Svaco v. Fusina
Filed 4/18/13 Svaco v. Fusina CA4/1
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
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publication or ordered published for purposes of rule 8.1115
COURT
OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION
ONE
STATE
OF CALIFORNIA
ESTHER KEEFE SVACO as Trustee,
etc.,
Plaintiff and Appellant,
v.
JOSEPH FUSINA,
Defendant and Respondent.
D058954
(Super. Ct.
No.
37-2009-00054498-CU-OR-NC)
ESTHER KEEFE SVACO as Trustee
etc.
Plaintiff and Appellant,
v.
JOSEPH FUSINA,
Defendant and Respondent.
APPEAL from
a judgment of the Superior Court
of
County, Robert P. Dahlquist, Judge. Affirmed as modified.
I.
INTRODUCTION
Joseph
Fusina purchased a five-acre parcel of undeveloped land (the Fusina Parcel or
Fusina's Parcel) from Eveline Bustillos (Eveline). At the time of the sale, Eveline also owned a
separate parcel (the Eveline Parcel or Eveline's Parcel) located in the same
general vicinity as the Fusina Parcel.
Around the time of the sale of the Fusina Parcel, Eveline transferred
Eveline's Parcel to a trust, of which Esther Keefe Svaco is the trustee, and
Eveline and others are beneficiaries.
Neither Fusina's Parcel nor Eveline's Parcel is adjacent to a public
road. Access to Fusina's Parcel and
Eveline's Parcel is gained by way of a private access road (Access Road) that
traverses several parcels,
name="_ftnref1" title="">[1] including Eveline's Parcel and Fusina's
Parcel. The Access Road reaches
Eveline's Parcel first, then splits and continues on to Fusina's Parcel.
Svaco filed
this lawsuit in which she contended that a provision in the covenants,
conditions, and restrictions (CC&Rs) governing Fusina's Parcel and
Eveline's Parcel required Fusina to contribute one-third of the costs related
to improvements to the Access Road.
Svaco sought to impose an equitable lien in the amount of $242,860.84 on
Fusina's Parcel, and also brought claims for
based on Fusina's alleged obligation to contribute to the costs of improving
the Access Road. Fusina filed a
cross-complaint in which he brought claims that included breach of contract and
fraudulent concealment against
Eveline, and a claim for rescission against Eveline and Svaco. Fusina's claims were based on his allegation
that Eveline concealed her plan to construct the improvements to the Access
Road prior to selling him the Fusina Parcel.
After a
bench trial, the trial court ruled in Fusina's favor on all of Svaco's causes
of action. The court noted that the
CC&Rs required that those who used the Access Road to pay equal shares of
the "costs of construction, [and] mutually agreed upon costs of
improvements." The court determined
that the costs that Svaco sought were for "improvements" and that
they were not chargeable to Fusina because they had not been
" 'mutually agreed upon.' "
On Fusina's cross-complaint, the trial court found that Eveline had
concealed her plan to perform substantial and expensive work on the Access Road
and to charge Fusina one-third of the costs.
Based on this concealment, the trial court permitted Fusina to rescind
the purchase agreement for the Fusina Parcel. The court stated that if Fusina chose not to
rescind the purchase agreement, he would receive $1.00 in damages from Eveline
and would retain the Fusina Parcel.
Fusina subsequently elected the rescission remedy. The court entered judgment awarding Fusina
nominal damages on his breach of contract and concealment claims, and specified
the terms by which Fusina could effectuate a rescission of the purchase
agreement for the Fusina Parcel. The
court also awarded Fusina approximately $137,000 in fees and costs as the
prevailing party.
Eveline and
Svaco filed a joint notice of appeal. In
their brief on appeal, with respect to Fusina's cross-complaint, Eveline
contends that the trial court erred in finding that she fraudulently procured
Fusina's consent to the purchase agreement for the Fusina parcel. Specifically, Eveline contends that the trial
court erred in finding that she committed fraud by concealment in failing to
disclose to Fusina her plan to improve the Access Road. In addition, with respect to the claims in
her complaint, Svaco contends that the trial court erred in concluding that the
costs related to constructing the Access Road were not chargeable to
Fusina. Eveline and Svaco also contend
that we must strike those portions of the judgment that grant Fusina
affirmative relief on his breach of contract and concealment causes of action,
in light of Fusina's election to rescind the agreement on which those causes of
action are based.
We conclude that the trial court
did not err in permitting Fusina to rescind the purchase agreement for Fusina's
Parcel based on Eveline's fraudulent concealment of her plan to improve the
Access Road and to charge Fusina for one-third of the costs of the
improvements. In light of our affirmance
of the trial court's judgment permitting Fusina to rescind the purchase
agreement for the Fusina Parcel, Fusina cannot be liable for claims premised on
the CC&Rs governing the Fusina Parcel since those CC&Rs are not binding
on him. Accordingly, we affirm the trial
court's ruling in favor of Fusina on Svaco's claims, all of which are premised
on the CC&Rs. Finally, we strike
those portions of the judgment granting Fusina affirmative relief on Fusina's
breach of contract and concealment causes of action, because such relief is inconsistent
with Fusina's election to rescind the purchase agreement. As so modified, we affirm the judgment.
II.
FACTUAL AND PROCEDURAL BACKGROUND
A.
Svaco's
complaint
Svaco filed a complaint against
Fusina in which she alleged that she was the legal owner of Eveline's Parcel
and that Fusina was the owner of Fusina's Parcel. Svaco alleged that both Fusina's Parcel and
Eveline's Parcel were bound by CC&Rs governing the parcels. Svaco alleged that one of the terms of the
CC&Rs stated, " 'All property owners have to contribute to the
construction, maintenance and improvement of the private easements that access
the Property.' "
In a claim
to impose an equitable lien on Fusina's Parcel, Svaco alleged that her
predecessor in interest had begun construction on the Access Road on or about
March 1, 2004, and that Svaco had substantially completed construction of the
road on September 1, 2008. Svaco further
alleged that Fusina had refused to "contribute his one-third share of the
costs of construction of the road," and that the CC&Rs permitted Svaco
to impose an equitable lien on Fusina's Parcel to secure the payment of
Fusina's share of these costs.
name="_ftnref2" title="">[2] In a breach of contract cause of action,
Svaco alleged that Fusina had breached a provision in the CC&Rs that
required him to contribute one-third of the costs of construction of the
improved Access Road. Svaco also brought
a claim for declaratory relief in which she requested that the court interpret
the relevant provisions of the CC&Rs.
B.
Fusina's
cross-complaint
Fusina filed a cross-complaint
against Svaco and Eveline that contained claims for breach of contract, breach
of the implied covenant of good faith and fair dealing, intentional
misrepresentation, fraudulent concealment, rescission, declaratory relief, and
a claim to quiet title. Fusina alleged
that on or about February 8, 2007, he entered into a purchase agreement with
Eveline for the Fusina Parcel and that escrow on the sale had closed on or
about June 11, 2007. Fusina further
alleged that "during the sale" of the Fusina parcel, Eveline and
Svaco had begun to construct improvements to the Access Road and that the
improvements were substantially completed by September 1, 2008. Fusina claimed that he "did not learn of
the [i]mprovements until . . . September 23, 2008,"
and that he never consented to the improvements. Fusina alleged that Eveline had
"concealed material facts" concerning the improvements prior to
selling him the Fusina Parcel.
C.
In August 2010, the trial court
held a bench trial on the complaint and the cross-complaint at which the
parties presented evidence concerning the circumstances surrounding the
construction of the Access Road and Fusina's purchase of the Fusina Parcel.
The
evidence established that in 2005, Eveline recorded CC&Rs burdening
Eveline's Parcel, the parcel that Fusina later purchased, and a nearby third
parcel (collectively "the Property").
The CC&Rs state in relevant part:
"All property owners have to contribute to the
construction, maintenance and improvement of the private easements that access
the Property. All persons who use the
easements agree that:
"1. The slope and grade and other conditions of the
access roads must be satisfactory to the relevant fire departments.
"2. The primary access roads are to have a six-foot
trail on their side for horses and runners and walkers, but not for motorized
vehicles. A lodgepole rail fence will be installed between the trail and the
road. Native plants will be planted along the fence. A bonded DG surface will
be placed on the trail.
"3. The costs of construction, mutually agreed upon
costs of improvements, and all necessary and reasonable repairs and
maintenance, of the roads and trail will be equally shared by the property
owners and others using the road.
"4. Those
property owners and others using the roads and trail who contribute to the
costs of construction, improvements, repairs and maintenance will have equal
access to the use, improvements and repairs to the road and trail.
"5. Those people who fail to pay their share of
costs of construction, mutually agreed upon costs of improvements, and all
necessary and reasonable repairs and maintenance, agree to pay interest on the
unpaid balance at the rate of twenty-five percent per annum, and agree to
permit a lien for the unpaid balance to be placed on their real and personal
properties. Interest and other payments collected under this paragraph will be
used to reimburse those parties who have made their required contributions or
(if appropriate) retained for future repairs and maintenance or mutually agreed
upon improvements.
"6. Costs of construction are required only for
those portions of the access roads lying within [the Property]."
In November 2005, Eveline hired
Michael Smith, a civil engineer, to design the Access Road. By late February 2007, Smith had completed
approximately 75 percent of his work.
On February 7, 2007, Fusina offered
Eveline $570,000 to purchase the Fusina Parcel.
On or about February 9, Fusina and
his real estate agent, Brian Cane, met with Eveline's husband, Michael
Bustillos (Michael), who showed them the Fusina Parcel. Both Fusina and Cane testified that Michael
did not disclose any plan to improve the Access Road during the showing. Michael testified that he did tell Fusina and
Cane about the plan to improve the Access Road at the February 9 showing.
On or about March 7, Eveline
accepted Fusina's offer to purchase the Fusina Parcel. In March and April 2007, Eveline and/or
Michael received various bids for performing portions of the work on the Access
Road, including bids of $153,592 for grading and drainage, $56,046 for asphalt
paving, and $337,000 for concrete work.
Neither Michael nor Eveline disclosed the bids to Fusina.
The bulk of the Access Road
improvements were constructed between April and September 2008, at a total cost
of $655,073.51. Fusina first learned of
the improvements to the Access Road in September 2008, when Michael sent him a
letter asking him to pay $179,193.56. In
the letter, Michael claimed that the CC&Rs required that Fusina pay this
amount for his share of the costs of the improvements to the Access Road.
D.
The
trial court's ruling
September 13, 2010, the trial court entered a statement of decision in which
the court ruled in favor of Fusina on all of the claims in Svaco's
complaint. The court interpreted the
CC&Rs and determined that none of the costs of improving the Access Road
were chargeable to Fusina. The court
therefore ruled that Svaco was not entitled to prevail on her breach of
contract and declaratory relief claims, which were based on the CC&Rs, and
that Svaco was not entitled to impose an equitable lien on the Fusina Parcel to
secure payment of these costs.
name="_ftnref3" title="">[3]
With
respect to Fusina's cross-complaint, the trial court found that Eveline had
breached provisions in the purchase agreement for the Fusina Parcel that
required her to disclose "known material facts and defects affecting the
property." The court found also
that Fusina was entitled to prevail on his claim for fraudulent concealment
against Eveline, based on her failure to disclose her plan to improve the
Access Road, and that Fusina was entitled to rescind the purchase agreement for
the Fusina Parcel due to this
concealment. Finally,
the court found that Fusina was the prevailing party in the action.
On
September 23, Fusina filed a "Notice of Election of Rescission,"
notifying the court and the other parties of his election to rescind the
purchase agreement for the Fusina Parcel, pursuant to the court's statement of
decision.
The trial court entered a
judgment on November 12, 2010, in favor of Fusina against Svaco on her claims
for equitable lien, breach of contract, and declaratory relief. The court granted judgment in favor of
Fusina, against Eveline, on the claims in his cross-complaint for breach of
contract and fraudulent concealment, and awarded Fusina damages in the amount
of $1.00 on each claim. In addition, the
court granted judgment in favor of Fusina on his cause of action for rescission
of the purchase agreement for the Fusina Parcel, and specified the manner by
which the rescission was to be effectuated.
Finally, the court found that Fusina was the prevailing party, and
awarded him costs in the amount of $6,918.11 and attorney fees in the amount of
$129,852.50. The court stated that Svaco
and Eveline were jointly and severally liable for the costs and attorney fees.
E.
Svaco and
Eveline timely appealed the judgment.
III.
DISCUSSION
A.
Fusina to rescind the purchase agreement
based on Eveline's fraudulent
concealment of her plan to improve the Access Road
Eveline contends that the trial
court erred in finding that she fraudulently procured Fusina's consent to the
purchase agreement for the Fusina parcel by concealing her plan to improve the
Access Road.
1. Governing
law
a.
Fraudulent concealment
In Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, at pages 612 through
613, the court outlined the elements of a fraudulent concealment cause of
action:
"(1) [T]he defendant must have concealed or
suppressed a
defendant must have been under a duty to disclose the fact to the plaintiff,
(3) the defendant must have intentionally concealed or suppressed the fact with
the intent to defraud the plaintiff, (4) the plaintiff must have been unaware
of the fact and would not have acted as he did if he had known of the concealed
or suppressed fact, and (5) as a result of the concealment or suppression of
the fact, the plaintiff must have sustained damage."
In Alfaro v. Community Housing Imp. System & Planning Assn., Inc. (2009)
171 Cal.App.4th 1356, the court discussed the tort of fraudulent concealment in
the context of a real estate transaction by stating, "A seller of real
property has a common law duty to disclose 'where the
seller knows of facts materially affecting the value or
only to him and also knows that such facts are not known to, or within the
reach of the diligent attention and observation of the buyer . . . .' [Citations.]" (Id.
at p. 1382.) "This broad statement
of duty has led one commentator to conclude:
'The ancient maxim caveat emptor ("let the buyer
beware") has little or no application to California real estate
transactions.' (1 Miller & Starr,
Current Law of Cal. Real Estate (rev. ed. 1975) § 1:80.)" (Reed
v. King (1983) 145 Cal.App.3d 261, 265 [concluding buyer stated
cause of action for rescission based on seller's failure to disclose that a
woman and her four children had been murdered on the property 10 years
earlier].)
b. Rescission
based on fraudulent concealment
Civil Code
section 1689, subdivision (b) provides:
"A party to a contract may rescind the contract in
the following cases:
"(1) If the consent
of the party rescinding, or of any party jointly contracting with him, was
given by . . . fraud . . . exercised by
or with the connivance of the party as to whom he rescinds, or of any other
party to the contract jointly interested with such party."
Civil Code section 1572, provides
in relevant part:
"Actual fraud, within the meaning of this chapter,
consists in any of the following acts, committed by a party to the contract, or
with his connivance, with intent to deceive another party thereto, or to induce
him to enter into the contract:
"[¶] . . . . [¶]
"3. The suppression of that which is true, by one
having knowledge or belief of the fact[.]"
In the context of real estate
sales, "[b]reach of a seller's duty of disclosure is grounds for
rescission. [Citation.]" (Assilzadeh
v. Cal. Fed. Bank (2000) 82 Cal.App.4th 399, 409 (Assilzadeh).)
2.
In its
statement of decision, the trial court stated the following:
"The court finds that Fusina's consent to the purchase agreement
was procured by 'fraud' within the meaning of Civil Code section 1689. The 'fraud' consisted of the concealment of
the following material facts: "(1)
[Eveline] had plans to perform substantial work on the [Access Road]; (2)
[Eveline] knew that the costs of the work would be significant – in the
hundreds of thousands of dollars; (3) [Eveline] had received bids from
contractors showing that the expected costs would be in the hundreds of thousands
of dollars; and (4) [Eveline] planned to charge Fusina for a one-third share of
those costs. [¶] Therefore, Fusina may, at his election,
rescind the purchase of the Fusina Parcel."
In addition to making these
findings, the trial court determined that Eveline had breached various
provisions in the purchase agreement for the Fusina Parcel that required her to
disclose material facts affecting the property.
In making this determination, the trial court noted that Eveline had
provided Fusina with a document entitled, "Seller Vacant Land
Questionnaire." That questionnaire
states in relevant part, " 'Are you (Seller) aware
of . . . [a]ny Homeowner or Property Owner Association (OA)
governing the Property, or any pending or proposed due increases, special assessments,
rule changes, insurance, availability issues or litigation by or against the OA
affecting the Property?' " The
trial court noted that Eveline had answered " 'Yes' " to this
question and that she had added, " 'Recorded CC&Rs requiring contribution
to access and trails.' " The court
found that Eveline's "response was misleading and incomplete,"
reasoning:
"At the time of the response, [Eveline] knew that
she or others would be making a claim against the purchaser of the Fusina
Parcel for one-third of hundreds of thousands of dollars of work to be
performed on the [Access Road]. . . . [¶] In essence [Eveline] knew that Fusina was not
only buying the Fusina Parcel for $570,000, he was also buying a claim against
him for more than a hundred thousand dollars.
Even if the claim turned out to be legally invalid (as this Court
believes to be the case), Fusina was unwittingly buying an obligation to defend
against a claim that was known to [Eveline].
This was material to the transaction and should have been
disclosed. The failure to disclose
constitutes a breach of the purchase agreement.
[¶] In this regard, the Court
finds that the testimony of both [Eveline] and [Michael] concerning these
important topics was not entirely credible."
3. Eveline's
contentions in support of reversal are without merit
Eveline
raises several contentions in support of reversal of the trial court's ruling
permitting Fusina to rescind his purchase of the Fusina Parcel. None are persuasive.
a.
trial court's finding that
concealed her plan to perform extensive work on the
Road
Eveline's contends that there is no
substantial evidence to support the trial court's finding that she failed to
disclose to Fusina her plan to perform extensive work on the Access Road.
i.
Standard of review
"We
the substantial evidence
standard. . . ." (
211 Cal.App.4th 726, 736.) " 'Substantial
evidence' is evidence of ponderable legal significance, evidence that is
reasonable, credible and of solid value.
[Citation] . . . Inferences may constitute
substantial evidence, but they must be the product of logic and reason. Speculation or conjecture alone is not
substantial evidence. [Citations.] . . . [¶] The ultimate test is whether it is reasonable
for a trier of fact to make the ruling in question in light of the whole
record. [Citation.]" (Roddenberry v. Roddenberry (1996) 44
Cal.App.4th 634, 651-652.)
ii. Application
At trial, Fusina repeatedly
testified that no one disclosed to him Eveline's plan to perform extensive work
on the road. For example, Fusina testified as follows:
"I had no . . . idea that there
was going to be a road or in the process of it.
And if it started in 2004, even though it didn't get finished until
2008, you would think that I would have been told something. You would think that I would have been told
something. You would think that the
people selling this, knowing that, that they would tell me something that a
road is coming in there. And it never
happened."
title="">[5]
Fusina's real estate agent, Brian
Cane, also testified that no one disclosed to him the plans to perform work on
the Access Road:
"[Fusina's attorney]: And no one ever told you that
. . . that road was going to be built and Mr. Fusina was going to be expected
to pay one-third of it; is that right?"
"[Cane]: No."
"[Fusina's attorney]: And had you known that, you certainly would
have told Fusina; is that correct?
"[Cane]: Correct."
Further, none of the various
documents that Eveline provided to Fusina in connection with the sale of the
Fusina Parcel disclosed her plan to perform substantial work on the Access
Road.
Eveline does not dispute that she
had a duty to disclose her plan to perform substantial work on the Access Road,
and does not address any of the evidence discussed above on which the trial
court could have based a reasonable finding that she failed to disclose such plan. Rather, Eveline's sole argument is that she
adequately disclosed her plan to perform substantial work on the Access Road by
providing Fusina with a copy of a "soils report"
any portion of the soils report that discloses an imminent plan to improve the
Access Road. Further, the trial court
could have reasonably relied on the following testimony concerning the soils report
in finding that Eveline did not fulfill her duty to disclose her plan to
perform substantial work on the Access Road merely by providing Fusina with a
copy of the report.
Engineer Smith testified as follows
concerning the soils report:
"[Fusina's attorney]: And the soils report, which we discussed
earlier, was not intended to convey that a road was going to be built. It was intended to evaluate the soils in the
area to subsequently design a road; is that right?
"[Smith]:
That's correct."
Cane, Fusina's real estate agent, testified as follows
concerning the soils report:
"[Fusina's attorney]: The
soils report, Exhibit 12, what did the soils report tell you about the [Access
Road]?
"[Cane]:
Tells me that the sellers had acquired—as to [sic] the feasibility of building a road, and gave factual
information on that.
"[Fusina's attorney]: And was that all it told you?
"[Cane]: The feasibility of building a road, yes.
"[Fusina's attorney]: It didn't . . . disclose
to you, in your view, that anyone was planning to build a road, did it?
"[Cane]: No, it was—it's my understanding of this
record that they had [sic] as to
feasibility of building a road on that."
Cane also testified that he was
under the impression that the soils report was "a report that they were
simply providing because they had a report." Fusina testified that he did not understand
the report.
In light of the nature of the soils
report and the testimony cited above, we conclude that the trial court was not
required to find that Eveline fulfilled her duty to disclose plans to perform
substantial work on the Access Road merely by providing Fusina with a copy of
the soils report. Accordingly, because
the trial court could have reasonably found that Eveline failed to disclose,
either orally or in writing, her plan to have extensive work done on the Access
Road, we conclude that there is substantial evidence to support the trial
court's finding that Eveline concealed her plan from Fusina.
b.
trial court's finding that
Eveline concealed her
plan to charge Fusina one-third of the costs
of improving the Access
Road
Eveline contends that there is no substantial evidence
to support the trial court's finding that she concealed her plan to charge
Fusina for one-third of the costs of improving the Access Road. We apply the substantial evidence standard of
review described in part III.A.1.a., ante,
to this claim.
The evidence supporting this
finding largely overlaps the evidence supporting the trial court's finding that
Eveline did not disclose her plan to perform substantial work on the Access
Road. Fusina and Cane both testified
that no one disclosed to them the fact that Eveline planned to charge Fusina
one-third of the costs of improving the Access Road. Nor did Eveline provide Fusina with any
documentation disclosing in writing her plan to charge him for one-third of the
costs of improving the Access Road.
Eveline does not dispute that she
had a duty to disclose her plan to charge Fusina one-third of the costs of the
planned improvements. However, she
contends that she fulfilled this duty by providing Fusina with a copy of the
CC&Rs. In making this contention,
Eveline demonstrates her misunderstanding of the crux of the trial court's
finding concerning her failure to disclose.
Irrespective of whether the costs for improving the Access Road were
chargeable to Fusina under the terms of the CC&Rs,
disclose that she intended to make a claim against Fusina for these costs, and
that she knew that these costs would be substantial, i.e.," in the
hundreds of thousands of dollars."
As noted previously, in connection with its finding that Eveline
breached the purchase agreement by failing to provide all material facts
affecting the property, the court found:
"[Eveline] knew that she or others would be making
a claim against the purchaser of the Fusina Parcel for one-third of hundreds of
thousands of dollars of work to be performed on the [Access
Road]. . . . [¶] In
essence [Eveline] knew that Fusina was not only buying the Fusina Parcel for
$570,000, he was also buying a claim against him for more than a hundred
thousand dollars. Even if the claim
turned out to be legally invalid (as this Court believes to be the case),
Fusina was unwittingly buying an obligation to defend against a claim that was
known to [Eveline]."
The evidence clearly supports the
trial court's finding that at the time the parties entered into the purchase
agreement for the Fusina Parcel, Eveline knew that she intended to make a claim
against Fusina. Eveline, herself,
testified that she knew, prior to entering into the purchase agreement for the
Fusina Parcel, that she would seek to charge Fusina one-third of the costs of
the improvements to the Access Road.
CC&Rs did not put Fusina on notice that Eveline would be making a claim
pursuant to the CC&Rs. It was
Eveline's failure to disclose her intention to make a claim for a substantial
amount of money against Fusina, pursuant to the CC&Rs, that the trial court
found constituted a breach of Eveline's duty of disclosure. Eveline has failed to make any persuasive
argument that would undermine this finding.
Accordingly, we conclude that there is substantial evidence to support
the trial court's finding that Eveline concealed her plan to charge Fusina
one-third of the costs of improving the Access Road.
c.
to disclose her
of the costs and bids associated with improving the
Road are unpersuasive
Eveline raises several contentions
concerning the trial court's findings that she knew that the costs of work on
the Access Road would be significant, and that she had received bids that
demonstrated that the expected costs would be in the hundreds of thousands of
dollars. None of Eveline's contentions
are persuasive. Most of her contentions
fail because they are based on the faulty premise that "there is
finding that [Eveline] concealed plans to perform substantial work on the
[Access Road]." (Italics
added.) In fact, as discussed above,
there is substantial evidence to
support the trial court's finding that Eveline concealed her plan to perform
substantial work on the Access Road. It
is Eveline's failure to disclose both her plan to improve the road
that plan that the trial court found constituted a breach of her to duty to
disclose. Thus, we are not persuaded by
any of Eveline's numerous arguments that she had no duty to disclose her
knowledge of the costs and bids associated with the road improvements because
she purportedly adequately disclosed her plan to perform substantial work on
the Access Road.
Citing Assilzadeh, supra, 82 Cal.App.4th 399, Eveline argues that she had
no duty to disclose her knowledge of the costs and bids associated with the
road improvements because a construction bid is a speculative opinion, and not
a factual matter bearing upon the quality of the property. In Assilzadeh,
the Court of Appeal concluded that a seller of a condominium unit had complied
with its duty of disclosure by informing the buyer of the settlement of
construction defect litigation related to the condominium project, and that the
seller was not required to disclose its agent's opinion concerning the
potential future market value of units in the project. (Id.
at pp. 410-412.)
In this case, in contrast, there is
substantial evidence to support the trial court's finding that Eveline
substantial work on the Access Road.
Further, the construction bids in this case constituted evidence that
Eveline had clear and specific plans to improve the Access Road, in contrast
with the "vague and general speculation concerning the possible market
value of the unit at some unspecified future time depending on factors that may
never exist," that the Assilzadeh
court held failed to give rise to a duty of disclosure. (Assilzadeh,
supra, 82 Cal.App.4th at p. 412.)
Thus, even assuming that there were authority to support the proposition
that a seller does not generally have a duty to disclose construction bids,
failure to disclose the bids is a component of a larger breach of her duty to
disclose her plan to have extensive and costly work performed on the Access
Road.
Next, citing Stevenson v. Baum (1998) 65 Cal.App.4th 159, 162 (
was not required to disclose the bids to perform work on the Access Road
because the bids were purportedly "merely further details regarding the
fundamental facts disclosed in the CC&Rs." This argument is similar to the argument
addressed above, and we reject it for a similar reason. In Stevenson,
the buyers of a mobilehome park claimed that the seller had breached his to
duty of disclosure by failing to inform the buyers that that in 1971, the
seller had temporarily moved several mobilehomes onto the property to permit an
easement holder to work on a pipeline under the property. (Id.
at p. 165.) The Stevenson court rejected the buyers' argument that the seller was
required to disclose that 1971 incident, reasoning:
"Although it would no doubt have interested the
[buyers] to learn of the 1971 incident, the primary material fact which
potentially affected the value of the property was the 'underlying' fact of the
pipeline itself—a fact immediately ascertainable from the public records. A reasonable person in the [buyers']
position, knowing that the oil company's easement was for pipeline purposes,
would have realized that the easement holder might exercise its right of access
to the pipeline at any time. . . .
[¶] By warning the [buyers] in
the purchase contract that they took title subject to easements of record, [the
seller] put them on notice of the above material facts, which satisfied his
duty of disclosure under the express terms of the contract." (Id.
at p. 166.)
The seller in Stevenson disclosed the fundamental fact related to the property,
i.e., the existence of the easement, but was not required to disclose
additional facts related to that fact.
In this case, in contrast, there is substantial evidence to support the
trial court's finding that Eveline failed
to disclose the fundamental fact related to the property at issue, i.e.,
her plan to perform substantial work on the Access Road. Thus, even assuming that the construction
bids were "merely further details" pertaining to a fundamental fact
related to the property, Eveline failed
to disclose the fundamental fact on
which theses details were based.
Citing Sweat v. Hollister (1995) 37 Cal.App.4th 603 (
the bids were not disclosable because they were merely "practical
ramifications of the CC&Rs." In
Sweat, this court concluded that a
house seller's agent was not required to disclose the legal and practical
ramifications emanating from the fact that the house was located in a
floodplain. (Id. at p. 608.) The
"The factual matter leading to the alleged
defect in the house—that it was in a floodplain—was revealed to the
plaintiffs. The legal and practical
effects of this state of affairs do not rise to the status of a fact—they are
conclusions as to value resulting from the fact of situs in a floodplain. The existence and effect of city ordinances
regulating rebuilding or improvement of a house in a floodplain constitute
information as readily available to the plaintiffs as to the defendants. Actionable nondisclosure relates to facts not
discoverable by the plaintiffs." (
Unlike in Sweat, the key factual matter related to the property at
issue—Eveline's plan to seek to recover from Fusina one-third of the costs of
improving the Access Road—was not
revealed to Fusina. Further, as
discussed above, there is substantial evidence to support the trial court's
finding that Eveline's disclosure of the CC&Rs did not constitute an adequate disclosure of her plan to charge Fusina
one-third of the costs of improvements to the Access Road. Thus, contrary to Eveline's contention that
the bids were practical ramifications of
the CC&Rs, in fact the bids were ramifications of Eveline's plan to perform substantial work on the Access Road and
charge Fusina one-third of the costs.
Finally, unlike in Sweat, Eveline's
plan was not public information "as readily available to the plaintiffs as
to the defendants." (
608.) Accordingly, we reject Eveline's
contentions that the bids were not disclosable pursuant to Sweat because they were merely "practical ramifications of
the CC&Rs."
Eveline also contends that no duty
to disclose the bids arose because there was "no substantial evidence to
prove that bids for the cost of bringing the road into compliance with the fire
department requirements were accessible only to [Eveline],
and . . . there was no substantial evidence that [Eveline]
was aware that Fusina did not know how to get such bids nor that [Eveline] knew
that Fusina could not reasonably discover such bids." This contention is entirely
unpersuasive. In light of the trial
court's finding that Eveline failed to disclose her plan to have extensive work
done on the Access Road, the trial court also could have reasonably found that
Fusina lacked the ability to discover the costs of her undisclosed plan and the
bids to perform such plan.
Eveline
also raises a series of arguments related to her contention that there is no
substantial evidence that Fusina would have acted differently if he had known
about the bids. Fusina testified that he
would not have purchased the Fusina Parcel if he had known of Eveline's plan to
improve the Access Road and that she intended to make a claim against him for
several hundred thousand dollars in costs for improving the Access Road. In fact, Fusina testified that he would not
have bought the Fusina Parcel if he had been told that the Access Road would
cost him even $20,000.
name="_ftnref10" title="">[10] Accordingly, we conclude that there is
substantial evidence that Fusina would not have entered into the purchase
agreement for the Fusina Parcel if he had known of Eveline's plan to perform
substantial work on the Access Road and the bids to perform such work.
Finally,
Eveline argues that there is no substantial evidence that the work performed on
the Access Road was detrimental to the value of Fusina's Parcel. (Citing Sweat,
supra, 37 Cal.App.4th at p. 608 [seller has duty to disclose "all
factual matters bearing upon the quality of the property being sold which might
be detrimental to value"].) Eveline argues that the improvements to the
Access Road "improved both the value and quality of [Fusina's
Parcel]" by making the land suitable for residential construction. This argument overlooks the fact that
Eveline's plan to charge Fusina more than $225,000 for the improvements to the
Access Road based on his ownership of the Fusina Parcel—an amount equal to
approximately 40 percent of cost of the parcel itself, rendered the Fusina
Parcel less desirable than represented.
Further, in making this argument, Eveline fails to address the detriment
that Fusina suffered in having to defend against a claim seeking to impose an
equitable lien in the amount of more than $225,000 on the property to pay for
the improvements.
name="_ftnref11" title="">[11] Accordingly, we conclude that Eveline has not
demonstrated that her failure to disclose her plan to perform substantial work
on the Access Road and charge Fusina one-third of the costs of that work was
not detrimental to the value of Fusina's Parcel.
B. In light of Fusina's election to rescind
the purchase agreement for the Fusina
Parcel, the judgment must be
modified by striking the judgment in Fusina's favor
on his breach of contract and concealment causes of action based on
that same agreement
contend that because Fusina elected to rescind the purchase agreement, the
judgment must be modified by striking the judgment in Fusina's favor on his
breach of contract and concealment causes of action based on the same
agreement. We agree.
1. Governing
law
The law is clear that a party may
not both rescind a contract and
obtain damages for breach of that same contract.
"When one party has been injured by a breach of
contract and she either lacks the ability or the desire to keep the contract
alive, she can choose between two different remedies. [Citation.]
She can treat the contract as rescinded and recover damages resulting
from the rescission. Or she can treat
the contract as repudiated by the other party and recover damages to which she
would have been entitled had the other party not breached the contract or
prevented her performance.
[Citation.] An action for
rescission is based on the disaffirmance of the contract and an action for
damages for breach of contract is based on its affirmance. [Citations.]
An action for rescission and an action for breach of contract are
alternative remedies. The election of
one bars recovery under the other. [Citations.]" (Akin
v. Certain Underwriters At Lloyd's London (2006) 140 Cal.App.4th 291,
296.)
"Under California law, a
defrauded party to a contract may elect to rescind the contract and seek
restitution, or stand on the contract
and recover damages arising from the fraud." (McClain
v. Octagon Plaza, LLC (2008) 159 Cal.App.4th 784, 793, fn. 1, italics
added (McClain).) More generally, any "cause of action having
its origin in a rescission of the contract is inconsistent with a cause of
action for enforcement of the contract based upon its affirmance. [Citations.]" (City
Bank of San Diego v. Ramage (1968) 266 Cal.App.2d 570, 587.)
2. Factual and procedural background
In its
statement of decision, the trial court stated:
"The court will enter a separate judgment with the
following terms: [¶] . . . [¶] . . . if
cross-complainant Joseph Fusina does not elect to rescind the purchase of the
Fusina Parcel, then . . . Joseph Fusina shall recover $1
from cross-defendant Eveline Bustillos . . . . [¶]
. . . Alternatively, if Joseph Fusina elects to rescind
the purchase agreement, Fusina's purchase of the Fusina Parcel shall be
rescinded and the parties shall be restored to their positions as they existed
immediately prior to the execution of the purchase agreement."
Ten days after the court issued its
statement of decision, Fusina filed a "Notice of Election of
Rescission," indicating his intent to elect the rescission remedy and
rescind the purchase agreement for the Fusina Parcel.
Approximately two months later, the
court entered judgment in favor of Fusina on his breach of contract and
concealment causes of action, and awarded nominal damages of $1.00 for each
claim. The trial court also entered
judgment in favor of Fusina on his cause of action for rescission, permitting
him to rescind the purchase agreement.
3. Application
Fusina concedes that the
"election of rescission is inconsistent with Judgment for breach of
contract," and agrees that the judgment for breach of contract must be
stricken. However, Fusina argues that
numerous cases "hold that fraudulent concealment of a material fact in
connection with a real estate sales contract properly serves as the basis for
rescission of that contract." As
made clear in their reply brief, appellants do not contend otherwise. Rather appellants object to the trial court
entering judgment in favor of Fusina on his claims for breach of contract and
fraudulent concealment based on the purchase agreement for the Fusina Parcel
and awarding him affirmative relief (in the form of nominal damages) on those
claims, and at the same time permitting him to rescind the purchase
agreement. Appellants are correct that
the judgment violates the election of remedies doctrine discussed in
(See McClain, supra, 159
Cal.App.4th at p. 793.) Having elected
to rescind the purchase agreement based on the court's finding that his consent
to the purchase agreement was obtained by fraud, Fusina may not
fraud.
Accordingly, we modify the judgment
to reflect Fusina's election to rescind the purchase agreement for the Fusina
Parcel by striking the judgment in Fusina's favor on his breach of contract and
concealment causes of action based on the same agreement.
IV.
DISPOSITION
The November 12, 2010 judgment is
modified to strike the judgment in favor of Fusina on Fusina's breach of
contract and concealment causes of action.
As so modified, the judgment is affirmed. Fusina shall recover
AARON, J.
WE CONCUR:
O'ROURKE,
Acting P. J.
IRION,
J.
name="_ftn1" title="">[1] Although
several maps depicting the parcels and the Access Road were offered as exhibits
at trial, appellants failed to transmit those exhibits to this court. We therefore base our description of the
physical location of the Access Road and the parcels on the trial court's
statement of decision. None of the
parties has raised any challenge to the trial court's statement of decision in
this respect on appeal.
name="_ftn2" title="">[2] Svaco
did not identify which provision in the CC&Rs she contended required Fusina
to contribute a one-third share of the costs.
