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Glen Oaks Estates Homeowners Association v. Re/Max Premier Properties

February 23, 2012


APPEAL from a judgment of the Superior Court of Los Angeles County, Joseph De Vanon, Jr., Judge. Affirmed in part; reversed in part. (Los Angeles County Super. Ct. No. GC 044725)

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


Appellant Glen Oaks Homeowners Association (the HOA) appeals from judgments entered against it after the trial court sustained demurrers to its first amended complaint (FAC). Respondents are two groups of realtors: (1) Loeffler and Bathke Properties Realtors, Inc., doing business as Re/Max Premier Properties, Inc., Priscilla Siew-Lin Yim, and Margaret M. Huang; and (2) DG Real Estate, Inc. (erroneously sued as Dilbeck, Inc.), doing business as Dilbeck Realtors GMAC Real Estate and Marklin Malone.*fn2 The trial court sustained the demurrers on standing and statute of limitations grounds. We affirm in part and reverse in part.

factual background*fn3

The HOA is a nonprofit, mutual benefit, unincorporated association responsible for the operation, maintenance, and management of the common area serving the five parcels of Glen Oaks Estates. Glen Oaks Estates is located in Pasadena, California. The members of the HOA consist of the owners of the five parcels in Glen Oaks Estates.

The FAC alleges that the Realtors acted as the sellers' agents for the developers of Glen Oaks Estates and assisted the developers in marketing and selling the parcels. The Realtors were dual agents in that they also represented the HOA members as buyers' agents. Re/Max acted as dual agent in the sale of three parcels in Glen Oaks Estates, and Dilbeck acted as dual agent in the sale of one parcel in Glen Oaks Estates.

On or about January 9, 2005, a significant slope failure occurred along parts of the Glen Oaks Estates common slope area and common driveway. In the aftermath of this landslide, a negligence lawsuit was filed against the HOA and two of its members on December 19, 2007: DePaul v. Glenoaks Estates Homeowners Association (Super. Ct. L.A. County, 2010, No. GC040069) (DePaul case). The HOA filed a cross-complaint in the DePaul case against the developers for indemnity and contribution. On September 10, 2008, the developers served verified responses to requests for production of documents in the DePaul case. The HOA received a compact disc containing the developers' responsive documents on February 9, 2009.

Among the documents produced by the developers was a letter dated December 28, 2000, from Re/Max to the developers, which the HOA attached to the FAC. The HOA alleges the letter falsely advised the developers that the Department of Real Estate (DRE) did not require a homeowners' association for Glen Oaks Estates. The letter further advised the developers to lower the amount of the homeowners' association monthly dues so that buyers would not "back out" from escrow. The HOA alleges that Re/Max and the developers collaborated to create a false and misleading budget and provided that false budget to the HOA members.

The documents produced by the developers also included a DRE "File Abandonment Notice" executed by one of the developers, which declined to file an application for a final public report on Glen Oak Estates. The HOA also attached this to the FAC. The HOA alleges that until it discovered the abandonment notice in the developers' document production, it did not know that the developers and the Realtors were required to provide a final public report to each buyer, which would have included a DRE-approved budget worksheet and "other material transactional disclosures and documents."

The HOA also alleges the Realtors received multiple soil reports by Pioneer Soils Engineering, Inc. (Pioneer), which included analyses of the common areas in Glen Oaks Estates. The analyses were used as the basis for the construction of the common roadway and common area slopes. The Realtors allegedly received material information that Pioneer may not have been validly licensed and that the soil reports were illegal or unreliable. First, Pioneer allegedly admitted that it did not have "errors and omissions" insurance. Second, certain soil reports lacked a signature by an engineer or geologist and/or an official marking of an engineer or geologist. Third, the body of one or more soil reports referenced testing, investigation, and grading of property in Fullerton rather than at Glen Oaks Estates. And fourth, the body of one or more soil reports referenced a nonexistent Pioneer report. The HOA alleges that the Realtors either did not provide these soils reports to the HOA members, or gave them these soil reports without any warning as to their potential defects.

The gravamen of the claims against the Realtors is that, had they acted fairly, honestly, and consistent with their fiduciary duties, the HOA members would have received an accurate budget and the transactional documents required by law and DRE regulations (such as the public report), and they would have known the soil reports were illegitimate. If the HOA members had this information, they allegedly would not have purchased their homes, would not be embroiled in third party litigation arising from the landslide, and would not be responsible for certain expenses to repair the common areas of Glen Oaks Estates.

procedural background

The HOA filed its original complaint on February 25, 2010. After the court sustained the Realtors' demurrers to the complaint, the HOA filed the FAC on June 4, 2010. The FAC alleges four causes of action against the Realtors collectively and two causes of action against Re/Max only.*fn4

First, the FAC alleges the Realtors engaged in unfair business practices (Bus. & Prof. Code, § 17200) by violating the Subdivided Lands Act (Bus. & Prof. Code, § 11018.1), which requires that the owner, subdivider, or real estate agent give buyers a public report regarding the property and other transactional documents prior to execution of the sale contract. Second, it alleges the Realtors engaged in unfair business practices through false advertising (Bus. & Prof. Code, §§ 17200, 17500) because they failed to disclose in flyers and other publications that Glen Oaks Estates was a "common interest development" subject to the requirements of the Subdivided Lands Act and the regulations of the DRE. Third, the FAC alleges the Realtors breached their fiduciary duties to the members of the HOA by failing to provide a final public report, a DRE-approved budget, and other required disclosures and transactional documents pursuant to the Subdivided Lands Act. It further alleges that these breaches and/or unfair practices were a substantial factor in the members' purchase of the Glen Oaks Estates parcels because they would not have purchased had they received the required documents; the documents would have revealed the defective condition of the common area roads and slopes.

Fourth, the FAC alleges that Re/Max intentionally misrepresented or concealed material facts from the members of the HOA by advising the developers to lower the monthly HOA dues so that the parcels would not fall out of escrow, and then Re/Max intentionally provided a false budget and deceptively low monthly dues statement to members. Had the members known the budget was inaccurate and misleading, they allegedly would not have purchased their parcels. Fifth, the FAC alleges Re/Max engaged in unfair business practices when it "low-balled" the budget and advised the developers to lower monthly dues. Sixth, and finally, the FAC alleges that the Realtors breached their fiduciary duties to the members by failing to investigate whether the Pioneer soil reports were legitimate or failing to warn the members that the reports might not be legitimate, despite "undeniable" bases for questioning the reliability or validity of the reports.

The Realtors demurred to the causes of action in the FAC. The court sustained the demurrers without leave to amend, ruling as follows: "The action against demurring defendants Re/Max and Dilbeck is barred by the statute of limitations. . . . Based on the allegations, it appears that all purchases occurred prior to February 2001 and the slope failure occurred in 2005. The complaint was filed on February 25, 2010, after the expiration of the statute of limitations set forth in CCP 338 and CC 2079.4. Finally, plaintiff lacks standing to assert a claim against moving defendants based on concealment and/or misrepresentation. The complaint alleges that individual members were induced into purchasing lots based on defendants' misrepresentations and concealments (i.e., failure to provide a final public report, DRE approved budget and required disclosures). Such claims belong to the individual homeowners, not plaintiff HOA."

The court entered judgment in favor of the Realtors on October 18, 2010. This timely appeal followed.

standard of review

When the trial court sustains a demurrer, we review the complaint de novo to determine whether it contains sufficient facts to state a cause of action. (Hernandez v. City of Pomona (1996) 49 Cal.App.4th 1492, 1497.) "'As a reviewing court we are not bound by the construction placed by the trial court on the pleadings but must make our own independent judgment thereon, even as to matters not expressly ruled upon by the trial court.'" (Marina Tenants Assn. v. Deauville Marina Development Co. (1986) 181 Cal.App.3d 122, 127.) We accept as true all properly pleaded material factual allegations of the complaint and other relevant matters that are properly the subject of judicial notice, and we liberally construe all factual allegations of the ...

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