Cole v. R & T Properties

Filed 3/19/07 Cole v. R & T Properties CA2/1

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

SECOND APPELLATE DISTRICT

DIVISION ONE

APPEAL from a judgment of the Superior Court of Los Angeles County, Judith C. Chirlin, Judge. Affirmed in part and reversed in part.

Regan-Braun Law Offices, Michael S. Braun and Kevin A. Gordon for Defendants and Appellants.

Landau & Landau and Bruce G. Landau for Plaintiffs and Respondents.

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The plaintiffs prevailed in this fraud action arising out of a failed real estate transaction. The defendants appeal, challenging the award of compensatory damages (on the ground that the plaintiffs failed to mitigate their damages), an award of attorneys fees (on the ground that the plaintiffs did not attempt to mediate the dispute before filing suit), and an award of punitive damages (claiming it is excessive). We reverse the attorney fee award but otherwise affirm the judgment.

FACTS

A.

On August 5, 2003, Robert Tieger sold residential real property to Keith and Gwendolyn Cole for $753,000.[1] The parties signed both a purchase agreement with escrow instructions and a lease so the Coles could rent the house from Tieger from the date of the agreement to the anticipated escrow closing date (December 31). The Coles gave Tieger a $2,000 deposit with the purchase agreement, plus $15,000 in rent and $10,000 as a security deposit (with the rent and deposit to be applied to the purchase price and closing costs). The Coles moved into the house and spent more than $20,000 for various improvements (new carpets and tile) and repairs (heating and plumbing).

In October, the Coles received a title report and learned for the first time that the property was the subject of a lawsuit.[2] On further investigation, the Coles discovered that the property was in fact owned by Carliss and Perfisity McGhee (collectively McGhee), not by Tieger, McGhee having obtained title by a judgment for specific performance rendered against Tieger in September 2002 (almost a year before Tieger purportedly sold the property to the Coles).[3] In February 2005, the Coles were evicted from the property by McGhee.

B.

Meanwhile, in January 2004, the Coles had sued Tieger for specific performance, breach of contract, fraud, and unjust enrichment. Tieger answered, and later filed a separate action against the Coles for rent due from January to November 2004. The cases were consolidated and tried to the court, at the conclusion of which the court found that Tieger had not disclosed any information about the McGhee lawsuit and had affirmatively misrepresented that he possessed good title to the property (knowing that he did not), that the problem with Tiegers title was not discovered by the Coles until October 2003, that R & T Properties is Tiegers alter ego (and vice versa), and that the Coles were entitled to compensatory damages in the sum of $291,150 (less $19,500 due to Tieger for unpaid rent), plus $250,000 in punitive damages.[4] Tieger appeals from the judgment thereafter entered (which includes a $37,000 attorney fee award in favor of the Coles).

DISCUSSION

I.

Tieger contends that, because the Coles failed to prove they attempted to mitigate their damages, they were not entitled to recover the $247,000 awarded to them as the difference between the purchase price and the undisputed value of the property. We disagree.

It is true, as Tieger claims, that a plaintiff who suffers damage as a result of a breach of contract has a duty to take reasonable steps to mitigate those damages and may not recover for any losses that could have thus been avoided. (Shaffer v. Debbas (1993) 17 Cal.App.4th 33, 41; see also Brandon & Tibbs v. George Kevorkian Accountancy Corp. (1990) 226 Cal.App.3d 442, 460.) But it was Tiegers burden to prove that the Coles losses could have been avoided or reduced (Millikan v. American Spectrum Real Estate Services Cal., Inc. (2004) 117 Cal.App.4th 1094, 1105), and that he did not do -- as a result of which there is no evidence in the record to support Tiegers assertion that the Coles could have but failed to mitigate their damages.[5]

It follows that the $247,000 damage award is proper.

II.

Tieger contends the award of attorneys fees is inappropriate because the Coles did not attempt to mediate their claim before filing suit. We agree.

A.

Paragraph 38 of the residential lease agreement provides that, [i]n any action or proceeding arising out of this Agreement, the prevailing party between [Tieger] and [the Coles] shall be entitled to reasonable attorney fees and costs, except as provided in paragraph 37A. Paragraph 37, Mediation, provides as follows:

A. Consistent with paragraphs B and C below, [Tieger] and [the Coles] agree to mediate any dispute or claim arising between them out of this Agreement, or any resulting transaction, before resorting to court action. Mediation fees, if any, shall be divided equally among the parties involved. If, for any dispute or claim to which this paragraph applies, any party commences an action without first attempting to resolve the matter through mediation, or refuses to mediate after a request has been made, then that party shall not be entitled to recover attorney fees, even if they would otherwise be available to that party in any such action.

B. The following matters are excluded from mediation: (i) an unlawful detainer action; (ii) the filing or enforcement of a mechanics lien; and (iii) any matter within the jurisdiction of a probate, small claims or bankruptcy court. The filing of a court action to enable the recording of a notice of pending action, for order of attachment, receivership, injunction, or other provisional remedies, shall not constitute a waiver of the mediation provision.

C. [Tieger] and [the Coles] agree to mediate disputes or claims involving Listing Agent, Leasing Agent or property manager (Broker), provided Broker shall have agreed to such mediation prior to, or within a reasonable time after, the dispute or claim is presented to such Broker. Any election by Broker to participate in mediation shall not result in Broker being deemed a party to the Agreement. (Emphasis added.)

Three things are plain. First, the mediation provision covers this dispute. Second, the provision (by its reference to the payment of a mediators fees) contemplates the involvement of a mediator, not just a meeting between the parties.[6] Third, unless the Coles first attempted to mediate their dispute with Tieger, they are not entitled to recover their attorneys fees, notwithstanding that they are the prevailing parties. (Frei v. Davey (2004) 124 Cal.App.4th 1506, 1508-1509.)

B.

After the judgment was entered, the Coles filed a motion for contractual attorneys fees but did not mention the mediation provision. Tieger opposed the motion, pointing to the mediation requirement and contending there was no pre-litigation attempt by the Coles to mediate the dispute. In reply, the Coles said they had attempted to mediate. This is what the evidence shows:

By letter dated January 7, 2004, the Coles lawyer (Bruce G. Landau) explained his clients position to Tiegers lawyer (Paul T. Gough), asserted the Coles demand for performance under the contract (and itemized the Coles damages), and closed with these remarks: Please advise this office as to how your client wishes to proceed in this matter. If no response is received within ten days of the date of this letter, we shall proceed with litigation in this matter. There was no mention of mediation.

On January 13, 2004, Mr. Landau filed the Coles complaint.

On February 10, 2004, Mr. Gough responded with a one-line letter: I am no longer representing Mr. Tieger, but I have forwarded your letter of todays date [sic] to him.

On February 19, 2004, Tieger (represented by new lawyers) filed his answer to the complaint.

In June 2006, the trial court entered a judgment that included an award of $37,000 for attorneys fees and later denied Tiegers motion for a new trial or judgment notwithstanding the verdict.

C.

There is no evidence to support the trial courts implied finding of compliance with the mediation requirement.

Under the terms of the agreement, if . . . [the Coles]commence[d] [this] action without first attempting to resolve the matter through mediation, or refuse[d] to mediate after a request ha[d] been made, then [the Coles] shall not be entitled to recover attorney fees, even if they would otherwise be available to [them] in [this] action.

We agree with Tieger that Mr. Landaus letter was a demand for full performance or payment, not an attempt to resolve the dispute by a formal mediation (or any kind of mediation involving a disinterested third party). (See Frei v. Davey, supra, 124 Cal.App.4th at p. 1514 [in mediation, a neutral third party analyzes the strengths and weaknesses of each partys case, works through the economics of litigation with the parties, and otherwise assists in attempting to reach a compromise resolution of the dispute]; Leamon v. Krajkiewcz (2003) 107 Cal.App.4th 424, 433 [costs of litigation can be avoided if, before suit, a disinterested mediator explains to the parties the costs of litigating the dispute through judgment and appeal].)

The award of attorneys fees cannot stand.

III.

Tieger contends the award of punitive damages is grossly disproportionate to the compensatory damages and thus excessive as a matter of law.[7] (BMW of North America, Inc. v. Gore (1996) 517 U.S. 559, 580.) The issue has been forfeited by Tiegers failure to develop it in his single-page conclusory discussion. (McComber v. Wells, supra, 72 Cal.App.4th at pp. 522-523.)

The trial court gave the Coles $291,150 for compensatory damages, plus $250,000 in punitive damage, a ratio of less than one-to-one. To find this award excessive under BMW and its progeny, we would have to conclude that Tiegers conduct was insufficiently reprehensible to justify the award, that there is too great a disparity between the harm or potential harm suffered by the Coles and the amount of the punitive damage award, or that there is too great a difference between the amount of this award and the penalties imposed in similar cases. (BMW of North America, Inc. v. Gore, supra, 517 U.S. at p. 575-584.) That is not the sort of analysis we are prepared to make in the absence of an appellants cogent argument.

Based on our summary of the facts and the trial courts express findings about Tiegers fraud and deception, his conduct appears sufficiently reprehensible, and the harm to the Coles sufficiently egregious, to justify the award -- and Tieger has offered no argument to suggest we ought to question these conclusions -- or to suggest there is any disparity (let alone a significant disparity) between this award and the awards made in similar cases.

We see no apparent due process violation (State Farm Mut. Automobile Ins. Co. v. Campbell (2003) 538 U.S. 408, 416-418) and no reason to vacate the punitive damage award.

DISPOSITION

The judgment is reversed insofar as it awards the Coles their attorneys fees of $37,000; in all other respects, the judgment is affirmed. The parties are to pay their own costs of appeal.

NOT TO BE PUBLISHED.

VOGEL, J.

We concur:

MALLANO, Acting P.J.

JACKSON, J.*

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*Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

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Analysis and review provided by Carlsbad Property line attorney.

[1] Our references to Tieger include his wholly owned corporation, R & T Properties, Inc.

[2] At trial, Tieger claimed he had told the Coles on August 1, 2003, that he did not have clear title and that they had knowingly decided to go forward with the purchase. The Coles testified that Tieger had not said a word about the lawsuit and that they certainly would not have gone forward with the sale and spent money on the house if they knew there was a problem with title. The trial court found the Coles testimony was credible, and that Tiegers was not (and that, to the contrary, Tieger appeared evasive, combative and conveniently forgetful). The court also found that Tieger had been thoroughly impeached by his admission that he used another name (Bob Mitchell), and used two different social security numbers. The trial court said it believe[d] the Coles and disbelieve[d] Tieger. This credibility call is binding on this appeal. (Nestle v. City of Santa Monica (1972) 6 Cal.3d 920, 925.)

[3] In October 2000, McGhee sued Tieger for breach of contract and specific performance. That case was tried in 2002, and the judgment in favor of McGhee ordered Tieger to sell the property to McGhee for $500,000, with a rent credit of $187,577.50 to McGhee. Tieger appealed but Division Five of our court affirmed the judgment. (Richardson-McGhee v. Mitchell (Dec. 9, 2003, B162441) [nonpub. opn.].)

[4] The compensatory damage award consists of $10,000 for closing costs, $2,000 for the security deposit, $26,150 for repairs and remodeling, $1,000 for moving costs, $5,000 for personal property, and $247,000 for the value of the property (the difference between the purchase price and the undisputed value of the property).

[5] As Millikan explains, the burden of proving that losses could have been avoided by reasonable effort and expense must always be borne by the party who has broken the contract. [Citations.] Inasmuch as the law denies recovery for losses that can be avoided by reasonable effort and expense, justice requires that the risks incident to such effort should be carried by the party whose wrongful conduct makes them necessary. (Millikan v. American Spectrum Real Estate Services Cal., Inc., supra, 117 Cal.App.4th at p. 1105.)

[6] Mediation is [a] method of non-binding dispute resolution involving a neutral third party who tries to help the disputing parties reach a mutually agreeable solution. (Blacks Law Dict. (8th ed. 2004) p. 1003.)

[7] Without citation to the record, Tieger also says the punitive damage award is excessive because his net worth at the time he filed his bankruptcy was $700,000. The issue, such as it is, has been forfeited by Tiegers failure to support it with record references or any further analysis or any law at all. (Cal. Rules of Court, rule 8.204; Duarte v. Chino Community Hospital (1999) 72 Cal.App.4th 849, 856; McComber v. Wells (1999) 72 Cal.App.4th 512, 522-523.)