Harchol v. Beneficial Services

Filed 10/11/06 Harchol v. Beneficial Services CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, Eleanor M. Palk, Temporary Judge. (Pursuant to Cal. Const., art. VI, § 21.) Affirmed.

Peter J. Porter for Plaintiff and Appellant.

Michael F. Obrand and David L. Krogh for Defendants and Respondents Coldwell Banker and Arlene Simmons.

Harbin & McCarron, Bruce A. Harbin and Richard H. Coombs, Jr., for Defendants and Respondents Beneficial Services, Inc., etc., and Jane Taggart-Richardson.

Amy Harchol bought an old dilapidated house intending to tear it down and build a new house on the property. Almost five years later, after the house was “red-tagged” by the City of Tustin (the City) and demolished, Harchol sued the seller and the real estate agents for fraud alleging they had failed to adequately disclose the condition of the house. At the beginning of trial, the court ruled that because Civil Code section 3343 was the exclusive measure of damages for fraud in the purchase of real estate, Harchol could not introduce evidence of damages not relating to the difference between the value of the property at the time of purchase and what Harchol paid for the property. In view of that limitation, Harchol conceded she had no damages and made no opening statement. The court granted nonsuit for the defendants. On appeal, Harchol contends she was improperly precluded from introducing evidence of her damages. We affirm the judgment.

FACTS

On February 7, 1997, Harchol bought a residential property located in the historic area of the City from Bonnie Masters Gimbel for $114,000. Gimbel was represented in the transaction by Arlene Simmons and Coldwell Banker Residential Brokerage Company, and Harchol was represented by Jane Taggert-Richardson and Beneficial Services, Inc., doing business as RE/Max Real Estate Services (hereafter sometimes collectively referred to as the defendants).

The house on the property was built around 1919. Although designated a historical structure, it was in very bad shape. Harchol purchased the house in “As-Is condition,” advising the realtors she intended to tear down the original structure and build a new house. The transfer disclosure statement received by Harchol contained the following inspection disclosure by the seller’s agent: “Agent recommends physical, geological [and] structural inspections. Home needs major repairs. Built in 1919. Sold ‘As-Is.’ No repairs, warranties or termite work to be done by Seller. Consult with Tustin City Hall for information re permits, expansion etc. In Historic area.” The transfer disclosure statement also contained the following inspection disclosure by the buyer’s agent: “Property is very old and needs extensive repairs, work, [and] updating. Buyers are encouraged to get [third-]party professional inspectors as to the extent and condition of the property.” Apparently, Harchol never had the property inspected.

On December 17, 2001, Harchol filed this action against the defendants for fraud. Her complaint specifically alleged she bought the property intending to build a new “two-story historic reproduction home” on the property and demolish the existing house upon its completion. From 1997 through the summer of 1999, she worked on drawings for the City’s approval. From the summer of 1999 until January 2001, she worked with architects, and she submitted building plans to the City in February. In April 2001, the City inspected the existing house, declared it unsafe to use as a dwelling because it had greater than 75 percent structural damage, and “red-tagged” it.

The City filed criminal code enforcement and civil nuisance actions against Harchol. In May 2002, Harchol and the City entered into a stipulated judgment in the nuisance action pursuant to which Harchol was to rehabilitate the existing house and make it habitable by certain deadlines. She failed to abide by the judgment, and ultimately the house was demolished by the City.[1]

Harchol’s single fraud cause of action alleged when she purchased the property, the defendants “failed to disclose known, preexisting, significant structural defects requiring substantial repairs on the foundation, wall[s] and roof framing systems . . . .” Harchol alleged the damages she had suffered as a result of the fraud included: the loss of use of the house due to its being condemned by the City, the costs of defending herself in the civil and criminal actions brought against her by the City, and costs to repair the house. The defendants’ motions for summary judgment, brought primarily on the grounds the statute of limitations had run, were denied and the matter proceeded to trial.

In February 2004, Harchol served her itemized statement of damages on the defendants. She claimed $1,706,500 in damages due to the defendants’ alleged fraud, which included: the loss of use of the house from April 2001 (when it had been “red-tagged”); the loss of personal income from December 2002 (when the house was demolished); the costs of alternative housing after June 2001; personal property damage; construction costs for building her new home on the property; medical bills; criminal bail fees and legal fees associated with the City’s criminal and civil actions against her; permanent injury to her wrist; the cost of an automobile; the “total loss of original historic redwood house”; the “loss related to [her] inability to prosecute other unrelated cases”; her construction insurance costs; her child care costs; and “credit history damage.”

The defendants filed a motion in limine to preclude Harchol from introducing evidence of the damages listed in her statement of damages because those items were not recoverable under Civil Code section 3343. The trial court granted the motion commenting the proper measure of damages for fraud in a real estate transaction was “the difference between what the purchase price of the property was at the time of the purchase versus what it would have been if everything that [Harchol was] complaining about had been brought out originally and not all of the other damages that [Harchol] is claiming flowed from that initial purchase and the alleged non-disclosures.” The court noted because Harchol had specifically alleged she bought the property with the intention of tearing down the existing house and building a new one, the damages set forth in her statement of damages were not the result of the defendants’ alleged failure to disclose the defective condition of the house, but of Harchol’s failure to abide by the stipulated judgment with the City and the subsequent demolition of the property. Harchol’s counsel noted in view of the court’s ruling, Harchol had no evidence to present concerning damages and offered no further opening statement. The court granted the defendant’s motion for nonsuit and judgment was entered for the defendants.

DISCUSSION

Harchol appeals from a judgment entered after a motion for nonsuit was granted upon her opening statement. Although the grant of a nonsuit on an opening statement is not favored, it is proper when “there is a clear and unequivocal demonstration of a total lack of a cause of action by plaintiff. [Citation.]” (Galanek v. Wismar (1999) 68 Cal.App.4th 1417, 1424.) In this case, the court ruled the specific items of damage Harchol claimed in her statement of damages were not recoverable under Civil Code section 3343. Conceding she had no other damages, Harchol submitted the matter to the court making no further opening statement. Accordingly, the court granted nonsuit because a necessary element of a fraud cause of action was missing--i.e., damage due to the alleged misrepresentation. (See Adkins v. Wyckoff (1957) 152 Cal.App.2d 684, 689-690 [“[a] fraudulent representation which does not result in damage is not actionable”].)

On appeal, Harchol contends the trial court improperly concluded she had no recoverable damages and she should have been permitted to introduce evidence of the items listed in her statement of damages. We disagree.

Civil Code section 3343 is the exclusive measure of damages for fraud involving the “purchase, sale or exchange of property[.]” It embodies the “out-of-pocket” measure of damages. “The ‘out-of-pocket’ measure of damages ‘is directed to restoring the plaintiff to the financial position enjoyed by him prior to the fraudulent transaction, and thus awards the difference in actual value at the time of the transaction between what the plaintiff gave and what he received. . . .’ [Citations.]” (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1240-1241.) A defrauded person may also recover “additional damage arising from the particular transaction[]” in the nature of consequential damages. (Civ. Code, § 3343, subd. (a); Bagdasarian v. Gragnon (1948) 31 Cal.2d 744, 762-763.) Such additional damages include “[a]mounts actually and reasonably expended in reliance upon the fraud[]” and compensation “for loss of use and enjoyment of the property to the extent that any such loss was proximately caused by the fraud.” (Civ. Code, § 3343, subd. (a)(1) & (2).)

Harchol made no showing she had any out-of-pocket loss as a result of the allegedly fraudulent transaction, i.e., from the defendants’ alleged failure to disclose the condition of the house. Harchol paid $114,000 for a ramshackle house, in as-is condition, with the intention of tearing it down. She expressly understood the house needed “major” and “extensive” repairs. What Harchol received in the bargain was a ramshackle house that in the City’s judgment several years later needed to be torn down. Harchol made absolutely no offer of proof that there was any “difference between the actual value of that with which [she] parted and the actual value of that which [she] received . . . .” (Civ. Code, § 3343, subd. (a).)

Harchol concedes she had no evidence the property, had the condition of the house been adequately disclosed (i.e., as an uninhabitable “tear-down”), was worth less than what she purchased it for (ironically, with the admitted intention of tearing it down). Harchol nonetheless argues she was entitled to recover as consequential damages amounts she subsequently spent years later trying to rehabilitate the structure after the City “red-tagged” it, amounts she spent fighting the City in its code enforcement efforts, personal injury and personal property damage she suffered in connection with the City’s demolition of the house, and costs associated with construction of her new house on the property. But, Harchol made no offer of proof any of those damages were caused by the alleged fraud in the original transaction. As the trial court noted, her damages all related to the subsequent condemnation of the house.

Harchol also complains the “out-of-pocket” measure of damages for fraud set forth in Civil Code section 3343 should not be applied in this case. She contends all the defendants stood in a fiduciary relationship to her and when a victim is defrauded by fiduciaries, “the ‘broader’ measure of damages provided by [Civil Code] sections 1709 and 3333 applies.” (Alliance Mortgage Co. v. Rothwell, supra, 10 Cal.4th at p. 1241, fns. omitted.) Harchol did not raise this argument below and cannot raise it for the first time on appeal. (In re Marriage of Eben-King & King (2000) 80 Cal.App.4th 92, 117 [“It is well established that issues or theories not properly raised or presented in the trial court may not be asserted on appeal, and will not be considered by an appellate tribunal. A party who fails to raise an issue in the trial court has therefore waived the right to do so on appeal”].) Harchol’s complaint did not allege any fiduciary relationships or breach of a fiduciary duty and she made no request to amend her opening statement to offer facts supporting a breach of fiduciary duty. (See John Norton Farms, Inc. v. Todagco (1981) 124 Cal.App.3d 149, 162.)

DISPOSITION

The judgment is affirmed. The Respondents are awarded their costs on appeal.

O’LEARY, ACTING P. J.

WE CONCUR:

MOORE, J.

IKOLA, J.

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[1] Harchol then sued the City alleging she had been damaged by its legal actions. That lawsuit was dismissed after an anti-SLAPP special motion to strike under Code of Civil Procedure section 425.16 was granted. A different panel of this court affirmed the judgment. (Harchol et al. v. City of Tustin et al. (May 22, 2006, G035632) [nonpub. opn.].)