Leko v. Cornerstone Bldg. Inspection Serv.

Opinion

May a realtor who is sued for negligent nondisclosure of defects in real property obtain equitable indemnity from a home inspection company that allegedly breached its duty to the purchaser to discover and

The trial court granted both motions. In its oral ruling, it explained that “under these circumstances, it isn’t fair to allow an agent and broker to point the finger at an inspection company when the agents and brokers have a separate and independent duty to disclose all known and readily observable defects with respect to a piece of real property.” Realtors appeal from the judgment of dismissal entered in favor of Cornerstone and the summary judgment entered in favor of Crystal and D-Way. Additionally, counsel for Crystal and D-Way has appealed a $950 sanctions order entered against him.

Discussion

Standard of Review

A motion for judgment on the pleadings, like a general demurrer, tests the allegations of the complaint or cross-complaint, supplemented by any matter of which the trial court takes judicial notice, to determine whether plaintiff or cross-complainant has stated a cause of action. (Briggs v. Lawrence (1991) 230 Cal.App.3d 605 , 610 [ 281 Cal.Rptr. 578 ].) Because the trial court’s determination is made as a matter of law, we review the ruling de novo, assuming the truth of all material facts properly pled. (Berry v. City of Santa Barbara (1995) 40 Cal.App.4th 1075 , 1082 [ 47 Cal.Rptr.2d 661 ].) A ruling on a summary judgment motion is reviewed de novo to determine whether there are any triable issues of material fact. (Code Civ. Proc., § 437c, subd. (c); Artiglio v. Corning Inc. (1988) 18 Cal.4th 604 , 612 [ 76 Cal.Rptr.2d 479 , 957 P.2d 1313 ].)

Cornerstone’s motion for judgment on the pleadings and Crystal’s and D-Way’s motion for summary judgment present several common issues relating to a realtor’s right to seek equitable indemnity from a home inspection company. The pertinent facts are essentially undisputed, and our review focuses on the legal significance of those facts. (See Providence Washington Ins. Co. v. Valley Forge Ins. Co. (1996) 42 Cal.App.4th 1194 , 1199 [ 50 Cal.Rptr.2d 192 ]; O’Neil v. General Security Corp. (1992) 4 Cal.App.4th 587 , 606 [ 5 Cal.Rptr.2d 712 ].)

Introduction

On appeal, Realtors contend they were entitled to seek equitable indemnity from Inspectors. They argue that Inspectors were jointly and

Joint and Several Liability

Joint and several liability is a prerequisite for equitable indemnity. (Yamaha Motor Corp. v. Paseman (1990) 219 Cal.App.3d 958 , 964 [ 268 Cal.Rptr. 514 ].) As a threshold matter, Realtors’ claim for equitable indemnity depends on whether a home inspection company and a realtor may be jointly and severally liable for the failure to disclose defects to a purchaser of residential real property.

When the negligent acts of two tortfeasors are both a proximate cause of an indivisible injury, the tortfeasors are jointly and severally liable for that injury. (American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578 , 586-588 [ 146 Cal.Rptr. 182 , 578 P.2d 899 ].) Joint tortfeasors may act in concert or independently of one another. (Id. at p. 587.) “There seems to be no logical reason why the application of [joint and several liability] should turn on the relationship of the tortfeasors to each other. What is important is the relationship of the tortfeasors to the plaintiff and the interrelated nature of the harm done.” (Jaffe v. Huxley Architecture (1988) 200 Cal.App.3d 1188 , 1192 [ 246 Cal.Rptr. 432 ].)

Joint and several liability does not depend on whether the tortfeasors owe a duty to one another. “ ‘It would be unfair to require one tortfeasor to bear a loss disproportionate to his relative culpability simply because a tortfeasor who contributed to the loss owed a duty to the plaintiff but not to the defendant.’ ” (GEM Developers v. Hallcraft Homes of San Diego, Inc. (1989) 213 Cal.App.3d 419 , 429, fn. 2 [ 261 Cal.Rptr. 626 ].) Nor must joint tortfea-sors owe the same duty of care to the plaintiff. “[A] defendant/indemnitee may in an action for indemnity seek apportionment of the loss on any theory that was available to the plaintiff upon which the plaintiff would have been successful.” (Id. at p. 430; see also Yamaha Motor Corp. v. Paseman, supra, 219 Cal.App.3d at p. 968.)

Real estate agents and brokers involved in the sale of a residential property owe the purchaser of that property a statutory duty to conduct a “reasonably competent and diligent visual inspection of the property offered for sale and to disclose to [a] prospective purchaser all facts materially affecting the value or desirability of the property that an investigation would

Purchasers’ original complaint, by contrast, alleged that Realtors were liable because they had failed to discover and/or disclose structural defects in the property. Realtors’ cross-complaint sought equitable indemnity from Inspectors on the theory that they had negligently failed to discover or disclose the same alleged defects. The allegations in the cross-complaint were sufficient to plead an indivisible injury—the purchase of a defective home.

Public Policy

Indemnification between joint tortfeasors is an equitable rule created to correct potential injustice, and the doctrine is not available where it would operate against public policy. (See Woodward-Gizienski & Associates v. Geotechnical Exploration, Inc. (1989) 208 Cal.App.3d 64 , 67 [ 255 Cal.Rptr. 800 ].) Inspectors argue that a rule permitting realtors to seek equitable indemnity from home inspection companies would violate public policy, because it would interfere with the inspection company’s duty of loyalty to its client. We are not persuaded.

“ ‘ “[I]n the great majority of cases . . . equity and fairness call for an apportionment of loss between the wrongdoers in proportion to their relative culpability, rather than the imposition of the entire loss upon one or the other tortfeasor.” ’ ” (Jaffe v. Huxley Architecture, supra, 200 Cal.App.3d at p. 1191.) Cases which have created exceptions to this general rule have done so “only where, because of the particular factual context, fairness did not require that any part of the loss be shifted from a defendant to a third party, or where such a loss shifting would interfere in a special relationship between the plaintiff and the third party.” (Gentry Construction Co. v. Superior Court (1989) 212 Cal.App.3d 177 , 181-182 [ 260 Cal.Rptr. 421 ].)

For example, indemnity claims by nonclients against attorneys have been disallowed when they are based on the attorney’s breach of duty to his or her

Similar considerations do not apply for an indemnity claim against a home inspection company retained by the purchaser of real property. Inspection companies do not have a privileged, fiduciary relationship with the client, and their reports are not confidential. While a potential indemnity claim could detrimentally affect an attorney’s advice to his or her client, it would seemingly enhance the performance of home inspectors by inducing them to be more diligent in discovering and reporting potential defects. And when the home purchasers have not directly sued the home inspection company, no equivalent relief will be available to a realtor defendant in the main action.

A rule allowing realtors to seek equitable indemnity does not unfairly shift the burden of disclosing defects from the realtor to the home inspection company. The purchaser of the property would be able to sue the home inspection company directly, and by statute, an inspector may not contractually eliminate its duty of care. (Bus. & Prof. Code, § 7198 [“Contractual provisions that purport to waive the duty owed pursuant to Section 7196, or limit the liability of the home inspector to the cost of the home inspection report, are contrary to public policy and invalid”].) Allowing realtors to seek equitable indemnity allows the realtor as well as the purchaser to initiate a lawsuit, but will not ordinarily increase the overall exposure of the home inspector for a single inspection.

Inspectors have not directed us to any statute suggesting the Legislature intended to immunize them from equitable indemnity actions as a matter of public policy. The only provision specifically addressing the overlapping duties, of inspectors and realtors is Business and Professions Code section

Application to Crystal and D-Way

The evidence presented in support of Crystal’s and D-Way’s summary judgment motion demonstrates that those entities did not inspect the subject property on behalf of Purchasers and were not directly involved in the transaction leading to this litigation. This presents an additional issue with respect to Realtors’ claim for equitable indemnity. Crystal and D-Way argue that they owed no duty to Purchasers because they performed their inspections solely for a third party’s benefit, and that as a result, they are not jointly and severally liable for Purchasers’ injuries. We disagree.

The undisputed facts reveal that Sellers originally agreed to sell the subject property to Paul Antonsen, an unrelated third party. Antonsen retained Crystal to perform a general inspection and retained D-Way to inspect the fireplace only. Crystal prepared a report identifying several problems with the property, including bowing and cracking in the foundation. D-Way’s report noted several problems with the fireplace, and recommended replacement of the entire fireplace structure. Copies of the reports were provided to Antonsen and the real estate agents involved in that transaction, including Oyler. The deal with Antonsen was never consummated and Purchasers made a purchase offer on the property less than a month later. Oyler testified in her deposition that she provided Purchasers with copies of Crystal’s and D-Way’s reports.

As previously discussed, Realtors’ right to seek equitable indemnification from Crystal and D-Way depends on whether those inspection companies owed a duty to Purchasers and may be held jointly and severally liable to Purchasers for the nondisclosure of certain defects. (See Yamaha Motor Corp. v. Paseman, supra, 219 Cal.App.3d at p. 964.) Because their only connection with Purchasers was through their inspection reports, such a duty must arise from representations contained in those reports, rather than negligence in the course of the inspections themselves.

In an analogous context, our Supreme Court has discussed the circumstances in which a supplier of commercial information may be liable

Though Bily involved the liability of accountants, its reasoning applies with equal force to home inspection companies. “Accountants are not unique in their position as suppliers of information and evaluations for the use and benefit of others. Other professionals, including attorneys, architects, engineers, title insurers and abstractors, and others also perform that function.” (Bily v. Arthur & Young, supra, 3 Cal.4th at p. 410.) In Soderberg v. McKinney (1996) 44 Cal.App.4th 1760 [ 52 Cal.Rptr.2d 635 ], for example, the court held that a real estate appraiser could be liable to investors for misrepresentations contained in its appraisal, even though the appraiser had been retained by a mortgage broker rather than the investors themselves.

Under Bily and the Restatement Second of Torts, a supplier of commercial information is deemed to have intended to influence a transaction by a third party when the supplier “ ‘knows with substantial certainty’ ” that the third party, or the class of persons to which that third party belongs, will rely on the information in the course of the transaction. (Bily v. Arthur & Young, supra, 3 Cal.4th at p. 414.) A reasonable trier of fact could infer that when Crystal and D-Way provided their reports to the listing agent on the property, they knew with substantial certainty that those reports would be transmitted to other prospective purchasers if the pending deal fell through. (Cf. Soderberg v. McKinney, supra, 44 Cal.App.4th at p. 1771.) This inference may be drawn even though Crystal’s written contract with Antonsen stated that the report could not be used by or transferred to other persons without Antonsen’s and Crystal’s consent. (Id. at pp. 1770-1771 [provision that appraisal report was restricted to use by mortgage broker did not establish that, as matter of law, appraiser owed no duty to third party investor].) Crystal and D-Way did not establish, as a matter of law, that they

Breach of Duty

Inspectors argue that if a duty of care was owed to Purchasers, there is no evidence to show they breached that duty. This issue is not properly before us. Cornerstone was granted judgment on the pleadings, and we may not consider the extrinsic evidence to which it refers in its appellate briefs when reviewing the ruling on that motion. (See Cloud v. Northrup Grumman Corp. (1998) 67 Cal.App.4th 995 , 999 [ 79 Cal.Rptr.2d 544 ].) Crystal and D-Way moved for summary judgment based solely on the alleged absence of duty to a subsequent home purchaser. They did not present admissible evidence to establish that they met their duty of care as a matter of law.

Inspectors may well have defenses to the claims against them. One issue lurking in this case, but not briefed by the parties, is whether liability under Bily will attach if the only wrongful conduct by an inspection company is a negligent failure to disclose a defect. (See, e.g., Wilson v. Century 21 Great Western Realty (1993) 15 Cal.App.4th 298 , 306 [ 18 Cal.Rptr.2d 779 ] [negligent misrepresentation is a species of fraud or deceit specifically requiring an assertion of fact, and an “implied” assertion or representation is not enough].) Another is whether D-Way can be held liable for nondisclosure of defects when it recommended a complete replacement of the fireplace structure it was hired to inspect. However, the procedural posture of this case makes it inappropriate for us to analyze the substance of the inspection reports or to resolve the ultimate issue of Inspectors’ liability.

In reversing the orders granting judgment on the pleadings and summary judgment, we express no opinion about the ultimate merits of Realtors’ claims. We conclude only that Realtors are not barred, as a matter of law, from seeking equitable indemnity.

Attorney

Gregory C. Pyfrom has represented Crystal and D-Way throughout the trial court proceedings and in this appeal. Before he filed the motion for summary judgment on behalf of his clients, he was ordered to pay $950 to Realtors’ counsel Natalie Blake as a discovery sanction. He has separately appealed this order, contending it was unauthorized. We disagree.

Pyfrom unilaterally noticed the depositions of Oyler, Pallat and Blago Leko, for March 1 and 2, 1999 (a Monday and Tuesday). Due to oversight

That same evening, Pyfrom faxed another letter to Blake in which he described her conduct as “unprofessional, outrageous and distressing.” After criticizing Blake’s “juvenile behavior” and characterizing the lawsuit against his clients as meritless, Pyfrom concluded, “You will find, if you known [sz'c] how to read, that ‘knee jerk’ cross-complaints for indemnity are improper and sanctionable without a firm and distinct basis. This distinct basis is not subject to defense by hunch, women’s intuition or ‘tea leaf interpretations. HQ When you come to the motion, bring you [szc] check book.”

Blake sent a letter to Pyfrom on March 9, 1999, stating that she had not been contacted regarding the scheduling of her clients’ depositions. “Please know that, despite the tone of your most recent correspondence, the offer to set the depositions on a mutually convenient date still stands. Again, we apologize for any misunderstanding regarding the original scheduling of the depositions.” On March 22, 1999, Pyfrom filed a motion to compel the depositions. He did not attach any of his correspondence with Blake to the motion.

The trial court denied the motion to compel and requested supplemental briefing on whether it should impose sanctions against Pyfrom for his unprofessional communications with counsel and his refusal to resolve the matter informally. It ultimately awarded $950 under Code of Civil Procedure section 2023, subdivision (a)(3), which authorizes sanctions for “[ejmploy-ing a discovery method in a manner or to an extent that causes unwarranted annoyance, embarrassment, or oppression, or undue burden and expense.” The court also referenced subdivision (a)(9) of the same statute, which authorizes sanctions for “[f] ailing to confer in person, by telephone, or by letter with an opposing party or attorney in a reasonable and good faith attempt to resolve informally any dispute concerning discovery, if the section governing a particular discovery motion requires the filing of a declaration stating facts showing that such an attempt has been made.. . . .”

Implicit in the requirement that counsel contact the deponent to inquire about the nonappearance is a requirement that counsel listen to the reasons offered and make a good faith attempt to resolve the issue. Here, the failure to appear was due to oversight and opposing counsel expressed a willingness to reschedule the depositions at a mutually convenient date. The trial court did not abuse its discretion when it determined that Pyfrom did not comply with his obligations under Code of Civil Procedure section 2025, subdivision (j)(3)(B). (See Estate of Ruchti (1993) 12 Cal.App.4th 1593 , 1601-1602 [ 16 Cal.Rptr.2d 151 ].) Sanctions were properly awarded under section 2023, subdivision (a)(3) and (9).

Pyfrom argues that the court overstepped its bounds by using discovery sanctions to penalize him for the unprofessional tone of his February 26 letter to Attorney Blake. Pyfrom was not sanctioned for the letter per se, but for filing an unnecessary motion to compel. The letter was relevant because it demonstrated that Pyfrom had completely disregarded his obligation to attempt to informally resolve the discovery issue.

In the respondent’s brief, Attorney Blake requests sanctions against Py-from for filing a frivolous appeal. (Code Civ. Proc., § 907; Cal. Rules of Court, rule 26(a).) She has not filed a separate motion or supporting declaration as required by California Rules of Court, rule 26(e), and we have no basis for determining the appropriate amount of sanctions. (See Estate of Gilkison (1998) 65 Cal.App.4th 1443 , 1450 [ 77 Cal.Rptr.2d 463 ].)

Disposition

The order granting judgment on the pleadings in favor of cross-defendant Cornerstone and the order granting summary judgment in favor of cross-defendants Crystal and D-Way are reversed. The sanctions order entered against Attorney Pyfrom is affirmed.

Yegan, Acting P. J., and Perren, J., concurred.

A petition for a rehearing was denied February 28, 2001, and respondents’ petition for review by the Supreme Court was denied May 2, 2001.