Opinion
B181465
4-30-2007
AMUSEMENT INDUSTRY, INC., et al., Plaintiffs, Cross-defendants and Appellants, v. MICHAEL ANTIN, Individually and as Trustee, etc., et al., Defendants, Cross-complainants and Respondents.
Horvitz & Levy, Curt Cutting and Lisa Perrochet; Sragow & Sragow and Allen P. Sragow; and Tuchman & Associates and Aviv L. Tuchman, for Plaintiffs, Cross-defendants and Appellants. Jones, Hirsch, Conner & Bull, Michael B. Magloff and Pamela Sirkin for Defendants, Cross-complainants and Respondents Michael Antin and Evelyne J. Antin, Trustees of their Antin Family Trust, and Michael Antin, Individually. Michael Antin for Defendants, Cross-complainants and Respondents Richard Alan Antin and Hong Kyu Hayne Antin, Trustees for their Antin Family Trust, and Richard Alan Antin, Individually.
NOT TO BE PUBLISHED
Plaintiffs and cross-defendants Amusement Industry, Inc., and Smart Real Estate, and cross-defendant Allen Alevy (collectively buyers) appeal from the judgment of rescission of a contract to purchase real property and for damages and attorneys fees entered in favor of defendants and cross-complainants (collectively sellers). They contend the trial court erred by: (1) finding buyers made certain judicial admissions; (2) excluding certain evidence; (3) calculating compensatory damages; (4) awarding punitive damages; and (5) awarding attorneys fees. We affirm.
FACTS
In addition to the opening, respondents and reply briefs, the parties have filed additional documents. We have considered all of these materials, and pursuant to Evidence Code section 452, subdivision (h), and section 459, subdivision (a), we grant buyers request that we take judicial notice of the published historical LIBOR and 11th District Cost of Funds indexes. (See Gamer v. DuPont Glore Forgan, Inc. (1976) 65 Cal.App.3d 280, 290 [judicial notice of historical fact of prime rate of interest].)
Viewed in accordance with the usual rules of appeal (Oliver v. Board of Trustees (1986) 181 Cal.App.3d 824, 832), the evidence adduced at trial establishes the following. The real property that is the subject of the litigation is comprised of 10 eight-unit apartment buildings (the property). In 1999, the property was owned by two trusts. For purposes of this appeal, the principal actors on the trusts behalf were brothers Michael and Richard Antin. Michael Antin is a tax attorney, and Richard relied on Michael to negotiate the sale of the property.
We refer to the trusts collectively as sellers; to avoid confusion, Richard Antin is referred to by his full name and Michael Antin is referred to as Antin.
Some time in late 1999 or early 2000, licensed real estate broker Matthew Mandell approached Antin about selling the property. Antin declined to enter into a written agreement with Mandell. However, he promised to pay Mandell a finders fee if Mandell produced a buyer who would purchase the property for an amount sufficient to generate a net profit of $3.2 million to sellers. Mandells marketing efforts eventually led to an accepted purchase offer, but the sale was not completed. Mandell, however, continued to market the property.
On April 14, 2000, Mandell faxed information about the property to Alevy, with an asking price of $3.45 million. Alevy told Mandell to present Antin with a "verbal" offer of somewhere between $2.8 and $3 million. Mandell did so but Antin rejected the offer. After Mandell showed the property to Alevy on April 23, 2000, Alevy said he was not willing to pay any more than $ 2.83 million for the property.
Alevy denied seeing the property with Mandell on April 23, 2000.
In September 2000, with Antins approval, Mandell advertised the property in the Los Angeles Times for $3.45 million. Real estate broker Richard Moody contacted Mandell in response to the ad. Moody told Mandell he intended to "partner" with Alevy, who was associated with a company called Platinum Capital Investments (Platinum), in any purchase of the property. Mandell provided Moody with additional information about the property and, on September 25, 2000, Mandell received an offer from Platinum to purchase the property for $3.089 million. Before Antin had responded to the offer, Mandell accompanied Moody, Alevy and their partner, Avi Shtern, on a walk-through of the property. After discussions with Antin, Mandell subsequently faxed to both Moody and Alevy a counteroffer of $3.150 million.
Mandell was familiar with Alevy from prior dealings.
Meanwhile, Alevy contacted Antin directly, falsely identifying himself to Antin as "Bob Roberts," and inquired whether the property was for sale. Antin told "Roberts" that the property was for sale for "[$]3.2 [million] net to me." In response to "Robertss" inquiry, Antin said: "There are a lot of brokers involved, and if one of them produces a buyer, I would work with that broker. But if theyre not involved with the broker, I can certainly deal with them directly."
While the Platinum offer was still outstanding, Antin received a second telephone call from "Roberts," who told Antin that the people he represented were prepared to make an all-cash, no contingency offer of $2.9 million to purchase the property. Antin told "Roberts" that, because the offer was for less than the sellers wanted, it would be acceptable only if the sellers incurred no costs, i.e., no brokers fees and no costs to repair the property; if these conditions were met, Antin said, he was confident he could convince his brother to accept the offer. When the conversation ended, Antin expected "Roberts" to make an offer in accordance with the terms Antin had set forth.
That same day, Antin received an offer to purchase the property for $2.9 million signed by Kracoff as president of appellant Smart Real Estate (Smart) (exh. No. 3); although "Roberts" had not told Antin whom he was representing, Antin understood this to be the offer he had discussed with "Roberts" (the Smart offer).
To assure himself that the sale he was negotiating with "Roberts" would not entail any broker commissions, Antin telephoned Mandell and "told him that I had another offer that I was going to accept. But he had worked the property, and if this offer had been generated by him, then he was entitled to commission. [¶] And then from then on, he would be dealing with the people, and I wouldnt be accepting the offer at that price, because it wouldnt tolerate a brokers commission." In response to Antins request for a list of everyone to whom Mandell had marketed the property, Mandell faxed Antin the following note on October 2, 2000: "As I worked with you on a trust basis in marketing the property, I am asking you to return the courtesy and assist me in protecting my interest by letting me know if any of the people on the list that follows are involved with the purchase from the offer you received. I shared the information on the property with the following people/companies: [¶] . . . ." Alan Alevy and Alevy & Associates and Avi Stern [sic] and Platinum were on the list, but Roberts, Kracoff, Smart, and Amusement were not. (Exh. No. 171).
The next day, October 3, 2000, Antin telephoned "Roberts" to discuss the offer, but Antin was told by the receptionist that there was "no such person." Since the offer was signed by Kracoff, Antin asked to speak to him. Antin explained to the woman who next answered the phone that he needed to talk to "Roberts" regarding the Smart offer to confirm that Smart was not involved with a broker. The woman told Antin that the receptionist was new and did not know everyone, then put Antin on hold. Kracoff was the next person who answered the phone. Antin told Kracoff about the confusion regarding whether "Roberts" worked there and then explained the purpose of his call: "Im calling because I had this list of people from the broker, and I dont have a listing with him, but I have an agreement with him. [¶] And if Smart Real Estate, his organization, whatever, any of these people on the list were together, involved together, because thats the language Mr. Mandell used, that I couldnt deal with them without the broker being involved. [¶] So I needed to know that these people on the list werent involved with Mandell." Kracoff responded: " `Why is he involved with this? This isnt what he does, but give me the list. "Antin read Mandells list to Kracoff. Kracoff told Antin that "Mr. Alevy was a stockholder of Amusement Industries, another company thats around here somewhere but doesnt have anything to do with the deal. [¶] And Smart Real Estate is owned by others, not by Allen Alevy. And Allen Alevy is not an officer, director, or shareholder, nor is he otherwise involved with Smart Real Estate." Kracoff also told Antin that he did not know Avi Shtern, Platinum and Capital Investments or any of the other names on Mandells list. Antin jotted his notes of the conversation onto the fax he received from Mandell the previous day (exh. No. 125). At the conclusion of their conversation, Antin asked Kracoff to have "Roberts" call Antin to further discuss the Smart offer.
Kracoffs representations to Antin were false. In fact, in October 2000 Alevy worked with Kracoff to secure properties on behalf of Smart and Amusement. Kracoff, who was president of Smart and Amusement, had instructed Alevy to negotiate the purchase of the property with Antin. Kracoff knew that Alevy sometimes used the name "Bob Roberts" as part of his negotiations. Kracoff also knew that Avi Shtern was one of the people who worked with Alevy on this transaction.
Meanwhile, later the same day that Antin talked to Kracoff, Antin received a message that "Roberts" had telephoned. When Antin eventually spoke to "Roberts," they discussed the terms of a proposed counteroffer, which Antin typed and sent to Smarts attorney. In agreeing to sell the property to Smart on the terms reflected in the offer and counteroffer (the agreement), Antin relied on "Kracoffs representation that Mr. Alevy and the other names on the list were not involved in any way. . . . [¶] And based on that, then I knew that I wasnt going to owe a brokers commission and $2.9 [million] net to me was a fair and reasonable deal."
Escrow was opened on November 15, 2000, and was set to close by January 16, 2001. During escrow, Smart assigned its interest to Amusement. At some point the parties disputed the scope of necessary termite repair work and who should pay for it under the agreement. For the next several months, Antin and "Bob Roberts" traded correspondence regarding the issue, but they could not come to an understanding. Escrow never closed.
PROCEDURAL BACKGROUND
On July 2, 2001, Amusement and Smart filed the instant action, and three days later they filed a lis pendens against the property. The gravamen of the operative first amended complaint (the complaint) was that sellers had breached the agreement by failing to pay for a pest control report and complete the repair work recommended by that report. Buyers sought specific performance.
On December 13, 2001, sellers answered the complaint and filed a cross-complaint against Smart and Amusement for breach of contract and a common count. The gravamen of the cross-complaint was that sellers fully performed their obligations under the agreement but buyers refused to close escrow unless $150,000 of the purchase price was retained in escrow.
On March 14, 2002, during discovery, sellers discovered "Bob Robertss" true identity when Alevy appeared at "Robertss" noticed deposition and testified that he had used the name "Bob Roberts" in his negotiations with Antin.
On July 11, 2002, sellers sought leave to amend their answer to add an affirmative defense of fraud and to file an amended cross-complaint adding Alevy as a cross-defendant and alleging new causes of action for rescission (third cause of action) and damages (fourth cause of action) based on fraud. Over buyers objections, the motion was granted. Buyers subsequent demurrer and motion to strike portions of the cross-complaint were denied.
After buyers made two unsuccessful motions for summary adjudication of the new fraud causes of action and affirmative defense, the issue of fraudulent inducement was bifurcated. The parties having agreed that the issues relating to fraud were equitable in nature, the first phase of the bifurcated trial commenced on November 17, 2003, to the court, without a jury.
Sellers moved to bifurcate "the issue of whether [buyers] action is barred by the affirmative defense of fraud in the inducement of the purchase agreement, and the identical issue contained in the Third and Fourth causes of action in the Cross-Complaint for fraud in the inducement of the purchase agreement, being heard first." Buyers opposed bifurcation. The record does not include either the reporters transcript of the hearing on the motion or the courts order.
On March 22, 2004, the trial court filed its Statement of Decision on Bifurcated Issues. Finding Antin and Mandell to be credible witnesses and Alevy, Kracoff, Shtern and buyers attorney Joel Cibener not credible, the trial court found, by clear and convincing evidence, that buyers were guilty of fraud based upon concealment in that they induced sellers to enter into the contract for sale of the property by intentionally concealing Alevys relationship to Smart. The trial court further found that, because buyers were guilty of fraud, they were not entitled to specific performance of the agreement, nor to any of the other relief sought in their complaint. On the cross-complaint, the trial court found sellers entitled to rescission as a result of the fraud, and to consequential and punitive damages subject to later proof.
The damages trial commenced on May 13, 2004. On January 28, 2005, the trial court filed its Statement of Decision re Damages Portion of Bifurcated Action/Order, which fully incorporated by reference the March 22, 2004, statement of decision. Once again, the trial court found buyers witnesses, Alevy and Kracoff, not credible. It concluded sellers had established that they "sustained compensatory damages that can be characterized as (1) Interest Differential on Refinance; (2) Time Spent By Michael Antin To Manage Property[; and] (3) Fumigation Costs." The trial court found sellers were also entitled to punitive damages based on the showing of "reprehensible conduct" engaged in by Smart, Amusement and Alevy.
In the judgment filed February 16, 2005, the agreement was declared "null, void and of no effect," and sellers were awarded consequential damages in the amount of $104,234 and punitive damages as follows: (1) $500,000 against Alevy; (2) $500,000 against Amusement; and (3) $250,000 against Smart. The trial court also awarded sellers attorneys fees of $1,575,955.90.
Buyers filed a timely notice of appeal.
DISCUSSION
1. The Trial Court Properly Found Buyers Made Certain Judicial Admissions
Pursuant to a motion in limine, sellers obtained an order that statements made by buyers in two unsuccessful motions for summary adjudication constituted judicial admissions. Buyers contend the trial court erred in finding "statements attributed to Kracoff, to wit, (a) Allen Alevy was a stockholder of a company called Amusement Industries, (b) Allen Alevy was not an officer, director or shareholder of Smart Real Estate, and (c) Allen Alevy had no involvement with Smart Real Estate, are conclusively proved as judicial admissions." While buyers ultimately do not dispute (a) and (b), they argue that the pleadings upon which the judicial admission finding was based — Undisputed Fact No. 5 in buyers two motions for summary adjudication and the evidentiary support therefor — do not constitute a judicial admission that Kracoff told Antin that Alevy "had no involvement with Smart." We disagree.
The parties dispute the appropriate standard of review. Buyers maintain that the appropriate standard is de novo, whereas sellers urge an abuse of discretion standard. The trial court did not assess the credibility of any witness or otherwise resolve contested issues of facts. Accordingly, and because resolution of the issue requires "a critical consideration, in a factual context, of legal principles and their underlying values," we conclude that the correct standard in this case is de novo. (See Harustak v. Wilkins (2000) 84 Cal.App.4th 208, 212-213, italics omitted.)
a. Factual background of the judicial admission ruling
The unverified cross-complaint alleges: "26. Prior to October 3, 2000, . . . Antin telephoned Smart Real Estate and asked to speak with Bob Roberts. Upon being told that no such person worked there, Michael Antin asked to speak [to] David Kracoff, President of Smart Real Estate. In the course of the conversation, Michael Antin informed David Kracoff [that Antin had a finders fee agreement with Mandell and before Antin would make a counteroffer to Smart, he needed to know whether the people on Mandells list, which included Alevy, were involved or associated with Smart in the transaction]. [¶] 27. In response to Antins inquiry, David Kracoff stated as follows: [¶](a) Allen Alevy was a stockholder of a company called Amusement Industries; [¶] (b) Allen Alevy was not an officer, director or shareholder of Smart Real Estate which was owned by others; and [¶] (c) Allen Alevy had no involvement with Smart Real Estate." (Italics added.)
Buyers filed a general denial to the complaint, and subsequently denied a request for admission that Antin questioned Kracoff about Alevy in a telephone conversation on October 3, 2000. Nevertheless, in two unsuccessful motions for summary adjudication of the fraud claims, buyers subsequently asserted the following as Undisputed Fact No. 5: "[Sellers] had knowledge that Allen Alevy was a shareholder of [Amusement] in October 3, 2000." In support of Undisputed Fact No. 5, the buyers cited the following evidence: (1) paragraph 27(a) of the cross-complaint; (2) the supporting declaration of their attorney; and (3) Antins handwritten notes on the October 2, 2000, fax from Mandell to Antin. Regarding Undisputed Fact No. 5, buyers argued in their first summary adjudication motion that: "It should be noted from the allegations of the [cross-complaint] that Michael Antin called the same number to look for Bob Roberts and to find out information on Allen Alevy, Smart Real Estate & Amusement." Buyers also argued: "[Sellers] fraud allegations are without merit because they admit that they were told on October 3, 2000[,] that Allen Alevy was a shareholder of Amusement [cross-complaint [¶] 27(a)] . . . . [¶] [Sellers] entire fraud claim is devoid of any logic or reason. They knew Allen Alevy was a shareholder of Amusement . . . . [¶] There was no false representation or concealment because the alleged statements of representations at paragraphs 27(a) and (b) are in fact true and undisputed . . . . Michael Antin[s] own alleged notes indicate his knowledge that Allen Alevy is a stock holder of Amusement and is not an officer, director or share holder of Smart." (Italics added.) Further, in their reply in support of the first summary adjudication motion, buyers argued: "Michael Antin . . . entered into this deal with his eyes wide open to the fact that, David Kracoff, president of Smart and signer of the Purchase Agreement, knew Allen Alevy and truthfully conveyed the facts of Allen Alevys relationship to Smart and Amusement. These facts are undisputed and were admitted to by [Antin] at deposition. [¶] This means that [Antin] was a) aware of the Smart and Amusement[s] relationships; b) was `keen enough to ask pinpoint questions regarding Allen Alevys titles, positions and interests in the corporations; and c) he himself hid the ball from buyers and brokers when he was asked about relationships. [¶] Moreover, he received all this information from one single person when he dialed one telephone number. Whether he was negotiating with Bob Roberts is irrelevant since by his own admission he was told about Allen Alevy. . . . [¶] The only other alleged statement `that he was not otherwise involved is (giving the benefit that it was even made) a mere legal conclusion not giving rise, as a matter of law, to an action for fraud." (Italics added.) Buyers made similar arguments in their second unsuccessful summary adjudication motion.
In his declaration, submitted in support of buyers first motion, buyers attorney averred, in pertinent part, as follows: "17. Michael Antins own alleged handwritten note indicate[s] his knowledge that Allen Alevy is a [stockholder] of Amusement and is not an officer, director, or shareholder of Smart. Attached hereto [as an exhibit] is a true and correct copy of [a memo] from Matthew Mandel[l] to Michael Antin with Michael Antins handwritten notes which state that `stockholder of Amusement Industry Alevy Smart Real Estate is owned by other — not Alevy — he is not an officer, director, shareholder [or] otherwise involved with Smart Real Estate." Similarly, in support of the second motion, the attorney averred: "19. Attached hereto . . . is a true and correct copy of the October 2, 2000 Memorandum with Michael Antins handwriting. . . . [¶] . . . [¶] 26. The allegations that `Allen Alevy was a stockholder of a company called Amusement Industries and that Allen Alevy was not an officer, director, or shareholder of Smart Real Estate, which is owned by others . . . are undisputed. [¶] . . . [¶] 30. Michael Antins own handwritten note, which indicates his knowledge that Allen Alevy was a stockholder of Amusement and was not an officer, director, or shareholder of Smart, speaks for itself. Attached hereto as [an exhibit] is a true and correct copy of [a memo] from Matthew Mandel[l] to Michael Antin with Michael Antins handwritten notes which state that `stockholder of Amusement Industry Alevy Smart Real Estate is owned by other — not Alevy — he is not an officer, director, shareholder nor otherwise involved with Smart Real Estate. "(Italics added.)
In its entirety, Antins handwritten note reads: "Stockholder of Amusement Industries[.] Smart Real Estate is owned by others — not Alevy — he is not officer, director, shareholder nor otherwise involved with Smart Real Estate[,] says David Kracoff [¶] 10/3/00."
As in the first motion, in the second motion buyers argued: "[Sellers] fail to present any evidence of concealment regarding Allen Alevy or allegation of a false fact. As a matter of law the evidence is clear that there was no justifiable reliance. Rather, Michael Antins own deposition testimony supports this Motion. Michael Antin testified that on October 3, 2000, prior to entering into the agreement, he telephoned one number and spoke with David Kracoff, president of both Smart Real Estate and Amusement, after being told that there was nobody by the name of Bob Roberts. Specifically, Mr. Antin testified [that Kracoff told him Alevy was a stockholder of Amusement, that Smart was not owned by Alevy, and that Alevy was not an officer, director, shareholder, nor otherwise involved with Smart]. [¶] The alleged statement of David Kracoff that Allen Alevy `is not otherwise involved or `not involved in any way is not actionable fraud." Buyers also argued: "Michael Antin testified that David Kracoff `said, give me a list. This testimony defeats this element of fraud — Antins testimony is that David Kracoff told Michael Antin about Allen Alevy and his relationship with Smart and Amusement."
After summary adjudication was denied, sellers made a motion in limine seeking an order prohibiting buyers from introducing evidence "which contradicts, negates or denies that David Kracoff, President of [Smart] and [Amusement], had a telephone conversation with Michael Antin, on or before October 3, 2000, concerning Alan Alevy and his involvement with Smart and Amusement in the Florence 80 transaction." The gist of the motion was that, by relying on paragraph 27 of the cross-complaint and Antins handwritten notes in support of their summary adjudication motions, buyers judicially admitted the content of paragraph 27 and of Antins note.
Buyers opposed the motion, arguing that, although Undisputed Fact No. 5 admitted that Kracoff told Antin that Alevy was a shareholder of Amusement and not an officer, director, or shareholder of Smart, it did not admit that Kracoff told Antin that Alevy was not " `otherwise involved with Smart." Buyers reiterated this position at the initial hearing on the motion. While the minute order from this hearing indicates that the trial court granted sellers motion, a fair reading of the record establishes that the court announced a tentative ruling in favor of sellers, but reserved final determination of the issue until the alleged admission was proffered during the trial. Accordingly, the issue was discussed again during the first phase of the bifurcated trial. At that time, buyers argued that the only judicial admission arising from Undisputed Fact No. 5 was that Antin knew, on October 3, 2000, that Alevy was a shareholder of Amusement and not an officer, director or shareholder of Smart. Sellers countered that, since the linchpin of buyers motions for summary adjudication was Antins note memorializing his telephone conversation with Kracoff on October 3, 2000, buyers necessarily adopted the entire note, not just the portions that were favorable to their position. The trial court agreed, ruling: "[S]tatements attributed to Kracoff, to wit, (a) Allen Alevy was a stockholder of a company called Amusement Industries, (b) Allen Alevy was not an officer, director or shareholder of Smart Real Estate, and (c) Allen Alevy had not [sic] involvement with Smart Real Estate, are conclusively proved as judicial admissions." Later, the trial court sustained sellers objections to Kracoffs proffered testimony about whether he told Antin that Alevy was not otherwise involved with Smart, as well as to any testimony describing Alevys involvement in Smart, on the ground that the issue had already been established by judicial admission.
Buyers oral argument at the in limine hearing that they did not admit that Kracoff was the source of Antins information about Alevy is inconsistent with buyers written argument in opposition to the motion that Undisputed Fact No. 5 established: "One, David Kracoff represented that Allen Alevy was a shareholder of Amusement. Two David Kracoff represented that Alevy was not an officer, director, or shareholder of Smart."
Initially, the trial court stated: "The ruling [is] — if [buyers] submitted evidence, evidence, meaning what is admissible as evidence, not argument, if you submitted evidence as undisputed . . . in a summary judgment or summary adjudication, then you have to live with it; and if you didnt, then you dont." The trial court later clarified: "If you [buyers] wrote it as undisputed, and you propounded it as undisputed, then its undisputed. And I guess its going to be at the time where I look at it specifically[,] okay?"
b. The judicial admission doctrine
"`A judicial admission (by affirmative allegation in a pleading) is a conclusive concession of the truth of the matter admitted. " (Prilliman v. United Air Lines, Inc. (1997) 53 Cal.App.4th 935, 961 (Prilliman); see also Kirby v. Albert D. Seeno Construction Co. (1992) 11 Cal.App.4th 1059, 1066, fn. 4 (Kirby); Electronic Equipment Express, Inc. v. Donald H. Seiler & Co. (1981) 122 Cal.App.3d 834, 850 (Electronic).) " `It is a waiver of proof of a fact by conceding its truth, and it has the effect of removing the matter from the issues. " (Valerio v. Andrew Youngquist Construction (2002) 103 Cal.App.4th 1264, 1271, quoting 4 Witkin, Cal. Procedure (4th ed. 1997) Pleading, § 413, p. 511, italics omitted.) Witkin explains that a judicial admission "is not treated procedurally as evidence; the particular pleading or allegation is not formally offered in evidence but may nevertheless be relied upon and treated in argument as part of the case." (1 Witkin, California Evidence (1 Witkin, Cal. Evidence (4th ed. 2000) Hearsay, § 97, p. 799; see also Uhrich v. State Farm Fire & Casualty Co. (2003) 109 Cal.App.4th 598, 613 (Uhrich).)
In Electronic, the court made a distinction "between admissions which are merely probative and those which are dispositive of an issue." (Electronic, supra, 122 Cal.App.3d at p. 850.) "If the pleader alleges the former, evidence may still be received on the ultimate issue. [Citations.] At the same time, the pleader cannot dispute the allegation that he made." (Ibid.) The court in Electronic used the case of Hall v. United States (N.D. Cal. 1970) 314 F.Supp. 1135, as an example of a dispositive judicial admission. There, the plaintiffs admission in the complaint on when they obtained knowledge of permanent sterility precluded plaintiffs from arguing that the statute of limitations did not bar the action. (Electronic, at p. 850.) By contrast, in Electronic, a malpractice action brought by a corporation against its accountant, the court found no judicial admission. There, an admission in the complaint that the corporation received reports containing false information did not preclude its CEO from testifying at trial that, on August 11, 1973, he received a year-end audit which reported results substantially different from the previous monthly statements, but did not understand the import of the discrepancies until several months later. (Id. at p. 849.) The jury was therefore entitled to hear evidence that the discovery of defendants negligence did not occur until later. (Id. at p. 851; see also Kirby, supra, 11 Cal.App.4th at pp. 1066-1067.)
Because a judicial admission may have a critical impact on the course of the litigation, the rule is that statements claimed to constitute judicial admissions that are "tacit" or "in part circumstantial" are not judicial admissions. (Price v. Wells Fargo Bank (1989) 213 Cal.App.3d 465, 480-481.) "[S]ummary judgment should not be based on tacit admissions or fragmentary and equivocal concessions, which are contradicted by other credible evidence." (Id. at p. 482; see also Kirby, supra, 11 Cal.App.4th at p. 1066.)
This limitation aside, judicial admissions may properly be found when a partys inconsistent positions taken in pleadings would operate unfairly and where the circumstances suggest the party is playing fast and loose with the court. In Trembley v. Benedetti (1955) 134 Cal.App.2d 553, 557 (Trembley), the court observed: "The logical absurdity which appellant asks this court to accept in this case is obvious: Despite the fact that the court has found the facts one way in the other cases, because [appellant] successfully contradicted respondents testimony he insists that in this case the court was compelled to make an exactly contrary finding on the same evidence, because it must accept respondents testimony as true. We are satisfied that this cannot be the law. If a partys testimony is to be treated as a judicial admission it must be accepted as true by his adversary. If his adversary elects to contradict it by testimony of his own he cannot at the same time insist that his opponent is bound by it."
c. Application of the doctrine here
We agree with the trial court that buyers pleading of undisputed facts in support of its summary adjudication motions constitutes an admission that Kracoff told Antin that Alevy was (1) a shareholder of Smart, (2) not an officer or director of Amusement, and (3) not otherwise involved with Smart. To induce the trial court to rule in their favor on the summary adjudication motions, buyers asserted that sellers statements in the cross-complaint and Antins handwritten notes established that Antin was informed by Kracoff of Alevys relationship with Smart and Amusement on October 2, 2000. Buyers assertions were not statements of a subjective belief or argument, but assertions of fact and, because they were made subsequent to buyers contrary denial of the allegations of the cross-complaint and responses to sellers requests for admissions, those assertions superseded buyers prior denials. As in Uhrich, supra, 109 Cal.App.4th at page 613, buyers assertions were based on evidence known to buyers — the content of Kracoffs conversation with Antin. On this record, we conclude that the trial court did not err in giving conclusive effect to the assertions of undisputed fact upon which the buyers relied in their summary adjudication motions. Under the reasoning of the court in Trembley, supra, 134 Cal.App.2d 553, by taking the position in their summary adjudication motions that paragraph 27 of the cross-complaint was a judicial admission that Kracoff informed Antin of Alevys relationship with Smart and Amusement, buyers cannot now take the inconsistent position that Kracoff did not do so. (Id. at p. 557.)
Buyers reliance on Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510 (Scalf) and Mason v. Marriage & Family Center (1991) 228 Cal.App.3d 537 (Mason), for a contrary result is misplaced. Both cases involved application, in the context of summary judgment, of what has become known as the DAmico rule. (See DAmico v. Board of Medical Examiners (1974) 11 Cal.3d 1 (DAmico).) In DAmico, our Supreme Court declared that "when discovery has produced an admission or concession on the part of the party opposing summary judgment which demonstrates that there is no factual issue to be tried, [the usual requirements or strict construction of the moving partys affidavits and liberal construction of the counteraffidavits] are relaxed or altered in their operation." (Id. at p. 21) "Accordingly, when such an admission becomes relevant to the determination, on motion for summary judgment, of whether or not there exist triable issues of fact (as opposed to legal issues) between the parties, it is entitled to and should receive a kind of deference not normally accorded evidentiary allegations in affidavits." (Id. at p. 22.) In Mason, summary judgment was granted based on the plaintiffs response to a form interrogatory; the court reversed, reasoning that the plaintiffs claim that her interrogatory response had been a simple mistake was credible and precluded summary judgment in light of the entire record. (Mason, at p. 546.) And in Scalf, summary judgment was based on the partys deposition testimony; the court reversed, reasoning that deposition answers "are simply evidence. Subject to the self-impeachment limitations of DAmico, they are considered and weighed in conjunction with other evidence. They do not constitute incontrovertible judicial admissions as do, for example, concessions in a pleading [citations], or answers to requests for admissions, which are specially designed to pare down disputed issues in a lawsuit. [Citation.]" (Scalf, at p. 1522.) While the principle of "judicial admission" is related to the DAmico rule, the two doctrines are not the same. (See Prilliman, supra, 53 Cal.App.4th at p. 961.) Because Mason and Scalf both involved application of the DAmico rule in the context of summary judgments, whereas the issue here is the judicial admission doctrine in the context of a court trial, Mason and Scalf are inapposite.
d. Harmless error
Even assuming the trial court erred in finding buyers judicially admitted that Kracoff told Antin that Alevy was "not otherwise involved" with Smart, the error was patently harmless under the circumstances. This is because the trial court made clear in two separate statements of decision that it found Antins testimony credible and Kracoffs testimony not credible. Inasmuch as Antin testified Kracoff told him that Alevy had no other involvement in Smart, it is not reasonably probable that the trial court would have believed Kracoffs contrary testimony even in the absence of the judicial admission.
2. The Trial Court Did Not Abuse Its Discretion in Excluding Evidence
Buyers contend the judgment should be reversed because the trial court erred in excluding, on relevance and Evidence Code section 352 grounds, the testimony of escrow officer Karen Lodes proffered during the damages phase of the bifurcated trial. Buyers argue that Lodess evidence was relevant to the issues of consequential and punitive damages, including sellers delay in seeking rescission after they learned of Alevys involvement and buyers lack of intent to injure the Antins by concealing Alevys identity. Sellers argue that Lodess testimony tended to prove Antin discovered Alevy was involved with buyers within a month after the purchase agreement but nevertheless continued with the sale. We are not persuaded.
A trial courts decision admitting or excluding evidence is reviewed for abuse of discretion. (Firestone v. Hoffman (2006) 140 Cal.App.4th 1408, 1418.) Only relevant evidence is admissible and, with certain statutory exceptions not applicable here, all relevant evidence is admissible. (Evid. Code, §§ 350, 351.) Evidence is relevant if it has "any tendency in reason to prove or disprove any disputed fact that is of consequence to the determination of the action." (Evid. Code, § 210.) However, the erroneous exclusion of relevant evidence cannot be the basis of a reversal unless the error resulted in a miscarriage of justice. (Evid. Code, § 354.) "A miscarriage of justice should be declared only when the reviewing court is convinced after an examination of the entire case, including the evidence, that it is reasonably probable a result more favorable to the appellant would have been reached absent the error. [Citations.]" (Brokopp v. Ford Motor Company (1977) 71 Cal.App.3d 841, 853-854.)
According to buyers offer of proof, Lodes was "expected to testify that in her initial telephone call with [Antin], she told Antin that she received the purchase agreement from Alevy & Associates, that she never heard of Bob Roberts . . . and . . . that her main contact with the buyer is Allen Alevy." At the hearing, counsel explained that the evidence tended to show "that the Bob Roberts representation was not made with any intent to injure . . . but was rather made simply as a negotiating tool. [¶] [Lodess] testimony establishes that neither Alevy nor any related entity attempted to conceal his involvement in the transaction once escrow opened supports our argument." The trial court granted sellers motion to exclude Lodes testimony on relevance and Evidence Code section 352 grounds.
Buyers submitted Lodess declaration, in which she averred that, shortly after November 15, 2000, she told Antin that she had received the purchase agreement from Alevy & Associates; in response to Antins inquiry as to whether Lodes had spoken to Bob Roberts, Lodes stated that she never heard of Bob Roberts and her dealings had been with Anna Chase, Joel Cibener and Alevy; throughout the course of escrow, Lodes referred to Alevy as the buyer; Antin never instructed Lodes that Alevy could not be involved in the transaction.
We find no abuse of discretion. Whether Alevy revealed his identity to Lodes during the escrow process was simply not relevant to any issue in dispute during the damages phase of the trial. Similarly, the fact that Lodes may have mentioned Alevys name to Antin more than a month after the purchase agreement was executed, at a time when the evidence shows Alevy was still misrepresenting himself to Antin as "Bob Roberts," does not have "any tendency in reason to prove or disprove any disputed fact that is of consequence to the determination" of the issue of punitive damages. (Evid. Code, § 210.)
Buyers argument that this evidence may have been relevant to the timeliness of sellers rescission remedy is also without merit. Whether sellers were entitled to the remedy of rescission was litigated in the first phase; only damages were at issue in the second phase. In a footnote in their opening brief, buyers argue that it would have been futile to introduce Lodess evidence during the first trial inasmuch as the court had admonished against offering evidence of events occurring during escrow during that phase. Buyers have not challenged any first phase evidentiary ruling except as it relates to the judicial admission. They argue only that Lodess evidence should have been admitted during the damages phase. As the evidence was not relevant to damages, they are incorrect.
3. Substantial Evidence Supports the Award of Compensatory Damages
Relying on Civil Code sections 3343 and 1692, the trial court found: "[Sellers are] entitled to be placed in the same position that [they] would have been in had [they] not relied upon the fraud — nothing more or less — and that is the purpose and function of the `out-of-pocket loss rule as codified in [section] 3343. [¶] [Sellers] presented evidence that [they] sustained the following actual damages: (1) interest differential damages in the amount of $71,854; (2) fumigation expenses in the amount of $32,280."
Buyers make three claims of error with respect to this award: (a) The award should have been offset by financial gains sellers received from continuing ownership of the property; (b) Sellers were not entitled to damages for the lost refinance opportunity or "interest rate differential"; and (c) There was no substantial evidence to support the award of $32,380 for fumigation expenses. As we shall explain, each contention is without merit.
a. Buyers were not entitled to an offset for the financial gains sellers received from continuing ownership of the property
Buyers contend the compensatory damages award must be reversed because the evidence showed that the income sellers derived from the property during the litigation exceeded their out-of-pocket loss and, moreover, sellers benefited from the appreciation of the property that accrued during the litigation. We disagree.
Known as the "out-of-pocket measure of damages," Civil Code section 3343 (§ 3343) governs the measure of damages to which one defrauded in the sale of property is entitled. In pertinent part, subdivision (a) of section 3343 provides that one defrauded in the sale of property is entitled to recover, among other things, "(1) Amounts actually and reasonably expended in reliance upon the fraud. [¶] . . . [¶] (3) Where the defrauded party has been induced by reason of the fraud to sell or otherwise part with the property in question, an amount which will compensate him for profits or other gains which might reasonably have been earned by use of the property had he retained it." Section 3343 is intended to restore a plaintiff to the financial position he enjoyed prior to the fraudulent transaction. (Fragale v. Faulkner (2003) 110 Cal.App.4th 229, 236.)
A claim for damages in not inconsistent with a claim for relief based upon rescission. (Civ. Code, § 1692) "Relief given in rescission cases — restitution and in some cases consequential damages — puts the rescinding party in the status quo ante, returning him to his economic position before he entered the contract." (Runyan v. Pacific Air Industries, Inc. (1970) 2 Cal.3d 304, 316, fn. 15, italics omitted (Runyan).) "`The aggrieved party shall be awarded complete relief, including . . . any consequential damages to which he is entitled; but such relief shall not include duplicate or inconsistent items of recovery. [¶] If in an action or proceeding a party seeks relief based upon rescission, the court may require the party to whom such relief is granted to make any compensation to the other which justice may require and may otherwise in its judgment adjust the equities between the parties. " (Id. at p. 311, fn. 10, quoting Civ. Code, § 1692.)
Like section 3343, the fundamental object of rescission is to restore the parties as far as possible to the economic position they occupied before they entered into the contract. (McCoy v. West (1977) 70 Cal.App.3d 295, 302 (McCoy).) For example, in the converse of the present setting, generally a buyer who rescinds a contract to purchase land because of the sellers fraud can recover the purchase price paid by him, but the guilty seller may be entitled to the reasonable rental value of the land while it was in the innocent buyers possession. (Id. at p. 301; see also Runyan, supra, 2 Cal.3d at p. 315.) "[T]he right is grounded upon equitable principles and finds its genesis in the proposition that a rescinding [buyer] should not be permitted to retain an unjust benefit as the result of the rescission." (McCoy, supra, 70 Cal.App.3d at p. 302.) California decisions that have determined when restitutionary damages should be awarded "have differentiated between actions for rescission based upon a ground involving some fault on the part of the nonrescinding party, and actions based upon a ground not involving such fault. Only in the former category have courts of equity required the nonrescinding party to pay to the other restitutionary damages, for the obvious reason that otherwise he would be unjustly enriched. [Citation.]" (Runyan, supra, 2 Cal.3d at p. 317, fn. omitted.)
It does not follow from this proposition that a guilty buyer is entitled to a setoff against income an innocent seller derives from land that remained in the sellers possession. In fact, such a rule would be inconsistent with section 3343, subdivision (a)(3), which provides that one defrauded in the sale of property is entitled to recover "an amount which will compensate him for profits or gains which might reasonably have been earned by use of the property had he retained it." If a defrauded seller who parts with his land is entitled to compensation for both reasonable expenses incurred as a result of the fraud (§ 3343, subd. (a)(1)) and for the profits which might have reasonably have been generated by the land if he had not parted with it (§ 3343, subd. (a)(3)), we see no reason an innocent seller should have those profits reduced.
Citing Runyan, supra, 2 Cal.3d at page 319, buyers assert: "Unless the plaintiff can establish his claimed damages exceed the `gross income generated by the property, a court cannot award consequential damages." But this was not the holding in Runyan. In Runyan, the plaintiff purchased an exclusive franchise from the defendant for $25,000. The franchise agreement obligated the defendant to, among other things, train the plaintiff in the business and supply 24-hour sales and technical assistance. Six months into the contract, the plaintiff brought an action for rescission and consequential damages under various theories, including failure of consideration and fraud. The trial court found in plaintiffs favor on the failure of consideration theory, but against him on fraud, and awarded consequential damages. The appellate court affirmed the judgment, noting that the trial court properly avoided duplicate recovery by deducting the gross income the plaintiff actually received from his activities relating to the franchise from his loss of income measured by the salary he would have received had he not left his job to open the franchise. Since Runyan did not involve fraud measure of damages, it is inapposite here.
We are also not persuaded that sellers consequential damages for fraud should be offset by any appreciation of the property. In support of this position, buyers cite CMSH Co. v. Antelope Development, Inc. (1990) 223 Cal.App.3d 174, 181 [inflation is not a proper factor to be considered in measuring damages for the nonexpungement of a lis pendens where the fair market value of the property has appreciated during the lis pendens period]; and Nielsen v. Farrington (1990) 223 Cal.App.3d 1582, 1587, fn. 5 [where seller is seeking only consequential damages for buyers breach of contract, it is buyers burden to establish propertys fair market value under any offset theory]. These cases deal with breach of contract damages, not fraud damages.
b. "Interest rate differential"
Buyers contend the award of $71,854 for sellers lost refinance opportunity should be stricken. The essence of their argument is that the award was not supported by substantial evidence. We disagree.
Buyers also argue that the amount of the award was the result of mathematical error. Antin testified that his calculations were based on the figures used by "Mr. Golub, CPA for Mr. Alevy, who was their expert witness, plaintiffs expert witness, who calculated what the interest rates would have been on a new loan" which buyers had obtained to purchase the property. Buyers complain that, whereas Golubs calculations covered only the period of December 2001 through July 2003, Antins calculations cover the period of October 2000 through December 2001, and July 2003 through May 2004; for these additional time periods, Antin assumed the same interest rate differential applied by Golub to the period of December 2001 through June 2002 (2%), and July 2003 (1.0%), respectively. But, as noted by sellers, buyers failure to raise this issue in the trial court waives the issue on appeal. (Padilla v. Greater El Monte Community Hospital (2005) 129 Cal.App.4th 667, 670 [failure to object in trial court to jurys calculation of present value of malpractice award waives issue on appeal].)
"`Except as otherwise provided by law, a party has the burden of proof as to each fact the existence or nonexistence of which is essential to the claim for relief or defense that he is asserting. [Citation.] To prevail, the party bearing the burden of proof on the issue must present evidence sufficient to establish in the mind of the trier of fact or the court a requisite degree of belief (commonly proof by a preponderance of the evidence). [Citation.]" (Sargent Fletcher, Inc. v. Able Corp. (2003) 110 Cal.App.4th 1658, 1667.) Once the party with the burden of proof "produces evidence sufficient to make its prima facie case, the burden of producing evidence shifts to the other party to refute the prima facie case. [Citations.] Even though the burden of producing evidence shifts to the other party, that party need not offer evidence in reply, but failure to do so risks an adverse verdict. [Citation.] Once a prima facie showing is made, it is for the trier of fact to say whether or not the crucial and necessary facts have been established. [Citation.]" (Id. at p. 1668, italics omitted.)
"`[T]he practical effect of a recorded lis pendens is to render a defendants property unmarketable and unsuitable as security for a loan. " (Kirkeby v. Superior Court (2004) 33 Cal.4th 642, 651, quoting La Paglia v. Superior Court (1989) 215 Cal.App.3d 1322, 1326; see also Yackey v. Pacifica Development Co. (1979) 99 Cal.App.3d 776, 786-787 [lis pendens renders real property unmarketable in the general marketplace], abrogated on another ground by Lewis v. Superior Court (1999) 19 Cal.4th 1232, 1258, fn. 17.) In Askari v. R & R Land Co. (1986) 179 Cal.App.3d 1101 (Askari), the prevailing seller sought consequential damages for the diminished value of the property as a result of a lis pendens filed by the breaching buyer. The appellate court held that such damages were available providing the seller could establish "that it diligently attempted to resell the property from the date of breach forward and that the lis pendens rendered the property unmarketable. [¶] Upon remand, [seller] shall bear the burden of proving this factual premise . . . . The trial judge shall then decide if [sellers] resale attempts were diligent and if they were hindered by the notice of lis pendens . . . ." (Id. at p. 1110.)
Here, Antin testified at the bifurcated trial on damages that sellers were damaged as a result of an "interest differential loss." He explained that the interest rate on the loan secured by the property at the time the agreement was executed was 2.75 basis points over the 11th District Cost of Funds Index. But for the lis pendens, a new loan tied to the LIBOR Index — the same standard the buyers expert testified that buyers were going to use to finance the purchase — could have been obtained. A new loan tied to the LIBOR Index would have been a better loan, Antin explained, because the LIBOR Index changes more quickly than the 11th District Cost of Funds Index. Antin calculated sellers interest rate differential loss to be $71,854, which represents "what is lost by the rate interest, rate differential between the new loan . . . as compared to what we actually had to pay . . . ."
In response to buyers objection that Antin was not an expert, sellers qualified Antin as an expert on "computation of . . . interest rate differential." In this regard, sellers adduced evidence that Antin received a Bachelor of Science degree in accounting from the University of California, Los Angeles, passed the CPA exam, and then worked as a controller at a company. As a practicing attorney and certified tax specialist, Antin computes interest rates and interest rate differentials for his clients. At the time of trial, Antin had served on the board of directors of three banks and two bank holding companies and had served on the loan committees of those banks. Although the record is far from clear, the trial court found Antin qualified to testify as an expert. We see no abuse of discretion in this finding. (See fn. 17, post.)
Buyers complain that Antin should have based his calculations on the 11th District Cost of Funds, not the LIBOR index used by Golub. Buyers made no such arguments in the trial court. Buyers expert, Tenzer, who identified the flaws in Antins calculations, did not identify Antins reliance on the LIBOR index as one of those flaws. Accordingly, buyers have failed to preserve the issue for appeal. We are not persuaded otherwise by buyers argument that there was no waiver because this is a "legal issue." That the buyers could have introduced into evidence the difference between the 11th District Cost of Funds and LIBOR indexes, but did not, does not transform the issue of whether the evidence that was adduced at trial was sufficient to support the judgment into a "legal issue."
Antin testified that sellers could have qualified for the better interest rate he used in his calculations because he had been told by bank officers that he had "the best credit of anyone Ive ever seen." Moreover, Antin had borrowed sufficient amounts of money from different banks over the years on many different projects and had never been turned down for a loan. Antin testified that he had seen advertisements for no-cost refinancing. Antin testified that, during the relevant time, he occasionally received calls from banks offering to refinance the property, but when Antin told the callers that the property was the subject of a lis pendens, the callers always said that the banks would not refinance under those circumstances. As a result, Antin never attempted to refinance the property while the lis pendens was in place. Antin never heard of "bonding around a lis pendens." Antin had been told by banks that the condition of the property would not have affected sellers ability to refinance.
Buyers expert witness, Gary Tenzer, testified that he was executive vice-president of a firm of real estate investment bankers and mortgage brokers specializing in commercial properties. His duties include arranging financing on commercial properties. About one-third of the $2.3 billion in financing the firm did in 2004 was for apartment buildings. Tenzer opined that Antins rate differential analysis was flawed for several reasons, including sellers inability to qualify for a loan with terms as favorable as the loan for which buyers qualified. Tenzer based his opinion on the fact that buyers loan was a short-term bridge loan, which typically has a lower interest rate than a long-term permanent financing loan, and was therefore not comparable to any loan sellers could obtain upon refinancing; the poor condition of the property would result in lenders charging a higher rate; and, in contrast to buyers, sellers did not have an ongoing relationship with the bank buyers were using. Tenzer concluded that the best rate sellers could have qualified for on a refinancing loan was the same rate as the existing loan, or even a higher rate. Tenzer also opined that Antins analysis was flawed because it failed to account for customary transaction fees. Tenzer opined that the lis pendens would not be an impediment to refinancing because sellers could "work an indemnity agreement with the title company," which is commonly known as "bonding around a lis pendens." However, Tenzer testified that in forming his opinion he assumed that sellers had no relationship with the bank from which buyers were borrowing the funds to purchase the property; if Antin did have a relationship with that bank, it would have an effect on sellers ability to do business with that bank. Tenzer also assumed that there were building code violations on the property during the relevant time period; he was never informed that the property was citation free for two years. Tenzer also conceded that, to bond around the lis pendens, the title company would require the borrower to secure the indemnity agreement, and Tenzer did not know whether sellers had the financial wherewithal to do so.
The trial court found the evidence established that sellers were debtors on a loan secured by a first trust deed on the property; buyers intended to use the proceeds of a new loan as a substantial portion of the purchase price; the interest rate on the new loan was less than the interest rate sellers were paying on the existing loan. On July 5, 2001, Amusement and Smart filed a lis pendens against the property. The trial court found that the difference between the two loans between October 2000, when the purchase agreement was entered into, until May 2004, when the lis pendens was expunged, was $71,854. The trial court found that, while the lis pendens was in place, the property could be refinanced but only under certain conditions, including if the borrower (1) indemnified the title insurer for any risk caused by the lis pendens and (2) collateralized the indemnity agreement. The trial court concluded that sellers had sustained their burden to prove: (1) that sellers had a relationship with a lender sufficient to enable sellers to obtain a comparable loan to the buyers anticipated new loan; (2) that alleged "code violations" on the property did not preclude refinancing; (3) that the lis pendens precluded refinancing; and (4) the costs of any refinancing transaction were subject to negotiation and could have been waived.
The trial courts findings are supported by substantial evidence. Under Askari, supra, 179 Cal.App.3d at page 1110, there was substantial, albeit conflicting, evidence from which the trier of fact could infer that, but for the lis pendens, sellers could have refinanced the property at a better interest rate than that of the existing loan and that, under the circumstances, sellers used due diligence to determine whether refinancing was available despite the lis pendens. Buyers experts contrary opinion was not determinative.
To the extent buyers separately argue that the trial court erred in finding Antin qualified to testify as an expert on interest rate differential, we disagree. The determination of whether a witness qualifies as an expert rests within the discretion of the trial court and will not be disturbed on appeal absent a showing of manifest abuse. (People v. Bloyd (1987) 43 Cal.3d 333, 357.) Error regarding a witnesss qualifications as an expert will be found only if the evidence shows that the witness " ` " `clearly lacks qualification as an expert. " " (People v. Farnam (2002) 28 Cal.4th 107, 162, quoting People v. Chavez (1985) 39 Cal.3d 823, 828, italics omitted.) The trial court reasonably could have concluded that Antins prior experience in the fields of banking, accountancy and real estate permitted him to render expert testimony.
c. Fumigation expenses
Relying on McNeil v. Bredberg (1961) 192 Cal.App.2d 458 (McNeil), buyers contend the award of $32,380 for fumigation expenses was not supported by substantial evidence because the fumigation constituted an improvement to property. We disagree.
Section 3343 provides that one defrauded in the sale of property "is entitled to recover the difference between the actual vale of that with which the defrauded person parted and the actual value of that which he received, together with any additional damage arising from the particular transaction, including any of the following: [¶] (1) Amounts actually and reasonably expended in reliance upon the fraud." Thus, in Stout v. Turney (1978) 22 Cal.3d 718, 721-722, as a result of the misrepresentation of the seller of a mobile home park as to "the parks sprinkler-type sewage disposal system and its capacity to legally absorb additional effluent to be generated by eight additional mobile home spaces whose construction on the property was contemplated by," the buyer was required to purchase additional acreage for sprinkling purposes in order to continue operation of the existing park and to develop the property as anticipated. The court found the defrauded buyer, who did not seek out-of-pocket damages, was nevertheless entitled to "additional damages" in the amount of the loss it sustained as a result of having to buy and hold additional property for sprinkling purposes. (Id. at p. 729.)
By contrast, the cost of repairing the property to bring it to the condition it would have been in had it been as represented is not "additional" damage within the meaning of section 3343, although it may be probative of the difference in the value between what was given and what was received. This is because such an expenditure is not lost or rendered fruitless as a result of the fraud. For example, in McNeil, supra, 192 Cal.App.2d 458, 469, the seller of real property misrepresented its condition to the buyer. Relying on those misrepresentations, the buyer purchased the property. The buyer made various improvements to the property to bring it up to the condition the seller had represented, including construction of retaining walls and a drainage system. The buyer then brought an action to rescind the purchase agreement and for damages. The trial court found the buyers were not entitled to rescission but were entitled to damages in the amount of the their expenditures on the improvements. The appellate court reversed. It reasoned that, under section 3343, the proper measure of damages was the difference between the consideration paid for the property and the actual value of the property. Although the trial court in McNeil found that by reason of the misrepresentations the property was not worth the price the buyer paid for it, there was no evidence of the actual value of the property and consequently no evidence of the difference between the price paid and the actual value. The appellate court held that while cost of repairs is probative on the issue of value, it is not of itself a proper measure of damages; since the buyers would receive the benefit of the repairs they made, those repairs had not been lost or rendered fruitless and were therefore not recoverable as "additional" damages under section 3343. (Id. at pp. 467-470.)
Here, sellers sought and were awarded additional damages for the amount they expended to fumigate the property in reliance on the fraudulently obtained agreement. Antin testified that he would not have caused the property to be fumigated but for the purchase agreement. In our view, fumigation is not analogous to construction of retaining walls and a drainage system. While retaining walls and a drainage system are permanent improvements to the land, fumigation is transient — the pests will eventually return. For this reason, substantial evidence supports the award of damages for these expenses.
4. Substantial Evidence Supports the Award of Punitive Damages
Buyers contend the punitive damages award should be reversed because there was no substantial evidence of fraud. They argue that "[t]he evidence demonstrates that [buyers] never intended to harm the [sellers]." We disagree.
Punitive damages are available "where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice." (Civ. Code, § 3294, subd. (a).) In this context, "fraud" means "an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury." (Civ. Code, § 3294, subd. (c)(3), italics added.)
Punitive damages are available where a defendant fraudulently induces the plaintiff to enter into a contract. " `The words "oppression, fraud, or malice" in Civil Code section 3294 being in the disjunctive, fraud alone is an adequate basis for awarding punitive damages. " (Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1238, quoting Glendale Fed. Sav. & Loan Assn. v. Marina View Heights Dev. Co. (1977) 66 Cal.App.3d 101, 135.) Likewise, the phrases "depriving a person of property or legal rights or otherwise causing injury" in Civil Code section 3294, subdivision (c)(3) (italics added) being in the conjunctive, an intent to deprive the plaintiff of property is an adequate basis for awarding punitive damages.
An award of punitive damages must be upheld if it is supported by substantial evidence. "As in other cases involving the issue of substantial evidence, we are bound to `consider the evidence in the light most favorable to the prevailing party, giving him the benefit of every reasonable inference, and resolving conflicts in support of the judgment. [Citation.] But since the [trier of facts] findings were subject to a heightened burden of proof, we must review the record in support of these findings in light of that burden. In other words, we must inquire whether the record contains `substantial evidence to support a determination by clear and convincing evidence . . . . [Citation.]" (Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 891, italics omitted.)
Here, there was evidence of the following: Mandell marketed the property to Alevy in April 2000; in September 2000, Alevy, on behalf of Smart and falsely identifying himself as "Bob Roberts," began direct negotiations with Antin to purchase the property; before making a counteroffer to the Smart offer, Antin explained to Kracoff that he needed to know whether the people on Mandells list were involved with Smart because, if they were, there would be a finders fee involved and that would affect the price; although Kracoff knew at the time that Alevy had been negotiating with Antin under the alias "Bob Roberts," Kracoff falsely told Antin that he did not know Alevy and that Alevy was not involved with Smart; and Antin only accepted the Smart offer, which was several hundred thousand dollars less than the Platinum offer, because sellers net profit would not be reduced by the amount of a finders fee. This evidence constituted substantial evidence to support a determination by clear and convincing evidence that buyers intentionally misrepresented to sellers that Alevy was not involved in the negotiations to purchase the property and that they did so with the intent of obtaining the property at price less than that for which sellers were willing to part with the property had they known the true facts. Thus, the evidence supports the award of punitive damages.
Buyers argument that the award against Amusement fails because the trial court did not identify any conduct by Amusement that independently contributed to the tort is without merit inasmuch as Kracoff was president of both Smart and Amusement.
5. The Punitive Damages Award Was Not Unconstitutional
Buyers contend the punitive damages award was unconstitutional. They argue that this is so because the harm was purely economic; there was no indifference to health or safety; the sellers were not financially vulnerable; and the transaction involved an isolated incident of fraud, not repeated misconduct. We are unpersuaded.
The due process clause of the Fourteenth Amendment to the United States Constitution places limits on state courts awards of punitive damages. "[T]he constitutional `guideposts for reviewing courts are: `(1) the degree of reprehensibility of the defendants misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award; and (3) the difference between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparable cases. [Citations.]" (Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 1171-1172 (Simon); see also State Farm Mutual Automobile Insurance Co. v. Campbell (2003) 538 U.S. 408, 409 (Campbell).) We review the award de novo, making an independent assessment of these three factors. (Ibid.) "On the other hand, findings of historical fact made in the trial court are still entitled to the ordinary measure of appellate deference. [Citations.]" (Simon, at p. 1172.)
In Simon, a jury found that the defendant committed promissory fraud in the sale of an office building to the plaintiff. The plaintiff was awarded $5,000 in compensatory damages and $1.7 million in punitive damages. Our Supreme Court found the punitive damages award unconstitutionally excessive and concluded that the maximum award constitutionally permissible in the circumstances was $50,000. (Simon, at p. 1166.)
Of the three guideposts, reprehensibility is "the most important indicium of a punitive damages awards reasonableness[.]" (Campbell, supra, 538 U.S. at p. 409.) In determining reprehensibility, the following factors must be considered: (1) whether "the harm was physical rather than economic"; (2) whether "the tortious conduct evinced an indifference to or reckless disregard of the health or safety of others"; (3) whether "the target of the conduct had financial vulnerability"; (4) whether "the conduct involved repeated actions or was an isolated incident"; and (5) whether the harm resulted from "intentional malice, trickery, or deceit, or mere accident." (Id. at p. 419.)
With regard to the second guidepost, "the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages award," the court in Campbell observed that "few awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process." (Campbell, supra, 538 U.S. at pp. 418, 425.) The court in Campbell noted three exceptions to the single-digit rule: (1) " `a particularly egregious act has resulted in only small economic damages "; (2) " `the injury is hard to detect "; and (3) " `the monetary value of noneconomic harm might have been difficult to determine. " (Id. at p. 425, quoting BMW of North America, Inc. v. Gore (1996) 517 U.S. 559, 582; see also Simon,supra, 35 Cal.4th at p. 1182.)
In Bardis v. Oates (2004) 119 Cal.App.4th 1 (Bardis), the plaintiffs were awarded $165,527.63 in compensatory damages and $7 million in punitive damages against the defendants in an action involving fraud arising out of a real estate partnership. (Id. at p. 5.) The court in Bardis found the award satisfied the reprehensibility test set forth in Campbell. This was because the defendants conduct satisfied the fourth and fifth factors relating to reprehensibility (the conduct involved repeated actions and the harm was the result of intentional fraud, malice and deceit). (Id. at p. 22.) The court noted that the defendant "was unrepentant at trial." (Ibid.) Regarding the ratio of 42 to 1 ($ 7 million to $165,527.63), the court observed: "[W]e believe it is fair to say the amount of damages suffered by plaintiffs was relatively small in comparison to the seriousness of defendants conduct. The jury verdict leaves no doubt that [the individual defendant] committed egregious misconduct. The judgment is not based on occasional transgressions; nor was it the product of negligence or sloppy accounting. Fraud and breach of fiduciary duty are universally deplored throughout our society; the jurys award reflects its repugnance at the intentional, oppressive and malicious conduct practiced here. Thus, in our view the compensatory damages figure does not fully reflect the blameworthiness of the acts condemned by the jury." (Id. at p. 23.) However, under Campbell, it found the 42-to-1 ratio of the punitive damages award to the compensatory damages award to be excessive because it significantly exceeded a single-digit ratio without meeting all three evaluative factors announced by the court in Campbell. (Id. at pp. 25-26.) Accordingly, the court in Bardis reduced the punitive damages from $7 million to $1.5 million, for a ratio of 9 to 1. (Id. at pp. 26-27.)
Here, the trial court awarded sellers a total of $1.25 million in punitive damages and $104,134 in compensatory damages. Similar to Bardis, the court here found that buyers conduct satisfied the fourth and fifth reprehensibility factors — buyers conduct involved repeated actions and the harm was the result of intentional deception. Specifically, the trial court found "the record clearly establishes a continuous and continuing pattern of deceit, deception, falsehood and arrogant trickery, unabated by the slightest hint of contrition, remorse or repentance. The record abounds in examples of the high degree of reprehensible conduct." In support, the trial court noted Kracoffs false statement to Antin when Kracoff knew that Alevy was "Bob Roberts"; Alevy was negotiating on behalf of Smart to purchase the property; Alevy routinely purchased property and arranged for financing on behalf of Smart and Alevy had signature authority on behalf of Smart; Kracoffs "deceitful, evasive, misleading and, when viewed against the other evidence, not credible" trial testimony; Alevys use of an alias "solely to deceive Antin"; Alevys lack of "contrition"; Alevys statement that he "fully ratified and defiantly accepted responsibility for `everybodys actions, including those of his attorneys; Alevys duplicitous trial testimony; and Alevys false financial statements which showed a consistent "pattern of obvious and intentional misrepresentations to the financial community." Regarding the ratio of punitive damages to compensatory damages award, the trial court found the award of "$500,000 each, against Alevy and Amusement [to be] within the acceptable due process single-digit multiplier, but of sufficient amount that it may have some effect as punishment and deterrence."
Our review of the entire record convinces us that the award does not offend due process. We agree with the trial court that buyers conduct satisfies the fourth and fifth prongs of the reprehensibility test announced in Campbell.
Regarding the ratio of punitive damages to compensatory damages, we note that the trial court erred in calculating the ratio based on the individual awards against Alevy, Amusement and Smart. Under Bardis, our proportionality analysis must compare the total amount of economic harm to sellers with the total punitive damages verdict because (1) the trial court found them joint and severally liable for a single compensatory damages figure and (2) there is no compelling reason to maintain strict culpability lines between Alevy, Smart and Amusement. (Bardis,supra, 119 Cal.App.4th at p. 21, fn. 8.) Thus, there was a 12-to-1 ratio of the punitive damages award to the compensatory damages award in this case. While this is greater than a single-digit ratio, it is not significantly greater. (See Simon, supra, 35 Cal.4th at p. 1182 ["[R]atios between the punitive damages award and the plaintiffs actual or potential compensatory damages significantly greater than 9 or 10 to 1 are suspect and, absent special justification . . . cannot survive constitutional scrutiny under the due process clause," italics added].) We conclude that the egregiousness of buyers conduct warrants this slight departure from the single-digit ratio. (Campbell,supra, 538 U.S. at p. 425; Simon, supra, 35 Cal.4th at p. 1182.) Finally, this ratio does not take into account the value of the property returned to sellers by virtue of the rescission judgment. The return of property — or at least the increase in fair market value over the contract price — is an additional compensatory benefit to sellers properly considered in calculating the reasonableness of the ratio between the compensatory and punitive awards.
6. Attorneys Fee Award
Buyers contend the attorney fee award is not supported by the evidence and is legally invalid. They argue that the fees attributed to legal efforts undertaken by Michael Antin as the attorney for Richard Antin cannot be charged to buyers because those fees were never charged to Richard Antin and were duplicative of the services provided by attorneys for Michael Antin inasmuch as the Antins had completely aligned interests. Alternatively, they argue that the fees Richard Antin incurred were not reasonable because Michael Antin "took no active role in deposing or examining witnesses, and left the drafting of points and authorities to" the attorney representing Michael Antin. We disagree.
"The determination of the legal basis for an award of attorneys fees is a question of law which we review de novo." (Honey Baked Hams, Inc. v. Dickens (1995) 37 Cal.App.4th 421, 424, disapproved of on another grounds in Santisas v. Goodin (1998) 17 Cal.4th 599.) " `The amount of an attorney fee to be awarded is a matter within the sound discretion of the trial court. [Citation.] The trial court is the best judge of the value of professional services rendered in its court, and while its judgment is subject to our review, we will not disturb that determination unless we are convinced that it is clearly wrong. A challenge to the amount of the award is upheld only if that amount `is so large or small that it shocks the conscience and suggests that passion and prejudice influenced the determination. " (Acree v. General Motors Acceptance Corp. (2001) 92 Cal.App.4th 385, 404, fn. omitted.)
Here, the evidence established that Michael Antin individually and Michael and Evelyne Antin as trustees of the Antin Family Trust were represented in the litigation by Jones, Hirsch, Connor & Bull (Jones Hirsch). Richard Antin, however, retained his brother Michael to represent Richard individually and Richard and Hong Kyu Antin as trustees of the Antin Family Trust; Richard agreed to pay Michael his regularly hourly rate of $400. After the trial court filed its statement of decision, sellers moved, pursuant to Civil Code section 1717 and Code of Civil Procedure section 998, for an award of attorneys fees in the amount of $1,575,955, comprised in part of $855,395.47 for services provided by Jones Hirsch and $702,060 for services provided by Michael Antin. The trial court awarded attorneys fees in the amount of $1,575,955. We find no legal error or abuse of discretion.
Buyers argument that Richard Antin did not incur any legal fees is contrary to the evidence that Richard retained Michael and agreed to pay him his regular fee of $400 per hour. The trial court presumably found that attorneys fees were incurred by both family members/trusts. That the two Antins were brothers is not dispositive, and there is nothing in the record that suggests the trial court ignored the potential for double or phantom billing. Apparently, the trial court found none. Moreover, we find no abuse of discretion in the amount of the award attributable to fees incurred by Richard Antin. In a case involving a multi-million dollar commercial property, the award is not so large as to shock the conscience. (Cf. Acree v. General Motors Acceptance Corp., supra, 92 Cal.App.4th at p. 404.)
DISPOSITION
The judgment is affirmed. Sellers shall recover their costs on appeal.
We concur:
COOPER, P. J.
BOLAND, J.