Newnes v. Farmers and Merchants Trust etc. CA2/1 ( 2022 )

Filed 1/11/22 Newnes v. Farmers and Merchants Trust etc. CA2/1
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
CURT DANIEL NEWNES, B303725
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. NC061713)
v.
FARMERS AND MERCHANTS
TRUST COMPANY OF LONG
BEACH,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Michael P. Vicencia, Judge. Reversed with
directions.
Curd, Galindo & Smith and Joseph D. Curd for Plaintiff
and Appellant.
Law Offices of Michael Leight, Michael Leight and John
Gloger for Defendant and Respondent.
_______________________
This is an appeal from a nonsuit on punitive damages
granted immediately after completion of plaintiff Curt Daniel
Newnes’s opening statement.
In his suit against defendant Farmers and Merchants
Trust Company (Merchants Trust or the Company) for
intentional and negligent interference with prospective economic
advantage, Newnes claimed that Merchants Trust, a large
financial institution primarily engaged in trust and estates
management, illegally and repeatedly solicited the real estate
management business of elderly Regena Cole, on whose behalf
Newnes had successfully managed properties for 25 years.
Although the trial court concluded that the Company had
engaged in wrongful conduct by operating without a real estate
broker’s license and unlawfully contracting with Cole, it
nevertheless granted a nonsuit on the issue of punitive damages
immediately after Newnes’s opening statement, stating it “simply
[did not] think this [was] a punitive damages case.” The jury
subsequently returned a special verdict finding that Merchants
Trust had intentionally interfered with Newnes’s economic
relationship with Cole by engaging in wrongful conduct while
knowing that its conduct was substantially certain to disrupt
their business relationship, and it awarded Newnes significant
compensatory damages.
Appellate courts have deemed it especially perilous for a
trial court to grant a nonsuit after opening statement because
this procedural device effectively takes the case away from the
jury before any evidence is received. This case exemplifies the
risk of removing a highly fact-intensive issue from the jury’s
consideration after a plaintiff has merely set forth a general
roadmap of the evidence expected at trial.
2
Merchants Trust spent seven months soliciting Cole’s
business and responding to her queries about their ability to
capably manage her large portfolio, even though it lacked legal
authority to engage in real estate management services and had
no significant experience doing so. Whereas Merchants Trust
claimed it had made an innocent mistake, the jury should have
been allowed to decide whether the Company knowingly flouted
the law or otherwise operated with the requisite mindset of
malice.
Accordingly, we reverse the judgment of nonsuit and
remand for a trial on Newnes’s claim for punitive damages.
PROCEDURAL HISTORY
A. The Complaint
Newnes filed a complaint against Merchants Trust,
asserting six causes of action: (1) intentional interference with
prospective economic advantage; (2) negligent interference with
prospective economic advantage; (3) intentional interference with
contractual relations; (4) violations of Business and Professions
Code section 17200 et eq.; (5) restitution based on unjust
enrichment; and (6) violation of the Financial Information
Privacy Act (Fin. Code, § 4050 et seq.).
The complaint was based on allegations that Newnes
managed Cole’s properties from 1993 to March 2017, increasing
her total equity from $5 million to $70 million, and that
Merchants Trust unlawfully solicited this business away from
Newnes. Merchants Trust knew of Newnes relationship with
Cole and acted illegally in soliciting Cole’s business away from
Newnes because it was not a duly licensed property management
company, had no lawful ability to provide the services in
question, and had no prior experience in the management of
residential real property for third parties. Merchants Trust’s
3
conduct was additionally wrongful as to Cole because she was 89
years old at the time Merchants Trust sought her business, had
named Merchants Trust as successor trustee to her trust, and
was susceptible to their suggestions.
The complaint alleged that Newnes lost income of over
$20,000 a month for all of his services, and suffered a past and
future economic loss in excess of $5 million. Also alleging that
Merchants Trust acted with malice, oppression, or fraud, Newnes
claimed he was entitled to punitive damages according to proof at
trial.
B. The Trial and Nonsuit Motion
Newnes’s claims for negligent and intentional interference
with prospective economic advantage were tried to a jury.1 His
opening statement contended that Merchants Trust illegally
competed against him in taking away the Cole account and, in
the course of so doing, made misrepresentations and concealed
material facts from Cole, particularly as to their experience and
legal ability to operate as a property manager.
After Newnes completed his opening statement, Merchants
Trust orally moved for nonsuit on his claim for punitive damages,
arguing that there was nothing in Newnes’s opening statement to
show by clear and convincing evidence that the Company acted
with malice, oppression, despicable conduct, or fraud. The
1 Newnes voluntarily dismissed his claims for violation of
the Financial Information Privacy Act and intentional
interference with contractual relations. The court granted
judgment in the Company’s favor on the other two claims,
explaining the type of equitable relief sought in these claims
(restitution/unjust enrichment) was not available to a nonparty to
the agreement between Merchants Trust and Cole. Newnes does
not appeal this ruling.
4
Company asserted there was “nothing that anyone has
demonstrated in the opening statement or on offers of proof that
would demonstrate that [Merchants Trust] had any idea that it
needed a license to do the type of work—a portion of the type of
work it’s doing for Ms. Cole.”
Newnes countered that a large financial institution such as
Merchants Trust could not “credibly claim” that they had no idea
whether they needed to be licensed, and that “to engage in a
business . . . without a license to do that, whether it’s as [sic]
unauthorized practice of law, what have you, is despicable.”
Newnes also argued Merchants Trust operated with “conscious
disregard” since “everybody in business that is going out and
doing business, they know what business they’re in” and are
“obligated to know the law.”
The court responded by pointing out that Merchants Trust
was “doing the work for a number of trusts that they’re trustees
for” and that it “just didn’t hear anything that would amount to
oppression, malice, or fraud” and “simply [did not] think this is a
punitive damages case.”
In response to Newnes’s assertion that Merchants Trust
failed to tell Cole that they were not licensed and that this was a
“fraud” and “misrepresentation,” the court stated “[m]aybe it’s a
fraud on Ms. Cole, but she’s not complaining” and was “still doing
business with them” at present. The court thus granted
Merchants Trust’s motion for nonsuit on the issue of punitive
damages.
Later, the court instructed the jury that it had found, as a
matter of law, that Merchants Trust had operated without a real
5
estate broker’s license and could not lawfully enter into a
contract for property management with Cole.2
On September 16, 2019, the jury returned a special verdict
in favor of Newnes, finding that Merchants Trust intentionally
interfered with the economic relationship between him and Cole
by engaging in wrongful conduct and knowing that its conduct
was certain or substantially certain to disrupt their business
relationship. The jury awarded Newnes actual damages in the
amount of $125,127.92.
On October 21, 2019, the trial court entered judgment on
the jury’s special verdict.
C. The New Trial Motion
On November 5, 2019, Newnes moved for a new trial on the
issue of punitive damages, arguing the trial court erred in
granting nonsuit on the issue.
On January 2, 2020, the trial court denied the motion,
observing that the evidence showed Merchants Trust “had done
this type of work before in a slightly different capacity, that is as
a trustee which they were legally allowed to do” and that in this
case “they just messed up.”
Newnes pointed out that he could have shown that
Merchants Trust knew it needed a license, rather than just
2 The court instructed the jury as follows: “The [c]ourt has
determined that [Merchants Trust] was not legally capable of
entering into an agreement which included the leasing and
advertising of property, listing property for rent, or collecting
rents without a real estate broker’s license, and [it] did not have
a real estate broker’s license when it entered into the Property
Management Agreement with REGENA COLE (Exhibit 84). You
are to determine if [Merchants Trust] entered into the agreement
with REGENA COLE.”
6
“mess[ing] up” since it submitted Cole’s properties to listing
agencies and told them it had a license and told Cole that
Merchants Trust could do these services for her, when they could
not legally do so.
The court acknowledged “[t]hey should have—they should
have made sure that they could do it in the capacity that they
were in” but that the case “struck” the court “as a very, very far
cry from malice, oppression or fraud.”
On January 15, 2020, Newnes filed a notice of appeal from
the final judgment and the trial court’s order denying his motion
for new trial.3
DISCUSSION
A. Standard of Review
After the plaintiff’s opening statement, a defendant may
move for nonsuit as to “some . . . of the issues involved in the
action” on the grounds the facts stated to be proved are legally
insufficient to constitute a claim, including damages. (Code Civ.
Proc., § 581c, subd. (b); Hoch v. Allied-Signal, Inc. (1994) 24
Cal.App.4th 48, 58-59; Jenson v. Hewlett-Packard Co. (1993) 14
Cal.App.4th 958, 965.)
“The standard of review for a nonsuit after [the] conclusion
of the opening statement is well settled. Both the trial court in
its initial decision and the appellate court on review of that
decision must accept all facts asserted in the opening statement
as true and must indulge every legitimate inference which may
be drawn from those facts.” (Abeyta v. Superior Court (1993) 17
3 Newnes filed an amended notice of appeal on February 6,
2020, clarifying that he was solely appealing from that portion of
the final judgment granting nonsuit on the issue of punitive
damages after opening statement.
7
Cal.App.4th 1037, 1041.) We will not affirm the judgment of
nonsuit “ ‘unless interpreting the evidence most favorably to [the]
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
law.’ ” (Carson v. Facilities Development Co. (1984) 36 Cal.3d
830, 839.)
Where punitive damages are involved, the court reviewing
a motion for nonsuit must evaluate the claim “ ‘with that higher
[clear and convincing evidentiary] burden in mind.’ ” (Hoch v.
Allied-Signal, Inc., supra, 24 Cal.App.4th at p. 59.) However,
nonsuit is proper only when “no reasonable jury” could make a
finding of malice, fraud, or oppression. (Id. at pp. 60-61.)
We review a nonsuit de novo. (Thrifty Payless, Inc. v.
Mariners Mile Gateway, LLC (2010) 185 Cal.App.4th 1050, 1060.)
B. The Trial Court Erred in Granting Nonsuit After
Newnes’s Opening Statement
In his opening statement, Newnes’s counsel told the jury
that Cole, a 90-year-old widow, had a good working relationship
with him, and that he had consistently increased Cole’s profits on
an annual basis. Both Newnes and Cole banked with Merchants
Trust and Cole had already named Merchants Trust as her
successor trustee in the event of her death.
While driving with her caretaker, and after noticing
Merchants Trust’s signage and office building in June of 2016,
Cole spoke to Jeffrey Hahn, senior vice president, and asked
about the nature of Merchants Trust’s business. Hahn explained
that Merchants Trust manages its clients’ trusts, which
sometimes includes managing real estate properties. Cole left
that meeting with no intention to transfer management services
of her properties from Newnes to Merchants Trust.
8
Newnes’s counsel further explained that, over the next
seven months, representatives from Merchants Trust, including
its president Daniel Walker and senior vice presidents Hahn and
Shawn Miller, met with Cole at the Company’s office and Cole’s
home to discuss the Company’s ability to manage her properties.
During these meetings, Cole told Merchants Trust that she
already had a property manager and gave the Company Newnes’s
annual reports on the income generated by Cole’s properties.
At no point during these meetings did Walker, Hahn, or
Miller tell Cole that Merchants Trust had no license to perform
current property management services for her, and could only do
so as trustee upon her death.
Newnes’s counsel said that Cole repeatedly asked whether
Merchants Trust could successfully manage real property and
what their capabilities were in this regard. At no point during
these meetings did Walker, Hahn, or Miller explain to Cole that
Merchants Trust managed only one single family home in a non-
trustee capacity, as compared to Cole’s 155 apartment units.
Instead, Merchants Trust assured her that they were able to
manage her properties in such a capacity.
On or around February 17, 2017, after being pursued by
Merchants Trust for about seven months, Cole decided to change
management services from Newnes to Merchants Trust.
Counsel for Newnes also told the jury that the loss of Cole’s
business to Merchants Trust caused Newnes to suffer a large
financial loss because Cole was Newnes’s largest client, making
up about one-third of the total number of units he managed. He
asked for an award to compensate Newnes for the loss of Cole’s
business to Merchants Trust as a result of unfair competition,
and an award against Merchants Trust to discourage them from
flouting the law.
9
Punitive damages are recoverable “where it is proven by
clear and convincing evidence that the defendant has been guilty
of oppression, fraud, or malice.” (Civ. Code, § 3294, subd. (a).)
“ ‘Malice,’ ” in turn, is defined as “despicable conduct which is
carried on by the defendant with a willful and conscious
disregard of the rights . . . of others.” (Civ. Code, § 3294,
subd. (c)(1); Turman v. Turning Point of Central California, Inc.
(2010) 191 Cal.App.4th 53, 63.)4
There is no specific recipe for identifying the circumstances
under which punitive damages might be warranted. (See, e.g,
Ramona Manor Convalescent Hospital v. Care Enterprises (1986)
177 Cal.App.3d 1120, 1132 [upholding award of punitive damages
where the defendant “intentionally retained” possession of a
nursing care facility (after expiration of its lease) knowing the
owner “had entered into a relationship with someone [else] and
knew that this prospective operator’s contractual rights would be
frustrated by [the defendant’s] actions”].) As discussed in Nolin
v. National Convenience Stores, Inc. (1979) 95 Cal.App.3d 279, “It
must be recognized that a claim for punitive damages may arise
in many varying factual contexts, as many as may be presented
in the law of torts. Both [the] plaintiff and [the] defendant have
argued their position here by dissecting the factual background of
[appellate cases] in the hope of finding persuasive similarities.
However, such efforts are not particularly productive; each case
where punitive damages are claimed must be adjudged on
4 Newnes argues that the trial court’s grant of nonsuit was
error in that he made a sufficient showing as to both malice and
fraud. Because we conclude there was a sufficient showing of
malice to defeat Merchants Trust’s nonsuit motion, we need not
address Newnes’s fraud-related arguments.
10
individual merit, bearing in mind the general principles set forth
in the decisional law . . . [¶] . . . [and] ‘[most] often [the malice]
element is proven by circumstantial evidence alone.’ [Citation.]”
(Id. at pp. 287-288; see also Campbell v. General Motors Corp.
(1982) 32 Cal.3d 112, 121 [“ ‘The mere fact that other inferences
adverse to [the] plaintiff might be drawn does not render the
inference favorable to [the] plaintiff too conjectural or speculative
for consideration [by the jury]’ ”]; Willis v. Gordon (1978) 20
Cal.3d 629, 633 [“ ‘Whether a particular inference can be drawn
from certain evidence is a question of law, but whether the
inference shall be drawn, in any given case, is a question of
fact’ ”].)
It can be especially problematic when the nonsuit is
granted following the opening statement rather than at the
completion of the plaintiff’s evidence. As explained in Galanek v.
Wismar (1999) 68 Cal.App.4th 1417, 1424, “Courts have
traditionally taken a restrictive view of the circumstances under
which a nonsuit at the close of an opening statement is
appropriate because nonsuit at that point effectively takes the
case away from the jury on a procedural device. [Citation.]
Indeed, granting a nonsuit at the close of an opening statement is
particularly dangerous because counsel rarely present such an
explicit, full, and unabridged version of the plaintiff’s case that
the court can be sufficiently confident of the impossibility of proof
of a cause of action to abruptly terminate the litigation.
[Citation.] . . . [T]his court long ago cautioned against the
precipitous grant of a nonsuit upon the conclusion of an opening
statement, as the law favors trial on the merits. Simply stated,
the grant of a nonsuit on an opening statement is clearly
disfavored and should be avoided unless there is a clear and
11
unequivocal demonstration of a total lack of a cause of action by
[the] plaintiff.”
At trial’s end, the court expressly instructed the jury on the
intentional interference claim that Merchants Trust had engaged
in “wrongful” conduct (by entering into a property management
contract without a real estate broker’s license), and the jury
thereafter found in its special verdict form that Merchants Trust
“kn[e]w that disruption of the relationship (between Newnes and
Cole) was certain or substantially certain to occur,” and that
Merchants Trust’s “wrongful conduct [was] a substantial factor in
causing harm to [Newnes].” By itself, the jury’s finding on
intentional interference with prospective economic advantage
went a considerable distance toward establishing that Merchants
Trust acted with “malice,” i.e., with a “willful and conscious
disregard of the rights of” Newnes.
The trial court’s instruction was supported by evidence
establishing that Merchants Trust spent fully seven months
soliciting Cole’s lucrative business and responding to her queries
about their ability to actively manage her large portfolio, even
though it was managing only one unit as a non-trust property
and did not have the necessary license for this line of business. 5
The absence of a license was important evidence. It is
unlawful for any person to engage in the business of or act as a
5 Consistent with Newnes’s opening statement, emails and
notes were presented during trial to various executives of
Merchants Trust who confirmed that Cole asked about the
Company’s ability to manage her properties, that Merchants
Trust explained their “basic process as far as managing
properties,” and that the Company was seeking to explain to Cole
how they were “different from other real estate management
firms” in an effort to obtain her business.
12
real estate broker without first obtaining a real estate license
from the Department of Real Estate. (Bus. & Prof. Code,
§ 10130.) Indeed, any person acting as a real estate broker or
salesperson without being licensed is guilty of a criminal offense.
(Id., § 10139.) During trial, a Company executive acknowledged
on cross-examination that Merchants Trust was a very large
financial institution with a long history and access to information
and advice from the Department of Business Oversight and
various private law firms.
To establish the conscious disregard necessary for “malice,”
it was incumbent upon Newnes to adduce evidence that “the
defendant was aware of the probable dangerous consequences of
his conduct, and that he wilfully and deliberately failed to avoid
those consequences.” (Taylor v. Superior Court (1979) 24 Cal.3d
890, 895-896; Butte Fire Cases (2018) 24 Cal.App.5th 1150, 1159.)
At trial’s end, the court instructed the jury, as a matter of law,
that Merchants Trust was “not legally capable of entering into”
the contract with Cole. (Italics added.) In reaffirming its nonsuit
ruling at the motion for new trial, the trial court commented that
“[Merchants Trust] should have—they should have made sure
that they could do it in the capacity that they were in.” The
court’s own observations come close to a finding that Merchants
Trust operated with the requisite mindset.6
Based on the facts outlined in Newnes’s opening statement,
the jury could have reasonably inferred that the Company was
6 However, proof that Merchants Trust intentionally
interfered with Newnes’s prospective economic advantage does
not, ipso facto, demonstrate that the company was also aware of
the unlawful nature of its “wrongful” act. (Arntz Contracting Co.
v. St Paul Fire & Marine Ins. Co. (1996) 47 Cal.App.4th 464,
477).
13
aware of the illegal or unlawful nature of its conduct.
Alternatively, it could have concluded that the Company’s
aggressive and extended pursuit of Cole’s business, without any
due diligence regarding its legal obligations, was itself evidence
of “a willful and conscious disregard for the . . . rights” of Newnes.
(Civ. Code, § 3294, subd. (c)(1); see also Campbell v. General
Motors Corp., supra, 32 Cal.3d at p. 121 [reversing a grant of
nonsuit and stating, “ ‘[i]t is not incumbent upon a plaintiff to
show that an inference in his favor is the only one that may be
reasonably drawn from the evidence; he need only show that the
material fact to be proved may logically and reasonably be
inferred from the circumstantial evidence”].)7
In addition to proof of a willful and conscious disregard for
Newnes’s rights, “ ‘malice’ ” also requires “[t]he additional
component of ‘despicable conduct.’ ” (College Hospital Inc. v.
Superior Court (1994) 8 Cal.4th 704, 725.) “ ‘[D]espicable’
conduct” refers to “circumstances that are ‘base,’ ‘vile,’ or
‘contemptible.’ ” (Ibid.)
7 Merchants Trust also contends that Newnes’s counsel
“conceded” that the Company acted without malice during an in
limine hearing, when counsel observed that Merchants Trust was
“attempting to get the business” but “[did not] know that it was
anything personal.” An isolated statement in court colloquy is
not a concession, let alone a concession that the Company lacked
malice. (See Ramona Manor Convalescent Hospital v. Care
Enterprises, supra, 177 Cal.App.3d at p. 1141 [to prove that a tort
was maliciously perpetrated it is not necessary to establish an
intent to injure the person wronged].) And, as noted above, the
jury here found that Merchants Trust engaged in its wrongful
conduct knowing that disruption of Newnes’s relationship with
Cole was certain or substantially certain to occur.
14
As we have said, Cole, a 90-year-old widow, had banked
with Merchants Trust a long time and had named them as her
successor trustee in the event of her death. One day, while in the
car with her caregiver, she passed a building with a sign that
stated “Farmers and Merchants Trust Department.” She was
curious because this building did not look like a bank, and
ultimately went inside and spoke with the vice president. He told
her they help people with their trusts and manage people’s
properties.
After this encounter, multiple meetings ensued over a
seven-month stretch, wherein Cole was trying to ascertain
whether Merchants Trust was capable of actively managing her
155-unit portfolio of rental properties. During that time,
Merchants Trust’s executives, including its president, met with
Cole both at their offices and her home.
During each of these meetings Cole met alone with
Company management, unaccompanied by any family member,
friend, accountant, financial advisor, or legal representative.
During this period, Merchants Trust reviewed detailed property
management reports prepared by Newnes, showing his fees and
the substantial income that the properties were generating for
both Cole and Newnes’s company.
Notwithstanding its lack of licensure and lack of experience
with non-trust property management, Merchants Trust competed
for Cole’s business by representing itself as experienced and
superior to Newnes and other licensed firms who actively manage
non-trust properties and multi-family units.
Newnes is a small boutique property manager who only
manages properties in Long Beach, within a mile or two of his
office. Newnes earned fees for both managing Cole’s units and
for supervising capital improvements to the property. At that
15
time, he managed a total of 520 units, meaning that Merchants
Trust’s interference caused Newnes to lose a third of his business.
Indulging every legitimate inference in favor of Newnes, as
we must (Abeyta v. Superior Court, supra, 17 Cal.App.4th at
p. 1041), and resolving all presumptions and doubts in his favor,
as we must (Carson v. Facilities Development Co., supra, 36
Cal.3d at p. 839), the jury could have found Merchants Trust’s
collective conduct so “ ‘contemptible . . . that it would be looked
down upon and despised by ordinary decent people.’ ” (Mock v.
Michigan Millers Mutual Ins. Co. (1992) 4 Cal.App.4th 306, 331.)
C. The Trial Court’s Error Was Not Harmless
Merchants Trust argues any error in granting nonsuit was
neither prejudicial nor subject to reversal. We disagree.
The jury awarded compensatory damages—“an absolute
predicate” for a punitive damages award (Kizer v. County of San
Mateo (1991) 53 Cal.3d 139, 147)—and it ultimately found an
intentional tort had been committed. (Cf. Lussier v. San Lorenzo
Valley Water Dist. (1988) 206 Cal.App.3d 92, 106-107 [erroneous
grant of nonsuit harmless where jury found in favor of the
defendant with regards to the only conduct that could have given
rise to liability for dismissed claims].) These and the other
circumstances we have already discussed laid appropriate
groundwork for punitive damages.
The testimony of Jeremy Clark, a junior Merchants Trust
employee, merits particular attention. He acknowledged at trial
that he used his personal license to perform duties for the
Company. In its responding brief, Merchants Trust attempts to
downplay its misfeasance, stating that Clark “may have used his
license merely as a convenience to facilitate listings on local
realty boards.” (Italics added and omitted.) However, the court
expressly found (and instructed the jury) that Merchants Trust
16
“was not legally capable of entering into an agreement which
included the leasing and advertising of property, listing property
for rent, or collecting rents without a real estate broker’s license,
and [Merchants Trust] did not have a real estate broker’s license”
(italics added) when it entered into the Cole agreement. The
Company’s use of a low-level employee’s personal license is
evidence from which the jury could have inferred that Merchants
Trust knew it needed its own license to operate. Thus, by using
Clark’s license rather than obtaining its own requisite corporate
license, the jury could have found that Merchants Trust
knowingly flouted the law.8
And as we have noted, various emails and notes were
presented to Merchants Trust executives at trial, who confirmed
that Cole asked about Merchants Trust’s ability to manage her
properties, that Merchants Trust explained its “basic process as
far as managing properties, multi-family units,” and that
Merchants Trust was seeking to explain to Cole how it was
8 Newnes’s trial brief, as well as his separate in limine
motion, successfully urged the court to preclude Merchants Trust
from telling the jury it was entitled to perform property
management services through the personal license of a junior
employee. Newnes included documentation showing that
Merchants Trust used Clark’s license to list Cole’s property and
that the license issued to Clark—and his associated license
history—clearly established that his license had no corporate
affiliation whatsoever. These documents were also included in
the parties’ joint exhibit list. Based on the evidence, the court
found that Merchants Trust lacked the requisite license, and
ability, to enter into a business agreement with Cole.
17
“different from other real estate management firms” in an effort
to lure away her business.9
We disagree with the evaluation of Merchants Trust’s
conduct as mere “puffery,” a “sales pitc[h],” by “singing the
praises of its property management capabilities” without any
thought of Newnes and with no knowledge it needed a real estate
license. Although this is one conceivable hypothesis (and was,
after all, Merchants Trust’s theory of the case), we are supposed
to indulge every legitimate inference in Newnes’s favor because
“the grant of a nonsuit on an opening statement is clearly
disfavored and should be avoided unless there is a clear and
unequivocal demonstration of a total lack of a cause of action by
[the] plaintiff.” (Galanek v. Wismar, supra, 68 Cal.App.4th at
p. 1424.)
Indulging reasonable inferences, the jury also could have
found there to be a significant difference between managing real
estate for others as a broker (which Newnes successfully did on a
large scale for his entire career) and stepping into the shoes as a
decedent’s trustee of someone who owns a home (which Merchants
Trust did 99 percent of the time).
The jury could have concluded that Merchants Trust had
precious little experience managing commercial properties and
was therefore unfamiliar with the “rules of the road” governing
licensed real estate brokers and commercial real estate
operations, including federal, state, and local ordinances
involving safety.
9 Merchants Trust cannot rely on Evidence Code section
354 to avoid reversal because, even if applicable, “[t]he substance,
purpose, and relevance of the excluded evidence was made known
to the court by the questions asked, an offer or proof, or by any
other means.” (Evid. Code, § 354, subd. (a).)
18
And the jury could have concluded Merchants Trust knew
it was violating the law and injuring Newnes in the process.
Indeed, jurors assessing the Company’s characterizations of its
actions as mere “puffery” or legitimate sales tactics could, in
contradistinction, have found such characterizations to be
despicable and conniving distortions of the truth, employed for
the specific purpose of unlawfully capturing Newnes’s lucrative
client account of nonagenarian Cole. The jury as the finder of
fact was not required to accept the bare denials proffered by
Company executives.10
The trial court’s ruling after opening statement invaded the
jury’s exclusive province as factfinder and unduly circumscribed
the evidence that plaintiff’s counsel was able to introduce at trial.
(Carson v. Facilities Development Co., supra, 36 Cal.3d at p. 851
10 Newnes has been faulted for his failure to provide
enough “circumstantial evidence of [Merchants Trust’s] actual
knowledge.” But any failure to do so was a result of the trial
court’s premature ruling, which had the effect of allowing
Merchants Trust to deny knowledge of its wrongful conduct
without affording Newnes an adequate opportunity to offer
countervailing or rebuttal evidence. As discussed in Nolin v.
National Convenience Stores, Inc., supra, 95 Cal.App.3d at page
288, “ ‘[most] often [the malice] element is proven by
circumstantial evidence alone,’ ” which, as we often see in the
context of summary rulings, would otherwise present
insurmountable evidentiary challenges. (See, e.g., Nazir v.
United Airlines, Inc. (2009) 178 Cal.App.4th 243, 286 [issues of
intent and motive are “rarely appropriate for disposition on
summary judgment”]; see also Wyatt v. Union Mortgage Co.
(1979) 24 Cal.3d. 773, 785 [participation and knowledge in
fraudulent scheme may be inferred from the actions and relations
of the parties]; Jolley v. Chase Home Finance, LLC (2013) 213
Cal.App.4th 872, 895 [same].)
19
[grant of nonsuit reversible error where evidence would have
allowed jury to make favorable inferences from the plaintiff’s
evidence]; see also Abeyta v. Superior Court, supra, 17
Cal.App.4th at p. 1046 [granting writ relief on erroneous grant of
nonsuit after opening argument].) Indeed, our disagreement is
evidence of the importance of a jury determination. (Hoch v.
Allied-Signal, Inc., supra, 24 Cal.App.4th at p. 58 [“Where
reasonable minds could differ as to whether the evidence would
support punitive damages, the resolution of the conflicting
inferences and the weighing of opposing evidence is for the jury;
for the court to grant a nonsuit in that circumstance, or the
appellate court to affirm a judgment of nonsuit, would be to
usurp the jury’s function”].)
Accordingly, we reverse the portion of the judgment that
granted nonsuit and remand the matter for a new trial limited to
the issue of punitive damages. (See Barmas, Inc. v. Superior
Court (2001) 92 Cal.App.4th 372, 376-377 [appellate courts retain
authority to order partial retrials limited to punitive damages
and such retrial may proceed in front of different jury than that
which decided tort liability or separate issues].)
20
DISPOSITION
The portion of the trial court’s judgment granting nonsuit
on the issue of punitive damages is reversed, and the matter is
remanded for partial retrial limited to Newnes’s claim for
punitive damages. Newnes shall recover his costs on appeal.
NOT TO BE PUBLISHED
CRANDALL, J.*
I concur:
CHANEY, J.
*Judge of the San Luis Obispo County Superior Court,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.
21
ROTHSCHILD, P. J., Dissenting
A reasonable jury could not have found the requisite
“fraud” or “malice” to support punitive damages based on the
evidence Curt Daniel Newnes described in his opening statement
(see Civ. Code, § 3294, subd. (a)), even “indulg[ing] every
legitimate inference which may be drawn from” that evidence.
(Abeyta v. Superior Court (1993) 17 Cal.App.4th 1037, 1041.) Nor
does the evidence Newnes subsequently identified to the trial
court in his new trial motion (and to this court on appeal) support
either fraud or malice. Accordingly, and for reasons I discuss in
more detail below, I disagree with the majority and would affirm
the judgment of nonsuit as to Newnes’s punitive damages claim.
A. Fraud
For the purposes of a punitive damages claim, “ ‘[f]raud’
means an intentional misrepresentation, deceit, or concealment
of a material fact known to the defendant with the intention on
the part of the defendant of thereby depriving a person of
property or legal rights or otherwise causing injury.” (Civ. Code,
§ 3294, subd. (c)(3).) The plain language of the statute thus
appears to contemplate the possibility of punitive damages based
on fraudulent conduct that injuriously deprives someone other
than the plaintiff (“a person”) of property or a legal right. (Ibid.;
see Garcia v. Myllyla (2019) 40 Cal.App.5th 990, 999 [fraud on a
third party that “directly enabled” the defendant to harm the
plaintiff could provide basis for punitive damages].) Newnes
argues that a jury could have reasonably found that Farmers and
Merchants Trust Company (Merchants Trust) intentionally
withheld from Regena Cole the material fact, known to
Merchants Trust, that in order to manage Cole’s property in any
capacity other than that of a trustee, Merchants Trust needed a
license it did not possess. Crucial to establishing fraud on this
theory is that a reasonable jury could find Merchants Trust knew
it needed such a license.
In opposing the motion for nonsuit below, Newnes
identified no facts based on which a reasonable jury could have
concluded that Merchants Trust knew it needed a license.
Rather, Newnes argued that Merchants Trust, as “a large
financial institution[,] [could not] credibly claim they have no
idea one way or the other whether they are or should be
licensed.” But evidence that Merchants Trust is a large financial
institution working with trusts and estates could only support a
finding that Merchants Trust should have known it needed a
license—not a finding that Merchants Trust actually did know. 1
“Should know” is insufficient to support a punitive damages
claim, because a negligent misrepresentation does not establish
the “fraud” required by Civil Code section 3294. (See Alliance
Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1241 [“Punitive
damages are recoverable in those fraud actions involving
intentional, but not negligent, misrepresentations.”]; Branch v.
Homefed Bank (1992) 6 Cal.App.4th 793, 799 [no punitive
damages recoverable for negligent misrepresentation]; see also
§ 3294, subd. (c)(3) [referring to a “fact known to the defendant”
to describe fraud].)
Newnes’s punitive damages claim fares no better if we
consider the sources of evidence Newnes identified after the
1 It is conceivable that, under different circumstances,
evidence suggesting a defendant should have known something
might be so strong as to provide circumstantial evidence of actual
knowledge. A showing only that the defendant is a large
institution, however, does not present such circumstances.
2
motion for nonsuit was granted.2 In support of Newnes’s motion
for new trial on the issue of damages, Newnes represented to the
trial court that he could offer “evidence that [Merchants Trust]
had paperwork filled out that [it] submitted to listing agencies
telling [the listing agencies] that [Merchants Trust] had a
license.” On appeal, Newnes identifies this evidence more
specifically as “[p]roposed trial exhibits 36 and 129,” which,
according to Newnes, “would have shown that [Merchants Trust]
actually used [a Merchants Trust employee’s] license with the
local [real estate] listing service to support its listings of various
managed properties for rental” and that Merchants Trust “also
required [that employee] to submit an application telling the local
listing service that he was [Merchants Trust’s] broker of record”
when in fact he was not. Newnes argues that “[t]his is evidence
from which a reasonable jury can conclude that [Merchants
Trust] must have known [it] needed a license, since [it was]
telling the local listing service [it] had one in order to list [its]
properties.”
Newnes’s argument mischaracterizes the evidence. None of
these documents reflect that Merchants Trust represented it had
a license or asked its employee to represent that the employee’s
license belonged to Merchants Trust. To the contrary, in these
documents, the license number of the employee is listed as
belonging to that employee only, whereas the space for any
license held by Merchants Trust is left blank. The documents
2 The parties dispute whether and to what extent Newnes,
in challenging the court’s ruling on the nonsuit motion, may rely
on evidence or facts Newnes did not identify either in his opening
statement or in opposing the nonsuit motion. But even
considering these additional proffers, the evidence could not
support punitive damages.
3
further reflect that Merchants Trust at one point changed its
“broker/designated realtor” with the Pacific West Association of
Realtors from one licensed Merchants Trust employee to another
(Jeremy Clark), and in doing so, listed the license number of each
broker as associated with that particular individual only. A
reasonable jury could not infer from these documents that
Merchants Trust knew it needed a license. To the contrary, these
documents show Merchants Trust clearly indicated that it, as an
organization, did not possess a real estate license, and was
nevertheless able to list property for rental. Finally, and more
broadly, the fact that Merchants Trust knew one needs to be a
licensed realtor in order to list property on a platform for realtors
does not support any reasonable inferences about the licensing
needs for property managers generally. Thus, this evidence—
even assuming we could properly consider it, despite Newnes not
having identified it to the court in opposing the nonsuit—is not a
basis on which a reasonable jury could find that Merchants Trust
knew it needed a license to manage property.
We disagree with the majority’s view that testimony
establishing Merchants Trust employee Clark used his real
estate license solely as part of his duties for Merchants Trust
could permit a reasonable jury to find Merchants Trust knew it
needed a license to manage property. Absent additional
evidence—which Newnes has not claimed he could offer—
establishing that anyone at the company asked Clark to use his
license as the company’s license, or to represent that it belonged
to the company, Clark’s testimony cannot provide a basis on
which a reasonable jury could infer anything about the company’s
knowledge of licensure requirements. And, as discussed above,
the documentary evidence in the record reflects that Clark
4
indicated when using his license for the company business that it
belonged solely to him, not to Merchants Trust.
We further disagree with the majority that the challenged
ruling prevented Newnes from offering evidence he otherwise
could have to support a finding of the requisite knowledge. First,
following that ruling, Newnes was given two opportunities—one
below and one on appeal—to identify the type of additional
evidence he would offer, were he permitted to try his punitive
damages claim. For the reasons I have discussed, nothing he
identified could support a finding that the company knew it
needed a license. Consistent with this, the examples the majority
provided of the trial court sustaining objections involved evidence
that would not help support a finding that Merchants Trust knew
it needed a license.3
Because nothing in Newnes’ opening statement or
subsequent proffers supports a finding that Merchants Trust
knew it needed a license,4 Merchants Trust’s failure to tell Cole it
3 Specifically, the majority identified objections to evidence
that the company lacked another type of license (city business
license) and that the company had “access to whatever lawyers or
advice you would ever want to get.” The company’s lack of a city
license, like its lack of a real estate license, does not establish
knowledge of licensure requirements. And the fact that the
company had legal counsel and could have inquired about
licensure requirements can at best support a finding about what
the company should have known—not what it actually did know.
4 Newnes also contends that Merchants Trust having
argued to the trial court in the context of motions in limine that it
possessed a license to manage property somehow provides the
requisite evidence of its knowledge that it needed such a license.
A motion in limine is not evidence. Nor is Merchants Trust’s
5
did not have a license cannot constitute concealment of a “fact
known to [Merchants Trust]” and cannot support punitive
damages. (Civ. Code, § 3294, subd. (c)(3).)
B. Malice
Newnes also argues that he has identified sufficient
evidence, based on which a jury could find Merchants Trust acted
with the “malice” necessary for punitive damages. In this
context, Newnes argues such conduct includes not only
Merchants Trust’s misrepresentations about its licensure
(discussed above), but also that Merchants Trust misrepresented
itself to Cole as having extensive property management
experience, when in fact it had almost no such experience outside
the context of handling property as a trustee. The definition of
“malice” in the punitive damages statute contemplates two types
of malicious conduct, the first of which is “conduct which is
intended by the defendant to cause injury to the plaintiff.” (Civ.
Code, § 3294, subd. (c)(1).) Merchants Trust singing the praises
of its property management capabilities—even if in a manner
that was exaggerated, inaccurate, or not forthcoming—was part
of an effort to win Cole’s business, not an effort to “cause injury to
[Newnes].” (Ibid.) None of the conduct Newnes describes
suggests Merchants Trust was even thinking about Newnes, let
alone seeking to harm him, when it crafted and delivered its sales
pitches to Cole. Of course, the jury found that Merchants Trust’s
efforts to win Cole’s business ultimately did harm Newnes, and
that Merchants Trust knew such harm “was certain or
approach in pretrial proceedings to the issue of whether it
possessed the requisite licensure to manage property tantamount
to an admission of knowledge regarding the need for any such
licensure years earlier.
6
substantially certain to occur” if its efforts were successful. But
knowing a particular harm can result from intentional conduct is
not the same as intending the harm. Concluding otherwise
would conflate intentional tort liability with punitive damages
liability.
The second type of malicious conduct that can support
punitive damages is “despicable conduct which is carried on by
the defendant with a willful and conscious disregard of the rights
or safety of others,” (not necessarily the plaintiff). (Civ. Code,
§ 3294, subd. (c)(1).) “ ‘Despicable conduct’ is conduct that is ‘ “so
vile, base, contemptible, miserable, wretched or loathsome that it
would be looked down upon and despised by [most] ordinary
decent people.” ’ [Citation.]” (Butte Fire Cases (2018) 24
Cal.App.5th 1150, 1159.) A jury simply could not reasonably find
that puffery regarding one’s experience managing property or
misrepresentations about one’s licensure to manage property—
even to an elderly widow—is so “vile” that it “ ‘has the character
of outrage frequently associated with crime.’ ” 5 (Taylor v.
Superior Court (1979) 24 Cal.3d 890, 894.) In concluding
5 In reaching a contrary conclusion, the majority relies on
Merchants Trust having virtually no experience managing
property except as a trustee, and on how different property
management experience is when one gains that experience as a
trustee, as opposed to as a non-trustee property manager. But
this logic is inconsistent with the majority’s view that the
company must have been aware of the licensure requirements for
the latter type of property management. If Merchants Trust had
so little experience with and knowledge of non-trustee property
management that the company’s representations to the contrary
were despicable, the company cannot also be charged with
knowledge of the licensure requirements for such non-trustee
property management.
7
otherwise, the majority relies in part on Cole’s age, the fact that
Merchants Trust had a pre-existing relationship of trust with
Cole, and that it aggressively pursued her property management
business for several months. Underlying this reasoning is the
idea that Merchants Trust was taking advantage of Cole by
misrepresenting its property management experience and
licensure, and that this raises Merchants Trust’s actions to the
level of “despicable” conduct. But it does not follow that Cole was
taken advantage of simply because she was an “elderly widow.”
Nor do the details about Cole’s interactions with Merchants Trust
support this. Cole herself initially approached Merchants Trust
to inquire about its ability to manage her property before her
death, not the other way around. She did so on the very logical
basis that Merchants Trust managing her properties might be
efficient, given that Merchants Trust would be managing those
properties after her death. She was not immediately or easily
persuaded to give Merchants Trust her business. Rather, she
was savvy enough to press Merchants Trust employees for
months with questions about its property management
capabilities, and to have her lawyers review the contract with
Merchants Trust before signing it. And, at the time of trial, she
stood by her decision to have Merchants Trust manage her
property. These circumstances cannot support a reasonable
finding that Merchants Trust’s conduct towards Cole was so
abhorrent as to be deemed “despicable” for the purposes of
punitive damages.
The majority also notes that Merchants Trust knew Cole’s
account represented a significant portion of Newnes’s business,
and thus that losing this business would have a significant
impact on him. But Merchants Trust’s tactics are not more
8
“despicable” because they caused a small competitor, as opposed
to a larger competitor, to lose business.
Thus, the conduct Newnes identifies as a basis for punitive
damages could not support a reasonable finding of “malice” under
Civil Code section 3294.
For the foregoing reasons, I respectfully disagree with the
majority’s conclusion that the trial court erred in granting
Merchants Trust’s motion for nonsuit on the punitive damages
claim. No reasonable jury could have properly awarded punitive
damages. I would therefore affirm the trial court’s judgment.
ROTHSCHILD, P. J.
9