Swartz v. Coldwell Bankers CA4/1

Filed 11/15/13 Swartz v. Coldwell Bankers CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

KEVIN F. SWARTZ et al., D062324

Plaintiffs and Appellants,

v. (Super. Ct. No.
37-2011-0051200 CU-IC-NC)
COLDWELL BANKER RESIDENTIAL
BROKERAGE COMPANY et al.,

Defendants and Respondents.

APPEAL from a judgment of the Superior Court of San Diego County, Jaqueline

M. Stern, Judge. Affirmed.

Naumann Law Firm, William H. Naumann and Monnett De La Torre for Plaintiffs

and Appellants.

Keeney Waite & Stevens, Mary M. Best and Todd F. Stevens for Defendants and

Respondents.
 I.

INTRODUCTION

In this case we consider whether a licensed real estate agent owed her client a duty

to conduct an independent review of public records or a duty to engage in additional

investigation to ascertain the existence of a recorded covenant burdening property prior to

her client purchasing the property, when that covenant was not identified by a title

insurance company in its preliminary report or its policy of title insurance.

Kevin F. Swartz and Diane Kocheran (plaintiffs) named Coldwell Banker

Residential Brokerage Company, NRT, LLC, Coldwell Banker Real Estate, LLC, and

Claudia Anderson (jointly "the Coldwell defendants") in a second amended complaint

(SAC) alleging causes of action for breach of fiduciary duty, negligent misrepresentation,

and negligence against these defendants. The Coldwell defendants demurred to the

causes of action asserted against them in the SAC on multiple grounds, and the trial court

sustained the demurrer without leave to amend on the ground that the causes of action

were untimely under the applicable statute of limitations. The court sustained the

demurrer as to the cause of action for negligent misrepresentation on the additional

ground that the SAC failed to allege the existence of a false statement made to plaintiffs,

and sustained the demurrer as to the breach of fiduciary duty and negligence causes of

action on the additional ground that plaintiffs failed to plead facts that would establish

that the Coldwell defendants owed a duty to plaintiffs and breached that duty.

On appeal, plaintiffs argue that their claims were not untimely because they did

not discover, and could not reasonably have discovered, the Coldwell defendants' failure

2
to meet their fiduciary duties until they learned of the recorded covenant during litigation

with the sellers of the property, who, at that point, were asserting their rights pursuant to

the easement on plaintiffs' property that was the subject of the recorded covenant.1

Plaintiffs also contend that their SAC sufficiently states causes of actions for breach of

fiduciary duty, negligent misrepresentation, and negligence.

We conclude that the SAC fails to state causes of action for breach of fiduciary

duty, negligent misrepresentation, and negligence. The conduct for which plaintiffs seek

relief under the theories of breach of fiduciary duty and negligence do not establish that

the Coldwell defendants owed a duty to plaintiffs and failed to meet that duty. Further,

plaintiffs failed to allege that the Coldwell defendants made any "misrepresentation" to

support their cause of action for negligent misrepresentation. The trial court thus did not

err in sustaining the Coldwell defendants' demurrer.

With respect to the trial court's conclusion that the causes of action against the

Coldwell defendants should be dismissed with prejudice, we agree. Plaintiffs fail to

make any argument as to how they could amend to state causes of action for breach of

fiduciary duty or negligence. (See Davies v. Sallie Mae, Inc. (2008) 168 Cal.App.4th

1086, 1090 (Davies) [" 'The plaintiff has the burden of proving that an amendment would

cure the defect [citation]' "].) Although plaintiffs do identify how they could amend the

operative complaint to state a cause of action for negligent misrepresentation, we

conclude that this claim is time-barred, and thus, leave to amend would not be

1 With respect to the easement, plaintiffs' property is the servient estate, and the
sellers' property is the dominant estate.
3
appropriate. We therefore affirm that portion of the trial court's order denying plaintiffs

leave to amend to attempt to plead any causes of action against the Coldwell defendants.

II.

FACTUAL AND PROCEDURAL BACKGROUND2

In November 2006, plaintiffs retained Anderson, a licensed real estate agent for

Coldwell Banker, to represent them in a transaction to purchase residential property from

Tye and Lori Smith (the sellers). The sellers own an adjacent parcel and built both the

home located on their own parcel as well as the home on the parcel that plaintiffs

purchased. According to plaintiffs, prior to the purchase, the sellers represented to

plaintiffs that the property that plaintiffs intended to purchase was burdened by an

easement, but that the easement was "unusable." Plaintiffs obtained a preliminary title

report from defendant Fidelity National Title Insurance (Fidelity) and a title insurance

policy that described the relevant easement as a "Proposed Private Road Easement."3

2 We take the factual background from the SAC, to the extent that its allegations are
not contradicted by allegations asserted in the prior complaints. (See Haggis v. City of
Los Angeles (2000) 22 Cal.4th 490, 495 ["On appeal from dismissal following a sustained
demurrer, we take as true all well-pleaded factual allegations of the complaint"].)

3 Attached to the SAC is a copy of "Schedule A" and "Schedule B" to the title
insurance policy. Although the SAC alleges that the title insurance policy describes the
relevant easement as a "Proposed Private Road Easement," in fact, "Schedule A"
describes the property and easement in the following manner:

"Parcel 1 of Parcel Map No. 15792, in the County of San Diego,
State of California, according to Map thereof, filed in the Office of
the County Recorder of San Diego County, February 27, 1992.

4
 Plaintiffs purchased the property from the sellers, and obtained title to the property

in January 2007.

In March 2009, plaintiffs filed a lawsuit against the sellers and the sellers' real

estate agent related to various construction defects on the property. In a first amended

complaint in that action, which included claims for quiet title, negligence, and fraud, in

addition to construction defects, nuisance and trespass, plaintiffs alleged that the sellers

had failed to disclose that they were asserting "an easement on the subject property" or

the "existence of what the SMITH Defendants are now claiming is a usable road

easement." Plaintiffs specifically alleged that the sellers had represented to them "[t]hat

there were no encroachments, easements, or similar matters that might [a]ffect the subject

property" and "[t]hat the alleged easement was not useable."

Plaintiffs allege in the SAC that during the course of their lawsuit against the

sellers, they learned that the Smiths' predecessor in interest had executed and recorded a

"Covenant of Improvement Requirements" (covenant) that burdened the property. The

covenant required the developer of the property (i.e., the Smiths) to construct site

improvements, including a paved access road on the portion of the property that plaintiffs

ultimately purchased. At the time plaintiffs purchased the property, there was no access

road. Fidelity did not identify the recorded covenant in either the preliminary title report

or the title insurance policy.

"Reserving an easement for road and utility purposes over, under,
along and across those portions designated as 'Proposed Private
Road Easement' and 'Proposed 20 Foot Wide Private Road
Easement' on said Parcel Map." (Italics added.)
5
 Plaintiffs filed their original complaint in this action on February 4, 2011, naming

Fidelity National Title Insurance Company and multiple Does as defendants. After

substituting in a new attorney, plaintiffs filed a second amended complaint (SAC) on

October 12, 2011, in which they added the Coldwell defendants,4 and asserted causes of

action against the Coldwell defendants for breach of fiduciary duty, negligent

misrepresentation and negligence.5

In the SAC, plaintiffs alleged that they obtained a title policy issued by Fidelity

and, "in reliance on the Preliminary Report [issued by Fidelity], . . . proceeded to

purchase" the property. Plaintiffs further alleged that "[d]uring the course of discovery in

their lawsuit against the sellers [the First Action], Plaintiffs learned for the first time that

previous owners of the subject property had executed and recorded a Covenant of

Improvement Requirements [Covenant] that burdens the subject property."

The Coldwell defendants filed a demurrer to plaintiffs' SAC in November 2011.

The trial court held a hearing on the demurrer on March 9, 2012. At the conclusion of the

hearing, the trial court sustained the Coldwell defendants' demurrer to the SAC, without

leave to amend. The court entered a judgment dismissing the Coldwell defendants from

the action, with prejudice. Plaintiffs filed a timely notice of appeal.

4 The SAC continued to name Fidelity as a defendant, and asserted against Fidelity
causes of action for breach of contract, indemnification, and breach of the covenant of
good faith and fair dealing.

5 Although the sixth cause of action in the operative complaint is titled
"Negligence," plaintiffs are alleging that the Coldwell defendants had a duty to meet the
standard of care of a reasonably prudent real estate licensee. The sixth cause of action is
thus more properly considered one for professional negligence.
6
 III.

DISCUSSION

A. Standards of review

We review de novo an order sustaining a demurrer to determine whether the

complaint alleges facts sufficient to state a cause of action. (CPF Agency Corp. v. Sevel's

24 Hour Towing Service (2005) 132 Cal.App.4th 1034, 1042.) We exercise our

independent judgment as to whether the complaint states a cause of action, "giv[ing] the

complaint a reasonable interpretation" and "treat[ing] the demurrer as admitting all

properly pleaded material facts." (Palestini v. General Dynamics Corp. (2002) 99

Cal.App.4th 80, 86.) In doing so, we assume the truth of "(1) all facts properly pleaded

by the plaintiff, (2) all facts contained in exhibits to the complaint, (3) all facts that are

properly the subject of judicial notice, and (4) all facts that may reasonably be inferred"

from such facts. (Neilson v. City of California City (2005) 133 Cal.App.4th 1296, 1305.)

We do not, however, accept the truth of allegations that constitute legal contentions,

conclusions of law, or deductions drawn from those legal contentions or conclusions.

(Ibid.)

When a demurrer is sustained without leave to amend, "we decide whether there is

a reasonable possibility that the defect can be cured by amendment: if it can be, the trial

court has abused its discretion and we reverse; if not, there has been no abuse of

discretion and we affirm. [Citations.] The burden of proving such reasonable possibility

is squarely on the plaintiff." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

7
B. The complaint does not allege facts sufficient to state a cause of action against the
Coldwell defendants.

1. Breach of fiduciary duty (fourth cause of action)

"The elements of a cause of action for breach of fiduciary duty are the existence of

a fiduciary relationship, its breach, and damage proximately caused by that breach."

(City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th

445, 483.)

"The law imposes on a real estate agent 'the same obligation of undivided service

and loyalty that it imposes on a trustee in favor of his beneficiary.' [Citations.] This

relationship not only imposes upon him the duty of acting in the highest good faith

toward his principal but precludes the agent from obtaining any advantage over the

principal in any transaction had by virtue of his agency." (Batson v. Strehlow (1968) 68

Cal.2d 662, 674-675.) A real estate licensee is "charged with the duty of fullest

disclosure of all material facts concerning the transaction that might affect the principal's

decision." (Rattray v. Scudder (1946) 28 Cal.2d 214, 223; see also Realty Projects, Inc.

v. Smith (1973) 32 Cal.App.3d 204, 210; Smith v. Zak (1971) 20 Cal.App.3d 785, 792-

793.)

Plaintiffs assert that the Coldwell defendants were their fiduciaries with respect to

the purchase of the property, and, as such, owed them certain duties. For example,

plaintiffs maintain that the Coldwell defendants owed them a duty to "exercise the

highest duty of loyalty," to "affirmatively protect the interests of Plaintiffs," and "to

refrain from any conduct resulting in a disadvantage to Plaintiffs." Plaintiffs allege that

8
the Coldwell defendants' fiduciary duty "required them to make full and truthful

disclosure to Plaintiffs of all facts known to [the Coldwell defendants] or discoverable by

them with reasonable diligence, and likely to affect the Plaintiffs and Plaintiffs' decision

to purchase the Subject Property." (Underscore in original.) Plaintiffs further allege that

the Coldwell defendants' duty included the "duty to learn of material facts that may affect

the Plaintiffs' decision" and a "duty to counsel and advise Plaintiffs regarding the

propriety and ramifications of their decision."

With respect to the alleged breach of these duties, the operative complaint states

that the Coldwell defendants "were aware of material facts or could have discovered

through reasonable diligence various material facts affecting Plaintiffs' decision to

purchase the Subject Property." The complaint identifies those "material facts" as the

following: (1) "A duly recorded Covenant of Improvement Requirements burdened the

Subject Property . . . "; (2) "The COVENANT affected title to the Subject Property"; and

(3) "The COVENANT required certain items including but not limited to: construction of

numerous quasi-public site improvements . . . ." Plaintiffs allege that the Coldwell

defendants "had no reasonable basis for failing to or disregarding the importance of

inspection of public records or permits to ensure title to Subject Property was free and

clear of any encumbrances or defects . . . ."

In sum, plaintiffs allege that "had [the Coldwell defendants] acted properly in their

duties as fiduciaries and undertaken a diligent investigation of public records and of the

Subject Property itself, the full extent of any encumbrances or defects in title to the

9
Subject Property would have been ascertained and Plaintiffs would not have purchased

the Subject Property."

Plaintiffs are asserting that the Coldwell defendants breached their fiduciary duties

by failing to independently determine that the covenant existed, despite the fact that the

title insurance company failed to identify the covenant in either the preliminary title

report or the title insurance policy. In essence, plaintiffs seek to expand the scope of a

real estate agent's duty to his or her client to include a duty to conduct an independent

investigation and search of the public record to find recorded documents pertaining to the

property that were not disclosed by the title insurance company. However, the scope of a

real estate agent's duty to his or her clients is not so broad as to encompass the duty that

plaintiffs propose.

"In California . . . the parties rely on title insurance companies, whose fundamental

purpose is to search the public land records, report their findings as to the status of title,

and provide an indemnity policy insuring their findings." (Greenwald & Asimow, Cal.

Practice Guide: Real Property Transactions (The Rutter Group 2011) ¶ 3:2, pp. 3-1 to

3-2.) In addition, a real estate transaction "can involve many issues that are outside the

scope of the typical broker's expertise; some such as legal issues, tax matters, accounting

issues, construction, engineering, and hazardous materials, require the assistance of other

professionals," and a "broker is not obligated to provide advice in subjects outside [the

broker's] core real estate expertise." (California Real Property Sales Transactions

(Cont.Ed.Bar 4th ed. 2010) § 2.151, p. 201.) Real estate agents are entitled to rely on the

expertise of other professionals who are hired to complete a task in their own area of

10
expertise. Thus, where a title insurance company is hired to perform the task of

searching the public record, a real estate agent is entitled to rely on the work of the title

insurance company and does not have a duty to independently search the public record to

ensure that the title company has completed its job correctly.

The only authority on which plaintiffs rely in an attempt to establish that the duties

owed by a real estate licensee to a client include a duty to independently search the public

record to find recorded documents pertaining to the property that a client seeks to

purchase is the case of Field v. Century 21 Klowden-Forness Realty (1998) 63

Cal.App.4th 18 (Field). Field does not expand the scope of the duty of a real estate agent

in the manner in which plaintiffs contend. In Field, the plaintiffs alleged claims of

negligence, negligent misrepresentation, and breach of fiduciary duty against defendant

Century 21, based on the defendant's "failure to inspect related title documents and to

determine the scope of an easement in favor of Otay Water District." (Id. at p. 21.) The

issue on appeal in Field was whether the two-year statute of limitations established by

Civil Code section 2079.4 applied to claims for a breach of fiduciary duty brought against

real estate brokers by purchasers whom they exclusively represented. The Field court

concluded that actions by purchasers against brokers who represent them exclusively in a

real estate purchase transaction are not limited by the two-year time bar of Civil Code

11
section 2079.4, which applies to breaches of the duties imposed on brokers by Civil Code

sections 2079 through 2079.24. (Field, supra, at p. 20.)6

The facts in Field established that the Fields' real estate agent not only had "not

inspect[ed] the preliminary title report in a timely manner, she did not even receive it

from the title company until after escrow closed." (Field, supra, 63 Cal.App.4th at p.

22.) At trial, experts for both the plaintiffs and defendants agreed that the real estate

agent had breached her duty to the Fields "by not reviewing the preliminary title report

before the close of escrow to verify, among other things, the scope of the easement

revealed in the transfer disclosure statement." (Id. at pp. 22-23, italics added.) Notably,

the Field court did not suggest that the real estate agent had breached any duty by failing

to independently investigate the public record to determine the extent of the easement.

(Id. at p. 23.)

In rejecting the proposition that the two-year statute of limitations in Civil Code

section 2079.4 applies to claims of breach of fiduciary duties brought by a real estate

purchaser against his or her own exclusive broker, the Field court explained that "the

fiduciary duty owed by brokers to their own clients is substantially more extensive than

the nonfiduciary duty codified in section 2079," and that application of a the "two-year-

6 As the Field court explained, Civil Code "[s]ection 2079 requires sellers' real
estate brokers, and their cooperating brokers, to conduct a 'reasonably competent and
diligent visual inspection of the property,' and to disclose all material facts such an
investigation would reveal to a prospective buyer." (Field, supra, 63 Cal.App.4th at p.
23.) Civil Code section 2079.4 establishes a two-year statute of limitations for breaches
of the duties imposed by section 2079, commencing at the date of possession of the
property. (Field, supra, at pp. 23-24.)
12
from-possession limitation" in Civil Code section 2079.4 would unduly "restrict the

ability of buyers to obtain redress for duties owed by their own real estate licensees

which existed before section 2079.4 was enacted." (Field, supra, 63 Cal.App.4th at p.

25.) The Field court reviewed the fiduciary duties owed by a real estate professional to

his or her client, which exist independent of the nonfiduciary duties created by the Civil

Code that a real estate professional owes to a purchaser of real property who is not his or

her client. After identifying the fiduciary duties owed by a real estate professional to his

or her client, the Field court broadly asserted: "Thus, depending on the circumstances, a

broker's 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." (Field, supra, at p. 26.)

Plaintiffs' contention that the Coldwell defendants owed them a duty to

independently search the public record is based on the Field court's statement that "a

broker's 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." (Field, supra, 63 Cal.App.4th at p. 26). Plaintiffs maintain that if the

Coldwell defendants had searched the public records, they would have found the

covenant. However, this language from Field is dicta. The Field court did not have to

consider how far the scope of the fiduciary duties owed by a real estate licensee might

extend, since in that case it was clear that the plaintiffs' real estate agent had failed to

even examine the preliminary title report.

13
 In this case, in contrast to Field, plaintiffs do not allege that the Coldwell

defendants failed to read the title report or pass on to them the information that the title

company had identified the existence of an easement that was clearly marked on the

recorded parcel map. Further, unlike in Field, an examination of the preliminary title

report would not have led the real estate agent to the covenant at issue, since the title

insurance company did not identify the covenant in any of its documents.

We do not believe that Field stands for the proposition that a real estate licensee

may not rely on the professional assistance of a title company in matters related to

encumbrances on the property, and instead must independently research the public record

to determine whether there are any encumbrances on the property that are not identified

by the title company in its report or title insurance policy. We decline to impose such a

duty on real estate professionals. A real estate agent is entitled to rely on the reporting of

a title company to the same extent as a purchaser of real property, and does not have an

affirmative duty to independently scour the public record to "double check" the work of a

title company.

Plaintiffs also suggest, without citation to the operative complaint, that the duty

they are seeking to impose on the Coldwell defendants is not a duty to search public

records for encumbrances on property, but rather, a broader duty to do something to

"verify whether such easements [i.e., 'unusable' or 'proposed' easements] existed."

However, plaintiffs later specify that what they believe the Coldwell defendants should

have done, and had a duty to do, was to "perfor[m] necessary research and investigation,

and disclose that information." Thus, although plaintiffs complain that the Coldwell

14
defendants and the trial court improperly "narrow[ed] the duty that Plaintiffs' allege the

Coldwell Defendants owed to them" by defining that duty as a duty to independently

search public records, we disagree. The allegations of the operative complaint, as well as

plaintiffs' briefing, confirm that the duty they allege the Coldwell defendants owed them

is a duty to conduct an independent investigation to identify encumbrances on the

property that were not identified by the title company. As we have already explained, a

real estate licensee's fiduciary duties to a client do not require that the licensee search the

public record to attempt to discover other recorded documents that affect the property

that the title company failed to identify. This is not a situation in which a real estate

professional failed to pass along material information to the client, or, as in Field, failed

to review the preliminary title report prior to the closing of escrow. In Field, the real

estate agent's conduct effectively prevented the purchasers from knowing what was in the

title report or considering that information prior to making the purchase. Here, plaintiffs

were aware of the contents of the title report, and knew that an easement existed. Their

real estate agent did not have an additional duty to independently "check" the

completeness of the title insurance company's work. We conclude that plaintiffs have

failed to state a cause of action for breach of fiduciary duty under the facts alleged in the

SAC.

2. Negligent misrepresentation (fifth cause of action)

"The elements of negligent misrepresentation are (1) the misrepresentation of a

past or existing material fact, (2) without reasonable ground for believing it to be true, (3)

with intent to induce another's reliance on the fact misrepresented, (4) justifiable reliance

15
on the misrepresentation, and (5) resulting damage. [Citation.] In contrast to fraud,

negligent misrepresentation does not require knowledge of falsity. A defendant who

makes false statements ' "honestly believing that they are true, but without reasonable

ground for such belief, . . . may be liable for negligent misrepresentation . . . ."

[Citations.]' [Citation.] However, a positive assertion is required; an omission or an

implied assertion or representation is not sufficient." (Apollo Capital Fund, LLC v. Roth

Capital Partners, LLC (2007) 158 Cal.App.4th 226, 243.) Although the Supreme Court

has not decided the issue, it appears that the rules for pleading fraud may apply to

negligent misrepresentation. (See Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167,

184 [holding that heightened pleading standard for fraud applies to claim for negligent

misrepresentation in an action for securities fraud, but "express[ing] no view on whether

this pleading requirement would apply in other actions for negligent misrepresentation"];

see also Charnay v. Cobert (2006) 145 Cal.App.4th 170, 185, fn. 14 ["Fraud and

negligent misrepresentation must be pleaded with particularity and by facts that ' " 'show

how, when, where, to whom, and by what means the representations were

tendered.' " ' "].)

The allegations of the operative complaint state that the Coldwell defendants

"negligently misrepresented and/or withheld important material facts related to the

Subject Property including but not limited to: Defects in the Subject Propert[y's] title

history, the existence of a valid easement, and the existence of a duly recorded Covenant

of Improvement Requirements." Plaintiffs allege that these "representations, or lack

thereof, regarding title were false," and that the Coldwell defendants knew or in the

16
exercise of reasonable diligence should have known of the existence of the encumbrances

and thus should have known that these representations were not true.

Plaintiffs failed to allege in the operative complaint the existence of even a single

false statement that the Coldwell defendants made to them. Rather, the allegations

supporting this cause of action appear to be the same facts that plaintiffs allege to support

their other causes of action against the Coldwell defendants, namely, that the Coldwell

defendants failed to adequately investigate the existence of the nature of the easement on

the property. Thus, rather than identifying any affirmative statement made by the

Coldwell defendants, plaintiffs appear to be relying on the Coldwell defendants' failure to

investigate and to inform plaintiffs about the nature and extent of the recorded covenant

identifying the easement encumbering the property—i.e., the failure to make a statement

to plaintiffs. However, a "negligent misrepresentation claim 'requires a positive

assertion,' not merely an omission." (Lopez v. Nissan North America, Inc. (2011) 201

Cal.App.4th 572, 596.)

Because plaintiffs made no allegations of any affirmative misrepresentation on the

part of any of the Coldwell defendants, the trial court properly sustained the Coldwell

defendants' demurrer to the negligent misrepresentation cause of action.

3. Negligence (sixth cause of action)

"The elements of a claim for professional negligence incorporate a specific

standard of care into the elements of a negligence claim." (Burgess v. Superior Court

(1992) 2 Cal.4th 1064, 1077.) " 'The elements of a cause of action in tort for professional

negligence are: (1) the duty of the professional to use such skill, prudence and diligence

17
as other members of his profession commonly possess and exercise; (2) a breach of that

duty; (3) a proximate causal connection between the negligent conduct and the resulting

injury; and (4) actual loss or damage resulting from the professional's negligence.

[Citations.]' " (Ibid.)

To make out their sixth cause of action, plaintiffs allege that the Coldwell

defendants owed them a duty of care "to perform services competently, prudently, and

thoroughly," and that the Coldwell defendants failed to meet this standard of care by

"fail[ing] to fully investigate the material defects in title, failures, and deficiencies with

the Subject Property which were known and/or should have been known to [the Coldwell

defendants]; and in failing to so act, breached the aforesaid duties of due care." Plaintiffs

further claim that as a result of this alleged breach, they purchased the property, which

suffered from material defects, to their detriment.

As with their cause of action for breach of fiduciary duty, plaintiffs allege in their

claim for negligence that the specific breach was the Coldwell defendants' failure to

complete an independent search of the public record to discover an encumbrance on the

property that the title company failed to identify in the preliminary title report and title

insurance policy. However, under the specific facts alleged in this complaint, we must

conclude that the duty of care owed by the Coldwell defendants to use the skill, prudence

and diligence that other members of the profession commonly possess and exercise does

not extend so far as to require them to independently comb the public record in an

attempt to find recorded encumbrances that the title insurance company failed to include

in its preliminary report and title insurance policy. We therefore conclude that plaintiffs

18
have failed to state a claim against the Coldwell defendants for negligence, and we affirm

the trial court's sustaining of the demurrer as to this cause of action alleged against the

Coldwell defendants.

C. Plaintiffs have not demonstrated a reasonable possibility that the defects in the
SAC could be cured

We next consider whether plaintiffs have established that there is some manner in

which they could amend the operative pleading to cure the defects that we have

identified. It is clear that the burden to establish the possibility of curing any defect rests

upon plaintiffs' shoulders. (See Davies, supra, 168 Cal.App.4th at p. 1090 [" 'The

plaintiff has the burden of proving that an amendment would cure the defect

[citation]' "].)

Plaintiffs do not suggest in their briefing on appeal what additional facts they

would allege with respect to the fourth and sixth causes of action (breach of fiduciary

duty and negligence) to attempt to cure the defects in these causes of action. They have

thus failed to meet their burden of establishing that an amendment would cure the defects

with respect to their claims for breach of fiduciary duty and negligence.

Plaintiffs do, however, set forth an argument in which they explain how they could

amend the operative complaint to state a cause of action for negligent misrepresentation.

Plaintiffs contend that after the sellers disclosed an " 'unusable easement,' " they asked

Anderson, their real estate agent, about the " 'unusable easement.' " Plaintiffs allege that

rather than looking into the issue further or offering them guidance with respect to this

easement, Anderson represented to them, prior to the close of escrow, "that everything

19
was fine and to proceed with the transaction." They further contend that Anderson had

no reasonable ground for believing that "everything was fine," that she intended for them

to rely on her assertion that "everything was fine," and that they did in fact rely on that

assertion and went through with the transaction, suffering damage as a result.7

However, even assuming that plaintiffs could allege sufficient facts to state a

cause of action for negligent misrepresentation, it is clear that such a claim would be

untimely under any of the potentially applicable statutes of limitations. "The limitations

period, the period in which a plaintiff must bring suit or be barred, runs from the moment

a claim accrues. [Citations.] Traditionally at common law, a 'cause of action accrues

"when [it] is complete with all of its elements"—those elements being wrongdoing, harm,

and causation.' [Citation.] This is the 'last element' accrual rule: ordinarily, the statute of

limitations runs from 'the occurrence of the last element essential to the cause of action.' "

(Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191.)

7 Although the statement that "everything [is] fine" may appear to be a statement of
opinion, as opposed to a fact subject to verification, it is possible that such a statement,
coming from a real estate agent, could be treated as a representation of fact. "Under
certain circumstances, expressions of professional opinion are treated as representations
of fact. When a statement, although in the form of an opinion, is 'not a casual expression
of belief' but 'a deliberate affirmation of the matters stated,' it may be regarded as a
positive assertion of fact. [Citation.] Moreover, when a party possesses or holds itself
out as possessing superior knowledge or special information or expertise regarding the
subject matter and a plaintiff is so situated that it may reasonably rely on such supposed
knowledge, information, or expertise, the defendant's representation may be treated as
one of material fact." (Bily v. Arthur Young & Co. (1992) 3 Cal.4th 370, 408, italics
added; see also Gagne v. Bertran (1954) 43 Cal.2d 481, 489; Cohen v. S & S
Construction Company (1983) 151 Cal.App.3d 941, 946.)
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 Although the parties dispute what the applicable statute of limitations is with

respect to plaintiffs' cause of action for negligent misrepresentation, we conclude that it is

of no consequence because under even the longest possible period—i.e., the four years

provided pursuant to Code of Civil Procedure section 3438 urged by plaintiffs in their

appellate briefing—the cause of action is time-barred.

According to the Coldwell defendants, plaintiffs had constructive notice of the

existence of the easement and the covenant because the covenant was a recorded

document. The Coldwell defendants claim that because the plaintiffs had constructive

notice that they were damaged as of the date that plaintiffs took title to the property,

which was in January 2007, the claim is time-barred.

"Civil Code section 1213 provides that every 'conveyance' of real property

recorded as prescribed by law provides 'constructive notice' of its contents to subsequent

purchasers. The term 'conveyance' is broadly defined to include 'every instrument in

writing . . . by which the title to any real property may be affected . . . .' [Citation.]

Constructive notice 'is the equivalent of actual knowledge; i.e., knowledge of its contents

is conclusively presumed.' " (Citizens for Covenant Compliance v. Anderson (1995) 12

Cal.4th 345, 355.) Thus, plaintiffs are charged with the equivalent of actual knowledge

of the existence and contents of the covenant as of January 2007. Once plaintiffs had

constructive notice of the covenant and its contents, which revealed that the property they

8 Code of Civil Procedure section 343 provides: "An action for relief not
hereinbefore provided for must be commenced within four years after the cause of action
shall have accrued."
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had purchased was burdened by an easement for a paved access road, they were on notice

of the existence of their negligent misrepresentation claim based on Anderson's alleged

comments to them that "everything [is] fine." Plaintiffs' negligent misrepresentation

claim therefore accrued as of January 2007. Their amendment to add the Coldwell

defendants and assert a negligent misrepresentation cause of action against the Coldwell

defendants in October 2011 occurred more than four years after their claim accrued. Any

cause of action for negligent misrepresentation that plaintiffs could allege would thus be

untimely.

We conclude that plaintiffs have not demonstrated how they could amend the

operative complaint to attempt to restate any of their causes of action. We therefore

affirm the trial court's order denying plaintiffs leave to amend.

IV.

DISPOSITION

The judgment is affirmed. The Coldwell defendants are entitled to costs on

appeal.

AARON, J.

WE CONCUR:

McCONNELL, P. J.

McDONALD, J.

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