Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court No. BC266081 of Los Angeles County, Joseph R. Kalin, Judge.
Robert Mann, Donald W. Cook for Plaintiff and Appellant.
Kahlil J. McAlpin for Defendants and Respondents.
BOREN, P.J.
The purchaser of real property sued after discovering that rehabilitation work done on the house was defective. The purchaser was compelled to redo the plumbing, waterproofing and tiling, which was installed without permits by contractors who were not licensed to perform the work. The sellers did not disclose the absence of permits or the defective construction in their real estate disclosure statement.
After the trial court nonsuited the plaintiff on her negligence claim, and refused her proposed instruction on negligent misrepresentation, the jury found for the sellers on plaintiff’s claims of concealment, breach of contract, and failure to make statutory disclosures. We reverse the judgment. The trial court erred by granting nonsuit and by refusing to give an instruction on negligent misrepresentation. Further, the verdict is infected by defense counsel’s improper and prejudicial arguments to the jury.
FACTS
In 2003, respondents Kevin and Darla Sayles purchased a 1916 Craftsman-style house in Los Angeles for $425,000 (the Property). Darla Sayles testified that they bought the Property as a “fixer-upper” to rehabilitate and sell: she and her husband intended to sell the Property at a profit, not live in it. Kevin Sayles testified that he hoped to convince his wife to move into it, after it was “fixed up.” They never lived there.
Kevin Sayles is a licensed real estate agent who owns six properties. He has rehabilitated all of the properties he owns, and knows that this work requires permits. He is also aware that a construction trade license only authorizes work in a specific area (such as plumbing or electrical work), and that “not every license permits the licensee to do every trade,” unless the person is a general contractor.
After purchasing the Property, the Sayles hired several individuals to rehabilitate it, including a drywall contractor named Leal. Kevin Sayles knew that Leal is not a general contractor. Leal hired an unlicensed day laborer he found at Home Depot to do the plumbing work on the Property. Leal did most of the tile work himself, and did not install a waterproof barrier behind the tile. Leal did not obtain a city building permit for any of this work, telling Kevin Sayles that, as the owner of the Property, Sayles was responsible for pulling permits.
The Sayles also hired a man named Johnson, who owns CC Cleaning and Maintenance Company. Johnson has a painting license, and is not a general contractor. Sayles claims that Johnson said he could subcontract work, though Johnson denies this. Johnson tiled a bathroom floor and the shower, and installed a toilet and a sink, though he is not licensed to do these things. Kevin Sayles believed that the people who worked on the Property were licensed.
The Sayles did not apply for any permits for the rehabilitation work on the Property. Leal did not apply for any permits, nor did Johnson. Kevin Sayles does not recall being told that he was responsible for applying for any permits, or that permits were necessary. He told the people that he employed that he wanted the work to be done “up to code.”
The Sayles invested around $115,000 to rehabilitate the Property. Afterwards, they listed the Property for sale. A real estate purchase agreement was entered in 2004, between the Sayles and appellant Elizabeth Robinson-Williams. The agreed-upon price was $780,000.
In the real estate disclosure form they provided to appellant, the Sayles indicated that no alterations or repairs were made without the necessary permits. Kevin Sayles discovered during escrow that the remodel was done without the necessary permits. The Sayles also indicated on the disclosure form that they had revealed all known facts regarding the condition of the Property. Kevin Sayles testified that he never intended to deceive appellant by failing to make disclosures. Appellant did not go to the city building department during escrow to see whether the work done by the Sayles was permitted; however, she asked the Sayles for the permits but did not receive them.
During escrow, appellant hired inspectors to examine the condition of the Property. The inspection report listed numerous deficiencies. The inspection was nondestructive, so no one opened up the walls of the Property to determine whether the work performed inside the walls was properly done. The inspection report did not reveal that the area beneath the bathroom tiling was not waterproofed. The inspection report warns that it does not approve, endorse or guarantee any work done without a permit because “latent defects could exist.”
Despite the deficiencies listed in the inspection report, appellant elected not to cancel the escrow, as permitted by the purchase agreement. Nor did she ask that the Sayles make repairs. Instead, she requested that the Sayles give her a credit of $18,000 so that she could make repairs. The Sayles agreed to the credit. They also paid $7,117 to fix problems that were listed in a termite report. If appellant had asked to cancel the escrow because of the defects her inspectors found, Kevin Sayles would have agreed to cancel the escrow. When escrow closed in April 2004, appellant paid a net price of $762,000 for the Property.
When escrow closed, the termite company falsely certified that the repairs were made.
After escrow closed, appellant had some work done on the Property, which required that the walls be opened up. It was then discovered that when the bathrooms were remodeled, no waterproofing material was installed in the walls of the bathrooms, which could lead to mold and dry rot. Moreover, there was existing dry rot that had not been fixed when the bathrooms were remodeled. In July 2004, improperly installed plumbing leaked through a ceiling.
City building inspectors examined the Property and found many problems that had to be corrected. As a result, all tile had to be removed from the three bathrooms, the dry rot was repaired, the walls were waterproofed, and the rooms were retiled. Also, drain lines and water pipes had to be repaired or replaced, as they were “a mishmash of galvanized and copper piping” that was improperly sized and improperly connected. Based on his after-the-fact viewing of the wall interiors, Kevin Sayles agrees that no waterproofing material was installed behind the tiles in the bathrooms. He did not disclose this defect on the real estate disclosure form because he was unaware during escrow that the bathroom walls lacked a water barrier.
Appellant had to obtain a loan to fix the deficiencies that were discovered. She expended $42,000 for the repairs. Her use of the bathrooms was curtailed for about one and one-half years, and she was unable to accommodate guests.
Appellant filed suit against the Sayles in 2005. She asserts causes of action for (1) fraud (for intentionally failing to disclose or actively concealing shoddy and sub-standard construction); (2) negligence (for failing to properly rehabilitate the Property); (3) breach of contract (for failing to deliver the Property in the condition that they represented it to be in); and (4) failure to make specified statutory disclosures about conditions on the Property regarding defects, hazards, and noncompliance with building code and permit requirements.
Appellant also sued the contractors hired by the Sayles to rehabilitate the Property. These individuals settled before trial.
Trial was by jury. At the close of appellant’s case, the Sayles moved for a nonsuit. The trial court granted nonsuit as to the cause of action for negligence, finding that the Sayles owed no duty to appellant with regard to the deficient and unpermitted work that was done by tradespeople on the Property while it was being rehabilitated.
The jury rendered a special verdict in October 2006. On the breach of contract claim, the jury found that the Sayles did not fail to do something that the contract required them to do. The jury rejected the fraud claim, finding that the Sayles did not intentionally fail to disclose an important fact that appellant did not know and could not reasonably have discovered. Finally, the jury found that the Sayles knowingly failed to disclose a fact on the real estate transfer disclosure statement, but that appellant did not rely on the lack of disclosure. Judgment was entered in favor of the Sayles.
Appellant moved for judgment notwithstanding the verdict and for a new trial. The motions were denied on January 11, 2007. The Sayles were awarded contractual attorney fees of $125,000 plus court costs. Appellant filed notices of appeal from the judgment and postjudgment orders on January 16, 2007, and from the award of attorney fees on February 7, 2007.
DISCUSSION
1. Nonsuit On Negligence Claim
After a plaintiff has presented evidence in a jury trial, the defendant may move for nonsuit. (Code Civ. Proc., § 581c, subd. (a).) The motion effectively operates as a “demurrer” to plaintiff’s evidence, and concedes the truth of that evidence. (Alpert v. Villa Romano Homeowners Assn. (2000) 81 Cal.App.4th 1320, 1328.) Because a nonsuit deprives the plaintiff of the right to have her claim decided by the jury, it lies “‘only when there is no substantial conflict in the evidence,’” without weighing the credibility of witnesses and after indulging every legitimate inference in favor of the plaintiff. (CC-California Plaza Associates v. Paller & Goldstein (1996) 51 Cal.App.4th 1042, 1050.) A reviewing court must evaluate the evidence in the light most favorable to the plaintiff, so that a ruling for the defendant “‘is required as a matter of law.’” (Carson v. Facilities Development Co. (1984) 36 Cal.3d 830, 839.) “Although a judgment of nonsuit must not be reversed if plaintiff’s proof raises nothing more than speculation, suspicion, or conjecture, reversal is warranted if there is ‘some substance to plaintiff’s evidence upon which reasonable minds could differ . . . .’” (Ibid.)
In their motion for nonsuit, the Sayles argued that they should prevail on the negligence claim, saying “there was no duty owed to Plaintiff because she was not a foreseeable victim. There was absolutely no testimony or evidence that would establish that Defendants . . . should have known that Plaintiff was a foreseeable victim.” Further, “Plaintiff failed to establish a causal connection between the alleged negligent acts of [ ] Defendants [and] Plaintiff’s damages.” After conducting “independent research,” the trial court determined that “nonsuit should be granted [ ] because of the lack of a duty to the purchasers in this particular case with regard to the work that was done . . . by the contractors and whomever and whatever other types of persons did any work. [¶] To allow otherwise would expand duty beyond the traditional sense of what a duty is here.”
Nonsuit was improperly granted in this case.
First, the court granted nonsuit on a ground that was not specified in the Sayles’ motion. Only the grounds specified in the motion can be considered by the trial court or, for that matter, on appeal. (John Norton Farms, Inc. v. Todagco (1981) 124 Cal.App.3d 149, 161.) In any event, the trial court’s interpretation of the Sayles’ duty is incorrect. Unlicensed contractors are the employees of those who hire them. (Lab. Code, § 2750.5; Mendoza v. Brodeur (2006) 142 Cal.App.4th 72, 77.) An employer is vicariously liable for the torts of employees committed within the scope of employment. (Lisa M. v. Henry Mayo Newhall Memorial Hospital (1995) 12 Cal.4th 291, 296.) The Sayles are vicariously liable under the doctrine of respondeat superior for the negligence of their employees, who were not licensed to perform plumbing or tiling work. (See Foss v. Anthony Industries (1983) 139 Cal.App.3d 794, 799.)
Second, the grounds specified in the Sayles’ motion are unavailing. Plaintiff is, in fact, a foreseeable victim of the improperly done remodeling work. Reviewing the evidence in the light most favorable to appellant, we see from Darla Sayles’ testimony that the Sayles bought the Property as a “fixer-upper” to rehabilitate and resell at a profit, without any intention of living there. A jury could reasonably find that a purchaser such as appellant would be injured if the Sayles’ remodel was done without a government permit and without the use of contractors who were licensed to perform the work. Because the Sayles intended to “flip” the Property without living in it themselves, the new owner was a foreseeable victim of the badly performed construction work.
By hiring Leal (a drywall installer) and Johnson (a painter), to perform plumbing and tiling work, the Sayles did not satisfy the legal requirement of using licensed contractors. As Kevin Sayles acknowledged in his testimony, a construction trade license only authorizes work in a specific area, not all trades. Neither Leal nor Johnson are general contractors.
The Sayles’ second point in support of nonsuit is untenable. They argued that there is no causal connection between their negligence and appellant’s damages. Appellant’s damage was that she had to spend significant money to repair the improper and unpermitted work done by the Sayles, she was unable to use the Property’s bathrooms while the improper work was being torn out and redone, and she could not have relatives stay with her at the Property due to the unusable bathrooms. There is a direct connection between the Sayles’ hiring of unlicensed and incompetent construction workers and appellant’s damages as a result of having to live with and repair the improperly done construction work.
On remand, appellant’s requested instructions regarding the use of unlicensed contractors and the relationship between principal and agent—which were refused by the trial court—should be revisited by the court and given if appropriate.
2. Refusal To Instruct On Negligent Misrepresentation
Appellant’s first cause of action is for fraud. She alleged that the Sayles defrauded her by “intentionally failing to disclose and/or actively concealing shoddy and sub-standard workmanship and defective conditions.” The court instructed the jury on the tort of concealment, with an instruction providing that the Sayles disclosed some facts to appellant but intentionally failed to disclose other important facts, or intentionally failed to disclose an important fact known only to them that appellant could not have discovered.
Appellant asked the court to instruct the jury on negligent misrepresentation. She requested an instruction providing that the Sayles negligently misrepresented an important fact; the representation was not true; the Sayles had no reasonable grounds for believing the representation was true; they intended for appellant to rely on the representation; and appellant reasonably relied upon it. The court refused to instruct the jury on negligent misrepresentation.
Parties have a right to jury instructions on all legal theories supported by the evidence. (Hasson v. Ford Motor Co. (1977) 19 Cal.3d 530, 543, overruled on other grounds in Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 580.) “[T]he rule is clear that instructions are not restricted to the pleadings, but are to cover matters developed by the evidence, although not disclosed by the pleadings.” (Reid & Sibell v. Gilmore & Edwards Co. (1955) 134 Cal.App.2d 60, 68. See also Lambert v. General Motors (1998) 67 Cal.App.4th 1179 [plaintiff who brought a single cause of action for product liability could have jury instructed on negligence as well].) The evidence relied upon to support a jury instruction may be circumstantial. (Hasson v. Ford Motor Co., supra, 19 Cal.3d at p. 548.)
Concealment and negligent misrepresentation are both forms of deceit and fall within the same statute, Civil Code section 1710. The evidence at trial was in conflict on the issue of whether the Sayles’ failure to disclose the lack of building permits was an intentional concealment or a negligent misrepresentation. For example, the Sayles’ contractor Leal testified that he told Kevin Sayles to apply for the necessary permits because Sayles was responsible for permitting, as the Property owner. This evidence could permit an inference that the Sayles’ failure to disclose that they did not apply for permits was an intentional concealment, the “suppression of a fact, by one who is bound to disclose it.” (Civ. Code, § 1710, meaning 3.) By contrast, Kevin Sayles testified to his awareness that rehabilitation work requires permits; however, he claims that he was not told that permits were necessary for the Property, or he thought that Leal and Johnson would apply for them. This evidence suggests that the Sayles’ failure to disclose was a negligent misrepresentation, an “assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true.” (Civ. Code, § 1710, meaning 2.) Thus, the evidence produced at trial supports instructions for both concealment and for negligent misrepresentation.
“A judgment may not be reversed for instructional error in a civil case ‘unless, after an examination of the entire cause, including the evidence, the court shall be of the opinion that the error complained of has resulted in a miscarriage of justice.’ (Cal. Const., art. VI, § 13.)” (Soule v. General Motors Corp., supra, 8 Cal.4th at p. 580.) An error is prejudicial “‘where it seems probable’” that the error “‘prejudicially affected the verdict,’” based on “its natural and probable effect on a party’s ability to place his full case before the jury.” (Ibid.)
Refusal to give the requested instruction meant that the jury was unable to consider whether the Sayles’ nondisclosure of the absence of building permits was an act of negligent misrepresentation, as opposed to being an act of intentional concealment. This affected appellant’s ability to place her full case before the jury. Because this case must be remanded for a new trial due to the erroneously granted nonsuit on appellant’s negligence claim, it is appropriate that appellant also be allowed to put her claim for negligent misrepresentation before the jury.
3. Rulings On Concealment Claim
Appellant argues that the trial court improperly limited her testimony, preventing her from proving that the Sayles intentionally failed to disclose that their remodeling work was done without licensed contractors and without building permits. Appellant was asked to testify whether the inspection report “relieved Mr. Sayles of his obligation to tell you of the permits . . . .” The court curtailed the question in midsentence because it calls for a legal conclusion. The court also curtailed a subsequent question asking appellant “what did this disclosure statement tell you?”
The rulings were correct. As the trial court observed, the disclosure statement speaks for itself. Apart from that, the court noted, appellant could testify to “anything that the defendant told her” but she could not interpret the legal effect of the disclosure statement.
4. Defense Counsel’s Improper Arguments
Defense counsel raised numerous improper and prejudicial matters during argument to the jury. During opening argument, defense counsel raised the attorney fees provision of the real estate purchase agreement, prompting the court to advise the jury that the issue of attorney fees “is an issue for the court, not an issue for the jury.” During closing argument, defense counsel stated that if appellant were to prevail on her breach of contract claim, she “would be entitled to collect from [Kevin Sayles] approximately 200 or something thousand dollars” in attorney fees, drawing an objection from appellant’s counsel. After the objection was overruled, defense counsel encouraged the jury to speculate about attorney fees, arguing that if appellant “is awarded one single dollar, one single cent . . . then they can come in and say Mr. Sayles you have to pay all of my attorney’s fees, and I’ve been told that’s somewhere around $200,000.” This drew another objection, and the court informed the jury that the parties’ contract contains an attorney fees provision, which allows the court to award fees to the prevailing party; however, the court refused appellant’s request to advise the jury that it should not consider the issue of attorney fees in determining liability.
It is improper—and an ethical violation—for counsel to allude to his personal knowledge of facts not in evidence during argument to a jury. (Garden Grove School Dist. v. Hendler (1965) 63 Cal.2d 141, 143; Cal. Rules of Prof. Conduct, rule 5-200(E).)
Defense counsel argued that appellant should have sought recovery on a home warranty plan insurance, which was mentioned in the real estate purchase agreement. Appellant objected that there was no evidence that the home warranty plan covers damages from broken pipes. The court sustained an objection to the argument, not as to existence of the insurance, but only with regard to what the warranty covers. Defense counsel next tried to argue that most homeowners have insurance, drawing an objection. The court advised the jury that “we are not talking here about insurance. We are not talking about whether the insurance would pay or not pay, we are talking about the mitigation to take some action or not take action.”
There is no evidence that the home warranty insurance was ever purchased by the Sayles for appellant’s benefit, as required by the purchase contract, nor is there evidence what the terms of that plan might be.
It is improper to argue that plaintiff may recover from some collateral source, such as her own insurance. (See Anheuser-Busch, Inc. v. Starley (1946) 28 Cal.2d 347, 349.) “To permit the defendant to tell the jury that the plaintiff has been recompensed by a collateral source . . . might irretrievably upset the complex, delicate, and somewhat indefinable calculations which result in the normal jury verdict.” (Helfend v. Southern Cal. Rapid Transit Dist. (1970) 2 Cal.3d 11-12).
Defense counsel argued that appellant was compensated by contractors Leal and Johnson, who had insurance and settled with appellant. Appellant’s counsel objected that it was misconduct to raise the issue of the settling defendants. Finally, defense counsel suggested that the Property had probably increased in value since appellant purchased it, presumably so the jury could infer that appellant could recover her damages out of the increase in value, instead of from the Sayles.
There is no evidence that Leal or Johnson had insurance coverage.
Defense counsel’s arguments were highly improper. They are unsupported by any evidence, and invited the jury to speculate about irrelevant matters. “There can be no doubt that to argue facts not justified by the record, and to suggest that the jury could speculate, was misconduct.” (Malkasian v. Irwin (1964) 61 Cal.2d 738, 747.) Misconduct of counsel during argument is grounds for a new trial. (City of Los Angeles v. Decker (1977) 18 Cal.3d 860, 870.) Apart from being unsupported by any evidence, the arguments were an obvious gambit to prejudice the jury into believing that appellant should not be compensated for her damages because (a) she had (or should have had) insurance to cover the damage; (b) the contractors already compensated her for her damage through their insurance; (c) she wanted extravagant attorney fees from the Sayles; or (d) appellant did not require payment from the Sayles because she would profit from the Property’s increase in value.
None of the enumerated points were proper matters for the jury to consider. It is error for counsel to deliberately attempt to appeal to the economic prejudices of the jury, when the economic issues raised have no relevance to the issues in the case. (Hoffman v. Brandt (1966) 65 Cal.2d 549, 552-553.) A “transparent attempt to appeal to the sympathies of the jury” with irrelevant and improper argument is prejudicial and grounds for reversal. (Id. at pp. 553, 555.) Because we must remand the case for a new trial due to the trial court’s erroneous rulings on appellant’s negligence claim and its refusal to instruct the jury on negligent misrepresentation, it is appropriate to order a new trial on all of appellant’s claims in light of defense counsel’s prejudicial arguments, which the court did little or nothing to cure.
5. Attorney Fees
We are reversing the judgment in favor of the Sayles, for the reasons discussed in the preceding sections. As a result, the award of attorney fees to the Sayles must also be reversed. (Merced County Taxpayers’ Assn. v. Cardella (1990) 218 Cal.App.3d 396, 402 [an order awarding attorney fees “falls with a reversal of the judgment on which it is based”].)
DISPOSITION
The judgment is reversed, and the case is remanded to the trial court for a new trial. The postjudgment order awarding attorney fees to respondents is reversed. Appellant is entitled to recover her costs on appeal from respondents.
We concur: DOI TODD, J., CHAVEZ, J.