Dhillon v. Tersini CA6 ( 2014 )

Filed 12/12/14 Dhillon v. Tersini CA6
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
PARMVIR S. DHILLON et al., H038447
(Santa Clara County
Plaintiffs and Appellants, Super. Ct. No. 1-09-CV137134)
v. ORDER MODIFYING OPINION
AND DENYING PETITION FOR
LOUIE TERSINI et al., REHEARING
Defendants and Respondents.
BY THE COURT:
It is ordered that the opinion filed herein on November 21, 2014, be modified as
follows:
On page 17, in the second sentence of the disposition, following the word
“misrepresentation,” insert the words “and concealment,” so the second sentence reads,
as follows: “The matter is remanded for retrial only of the misrepresentation and
concealment causes of action which were disposed of by respondents’ motions for
nonsuit, as well as for retrial of the claim for rescission.”
Appellants’ petition for rehearing is denied. There is no change in the judgment.
Dated: __________________________
Premo, J.
Rushing, P.J. Elia, J.
Filed 11/21/14 Dhillon v. Tersini CA6 (unmodified version)
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication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.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SIXTH APPELLATE DISTRICT
PARMVIR S. DHILLON et al., H038447
(Santa Clara County
Plaintiffs and Appellants, Super. Ct. No. 1-09-CV137134)
v.
LOUIE TERSINI et al.,
Defendants and Respondents.
Appellants Parmvir S. Dhillon and Mohinderpal Kaur (the Dhillons)1 purchased a
condominium in a small (20 unit) complex in San Jose in 2007. After moving into their
downstairs unit, the Dhillons began experiencing what they considered excessive noise
from the unit upstairs and eventually filed a lawsuit against the sellers, respondents Louie
and June Tersini (the Tersinis), as well as the real estate agent, Cindy Riccardi, and the
broker, Ryness Company (Ryness).2 Eventually, the matter proceeded to trial on the
Dhillons’ claims of breach of fiduciary duty and fraud. With respect to their fraud
claims, the Dhillons sought damages or, as an alternative remedy, rescission.
After the Dhillons closed their case-in-chief, the Tersinis moved for nonsuit,
arguing the Dhillons had failed to present competent evidence of damages recoverable
1
Parmvir and Mohinderpal are married. Mohinderpal testified she goes by her
married name of Dhillon, so we hereafter refer to them as the Dhillons for simplicity’s
sake.
2
We refer to the Tersinis, Riccardi and Ryness collectively as “respondents.”
under Civil Code section 3343.3 Riccardi and Ryness brought a separate motion for
nonsuit, arguing the Dhillons had failed to present evidence to support the existence of a
fiduciary relationship between themselves and Riccardi and Ryness. The trial court
granted both motions, dismissed the jury and proceeded to a court trial on the Dhillons’
claim for rescission.
Following the court trial, the trial court issued a statement of decision in which it
found the Dhillons had failed to establish fraud, either by misrepresentation or
concealment, and were thus not entitled to rescission. Judgment was entered in favor of
respondents.
On appeal, the Dhillons argue: (1) the trial court erred in granting Riccardi’s and
Ryness’ motion in limine precluding any evidence relating to an agency relationship
between Riccardi and the Dhillons, which error necessarily led to the court’s granting
Riccardi’s and Ryness’ subsequent motion for nonsuit; (2) the trial court erred in granting
the Tersinis’ motion for nonsuit as there was sufficient evidence of damages resulting
from respondents’ misrepresentations and concealment; (3) the trial court erred in finding
in respondents’ favor on the concealment cause of action because the court improperly
dismissed the jury without allowing it to determine whether or not fraud had occurred;
and (4) alternatively, the trial court applied the wrong legal standard regarding
concealment.
We agree that the trial court erred in granting the motion for nonsuit on the
misrepresentation claims, but not on the fiduciary duty cause of action. Because we will
reverse and remand for retrial on those misrepresentation claims, the trial court’s decision
on the rescission claim must be vacated and that issue must also be retried by the court.
3
Further statutory references are to the Civil Code.
2
I. FACTUAL AND PROCEDURAL BACKGROUND
Between 1989 and 1991, the Tersinis built a 20-unit complex, now known as
Century Plaza Condominiums (Century Plaza), on a one-acre parcel on Moorpark
Avenue in San Jose, California. Century Plaza consists of four separate two-story
buildings with individual units on each floor. The units were constructed with sound
attenuation features including concrete flooring in the upstairs units, along with resilient
channel ceilings.
Upon completion, the units were initially rented out as apartments. As rentals, the
units had tile flooring in the entryways, and linoleum flooring in the kitchens and
bathrooms. The living room, dining room and bedrooms were all carpeted.
In 2006, the Tersinis decided to sell the units as condominiums and terminated the
existing leases. All of the units were renovated and the linoleum flooring in the kitchens
and bathrooms was replaced with tile. Prospective purchasers were offered a range of
upgraded carpeting or hardwood flooring in the living room, dining room and bedrooms.
In February 2007, the Dhillons stopped by Century Plaza and met with Riccardi, a
licensed real estate agent.4 After viewing several units, they asked Riccardi if she would
recommend a unit for them to buy. She suggested they might prefer unit No. 3 (a
downstairs unit) as it was more private and would be quieter than other available units,
two of which were adjacent to a daycare center. At some point during their initial
meeting, Riccardi gave the Dhillons a business card which indicated she was a sales
representative for Century Plaza.
As they toured the property, Riccardi told the Dhillons about the renovations. She
said there was “solid concrete” between the upper and lower units. The sales brochure
she gave the Dhillons noted that, among various “energy conservation and sound
4
Riccardi’s license was lodged with Ryness, the brokerage company retained by
the Tersinis to market and sell the units at Century Plaza.
3
attenuation features” in the units, there was a “concrete floor” in the upper units and
“resilient channel ceiling” in the lower units.
At a second meeting with Riccardi at Century Plaza, the Dhillons asked if they
would have noise problems in a downstairs unit, but Riccardi reassured them they would
not because of the concrete floor between the units. Riccardi said that many units in the
complex had already been sold and there had been no complaints about noise.
The Dhillons then knocked on the door of several units in the complex, and spoke
to two couples (one in unit No. 7 and another in unit No. 5). Both of those couples
confirmed that Century Plaza was a quiet community and they had no complaints about
noise from the upstairs units.5
The Dhillons decided to purchase unit No. 3 and Riccardi provided them with a
stack of documents to review prior to signing, including a real estate purchase agreement,
a property disclosure statement and an agency disclosure. The Dhillons admitted reading
through all of these documents before meeting with Riccardi to sign them.
On March 25 (or March 26),6 2007, the Dhillons signed the real estate purchase
agreement, entering into a contract to purchase unit No. 3 for $459,950. They also
executed the property disclosure statement and the agency disclosure on the same date.
The property disclosure statement included the following paragraph under the heading
“Statements and Agreements by Salesperson”: “Seller is not responsible for or bound by
any verbal statement or representation made by a salesperson unless the President or Vice
President of the Division confirms such statement in writing. If any such verbal
representation or statement has been made, please put it in writing in the space provided
5
The Dhillons subsequently learned that, at the time they made these inquiries,
their prospective neighbors’ upstairs units were vacant.
6
The Dhillons testified that although they signed the contract on March 26, 2007,
but that Riccardi directed them to backdate the document to March 25, because “that’s
the last day the buyers [sic] can allow her to sell that unit.”
4
below and initial along with the salesperson in the blank provided below.” Nothing was
written in the space underneath that paragraph, although the Dhillons and Riccardi each
initialed it.
The agency disclosure contained a section entitled “Confirmation Real Estate
Agency Relationships,” which indicated that Ryness was the listing and selling agent
exclusively for the sellers, rather than for both the buyers and the sellers. Again, the
Dhillons signed this document, acknowledging its receipt.
Escrow closed on June 18, 2007, but the Dhillons did not move in until July 1,
2007. Several weeks later, they began hearing an excessive amount of noise from the
unit above them (unit No. 4). Initially, they believed that someone had just moved into
the unit and the noise was due to moving things around, but as the noise continued over
the next few weeks, they realized that was not the case.
Specifically, the Dhillons were able to hear the following sounds from the upstairs
unit: kitchen counter noises, such as chopping; footsteps; male urination; flushing toilets;
bedsprings; chairs scraping across the floor; cords hitting the wall; alarm clocks; the
television; bedroom noises; talking; music; creaking floor; drawers opening and closing;
the washing machine; blenders; noises from the master bedroom vanity; etc.
On August 13, 2007, the Dhillons noticed a crowd of people meeting around the
Century Plaza pool. Jeanne Anderson, the Tersinis’ property manager, was present along
with several other residents. When the Dhillons approached, they discovered the meeting
was about the noise problems all these residents were experiencing, and they were invited
to voice their complaints as well. This was the first time the Dhillons heard that other
neighbors had been experiencing noise problems in their units.
The Dhillons would often leave their home in order to avoid the noise, and it
interfered with their sleep, as well as their young childrens’ sleep. Because they could
not afford both a mortgage and a rent payment, they have not moved. In addition, the
Dhillons were unsuccessful in their efforts to rent their unit after disclosing the noise
5
issues. Two separate prospective renters visited unit No. 3 in order to hear the noise first-
hand. Neither of them contacted the Dhillons again.
In 2009, Mohinderpal took their two children with her to Hong Kong for several
months to escape the noise and the headaches it was causing her. She spent
approximately $3,000 on airfare for that trip.
The Dhillons filed a complaint against the Tersinis, Riccardi and Ryness, listing
causes of action for negligent misrepresentation, intentional misrepresentation,
concealment, violation of sections 1102 et seq., breach of fiduciary duty, negligent
infliction of emotional distress and intentional infliction of emotional distress. In their
complaint, the Dhillons alleged that the respondents falsely represented, both orally and
in writing, that they would hear little to no sound from the upstairs unit because of the
solid concrete barrier between their unit and the upstairs unit, as well as the other noise
attenuation features. In addition, the Dhillons alleged that the respondents, prior to the
close of escrow on unit No. 3, were aware of noise complaints from the owners of other
downstairs units. The Dhillons sought rescission, or in the alternative, damages.
At trial, the Dhillons called other owners of downstairs units to testify about the
representations made to them during the sales process. Soo Kim, who purchased unit No.
11, testified she was told there was solid concrete between upstairs and downstairs units
and that the concrete was thicker than normal to absorb the sound. Jennifer Moss and her
husband, who purchased unit No. 13, were also told by Riccardi that there was solid
concrete between the units.
On March 29, 2007, Mark Lubeck, owner of unit No. 5, telephoned Anderson to
complain about excessive noise from the unit above his. He followed up with e-mails to
her on April 17 and April 7. In his April 7 e-mail, Lubeck wrote that other owners of
downstairs units were having similar issues with upstairs units in which hardwood
7
Riccardi was copied on the April 1 e-mail.
6
flooring had been installed. In an April 16, 2007 e-mail from Anderson to Riccardi,
Anderson wrote that Lubeck has “spear-headed a complaint campaign” regarding the
“flooring.” Riccardi responded, “As far as the flooring thing ……. What flooring
thing??????????? (ha, ha).” Anderson replied, “Don’t have the faintest idea what you are
talking about… ;-)” In May 2007, the owners of unit No. 9, Wilson and Margaret Craig,
complained to Anderson about the noise emanating from the unit upstairs.
The Dhillons also presented evidence to show the Tersinis hired an attorney and
an acoustical engineer in April 2007 because of the noise issues raised by Lubeck.
Before escrow closed on unit No. 3, respondents learned that the newly-installed tile in
upstairs bathrooms, vanity areas and kitchens had been installed improperly and the noise
transmission levels violated the minimum standard set forth in the building code.
After the Dhillons rested their case, the Tersinis brought a motion for nonsuit on
the grounds that there was no evidence of recoverable damages. This motion was joined
by Riccardi and Ryness, who brought a separate motion for nonsuit as to the breach of
fiduciary duty cause of action based on the Dhillons’ failure to present evidence
supporting the existence of such a duty.
The trial court granted the motions, and proceeded to the court trial on the
Dhillons’ claim for rescission. After the parties proceeded by way of offers of proof, the
trial court issued a statement of decision in which it found that the Dhillons had failed to
prove misrepresentation or concealment by defendants or present evidence that the value
of their unit was affected by the noise transmissions. Judgment was subsequently entered
against the Dhillons.
II. DISCUSSION
A. Nonsuit in favor of Riccardi and Ryness
The Dhillons argue the trial court erred first by granting Riccardi’s and Ryness’ in
limine motion precluding them from introducing contemporaneous statements regarding
Riccardi’s agency to the extent those statements contradicted the agency disclosure
7
statement. Because the Dhillons were not allowed to introduce any evidence to show that
Riccardi was a dual agent and thus owed them fiduciary duties, the trial court granted the
motion for nonsuit on the cause of action for breach of fiduciary duty. We find no error.
1. The in limine motion and motion for nonsuit
Before trial, Riccardi and Ryness brought a motion in limine to exclude evidence
of conversations between Riccardi and the Dhillons regarding her status as a dual agent,
arguing such evidence was precluded by the parol evidence rule. The Dhillons initialed
and signed the agency disclosure statement which explicitly provided that Riccardi was
acting exclusively as the sellers’ agent, not as an agent for the buyers and sellers.
In response, the Dhillons argued the agency disclosure form was not a fully
integrated agreement and thus not subject to the parol evidence rule. As an offer of
proof, the Dhillons indicated they would testify that when they were signing the purchase
documents, Riccardi told them they would not need their own agent because they would
have to pay that agent themselves. She then directed their attention to the language in the
agency disclosure discussing an agent representing both the buyer and the seller.
The trial court granted Riccardi’s motion and excluded testimony regarding any
statements made contemporaneous with the execution of the agency disclosure form
since the language in that written document was a complete and exclusive statement of
their agreement that Riccardi was acting only as the sellers’ agent in the transaction. The
trial court stated it would not permit any “extrinsic evidence as to the document, but there
can be evidence as to whether or not separate and apart from that document an agency
was created.” At trial when the subject came up again, the trial court reiterated “there
was no extrinsic evidence that would be admissible to talk about the terms, because there
was no ambiguity. But there could be facts separate and apart which could--facts
separate and apart from the disclosure form. If that established an agency, then those
facts would be admissible.”
8
At trial, once the Dhillons rested their case, Riccardi and Ryness moved for
nonsuit on the Dhillons’ breach of fiduciary duty cause of action, arguing no evidence
had been presented to establish that Riccardi owed them any such duty. The Dhillons
sought to reopen and made an offer of proof that they would testify they had a friend who
would refer them to an agent, but Riccardi advised them they did not need an agent,
saying she represented all of the other buyers in the complex. She also told them they
would have to pay an agent “out of [their] own pocket.” The trial court granted the
motion.
2. Applicable legal principles
a. Motion for nonsuit
A motion for nonsuit “is tantamount to a demurrer to the evidence [citations] by
which a defendant can test the sufficiency of the plaintiff’s case before presenting his or
her own.” (Loral Corp. v. Moyes (1985) 174 Cal.App.3d 268, 272; Code Civ. Proc., §
581c, subd. (a).) In ruling upon the motion, the trial court examines the evidence without
weighing it or considering the credibility of witnesses, accepting as true the evidence
most favorable to the plaintiff, indulging in every legitimate inference drawn from the
evidence in the plaintiff’s favor and disregarding conflicting evidence. (Carson v.
Facilities Development Co. (1984) 36 Cal.3d 830, 838.) The trial court may grant the
motion only if there is no substantial evidence to support an element of the claim; the
court is bound to deny a nonsuit motion if the evidence would support a jury verdict in
the plaintiff’s favor. (Ibid.)
In reviewing the trial court’s ruling, we review the entire record, applying the
same rules that governed the trial court’s determination. (Alpert v. Villa Romano
Homeowners Assn. (2000) 81 Cal.App.4th 1320, 1327.) “ ‘The judgment of the trial
court cannot be sustained unless interpreting the evidence most favorably to plaintiff’s
case and most strongly against the defendant and resolving all presumptions, inferences
and doubts in favor of the plaintiff a judgment for the defendant is required as a matter of
9
law.’ ” (Carson v. Facilities Development Co., supra, 36 Cal.3d at p. 839.) Thus, our
task is to examine the evidence presented by the Dhillons to determine whether it was
sufficient to support a jury finding that Riccardi owed a fiduciary duty to them.
b. Review of in limine orders and the parol evidence rule
We review a trial court’s ruling on a motion in limine for abuse of discretion.
(People v. Mincey (1992) 2 Cal.4th 408, 439.)
“[The parol evidence rule] provides that when parties enter an integrated written
agreement, extrinsic evidence may not be relied upon to alter or add to the terms of the
writing. [Citation.] ‘An integrated agreement is a writing or writings constituting a final
expression of one or more terms of an agreement.’ ” (Riverisland Cold Storage, Inc. v.
Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169, 1174, fn. omitted.)
Accordingly, “[w]hen the parties to a written contract have agreed to it as an
‘integration’--a complete and final embodiment of the terms of an agreement--parol
evidence cannot be used to add to or vary its terms.” (Masterson v. Sine (1968) 68 Cal.2d
222, 225.)
“Unlike traditional rules of evidence, the parol evidence rule ‘does not exclude
evidence for any of the reasons ordinarily requiring exclusion, based on the probative
value of such evidence or the policy of its admission. The rule as applied to contracts is
simply that as a matter of substantive law, a certain act, the act of embodying the
complete terms of an agreement in a writing (the “integration”), becomes the contract of
the parties. The point then is, not how the agreement is to be proved, because as a matter
of law the writing is the agreement.’ ” (Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th
336, 344.) “The parol evidence rule therefore establishes that the terms contained in an
integrated written agreement may not be contradicted by prior or contemporaneous
agreements. In doing so, the rule necessarily bars consideration of extrinsic evidence of
prior or contemporaneous negotiations or agreements at variance with the written
agreement.” (Ibid.)
10
“In this state, . . . the intention of the parties as expressed in the contract is the
source of contractual rights and duties. A court must ascertain and give effect to this
intention by determining what the parties meant by the words they used.” (Pacific Gas &
E. Co. v. G. W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33, 38 (Pacific Gas), fn.
omitted.) “Although extrinsic evidence is not admissible to add to, detract from, or vary
the terms of a written contract, these terms must first be determined before it can be
decided whether or not extrinsic evidence is being offered for a prohibited purpose.” (Id.
at p. 39.)
Pacific Gas made clear that the traditional rule that parol evidence is inadmissible
to contradict the “plain meaning” of an integrated agreement does not apply in California.
“The test of admissibility of extrinsic evidence to explain the meaning of a written
instrument is not whether it appears to the court to be plain and unambiguous on its face,
but whether the offered evidence is relevant to prove a meaning to which the language of
the instrument is reasonably susceptible. [Citations.] [¶] A rule that would limit the
determination of the meaning of a written instrument to its four-corners merely because it
seems to the court to be clear and unambiguous, would either deny the relevance of the
intention of the parties or presuppose a degree of verbal precision and stability our
language has not attained.” (Pacific Gas, supra, 69 Cal.2d at p. 37.) Thus, “[a]n
ambiguity can be patent, arising from the face of the writing, or latent, based on extrinsic
evidence.” (Solis v. Kirkwood Resort Co. (2001) 94 Cal.App.4th 354, 360.) “In order to
determine initially whether the terms of any written instrument are clear, definite and free
from ambiguity the court must examine the instrument in the light of the circumstances
surrounding its execution so as to ascertain what the parties meant by the words used.
Only then can it be determined whether the seemingly clear language of the instrument is
in fact ambiguous.” (Estate of Russell (1968) 69 Cal.2d 200, 208-209.)
“[R]ational interpretation requires at least a preliminary consideration of all
credible evidence offered to prove the intention of the parties. [Citations.] Such
11
evidence includes testimony as to the ‘circumstances surrounding the making of the
agreement . . . including the object, nature and subject matter of the writing . . .’ so that
the court can ‘place itself in the same situation in which the parties found themselves at
the time of contracting.’ [Citations.] If the court decides, after considering this evidence,
that the language of a contract, in the light of all the circumstances, is ‘fairly susceptible
of either one of the two interpretations contended for . . .’ [citations], extrinsic evidence
relevant to prove either of such meanings is admissible.” (Pacific Gas, supra, 69 Cal.2d
at pp. 39-40, fn. omitted.)
3. Analysis
The trial court properly granted the motion in limine. The agency disclosure
statement, which the Dhillons admitted reading and signing, made clear that Riccardi was
acting as the exclusive agent of the sellers. While this document is not a contract in the
traditional sense, it is a written expression of the parties’ understanding regarding the
agent’s role in the real estate transaction. By executing the statement, the Dhillons
acknowledged that Riccardi was not their agent and undertook no extraordinary duties to
them. The Dhillons’ testimony that Riccardi told them they did not need their own agent,
and that Riccardi was acting as the agent for all the buyers in the complex, directly
contradicts the acknowledgement they signed. Permitting them to offer this evidence
would render the disclosure statement meaningless. Besides, the trial court made clear
that its ruling only precluded the Dhillons from testifying about the contemporaneous
statements Riccardi made at the time the disclosure was signed. They remained free to
offer other evidence demonstrating how Riccardi may have assumed a fiduciary duty to
them. It was only after they failed to present any such evidence in their case-in-chief or
in their offer of proof that the trial court granted Riccardi and Ryness’ motion for nonsuit.
Turning to that motion for nonsuit, it is clear that the Dhillons failed to present
substantial evidence to support the existence of a fiduciary duty owed to them by
Riccardi. Though the in limine motion did not permit them to testify that Riccardi told
12
them she was acting as the buyers’ agent at the complex, they were expressly permitted to
offer other evidence showing that Riccardi undertook a fiduciary relationship with them.
Their failure to present any such evidence was fatal to that cause of action.
Accordingly, the trial court properly entered nonsuit in favor of Riccardi and
Ryness on the breach of fiduciary duty cause of action.
B. The Tersinis’ motion for nonsuit
1. Applicable legal principles
Section 3343 provides that the out-of-pocket measure of damages applies in the
case of fraud in the “purchase, sale or exchange of property.” (§ 3343, subd. (a).)
Section 3343, subdivision (a), provides, “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 . . . .” This
statute has been held to define the exclusive measure of damages for most forms of fraud
in connection with the sale of property. (Bagdasarian v. Gragnon (1948) 31 Cal.2d 744,
762-763; Cory v. Villa Properties (1986) 180 Cal.App.3d 592, 599.) It authorizes
recovery for so-called “ ‘out-of-pocket’ ” loss (McNeill v. Bredberg (1961) 192
Cal.App.2d 458, 467-468), i.e., “ ‘the difference between the consideration paid for the
property and the actual value of the property, with additional damage, if any.’ ” (Id. at p.
468.) It does not permit recovery of “benefit of the bargain” damages, which represent
the harm to the plaintiff’s “ ‘expectancy interest,’ ” and are measured by the difference
between the value received and the value promised (or more precisely, the value the
plaintiff was led to expect). (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226,
1240 (Alliance Mortgage), quoting Stout v. Turney (1978) 22 Cal.3d 718, 725.)
In sum, one who misrepresents the condition of property in order to persuade
another to buy it may not generally be held liable for the difference between the value of
the property as delivered and its value as described, but only for the difference between
13
the value of the property as delivered and the price actually paid. This means that if the
property is found to be worth what the plaintiff paid for it, he will be able to recover only
such “additional” damages as he can establish. (§ 3343, subd. (a).)
In Gagne v. Bertran (1954) 43 Cal.2d 481, the plaintiffs purchased property based
upon the defendant’s report that there was no fill below 16 inches. When the plaintiffs
commenced construction of a foundation for an apartment building they discovered that
the fill actually went as deep as six feet in some places. (Id. at p. 485.) The plaintiffs
sued the defendant to recover the increased cost of installing the foundation. (Ibid.) The
Supreme Court stressed that the proper measure of damages was the difference between
the true value of the property and the amount plaintiffs had paid for the lots. (Id. at pp.
490-491.) “[I]f the lots were worth what plaintiffs paid for them, plaintiffs were not
damaged by their purchase, for even though they would not have bought the lots had they
known the truth, they nevertheless received property as valuable as that with which they
parted.” (Id. at p. 491.)
In addition to out-of-pocket losses, one defrauded in the purchase of real estate is
entitled to recover “any additional damage arising from the particular transaction,
including . . . [a]mounts actually and reasonably expended in reliance on the fraud,” and
“[a]n 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.” (§
3343, subd. (a)(1), (2).) These “additional damages” may be recovered even without
evidence of a difference in value, so long as the plaintiff can show the expenses were
directly related to defendants’ fraud or concealment. (Stout v. Turney, supra, 22 Cal.3d
at pp. 729-730; Alliance Mortgage, supra, 10 Cal.4th at p. 1241, fn. 5.)
2. Evidence of damages regarding out-of-pocket loss
As appellants, the burden of proof is on the Dhillons to show they presented
substantial evidence to support their claims for out-of-pocket loss. They have not done
so.
14
The evidence presented on this subject by their acoustical expert was that the units
at Century Plaza were constructed to the lower standards used for apartments, rather than
high end condominiums. No evidence was presented as to what effect those lower
standards would have on the price of the units, however, and the Dhillons made no
attempt to establish a lower value with any competent evidence. Instead, their theory of
out-of-pocket damages assumed that the property was worth nothing to them. They
testified that, had they known that they would experience the amount of noise from the
upstairs unit, they would not have purchased unit No. 3. While that may be true, it does
not mean that unit No. 3 had no value whatsoever. The Dhillons had a roof over their
heads, a place to store and prepare their meals and a place to sleep, whether that sleep
was fitful or not. Had they not purchased unit No. 3, they would have had to pay rent or
a mortgage for a different property. There was no evidence offered on the subject of
what a comparably-constructed dwelling was worth, in that general area, during that time
frame. If the Dhillons had been able to prove that the property’s actual value in 2007 was
some specified amount less than what they paid ($459,950), they would have been
entitled to recover the difference. Their failure of proof means the court had no evidence
upon which it could base an award for the difference in value. Consequently, the court
was justified in finding that the Dhillons’ evidence on out-of-pocket damages was
insufficient to go to a jury.
3. Evidence of additional damages
However, after (properly) finding that the Dhillons had failed to present evidence
to support their claim for out-of-pocket damages, the trial court improperly found that the
Dhillons could not proffer evidence of additional damages. This was error.
Under Stout v. Turney, it is clear that, even where a plaintiff cannot show a
difference in value between what was paid for the property and what was received,
additional damages may be recovered, so long as those damages can be directly tied to
the defendants’ wrongdoing. (Stout v. Turney, supra, 22 Cal.3d at pp. 729-730.)
15
“[W]hen, as a result of the fraud, the person defrauded has made expenditures
which were reasonable under the circumstances, these may ordinarily be recovered,
insofar as they have been lost or rendered fruitless because of the deceit.” (Garrett v.
Perry (1959) 53 Cal.2d 178, 186.) For example, consequential damages would be proper
where “a buyer was obliged to move from the property that he had been fraudulently
induced to purchase on account of the dangerous character of the premises.” (Jacobs v.
Levin (1943) 58 Cal.App.2d Supp. 913, 917.) “In such a case he could not only recover
the difference between the amount that he had paid for the property and its actual value
but also recover the expense of moving.” (Ibid.)
In Walters v. Marler (1978) 83 Cal.App.3d 1, 26-27 (disapproved on other
grounds in Gray v. Don Miller & Associates, Inc. (1984) 35 Cal.3d 498, 507), the
plaintiff purchased property based on representations regarding its boundaries. He
subsequently discovered that only a small portion of a house was actually located on the
parcel purchased. (Walters v. Marler, supra, at pp. 13-15.) The appellate court rejected
the plaintiff’s claim of damages for the cost of landscaping, property taxes, title
insurance, property insurance, interest on the loan, and maintenance and repair of the
property because those expenditures “would have been made even if the property had
been as it was represented to be.” (Id. at p. 26.)
Here, the Dhillons’ evidence of additional damages consisted of the following:
escrow fees; $10,000 in points on their mortgage; closing costs; $5,000 deposit; a
$60,000 down payment; $3,000 in airfare to Hong Kong and rent while she was in Hong
Kong. While the majority of these expenses are costs they would have incurred in
owning any property, such as closing costs, the down payment, etc., there are at least
some expenses which may or may not have been incurred because the unit was
excessively noisy contrary to what had been represented to them. Consequently, there
was substantial evidence of additional damages that should have been permitted to go to
the jury, and thus the motion for nonsuit should have been denied.
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C. Rescission
The Dhillons argue that, after granting the respondents’ motions for nonsuit on the
grounds of insufficient evidence of damages, the trial court applied an incorrect standard
for evaluating their concealment claim in ruling on their entitlement to rescission.
Because we have determined the trial court erred in granting nonsuit on the
Dhillons’ misrepresentation claims and are remanding the matter for retrial, which may
result in a jury finding that respondents are liable on those claims, the trial court’s
decision on the rescission claim must also be vacated. Assuming the jury finds
actionable misrepresentations were made by respondents resulting in recoverable
damages, the trial court should then reexamine whether or not the Dhillons are entitled to
rescission as an alternate remedy based on those misrepresentations.
III. DISPOSITION
The judgment is reversed. The matter is remanded for retrial only of the
misrepresentation causes of action which were disposed of by respondents’ motions for
nonsuit, as well as for retrial of the claim for rescission.
The Dhillons shall recover their costs on appeal.
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Premo, J.
WE CONCUR:
Rushing, P.J.
Elia, J.