David W. Evans and Renata L. Hoddinott | Haight Brown & Bonesteel | March 7, 2019
In Ryan v. Real Estate of the Pacific, Inc., et al. (No. D072724, filed 2/26/19), the Fourth Appellate District reversed a trial court’s granting of summary judgment and finding that expert testimony is not required in a professional negligence action where the claimed acts or omissions are within the understanding of a lay person.
Daniel and Patricia Ryan hired Defendants David Schroedl, David Schroedl & Associates, and Real Estate of the Pacific, Inc., doing business as Pacific Sotheby’s International Realty to list, market, and sell their property. During an open house, the Ryans’ neighbor informed Defendant David Schroedl that he planned significant construction on his own property which would impact the Ryans’ property including, but not limited to, building a large addition that would obstruct the property’s westerly ocean view. Schroedl never disclosed this information to the Ryans or to the subsequent purchasers of the Ryans’ property. The day after escrow closed, the new owners’ interior decorator spoke with that neighbor who again explained his extensive remodeling plans.
Upon learning the new information, the new owners of the property immediately sought to rescind the transaction. The Ryans, based in part on Defendants’ advice, refused to rescind the transaction. The dispute then proceeded to arbitration with the new owners contending the Ryans knew and failed to disclose the construction plans for their neighbor’s property. After extensive litigation, investigation, discovery, and an arbitration hearing, the arbitrator ruled in favor of the subsequent purchasers of the property and ordered that the real estate purchase contract be rescinded. The Ryans were ordered to return the $3.86 million purchase price and title and possession for the property transferred back to the Ryans. The arbitrator further ordered the Ryans to pay damages, prejudgment interest, costs, and attorneys’ fees in excess of $1 million.
After the arbitration, the Ryans filed suit against Defendants seeking to recover the money paid as a result of the arbitrator’s award and damages caused by Defendants’ negligence. The complaint alleged six causes of action: (1) negligence, (2) breach of fiduciary duty, (3) breach of implied covenant of good faith and fair dealing, (4) equitable indemnity and apportionment, (5) common count – mistaken receipt, and (6) common count – money had and received. The Ryans’ lawsuit was based on Defendants’ knowledge of the neighbor’s construction plans and failure to inform either the Ryans or the subsequent purchasers about the plans.
Defendants moved for summary judgment arguing that the Ryans could not establish any cause of action against Defendants as they failed to designate an expert witness. Defendants contended that a party could not establish a claim for professional negligence without expert testimony to prove or disprove that Defendants’ performed in accordance with the prevailing standard of care. The Ryans opposed the motion maintaining that expert testimony was not required because of the findings of fact and conclusions of law regarding the standard of care in the prior arbitration. The trial court granted Defendants’ motion and the Ryans appealed.
On appeal, the Court held that California law does not require an expert witness to prove professional malpractice in all circumstances and that expert testimony is not required to prove or disprove a party acted in accordance with the prevailing standard of care where the negligence is obvious to laymen. The Court determined that Defendants possessed material information impacting the value of the Ryans’ property and chose to keep that information from the Ryans and from the subsequent purchasers so as to collect a commission from the sales price which would undoubtedly have been lower had the information been disclosed. The Court pointed out that any seller who hired a real estate broker to sell their home would expect that broker to share pertinent information that would adversely impact the value of the home. Because Defendants’ conduct was within the common knowledge of a layman, expert testimony was not warranted.
The purpose of expert testimony is to assist the trier of fact in understanding a technical or scientific issue that requires specialized knowledge, education or training. While it is generally good practice in any professional liability matter to retain an expert on the standard of care in that industry, the Ryan opinion is a reminder that not all professional liability actions involve a nuanced issue pertaining only to that profession and requiring expert analysis. Sometimes an act or omission is such that anyone can see it using simple common sense.
This document is intended to provide you with information about professional liability law related developments. The contents of this document are not intended to provide specific legal advice. This communication may be considered advertising in some jurisdictions.