Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County No. GIC836594, Lillian Y. Lim, Judge.
HALLER, Acting P. J.
Plaintiffs Christopher and Christine Waits identified a condominium unit under construction they wanted to purchase as part of a section 1031 real estate exchange. They made a written offer to purchase the condominium unit, but the seller never accepted the offer under the offer terms. After the deadline passed for the Waitses to complete their purchase to qualify for the section 1031 tax benefit, the Waitses sued the condominium owner (Pacifica) and the owner's real estate agent (Home Builders Marketing Services, Inc. (Home Builders)), seeking to hold defendants responsible for the Waitses' failure to obtain the tax benefits.
Pacifica refers to defendants Pacifica Villa Royale, LLC and Pacifica Villa Royale, Inc.
The Waitses asserted tort and contract claims in their complaint. Before trial, the Waitses dismissed their contract-based claims, except for a declaratory relief cause of action. The court then granted defendants' summary adjudication motion on the declaratory relief claim, finding there was no enforceable contract between the Waitses and Pacifica. After a lengthy trial, the jury found the Waitses did not prove their remaining fraud, negligent misrepresentation, and negligence causes of action. The court entered judgment in defendants' favor and awarded defendants $65,000 for their attorney fees incurred in prevailing on the Waitses' contract-based declaratory relief claim.
The Waitses raise numerous appellate contentions. We find no prejudicial error and affirm the judgment.
FACTUAL AND PROCEDURAL SUMMARY
Under well-settled appellate principles, we summarize the evidence in the light most favorable to defendants, and make all reasonable factual inferences in defendants' favor. (Weeks v. Baker & McKenzie (1998) 63 Cal.App.4th 1128, 1137-1138.)
In September 2003, Pacifica was in the process of converting an apartment complex to condominium units in El Cajon. This project was known as the Madison Avenue condominium project. Pacifica retained Home Builders to serve as its real estate agent in selling the converted units to interested condominium buyers.
On September 22, 2003, the Waitses came to the Madison Avenue property and met with Kenneth Ingersoll, a real estate agent employed by Home Builders. Mr. Waits was a licensed real estate agent, and worked as a real estate agent and as a consultant advising clients on section 1031 exchange transactions. Mrs. Waits was a licensed real estate broker who was employed by a home loan company.
The Waitses told Ingersoll they were interested in purchasing Unit 19 as part of a section 1031 tax exchange involving property they owned in Santee. Ingersoll responded that the condominium unit was not yet available for sale because it was under construction, but they could reserve the unit by signing a document entitled "Reservation Instrument." Ingersoll said Pacifica was hoping to have the construction completed by mid-December, but indicated this date was tentative. Ingersoll told the Waitses that he was representing only the seller in the transaction, and the Waitses were entitled to have their own agent if they wished.
The Waitses decided they wanted to represent themselves, and signed the Reservation Instrument and gave Ingersoll a $2,000 deposit. The top of the Reservation Instrument states: "This Is Not An Offer Or Contract To Purchase Or Sell." The document also states: "This instrument does not create a contractual obligation to buy or sell on the part of either Subdivider or Potential Buyer. Either party may, at any time, cancel this reservation instrument without incurring liability to the other. In the event of cancellation by either party, the Subdivider shall return the deposit to the Potential Buyer within two business days . . . ."(Italics in original.)
On that same date, Ingersoll gave the Waitses a copy of the California Department of Real Estate's "Preliminary Public Report" applicable to the project (also known as a "Pink Report"). This Preliminary Report stated: "The Department of Real Estate has not yet made a substantive review of this proposed subdivision. [¶] Under this Preliminary Public Report, seller is authorized only to advertise and take reservations. [¶] The seller may not negotiate the sale or lease of lots or units with you until a CONDITIONAL or FINAL PUBLIC REPORT has been issued by the Department of Real Estate. . . . [¶] . . . [¶] The conditional or final public report will tell you much more vital information about the property than is contained in the Preliminary Public Report. It is important that you read and consider all of this information before deciding to purchase."
Shortly after signing the Reservation Instrument, the Waitses listed their Santee property for sale. The Waitses intended to sell this property and purchase the Madison Avenue condominium unit and another property to qualify for the section 1031 tax benefit.
Approximately two months after signing the Reservation Instrument, on November 24, the Waitses came to Ingersoll's office and signed a purchase offer on a form that had been prepared by Ingersoll. At the time, the Waitses understood that no applicable Conditional or Final Report had been issued by the Department of Real Estate. The printed offer form, entitled "DEPOSIT RECEIPT, PURCHASE CONTRACT AND ESCROW INSTRUCTIONS," stated that the Waitses were offering to purchase Unit 19 for $177,900. (Underscoring omitted.) We shall refer to this offer document as the "Purchase Agreement Form" or "Form."
The Form included an "Estimated" closing date of January 15, 2004, but stated the "Estimated Closing Date shall not in any way affect the rights or obligations of the parties . . . and [Pacifica] shall not have any liability of any kind in the event that Seller's estimate is incorrect." The Form also stated that an escrow would be opened "[u]pon execution of [the] Contract by both Buyer and Seller," and that "Execution of this contract by Buyer and Seller's sales representative shall constitute only an offer to purchase which shall not be binding unless Seller delivers to Buyer a copy of this contract executed by Seller within twenty (20) business days after the date of this contract. Failure of Seller to so accept shall automatically revoke this offer and all funds deposited by Buyer with Seller shall be promptly refunded to Buyer." (Italics added.) The Form contained several additional provisions reiterating that Ingersoll was not authorized to accept the purchase offer or to make any representations other than those contained in the Form. The Form also contained a statement that the "Seller is aware, by this note, that buyer is involved in a 1031 EXCHANGE on this property purchase."
These provisions stated: "Buyer expressly acknowledges that he is not relying on any statements, representations or warranties made by any entity or persons, including sales representatives, written or oral, express or implied, other than those specifically set forth in [the agreement]. . . . [¶] No salesperson, broker, or other person has any authority whatsoever to make any representation, agreement, or warranty, express or implied, for Seller, except for those expressly set forth herein or in any Exhibit or addendum hereto; and any other [statement to the] contrary shall be invalid, unenforceable and not binding on Seller. [¶] . . . [¶] . . . Sales Representatives Not Authorized To Accept Offer To Purchase: Seller's sales representatives are not authorized to accept this offer. Receipt and deposit of Buyer's funds shall not constitute an acceptance of this offer by Seller. No agreement or representation has been made by Seller, Seller's agents or representatives that Buyer's credit will be approved by a lender or that a loan commitment will be obtained."
After the Waitses signed the Purchase Agreement Form, Ingersoll sent the document to Pacifica for Pacifica's signature. Following his standard practices, Ingersoll assumed that a Pacifica officer would sign the document and then send a copy to the Waitses and to the escrow company. Ingersoll generally did not receive copies of the executed contract documents.
Two days after the Waitses signed the Purchase Agreement Form, escrow closed on the sale of the Waitses' Santee property. The Waitses were aware the section 1031 deadline to identify replacement property was January 10, 2004, and the deadline to complete the sale was May 24, 2004.
Unbeknownst to Ingersoll: (1) Pacifica did not sign the Purchase Agreement Form; (2) the Waitses never received an executed copy of the agreement; and (3) escrow was never opened on the Waitses' offer. The Waitses spoke with Ingersoll in December 2003 about a carpet deposit, but they never asked him whether Pacifica had signed the agreement or escrow had been opened, and never questioned why they had not received a copy of an executed agreement. On December 20, Mrs. Waits delivered $235 to Ingersoll to upgrade the carpeting.
On December 22, 2003, the Waitses designated the Madison Avenue condominium unit and another property as the replacement properties as part of the section 1031 exchange. Although the Waitses could have designated a third property, they did not want to do so because they believed the Madison Avenue condominium was a good value. At trial, the Waitses testified they understood in December 2003 that there were construction delays at the Madison Avenue project, and Mr. Waits acknowledged there were no guarantees as to when the transaction might close. On January 14, the Waitses sent another check for a carpet upgrade in the condominium unit.
In mid-January 2004, the City conducted an inspection of the Madison Avenue condominium project, and notified Pacifica that certain "one-hour firewalls" had to be constructed in the units, and that a certificate of occupancy would not be issued until this construction was completed. This additional work would substantially delay the project.
In early February, the Waitses were notified of the delays because of the new inspections. By about February 16 or 17, Ingersoll advised the Waitses that the new city-required work would delay the project until at least June. He indicated the sales would have to be put on hold until the work was completed.
On April 7 or 8, Home Builders notified the Waitses that Pacifica was cancelling all of the sales. Several days later, the escrow company returned the $2,000 reservation deposit to the Waitses.
The Waitses thus did not accomplish the desired section 1031 exchange by May 24, 2004 as required under the tax laws. As a result, they were required to pay $22,976 in capital gains taxes that they might otherwise have deferred.
Five months later, in October 2004, the Waitses sued Pacifica and Home Builders. The Waitses alleged three contract-based claims, and a related declaratory relief cause of action. The Waitses also alleged various tort claims, including fraud, negligent misrepresentation, and breach of fiduciary duty.
The Waitses also sued Ingersoll, but those claims were settled before trial.
In May 2005, Pacifica moved for summary adjudication of the contract causes of action and the related declaratory relief claim. Pacifica argued that no contract was formed because it was undisputed Pacifica had never signed the Purchase Agreement Form and had never delivered an executed copy of the document to the Waitses as required to create an enforceable contract. In support, Pacifica relied on the provision in the Purchase Agreement Form, stating that the offer "shall not be binding unless Seller delivers to Buyer a copy of this contract executed by Seller within twenty (20) business days after the date of this contract. Failure of Seller to so accept shall automatically revoke this offer . . . ." (Italics added.) Pacifica also produced a declaration of Deepak Israni, a Pacifica managing officer, who stated he was responsible for signing all contract documents on behalf of Pacifica, and he never signed the Waitses' offer. Israni said, "Neither I nor anyone else acting on behalf of [Pacifica] signed that document."
In response, the Waitses dismissed their contract claims, except they continued to assert their declaratory relief claim seeking to establish that an enforceable contract existed between the parties. After granting numerous extensions to the Waitses and permitting the Waitses to file supplemental opposition memoranda, the court granted summary adjudication on the declaratory relief cause of action. The court found Pacifica met its burden to show it had not signed the contract, and there were no facts supporting the Waitses' arguments that Pacifica should be estopped from asserting the statute of frauds and/or that Home Builders had the authority to sign the contract.
The trial began two months later. At trial, the Waitses' causes of action included: (1) fraud and negligent misrepresentation against Pacifica; and (2) negligent misrepresentation and negligence against Home Builders.
In support of their fraud and negligent misrepresentation claims, the Waitses claimed they sold their Santee property and identified the Madison Avenue property on their section 1031 tax form based on Ingersoll's false representations that escrow would close in January or February. They claimed they would not have sold their home or designated the condominium property on the tax form if they had known the true facts that the escrow would not close in time to complete the section 1031 transaction. They acknowledged they had no enforceable contract with Pacifica, but argued that defendants acted improperly in failing to sign the contract and/or that defendants should have affirmatively disclosed this fact (the lack of an enforceable contract) to them. On their negligence claim against Home Builders, the Waitses presented an expert witness who testified that Home Builders' conduct fell below the standard of care.
In response to the misrepresentation claims, defendants presented evidence that Ingersoll never told the Waitses the offer had been signed, and the Waitses never received delivery of the contract or asked Ingersoll or anyone else whether a contract had been signed and escrow had been opened. Defendants also presented evidence that neither Pacifica nor Home Builders told the Waitses that the sale would close by January or February. Defendants further argued that even if they had made these statements, the statements would have been "mere opinion" and the Waitses could not have reasonably relied on the statements, particularly because they were real estate professionals who admittedly understood the importance of confirming the existence of a contract and knew that construction delays are normal and occur frequently and that a section 1031 exchange on new construction is risky.
With respect to the negligence claims against Home Builders, Home Builders presented an expert witness, Alan Wallace, a licensed real estate broker and attorney, who opined that Home Builders acted consistent with the applicable standard of care under the circumstances of the transaction.
At the close of trial, the court gave the jury special verdict forms. The first question on the intentional and negligent misrepresentation claims against Pacifica asked: "Did [Pacifica] make a false representation of an important fact to Plaintiffs, or conceal an important fact from Plaintiffs?" The jury answered "No." On the verdict form relating to the Waitses' negligent misrepresentation claim against Home Builders, the first question asked: "Did [Home Builders] make a false representation of an important fact to Plaintiffs"? The jury answered "No." On the negligence special verdict form against Home Builders, the jury found Home Builders was not negligent. Based on these findings, the jury did not reach the additional elements on each of these claims (e.g., causation, damages, reliance).
The court then entered judgment in defendants' favor, and awarded Pacifica $65,000 in attorney fees incurred before trial in defending against the declaratory relief claim.
DISCUSSION
I. Contentions Relating to Pacifica's Compliance with Subdivided Lands Act
The Waitses raise several appellate challenges relating to their assertion that Pacifica failed to comply with reporting requirements contained in the Subdivided Lands Act (Act). (Bus. & Prof. Code, § 11000 et seq.) We first summarize the applicable law. We then consider the Waitses' contention that the court erred in instructing the jury on the Act's reporting obligations. We then address the Waitses' argument that the court abused its discretion in denying their motion to amend the complaint to add a cause of action for violation of the Act.
All further statutory references are to the Business and Professions Code unless otherwise specified.
A. Generally Applicable Law
The Act is one of several government regulatory schemes governing the conversion of an apartment building to a condominium complex. (See City of West Hollywood v. Beverly Towers, Inc. (1991) 52 Cal.3d 1184, 1189.) Under the Act, a property owner must comply with numerous reporting and disclosure requirements if the conversion will result in five or more condominium units. (§ 11000 et seq.; Drake v. Martin (1994) 30 Cal.App.4th 984, 992.) The Act is a "consumer protection statute intended primarily to prevent 'fraud and sharp practices' by requiring disclosure of all relevant information to potential purchasers and lessees of subdivision lots in a project of five or more units." (City of West Hollywood v. Beverly Towers, Inc., supra, 52 Cal.3d at p. 1189, fn. 3; see Drake v. Martin, supra, 30 Cal.App.4th at p. 995.) The statutory requirements are enforced by the Department of Real Estate (Department) and the Real Estate Commissioner (Commissioner).
As is relevant here, the Act requires a subdivider to obtain a report from the Commissioner approving the subdivision before a unit may be sold to a buyer. (§ 11018.2.) Section 11018 provides that the Commissioner "shall" examine any subdivision and "issue to the subdivider a public report authorizing the sale or lease . . . of the lots or parcels within the subdivision." Section 11018.1 states that "A copy of the public report . . . shall be given to the prospective purchaser by the owner, subdivider or agent prior to the execution of a binding contract or agreement for sale or lease of any lot or parcel in a subdivision." (§ 11018.1, subd. (a), italics added.) Section 11081.2 provides that: "No person shall sell or lease, or offer for sale or lease in this state any lots or parcels in a subdivision without first obtaining a public report from the . . . Commissioner." (Italics added.)
Section 11018.12 creates exceptions to section 11018.2's report requirement under certain circumstances. Section 11018.12, subdivision (a) provides: "The commissioner may issue a conditional public report for a subdivision" if various requirements set forth in subdivision (e) are met, including that certain specific disclosures are made and purchase money is deposited according to statutory requirements. (Italics added.) Section 11018.12, subdivision (d) provides: "Notwithstanding the provisions of Section 11018.2, a person may sell or lease, or offer for sale, or lease, lots or parcels in a subdivision pursuant to a conditional public report if, as a condition of the sale or lease or offer for sale or lease, delivery of legal title or other interest contracted for will not take place until issuance of a public report and provided that the requirements of subdivision (e) are met." (Italics added.)
Although the statutes do not mention a "preliminary" public report, the regulations provide for a preliminary report if the owner/developer wishes to provide the opportunity for purchasers to reserve a unit in a condominium conversion project. Title 10 of the Code of California Regulations, section 2795, subdivision (a) states: "If a subdivider makes application and pays the appropriate fee, a preliminary subdivision public report may be issued by the Department in advance of satisfaction of all requirements for issuance of a final public report when in the judgment of the Commissioner it is reasonable to expect that all of the requirements for the issuance of a final public report will be satisfied in due course."
B. Relevant Facts and Procedure
In June 2003, the Department issued a Preliminary Public Report permitting Pacifica to accept reservations for units in Phase 2 of the Madison Avenue development, which included Unit 19. However, Pacifica never obtained a Final or Conditional Report for Phase 2 of the development.
About five months before trial, the Waitses moved to amend the complaint to add a cause of action for violation of the Act based on the lack of a Conditional or Final Report. The court denied the motion because there is no private right of action for damages under the Act.
During trial, the court and counsel engaged in numerous discussions about whether defendants violated the Act by soliciting purchase offers before obtaining a Conditional or Final Report. The Waitses argued, and sought to present expert evidence, that defendants' conduct in soliciting the offer from the Waitses without obtaining these reports violated the Act. Defendants objected, asserting that Pacifica was entitled to solicit offers based on the Preliminary Report before the additional reports had been obtained.
The court ultimately agreed with defendants' position and, over the Waitses' objections, instructed the jury in the language of defendants' proposed "Public Reports" instruction. The given instruction stated: "California law regulates the sale and marketing of property which is being subdivided into condominiums. A developer is required to obtain a Final Public Report before transferring title to a buyer. But a developer has the option of beginning negotiations with a prospective purchaser. Thus, it is not a violation of a Statute or Regulation for a seller to solicit a signed purchase offer from a buyer prior to the issuance of the Conditional or Final Report."
C. Alleged Instructional Error
On appeal, the Waitses contend the court erred in giving the Public Reports instruction, arguing the last sentence of the instruction was erroneous because it misstated applicable law and was inconsistent with sections 11018.2 and 11018.12. The Waitses maintain that under these statutes, an owner and developer cannot solicit an offer for a unit in a planned condominium subdivision until the Department has issued a Conditional or Final Report. Defendants counter that the instruction was correct because an owner may solicit offers based solely on the issuance of a Preliminary Report. Defendants rely primarily on the implementing regulation (Cal. Code Regs., tit. 10, § 2795, subd. (a)) and a brief discussion in a California real estate law treatise (see 1 Miller & Starr, Cal. Real Estate (3d ed. 2005) § 1:144).
On our review of the applicable statutes, it appears the Waitses have the better argument. The statutes require a final report before soliciting offers, but provide for an exception if a Conditional Report has been issued under certain circumstances. (§§ 11018.2, 11018.12.) There is nothing in the statutes or regulations providing that a Preliminary Report can serve the same purpose as a Conditional Report. Because the Legislature imposed numerous specific requirements before a Conditional Report could be used in place of a Final Report, it does not logically follow that the Legislature intended a Preliminary Report (which contains much less information) could be substituted for a Conditional Report. The portion of the Miller & Starr treatise relied upon by defendants does not specifically analyze this issue, and to the extent it supports defendants' assertions, we find its summary conclusion unpersuasive.
But even if the Public Reports instruction should not have been given, the error was not prejudicial. A judgment may not be reversed for instructional error in a civil case unless the appellant establishes the error was prejudicial. (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 580; Zagami, Inc. v. James A. Crone, Inc. (2008) 160 Cal.App.4th 1083, 1094.) Error is prejudicial " 'where it seems probable' " that the error affected the outcome of the case. (Soule, supra, 8 Cal.4th at p. 580.) A judgment will not be reversed " ' "unless, after an examination of the entire cause, including the evidence, the court shall be of the opinion that the error complained of has resulted in a miscarriage of justice." ' " (Zagami, supra, 160 Cal.App.4th at p. 1094.)
The Waitses' theory at trial pertaining to the Act's reporting requirements was that defendants committed fraud and misrepresentation when they failed to disclose that the Department had not issued a Final or Conditional Report before they solicited the offer. However, Mrs. Waits testified at trial that she was aware the Department had not issued these reports when she signed the purchase offer. Mrs. Waits said that she asked Ingersoll several times if there were any additional reports issued for the unit, and each time he responded that there were no additional reports. Further, the Waitses acknowledged that Ingersoll gave them the Preliminary Report, which contained a statement that: "The seller may not negotiate the sale or lease of lots or units with you until a CONDITIONAL or FINAL PUBLIC REPORT has been issued by the Department . . . ." The Preliminary Report also stated that the Waitses should read these additional reports before deciding to purchase the property. Mr. Waits also testified that at the time he signed the purchase offer, Ingersoll told him that a transfer could not take place until various government approvals were obtained.
In March 2004, Ingersoll faxed a conditional report for Phase 1 of the project, but the Waitses never claimed they relied on this document to their detriment. The document on its face did not apply to Unit 19, and the document was sent after the Waitses knew the sale would be delayed until at least June.
On this record, the challenged instruction would not have affected the jury verdict on the misrepresentation claims. It was undisputed that neither Pacifica nor Home Builders made a false statement about the necessity for a Final or Conditional Report, nor did they make a false statement about the existence of such a report. Additionally, the Waitses never claimed that the additional reports would have provided them with material information of which they were not aware at the time. The issue on a misrepresentation claim is whether the defendants misled the plaintiffs, not whether the defendants complied with a regulatory statute. The undisputed facts show the Waitses were aware there was no Conditional or Final Report, and they were on notice they should review such a report before deciding to purchase the property. There is no actionable failure to disclose if the defendant did not make a misrepresentation and the plaintiffs were fully aware of the true facts.
We reach a similar conclusion on the Waitses' negligence claim. First, the negligence claim was asserted only against Home Builders. Section 11018.2's reporting duties are directed at sellers of subdivided lots, and not real estate agents. But even assuming that Home Builders owed a duty toward the Waitses to obtain a Conditional or Final Report before it solicited a purchase offer, and the breach of a duty could be established through the violation of the Act, it is not reasonably probable that the jury would have found that the breach of this duty caused any of the Waitses' claimed damages. The Waitses claimed they suffered damages because they were unable to close the escrow in time for the section 1031 exchange. There was no evidence presented that the lack of a Conditional or Final Report contributed to these claimed damages.
In attempting to establish prejudice from the instruction on the misrepresentation and negligence claims, the Waitses rely primarily on several written questions from the jurors during deliberations concerning escrow accounts. The Waitses argue the questions show the jury was "confused" about the statutory reporting requirements.
The questions indicate the jury (at one point in time) was focused on the requirements for opening an escrow account and how the issuance (or nonissuance) of a Final and/or Conditional Report affects escrow. However, the undisputed evidence showed that escrow was never opened and the Purchase Agreement Form was never signed by defendants or delivered to the Waitses. Thus, the issue of when the Purchase Agreement Form would hypothetically become a contract and whether that hypothetical contract could be sent to escrow before the issuance of a Final or Conditional Report does not have any bearing on the question whether plaintiffs proved their misrepresentations and negligence claims. Thus, the jury questions do not show the jury improperly based their verdict on the erroneous instruction.
Moreover, after the court answered the jury's questions, the court replaced one of the jurors because of his scheduling problems, and admonished the jury that it was required to disregard prior deliberations and began deliberations anew with the new juror. Because there is no indication that the issue of the Conditional or Final Reports was discussed in the second jury deliberations, we cannot conclude that the issue had any relevance in the jury's deliberations.
We similarly reject the Waitses' reliance on a statement made by Pacifica's counsel during closing argument that the Public Reports instruction "deals with the very issue that is sort of a core of this case, whether it was wrong for Mr. Ingersoll to get that purchase offer signed by the Waits." Although counsel may have had tactical reasons for focusing attention on this issue, the matter had very little relevance to the actual issues the jury was asked to decide. The crux of the Waitses' case at trial was their claim they were unable to purchase the Madison Avenue condominium unit in a timely fashion to reap the benefits of a section 1031 exchange because of defendants' misrepresentations and failures to disclose relevant information. The jury instruction on public reports had only a tangential bearing on this theory of liability and on the asserted defenses. The Waitses could not purchase the condominium primarily because they never had an enforceable contract to do so. The purchase offer was never signed by Pacifica, and Pacifica never delivered an executed copy of the agreement to the Waitses. Thus, the Waitses could not have closed escrow irrespective of the existence of any public reports.
The instructional error was not prejudicial. It is not reasonable to conclude the jury would have reached a verdict more favorable to the Waitses if the challenged instruction had not been given.
D. Court Did Not Abuse Its Discretion in Refusing to Permit Amendment
The Waitses alternatively contend the court erred in refusing to permit them to amend their complaint to add a cause of action for violation of the Act's reporting requirements.
About one year after filing their complaint, the Waitses moved for leave to amend their complaint to add a cause of action for violation of the Act. In their proposed amendment, the Waitses claimed defendants violated the Act by offering condominium units without a Conditional Report or Final Report issued by the Department. The court denied the motion based on its conclusion that the proposed amendment did not state a cause of action because there was no private damages remedy for violation of the Act.
The court's ruling was correct. Generally, a statutory violation does not give rise to a private right of action unless the Legislature expressly provides for a private remedy. "[A] private right of action exists only if the language of the statute or its legislative history clearly indicates the Legislature intended to create such a right to sue for damages." (Vikco Ins. Services, Inc. v. Ohio Indemnity Co. (1999) 70 Cal.App.4th 55, 62.) If the Legislature intends to create a private cause of action, the court must generally assume it will do so " ' "directly[,] . . . in clear, understandable, unmistakable terms." ' " (Id. at pp. 62-63; accord Farmers Ins. Exchange v. Superior Court (2006) 137 Cal.App.4th 842, 850; Agricultural Ins. Co. v. Superior Court (1999) 70 Cal.App.4th 385, 400.)
The Legislature did not express an intent to provide for a private right of action under the Act. Instead, the Legislature provided that the remedy for violating the statute's reporting requirements consists of criminal penalties and administrative enforcement actions. (§§ 11023, 11019; City of West Hollywood v. 1112 Investment Co. (2003) 105 Cal.App.4th 1134, 1151.) Section 11023 provides that a person who violates the report requirement "is guilty of a public offense" punishable by a fine not exceeding $10,000 and/or imprisonment not exceeding one year. (§ 11023.) Under section 11019, the Commissioner has the authority to order a party violating the Act to desist from the conduct and discontinue all further sales activities. (§ 11019, subd. (a).) Because the Legislature provided for these specific remedies, and did not include a private damages remedy, we necessarily presume that this remedy is not available under the Act.
This conclusion is bolstered by the fact that the Legislature specifically created a damages remedy in a related statutory scheme. In the Subdivision Map Act, which regulates the design, improvement and sale of subdivisions and authorizes conditions for approval of subdivision maps, the Legislature expressly provided for the recovery of damages caused by violations of the Subdivision Map Act. (Gov. Code, § 66499.32, subd. (b).) By expressly permitting damages in one statutory scheme and not including a similar provision in a related statutory scheme, it is reasonable to infer the Legislature did not intend to provide a private right of action for violations of the Act.
In urging this court to create a new damages remedy, the Waitses point out that courts have permitted purchasers to declare a purchase agreement void, and recover sums paid, if a seller violated the Act's reporting requirements. (See Drake v. Martin, supra, 30 Cal.App.4th at p. 992.) However, the availability of a rescission remedy is premised on contract principles applicable to a "void" contract. (Murphy v. San Gabriel Mfg. Co. (1950) 99 Cal.App.2d 365, 368-369; see Barrett v. Hammer Builders, Inc. (1961) 195 Cal.App.2d 305, 308-309.) In this case, there was no contract formed and thus the existence of a contract remedy is irrelevant. This case must be instead analyzed under the general presumption against implying a private right of action unless a contrary legislative intent appears.
We also find unavailing the Waitses' reliance on language in City of West Hollywood v. 1112 Investment Co., supra, 105 Cal.App.4th 1134 , which emphasized that the Act's public report requirement serves an important consumer protection function. The West Hollywood court merely identified the statutory penalties and the rescission remedy, and did not state or suggest that a court has the authority to create new remedies. (Ibid.) Nothing in the West Hollywood decision suggests that we may depart from the general presumption against implying a private right of action for a statutory violation.
The Waitses also argue that we should imply a private right of action because the right is needed to assure the effectiveness of the Act. However, the issue here is whether the Legislature intended to create the damages remedy, not the court's view of whether this remedy would be helpful or necessary to achieving legislative goals. (See Animal Legal Defense Fund v. Mendes (2008) 160 Cal.App.4th 136, 144, fn. 6; Crusader Ins. Co. v. Scottsdale Ins. Co. (1997) 54 Cal.App.4th 121, 131-134.) Further, the Act does not require a private right of action to be effective. Given the extensive criminal remedies, the Department's broad administrative authority to prevent violations, and the fact that a disappointed purchaser who believes he or she did not have full information may pursue common law remedies, there are no compelling public policy reasons requiring judicial recognition of a private right to enforce the statutory scheme.
We additionally reject the Waitses' summary assertion that they should be permitted to amend the complaint to seek declaratory relief for a violation of the Act. The argument is waived because it was not supported by applicable authority or argument.
II. Sufficiency of the Evidence Challenge
The Waitses next challenge the sufficiency of the evidence to support the jury's finding that they did not prove Home Builders was negligent.
"When appellants challenge the sufficiency of the evidence, all material evidence on the point must be set forth and not merely their own evidence." (Jordan v. City of Santa Barbara (1996) 46 Cal.App.4th 1245, 1255.) Failure to comply with this rule "waives a claim of insufficiency of the evidence." (Brockey v. Moore (2003) 107 Cal.App.4th 86, 96; see Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246.) In asserting their challenge to the sufficiency of the evidence, the Waitses focus on the evidence supporting their claims, and make no attempt to set forth an accurate summary of the contrary evidence. Thus, the Waitses waived their right to challenge the sufficiency of the evidence on appeal.
The Waitses' contention also fails on its merits.
The Waitses presented an expert witness who opined that Home Builders' conduct fell below the standard of care by: (1) failing to disclose to the Waitses that the Purchase Agreement Form had not been signed by Pacifica; (2) failing to disclose that the Department had not issued a Final or Conditional report required by the Act before Pacifica could offer the property for sale; and (3) failing to notify the Waitses the escrow would not close in time to permit them to utilize the section 1031 tax benefit.
To rebut these opinions, Home Builders called an expert witness, Alan Wallace, a licensed real estate broker and attorney. Wallace testified that Home Builders met its standard of care towards the Waitses. Specifically, Wallace opined that: (1) Ingersoll's assumption that the contracts had been signed (without specifically confirming this fact with Pacifica) was reasonable and consistent with standard industry practice under similar circumstances and Ingersoll had no affirmative duty to the Waitses (who were not his clients) to confirm that the contract had been signed; (2) Ingersoll acted within the standard of care with respect to the statutory reports because the documents signed by the Waitses included admonishments that no sale could be competed until the Department had issued a Final Report; and (3) a section 1031 exchange on new construction is risky particularly where the contract provisions state that the seller has no liability if the contract does not close in time. Wallace also opined that in April 2004 when the Waitses were told that Pacifica was cancelling all of the sales on the project, the Waitses "had time under the IRS rules to identify other properties and close them . . . ."
Further, defendants presented Ingersoll's testimony that although he did not recall all of the specific conversations with the Waitses, he never gave prospective purchasers definite dates, explaining that: "There is no way I could have told them that it would close [at a particular time] . . . . [¶] I usually just say, 'hopefully we will close by this particular date,' from the information I had gotten to that point." He also testified that he never promised a buyer or prospective buyer a specific closing date because "[t]hat would be a fallacy."
When an appellant asserts a sufficiency of the evidence challenge, we "view the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor . . . ." (Jessup Farms v. Baldwin (1983) 33 Cal.3d 639, 660.) "It is not our task to weigh conflicts and disputes in the evidence; that is the province of the trier of fact. Our authority begins and ends with a determination as to whether, on the entire record, there is any substantial evidence, contradicted or uncontradicted, in support of the judgment." (Howard v. Owens Corning (1999) 72 Cal.App.4th 621, 630-631.)
Applying these standards, we reject the Waitses' argument that insufficient evidence supported the jury verdict on the negligence claim. The jury was entitled to find the testimony of Wallace and Ingersoll to be reasonable and credible, and thus to conclude that Home Builders was not negligent.
III. Testimony of Expert Alan Wallace
The Waitses contend the court abused its discretion in permitting Pacifica's expert, Wallace, to testify: (1) regarding the Waitses' standard of care as California real estate professionals; and (2) pertaining to issues relating to the section 1031 exchange.
Home Builders designated Wallace to testify with regard to the standard of care for real estate agents and brokers in the purchase and sale of real property. Before trial, the Waitses moved to exclude Wallace's opinion that they "owed or breached fiduciary or other duties as California real estate licensees." The court granted the motion to the extent that Wallace would phrase his opinions in the language of a fiduciary duty, but ruled that evidence regarding the Waitses' real estate experience was relevant and admissible on the issue of justifiable reliance. The court stated it agreed with Pacifica's contention that its ruling "does not in any way limit . . . evidence or argument regarding how plaintiffs' knowledge, experience and training relates to the essential element of justifiable reliance on plaintiffs' alleged fraud causes of action." The court also granted the Waitses' in limine motion to exclude Wallace's expert testimony on matters not set forth in his expert designation.
During direct examination, Home Builders' counsel asked Wallace whether he had formed an opinion about the conduct of the Waitses as real estate agents and brokers. The court sustained the Waitses' counsel's objection to this question. Counsel then asked Wallace whether the Waitses had an obligation to act reasonably, and Wallace responded "[o]f course." Wallace then opined that the Waitses did not act reasonably. Over the Waitses' counsel's objections, Wallace elaborated on this testimony as follows: "It says [in the Purchase Agreement Form], 'If your contract isn't signed, you got nothing.' [¶] And if you're a trained real estate professional and you're doing [a section 1031] exchange on that, you are taking extraordinary risks, in my opinion."
The Waitses contend this testimony was inadmissible because Wallace suggested the Waitses were subject to a higher duty of care than a layperson. This contention is without merit. "In determining whether one can reasonably or justifiably rely on an alleged misrepresentation, the knowledge, education and experience of the person claiming reliance must be considered." (Guido v. Koopman (1991) 1 Cal.App.4th 837, 843.) Wallace's brief testimony on this subject was relevant and admissible on the issue of what was reasonable under the circumstances.
We reject the Waitses' additional argument that Wallace's testimony should have been excluded under Evidence Code section 352. The Waitses waived the argument by failing to assert it at trial. Their brief reference to this code section in their in limine motion papers was not sufficient to preserve the issue. In any event, the testimony was not unduly prejudicial or inflammatory, and the court would not have abused its discretion in overruling an Evidence Code section 352 objection if it had been properly made.
Finally, even if the testimony should have been excluded, the evidence had no effect on the outcome of the trial. The jury never reached the reasonable reliance issue. The jury found that defendants did not make a material misrepresentation, and that Home Builders did not act below the standard of care. Additionally, much of Wallace's challenged testimony was cumulative and repetitive of the testimony by the Waitses' expert, Richard Snyder, who acknowledged that a section 1031 exchange on new construction is "risky," and that someone with real estate training should understand that a sale cannot be closed unless a Final Report had been issued on the project. Snyder also testified that the Waitses had the obligation to exercise reasonable care to protect their own self-interest, and questioned why the Waitses had not followed up to determine whether Pacifica had signed the contract.
We also reject the Waitses' argument that the court erred in permitting Wallace to offer opinions on the section 1031 exchange issues. During direct examination, Home Builders' counsel asked Wallace whether he "evaluate[d] the conduct of Home Builders with regard to the claim by the Waitses that somehow it's [Home Builders'] fault that this 1031 exchange didn't get completed in time[.]" Counsel for the Waitses objected, claiming the question called for information that was not in Wallace's expert report. The court overruled this objection after viewing a written summary of Wallace's opinions (entitled "Bulletpoints"). Defense counsel said this summary was provided to the Waitses' counsel at Wallace's expert deposition. The court did not abuse its discretion in overruling the objection. The record does not support that counsel's question sought information that was beyond the scope of Wallace's deposition testimony and/or expert designation.
IV. Motion for New Trial
The Waitses moved for a new trial with respect to the court's order granting defendants' summary adjudication motion on the Waitses' declaratory relief claim. The Waitses argued they were entitled to a new trial based on "newly discovered" evidence—information supplied by Yvonne Winell, Pacifica's former escrow coordinator. The court denied the motion, finding the Waitses did not exercise reasonable diligence in obtaining this information and the information was not material because it would not have changed the outcome of the summary adjudication order. We conclude the court's ruling was a proper exercise of discretion.
A. Relevant Factual Background
Summary Adjudication Proceedings
In their declaratory relief claim, the Waitses sought a judicial declaration that: (1) the Purchase Agreement Form was binding on the parties; and (2) Pacifica was estopped from asserting the statute of frauds. Pacifica moved for summary adjudication of this claim, supported by evidence that it never signed the Waitses' purchase offer, and never delivered an acceptance of the offer to the Waitses. The Waitses did not present any contrary evidence. Thus, the court granted summary adjudication on this claim.
We provide only a brief summary of the evidence presented in the summary adjudication motion proceedings because the Waitses do not challenge the merits of the court's pretrial ruling. Instead, they challenge only the court's denial of their new trial motion.
Trial Testimony
At trial, the evidence showed that the Waitses' written offer (the Purchase Agreement Form) could not be found at Pacifica's offices. During their case-in-chief, the Waitses called Winell to testify as a percipient witness pertaining to the issue of what happened to the Waitses' Purchase Agreement Form after Ingersoll sent the form to Pacifica.
Winell testified that during late 2003 through early 2004 she was Pacifica's escrow coordinator responsible for: (1) receiving "hundreds" of purchase offers at Pacifica headquarters from several different projects; (2) obtaining signatures from Pacifica's managing officer, Deepak Israni, on the purchase offers; and (3) sending the agreements to the applicable escrow company. She did not know whether a purchase offer by the Waitses was one of the documents for which she obtained a signature. Additionally, when asked whether she recalled whether Israni signed all of the offers pertaining to the Madison Avenue project, she testified "[b]ecause they're so long ago, I can't recall if he did sign them. . . . I can't, in good conscience, remember." However, after being shown her declaration authored by the Waitses' counsel, she said she believed that Israni signed all the contracts that were presented to him. Later in her testimony, she again stated that she could not recall whether Israni signed all of the purchase offers that she had given him. Winell also said she believed that she put some of the files in a box in the summer of 2004 (after the Madison Avenue project had been placed on hold for the new construction required by the city).
New Trial Motion
After judgment was entered, the Waitses moved for a new trial based on claimed "newly discovered" evidence, which was contained in Winell's declaration. The declaration was prepared by the Waitses' counsel and was signed by Winell on April 1, 2006, three days before she testified at trial. One paragraph of the declaration stated that: "In relation to the Madison Avenue project, Mr. Deepak Israni signed all the contracts that were presented to him by me . . . . All the contracts presented by me to Mr. Israni on the Madison Avenue condominium project whether during 2003 or 2004 had to have been signed by him. To my knowledge and recollection, Mr. Israni did not return unsigned any real estate purchase contracts to me at any time on that project."
We grant the Waitses' motion to augment the appellate record with Winnell's declaration. The Waitses timely lodged the declaration with the trial court in support of their new trial motion.
The Waitses also produced a supporting declaration of their trial counsel stating that he did not produce Winell's declaration earlier because he did not speak with Winell about the relevant events until after trial began. The Waitses' counsel said that defendants did not identify Winell's full name and phone number until February 2, 2006 (after the discovery cut-off date), and that Winell refused to accept his phone calls until he subpoenaed her to appear at trial several days before trial.
Based on this evidence, the Waitses urged the court to grant a new trial on the summary adjudication motion, and to provide them the opportunity to obtain a trial on their declaratory relief claim. Defendants opposed the new trial motion, arguing that: (1) the motion was procedurally improper because it was in reality an untimely motion for reconsideration; (2) the Waitses failed to demonstrate reasonable diligence in discovering the evidence since Winell's full name was identified on January 18, 2006, seven weeks before the court granted summary adjudication, and her phone number was easily obtainable through public sources; and (3) Winell's testimony would not have affected the court's summary adjudication order.
After considering the parties' submissions and arguments, the court denied the new trial motion. The court first noted that the "new" information could have been brought to the court's attention at the summary adjudication proceedings because Waitses' counsel was aware of Winell's identity at the time of those proceedings. The court additionally found that the motion was unsupported because the claimed new information was not material to the issues raised in the summary adjudication proceedings.
B. Legal Analysis
"A trial court has broad discretion in ruling on a new trial motion, and the court's exercise of discretion is accorded great deference on appeal. [Citation.] An abuse of discretion occurs if, in light of the applicable law and considering all of the relevant circumstances, the court's decision exceeds the bounds of reason and results in a miscarriage of justice." (Fassberg Construction Co. v. Housing Authority of Los Angeles (2007) 152 Cal.App.4th 720, 752.)
Code of Civil Procedure section 657, subdivision 4 authorizes a court to grant a new trial on the ground of newly discovered evidence. " 'The essential elements which must be established are (1) . . . the evidence is newly discovered; (2) . . . reasonable diligence has been exercised in its discovery and production; and (3) the evidence is material to the movant's case.' " (Sherman v. Kinetic Concepts, Inc. (1998) 67 Cal.App.4th 1152, 1161.)
The court did not abuse its discretion in finding the Waitses did not use reasonable diligence in producing Winell's declaration. The record shows the Waitses' counsel was aware of Winell's identity at least one month before he submitted his final summary adjudication opposition papers, yet he made no attempt to notify the court of this newly identified witness. Additionally, the court had a reasonable basis to conclude that counsel could have discovered Winell's identity and contacted her in a more timely fashion. Although defendants apparently did not disclose Winell's full name until mid-January 2006, the Waitses had long been on notice of their need to conduct discovery on the issue of whether the Purchase Agreement Form was signed by Pacifica, which included the need to investigate the applicable procedures in Pacifica's offices for obtaining those signatures. The court granted the Waitses several continuances to conduct additional discovery after defendants filed their summary adjudication motion in May 2005. If the Waitses had proffered an effectively-worded interrogatory soon after defendants filed their motion, it is reasonable to assume the Waitses would have obtained Winell's identity in a more timely fashion. Further, the court had a reasonable basis to conclude it was not proper for the Waitses' counsel to wait until the entire trial had been conducted on the tort claims to then raise the issue of "new information" pertaining to the declaratory relief claim.
Equally important, the court did not abuse its discretion in concluding that the information possessed by Winell was not material to the summary adjudication motion. The Waitses argue that if they had produced Winell's declaration in opposition to defendants' summary adjudication motion, the declaration would have contradicted Israni's declaration that he did not sign the Purchase Agreement Form, and created a triable issue of fact on the issue of whether there was an enforceable contract between the Waitses and Pacifica.
However, viewing Winell's trial testimony and declaration in their entirety, Winell never stated or suggested that the Waitses' contract was signed. Although the evidence shows that Ingersoll sent the contract to Pacifica, and at one point Winell suggested that all the contracts that she gave to Israni were signed by him, she subsequently admitted she did not know whether the Waitses' purchase offer was one of the documents that was signed by Israni, or whether he signed all of the purchase offers. Winell testified "[b]ecause they're so long ago, I can't recall if he did sign them. . . . I can't, in good conscience, remember." Later in her testimony, she reiterated that she could not recall whether Israni signed all of the purchase offers that she had given him. Winell also admitted telling defense counsel before trial that she could not remember anything about the Madison Avenue project because she had been dealing with so many different projects at the time.
Additionally, even assuming Winell's declaration and trial testimony could support an inference that a Pacifica representative signed the Purchase Agreement Form, this evidence would not have created a material triable issue of fact on the declaratory relief claim. The Purchase Agreement Form made clear that the offer was not binding on Pacifica unless the offer was signed and a signed copy was delivered to the buyers. It was undisputed that Pacifica never delivered a signed copy to the Waitses. Thus, even if the Waitses' new evidence could be construed to support a finding that the Waitses' contract was signed by an authorized representative of Pacifica, this evidence would not have created a triable issue of fact on the declaratory relief claim.
V. Attorney Fees
The Waitses contend the court erred in awarding Pacifica $65,000 in attorney fees under Civil Code section 1717. The Waitses do not challenge the amount of fees awarded. Instead they contend the court abused its discretion in awarding any fees because they voluntarily dismissed their contract-based claims before trial.
We agree that Civil Code section 1717 bars an award of contractual attorney fees incurred on a claim that has been dismissed voluntarily before trial. (See Ford Motor Credit Co. v. Hunsberger (2008) 163 Cal.App.4th 1526, 1531-1532.) This principle, however, is inapplicable here. The court specifically awarded the fees based on the fact that Pacifica prevailed on the Waitses' declaratory relief cause of action. The Waitses never voluntarily dismissed this claim, and continue to pursue this cause of action on appeal.
In their declaratory relief cause of action, the Waitses sought a judicial declaration that "the Purchase [Agreement Form] is binding on the parties." The Waitses alleged that the contract was binding and enforceable and requested judicial relief on that claim. The Purchase Agreement Form contained an attorney fees provision, stating: "Should legal action be instituted in order to enforce any of the terms or provisions hereof, the prevailing party shall be entitled to recover reasonable attorneys [f]ees . . . ."
Civil Code section 1717 governs awards of attorney fees based on a contract provision and authorizes an attorney fee award to a prevailing party "[i]n any action on a contract . . . to enforce that contract." (Civ. Code, § 1717, subd. (a).) A declaratory relief action that seeks to establish the parties' rights under a contract is an action to enforce the contract. (See Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 710-711; Harbour Landing-Dolfann, Ltd. v. Anderson (1996) 48 Cal.App.4th 260, 263; Milman v. Shukhat (1994) 22 Cal.App.4th 538, 545.) Civil Code section 1717 thus permits an award of attorney fees to the party who prevails in a declaratory relief action which seeks to declare the existence of a contract.
"[W]hen the decision on a litigated contract claim 'is purely good news for one party and bad news for the other . . .,' " the successful litigant is the prevailing party. (Otay River Constructors v. San Diego Expressway (2008) 158 Cal.App.4th 796, 806.) " 'Thus, when a defendant defeats recovery by the plaintiff on the only contract claim in the action, the defendant is the party prevailing on the contract under [Civil Code] section 1717 as a matter of law. [Citations.]' " (Ibid., italics omitted.)
Under these principles, the court properly found Pacifica was the prevailing party and awarded attorney fees for Pacifica's defense of the declaratory relief claim. The record establishes that the fees awarded were only those incurred by Pacifica in defending on the contract-based declaratory relief claim, and the court reduced the requested fees based on various equitable factors.
DISPOSITION
The judgment is affirmed. Appellants to pay respondents' costs on appeal.
WE CONCUR: McINTYRE, J., AARON, J.