Opinion
B317543
06-21-2023
MICHAEL J. MODER, Plaintiff, Cross-defendant and Appellant, v. STEVE TAYLOR, Defendant, Cross- complainant and Respondent.
Law Offices of Timothy P. Creyaufmiller and Timothy P. Creyaufmiller for Plaintiff, Cross-defendant and Appellant. Pitre &Teunisse and Patricia A. Teunisse for Defendant, Cross-complainant and Respondent.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, No. KC070115 Peter A. Hernandez, Judge.
Law Offices of Timothy P. Creyaufmiller and Timothy P. Creyaufmiller for Plaintiff, Cross-defendant and Appellant.
Pitre &Teunisse and Patricia A. Teunisse for Defendant, Cross-complainant and Respondent.
CHAVEZ, J.
Plaintiff and appellant Michael J. Moder (appellant) appeals from the portion of the judgment that awarded damages to respondent Steven Taylor. Appellant argues substantial evidence does not support the trial court's finding that he breached the agreement and the decision to not award him a financial setoff. We find substantial evidence supports the trial court's judgment and affirm.
FACTUAL BACKGROUND
Appellant owns a single family residence on Greenhaven Ave., San Dimas, that was rented to respondent. In 2012 the parties agreed that respondent could buy the property for $370,000. After respondent failed to make timely payments, the parties entered into an addendum in which respondent agreed to obtain a loan for $100,000 that he failed to obtain. As a result, appellant canceled the purchase agreement.
Respondent declared he was the sole owner of the property.
Appellant filed a complaint in March 2018, alleging causes of action for quiet title, cancellation of written instrument, slander of title, unfair business practices, breach of contract, unjust enrichment, and declaratory and injunctive relief. At the time of trial, appellant dismissed all but the quiet title cause of action.
Respondent filed a cross-complaint, alleging causes of action for quiet title, breach of contract, and abuse of process, taking the position he made the required payments and it was appellant who breached the contract by failing to transfer title to respondent and by demanding he pay an additional $100,000 beyond the original agreed-upon price.
After a court trial in May 2021, the court issued a statement of decision finding the purchase agreement was simultaneously breached in 2015 when appellant demanded an additional $100,000, and respondent stopped making payments. The court quieted title in favor of appellant and awarded damages and interest of $277,165.14 to respondent.
The trial court entered two judgments: one on October 8, 2021, and the other on October 13, 2021. Both documents quiet title in favor of appellant and award damages to respondent. The notice of entry of judgment states the October 8, 2021 judgment was entered on October 21, 2021, causing it to be the operative judgment.
Appellant filed a timely notice of appeal of the October 8, 2021 judgment on December 6, 2021.
CONTENTIONS ON APPEAL
Appellant argues the portion of the judgment awarding damages to respondent is not supported by substantial evidence because appellant did not breach the agreement. Additionally, appellant argues it was error to not award him an offset against the damage award for the reasonable value of the respondent's use of the property.
DISCUSSION
I. Standard of review
On review of a judgment entered after a bench trial, "'we review the entire record in the light most favorable to the judgment to determine whether there are sufficient facts, contradicted or uncontradicted, to support the judgment.'" (Patricia A. Murray Dental Corp. v. Dentsply Internat., Inc. (2018) 19 Cal.App.5th 258, 270.)
We review findings of fact in the statement of decision for substantial evidence. (Gomez v. Smith (2020) 54 Cal.App.5th 1016, 1026.) In general, "'"'any conflict in the evidence or reasonable inferences to be drawn from the facts will be resolved in support of the determination of the trial court decision.'"'" (Id. at p. 1027.) We "'"'consider all of the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference, and resolving conflicts in support of the [findings].'"'" (Id. at p. 1026.)
II. Substantial evidence supports the finding appellant breached the agreement
The trial court found appellant breached the purchase agreement by demanding $100,000 in June 2015 over the agreed-upon price. The parties entered into a purchase agreement on March 21, 2012, in which respondent agreed to pay $370,000 to appellant. The agreement included a payment schedule under which respondent paid the first $120,000 in monthly payments from March 2012 to March 2013. The remaining $250,000 of the sales price would be paid over 15 years in monthly installments of $1,944.58 from April 2013 to April 2028.
Documents and testimony show appellant attempted to change the payment schedule (following late payments from respondent) by demanding $100,000 in 2015 and threatening to sell the property if respondent did not pay. The court found this evidence established that appellant had demanded an additional $100,000 above the contract price of $370,000.
The following testimony supports the trial court's finding. First, appellant asked respondent to pay $100,000 that was not on the payment schedule when he sent a written notice to respondent indicating he was extending the time to secure a loan for and pay $100,000 until May 2, 2015. The notice warned that, if the amount was not paid, appellant would hire a real estate agent to sell the property.
Second, respondent, by letter, refused to pay the $100,000, stating, "Also per our agreement, I'm under no obligation to pay you money due to the property increasing in value since I purchased it. We have no agreement that a partnership or equity participation was to take place." Respondent added, "Like I stated before, had the property went down in value, I would never ask for you to pay me to offset the decrease in value, and you obviously wouldn't agree to it had I asked."
Third, during cross-examination appellant was asked, "So were you asking for an additional hundred thousand dollars in addition to the original purchase price of $370,000?" Appellant responded, "Yes. In short of stopping from taking the home from him."
Later appellant returned to his original position and denied that $100,000 was in addition to the original $370,000. When the court attempted to determine the basis for the $100,000 by inquiring whether it was based on amounts due and owing, appellant admitted the $100,000 was not related to outstanding delinquencies, but was "security."
Fourth, respondent testified that appellant demanded respondent pay an additional $100,000, adding that respondent had tried to negotiate the amount down to $80,000, and appellant threatened to sell the property if respondent could not get the additional funds.
This testimony supports the conclusion that appellant demanded respondent pay $100,000 and threatened to sell the property if the amount was not paid. It was a demand for payment that was not in accordance with the payment schedule. Therefore, when reviewing the entire record in the light most favorable to the judgment, we find substantial evidence to support the finding of appellant's breach of the contract by threatening to sell the property if respondent did not make a $100,000 payment that was not required under the original payment schedule.
III. Appellant did not plead or prove entitlement to an offset
The trial court found appellant was not entitled to damages because he had dismissed all of his causes of action, other than to quiet title, prior to trial. Furthermore, appellant's answer to respondent's cross-complaint did not raise any affirmative defense seeking an offset from any damages awarded to respondent.
While claims of a setoff can be raised as an affirmative defense or in a cross-complaint (American Nat. Bank v. Stanfill (1988) 205 Cal.App.3d 1089, 1097), appellant offers no legal authority by which the trial court could award an offset when one was not pleaded.
Appellant attempts to circumvent this defect by arguing the trial court should have given him an offset when it was calculating the amount of damages to award respondent on the rescission claim, based on the purpose of rescission damages, being to restore the parties to the positions they held before the contract. (Runyan v. Pacific Air Industries, Inc. (1970) 2 Cal.3d 304, 314-316 (Runyan) ["It is the purpose of rescission 'to restore both parties to their former position as far as possible' [citation] and 'to bring about substantial justice by adjusting the equities between the parties' despite the fact that 'the status quo cannot be exactly reproduced.'"].) This has included allowing a court that rescinds a real estate contract to award the rental value of the land to the seller while it was in the buyer's possession. (McCoy v. West (1977) 70 Cal.App.3d 295, 301-302.)
In his cross-complaint, respondent sought rescission and a return of all money paid to appellant. The trial court, when making its decision on the rescission claim, found the promissory note to be the only reliable evidence upon which to calculate damages. "The parties' inability to provide reliable documentary evidence in this property matter has been a challenge to this court to say the least. It appears both parties tried to skirt longstanding real estate procedural safeguards in order avoid accountability or reduce their financial obligations to the taxing authorities." The court then awarded $120,000, the down payment, and $50,559.08, based on respondent's 26 payments at $1,944.58 each. To this, the court added prejudgment interest calculated on the total amount of $170,559.08 accruing from July 1, 2015.
Appellant urges that the trial court could have used the written lease agreement to determine that the rental value of the property was $2,000 per month, but offers no grounds to find the trial court did not act reasonably by rejecting the lease agreement as unreliable on this point.
Trial courts have broad discretion to "adjust the equities between the parties" when awarding damages in rescission under Civil Code section 1692. Our function on appeal is limited to determining "whether the trial court, presumably responsive to the mandate that the aggrieved party be awarded complete relief, acted reasonably and equitably." (Runyan, supra, 2 Cal.3d p. 318.)
Further, the trial court has broad discretion to adjust the equities between the parties. Having found the parties had circumvented safeguards to avoid accountability or reduce their financial obligations, it is not an abuse of discretion for the trial court to find it equitable in such circumstances to order damages in the amount paid by respondent. It appears the trial court sought to return the parties to the status they held before they entered into the real estate contract they both breached and that involved conduct designed to avoid accountability or other financial obligations.
We find substantial evidence supports the judgment of the court.
DISPOSITION
We affirm. Respondent is awarded his costs of appeal.
We concur: ASHMANN-GERST, Acting P. J. HOFFSTADT, J.