Filed 6/21/17 Toranji v. Lim CA4/3





NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE


SHADFAR TORANJI et al.,

Plaintiffs and Respondents,

v.

CHRIS SUNGDUK LIM et al.,

Defendants and Appellants.


G053434

(Super. Ct. No. 30-2014-00740285)

O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, Robert J. Moss, Judge. Reversed.
Law Offices of Thomas E. Elenbaas and Thomas E. Elenbass; Law Offices of Christina S. Kim and Christina S. Kim for Defendants and Appellants.
Commerce Law Group and Sassan A. MacKay for Plaintiffs and Respondents.

* * *
INTRODUCTION
Plaintiffs Shafar Toranji and his wife Firoozeh Arghavani (collectively plaintiffs) sued defendants Chris Sungduk Lim, Justin Jinhyong Bae, and Best 4U, Inc. (collectively defendants) after Lim, their real estate broker, failed to timely communicate a competing and ultimately successful offer to purchase a home in Newport Coast. Following a bench trial, the trial court entered judgment that awarded plaintiffs $409,846 in damages for that omission; the court’s damages determination was based on the difference between the property’s fair market value ($2,659,846) and the amount the court found plaintiffs would have paid for the property ($2.25 million). Defendants argue insufficient evidence supported the damages award because Evidence Code section 813, subdivision (a) requires that proof of the fair market value of real property may only be shown through the opinions of a qualified expert or the owner of the property in question and no such evidence was presented at trial. (All further statutory references are to the Evidence Code.)
We reverse the judgment. The trial court stated that its finding of the property’s fair market value was solely based on the value contained in the RealtyTrac Foreclosure Auction flyer identified in the record as exhibit 87. That document is insufficient to prove the property’s fair market value as a matter of law. Section 813, subdivision (a), expressly and unambiguously contains specific proof requirements to establish the fair market value of real property through testimony by a qualified expert or the owner of the property in question. Plaintiffs’ expert witness was excluded by the trial court from testifying at trial; plaintiffs do not challenge that ruling in this appeal. Our record does not contain any testimony by an owner of the property opining on the value of the property. The damages award is therefore unsupported by substantial evidence.

FACTS
In January 2012, Clark Kim and Kyoung Kim (collectively, the Kims) owned a single family residence in Newport Coast (the property) that was encumbered by a first deed of trust and a second deed of trust; both trust deeds were held by Bank of America (the bank). The Kims defaulted on both loans and foreclosure proceedings began.
Bae was a real estate sales person and Clark Kim’s friend. Bae introduced Clark Kim to his friend Lim, who was a broker and the sole shareholder of the real estate brokerage firm, Best 4U, Inc. The Kims retained Best 4U, Inc. to list their property for a short sale. The bank had to approve any sale because “it would be agreeing to accept less than was owed on the existing loans.”
In February 2012, Dr. Tony Nahkla offered to purchase the property for $2.2 million. The bank countered with an offer to sell the property for $2.25 million. The Nahkla transaction did not go forward.
In May 2012, plaintiffs contacted Lim about making an offer on the property. Toranji was a sophisticated businessman who had worked for years in the financial industry and Arghavani was an attorney. Lim convinced plaintiffs to retain him as their real estate agent so that he would be able to represent both the prospective buyers and sellers in the transaction.
In May 2012, plaintiffs made an all cash offer to purchase the property for $2.1 million. The Kims promptly accepted the offer but the bank did not approve the transaction. Instead, the bank made a counter offer to sell the property for $2.4 million.
Plaintiffs authorized Lim to raise their offer to $2.175 million. The bank’s records do not show that such an offer was ever communicated to it. Lim testified that he orally informed the bank’s representative of the offer, who informed Lim the bank would not accept it. An offer to purchase the property in the amount of $2.2 million was submitted to the bank on Toranji’s behalf. Although Toranji testified he had not authorized the $2.2 million offer, he further testified he was prepared to offer as much as $2.25 million to purchase the property “if he had to.”
In August 2012, the bank made a counter offer to sell the property for $2.25 million. Toranji wanted to negotiate with the bank to see if he could get the property for less. On August 17, Toranji texted Lim, “I know they don’t want to go any lower, but will they go any lower? Initially, they told us they won’t consider anything that wasn’t close to $2.4MM and we know that they did not stick to that. Get them to go lower and I’ll go higher. Also, send me what they sent you saying they won’t go any lower.”
That same day, Lim replied to Toranji: “Please let me know today if you want to buy at $2.25 or not. If you want to buy, you need to make escrow deposit by Monday. Today is the last day to decide.” Toranji responded to Lim: “I need to get a formal response from them in writing in response to my counter at $2.175MM. I am not going to do anything until I get a written response. They need to provide a formal response. If they are not going to respond in writing, there is another property that my wife likes, which I want to pursue. The ball is in their court, not in my court.”
While these communications were going on between Toranji and Lim, and unbeknownst to plaintiffs, Lim received another offer to purchase the property for $2.25 from a prospective buyer (identified in the record as Cammilleri) who was represented by an independent real estate agent. Lim never told Toranji of the competing offer, although the Short Sale Addendum signed by the parties allowed for the seller and the bank to receive competing offers on the property. The bank ultimately accepted the competing offer by Cammilleri after Toranji did not promptly reply to its counter offer of $2.25 million.

PROCEDURAL HISTORY
In January 2015, plaintiffs filed a second amended complaint against defendants containing claims for breach of contract, negligence, breach of fiduciary duty, fraud and deceit, and negligent misrepresentation. The trial court sustained without leave to amend defendants’ demurrer to plaintiffs’ claims for fraud and deceit and negligent misrepresentation. The court also sustained defendants’ demurrer to plaintiffs’ breach of contract claim against Bae. Plaintiffs’ remaining claims for breach of contract, negligence, and breach of fiduciary duty were tried to the court.
Following the bench trial, the court found that defendants’ wrongful conduct “would amount to negligence, breach of fiduciary duty, breach of contract and fraud.” The court found, however, that defendants’ conduct did not cause harm to plaintiffs “with one exception, the failure to tell plaintiff[s] that there was another competing offer pending.”
With regard to the fair market value of the property, the statement of decision continued: “While the plaintiffs were precluded from calling their appraisal expert to establish the fair market value of the property at the time of the transaction by granting of defendants’ motion in limine, there was evidence of the fair market value introduced, without objection, in Exhibit 87, RealtyTrac Foreclosure Auction flyer. That document sets forth the fair market value of the property at $2,659,846 close in time to the lost transaction. There was no contrary evidence on the fair market value offered by defendants. Thus, if plaintiffs had met the bank’s demand of $2.25 million, they would have acquired a property worth $2,659,846. Their damage is the difference between these two numbers, $409.846.00.”
In response to defendants’ specific requests for findings regarding the trial court’s determination of the property’s fair market value in the calculation of damages, the statement of decision stated as follows:
“7. What is the factual and legal basis for the court’s [valuation] of $2,659,846.00 for the property located at 5 Cottonwood, Newport Coast?
“Evidence of fair market value of the [property] was [introduced], without objection, in Exhibit 87, RealtyTrac foreclosure sheet, sets forth the fair market value of the property at $2,659,846.00 close in time to the lost [transaction]. There was no [contrary] evidence on the fair market value offered by the defendants.
“8. In the absence of opinion evidence given by (a) a witness qualified to express such opinion; (b) the owner or spouse of the owner of the property; or (c) an officer, employee or other qualified person affiliated with an entity which owns the property [see, Evidence Code § 813], was there any competent evidence before the court sufficient to allow the court to make a determination of the value of the property located at 5 Cottonwood, Newport Coast?
“Evidence of fair market value of the [property] was introduced, without objection, in Exhibit 87 setting forth the fair market value of the property at $2,659,846.00 close in time to the lost [transaction]. There was no [contrary] evidence on the fair market value offered by the defendants.
“9. To the extent the court is relying on Exhibit 87, the RealtyTrac foreclosure sheet, to establish the value of the property located at 5 Cottonwood, Newport Coast, is Exhibit 87 sufficient proof under Evidence Code §[]813 of the fair market value of the property?
“Yes. Exhibit 87 is the foreclosure auction sheet stating the opening bid for the [property] and the market value for the property. Exhibit 87 was admitted into evidence without any objection. Exhibit 87 provides market value of the property at $2,659,846.00. Defendants provided no [testimony] or contrary evidence on the fair market value offered by the defendants.”
Judgment in the amount of $409,846 was entered in plaintiffs’ favor and against defendants jointly and severally. Defendants appealed.

DISCUSSION
Defendants argue substantial evidence does not support the judgment awarding damages to plaintiffs because insufficient evidence proved the fair market value of the property. We agree.
Special rules of evidence apply in an action in which the market value of real property must be ascertained. (§ 810, subd. (a).) One such rule is that proof of the value of property may only be shown through the opinions of a qualified expert or the owner of the property in question. (§ 813, subd. (a).) Section 813, subdivision (a) provides: “The value of property may be shown only by the opinions of any of the following: (1) Witnesses qualified to express such opinions. [¶] (2) The owner or the spouse of the owner of the property or property interest being valued. [¶] (3) An officer, regular employee, or partner designated by a corporation, partnership, or unincorporated association that is the owner of the property or property interest being valued, if the designee is knowledgeable as to the value of the property or property interest.”
Here, there was no expert testimony on the fair market value of the property. Our record shows the trial court had excluded plaintiffs’ expert from testifying regarding the property’s fair market value and plaintiffs have not challenged that ruling.
There was also no testimony by the owners of the property regarding its fair market value. Plaintiffs do not contend otherwise.
In their respondent’s brief, plaintiffs argue substantial evidence supports the court’s fair market value finding because (1) Lim testified that Clark Kim believed the property should be listed at $2.5 million; (2) Lim’s testimony “confirmed that under these conditions the Property’s value was at least $2,250,000 because that amount had previously been offered by Nahkla and that offer had been accepted”; (3) Toranji testified that he told Lim he was in the market to purchase a property in the range of $2.5 to $2.6 million and that he entertained the idea of purchasing another property with a floor plan that was identical to that of the property which was on the market for $2,599,000; and (4) the RealtyTrac foreclosure status sheet containing an estimated fair market value of over $2.6 million.
None of the evidence cited by plaintiffs constitutes the opinion testimony of an expert or an owner of the property as required by section 813. No testimony was offered at trial regarding the creation of the RealtyTrac foreclosure sheet, which was cited by the trial court in the statement of decision as the sole basis for determining the property’s fair market value.
Section 813, subdivision (b) expressly permits the trial to consider other admissible evidence bearing on the value of a property to weigh testimony offered under section 813, subdivision (a) in determining fair market value. Section 813, subdivision (b) provides: “Nothing in this section prohibits a view of the property being valued or the admission of any other admissible evidence (including but not limited to evidence as to the nature and condition of the property . . .) for the limited purpose of enabling the court, jury, or referee to understand and weigh the testimony given under subdivision (a); and such evidence, except evidence of the character of the improvement proposed to be constructed by the plaintiff in an eminent domain proceeding, is subject to impeachment and rebuttal.” (Italics added.) Subdivision (b) of section 813 is inapplicable here because there was no witness testimony of value given at trial, within the meaning of section 813, subdivision (a), for the court to weigh using other admissible evidence of value under subdivision (b).
Plaintiffs also argue that defendants failed to object to the introduction of the above cited Lim testimony, Toranji testimony, and the RealtyTrac foreclosure sheet and also failed to present their own evidence of the property’s value. Plaintiffs therefore argue defendants were “foreclosed from challenging the admissibility of the evidence which was admitted at trial establishing the Property’s value.”
Even if plaintiffs’ evidence was offered to establish the fair market value of the property, that does not change the fact that the damages award was not supported by substantial evidence. To qualify as substantial evidence, “‘the evidence must be “‘substantial’ proof of the essentials which the law requires.” . . .’” (Barratt American, Inc. v. Transcontinental Ins. Co. (2002) 102 Cal.App.4th 848, 861.) One essential the law requires is that real property value be shown by an opinion of either an expert or an
 
owner. (§ 813, subd. (a).) It was plaintiffs’ burden to prove damages and thus, necessarily, the property’s fair market value. They did not meet their burden of proof.

DISPOSITION
The judgment in favor of plaintiffs is reversed. Defendants shall recover costs on appeal.



FYBEL, J.

WE CONCUR:



BEDSWORTH, ACTING P. J.



ARONSON, J.