Opinion
D070922 D070923
01-24-2017
GREGORY L. FOX, Plaintiff and Appellant, v. TODD H. KATZMAN et al., Defendants and Respondents.
Gladych & Associates, John A. Gladych and Andrea A. Golan, for Plaintiff and appellant. Wood & Delgado and Marc Ettinger for Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2013-00674262) CONSOLIDATED APPEALS from a judgment and order of the Superior Court of Orange County, Gail A. Andler, Judge. Affirmed. Gladych & Associates, John A. Gladych and Andrea A. Golan, for Plaintiff and appellant. Wood & Delgado and Marc Ettinger for Defendants and Respondents.
Gregory Fox purchased a home for $2.3 million, and later sued the sellers for failure to disclose various defects. Fox asserted breach of contract and misrepresentation claims. In a special verdict, the jury found Fox did not prove any of his causes of action. After the court entered judgment in defendants' favor, Fox moved for a new trial, claiming a witness's changed testimony resulted in unfair surprise and the jury's factual findings were inconsistent. (Code Civ. Proc., § 657, subds. (3), (6).) The court denied the motion.
On appeal, Fox contends the court erred in denying his new trial motion. We reject this contention and affirm.
SUMMARY OF RELEVANT FACTS AND PROCEDURE
Because Fox does not challenge the sufficiency of the evidence, we describe the factual record primarily to provide context to the court's posttrial rulings at issue on appeal. Based on the jury's defense verdict, we generally presume the jury credited the defense evidence and found Fox's conflicting evidence not to be credible. (See Green Wood Industrial Co. v. Forceman Internat. Development Group (2007) 156 Cal.App.4th 766, 770, fn. 2.)
Background
In about 1999, Dr. Todd Katzman purchased and moved into a large home with a backyard that contained a swimming pool and a tennis court. After several years, Katzman and his family moved out of the home, and later rented the property to tenants.
The home was legally owned by a revocable trust, of which Katzman and his former wife were trustees. For simplicity, we refer collectively to the sellers as Katzman. --------
In August 2012, Katzman and Fox entered into a written contract in which Katzman agreed to sell the property to Fox for $2.3 million. The parties used California's standard form residential purchase agreement. The agreement provided that the property would be sold in its " 'as is' " condition, subject to the seller disclosing "known material facts and defects affecting the Property." (Capitalization omitted; italics added.) The contract "strongly advised" Fox to "conduct investigations of the entire Property" and stated that "Seller may not be aware of all defects affecting the Property . . . . "
Both parties were represented by real estate agents. Katzman was represented by Kathleen Leimkuhler, and Fox was represented by Lisa Lovell and Greg Hanson. Fox and his wife intended to substantially remodel the property after escrow closed, expecting to spend at least $500,000 to create a home worth more than $4 million.
Escrow Period
Although he was advised to do so, Fox did not retain a professional home inspection contractor during escrow, including to inspect the roof and other areas not visible during a walkthrough of the property. Fox signed an acknowledgement that his decision not to retain a home inspection expert was against the brokers' advice. Fox testified he did not believe he needed to retain an expert because he intended to rely on the sellers' disclosures and to conduct his own inspection. Fox said he was experienced in real estate matters, having previously purchased about 16 different properties.
During escrow, Katzman filled out standard real estate disclosure forms. Katzman testified he included information on the forms to the best of his knowledge and made every effort to be honest and truthful in the disclosures.
Several of his answers are of relevance in this case.
First, Katzman responded "No" to the following question: "Any alterations, modifications, remodeling, replacements or material repairs to the Property."
Second, in response to a question asking whether there was any "[o]ngoing or recurring maintenance on the Property [¶] (for example, drain or sewer clean-out, tree or pest control service," Katzman checked the "Yes" box and stated that he hired a pest control company "on [a] monthly basis for bug control outside property[.]"
Third, with respect to water-related and mold issues, Katzman checked "No" regarding a question as to "Flooding, drainage, or grading problems," and checked the "Yes" box on questions regarding "Water intrusion into any part of any physical structure on the Property" and concerning "infestation of mold, mildew, fungus or spores, past or present." In the explanation for the latter answers, Katzman stated: (1) "water heater broke 2 yrs ago in downstairs room" and (2) "mold was found and treated under outside staircase where pump for fountain is located. No mold was inside."
Fourth, with respect to a question whether there were animals or pests on or in the property, Katzman checked "Yes" and stated that "we had a dog. "
After Close of Escrow
Escrow closed in September 2012. Soon after, Fox began an extensive remodel. During the remodel, Fox's contractor found numerous issues with the property that Fox believed should have been disclosed by Katzman and his agent.
Based on the claimed nondisclosures, Fox sued Katzman, alleging breach of contract, negligent misrepresentation, intentional misrepresentation, and nondisclosures in violation of Civil Code section 2079. At trial, Fox presented evidence of numerous claimed undisclosed defects. During closing argument his counsel focused on three main categories: (1) a defective (leaky) roof; (2) damage to electrical wires caused by rats; and (3) damage caused by clogged drain pipes and/or water intrusion into the home. We briefly summarize the evidence relating to each of these issues.
Roof
Fox presented evidence that a roof inspection conducted after escrow closed showed the roof was in "fair to poor condition"; there had been "sub-standard" prior repairs; and there was a "risk of leaking in the near future." In her testimony, Fox's wife acknowledged that during escrow she was aware the roof was more than 25 years old and that she and her husband did not retain a roof inspector until after escrow closed.
Katzman testified he did not disclose any roof problems because he was unaware of any material issues with the roof. He said he had no roof problems until 2010 or 2011 when his tenants notified him of a minor leak. Katzman responded by retaining a roofing contractor to inspect the roof and repair this problem. He paid $385 for this repair. Katzman testified that after this repair there were no more problems with the roof.
At trial, Fox argued that Katzman was liable for breach of contract and misrepresentation regarding the roof leak because he did not disclose this roof repair in the portion of the disclosure form asking whether there had been any roof problems. Katzman said he did not do so because he thought the problem had been fully addressed, and did not consider the minor roof repair to be important information.
Rats
Fox and his wife testified that during the remodel project after walls and attached cabinetry had been removed, they saw some rat droppings, and their contractor saw electrical wires that appeared to have been chewed by rats. Fox said that neither he nor his wife saw any rats inside the home before or after the close of escrow, and none of the rat-related issues could be seen until the attached cabinets had been torn from the wall. Fox said he would not expect a seller to tell him that there were rat droppings behind walls.
Katzman testified he was unaware of any rat problem, and there had been no problems with the electrical system. He said that shortly after he moved into the home in 1999, an air conditioning technician told him there was a dead rat in the attic. Katzman immediately called a pest control service, which took the rat away. Katzman never again saw any indication of rats in the home.
Katzman testified that when he filled out the disclosure form, he forgot about the rat sighting. He said that when he was filling out the form in 2012, "it didn't even occur to me [that] I had [rats] in 1999." Katzman's counsel argued that because only one rat had been found more than a decade earlier and the problem appeared to have been resolved at that time, it was unnecessary for Katzman to disclose the issue at the time of the sale.
Drainage/Water Seepage
With respect to the drainage issues, Fox testified that the backyard flooded in 2013 (after close of escrow). He presented evidence that when his contractors dug in the pool area in preparation for a new pool, they found drain pipes that were clogged and full of tree roots. It was undisputed that this problem was not visible until the renovation project began. At trial, Katzman acknowledged he had a problem with clogged drains in the backyard in about 2001 or 2002, but said he did not disclose this issue to Fox because he had fully repaired and replaced the drains and was unaware of any drainage problems after that time. Katzman's pool servicer testified he once saw the backyard flood during heavy rains in about 2007, but he never told Katzman about this incident.
At trial, Katzman denied that he ever had any water intrusion problem in the home. To rebut this claim, Fox presented evidence that after escrow closed Katzman told his real estate agent (Leimkuhler) that shortly after he moved into the home "there was a major rain and water got into the yoga room," and he then fixed all of the drains. At her deposition, Leimkuhler testified to these facts. She also documented this conversation in an October 2012 email sent to Fox's agent after the close of escrow. However, at trial, Leimkuhler disavowed her earlier testimony and email, claiming that she had been mistaken. As discussed in detail below, this changed testimony was a primary ground for Fox's new trial motion on the grounds of surprise.
Jury Verdict
At the conclusion of the trial, the jury returned a special verdict that found Fox did not prove any of his causes of action.
On the breach of contract claim, the jury answered "NO," to the question: "Did the Katzmans breach the Residential Purchase Agreement contract with Plaintiff Fox?"
On the concealment claim, the jury answered "NO" to the question: "Did the Katzmans intentionally fail to disclose material defects that Plaintiff Fox did not know and could not reasonably have discovered?"
On the intentional misrepresentation claim, the jury answered "NO" to the question: "Did the Katzmans make false representations of material facts to Plaintiff Fox?"
On the negligent misrepresentation claim, the jury answered "YES" to the question: "Did the Katzmans make false representations to Plaintiff Fox?" But the jury also found the Katzmans made these representations with the honest and reasonable belief they were true. Specifically, the jury answered "YES" to the questions: "Did the Katzmans honestly believe that the representations were true when they made them to Plaintiff Fox?" and "Did the Katzmans have reasonable grounds for believing the representations were true when they made them to Plaintiff Fox?" The jury also found the Katzmans did not intend to induce reliance, when it answered "NO" to the question: "Did the Katzmans intend that Plaintiff Fox rely on the representations?"
Based on these special verdict responses, the court entered judgment in Katzman's favor.
New Trial Motion
Fox then moved for a new trial on two grounds: (1) surprise based on Leimkuhler's unexpected testimony that she was mistaken when she wrote the email to Fox's real estate agent regarding flooding in the basement; and (2) inconsistent special verdict based on the jury's factual findings that Katzman made a "false representation[ ]" to Fox, but that Katzman did not breach the parties' purchase agreement.
After considering the parties' written submissions, the court denied the motion. As to Fox's "surprise" claim, the court found the change in Leimkuhler's testimony did not materially affect Fox's ability to prove his claims. On the inconsistent verdict issue, the court found there was no inconsistency because the "verdict supports the conclusion that the jury found that because [Katzman] reasonably did not know that any of [his] representations were false, [he] did not breach any contractual provision requiring disclosure of known facts affecting the property." (Italics added.) The court later awarded Katzman $250,000 in prevailing party attorney fees.
DISCUSSION
I. Review Standards
Generally, "a trial judge is accorded a wide discretion in ruling on a motion for new trial and . . . the exercise of this discretion is given great deference on appeal." (City of Los Angeles v. Decker (1977) 18 Cal.3d 860, 871-872 (Decker); Fassberg Construction Co. v. Housing Authority of City of Los Angeles (2007) 152 Cal.App.4th 720, 752.) "An abuse of discretion occurs if . . . the court's decision exceeds the bounds of reason and results in a miscarriage of justice." (Fassberg, supra, at p. 752.)
These standards are qualified by two rules applicable here.
First, reviewing courts ordinarily apply an independent review standard when assessing an appellate contention that a jury verdict is inconsistent. (Singh v. Southland Stone, U.S.A., Inc. (2010) 186 Cal.App.4th 338, 358 (Singh); Zagami, Inc. v. James A. Crone, Inc. (2008) 160 Cal.App.4th 1083, 1092 (Zagami).) Second, when reviewing an order denying a new trial, the appellate court is required to consider the entire record to determine independently whether the error on which the new trial motion is based is prejudicial. (Decker, supra, 18 Cal.3d at p. 872; Sherman v. Kinetic Concepts, Inc. (1998) 67 Cal.App.4th 1152, 1160-1161.)
II. New Trial Motion Based on Surprise
A. Factual Background
At trial, Fox's attorney called Katzman's real estate agent (Leimkuhler) as an adverse witness under Evidence Code section 776. During the examination, Fox's counsel asked Leimkuhler if she learned after escrow closed that water had seeped into the lower level of the house during Katzman's ownership. Leimkuhler responded, "This is an issue, because the answer to that question from what I know now is no."
Fox's attorney then impeached Leimkuhler on this issue by introducing an email Leimkuhler wrote to Fox's real estate agent on October 25, 2012 (about five weeks after escrow closed), which stated:
"Hi Lisa.
"I just got off the phone with the seller of [the property]. One winter after he first purchased the home there was a major rain and water got into the yoga room. At that point, the entire 'basement' was fixed and all of the drains throughout the outside were cleared, tree roots removed and there has never been a problem since. He said that every year since he has owned the home he had had the drains checked and cleared to make sure that does not happen again.
"I hope this answers your questions." (October 2012 email.)
At trial, Leimkuhler acknowledged she wrote the email immediately after a phone conversation with Katzman after escrow closed. Leimkuhler said she wrote the email in response to a question from Fox's real estate agent, and she was aware at that time that Fox was upset about the condition of the property. Leimkuhler also admitted at trial that at her deposition she had reaffirmed that the email accurately reflected her conversation with Katzman. Leimkuhler explained that she did her best to be accurate and truthful when she wrote the email and at her deposition, but after speaking with Katzman the day after her deposition she realized that she had made a mistake when she wrote the email.
Specifically, in a lengthy series of questions, Fox's attorney elicited Leimkuhler's trial testimony that (1) when she wrote the October 2012 email she believed it to be the truth; (2) she was being truthful at her deposition when she testified that the email accurately reflected her conversation with Katzman; (3) she changed her mind about the truth of the email after she spoke at length with Katzman on the day after her deposition; and (4) she continued to work and earn money from Katzman after the sale of the property.
When asked to explain why she wrote the email if it was not true, Leimkuhler testified at trial that "I don't know what else to say to you other than I made a mistake. I apologize that I made a mistake." She said, "I wrote what I thought was said, and apparently I was wrong. So I'm a big bundle of wrong at this moment with the email. . . . [¶] . . . [¶] So did I perjure? No. I was wrong. I made a mistake." She said that after her deposition, Katzman told her that she had "the stories mixed up" and that she had "mixed up" Katzman's words and there was never flooding in the basement area. During this portion of Leimkuhler's testimony, Fox's counsel quoted at length from Leimkuhler's deposition transcript for impeachment purposes.
In his trial testimony, Katzman adamantly denied there had ever been water seepage into the home, including in the basement. Neither party apparently asked Katzman at trial about the conversation with Leimkuhler that led to the October 2012 email.
After the jury verdict in Katzman's favor, Fox moved for a new trial based on his claim that Leimkuhler's testimony disavowing the truth of her email was an "unexpected, surprising and dramatic . . . turn in her testimony that could not reasonably have been prevented or foreseen . . . ." He also proffered a portion of her deposition transcript that read:
"[Plaintiff's counsel:] . . . Have you at any time told Dr. Katzman that he should have disclosed . . . the things that he admitted to you he was aware of going back to [the October 2012 email]?"In his new trial motion, Fox noted that after Leimkuhler's deposition he had dismissed his claims against Leimkuhler and her real estate agency for a settlement payment of $100,000.
"[Leimkuhler:] No."
"[Plaintiff's counsel]: Why not?"
"[Leimkuhler:] It's—it's over. What—what is—what am I going to say? Like what—'You were bad? You were wrong? You should have'—I mean it's—it's obvious that some things should have been disclosed." (Italics added.)
The court denied the new trial motion primarily on the ground that Leimkuhler's changed testimony did not materially affect Fox's ability to prove his claims.
B. Legal Principles
A new trial may be granted on the ground of "[a]ccident or surprise, which ordinary prudence could not have guarded against." (Code Civ. Proc., § 657, subd. (3).) To show grounds for relief, the moving party has the burden to establish (1) an accident or surprise, i.e., something unforeseen happened during the trial that could not have been guarded against; and (2) prejudice, i.e., that the surprise had a material adverse effect on his case. (See Kauffman v. De Mutiis (1948) 31 Cal.2d 429, 432; McCoy v. Pacific Maritime Assn. (2013) 216 Cal.App.4th 283, 305; Hata v. Los Angeles County Harbor/UCLA Medical Center (1995) 31 Cal.App.4th 1791, 1806-1807; Wade v. De Bernardi (1970) 4 Cal.App.3d 967, 971-972 (Wade).)
A court has broad discretion in ruling on a new trial motion on the grounds of surprise. (Wilson v. Kopp (1952) 114 Cal.App.2d 198, 205 (Wilson); Whitfield v. Debrincat (1937) 18 Cal.App.2d 730, 733 (Whitfield).) The question on appeal from the denial of a new trial motion is "whether, on the affidavits submitted, the trial court was compelled to grant the new trial, not whether the affidavits would have supported an order granting the new trial." (Wilson, at p. 205.) New trial motions on the ground of "surprise" are viewed with " 'suspicion' " and are " 'seldom successful.' " (Fletcher v. Pierceall (1956) 146 Cal.App.2d 859, 866.)
C. Analysis
The court did not abuse its discretion in this case.
First, the possibility that Leimkuhler would attempt to change or minimize her prior testimony was reasonably foreseeable. Leimkuhler was an adverse witness who continued to work for Katzman on real estate matters. Given this fact, Fox's counsel was on notice of the possibility of changed testimony and fully protected against this possibility by taking Leimkuhler's deposition and preserving that testimony for impeachment purposes.
Changed testimony by a witness who has been deposed and who is aligned with the opposing party is not generally the type of unfair surprise protected by Code of Civil Procedure section 657, subdivision (3). (See Wilson, supra, 114 Cal.App.2d at pp. 206-207.) It is not uncommon for a third-party witness to modify her testimony on the witness stand. As here, the proper remedy for changed testimony is to permit counsel to impeach the witness with his or her prior statements under oath. The court liberally allowed such impeachment in this case.
Additionally, "a party's right to a new trial upon the ground of surprise" is generally "waived if the alleged surprise is not called to the court's attention by motion for a continuance or other relief." (Noble v. Tweedy (1949) 90 Cal.App.2d 738, 742.) "[W]here a situation arises [that] might constitute legal surprise, counsel cannot speculate on a favorable verdict. [Counsel] must act at the earliest possible moment" to notify the court and seek appropriate relief. (Kauffman v. De Mutiis, supra, 31 Cal.2d at p. 432.)
In this case, Fox's counsel did not respond to Leimkuhler's changed testimony by seeking relief during trial, such as a mistrial or continuance. Instead, Fox's counsel acted as any competent counsel would by impeaching the witness with her deposition transcript and her prior writings (the October 2012 email), both of which were inconsistent with her trial testimony. The jury had all the facts before it to determine whether Leimkuhler was telling the truth before trial or at trial.
Additionally, Fox failed to show that if a new trial was granted he would obtain a more favorable result. (See Wade, supra, 4 Cal.App.3d at p. 972; Whitfield, supra, 18 Cal.App.2d at p. 738.) Fox argues that without Leimkuhler's favorable trial testimony, he would have "crafted an entirely different trial strategy, utilizing different and additional witnesses and factual evidence to support his claims." This generalized statement is insufficient to meet Fox's burden on the prejudice element for a new trial motion. Fox has not identified any witnesses or favorable evidence that could have been proffered on the water seepage issue in place of Leimkuhler's testimony.
Fox's reliance on Whitfield, supra, 18 Cal.App.2d 730 is misplaced. Whitfield involved a car accident in which an independent eyewitness testified contrary to his initial statements to the defendant's attorney. (Id. at pp. 732-733.) In successfully moving for a new trial, the defendant submitted the witness's affidavit that he had been confused at trial and had intended to testify consistent with his earlier statements. (Id. at p. 733.) In affirming, the reviewing court emphasized the trial court's "wide" discretion in ruling on such matters (ibid.) and the court's factual findings that the defendant could not have reasonably anticipated the witness's changed testimony and could not have effectively remedied the problem at trial (id. at pp. 734-740).
Unlike the situation with an independent witness in Whitfield, there was a reasonable basis for Fox to anticipate Leimkuhler might attempt to change her testimony; Fox's counsel had the opportunity to fully impeach Leimkuhler's trial testimony; and there was no evidence Leimkuhler would have testified more favorably to Fox at a second trial. Further, in this case, as in Whitfield, we are merely upholding the trial court's factual conclusion concerning whether a witness's changed testimony constituted sufficient surprise to warrant a new trial. As in Whitfield, there is nothing in the record showing the court abused its discretion in reaching its conclusion.
The court did not err in denying the new trial motion based on surprise.
III. New Trial Motion Based on Claimed Inconsistent Verdict
An inconsistent verdict is "against law" and therefore warrants a new trial. (Code Civ. Proc., § 657, subd. (6); David v. Hernandez (2014) 226 Cal.App.4th 578, 585; Morris v. McCauley's Quality Transmission Service (1976) 60 Cal.App.3d 964, 970.) A special verdict is inconsistent only if there is no possibility of reconciling the factual findings. (Singh, supra, 186 Cal.App.4th at p. 357; Zagami, supra, 160 Cal.App.4th at p. 1092.) On appeal, we review de novo an inconsistency challenge. (Singh, supra, at p. 358.)
Fox contends the special verdict was necessarily inconsistent because the jury's finding that he did not prove breach of contract cannot be reconciled with its finding on the negligent misrepresentation claim that Fox proved Katzman made "false representations to . . . Fox[.]" We disagree. The findings can be reconciled on at least two grounds.
First, the findings are consistent when viewing the jury's additional findings on the negligent misrepresentation claim that although Katzman made "false representations," he made them with the honest and reasonable belief they were true. Reasonably interpreting these findings in light of the instructions and evidence, the jury could have found that Katzman made false statements without any knowledge they were untrue. In so doing, Katzman did not breach the purchase agreement as the parties' contract did not require Katzman to disclose information of which he was reasonably unaware. For example, based on the evidence, the jury could have found that Katzman made a false representation when he indicated on the disclosure forms that there were no current problems with the drain pipes, but that he could not be held liable for making this statement because Katzman had no knowledge of this problem as it was not detectable until the backyard was excavated.
Second, the findings can be reconciled when considering the materiality concept, which was encompassed within the questions on the breach of contract and intentional misrepresentation and concealment claims, but not on the negligent misrepresentation claim. The contract required Katzman to disclose only "material" defects, and in its intentional misrepresentation and concealment findings the jury specifically found that Katzman did not intentionally fail to disclose "material defects" of which Fox was unaware. But in finding that Katzman negligently made "false representations," the jury was not asked whether the representations concerned material matters. Accordingly, the findings were consistent. The jury could have reasonably found that Katzman made false statements about certain matters that were not material (e.g., failing to disclose the minor roof repair in 2007 or the finding of a single rat in the attic in 1999) but these failures to disclose did not constitute a breach of contract because these facts were not material to a buyer in 2012.
IV. Attorney Fees
Fox also filed an appeal from the attorney fees order awarding Katzman $250,000 in prevailing party attorney fees. That appeal was later consolidated with the appeal of the judgment. In his appellate briefs, Fox's sole challenge to the attorney fees award is to argue that if this court reverses the judgment or the order denying the new trial, it must also reverse the attorney fees order. As we have found no grounds for reversing the judgment, we affirm the attorney fees order.
DISPOSITION
Judgment affirmed. Attorney fees order affirmed. Respondents to recover their costs on appeal.
HALLER, Acting P. J. WE CONCUR: O'ROURKE, J. AARON, J.