Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, Ct. No. MC017781 Randolph A. Rogers, Judge.
Law Offices of Saul Reiss and Saul Reiss, for Plaintiff and Appellant.
Koenig Jacobsen, Randell F. Koenig, Wilfred A. Llaurado and Kim T. Dawley, for Defendants and Respondents.
EPSTEIN, P. J.
Appellant, Shahram Holdings, Inc., sued respondents, Environmental Geotechnology Laboratory, Inc., and its president, Hank Hsing-Lian Jong, over a dispute arising out of a land grading project on appellant’s undeveloped property. The trial court ruled in favor of respondents in a bench trial, finding appellant did not suffer any damages. Appellant argues the court erred in this finding, and in admitting several testimonial statements. We find no reversible error and affirm the judgment.
FACTUAL AND PROCEDURAL SUMMARY
To the extent appellant challenges the trial court’s factual findings, we examine the record for substantial evidence to support the findings. (Ermoian v. Desert Hospital (2007) 152 Cal.App.4th 475, 500-501.) Under this standard of review, we determine whether, on the entire record, there is substantial evidence, contradicted or uncontradicted, which supports the trial court’s factual determinations. (Id. at p. 501.) We consider the evidence “in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving conflicts in support of the judgment.” (Employers Mutual Casualty Co. v. Philadelphia Indemnity Ins. Co. (2008) 169 Cal.App.4th 340, 347.)
Appellant owned an undeveloped 37-lot property in Lancaster, California. In 2005, it began discussions for possible sale of the land to Western Pacific Housing Inc., a subsidiary of D.R. Horton (collectively Horton). According to the City of Lancaster permit requirements, all lots must be graded and compacted to 90 percent compaction prior to construction. In November 2005, appellant entered into an agreement to hire Pioneer Construction, Inc. (Pioneer) to grade and compact the 37 lots. In early 2006, appellant’s President, Ben Sayani, entered into an agreement to hire respondents as the engineer of record to ensure that Pioneer’s grading and compacting were done in compliance with the city requirements.
Pioneer completed the project in May 2006. Later that month, respondents certified to the City of Lancaster that the lots had been graded and compacted in conformance with city requirements. Appellant provided Horton with the certificate. Horton’s engineer, Rudolph Ruberti, a certified engineering geologist with Geosoils, investigated the lots and discovered that the lots had not been properly graded. Geosoils advised Horton not to purchase the property. Nonetheless, in August 2006, Horton entered into a purchase agreement with appellant to buy the 37-lot property for approximately $2.54 million. The sale was conditioned on the lots being graded and certified by the engineer of record.
In August 2006, prior to the close of escrow, Sayani promised Rodney Singh, director of land acquisition for Horton, that appellant would reimburse Horton for the cost of re-grading the lots. Horton moved forward with the purchase with the understanding that it would be reimbursed. The reimbursement discussion was not incorporated into the written purchase agreement. In August 2006, Horton closed escrow on the purchase of the lots without negotiating a reduction in the $2.54 million purchase price for the cost of regrading. Horton subsequently expended $677,555.24 to regrade the site.
On December 8, 2006, appellant sued Pioneer, Pioneer’s principal owner, Nasir Eftekhari, and respondents for breach of contract and fraud. In May 2007, Singh sent a letter to Sayani outlining the terms of their 2006 oral agreement. The letter stated: “In order to move forward with the close, [Horton] and Ben Sayani agreed that [Horton] will recompact the whole site, pay all associated costs for the operation and will assess a 25% management fee.” Appellant was to reimburse Horton for the re-grading costs by September 2007. Appellant made no payments to Horton by September 2007.
In February 2008, appellant filed its fifth amended complaint, the operative complaint, against the same defendants for breach of contract, fraud, professional negligence, and negligent misrepresentation. As to all causes of action against all defendants, appellant sought to recover the $677,555.24 cost of re-grading and recompacting the lots. Appellant also sought punitive damages against all defendants on its fraud action. Appellant and defendants Pioneer and Eftekhari reached a $170,000 settlement agreement in January 2009. Accordingly, the court granted appellant’s request for dismissal with respect to Pioneer and Eftekhari only.
The bench trial between appellant and respondents began in June 2009. Singh testified that Horton never received any reimbursement payments from appellant and had not initiated any action against appellant to seek reimbursement. Subsequently, the court found Horton to be a real party in interest and ordered that it be added as a party plaintiff, pursuant to Code of Civil Procedure section 389. The court indicated that if it ruled in favor of appellant it would order the damages to be paid directly to Horton. On June 12, 2009 appellant stipulated to the existence of a written agreement between Horton and itself that provided: Horton acknowledged it has claims against appellant for re-grading the lots; Horton was aware that appellant received $170,000 from Pioneer in a partial settlement in connection with the current lawsuit but did not remit any of that sum to Horton; Horton agreed to accept the court’s ruling as dispositive of its claims against appellant and would not seek recovery from appellant in excess of the amount awarded to appellant by the court; and appellant would pay Horton $100,000 in the event the decision was in favor of the respondents; and Horton asked that it not be a party in the current litigation so that it did not incur attorney fees.
The court filed its statement of decision in August 2009. It ruled in favor of respondents, finding that appellant failed to prove that it suffered any damages as a result of respondents’ conduct. The court noted that appellant’s failure to show damages “is now unequivocally clear” in light of the written agreement between appellant and Horton whereby Horton “will be bound by the judgment of the Court in his action....” The court further noted that appellant recovered $170,000 in its settlement with Pioneer.
The court additionally found that appellant was not entitled to recover because Horton, a real party in interest, had declined to join the action. Finally, the court found that, in any event, Horton would be barred from recovery under the doctrine of “unclean hands, ” based on evidence it had solicited kickbacks from Pioneer in exchange for being awarded grading contracts. The court entered judgment against appellant, and this timely appeal followed.
DISCUSSION
I
Appellant argues the court erred in finding that did not suffer any damages. “[I]t is fundamental that ‘damages which are speculative, remote, imaginary, contingent, or merely possible cannot serve as a legal basis for recovery.’” (Piscitelli v. Friedenberg (2001) 87 Cal.App.4th 953, 989.) Here, appellant has not made any reimbursement payments to Horton and Horton has not initiated any legal action to seek payments from appellant. Nor is there any evidence that the defect in the grading project forced appellant to sell the land to Horton at a lower price. Rather, the evidence showed that Horton was aware of the problems with the grading prior to agreeing to purchase the lots, and entered into the purchase agreement and closed escrow without any reduction in the purchase price.
There also is evidence that provisions in the purchase agreement barred Horton from seeking reimbursement for the re-grading. The purchase agreement provided that the 37-lot property was sold “‘as is, ’” and that neither appellant nor Horton would be liable to one another for consequential, special, or punitive damages relating to the purchase of the property following the close of escrow. An “as is” clause relieves the seller of liability for defects in the property unless the seller, through fraud or misrepresentation, conceals material defects not otherwise known or observable to the buyer. (See Shapiro v. Hu (1986) 188 Cal.App.3d 324, 333 [“[A]ny sale of property ‘as is’ is a sale of the property in its ‘present or existing condition’; the use of the phrase ‘as is’ relieves a seller of real property from liability for defects in that condition.”].) When deciding to enforce an “as is” clause, courts have considered the purchaser’s experience with real property. (See Driver v. Melone (1970) 11 Cal.App.3d 746, 752-754 [“as is” clause alone does not shield sellers from liability for misrepresentation, but is a factor considered with other circumstances, including purchaser’s prior experience, in determining whether purchaser was misled]; see also Shapiro v. Hu, supra, 188 Cal.App.3d at p. 333.) Here, Horton, a publicly traded company in the business of purchasing undeveloped land for residential projects since 1978, was aware of the need to re-grade the lots prior to entering into the purchase agreement and closing escrow. The effect of the provision was to protect appellant from any legal action Horton might pursue to seek reimbursement.
The purchase agreement stated: “Except as otherwise provided in this Agreement an[d]without in any way negating, modifying or otherwise affecting any obligation or liability of Seller with respect to Seller’s representation, warranties and covenants to this Agreement, Buyer agrees to take the Property ‘AS IS’ and acknowledges and represents that it shall inspect the Property and make such investigation as it deems appropriate into the condition of the Property and any other matters that affect the Property and its developability.”
Appellant contends the oral reimbursement agreement between Sayani and Singh modified the original purchase agreement. Appellant argues that the modification subjected it to future liability if it did not reimburse Horton, and therefore, it was injured by respondents’ conduct. The trial court questioned the validity of the oral modification but ultimately did not rule on it. We need not determine the validity of the modification because even if we were to conclude the oral agreement gave rise to an obligation of appellant to reimburse Horton, “[a] plaintiff may not recover damages for an unpaid liability to a third party, unless the plaintiff proves to a reasonable certainty that the liability could and would be enforced by the third party against the plaintiff or that the plaintiff otherwise could and would satisfy the obligation.” (Green Wood Indus. Co. v. Forceman Intern. Development Group, Inc. (2007) 156 Cal.App.4th 766, 776 (Green Wood).)
In Green Wood, supra, 156 Cal.App.4th at page 770, plaintiff Green Wood was a Chinese company in the business of buying scrap metal from sellers in the United States for resale to buyers in China. It ordered scrap metal from an American-based scrap metal exporter, Richshine Metals, and agreed to resell the scrap metal to a buyer in China. Chinese law required that imported goods be inspected and certified. Defendant Forceman, was in the business of obtaining and delivering the certificates. However, the scrap metal ordered by Green Wood from Richshine Metals did not exist, and the certificates obtained by Forceman and provided to Green Wood as proof of shipment were false. (Ibid.) Green Wood sued Forceman and Richshine Metals for fraud, conspiracy to commit fraud, and negligence. It prevailed and was awarded compensatory and punitive damages. The compensatory damages included an obligation Green Wood owed its Chinese buyer for nondelivery of the goods, in the amount of $274,868. (Id. at p. 771.)
On appeal, the court affirmed the verdict and the damages, but overturned the award of $274,868 for the amount Green Wood owed its Chinese buyer for the nondelivery. (Green Wood, supra, 156 Cal.App.4th at p. 778.) The court noted that under California law, a plaintiff, whether in a tort or contract action, generally cannot recover damages alleged to arise from a third-party claim against the plaintiff even when caused by the defendant’s misconduct. (Id. at p. 776.) Accordingly, the court held: “the existence of a mere liability is not necessarily the equivalent of actual damage. This is because the fact of damage is inherently uncertain in such circumstances. The facts that a third party has demanded payment by the plaintiff of a particular liability and the plaintiff has admitted such liability are not, by themselves, sufficient to support an award of damages for that liability, because that third party may never attempt to force the plaintiff to satisfy the alleged obligation, and the plaintiff may never pay the obligation.” (Ibid.) Thus, in order to recover against a defendant based on an obligation owed to a third-party, the plaintiff must either pay the obligation or demonstrate with reasonable certainty that it will suffer the damage. (Id. at p. 778.) The court found that while Green Wood did demonstrate an agreement to pay its buyer, it had not yet paid the obligation and did not present any evidence showing that the liability could and would be enforced by the buyer, or that the claim would otherwise be paid. (Ibid.)
Similarly, here, appellant has made no reimbursement payments to Horton. Furthermore, the evidence demonstrated that Horton gave little indication it would actively seek reimbursement from appellant. Although Singh sent Sayani a letter in May 2007, after appellant initiated this present action, asking to be reimbursed by September 2007, no payments were made as of the June 2009 trial. And while Horton had the opportunity to join the current matter as a party plaintiff, it entered into an agreement with appellant during trial asking that it not be joined as a party. Horton’s agreement to accept the judgment of the court as dispositive of its claims against appellant not only demonstrates its unwillingness to pursue legal action to recover the reimbursement fees, but also precludes Horton from doing so in the future. Thus, there was no evidence for the court to conclude that it was reasonably certain appellant would ever have to pay Horton. Finally, appellant’s agreement to pay Horton if the judgment was in favor of respondents is, at best, a possible future damage. The court seemed to note that the $100,000 sum was offset by the $170,000 settlement agreement appellant reached with Pioneer, which it did not remit to Horton. Accordingly, there was ample evidence to support the court’s finding that appellant had suffered no harm as a result of respondents’ conduct.
Appellant argues that the court’s discussion of damages related only to its breach of contract cause of action, and therefore, the court erred in dismissing all remaining causes of action. Yet, there is nothing in the record to suggest that the trial court limited its holding to appellant’s breach of contract cause of action. In any event, damages are an essential element to all of appellant’s causes of action against respondents. (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1367 [damages an essential element to breach of contract cause of action]; Levine v. Blue Shield of California (2010) 189 Cal.App.4th 1117, 1136 [negligent misrepresentation]; Blanks v. Seyfarth Shaw (2009) 171 Cal.App.4th 336, 356-357 [professional negligence]; Agosta v. Astor (2004) 120 Cal.App.4th 596, 603 [fraud].) Appellant’s operative complaint alleged the same damages-the costs of re-grading and recompacting the lots-as to all causes of action against respondents. Thus, the finding of no damages applies equally to appellant’s tort and contract claims. (See Green Wood, supra, 156 Cal.App.4th at p. 776, fn. 27.)
II
Appellant also argues the court erred in concluding that Horton was a real party in interest and an indispensable party. During trial the court announced: “‘[I]t’s the Court’s intent to Order that [Horton] be added as a party pursuant to [Code of Civil Procedure section] 389. And they’d have to be added as a party Plaintiff because, based on what I’m hearing so far, I don’t think it’s appropriate for me to be ordering a judgment in favor of Plaintiff directly, and I think ultimately [Horton] is the real party in interest.” Horton did not join the action, pursuant to its stipulated agreement with appellant. In its statement of decision, after finding that appellant had not suffered any damages, the court additionally found: “[Appellant] is not entitled to recover in this action because the real party in interest is [Horton], an entity who has not been joined and who has now declined to be joined as a party plaintiff.”
Except as otherwise provided by statute, every action must be prosecuted in the name of the real party in interest. (Code Civ. Proc., § 367.) The real party in interest is the entity that has the right to sue under substantive law; it is the person who owns or holds title to the claim or property involved, as opposed to others who may be interested or benefited by the litigation. (Jasmine Networks, Inc. v. Superior Court (2009) 180 Cal.App.4th 980, 991.) A person is an indispensable party to a litigation if his or her rights must necessarily be affected by the judgment. (Washington Mutual Bank v. Blechman (2007) 157 Cal.App.4th 662, 667.) Under Code of Civil Procedure section 389, the court has discretion to dismiss an action for failure to name an indispensable party. (Tracy Press, Inc. v. Superior Court (2008) 164 Cal.App.4th 1290, 1299.)
We do not reach this issue because the court’s statement of decision does not support a finding that it dismissed the action solely because Horton refused to join, whether because Horton was an indispensable party or the real party in interest. The court’s primary and independent reason for ruling in favor of respondents was appellant’s failure to prove damages, irrespective of Horton’s party status.
III
Finally, appellant argues the court erred in allowing several inadmissible testimonial statements into evidence. We review evidentiary rulings for abuse of discretion. (Poniktera v. Seiler (2010) 181 Cal.App.4th 121, 142.)
First, appellant claims the court erred in admitting testimony concerning alleged kickbacks between Pioneer and Horton. Eftekhari, the principal of Pioneer, testified that in 2005, he was approached by Emad, an engineer affiliated with Horton at the time, to do the grading on appellant’s lots. Respondents’ counsel asked the witness what he and Emad discussed. Appellant’s counsel objected on hearsay grounds, but the objection was overruled. Eftekhari responded, stating that Emad informed him of a project with Horton and asked him to submit a low bid. The witness continued, testifying that Emad stated he would place Pioneer on Horton’s list of preferred grading contractors for future projects if Eftekhari reduced his bid from $570,000 to $375,000. Eftekhari then paid Emad $17,000 for the project referral and for placing Pioneer on Horton’s list of preferred contractors. Subsequently, Eftekhari met with Singh and another man from Horton to negotiate similar payments. Respondent’s counsel inquired: “And did Mr. Singh ask you for some monies under the table for certain favors with Horton?” The court overruled appellant’s hearsay objection, stating, “I believe [the witness] already answered that question. I’ll let him answer it again.” Eftekhari answered in the affirmative, stating that he witnessed “under the table” deals involving Singh, other Horton employees, and Geosoils. Appellant’s counsel moved to strike the testimony. The court denied the motion.
Appellant argues that Eftekhari’s testimony was inadmissible hearsay. “‘Hearsay evidence’ is evidence of a statement that was made other than by a witness while testifying at the hearing and that is offered to prove the truth of the matter stated.” (Evid. Code, § 1200, subd. (a).) Conversely, a statement offered for some purpose other than to prove the fact stated therein is not hearsay. (See Rufo v. Simpson (2001) 86 Cal.App.4th 573, 596.) “Frequently, an utterance may justify an inference concerning a fact in issue, regardless of the truth or falsity of the utterance itself. It is admitted as circumstantial evidence of that independent fact.” (1 Witkin, Cal. Evidence (4th ed. 2000) Hearsay, § 36, pp. 718-719, italics omitted.) Here, Eftekhari’s statements concerning his initial conversation with Emad were offered to demonstrate how Eftekhari became involved in the project, not to prove the truth of anything Emad specifically stated during the discussion. Similarly, Eftekhari’s testimony that Singh requested kickbacks was offered to prove that such a request was made. The relevancy of the testimony derived from the fact that the request was made, not from the “truth” of the statement.
Appellant also argues that evidence of kickbacks was irrelevant to respondents’ liability. Appellant’s counsel did not make a specific relevancy objection at trial and may not do so for the first time on appeal. (See Cucamonga County Water Dist. v. Southwest Water Co. (1971) 22 Cal.App.3d 245, 263.) In any event, admitting the testimony was not prejudicial error because the court’s independent and primary reason for dismissing appellant’s action was its failure to prove damages.
Appellant asserts that because the court considered evidence of kickbacks that did not involve appellant, the court must have imputed Horton’s wrongdoing to appellant. It also contends the court was biased, as evidenced by conflicting factual findings. The court first found that Emad was an engineer for Diamond West, the surveyor on appellant’s project, but later determined that Pioneer paid kickbacks to Horton through Emad. Appellant misstates the record. Eftekhari testified that Emad was an engineer for Diamond West, but was working with, or for, Horton at the time. The court’s statement of decision accurately summarizes Eftekhari’s testimony. Regardless, Eftekhari’s testimony that he made similar payments to Singh supports the court’s finding that there were kickbacks between Pioneer and Horton. Appellant offers no other evidence to support its claim that the court punished appellant for Horton’s alleged wrongdoing. Absent evidence showing otherwise, we presume the court did not act improperly. (See Cox Cable San Diego, Inc. v. City of San Diego (1987) 188 Cal.App.3d 952, 968.)
Appellant also argues the court violated the mediation privilege under Evidence Code section 1119, by admitting testimony concerning appellant’s January 2009 settlement with Pioneer. We do not agree.
On cross-examination, respondents’ counsel asked Singh if he was aware of a settlement between Pioneer and appellant. Appellant’s counsel objected that the question was “[i]rrelevant and inappropriate at this stage of the proceeding....” The court, which was unaware of the settlement, allowed the question. Singh responded, “[n]o” and respondents’ counsel ended his cross-examination. Later, respondents’ counsel asked Eftekhari if he entered a settlement agreement with appellant. Appellant’s counsel objected on relevancy grounds. The court responded that since this was a bench trial it would allow the witness to explain. Eftekhari stated that Pioneer was not at fault for the grading defects and that he only agreed to the settlement because Pioneer’s insurance company did not want Pioneer to stay in the litigation. Appellant’s counsel moved to strike the testimony, but the court denied the motion, stating there was no harm because the response was consistent with Eftekhari’s earlier testimony denying liability. Eftekhari continued, stating that Pioneer’s insurance paid the settlement amount. Appellant’s counsel objected to the admission of a settlement discussion. The court responded: “I don’t know what content this is going to be placed in at the moment, but I’m going to allow it and see.” Eftekhari testified that Sayani’s counsel asked him to accept responsibility for the grading defect, so that appellant could recover from the insurance company.
Evidence Code section 1119, subdivision (a), provides: “No evidence of anything said or any admission made for the purpose of, in the course of, or pursuant to, a mediation or a mediation consultation is admissible or subject to discovery....” Subdivision (c) further provides: “All communications, negotiations, or settlement discussions by and between participants in the course of a mediation or a mediation consultation shall remain confidential.” (Evid. Code, § 1119, subd. (c).) Evidence Code section 1115, subdivision (a), defines “‘[m]ediation’” broadly as “a process in which a neutral person or persons facilitate communication between the disputants to assist them in reaching a mutually acceptable agreement.” There was no evidence here that the settlement involved a neutral third-party, as to constitute a “mediation” under Evidence Code section 1115, subdivision (a). Thus, Evidence Code section 1119 does not act as a bar to the statements made by Singh and Eftekhari.
Appellant also argues this testimony was irrelevant. As evidenced by the court’s statement of decision, the settlement between Pioneer and appellant was relevant in determining whether appellant suffered any injury warranting recoverable damages, particularly since appellant had not remitted any of the settlement proceeds to Horton. Although the details of Eftekhari’s settlement discussion with Sayani may have gone beyond that scope of relevance, we find that the admission of Eftekhari’s testimony did not unfairly prejudice appellant. The trial court noted Eftekhari’s testimony in its factual findings, but the court’s ultimate holding emphasized the existence of a settlement between appellant and Pioneer, not the contents of the settlement discussion.
We also note that there was independent evidence of the settlement agreement between Pioneer and appellant, including the stipulated agreement between appellant and Horton.
DISPOSITION
The judgment is affirmed. Respondents to have their costs on appeal.
We concur: MANELLA, J., SUZUKAWA, J.