Deutsch v. Deutsch
Filed
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF
ARTHUR DEUTSCH, Plaintiff and Appellant, v. FRANCINE DEUTSCH et al., Defendants and Respondents, | D047968 (Super. |
APPEAL from an judgment of the Superior Court of San Diego County, William C. Pate, Judge. Affirmed.
Arthur Deutsch appeals a judgment in favor of his daughter, Francine Deutsch, and her domestic partner, Carole Anne Leland (together, the defendants) following the grant of a motion for judgment at the close of his case. (Code Civ. Proc., § 631.8; all undesignated statutory references are to this code.) He contends that the trial court's findings are not supported by substantial evidence. He also argues that the trial court abused its discretion by granting the defendants' request for expert witness fees because he refused to settle and did not obtain a more favorable result. (§ 998, subd. (c)(1).) We reject his contentions and affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In November 2004, Arthur filed a verified complaint against the defendants alleging six causes of action for: money had and received, breach of contract, breach of contract and/or accounting, conversion, fraud and elder abuse. Arthur claimed that the defendants purchased a home from him and his wife, Dorace (together, the Deutschs), promising to give them a life estate and share the profits when they sold the home. Arthur also loaned the defendants $65,000 based on Francine's promise to repay the loan. The defendants sought rent from the Deutschs and after Dorace passed away, constructively evicted Arthur from the home and sold it without sharing in the profits. Arthur also claimed that Francine had taken four rings from the home. In May or June 2004, Arthur discovered that the loan had not been repaid and Francine had credited certain home improvements, insurance payments and other expenses as payments on the loan. He claimed that these facts amounted to fraud and elder abuse.
The parties tried the matter to the court and presented the following evidence: In 1982, the Deutschs purchased a home in La Mesa,
Francine claimed that they based the $165,000 sales price of the home on comparable sales, estimated closing costs and the existing condition of the home, which needed new windows and repairs to the siding, fencing and a retaining wall. Francine stated that everyone agreed to share the cost of the large items, with defendants having the initial responsibility of getting bids and paying the contractors. Carole was present when Francine discussed sharing these expenses with the Deutschs and everyone agreed that the defendants would pay for all the repairs and be given credit for 50 percent of the cost by deducting it from the loan balance. Although Francine acknowledged that the Deutschs were entitled to live in the home rent-free indefinitely, there was nothing in writing reflecting this agreement.
The four parties initialed a document agreeing to the $165,000 sales price; thereafter, the Deutschs received a check for $165,000. The parties also agreed that $65,000 would be carried back in the form of an interest-free loan that the defendants were required to repay. The parties created a four-way bank account for property management purposes, with the defendants depositing $2,000 in most months into the account and the Deutschs writing a $700 " rent" check out of the account to the defendants for the defendants' income tax purposes. The defendants claimed that they paid off the loan in November 2000 after having deposited $36,250 into the account, paying $30,530 in cash and then deducting the $700 " rent" payments and fifty percent of the improvement expenses. Carole testified that the parties celebrated the loan payoff by going to a restaurant.
Arthur did not do any research and trusted Francine regarding the value of the home. He believed he was selling the home to Francine and Kerry, but never spoke to Kerry about the sale before Dorace's death and admitted that he never read the deed of trust listing the defendants as the purchasers. After completion of the sale, Arthur claimed that Francine telephoned him, asking for a $65,000 loan. After discussing the matter with Dorace, Arthur gave Francine a check in that amount, but did not document the loan in writing. Arthur considered the transaction to be a loan, not a gift, but he never discussed with Francine whether she had to pay it back and she never offered to pay it back. After the sale, Francine asked Arthur to start paying $700 a month in rent and he wrote 23 checks until Francine called him and told him to stop the payments. Arthur never questioned or complained about the request for rent, even though he had not agreed to this arrangement.
Although the Deutschs had a four-way account with the defendants, Arthur was not aware that the defendants ever deposited money into the account and claimed that they never paid back any of the loan and that he discussed the matter with them in 2004. He also claimed that a document with the writing " Fran, $65,000 paid 11/00" and signed by him did not look like his writing. Arthur recalled going to dinner with the defendants in November 2000, but did not recall that the dinner was to celebrate the payoff of the loan.
Dorace died in August 2003 and Arthur and Francine had a falling out at her memorial service. Thereafter, Arthur described their relationship as " very estranged." After the service, Arthur discovered that four rings and some of his files were missing. Arthur claimed that Dorace would never have given up the rings during her lifetime, but admitted that a document addressing the four rings and several other items was in his wife's handwriting, except for the date " 1990." Arthur understood the document to mean that Dorace wanted Francine to have certain items.
Arthur later received a letter from a property manager hired by the defendants that he interpreted as a request for rent. He got angry, tore the letter up and moved out of the house in July or August 2004. The letter proposed that Arthur would continue paying the cost of maintaining the property, but that the defendants needed documentation of the expenses for income tax purposes.
Francine denied taking anything from her father's house, including the rings, stating that Dorace gave her the four rings in June 2003. Carole stated that she saw the rings when Francine brought them home before Dorace's death. Francine claimed that Arthur moved out without telling her and that she had the locks changed after learning about the move from one of the neighbors. Eventually, the defendants listed the house for sale and sold it in March 2005 for $556,000. At the time of trial, Arthur was 82-years old, in good health and had no mental problems.
After Arthur rested his case, the defendants made a motion for judgment arguing that: (1) the statute of limitations barred the oral agreement to repay the loan; (2) the statute of frauds barred the oral agreement to create a life estate; (3) the evidence showed that Francine obtained the rings during Dorace's lifetime; (4) the balance of the evidence showed that Arthur could not prevail on his remaining claims; and (5) the claims for fraud and elder abuse failed because they were derivative of the other claims.
Arthur conceded that the third cause of action to share profits from the sale of the home lacked merit and that the statute of frauds barred his claim regarding an oral life estate. He also agreed that the claim for breach of agreement to repay the loan was time barred if the court believed the evidence that the defendants paid off the loan in November 2000, but argued the evidence showed that the loan had not been paid off. He also claimed that the evidence was insufficient to show a completed gift of the rings before Dorace's death.
The trial court agreed with all of the defendants' contentions, granted the motion and entered judgment in their favor. Thereafter, the defendants filed a verified memorandum of costs and a motion to augment those costs to include expert witness fees they incurred after making an offer to compromise that Arthur rejected. The trial court awarded the defendants their costs, including the requested expert witness fees. Arthur timely appealed from the judgment and the award of costs.
DISCUSSION
I. Legal Principles
In a nonjury trial, a party may move for judgment in its favor after the opposing party has completed presentation of its evidence. The judge, sitting as trier of fact, may weigh the evidence and order judgment in favor of the moving party. (§ 631.8, subd. (a).) The purpose of section 631.8 is to dispense with the need for the defendant to produce evidence where the court is persuaded that the plaintiff has failed to sustain its burden of proof. (Roth v. Parker (1997) 57 Cal.App.4th 542, 549.) Because the trial court evaluates the evidence as a trier of fact, it may refuse to believe some witnesses while crediting the testimony of others. (Jordan v. City of Santa Barbara (1996) 46 Cal.App.4th 1245, 1255.) We apply the substantial evidence standard of review to a judgment entered under section 631.8, reviewing the record in the light most favorable to the judgment and making all reasonable inferences in favor of the prevailing party. (San Diego Metropolitan Transit Development Bd. v. Handlery Hotel, Inc. (1999) 73 Cal.App.4th 517, 528.) We will not reverse the trial court's order granting the motion if its findings are supported by substantial evidence, even if other evidence in the record conflicts. (Roth v. Parker, supra, 57 Cal.App.4th at pp. 549-550.) With these principles in mind, we turn our attention to the merits.
II. Analysis
A. Breach of Contract Claims
The first and second causes of action alleged breach of contract regarding repayment of the loan. The undisputed evidence at trial established that the loan was not documented by any writing and as such a two-year limitation period applied. (§ 339.) A cause of action on an oral contract accrues, and the statute of limitations begins to run, at the time the contract is breached. (Trustees of Capital Wholesale Electric etc. Fund v. Shearson Lehman Brothers, Inc. (1990) 221 Cal.App.3d 617, 627, fn. 4.) Here, the trial court concluded that the statute of limitations had expired because the defendants stopped the loan payments in November 2000; however, Arthur did not file this action until November 2004.
Arthur relies on the discovery rule to avoid the two-year limitation period, asserting that Francine prepared his income taxes, the defendants' representations allowed the passage of time and he did not discover that anything was amiss with the loan or the home purchase until 2004. The discovery rule has been held to apply to breaches of contract that are committed in secret and where the harm flowing from those breaches will not be reasonably discoverable by plaintiffs until a future time. (April Enterprises, Inc. v. KTTV (1983) 147 Cal.App.3d 805, 832.) " [U]nder the delayed discovery rule, a cause of action will not accrue until the plaintiff discovers or should have discovered, through the exercise of reasonable diligence, all the facts essential to the cause of action." (Prudential Home Mortgage Co. v. Superior Court (1998) 66 Cal.App.4th 1236, 1246.)
Based on its conclusion that the statute of limitations started to run in November 2000, the trial court impliedly found that the evidence presented at trial did not support application of the delayed discovery rule. Substantial evidence supported this implied conclusion as the defendants testified and presented documentary evidence showing they paid off the loan in November 2000, celebrated the payoff by taking the Deutschs to dinner and Arthur acknowledged the payoff in a signed note. Although Arthur claimed he did not remember writing the note, he admitted the note was in his handwriting, but that the portion of the note pertaining to the loan payoff did not look like his writing. The defendants paid the loan payments into a four-way account with the Deutschs and despite his access to the account, Arthur claimed he did not know whether the defendants ever deposited money into the account. As the arbiter of the witnesses' credibility, the trial court could reasonably conclude that Arthur was on inquiry notice of the breach in November 2000 when defendants stopped the loan payments. Given the trial court's role as the fact finder in this matter, we cannot say it erred in concluding that the limitations period had expired.
Arthur also claims that the defendants should be estopped from relying on the statute of limitations defense; however, he did not raise this argument in the trial court and therefore cannot raise it for the first time on appeal. (Santantonio v. Westinghouse Broadcasting Co. (1994) 25 Cal.App.4th 102, 113.) In any event, a required element for estoppel is justifiable ignorance of the true facts by the party claiming estoppel. (Kiernan v. Union Bank (1976) 55 Cal.App.3d 111, 117.) As such, the doctrine of estoppel leads to a similar factual inquiry as application of the delayed discovery rule and, as summarized above, the evidence does not support suspension of the statute of limitations based on estoppel.
Finally, Arthur claims that the trial court should have rescinded the oral contract because it lacked essential elements and he entered the contract based on mistake of fact; however, he did not raise these arguments in the trial court and cannot raise them now. (Santantonio v. Westinghouse Broadcasting Co., supra, 25 Cal.App.4th at p. 113.)
B. Elder Abuse and Fraud
The Elder Abuse and Dependent Adult Civil Protection Act (Welf. & Inst. Code, § 15600 et seq.; the Act) defines elder abuse to include financial abuse. (Welf. & Inst. Code § 15610.07, subd. (a).) Financial abuse of an elder is established where one " appropriates . . . real or personal property of an elder . . . to a wrongful use or with intent to defraud, or both." (Welf. & Inst. Code, § 15610.30, subd. (a)(1).) A person shall be deemed to have " appropriated . . . property for a wrongful use if, among other things, the person . . . appropriates . . . property in bad faith. (Welf. & Inst. Code, § 15610.30, subd. (b).) Thus, the viability of the elder abuse claim is dependent on whether the defendants acted in bad faith or intended to defraud Arthur when they purchased the home and obtained the loan.
Arthur essentially contends that the defendants' entire course of conduct amounted to fraud and financial abuse because the defendants did not pay fair value for the home or pay interest on the loan and the promise of a life estate was unenforceable. The trial court rejected the fraud and elder abuse claims on the ground Arthur had not met his burden of proof. Specifically, the court found that the defendants paid fair market value for the home, repaid the loan, conveyed a substantial benefit to Arthur above the purchase price by allowing him to live in the home rent-free and that Arthur voluntarily abandoned his rent-free tenancy. Substantial evidence supported the trial court's findings.
Arthur agreed to sell his home to the defendants after discussing it with his son and considered it an excellent idea. The defendants testified that Arthur agreed to all the terms, including the sales price, the carry-back no interest loan and paying for one-half of necessary repairs out of the loan balance. Homes in the area sold for an average of $139,527 and a high of $181,000, for a home of the same age and square footage. Based on the necessary repairs to the property, the trial court could reasonably have found that the $165,000 sales price was fair based on market conditions at that time. In its oral statement, the trial court found no economic disadvantage to Arthur, other than by selling the property he was no longer in a position to take advantage of the " unprecedented" increase in real property values. Substantial evidence also supported the trial court's conclusion that the loan had been repaid and we cannot reverse this finding even if other evidence in the record conflicts. (Roth v. Parker, supra, 57 Cal.App.4th at pp. 549-550.)
The life estate in the property was technically unenforceable based on the statute of frauds; however, Francine readily admitted that she intended to give the Deutschs a life estate and there was no evidence presented at trial showing any of the parties recognized the need for a writing to create a life estate. In any event, Arthur mooted this issue by voluntarily vacating the home even though the letter he received from the defendants' property manager clearly stated that the existing tenancy arrangement in lieu of rent would not change. Simply put, the evidence presented at trial does not show that the defendants induced the Deutschs to sell their home or extend the loan based on bad faith, false statements, misrepresentations or the concealment of material facts. Moreover, while the arrangement ultimately benefited the defendants, this result does not prove fraud or elder abuse. As noted by the trial court, Arthur would have benefited had the housing market moved in the opposition direction.
Although Arthur asserts that he sustained his burden of proof with regard to showing financial abuse of an elder, substantial evidence supports the contrary finding. Consequently, Arthur has not met his burden of demonstrating reversible error.
C. Remaining Claims
Arthur conceded, and the trial court found, that the third cause of action to share profits from the sale of the home lacked merit and that the statute of frauds barred his claim regarding an oral life estate. Arthur does not challenge these findings on appeal and we will not discuss them further. Additionally, Arthur's opening brief does not challenge the trial court's finding that he failed to prove conversion of the rings and we deem any argument regarding this claim waived. (Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785.)
D. Costs Award
On
Where a plaintiff does not accept a section 998 offer and fails to obtain a more favorable judgment, the plaintiff " shall pay the defendant's costs from the time of the offer" and the trial court has the discretion to require the plaintiff to pay a reasonable sum to cover costs of the services of expert witnesses " actually incurred and reasonably necessary" in preparation for trial of the case by the defendant. (§ 998, subd. (c)(1).) A section 998 offer must be made in good faith to be valid (Wear v. Calderon (1981) 121 Cal.App.3d 818, 821), meaning the settlement offer be " 'realistically reasonable under the circumstances of the particular case. . . .' [Citation.]" (Jones v. Dumrichob (1998) 63 Cal.App.4th 1258, 1262.) We review the award of expert witness fees under the abuse of discretion standard. (Ibid.) A verdict less than the defendants' section 998 offer constitutes prima facie evidence that the offer was reasonable, and the burden of proving an abuse of discretion is on the appellant to prove otherwise. (Elrod v. Oregon Cummins Diesel, Inc. (1987)195 Cal.App.3d 692, 698.)
The trial court was in a better position to evaluate the strength of Arthur's case at the time of the settlement offer and he has not provided us with sufficient evidence upon which to base a finding that the trial court abused its discretion in determining that the defendants' section 998 offer was reasonable. Arthur's $100,000 settlement demand is not relevant to the trial court's determination of whether the defendants' $17,500 offer was made in good faith because " even a 'modest settlement offer' may be in good faith if it is believed the defendant has a significant likelihood of prevailing at trial. [Citation.]" (Jones v. Dumrichob, supra, 63 Cal.App.4th at p. 1264.)
Although the granting of the defendants' motion for judgment relieved them of the need to present any evidence, the trial court reasonably determined that the fees sought by the defendants were necessarily incurred in preparation for trial. (§ 998, subd. (c)(1).) Moreover, the sworn declaration of defense counsel shows that all expert witness fees were incurred after the defendants made their offer to compromise. The declaration of counsel can be considered as documentation for claimed items. (Jones v. Dumrichob, supra, 63 Cal.App.4th at p. 1265.) Accordingly, we reject Arthur's assertion that the trial court erred in allowing the fees of one individual on the ground the person was not an expert because counsel's declaration identifies the individual as an expert and the supporting invoice shows that the individual was an appraiser. Because the trial court could reasonably find that the offer was reasonable and that the fees were necessary for the defendants' trial preparation, we conclude it acted within its discretion in awarding the challenged costs.
DISPOSITION
The judgment is affirmed in its entirety. Respondents are awarded their costs on appeal.
McINTYRE, J.
WE CONCUR:
NARES, Acting P. J.
HALLER, J.
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