Wurtzel v. Marcus & Millichap

Filed 8/29/07 Wurtzel v. Marcus & Millichap CA2/4

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION FOUR

APPEAL from a judgment of the Superior Court of Los Angeles County, Michael Stern, Judge. Affirmed.

Lon B. Isaacson Associates, Lon B. Isaacson, and Larry Johnson for Plaintiff and Appellant.

Overland Borenstein Scheper & Kim, Diann H. Kim, and Annah S. Kim for Defendants and Respondents.

Appellant Alan Paul Wurtzel (Wurtzel) appeals from summary judgment entered in favor of real estate brokers who jointly represented Wurtzel and the sellers of a six-unit apartment building Wurtzel purchased in 2004. We conclude that summary judgment was properly granted, and we affirm.

FACTS AND PROCEDURAL HISTORY

I. The Purchase and Sale of the Property

Wurtzel purchased a six-unit apartment building (the property) from defendants Les Rodin, Jason Rodin, Steven Rodin, Malkie Rodin, and Ruchama Rodin (sellers) in 2004. Defendants Toni Azzi and Marcus & Millichap Real Estate Investment Brokerage Company (collectively, brokers) represented both the sellers and Wurtzel in the sale and purchase of the property.

Before escrow closed, Fidelity National Title Company prepared a preliminary title report that noted the existence of a Regulatory Agreement executed between the propertys prior owners and the City of Los Angeles, but did not describe the agreements terms.[1] In fact, the regulatory agreement significantly encumbered the property, requiring 40 percent of the units to be occupied or made available to very low income households (defined as households with income less than 60 percent of the median income for the Los Angeles metropolitan area) at below market rents for 30 years.

It is a matter of dispute whether Wurtzel received the preliminary title report prior to the close of escrow. It is undisputed, however, that neither Wurtzel nor the brokers reviewed the report or knew about the regulatory agreement before escrow closed.[2] It further is undisputed that Wurtzel signed a document acknowledging receipt of the preliminary title report and that he subsequently approved in writing the exceptions contained in the title report.

Wurtzel first learned about the regulatory agreement in about May 2004, after escrow closed. Wurtzel claimed that had he known about the regulatory agreement before the close of escrow, he would not have purchased the property.

II. The Written Agreements Purporting to Limit the Brokers Duties

to Buyer and Sellers

In connection with his purchase of the property, Wurtzel signed several documents that purported to limit the brokers duties to advise him about the propertys physical and financial condition. Among those documents was the purchase agreement, which provided that the brokers shall not be responsible for performing any due diligence or other investigation of the Property on behalf of either Buyer or Seller, or for providing either party with professional advice with respect to any legal, tax, engineering, construction or hazardous materials issues. It further provided that, except for maintaining the confidentiality of any information regarding Wurtzels or sellers financial condition and further negotiations regarding the purchase agreement, Buyer and Seller agree that their relationship with Agent is at arms length and is neither confidential nor fiduciary in nature. (Italics added.) And, it included an acknowledgement that:

[E]xcept as otherwise expressly stated herein, Agent has not made any investigation, determination, warranty or representation with respect to any of the following: . . . (b) the legality of the present or any possible future use of the Property under any federal, state or local law; (c) pending or possible future action by any governmental entity or agency which may affect the Property; . . . (e) the accuracy or completeness of income and expense information and projections, of square footage figures, and of the texts of leases, options and other agreements affecting the Property; (f) the possibility that lease, options or other documents exist which affect or encumber the Property and which have not been provided or disclosed by Seller . . . . [] Buyer agrees that investigation and analysis of the foregoing matters is Buyers sole responsibility and that Buyer shall not hold Agent responsible therefor[]. Buyer further agrees to reaffirm its acknowledgement of this disclaimer at close of escrow and to confirm that it has relied upon no representations of Agent in connection with its acquisition of the Property.

The receipt of documents also contained language purporting to limit the agents duties to Wurtzel, including an acknowledgment that Marcus and Millichap has conducted no investigation regarding the accuracy or completeness of the information contained therein and that Buyer, together with its own independent advisors, will conduct whatever investigations Buyer deems necessary to evaluate this information and the subject property. It further provided that Although Agent believes the documents, and information contained therein, are reliable, Agent makes no representations as to the accuracy or completeness of the documents. Buyer must personally review all documents and verify the information contained therein.

Finally, the contingency removal stated that Buyer acknowledges that no representative of Marcus & Millichap has made any investigation, determination, warranty or representation with respect to the subject matter of any of the contingencies removed herein, including, but not limited to any of the following: . . . the texts of leases, options and other agreements affecting the property; the possibility that leases, options or other documents exist which affect or encumber the property.

III. The Present Action

On December 9, 2004, Wurtzel filed the present action against the sellers, the brokers, and Fidelity National Title Company, seeking compensatory and punitive damages for defendants failures to disclose the existence of the regulatory agreement. As against the brokers, who are the sole appellants here, the operative first amended complaint alleged that the brokers failure to discover and disclose the existence of the regulatory agreement constituted negligence (first cause of action), fraud (fifth cause of action), and negligent misrepresentation (sixth cause of action).[3]

The brokers filed a motion for summary judgment or summary adjudication of the first, fifth, and sixth causes of action on March 3, 2006. The motion asserted that the brokers were entitled to judgment as a matter of law because (1) Wurtzel waived the right to assert the present claims by acknowledging receipt of the preliminary title report and approving its exceptions; (2) the brokers had no duty to discover or disclose the regulatory agreement; (3) the brokers did not deliberately withhold information from Wurtzel; and (4) the brokers made no representations about the regulatory agreement to Wurtzel.

The trial court granted summary judgment for the brokers on May 18, 2006. The court found that the undisputed facts established that Wurtzel had waived his right to assert that he had not received or inspected the preliminary title report as a contingency of sale. Further, it found that the brokers did not have a duty to discover or disclose the regulatory agreement and that there was no evidence that the brokers had made any misrepresentations or had fraudulent intent. Thus, there were no triable issues of fact as to any of the claims against the brokers.

Judgment for the brokers was entered on May 31, 2006. This timely appeal followed.

DISCUSSION

I. Standard of Review

The standard of review for summary judgment is well established. The motion shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. (Code Civ. Proc., 437c, subd. (c).) A moving defendant has met his burden of showing that a cause of action has no merit by establishing that one or more elements of a cause of action cannot be established or that there is a complete defense. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 849-850; Lackner v. North (2006) 135 Cal.App.4th 1188, 1196.)

We independently review an order granting summary judgment, viewing the evidence in the light most favorable to the nonmoving party. (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768; Lackner v. North, supra, 135 Cal.App.4th at p. 1196.) In performing our independent review of the evidence, we apply the same three-step analysis as the trial court. First, we identify the issues framed by the pleadings. Next, we determine whether the moving party has established facts justifying judgment in its favor. Finally, if the moving party has carried its initial burden, we decide whether the opposing party has demonstrated the existence of a triable, material fact issue. (Chavez v. Carpenter (2001) 91 Cal.App.4th 1433, 1438.)

In determining whether there are triable issues of material fact, we consider all the evidence set forth by the parties, except that to which objections have been made and properly sustained. (Code Civ. Proc., 437c, subd. (c); Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.) We accept as true the facts supported by plaintiffs evidence and the reasonable inferences therefrom (Sada v. Robert F. Kennedy Medical Center (1997) 56 Cal.App.4th 138, 148), resolving evidentiary doubts or ambiguities in plaintiffs favor (Saelzler v. Advanced Group 400, supra, 25 Cal.4th at p. 768).

II. First Cause of Action: Negligence

The first cause of action is for negligence. It alleges that the brokers owed Wurtzel a duty to discover and disclose the existence and contents of the regulatory agreement, but that the brokers breached this duty by failing to advise him of the regulatory agreements existence, scope, and deleterious effect.[4]

The elements of a cause of action for negligence are commonly stated as (1) a legal duty to use due care; (2) a breach of that duty; (3) a reasonably close causal connection between that breach and the resulting injury; and (4) actual loss or damage. (Ahern v. Dillenback (1991) 1 Cal.App.4th 36, 42; 6 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, 732, p. 60.) Failure to prove any one of these elements is fatal to plaintiffs recovery. (Banerian v. OMalley (1974) 42 Cal.App.3d 604, 612.) (Carleton v. Tortosa (1993) 14 Cal.App.4th 745, 754.) Whether a legal duty of care exists in a given factual situation is a question of law to be determined by the court. (Ballard v. Uribe (1986) 41 Cal.3d 564, 572, fn. 6; Carleton v. Tortosa, supra, 14 Cal.App.4th at p. 754.)

In the present case, the brokers were dual agents for Wurtzel and the sellers. They thus owed Wurtzel duties in two capacities: (1) as sellers agents, and (2) as buyers agents. For the reasons set forth below, we conclude that the trial court correctly found that the brokers did not have a duty in either capacity to discover and disclose the existence of the regulatory agreement, and that Wurtzels negligence claim therefore fails as a matter of law.

A. The Brokers Did Not Owe Wurtzel a Duty to Discover and Disclose the Regulatory Agreement in Their Capacity as Sellers Agents

The sellers brokers duty of care to a prospective buyer, including the duty to disclose facts about the property, is codified in Civil Code sections 2079 through 2079.24.[5] As relevant here, section 2079, subdivision (a), provides: It is the duty of a real estate broker . . . to a prospective purchaser of residential real property . . . 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 . . . . (See also Assilzadeh v. California Federal Bank (2000) 82 Cal.App.4th 399, 412-413.)

We conclude that this section did not require the brokers in their capacity as sellers agents to advise Wurtzel of the regulatory agreement. As an initial matter, by its plain language section 2079 applies only to sales of residential real property, defined as property comprising one to four dwelling units. ( 2079, subd. (a); Smith v. Rickard (1988) 205 Cal.App.3d 1354, 1360 [the Legislature intended the duties set out in section 2079 to apply only to brokers selling residential properties of four or fewer dwellings, and not to commercial real estate transactions].) The property Wurtzel purchased is a six-unit apartment building, and thus its sale is not subject to the duties set out in section 2079.

Moreover, the duty created by section 2079 is limited to a visual inspection. Section 2079.3 is express that the inspection required by section 2079 does not include or involve . . . an affirmative inspection of . . . public records or permits concerning the title or use of the property. (Italics added; see also Field v. Century 21 Klowden-Forness Realty (1998) 63 Cal.App.4th 18, 24 [the statutory scheme expressly states a selling broker has no obligation to purchasers to investigate public records or permits pertaining to title or use of the property].) In the present case, a diligent visual inspection of the property would not have revealed the existence or contents of the regulatory agreement. Rather, the agreement was discoverable only through an investigation of the public records referenced in the title reportan investigation the statute expressly states the brokers had no duty to undertake. ( 2079.3.) The brokers failure to discover and disclose the regulatory agreement, thus, does not violate section 2079.

Wurtzel contends that even if the brokers did not have a statutoryduty under section 2079 to discover and disclose the regulatory agreement, they nonetheless had such a duty under the common law. We do not agree. Wurtzel cites no authority for the proposition that a sellers agent had a common law duty to investigate public records relevant to title,[6]and even if such a duty existed before the Legislature passed section 2079.3, it could not have survived the enactment of that section. Further, we agree with courts that have concluded that by enacting section 2079, the Legislature intended that the duty of care it articulated not apply to the sale of commercial properties or residential properties with more than four dwelling units. (Smith v. Rickard, supra, 205 Cal.App.3d at p. 1361, italics added.) As one court has explained, If a statute enumerates the persons or things to be affected by its provisions, there is an implied exclusion of others, and if a statute specifies one exception to a general rule, other exceptions or effects are excluded; in other words, as has been frequently held, a general provision of a statute is controlled by a specific and express exception. It is an elementary rule of construction that the expression of one excludes the other. It is equally well settled that the court is without power to supply an omission. (Estate of Pardue (1937) 22 Cal.App.2d 178, 180-181.) (Smith v. Rickard, supra, 205 Cal.App.3d at p. 1361.) Thus, we conclude that the brokers did not have a common law duty as sellers agents to discover the existence of the regulatory agreement.

B. The Brokers Did Not Owe Wurtzel a Duty to Discover and Disclose the Regulatory Agreement in Their Capacity as Buyers Agents

In addition to the duties the brokers owed Wurtzel as agents for the sellers, the brokers also owed him duties as his own agent. (E.g., Assilzadeh v. California Federal Bank, supra, 82 Cal.App.4th at p. 414 [[A] dual agent has fiduciary duties to both the buyer and seller].) Those duties derive from two sources: regulatory statutes and the common law of agency. (Carlton v. Tortosa, supra, 14 Cal.App.4th at p. 755.) Wurtzel does not contend that the brokers failed to fulfill a duty imposed by statute, and thus he must derive the brokers duties from the common law of agency.

Under the common law, . . . a brokers fiduciary duty to his client requires the highest good faith and undivided service and loyalty. [Citations.] (Field v. Century 21 Klowden-Forness Realty, supra, 63 Cal.App.4th at pp. 25-26.) Thus, many cases hold that a real estate broker as a fiduciary has a duty to learn the material facts that may affect the principals decision. . . . [H]e is expected to perform the necessary research and investigation in order to know those important matters that will affect the principals decision, and he has a duty to counsel and advise the principal regarding the propriety and ramifications of the decision. (Ibid.) This duty may require investigation of facts not known to the agent and disclosure of all material facts that might reasonably be discovered. (Ibid.) Additionally, depending on the circumstances, a brokers fiduciary duty may be much broader than the duty to visually inspect and may include a duty to inspect public records or permits concerning title or use of the property, a duty which is expressly excluded from section 2079. (Id. at p. 26.)

However, the brokers duties to investigate and counsel the principal about his prospective purchase of real estate do not exist in all agency relationships. An agency is a contractual relationship and, thus, [t]he existence and extent of the duties of the agent to the principal are determined by the terms of the agreement between the parties, interpreted in light of the circumstances under which it is made, except to the extent that fraud, duress, illegality, or the incapacity of one or both of the parties to the agreement modifies it or deprives it of legal effect. (Rest.2d Agency, 376; Anderson v. Badger (1948) 84 Cal.App.2d 736, 741; 3 Cal.Jur.3d, Agency,  87, pp. 119-120.) (Carlton v. Tortosa, supra, 14 Cal.App.4th at p. 755; see also Padgett v. Phariss (1997) 54 Cal.App.4th 1270, 1279-1280 [same].) An agency agreement can, accordingly, define, modify, and limit the terms of the agency and the agents fiduciary duties. (2 Miller & Starr, Cal. Real Estate (3d ed. 2000) Agency, 3:25, p. 122.) Such a limitation is not a disclaimer but merely a contractual limitation on the agents duties. (Ibid., fn. omitted.)[7]

The Legislature codified this common law principle permitting parties to define fiduciary duties by contract in section 2079.23. That section provides that in a real property transaction, [a] contract between the principal and agent may be modified or altered to change the agency relationship at any time before the performance of the act which is the object of the agency with the written consent of the parties to the agency relationship. ( 2079.23; see also 2079.13 [defining agent].)

Applying these principles, the court in Carleton v. Tortosa, supra, 14 Cal.App.4th 745, held that, as a matter of law, a real estate agent did not owe her principal duties expressly disclaimed in the listing agreement. There, the plaintiff retained the agent to assist him with the sale and purchase of commercial property. (Id. at p. 749.) The plaintiff executed listing agreements, disclosure statements, and purchase contracts that informed him that the agent would not advise him of the tax consequences of his real estate transactions. (Id. at pp. 749, 752-753.) After the transactions were completed, however, plaintiff learned that he had incurred a significant tax liability, and he sued the agent for professional negligence for failing to structure the transactions as tax-deferred exchanges. (Id. at pp. 750, 753.) The Court of Appeal affirmed the grant of summary judgment for the agent, concluding that there was no breach of duty as a matter of law. (Id. at pp. 750-751, 754-759.) It explained: [A]side from obligations imposed by statute and implementing regulations, a real estate brokers duty is derived from the agreement between the broker and client. In this case, the parties agreement in effect specified that defendant had no duty to recognize and advise plaintiff regarding the potential tax consequences of his transactions. Contrary to plaintiffs claim, this contractual provision did not violate public policy . . . . Accordingly, we shall affirm the judgment. (Id. at pp. 750-751.)

The court reached a similar conclusion in a related context in Meyers v. Guarantee Sav. & Loan Assn. (1978) 79 Cal.App.3d 307. There, the defendant bank agreed to hold construction funds in a special account for the plaintiffs and to release the funds to the plaintiffs builder when he submitted vouchers indicating that prescribed work on plaintiffs new home had been completed. (Id. at p. 309.) The agreement between the plaintiffs and the bank stated that the bank had the right to inspect the property at any time to verify that the work was progressing satisfactorily, but that it had no duty to do so. (Ibid.) After the construction was partially completed, plaintiffs became dissatisfied with the builders work and filed a claim against the bank, alleging that it breached its fiduciary duty to inspect the construction of the house and verify that the builder complied with the plans and specifications before releasing construction funds to him. (Id. at pp. 310-311.) The court affirmed the trial courts grant of summary judgment for the bank, concluding as a matter of law that the bank had no duty to inspect the property. It explained: Appellants . . . argue that [the bank] was their agent and as a fiduciary owed them the duty to inspect the ongoing construction and report any departures from specifications. [The bank] concedes the agency relationship but correctly points out that its duty was limited to the scope of the agency set forth in the agreement. (Rest.2d Agency, 376, 377; Anderson v. Badger (1948) 84 Cal.App.2d 736, 743.) Since the contract provided that respondent had no duty to inspect . . . , the agency did not encompass a duty to protect appellants by inspecting the ongoing construction for departures from the specifications. (Id. at p. 312.)

These principles control here. As we have said, in connection with his purchase of the property, Wurtzel signed several documents that purported to limit the brokers fiduciary duties to advise him about the property. Those documents provided that, except for maintaining the confidentiality of any information regarding Wurtzels or sellers financial condition and further negotiations regarding the purchase agreement, Buyer and Seller agree that their relationship with Agent is at arms length and is neither confidential nor fiduciary in nature. Further, the documents provided that the brokers would not (1) perform any due diligence or other investigation of the Property; (2) provide the buyer or seller professional advice with respect to any legal . . . issues; (3) make any investigation or representation about the legality of the present or any possible future use of the Property under any federal, state or local law, pending or possible future action by any governmental entity or agency which may affect the Property, the texts of leases, options and other agreements affecting the Property, or the possibility that lease, options or other documents exist which affect or encumber the Property and which have not been provided or disclosed by Seller; (4) investigate the accuracy or completeness of the information contained in any document provided by the sellers; or (5) make any investigation or representation with respect to the subject matter of any of the contingencies removed in the contingency removal, including the texts of leases, options and other agreements affecting the property; the possibility that leases, options or other documents exist which affect or encumber the property. Finally, the documents provided that any investigation of these matters is Buyers sole responsibility and that Buyer shall not hold Agent responsible therefor[].

Taken together, these documents disclaim the alleged duties on which Wurtzels breach of fiduciary duty claim rests. Wurtzel asserts that the brokers had a duty to point out negative information that is otherwise buried in documents submitted to the buyer, but that alleged duty is inconsistent with Wurtzels acknowledgements that his relationship with the brokers is at arms length and is neither confidential nor fiduciary in nature and that the brokers would not make any investigation or representation with respect to the subject matter of any of the contingencies. Wurtzel also claims that the brokers had a duty to make any investigation necessary to learn the value of the property, but that claim similarly is inconsistent with his acknowledgement that the brokers shall not be responsible for performing any due diligence or other investigation of the Property, that the brokers had not made any investigation, determination, warranty or representation about the legality of the present or any possible future use of the Property or the possibility that lease, options or other documents exist which affect or encumber the Property and which have not been provided or disclosed by Seller, that investigation and analysis of the foregoing matters is Buyers sole responsibility and that Buyer shall not hold Agent responsible therefor[],and that no representative of Marcus & Millichap has made any investigation, determination, warranty or representation with respect to the subject matter of any of the contingencies removed herein, including . . . the texts of . . . agreements affecting the property . . . [and] the possibility that . . . documents exist which affect or encumber the property.

On their face, the purchase agreement, receipt of documents, and contingency removal agreements bar Wurtzels breach of fiduciary duty claim because the documents eliminate the very duties on which the fiduciary duty claim depends. The claim therefore must fail unless, as Wurtzel contends, his disclaimer of these duties violates public policy. (See, e.g., Carleton v. Tortosa, supra, 14 Cal.App.4th at pp. 751, 758-759.)

We are not aware of any public policy that would prevent a buyer of commercial real property from contracting away the duties his broker otherwise might owe him to advise him of the contents and effect of real estate purchase documents and to inspect public records that affect title or use of the property. While a real estate broker presumably has the expertise to act in this advisory capacity, not every purchaser will need or want such advice. Moreover, a purchaser who wants this kind of advice may want to obtain it from another source, such as an attorney or a financial advisor. Accordingly, we see no reason why a buyer should be legally compelled to receiveand to pay foradvice about a real property transaction from his or her broker.

Wurtzel cites BT-I v. Equitable Life Assurance Society (1999) 75 Cal.App.4th 1406, 1412, for the proposition that a principal cannot contractually waive or limit the fiduciary duties owed by his agent, but that case does not so hold. There, the plaintiff, a limited partner, was squeezed out of the partnership when the general partner purchased and then foreclosed a deed of trust on the partnerships sole asset, an office building. (Id. at p. 1408.) The Court of Appeal reversed the trial courts conclusion that the partnership agreement authorized the general partners conduct and relieved it of any duty to the limited partner. (Ibid.) The court held that while partners may determine by agreement many aspects of their relationship (id. at p. 1411), the fiduciary duties of loyalty and good faith cannot be waived (id. at p. 1410, italics added). It explained: [T]he fact that the [Revised Uniform Limited Partnership Act] allows the parties to structure many aspects of their relationship is not a license to freely engage in self-dealingit remains our responsibility to delimit the outer boundaries of permissible conduct by a fiduciary. In view of the rule against waiving fundamental fiduciary duties, we cannot stretch these general provisions to include giving [the general partner] a free hand to act for its own self-interest. (Id. at p. 1414; see also Everest Investors 8 v. McNeil Partners (2003) 114 Cal.App.4th 411, 424 [The fiduciary obligations of a general partner with respect to matters fundamentally related to the partnership business cannot be waived or contracted away], italics added.)[8]

BT-I does not purport to define fiduciary duties outside the partnership context, and thus it has no direct application here. But even if the principles it articulates apply equally to real estate agents and their principals, it still would not prevent the parties from contractually limiting the brokers duties to advise Wurtzel about the contents of the purchase documents and to investigate any incumbrances on the property. BT-I recognizes that many fiduciary duties can be contracted away; the exceptions, it says, are the fiduciary duties of loyalty and good faith. (Id. at p. 1410.) As applied to the real estate context, a comparable rule would prevent a principal from disclaiming his agents fiduciary duty to represent him in good faith, and thus, for example, it would not eliminate liability if an agent encouraged the principal to purchase property on terms that were advantageous to the agent but were disadvantageous to the principal. A comparable rule would not, however, prevent the parties from agreeing to limit the services the broker would provide to the principal, as happened in the present case.

For all of these reasons, we conclude that, as a matter of law, the brokers did not owe Wurtzel a duty to discover and disclose the existence of the regulatory agreement. The trial court thus correctly found that there were no triable issues of fact as to Wurtzels cause of action for breach of fiduciary duty.^[9]

III. Fifth Cause of Action: Fraud and Deceit

The fifth cause of action is for fraud and deceit based on the brokers alleged concealment of the regulatory agreement. [T]he elements of an action for fraud and deceit based on concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage. (Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612-613; accord, Hahn v. Mirda (2007) 147 Cal.App.4th 740.) (Linear Technology Corp. v. Applied Materials, Inc. (2007) 152 Cal.App.4th 115, 131.)

The trial court properly concluded that there were no triable issues of material fact as to fraud. As we have said, Wurtzel has not identified any admissible evidence that the brokers knew about the regulatory agreement before escrow closed. Accordingly, the brokers did not have a duty to disclose the fact of the regulatory agreement to Wurtzel and their alleged concealment of the regulatory agreement could not have been intentional. Since [a]ctual fraud . . . involve[s] active misconduct, such as an intent to deceive, or misrepresentation, by the defendant (Tyler v. Childrens Home Society (1994) 29 Cal.App.4th 511, 548, italics added), Wurtzels fraud cause of action fails as a matter of law.

Wurtzel contends that even if he failed to produce evidence of actual fraud, the trial court should not have summarily adjudicated this cause of action because there was evidence of constructive fraud. Constructive fraud is not alleged in the first amended complaint, however, and thus evidence of such alleged fraud cannot create a triable issue of fact in opposition to the summary judgment. An appellate courts first step in reviewing a summary judgment is to identif[y] the issues as framed by the pleadings. (Turner v. Anheuser-Busch, Inc. (1994) 7 Cal.4th 1238, 1252-1253.) We do not require the [defendants] to negate elements of causes of action plaintiffs never pleaded. (Melican v. Regents of University of California (2007) 151 Cal.App.4th 168, 182.)

IV. Sixth Cause of Action: Negligent Misrepresentation

The sixth cause of action is for negligent misrepresentation. Negligent misrepresentation is a species of the tort of deceit and, like fraud, requires a misrepresentation, justifiable reliance and damage. (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239, fn. 4.) The elements of negligent misrepresentation are similar to intentional fraud except for the requirement of scienter; in a claim for negligent misrepresentation, the plaintiff need not allege the defendant made an intentionally false statement, but simply one as to which he or she lacked any reasonable ground for believing the statement to be true. (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.) (Melican v. Regents of University of California, supra, 151 Cal.App.4th at pp. 181-182.)

Wurtzel alleges that he purchased the property because Azzi made two statements to him: he (1) represented to Wurtzel that the subject property was a good buy, and (2) represented that the only encumbrance on the property was a first deed of trust. However, neither of these alleged misrepresentations is alleged in the complaint. The complaint alleges that the brokers failed to disclose the regulatory agreement, not that they made any affirmative factual representations on which Wurtzel relied. Thus, the alleged affirmative misrepresentations fail to create triable issues of fact sufficient to defeat summary judgment. (Turner v. Anheuser-Busch, Inc., supra, 7 Cal.4th at pp. 1252-1253.)

V. Evidentiary Issues

Wurtzel claims finally that the trial court erred in sustaining the brokers objections to the expert declarations of Jan Feldman and Kitty Krant. The trial court excluded both declarations because it concluded that Feldman and Krant had not properly been qualified as experts; in addition, it excluded most of the testimony of Feldman and Krant as irrelevant, improper opinion, and lacking foundation.

We review the trial courts evidentiary rulings for abuse of discretion. (Carnes v. Superior Court (2005) 126 Cal.App.4th 688, 694.) To demonstrate that the trial court abused its discretion in sustaining the brokers evidentiary objections, Wurtzel must demonstrate that Feldman and Krant should have been qualified as experts, that their testimony was admissible, and that exclusion of their testimony was prejudicial. (Ibid.) He has not done so. While he contends that Feldman and Krant were qualified to serve as experts, he has not demonstrated that the contents of their declarations were admissible. Thus, we need not determine whether Wurtzel was prejudiced by the courts ruling. He has failed to establish reversible error.

DISPOSITION

The judgment for respondents is affirmed. Respondents shall recover their costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

SUZUKAWA, J.

We concur:

EPSTEIN, P. J.

WILLHITE, J.

Publication Courtesy of San Diego County Legal Resource Directory.

Analysis and review provided by San Diego County Property line attorney.

[1] Specifically, the preliminary title report referenced that certain document entitled Regulatory Agreement dated May 17, 1995, executed by and between City of Los Angeles, a municipal corporation[,] and Charles Lawrence and Arline Lawrence, husband and wife, as joint tenants recorded June 19, 1995, Instrument No. 95-971484, of Official Records, which document, among other things, contains or provides for: terms and conditions as set forth therein. [] Reference is hereby made to said document for full particulars.

[2] Wurtzel disputes the brokers contention that they did not know about the regulatory agreement before escrow closed, but he does not offer any admissible evidence in support of his claim. His only proffer in this regard is the declaration of real estate broker Kitty Krant, who states that, [I]n my opinion Mr. Azzi did read the Preliminary Title Report when he received it because all real estate agents I know read Preliminary Title Reports. The trial court properly sustained an objection to this statement. (See Discussion, part V, post.)

[3] According to Wurtzel, he settled with Fidelity National and went to trial against the sellers, obtaining a judgment in his favor.

[4] The appellants opening brief also asserts that the brokers had a duty not merely to disclose that they were acting as dual agents, but also to explain the implications of the dual agency. This assertion fails to raise a triable issue of material fact because there is no allegation in the first amended complaint of failure to disclose the implications of dual agency. Defendants moving for summary judgment have only the burden of negating the theories of liability alleged in the complaint, and need not refute liability on some theoretical possibility not included in the pleadings. (Tsemetzin v. Coast Federal Savings & Loan Assn. (1997) 57 Cal.App.4th 1334, 1342-1343.) Thus, evidence of the brokers asserted failure to disclose the implications of their dual agency does not raise an issue of fact material to the present appeal.

[5] All further undesignated statutory references are to the Civil Code.

[6] None of the cases Wurtzel relies on support his contention that the brokers had a common law duty to discover and disclose the regulatory agreement. To the contrary, Field v. Century 21 Klowden-Forness Realty, supra, 63 Cal.App.4th at pages 25-28, and footnote 11, holds that a sellers agent does not have a duty to investigate title; he or she is liable for misrepresentations pertaining to title only if they are knowingly and intentionally made. Sweat v. Hollister (1995) 37 Cal.App.4th 603 is also unavailing because it does not hold that a broker has a duty to investigate. It merely lists the type of information that should be disclosed to the buyer. Finally, Easton v. Strassburger (1984) 152 Cal.App.3d 90, 102, footnote 8, explicitly declined to recognize a sellers brokers duty to investigate in the case of a commercial real estate sale: We express no opinion here whether a brokers obligation to conduct an inspection for defects for the benefit of the buyer applies to the sale of commercial real estate.

[7] The Restatement Second of Agency explains as follows: Agency is a relation based upon the manifestations of consent of the parties and hence, except where the manifestations do not have legal effect, the duties of both parties are based upon them. Unless the parties have manifested an intent otherwise, the agreement is interpreted to be that which, in view of the conduct of the parties in light of all the circumstances, reasonable men in the position of the principal and agent would expect. Ordinarily, the duties of the agent are the result of inferences from the conduct of the parties. Thus, the duties, described in Section 379 as duties of care, those stated in Section 385 as duties of obedience, and those stated in Sections 387-398 as duties of loyalty, are inferences drawn from the conduct of the parties in light of common experience and what reasonable men regard as fair. The rules stated in such Sections are the rules applicable to the normal case, in which the parties have not made a different agreement. Since the parties can make what agreements they please, and since, with the exceptions stated in Comment b, such agreements are enforceable, the rules stated in Sections 378-398 are, with the same exceptions, dependent upon the nonexistence of an agreement to the contrary. (Rest.2d Agency, 376, com. a, p. 173.)

[8] Wurtzel quoted this passage from Everest Investors in his opening brief, but in doing so replaced the italicized phrases with ellipses, thus fundamentally changing its meaning. As quoted by Wurtzel, the quotation suggests that fiduciary obligations . . . cannot be waived or contracted away. As the full quote makes clear, the statement by the Everest Investors court is significantly more limited. We raised this issue at oral argument, and were unpersuaded by counsels explanation for his editing decision. We admonish counsel that it is not appropriate to omit significant language in a quotation in an attempt to demonstrate that the case supports his position.

[9] Because we have concluded that the brokers did not breach their fiduciary duties to Wurtzel as a matter of law, we do not consider the alternative basis on which the trial court granted summary adjudication, i.e., that Wurtzel waived his breach of duty claim.