Cairns v. Johnson

Filed 9/11/07 Cairns v. Johnson CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

APPEAL from the Superior Court of Riverside County. Edward D. Webster, Judge. Affirmed in part and reversed in part.

Law Office of Steve Odom and Stephen A. Odom for Defendants and Appellants.

Law Offices of Dennis F. Fabozzi and Dennis F. Fabozzi for Plaintiffs and Respondents.

After a court trial, the trial court found that defendants Jimmy Johnson and Deborah Johnson committed fraud and breached fiduciary duties in connection with a purchase of real property. The trial court reformed the deed to the property to remove the Johnsons from title, and to confirm plaintiffs Neil Cairns and Verla Cairns as the sole owners of the property.

The trial court also found that the Johnsons conduct was outrageous and maliciously oppressive. It therefore awarded plaintiffs general damages for emotional distress of $50,000 and punitive damages of $50,000.

The Johnsons appeal, contending the emotional distress damages are unsupported by substantial evidence. They also argue that the punitive damages award should be reversed because there was no evidence of their financial condition.

I. FACTS

In 1996, Verla Cairns sustained a closed-head injury in an automobile accident. Her face was paralyzed on the right side and she had speech and cognitive problems with memory, understanding, and comprehension. Following the accident, she and her husband moved to California to be closer to her family. Mr. Cairns was also in poor health at that time.

Defendant Deborah Johnson is one of Verla Cairnss sisters. Deborahs husband, Jimmy Johnson, volunteered to help the Cairns find property to purchase. In 2000, after the Cairns decided to purchase a rundown property next door to the Johnsons property, Mr. Johnson opened the escrow and handled negotiations with the seller. Mr. Johnson told Mr. Cairns that the seller insisted that he be a cosigner on the purchase money note. Mr. Johnson and his wife ended up as joint tenants on the deed.

The Cairns paid the down payment, and all other funds required to maintain and improve the property. After the property was purchased, the Cairns spent over $100,000 refurbishing it. The trial court was shown videotapes which showed the before and after condition of the property. The Johnsons did not pay for any expenses connected with the property.

In 2004, the Cairns decided to refinance the mortgage. Since the purchase money note was being paid off, they asked Mr. Johnson to quitclaim his interest in the property to them to get him off title. He refused and demanded money from the Cairns. Mr. Johnson subsequently claimed that he was the person who bought the house and that the Cairns were glorified renters. After the case was filed, his attorney explained to him that he was actually half owner of the property. But, at trial, he still believed he owned the entire property.

After another witness contradicted Mr. Johnson, and an expert testified as to the fiduciary aspects of the transaction, the trial court found in favor of the Cairns.

II. THE AWARD OF GENERAL DAMAGES FOR EMOTIONAL DISTRESS

The trial court was pretty offended by this case. With regard to emotional distress, it said: In my view, and its clear from seeing Ms. Cairns testify, that this uncertainty about having the place youre going to live for the rest of your life, that you fixed up and [did] a wonderful job withI mean, my house is nowhere near the shape that Mr. Cairns has done and put his house intoshows true pride of ownership. I cant even imagine the distress they must feel as a result of whats happened, and having her own sister and brother-in-law do this to her.

The Johnsons contend that the trial courts award of $50,000 as general damages for emotional distress should be reversed because there was no evidence that the Cairns suffered any emotional distress.

The Johnsons cite Nally v. Grace Community Church (1988) 47 Cal.3d 278. In that case, our Supreme Court stated: The elements of a cause of action for intentional infliction of emotional distress are (i) outrageous conduct by defendant, (ii) an intention by defendant to cause, or reckless disregard of the probability of causing, emotional distress, (iii) severe emotional distress, and (iv) an actual and proximate causal link between the tortious conduct and the emotional distress. [Citation.] (Id. at p. 300.)

Both sides cite Pintor v. Ong (1989) 211 Cal.App.3d 837. That case concerned the statutory duty of a mortgagee, a trust deed beneficiary, or others to reconvey title after the mortgage or other note has been paid off. Civil Code section 2941 provides that a person who fails to reconvey in violation of that section is liable for all resulting damages. In Pintor, the court held that the statutory term all damages included damages for emotional distress. It therefore upheld an award of $15,000 for the mental and emotional strain [plaintiff] suffered in his efforts to obtain from defendants . . . the request for full reconveyance. (Pintor v. Ong, supra, at p. 840.) The court found that the action was a tort action, and [a]ccordingly, we apply the general rule of tort damages, namely, that all detriment proximately caused by breach of a legal duty is compensable, including damages for emotional distress. [Citations.] (Id. at pp. 841-842.) It therefore allowed recovery for emotional distress. (Id. at p. 846.)

In discussing a claim that the amount of emotional distress damages awarded, $15,000, was excessive, the Pintor court said: To put the award in context, it is helpful to recall that to recover emotional distress damages, the injury suffered must be severe, i.e., substantial or enduring as distinguished from trivial or transitory. [Citation.] The range of injury broadly encompasses all highly unpleasant mental reactions . . . [citation] and includes fright, nervousness, grief, anxiety, worry, mortification, shock, humiliation and indignity, as well as physical pain. [Citation.] [] As the record demonstrates, the harm suffered by respondent was not trivial or transitory, and fits within the confines of emotional distress injury established by case law. . . . [] In concluding respondent was entitled to compensation for mental and emotional distress resulting from willful violation of [Civil Code] section 2941, the [trial] court found that respondent experienced worry, frustration, anger and sleeplessness due to [appellants] failure to execute and deliver a Request for Full Reconveyance. The [trial] court further concluded: Given the mental and emotional strain suffered by [respondent], over two and one-half (2 1/2) years in his efforts to obtain the Request for Full Reconveyance, the award of $15,000.00 is reasonable and just. [] The record amply supports these findings; the award was not excessive. (Pintor v. Ong, supra, 211 Cal.App.3d at pp. 846-847.)

Although the Johnsons argue that evidence of emotional distress was lacking, rather than arguing that the award was excessive, we find Pintor persuasive. There was ample evidence here of the mental and emotional strain suffered by the Cairns after they realized that Mrs. Cairnss sister and brother-in-law had defrauded them by claiming ownership of the property they had just spent over $100,000 improving. The fraud and breaches of fiduciary duty occurred at a time when the Johnsons knew that Mrs. Cairns had serious mental problems, and that Mr. Cairns was in poor health. The Cairns testified they were very angry over the betrayal by trusted family members and Mrs. Cairns was barely able to testify about what she called her sister and brother-in-laws ridiculous claim.

The trial court alluded to Mrs. Cairnss demeanor when testifying and to the distress that she must have suffered under the circumstances. In our view, the trial courts conclusion that the Cairns had suffered emotional distress was a reasonable inference for the trier of fact to draw from the evidence. We therefore agree with the Cairns that there was substantial evidence before the trial court to support its award of emotional distress damages.

The Johnsons also argue that an award of emotional distress damages was improper because such an award can only be made when there are other damages. They cite Nagy v. Nagy (1989) 210 Cal.App.3d 1262. In that case, plaintiff sued for fraud and intentional infliction of emotional distress resulting from a statement his wife made in a deposition during divorce proceedings. The court found the statement to be privileged and upheld defendants demurrer. Since the court found there was no unprivileged cause of action, there was no possible recovery for emotional distress. In a passage relied on here, it said: Although damages for emotional distress can be recovered in a fraud cause of action, such damages have been allowed only as an aggravation of other damages. (See Schroeder v. Auto Driveaway Co. (1974) 11 Cal.3d 908, 921 . . . ; Crisci v. Security Ins. Co. (1967) 66 Cal.2d 425, 433 . . . .) Since we conclude that appellant has not successfully pled other, or indeed any legally recognizable damages, damages for emotional distress alone are not recoverable. (Id. at p. 1269.)

Since no other monetary damages, except punitive damages, were awarded here, the Johnsons contend that emotional distress damages should not have been awarded.

In Schroeder v. Auto Driveaway Co. (1974) 11 Cal.3d 908, a rental van was involved in an accident and the contents were badly damaged or lost. Our Supreme Court upheld an award of $19,000 for loss or damage to the goods, plus $3,585.15 for emotional distress. (Id. at p. 921.) The case does not support the proposition that emotional distress damages can only be recovered as an aggravation of other damages. Indeed, the court emphasizes that, once plaintiff shows that he or she has been damaged due to the wrongful conduct of the defendant, liability cannot be evaded because the damages cannot be measured with exactness. (Ibid.)

The second case relied on by Nagy is Crisci v. Security Ins. Co. (1967) 66 Cal.2d 425. That case, which is relied on by the Cairns, supports their position. It states: The general rule of damages in tort is that the injured party may recover for all detriment caused whether it could have been anticipated or not. [Citations.] In accordance with the general rule, it is settled in this state that mental suffering constitutes an aggravation of damages when it naturally ensues from the act complained of, and in this connection mental suffering includes nervousness, grief, anxiety, worry, shock, humiliation and indignity as well as physical pain. The commonest example of the award of damages for mental suffering in addition to other damages is probably where the plaintiff suffers personal injuries in addition to mental distress as a result of either negligent or intentional misconduct by the defendant. [Citations.] Such awards are not confined to cases where the mental suffering award was in addition to an award for personal injuries; damages for mental distress have also been awarded in cases where the tortious conduct was an interference with property rights without any personal injuries apart from the mental distress. [Citations.] (Id. at p. 433.)

In the present case, there was a tortious interference with property rights which led to the deed being reformed. Even though there were no monetary damages, the tortious conduct supports the award of emotional distress damages. Thus, the reformation of the deed for fraud supported an award for the emotional distress suffered by the Cairns, even under the criteria stated in Nagy.

III. THE AWARD OF PUNITIVE DAMAGES

The Johnsons attack the award of punitive damages in the sum of $50,000 on grounds that the award was improper because there was no evidence of their financial condition. In the leading case of Adams v. Murakami (1991) 54 Cal.3d 105, our Supreme Court held that such evidence was essential to a punitive damages award: A reviewing court cannot make a fully informed determination of whether an award of punitive damages is excessive unless the record contains evidence of the defendants financial condition. Since Neal [v. Farmers Ins. Exchange (1978)], 21 Cal.3d 910, we have repeatedly examined punitive damage awards in light of the defendants financial condition. [Citations.] This simple principle is well understood by the bench. The standard jury instruction on punitive damages given in this case expressly directed the jury to consider the defendants financial condition. [Citation.] The Use Note to this instruction explained that consideration of this factor was necessary under Neal, supra, 21 Cal.3d 910. [Citation.] The principle is also axiomatic to the bar. (Id. at pp. 110-111.) Adams also held that the plaintiff bears the burden of proof of producing evidence of defendants financial condition. (Id. at pp. 119-123.)

More recently, our Supreme Court said: Punitive damages are to be assessed in an amount which, depending upon the defendants financial worth and other factors, will deter him and others from committing similar misdeeds. [Citation.] Because compensatory damages are designed to make the plaintiff whole, punitive damages are a windfall form of recovery. [Citation.] (College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 712.)

The Cairns do not disagree that at least some evidence of the financial condition of the Johnsons was required.^[1] Although they agree that no balance sheet net worth evidence was produced, they argue that other evidence establishes the financial condition, or minimum net worth, of the Johnsons. They point to evidence showing that Mr. Johnson owned a fencing company, and that he owned five properties at the time of trial. From this they extrapolate a minimum net worth of at least $600,000. The Cairns then argue that the award of $50,000 is appropriate because it represents 8 to 20 percent of the Johnsons net worth.

The Johnsons characterize the argument as a creative attempt to show their net worth. They point out that no evidence was introduced as to the value of the fencing company, or the value of properties owned at time of trial. Nor was there any evidence of their liabilities.

There was no other evidence of the Johnsons financial condition introduced at trial, and we must agree with the Johnsons that the punitive damages award cannot stand. Although the evidence of their conduct fully supports a substantial award of punitive damages, we cannot determine whether the amount of the award was excessive without meaningful evidence of their financial condition. (Lara v. Cadag (1993) 13 Cal.App.4th 1061, 1063-1064.)

The Johnsons contend that this should end the matter, and they object to retrial of the issue. They cite Silberg v. Anderson (1990) 50 Cal.3d 205: For our justice system to function, it is necessary that litigants assume responsibility for the complete litigation of their cause during the proceedings. To allow a litigant to attack the integrity of evidence after the proceedings have concluded, except in the most narrowly circumscribed situations, such as extrinsic fraud, would impermissibly burden, if not inundate, our justice system. [Citations.] (Id. at p. 214.)

Neither party cites the more recent precedent on this subject. The Cairns cite Adams v. Murakami, supra, 54 Cal.3d 105 in support of their remand argument because that case reversed the punitive damages award and directed a remand to the trial court for further proceedings in accord with the opinion. (Id. at pp. 123-124.) But a remand was appropriate in that case because a new rule was being announced and applied to pending cases. (Washington v. Farlice (1991) 1 Cal.App.4th 766, 777; Douglas v. Ostermeier (1991) 1 Cal.App.4th 729, 740-751.)

But now that the issue is settled, recent cases decline to order a retrial when there is a lack of sufficient evidence of the defendants financial condition. In Kelly v. Haag (2006) 145 Cal.App.4th 910, our colleagues in Division One reversed a punitive damages award for lack of evidence of the defendants financial condition. The court said: Under Evidence Code section 500 and consideration of fundamental fairness, it is the plaintiffs burden to establish the defendants financial condition. [Citation.] It is not too much to ask of a plaintiff seeking such a windfall to require that he or she introduce evidence that will allow a jury and a reviewing court to determine whether the amount of the award is appropriate and, in particular, whether it is excessive in light of the central goal of deterrence. [Citation.] Further, it is inherently prejudicial to require a defendant to introduce evidence of personal finances. [Citation.] (Id. at p. 916.)

The court then refused to remand for retrial of the punitive damages issue: When the plaintiff has had full and fair opportunity to present the case, and the evidence is insufficient as a matter of law to support plaintiffs cause of action, a judgment for defendant is required and no new trial is ordinarily allowed, save for newly discovered evidence. . . . Certainly, where the plaintiffs evidence is insufficient as a matter of law to support a judgment for plaintiff, a reversal with directions to enter judgment for the defendant is proper. . . . [] . . . [A] reversal of a judgment for the plaintiff based on insufficiency of the evidence should place the parties, at most, in the position they were in after all the evidence was in and both sides had rested. [Citations.] (Kelly v. Haag, supra, 145 Cal.App.4th at p. 919.)

In a very recent decision, Kelly was followed in Baxter v. Peterson (2007) 150 Cal.App.4th 673. The court found the record insufficient to allow a reviewing court to evaluate the defendants ability to pay punitive damages. Citing Kelly, the court reversed the award. Since plaintiff had a full opportunity to present his case, and failed to introduce evidence of defendants financial condition, the evidence was insufficient. Following Kelly, the court said: When a punitive damage award is reversed based on the insufficiency of the evidence, no retrial of the issue is required. [Citation.] Accordingly, on remand, the issue of punitive damages shall not be retried. (Baxter v. Peterson, supra, at p. 692.)

IV. DISPOSITION

The award of punitive damages is reversed for insufficiency of the evidence. In all other respects, the judgment is affirmed. Each party to bear their own costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

/s/ King

J.

We concur:

/s/ Ramirez

P.J.

/s/ McKinster

J.

Publication Courtesy of San Diego County Legal Resource Directory.

Analysis and review provided by San Diego County Property line attorney.

^[1] The Cairns argue that the punitive damages issue was waived because the Johnsons failed to file a new trial motion arguing that the damages were excessive. (Code Civ. Proc.,  657; County of Los Angeles v. Southern Cal. Edison Co. (2003) 112 Cal.App.4th 1108, 1121; Schroeder v. Auto Driveaway Co., supra, 11 Cal.3d at p. 918.) However, the Johnsons do not argue that the punitive damages are excessive. Instead, they argue that there is a lack of substantial evidence, i.e., evidence of their financial condition, to allow for meaningful appellate review of the punitive damages award.