Sinkiewicz v. Skyline 83 Batavia Investors CA1/2 ( 2021 )

Filed 12/23/21 Sinkiewicz v. Skyline 83 Batavia Investors CA1/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or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.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION TWO
THOMAS E. SINKIEWICZ et al.,
Plaintiffs and Appellants,
v.
SKYLINE 83 BATAVIA A157192
INVESTORS, INC.,
(San Francisco County
Defendant and Respondent.
Super. Ct. No. CGC-17-561619)
The plaintiffs in this case, Thomas E. Sinkiewicz and Gayle A.
Sinkiewicz, bought commercial real property and then sued the seller,
Skyline 83 Batavia Investors, Inc. (Skyline), alleging that the property listing
had significantly overstated the property’s size. The trial court granted
Skyline’s motion for summary judgment, and plaintiffs now appeal. The
issue before us is whether the trial court abused its discretion by denying
plaintiffs’ request for leave to amend the complaint. We will affirm.
FACTUAL AND PROCEDURAL BACKGROUND
A. Allegations in Plaintiffs’ Complaint
In September 2017, plaintiffs filed a complaint against Skyline alleging
causes of action for fraudulent misrepresentation, fraudulent concealment,
negligent misrepresentation, unfair business practices, and tort of another.
1
They alleged that Skyline conveyed false information about the square
footage of real property at 107 N. Batavia Avenue in Batavia, Illinois (the
Property): the listing stated that the commercial space was 3,800 square feet,
when the actual size was only about 2,300 square feet. Plaintiffs alleged that
they justifiably relied on the listing when they bought the Property in April
2014 for the listed price; they would not have bought the Property if they had
known the truth about its size; and they did not discover the
misrepresentation until October 2015. Plaintiffs claimed to have suffered $1
million in economic damage.
B. Undisputed Facts
In April 2014, in connection with a so-called “1031 exchange” under
Internal Revenue Code section 1031, plaintiffs sought to purchase
commercial property occupied by fast food restaurants under long term
leases. They were represented by licensed real estate agents of their own
choosing, who worked under the license of real estate brokerage Marcus &
Millchap Company (MMC). Plaintiffs’ agents contacted William Schofield,
another licensed real estate agent working for MMC, and a principal of
Skyline, asking for information about investment opportunities that would
meet the plaintiffs’ criteria.
On April 23, 2014, Schofield sent plaintiffs’ agent a document
concerning the Property, stating that his partnership, Skyline, owned the
Property and planned to start marketing it within the next month or so. The
document, which Schofield characterized as a “draft numbers page,” and
which was entitled “Offering Memorandum,” showed the “Rentable Square
Feet” of the property as 3,800, and stated that the Property was occupied by a
Hardee’s restaurant under a 20-year lease that had commenced in 2013. The
Offering Memorandum was printed on MMC stationery, and stated, “This
2
information has been secured from sources we believe to be reliable, but we
make no representations or warranties, expressed or implied, as to the
accuracy of the information. References to square footage . . . are
approximate. Buyer must verify the information and bears all risk for any
inaccuracies.” At some point, plaintiffs received a copy of the Offering
Memorandum.
On April 25, 2014, the plaintiffs and Skyline entered a Purchase
Agreement (the Agreement) in which plaintiffs agreed to pay $1,864,285 to
acquire the Property. By its terms, the Agreement is governed and construed
in accordance with Illinois law, except that paragraph 9 (“Condition of
Property”) is governed by California law. The Agreement says nothing about
the size of the Property.1
In paragraph 5, “Contingencies,” the Agreement provided a diligence
period for plaintiffs (as “Buyer”) to review and approve certain documents to
be produced by Skyline (as “Seller”), and to conduct physical inspections of
the Property. Plaintiffs would be deemed to have approved the physical
condition of the property absent failure to approve or object to the condition
in writing by the end of the diligence period.
Paragraph 9 of the Agreement, which was initialed by plaintiffs, states,
“It is understood and agreed that the Property is being sold ‘as is;’ that Buyer
has, or will have prior to the Closing Date, inspected the Property; and that
neither Seller [i.e., Skyline] nor Agent [defined as MMC] makes any
representation or warranty as to the physical condition or value of the
Property or its suitability for Buyer’s intended use except as stated herein.”
1The Agreement disclosed that some of the principals of Skyline,
including Schofield, were licensed real estate agents or brokers, and that
Schofield was a licensed agent at MMC. The Agreement also disclosed that
MMC represented both the buyer and seller in the sale of the Property.
3
Paragraph 9 further states, “Upon Buyer’s satisfaction or waiver of the
contingencies [which include the review of Seller’s documents and physical
inspection of the Property] Buyer will purchase the property ‘as is’ and solely
on reliance on its own investigation of the Property.” In addition, paragraph
9 states, “Upon Closing, Buyer hereby waives, releases, acquits and forever
discharges Seller . . . to the maximum extent permitted by law from any and
all claims, actions, causes of action . . ., direct or indirect, known or unknown,
foreseen or unforeseen, that it now has or which may arise in the future on
account of or in any way growing out of or connected with Property
Condition.” “Property Condition” is defined as “each and every matter of
concern or relevance to Buyer relating to the Property, including [the]
physical . . . condition and sufficiency of the Property and all improvements
and equipment thereon; . . . [and] the fitness of the Property for Buyer’s
contemplated use.” Paragraph 9 also includes an express waiver of Buyer’s
rights under Civil Code section 1542.
On April 28, 2014, plaintiffs signed a Receipt of Documents, stating
that they had received documents “as per the . . . Agreement,” including a
“Survey dated June 7, 2013.” Plaintiffs concede that the Survey “depicted the
dimensions of the building on the . . . Property, and hence would have
allowed, with a modicum of arithmetic, a rough calculation that the actual
rentable square footage in the building was actually in the vicinity of 2217
square feet.” The Receipt of Documents and the documents themselves had
been sent to plaintiffs by their agents. Plaintiffs’ agents sent most of the
documents by mail and email but informed the plaintiffs that because the
Survey was too large to email or mail, they had made it available for
plaintiffs to download from Dropbox and provided a link to it. Plaintiffs
admit they did not review the Survey before the close of escrow.
4
On May 2, 2014, plaintiffs signed a Contingency Removal, stating
“Buyer hereby approves and removes as contingencies” various inspections,
including the documents provided by seller and the physical inspection, and
specifically confirming receipt of the documents. With the removal of
contingencies, the Agreement became binding. Escrow closed a few days
later.
C. Motion for Summary Judgment
Skyline moved for summary judgment, or alternatively for summary
adjudication as to each cause of action. Skyline argued that plaintiffs’
contractual waiver of claims, which was governed by California law, barred
their claims, and that in any event the individual claims, which were
governed by Illinois law, failed because they could not be supported by any
admissible evidence.
In opposition to the motion, Plaintiffs argued that the contractual
waiver did not apply to their claims for intentional fraud and negligent
misrepresentation. They conceded that summary adjudication should be
granted as to all their claims, but they argued that the evidence raised
triable issues of fact that defendants had violated the Illinois Consumer
Fraud and Deceptive Business Practices Act (815 Ill. Comp. Stat. 505/1 et
seq. (Illinois Act)), and sought leave to amend their complaint to allege a
cause of action under the Illinois Act.
In reply, Skyline argued that plaintiffs’ proposed Illinois Act cause of
action was time-barred, and that in any event plaintiffs could not carry their
burden of proof.
The trial court granted the motion for summary judgment and denied
as futile plaintiffs’ request to amend the complaint. The trial court ruled that
plaintiffs had waived all claims, and that even if the waiver were invalid,
5
plaintiffs’ proposed cause of action under the Illinois Act was barred by the
three-year statute of limitations, which had expired before plaintiffs filed
their complaint.
Judgment was entered for Skyline and plaintiffs timely appealed.
DISCUSSION
Plaintiffs argue that the trial court incorrectly interpreted the law in
upholding the contractual waiver of claims and in deciding that their
proposed cause of action was time-barred. We conclude that the Illinois Act
claim is time-barred, and therefore we need not reach the issue of waiver.
A. Applicable Law and Standard of Review
Where a motion for summary judgment has been granted but the facts
indicate that the plaintiff has a good cause of action that has been
imperfectly pleaded, the trial court should grant a request for leave to amend.
(Falcon v. Long Beach Genetics, Inc. (2014) 224 Cal.App.4th 1263, 1280.) We
review the denial of leave to amend for abuse of discretion. (Id. at p.1281.) If
the proposed amendment would not state a cause of action, however, it is
proper to deny leave to amend. (Id. at p. 1280.) On appeal, the plaintiff
bears the burden of showing that the court abused its discretion by making a
ruling that exceeded the bounds of reason or is legally incorrect. (Id. at p.
1281.) Where, as here, the plaintiff claims that the abuse of discretion is
based on an error of law, we are presented with a legal question, which we
review de novo. (In re Charlisse C. (2008) 45 Cal.4th 145, 159.)
To prove a violation of the Illinois Act, a plaintiff must prove a
deceptive act or practice; intent on the part of the defendant that plaintiff
rely on the deception; the deception occurred in the course of conduct
involving trade or commerce; and that damages were proximately caused by
6
the deception. (Adler v. William Blair & Co. (Ill.Ct.App. 1995) 648 N.E.2d
226, 233-234.)
The statute of limitations for an action under the Illinois Act is three
years, and any cause of action not filed within the statute of limitations is
time barred. (815 Ill. Comp. Stat. 505/10a(e); Gredell v. Wyeth Laboratories,
Inc. (Ill.Ct.App. 2004) 803 N.E.2d 541, 547.) The discovery rule applies to
actions filed under the Illinois Act, and therefore “[t]he statute of limitations
[begins] to run ‘ “when a party knows or reasonably should know both that an
injury has occurred and that it was wrongfully caused” ’ and, at that point,
‘ “the party is under an obligation to inquire further to determine whether an
actionable wrong was committed.” ’ ” (Id. at pp. 546-547.)
B. Analysis
Plaintiffs argue that the statute of limitations did not begin to run until
late 2015, when they discovered the discrepancy in square footage between
the listing and the Property. They argue that their complaint was filed
within three years calculated from the date of that discovery, and under the
relation back doctrine the Illinois Act claim should relate back to the date of
filing of the original complaint.
Plaintiffs further argue they justifiably relied on the information in the
Offering Memorandum, which was not improbable on its face; they had no
obligation to investigate further; and it was error for the trial court to
conclude that they should have known the true size of the property on or
before May 2, 2014 (when they signed the Contingency Removal). Their
argument rests on the principle that under Illinois law, “where the
representation is made as to a fact actually or presumptively within the
speaker’s knowledge, and contains nothing so improbable as to cause doubt of
its truth, the hearer may rely upon it without investigation, even though the
7
means of investigation were within the reach of the injured party and the
parties occupied adversary positions toward one another.” (Sims v. Tezak
(Ill.Ct.App. 1998) 694 N.E.2d 1015, 1020 (Sims).)
But the principle stated in Sims does not apply here. There was no
representation in the Offering Memorandum on which plaintiffs could
reasonably rely. In the Offering Memorandum, which was prepared on MMC
stationery, MMC stated that it made no representations as to the accuracy of
the information, and notified the plaintiffs that as prospective buyers they
“must verify the information” and “bear[ ] all risk for any inaccuracies.”
Under Illinois law, justifiable reliance is generally a question of fact,
but “the court may dispose of the issue on summary judgment if the facts are
undisputed and only one conclusion is apparent.” (D.S.A. Finance Corp. v.
County of Cook (Ill.Ct.App. 2003) 801 N.E.2d 1075, 1081.) “[T]he court
considers whether the party was reasonable in relying on his adversary’s
representation in light of the facts within his actual knowledge and any he
might have discovered by the exercise of ordinary prudence. [Citation.] ‘[A]
person may not enter into a transaction with his eyes closed to available
information and then charge that he has been deceived by another.’
[Citation.]” (Ibid.) “ ‘A plaintiff has a duty to investigate further when the
circumstances reasonably require, as a matter of prudence, that an
investigation be undertaken.’ ” (Neptuno Treuhand-Und
Verwaltungsgesellschaft Mbh v. Arbor (Ill.Ct.App. 1998) 692 N.E.2d 812,
818.) “ ‘[T]he crucial question is whether the plaintiffs’ conduct was
unreasonable under the circumstances and “ ‘in light of the information open
to him, that the law may properly say that this loss is his own
responsibility.’ ” [Citation.]’ ” (Ibid.)
8
Even apart from the disclaimer on the Offering Memorandum, on the
facts here, plaintiffs had a duty to further investigate the representations in
the Offering Memorandum. This is reflected in the Agreement, which
includes an acknowledgement that neither Skyline nor MMC made any
representation as to the size of the Property as well as a provision that
plaintiffs would inspect the Property before closing and would purchase the
property “solely on reliance on [their] own investigation of the Property.”
(See Schrager v. Bailey (Ill.Ct.App. 2012) 973 N.E.2d 932, 939 [nonreliance
clause in agreement precludes plaintiff from proving justifiable reliance].)
Further, the circumstances here reasonably required as a matter of
ordinary prudence that plaintiffs investigate the size of the Property because,
as plaintiffs stated in the trial court, plaintiffs understood the square footage
of the Property to be a material consideration in their evaluation of its fair
market value.
Plaintiffs were not prevented from undertaking the necessary
investigation. Far from it. They admit that the relevant information was
available in the Survey that they had received and approved. By signing the
Contingency Removal, plaintiffs signified that they had reviewed the Survey.
Under the circumstances, their failure to review it is unreasonable.2
In sum, the undisputed facts compel the conclusion that plaintiffs
reasonably should have known the size of the Property when they signed the
Contingency Removal. Because plaintiffs claim that the value of the
Property was inflated based on the overstated size, their alleged injury
2 Plaintiffs’ contention that they did not know how to use Dropbox is
irrelevant. In any event, plaintiffs’ only support for that contention is a
citation to a portion of Mr. Sinkiewicz’s declaration to which Skyline’s
evidentiary objection was sustained, and plaintiffs do not challenge the trial
court’s evidentiary rulings.
9
occurred when they removed the contingencies on May 2, 2014 and
committed themselves to paying more than they now claim they would have
paid had they known the true size. Accordingly, the three-year limitation
period for a claim under the Illinois Act expired by May 2, 2017, before
plaintiffs filed their complaint; amendment of the complaint to add such a
claim would be futile; and the trial court properly denied plaintiffs’ request
for leave to amend.
DISPOSITION
The judgment is affirmed. Respondent shall recover its costs on appeal.
10
_________________________
Miller, J.
WE CONCUR:
_________________________
Stewart, Acting P.J.
_________________________
Kline, J.*
A157192, Sinkiewicz v. Skyline 83 Batavia Investors, Inc.
*Assigned by the Chief Justice pursuant to article VI, section 6 of the
California Constitution.
11