Opinion
NOT TO BE PUBLISHED
Appeals from a judgment of the Superior Court of Orange County, Ct. No. 04CC12509 Sheila B. Fell, Judge.
Law Offices of Frank D. Granato, Frank D. Granato and Stuart L. Yates, for Defendants and Appellants Hoang Hoa Thai, Sarah Phan Thai and H & S, LLC; Law Offices of Pease & de Petris and Edgar B. Pease, III, for Defendants and Appellants American Realty & Investment, Inc. and Eugene Park.
Robert L. Luty for Plaintiffs and Appellants.
OPINION
BEDSWORTH, ACTING P. J.
Defendants Hoang Hoa Thai, his wife Sarah Phan Thai, and their corporation H & S, LLC (collectively, the Thais), along with defendants Eugene Park and his corporation, America Realty and Investments, Inc. (collectively Park), appeal from a judgment entered in favor of plaintiffs Daniel Wan Muk Im and his corporation Yeahoo Enterprises, Inc. (collectively Im.). This case arises out of a real estate transaction in which the Thais sold a cafe to Im, and Park acted as a dual agent representing both parties. Im alleged that the Thais materially misrepresented the gross monthly revenues of the cafe, and Park breached his fiduciary duties in connection with the transaction.
On appeal, the Thais suggest the court erred procedurally in the issuance of its statement of decision, and more significantly that the statement of decision was substantively deficient in failing to explain exactly how they misrepresented “the value” of the cafe to Im. They also contend the court’s finding Im relied upon their representations is inconsistent with the undisputed evidence Im was contractually obligated to rely “solely on [his] own due diligence” in proceeding with the purchase of the cafe. They insist the court’s finding Im did not waive any rights is inconsistent with his execution of a “contingency removal” in which he explicitly agreed he had “favorably concluded” his review of the cafe’s financial papers and the transaction could proceed. The Thais also argue the court erred in imposing liability on them based upon a breach of the covenant of good faith and fair dealing, while simultaneously finding there was no breach of any provision of the contract itself, and in failing to explain exactly how they breached the covenant. Finally, they contend the court erred in refusing to grant their motion for judgment pursuant to Code of Civil Procedure section 631.8, because there was no “substantial or credible evidence” they had made any misrepresentations as to the café’s value, or that Sarah Thai had any involvement with H & S, LLC.
We find none of the contentions persuasive as grounds for reversal. While we agree the Thais properly preserved their objections to the court’s statement of decision, we note those objections are, for the most part, not the same as the objections they articulate on appeal. Moreover, we conclude those objections lack merit as a basis for overturning the judgment. In the context of this case, in which Im specifically alleged and consistently relied upon a very specific and narrow assertion – that the Thais misrepresented the cafe’s gross monthly revenues – to support his contention that they were liable for the damages he incurred in purchasing the business, the court’s finding they had misrepresented the “value” was neither ambiguous nor inconsistent with that allegation. Moreover, the Thais have made no showing that the court erred by impliedly concluding (if it did) that Im’s agreement to “rely solely on his own due diligence with respect to this purchase of the Business” was not an obligation he owed to them under the contract, such that his failure to conduct “even a modicum of due diligence” would constitute a failure to perform. Nor have the Thais explained how Im’s agreement to rely solely upon his own due diligence, even if construed as an obligation owed to them, was violated by his failure to perform any significant due diligence.
Nor have the Thais explained how Im’s failure to perform significant due diligence, even if he were obligated by the purchase agreement to do so, would excuse their own obligation, under the covenant of good faith and fair dealing, to be truthful in the affirmative representations they chose to make about the cafe, or would preclude him from assuming they would be. And finally, we reject the Thais’ suggestion that Im’s execution of the “contingency removal” document would necessarily amount to a waiver of any claim based upon those affirmative misrepresentations. Im may have agreed to conduct his own investigation, but that does not reasonably imply an understanding he could not rely upon the representations they made to him or suggest he should have understood they would lie to him if given the chance.
The Thais’ assertion the court should have granted a motion for judgment in their favor is unsupported by any meaningful summary of the evidence that might suggest the court abused its discretion in denying the motion, and is thus waived. However, we note there is evidence in the record that both of the Thais made misrepresentations – through their agent Park, if nothing else – about the gross revenues of the cafe, and thus it is clear the motions were properly denied on the merits.
Park argues the court erred in finding him liable for breach of fiduciary duty because (1) the law specifically allows him to act as a dual agent, and thus it was not an actionable “conflict of interest” for him to do so, and (2) Im failed to support his claim with any expert testimony. The first assertion is correct, but ultimately irrelevant, since the court’s conclusion he breached his duty was based upon three distinct grounds, only one of which was his status as a “dual agent.” And Park’s second contention fails because one of the breaches the court found that he committed – expressly assuring Im that he believed the cafe’s sale price was “fair, ” when he apparently had a basis to believe it was not – is the type of breach which could easily be understood by a layman, without the assistance of expert testimony.
Finally, Im cross appeals, asserting the court erred in entering a judgment which held the Thais and Park were each separately liable for one-half of the total judgment, rather than jointly and severally liable for the whole. Im points out the court’s initial tentative decision explicitly provided defendants would be jointly and severally liable, which he contends is the correct result under the law, and asks that we correct the judgment to provide for it. However, Im simply assumes the court imposed tort liability against the Thais, based upon a theory of fraud, when the court’s statement of decision makes clear it was relying upon the Thais’ breach of the covenant of good faith and fair dealing – a claim which generally sounds in contract, rather than tort. Because Im failed to provide any authority for the proposition that joint and several liability is the appropriate result when one defendant is found liable on a contract theory and another in tort, he failed to demonstrate error. We consequently affirm the judgment.
FACTS
In October of 2005, Im filed his first amended complaint against the Thais; H & S, LLC, a corporation owned by the Thais, Park, and America Realty and Investment, Park’s realty business. The complaint alleged breach of contract and breach of the covenant of good faith and fair dealing against the Thais and H & S; intentional and negligent misrepresentation against all defendants; and breach of fiduciary duty against Park and America Realty. Im also alleged H & S was the alter-ego of both Hong Thai and Sarah Thai.
In support of his causes of action, Im alleged H&S and the Thais had orally represented to him that the cafe had a gross monthly income of $50,000, and that based upon that representation, he entered into the agreement entitled “Business Purchase Contract and Receipt for Deposit, ” by which he agreed to purchase the cafe for $440,000. However, Im alleged the Thais breached that agreement, and committed intentional and negligent misrepresentation, because they knew or should have known the cafe’s gross sales were only $36,000 per month.
The cause of action for breach of fiduciary against Park and American Realty was based on the allegation that they failed to “fully advise [Im] that they also represented the [Thais and H & S] and by failing to fully and accurately advise [Im] of the Amsterdam Cafe’s actual gross monthly sales.”
The case proceeded to trial before the court, without a jury. Evidence at trial demonstrated the Thais had purchased the cafe in September of 2003, for $117,000. After only nine months of operation, with apparently disappointing results, the Thais’ engaged Park to offer it for sale. Park was a friend of the Thais, and had previously helped them sell a different business they owned.
Park advertised the cafe for $500,000 in a local Korean newspaper, and stated in the advertisement that it had gross monthly revenues of over $50,000, and a net monthly profit of $18,000. Park stated this information was based on representations made to him by the Thais. Im saw the advertisement and contacted Park to discuss purchasing the cafe. When Im and Park met, Park reiterated the sales figures in the advertisement, and invited Im to visit the cafe itself.
After seeing the cafe, and being impressed with the location, Im met again with Park and offered to purchase the cafe for $440,000. The offer was contingent upon Im’s “approval of sales volume/records showing monthly gross of approximately $50,000, ” and provided that Im would “rely solely upon [his] own due diligence with respect to this purchase of the business.” Moreover, the offer document contained an acknowledgement that Im understood Park was relying upon the financial information provided by the seller, and “has not made any independent investigation or verification of such information.” And the document also specified that Park, the listing agent, was acting as agent for both the seller and the buyer.
When Im expressed uncertainty as to how he would go about confirming the validity of the cafe sales figures, Park offered to help Im obtain the information necessary to do so. However, the documentation obtained by Park for Im to review was, as Im characterizes it, “sparse.” It consisted of a one-page summary document which listed the total expenses for the cafe for each of the seven months from November of 2003 through May of 2004, as well as the total “gross sales” for each month. The gross sales were represented to be anywhere from $49,069 to $53,733 per month. Attached to the sheet were copies of several cash register receipt sized documents, each of which purported to reflect the total “cash sales” for one of the months covered by the summary – apparently intended to be viewed as back-up for the numbers on the summary sheet. This summary document was prepared by Hoang Thai.
When Im questioned the lack of significant documentation, Park told him that no other records existed, but assured him the Thais were honest and could be trusted. With Park’s encouragement, Im executed a “contingency removal” document, in which he represented that he had completed his review of the business’s financial records, and thus removed the contingency from his original purchase offer and agreed to purchase the business.
At the conclusion of Im’s case-in chief, the Thais moved for judgment pursuant to Code of Civil Procedure section 631.8, arguing there was no credible or substantial evidence to support a judgment against them. The court denied the motion.
Code of Civil Procedure section 631.8 provides in pertinent part that “(a) After a party has completed his presentation of evidence in a trial by the court, the other party, without waiving his right to offer evidence in support of his defense or in rebuttal in the event the motion is not granted, may move for a judgment. The court as trier of the facts shall weigh the evidence and may render a judgment in favor of the moving party, in which case the court shall make a statement of decision as provided in Sections 632 and 634, or may decline to render any judgment until the close of all the evidence. The court may consider all evidence received, provided, however, that the party against whom the motion for judgment has been made shall have had an opportunity to present additional evidence to rebut evidence received during the presentation of evidence deemed by the presenting party to have been adverse to him, and to rehabilitate the testimony of a witness whose credibility has been attacked by the moving party. Such motion may also be made and granted as to any cross-complaint. [¶] (b) If it appears that the evidence presented supports the granting of the motion as to some but not all the issues involved in the action, the court shall grant the motion as to those issues and the action shall proceed as to the issues remaining.”
After hearing closing argument, the court took the case under submission on December 7, 2006. However, in lieu if issuing any tentative decision, the court proceeded directly to issuance of a minute order on February 20, 2007, which it characterized as a “statement of decision and judgment.” The minute order directed Im’s counsel to prepare a proposed judgment. On March 15, nearly a month after the minute order, and two weeks after Im served the proposed judgment, the Thais moved, ex parte, for an order amending the minute order to characterize it as merely a “proposed” statement of decision, so they would have an opportunity to file objections and suggestions of issues to be addressed in the final statement of decision.
The court denied the ex parte application, but agreed to consider the Thais’ objections. The Thais filed their objections, and on May 3, 2007, the court issued a new statement of decision/order. In that order, the court simply stated that its earlier minute order had been “erroneously termed findings and Judgment, ” but was “treated as a tentative statement of decision.” The court’s order went on to explain that it had now considered the parties’ substantive objections to the content of the earlier tentative statement of decision.
The May 3 minute order was in large part identical to the earlier “[tentative] statement of decision and judgment, ” with the exception of two issues. First, although the tentative decision provided that all defendants were to be held jointly and severally liable for two-thirds of the total losses suffered by Im (holding Im responsible for the other one-third, apparently based upon his inadequate due diligence), the later statement provided that the Thais were liable for only half of defendants’ two-third portion, while Park was held separately liable for the other half. And second, the May 3, 2007 order, explained that the Thais, while not committing any “breach of contract in the traditional sense, ” nonetheless “breached the covenant of good faith and fair dealing.”
Thus, the court’s statement of decision provided in pertinent part, as follows: “Plaintiffs Daniel Wan Muk Im and Yeahoo Enterprise, Inc., though they did perform, failed to protect themselves by doing any modicum of due diligence such as inquiring about the purchase price paid by Defendant, Thai, only several months earlier. They knew that the realtor was representing both parties, and they did nothing to conduct an independent investigation to determine whether the information given to them was accurate. Defendants Eugene Park for himself and as agent for America Realty & Investments, Inc. breached their fiduciary duties to Plaintiff by the following acts: 1) Park and America Realty & Investments represented both the buyer and seller of the restaurant thereby creating a conflict of interest; 2) Park and America Realty & Investments, Inc. assured the buyers that the price of $440,000 paid by Plaintiffs for the restaurant was a fair price and reflected the value of the restaurant; 3) A simple investigation by the realtor would have revealed that Defendant, Thai, had paid only $117,000 for the restaurant in 2003, less than one year earlier. Defendants Hoang Hoa Thai, Sarah Phan Thai, and H & S, LLC. misrepresented the value of the restaurant knowing that the information given to the buyers was incomplete or inaccurate with the intent to induce Plaintiffs to enter a contract for a grossly inflated sale price. Plaintiffs were ignorant of the falsity of the representations and believed them to be true. This led to Plaintiffs’ justifiable reliance and resulting damages as identified below. Had Plaintiffs known the true facts, they would not have entered the contract. The restaurant was purchased by Plaintiffs for the inflated price of $440,000. Approximately fourteen months later, after hard work by both Daniel Wan Muk Im and his wife, they were able to sell the restaurant for only $150,000 (including credit for the sale of the gelato machine). While there was no breach of contract in the traditional sense, the Court finds that the Thai Defendants breached the covenant of good faith and fair dealing as set forth below. Plaintiffs did not waive any rights against the Thai Defendants by executing the contingency removal. The loss incurred by Plaintiffs is apportioned as follows based on the findings above: Plaintiffs are charged with one third of the total loss (one third of $290,000) which is $96,667; Defendants Hoang Hoa Thai, Sarah Phan Thai, and H & S jointly and severally are charged with one third of the total loss, which is $96,667 as damages for the causes of action for breach of the covenant of good faith and fair dealing and fraud. Defendants Eugene Park and America Realty & Investments, Inc. jointly and severally are charged with one third of the total loss, which is $96,667 on the cause of action for breach of fiduciary duty. These findings shall serve as the Courts’ Statement of Decision.”
The Thais filed timely objections to the court’s new statement of decision, the court made no further changes. Im was ordered to prepare a new proposed judgment in conformity with the court’s new statement of decision. He did so, and the court entered judgment on June 22, 2007.
DISCUSSION
A.
The Thais first object to the court’s statement of decision, arguing it is inadequate to support the judgment in several respects, and claiming they filed timely objections pointing out those defects in the trial court.
We start with the latter point, noting that any omissions or ambiguities in the court’s statement of decision are waived if not promptly raised in the trial court, since failing to do so deprives the court of an opportunity to address any concerns prior to the case proceeding to appeal. (Code Civ. Proc., § 634; In re Marriage of Arceneaux (1990) 51 Cal.3d 1130.) The problem here is that procedurally, this issue is a mess. The court failed to explicitly announce the nature of the orders it was issuing, and the Thais were apparently immobilized by their resulting confusion.
As provided for in California Rules of Court, rule 3.1590 (rule 3.1590), in the case of a court trial, the court is required to issue a “tentative” decision, either orally or in writing, but that tentative decision “does not constitute a judgment.” The court is free to designate its tentative decision as a proposed statement of decision, or to specify that it will “become the statement of decision unless, within 10 days after announcement or service of the tentative decision, ” a party specifies issues not included in the tentative decision on which it requests a statement of decision. (Cal. Rules of Court, rule 3.1590; see also Code Civ. Proc., § 632.)
California Rules of Court, rule 3.1590 provides as follows: “On the trial of a question of fact by the court, the court must announce its tentative decision by an oral statement, entered in the minutes, or by a written statement filed with the clerk.... [¶] (b) The tentative decision does not constitute a judgment and is not binding on the court. If the court subsequently modifies or changes its announced tentative decision, the clerk must serve a copy of the modification or change on all parties that appeared at the trial. [¶] (c) The court in its tentative decision may: [¶] (1) State that it is the court's proposed statement of decision, subject to a party’s objection under [subdivision] (g); [¶] (2) Indicate that the court will prepare a statement of decision; [¶] (3) Order a party to prepare a statement of decision; or [¶] (4) Direct that the tentative decision will become the statement of decision unless, within 10 days after announcement or service of the tentative decision, a party specifies those principal controverted issues as to which the party is requesting a statement of decision or makes proposals not included in the tentative decision.”
However, the court in this case simply issued what it termed “findings and judgment, ” which it also characterized as a “statement of decision” without actually specifying that it was merely a “proposed” version. The omission of the word “proposed” was apparently confusing to the Thais, although as rule 3.1590 makes clear, an initial “statement of decision” – whether prepared by the court directly or by a party at the court’s direction – always qualifies as a “proposed” statement of decision. (Cal. Rules of Court, rule 3.1590, subd. (f)). Indeed, almost by definition, a statement of decision cannot be deemed final until after the court has an opportunity to consider any objections to it, and proposals for specific issues to be included within it, which the parties are explicitly entitled to make within 15 days of its service. (Cal. Rules of Court, rule 3.1590, subd. (g).)
The court’s inclusion of the word “judgment” in its characterization of the order is not as scary as it might otherwise seem when considered in context. The court’s order also explicitly required Im to “[p]repare a Proposed Judgment” within 15 days.”
California Rules of Court, rule 3.1590, subdivision (g) provides: “Any party may, within 15 days after the proposed statement of decision and judgment have been served, serve and file objections to the proposed statement of decision or judgment.”
But in this case, the Thais did nothing to articulate their objections or make any proposals within that 15-day period. Instead, they waited 25 days after service – and 14 days after Im had filed a proposed judgment – to file an ex parte request for an order clarifying that the earlier minute order had actually been merely a “proposed” statement of decision, and then setting a future briefing schedule for submission of objections or proposals with respect to that proposed statement.
The court denied that ex parte request, noting that the Thais’ attempt to draw a distinction between the court’s characterization of the minute order as a “statement of decision” as opposed to a “proposed statement of decision, ” elevated form over substance, and nothing in the order actually precluded them from treating it as a proposed statement and filing their objections in a timely fashion. The court also noted that even if it did change the name of the prior order, that change would be effective nunc pro tunc, and thus the Thais’ current request for an opportunity to object to that earlier “proposed” order would automatically be untimely.
However, the court also noted the Thais could still object to the content of the proposed judgment prepared by Im, and they promptly did so – but used that as an opportunity to reargue their contention the court had erred in the manner in which it issued the statement of decision, and then to make proposals as to the content of a statement of decision.
Im’s proposed judgment contained very little detail, and thus it is clear the Thais’ objections are not really directed to its specific content. In fact, they freely acknowledge their intention by stating that “because the proposed judgment was prepared in conformity [with] the Court’s statement of decision, the Thai defendants hereby make the following objections and proposals to the Plaintiff’s proposed judgment and the Court’s findings upon which the judgment is based....”
Nearly two months later, the court issued a new minute order, in which it clarified that the prior minute order had been meant as a “tentative statement of decision, ” and then stated it was responding to “relevant issues and objections presented by counsel [which were not previously addressed].” The court then explained the reasoning underlying its decision to rule in favor of Im, and stated this new order would serve as its statement of decision. In other words, the new minute order gave the Thais essentially all the relief they had asked for in their ex parte application, and treated their “objections” to the proposed judgment as essentially a request for a formal statement of decision.
Although this series of events was all very confusing, the ultimate effect was that the court essentially relieved the Thais from their failure to take any prompt action in the wake of its issuance of a “tentative” decision, and gave them the opportunity to make proposals with respect to the content of its statement of decision. The court was entitled to do that, and there is no suggestion that it abused its discretion in doing so. (Cal. Rules of Court, rule 3.1590, subd. (m).) The Thais then timely pointed out what they perceived were the deficiencies in the new statement of decision, but the trial court did not respond to those points with any further modifications to the statement.
California Rules of Court, rule 3.1590, subdivision (m), provides: “The court may, by written order, extend any of the times prescribed by this rule and at any time before the entry of judgment may, for good cause shown and on such terms as may be just, excuse a noncompliance with the time limits prescribed for doing any act required by this rule.”
Hence, the record here demonstrates the court’s first post-trial minute order was effective only as a tentative decision; it issued its statement of decision only after the Thais had submitted proposals as to its content; and the Thais then filed timely objections to that statement. Thus, we agree with the Thais’ assertion that to the extent their objections pointed to ambiguities or the omission of necessary findings in that statement of decision, we cannot apply the “doctrine of implied findings” in support of the court’s decision.
“Under the doctrine of implied findings, the reviewing court must infer, following a bench trial, that the trial court impliedly made every factual finding necessary to support its decision. Securing a statement of decision is the first step in avoiding the doctrine of implied findings, but is not always enough: The appellant also must bring ambiguities and omissions in the factual findings of the statement of decision to the trial court’s attention. If the appellant fails to do so, the reviewing court will infer the trial court made every implied factual finding necessary to uphold its decision, even on issues not addressed in the statement of decision. The question then becomes whether substantial evidence supports the implied factual findings.” (Fladeboe v. American Isuzu Motors Inc. (2007) 150 Cal.App.4th 42, 48.)
However, to be clear, the only objections preserved for appeal are those pointed out after the court issues the statement of decision. Code of Civil Procedure section 634 provides: “When a statement of decision does not resolve a controverted issue, or if the statement is ambiguous and the record shows that the omission or ambiguity was brought to the attention of the trial court either prior to entry of judgment or in conjunction with a motion under Section 657 or 663, it shall not be inferred on appeal or upon a motion under Section 657 or 663 that the trial court decided in favor of the prevailing party as to those facts or on that issue.” (See Agri-Systems, Inc. v. Foster Poultry Farms (2008) 168 Cal.App.4th 1128, 1135 [“Pursuant to section 634, a party must point out deficiencies in the statement of decision as a condition of avoiding implied findings that support the judgment.”].)
With that in mind, we turn to the Thais’ contentions.
B.
The first objection raised by the Thais is that the court erred in refusing to explain the basis of its conclusion they had misrepresented the “value” of the cafe. They contend the word “value” is ambiguous, and thus, in the absence of explanation, we cannot construe the word in a manner favorable to the judgment. However, that is not quite the problem articulated in the “objections and proposals” the Thais filed in response to the court’s statement of decision. Indeed, nowhere in that document do the Thais’ claim the court’s reference to the cafe’s “value” is ambiguous. Instead, what they assert is that the finding they misrepresented the café’s value must be stricken because it does not exactly match the allegation in the complaint that they had “misrepresented [the cafe’s] gross monthly sales.”
But whether we construe the Thais’ objection as asserting the court’s use of the word “value” is inherently ambiguous (as it now claims), or instead as asserting it is fatally inconsistent with the complaint’s specific allegation that they had misrepresented “gross monthly sales” (as it claimed in its objections below) we have no trouble concluding the objection lacks merit – the court’s reference to the Thais’ misrepresentation of the cafe’s “value” is both clear and proper in the context of this case.
From the inception of this case, Im has specifically alleged and consistently relied upon a very specific and narrow assertion – that the Thais misrepresented the cafe’s gross monthly revenues – to support his contention he was wrongfully induced to pay an unreasonably high purchase price for the business. He made no other claim of misrepresentation which affected the value of the cafe.
And obviously, the “value” of a business will be largely, if not almost entirely, dependent upon the income it produces, and assuming the expenses associated with running the business remain the same, its gross revenues will directly determine how much income that is. Thus, it was specifically the discrepancy between what the Thais had represented were the cafe’s monthly revenues, and what those revenues actually were, which caused the café to be worth so much less than what he had paid. Stated another way, with all other things being equal (and no one contends they were not), the cafe’s “gross monthly revenues, ” determined its “value” as a business and thus when the Thais misrepresented the former, it necessarily amounted to a misrepresentation of the latter. Thus, we find no significant ambiguity in the court’s finding the Thais’ misrepresented the “value” of the cafe, and no significant disparity between that finding and the complaint’s allegation they misrepresented its “gross monthly sales.”
The Thais next assert the court’s statement of decision is inadequate because it fails to explain the “factual and legal” basis for its finding that Im justifiably relied upon their representations as to the cafe’s value. However, again, we note that nowhere in the Thais’ “objections and proposals” document filed in response to the statement of decision do they make any such request. Instead, the Thais merely request that the court include a finding that “Im did not prove that he reasonably relied on any written or oral statement made by [the Thais]” (italics added) – albeit without explaining why it should make that finding. We will consequently infer that the court made whatever findings were necessary to support that conclusion, and since the Thais have not attempted to establish that the evidentiary record is insufficient to support any such implied findings, we need not consider the issue further.
In a supplemental briefing order, we asked the parties to address the specific issue of whether the court’s finding that Im failed to perform “any modicum of due diligence, ” a failure which the court impliedly found to be a cause of Im’s losses and justified holding him one-third responsible for his own losses – is inconsistent with a finding that he “justifiably” relied upon their inaccurate information. We are satisfied that it is not. Case law makes clear that plaintiff’s negligence is not a defense to liability based upon fraudulent conduct. (Manderville v.PCG&S Group, Inc. (2007) 146 Cal.App.4th 1486 [Buyer’s negligent failure to discover falsity of broker’s statement regarding property is no defense to fraud liability.].) In Seeger v. Odell (1941) 18 Cal.2d 409, 414, a unanimous decision of the California Supreme Court, Justice Traynor quoted an out-of-state case for the proposition that “‘[n]o rogue should enjoy his ill-gotten plunder for the simple reason that his victim is by chance a fool.’ [Citation.]” (Id. at p. 415.)
The Thais also argue the court erred in its statement of decision by “impliedly” finding that the cafe’s purchase was governed by only a one-page purchase agreement, when in fact the document includes two pages. They argue the court must have made that erroneous “implied” finding, because it is the second page of the purchase agreement which contains a provision stating that Im “agrees to rely solely on [his] own due diligence with respect to purchase of the Business, ” and they believe that provision makes it impossible to reconcile the court’s explicit finding that Im “did perform” under the terms of the contract with its additional finding that he also “failed to protect [himself] by doing any modicum of due diligence.”
We will not infer the court made erroneous findings which are not reflected in the statement of decision, especially where, as here, the Thais – again – did not actually point out the erroneous “implied” finding in their objections to the second statement of decision. In any event, we disagree with the Thais’ conclusory assertion that the court’s finding Im performed his obligations under the contract is, in light of the provision that he would “rely solely on [his] own due diligence with respect to purchase of the Business, ” inherently inconsistent with its determination he “failed to conduct even a modicum of due diligence, ” – and thus we reject its contention that the “only way” to reconcile the court’s express findings is to infer it ignored the contractual provision. The Thais’ assertion is unaccompanied by either any analysis of the contractual provision, which is merely a single sentence extracted from a larger paragraph on the second page of the agreement, or by any citation to legal authority.
Indeed, when we consider the sentence in the context of the entire paragraph in which it appears, the language providing that Im will rely solely on his own due diligence appears to be specifically designed to benefit Park, the broker, and not the Thais. The paragraph expressly exempts “Broker” (but no one else) from any responsibilities for the accuracy or truthfulness of any representations made by either buyer or seller to the other, follows that with the provision specifying that the buyer (in this case, Im) will rely solely upon his own due diligence with respect to the purchase of the business, and then follows that with a provision requiring both the buyer and seller to indemnify “Broker” from and against any claims arising out of any breach of either the buyer’s or seller’s representations. Significantly, nothing in this provision relieves either buyer or seller from any obligations for the representations they make, and considering the “due diligence” agreement in that context, we would be hard-pressed to interpret it as intending to accomplish anything more than make clear Im should not rely upon the broker to conduct his due diligence for him – or rely upon any due diligence the broker might apparently have conducted already. Interpreted that way, Im’s failure to conduct due diligence would not constitute any failure to perform an obligation owed to the Thais.
The paragraph reads: “Buyer acknowledges and agrees that Broker has made no, and makes no representations and warranties, either express or implied, about the accuracy or truthfulness of any representation or warranty made by Seller or regarding the Business, seller acknowledges and agrees that Broker has made no, and makes no representations or warranties, either express or implied, about the accuracy or truthfulness of any representation or warranty made by Buyer. Buyer agrees to rely solely on its own due diligence with respect to this purchase of the Business. Buyer and Seller each shall indemnify, protect, defend and hold harmless Broker from and against any and all claims, demands[, ] causes of action[, ] costs and expenses, including without limitation attorney’s fees and costs, arising out of a breach of any Buyer’s [or] Seller’s respective representations and warranties in this Agreement.”
Additionally, we note the Thais have not explained how Im’s agreement to rely solely upon his own due diligence, even if construed as an obligation owed to them, was violated by his failure to perform any significant due diligence. Technically, the provision does not require Im to perform due diligence, but only to rely solely on whatever due diligence he did perform.
And finally, the Thais have not explained how Im’s failure to perform significant due diligence, even if he were obligated to do so, would relieve them from liability, under the covenant of good faith and fair dealing, for their failure to be truthful in the affirmative representations they chose to make about the cafe, or would preclude Im from assuming they will be. Not every breach of a contract excuses the other side’s obligations under the covenant of good faith and fair dealing. (Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 578, [“While it might be argued that defendants would be excused from their contractual duties (e.g., obligation to indemnify) if plaintiff breached his obligations under the policies, we do not think that plaintiff’s alleged breach excuses defendants from their duty, implied by law, of good faith and fair dealing.]”.)
And in fact, it has been long settled in California that the seller of real property cannot simply exempt himself for liability for intentional misrepresentations by including language in the sale agreement which provides that the buyer relies solely on his own inspection and investigation of the property, and not upon any representations made by the sellers. The ploy, which has apparently enjoyed an enduring popularity, is simply ineffective. Thus, in Simmons v. Ratterree Land Co. (1932) 217 Cal. 201, involving a claim for rescission of an agreement to buy a subdivided lot falsely characterized as having been zoned for business purposes, the Supreme Court rejected seller’s reliance on contractual provisions stating the buyer had viewed and investigated the property and did not rely upon any representations of the seller or its agents except those mentioned in the contract of sale. The high court explained, “It is settled beyond doubt, manifestly on sound grounds of justice, that a seller cannot escape liability for his own fraud or false representations by the insertion of provisions such as are embodied in the contract of sale herein. [Citations.]” (Id. at p. 204.)
For all of these reasons, we reject the Thais’ suggestion that the court must have erred by “impliedly” finding that the parties’ agreement consisted of only one page, and thus ignoring the provision on the second page by which Im agreed to rely upon his own due diligence in the purchase of the cafe. That provision is simply irrelevant in the analysis of whether the Thais should be held liable for their misrepresentations.
In their penultimate challenge to the sufficiency of the statement of decision, the Thais assert the court’s finding that Im “did not waive any rights against the Thai Defendants by executing the contingency removal” is insufficient, because it is unsupported by any factual and legal basis. But again, the Thais did not articulate this specific point in their “objections and proposals” document filed in the wake of the court’s statement of decision. Instead, what they requested is that the court “delete its finding” that Im did not waive any rights, because “the Court fails to explain why Plaintiff’s execution of the Contingency Removal should not be construed as a removal of the condition that Plaintiff is to approve sales showing monthly gross of approximately $50,000 as stated in Paragraph 1 of the Contract.” In other words, the Thais made a very specific point about the perceived problem with this finding – i.e., that it implies the court did not interpret the contingency removal document as a removal of the condition that Im approve the monthly sales figures – and not the general “too conclusory” assertion one they now make on appeal.
And when we consider the specific point the Thais did make, we note there is nothing in our record to suggest the court did not construe Im’s execution of the contingency removal document as a removal of the condition that he must “approve sales showing monthly gross of approximately $50,000.” It’s pretty clear that is what the document was intended to do, and also undisputed that the sale actually proceeded only after Im executed that document. However, the Thais’ objection does not explain how construing the contingency removal document as “a removal of the condition that Plaintiff is to approve sales” is inconsistent with a finding that Im did not waive his claims in this litigation when he signed it. Nor do they effectively explain that on appeal.
But in any event, even if the Thais’ “objections and proposals” document had expressly made the broader point they seem to be asserting on appeal – i.e., that Im’s execution of the contingency removal document necessarily operated as a waiver of any and all claims of liability based upon their misrepresentations – we would not find it persuasive. Simply put, “[i]t is well-established in California that a party to a contract is precluded under [Civil Code] section 1668 from contracting away his or her liability for fraud or deceit based on intentional misrepresentation.” (Manderville v. PCG&S Group, Inc., supra, 146 Cal.App.4th at p. 1500.)
Civil Code section 1668 provides: “All contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.
Moreover, the general rule is that an effective waiver of claims requires the waiving party to understand and articulate exactly what claims he is waiving. There can be no implied general release of unknown claims. Indeed, Civil Code section 1542 expressly provides: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” Here, there was no evidence Im knew or suspected anyone was lying to him about the sales figures when he signed the contingency removal document. Thus, the document cannot be construed as a general release of all claims based upon such a lie.
At best, the contingency removal document might be argued as supporting a waiver of Im’s right to seek the remedy of rescission, as it specifically provides that he is waiving “all rights that I may have to rescind, ” but it nowhere indicates he understands he may have claims for liability based upon misrepresentation, and nonetheless waives such claims. The document is thus ineffective, as a matter of law, to constitute such a waiver.
And the Thais’ final objection to the statement of decision is their assertion the court failed to meaningfully explain the basis for its conclusion that although “there was no breach of contract in the traditional sense, the... Thai defendants breached the covenant of good faith and fair dealing as set forth below.”
The Thais did preserve this point by raising it in their “objections and proposals” document filed in response to the statement of decision, and as they have pointed out both in that document and on appeal, the court did not actually “set forth” any factual findings or analysis below that conclusion. So the Thais are correct that the court erred, but it’s merely a technical victory. It is clear the court’s factual findings pertaining to the Thais, which are actually set forth above its legal conclusion, are the ones it intended to refer to. If the court had also set forth additional factual findings against the Thais below the “breach of good faith and fair dealing” conclusion – making it difficult to conclude the court intended to include the findings above as a basis for its conclusion – we might agree it would be problematic to do so. But as it stands, we agree only that the statement was poorly proofread. Such an error is not a basis for remand. It is only in cases where the court’s findings are so ambiguous its reasoning cannot be determined, that reversal of the judgment may be proper. The question is always whether the findings, as written, preclude meaningful appellate review. (Mitidiere v. Saito (1966) 246 Cal.App.2d 535, 539.) In this case, where the basis for imposing liability on the Thais was so patent, the statement of decision does not fall to that level.
And as to the substance of the factual findings supporting the conclusion the Thais breached the covenant of good faith and fair dealing, we have no problem concluding they were sufficient. Knowing that Im had a right to conduct due diligence relating to the purchase of the cafe, and that his specific concern was to ascertain the validity of their claimed sales figures, the Thais undermined his efforts (slight though those efforts may have been) by providing him with falsified monthly “receipts” to justify the inflated figures they were claiming. It is hard to imagine a more direct effort to “deprive [Im] of the benefits of the agreement.” (Ocean Services Corp. v. Ventura Port Dist. (1993) 15 Cal.App.4th 1762, 1780 [“[T]he law implies in every contract a covenant of good faith and fair dealing. [Citations.] Broadly stated, that covenant requires that neither party do anything which will deprive the other of the benefits of the agreement. [Citation.]”].)
And while the Thais also assert the court erred by holding them responsible for breach of the covenant even though it found no “breach of the contract in the traditional sense, ” – arguing this amounted to holding them responsible for breach of an obligation beyond “those to which the contract parties actually agreed” (see Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317), we do not find the point persuasive. This is not a case in which the court imposed liability based upon their failure to do something the contract did not require. For example, the court did not impose liability for their failure to disclose the cafe’s monthly revenues, or their failure to produce sufficient records to assist Im in the performing his due diligence. They were under no contractual obligation to do either of those things. Instead, the court faulted them for doing the things they chose to do in a wrongful manner. Had they made no representations at all, they would have been in the clear. But having made representations, the covenant of good faith and fair dealing obligated them to do so honestly. Honesty is not “an obligation beyond those to which the contract parties actually agreed.”
We find no error in the court’s conclusion the Thais violated the covenant of good faith and fair dealing implied in the purchase agreement.
C.
The Thais also contend the court should have granted a motion for judgment in their favor at the conclusion of Im’s case in chief pursuant to Code of Civil Procedure section 631.8. However, such a motion, in contrast to a motion for nonsuit, allows the court to weigh the evidence relied upon by plaintiff, and weigh the credibility of witnesses. In essence, the court exercises discretion in determining whether it finds plaintiff’s case so unconvincing there is no need to hear defendant’s additional evidence. (Kinney v. Overton (2007) 153 Cal.App.4th 482.)
On appeal, the court’s denial of such a motion is governed by the substantial evidence test. (Swanson v. Skiff (1979) 92 Cal.App.3d 805, 810.) And an appellant who is claiming the record contained no substantial evidence to support the court’s ruling has a heavy burden. “It is the appellant’s burden, not the court’s, to identify and establish deficiencies in the evidence. (Brown v. World Church [(1969)] 272 Cal.App.2d 684, 690.) This burden is a ‘daunting’ one. (In re Marriage of Higinbotham (1988) 203 Cal.App.3d 322, 328-329.) ‘A party who challenges the sufficiency of the evidence to support a particular finding must summarize the evidence on that point, favorable and unfavorable, and show how and why it is insufficient. [Citation.]’ [Citation.] ‘[W]hen an appellant urges the insufficiency of the evidence to support the findings it is his duty to set forth a fair and adequate statement of the evidence which is claimed to be insufficient. He cannot shift this burden onto respondent, nor is a reviewing court required to undertake an independent examination of the record when appellant has shirked his responsibility in this respect.’ (Hickson v. Thielman (1956) 147 Cal.App.2d 11, 14-15.)” (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 409.)
In this case, the Thais made no significant effort to fulfill that burden on appeal. Instead, they merely assert in conclusory fashion that there was insufficient evidence to support the determination that their representations as to the cafe’s gross monthly sales were inaccurate. In doing so, they expressly rely upon what they characterize as the only “credible evidence, ” i.e., Mr. Thai’s own testimony “confirm[ing] that any representations pertaining to the Cafe were indeed accurate.” Significantly, they ignore evidence that managers of the cafe were asked by Mr. Thai to inflate the daily receipts, and at least one acknowledged he did so on a frequent basis between January and September of 2004.
Similarly, the Thais assert that Mrs. Thai was entitled to have judgment entered in her favor, because there was no evidence she ever made any representations to anybody about the cafe, and had no involvement with H & S, LLC. That argument is supported by citations to only two pages of the reporter’s transcript, and again ignores the evidence which contradicts it. That is inadequate.
The Thais have demonstrated no error in the court’s denial of their motion for judgment.
D.
Eugene Park, the realtor who represented both parties in the sale transaction, was found liable for breach of fiduciary duty, based on the facts that (1) his dual agency presented an inherent conflict of interest; (2) he “assured” Im that the sale price for the cafe was a fair price and reflected the value of the restaurant; and (3) he could have easily ascertained, through independent research, that the Thais had purchased the café only a year previously, and paid only about a third of the price they were asking Im to pay.
Park argues the judgment against him cannot stand, because Im failed to present any expert testimony establishing the scope of his duty in this context. We agree in part, as the standard of care for a broker is generally determined by what a reasonable broker would do in a given circumstance. But ultimately, an expert opinion is required to establish a breach of that duty only when the alleged breach is of the sort that is not within the knowledge of a layperson. “In professional malpractice cases, expert opinion testimony is required to prove or disprove that the defendant performed in accordance with the prevailing standard of care [citation], except in cases where the negligence is obvious to laymen. [Citation.]” (Kelley v. Trunk (1998) 66 Cal.App.4th 519, 523, italics added; see also Carleton v. Tortosa (1993) 14 Cal.App.4th 745, 754-755, [“The degree of care and skill required to fulfill a professional duty ordinarily is a question of fact and may require testimony by professionals in the field if the matter is within the knowledge of experts only.”]; and Ewing v. Northridge Hospital Medical Center (2004) 120 Cal.App.4th 1289, 1302 [describing the so-called “common knowledge exception [to the requirement of expert testimony, ] typically employed in medical malpractice cases in which the misfeasance is sufficiently obvious as to fall within the common knowledge of laypersons.”].)
As set forth in Civil Code section 2079.2, “[t]he standard of care owed by a broker under this article is the degree of care that a reasonably prudent real estate licensee would exercise and is measured by the degree of knowledge through education, experience, and examination, required to obtain a license under Division 4 (commencing with Section 10000) of the Business and Professions Code.”
In this case, we conclude the validity of the court’s decision against Park was not dependent upon its determination of issues requiring expert testimony. Although decidedly sparse, the court’s findings against Park disclose three separate bases for its determination he had breached a fiduciary duty. First, the court concluded Park’s representation of both the Thais and Im in the transaction amounted to a “conflict of interest.” Second, the court faulted Park for “assuring the buyers that the price of $440,000... was a fair price and reflected the value of the restaurant.” And third, the court faulted Park for not conducting a “simple investigation [which] would have revealed that [the Thais] had paid only $117,000 for the restaurant in 2003, less than one year earlier.”
The court’s “conflict of interest” finding was clearly an inappropriate basis for concluding Park violated a fiduciary duty. The law quite clearly allows a real estate agent, such as Park, to act as a dual agent in these circumstances. (Civ. Code, § 2079.17.) Moreover, Im’s suggestion that Park was somehow prohibited from relying upon the statutory provision allowing a dual agency, because he did not ask Im to execute the pro forma dual-agency disclosure form as quickly as he should have, is not persuasive. Im does not cite any authority for his argument, nor does he contend there is any evidence which would sustain the conclusion he was ever misled about Park’s dual agency status in the transaction. Im knew that Park was the listing agent on the property, and the purchase offer he signed clearly disclosed that Park was acting as a dual agent in the transaction. There is simply no basis to conclude Im might have reasonably believed that Park was working for him exclusively.
As the listing agent, Park was prohibited by law from acting as only Im’s agent in the purchase transaction. (Civ. Code, § 2079.18.)
And the court’s third complaint about Park – that he failed to investigate the sales history of the property to determine its prior sales price – is likewise unavailing. Although a broker (like any other person) could presumably investigate public records and discover the sales history of a property, the law imposes no affirmative duty upon him to do so. Civil Code section 2079.3 provides that “[t]he inspection to be performed pursuant to this article does not include or involve an inspection of areas that are reasonably and normally inaccessible to such an inspection, nor an affirmative inspection of... public records or permits concerning the title or use of the property.” (Italics added.)
And so we are left with the court’s second complaint, that Park acted improperly by “assuring” Im that the sales price was fair, and it “reflected the value of the restaurant.” Of course, the court impliedly concluded Park had no basis for making such assurances, and thus the question Park raises on appeal is whether the court could properly conclude, even in the absence of expert testimony, that his act of doing so without justification was a violation of his fiduciary duty. We have no trouble concluding it could.
Park filed no challenge to the court’s statement of decision, so we must imply all necessary findings in support of its ultimate conclusion against him. Moreover, we invited the parties to file supplemental briefing addressing whether there was substantial evidence in the record to support an implied finding that Park might have known the sales price for the cafe was not fair at the time he made the representations to Im. Park declined to file any supplemental brief.
Like the Thais, Park had no obligation to make any affirmative representations to Im at all. When faced with the issue of whether he believed the cafe was reasonably priced, he could have demurred, stating something along the lines of “that’s not for me to decide, ” or recommending that Im discuss the issue with a financial professional instead. But he chose instead to encourage Im to believe this was a good deal, without any concrete basis to believe that was true. Indeed, given his role in helping Im with his “due diligence, ” Park was particularly well situated to understand that the Thais had proffered almost no documentation to support their representations about the cafe’s earnings.
Thus, while completing the sale transaction would clearly have been a beneficial course of action for Park personally – after all, he stood to earn a large commission if the deal went through – it placed Im at a huge risk. Under those circumstances, it doesn’t take an expert to understand that affirmatively encouraging Im to proceed was not consistent with Park’s fiduciary obligation to act with “the highest good faith and undivided service and loyalty.” (Field v. Century 21 Klowden-Forness Realty (1998) 63 Cal.App.4th 18, 25.) The court did not err in making that finding, and thus did not err in concluding Park was liable for the breach.
E.
Our final issue on appeal is Im’s assertion the court erred in imposing only separate liability against the Thais and Park. Im argues that as between two tortfeasors who contribute to a single indivisible injury, joint and several liability is appropriate. (See American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578.)
However, in making that argument, Im ignores the fact the court found the Thais liable based upon their breach of the covenant of good faith and fair dealing, a claim that generally sounds in contract, rather than tort. “[W]ith the exception of bad faith insurance cases, a breach of the covenant of good faith and fair dealing permits a recovery solely in contract.” (Fairchild v. Park (2001) 90 Cal.App.4th 919, 927.) Because Im has provided us with no authority suggesting that joint and several liability is appropriate in this situation, we conclude he has demonstrated no error in the court’s decision to impose only separate liability.
The judgment is affirmed. All parties are to bear their own costs on appeal.
WE CONCUR: MOORE, J.ARONSON, J.
Code of Civil Procedure section 632 provides in pertinent part: “In superior courts, upon the trial of a question of fact by the court, written findings of fact and conclusions of law shall not be required. The court shall issue a statement of decision explaining the factual and legal basis for its decision as to each of the principal controverted issues at trial upon the request of any party appearing at the trial. The request must be made within 10 days after the court announces a tentative decision unless the trial is concluded within one calendar day or in less than eight hours over more than one day in which event the request must be made prior to the submission of the matter for decision. The request for a statement of decision shall specify those controverted issues as to which the party is requesting a statement of decision. After a party has requested the statement, any party may make proposals as to the content of the statement of decision.” (Italics added.)