Filed 11/9/26 Ten-X v. Lutsch CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
TEN-X, LLC,
Plaintiff and Respondent, G064615
v. (Super. Ct. No. 30-2021-
01231127)
CODY LUTSCH et al.,
Defendants and Appellants.
TEN-X, LLC,
Plaintiff and Appellant, G064714 & G065240
v.
CODY LUTSCH et al., OPINION
Defendants and Appellants;
FAT PROPERTY, LLC,
Defendant and Respondent.
Appeals from judgments and postjudgment order of the Superior
Court of Orange County, Robert Shawn Nelson, Judge. Affirmed in part,
reversed in part, and remanded with directions. Request for Judicial Notice.
Denied.
Fennemore, Robert P. Allenby and Shannon D. Sweeney for
Defendants and Appellants Cody Lutsch and Lemmings, LLC.
Call & Jensen, David R. Sugden, Aaron L. Renfro and L. Lisa
Sandoval for Plaintiff and Appellant Ten-X, LLC.
Fennemore, Robert P. Allenby and Shannon D. Sweeney for
Defendant and Respondent Fat Property, LLC.
* * *
Plaintiff Ten-X, LLC (Ten-X) filed this action against defendants
Cody Lutsch, Lemmings, LLC (Lemmings), and Fat Property, LLC (Fat
Property) (collectively, Defendants). Lutsch is the sole owner of Lemmings,
which owned a commercial property in Houston (the Property). Lutsch also
owns Fat Property, a property management company. Ten-X is an online
auction platform for the sale of commercial properties. In 2021, Lemmings
entered into an agreement with Ten-X to sell the Property at auction (the
Marketing Agreement), which, among other things, prohibited the seller or
any of its members and managers from bidding on the Property. Lutsch,
however, wanted to increase the auction price, so he used the fictitious
persona of “Scott Max” to bid on the Property. While pretending to be Scott
Max, he agreed to abide by Ten-X’s standard participation terms that
governed bidders in its auctions (the Participation Terms); he also submitted
a fabricated Scott Max bank record to satisfy Ten-X’s requirement that
prospective bidders provide proof of funds. Having qualified to participate in
the auction, Lutsch (as Scott Max) submitted multiple bids. When it became
2
apparent he was the highest bidder, Scott Max went silent; he stopped
communicating with Ten-X, and the sale was not consummated.
The case proceeded to a jury trial. The trial court granted Fat
Property’s motion for nonsuit, and the jury rendered a verdict in favor of Ten-
X against Lutsch and Lemmings on various legal theories. The court entered
judgment on the verdict, awarding $79,900 against Lemmings for breach of
the Marketing Agreement and $51,000 against Lutsch for breach of the
Participation Terms; $73,500 against Lemmings and Lutsch for breach of the
covenant of good faith and fair dealing and on Ten-X’s two fraud claims;
$10,000 against Lemmings on the common count of quantum meruit; and
punitive damages of $1,000,000 against Lemmings and $5,400,000 against
Lutsch. On August 2, 2024, the court denied Lutsch and Lemmings’s motions
for judgment notwithstanding the verdict (JNOV) and for a new trial or
remittitur, except that, with respect to the punitive damages award against
Lutsch, the court agreed to order a new trial if Ten-X did not accept a
remittitur of the punitive damages against Lutsch to $1,790,000. Ten-X
accepted the remittitur, and the court subsequently entered an amended
judgment. That was followed by a second amended judgment entered at Ten-
X’s request to correct the amount of the remittitur and some other aspects of
the judgment not at issue here.
Lutsch and Lemmings appealed, as did Ten-X.1 We affirm the
second amended judgment in part and reverse in part. We conclude the trial
court erred in several respects. First, it erred by denying JNOV on Ten-X’s
1
Separate appeals were taken from the initial judgment, the
amended judgment, and the second amended judgment, which correspond to
the three separate appeals consolidated in this proceeding, as discussed
further below.
3
fraud claims and, because there is no basis for punitive damages absent the
fraud claims, by denying JNOV on punitive damages. Second, because Ten-
X’s claim for breach of the implied covenant of good faith and fair dealing is
superfluous (in that it is duplicative of the breach of contract claim) it was
error to deny JNOV as to it. Third, judgment must be reversed on the award
on the common count for quantum meruit. We find no basis to disturb the
judgment on the remaining claims. Accordingly, Ten-X remains entitled to
recover $79,900 against Lemmings for breach of the Marketing Agreement
and $51,000 against Lutsch for breach of the Participation Terms. Finally, we
conclude the trial court did not err in granting nonsuit as to Fat Property.
Thus, the August 2, 2024 order (as corrected nunc pro tunc) and the second
amended judgment are affirmed in part and reversed in part, and the matter
is remanded to the trial court with directions to enter an amended judgment
consistent with this opinion.
FACTUAL AND PROCEDURAL BACKGROUND
I.
THE COMPLAINT
In November 2021, Ten-X filed its complaint against
Defendants.2 The complaint asserted five causes of action: (1) breach of
written contract against Lemmings and Lutsch3; (2) breach of the implied
2
Thomas Brame Wilkinson, IV also was named as a defendant
but was dismissed prior to trial. He is not a party to this appeal.
3
In the complaint, the heading of the first cause of action, for
breach of contract, stated it was against “All Defendants Lemmings, Lutsch,
and Does 1 through 10.” (Boldface omitted.) On this consolidated appeal, Ten-
X states its sole claim against Fat Property was the fifth cause of action for
fraud and asserts the trial court erred in granting nonsuit on that fraud
claim as to Fat Property. Accordingly, we need not—and do not—decide in
4
covenant of good faith and fair dealing against Lemmings and Lutsch;
(3) common counts against Lemmings and Lutsch; (4) promissory fraud
against Lemmings and Lutsch; and (5) fraud against all Defendants. The
complaint also attached two written agreements: the Marketing Agreement
and the Participation Terms.
II.
TRIAL
A. Evidence During Phase 1
Trial of the action was bifurcated. Trial of the first phase, on
liability and compensatory damages, began in April 2024. During that phase,
multiple witnesses testified, including Lutsch, four current employees of Ten-
X, and a former Tex-X employee. The evidence showed, among other things,
the following:
Lemmings purchased the Property in 2017 for approximately
$2,900,000. Lutsch is a real estate investor and is the manager and sole
owner of Lemmings. He also is the president and owner of Fat Property, a
property management company that provided management services to the
Property.
After a tenant at the Property vacated the premises, Lutsch
began looking to sell the Property, and he eventually discussed with Ten-X
the prospect of selling it at auction. Ten-X conducts online auctions of
commercial real estate. In exchange for a transaction fee (which is an amount
paid by the property buyer over and above the purchase price), Ten-X creates
a listing on its website, markets the property, conducts the auction, and
facilitates finalizing the sale to the successful bidder.
this opinion whether the first cause of action in the complaint was also
asserted against Fat Property.
5
On March 25, 2021, Lemmings entered into the Marketing
Agreement with Ten-X regarding the auction of the Property. Lutsch signed
the Marketing Agreement on behalf of Lemmings. The Marketing Agreement
listed the reserve price as $1,500,000, which is the minimum price at which
the Property could sell at the auction. It also specified how the transaction
fee would be calculated. For example, if the buyer’s offer price was $1,000,000
to $2,999,999, the transaction fee would be 3 percent of that price. The
Marketing Agreement also provided for a withdrawal fee in the event the
property owner withdrew the property from the auction. The withdrawal fee
was “[a]n amount equal to the Transaction Fee that would be applicable to a
sale at the Initial Reserve Price.”4
The Marketing Agreement also incorporated what it referred to
as Ten-X’s Marketing Agreement standard terms. Among other things, the
standard terms provided: “Neither Seller nor any of its affiliates, nor any of
their respective directors, members, managers, officers, partners, employees,
representatives or agents, shall enter any offer or bid for a Property on behalf
of Seller. Seller authorizes Ten-X to enter bids on behalf of Seller up to the
Reserve Price, unless otherwise prohibited by law.” The standard terms also
provided: “In no event shall any partner, member, shareholder, manager,
director, officer, agent, employee, representative or affiliate of any party have
any personal liability in connection with the Agreement. Despite anything to
the contrary in the Agreement or these Standard Terms, under no
4
If the seller withdrew the property more than 30 days before the
start of the first scheduled auction date, then only 50 percent of the
withdrawal fee would be due. Additionally, “[i]f the highest offer for the
Property is at or above the Reserve Price and Seller rejects it, Seller shall
immediately pay Ten-X the Transaction Fee based on that offer.”
6
circumstances shall any party hereto be liable to the other for, and each party
waives any and all rights to claim against the other for, any special, indirect,
incidental, consequential, punitive or exemplary damages in connection with
the Agreement or any services performed under the Agreement, including,
but not limited to, lost profits, even if such party has knowledge of the
possibility of such damages.”
To participate in a Ten-X auction, a bidder must first register to
bid on the Ten-X auction platform. That required a prospective bidder to not
only agree to abide by Ten-X’s Participation Terms but also to provide
additional information, including proof of funds.
One of the eventual bidders on the Property was named “Scott
Max,” which, unbeknownst to Ten-X at the time, was a fictitious name and
actually was Lutsch. Scott Max (i.e., Lutsch) agreed to Ten-X’s Participation
Terms on February 21, 2021. Among other things, the Participation Terms
provided that all offers are irrevocable (except where an offer withdrawal
option is expressly made available), and a “Winning Buyer must sign the
Purchase Documents within two hours after they are sent to Winning Buyer
(unless a longer timeframe is specified in writing by Ten-X).” The
Participation Terms also contained a liquidated damages provision.
For proof of funds, Scott Max submitted a document that
purported to be one of his bank records. In fact, however, the bank record was
a fake: it was actually a bank record for Fat Property that Lutsch had altered
to make it appear to be an account document for Scott Max. Among other
things, Lutsch altered the document to show a fictitious account balance of
more than $3,000,000.
In an email to a friend almost two months before the auction took
place, Lutsch explained that he intended to bid on his own property “to get it
7
up to where [he would] be happy to sell.” Lutsch indicated that, if he was the
highest bidder, he would simply “ghost” Ten-X.
And that is precisely what happened. The auction for the
Property began on June 1 and ended on June 3, 2021. There were multiple
bidders, including multiple bids from Lutsch, posing as Scott Max. Scott Max
eventually won the auction with a bid of $2,550,000. The next highest bidder
was at $2,425,000. When Lutsch learned his self-bid as Scott Max was the
highest bid, Scott Max stopped communicating with Ten-X. And when Ten-X
sent a contract package to Scott Max to finalize the sale, Lutsch did not
respond. This prompted Ten-X to conduct an investigation. Upon further
review of Scott Max’s proof of funds document within a few days after the
auction, Ten-X discovered an apparent reference to Fat Property, which it
recognized as one of Lutsch’s businesses. Ten-X then sent Lutsch an invoice,
addressed to Lemmings, for $79,900, which consisted of a transaction fee of
$76,500 (3 percent of $2,550,000) plus $3,400 for reimbursement for the cost
of two property reports (an environmental site assessment and a property
condition assessment) that Ten-X had obtained from third parties. Lutsch did
not pay it.
In October 2022, Lutsch sold the Property for $3,300,000.
Between the date of the auction and the date on which he sold the Property,
Lutsch collected rent of more than $300,000 from a tenant at the Property.
B. Defendants’ Motion for Nonsuit
After Ten-X rested its case at trial, Defendants moved for a
nonsuit. Among other things, they argued (1) there was no evidence Ten-X
suffered any independent harm on the fraud claims that was separate from
the harm it suffered for breach of contract, (2) the claim for breach of the
implied covenant of good faith and fair dealing was duplicative of the breach
8
of contract claim, and (3) there was no evidence Fat Property was a proper
defendant. The trial court granted the motion only as to Fat Property and
otherwise denied it.
C. Jury Verdict for Phase 1
On May 1, 2024, the jury, using the parties’ jointly submitted
special verdict forms, made findings in favor of Ten-X on its claims. On the
breach of contract cause of action, the jury awarded $79,900 against
Lemmings and $51,000 against Lutsch. On the cause of action for breach of
the implied covenant of good faith and fair dealing, the jury awarded $73,500.
On the common counts cause of action, the jury found the reasonable value of
the services provided to Lutsch and/or Lemmings was $10,000. On the
intentional misrepresentation cause of action, the jury awarded $73,500. On
the promissory fraud cause of action, the jury also awarded $73,500. The jury
also found Lemmings and Lutsch acted with malice, oppression, or fraud.
Additionally, on a “special verdict form for damages on multiple
legal theories” (capitalization and boldface omitted), the jury entered the
total amount for which Lutsch and Lemmings each was liable to Ten-X for
“breach of contract, breach of the implied covenant of good faith and fair
dealing, common counts for services rendered, promissory fraud, or fraud”:
the total was $124,500 for Lutsch and $163,400 for Lemmings.
D. Phase 2
During the second phase of the trial relating to the amount of
punitive damages, only two witnesses testified: Lutsch and an expert for Ten-
X. The expert testified Lutsch’s current net worth was around $64,000,000.
The jury awarded punitive damages of $5,400,000 against Lutsch and
$1,000,000 against Lemmings.
On May 22, 2024, the trial court entered judgment.
9
III.
POSTJUDGMENT MOTIONS, AMENDED JUDGMENTS, AND APPEALS
In June 2024, Lutsch and Lemmings moved for JNOV or,
alternatively, a new trial/remittitur. Ten-X opposed, and the parties
submitted additional filings related to the motions.
On August 2, 2024, the trial court held a hearing and ruled on
the motions. It denied the motions, except for the request for a remittitur
regarding the punitive damages award against Lutsch. On that issue, the
court ordered that Ten-X had 30 days to accept the remittitur of the punitive
damages against Lutsch to $1,790,000 or a new trial would be ordered.5 On
August 30, 2024, Ten-X filed its notice of acceptance of the remittitur of the
punitive damages against Lutsch to $1,790,000.
On September 3, 2024, Lutsch and Lemmings filed a single notice
of appeal (No. G064615). It stated they both appealed from the May 22, 2024
judgment; Lemmings also appealed from the order denying its motion for
JNOV; and Lutsch also appealed from the order granting his motion for new
trial/remittitur regarding punitive damages and denying his motion for
JNOV.
On September 19, 2024, the trial court entered the amended
judgment. On September 27, 2024, Ten-X filed a notice of appeal, indicating
it appealed from the September 19, 2024 amended judgment and the order
granting Lutsch’s motion for JNOV and/or remittitur on punitive damages
5
The trial court subsequently issued a minute order on August 7,
2024, that corrected nunc pro tunc the August 2, 2024 order; it also issued an
order on August 8, 2024, that made a further nunc pro tunc correction to the
August 7, 2024 order to note a signed transcript of the hearing would be
incorporated as the court’s statement of reasons.
10
that had been corrected nunc pro tunc (No. G064714). On October 1, 2024,
Lutsch and Lemmings filed a notice of cross-appeal, indicating they appealed
from the September 19, 2024 amended judgment. Their notice of cross-appeal
also stated Lemmings appealed from the order denying its motion for JNOV
and Lutsch appealed from the order granting his motion for new
trial/remittitur on punitive damages and denying his motion for JNOV.
On February 3, 2025, after additional filings by the parties
related to a proposed second amended judgment sought by Ten-X, the trial
court entered the second amended judgment. On February 21, 2025, Lutsch
and Lemmings filed a notice of appeal indicating they appealed from the
February 3, 2025 second amended judgment (No. G065240). That notice of
appeal again stated Lemmings appealed from the order denying its motion
for JNOV and Lutsch appealed from the order granting his motion for new
trial/remittitur on punitive damages and denying his motion for JNOV. Also
on February 21, 2025, Ten-X filed a notice of cross-appeal indicating it was
appealing from the February 3, 2025 second amended judgment and stating
that, by doing so, it also appealed from all prior orders and rulings, including
the order granting Lutsch’s motion for JNOV and/or remittitur on punitive
damages.6
This court consolidated all three appeals.7
6
On August 8, 2025, Lutsch and Lemmings filed a request for
judicial notice of three documents they contend relate to their “partial
satisfaction of the jury’s verdicts.” The request for judicial notice is denied as
those documents are unnecessary to the resolution of this appeal. (See County
of San Deigo v. State of California (2008) 164 Cal.App.4th 580, 613, fn. 29.)
7
There is a separate appeal regarding attorney fees
(No. G065826), which was stayed pending resolution of this consolidated
appeal. This opinion does not address No. G065826.
11
DISCUSSION
I.
FRAUD CLAIMS
A. JNOV Standard
“‘A trial court must render judgment notwithstanding the verdict
whenever a motion for a directed verdict for the aggrieved party should have
been granted. [Citation.] A motion for judgment notwithstanding the verdict
may be granted only if it appears from the evidence, viewed in the light most
favorable to the party securing the verdict, that there is no substantial
evidence in support. [Citation.] [¶] The moving party may appeal from the
judgment or from the order denying the motion for judgment notwithstanding
the verdict, or both. [Citation.] As in the trial court, the standard of review is
whether any substantial evidence—contradicted or uncontradicted—supports
the jury’s conclusion.’ [Citation.] However, to the extent a motion for
judgment notwithstanding the verdict raises legal issues such as the
application of law to undisputed facts or the interpretation of a statute or
contract, we review the trial court’s ruling on the motion de novo.” (Brown v.
City of Sacramento (2019) 37 Cal.App.5th 587, 597–598.)
B. The Economic Loss Rule and Independent Tort Principles
“The economic loss rule is a device, among others, that courts
have developed to address and protect the often elusive boundary line
between tort and contract law.” (Rattagan v. Uber Technologies, Inc. (2024)
17 Cal.5th 1, 19 (Rattagan).) “‘Whereas contract actions are created to enforce
the intentions of the parties to the agreement, tort law is primarily designed
to vindicate “social policy.”’” (Ibid.)
“As a result of this distinction between contract and tort claims,
parties injured solely by a contractual breach have a narrower set of remedies
12
compared to those available to litigants who suffered tortious injury.
‘Contract damages are generally limited to those within the contemplation of
the parties when the contract was entered into or at least reasonably
foreseeable by them at that time; consequential damages beyond the
expectations of the parties are not recoverable. [Citations.] This limitation on
available damages serves to encourage contractual relations and commercial
activity by enabling parties to estimate in advance the financial risks of their
enterprise.’” (Rattagan, supra, 17 Cal.5th at pp. 19–20.)
“Civil Code section 3333 further provides: ‘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.’ . . . Thus, emotional distress damages are
awarded under appropriate circumstances in tort actions but generally are
not available in contract actions. [Citations.] Additionally, exemplary or
punitive damages may be awarded in a tort action if by clear and convincing
evidence the tortfeasor is shown to have acted with ‘oppression, fraud, or
malice.’ [Citation.] But ‘punitive damages “‘are never recoverable for breach
of contract, no matter how willful or malicious, except where the wrongful act
is also a tort.’”’” (Rattagan, supra, 17 Cal.5th at p. 20.)
“Given the tension created by the policy of assuring predictability
in contractual relations and the expansive scope of potential tort recovery,
the economic loss rule was developed to ensure that the law of contract would
not ‘drown in a sea of tort.’ [Citation.] ‘The rule itself is deceptively easy to
state: In general, there is no recovery in tort for negligently inflicted “purely
economic losses,” meaning financial harm unaccompanied by physical or
property damage.’ [Citation.] Or, as [Robinson Helicopter Co., Inc. v. Dana
13
Corp. (2004) 34 Cal.4th 979] phrased the rule: ‘[t]he economic loss rule
requires a [contractual party] to recover in contract for purely economic loss
due to disappointed expectations, unless [the party] can demonstrate harm
above and beyond a broken contractual promise.’” (Rattagan, supra, 17
Cal.5th at p. 20.)
“[T]he economic loss rule does not act as an absolute bar to tort
recovery in every case in which the parties have a contractual relationship.
Courts generally permit tort suits if the defendant allegedly violated a duty
rooted in tort principles that is independent of the parties’ contractual rights
and obligations and exposed the plaintiff to a risk of harm beyond the parties’
reasonable contemplation when they entered into the contract. The ability to
recover for an independent tort is a fundamental principle that our courts
have broadly applied even where the economic loss rule is not directly
implicated.” (Rattagan, supra, 17 Cal.5th at p. 23, fn. omitted.) Rattagan
recognized that “[w]hether the alleged harm arises independently from the
contract can be a nuanced question.” (Id. at p. 26.)
“When evaluating whether the parties’ expectations and risk
allocations bar tort recovery, the court must consider the alleged facts. First,
applying standard contract principles, it must ascertain the full scope of the
parties’ contractual agreement, including the rights created or reserved, the
obligations assumed or declined, and the provided remedies for breach.
Second, it must determine whether there is an independent tort duty to
refrain from the alleged conduct. Third, if an independent duty exists, the
court must consider whether the plaintiff can establish all elements of the
tort independently of the rights and duties assumed by the parties under the
14
contract.” (Rattagan, supra, 17 Cal.5th at p. 26.)8 “If all the defendant has
allegedly done is violate the terms of the parties’ contract, depriving the
plaintiff of the benefits the contract ensures, the defendant’s liability is
limited by the contract. Broader tort liability only arises if a defendant
violates an independent legal duty and the type of harm that ensues was not
reasonably contemplated or accounted for by the contractual parties.”
(Rattagan, at p. 37.)
In Rattagan, the California Supreme Court addressed a question
that had been posed by the Ninth Circuit: “‘Under California law, are claims
for fraudulent concealment [as opposed to affirmative deception] exempted
from the economic loss rule?’” (Rattagan, supra, 17 Cal.5th at p. 38.) Our
Supreme Court stated the answer was yes because “the economic loss rule
does not apply to limit recovery for intentional tort claims like fraud. The
doctrine only applies to bar tort recovery for negligently inflicted economic
losses unaccompanied by physical or property damage under the limits
8
The California Supreme Court added, “[a]n important part of
this inquiry is determining whether the aggrieved party was exposed to a
risk of harm beyond the reasonable contemplation of the parties when they
entered into the contract. An unanticipated harm may result from the breach
of an independent tort duty. If, however, the harm was anticipated and the
risk allocated, the conduct causing it would not support an independent tort
claim.” (Rattagan, supra, 17 Cal.5th at p. 26, fn. 7.) It also noted, “[t]he
guiding and distinguishing principle is this. If the alleged breach is based on
a failure to perform as the contract provides, and the parties reasonably
anticipated and allocated the risks associated with the breach, the cause of
action will generally sound only in contract because a breach deprives an
injured party of a benefit it bargained for. However, if the contract reveals
the consequences were not reasonably contemplated when the contract was
entered and the duty to avoid causing such a harm has an independent
statutory or public policy basis, exclusive of the contract, tort liability may
lie.” (Id. at p. 27.)
15
recognized in” Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905.
(Rattagan, at p. 38.) Our Supreme Court, however, noted that this conclusion
did not “provide the dispositive answer the Ninth Circuit has requested,” and
thus, it reframed the question as: “Can a plaintiff assert an independent
claim of fraudulent concealment in the performance of a contract?” (Ibid.)
Our Supreme Court answered that question with a qualified yes, holding that
“[a] plaintiff may assert a tort claim for fraudulent concealment based on
conduct occurring in the course of a contractual relationship, if the elements
of the cause of action can be established independently of the parties’
contractual rights and obligations and the tortious conduct exposes the
plaintiff to a risk of harm beyond the reasonable contemplation of the parties
when they entered into the agreement.” (Ibid.)
Our Supreme Court further explained: “A case in which the
plaintiff sues a contractual party for fraud based on conduct committed
during the course of a contractual relationship falls outside the economic loss
doctrine. As we explained in [Robinson Helicopter Co., Inc. v. Dana Corp.,
supra, 34 Cal.4th 979], ‘[d]ealing with affirmative acts of fraud and
misrepresentation raises different policy concerns than those raised by
negligence or strict liability claims.’ [Citation.] California public policy
strongly supports imposing a tort duty on contractual parties to refrain from
fraudulent deceit and favors enforcement of valid fraud actions, which the
Legislature has facilitated through the enactment of the general fraud
statute. Thus, the analysis focuses on whether the plaintiff can establish the
elements of the cause of action independently of the parties’ contractual
rights and obligations. In other words, the question will turn on the nature of
the alleged conduct, the provisions of the contract itself, and whether the
conduct exposed a party to a risk of harm neither reasonably contemplated
16
nor allocated by the parties before entering their agreement. Parties
generally do not enter a contract expecting that its terms will be intentionally
ignored. However, to assure greater certainty between themselves, they may
choose at the outset to contractually guard against certain risks by imposing
specific obligations on the other party and allocate their agreed-upon
remedies should a breach occur. Among other reasons, they may choose to
provide for how violations will be treated, to provide greater deterrence for
some kinds of violations, or to eliminate the need to litigate regardless of
whether the breach was intentional or negligent. The freedom to do so,
however, is limited to agreements that do not violate public policy.”
(Rattagan, supra, 17 Cal.5th at p. 44.)
Here, Defendants argue Ten-X’s fraud claims are barred by the
economic loss rule and Ten-X failed to present evidence “that any
misrepresentation or trickery caused any harm cognizable in tort to Ten-X
separate and apart from the contractual breach (i.e. failure to pay the
transaction fee on the [Marketing] Agreement, and the failure to pay
liquidated damages on the Participation [Terms]).” We conclude Ten-X did
not prove an independent fraud claim, and the trial court therefore erred by
not granting JNOV as to the fraud claims.
As an initial matter, Ten-X argues defendants waived their
argument regarding the economic loss rule by failing to assert it in their
answer and raising it for the first time on appeal. Even if defendants were
required to assert the economic loss rule in their answer, we conclude they
sufficiently did so in their amended answer, which listed the economic loss
doctrine as an affirmative defense. Moreover, Lemmings and Lutsch argued
as part of both their motion for nonsuit and their motion for JNOV that Ten-
17
X had failed to present evidence of independent harm in connection with the
fraud claims. We do not find the argument waived.
Ten-X also asserts “the economic loss rules only apply to the
recovery of a plaintiff in a strict products liability tort action.” Ten-X is
incorrect. (See Rattagan, supra, 17 Cal.5th at p. 23 [“courts have gone on to
apply the economic loss rule in a broad range of contractual situations”].) As
discussed above, our Supreme Court’s recent decision in Rattagan extensively
discussed the economic loss rule and independent tort principles. Ten-X’s
appellate briefing, however, does not cite, and therefore does not raise any
arguments specifically based on either Rattagan, supra, 17 Cal.5th 1, or
Robinson Helicopter Co., Inc. v. Dana Corp., supra, 34 Cal.4th 979.
Ten-X’s fraud claims fail because Ten-X failed to show Lutsch’s
and Lemmings’s fraudulent conduct caused it to suffer any harm independent
of the breach of the rights and duties of the Marketing Agreement and the
Participation Terms. (See Rattagan, supra, 17 Cal.5th at p. 38 [noting third
step requires the court to “determine whether the plaintiff can establish all
elements of the tort independent of the rights and duties assumed by the
parties under the contract”]; see also id. at p. 37 [“[b]roader tort liability only
arises if a defendant violates an independent legal duty and the type of harm
that ensues was not reasonably contemplated or accounted for by the
contractual parties”].) On appeal, Ten-X argues its fraud damages were
reputational harm, the costs it incurred to investigate the bogus bid and
prosecute this case, and the marketing costs it incurred in connection with
18
the auction of the Property. None of these arguments supports an
independent tort here.9
The testimony Ten-X suffered harm to its reputation as a result
of the actions by Lutsch and Lemmings was entirely speculative and does not
constitute substantial evidence of cognizable reputation damage. At most,
Ten-X presented testimony concerning the importance to Ten-X of its
reputation and its ability to conduct trustworthy auctions, and how Ten-X’s
reputation could be negatively impacted by the kind of conduct Lutsch and
Lemmings engaged in.10 But that testimony does not demonstrate Ten-X
9
Ten-X also argues Lutsch and Lemmings raised for the first
time on appeal a lack of causation and damages. As discussed above, they
argued in the trial court that Ten-X had failed to present evidence of
independent harm in connection with the fraud claims. Moreover, an
appellant “may raise its sufficiency of the evidence argument for the first
time on appeal.” (See Kaushansky v. Stonecroft Attorneys, APC (2025) 109
Cal.App.5th 788, 798.)
10 For example, a Ten-X employee testified that, if a buyer wins
an auction but does not close the deal, “it hurts . . . our reputation. So if we
have buyers bidding on assets and they don’t honor their bids, then the
sellers will be upset with us because the bidders that participated in the
event, in their opinion, weren’t real bidders. So it usually hurts us from doing
ongoing business with those sellers. [¶] And then from the buyers’ side of the
table, when buyers hear the broker call them after the auction and say, you
know, the winning bidder didn’t perform. Do you want to buy the property, it
dissuades them from participating in future auction events. Because they
now know that there’s the opportunity that the properties selling on Ten-X
are no longer selling on Ten-X and they have the opportunity to buy them
after the auction. So then it deters them from participating in future auction
events.” That Ten-X employee also added, “it damages our reputation if we’re
showing things as sold in auction and they’re not actually sold in auction,”
and “if Ten-X is known for the platform that has fraudulent buyers or shaky
buyers, then sellers are no longer going to want to auction their properties on
Ten-X and buyers aren’t going to want to buy on the Ten-X platform because
they don’t know if they’re competing with a real person or a fake person.”
19
actually suffered any cognizable harm to its reputation from the auction here.
Notably, Ten-X cites no testimony that any potential buyers or sellers had
heard about the problem with the auction in this case or that any potential
buyers or sellers had refused to do business (or continue to do business) with
Ten-X because of concern about fraudulent bidding. Indeed, Ten-X’s vice
president of sales admitted he was not aware of any business that had been
lost by Ten-X because of this auction; nor was he aware of anyone outside of
Ten-X who even knew what had happened.11 Nor did Ten-X present any
expert testimony on this issue.12
Regarding its costs to investigate, Ten-X again cites to no
testimony that sufficiently established such costs. At most, there was some
general testimony that Ten-X employees conducted an investigation and
discovered Scott Max’s identity shortly after the auction.13 But there was no
testimony about what that investigation cost or how much employee time or
other resources Ten-X expended in conducting the investigation. Ten-X
suggests its legal costs in prosecuting this action should be considered, but it
11
Ten-X notes it filed this public lawsuit but, again, points to no
evidence at trial of any lost business or even any potential buyers or sellers
who had heard about the problem with the auction of the Property.
12
In denying the motion for nonsuit, the trial court noted “the
implication by at least two witnesses [is] that the reputation is harmed,”
which is “quantifiable.” For the reasons discussed, we disagree there was
sufficient evidence of reputational harm.
13
Ten-X claims it “was also forced to expend substantial
resources and time investigating the matter, and then pursuing its claims in
litigation.” Ten-X’s record citations for this assertion are to testimony from a
Ten-X employee that Ten-X looked at its prior communications with Scott
Max and looked into the Scott Max account and Scott Max’s bid history.
20
cites no authority that the attorney fees incurred to bring and prosecute this
action are considered cognizable fraud damages. (See Pulliam v. HNL
Automotive Inc. (2022) 13 Cal.5th 127, 141 [“‘attorney’s fees qua attorney’s
fees’—that is, the fees ‘attributable to the bringing of the . . . action itself’—
are not an element of damages”].)
Ten-X’s reference to its marketing and related costs to conduct
the auction is also unavailing. Those costs were within the contemplation of
the Marketing Agreement and Participation Terms and the contractually-
provided remedies. The Marketing Agreement and Participation Terms
contemplated Ten-X would incur costs related to the auction. And if the
auction did not occur because the seller withdrew or the bidder failed to
consummate the purchase of the property, there were contractually-specified
remedies for those eventualities, namely the withdrawal fee in the Marketing
Agreement and the liquidated damages provision in the Participation Terms.
C. Punitive Damages
Given our conclusion that Ten-X’s fraud claims fail for lack of
proof of damages independent from those embraced by the contract claims,
there is no tort claim to support the punitive damages award. (See Rattagan,
supra, 17 Cal.5th at p. 20; Civ. Code, § 3294, subd. (a) [“In an action for the
breach of an obligation not arising from contract, where it is proven by clear
and convincing evidence that the defendant has been guilty of oppression,
fraud, or malice, the plaintiff, in addition to the actual damages, may recover
damages for the sake of example and by way of punishing the defendant”].)
Thus, Ten-X cannot recover punitive damages, and JNOV also should have
21
been granted as to the awards of punitive damages against Lemmings and
Lutsch.14
II.
BREACH OF CONTRACT, BREACH OF THE IMPLIED COVENANT OF GOOD FAITH
AND FAIR DEALING, AND COMMON COUNT
A. Breach of Contract Claim Against Lutsch
The theory at trial for the breach of contract claim against Lutsch
was based on his breach of the Participation Terms. Lutsch argues, however,
that breach of the Participation Terms was not a pleaded claim. According to
Lutsch, the breach of contract claim asserted in the complaint was only for
breach of the Marketing Agreement, and although the Participation Terms
were attached to and referenced in the complaint, that was not sufficient to
state a cause of action for breaching them.
Lutsch’s argument fails because, even if it was not sufficiently
clear in the complaint that the breach of contract claim against Lutsch was
based at least in part on his breach of the Participation Terms, he has not
shown prejudice. “‘It is well settled that the failure of a complaint to state a
cause of action is not fatal to a judgment for the plaintiff unless the appellant
can show that the error has resulted in a miscarriage of justice. Where the
parties at the trial treat a certain issue as being involved, and the judgment
is based on that issue, it is not a prejudicial error that the complaint
defectively alleges or fails to allege at all that issue.’ [Citation.] As our
Supreme Court has explained, ‘variance between pleadings and proof is not a
basis for reversal unless it prejudicially misleads a party. A variance must be
14
Ten-X’s argument on appeal that the trial court erred in
ordering remittitur of the amount of punitive damages as to Lutsch is
therefore moot.
22
disregarded if the issues on which the decision is actually based were fully
and fairly tried.’” (Howard v. American National Fire Ins. Co. (2010) 187
Cal.App.4th 498, 523; see also Hayes v. Richfield Oil Corp. (1952) 38 Cal.2d
375, 382 [“A variance between the allegations of a pleading and the proof will
not be deemed material unless it has actually misled the adverse party to his
prejudice in maintaining his action or defense on the merits, and a variance
may be disregarded where the action has been as fully and fairly tried on the
merits as though the variance had not existed”].)
Here, there was no prejudice to Lutsch. The complaint attached
the Participation Terms and alleged Lutsch “accepted the Participation
Terms for the auction and used this false persona to bid on the listing for the”
Property. The complaint’s prayer of relief specifically asked for liquidated
damages under the Participation Terms. It was clear from the complaint that
Lutsch’s breach of the Participation Terms was at issue. That was also
reinforced at trial. For example, there were numerous questions during trial
regarding Lutsch’s breach of the Participation Terms. Indeed, during cross-
examination of the first witness at trial, Lutsch’s own trial counsel asked:
“Cody Lutsch is being sued—is it your understanding that Cody Lutsch is
being sued under that participation contract in addition to other reasons, but
he’s being sued under that contract?”15 Additionally, in a colloquy outside of
the presence of the jury, the court asked the parties how Lutsch is personally
liable for breach of contract, and Ten-X’s trial counsel responded that Lutsch
is liable for breach of the Participation Terms.
15
The witness did not answer because the trial court sustained
an objection, but this question further supports that Lutsch was aware of this
issue.
23
Lutsch argues he was prejudiced because he “presented no
defense related to the alleged breach of the Participation Terms and objected
to it by way of a motion for a nonsuit.” Lutsch—who admitted he created the
fake Scott Max account, won the auction with the fake account, and then
disappeared when Ten-X sent the purchase contracts—provides no
explanation of what defense he might have offered. Moreover, as discussed
above, it is clear from the complaint that Lutsch’s breach of the Participation
Terms was at issue in the case. Lutsch had sufficient opportunity to present a
defense had he chosen (and been able) to do so.16
Additionally, Lutsch points to the clause in the Marketing
Agreement that provides, “[i]n no event shall any partner, member,
shareholder, manager, director, officer, agent, employee, representative or
affiliate of any party have any personal liability in connection with the
Agreement.” According to Lutsch, only Ten-X and Lemmings are parties to
the Marketing Agreement, and “[a]s Lemmings’ principal officer, Lutsch is
exempted from liability by this contractual provision for any claim made ‘in
connection with’ the Marketing Agreement.” Lutsch asserts, “[t]here can be
no genuine dispute that all of Lutsch’s conduct was ‘in connection with’ the
16
In the opening brief on appeal, Lutsch faults Ten-X for not
requesting in the trial court to amend the complaint to conform to proof. In
the reply, Lutsch also argues “it would have been an abuse of discretion for
the trial court, far less this Court, to grant Ten-X leave to amend its
complaint to allege a wholly new cause of action.” To the extent Lutsch is
suggesting in his reply brief that the trial court could not have granted a
motion to amend to conform to proof if Ten-X had made such a request,
Lutsch forfeited that argument by failing to make it in his opening brief. (See
Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 852, fn. 10 [“As
a general rule, points not addressed until a reply brief will not be considered
unless good reason is shown for failing to address them earlier”].)
24
Marketing Agreement. His conduct in bidding could not have occurred but for
the auction arising from the Marketing Agreement.”
We disagree that this provision in the Marketing Agreement bars
the breach of contract claim against Lutsch. Lutsch cites to cases for the
proposition that “the term ‘in connection with’ is broad.” (See, e.g., Mountain
Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744, 757
[“the term ‘in connection with’ is broad, and has been interpreted to extend to
both contract and tort claims in a contractual attorney fees provision”].) We
do not disagree with that proposition. But it is not so broad as to exculpate
Lutsch from his breach, when masquerading as Scott Max, of the separate
Participation Terms.
B. Breach of the Implied Covenant of Good Faith and Fair Dealing
“Every contract, insurance or otherwise, imposes on each party a
covenant of good faith and fair dealing in its performance and enforcement.”
(Wexler v. California FAIR Plan Assn. (2021) 63 Cal.App.5th 55, 61.) “The
covenant of good faith and fair dealing, implied by law in every contract,
exists merely to prevent one contracting party from unfairly frustrating the
other party’s right to receive the benefits of the agreement actually made.
[Citation.] The covenant thus cannot ‘“be endowed with an existence
independent of its contractual underpinnings.”’ [Citations.] It cannot impose
substantive duties or limits on the contracting parties beyond those
incorporated in the specific terms of their agreement.” (Guz v. Bechtel
National, Inc. (2000) 24 Cal.4th 317, 349–350.) “Because the implied good
faith duty is a contract term, compensation for its breach has almost always
been limited to contract rather than tort remedies. [Citation.] We italicize
almost because there is an exception to the general rule: insurance contracts.”
(Wexler, at p. 62.) Additionally, “[i]f the allegations do not go beyond the
25
statement of a mere contract breach and, relying on the same alleged acts,
simply seek the same damages or other relief already claimed in a companion
contract cause of action, they may be disregarded as superfluous as no
additional claim is actually stated.” (Careau & Co. v. Security Pacific
Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1395; see also Guz, at
p. 352 [“insofar as the employer’s acts are directly actionable as a breach of
an implied-in-fact contract term, a claim that merely realleges that breach as
a violation of the covenant is superfluous”].)
Lutsch and Lemmings argue the claim for breach of the implied
covenant was “superfluous and should not have supported an award of
damages.” They assert the damages for this claim were already subsumed in
the damages awarded to Lemmings on the breach of contract claim, and
“Ten-X cannot recover the same contractual damages twice.”
We conclude the claim for breach of the implied covenant of good
faith and fair dealing, as properly construed, is superfluous because it could,
at most, yield the same contractual damages as the breach of contract claim,
on which Ten-X succeeded and for which it recovered compensatory
damages.17 Ten-X recovered contractual remedies of $79,900 against
Lemmings and $51,000 against Lutsch as a result of its success on the breach
of contract claim, and Ten-X does not argue it was error for it not to be
awarded more on that claim. Instead, Ten-X argues its claim for breach of the
covenant of good faith and fair dealing sought additional damages, referring
again to purported damages to its reputation, for its costs to investigate and
prosecute this action, and for its marketing costs. Ten-X, however, cites no
17
In light of our conclusion, we need not address the parties’
other arguments regarding the claim for breach of the implied covenant of
good faith and fair dealing.
26
applicable authority that would permit tort damages to be awarded on its
claim for breach of the covenant of good faith and fair dealing. Ten-X cannot
recover tort damages because this case does not fall within the limited
exception in insurance litigation. Thus, the trial court erred by not granting
JNOV on the claim for breach of the implied covenant of good faith and fair
dealing against Lemmings and Lutsch.
C. Common Count
The second amended judgment awarded $10,000 against
Lemmings on the common count for quantum meruit. Lemmings argues Ten-
X cannot recover for quantum meruit because it recovered on the breach of
contract claim. We agree. “A plaintiff may not . . . pursue or recover on a
quasi-contract claim if the parties have an enforceable agreement regarding a
particular subject matter.” (Klein v. Chevron U.S.A., Inc. (2012) 202
Cal.App.4th 1342, 1388.) Here, Lemmings and Ten-X had an express
contract—the Marketing Agreement—that covered Ten-X’s marketing and
auction of the Property, including how Ten-X would be paid, i.e., the
transaction fee or withdrawal fee. Ten-X was awarded $79,900 on its breach
of contract claim against Lemmings. Ten-X cannot also recover against
Lemmings for quantum meruit, and the judgment on this claim must be
reversed.18
18
Ten-X suggests Lemmings waived this argument by not
asserting an affirmative defense of “election of remedies” in its answer to the
complaint. We find no such waiver. The problem with the quantum meruit
count is not that Ten-X had to elect between two inconsistent remedies, i.e.,
one remedy (breach of contract) based on the existence of the contract and
another remedy (quantum meruit) based on an allegation that the contract
was void or rescinded. (See Bowser v. Ford Motor Co. (2022) 78 Cal.App.5th
587, 623 [“‘The doctrine of election of remedies “‘“has been generally limited
to a choice by a party between inconsistent remedial rights, the assertion of
27
In sum, on its claims, Ten-X may recover: (1) $79,900 against
Lemmings for breach of contract and (2) $51,000 against Lutsch for breach of
contract.19
III.
JURY INSTRUCTIONS
Lutsch and Lemmings argue the judgment should be reversed
because the trial court provided erroneous instructions to the jury. According
to Lutsch and Lemmings, “the court told the jury that Lemmings and Lutsch
breached the contract(s) and violated their respective duties to act fairly and
in good faith.” Lutsch and Lemmings assert the jury instructions
unequivocally advised the jury that Lutsch had breached the Participation
Terms, Lemmings had breached the Marketing Agreement, Ten-X had
performed under the Marketing Agreement, and Lutsch and Lemmings had
violated their duty to act fairly and in good faith. For example, one of the
jointly submitted jury instructions regarding breach of contract included the
following statement: “Lutsch violated the Participation Terms when he
assumed the false persona of ‘Scott Max’ to bid on the listing for the Houston
Property but failed to pay obligations as the winning bidder and failed to pay
one being necessarily repugnant to or a repudiation of the other”’”’”].) Ten-X
did not allege in its quantum meruit count that the Marketing Agreement
was void or rescinded.
19
On appeal, Lutsch does not provide developed argument that
the $51,000 awarded against him under the liquidated damages provision of
the Participation Terms is duplicative of the damages awarded against
Lemmings under the Marketing Agreement. We therefore deem the issue
waived. (See Benach v. County of Los Angeles, supra, 149 Cal.App.4th at
p. 852.)
28
Ten-X for its services.”20 Lutsch and Lemmings contend these issues should
have been decided by the jury.
If there was error on this point, Lutsch and Lemmings invited it.
“Under the doctrine of invited error, when a party by its own conduct induces
the commission of error, it may not claim on appeal that the judgment should
be reversed because of that error.” (Mary M. v. City of Los Angeles (1991) 54
Cal.3d 202, 212.) “It has been said that the invited error doctrine ‘applies
“with particular force in the area of jury instructions. . . .”’ [citation], and
numerous cases have held that a party who requests, or acquiesces in, a
particular jury instruction cannot appeal the giving of that instruction.”
(Transport Ins. Co. v. TIG Ins. Co. (2012) 202 Cal.App.4th 984, 1000.) The
jury instructions Lutsch and Lemmings now complain about were jointly
submitted; thus, any error was invited. (See Davis v. Harano (2022) 79
Cal.App.5th 688, 692 [holding the party “cannot now argue these instructions
or this verdict form are cause for reversal” where they were jointly submitted
by his counsel].)
Lustch and Lemmings contend “the law is well established that
parties cannot waive objections to, or otherwise stipulate to or invite error
regarding, jury instructions that are legally erroneous.” “‘[W]hen a trial court
gives a jury instruction which is prejudicially erroneous as given, i.e., which
is an incorrect statement of law, the party harmed by that instruction need
not have objected to the instruction or proposed a correct instruction of his
own in order to preserve the right to complain of the erroneous instruction on
20
In a discussion regarding jury instructions, the trial court
noted that, if the parties wanted to stipulate to certain facts, they could state
that fact in the jury instructions and would not also need to add language to
the effect that the parties stipulate that something is true.
29
appeal.’” (Maureen K. v. Tuschka (2013) 215 Cal.App.4th 519, 530.) But
whether a party may raise an objection to a jury instruction in a civil case for
the first time on appeal is not the same as whether the doctrine of invited
error is inapplicable. As discussed, “numerous cases have held that a party
who requests, or acquiesces in, a particular jury instruction cannot appeal
the giving of that instruction.” (Transport Ins. Co. v. TIG Ins. Co., supra, 202
Cal.App.4th at p. 1000.)
Relying on Code of Civil Procedure section 647,21 Lutsch and
Lemmings suggest they had made their positions known, did not need to
object to the jury instructions, and acquiesced to a judicial determination.
(See Mary M. v. City of Los Angeles, supra, 54 Cal.3d at p. 212 [“the doctrine
does not apply when a party, while making the appropriate objections,
acquiesces in a judicial determination”].) We disagree that Lutsch and
Lemmings’s prior objections and arguments and the trial court’s comments
eliminated any invited error. Regarding the Participation Terms, Lutsch and
Lemmings point to no comments by the trial court requiring them to
effectively stipulate that Lutsch violated the Participation Terms. Although
the trial court indicated it would permit the breach of contract claim against
Lutsch to be based on the Participation Terms, if Lutsch had intended to
21
Code of Civil Procedure section 647 provides: “All of the
following are deemed excepted to: . . . giving an instruction, refusing to give
an instruction, or modifying an instruction requested; an order or decision
made in the absence of the party or an order granting or denying a nonsuit or
a motion to strike out evidence or testimony; a ruling sustaining or overruling
an objection to evidence; and any statement or other action of the court in
commenting upon or in summarizing the evidence. If the party, at the time
when the order, ruling, action or decision is sought or made, or within a
reasonable time thereafter, makes known his position thereon, by objection or
otherwise, all other orders, rulings, actions or decisions are deemed to have
been excepted to.” (Ibid.)
30
dispute whether he had, in fact, violated the Participation Terms, he should
not have agreed to the jury instruction stating that he had.22 (See Davis v.
Harano, supra, 79 Cal.App.5th at p. 692 [“You may lose on a general point,
but you still must alert the court to particular errors you see in the proposed
wording of a jury instruction or a verdict form”].) Lutsch and Lemmings also
cite no comment by the trial court that required them to concede in the jury
instructions that Lemmings had breached the Marketing Agreement and
Ten-X had performed under the Marketing Agreement.
IV.
NONSUIT AS TO FAT PROPERTY
“A defendant is entitled to a nonsuit if the trial court determines
that, as a matter of law, the evidence presented by plaintiff is insufficient to
permit a jury to find in his favor. [Citation.] ‘In determining whether
plaintiff’s evidence is sufficient, the court may not weigh the evidence or
consider the credibility of witnesses. Instead, the evidence most favorable to
plaintiff must be accepted as true and conflicting evidence must be
disregarded. The court must give “to the plaintiff[’s] evidence all the value to
which it is legally entitled, . . . indulging every legitimate inference which
may be drawn from the evidence in plaintiff[’s] favor.”’ [Citation.] A mere
‘scintilla of evidence’ does not create a conflict for the jury’s resolution; ‘there
must be substantial evidence to create the necessary conflict.’” (Nally v. Grace
Community Church (1988) 47 Cal.3d 278, 291.)
22
Similarly, although the trial court denied a motion for nonsuit
as to the claim for breach of the implied covenant of good faith and fair
dealing, that ruling did not require Lemmings and Lutsch to agree they had,
in fact, violated the duty to act fairly and in good faith.
31
“We review a grant of nonsuit de novo. [Citation.] ‘“In an appeal
from a judgment of nonsuit, the reviewing court is guided by the . . . rule
requiring evaluation of the evidence in the light most favorable to the
plaintiff.”’ [Citations.] However, a judgment of nonsuit must not be reversed
if plaintiff’s proof raises nothing more than speculation, suspicion, or
conjecture.” (Doe v. Los Angeles County Dept. of Children & Family Services
(2019) 37 Cal.App.5th 675, 682; see also IIG Wireless, Inc. v. Yi (2018) 22
Cal.App.5th 630, 650 [“evidence that raises mere conjecture or speculation is
insufficient”].)
On appeal, Ten-X asserts, “[v]iewing the evidence in the light
most favorable to Ten-X, there is at least some substance to its evidence
against Fat Property for intentional misrepresentation.” Ten-X says its fraud
claim against Fat Property “only involves Lutsch’s misrepresentations in
creating a bogus ‘Scott Max’ account and using Fat Property’s bank
statement to forge the proof of funds.” According to Ten-X, “the trial court
should have, viewing the light most favorable to Ten-X, found that there [sic]
at least some substance to Ten-X’s evidence that Lutsch was acting in his
capacity as President and owner to use Fat Property’s resources to defraud
Ten-X.”
Viewing the evidence in the light most favorable to Ten-X, we
conclude the trial court properly granted nonsuit as to Fat Property. There is
no substantial evidence Lutsch made a false statement to Ten-X acting in his
capacity as the president and owner, or otherwise as an agent, of Fat
32
Property. Ten-X’s arguments on appeal do not show the trial court erred in
granting nonsuit as to Fat Property.23
Ten-X contends the trial court applied the wrong legal standard.
Ten-X appears to focus on the court’s comment, when addressing the motion
for nonsuit, that “[b]ased on the state of the evidence, I don’t see that there’s
been a burden met . . . .” We do not understand the court’s comments to
suggest it applied the wrong standard. As the plaintiff, Ten-X did have the
burden to prove its fraud claim against Fat Property at trial. The court’s
comment does not show it was applying the wrong standard on a motion for
nonsuit, which does not eliminate the need for Ten-X to produce sufficient
evidence to support its claim. In any event, our review is de novo.
Ten-X asserts Fat Property is constrained by the grounds
asserted in its motion for nonsuit, which according to Ten-X, were only that
Fat Property had no dealings with Ten-X employees and was not a signatory
to any agreement. (See Carson v. Facilities Development Co. (1984) 36 Cal.3d
830, 839 [“Only the grounds specified by the moving party in support of its
motion should be considered by the appellate court in reviewing a judgment
of nonsuit”]. Thus, Ten-X contends Fat Property has forfeited many of its
arguments, including that Lutsch was not acting in his capacity as president
or as an agent of Fat Property when he made the misrepresentations. We
disagree with Ten-X’s cramped reading of Fat Property’s motion for nonsuit.
Fat Property argued in its motion there was no evidence it was a proper
defendant in the lawsuit, and it “had no dealings with any of [Ten-X’s]
23
Ten-X does not address whether Fat Property can be liable for
fraud if the fraud claims against Lemmings and Lutsch fail. We need not
address that issue in light of our conclusion the trial court did not err in
granting nonsuit as to Fat Property.
33
employees, was not a signatory to any legal agreement, and is an entirely
innocent of all claims in this lawsuit.” Moreover, during argument on the
nonsuit motion, Ten-X’s trial counsel attempted to rebut the argument that
Fat Property was not a proper defendant by arguing Lutsch was acting on
behalf of Fat Property.
Ten-X relies on evidence that the altered bank record Lutsch
presented to Ten-X was a Fat Property bank statement. But that is not
substantial evidence that Lutsch was acting in his capacity as president and
owner of Fat Property when he submitted the fabricated bank record to Ten-
X. By pretending to be Scott Max and submitting the falsified document,
Lutsch was able to register as a bidder and drive up the price of the Property;
but Lemmings was the owner of the Property and the party to the Marketing
Agreement, not Fat Property. There also is no evidence Ten-X believed at the
time Scott Max was acting on behalf of Fat Property.24
Ten-X notes that Lutsch listed his Fat Property email address on
the Marketing Agreement he signed on behalf of Lemmings and argues this
shows “Lutsch was acting [sic] his capacity as President and owner of Fat
Property to sign an agreement with Ten-X for Lemmings.” But the owner of
the Property and the party to the Marketing Agreement was Lemmings, not
Fat Property, and the Marketing Agreement clearly lists the seller as
Lemmings and states Lutsch was signing as president of Lemmings. Lutsch’s
use of a Fat Property email address as his contact information did not make
24
Citing Corporations Code sections 17703.01 and 17704.08,
subdivision (d)(2)(A), Ten-X argues Lutsch was an agent of Fat Property
because he was its president and manager/member. Although Lutsch is an
agent of Fat Property, that does not mean he always acted in that capacity.
34
Fat Property a party to the Marketing Agreement; nor is it substantial
evidence Lutsch was acting on behalf of Fat Property.
Ten-X argues there are also emails showing Lutsch using his Fat
Property email address. Ten-X, however, does not argue any of them contain
a false statement to Ten-X that is the basis of the fraud claim against Fat
Property. Moreover, these emails are not substantial evidence Lutsch was
acting on behalf of Fat Property when he provided false information to Ten-
X.25 Ten-X also asserts Fat Property collected rent from the Property after
the auction until the Property was eventually sold. But Fat Property’s
collection of rent does not demonstrate it made a false statement to Ten-X;
nor is it substantial evidence Lutsch was acting on behalf of Fat Property
when he provided false information to Ten-X.
Ten-X argues Jacobs v. Freeman (1980) 104 Cal.App.3d 177 and
Copeland v. Rabing (1952) 110 Cal.App.2d 631 support reversal of the
nonsuit here. They do not. In Jacobs, the court reversed a grant of nonsuit on
a breach of contract claim as to a company and on a fraud claim as to the
company and its senior vice president related to the sale of land by the
defendant company. (Jacobs, at pp. 181–182, 191–193.) Jacobs does not
support Ten-X’s assertion that Fat Property is liable for fraud here, as there
was no dispute in Jacobs that individuals who made the alleged
25
In its opening brief, Ten-X cites to trial testimony about the
emails that were admitted into evidence at trial as parts of exhibits 61 and
125. Defendants attached exhibits 61 and 125 to their combined reply and
cross-respondents’ brief. Ten-X argues we should disregard these two exhibits
because attaching them violated rule 8.204(d) of the California Rules of
Court. We disagree. That rule permits a party to attach to its brief copies of
exhibits that are in the appellate record. (Ibid.) And “[a]ll exhibits admitted
in evidence, refused, or lodged are deemed part of the record, whether or not
the appendix contains copies of them.” (Cal. Rules of Court, rule 8.124(b)(4).)
35
misrepresentations were acting as agents for the company. (See ibid.) The
Copeland court reversed the grant of nonsuit for fraud, but it did not address
agency principles for a corporation. (Copeland, at p. 637.)
DISPOSITION
The August 2, 2024 order (as corrected nunc pro tunc) and the
second amended judgment are affirmed in part and reversed in part, and the
matter is remanded to the trial court with directions to enter an amended
judgment consistent with this opinion. Lutsch and Lemmings’s request for
judicial notice is denied. In the interests of justice, the parties are to bear
their own costs on appeal.
GOODING, ACTING P. J.
WE CONCUR:
SCOTT, J.
SCHWARM, J.*
*Judge of the Orange County Superior Court, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.
36