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William L. Lyon & Associates, Inc., et al v. the Superior Court of Placer County

April 12, 2012

WILLIAM L. LYON & ASSOCIATES, INC., ET AL., PETITIONERS,
v.
THE SUPERIOR COURT OF PLACER COUNTY, RESPONDENT; TED HENLEY ET AL., REAL PARTIES IN INTEREST.



(Super. Ct. No. SCV24208) ORIGINAL PROCEEDING. Petition denied.

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

CERTIFIED FOR PUBLICATION

This original proceeding illustrates the perils that real estate brokers and their agents assume when acting as a dual listing agent with duties to both the buyers and sellers of the same house. We consider whether Civil Code section 2079.4*fn1 or the standard buyer-broker agreement form issued by the California Association of Realtors (Association) governed the limitations period for filing breach of contract and tort causes of action against petitioners William L. Lyon & Associates and Connie Gidal.*fn2 The buyer-broker agreement form serves to give real estate brokers the exclusive right to represent prospective buyers of residential property. The preprinted form also imposes a two-year limitations period on any legal action against the buyers' real estate broker. In this case, slightly less than three years elapsed after the close of escrow and before the buyers, real parties in interest Ted Henley and Patti Henley, sued Lyon & Associates.

The Henleys allege that Lyon & Associates committed breach of contract, breach of fiduciary duty, fraud, negligence, and negligent misrepresentation by failing to investigate and disclose problems with the house they purchased that were covered up with a coat of dark brown paint while the house was offered for sale. The sellers, Robert Costa and Denise Costa, were also named as defendants in the Henleys' complaint and are additional real parties in interest in this proceeding. The Costas, in turn, filed a cross-complaint to seek (1) indemnity from Lyon & Associates, and (2) to assert additional causes of action against Lyon & Associates as the sellers' own broker.

Lyon & Associates moved for summary judgment, arguing that the Henleys' claims were all barred by the two-year statute of limitations imposed by section 2079.4. Lyon & Associates also argued that the Costas' cross-complaint was time-barred because it sought only indemnity for the untimely claims made by the Henleys. The trial court denied the summary judgment motion on grounds that (1) the limitations period imposed by section 2079.4 was equitably tolled while the Henleys attempted to mediate their dispute with Lyon & Associates, and (2) the Costas' claims were not merely for indemnity but sought also to recover for the breach of duties owed by Lyon & Associates as the sellers' broker.

We conclude that Lyon & Associates' motion for summary judgment was correctly denied, but for reasons different than those articulated by the trial court. Section 2079.4 does not apply in this case because that section imposes a statutory duty on a seller's broker to the buyer when the Henleys' case involves assertion of fiduciary duties based on Lyon & Associates' duties as the buyers' broker. We also reject the argument that the two-year limitations period in the buyer-broker agreement rendered the Henleys' claims untimely. The Henleys' breach of contract claim was extended by the discovery rule. With regard to the Henleys' tort causes of action, which are based on Lyon & Associates' breach of fiduciary duty, we conclude that the two-year limitations period in the buyer-broker agreement did not render these claims untimely.

With regard to the Costas' claims against Lyon & Associates, the indemnity causes of action that depend on the Henleys' claims were also not time barred. The Costas' additional claims against Lyon & Associates as the sellers' broker were also timely.

Concluding that Lyon & Associates have not established the Henleys' nor the Costas' claims to be untimely, we deny the petition for writ of mandate and vacate the stay of trial court proceedings previously issued by this court.

FACTS PLED

The Henleys' first amended complaint alleged that, in early 2006, the Costas contacted the Lyon & Associates agent who had previously represented them in the purchase of their house on Clubhouse Drive in Rocklin, California. That agent became aware of some of the house's defects and problems. Rather than continuing with their original agent, the Costas decided to use another Lyon & Associates agent, Gidal, to sell the property. Defects in the paint and stucco of the house were visible when photos of the property were taken to list it for sale. Gidal was present when the photographs were taken.

The Henleys decided to purchase the Costas' house. On May 2, 2006, the Henleys signed a buyer-broker agreement giving William L. Lyon & Associates and Gidal the exclusive right to represent the Henleys in any purchase of a house from April 1, 2006, to April 1, 2007. Lyon & Associates agreed to "exercise due diligence and reasonable efforts to fulfill the . . . authorizations and obligations" set forth in the buyer-broker agreement. The agreement affirmed that "a dual agent is obligated to disclose known facts materially affecting the value or desirability of the property to both parties." After entering into the buyer-broker agreement with the Henleys, Lyon & Associates became a dual agent in the sale of the Clubhouse Drive house.

The buyer-broker agreement limited the period for legal action on the contract as follows: "10. TIME TO BRING LEGAL ACTION: Legal action for breach of this Agreement, or any obligation arising therefrom, shall be brought no more than two years from the expiration of the Representation Period or from the date such cause of action may arise, whichever occurs first."

Escrow on the Clubhouse Drive house closed on May 9, 2006. Subsequently, the Henleys began to discover construction defects that had been concealed by the Costas. These defects were alleged to have been caused by McKim Construction and the Costas, and included problems with water intrusion and efflorescence*fn3 extending from the decks to the exterior paint and stucco of the house. The Costas also installed quartzite stone overlays on the backyard steps in a manner that caused water intrusion on the house's stucco walls.

The Henleys' first amended complaint alleged that the Costas knew of the construction defects and problems but did not disclose them as part of the sale. Instead, the Costas painted the house a dark brown color to conceal many of the problems. While the house was listed for sale, rain caused many of the painted-over defects to reappear. The Costas purchased more dark brown paint and covered up the newly visible damage prior to inspection by the Henleys.

The Henleys moved in during June 2006, and began to discover various construction defects with the house.

PROCEDURAL HISTORY

On May 8, 2009, the Henleys filed their first amended complaint against Robert Costa, Denise Costa, and Ron McKim Construction, Inc.*fn4 The first amended complaint also named Lyon & Associates and Gidal as defendants for the first time. In pertinent part, the Henleys' operative complaint set forth causes of action against Lyon & Associates for (1) breach of contract for failure to conduct an inspection of the house prior to sale, (2) negligence in failing to conduct a reasonable inspection of the house or to ask the Costas about defects or problems, (3) fraud due to the intentional failure to disclose the efflorescence, bubbling, blistering, and cracking of the stucco and paint on the house, (4) breach of fiduciary duty, and (5) negligent nondisclosure of defects.

The Costas' cross-complaint alleged causes of action for negligence, breach of fiduciary duty, and breach of contract based on Lyon & Associates' duties as the Costas' broker. The cross-complaint also alleged implied and comparative indemnity against Lyon & Associates.

Lyon & Associates moved for summary judgment on the first amended complaint and the cross-complaint. The motion argued that all of the causes of action asserted by the Henleys and Costas were barred because the two-year statute of limitations imposed by section 2079.4 expired before the filing of the first amended complaint and the cross-complaint.

The Henleys opposed summary judgment by arguing that section 2079.4 does not apply and the two-year contractual limitations period must be subject to the discovery rule. The Henleys further argued that the contractually required mediation preceding the first amended complaint tolled the limitations period so that their causes of action against Lyon & Associates were timely. The Costas opposed summary judgment on grounds that Lyon & Associates' breach of contract and fiduciary duties to the Costas as sellers were separate from the claims brought by the Henleys as buyers.

The trial court denied the motion for summary judgment. As to the Henleys, the court explained that the contractual limitations period was tolled pending mediation between the parties. As to the Costas, the court concluded that their claims were based on duties owed exclusively to the Costas and were timely filed.

On August 3, 2011, Lyon & Associates filed a petition for writ of mandate under Code of Civil Procedure section 437c, subdivision (m).*fn5 We granted a stay of all trial court proceedings in this case and issued an alternative writ.

DISCUSSION

I

Review of a Denied Motion for Summary Judgment

As the California Supreme Court has explained, "The purpose of the law of summary judgment is to provide courts with a mechanism to cut through the parties' pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute." (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) "An order denying a motion for summary judgment may be reviewed by way of a petition for a writ of mandate. ([Code Civ. Proc,] § 437c, subd. (l).) Where the trial court's denial of a motion for summary judgment will result in a trial on non-actionable claims, a writ of mandate will issue. (Lompoc Unified Sch. Dist. v. Superior Court (1993) 20 Cal.App.4th 1688, 1692.) Since a motion for summary judgment 'involves pure matters of law,' we review a ruling on the motion independently. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860.) Summary judgment is proper when there is no triable issue of material fact and the moving party is entitled to judgment as a matter of law. ([Code Civ. Proc.,] § 437c, subd. (c).) A defendant making the motion has the initial burden of showing that one or more elements of the cause of action cannot be established or that there is a complete defense to that cause of action. ([Code Civ. Proc.,] § 437c, subd. (o)(2); Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at p. 850.) If the defendant fails to make this initial showing, it is unnecessary to examine the plaintiff's ...


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