Opinion
B222276
09-28-2011
SHEK-SE PETER IP et al., Plaintiffs and Respondents, v. CITY VIEW CONSTRUCTION, INC., et al., Defendants and Appellants.
Cheren and Associates and Daniel J. Cheren for Defendants and Appellants. Tourtelot & Butler, Laurie J. Butler and T. Sean Butler for Plaintiffs and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. LC082508)
APPEAL from a judgment of the Superior Court of Los Angeles County. Michael Latin, Judge. Affirmed.
Cheren and Associates and Daniel J. Cheren for Defendants and Appellants.
Tourtelot & Butler, Laurie J. Butler and T. Sean Butler for Plaintiffs and Respondents.
A jury found defendants City View Construction, Inc. and Robert Almeri (collectively "defendants") committed fraud in connection with the house remodel of plaintiffs Shek-Se Peter and Christine Ip. On appeal, defendants contend insufficient evidence supported the jury's fraud findings. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
"Following the usual rules on appeal after a trial on the merits, we construe the facts in the light most favorable to the judgment." (Fulton v. Medical Bd. of California (2010) 183 Cal.App.4th 1510, 1513.) In 2007, Shek-Se Peter and Christine Ip decided to remodel their home in West Hills. Christine took the lead in pursuing the project. She had never remodeled a home before or engaged in any large-scale home improvement projects. She first interviewed one or two contractors. She then received a solicitation letter from City View Construction, Inc. (City View), and she arranged a meeting with the company. She had also seen other advertising materials from City View.
When referring to the Ips individually we will identify them as "Christine" and "Peter," which were the names used for them at times during the trial.
Christine reviewed City View's website. She read on the website that the company could "do it all" and did not use subcontractors on their jobs. This appealed to her because she felt it meant they would experience fewer delays and City View would have their own employees working on the project. One of the City View advertising flyers she had seen also claimed City View did not use subcontractors or salesmen. While on the website, Christine took a "virtual tour" of a house the company had remodeled, showing "before and after" photographs. The website did not disclose that the house in question was owned by David Moshe, City View's vice president and treasurer.
City View's two principals were Isaac and David Moshe, father and son.
In October 2007, the Ips met with Robert Almeri, who held himself out as a City View "project manager." Almeri impressed Christine. He told her City View was a second generation family-owned business that had been operating since 1969. Almeri said City View did everything "legally," and he would be the Ips' project manager. Although Almeri did not explicitly describe his role at the company, he indicated he would handle everything, get them the architectural plans, get permits from the city, do the remodeling work. Almeri told Christine: "You don't have to worry [about] anything," and that if the Ips hired City View, all they would have to do is move in. Christine felt "it took the burden off [her]."
The Ips did not yet have architectural plans for the remodel so Almeri suggested an architect. Christine also asked Almeri to show the Ips some examples of City View's work. Christine wanted to see a remodeling project on a two-story home, since the Ips' project would involve adding a second level onto the existing one-story house. Almeri took the Ips to see two homes. At the first house, Almeri and the Ips viewed the house from the outside. Almeri told the Ips only that the house was one City View built. He added that he had not made an appointment with the owner so the Ips could not go inside, but an appointment could be arranged if the Ips wanted. Almeri did not reveal to the Ips that the house belonged to Sharone Moshe, Isaac Moshe's son.
The Ips toured the inside of the second house Almeri showed them (the Topeka house). The house was in the process of being remodeled. City View was turning it into a two-story home. While the Ips were there, Almeri pointed out the owner, who was holding a saw. When Christine asked why the owner was holding a saw, Almeri said the owner liked to do a little work on the home. Almeri did not tell the Ips that the house belonged to his girlfriend's brother, Almeri's soon to be brother-in-law.
Almeri had given the Ips a contract. Christine saw a Better Business Bureau symbol on the contract and looked up City View's rating online. City View had an A plus rating. At trial, Christine described how the rating made her feel: "It all fit in. No subcontract me. I don't have to deal with all that coordinating thing. I have a project manager, this is A plus, they have their own crews, there's no time delay. . . . Oh, [Almeri] even say we do everything legal, by code, by law. And exactly on the website said that, too." In addition, Christine "fell in love" with City View's website and the Topeka house. She described the Topeka house as her dream house. She was impressed by the quality of work she saw.
Almeri initially quoted the Ips a contract price of $500,000. When the architectural plans were finished, City View lowered the price quote to $492,000. Almeri told the Ips City View would make no profits at that price. In the course of these discussions, Peter secured an estimate of $400,000 from another contractor and negotiated on that basis. City View agreed to do the job for $435,000. The Ips signed a construction contract with City View.
However, several facts City View and Almeri had led the Ips to believe about the company were false or misleading. Despite the company's proclamation in its advertising materials that the company did not use salespeople, Almeri was in fact a salesman for City View. Although Almeri identified himself as a "project manager," and suggested to the Ips that he would have an important role in the project, he did none of the actual construction work, he was not involved in the "aspect of paperwork in the office or delivery dates," nor did he supervise workers. He had never done any electrical work. He had no formal training in the building trades industry. He did not order materials or oversee labor. In addition, defendants represented that City View was established in 1969, but it was not actually formed until 1996. While the company represented that it did not use subcontractors, it would actually use between four and five subcontractors on the Ip remodel.
After the Ips' architectural plans were approved, the Ips moved into a rental home so construction could begin. The Ips had given Almeri a $1,000 deposit when they signed the contract. When the Ips moved out of the house and gave the keys to Almeri, he asked for a payment of 15 percent of the total cost of the job, which was $65,250. The Ips paid the money. Demolition began the next day. A few months later, Almeri collected a second payment that was over $100,000. Almeri said he was collecting the payment so that the next stage of the work could begin. The first stage, demolition, was still under way.
Soon after Almeri collected the second payment, he informed Christine he needed to present her with a change order. The Ips had paid $175,000 on the contract by this time. Almeri met the Ips at their rental house. He gave them a change order totaling $60,000. The Ips were shocked and said they needed a few days to think about the order. They sought a second opinion and received an estimate of $18,000 for the work identified on the change order. They then arranged a meeting with Almeri and showed him the estimate. Almeri said, "This is ridiculous. I have nothing else to do over here." Christine asked if they could negotiate or compromise. She offered $30,000, then $50,000. Almeri responded: "No. It's ridiculous. This is America." He left the house, ignoring Christine's request that he come back.
The next day, Almeri sent Christine an email informing her City View would not be working at the house that day. He offered no explanation. The Ips assumed City View was not working because they had refused to accept the change order.
Peter contacted another contractor and expert witness on construction, Mike Panish, for an opinion on the change order. Panish walked through the construction site with Peter and reviewed the City View paperwork and contracts. Panish thought the change order was repetitive when compared to the initial contract, as well as vague and ambiguous as to what the changes were from the original contract. Panish told Peter he thought a lot of what was identified in the change order should have been included in the original contract. Panish also felt there was "no motivation for any of these additional changes as that in the basic contract and under the agreement of the blueprints, everything is supposed to be the responsibility of the contractor."
Panish also noted problems with the work City View had done to that point. For example, he observed construction debris on the property although Peter told him part of the contract was that City View would handle debris removal to get the house ready for the new construction. The house was left unsecured so anyone could enter the yard, and there was no construction fence. Panish also noted that pipes had been laid so they were penetrating shear walls, despite code requirements that such walls not be penetrated by pipes. Other pipes were placed through the foundation in a location Panish thought would probably not be up to code standards and did not meet what he considered appropriate trade standards. He also observed several instances of incomplete demolition.
At trial, Panish offered a definition of "shear wall": "A shear wall was developed to stabilize the wood frame structure, to keep it from racking or diagonally bending . . . . So after we've had significant seismic activity around here, engineers got together and decided that they needed to come up with a more firm stabilization method which includes putting plywood or oriented strand board, nailed at specific intervals to assure that the house does not diagonally compress or rack."
The next day, Christine emailed Almeri and directed him to stop work on the project. The Ips hired a different contractor to take over the remodel. The new contractor, Andres Villanueva, also discovered numerous problems with the work City View had done. There were significant problems with the framing and plumbing. In some cases, the work did not conform to the Ips' architectural plans, and in others it did not conform to code standards. Villanueva corrected these problems. He rerouted pipes so they would not go through structural walls. In some places, this required breaking the concrete slab or cutting the floor. Elsewhere in the house, Villanueva shored and replaced walls. He also corrected City View's work by, for example, putting bolts in floor sills so that they would have the required number, replacing studs in the kitchen so that they were all the same height, and replacing floor joists so that the floors would not be uneven. Similarly, Villanueva had to relocate the air conditioning unit since, as he explained at trial, "there was no way, according to the heating and air conditioning experts [that] . . . they could have had that unit work from [where it was placed] for the whole house." Villanueva also noted there was more construction debris on the property than he would expect as a contractor.
Villanueva concluded the quality of the framing and plumbing was very poor. He was also puzzled by some of City View's receipts that it had provided to the Ips. The receipts were dated before City View actually signed the contract with the Ips and were for items that would not be used at the beginning of the job. Some of the items were for tools, including tools Villanueva felt were not related to the Ips' remodel. Villanueva testified he did not charge customers for his tools. Later receipts also included items Villanueva noted were not used for the Ips' project, such as an undercounter water heater, when the job called for a tankless water heater.
Villanueva completed the remodel. The Ips paid Villanueva $30,816.41 for framing and plumbing repairs necessitated by City View's work. Eventually, Panish concluded the value of the work City View had performed was $45,000, rather than the $175,000 they had paid.
The Ips filed suit against City View and Almeri, asserting several causes of action, including breach of contract, negligence and fraud. City View and Almeri filed a cross-complaint against the Ips for breach of contract. Following a jury trial, the jury found City View liable on causes of action for breach of contract, negligence, and fraudulent concealment. The jury also found Almeri liable for fraudulent concealment. The jury subsequently awarded the Ips punitive damages against both defendants. Judgment was entered in favor of the Ips, awarding them $378,450 in damages against City View and $378,450 in damages against Almeri, as well as $126,150 in punitive damages against City View and $6,307.50 in punitive damages against Almeri.
Defendants filed a motion for judgment notwithstanding the verdict. They argued the evidence adduced at trial did not establish a prima facie case of fraud. The trial court denied the motion.
Defendants timely filed this appeal.
DISCUSSION
Defendants argue there was insufficient evidence for the jury to find them liable for fraud. They contend there was no evidence of any material misrepresentation, reasonable reliance, or that the Ips' reliance on any claimed representation resulted in their damages. Defendants also assert there was insufficient evidence to support a fraud claim against Almeri because statements made by City View could not necessarily be attributed to him.
"When faced with a challenge to the sufficiency of the evidence to support a judgment, an appellate court, 'indulge[s] in every reasonable inference to uphold the verdict if possible and defer[s] to the [trier of fact's] assessment of the credibility of the witnesses. [Citation.] "[T]he power of the appellate court begins and ends with a determination as to whether there is any substantial evidence, contradicted or uncontradicted, which will support the conclusion reached by the [trier of fact]." [Citation.]' " (Warren v. Merrill (2006) 143 Cal.App.4th 96, 109, fn. omitted.)
Defendants also assert the jury failed to follow the jury instructions. However, the substance of defendants' argument is that the jury could not possibly have followed the instructions because the evidence did not support its findings. This is a sufficiency of the evidence argument. Further, contrary to defendants' assertions, the facts were disputed and defendants continue to challenge the facts and the inferences the jury may have drawn from those facts. The substantial evidence standard of review applies.
" '[T]he elements of a cause of action for fraud based on concealment are: " '(1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage. [Citation.]' [Citation.]" [Citation.]' [Citation.]" (Levine v. Blue Shield of California (2010) 189 Cal.App.4th 1117, 1126-1127, italics omitted.)
I. Substantial Evidence Supported the Jury's Fraud Findings
A. Concealed Facts From the Initial Contract and Contract Price
There was substantial evidence defendants committed fraudulent concealment in connection with the original contract and contract price. When the Ips were in their initial discussions with defendants, and after they received the architectural plans, City View, through Almeri, quoted the Ips a contract price of $492,000. The Ips negotiated the price down to $435,000, believing this would be the cost of the project. Almeri told them that City View would take care of everything, so that at the end of the job, the Ips could simply move in. After settling on this price, the Ips agreed to the construction contract, and made several significant payments to City View.
However, after the house was almost completely demolished, City View presented the Ips with a change order for $60,000. To the extent the change order items were necessary and were not already encompassed in the original contract, there was evidence that they were unreasonably omitted from the original contract and estimate. Both Panish and Villanueva testified that work items included in the change order should have been included in the original contract. Villanueva explained that much of the work should have been taken into consideration when City View made its original estimate, including items that were obvious from the architectural plans. For example, as to an alleged change relating to drywall, Villanueva said he "really [did not] see how [City View's original estimate] could have been put together without taking into consideration that drywall was needed throughout."
David Moshe testified the work order was necessitated in large part because of circumstances revealed after demolition. But the jury was entitled to believe Panish and Villanueva's testimony and to disbelieve Moshe. Based on the evidence, the jury could also conclude omissions from the original contract were not the result of mere carelessness, but instead that City View deliberately concealed the fact that substantially more work would be required to complete the remodel than was reflected in the original contract price. Villanueva, for example, indicated the abnormality of omitting the drywall item from the original estimate.
Moreover, by the time defendants presented the change order to the Ips, they had already engaged in a course of misrepresentations and misleading statements. City View's website and promotional materials falsely stated the company had been around 27 years longer than it had actually existed. City View represented that the company did not use subcontractors or salespeople, when in reality it used both. Neither City View nor Almeri disclosed that all of the examples of the company's work the Ips had seen were homes owned by people who had a special relationship with the company's principals or employees. Almeri told the Ips that City View would do everything legally, which they understood to mean by code, when in fact City View's work on the Ip project did not meet code or trade standards in several instances. With this collection of falsehoods as a backdrop, and combined with the expert testimony offered at trial, the jury could reasonably conclude it was no mistake that significant items were not included in the original contract. City View revealed the omissions from the original contract and estimate in the change order, after the Ips had relied on the original contract and estimate to their detriment by entering the contract and making contract payments totaling $175,000 for only $45,000 worth of work, based on what they believed would be a $435,000 contract price.
In fact, Peter testified Almeri told the Ips that Isaac Moshe was his father, or his stepfather, and David Moshe his brother. This testimony was not rebutted at trial. If Almeri's statement to the Ips was true, the connection between City View, Almeri, and the owner of the Topeka House was even more relevant. If Almeri's statement was false, it was yet another misrepresentation he made to the Ips.
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The jury could properly infer from the evidence that, unbeknownst to the Ips, City View never planned to only charge $435,000 for the remodel, but instead intended to increase the price with work items it did not identify at the outset. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 170 (Sangster)[court found meritless party's argument that "it is not fraud knowingly to underbid a contract intending to add on costs later," as well as contention that "a person has no remedy at all if he or she accepts a low bid on a contract for goods or services to be rendered, where the bidder has intentionally concealed material details about the way he or she intends to perform the contract and subsequently submits a bill double the amount of the bid on the basis of excessive and undisclosed markups"].) Further, the jury could conclude that this was a material matter, or in other words, that " 'a reasonable [person] would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question . . . .' " (Charpentier v. Los Angeles Rams Football Co. (1999) 75 Cal.App.4th 301, 313.)
There was also sufficient evidence of reliance. "[R]eliance may be established on the basis of circumstantial evidence showing the alleged fraudulent misrepresentation or concealment substantially influenced the party's choice, even though other influences may have operated as well." (Sangster, supra, 68 Cal.App.4th at p. 170.) Here, the Ips negotiated the contract price down before signing the contract. They secured an estimate from a different contractor as a basis for the negotiations, and finalized the agreement with City View only after the company had lowered its bid. When defendants presented the change order to add $60,000 on to the price, the Ips did not agree to pay it, instead choosing to terminate the contract. The evidence allowed the jury to conclude the Ips reasonably relied on City View's misrepresentation and omission in both entering the original contract and making advance payments on the work to be done, and that they would not have done so had they known City View would later reveal the project required as much as $60,000 of additional work. (Mirkin v. Wasserman (1993) 5 Cal.4th 1082, 1093 [to prove reliance on an omission the plaintiff need only prove that had the omitted information been disclosed, he or she would have been aware of it and behaved differently].)
City View contends the change order is irrelevant because the Ips fired City View after receiving it and did not rely on it. This contention ignores the entirety of the evidence, which the jury could reasonably interpret as establishing a fraudulent course of conduct that merely ended with the change order.
B. Almeri
Defendants also argue that Almeri could not be held liable for misrepresentations or omissions City View made that did not come directly from him. We conclude there was sufficient evidence for the jury to find Almeri liable for fraudulent concealment.
In general, "an innocent agent is not liable for the principal's tort, but in some cases of fraud or conversion, where the agent participates in the act, liability may be imposed." (3 Witkin, Summary of Cal. Law (10th ed. 2005) Agency and Employment, § 201, p. 255; Mars v. Wedbush Morgan Securities, Inc. (1991) 231 Cal.App.3d 1608, 1616 [an agent not held liable for the fraud of a principal unless the agent knows of or participates in the fraudulent act].) There was substantial evidence that Almeri participated in City View's fraud involving the original contract, contract price, and the change order, described above.
Almeri presented himself to the Ips as a "project manager." He was their only contact with City View. He told the Ips he would handle everything. He communicated City View's initial bid and testified that based on his experience with previous City View projects, he "kind of like give them a high, kind of like a price, that I think it's going to be in that range." He explained further that he based the initial estimate "on past experience of different other projects, and, you know, it's not true to say square footage so much, but in general, when the project is including, and what the expectation is from the project and length of time and everything else, so mostly on previous experience of other bigger jobs." Almeri handled the subsequent negotiations on the contract price with the Ips. Almeri was the only person affiliated with City View to discuss the Ips' plans for the remodel with them. He went to David Moshe and, according to Almeri, "we're going through and how—and what exactly it's going to be, and then we talked about it and bring it back to the customer." Almeri presented the change order to the Ips and returned to discuss it with them. When they made a counteroffer he reacted angrily. The evidence adduced at trial was not that Almeri said he would have to go back and consult his bosses at City View. Instead he rejected the Ips' attempts to negotiate. In addition, as explained above, Almeri was integrally involved in the misrepresentations and concealment of facts that led the Ips to trust Almeri and City View and ultimately to enter into the contract.
This evidence was sufficient for the jury to find Almeri participated in City View's fraud in failing to disclose that $435,000 would not actually be the price of the remodel, and to conclude he was not an innocent agent. At trial, Almeri attempted to minimize his role and suggested he was merely a scribe and mouthpiece for David Moshe. But the jury was free to reject his interpretation of his actions. We do not reweigh the evidence or second guess the jury's credibility determinations. (Escamilla v. Department of Corrections and Rehabilitation (2006) 141 Cal.App.4th 498, 514.)
DISPOSITION
The judgment is affirmed. Respondents are to recover their costs on appeal.
BIGELOW, P. J. We concur:
FLIER, J.
GRIMES, J.