## Facts

- Kenn and Victoria Smiser listed their Oakland home for sale through a broker, and the property was marketed as designed by architect Julia Morgan.
- Media coverage and a sales brochure described the house as an “Authenticated, Julia Morgan Design, built 1917.”
- Geoffrey and Charlene Jue made a full-price offer and entered a purchase agreement with a scheduled closing date.
- Shortly before closing, the Jues were presented an addendum stating the home was “commonly known” to be a Julia Morgan design but that no plans at city hall verified the attribution; the Jues did not sign the disclaimer portion.
- Before escrow closed, the Jues consulted sources and received mixed information about whether Morgan designed the home.
- The Jues closed escrow, took title, and later sued the Smisers for fraud, concealment, negligent misrepresentation, and related claims based on the asserted Julia Morgan attribution.
- The trial court granted the Smisers’ motion for summary judgment on the ground that the Jues’ pre-closing knowledge defeated justifiable reliance and amounted to waiver; the Jues appealed.

## Issues

1. Whether a real-property purchaser who learns of potential material misrepresentations after signing a purchase agreement but before closing may close escrow and later sue for damages for fraud or misrepresentation.
2. Whether completing the transaction after learning of possible falsity negates reliance or constitutes waiver as a matter of law for purposes of summary judgment.

## Decision

- The Court of Appeal reversed the summary judgment for the sellers.
- A buyer who discovers possible fraud or misrepresentation before performance is complete may elect to proceed with closing and still sue for damages.
- Reliance for fraud is evaluated at the time the parties entered the purchase agreement, not at the time of closing after suspicions arise.
- The record on summary judgment did not eliminate triable issues, including whether the “Authenticated, Julia Morgan Design” representation was material and whether the buyers actually and justifiably relied on it when contracting.
- The case was remanded for further proceedings.

## Legal Principles

- A defrauded party may elect between rescinding the contract or affirming it and suing for damages; continued performance after learning of the fraud does not, by itself, waive a damages remedy.
- For fraud-based claims tied to contract inducement, the reliance inquiry focuses on the plaintiff’s state of mind when the contract was formed, not on later conduct taken after learning facts suggesting possible falsity.
- A rule requiring a purchaser to forgo closing to preserve fraud remedies is disfavored because it forces an unfair choice between risking breach and forfeiting a damages claim.
- Summary judgment is improper where material factual disputes remain as to misrepresentation, actual reliance at contract formation, and the reasonableness of that reliance.

## Conclusion

The court held that a buyer who learns before closing that a key representation may lack verification may still close escrow and pursue fraud or misrepresentation damages, because post-discovery performance does not automatically waive the claim and reliance is measured at the time the purchase agreement was made.


Jue v. Smiser, 28 Cal. Rptr. 2d 242 (Cal. Ct. App. 1994)