Opinion
2d Civil No. B223462
09-07-2011
RON CASTILLO et al., Plaintiffs and Appellants, v. EXPRESS ESCROW CO., Defendant and Respondent.
James E. Marino for Plaintiffs and Appellant. Law Office of Herb Fox, Herb Fox, Michael Evans and Lauren J. Udden for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. 1156922)
(Santa Barbara County)
In Castillo v. Express Escrow Company (2007) 146 Cal.App.4th 1301, we determined that an escrow holder in a mobile home sale violates Health and Safety Code section 18035, subdivision (f) when it closes escrow in spite of having notice of a dispute between the parties to the escrow. We reversed a judgment in favor of the escrow pursuant to its motion for summary judgment. On remand, the case was tried to the court without a jury. The court found in favor of the escrow. Although the escrow was liable as a matter of law, plaintiffs failed to prove damages. We affirm.
FACTS
On August 23, 2003, Ron and Lavina Castillo entered into a contract with San Jose Advantage Mobile Homes, Inc., (Advantage) to purchase a new mobile home. The new mobile home was to replace the Castillos' existing mobile home at the Blue Skies Mobile Home Park in Santa Barbara. The purchase price was $99,902, including delivery and installation.
The parties opened escrow with Express Escrow Company (Express). Shortly after executing the purchase agreement, the Castillos agreed to pay the purchase price with the proceeds of a $55,000 loan and the balance deposited in cash. The Castillos made an initial deposit of $22,395 into escrow and applied to Origin Financial Services, LLC., (Origin) for the $55,000 loan.
On October 30, 2003, the Castillos vacated their existing mobile home so Advantage could remove it and prepare the site. Between October 31 and November 5, 2003, Advantage removed and destroyed the existing mobile home.
On November 17, 2003, the new mobile home arrived at the park. It had, however, been damaged in transit. The mobile home sustained further damage when it was placed on the site. Advantage had hired Paul Flohr to prepare the site and install the mobile home. Advantage promised to repair the damage. On December 23, 2003, the Castillos deposited $21,164 into escrow. By December 30, 2003, Origin had deposited the $55,000 loan proceeds into escrow, and began charging the Castillos for loan payments.
On February 23, 2004, the Castillos' attorney sent a letter to Advantage. The letter stated that Advantage has not completed performance under the purchase and sale contract and demanded that Advantage promptly repair the damage to the mobile home. A copy of the letter was sent to Flohr, Express and Origin.
On April 9, 2004, the County issued a certificate of occupancy. Escrow closed the same day. The Castillos did not approve the close of escrow and refused to accept the mobile home. The Castillos brought an action against Express, Advantage, Flohr and Origin.
While the action was pending, the Castillos refused to enter into possession of the mobile home or to make payments on the loan. Origin sent a notice of default. Origin advised the Castillos that they had the right to cure the default by paying approximately $10,000. The Castillos made no effort to cure the default. The mobile home was sold in foreclosure for $115,000. The sale produced a surplus of $45,962.69, which was paid to the Castillos.
The trial court granted Express's motion for summary judgment. We reversed on the ground that Health and Safety Code section 18035, subdivision (f), as it was then written, required escrow to forebear from closing when it obtained notice of a dispute between the parties. We determined that the letter of February 23, 2004, a copy of which was sent to escrow, constituted such notice. (Castillo v. Express Escrow Co., supra, 146 Cal.App.4th 1301.)
In the meantime, the matter went to trial against Advantage and Flohr. A jury awarded $36,275 in damages against Advantage and the same amount against Flohr, for a total of $72,550. All parties appealed. We affirmed the judgment. (Castillo v. Flohr (Sept. 16, 2008, B189123 & B193625 [ nonpub. opns.].)
After we affirmed the judgment against Advantage and Flohr, the case against Express went to trial. The Castillos amended their complaint to allege causes of action for breach of Health and Safety Code section 18035, subdivision (f), breach of the escrow contract and breach of fiduciary duties. The matter was tried before the court sitting without a jury.
The Castillos testified that because Express had notice of a dispute, escrow should not have closed. They also testified they made no payments on the loan; they made no effort to cure the default; they made no warranty demand on Advantage or Flohr; they did not know that if they took possession they would have been entitled to protection under the Song-Beverly Consumer Warranty Act (Civ. Code, § 1790 et seq.); they would not have moved into the mobile home even if all the alleged defects would have been repaired without being paid damages; and they erroneously believed that after the foreclosure sale the buyer would be required to remove the mobile home and that they would regain possession of the space.
Ron Castillo testified they had to move into a condominium at a cost of $1,850 per month. The mobile home would have cost them $850 per month. The Castillos testified that the mobile home was worth between $300,000 and $350,000 at the time of the foreclosure sale.
Janet Swain testified she purchased the mobile home for $115,000 at the foreclosure sale. There were two other parties bidding at the sale. After she purchased it, some railing on the deck needed to be changed to meet code and the carport needed an additional support post. Advantage corrected those problems without charge. A leak in a hose leading to the bathtub required that the tub be removed to facilitate repair. Advantage charged her $200 for a new tub, but installed it for free. At the time of trial, Swain had been living in the mobile home for four and a half years without experiencing problems.
The trial court concluded our opinion in Castillo v. Express Escrow Company, supra, 146 Cal.App.4th 1301 established liability as a matter of law. The only question was damages. It stated the Castillos claimed three elements of damages: (1) the $300,000 to $350,000 they believe the mobile home was worth at the time of sale, (2) the $1,000 per month differential between the $1,850 per month cost of renting the condominium and the $850 per month cost of the mobile home, and (3) attorney fees. The court opined the proper measure of damages is based on breach of contract. The court found, however, that the Castillos failed to prove damages.
The trial court found that by the time the Castillos' attorney sent the "dispute" letter detailing alleged defects, the Castillos determined they would never accept the home no matter what the seller did to correct the defects. Instead, the Castillos decided to let the mobile home go through foreclosure. They planned to use the money they would be awarded in damages to replace the mobile home with a new mobile home in the same space. Their plan was based on their mistaken belief that the foreclosure would affect the mobile home only, and not their right to the space. They were unaware that under Civil Code section 798.79 and their rental agreement, the purchaser of the mobile home would have the right to possession of the mobile home in its space.
The court found the mobile home was habitable. When the certificate of occupancy was issued on April 9, 2004, all the damage had been repaired except for two minor items.
The court determined that the Castillos failed to mitigate their damages. They should have avoided the loss of their new mobile home and space by moving into the mobile home and seeking repairs of the alleged remaining problems. The home was under warranties mandated by law. At least the Castillos should have cured the default under the loan to stop foreclosure.
The court found it was not foreseeable on April 9, 2004, that the Castillos would suffer damages caused by foreclosure. By the time escrow closed in April 2004 all the County's correction notices had been approved.
The court found the Castillos' testimony that the mobile home was worth between $300,000 and $350,000 not to be credible. The value of the mobile home was $115,000 at the time of foreclosure.
The court also found the Castillos failed to prove damages based on the difference between the $1,850 per month rent of the condominium and the $850 cost of the mobile home. The court stated there was no showing the two were comparable living situations.
Finally, the court refused to award attorney fees to either party.
DISCUSSION
I
The Castillos contend the trial court erred in concluding their complaint sounded only in contract.
The Castillos' second amended complaint stated causes of action for breach of a statutory duty under Health and Safety Code section 18035, subdivision (f), breach of contract and breach of fiduciary duty. The complaint did not state a cause of action for negligence. The evidence produced at trial was the same for all three causes of action.
Whether an action is based on tort or contract depends on the nature of the right sued upon. (Kangarlou v. Progressive Title Co., Inc. (2005) 128 Cal.App.4th 1174, 1178.) If based on breach of promise it is contractual; if based on breach of a noncontractual duty it is tortious. (Ibid.)If unclear, the action will be considered based on contract rather than tort. (Ibid.)
In Kangarlou, plaintiff obtained a judgment against escrow for breach of fiduciary duty. The breach was based on, among other factors, a violation of Business and Professions Code section 10138, delivering compensation to an unlicensed real estate broker. The question was whether the action was to enforce a contract, allowing an award of attorney fees under Civil Code section 1717. In holding that the action was based on contract, the Court of Appeal stated: "The duty of an escrow holder to obtain evidence that a real estate broker was regularly licensed before delivering compensation arises from Business and Professions Code section 10138. Respondent assumed this duty only by entering the contract to execute the escrow for appellant and the seller. Accordingly, the duty arose out of and is not outside the contract." (Kangarlou v. Progressive Title Co., Inc., supra, 128 Cal.App.4th. at p. 1179.)
Similarly, here Express assumed the statutory and fiduciary duties that the Castillos alleged it breached only by entering into the contract to execute the escrow. Accordingly, the duties arose out of contract. The trial court did not err in treating the action as one based on contract.
Contract damages, unlike damages in tort, do not permit recovery for unanticipated injury. (Lewis Jorge Construction Management, Inc. v. Pomona Unified School Dist. (2004) 34 Cal.4th 960, 969.) The Castillos argue the trial court erred in concluding foreclosure was not foreseeable. Whether damages were foreseeable is a question of fact. (Sun-Maid Raisin Growers v. Victor Packing Co. (1983) 146 Cal.App.3d 787, 790.)
"In viewing the evidence, we look only to the evidence supporting the prevailing party. [Citation.] We discard evidence unfavorable to the prevailing party as not having sufficient verity to be accepted by the trier of fact. [Citation.] Where the trial court or jury has drawn reasonable inferences from the evidence, we have no power to draw different inferences, even though different inferences may also be reasonable. [Citation.] The trier of fact is not required to believe even uncontradicted testimony. [Citation.]" (Rodney F. v. Karen M. (1998) 61 Cal.App.4th 233, 241.)
Of course, in any transaction involving a mortgage it is always foreseeable in the abstract that the mortgage might be foreclosed. But here it was clearly not foreseeable that the Castillos would refuse to occupy a habitable mobile home for which the County issued a certificate of occupancy. Nor was it foreseeable that the Castillos would deliberately allow the mortgage to go into foreclosure as part of a strategy to replace an existing new mobile home with another new mobile home.
In any event, even if foreclosure was foreseeable, the Castillos would not have received a more favorable result. The Castillos simply failed to carry their burden of proving damages. The trial court did not believe the Castillos' testimony that the mobile home was worth between $300,000 and $350,000. Instead, the trial court valued it at $115,000. We have no power on appeal to judge the credibility of witnesses or to reweigh the evidence. (Kimble v. Board of Education (1987) 192 Cal.App.3d 1423, 1427.) The Castillos received over $118,000: $45,962 received as surplus from the foreclosure and $72,550 received as satisfaction of the judgment against Advantage and Flohr. The Castillos only put $43,559 into the purchase of the new mobile home.
The Castillos also claimed a $1,000 per month difference between the cost of their rental condominium and the cost of the mobile home. But the trial court rejected that claim on the ground that the Castillos failed to show the two living circumstances were similar.
II
The Castillos contend the trial court erred in concluding they had a duty to mitigate damages.
A plaintiff who suffers damage from breach of contract or tort has a duty to take reasonable steps to mitigate damages. (Shaffer v. Debbas (1993) 17 Cal.App.4th 33, 41.) The plaintiff will not be able to recover for any loss that could have been avoided. (Ibid.)
The Castillos cite no authority excusing them from mitigating damages. Instead, they claim that had they moved into the mobile home, they would have lost their leverage to have the defects repaired.
The Castillos cite no evidence in support of their claim that they would have lost leverage. In fact, the evidence shows that prior to the close of escrow the County issued a certificate of occupancy. When Swain moved in she found only minor defects, which Advantage and Flohr promptly fixed. She lived in the mobile home for four and a half years prior to trial, and experienced no problems.
The Castillos argue the undisputed evidence is that they did not have the $10,000 required to cure the mortgage default. But the Castillos mistake undisputed evidence for credible evidence. The trier of fact is not required to believe undisputed evidence. (Sprague v. Equifax, Inc. (1985) 166 Cal.App.3d 1012, 1028.)
In any event, the Castillos do not contest on appeal that they had the ability to avoid default by making timely monthly payments on the mortgage. The trial court's point is that the Castillos should have taken possession of the mobile home, made timely mortgage payments, and exercised their express and statutory warranty rights against Advantage an Flohr. Any suggestion that the mobile home was not habitable or that Advantage and Flohr would refuse to make the necessary repairs is belied by the evidence.
III
The Castillos contend the trial court erred in denying their motion for attorney fees.
The Castillos claim they are entitled to fees under the terms of the escrow agreement. The escrow instructions provide in part: "If Escrow Agent is required to respond to any legal summons or proceedings, or if any action of interpleader or declaratory relief is brought by Escrow Agent, or if conflicting demands are noticed by parties to this escrow or by any other party or parties as served upon Escrow Agent, the parties hereto joint[ly] and severally agree to pay reasonable escrow fees and all costs, expenses and reasonable attorneys' fees expended or incurred by Escrow Agent as a result of any of the above described events, and a lien is hereby created in escrow's favor to cover said items. The parties hereto agree to save you harmless as Escrow Agent hereunder from all losses and expenses, including reasonable attorneys' fees and court costs sustained by reason of ay claim, demand, or action filed, legal or otherwise, which may in any manner arise out of, or from the property which is the subject of this escrow, or out of or from this escrow, before or after closing, notwithstanding anything in these instructions to the contrary, and in addition thereto the parties jointly and severally agree to pay reasonable escrow fees therefore."
This type of clause provides for indemnity for the escrow holder in the event of a dispute between the principals to the escrow or with a third party. (Campbell v. Scripps Bank (2000) 78 Cal.App.4th 1328, 1337.) The clause does not provide for attorney fees in direct actions between a principal and an escrow holder. (Ibid.)
In any event, even if the escrow clause were to apply to direct actions against the escrow holder, the Castillos would not be helped. They were not the prevailing party. The Castillos cite no authority for an award of fees for a party who did not prevail in the action.
The Castillos claim they are entitled to an award of attorney fees under Health and Safety Code section 18035, subdivision (n). That subdivision provides for a civil cause of action against the "buyer or dealer or other seller" who violates the section. Express violated the section when it closed escrow after having notice of a dispute. But Express is not a "buyer or dealer or other seller." (Ibid.)Moreover, the subdivision provides for an award of fees to the "plaintiff who prevails in the action." (Ibid.)The Castillos prevailed on appeal of a summary judgment in favor of Express. But the Castillos did not prevail "in the action." (Ibid.)
The Castillos claim they are entitled to fees under Code of Civil Procedure section 1021.5. That section provides in part: "Upon motion, a court may award attorneys' fees to a successful party against one or more opposing parties in any action which has resulted in the enforcement of an important right affecting the public interest if: (a) a significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public or a large class of persons, (b) the necessity and financial burden of private enforcement . . . are such as to make the award appropriate, and (c) such fees should not in the interest of justice be paid out of the recovery, if any."
The trial court did not reach the issue in its statement of decision. The Castillos fail to point to the place in the record where they brought the omission to the trial court's attention. Accordingly, we will infer that the trial court made the findings necessary to support the denial of fees. (Code Civ. Proc., § 634; Uzyel v. Kadisha (2010) 188 Cal.App.4th 866, 896.)
In addition, if the litigation conferred a significant public benefit, the public benefit was conferred when we decided Castillo v. Express Escrow Company, supra, 146 Cal.App.4th 1301, in 2007. A motion for attorney fees on appeal must be filed and served within 40 days after the clerk sends notice of the issuance of the remittitur. (Cal. Rules of Court, rules 3.1702(c)(1) & 8.278(c)(1).) The Castillos failed to make a timely motion.
Finally, the Castillos claim they are entitled to an award of fees incurred in the proceedings against Advantage and Flohr, as an element of damages in this case. They reason that had Express complied with Health and Safety Code section 18035, subdivision (f), escrow would never have closed.
The Castillos offered an exhibit at trial showing the fees they incurred in their case against Advantage and Flohr. Express objected on the ground that the Castillos failed to provide the evidence during discovery. The trial court sustained the objection. The Castillos do not cite the ruling as error on appeal. They have waived the issue. (See Interinsurance Exchange v. Collins (1994) 30 Cal.App.4th 1445, 1448.)
Moreover, fees as an element of damages are not mentioned in the trial court's statement of decision. The Castillos fail to point to any place in the record where they brought the omission to the trial court's attention. Accordingly, we will presume the trial court made findings necessary to support the denial of such fees. (Code Civ. Proc., § 634.)
IV
The Castillos contend the trial court erred in denying their request to take the case off calendar or continue it.
The Castillos complain that Express placed the Castillos' counsel on the witness list. The Castillos asked for a continuance so that they could obtain new counsel. The trial court denied the request.
The grant or denial of a motion for a continuance is reviewed for an abuse of discretion. (See Estate of Meeker (1993) 13 Cal.App.4th 1099, 1105.) Here the Castillos fail to show an abuse of discretion. Nor do they attempt to show any prejudice. In fact, the Castillos' counsel voluntarily testified in the Castillos' case-in-chief.
The judgment is affirmed. Costs on appeal are awarded to respondent.
NOT TO BE PUBLISHED.
GILBERT, P.J. We concur:
YEGAN, J.
COFFEE, J.
Thomas P. Anderle, Judge
Superior Court County of Santa Barbara
James E. Marino for Plaintiffs and Appellant.
Law Office of Herb Fox, Herb Fox, Michael Evans and Lauren J. Udden for Defendant and Respondent.