Nelson v. Pickford Real Estate, Inc.

Filed 6/15/07 Nelson v. Pickford Real Estate, Inc. CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment and order of the Superior Court of Orange County, Dennis S. Choate, Judge. Judgment affirmed; order reversed.

Ayscough & Marar, Sidney Lanier and Brent Ayscough for Plaintiffs and Appellants.

Maxie Rheinheimer & Vrevich and Suzanne L. Smigliani for Defendants and Respondents.

* * *

Donald R. Nelson and Brenda Arnett-Nelson (the Nelsons), purchasers of residential real property, appeal from the judgment in favor of the real estate agent for the sellers in their action for damages arising out of failure to disclose defects in the property. They argue the trial court made prejudicial rulings on the admission of evidence and jury instructions. We find no error and affirm the judgment.

The Nelsons also appeal from the order awarding the agent expert witness fees under Code of Civil Procedure section 998 for their failure to accept an offer to compromise. They claim the offer was ambiguous and not made in good faith. We find the offer was uncertain and did not operate to shift costs under section 998; accordingly, we reverse the order awarding expert fees.

FACTS

The Nelsons purchased a home in San Juan Capistrano from Brian and Lori Hirth for more than $1 million. After the Nelsons took possession, they discovered water damage and structural defects that were not disclosed before the sale. The Nelsons sued the Hirths; the home inspection company; and the Hirths listing agents, Pickford Realty, Bob Smith and Michael Dipilla (the Pickford defendants) for fraud, negligent misrepresentation, professional negligence, nuisance and constructive fraud.^[1] The complaint prayed for damages for the cost of repair, living expenses, loss of use and enjoyment, the difference in value between the price paid and the actual value of the home, emotional distress, loss of resale value, nuisance abatement, and punitive damages.

Three weeks before the original trial date, the Pickford defendants served Donald Nelson and Brenda Arnett-Nelson each with a Code of Civil Procedure section 998 offer to settle the case for $15,001.00. Neither of the Nelsons responded to the offers. The trial was continued several times; it finally began in July 2005, more than a year after the original date. The Nelsons filed a motion in limine to bar evidence of a prior lawsuit they had brought against the seller of their previous home. The trial court denied the motion. The Pickford defendants also filed a motion in limine to exclude evidence of emotional distress damages, which was granted.

The Nelsons claims against the Pickford defendants for fraud, negligent misrepresentation, and professional negligence were tried before a jury. After the close of evidence, the Nelsons moved to include claims against the Hirths under the statutes relating to the required disclosure statement on the transfer of residential property (Civ. Code,  1102 et seq.). The trial court denied the motion. The trial court also refused the Nelsons request for jury instructions on the willful suppression of false evidence. The jury returned a verdict in favor of the Nelsons against the Hirths in the amount of $279,000, but awarded the Nelsons nothing against the Pickford defendants.

The Pickford defendants subsequently filed their memorandum of costs, seeking reimbursement of costs incurred as a result of the Nelsons failure to accept the Code of Civil Procedure section 998 offers. The Nelsons responded with a motion to tax costs. After extensive briefing and argument, the trial court awarded costs to the Pickford defendants, including a portion of their expert fees, in the amount of $38,592.27.

DISCUSSION

Jury Instruction re Suppression of Evidence

The Nelsons first argue the trial court committed reversible error by failing to give their requested jury instructions regarding suppression of evidence (BAJI No. 2.03) and credibility of a witness (BAJI No. 2.22).^[2] They claim Smith refused to identify the couple who lived in the house when it was being shown for sale, notwithstanding the Nelsons requests to depose them and call them as trial witnesses.

Smith testified that the Hirths had moved out of the house during the listing period, and Smith referred them to an organization called Showcase Homes, which had recently made a presentation to his office. Showcase Homes contract[s] with people that can live in the house, have nice furniture, can have the house presentable for showings. And when the showings take place, they . . . vacate the house so the prospective buyers have the house to themselves. Smith gave Mr. Hirth the contact and he made the phone calls and signed the contract with Showcase. Hirth told Smith the only contact he had was with the lady that ran the showcase homes.

Smith testified the couple caused problems rather than facilitating the sale of the house. He first learned of problems when a local locksmith told him her company had changed the locks at the request of the couple, who the locksmith thought were the new owners. Smith went to the property and introduced myself as the listing agent and the people would not allow me to enter the home. . . . At Hirths suggestion, Smith called Showcase Homes and talk[ed] to the area manager and voice[d] my concern. Other agents who attempted to show the property complained that the couple did not leave the house during showings. Although the couple was in the house for maybe a week at the most, they caused some damage. They had broken the master shower glass enclosure, caused the pool heater to break, had set the air-conditioning system in such a way that the upstairs couldnt be turned on, abused the water heater by having it at full blast. And . . . nicks on the wall, some broken things that were left like pots and what have you. It was kind of a mess.

Nelson testified Smith never told him the names of the couple or provided any information about them. Smith testified he never knew the couples names or anything about them. Hirth had a contract with Showcase Homes, which screened and hired the couple. After the couple vacated the house, Hirth and Showcase Homes worked out some sort of settlement regarding the damages caused by the couple. Smith testified the couple were in the home in the latter part of the summer of 02 and Mr. and Mrs. Nelson didnt come on the scene until either December or early January of, that would be, 03.

In her opening statement, counsel for the Pickford defendants claimed nobody is hiding [the couple]. They disappeared into the night. She stated Smith got a call from their car lender that they were getting ready to repo their car. So these people are off in the night.

The Nelsons claim the couple were material witnesses to the condition of the house before they saw it. They argue the record clearly shows that the Pickford defendants knew the couples identity and willfully suppressed it, justifying the requested instructions.

A party is entitled upon request to correct, nonargumentative instructions on every theory of the case advanced by him which is supported by substantial evidence. (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 572.) There was no substantial evidence that the Pickford defendants willfully suppressed the couples identity. Furthermore, even if the instruction should have been given, [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.) (Id. at p. 580.) Our review of the record indicates the couples testimony would not have had a significant impact on the outcome of the case.

Failure to Instruct on Emotional Distress Damages

The Nelsons contend the trial court should have instructed the jury that they could recover emotional distress damages for the Pickford defendants failure to disclose defects in the property. They argue the Legislature intended to allow injured purchasers to recover all damages proximately caused by a violation of the statutory scheme that requires a disclosure form on the transfer of residential real property (Civ. Code,  1102 et seq.).

Civil Code section 1102.6 requires the sellers of residential property and their real estate agents to complete a disclosure form including information about the buildings and any significant defects, as well as information about the land itself, including disclosure of hazardous materials, encroachments, easements, fill, settling, flooding, drainage problems, neighborhood noise, major damage from natural disasters, and lawsuits by or against the seller affecting the property. (Realmuto v. Gagnard (2003) 110 Cal.App.4th 193, 200.) A person who willfully or negligently violates the disclosure requirements shall be liable in the amount of actual damages suffered by a transferee. (Civ. Code,  1102.13.)

In Saunders v. Taylor (1996) 42 Cal.App.4th 1538, the defrauded buyer of a home asserted that the correct measure of damages under section 1102.13 was the benefit-of-the-bargain rule, i.e., the difference between the actual value of what the defrauded person received and the value which it would have had if it had been as represented. [Citation.] (Id. at pp. 1542-1543.) The court disagreed, holding that actual damages in Civil Code section 1102.13 means compensatory damages as measured by [Civil Code] section 3343. (Id. at p. 1545.) The court explained that the exclusive measure of damages for one defrauded in the purchase, sale or exchange of property is  . . . the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received . . . . ( 3343, subd. (a).) (Id. at p. 1542.) Section 3343 represents the out-of-pocket rule. (Ibid.)

The Nelsons contend that Saunders is incorrect. They argue because they pleaded causes of action for negligent misrepresentation and professional negligence against the Pickford defendants, actual damages under section 1102.13 should be the same as the measure of tort damages in Civil Code section 3333: For the breach of an obligation not arising from contract, the measure of damages, except where otherwise expressly provided by this Code, is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not. This measure of damages, they contend, includes damages for emotional distress.

The Nelsons claim of error fails for two reasons. First, in the absence of physical injury, emotional distress damages are not allowed where the direct loss from the defendants negligence is economic. (Butler-Rupp v. Lourdeaux (2005) 134 Cal.App.4th 1220, 1227-1228.) Second, any possible error is harmless because the jury found the Pickford defendants were not liable to the Nelsons on the causes of action for fraud, negligent misrepresentation, and professional negligence.

Denial of Leave to Amend

The Nelsons complain the trial court erroneously denied them leave to amend the complaint to add a statutory cause of action against the Pickford defendants under section 1102 et seq. But the record shows the Nelsons asked to amend against the Hirths, not the Pickford defendants. The Hirths are not parties to this appeal.

Exclusion of Emotional Distress Evidence

The Nelsons argue the trial court erred in granting the Hirths motion in limine to exclude evidence of emotional distress against all defendants. They contend the trial court improperly based its ruling on deposition testimony in a federal case that the Nelsons brought against their insurance company for refusing coverage for mold damage. Hirths counsel attached that deposition testimony to their reply to opposition to their motion in limine: Are you seeking damages for emotional distress from the seller and the inspector and the realtor [in Nelson v. Hirth]? Answer: No. Are you seeking damages for emotional distress from the [insurer in this case]? Answer: Yes.^[3] The Nelsons point out they gave notice they were seeking emotional distress damages in this case in the answers to interrogatories sent out by the Hirths.

Absent surprise, a trial court cannot require a party to limit trial testimony so that it conforms to testimony given during discovery. (See Campain v. Safeway Stores (1972) 29 Cal.App.3d 362.) In Kelly v. Far West Federal Savings (1996) 49 Cal.App.4th 659, the plaintiffs were injured on one of two elevators in a building. During depositions, the plaintiffs testified the accident occurred on the small elevator, and the defendants filed a motion in limine to exclude evidence at trial that perhaps they were injured in the large elevator. The trial court granted the motion and the appellate court reversed. Other than issue preclusion based on responses to requests for admissions, sanctions for abuse of the discovery process, or a clear case of waiver or estoppel, a court abuses its discretion when it precludes a party from trying a case on a theory consistent with existing evidence, even though the pretrial testimony of the party relating to how the accident occurred is contrary to the theory. (Id. at pp. 672-673.) A conflict between pretrial and trial testimony presents an opportunity for impeachment. (Id. at p. 672.)

The trial court commented that Nelson stated under oath in a deposition that hes not [claiming emotional distress damages]. And Ill quote it here and its not vague. Its not the type of thing that youre likely to be led to give a mistaken answer. But the court also emphasized it was improper to claim emotional distress damages in a fraud case. It is not clear on which basis the court made its ruling. But because we have held that emotional distress damages were not recoverable under section 1102 et seq., any error on the part of the trial court was harmless.

Evidence of Prior Lawsuit

The Nelsons contend the trial court erred in denying their motion in limine to exclude evidence of their prior lawsuit against the sellers of their previous residence. They argue the admission of this evidence unfairly allowed the jury to infer they are litigious and the claims in the present lawsuit are not made in good faith, violating the prohibition against character evidence (Evid. Code,  1104).

The Nelsons prior lawsuit was based on claims for undisclosed water problems, water issues, water intrusion, drainage. In this lawsuit, the Nelsons claimed ignorance of similar problems, notwithstanding their receipt of an inspection report with

some warning signs. The trial court admitted evidence of the prior lawsuit because it

found it was relevant to the Nelsons knowledge about water intrusion, drainage, and erosion, the basis for the current lawsuit. We are not going to go over the whole lawsuit or any substantial part of the old lawsuit. But the fact that they brought a lawsuit for water damage and recovered on it is relevant, in my view.

On a motion in limine to exclude evidence, the trial court must weigh the probative value of the evidence against the likelihood that its admission will necessitate undue consumption of time or . . . create substantial danger of undue prejudice, of confusing the issues, or of misleading the jury. (Evid. Code,  352.) The trial courts ruling will be upheld unless it was an abuse of discretion that resulted in a manifest miscarriage of justice. (Hernandez v. Paicius (2003) 109 Cal.App.4th 452, 456.)

There was no abuse of discretion here. The admissibility ruling was limited to the issue of the Nelsons prior knowledge of water problems, and the testimony emphasized the similarity of the allegations in the two actions, not the Nelsons general litigious nature.

Award of Expert Fees

The trial court reduced the fees for one of the Pickford defendants expert witnesses by 50 percent. Otherwise, the court allowed the claimed fees incurred after the date of the Pickford defendants separate but identical offers to compromise to both Donald Nelson and Brenda Arnett-Nelson. The offer read: Defendants, Pickford Realty, Ltd., dba Prudential California Realty, Bob Smith and Michael Dipilla (Defendants), offer to allow judgment to be taken by plaintiffs in the sum of $15,001 in exchange for a release of all of [Plaintiffs] claims against Defendants and a dismissal with prejudice of all of [his or] her claims from the Plaintiffs Complaint, pursuant to Section 998 of the Code of Civil Procedure. Each of the parties will bear their own costs of suit.

The Nelsons first contend the offer to compromise made by the Pickford defendants was invalid for uncertainty because it required each plaintiff to do two

inconsistent things: enter judgment and dismiss all claims with prejudice. The trial court found requesting a dismissal and a judgment two things that are factually impossible to occur, I suppose, are opposite things didnt create the confusion as to what was being done here. It was a 998. It was submitted, and it was entitled a 998. It was for $15,001 as to each defendant. So long as each of [the Pickford defendants] came in under the $15,001, which they did, then the remedies under 998 are in effect.

Civil Code section 998 penalizes a prevailing party if it obtains a less favorable judgment than a pretrial settlement offer made by the other party by requiring it to pay the other partys post offer costs. These costs may include expert witness fees, in the trial courts discretion. (Elite Show Services, Inc. v. Staffpro, Inc. (2004) 119 Cal.App.4th 263, 268.) The purpose of the cost-shifting statute is to encourage the settlement of litigation without trial, by punishing the party who fails to accept a reasonable settlement offer from its opponent. (Ibid.)

A party should not be punished for failing to accept an uncertain offer. In interpreting section 998, this court has placed squarely on the offering party the burden of demonstrating that the offer is a valid one under section 998. (Taing v. Johnson Scaffolding Co. (1992) 9 Cal.App.4th 579, 585.) The corollary to this rule is that a section 998 offer must be strictly construed in favor of the party sought to be subjected to its operation. (Garcia v. Hyster Co. (1994) 28 Cal.App.4th 724, 732-733.) . . . Finally, our Supreme Court has held that the legislative purpose of section 998 is generally better served by bright line rules that can be applied to these statutory settlement offers -- at least with respect to the application of contractual principles in determining the validity and enforceability of a settlement agreement. (Barella v. Exchange Bank (2000) 84 Cal.App.4th 793, 799.)

Here, the offers required the simultaneous performance of contradictory acts the entry of judgment and dismissal which have very different practical consequences. A judgment entered against a party may suggest culpability to credit

reporters and future employers, whereas a dismissal has significantly different overtones. The Nelsons may have surmised that the offer was meant to be one to accept judgment for $15,001, but should they be legally charged with the knowledge that the language about a dismissal was a mere mistake? Was it their burden to point out the mistake to the defendants? We think not.

Section 998 requires that the written offer include a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted. If accepted, the offer with proof of acceptance shall be filed with the court, and judgment shall be entered accordingly. (Code Civ. Proc., 998, subd. (b).) This offer could not have been accepted without some qualification in the acceptance. An offer must be sufficiently definite, or must call for such definite terms in the acceptance that the performance promised is reasonably certain. (1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts,  137, p. 176.)

The Pickford defendants rely on Zamora v. Clayborn Contracting Group, Inc. (2002) 28 Cal.4th 249 in support of their argument that the inadvertent inclusion of language referencing a dismissal with prejudice did not serve to invalidate the offer for uncertainty. But Zamora is not on point. There, the plaintiffs offer to compromise mistakenly offered to have judgment taken against himself rather than against the defendant in the amount of $149,999. The defendant jump[ed] at the offer (Id. at p. 252), and judgment was entered. Subsequently, the plaintiff realized his mistake and moved to set aside the judgment under Code of Civil Procedure section 473, subdivision (b). In support of the motion, the plaintiffs counsels legal assistant declared she mistakenly typed the word against as opposed to the phrase in favor of . . . . (Id. at p. 253.)

The court found the mistake was excusable and granted relief from the judgment. The erroneous substitution of the word against for the phrase in favor of is a clerical or ministerial mistake that could have been made by anybody. While

counsels failure to review the document before sending it out was imprudent, we cannot say that his imprudence rendered the mistake inexcusable under the circumstances. Indeed, appellate courts have routinely affirmed orders vacating judgments based on analogous mistakes made by an attorney or his or her staff. (Zamora v. Clayborn Contracting Group, Inc., supra, 28 Cal.4th at p. 259.)

Unlike the error in Zamora, the inclusion of the mistaken language here cannot be called a typo. Furthermore, granting relief under section 473 is different from punishing a litigant for failing to properly interpret and then accept an ambiguous offer. It was not unreasonable for the Nelsons to assume they had no obligation to respond to the offer in order to avoid the consequences of section 998. The order awarding expert witness fees must be reversed.

DISPOSITION

The judgment in favor of the Pickford defendants is affirmed. The order awarding expert witness fees is reversed. Each party shall bear its own costs on appeal.

SILLS, P. J.

WE CONCUR:

RYLAARSDAM, J.

BEDSWORTH, J.

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^[1] The appeals against the Hirths and the home inspection company have been dismissed. Only the real estate company and the two agents remain as respondents.

^[2] The instructions requested by the Nelsons are as follows: If you find that a party willfully suppressed or concealed evidence in order to prevent its being used in this trial, you may consider that fact in determining what inferences to draw from the evidence. A witness who is willfully false in one material part of his or her testimony, is to be distrusted in others. You may reject the whole testimony of a witness who willfully has testified falsely as to a material point, unless, from all the evidence, you believe the probability of truth favors his or her testimony in other particulars.

^[3] We presume the deposition testimony was attached to the reply papers because the trial court read it into the record. It is not included in the record on appeal.