Agcon v. Cornerstone Financial CA4/2 (2026) · DecisionDepot
Agcon v. Cornerstone Financial CA4/2
California Court of Appeal Jan 27, 2026 No. E081767Unpublished
Filed 1/27/26 Agcon v. Cornerstone Financial CA4/2 NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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
FOURTH APPELLATE DISTRICT
DIVISION TWO
AGCON, INC.,
Plaintiff and Appellant, E081767
v. (Super. Ct. No. CIVDS1720699)
CORNERSTONE FINANCIAL et al., OPINION
Defendants and Respondents.
APPEAL from the Superior Court of San Bernardino County. Winston S. Keh,
Judge. Affirmed in part, reversed in part, and remanded.
Pope & Gentile and Daniel K. Gentile, for Plaintiff and Appellant.
Larson, Stephen G. Larson, A. Alexander Lowder, and Juliette Tran, for
Defendants and Respondents.
1
I.
INTRODUCTION
Agcon, Inc. sold a parcel of vacant land in the City of Adelanto (the City) to
Industrial Integrity Solutions, LLC (IIS). A few months later, the City rezoned the land to
allow cannabis cultivation on it, which significantly increased its value.
Agcon then sued respondents for various fraud-based claims premised on the 1 argument that respondents’ broker, Daniel C. Pocius, knew that the City planned on
rezoning the land, but he intentionally withheld that information from Agcon to get a
better deal. Agcon claimed that, by doing so, Pocius violated duties imposed under Civil
Code section 2079.16 (section 2079.16). At the beginning of trial, Agcon argued that
respondents also violated the purchase agreement for the land, but the trial court
precluded Agcon from making that argument at trial on the ground that Agcon had not
timely asserted it and instead had consistently stated its case was based on section
2079.16 alone.
After Agcon rested its case at trial, respondents moved for nonsuit on the grounds
that Pocius did not violate section 2079.16. The trial court agreed and granted the
motion. Later, the trial court partially granted Agcon’s motion to tax costs but awarded
respondents expert fees under Code of Civil Procedure section 998 (section 998). Agcon
timely appealed.
1 Respondents are IIS, Cornerstone Financial, Daniel C. Pocius, Frontier Homes, LLC, Frontier Enterprises, and Frontier Communities.
2
We first conclude that the trial court properly limited Agcon to arguing at trial that
respondents violated section 2079.16 and precluded Agcon from arguing that its claims
were contract-based. The main issue on appeal is thus whether the trial court correctly
found that Pocius did not violate section 2079.16 and granted respondents’ motion for
nonsuit on that basis. We conclude the trial court erred in granting the motion because
Agcon presented sufficient evidence for a jury to reasonably find that Pocius breached the
“duty of honest and fair dealing and good faith” imposed under section 2079.16. We also
conclude, however, that Pocius’s section 2079.16 “duty to disclose all facts known to
[him] materially affecting the value or desirability of the property that are not known to,
or within the diligent attention and observation of, the parties” did not require him to tell
Agcon at the time of the parcel sale that the City was contemplating rezoning the parcel
in the future. We therefore reverse the judgment, affirm in part and reverse in part the
trial court’s order granting respondents’ motion for nonsuit, and reverse the order
awarding fees to respondents under section 998.
II.
FACTUAL AND PROCEDURAL BACKGROUND
Agcon owned a 9.43-acre parcel of vacant land in the City (the parcel). On
October 26, 2016, Pocius called Agcon’s President and CEO, Jonathan Hove, to express
his interest in buying the parcel. At the time, Pocius, a licensed real estate broker, was
3
2 employed as Vice President for Land Acquisition for Frontier and IIS, but he also owned
his own brokerage, Cornerstone Financial.
Later that day, at a public City Council meeting, the City’s Mayor Pro Tem,
Jermaine Wright, a City Senior Planner, and the City Attorney discussed expanding the
City’s cannabis cultivation zone during the first reading of a proposed resolution to adopt
Ordinance 553, which concerned the City’s cannabis zoning. Wright stated that he
wanted an amendment to a proposed resolution to expand the zone’s boundaries along
various streets in the City. The proposed boundaries included the area where Agcon’s
vacant land was located. The council approved the amendment at the meeting, but did
not adopt the resolution, which was scheduled for further consideration.
The next day, Pocius met with Jonathan Hove to discuss purchasing the parcel.
After some deliberations, the parties agreed to a price of $460,000 for the parcel. Later
that day, October 27, 2016, the parties executed a purchase agreement for the sale, with
IIS as the buyer, Cornerstone Financial (Pocius) as the agent/broker for IIS, and Agcon as
the seller.
About two months later, in December 2016, the City adopted Ordinance 553. By
doing so, the City expanded its cannabis cultivation zone’s boundaries, which included
the parcel for the first time.
2 Like the parties, we collectively refer to respondents Frontier Homes, LLC, Frontier Enterprises, and Frontier Communities as “Frontier.” For purposes of this opinion, there is no difference between the entities.
4
Because Agcon believed Pocius knew the zoning change was imminent and that
the change would (and did) substantially increase the parcel’s value, Agcon sued
respondents in October 2017. Agcon alleged four causes of action: (1) violation of
section 2079.16 (against Pocius and Cornerstone only), (2) fraud (against all
respondents), (3) rescission (against IIS only), and (4) civil conspiracy (against all
respondents). Agcon filed a first amended complaint (FAC) in February 2018, asserting
the same four causes of action with the same material allegations. Agcon filed its
operative second amended complaint (SAC) in September 2018, again asserting the same
four causes of action with the same material allegations as the FAC. The thrust of
Agcon’s case was that Pocius owed Agcon a duty under section 2079.16 to disclose all
material facts affecting the parcel’s value, and he violated that duty by knowingly
declining to tell Agcon that the parcel’s value would dramatically increase in a few
months after it was rezoned.
After Agcon presented its case-in-chief and rested, respondents moved for nonsuit
on the ground that (1) Pocius did not know of the potential zoning change and, (2) even if
he did, he owed no duty under section 2079.16 to tell Agcon of a forthcoming zoning
change. The trial court agreed, finding that, under Borba v. Thomas (1977) 70
Cal.App.3d 144, respondents had “no legal obligation” to tell Agcon about any
contemplated zoning change. The court therefore granted nonsuit to respondents.
5
Agcon then moved to tax respondents’ costs. The trial court granted the motion in
part but allowed respondents to recover $43,915.00 in expert fees pursuant to section 998.
In doing so, the court rejected Agcon’s argument that respondents’ two section 998 offers
to compromise were unreasonable.
The trial court entered judgment in respondents’ favor and awarded them about
$61,000 in costs. Agcon timely appealed.
III.
STANDARD OF REVIEW
“[C]ourts grant motions for nonsuit only under very limited circumstances.” (v.
Atlantic Richfield Co. (2003) 108 Cal.App.4th 327, 334-335.) The standard for obtaining
a nonsuit is “difficult” to satisfy. (A.M. v. Albertsons, LLC (2009) 178 Cal.App.4th 455,
463.)
The trial court may grant nonsuit in a jury case only “‘if the trial court determines
that the plaintiff’s evidence is insufficient as a matter of law to support a jury verdict in
her favor.” (Garcia-Brower v. Premier Auto. Imports of CA, LLC (2020) 55 Cal.App.5th
961, 971.) The trial court therefore may not grant a motion for nonsuit “‘if [the]
plaintiff’s evidence would support a jury verdict in [the] plaintiff’s favor.’” (Castaneda v.
Olsher (2007) 41 Cal.4th 1205, 1214.) We must reverse a judgment of nonsuit “‘if there
is “some substance to [the] plaintiff’s evidence upon which reasonable minds could
differ”’” and the law supports the plaintiff’s claim(s). (Garcia-Brower v. Premier Auto.
Imports of CA, LLC, supra, at p. 971.)
6
We review the grant of nonsuit de novo. (Hernandez v. Amcord, Inc. (2013) 215
Cal.App.4th 659, 669.) In doing so, we review the evidence in the light most favorable to
the plaintiff and most strongly against the defendant, “resolving all presumptions,
inferences, and doubts in favor of the plaintiff.” (Ibid.) We also accept the plaintiff’s
evidence as true and disregard conflicting evidence. (Campbell v. General Motors Corp.
(1982) 32 Cal.3d 112, 118.)
IV.
CONTRACT CLAIM
We first address Agcon’s argument that the trial court improperly precluded Agcon
from arguing that the purchase agreement imposed a contractual duty on respondents to
disclose information about the potential zoning change and, in turn, limiting Agcon to
arguing that respondents violated section 2079.16. We find no error.
On the third day of trial, Agcon argued that language in the purchase agreement
imposed a contractual duty on Pocius to disclose any information he had about the
potential zoning change. Specifically, Agcon pointed to page 14 of the purchase
agreement, which provided that Pocius, as IIS’s agent, owed Agcon “[a] duty to disclose
all facts known to the agent, the broker, materially affecting the value or desirability of
the property that are not known to, or within the diligent attention and observation of the
parties.”
7
In respondents’ view, this was the first time Agcon made the argument that
respondents violated any contractual duty. Respondents thus moved for, and the trial
court granted, an order precluding Agcon from arguing that the purchase agreement
imposed on respondents “a general duty of disclosure apart from the duty of disclosure
arising from . . . section 2079.16.”
The trial court was right to do so. To begin with, the SAC does not suggest that
Agcon was pursuing a claim based on a purported breach of contract. Agcon
acknowledges that the first cause of action expressly alleges only a violation of section
2079.16. But Agcon maintains that its second cause of action for fraud alleged that
respondents had a contractual duty under the purchase agreement to disclose information
about the zoning changes.
That cause of action, however, does not even mention the purchase agreement
beyond stating that Agcon would not have entered it had respondents disclosed
information about the potential zoning change. The second cause of action does not
mention page 14 of the purchase agreement, the duty that provision allegedly imposed on
Pocius, or any suggestion that respondents violated a contractual duty. Even a generous,
liberal reading of the SAC generally and the second cause of action specifically does not
suggest Agcon asserted that respondents violated a contractual duty imposed by the
purchase agreement. The second cause of action instead alleges a general fraud claim
based in the common law.
8
More to the point, Agcon repeatedly stated before trial that its case was based on
section 2079.16, without ever suggesting that respondents also breached the purchase
agreement. Most notably, in its trial brief filed about a week before trial, Agcon
explained that its complaint “alleges, among other things, that [respondents] perpetrated a
fraud by failing to disclose the impending zon[ing] change as required by . . . [s]ection
2079.16.” In the argument section of that brief, Agcon mentioned only section 2079.16
as a basis for respondents’ liability, not the purchase agreement.
Agcon argued section 2079.16 as the only basis for respondents’ liability on
several other occasions before trial. In its August 2018 opposition to respondents’ first
motion for judgment on the pleadings, Agcon explained that its complaint “alleges,
among other things, that [respondents] perpetrated a fraud by failing to disclose the
impending zone change as required by . . . [s]ection 2079.16.” There is no suggestion
that the purchase agreement imposed a duty on respondents to disclose those facts.
Similarly, in its May 2022 opposition to respondents’ second motion for judgment on the
pleadings, Agcon did not indicate, in the alternative or otherwise, that its claims arose
from a purported contractual duty that respondents violated. Agcon instead argued
“common law princip[les] are irrelevant to this dispute as this transaction, and the SAC, is
governed by the statutory duty to disclose under . . . [s]ection 2079.16.” (Italics added,
underline in original.)
9
Agcon made a similar representation orally. At a hearing in September 2019,
when the trial court asked Agcon about the basis for its second cause of action, Agcon’s
counsel explained: “ . . . [T]he agent for the buyer is under a duty to disclose. And I
recognize that is the statutory duty. That is why we said ‘a statutory duty to disclose.’”
At no point during that hearing did Agcon’s counsel suggest that respondents had a
contractual duty to disclose that they violated.
Agcon does not cite, nor can we locate, anywhere in the record where Agcon made
clear before trial that its second cause of action was contract-based. The trial court thus
properly precluded Agcon from arguing at trial that respondents had a contractual duty to
disclose information about the potential zoning change. (Cf. Duchrow v. Forrest (2013)
215 Cal.App.4th 1359, 1380-1382 [amendment during trial to rely on different
contractual theory prejudiced defendant, who was unable to conduct discovery or
research to mount defenses to new theory].)
In any event, even if Agcon sought to hold respondents liable under a contract-
based theory, its two causes of action allege a tort (fraud). As a result, any recovery
resulting from respondents’ purported breach of contract would be barred under the
economic loss rule. (See Rattagan v. Uber Technologies, Inc. (2024) 17 Cal.5th 1, 13; 5
Witkin, Summary of California Law Torts § 2; 6 Witkin, Summary of California Law,
Torts §§ 1177A, 1306, 1682.) Under this rule, Agcon was properly limited to arguing
that respondents violated section 2079.16. (See Food Safety Net Services v. Eco Safe
Systems USA, Inc. (2019) 209 Cal.App.4th 1118, 1130.)
10
V.
SECTION 2079.16 CLAIM
Because the trial court properly precluded Agcon from arguing respondents
violated a contractual duty, Agcon was limited to arguing respondents violated section
2079.16. And because there is no dispute that the statute only applies, if at all, to brokers, 3 Agcon’s entire case turns on whether Pocius violated the statute.
Based on our independent review after the parties filed their initial briefs, we
concluded that the statute did not apply because it may not have covered sales of “vacant
land” when Agcon sold the parcel in 2016.
We observed as follows: section 2079.14, subdivision (a) provides that “[a] copy
of the disclosure form specified in [s]ection 2079.16 shall be provided in a real property
transaction . . . .” (Italics added.) The obligations under section 2079.16 thus apply only 4 in “a real property transaction.”
3 Respondents disputed below that the statute applied at all because, in their view, Pocius was not acting as IIS’s (the buyer’s) broker. In their motion for nonsuit, however, they assumed for the purposes of the motion that Pocius was acting as IIS’s broker, and they do not argue in their respondent’s brief that Pocius was not a broker. We will assume without deciding that Pocius was IIS’s broker. 4 Section 2079.14 directs that “[a] copy of the disclosure form specified in [s]ection 2079.16 shall be provided in a real property transaction” with certain conditions. The disclosure form in section 2079.16 then states that the buyer’s agent has a duty of disclosure to the seller. Like the parties, we “assum[e] that the language of a form prescribed by statute can alter the common law duties of the buyer’s agent, where there is no other language in the statute that affirmatively sets forth such an intention.” (Miller & Starr, 2 Cal. Real Est. § 3:67 (4th ed.).) It would make no sense for the Legislature to mandate that the form be provided in various transactions but not impose the duties [footnote continued on next page]
11
Section 2079.13 provides definitions for various terms used in sections 2079.14
and 2079.16, including “real property transaction.” (§ 2079.13 [“As used in this section
and [s]ections 2079.7 and 2079.14 to 2079.24, inclusive, the following terms have the
following meanings . . . .”].) The statute has been amended several times since first
enacted in 1995.
In 2016, when the transaction at issue here occurred, the version of section
2079.13 then in effect defined a “real property transaction” as “a transaction for the sale
of real property in which an agent is employed by one or more of the principals to act in
that transaction, and includes a listing or an offer to purchase.” (Former § 2079.13, subd.
(l).) In turn, the statute defined “real property” only as: (1) certain estates in property
(not at issue here), (2) “any commercial real property,” (3) “any leasehold in these types
of property exceeding one year’s duration,” and (4) “mobilehomes” (Id., subd. (k), italics
added.)
The version of section 2079.13 in effect in 2016 thus did not include expressly
vacant land in its definition of “real property.” (See Stats. 2014, ch. 200 (S.B. 1171), §
2, eff. Jan. 1, 2015.) That did not occur until the statute was amended in 2018, with an
effective date of January 1, 2019. (See Stats. 2018, ch. 907 (A.B. 1289), § 38, eff. Jan. 1, 5 2019.) Among other changes to section 2079.13, the amending legislation changed the
enumerated in the form on agents who are required to provide it. (See § 2079.14, subds. (a)-(b).) 5 We note that in Greif v. Sanin (2022) 74 Cal.App.5th 412, 427, we incorrectly stated that section 2079.16 was amended in 2015 to add that the agency disclosure provision applies to all real property transactions, including transactions involving vacant [footnote continued on next page]
12
definition of “real property” to include “vacant land” and correspondingly amended the
definition of “commercial property” to exclude “vacant land.” (See ibid., amending
§ 2079.13, subds. (c) & (j).)
This legislative history of section 2079.13 arguably suggests that the version of the
statute in effect in 2016 did not cover sales of vacant land, such as the parcel at issue in
this case. (See Miller & Starr, 2 Cal. Real Est. § 3:28 (4th ed.) [“Previously, the statutory
disclosures of agency relationships were required only where the property constituted or
was improved by one-to-four dwelling units, or a lease of such property with a term in
excess of one year, and mobilehomes.”) However, the version of section 2079.13 in
effect in 2016 broadly defined “commercial real property” as “all real property” in
California, except four enumerated kinds of residential property not at issue here. This
arguably suggests that vacant land qualified as “commercial real property” under the
version of section 2079.13 in effect in 2016.
land. Instead, we should have stated that sections 2079.13 and 2079.16 were amended in 2018 (effective January 1, 2019), and that the amendments extended section 2079.16’s disclosure requirements to transactions involving “vacant land.” In any event, that statement was dicta given that the sale of vacant land in that case occurred in 2012, long before any of the relevant amendments to section 2079.16 occurred.
13
We therefore asked for and received supplemental briefs from the parties
answering two questions: (1) Does vacant land qualify as “commercial real property”
under the version of section 2079.13 in effect in 2016? (2) If not, does section 2079.16
nonetheless apply to the sale of the vacant land at issue in this case?
We agree with Agcon that vacant land qualifies as “commercial real property”
under the plain meaning of the 2016 version of section 2079.13, which broadly defined
“commercial real property” as “all real property in the state,” except a few kinds of
residential property. Because vacant land is real property, it is by definition “commercial
real property” under a plain reading of that statute. If the Legislature wanted to exclude
“vacant land” from the definition of commercial real property, it could have done so, as
evidenced by the fact that the definition expressly excludes four kinds of residential
property.
However, we agree with respondents, and Agcon concedes, that vacant land does
not qualify as “commercial real property” under the 2019 version of section 2079.13
(amended in 2018) since that version expressly excludes vacant land from the definition
of “commercial real property.” In respondents’ view, this exclusion shows that the
Legislature did not intend for vacant land to be considered “commercial real property”
under the 2016 version of the statute.
But if respondents are correct that the 2018 amendments to section 2079.13 show
that vacant land is not “commercial real property” under the 2016 version of the statute,
then those amendments likewise show that vacant land is nonetheless real property under
14
the 2019 version of section 2079.13. Although the amendments redefined commercial
real property as excluding vacant land, the amendments also defined “real property” as
including vacant land. This means that under the 2019 version of section 2079.13’s
definitions of “real property,” the sale of vacant land qualifies as a “real property
transaction.” The amendments to section 2079.13’s definitions thus show, if anything,
that the Legislature intended for vacant land to be covered by section 2079.16’s
disclosure requirements. This provides further support for our conclusion that the 2016
version of section 2076.13’s expansive definition of “commercial real property” (“all real
property in the state” except a few residential properties) should be read to include vacant
land. Taken together, the nearly all-inclusive definition of “commercial real property” in
the 2016 version of section 2079.13, plus the definition of “real property” expressly
including “vacant land” in subsequent versions of the statute leads us to conclude that the
Legislature intended for vacant land to be covered by section 2079.13 in 2016.
In sum, section 2079.16 applied to the parties’ transaction—a sale of vacant land 6 in 2016.
Thus, as a broker to a real estate transaction, Pocius owed Agcon the following
duties imposed under section 2079.16: (1) a duty of “diligent exercise of reasonable skill
and care in performance of [his] duties,” (2) a “duty of honest and fair dealing and good
faith,” and (3) a “duty to ‘disclose all facts known to the agent materially affecting the
value or desirability of the property that are not known to, or within the diligent attention
6 Respondents did not challenge this conclusion at oral argument.
15
and observation of, the parties.’” (Assilzadeh v. California Federal Bank (2000) 82
Cal.App.4th 399, 414.)
Agcon correctly notes that the trial court focused entirely on a broker’s third duty
to disclose material facts when granting respondents’ motion for nonsuit. As Agcon
emphasizes, however, this case also concerns Pocius’s duty of honest and fair dealing and
good faith. We agree with Agcon that the trial court overlooked that fact and respondents
overlook it on appeal.
At oral argument, respondents described Agcon’s position as a “moving target”
throughout the proceedings below and argued Agcon did not contend respondents
violated the duty of honest and fair dealing and good faith imposed by section 2079.16.
Respondents pointed out that Agcon’s SAC did not clearly identify those duties as the
basis for its first cause of action for breach of section 2079.16, nor did Agcon raise the
argument in its oral opposition to respondents’ oral motion for nonsuit.
It is true that Agcon’s SAC only expressly identifies section 2079.16’s duty to
disclose as the basis for its first cause of action, “Breach of Violation of Statutory Duty.”
Respondents are also correct that Agcon did not mention the other statutory duty of
honest and fair dealing and good faith when opposing Agcon’s motion for nonsuit.
But, as Agcon explained at oral argument, its position was that Respondents
violated section 2079.16, not just the statute’s disclosure duty. Agcon thus argued on
multiple occasions in the trial court that Respondents violated the duty of honest and fair
dealing and good faith imposed by section 2079.16, including (1) at a hearing on
16
Respondents’ motion for judgment on the pleadings, (2) in opposition to Respondents’
third motion in limine, (3) in Agcon’s trial brief, (4) in a special jury instruction Agcon 7 proposed, and, (5) critically, in a mid-trial brief on the scope of respondents’ duty.
Agcon also unambiguously argued many times at trial that the purchase agreement
memorialized that respondents had a statutory duty to act honestly and in good faith,
including in its opening statement, on direct examination of Hove, and when cross-
examining Pocius. Despite all of this, respondents never suggested Agcon was or should
be limited to arguing its only statutory duty was a duty to disclose.
More importantly in our view, however, is the fact that Agcon repeatedly argued in
its opening brief that respondents had a statutory duty to act honestly and in good faith.
Agcon unambiguously stated in the introduction of its opening brief that section 2079.16
imposes a duty on brokers to act honestly and in good faith and that Pocius violated that
duty. The first line in the discussion section of Agcon’s opening brief begins by stating,
“In addition to imposing the duty of honesty and good faith upon real estate brokers,
[section] 2079.16 . . . .” About a page later, Agcon argues that respondents “wanted Hove
to believe Pocius . . . would act honestly and in good faith.”
7 The trial court ordered the parties to file briefs on the scope and nature of respondents’ duty after a dispute arose about whether Agcon could raise a contract claim based on the purchase agreement. In its brief, Agcon argued on that, among other things, respondents had “a statutory duty . . . to act honestly and in good faith.”
17
Later in its argument, Agcon argues respondents’ position that Pocius did nothing
wrong “denigrates a broker’s duties to act honestly and in good faith,” and his conduct
“would not pass the honesty and good faith requirements.” On the same page, Agcon
then reiterates its position by arguing that “Pocius had the absolute duty to act honestly
[and] in good faith,” and that Hove believed “Pocius would act with honesty [and] in
good faith.” Finally, Agcon reaffirmed the argument it made below by arguing that
“Pocius had a statutory and contractual duty to act honestly and in good faith.”
(Emphasis in original.)
In short, Agcon’s opening brief argued at least five separate times that respondents
were liable because Pocius had a duty under section 2079.16 to act honestly and in good
faith and he violated that duty. Yet, respondents never suggested in their respondent’s
brief, like they did at oral argument, that Agcon forfeited the issue by failing to properly
assert it below. As a result, Respondents forfeited their own forfeiture argument by
failing to raise it until oral argument. (See Sciarratta v. U.S. Bank N.A. (2016) 247
Cal.App.4th 552, 560; Shoemaker v. County of Los Angeles (1995) 37 Cal.App.4th 618,
633, fn. 17; San Mateo County Coastal Landowners’ Assn. v. County of San Mateo (1995)
38 Cal.App.4th 523, 558-559 & fn. 28.) We will therefore address Agcon’s argument that
the trial court erroneously granted nonsuit because the evidence could allow a jury to find
that respondents (Pocius) violated the section 2079.16 duty to act honestly and in good
faith.
18
The duty to disclose is distinct from the duty to act honestly, fairly, and in good
faith. (See Nguyen v. Scott (1988) 206 Cal.App.3d 725, 737.) As a result, a broker’s
conduct may breach the duty of honest and fair dealing while not violating (or even
implicating) the duty to disclose. (See ibid. [allegations that broker secretly bid on same
property as client alleged breach of duty of honest and fair dealing].) A breach of the
duty to disclose generally involves some kind of misrepresentation, omission, or
concealment that amounts to fraud. (See Horiike v. Coldwell Banker Residential
Brokerage Co. (2016) 1 Cal.5th 1024, 1039-1040.) But it does not follow that a broker’s
failure to disclose information, while perhaps not reaching the level of fraud, could
nonetheless amount to a breach of the broker’s duty under section 2079.16 to act
honestly, fairly, and in good faith. (See e.g., Nguyen v. Scott, supra, at p. 736; see also
Holmes v. Summer (2010) 188 Cal.App.4th 1510, 1525 (Holmes) [declining to determine
whether sellers’ brokers’ failure to disclose information about property was fraudulent
because, “at a minimum,” the brokers breached their duty under section 2079.16 to act
fairly by failing to make disclosures].)
We thus agree with Agcon that the fact that Pocius may not be liable for fraud
under Borba v. Thomas, supra, 70 Cal.App.3d 144, Brakke v. Econ. Concepts, Inc. (2013)
Cal.App.4th 761, or other fraud cases does not mean that he nonetheless could be liable
for violating his section 2079.16 duty to act honestly, fairly, and in good faith. As Agcon
puts it, even if Pocius’s conduct were “legally permissible” since it did not amount to
19
actionable fraud, it nonetheless might “not pass the honesty and good faith requirements”
of section 2079.16.
Viewing the evidence de novo and in the light most favorable to Agcon, while
“resolving all presumptions, inferences, and doubts in” its favor, we conclude a jury
could find that Pocius breached his duty of honest and fair dealing and good faith. 8 (Hernandez v. Amcord, Inc., supra, 215 Cal.App.4th at p. 669.)
During his trial testimony, Pocius denied having any special knowledge about the
City Council’s rezoning plans that could affect Agcon’s parcel. He specifically denied
that he met with or talked with any City Council officials, in secret or otherwise, about
any such impending zoning change. He also denied that he knew Agcon’s parcel would
be included in a new cultivation zone that the City was in the process of approving.
Some of his emails, however, suggest otherwise. On October 10, 2016, Pocius
emailed Frontier employee Naseem Farooqi a spreadsheet with the subject line, “List of
APNs for New Cultivation Zone.” The spreadsheet identified Agcon’s parcel as one of
the properties.
Less than an hour later, Farooqi emailed Pocius with a spreadsheet attached. The
spreadsheet identifies various properties by APN, including Agcon’s parcel. In the email,
Farooqi outlined a timeline in the following six weeks listing four dates with
corresponding City Council items, including a “Special Planning Commission Meeting”
8 We emphasize that we are not resolving any conflicts in the evidence and express no opinion on how the jury should view the evidence.
20
on October 25, 2016.” The email then lists three agenda items for that meeting. The first
is an “Ordinance Amendment,” which Farooqi notes would “[s]pecify cultivation can
exist within cultivation zone boundaries.” The second agenda item is “Create New
Cultivation Zone,” under which Farooqi states, “Include APNs from attachment.”
Farooqi concludes the email by stating, “[u]pon recommendation for approval from
Planning Commission, items would go for approval to the City Council on November 9,
and a special meeting of the City Council, November 23.” Two weeks after these email
exchanges, Pocius approached Agcon to discuss purchasing the parcel for Frontier.
A jury could reasonably find that these emails during this timeline show that, at a
minimum, Pocius knew the City was considering rezoning Agcon’s property to allow for
cannabis cultivation in the upcoming months. Although that was not guaranteed, a jury
could reasonably find that it was unfair, dishonest, or in bad faith for Pocius not to tell
Agcon of this possibility while simultaneously representing Frontier.
A case Agcon cites Holmes, supra, 188 Cal.App.4th 1510, is instructive, though
not on all fours with this case. There, the defendant-brokers listed a property for sale on
different occasions for prices ranging between $750,000 to $800,000, and eventually
offered to sell the property to the plaintiffs for $749,000. (Id. at p. 1516.) According to
the plaintiffs, however, the offer and purchase documents did not disclose that the
property was encumbered with three deeds of trust totaling over $1.1 million, meaning
that the property could not be transferred to the plaintiffs free and clear. (Ibid.) The
brokers argued that they had no obligation to disclose the encumbrances because it would
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have required them to disclose that the seller might lose money on the deal. (Id. at p.
1518.)
The Holmes court noted that, assuming the plaintiffs’ allegations were true, the
brokers’ listing prices were “less than honest.” (Holmes, supra, 188 Cal.App.4th at p.
1525.) The court, however, declined to decide whether those alleged representations
were fraudulent because the brokers had “the affirmative duty to treat [the plaintiffs]
honestly and fairly” under section 2079.16 and, “[a]t a minimum, the brokers did not act
fairly towards [the plaintffs] when signing them up for a real estate purchase the brokers
had reason to know was a highly risky proposition.” (Ibid.) The court reasoned that
“[s]urely a sense of rudimentary fairness would dictate that buyers in a case such as this
should be informed before they open escrow and position themselves to consummate the
same that there is a substantial risk that title cannot be conveyed to them.” (Id. at p.
1523.)
We acknowledge the facts in Holmes differ significantly from the facts here. But
Holmes shows that a broker in a real estate transaction can breach the section 2079.16
duty to act fairly, honestly, and in good faith by failing to disclose facts the broker knows
that any buyer or seller certainly would want to know about the property.
Here, for instance, a jury could permissibly find that Pocius knew about the City’s
considered zoning change, expected the change would significantly increase the value of
Agcon’s parcel, and intentionally withheld any information he knew about the potential
zoning change from Agcon with the hope that he could get a better deal for the parcel for
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Frontier, his employer. If the jury were to make these findings, it could likewise
permissibly find that, “[a]t a minimum, [Pocius] did not act fairly toward” Agcon, thereby
breaching his duty under section 2079.16. (Holmes, supra, 188 Cal.App.4th at p. 1525.)
For this reason, we conclude the trial court erred in granting Respondents’ motion
for nonsuit since it focused only on the duty to disclose under section 2079.16. We
therefore reverse the order granting the motion because it overlooked Agcon’s claim that
Pocius violated his section 2079.16 duty to act fairly, honestly, and in good faith.
But, as respondents urged at oral argument, we must still resolve whether the trial
court correctly found that respondents cannot be liable for violating the section 2079.16
duty to disclose.
Respondents persuasively argue that, under the plain language of section
2079.16’s duty to disclose, Pocius had no duty to disclose to Agcon that the City was 9 considering rezoning the parcel. Again, Pocius had a “duty to disclose all facts known to
[him] materially affecting the value or desirability of the property that are not known to,
or within the diligent attention and observation of, [Agcon].” (§ 2079.16, italics added.)
The two italicized portions of the statute present two distinct problems for Agcon’s 10 position.
9 We therefore need not decide whether respondents are correct that Borba and Brakke, two cases not involving section 2079.16, control here. 10 We reject respondents’ argument that, as a matter of law, the City’s plans to rezone the property at the time of the sale were “within the reach of the diligent attention and observation of” Agcon. That is an issue of fact. (See Shapiro v. Sutherland (1998) 64 Cal.App.4th 1534, 1544.)
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First, the only purported “fact” at the time of parcel’s sale was that the City was
considering rezoning the parcel in the future. Even if, as Agcon contends, Pocius knew
about the City’s plans, had special knowledge about them due to “secret meetings” with
the City, and expected the zoning change to occur shortly after the parcel’s sale, his
knowledge was not a “fact” under section 2079.16. (See Horiike v. Coldwell Banker
Residential Brokerage Co., supra, 1 Cal.5th at p. 1040 [collecting cases involved past
facts that had to be disclosed under section 2079.16].) It was instead an opinion about
how the City was going to act in the future. Speculation about how the parcel may be
zoned “at some unspecified future time depending on factors that may never exist” is not
a “fact” under section 2079.16. (Assilzadeh v. California Federal Bank, supra, 82
Cal.App.4th at p. 412.)
This brings us to the second problem with Agcon’s position. The duty to disclose
under section 2079.16 is written in the present tense (“materially affecting”). Under the
plain language of the statute, Pocius had a duty to disclose only those facts materially
affecting the parcel at the time of the sale. By definition, potential future acts by the
government are not “materially affecting” a property at the time of the sale.
For these reasons, we conclude that, at the time of the sale, Pocius’s failure to
disclose that the City was considering rezoning the parcel did not violate his section
2079.16 duty to disclose. The trial court thus properly granted Respondents’ motion for
nonsuit on Agcon’s claim that Pocius violated his section 2079.16 “duty to disclose all
facts known to [him] materially affecting the value or desirability of the property . . . .”
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VI.
DISPOSITION
The judgment is reversed. The trial court’s order granting respondents’ motion for
nonsuit is affirmed in part and reversed in part. The order is affirmed as to Agcon’s claim
that respondents violated the duty to disclose under section 2079.16, but the order is
reversed as to Agcon’s claim that respondents violated section 2079.16’s duty of honest
and fair dealing and good faith. The trial court’s order granting respondents’ request for
costs under section 998 is thus reversed. The matter is remanded for further proceedings
consistent with this opinion. The parties shall bear their own costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
CODRINGTON J.
We concur:
MILLER Acting P. J.
FIELDS J.
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AI Brief
AI-generated · verify before citing
Holding. The court held that the trial court erred in granting nonsuit because Agcon presented sufficient evidence for a jury to find that the broker breached the statutory duty of honest and fair dealing and good faith under Civil Code section 2079.16. However, the court also held that the broker's duty to disclose material facts did not require him to disclose the City's future, contemplated rezoning plans at the time of the sale.
Issues
Did the trial court properly preclude Agcon from arguing that the purchase agreement imposed a contractual duty of disclosure?
Did the trial court err in granting nonsuit on the claim that the broker violated Civil Code section 2079.16?
Does the duty to disclose under Civil Code section 2079.16 require a broker to disclose future, contemplated zoning changes?
Disposition. Affirmed in part, reversed in part, and remanded.
Quotations verified verbatim against the opinion
“Agcon presented sufficient evidence for a jury to reasonably find that Pocius breached the “duty of honest and fair dealing and good faith” imposed under section 2079.16.”