Opinion
A131849
02-14-2013
ELVIS LEWIS, Plaintiff and Appellant, v. HOLLIS GENERAL PARTNERSHIP et al., Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Alameda County
Super. Ct. No. RG08401589)
I. INTRODUCTION
In 2004, appellant, a professional physical trainer, rented space for a gym in Emeryville from the owner of that space, respondent Hollis General Partnership (Hollis) via a broker, respondent Jeff Lahr (Lahr), who was affiliated with the brokerage firm listing that space, respondent Cornish & Carey Commercial (C&C). Because of one principal problem with that space, namely noise arising from a neighboring commercial "Taiko drumming club," appellant's business failed and he was evicted from the space he occupied because of his failure to pay rent. He sued all three respondents on a variety of causes of action, but after the trial court sustained demurrers brought by the respondents, the case proceeded to trial before a jury on only three causes of action, i.e., one for breach of fiduciary duty and two for breach of the lease. Before the jury was given the case to consider, the trial court granted a motion by the brokers C&C and Lahr for a directed verdict on the one remaining cause of action (breach of fiduciary duty) brought against it. The jury thus considered only the two breach of contract claims against respondent Hollis, the property owner and landlord, and returned a verdict in appellant's favor against it. However, the trial court thereafter granted a judgment notwithstanding the verdict (JNOV) in favor of Hollis.
Appellant appeals from the judgments entered in favor of respondents, i.e., the judgment in favor of the respondent brokers based on the directed verdict order issued by the court and the JNOV issued by it in favor of respondent and landlord Hollis. We agree with the arguments presented by appellant and hence reverse and vacate the judgments entered in favor of respondents and remand the matter to the trial court for further proceedings consistent with this opinion.
II. FACTUAL AND PROCEDURAL BACKGROUND
In 2002, appellant Lewis, a trainer with considerable experience working in and operating gyms in the Bay Area, was operating such a gym (The Fitness Court) in Walnut Creek. Because of the location and growth of businesses attracting younger workers, he determined to try to move that gym to either Oakland or Emeryville in Alameda County. His concept was to provide a space where clients could both work out and then shower in a relatively short amount of time, i.e., either before or after work or during a lunch break.
After seeing a sign for space available in a building on Hollis Street in Emeryville, appellant contacted the listing broker for the space, respondents Lahr and C&C, in April 2004. Lahr, who also acted as appellant's agent, showed appellant the space, which consisted of about 2900 square feet on one floor of a building at 1601-B Hollis Street. Appellant was attracted to the space because of both its light and the availability of parking, but also found it a bit small because of the necessity, in his view, to have space for both the exercise equipment and for showering.
Appellant and Lahr discussed two neighboring premises, one unoccupied and the other occupied by a "Taiko drumming club," an operation appellant was not familiar with. The landlord, respondent Hollis, advised appellant that the unoccupied space was probably not going to be available because of construction problems involved in connecting it with the space appellant was interested in.
A few months later, appellant went back to the Hollis Street space and heard the noise coming from the Taiko drumming club; he found the noise caused the walls of the space he was interested in to rattle and that it sounded like "a freight train coming through that building." He then told Lahr that "there is no way, no way that I'm going to take that space" if the Taiko club was going to remain next to it.
Lahr took appellant to various other possible sites in Emeryville. At one point, according to appellant, Lahr told him that the 1601-B Hollis Street location "is still an option" because the landlord, respondent Hollis, had "terminated" the Taiko club's lease by serving it with a notice to vacate and that, therefore, that club would be "history" at the end of its lease term, i.e., October 31, 2004, and that, when it had moved out, appellant could expand his gym into that space. Indeed, Lahr acknowledged that he had specifically told appellant "that the Taiko lease expired October 31st, 2004."
According to evidence introduced by respondents, in fact the Taiko club was planning to move into other space at that time, but it unexpectedly lost that space because it was rented to another tenant. As a result, the Taiko club did not in fact vacate their 1601-A Hollis Street space on October 31, 2004. Hollis then attempted to evict Taiko from that space but, as discussed below, was unsuccessful in doing so.
In fact, the Taiko club had not been served with a notice to quit as of October 2004, although it had asked the City of Emeryville for a conditional use permit for other space. In his testimony, Lahr denied telling appellant that such had happened, although he did admit that he told appellant that the Taiko lease "had a lease expiration date of 10/31 [2004]" and that "they will probably . . . move" then. However, both some notes Lewis had made and e-mails he had sent the Hollis respondent's agent were consistent with his version of what Lahr had told him. And respondent Hollis, the landlord of the premises, was aware that the noise emanating from the Taiko premises had led to complaints from the previous tenants of the (now) empty neighboring space.
Being under the impression that the Taiko club would soon be gone, Lewis made an offer to lease the 1601-B Hollis Street premises, subject to the condition that he would have the right of first refusal on the Taiko space next door at 1601-A Hollis Street. Respondent Hollis accepted that offer and gave appellant its standard form commercial lease, a lease prepared by its attorneys. It provided for a three-year term, commencing on August 15, 2004, and a right of first refusal on the neighboring Taiko club space, which Lewis then believed would be available on or about November 1, 2004. The combination of the two spaces would then, per Lewis, allow for the installation of showers. Both parties executed the lease agreement. Lewis conceded, on cross-examination, that he "read through the lease" before signing it on, apparently, August 4, 2004.
After the execution of the lease by both parties, appellant began to clean and paint the 1601-B Hollis Street space, removing a floor previously placed there, and moving over $100,000 worth of equipment into the premises. He also began to aggressively market his prospective new gym within the Emeryville business community by telling both his current club members and prospective members that there would be a "grand opening . . . sometime in January" 2005. He testified that he spent at least $12,000 on such efforts.
However, in late October 2004, Lahr told appellant that the landlord, Hollis, had determined to give the Taiko club two more months on its lease because, apparently, of its inability to move into new space. Lewis testified that this news "absolutely devastated" him. He sent an e-mail to Hollis's management company stating that the noise coming from the Taiko club would have "a tremendous impact" on his business, that he could not run it with the noise coming from their operation, and that he had entered into the lease with Hollis on the understanding that the Taiko operation would be gone by November 1, 2004.
There ensued a series of communications back and forth between appellant and the agents for the landlord, respondent Hollis, regarding what could and should be done to solve the noise problems emanating from the Taiko club's premises. Appellant also had to tell his present and potential customers that he understood the Taiko club would soon be out of the next-door space, and the showers then put in place.
In fact, however, the Taiko club did not leave until October 31, 2005, i.e., a year after appellant understood they would be gone. This was so because Hollis did not serve Taiko with a notice to quit until December 2004, and such a notice was not effective then because its lease had expired and it was now on a month-to-month tenancy. Hollis thus had to serve a 30-day notice to evict, followed by an unlawful detainer action filed in January 2005. This action was, however, settled in March 2005, via a stipulation between Hollis and the Taiko club management that they could stay until October 2005 if they agreed to "muffle" their drums. They so agreed, but that apparently did not work, and Hollis attempted to enforce the stipulated judgment against the Taiko ownership in court, but was unable—inexplicably—to do so.
As a consequence, and as noted above, the Taiko club remained in the 1601-A premises until October 31, 2005. According to the testimony of some of appellant's former customers, its presence there adversely affected his business because (1) of the continued noise (notwithstanding the attempted "muffling") and (2) he was unable to install showers.
Appellant testified that he determined not to try to break his lease with Hollis because he had invested considerable money and effort to try to make his new gym profitable and because his landlord, Hollis, repeatedly assured him it was trying to deal with the Taiko noise problem. Additionally, appellant accepted Hollis's offer to reduce his rent while Taiko remained on the premises.
Per his testimony, however, this reduction did not offset the substantially lessened revenue he was receiving because of the decline in business he attributed to the noise caused by the Taiko operation. As a consequence, per appellant, "the business died" and he stopped paying rent sometime in 2005, as a result of which (1) he was threatened with eviction and (2) his right of first refusal on the Taiko space was revoked in August 2005. The rent reduction agreement Hollis had given appellant was also revoked when the Taiko club moved out on October 31, 2005. As a result of all of this, appellant was unable to install showers in his gym nor make other improvements he had both contemplated and advertised. He also had to cash out his IRA, and sold off many personal assets to keep the business running.
Although Lewis complained verbally and in e-mails to Hollis's agent about the noise problem he was experiencing in the premises, he never delivered a formal written notice to his landlord, i.e., Hollis or its agent, of any "default" by the landlord regarding the premises. He also never specifically complained to Hollis that the rent reduction did not alleviate or compensate him for the problems associated with the noise coming from the Taiko premises. In the summer of 2007, appellant asked Hollis for, and secured, a one-year extension of the lease agreement; his lease would thus expire on August 31, 2008. But, per his testimony, at that point in time he believed that Hollis was "in gross breach of the lease."
Appellant was evicted from the Hollis Street premises for failure to pay rent in September 2008. He moved much of his equipment and other belongings into a storage unit but then, because he was also unable to pay the rent on that unit, he lost most of it.
Appellant commenced this action by filing (in pro per) his first complaint in July 2008. Defendants successfully demurred to both it and two later amended complaints. On October 14, 2009, appellant—still acting in pro per—filed a third amended complaint, which contained eight causes of action. Respondents demurred to five of these causes of action, and those demurrers were sustained. That left three causes of action, one for breach of fiduciary duty against respondents C&C and Lahr and two for "breach of lease" against respondent Hollis. The latter two causes of action were designated as breach of contract claims to the jury; one such claim involved breach of the covenant of quiet enjoyment and the other breach of the covenant of good faith and fair dealing.
In November 2010, the case proceeded to trial before a jury on these three causes of action; by this time, appellant was represented by counsel. However, prior to trial the trial court granted respondents' motion in limine to restrict appellant's damage evidence to his out-of-pocket losses because, per the trial court's order, appellant had failed to produce financial records, bank records, or other documentary evidence relevant to his claimed losses.
After the evidence had been submitted, but before the jury had been instructed, the trial court granted a motion brought by respondents C&C and Lahr for a directed verdict in their favor on the sixth cause of action, the cause of action for breach of fiduciary duty and the only remaining cause of action pending against them. Approximately six weeks later, the court entered a written order to that effect. The bases for that order were that (1) appellant had failed to establish a breach of fiduciary duty by C&C and Lahr because he had not produced expert testimony regarding the requisite standard of care and the failure to meet that standard and (2) the claim was barred by the applicable statute of limitations, i.e., Code of Civil Procedure section 338, subdivision (d), the statute of limitations applicable to actions for fraud or mistake.
As to respondent Hollis, the jury returned a verdict against it and in favor of appellant on December 15, 2010, on both the seventh and eighth causes of action (both for breach of contract). It found, via its special verdict form, that Hollis was liable to appellant in the amount of $11,232 (i.e., for rent paid between October 1, 2004, and February 28, 2008) for breach of the covenant of quiet enjoyment and in the amounts of $5,184 for rent paid and $8,365 for improvements made on the rented premises for breach of the covenant of good faith and fair dealing. Later, the trial court ruled that the damages for rent awarded to appellant were cumulative and reduced the total damages awarded appellant to $19,597.88.
On December 30, 2010, respondent Hollis moved for the entry of JNOV in its favor. On January 10, 2011, appellant filed his opposition to that motion, and the matter was argued to the trial court on January 14, 2011. That court granted the motion on the basis that there was "insufficient evidence to support the jury verdict in favor of [appellant] on his breach of contract claim." More specifically, it ruled that appellant had failed to present adequate evidence that he had complied with the notice provisions of the lease.
On February 26, 2011, the trial court entered a final judgment in favor of respondents. Notice of entry thereof was served and filed on March 2, 2011.
Appellant filed a timely notice of appeal on April 25, 2011.
III. DISCUSSION
A. The Issues Before Us and the Applicable Standard of Review.
There are four issues before us on this appeal, two relating to the directed verdict of the trial court regarding the claims appellant made against respondents C&C and Lahr and two relating to his claims against respondent Hollis.
Regarding the directed verdict the trial court granted respondents C&C and Lahr, the issues are whether the trial court was correct in ruling that appellant's claims against them (1) failed because he had not presented expert testimony regarding their breach of fiduciary duty and (2) were barred by the applicable statute of limitations.
Regarding the JNOV entered by the trial court in favor of respondent Hollis, the issues are whether (1) appellant had given written notice of a breach of the lease to Hollis and (2) Hollis had waived any requirement of notice.
Before discussing those issues, some brief discussion is in order regarding the applicable standards of review.
A decision by our colleagues in Division Three of this court—a case cited by respondent Hollis in its brief to us—makes clear the standard of review applicable to a trial court's grant, under Code of Civil Procedure section 630, of a motion for a directed verdict. In Howard v. Owens Corning (1999) 72 Cal.App.4th 621, 629-630 (Howard),that court wrote: "A directed verdict may be granted only when, disregarding conflicting evidence, giving the evidence of the party against whom the motion is directed all the value to which it is legally entitled, and indulging every legitimate inference from such evidence in favor of that party, the court nonetheless determines there is no evidence of sufficient substantiality to support the claim or defense of the party opposing the motion, or a verdict in favor of that party. [Citations.]" (Emphasis supplied; see also Colbaugh v. Hartline (1994) 29 Cal.App.4th 1516, 1521.)
The rule is the same regarding the review of a trial court's JNOV. As our Supreme Court has stated: "When reviewing the validity of a judgment notwithstanding the verdict, an appellate court must resolve any conflict in the evidence and draw all reasonable inferences therefrom in favor of the jury's verdict." (Henrioulle v. Marin Ventures, Inc. (1978) 20 Cal.3d 512, 515.)
One of our sister courts recently expanded on this issue in these words: " 'The trial court's discretion in granting a motion for judgment notwithstanding the verdict is severely limited.' [Citation.] ' "The trial judge's power to grant a judgment notwithstanding the verdict is identical to his power to grant a directed verdict [citations]. The trial judge cannot reweigh the evidence [citation], or judge the credibility of witnesses. [Citation.] If the evidence is conflicting or if several reasonable inferences may be drawn, the motion for judgment notwithstanding the verdict should be denied. [Citations.] 'A motion for judgment notwithstanding the verdict of a jury may properly be granted only if it appears from the evidence, viewed in the light most favorable to the party securing the verdict, that there is no substantial evidence to support the verdict. If there is any substantial evidence, or reasonable inferences to be drawn therefrom, in support of the verdict, the motion should be denied.' [Citation.]" ' [Citations.] The trial court cannot consider witness credibility. [Citation.] [¶] On review of an order granting JNOV, we ' "must resolve any conflict in the evidence and draw all reasonable inferences therefrom in favor of the jury's verdict. [Citation.]" ' [Citation.]" (Hansen v. Sunnyside Products, Inc. (1997) 55 Cal.App.4th 1497, 1510 (Hansen);see also Eisenberg et al., Civil Appeals & Writs (The Rutter Group 2011) ¶ 8:119, p. 8-75.)
Another authority cited by respondent Hollis supports this rule. In Mason v. Lake Dolores Group (2004) 117 Cal.App.4th 822, 829-830, the court wrote: "On an appeal from a JNOV, we ordinarily use the same standard the trial court used in granting the JNOV. We independently determine whether the record, viewed in the light most favorable to the verdict, contains any substantial evidence to support the verdict. If substantial evidence supports the verdict, the trial court erred in granting the JNOV and we reverse. [Citations.]"
However, with regard to both the directed verdict and the JNOV issues, we must bear in mind that, as the Howard court noted, "substantial evidence" means evidence "of ' "ponderable legal significance," ' ' "reasonable in nature, credible, and of solid value . . . ." ' [Citations.]" (Howard, supra, 72 Cal.App.4th at p. 631.) B. The Necessity of Expert Testimony Regarding the Alleged Breach of Fiduciary Duty.
We will follow the chronological order of the trial court's rulings, and first address the two issues regarding its grant of a directed verdict to respondents C&C and Lahr.
As noted above, the first such issue is whether, as the trial court ruled verbally in court on December 13, 2010, and by its written order of January 27, 2011, appellant had failed to establish those respondents' breach of fiduciary duty because he had failed to present expert evidence on that subject.
Prior to those rulings, the trial court had addressed essentially this same issue several times, and each time had agreed with appellant's position that expert testimony was not required to sustain its breach of fiduciary duty claim against C&C and Lahr. Thus, at the beginning of trial, the court ruled in favor of appellant on one of his motions in limine and against C&C and Lahr on one of theirs; both addressed the issue of the necessity of expert testimony. Appellant's motion in limine No. 4 asked the trial court to rule that "expert testimony is not required to establish a breach of fiduciary duty" and cited various authorities supporting that argument. On the other side of the coin, respondents C&C and Lahr argued, in their motion in limine No. VI, that appellant had failed to timely designate an expert to testify on that subject, and that such testimony was necessary because "the standard of care of a commercial real estate agent is not of such common knowledge so as to exclude expert knowledge." Further, a few weeks after that motion in limine was filed, C&C and Lahr filed a "Supplemental Argument" in support of it in which they further emphasized their argument that the issue before the trial court was "not the issue of honesty or fair play. The issues do not dwell on matters of common knowledge. Instead the issues relating to the standard of care relate to a specific sub-group of real estate agents, who deal with the leasing of commercial real property."
On November 5, 2010, the court heard oral argument on the various motions in limine pending before it. But before hearing that argument, the trial court stated that it was "inclined to—to grant plaintiff's motion [and] not require expert testimony . . . [¶] . . . [because] this is a case about essentially whether the plaintiff was treated fairly."
After hearing oral argument from both sides (by this time, as noted above, appellant was represented by counsel), the trial court stated that it was granting appellant's motion in limine and denying respondent's motion on the same subject, albeit without prejudice.
After all the evidence had been presented to the jury, the C&C respondents motion for a directed verdict was argued to the court on December 9, 2010. Among other things, those respondents argued that appellant had failed to establish that they had breached their fiduciary duty because he could not "testify as [a] lay witness that those defendants failed to follow a reasonable standard of practice, because such testimony requires the testimony of an expert."
Actually, the motion was initially filed as a motion for a non-suit, but then dealt with by the trial court as a motion for a directed verdict.
At the conclusion of argument by both sides, the trial court stated that, after further considering the matter, it would e-mail its ruling to the parties the following day, December 10. It did so, and in so doing denied those respondents' motion for a directed verdict.
However, this changed abruptly when the trial proceedings reconvened the following Monday, December 13. At that time, the trial court advised counsel and the parties that it had decided "on its own motion, [to] reconsider the denial of the motions for nonsuit . . . ." After hearing some further oral argument on the subject of respondents C&C and Lahr's motion for a directed verdict, the court stated: "The real question is whether or not there is any standard that the jury can measure; that is, whether there is any expert testimony regarding what standard should be met, what duty is owed, and . . . whether or not Jeff Lahr's conduct fell below that standard, in the absence of expert testimony."
Further argument was then had on this subject, at the conclusion of which the court reversed its several prior rulings and held that appellant was required to present expert testimony to establish any breach by those respondents of fiduciary duty. It stated that "the only thing that you really have left at this point is the failure to investigate. And the standard has to be what a reasonable real estate broker would do under the circumstances. [¶] And stated that way, I don't know of a way that the case can go to the jury on the breach of fiduciary duty, because plaintiff has failed to designate an expert."
As noted, several weeks later, i.e., on January 27, 2011, the trial court filed its written order to essentially this same effect and, by it, granted the directed verdict motion of respondents C&C and Lahr.
The key portions of that order stated: "The Court grants this motion for directed verdict on the following grounds: [¶] Plaintiff, Elvis Lewis, has failed to introduce sufficient facts to establish the standard of care of real estate agents and brokers. Plaintiff has alleged that the Cornish & Carey Defendants breached their fiduciary duty by failing to investigate and disclose that Emeryville Taiko was not obligated to terminate its tenancy. However, plaintiff has not met his burden of proof on these issues. Plaintiff has both the burden of proof and the burden of going forward. (Evidence Code Section 500 and Section 550.) 'The party claiming that a person did not exercise a requisite degree of care has the burden of proof on that issue.' (Evidence Code Section 521.) To prove that a real estate agent failed to adhere to the requisite duty of care is an issue that may require testimony by professionals in the field if the matter is within the knowledge of experts only. Carleton v. Tortosa (1993) 14 Cal.App.4th 745, 755 [(Carleton)]. [¶] This court has already ruled in response to an in limine motion number 6 filed by the Cornish & Carey Defendants that plaintiff could not testify as lay witness that the Cornish & Carey Defendants failed to follow a reasonable standard of practice, because such testimony requires the testimony of an expert. As stated by the California Evidence Code Section 720(a): 'A person is qualified to testify as an expert if he has special knowledge, skill, experience, training, or education sufficient to qualify him as an expert on the subject to which his testimony relates. Against the objection of a party, such special knowledge, skill, experience, training or education must be shown before the witness may testify as an expert.' "
After reviewing both the applicable law and the evidence in the record, we conclude that the trial court erred in granting a directed verdict in favor of respondents C&C and Lahr on appellant's cause of action against them for breach of fiduciary duty.
The trial court also erred regarding the timing of this ruling. By the time it entered this (180 degree different) ruling, it was too late for appellant to present any such expert testimony.
First of all, California law is clear that real estate brokers such as C&C and Lahr owe a fiduciary duty to a client such as, in this case, appellant. (See 3 Witkin, Summary of Cal. Law (10th ed. 2005) Agency and Employment, § 58, pp. 99-101; 2 Miller & Starr, Cal. Real Estate (3d ed. 2000) §§ 4:23-4:27; see also Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1579; Salahutdin v. Valley of California, Inc. (1994) 24 Cal.App.4th 555, 562-563.) Indeed, Business and Professions Code section 10176, subdivisions (a) and (b), make clear that a real estate licensee is subject to disciplinary action for "[m]aking any substantial misrepresentation" or "any false promises of a character likely to influence, persuade or induce" a prospective or actual client.
Second, in Carson v. Facilities Development Co. (1984) 36 Cal.3d 830 (Carson), our Supreme Court held—unanimously—that expert testimony was not required on an issue such as whether a city had created a dangerous condition on its roads by its allowance of the placement of a sign alongside a roadway. It stated: " '[T]he decisive consideration in determining the admissibility of expert opinion evidence is whether the subject of inquiry is one of such common knowledge that men of ordinary education could reach a conclusion as intelligently as the witness or whether, on the other hand, the matter is sufficiently beyond common experience that the opinion of an expert would assist the trier of fact.' [Citations.] Expert opinion evidence is required in some circumstances. 'If the matter in issue is one within the knowledge of experts only and not within the common knowledge of laymen, it is necessary for the plaintiff to introduce expert opinion evidence in order to establish a prima facie case.' [Citations.] [¶] This rule has been applied to require expert testimony on a wide range of issues. . . . [¶] However, appellate courts have repeatedly held that expert testimony is unnecessary to a plaintiff's case where the fact sought to be proved is one within the general knowledge of laymen. For example, in Chaplis v. County of Monterey (1979) 97 Cal.App.3d 249, 263-267, the trial court had ruled that expert testimony was necessary to prove that a building designer and a contractor were negligent in failing to inform plaintiff property owner of the necessity of obtaining building and land use permits before beginning construction of shops and offices on plaintiff's property. In reversing, the Court of Appeal held that since defendants' alleged negligent conduct was unrelated to the technical or mechanical aspects of building design or construction, no expert testimony was needed to prove their alleged negligence. [¶] In Jorgensen v. Beach'N'Bay Realty, Inc. (1981) 125 Cal.App.3d 155 [(Jorgensen)], the trial court granted defendants' nonsuit motion in part because plaintiff failed to use expert testimony to establish defendants' negligence in the handling of her real estate sale. The Court of Appeal reversed, holding that the duty of care to be exercised by a real estate agent was not beyond the realm of lay jurors' common knowledge. [Citations.] [¶] Evaluated by these standards, proof of an obstruction at the [relevant] intersection did not require expert testimony." (Carson, supra, 36 Cal.3d at pp. 844-845; see also McCoy v. Gustafson (2009) 180 Cal.App.4th 56, 99-100.)
A few months before our Supreme Court decided Carson, this court was faced with essentially the same issue in Easton v. Strassburger (1984) 152 Cal.App.3d 90 (Easton). In that case, we affirmed that portion of a judgment of the Contra Costa Superior Court which had held the real estate broker defendants liable to the home-purchaser plaintiff when the home the latter had bought via those brokers was damaged by subsequent earth movement on the property. In so doing, we rejected the appellant-brokers' argument that "the judgment must be reversed because no expert testimony was received on two critical issues: the standard of care applicable to appellant, and appellant's failure to meet this standard." (Easton, supra, 152 Cal.App.3d at p. 105.)
We responded to this argument by, first, noting that "none of the pertinent cases involving allegations of negligence against a real estate broker require expert testimony to establish the standard of care in the real estate industry, or the particular broker's breach of that standard of care." We then noted that Jorgensen was the only reported case directly addressing that issue, and that it held that no such expert evidence was required. (Easton, supra, 152 Cal.App.3d at p. 105.) We then held that that principle was also applicable in the case before us, stating: "As the Jorgensen court so aptly put it: 'The correct rule on the necessity of expert testimony has been summarized by Bob Dylan: "You don't need a weatherman to know which way the wind blows." The California courts, although in harmony, express the rule somewhat less colorfully and hold expert testimony is not required where a question is "resolvable by common knowledge." [Citations.]' [Citation.] This notion has been most fully developed in the medical malpractice cases. [Citation.] In medical malpractice actions 'cases which depend upon knowledge of the scientific effect of medicine, or the result of surgery, must ordinarily be established by expert testimony of physicians and surgeons. [Citation.] This rule, however, applies only to such facts as are peculiarly within the knowledge of such professional experts and not to facts which may be ascertained by the ordinary use of the senses of a nonexpert.' [Citation.] [¶] Adopting this rationale, we cannot say that the issue of negligence in this case turns on facts 'peculiarly within the knowledge of . . . professional experts'; rather, we believe that the jury could have found appellant negligent based on 'facts which may be ascertained by the ordinary use of the senses of a nonexpert.' [¶] As we earlier found, there was ample evidence appellant's agents were aware of the fill on the property and that erosion and settlement problems are frequently associated with such soil. The evidence also showed the agents were alert to such indications of soil problems as an uneven floor and the use of netting to repair an earlier slide. It does not require an expert to explain to the jury the relationship between uneven floors and the possibility of unstable soil, or the relationship between past slide activity and the likelihood or possibility of future slide activity. It may be noted, finally, that even if expert testimony were required in this case to establish the appropriate standard of care or the breach thereof, such testimony was supplied by appellant's own agents. (Jorgensen, supra, 125 Cal.App.3d at pp. 164-165.)" (Easton, supra, 152 Cal.App.3d at pp. 106-107, fn. omitted.)
Just so here. Appellant's only cause of action against respondents C&C and Lahr was, as noted above, his sixth cause of action for breach of fiduciary duty. That cause of action specifically incorporated the earlier allegations of the complaint that both those respondents had made representations to appellant that "were in fact false," i.e., representations regarding the imminent departure of the Taiko club from the neighboring premises.
Particularly bearing in mind both the law just discussed and the standard of review regarding orders for directed verdicts, the trial court's ruling must be reversed. First of all, the Carleton case cited by the trial court and by respondents C&C and Lahr in their brief to us is not contrary to the authority just discussed: it stated only that the "degree of care and skill required to fulfill a professional duty ordinarily is a question of fact and may require testimony by professionals in the field if the matter is within the knowledge of experts only." (Carleton, supra, 14 Cal.App.4th at pp. 754-755, emphasis supplied.)
Second, the reason why the Carleton court found the law discussed above inapplicable to the case before it was because the plaintiff, a real estate investor for over 25 years (14 Cal.App.4th at p. 751), was suing a broker for failing to advise him of the tax consequences under the Internal Revenue Code of four real property transactions executed by him within a four-month period. Thus, totally unlike the present case, where the defendant broker was working directly with appellant to try to find a suitable property for him to lease for an exercise facility and was telling him, presumably face-to-face, about the circumstances involving the Taiko club, the broker in Carleton was being sued for not being an expert in federal tax law applicable to multiple and substantially-simultaneous real estate transactions.
The Carleton court specifically cited our Supreme Court's unanimous decision in Carson, correctly recognizing that it stated the proper rule of law. (Carleton, supra, 14 Cal.App.4th at p. 755.) Although, in a footnote in their brief to us, respondents C&C and Lahr also cite Carson, they make no attempt to explain why the unanimous holding of that case, including its express reliance on Jorgensen, is not applicable here. Even more significantly, those respondents do not cite, much less discuss Easton, this court's case regarding the duties and alleged failures of real estate brokers. Instead, they rely on cases decided well before Carson, Easton and Jorgensen, none of which involved the actions or inactions of real estate brokers or agents.
Simply stated, Carleton has no relevance here. This case involved actions and communications which were clearly within the scope of the normal dealings between a client and a real estate broker, i.e., (1) Lahr's statements to appellant that the Taiko club's "tenancy is terminated," they would soon be "history" and that "the Taiko lease expired October 31st, 2004," and they had been served with a notice to quit and (2) appellant's reliance on those representations and his consequent damage.
Clearly, no expert testimony was required to advise the jury as to whether the respondent brokers had, in these circumstances, breached their fiduciary duty to appellant. C. The Applicable Statute of Limitations Regarding the Breach of Fiduciary Duty Claim.
As noted above, the trial court also based its directed verdict against appellant and in favor of respondents C&C and Lahr on the basis that the applicable statute of limitations had run. In the brief oral argument before the court on this subject, respondents' counsel asserted that the applicable statute of limitations was "three years" and the relevant representations were made in 2004 and the complaint not filed until 2008.
Via a handwritten addition to its January 27, 2011, order on this subject, the trial court stated: "The Court further ruled that the statute of limitations had run on Plaintiff's Claims, as the alleged misrepresentations occurred in 2003 [sic: 2004], and plaintiff's complaint was not filed until 2008." We conclude that this ruling was also incorrect.
The law on this subject was well-summarized last year by our colleagues in Division Four of this court in Thomson v. Canyon (2011) 198 Cal.App.4th 594, 606 (Thomson). That was an action brought by a real estate seller alleging negligence and breach of fiduciary against her real estate agent and broker. In her complaint, the plaintiff alleged that she had instructed the defendants to prepare the necessary paperwork to implement a sell-back agreement with the buyer of her property, but they had failed to do so. The trial court ruled that both plaintiff's causes of action (one for negligence and the other for breach of fiduciary duty) were barred by the applicable statute of limitations. Division Four agreed as to the negligence cause of action, but disagreed regarding the breach of fiduciary duty claim.
As to the latter claim, the court stated: "The Code of Civil Procedure does not specify a statute of limitations for breach of fiduciary duty. The cause of action is therefore governed by the residual four-year statute of limitations in Code of Civil Procedure section 343 governing '[a]n action for relief not hereinbefore provided for' in the code. [Citation.] [¶] There is a limitation to the applicability of this statute of limitations, as with any statute of limitations. It is widely understood that a plaintiff is not permitted to evade a statute of limitations by artful pleading that labels a cause of action one thing while actually stating another. California courts therefore look to the gravamen of the cause of action. 'To determine the statute of limitations which applies to a cause of action it is necessary to identify the nature of the cause of action, i.e., the "gravamen" of the cause of action. [Citations.] "[T]he nature of the right sued upon and not the form of action nor the relief demanded determines the applicability of the statute of limitations under our code." ' [Citation.] Accordingly, '[w]here the gravamen of the complaint is that defendant's acts constituted actual or constructive fraud, the applicable statute of limitations is the [Code of Civil Procedure section 338, subdivision (d) three-year] limitations period,' governing fraud even though the cause of action is designated by the plaintiff as a claim for breach of fiduciary duty. [Citation.] [¶] Defendants argue on appeal that the gravamen of plaintiff's complaint is that defendants' acts constituted actual or constructive fraud, and thus should be governed by the fraud statute of limitations. We disagree. Plaintiff's claim is not founded upon the concealment of facts but upon defendants' alleged failure to draft documents necessary to the real estate transaction in which they represented plaintiff. The allegation is an allegation of breach of fiduciary duty, not fraud. The fiduciary duties of a real estate agent include the duties to obey the instructions of the client, and to provide diligent and faithful service. [Citation.] Plaintiff alleges that defendants failed to follow her instruction to prepare documentation of her sell-back arrangement with Harris, and failed to prepare the necessary documentation even after confirming the terms of the arrangement with Harris. The allegations here thus differ from those in a case cited by defendants, where the court applied the three-year fraud statute of limitations to the claim that a securities broker misrepresented the risk-level of a security. [Citation.]" (Thomson, supra, 198 Cal.App.4th at pp. 606-607.)
In their briefs to us, appellant and respondents C&C and Lahr debate whether the ruling in Thomson applies here. We conclude that appellant has the better of this argument for several reasons.
First of all, the evidence adduced at trial pointed much more to the failure of C&C and Lahr to provide "diligent and faithful service" (Thomson, supra, 198 Cal.App.4th at p. 607) than it did to their commission of any sort of fraud, either actual or constructive, on appellant. The evidence introduced by appellant at trial (i.e., his testimony and his written notes) suggested that Lahr and his superiors at C&C were simply not "leveling" with him about exactly what they knew concerning if, as and when the Taiko club was going to vacate the adjoining premises; they did not suggest that those respondents were deliberately committing "fraud" on appellant regarding the possible availability of those premises.
Second, "[w]hat is significant for statute of limitations purposes is the primary interest invaded by defendant's wrongful conduct." (Barton v. New United Motor Manufacturing, Inc. (1996) 43 Cal.App.4th 1200, 1207; Marin Healthcare Dist. v. Sutter Health (2002) 103 Cal.App.4th 861, 875.) In this case, appellant's "primary interest" was in getting the rental space he wanted. That meant, as it impacted these respondents, having them perform their obligations as brokers with the required degree of skill and to communicate with him fully and correctly. Thus, his allegations and the evidence he adduced were much closer to showing a failure to perform the fiduciary duty of a real estate broker than it was to showing fraud, actual or constructive.
Third and finally, several appellate court cases have suggested that when there is a close call as to which statute of limitations should apply in a case—i.e., when a case involves both allegations of fraud and some other alleged wrong—the courts may and do choose the longer statute of limitations. Thus, in Kornbau v. Evans (1944) 66 Cal.App.2d 677, the court considered the statute of limitations applicable to a claim by a woman against an attorney who was handling her bank accounts and who she accused of mishandling one of her investments. The attorney claimed that her action was barred by the statute of limitations because it was basically a fraud action. The court conceded that, from the allegations of the complaint and the evidence, a cause of action based on fraud could be discerned, "the action is not entirely based on the theory of fraud." (Id. at p. 683.) It was also possible, the court concluded, that the case involved a claim of a breach of an oral trust relationship between the plaintiff and the defendant, and the statute of limitations had not run on the latter claim. Such being the case, "it is not necessary to determine whether the cause of action for fraud was barred." (Id. at p. 686.)
A very similar holding was rendered by Division One of this court in San Filippo v. Griffiths (1975) 51 Cal.App.3d 640, where the court reversed a summary judgment which had been granted by the trial court in an action involving both allegations of fraud (subject then as now to a three-year statute of limitations) and breach of contract (subject to a four-year statute). The court held that, as it analyzed the facts pled by the plaintiff, although fraud was clearly involved, the "gravamen" of the plaintiff's action was for breach of contract. (Id. at p. 645.) In so holding, the court cited many precedents in which "the otherwise applicable four-year statute was extended because of the fraud; no case has been brought to our attention, and we find none, where the four-year statute for an action on a written contract was shortened because of related fraud." (Ibid.)
As a result of these and other somewhat similar California appellate court decisions, several federal courts have held that, when both fraud and breach of fiduciary duty are pled in complaints, the longer statute of limitations, i.e., the four-year period provided for by Code of Civil Procedure section 343 (section 343) applies. (See, e.g., David K. Lindemuth Co. v. Shannon Financial Corp. (N.D. Cal. 1987) 660 F. Supp. 261, 264-265; Davis & Cox v. Summa Corp. (9th Cir. 1985) 751 F.2d 1507, 1520, fn. 3.)
Cf., e.g., David Welch Co. v. Erskine & Tulley (1988) 203 Cal.App.3d 884, 893 (breach of fiduciary duty, not attorney malpractice pled); Manok v. Fishman (1973) 31 Cal.App.3d 208, 213 (both breach of contract and duty to account possibly involved); Schneider v. Union Oil Co. (1970) 6 Cal.App.3d 987, 993 (both breach of contract and conversion possibly involved).
For all of the foregoing reasons, we conclude that the trial court was incorrect in ruling that the statute of limitations had run on appellant's claims because the applicable statute was only three years in length; in fact the applicable statute is section 343, which is four years in length. D. The JNOV Entered Regarding Appellant's Claims Against Respondent Hollis.
As noted above, after the jury returned its verdict in favor of appellant respondent Hollis moved for a judgment NOV, which appellant opposed. On January 14, 2011, the trial court heard oral argument on the motion and then issued a written order granting it. In the key passage of that order, the court stated that "there is insufficient evidence to support the jury verdict in favor of Plaintiff Elvis Lewis . . . on his breach of contract claim. The court concludes that Plaintiff Lewis did not satisfy his obligation under Articles 11.5 and 24 of the Lease to give written notice of Defendant's alleged default. Plaintiff's compliance with Articles 11.5 and 24 are conditions precedent that must be satisfied before Plaintiff can sue for damages. See CACI 303."
In their briefs to us, appellant and respondent Hollis argue three principal questions, i.e.: (1) Whether the lease appellant executed required him to provide Hollis with written notice of a breach thereof? (2) If it did, had appellant provided such written notice to Hollis? (3) If written notice of a breach was required under the lease, did the jury's special verdict find that Hollis waived any such notice?
After reviewing the extensive briefing on this subject, we conclude that we do not need to resolve either of the first two points. The first involves a very arcane debate about the meaning and interpretation of the terms "breach" and "default" as those terms are used in the relevant provisions of the lease, articles 11.5 and 24 while the second involves the interesting—but unnecessary to decide—issue of whether in this day and age e-mails constitute "written notice" under a lease such as this. Rather, the final issue argued by the parties, i.e., was the jury correct in finding that Hollis had waived the requirement of notice, is much simpler to resolve. And its resolution requires that the trial court's JNOV should be reversed—especially under the very strict standard of review we are required to give such judgments, i.e., whether there is any "substantial evidence" supporting the jury's verdict. (See, e.g., Hansen, supra, 55 Cal.App.4th at p. 1510.)
The trial court, relying on the agreement of both parties, provided the jury with special verdict forms for its verdict on both of the two breach of contract (i.e., breach of lease) claims against Hollis. Each of those forms asked the jury to state whether, first of all, appellant and Hollis had entered "into a contract." As to both causes of action, the jury answered in the affirmative. The jury was then asked if appellant had done "all or substantially all of the significant things that the contract required him to do?" As to this question, the jury both times responded in the negative.
Then came the special verdict form's third question, one that, for purposes of our evaluation of the propriety of the trial court's JNOV, is the most important. It was asked: "Was Elvis Lewis excused from having to do all, or substantially all of the significant things that the contract required him to do?" In both instances, i.e., with respect to both of the breach of lease causes of action pending against Hollis, the jury answered: "Yes."
Appellant contends that these answers by the jury regarding both of the breach of lease claims by Hollis constitute findings that Hollis had waived any right to assert that appellant had failed to give written notice to it of any breach or default by Hollis of the provisions of the lease. Although Hollis disagrees, we have no difficulty in agreeing that these two findings by the jury constitute substantial evidence that the JNOV was erroneous.
First of all, the record is clear that counsel for Hollis specifically approved the special verdict forms provided by the jury; indeed, they did so three (3) times.
Second, the jury was specifically instructed regarding the issue of possible waiver by Hollis. The court instructed the jury with CACI No. 323, entitled "Waiver of Condition Precedent," although appellant himself had apparently objected to that instruction. That instruction read: "Elvis Lewis and Hollis General Partnership agreed in their contract that Hollis General Partnership would not have to give Elvis Lewis a right of first refusal to lease additional space unless Elvis Lewis cured any default he had committed under the contract within the required time. That condition did not occur. Therefore, Hollis General Partnership contends that it did not have to give Elvis Lewis a right of first refusal to lease additional space. [¶] To overcome this contention, Elvis Lewis must prove that Hollis General Partners, by words or conduct, gave up its right to require that Elvis Lewis cure any default he had committed under the contract within the required time before having to give Elvis Lewis a right of first refusal to lease additional space." (Emphasis added.)
Although the word "waiver" is used in the title but not the text of CACI No. 323, the portion italicized above clearly asked the jury to determine if Hollis had waived any failures by appellant to give notice or do anything else he was required to do under the lease. We have no difficulty in concluding that the jury's findings, as to both causes of action, that appellant was "excused from having to do all, or substantially all of the significant things that the contract required him to do" was almost certainly based on the CACI No. 323 instruction it had been given.
In its brief to us, Hollis makes two arguments against the waiver finding. First of all, it argues that "[t]he lower court did not address the issue of whether Appellant's performance of the condition precedent of notice was waived. That question is distinct and separate from Appellant's argument, and as Appellant points out, there is no way to determine whether it formed any part [of] the lower court's decision."
While it may be true that the issue of waiver did not "form any part" of the trial court's grant of JNOV to respondent Hollis, as discussed above the waiver issue almost certainly did form a part of the jury verdict preceding that order; CACI No. 323 was clearly directed at the issue of potential waiver by Hollis per both its title and its wording.
Next, Hollis argues that "[w]aiver must be established with clear and convincing evidence." It cites only to CACI No. 336 in support of this assertion, but this reference simply does not work. First of all, CACI No. 336 was not given to the jury, and the record shows no objection by Hollis to that omission; the only "waiver" instruction provided to the jury was CACI No. 323. Second, as set forth generally in its text (see CACI No. 336) and proposed by one of the parties to the trial court—albeit not given— this instruction relates to an alleged waiver by a plaintiff of a defendant's obligation to perform. Clearly, then and only then is the standard of proof "clear and convincing evidence." Otherwise, as the authority cited under CACI No. 323 makes clear, a "condition is waived when a promisor by his words or conduct justifies the promisee in believing that a conditional promise will be performed despite the failure to perform the condition, and the promisee relies upon the promisor's manifestations to his substantial detriment." (Sosin v. Richardson (1962) 210 Cal.App.2d 258, 264.) And, under this standard, we have no difficulty in concluding that there was substantial evidence to support the jury's two special verdict findings that Hollis had waived the requirement of written notice.
For both of the reasons set forth above, we conclude that, especially under the strict standard of review mandated, the trial court erred in granting respondent Hollis JNOV against the appellant.
IV. DISPOSITION
The judgments in favor of respondents are reversed and vacated and the case is remanded to the trial court for further proceedings consistent with this opinion. Costs on appeal are awarded to appellant.
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Haerle, Acting P.J
We concur: ______________
Lambden, J.
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Richman, J.