Owner Not Liable for Fraud and Concealment

Facts: A resident sued an owner for fraud and concealment based on alleged misrepresentations made when the resident was a prospective tenant looking to rent a unit at the site. In November 2008, at the time the resident was looking at an apartment, he “made several inquiries about the quietness and crime in the neighborhood,” and an employee informed him that there was very little criminal activity and only mentioned “occasional noise from a restaurant across the street.”

In addition, according to the resident, at the time of lease signing, the employee presented a seven-page lease agreement with three pages of house rules, and the resident was “surprised at the length and complexity of the rental agreement.” He began reading the lease agreement, but the employee allegedly became impatient and insisted that he sign the rental agreement. When the resident asked about the site’s grievance process, the employee allegedly stated that there was no grievance process.

Eventually, the resident signed the lease and returned it to the employee, who refused to give him a signed copy. From then on, the relationship between the resident and the employee became increasingly hostile. For example, the resident claimed that the employee made false accusations that the resident failed to comply with “the certification process.”

The resident claimed that the employee’s statements about noise were false, citing noise from a nightclub across the street and an ice cream shop below his unit. Second, the resident asserted that the employee’s statement that there was no grievance process at the site was also false and that the employee improperly failed to disclose the grievance procedure even though such a grievance procedure existed.

The owner argued that the resident’s cause of action for fraud and concealment should be dismissed because it is time-barred by the applicable statute of limitations—that is, the resident didn’t file a lawsuit within the legal time frame. The owner asked the court to dismiss this claim.

Ruling: A California district court dismissed the resident’s fraud and concealment claim.

Reasoning: Under California law, “[a]n action for relief on the ground of fraud or mistake” must be brought within three years after “the discovery, by the aggrieved party, of the facts constituting the fraud or mistake.” For the resident’s first theory of fraud and concealment, the court concluded that the resident would have discovered the noise from the nightclub and ice cream shop by July 2009 at the very latest. This is because the resident complained about the noise to both the city council and the police department in July 2009. And for his second theory of concealment, the resident learned of the existence of a grievance procedure on July 17, 2009, because that is the date on which an employee told him that such a grievance procedure existed. Thus, for both of his fraud and concealment theories, he learned “the facts constituting the fraud or mistake” in July 2009. But the resident filed this lawsuit in Jan. 17, 2017, outside of the three-year limitations period.

• West v. Palo Alto Housing Corp., March 2018