action is untimely but erred in barring other causes of action that are distinct from negligence and have longer limitation periods. We reverse the judgment with directions to grant summary adjudication on the negligence causes of action alone.

I. facts

Plaintiffs are Eugene E. Satrap and Satrap Properties II, LLC (collectively, Satrap). In the summer of 2005, Satrap hired defendant PC Real Estate, Inc. (PC) to act as his real estate broker in the purchase of residential, income-producing rental properties. Defendant Robert Baker was employed by PC as a real estate agent. Satrap informed Baker that he was looking for properties with triple net leases, where the tenant paid not only rent but also taxes, insurance, and maintenance. Baker identified two Stockton properties for Satrap which, according to the Multiple Listing Service (MLS) report, had an existing tenant with triple net leases. According to the MLS report, the tenant was paying $5,000 a month in rent under a triple net lease for each property. Both properties were owned by MIM, LLC (MIM), and rented to the same tenant. The tenant was a business entity that Satrap believed ran halfway houses for recent prison parolees. In November 2005, Satrap entered into two contracts with MIM to purchase the properties. Escrow closed on the properties in December 2005.

In January 2006, the tenant failed to pay its monthly rent in full and disputed the existence of a triple net lease on the properties. The tenant denied any obligation to pay insurance or taxes. For purposes of this appeal, we assume that the tenant was correct, and the leases do not require payment of insurance and taxes, because Satrap alleged, in his action against the agent and seller that "the property was not leased pursuant to a triple net lease" and that the seller misrepresented the lease terms in stating otherwise.

A January 25, 2006 letter written by Satrap to the tenant's chief executive officer (CEO) memorialized a meeting between Satrap and the CEO concerning the lease dispute. In the letter, Satrap noted that the CEO said he did "not understand what a triple net obligation is" and that he had been "misrepresented by the past owner of the property as to [his] obligation for the lease." Satrap stated his suspicion that the MLS was "false" and that the seller was guilty of fraud. Satrap also threatened the tenant with eviction for failing to pay rent. At some point, Satrap commenced eviction proceedings, and the eviction was completed on May 1, 2006.

In April 2007, Satrap filed a complaint against the seller for breach of contract, negligent misrepresentation, and fraud. Satrap did not sue his real estate broker and agent (PC and Baker) at that time. Satrap did not sue them until he filed his third amended complaint on April 25, 2008, which was more than two years after close of escrow and initiation of the dispute over lease terms.

In March 2009, Satrap filed his fifth amended complaint. In that complaint, Satrap charged PC and Baker with negligence, breach of fiduciary duty, and constructive fraud. Among other things, Satrap alleged that PC and Baker failed to (1) obtain an estoppel certificate from the tenant confirming the lease terms or advise Satrap about a certificate, (2) review the leases or advise Satrap about the leases, (3) investigate zoning and other regulations governing the property or advise Satrap about regulations, and (4) investigate or confirm the seller's MLS representations or advise Satrap about ...

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