Cohen v. S & S Construction Co

In Cohen v. S & S Construction Co. (1983) 151 Cal. App. 3d 941, individual homeowners brought an action against the developer for failure to enforce the covenants, conditions and restrictions (CC&Rs) of the subdivision. At all pertinent times, the developers controlled the homeowners' association's board of directors, and the court concluded that the association had an affirmative duty to enforce the CC&Rs. (Cohen, supra, 151 Cal. App. 3d at pp. 944-945.) The Court concluded that the developer therefore owed the association members a fiduciary duty not to make decisions that favored itself over the interests of the members. (Cohen, supra, 151 Cal. App. 3d at p. 945.) In that case, home buyers "were induced to pay a $ 35,000 lot premium" based on the assurances of the developer's sales agent that the Declaration of Covenants, Conditions and Restrictions "protected the view from their lot and the architectural committee would not approve fence or landscaping plans which would interfere with the view." (Id. at p. 944.) The buyers sought damages from the developer and its sales agent for fraud and negligent misrepresentation. (Id. at p. 946.) One issue in Cohen was the legal sufficiency of the complaint in pleading fraud and negligent misrepresentation. The appellate court stated: "Generally, actionable misrepresentation must be one of existing fact; 'predictions as to future events, or statements as to future action by some third party, are deemed opinions, and not actionable fraud . . . ' But there are exceptions to this rule: '(1) where a party holds himself out to be specially qualified and the other party is so situated that he may reasonably rely upon the former's superior knowledge; (2) where the opinion is by a fiduciary or other trusted person; (3) where a party states his opinion as an existing fact or as implying facts which justify a belief in the truth of the opinion.' Examples of actionable statements under these exceptions include a sales agent's representation that a condominium with structural defects was nevertheless luxurious and an outstanding investment and a realtor's opinion that the purchaser of a particular lot would have an enforceable access easement. " (Cohen v. S & S Construction Co., supra, 151 Cal. App. 3d at p. 946.) The appellate court in Cohen concluded that complaint stated causes of action for fraud and negligent misrepresentation because it alleged that the developer had "emphasized the development's panoramic views in its marketing and held themselves out as experts in establishing and administering homeowner associations and maintaining the aesthetic integrity of their developments." (Id. at p. 946.)