Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
Superior Court County of Ventura No. CIV219776, Frederick H. Bysshe, Judge
Benton, Orr, Duval & Buckingham, Bruce Alan Finck for Defendants and Appellants.
Paul M. Patten, in pro. per., for Plaintiff and Respondent.
COFFEE, J.
Appellants Edmund and Sybil Obendrauf are private homeowners. They remodeled their home themselves, along with the assistance of friends and relatives. After living in the home for eight years, they sold it to respondent Paul Van Patten. They failed to disclose that most of the remodeling was performed by unlicensed workers and did not comply with code requirements. Respondent moved into the home and discovered significant structural defects and code violations. He filed an action against appellants for fraud. Following a bench trial, the court awarded respondent $56,500 in damages. Appellants allege that the trial court used the incorrect measure of damages in calculating respondent's recovery. We affirm.
FACTS
In 1992, appellants purchased a home at 2105 Hyland Avenue in Ventura. It is situated in the foothills above Ventura and "provides unimpeded views of the ocean and Channel Islands." Appellants envisioned a major remodel which would include an expanded first floor and the addition of a second story. They submitted their plans to the City of Ventura, which approved them. Mrs. Obendrauf was in the "retail business" and Mr. Obendrauf was a schoolteacher. However, he also had some construction skills. Mr. Obendrauf, along with friends and relatives, performed most of the remodeling. Some of the construction was inspected and approved by building inspectors.
The remodel consisted of a new bedroom, expansion of the dining, kitchen and garage areas, installation of a new roof and a freestanding fireplace. Appellants also made the necessary plumbing and electrical improvements. They decided against making the second story addition. The City approved their plan to add a covered deck with an open railing on top of the house. However, appellants did not install a solid roof on the deck. It had solid parapet walls (low walls along the edge) and a deck floor covered with an outdoor carpet. Drains were located several inches above the level of the carpet.
In approximately 1999, appellants decided to sell their home. They had lived in it for about eight years. Appellants advertised it, through their real estate agent, as a "better than new view home" that had undergone an "extensive remodel" in 1993, and came with "approved plans for [a second] story." The house was also described as "model perfect." In May 2000, appellants sold the house to respondent for $407,900.
Appellants signed the customary real estate transfer disclosure statement, representing they were unaware of any significant defects or malfunctions in the house. They also indicated that they were not aware of any room additions, structural modifications or other alterations made without the necessary permits or without compliance with the applicable building codes. Their only disclosure was that a small amount of water pooled on the back patio after a continuous rain. Respondent hired an inspector who found only some stains on the ceiling, associated with roof repairs.
During a rainy season in January 2001, respondent began to notice leakage problems. The drains on the deck did not function and rainwater damaged the bathroom ceilings. The kitchen and bathroom walls began to warp and bow outward from water leakage. The windows in the living room, master bedroom and bathroom cracked and separated from their frames and the main header in the dining room became warped. Rainwater collected on the deck, pooled on the patio and ran into the garage. The fireplace did not function correctly and filled the house with smoke when respondent tried to use it.
Respondent retained construction experts to inspect the property. He learned that there were defects in the flashing and waterproofing, particularly in the parapet walls of the deck. Structural problems were discovered. The foundation under the (expanded) kitchen floor was defective. The front exterior wall in the master bedroom had settled, and a 4" x 16" beam required by the remodel plans had not been installed. In early 2004, respondent hired an environmental firm to conduct a mold assessment. They found evidence of water intrusion and mold inside the house.
On May 23, 2003, respondent filed an action against appellants seeking compensatory and punitive damages arising from appellants' alleged negligence, and fraud. He contended they failed to disclose material defects in the residence and concealed the defects to induce him to purchase the property.
Statement of Decision
The matter was tried to the court, which issued a statement of decision. It found it was "more likely than not" that appellants committed fraud in the sale of their home and concluded that respondent suffered damages in the amount of $56,500. The court indicated that respondent successfully proved damage to the home resulting from rain intrusion and structural defects. However, he had not carried his burden with respect to allegations of the cost of remediation of mold or the cost of investigation and remediation of a termite problem. Nevertheless, it found that respondent was entitled to the cost of the investigation to determine the presence of mold.
The court noted that, several years after respondent purchased the house, he constructed a music studio in his garage. He did not obtain City permits. He remediated the rain intrusion problems by placing tarps and plastic sheeting on the roof and parapet walls, but did not make any repairs.
The trial court made the following specific findings: respondent had purchased a home for $408,000 with the representation that it was "completely remodeled, with new additions that were done competently, in accordance with building plans and codes and free of defects," and that he had been given "approved building plans to construct a second story addition." The only defects that had been disclosed were a small tear in a screen, a missing baseboard and a small amount of standing water on a back patio during a continuous rain.
According to the purchase and sale agreement, respondent purchased the house for $407,900.
After respondent purchased the home, the following defects were discovered: (1) a missing support beam, missing structural ties and straps, sloping floors and a bowed wall; (2) the upstairs deck, floor and front bedroom were not constructed according to the building plans nor approved by the City; (3) the fireplace was not installed according to the manufacturer's specification (causing serious smoke problems); (4) substantial flooding problems on the upstairs deck and lower patio during most rainstorms; (5) water intrusion into the garage from the rear yard; and (6) a leaky roof. The plans for the second story addition had not, in fact, been approved by the City.
The court found that respondent's placement of tarps on the roofs was a reasonable effort to mitigate damages. It noted that respondent had chosen to defer repairs until the close of litigation, which it also concluded was reasonable. In its statement of decision, the court awarded damages in the amount of $98,000. Appellants filed objections and the court held a hearing and requested further briefing. It vacated its statement of decision, and issued another, in which it reduced the damages to $56,500.
DISCUSSION
On appeal, respondent requested that numerous trial exhibits be transmitted to this court. They included a videotape showing the effects of the rain intrusion in the house and a photo album with pictures of the house before and after the remodel. At his request, we have viewed these items.
Appellants argue that the trial court misapplied the law relating to misrepresentation and construction defect litigation. They do not challenge its finding of fraud, but claim the court improperly applied a "tear out and replace" measure of damages. They also allege evidentiary error.
Appellants contend that Mr. Obendrauf is not a professional builder or developer and should not be held to the standards applicable in commercial construction defect litigation. We need not address his arguments based on this premise, because it is undisputed that Mr. Obendrauf is not a professional builder. All agree that he is a private individual who chose to do his own home remodel.
Measure of Damages
The seller of a residence has a duty to disclose material facts concerning a defect in the property. (See 1 Miller & Starr, Cal. Real Estate (3d ed. 2003) § 1:140, p. 504.) Failure to fulfill this duty constitutes fraud. (Id. at p. 505.)
The measure of damages for fraud in the purchase, sale or exchange of property is specified by Civil Code section 3343. A defrauded buyer may recover out of pocket loss, together with consequential damages. (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1240.) "Out of pocket loss" is measured as the difference between the amount the buyer paid and what he received. (Ibid.; Fragale v. Faulkner (2003) 110 Cal.App.4th 229, 236 [private seller's nondisclosure of construction defects]; Bagdasarian v. Gragnon (1948) 31 Cal.2d 744, 752.) Damages are calculated as of the date of the transaction. (Salahutdin Valley of California, Inc. (1994) 24 Cal.App.4th 555, 568.) The buyer must offer evidence that the price he or she paid was greater than the property's actual value at the time of sale. (Saunders v. Taylor (1996) 42 Cal.App.4th 1538, 1543.)
Civil Code section 3343 provides in pertinent part:
In addition to out of pocket loss, a defrauded buyer may recover consequential damages, defined as (1) expenditures in reliance on the fraud; (2) compensation for the loss of use and enjoyment of the property caused by the fraud; and (3) loss of profits. (Civ. Code, § 3343, subd. (a)(1)-(4).) A buyer may recover consequential damages without showing out of pocket loss. (Stout v. Turney (1978) 22 Cal.3d 718, 729; Greenwald & Asimov, Cal. Practice Guide: Real Property Transactions (The Rutter Group 2007) ¶ § 11:360.)
The trial court found that the cost to repair the defects was $56,500. It deducted this amount from the purchase price of $408,000 to conclude that the actual fair market value at the time of the purchase was $351,500. The court found that respondent was not entitled to recovery for the mold and terminate damage or the removal and replacement of the second story deck. The trial court specified the costs of repair as follows:
Repair of structural defects in front bedroom
$14,600.34
Structural repairs in living room
$ 6,042.04
Kitchen structural repairs
$12,099.84
Master bathroom structural repairs
$ 3,585.71
Laundry room (water intrusion and stains)
$ 418.51
General costs (services charges, overhead,profit, tax)
$14,617.33
Costs of investigation
$ 5,136.23
The court based its calculation of damages on Civil Code section 3343. It stated that respondent was entitled to "the difference between the amount that he paid to purchase the subject property and the actual fair market value of the house [respondent] received based on the lack of disclosure." The court relied on the testimony of respondent's expert real estate appraiser, Larry Martineau, and the testimony of respondent's expert general contractor, Kyle Sibley, to determine that the cost of repairing the defects was $56,500. It declined to award punitive damages. The court indicated respondent was also entitled to "expert witness fees and/or attorney fees permitted by law" and according to proof.
It was established that respondent purchased the property in May 2000 for $408,000. We can infer from the expert testimony that the price respondent paid was greater than the property's actual value at the time of the purchase, due to the existence of the defects. Respondent did not expend funds to repair the structure, but used temporary means to protect it from water intrusion until resolution of his claim. He is, nevertheless, entitled to recover consequential damages. Under the circumstances present here, we conclude that respondent may recover damages for his loss of use and enjoyment of the property (Civ. Code, § 3343, subd. (a)(2)) as measured by the cost of repair. We therefore need not address appellants' claims of evidentiary error.
DISPOSITION
The judgment is affirmed. Costs on appeal are awarded to respondent.
We concur: YEGAN, Acting P.J., PERREN, J.
"(a) One defrauded in the purchase, sale or exchange of property is entitled to recover the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received, together with any additional damage arising from the particular transaction, including any of the following:
"(1) Amounts actually and reasonably expended in reliance on the fraud.
"(2) An amount which would compensate the defrauded party for loss of use and enjoyment of the property to the extent that any such loss was proximately caused by the fraud."