Calemine v. Samuelson
2009 Cal. App. LEXIS 174, 171 Cal. App. 4th 153, 89 Cal. Rptr. 3d 495 (2009)
Rule of Law:
A real estate seller has a duty to disclose the existence of prior lawsuits regarding property defects if such litigation constitutes a material fact affecting the value or desirability of the property, even if the physical defects themselves have been disclosed.
Facts:
- Samuelson owned a condominium from 1983 to 2002 which experienced intermittent water intrusion and flooding in the lower level.
- In 1986, Samuelson and the Homeowners Association (HOA) sued the developer for design and construction defects related to the water issues.
- Following ineffective repairs, the HOA sued a repair contractor (Westar) in 1996, a fact known to Samuelson as he served on the HOA board.
- A new contractor, CHI, was hired to perform repairs but explicitly warned Samuelson that the work was only a 'band-aid' and would not fully solve the water intrusion due to hydrostatic pressure.
- In 2002, Samuelson sold the condominium to the Calemines.
- During the sale, Samuelson disclosed that there had been 'heavy rains below ground' and water damage, but he orally represented that the problem was 'solved' and did not mention the two prior lawsuits or the contractor's warnings.
- The Calemines purchased the property believing the water issue was a minor, resolved matter.
- In 2005, the garage flooded again, leading the Calemines to discover the history of litigation and the temporary nature of the repairs.
Procedural Posture:
- The Calemines sued Samuelson in the Superior Court (trial court) for nuisance, breach of contract, negligence, and misrepresentation/concealment.
- Samuelson moved for summary judgment, arguing he had sufficiently disclosed the defects.
- The trial court granted Samuelson's motion for summary judgment, finding no triable issue of material fact regarding the disclosures.
- The Calemines appealed the judgment to the California Court of Appeal.
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Issue:
Does a genuine issue of material fact exist as to whether a real estate seller breached his duty of disclosure by failing to inform the buyers of two prior lawsuits regarding water intrusion, even though he disclosed the existence of the water intrusion itself?
Opinions:
Majority - Doi Todd
Yes, a triable issue of fact exists regarding whether the undisclosed litigation was a material fact that should have been disclosed. The court reasoned that while the seller satisfied the duty to disclose the physical condition of water intrusion, the failure to disclose the existence of the prior lawsuits deprived the buyers of critical context. The litigation history would have revealed that the defects were chronic, that previous repairs were ineffective, and that the current repairs were executed on a limited budget as a partial solution. Citing Pagano v. Krohn, the court distinguished this case because the seller in Pagano had disclosed the existence of the lawsuit, whereas Samuelson provided a partial disclosure that potentially misled the buyers into thinking the problem was fully resolved.
Analysis:
This case highlights the distinction between disclosing a physical defect and disclosing the history of that defect. The court clarified that a seller cannot hide behind a partial disclosure; stating that a leak exists is not the same as disclosing that the leak was the subject of years of litigation and failed repairs. This decision expands the understanding of 'material facts' in real estate transactions to include the litigation history of a property when that history illuminates the severity or permanence of a physical defect. It prevents sellers from sanitizing the history of a property defect by admitting to the symptom while concealing the diagnosis.
