Greif v. Sanin ( 2022 )

Filed 1/26/22; See Concurring and Dissenting Opinion
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
MARK RANDALL GREIF,
Cross-complainant and Appellant,
v. E070283
EDDIE SANIN et al., (Super. Ct. No. PSC1301341)
Cross-defendants and Respondents.
OPINION
THE YARDLEY PROTECTIVE
LIMITED PARTNERSHIP,
Plaintiff, Cross-defendant and E072143
Respondent,
(Super. Ct. No. PSC1301341)
v.
MARK RANDALL GREIF et al.,
Defendants, Cross-complainants
and Appellants.
THE YARDLEY PROTECTIVE
LIMITED PARTNERSHIP,
Plaintiff, Cross-defendant and E073786
Respondent,
(Super. Ct. No. PSC1301341)
v.
MARK RANDELL GREIF, Individually
and as Trustee, etc.,
Defendant, Cross-complainant and
Appellant.
1
APPEAL from the Superior Court of Riverside County. James T. Latting, Judge.
Affirmed.
Reed Smith, Raymond A. Cardozo, David J. de Jesus and Kasey J. Curtis; Best
Best & Krieger, G. Henry Welles and Gregg W. Kettles, for Appellants Mark Randall
Greif and Gabriel Nicholas.
Lewis Brisbois Bisgaard & Smith, Raul L. Martinez and Esther P. Holm, for
Cross-Defendants and Respondents, Eddie Sanin and Desert Gate Real Estate.
Rutan & Tucker, Richard K. Howell and Proud Usahacharoenporn, for Plaintiff-
Cross-Defendant and Respondent, The Yardley Protective Limited Partnership and
Cross-Defendant and Respondent, Sohail Ahmad.
I.
INTRODUCTION
This is a case of seller’s remorse. Appellant, defendant, and cross-complainant
1
Earl Greif sold 10 acres of raw vacant land (Property) in Rancho Mirage to plaintiff and
respondent Yardley Protective Limited Partnership, a family real estate investment
partnership. A few days after Earl signed the purchase agreement (Purchase
2
Agreement), he concluded he had sold the Property for less than its fair market value
1
We mean no disrespect by referring to Earl Greif and other individuals by their
first names. We do so in some instances for purposes of efficiency, brevity, clarity, and
avoiding confusion in this opinion.
2
Earl signed documents, such as the Purchase Agreement, on behalf of Shirley as
her attorney in fact throughout 2012 and 2013, up until her death in April 2013.
2
(FMV) and attempted to back out of the sale. The Yardley partnership sued Earl, Earl’s
3
wife, Shirley Greif, and Gabriel Nicholas Limited Liability Company (collectively
GNLLC) to enforce the Purchase Agreement.
Greif filed a cross-complaint against the Yardley partnership and one of its limited
partners, Solail Ahmad (Yardley). Greif later added as cross-defendants Yardley’s real
estate brokers, Desert Gate Real Estate, Inc. dba Four Season Realty (Desert Gate) and
Desert Gate broker, Eddie Sanin (collectively Sanin). The trial court dismissed Greif’s
third amended cross-complaint (Cross-complaint) on the eve of trial for failing to state
any cause of action as a matter of law. After a lengthy court trial, the trial court entered
judgment in favor of Yardley and against Greif and GNLLC.
Greif filed three separate appeals. Greif’s first appeal (E070283) challenges the
trial court’s dismissal of the Cross-complaint. Greif’s second appeal (E072143), joined
by GNLLC, challenges the trial judgment in favor of Yardley, ordering specific
performance of the Purchase Agreement and damages. Greif’s third appeal (E073786)
objects to the trial court’s postjudgment order awarding Yardley attorney fees.
3
Earl was named as a defendant in his individual capacity and as trustee of the
Shirley Greif Decedent’s Trust dated April 10, 2013 and the Shirley Grew Marital Trust
dated April 10, 2013. On February 24, 2016, Earl also died during the course of this
lawsuit. After Earl’s death, his son, Mark Randall Greif, substituted in this action as
Earl’s representative and successor in interest. We refer to the Greif appellants, including
Mark Greif, collectively as “Greif,” unless stated otherwise.
3
This court ordered the three appeals consolidated for purposes of oral argument
and decision, with case no. E070283 designated the master file. The second and third
appeals (E072143 & E073786) are consolidated for briefing as well.
We reject Greif and GNLLC’s contentions raised in the three appeals. We
therefore affirm the judgment on Yardley’s second amended complaint (Complaint) and
Greif’s Cross-complaint, and the postjudgment order awarding Yardley its attorney fees
as the prevailing party.
II.
GREIF’S APPEAL OF DISMISSAL OF
THE CROSS-COMPLAINT (First Appeal)
Greif appeals the judgment of dismissal of Greif’s Cross-complaint against the
buyer’s broker, Sanin, after the trial court granted Sanin’s motion for judgment on the
pleadings on the sole remaining negligence cross-claim. The trial court concluded as a
matter of law that Sanin did not owe the seller any duty that Greif alleged was breached.
We agree.
A. Facts and Procedural Background
Greif filed a Cross-complaint against cross-defendants Yardley and Sanin. The
Cross-complaint asserted the following cross-claims: (1) rescission of the Purchase
Agreement and damages based on mistake; (2) rescission and damages based on undue
influence; (3) negligence; and (4) financial elder abuse. Only the third and fourth causes
of action were against Sanin. Prior to the trial court granting judgment on the pleadings
4
on the negligence cause of action, Greif dismissed the fourth cause of action against
Sanin for financial elder abuse.
1. Greif’s Cross-Complaint Allegations Against Sanin
Greif alleged in his Cross-complaint the following facts and contentions. Earl was
born on May 3, 1925. Before and or at the time of the events alleged in the Cross-
complaint, Earl suffered from a variety of illnesses and disorders, including suffering a
heart attack in 2004 and one or more strokes after that, and before December 2012.
These illnesses and disorders severely impacted his ability to walk, see, hear, and speak,
and impaired his cognitive abilities, which should have been readily apparent to others.
On December 26, 2006, Earl purchased 5.04 acres of raw vacant land for
$1,850,000 (Parcel 1). On March 31, 2011, he purchased 5.04 acres of raw vacant land
adjacent to Parcel 1 for the sum of $480,000 (Parcel 2). Parcel 1 and Parcel 2 are
collectively referred to as the Property. The current FMV of the Property is in excess of
$4 million based on recent sales of comparable property in the vicinity of the Property.
The FMV of the Property when Yardley and Earl executed the Purchase Agreement was
near this amount.
In December 2012, Eddie called Earl and stated that Yardley wished to purchase
the Property. Eddie, Ahmad, and Earl met at the Property on December 18, 2012. Earl
informed Ahmad and Eddie of his strokes and resultant speech impediment, which was or
should have been readily apparent to Ahmad and Eddie. Earl’s other health issues and
cognitive impairment should have also been readily apparent. Ahmad and Eddie were
5
also made aware of Earl’s advanced age. In addition, Earl’s driver, William Harrison,
told Ahmad and Eddie that they would need to be directly in front of and close to Earl’s
face in order for him to more effectively hear and communicate with them.
While Earl was in the van and Ahmad and Eddie were either in the van or directly
next to it, the parties negotiated the purchase price for the Property, which ranged from
$3,399,000 to $3,380,000 to $3,350,000. Ultimately, the parties agreed on the purchase
price of $3,330,000. Due to Earl’s poor hearing, speech impediment, and cognitive
issues, Ahmad and Eddie may have understood that Earl was willing to sell the Property
at a price ranging from $399,000 to $380,000 to $350,000, with an ultimate agreed sales
price of $330,000. Later, during the evening of December 18, 2012, the parties met at
Earl’s home in Rancho Mirage, to execute the Purchase Agreement for the Property.
During Earl’s negotiations with Ahmad and Eddie, he stated that the purchase
price for the Property was either $3,300,000 or $3,330,000. Due to Earl’s speech
impediment and cognitive issues, Ahmad and Eddie may have thought Earl agreed to a
purchase price of $330,000. Ahmad and Eddie knew or should have known at that time
that the $330,000 purchase price for the Property was a small fraction of the Property’s
FMV and a small fraction of the amount Earl paid for the Property. Nevertheless, the
Property Purchase Agreement, which Eddie prepared, stated a purchase price of
$330,000.
When presenting the Purchase Agreement to Earl, Eddie pointed out to Earl the
purchase price, which was conspicuously stated on the first page of the Purchase
6
Agreement. Eddie did not review with Earl all of the other terms. Ahmad and Eddie
directed Earl to initial and sign the Purchase Agreement in a cursory fashion, without
reviewing and explaining to Earl the key terms of the Purchase Agreement, and without
otherwise ensuring that Earl actually understood the terms, including the stated purchase
price.
The circumstances of the parties’ execution of the Purchase Agreement and Earl’s
health and cognitive issues impaired his ability to read and understand the Purchase
Agreement. This should have been apparent to Ahmad and Eddie. They thus took
advantage of Earl’s obvious health conditions and cognitive impairment by having him
execute the Purchase Agreement without affording him an adequate opportunity to
review the Purchase Agreement or an opportunity to consult his advisors and legal
counsel.
Shortly after Earl signed the Purchase Agreement and Ahmad and Eddie left, Earl
reviewed the Purchase Agreement. In the absence of Ahmad and Eddie pressuring and
distracting him, Earl realized that the purchase price stated in the Purchase Agreement
was $330,000, whereas he had understood the agreed purchase price would be
$3,300,000 or $3,330,000. Earl immediately called and advised Ahmad or Eddie of the
mistake. In response, they assured Earl that Yardley would not open escrow. Contrary to
this assurance, Yardley opened escrow on the Purchase Agreement and deposited in
escrow the full purchase price stated in the Purchase Agreement, rather than just the
initial deposit amount of $30,000. Yardley did so hoping to force consummation of the
7
transaction and take unfair advantage of Earl’s health conditions and cognitive
impairment.
On November 13, 2014, Earl, with the assistance of legal counsel, rescinded the
Purchase Agreement by executing escrow cancellation instructions and offered to
compensate Yardley by paying interest on the amount Yardley had deposited in escrow.
Yardley refused to execute the proposed escrow cancellation instructions.
In the cross-claim for negligence, Greif alleged that Sanin owed Earl a duty to be
honest and truthful during the Property transaction under Business & Professions Code
sections 10152, and 10176, subdivisions (a)-(c), and (i).
Greif further alleged Sanin breached a duty owed to Earl by Sanin “having
presumed knowledge of the fair market value of the subject Property at the time of
preparing and presenting the Purchase Agreement to Greif, and Sanin’s failure to raise
the gross discrepancy between the true value of the Property and the purchase price stated
in the Purchase Agreement.” Greif alleges Sanin’s acts constituted a breach of duty owed
to Earl and dishonest dealing. As a direct and proximate result, Greif allegedly was
damaged in a sum in excess of $250,000, which damages include those sustained due to
Greif’s inability to develop the Property or sell it for its true FMV. Yardley allegedly
was jointly and severally liable for Sanin’s acts and omissions.
2. Motion for Summary Adjudication
Sanin moved for summary adjudication of Greif’s negligence cross-claim. Sanin
argued that neither Eddie nor his client, Yardley, owed a duty to advise Eddie during the
8
arm’s length transaction that the purchase price should be higher. Greif filed opposition,
arguing Sanin owed Greif a duty of honesty regarding the FMV of the Property. The trial
4
court denied Sanin’s motion for summary adjudication, concluding a buyer’s broker
owes a duty of care to be honest and truthful to the seller, and Sanin did not demonstrate
there were no triable issues of fact.
3. Judgment on the Pleadings
On the eve of trial, during a pre-trial dispute over jury instructions on Greif’s
Cross-complaint, the trial court considered whether to instruct on negligence. After
hearing argument and reviewing the parties’ supplemental briefs on the issue, the court
ruled Greif had not sufficiently alleged that Sanin owed him any duty that was breached.
The court therefore denied instruction on negligence and granted judgment on the
pleadings on the negligence cross-claim against Sanin. The court further dismissed Sanin
from Greif’s Cross-complaint because there were no remaining cross-claims against him.
4. Bench Trial
After the bench trial on Yardley’s Complaint against Greif and GNLCC to enforce
the Purchase Agreement, Greif filed a motion for new trial, arguing the trial court erred in
dismissing his negligence cross-claim against Sanin. Greif argued Sanin’s testimony
during the bench trial on Yardley’s Complaint supported a finding Sanin owed a duty of
care to Greif that was breached. Sanin testified he believed he owed a legal duty to all
4
We recognize there is a difference between a real estate broker and real estate
agent but, for purposes of this appeal, the difference is immaterial. Therefore, the two
terms are used interchangeably.
9
parties of honesty, fairness, and good faith, including to parties he did not represent, such
as the seller. The trial court denied Greif’s motion for a new trial, and entered judgment
in Yardley’s favor on the Complaint and Cross-complaint.
B. Standard of Review of Judgment on the Pleadings
This first appeal concerns the trial court’s order granting judgment on the
pleadings on the sole remaining cross-claim against Sanin for negligence. The standard
of review is de novo. (Ellerbee v. County of Los Angeles (2010) 187 Cal.App.4th 1206,
1213-1214.) “‘A motion for judgment on the pleadings, like a general demurrer,
challenges the sufficiency of the plaintiff’s cause of action and raises the legal issue,
regardless of the existence of triable issues of fact, of whether the complaint states a
cause of action. [Citation.]’ [Citation.] The standard of review for a motion for
judgment on the pleadings is the same as that for a general demurrer. [Citation.] ‘We
treat the pleadings as admitting all material facts properly pleaded, but not contentions,
deductions or conclusions of fact or law.’ (Ibid.) ‘“We review the complaint de novo to
determine whether [it] alleges facts sufficient to state a cause of action under any legal
theory. [Citations.]”’ [Citation.] We review the disposition, not the court’s reasons for
that disposition. [Citation.]” (Ibid.)
C. Duty Owed by Sanin to Greif
Greif contends that even though Sanin did not represent him during the sale of the
Property, Sanin owed Greif a duty of fairness and good faith, which Sanin breached.
10
The trial court’s judgment on the pleadings and dismissal of the Cross-complaint
against Sanin were based on Greif’s failure to allege simple negligence against Sanin.
The elements of a simple negligence cause of action include a duty to use due care,
breach of this duty, and the breach proximately causing injury. (Easton v. Strassburger
5
(1984) 152 Cal.App.3d 90, 98 (Easton); Civ. Code, § 1714, subd. (a). ) The trial court
granted judgment on the pleadings on the ground Sanin did not owe Greif any duty
alleged in the negligence cross-claim.
“A duty of care may arise in various ways, but the concept of duty is simply a
shorthand way of expressing whether the plaintiff’s interests are entitled to protection
against the defendant’s conduct. (Ibid.)” (Earp v. Nobmann (1981) 122 Cal.App.3d 270,
290 (Earp).) “‘Real estate brokers are subject to two sets of duties: those imposed by
regulatory statutes, and those arising from the general law of agency. [Citation.]’”
(Padgett v. Phariss (1997) 54 Cal.App.4th 1270, 1279, quoting Carleton v. Tortosa
(1993) 14 Cal.App.4th 745, 755.) “The existence of a legal duty is a question of law for
the court. [Citations.]” (Norman I. Krug Real Estate Investments, Inc. v. Praszker (1990)
220 Cal.App.3d 35, 41 (Krug).)
1. Statutory Duty
Relying on section 2079.16, Greif contends that, even though Sanin represented
the buyer and not Earl during the real property transaction, Sanin owed Earl a duty of
fairness and good faith dealing, which included (1) informing Earl that the sales price
5
Unless otherwise noted, all statutory references are to the Civil Code.
11
stated in the purchase agreement was excessively low, (2) drafting the Purchase
Agreement to state Earl’s intended purchase price, rather than the stated purchase price of
$330,000, (3) obtaining Earl’s informed consent to the 5 percent commission included in
the Purchase Agreement, and (4) disclosing to Earl that he had the right to review the
Purchase Agreement with an independent advisor. Greif argues that if Sanin had taken
any of these precautionary measures, Earl would have discovered the purchase price was
incorrect and would not have signed the Purchase Agreement.
At the time Earl signed the Purchase Agreement in December 2012, there was no
statutory duty of disclosure owed by a buyer’s broker to a seller of vacant land. Section
2079.16, which required agency disclosure, only applied to residential real property
transactions. (See former § 2079.13, subds. (j), (k) (Stats.1995, c. 428 (S.B.467), § 2).)
It was not until after the Legislature amended section 2079.16, effective on January 1,
2015, that the agency disclosure provision applied to all real property transactions,
including transactions involving vacant land. (§§ 2079.13, subds. (j), (k); 2079.14,
20179.16.) As a consequence, section 2079.16 does not apply to the sale of the Property
to Yardley in 2012. The parties and their brokers were thus only subject to the common
law duties existing at the time of the sale.
In a footnote in Greif’s appellant’s reply brief, Greif seems to acknowledge that
section 2079.16 does not apply, but asserts that “the statutory scheme recognizes real
estate brokers owe duties to buyers and sellers, and in this respect, does not differ from
what caselaw has consistently held.” It is undisputed by the parties that real estate
12
agents, regardless of whether they represent the buyer or seller, owe a duty of care to
third parties in a real property transaction. Section 2079.16 does not assist this court in
determining the scope of that duty because the agency disclosure statute does not apply
here. We therefore must look to common law in determining the extent of Sanin’s duty
owed to Greif.
2. Common Law Duty
Under common law, generally any person who performs professional services
owes a duty of care to all persons within the area of foreseeable risk. (Krug, supra, 220
Cal.App.3d at pp. 42-43.) The standard of care imposed on a real estate broker thus is
higher than that applicable to a layperson. The broker is subject to a duty of skill, care,
and diligence commensurate with the professional standards that the real estate industry
has held out to the public and that the public reasonably can expect. (Gardner v. Murphy
(1975) 54 Cal.App.3d 164, 168.) “‘The real estate broker is brought by his calling into a
relation of trust and confidence. Constant are the opportunities by concealment and
collusion to extract illicit gains. . . . [The broker] is accredited by his calling in the minds
of the inexperienced . . . with a knowledge greater than their own.’” (Richards Realty
Co. v. Real Estate Com’r (1956) 144 Cal.App.2d 357, 362; see also Gardner v. Murphy,
supra, at p. 168; Brady v. Carman (1960) 179 Cal.App.2d 63, 68.)
The standard of care of a real estate broker can be measured by the Code of Ethics
of the National Association of Realtors when the broker is a “realtor” (a member of the
National Association or local Board of Realtors). (See 2 Miller & Starr, California Real
13
Estate § 3:63, p. 3-372 (4th ed. 2015)) (Miller & Starr). As explained succinctly in
Miller & Starr, “The Code of Ethics of the National Association of Realtors provides that
it imposes ‘obligations that may be higher than those mandated by law, (and) in any
instance where the Code of Ethics and the law conflict, the obligations of the law must
take precedence (preamble)’; while the obligation of absolute fidelity to the client’s
interests is primary, this does not relieve the Realtor of an obligation to treat fairly all
persons to the transaction (Article 7).” (Miller & Starr, supra, § 3:63, p. 3-372, italics
added.)
The extent of the broker’s duty of care is determined under common law by
examining whether a reasonable person would have foreseen an unreasonable risk of
harm to a third party and whether, in view of such risk, the broker exercised ordinary care
under the circumstances. (Krug, supra, 220 Cal.App.3d at pp. 42-43.) Whether a real
estate broker has a duty of care to a third party is a question of law that is determined by
weighing the following factors: (1) the extent that the transaction was intended to affect
the third party; (2) the foreseeability of harm; (3) the degree of certainty that the third
party suffered injury; (4) the closeness of the connection between the broker’s conduct
and the injury suffered; (5) the moral blame attached to the broker’s conduct; and (6) the
policy of preventing future harm (Biakanja duty factors). (Biakanja v. Irving (1958) 49
Cal. 2d 647, 650; J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 804; Earp, supra, 122
Cal.App.3d at p. 290; Holmes v. Summer (2010) 188 Cal.App.4th 1510, 1522 (Holmes);
Krug, supra, at p. 42.)
14
Under the common law, “‘[t]here is little question that a real estate broker owes a
duty of care to third persons in the transaction, where the broker does not have privity
with, or fiduciary duties to, such third person.’” (Krug, supra, 220 Cal.App.3d at p. 42.)
“‘Despite the absence of privity of contract, a real estate agent is clearly under a duty to
exercise reasonable care to protect those persons whom the agent is attempting to induce
into entering a real estate transaction for the purpose of earning a commission.
[Citations.]’” (Holmes, supra, 188 Cal.App.4th at p. 1519, quoting Easton, supra, 152
Cal.App.3d at p. 98, fn. 2.)
The parties agree a buyer’s broker owes a duty of care to the seller, even when the
broker is the exclusive broker of the buyer. There is thus no question that Sanin owed a
duty of care to the seller, Greif, not to impose a foreseeable risk on the seller
unreasonably. (Earp, supra, 122 Cal.App.3d at pp. 290, 292.) The issue here is whether
Sanin owed Earl a duty to tell him the purchase price was less than the FMV. We
conclude that at the time of execution of the Purchase Agreement there was no such duty.
3. Case Law Relied on by Greif
The cases Greif cites for the proposition Sanin, who exclusively represented the
buyer, owed Earl a duty to disclose that the purchase price was too low are inapposite.
(Earp, supra, 122 Cal.App.3d at p. 290 [dual agent acting for both the buyer and seller];
Easton, supra, 152 Cal.App.3d at p. 98, fn. 8, 102 [seller’s broker owes a duty to
potential buyer to inspect and disclose all facts materially affecting value or desirability
of the property; Krug, supra, 220 Cal.App.3d 35 [seller’s agent, who had actual
15
knowledge of unrecorded deed and concealed it, breached duty of honesty, fairness, and
full disclosure]; Holmes, supra, 188 Cal.App.4th at pp. 1518-1519, 1524 [seller’s agent,
who “knows of facts materially affecting the value or desirability of the property which
are known or accessible only to him and also knows that such facts are not known to, or
within the reach of the diligent attention and observation of the buyer,” owes a duty to
disclose them to the buyer]; Saffie v. Schmeling (2014) 224 Cal.App.4th 563, 568
[discusses duty of the seller’s broker].) These cases involve the duty of a seller’s
exclusive agent or a dual agent representing the seller and buyer. They do not address the
issue of whether a buyer’s broker owes a duty to tell the seller that a purchase price is
below FMV.
Greif argues a real estate broker’s duty to a third party is the same, whether the
broker represents the seller or buyer. Regardless, we conclude Greif’s cited cases do not
support Greif’s allegation that Sanin owed Earl a duty “to raise the gross discrepancy
between the true value of the Property and the purchase price stated in the Purchase
Agreement.” Neither the Legislature nor the courts have recognized such a duty exists
where there have been arm’s-length negotiations.
Greif argues on appeal that Sanin owed various additional duties that were
breached, such as the duty to (1) draft the Purchase Agreement to state Earl’s intended
purchase price, rather than the stated purchase price of $330,000, (2) obtain Earl’s
informed consent to the 5 percent commission payable to Sanin, and (3) disclose to Earl
that he had the right to review the Purchase Agreement and commission with an
16
independent advisor. But Greif did not allege in his negligence cause of action that Sanin
owed Earl these duties or cite any supporting legal authority.
Greif cites Earp, supra, 122 Cal.App.3d 270, in support of two legal principles:
(1) a real estate broker owes a duty of care under negligence principles to other parties in
a real property transaction, regardless of whether the broker has a fiduciary, agency, or
privity relationship; and (2) a broker, who represents the buyer may owe a duty of care to
the seller, “where circumstances warrant.” While we agree these principles are well
established, Earp does not support the proposition that in the instant case the buyer’s
broker owed the seller a duty to disclose that the purchase price was below FMV.
In Earp, supra, 122 Cal.App.3d 270, the president of a company signed a written
agreement for the sale of real property, but orally stated that his acceptance of the buyer’s
offer would not be effective until the company’s controller could review and approve the
offer. (Earp, supra, at pp. 278, 288.) The court in Earp concluded that a contractual
agreement had not been reached because the condition precedent had not been satisfied.
(Id. at pp. 288-289.) Applying the Biakanja duty factors, the Earp court further found
that the dual agent broker owed a duty of care to the seller, which he breached. The
broker negligently prepared a purchase offer, which he knew was unacceptable to the
seller, and informed the buyer that the offer had been accepted when it had not. (Earp,
supra, at pp. 290-291.)
The instant case is distinguishable from Earp in that (1) it is conspicuously stated
on the first page of the Purchase Agreement that Sanin was acting as the buyer’s
17
exclusive agent, (2) there is no allegation Sanin prepared the Purchase Agreement
knowing it was unacceptable to Greif, (3) the real property transaction does not involve
an unconsummated purchase agreement subject to an unfulfilled condition precedent; and
(4) there is no allegation Sanin knew the Purchase Agreement was unenforceable yet
falsely represented it had been accepted, when he had not.
Greif’s reliance on Easton, supra, 152 Cal.App.3d at page 98, is also misplaced.
In Easton, the seller’s broker was aware of facts indicating soils problems but did not
request further investigation and did not disclose to the buyer that there were soils
problems or a history of slides on the property. The buyer sued the seller’s broker for
negligence. The jury returned a verdict against the seller’s broker on the negligence
claim for nondisclosure. The Easton court held the seller’s broker owed the buyer duties
of disclosure and to investigate. (Easton, supra, at pp. 99, 102.) The court in Easton
explained that this was implicit in common law, which was intended “to protect the buyer
from the unethical broker and seller and to ensure that the buyer is provided sufficient
accurate information to make an informed decision whether to purchase.” (Easton,
supra, at p. 99, italics added.)
Easton is distinguishable in that Easton concerns nondisclosure by the seller’s
broker to a prospective residential buyer of material facts, which the buyer did not know
or, which through reasonable diligence, would not have been able to discover before
purchasing the property. In Easton, the court noted that “[c]ases will undoubtedly arise
in which the defect in the property is so clearly apparent that as a matter of law a broker
18
would not be negligent for failure to expressly disclose it, as he could reasonably expect
that the buyer’s own inspection of the premises would reveal the flaw. In such a case the
buyer’s negligence alone would be the proximate cause of any injury he suffered.”
(Easton, supra, 152 Cal.App.3d at p. 103.)
Here, the purchase price information that Greif alleges Sanin negligently failed to
disclose to Earl was known or should have been known by Earl, as seller, such that Sanin
did not owe him a duty to disclose it. (Kahn v. Lischner (1954) 128 Cal.App.2d 480, 487
[“[T]he law generally assumes one will have some knowledge of the value of that which
he owns.”].)
Greif also relies on Krug, supra, 220 Cal.App.3d 35, which is inapposite. In Krug,
Norman Krug, a real estate investor, and his partner, Dr. Robert Gilbert, purchased an
apartment building. Krug deeded his share of the property to Gilbert in return for a
promissory note secured by an unrecorded third deed of trust on the property. Gilbert
defaulted on the property loan and hired real estate broker Roman Praszker to list the
property for sale. Praszker sold the property without informing Krug that the sale was
pending or advising the buyer of Krug’s unrecorded lien. As a result, the buyer took the
property free and clear of Krug’s deed of trust, and Krug’s security interest was
extinguished. Krug sued Praszker for failing to disclose the lien to the buyer and failing
to inform Krug of the impending sale, which would have alerted Krug of the need to
record his lien. The trial court entered judgment in favor of Krug, finding Praszker had
breached his duty of disclosure to Krug and the buyer. (Krug, supra, at p. 43.)
19
On appeal, the court in Krug upheld the trial court’s determination that the broker
breached his duty to third parties who were foreseeably harmed by the broker’s action.
(Krug, supra, 220 Cal.App.3d at p. 43.) The Krug court explained that, under California
case law, there is “a fundamental duty on the part of a realtor to deal honestly and fairly
with all parties in the sale transaction. [Citations.] ‘There is little question that a real
estate broker owes a duty of care to third persons in the transaction, where the broker
does not have privity with, or fiduciary duties to, such third person.” (Krug, supra, at p.
42.) The Krug court further stated that the extent of that duty imposed on the broker is
determined by weighing the Biakanja duty factors. (Krug, supra, at p. 42.)
The court in Krug noted that the Code of Ethics of the National Association of
Realtors provided that a realtor is obligated to treat fairly all persons to the transaction.
(Krug, supra, 220 Cal.App.3d at p. 42.) The preamble to the National Association of
Realtors’ Code of Ethics states that, “‘The term Realtor has come to connote competency,
fairness, and high integrity resulting from adherence to a lofty ideal of moral conduct in
business relations. No inducement of profit . . . can justify departure from this ideal.’”
(Krug, supra, at p. 43.) The Krug court emphasized that, “[t]he most important step in
determining if a broker owes a duty of care to a third party is to examine ‘whether a
reasonable person would have foreseen an unreasonable risk of harm to the third person
and whether in view of such risk the broker exercised ordinary care under the
circumstances.’” (Id. at p. 42.) The Krug court added that “[b]oth the policy of
preventing future harm and considerations of moral blame compel the imposition of a
20
duty on the part of a realtor never to allow a desire to consummate a deal or collect a
commission to take precedence over his fundamental obligation of honesty, fairness and
full disclosure toward all parties.” (Id. at p. 43.)
Krug is instructive but not dispositive here because it does not address the issue of
whether a buyer’s broker owes the seller a duty to tell the seller that the purchase price is
too low. Also, Krug is distinguishable in that Krug concerns the seller’s broker failing to
disclose information to his own client, and failing disclose to the buyer a known
unrecorded lien on the property, which the buyer would not normally be aware of before
agreeing to the purchase. The instant case, on the other hand, concerns whether the
buyer’s broker owed a duty to provide the seller with information about the purchase
price, which the seller could be reasonably expected to know. While Krug states that
there is a “fundamental obligation of honesty, fairness and full disclosure toward all
parties (Krug, supra, 220 Cal.App.3d at p. 43), Krug does not support the proposition
that, under the facts alleged in the instant case, the buyer’s broker owed a duty to disclose
to the seller that the purchase price was below FMV.
Greif’s reliance on Holmes, supra, 188 Cal.App.4th at p. 1518, is also misplaced.
In Holmes, the seller’s broker failed to disclose to the buyer that the purchased residential
property was over-encumbered with debt. The Holmes court held that the seller’s
“brokers were obligated to disclose to the buyers that there was a substantial risk that the
seller could not transfer title free and clear of monetary liens and encumbrances.” (Id. at
p. 1515.) The Holmes court acknowledged the well-established rule that the seller’s
21
broker owes the buyer a duty to disclose, when the seller’s broker “knows of facts
materially affecting the value or desirability of the property which are known or
accessible only to him and also knows that such facts are not known to, or within the
reach of the diligent attention and observation of the buyer.” (Id. at pp. 1518-1519) In
determining whether the seller’s broker owed the buyer a duty of disclosure under the
facts in Holmes, the Holmes court applied the Biakanja duty factors, and concluded all
six factors weighed in favor of finding a duty of disclosure. (Holmes, supra, at p. 1522)
Unlike in Holmes, Greif did not allege in his negligence cause of action that Sanin
was dishonest or failed to disclose facts which were known or accessible only to Sanin,
and which Sanin knew were “not known to, or within the reach of the diligent attention
and observation” of Earl. (Holmes, supra, 188 Cal.App.4th at p. 1518.) Sanin thus did
not have a duty to tell Earl he was selling his property for less than the FMV, when Earl
knew or should have known the value of his own property before selling it. As the
Holmes court noted, “the information in question must be unknown to, or outside ‘the
diligent attention and observation of the buyer. . . . ,’” or in this case, the seller. (Id. at p.
1520, quoting Lingsch v. Savage (1963) 213 Cal.App.2d 729, 735.) This was not the case
here. Sanin also owed no duty to Earl to explain the significance of facts that were
readily accessible or observable by Earl. (Peake v. Underwood (2014) 227 Cal.App.4th
428, 445 [seller’s agent had no duty to buyer to disclose or explain significance of facts
where seller had furnished buyer with disclosures and reports.].)
22
Greif also cites Saffie v. Schmeling, supra, 224 Cal.App.4th at p. 568, for the well-
established proposition a broker owes third parties, including an adverse party in a real
estate transaction, duties of “honesty, fairness and full disclosure.” As we already noted,
this principle is undisputed. The issue here is whether under the Biakanja duty factors,
Sanin owed Earl a duty of fairness and disclosure of the fact the purchase price was
below FMV.
4. Applying the Biakanja Duty Factors
Applying the six Biakanja duty factors, we conclude Sanin did not owe a duty to
tell Earl the purchase price stated in the Purchase Agreement was below FMV. The first
three factors weigh in favor of finding a duty of care. As to the first factor, the extent to
which the transaction was intended to affect the third party, it is undisputed the real
property transaction was intended to directly affect Earl as seller. As to the second
factor, foreseeability of harm, it was foreseeable that Earl would allegedly receive less
than the FMV for the Property. However, it was not foreseeable Earl did not know the
FMV of his property. As to the third factor, the degree of certainty that the third party
suffered injury, the Cross-complaint alleges sufficient facts that Greif suffered injury by
selling the Property for less than its FMV.
The fourth factor concerns the closeness of the connection between Sanin’s
conduct and Greif’s injury. While there is an alleged connection, it is not close. Had
Eddie mentioned to Earl that the purchase price was below FMV, this might have alerted
Earl that the purchase price stated in the Purchase Agreement was $330,000, not
23
$3,300,000. But Eddie pointed out to Earl the $330,000 purchase price stated
conspicuously on the first page of the Purchase Agreement, before Earl signed the
agreement.
Greif argues the connection was close, not only because Eddie did not tell him the
purchase price was a fraction of the FMV, but also because Eddie did not confirm in
writing that he did not represent Earl; Eddie did not provide Earl with a sufficient
opportunity to review the agreement or consult with independent advisors; and Eddie did
not require Earl to confirm in writing that he was of sound mind and freely elected to
proceed unrepresented. But Greif did not allege in his negligence cause of action that
Sanin owed a duty to perform these additional acts or that the alleged omissions
constituted a breach of duty. Even taking into consideration the additional factors, we
reject Greif’s argument there was a close connection between Sanin’s alleged omissions
and an injury suffered by Greif.
As to the fifth factor, the moral blame attached to the broker’s conduct, Greif
argues there was moral blame because the sales price was extremely low; Earl was 87
years old; he had obvious physical and cognitive impairments; Eddie rushed to
consummate the real property transaction; Eddie drafted the Purchase Agreement at
Earl’s request; and Eddie benefited from the transaction by receiving a 5 percent
commission, which was not negotiated.
These facts demonstrate little, if any, moral blame attached to Eddie’s conduct.
This is not a case in which the buyer’s broker failed to disclose material facts known
24
exclusively to the buyer’s broker or buyer. In addition, Greif alleged in his Cross-
complaint that Eddie might not have been aware that Earl stated or intended a sales price
of $3,300,000, rather than $330,000. There are no allegations of dishonesty,
concealment, misrepresentation, or fraud committed by Eddie. There are also no
allegations that Eddie knew that the stated price in the Purchase Agreement was not what
Eddie had orally agreed to during negotiations. In addition, Eddie showed Earl the
Purchase Agreement, which had the $330,000 purchase price on the first page of the
agreement.
As to the sixth factor, the policy of preventing future harm, we conclude holding a
buyer’s broker liable for not telling the seller the purchase price is below FMV is not an
appropriate, necessary means of preventing a seller, even one such as Greif, from selling
property for less than the FMV. Other more appropriate measures are available to protect
a seller, such as the seller diligently investigating the value of a property, obtaining a
property appraisal before placing the property on the market, retaining an exclusive or
dual real estate agent, and taking into consideration facts about the property known by the
seller.
Under the circumstances in this case, there is no policy justification for placing the
burden on the buyer’s exclusive broker to inform the seller that the purchase price is
below FMV. The purpose of a seller and buyer having the option of being represented by
separate real estate agents is to protect the buyer and seller’s unique and antagonistic
interests; that of the buyer seeking to purchase the property for as low a price as possible,
25
and the seller attempting to sell the property for as high a price as possible. For this
reason, each party benefits from retaining his/her own agent. The purchase price of real
property is contingent upon many factors, including such factors as the current state of
the real estate market and economy, encumbrances against property, the previous
purchase price of the property paid by the seller, the seller’s motivation for selling the
property, and how quickly the seller desires to sell the property. These are generally
factors within the knowledge of the seller or easily ascertainable by the seller. This case
is not analogous to Holmes, in which there were undisclosed facts known or accessible
only to the buyer’s broker, which were “not known to, or within the reach of the diligent
attention and observation” of the seller. (Holmes, supra, 188 Cal.App.4th at p. 1518.)
It is inappropriate, here, to place the burden on the buyer’s broker, Sanin, to
inform the seller, Earl, that the purchase price is below FMV, where Earl had access to
information relevant to the FMV, could research the FMV, and could retain a real estate
agent to advise and assist him in determining the sales price, yet chose not to do so at his
own peril. Placing such a burden on the buyer’s broker under these circumstances would
wreak havoc on real estate transactions and client/agent relationships (dueling duties).
We thus conclude that, even under the facts alleged in this case, where the seller is
elderly and physically infirm, public policy does not favor holding the buyer’s agent
responsible for informing the seller that the agreed upon purchase price is below FMV.
That is the responsibility of the seller’s broker and, if the seller chooses not to retain a
real estate agent or advisor, the seller is responsible for investigating the value of the
26
Property and determining the sales price. (Holmes, supra, 188 Cal.App.4th at p. 1518;
Kahn, supra, 128 Cal.App.2d at p. 487 [“[T]he law generally assumes one will have
some knowledge of the value of that which he owns.”].)
We conclude that, as a matter of law, Greif has not alleged facts establishing that
Sanin owed a duty to advise Greif that the purchase price was less than the FMV or any
other alleged breached duty. Therefore, the trial court did not err in granting judgment on
the pleadings on Greif’s negligence cause of action against Sanin.
III.
GREIF AND GNLLC’S APPEAL OF JUDGMENT
ON YARDLEY’S COMPLAINT (Second Appeal)
In the second appeal (case no. E072143), appellants Greif and GNLLC
(Greif/GNLLC) contend (1) the trial court erred in rejecting his unilateral mistake
defense; (2) the trial court abused its discretion in awarding Yardley specific performance
of the Purchase Agreement; and (3) the trial court erred in granting duplicative
conversion damages and failed to credit Greif for paying property taxes on the Property.
A. Factual and Procedural Background
The day after Earl signed the Purchase Agreement on December 18, 2012, Eddie
opened escrow and Yardley paid the $30,000 deposit. A few days later, Earl called Eddie
and requested to cancel the transaction because he believed he had sold the Property for
less than its FMV. Eddie told Ahmad, who said he wanted to go forward with the
27
transaction. In January 2013, Yardley deposited in escrow $305,000, which was the
remainder of the purchase price, plus $5,000 in estimated closing costs.
After Sanin and Yardley requested Earl to perform the Purchase Agreement and
got no response, in March 2013, Yardley signed escrow cancellation instructions, which
the escrow company required both parties to sign before releasing Yardley’s money. Earl
did not respond to Yardley’s requests to do so or comply with the Purchase Agreement
terms. As a result, in September 2013, Yardley filed the instant lawsuit against
Greif/GNLLC to enforce the Purchase Agreement. Yardley’s Complaint against
Greif/GNLLC asserts causes of actions for breach of contract/specific performance,
conversion, and fraudulent transfer.
After Yardley filed its lawsuit against Greif, Earl signed escrow cancellation
instructions in November 2013, but they were contingent upon Yardley waiving its right
to proceed with its lawsuit. Yardley was not willing to waive its rights to enforce the
Purchase Agreement and recover its expenses and damages incurred as a result of Earl’s
delay in signing escrow cancellation instructions and failure to comply with the Purchase
Agreement. Therefore, Yardley refused to sign Earl’s proposed escrow cancellation
instructions.
In December 2014, Earl and Yardley signed escrow cancellation instructions
which did not require Yardley to release any of its rights related to its lawsuit against
Greif/GNLLC. This resulted in the unconditional release of Yardley’s funds ($335,000)
28
on January 30, 2015. Efforts to resolve the instant lawsuit informally and by mediation
were unsuccessful, and the matter proceeded to trial.
After conducting a court trial lasting over a month, the trial court provided a
detailed statement of decision (SOD) and entered judgment in favor of Yardley and
against Greif/GNLLC. The judgment enforced the Purchase Agreement, thereby
requiring Greif/GNLLC to sell the Property to Yardley and transfer title to Yardley in
accordance with the Purchase Agreement, in return for payment by Yardley of $330,000
to Greif. The judgment further awarded Yardley $43,040.80 in conversion damages,
consisting of the interest that accrued during retention of Yardley’s money by the escrow
company during Earl’s delay in signing the escrow cancellation instructions. In addition,
the trial court awarded Yardley, as prevailing party, its costs and attorney fees, to be
determined at a later date.
Additional pertinent facts and evidence produced at trial are summarized below,
6
where relevant to the issues addressed.
B. Standard of Review
The trial court’s detailed SOD contains both findings of fact and conclusions of
law. “We review the court’s findings of fact for substantial evidence. [Citations] Under
that standard, our review begins and ends with a determination as to whether there is any
substantial evidence, contradicted or uncontradicted, to support the findings below.
6
A detailed statement of the facts and evidence presented during the trial is
provided in the trial court’s statement of decision and in the parties’ appellate brief
statements of facts.
29
[Citations.] In assessing whether any substantial evidence exists, we view the record in
the light most favorable to respondents, giving them the benefit of every reasonable
inference and resolving all conflicts in their favor. [Citation.] ‘[I]t is not our role to
reweigh the evidence, redetermine the credibility of the witnesses, or resolve conflicts in
the testimony, and we will not disturb the judgment if there is evidence to support it.’
[Citations.] [¶] Where the trial court used findings of fact in drawing conclusions of law,
we independently review the conclusions of law. [Citations.]” (Williamson v. Brooks
(2017) 7 Cal.App.5th 1294, 1299-1300.)
C. Unilateral Mistake Defense
Greif/GNLLC contends it met its burden of proving the unilateral mistake defense
and, therefore, the trial court erred in ordering the Purchase Agreement enforced, instead
of rescinded.
“A party may rescind a contract if his or her consent was given by mistake. (Civ.
Code, § 1689, subd. (b)(1).) A factual mistake by one party to a contract, or unilateral
mistake, affords a ground for rescission in some circumstances.” (Donovan v. RRL Corp.
(2001) 26 Cal.4th 261, 278 (Donovan).) Section 1577 defines “mistake of fact” as “a
mistake, not caused by the neglect of a legal duty on the part of the person making the
mistake, and consisting in: [¶] 1. An unconscious ignorance or forgetfulness of a fact
past or present, material to the contract; or, [¶] 2. Belief in the present existence of a
thing material to the contract, which does not exist, or in the past existence of such a
thing, which has not existed.”
30
The trial court found Greif/GNLLC had not met this burden of establishing clear,
convincing, and satisfactory evidence of the unilateral mistake defense under Brookwood
v. Bank of America (1996) 45 Cal.App.4th 1667 (Brookwood), and Bunnet v. Regents of
University of California (1995) 35 Cal.App.4th 843 (Bunnet). The trial court concluded
in its SOD that (1) there was insufficient evidence of a mistake by Earl; (2) there was
insufficient evidence that Ahmad or Eddie knew of any mistake; (3) there was
insufficient evidence Ahmad or Eddie did anything to encourage or foster any mistake;
and (4) any mistake was caused by the neglect of Greif and his representatives.
Even though Greif/GNLLC cites evidence refuting these findings, we affirm the
trial court’s findings because there was substantial evidence supporting them. “In
assessing whether any substantial evidence exists, we view the record in the light most
favorable to respondents, giving them the benefit of every reasonable inference and
resolving all conflicts in their favor. [Citation.] ‘[I]t is not our role to reweigh the
evidence, redetermine the credibility of the witnesses, or resolve conflicts in the
testimony, and we will not disturb the judgment if there is evidence to support it.’
[Citations.]” (Williamson v. Brooks, supra, 7 Cal.App.5th at pp. 1299-1300.)
Greif argues that the trial court’s SOD reflects that the trial court failed to consider
the correct unilateral mistake defense elements stated in Donovan. The trial court cited
Donovan, supra, 26 Cal.4th at page 284, in its SOD, but only did so when noting that the
failure to use reasonable measures to avoid a mistake is a proper ground for rejecting the
unilateral mistake defense. The trial court did not cite the Donovan elements required for
31
establishing a unilateral mistake defense. Instead, the trial court relied on case law
preceding Donovan (Brookwood, supra, 45 Cal.App.4th 1667, and Bunnet, supra, 35
Cal.App.4th 843), which relied on essentially the same elements in Donovan, with the
exception of the knowledge element rejected by Donovan.
Our high court in Donovan concluded that the courts in Brookwood and Bunnet
erroneously held that “California law allows rescission of contract for a unilateral mistake
only ‘when the unilateral mistake is known to the other contracting party and is
encouraged or fostered by that party.’” (Brookwood, supra, 45 Cal.App.4th at pp. 1673-
1674; see also Bunnet, supra, 35 Cal.App.4th at pp. 854-855.) The court in Donovan
held that this was error “to the extent it suggested that a unilateral mistake of fact affords
a ground for rescission only where the other party is aware of the mistake.” (Donovan,
supra, 26 Cal.4th at p. 279.) In all other respects, the factors the trial court considered in
the instant case are consistent with Donovan.
Even though the trial court did not specifically address in the SOD each of the four
Donovan factors, the trial court sufficiently addressed them indirectly. The trial court
found there was insufficient evidence of a material mistake by Earl; there was insufficient
evidence either Ahmad or Eddie did anything to encourage or foster any alleged mistake;
and any alleged mistake was caused by the neglect of Earl and his representatives. The
trial court’s findings are consistent with rejecting the unilateral mistake defense under
Donovan.
32
In Donovan, an automobile dealer advertised a car for sale in a newspaper. The
newspaper made typographical and proofreading errors that resulted in the advertisement
misstating the car’s purchase price. The plaintiff buyers offered to pay the advertised
price for the car. The dealer refused the offer. The buyers sued the dealer for breach of
contract. (Donovan, supra, 26 Cal.4th at pp. 266-267.) The Donovan court held
rescission of the contract based on mistake of fact was warranted because the seller’s
unilateral failure to discover the typographical and proofreading errors was made in good
faith, the seller did not bear the risk of the mistake, and enforcement of the contract with
the erroneous price would be unconscionable. (Id. at p. 267.)
In Donovan, the California Supreme Court stated that, “[w]here the plaintiff has
no reason to know of and does not cause the defendant’s unilateral mistake of fact, the
defendant must establish the following facts to obtain rescission of the contract: (1) the
defendant made a mistake regarding a basic assumption upon which the defendant made
the contract; (2) the mistake has a material effect upon the agreed exchange of
performances that is adverse to the defendant; (3) the defendant does not bear the risk of
the mistake; and (4) the effect of the mistake is such that enforcement of the contract
would be unconscionable.” (Donovan, supra, 26 Cal.4th at p. 282.)
Greif/GNLLC argues that the evidence established that (1) Earl made a mistake
when signing the Purchase Agreement, agreeing to the $330,000 purchase price, (2) the
mistake had a material effect on him signing the Purchase Agreement, resulting in Earl
selling the Property for less than its FMV, (3) Earl did not bear the risk of the mistake,
33
and (4) enforcement of the Purchase Agreement would be unconscionable because Earl
was elderly, had physical and mental disabilities, was rushed into signing the Purchase
Agreement, and sold the Property for less than the FMV.
We begin by determining whether there was substantial evidence supporting the
trial court’s finding there was no material mistake of fact relied upon by Earl when he
signed the Purchase Agreement. Without a material mistake of fact, Greif/GNLLC
cannot prevail on its unilateral mistake defense. Based on our review of the evidence
presented at trial, we conclude there was substantial evidence to support the trial court’s
finding that Earl did not make a material mistake of fact when he signed the Purchase
Agreement. There was evidence that, at the time of the sale, Earl was mentally and
physically capable of comprehending, reading, hearing, and negotiating the sale of the
Property, and was competent when executing the Purchase Agreement.
In addition, there was compelling evidence that Earl competently negotiated the
purchase price and knowingly agreed to sell the Property for $330,000 when he signed
the Purchase Agreement. It was not until a few days later, after a friend told him the
price was too low, that he attempted to back out of the Purchase Agreement by claiming
he thought the purchase price was in the $3 million range.
The trial court noted in its SOD that, even if Earl may have thought he had stated
during negotiations an agreed-upon price in the three million dollar range, there was no
evidence he actually stated such a price. Earl’s assistant and driver, Robert Harrison,
testified Earl would always say the price was in the $300,000 range, even though
34
Harrison thought Earl meant to say a price in the three million dollar range. There was
no evidence Earl had difficulty hearing when negotiating with Eddie and Ahmad, or that
Earl, Eddie or Ahmad stated any potential prices other than in the $300,000 range.
In addition, there was evidence that, when Earl met with Eddie and Ahmad and
signed the Purchase agreement, Earl looked at the Purchase Agreement while Eddie
showed him the first page of the agreement, which showed the $330,000 purchase price
conspicuously stated in several places on the first page. Harrison testified that he was
sure that, if Earl saw the $330,000 purchase price in writing, he would have been able to
read the price accurately. Harrison said he had “no concern” at that time about Earl’s
ability to read and understand documents and to accurately read numbers. At that time,
Harrison felt positive that, “if the contract said 330,000 and Mr. Greif intended it to say
3.3 million, [Mr. Greif] would have caught that difference.” Harrison further testified
that, at the time of the negotiations between Earl and Yardley, Harrison thought Earl
“was entirely capable of negotiating his deals.”
There was additional evidence that Earl had signed numerous other contracts in
late 2012 and throughout 2013, with no evidence he had any problem reading or
understanding the contracts during that time. Earl’s assistant, Jay Sese, testified on cross-
examination that he did not start having concerns about Earl’s mental health until
November 2013. Before that, in 2012 and 2013, Sese had entered into numerous
agreements with Earl relating to real properties, some of which were drafted by Earl in
35
2012. Earl had also signed lease agreements in September 2012, which Sese believed
Earl understood what he was signing.
The trial court found that “Mr. Greif may have been subjectively mistaken about
the value of the Property, and later determined the Property was worth some unspecific
amount more than the negotiated purchase Price.” The court added that “[t]his explains
Mr. Greif’s initial comments to both Mr. Sanin (as confirmed by Dijana Arbaugh) and to
Jay Sese that he wanted to cancel the transaction because he sold the Property too cheap,
not because of any factually mistaken belief the price expressed on the contract was
actually $3,330,000, $3,300,000, or $3,000,000.” Eddie, his assistant, Dijana Arbaugh,
and Ahmad testified that a few days after Yardley made the initial $30,000 deposit on
December 20, 2012, Earl called Eddie and said he wanted to cancel the Purchase
Agreement because he spoke to one of his good friends who told Earl he sold the
Property “too cheap.” Earl did not mention he had made any mistake about the price
stated in the Purchase Agreement or that he thought he had sold the Property for $3.3
million.
We thus conclude there was substantial evidence supporting the trial court’s
findings that Earl did not make a mistake of fact as to the agreed upon purchase price of
$330,000 when he signed the Purchase Agreement; there was no miscommunication or
confusion by Earl during the Property transaction negotiations or signing of the Purchase
Agreement; there was no misunderstanding of the terms of the Property sale by Earl due
to any physical or mental issues; Earl did not misread or miscomprehend the purchase
36
price stated in the Purchase Agreement; and Eddie did not err in drafting the Purchase
Agreement to reflect the terms orally agreed upon.
As the trial court correctly noted in the SOD, Greif/GNLLC was not entitled to
relief under the unilateral mistake of fact defense where the evidence showed that any
error on Earl’s part was due to his error in judgment in selling the Property for what he
later believed was too low a sales price. As the trial court noted, “Such ignorance or
erroneous belief as to the mere value of property [does not] amount [] to mistake of fact
as defined in section 1577, Civil Code. (Tetenmant v. Epstein (1924) 66 Cal.App. 745,
751) Therefore, Defendants [Greif/GNLLC] could not rely on a mere mistake by Mr.
Greif as to value of the Property but instead had the burden of showing by ‘clear,
convincing and satisfactory’ evidence that Mr. Greif made the mistake of believing he
had actually contracted to sell the Property for $3.3 million.” The trial court reasonably
found there was insufficient evidence to support such a finding.
Furthermore, any mistake Earl made in setting the purchase price too low does not
amount to the type of mistake of fact that qualifies for rescission under the unilateral
mistake of fact defense. Merely making a mistake as to the Property’s value is not a valid
basis for rescinding the Purchase Agreement based on the unilateral mistake defense.
(See § 1577.) Earl bore the risk of any mistake in setting the purchase price too low
because he was responsible for investigating, evaluating, and determining the purchase
price for the Property. As a consequence, enforcing the Purchase Agreement was not
unconscionable.
37
Greif/GNLLC argues there was evidence supporting a finding Earl made a mistake
of fact as to believing the purchase price was different than what was stated in the
Purchase Agreement. But this court is required to give deference to the factual findings
made by the trial court, where there is substantial evidence supporting them. (Williamson
v. Brooks, supra, 7 Cal.App.5th at pp. 1299-1300.) In doing so, we conclude there was
substantial evidence supporting the trial court’s rejection of the unilateral mistake
defense. Because substantial evidence supports the trial court’s key finding that there
was no material mistake of fact, we need not discuss further the other Donovan factors.
D. Specific Performance
Greif contends that even if the Purchase Agreement is an enforceable contract,
specific performance is not an available remedy because there was inadequate
consideration and Earl did not own the Property at the time he signed the Purchase
Agreement. We disagree.
1. Standard of Review of Adequacy of Consideration
Section 3391 provides in relevant part that “[s]pecific performance cannot be
enforced against a party to a contract . . . . [¶] [i]f he has not received an adequate
consideration for the contract,” as measured at the time the contract was made. (§ 3391;
Steiner v. Thexton (2010) 48 Cal.4th 411, 424.) Since the remedy of specific
performance is a discretionary, equitable remedy, we apply the abuse of discretion
standard of review, but as to underlying findings of fact, we apply the substantial
evidence standard of review. (Petersen v. Hartell (1985) 40 Cal.3d 102, 110; Williamson
38
v. Brooks, supra, 7 Cal.App.5th at pp. 1299-1300; Maxfield v. Burtt (1953) 121
Cal.App.2d 102, 115-116.)
2. Expert Testimony
Greif/GNLLC argues Yardley did not provide adequate consideration for the
Purchase Agreement because the purchase price of $330,000 was a fraction of the FMV
of the Property. The parties introduced expert opinion testimony to assist the court in
assessing the adequacy of the consideration. The value of the property at the time of the
Purchase Agreement is a question of fact. As such, we apply the substantial evidence
standard of review, giving deference to the trial court’s Property value findings. (Gilbert
v. Mercer (1960) 179 Cal.App.2d 29, 31; Williamson v. Brooks, supra, 7 Cal.App.5th at
pp. 1299-1300.)
The trial court stated in its SOD that, in assessing the Property’s value, it took into
consideration expert opinion testimony regarding the value of the property provided by
both parties’ experts. Greif’s expert, Noble Tucker, Jr., appraised the Property at $1.25
million. Yardley’s expert, Steven Fontes, appraised the Property at $705,000. Based on
additional evidence affecting the value of the Property, the trial court found that the
Property value was in the $500,000 range, and the $330,000 purchase price was
“substantially fair and just under all of the circumstances of the case.”
“It is the universal rule that the market value of property is measured by the
highest price estimated in terms of money which the land would bring if exposed for sale
in the open market, with reasonable time allowed in which to find a purchaser, buying
39
with knowledge of all the uses and purposes to which it was adapted and for which it was
capable.” (Milton Kauffman, Inc., v. Smith (1947) 82 Cal.App.2d 302, 304.) Thus, “‘[i]n
determining whether consideration was fair and adequate, all circumstances surrounding
the transfer of the property as they existed at that time, must be considered.’ [Citation.]
‘A consideration, to be adequate, need not amount to the full value of the property.’
[Citation.] The test ‘is not whether the [vendor] received the highest price obtainable for
his property, but whether the price he received is fair and reasonable under the
circumstances.’ [Citation.]” (Meyer v. Benko (1976) 55 Cal.App.3d 937, 945, italics
added.)
Greif/GNLLC argues the trial court erred in finding the purchase price fair and
reasonable because the trial court disregarded the expert testimony valuations of the
property, which were much higher than the $330,000 purchase price. Even the trial
court’s estimate of $500,000 was much higher. Greif/GNLLC asserts that under
Evidence Code section 813 and case law, the trial court was precluded from making its
own valuation of the Property.
Evidence Code section 813 provides in relevant part: “(a) The value of property
may be shown only by the opinions of any of the following: [¶] (1) Witnesses qualified
to express such opinions. [¶] (2) The owner . . . of the property or property interest being
valued. . . . [¶] (b) Nothing in this section prohibits a view of the property being valued
or the admission of any other admissible evidence (including but not limited to evidence
as to the nature and condition of the property . . . ) for the limited purpose of enabling the
40
court . . . to understand and weigh the testimony given under subdivision (a); and such
evidence . . . is subject to impeachment and rebuttal.”
Evidence Code section 813 does not preclude the court from assessing the value of
real property differently than the value stated by an expert based on other relevant
evidence. (Escondido Union School Dist. v. Casa Suenos De Oro, Inc. (2005) 129
Cal.App.4th 944, 982.) Subdivision (b) of Evidence Code section 813 clarifies that the
trial court can consider other relevant evidence when considering and weighing expert
testimony. A court is thus not bound by the property value assessments provided by the
experts, where other evidence supports rejection of the expert’s property value
assessment. (Escondido, supra, at p. 982.)
1. Substantial Evidence Supporting the Trial Court’s Value Finding
The trial court explained in the SOD that the true market value of the Property
might be less than Fontes’s appraisal of $705,000, and was worth closer to $500,000,
“given significant issues getting water to the Property that were not taken into
consideration in Mr. Fontes’ appraisal.” The evidence supporting the trial court’s finding
of adequate consideration includes testimony by Yardley’s expert, Steven Fontes, who
stated that Earl purchased Parcel 1 in 2006, at the peak of the market for $1.25 million.
Earl purchased in 2011, Parcel 2, which was the same size as, and adjacent to, Parcel 1,
for $480,000. Thereafter, on March 24, 2011, the county tax assessor assessed Parcel 2 at
$403,200. This reflected the decline in the market. According to Fontes, in 2008 there
was a real estate market “crash,” with a slow recovery over several years. In 2010
41
through 2012, countywide, residential land was selling below $50,000 an acre on
average. In 2013, the price shot up to $90,000 per acre. Fontes stated that, “when there’s
a downturn in the market, the parcels that tend to get hit the hardest are the ones that are
not as far along in the development cycle.” There was a “lag” in the vacant land market
recovery.
Fontes testified that the Property was unimproved, raw, “unentitled,” vacant
residential land. Its development potential was low because it appeared to lack
“entitlements” and “off-sites,” such as utilities (water, sewer, gas, electric, telephone),
gutters, streetlights, storm drains, and sidewalks. Fontes stated he did not have
“specifics” on the utilities or know where they were located. There appeared to be
utilities nearby but not on the Property.
Fontes conducted a “Sales Comparison Approach,” which provided an analysis
based on comparable sales (“comps”), consisting of other similar raw land property in the
same neighborhood as the subject Property. The comps were used for a value
comparison with the subject Property’s value in December 2012. The comps Fontes
considered ranged from $52,250 an acre to $80,870 an acre. Fontes also found comps in
the $30,000 to $50,000 range but did not consider them in his analysis for various
reasons, such as lot size and location. Fontes concluded the Property value was $70,000
an acre. He did not give much consideration to the $52,000 comp because the other five
comps were in the $70,000 range. Fontes testified that Greif/GNLLC’s expert’s appraisal
of the Property, of $1.25 million, was “ridiculous.”
42
Ahmad testified that at the time of the Property transaction in 2012, the real estate
market had been trending downward for the past six years. The peak in the market in
California was in 2006. This was why Ahmad wanted to purchase investment property
when he purchased Earl’s Property. Ahmad was looking for property selling in the
$20,000 to $30,000 per acre range. Someone he knew said he could not go wrong
purchasing raw land for $20 to $30 thousand per acre. He found a 10-acre property in
Indio, in 2012. The raw land was listed for $500,000 or $600,000. In 2006, it had been
listed for $1.83 million. It had utilities and some infrastructure. Ahmad did not buy the
land because the seller was willing to sell it for $280,000, but Ahmad did not want to pay
more than $230,000. There were lots of raw land parcels available for sale that were
being sold at depressed values. Ahmad’s initial offer on the Property was $200,000.
The trial court found Fontes’s appraisal of the Property more credible than
Tucker’s appraisal. The court also found the Property’s actual value was lower than
Fontes’s $705,000 appraisal because Fontes “did not take into consideration the
significant issues bringing water to the Property testified to by Bruce Maize and Brian
Orr.” The trial court noted Tucker acknowledged that such a factor would have a
material impact on the appraised value of the Property. The court also noted Fontes used
comparable sales of $52,000 an acre, for raw land located in close proximity to the
Property and sold near the time of the Property’s sale.
Developers Bruce Maize and Brian Orr testified they attempted to develop the
Property for Earl in 2013 and 2014. They gave up and stopped working on the project in
43
November 2014, because they were unable to obtain the requisite water services for
developing the Property and entitlements until the infrastructure was enhanced. The
infrastructure enhancement required a massive, expensive undertaking of running water
lines under the freeway, from a distant reservoir to the Property. This impediment to
developing the Property remained at the time of the trial in 2018.
Based on evidence there were no water services for the Property and obtaining
them would be a massive, expensive undertaking, the trial court reasonably rejected the
expert witness appraisals and concluded the Property’s value was “closer to $500,000.”
The trial court reasonably found that, although the purchase price was $330,000, it was
substantially fair and just under the totality of the circumstances. Such circumstances
included the above-summarized evidence and evidence that Earl and Yardley negotiated
the price in good faith. Although the price may be less than the FMV at that time, it was
not an unreasonable price based on evidence the Property could not be developed without
a massive, expensive undertaking to obtain water services. And as the trial court noted,
“adequate consideration” need not be the full value of the property. It need only be fair
and reasonable under all of the circumstances of the case. (Jenkins v. Teegarden (2014)
230 Cal.App.4th 1128, 1142; Meyer v. Benko, supra, 55 Cal.App.3d at p. 945.) We thus
conclude the trial court’s finding that the $330,000 purchase price was adequate
consideration was reasonable and supported by substantial evidence.
44
4. GNLLC’s Property Interest
Greif/GNLLC contends the trial court erred in ordering specific performance of
the Purchase Agreement because Earl no longer held title to the Property when he sold
the Property to Yardley. Before entering into the Purchase Agreement, Earl transferred
the Property to GNLLC, a limited liability company (LLC), for the benefit of his
grandchildren. Greif argues that, because Earl no longer owned the Property when he
signed the Purchase Agreement, title cannot be conveyed to Yardley by ordering specific
performance. We disagree.
Earl’s estate tax attorney, Lloyd Copenbarger, testified that in November 2012, he
assisted Earl in forming GNLLC and an irrevocable grantor trust. Earl transferred the
Property to GNLLC and gave a non-management interest in GNLLC to the trust. By
doing so, on November 25, 2012, Earl granted his two grandsons, Nicholas and Gabriel, a
beneficial ownership interest in the Property. Earl was GNLLC’s sole operating officer,
with power to contract and dispose of assets of the company.
The transfer of the Property to GNLLC was not recorded until December 20,
2012, two days after Earl signed the Purchase Agreement. Copenbarger testified the
transfer merely transferred the Property “from Mr. Greif to Mr. Greif,” for no monetary
consideration. Copenbarger further testified that GNLLC’s “operating agreement
specifically gave Mr. Greif the authority to enter into contracts relating to the disposition
of that property.”
45
The trial court noted in its SOD that the GNLLC operating agreement gave Earl
the powers of “entering into, making and performing contracts, agreements, and other
undertakings binding the Company [GNLLC]” and “Disposing of any asset of the
Company.” The trial court concluded Earl and his successor thus held equitable title to
the Property through Earl’s authority as the sole operating officer of GNLLC, with power
to contract and dispose of GNLLC’s assets, including the Property.
We agree that, even though Earl transferred title to the Property to GNLLC before
selling the Property to Yardley, Earl and his successor held equitable title based on
holding contractual power to enter binding contracts on GNLLC’s behalf and dispose of
GNLLC’s assets, including selling the Property. We recognize that, “Although a party
may lawfully contract to convey property he does not own [citations], his failure to obtain
legal title as a practical matter precludes enforcement of the contract by way of specific
performance. [Citations.] Where, however, a party holds the equitable title to realty and
has the power to ‘call for’ legal title, it is established that specific performance is
available.” (Walgren v. Dolan (1990) 226 Cal.App.3d 572, 576, 576 (Walgren).)
Greif/GNLLC argues Walgren is inapposite because it involved assets held in a
trust, whereas the Property was held in an LLC, which is a separate legal entity. In
Walgren, the trust beneficiary sold real property, which was a trust asset. The purchaser
of the property sought specific performance of the contract. The Walgren court
concluded that, although the beneficiary lacked legal title, the beneficiary held equitable
title in the property because, under the terms of the trust, the beneficiary had complete
46
control over disposition of the trust property and had the power to compel the trustee to
convey the property. The Walgren court stated that, under such circumstances, “we see
no reason to deny a party the right to pursue specific property of a trust for which he has
a valid sales contract and which the settlor has for all practical purposes treated as his
own.” (Walgren, supra, 226 Cal.App.3d at pp. 578-579.) The Walgren court thus held
that the contract to sell the property was enforceable and, therefore, specific performance
was a remedy available to the property purchaser. (Id. at pp. 578-579.)
Walgren is analogous to the instant case in that, even though GNLLC held legal
title to the Property, Earl retained sole control and authority to dispose of GNLLC’s
assets, including the Property. Earl thus retained equitable title to the Property and could
sell the Property to Yardley. Even though Walgren involves trust assets and the instant
case concerns an LLC asset, we conclude that under Walgren, the Purchase Agreement
was a valid enforceable contract, and specific performance of the contract was a proper
remedy. (Walgren, supra, 226 Cal.App.3d at pp. 578-579.)
We further note that Earl did not record the GNLLC operating agreement until
after signing the Purchase Agreement. Yardley was thus deprived of any notice that Earl
had transferred title to the Property to GNLLC. As the court in Walgren noted, “[t]he
primary purpose of the recording laws is the protection of bona fide purchasers for value
and without notice of title defects. [Citation.]” (Walgren, supra, 226 Cal.App.3d at p.
579.) Furthermore, even if Yardley had been aware of the GNLLC operating agreement,
47
it would have revealed that Earl had the power to sell the Property, and therefore he had
the equitable power of entering into the Purchase Agreement. (Ibid.)
We thus conclude that when Earl signed the Purchase Agreement, he had retained
equitable title to the Property, had full control over the Property, and had legal authority
to sell the Property. Earl’s transfer of title to GNLLC before selling the Property to
Yardley therefore did not bar the trial court from ordering specific performance of the
Purchase Agreement.
E. Conversion
The trial court found that Earl committed conversion of Yardley’s funds by
delaying for almost two years signing escrow cancellation instructions required to release
Yardley’s funds deposited in escrow. Greif/GNLLC contends the trial court erroneously
awarded duplicative damages and failed to credit Greif/GNLLC for the Property’s
carrying costs paid after Earl signed the Purchase Agreement. Greif/GNLLC argues
Yardley is not entitled to interest on its $335,000 in funds deposited in escrow. In
addition, Greif/GNLLC argues it should receive an offset for all taxes paid on the
Property from the time of the sale, up until the Property is transferred to Yardley.
Otherwise, Yardley will receive duplicative benefits consisting of use of the purchase
funds (interest) and GNLLC’s payment of the property taxes on the Property.
Greif/GNLLC asserts this would constitute an unjust, inequitable windfall for Yardley.
“Conversion is the wrongful exercise of dominion over the property of another.
The elements of a conversion claim are: (1) the plaintiff’s ownership or right to
48
possession of the property; (2) the defendant’s conversion by a wrongful act or
disposition of property rights; and (3) damages. Conversion is a strict liability tort. The
foundation of the action rests neither in the knowledge nor the intent of the defendant.
Instead, the tort consists in the breach of an absolute duty; the act of conversion itself is
tortious. Therefore, questions of the defendant’s good faith, lack of knowledge, and
motive are ordinarily immaterial.” (Burlesci v. Petersen (1998) 68 Cal.App.4th 1062,
1066.)
Conversion damages are calculated based on the detriment caused to the plaintiff.
Such detriment caused by wrongful conversion of personal property is presumed to be the
“value of the property at the time of the conversion, with the interest from that time, or,
an amount sufficient to indemnify the party injured for the loss which is the natural,
reasonable and proximate result of the wrongful act complained of and which a proper
degree of prudence on his part would not have averted.” (§ 3336.) “‘Money may be the
subject of conversion if the claim involves a specific, identifiable sum.’” (Fong v. E.W.
Bank (2018) 19 Cal.App.5th 224, 231, quoting Welco Electronics, Inc. v. Mora (2014)
223 Cal.App.4th 202, 209 [depositor of money in bank may pursue conversion action
against the bank that held or failed to release money.].)
Even though the escrow company, not Earl, had possession of Yardley’s funds for
almost two years, Earl acted wrongfully in delaying the release of the escrow funds to
Yardley. “[A] conversion claim does not require that a specific lump sum of money be
entrusted to defendant; the plaintiff must merely prove a specific, identifiable sum of
49
money that was taken from it.” (Welco Electronics, Inc. v. Mora, supra, 223 Cal.App.4th
at p. 216.) Substantial evidence supports such a finding here where there is evidence
Greif unjustifiably delayed signing escrow cancellation instructions, which resulted in
tying up Yardley’s money for almost two years. The Purchase Agreement contemplated
the escrow deposit funds would only briefly remain in escrow, which was to close within
15 days of acceptance of the Purchase Agreement on December 18, 2012. Instead,
Yardley’s $335,000 escrow deposit was tied up in escrow for nearly two years, until
Greif finally signed escrow cancellation instructions releasing the funds on January 30,
2015.
After Earl attempted to cancel the Purchase Agreement, he was obligated under
the Purchase Agreement provisions regarding cancellation to sign escrow cancellation
instructions releasing Yardley’s escrow deposit funds. Yardley signed escrow
cancellation instructions on March 31, 2013, and requested Earl to do so as well for the
purpose of releasing Yardley’s escrow deposit. Earl delayed signing the escrow
cancellation instructions releasing Yardley’s $335,000 escrow deposit for almost two
years. Under such circumstances, the trial court properly awarded Yardley conversion
damages, consisting of interest on Yardley’s $335,000 from March 31, 2013, until the
funds were released from escrow on January 30, 2015.
Greif/GNLLC’s reliance on Ellis v. Mihelis (1963) 60 Cal.2d 206, 220-221 (Ellis),
for the proposition the court improperly ordered specific performance of the Purchase
Agreement and awarded interest on the escrow deposit is misplaced. In Ellis, the plaintiff
entered into a contract with the defendant to purchase a ranch upon which a home was
50
built. The defendant delayed completing the terms of the contract. The plaintiff obtained
a decree of specific performance for the defendant’s failure to complete the transaction.
The trial court additionally awarded the plaintiff the profits on the ranching operations,
the rental value of the ranch home, and 7 percent interest on the $35,000 escrow deposit.
The case was reversed, however, because of the trial court’s failure to allow an interest
offset to the defendant seller against the profits accruing after the contract completion
date. (Id. at p. 222.)
The Ellis court reasoned that the seller was entitled to an offset because the
purchaser would have had the use of the purchase funds during the delay in performance
of the contract. (Ellis, supra, 60 Cal.2d at pp. 220-221.) The Ellis court relied on the
well-established principle that “the parties should be placed in the same position as if the
contract had been performed.” (Id. at p. 221.) The Ellis court explained that “[t]he
guiding principle with respect to the calculation of the damages incident to the decree of
specific performance, as we have seen, is to relate the performance back to the date set in
the contract. Timely performance of the contract would result in the purchaser’s
receiving the rents and profits of the land but being denied the use of the purchase
money, and a purchaser who seeks to recover rents and profits must permit an offset for
his use of the purchase funds during the period that performance was delayed.” (Id. at p.
220.)
The Ellis court also concluded that it was “error to award [the purchaser] interest
on the $35,000 placed in escrow because, as we have seen, he would have been deprived
of the use of that money had the contract been timely performed.” (Ellis, supra, 60
51
Cal.2d at p. 222.) This case is distinguishable in that Greif not only refused to perform
the contract, but also wrongfully refused to release Yardley’s $335,000 escrow deposit.
Greif was required to release the escrow deposit under the Purchase Agreement upon
repudiating the Purchase Agreement, yet wrongfully retained control over Yardley’s
escrow deposit funds for nearly two years by failing to sign escrow cancellation
instructions until January 30, 2015.
Had the Purchase Agreement been performed according to its terms, Greif would
have timely completed the sale within 15 days of acceptance of the Purchase Agreement
on December 18, 2012, and Yardley’s purchase funds would not have been tied up for
almost two years. But, also, had Greif complied with the Purchase Agreement terms
upon repudiating the Purchase Agreement, he would have released Yardley’s escrow
deposit, instead of tying up Yardley’s funds for nearly two years. By ordering specific
performance of the Purchase Agreement and ordering interest accruing on the wrongfully
retained escrow funds after the contract performance date, the parties were placed in the
same position as if Greif had complied with all of the terms of the Purchase Agreement,
including the contract provision requiring release of the escrow deposit upon repudiation
of the contract.
We therefore conclude the trial court appropriately compensated Yardley for
losses occasioned by Earl’s conduct amounting to conversion. (Cal. Const. art. 15, § 1;
Civ. Code, § 3287.) We further conclude Greif/GNLLC is not entitled to a property tax
offset because Greif/GNLLC asserted title and retained possession of the Property, with
52
all the benefits of property ownership up until the trial court entered judgment enforcing
the Purchase Agreement and ordering transfer of title.
The concurrence/dissent concludes the trial court erred in awarding Yardley
interest on the escrow deposit funds because under Bravo v. Buelow (1985) 168
Cal.App.3d 208, 213 (Bravo), the trial court decree of specific performance of the
Purchase Agreement requires the court to treat the parties as if the change in ownership
had taken place as the contract originally intended. The concurrence/dissent states that
by doing so, this court must treat Greif/GNLLC as the owner of the escrow funds, in
which case Yardley would not be entitled to interest on those funds. We respectfully
disagree. The general principle that “the parties should be placed in the same position as
if the contract had been performed,” does not preclude awarding Yardley conversion
damages for wrongfully tying up Yardley’s escrow deposit funds for nearly two years.
(Ellis v. Mihelis, supra, 60 Cal.2d at p. 221.) Under the Purchase Agreement, Greif was
required to return the escrow deposit to Yardley when Greif repudiated the Purchase
Agreement. Greif failed to do so. Under such circumstances, Greif/GNLLC committed
conversion of the funds and Yardley was entitled to damages, regardless of whether the
court ultimately granted specific performance of the agreement.
We also respectfully disagree with the concurrence/dissent’s assertion that the
interest awarded to Yardley on the conversion cause of action was improper because it
was not a real amount earned but, rather, was calculated using a statutory rate for
prejudgment interest awards. The trial court reasonably calculated the conversion
damages by applying the statutory rate for prejudgment interest awards to the escrow
53
funds Greif failed to release upon repudiating the Purchase Agreement. (See Bravo,
supra, 168 Cal.App.3d at p. 215.) The conversion damages were reasonably based on the
trial court finding that, as a result of Greif failing for almost two years to agree to release
the escrow funds to Yardley as required under the Purchase Agreement, Yardley
sustained a financial loss of not being able to use those funds.
The remedies of specific performance and conversion damages in this case are not
inconsistent or improper. The conversion damages were not awarded based on the
Purchase Agreement terms requiring the transfer of title to Yardley. The conversion
damages were based on the contract provisions requiring release of the escrow deposit
upon a party to the contract repudiating or canceling the contract. Unlike in Bravo,
supra, 168 Cal.App.3d 208, the conversion claim for interest damages was a separate
claim, independent from enforcement of the Purchase Agreement.
In Bravo, the court ordered specific performance requiring the seller to convey a
lot to the purchaser and, as incidental compensation, also awarded the increased costs of
construction caused by the seller’s refusal to perform the purchase agreement, resulting in
the delay in the purchaser’s intended construction of a home on the lot. (Bravo, supra,
168 Cal.App.3d p. 213.) The court in Bravo explained: “‘In California the compensation
which may be awarded incident to a decree of specific performance is not for breach of
contract and is not legal damages. The complainant affirms the contract and asks that it
be performed. Since the time for performance has passed, the court relates that
performance back to that date, by treating the parties as if the change in ownership had
taken place at that time.’” (Id. at p. 213, quoting Hutton v. Gliksberg (1982) 128
54
Cal.App.3d 240, 248.) Unlike in Bravo and Ellis, the interest damages for conversion
were awarded based on the separate conversion claim that Greif wrongfully retained
dominion and control over Yardley’s escrow deposit funds, which Greif was required
under the Purchase Agreement to return to Yardley when Greif refused to perform the
Purchase Agreement.
Awarding Yardley interest damages on the conversion claim for Greif’s failure to
release the escrow funds after refusing to perform the Purchase Agreement is completely
in harmony with the principle that the parties should be placed in the same position as if
the contract had been performed. The specific performance decree and conversion
damages are founded on different, independent theories and the remedies are not
duplicative or inconsistent. Under such circumstances, the trial court properly ordered
specific performance of the Purchase Agreement and awarded conversion damages for
Greif’s wrongful failure to release Yardley’s escrow deposit upon repudiating the
Purchase Agreement. This placed the parties in the same position as if the contract had
been performed according to the terms of the Purchase Agreement.
Furthermore, not only was interest on the escrow deposit funds separately
recoverable as conversion damages, the interest was also recoverable as reasonable
equitable compensation incident to specific performance of the Purchase Agreement,
based on Yardley’s loss of use of the escrow deposit funds which should have been
returned to Yardley when Earl repudiated the Purchase Agreement. (Bravo, supra, 168
Cal.App.3d at p. 215.)
55
IV.
GREIF’S APPEAL OF POSTJUDGMENT
ATTORNEY FEES AWARD (Third Appeal)
In the third appeal (case no. E073786), Greif objects to the trial court’s
postjudgment order awarding attorney fees to Yardley. Greif contends Yardley is barred
from recovering attorney fees under the Purchase Agreement mediation clause.
After prevailing at trial, Yardley filed a motion for attorney fees, which the trial
court heard and granted. The trial court awarded Yardley $776,757.88 in attorney fees
under the Purchase Agreement attorney fees provision. Greif contends the attorney fees
award should be reversed because Yardley failed to comply with the pre-litigation
mediation requirement in the Purchase Agreement. Greif argues that, in order to preserve
Yardley’s right to seek attorney’s fees, Yardley was required to mediate its claims before
filing suit. Yardley argues the Purchase Agreement includes an express exception to the
mediation requirement, which applies.
“On appeal, we review the determination of the legal basis for an award of
attorney fees de novo as a question of law. [Citation.]” (Blackburn v. Charnley (2004)
117 Cal.App.4th 758, 767.)
The Purchase Agreement provides in paragraph 26, entitled “Attorney Fees,” that
in any action arising out of the Purchase Agreement, “the prevailing Buyer or Seller shall
be entitled to reasonable attorney fees and costs from the non-prevailing Buyer or Seller,
except as provided in paragraph 31A.” Paragraph 31 of the Purchase Agreement is
56
entitled “Dispute Resolution.” Paragraph 31A, entitled “Mediation,” states that, if any
party “commences an action without first attempting to resolve the matter through
mediation, . . . then the party shall not be entitled to recover attorney fees, even if they
would otherwise be available to that party in any such action. . . . Exclusions from this
mediation agreement are specified in paragraph 31C.”
Paragraph 31C, entitled “Exclusions,” states: “The filing of a court action to
enable the recording of a notice of pending action, for order of attachment, receivership,
injunction, or other provisional remedies, shall not constitute a waiver or violation of the
mediation and arbitration provisions.” The lis pendens exception to mediation serves the
purpose of enabling a plaintiff claiming a disputed interest in real property to preserve the
property during the pendency of the dispute. Filing a complaint alleging a disputed
interest in real property is generally a prerequisite to filing and recording a notice of
pending action (lis pendens).
On February 8, and May 29, 2013, Yardley’s attorneys sent Earl letters stating that
if they did not hear back regarding compliance with the Purchase Agreement or signing
the escrow cancellation instructions, Yardley would “file a complaint for specific
performance/breach of contract and record a lis pendens on the Property.” Greif did not
respond. On September 25, 2013, Yardley filed its Complaint for specific performance,
and on January 14, 2014, Yardley filed a notice of pendency of action, which was
recorded on February 7, 2014.
57
After Yardley’s initial unsuccessful informal efforts to settle, on February 4, 2014,
Yardley’s attorney sent Earl’s attorney a letter requesting mediation. In March 2014,
Yardley served Earl with the Complaint and notice of lis pendens. The parties
participated in mediation on May 23, 2014, with Judge Robert Taylor, which ended when
Earl’s attorney asserted mediation was futile because Earl was incapable of proceeding
with mediation. Thereafter Mark Greif substituted in for Earl and the parties participated
in another mediation attempt and two settlement conferences, without resolving the case.
The only action Yardley took in furtherance of its lawsuit before the first mediation was
filing the lawsuit, recording the lis pendens, serving the summons, and filing an amended
complaint after Earl revealed for the first time in January 2014, that title to the Property
had been transferred to GNLLC.
When ruling on Yardley’s motion for attorney fees, the trial court concluded the
lis pendens exception to the mediation requirement applied. The trial court found that
Yardley filed its lawsuit for specific performance “to enable the recording” of a lis
pendens. The trial court noted that the filing of the lis pendens several months after
Yardley filed its complaint for specific performance did not bar application of the lis
pendens exception to mediation. We agree. Yardley’s attorney’s letters, sent to Earl
before filing the complaint, show that the complaint and lis pendens were integrally
related even though they were not filed at the same time. In addition, both the complaint
and lis pendens were served on Greif at the same time.
58
This case is analogous to Blackburn v. Charnley, supra, 117 Cal.App.4th 758. In
Blackburn, the court held that the lis pendens exception to mediation included in the
parties’ real property purchase agreement applied. (Id. at p. 768.) The Blackburn court
explained: “Here, the parties filed a lawsuit and recorded a lis pendens on their lots in
order to protect their homes from resale to a bona fide purchaser in a booming real estate
market and to preserve their right to seek specific performance. Under the plain and
unambiguous provisions of the purchase agreements, they were exempt from the
mediation requirement. We agree with the trial court that the couples were entitled to
attorney’s fees as the prevailing parties.” (Ibid. at p. 768.) Under Blackburn, we
conclude the lis pendens exception to mediation applies and Yardley is therefore entitled
to recover its attorney fees.
Greif argues that the arbitrations statutes, Code of Civil Procedure sections 1281.8
and 1298.5, support his argument that the lis pendens exception does not apply. Those
statutes apply where parties have agreed to attempt to resolve a dispute by arbitration
before proceeding with court litigation. The arbitration statutes include a lis pendens
exception that allows a party to file a lawsuit for the limited purpose of recording a lis
pendens, but the filing party must immediately stay the lawsuit in order to preserve its
right to arbitrate. Greif argues the arbitration statutes are relevant in this case to
construing the Purchase Agreement mediation clause and lis pendens exception.
We disagree. The arbitration statutes do not apply to the mediation requirement in
the Purchase Agreement. Furthermore, the language in the arbitration statutes is
59
significantly different than the language in the Purchase Agreement mediation provisions.
There is no mention in the Purchase Agreement mediation provisions of staying court
proceedings after filing a complaint and lis pendens, although Yardley, in effect, did so
during the initial mediation. The arbitration statutes simply do not have any bearing on
awarding attorney fees in the instant case.
Greif’s reliance on Frei v. Davey (2004) 124 Cal.App.4th 1506, 1508, is also
misplaced. Frei is distinguishable in that the real property sellers in Frei rejected the
buyers’ initial request to mediate, required under the purchase agreement. The
defendants eventually participated in mediation, but at the request of another party nearly
one year later, on the eve of trial. The court found that the sellers’ refusal to mediate
could not be cured one year later. (Id. at p. 1517.)
Unlike in Frei, the lis pendens exception to the mediation requirement applies. In
addition, Yardley did not refuse any request to mediate. On the contrary, Yardley made
numerous attempts to contact Earl in an attempt to resolve the dispute informally before
filing its lawsuit. Because Earl did not respond to Yardley’s overtures to resolve the
dispute informally, Yardley filed a complaint and lis pendens, but did not serve them on
Earl until after formally requesting mediation. Thereafter, the parties engaged in
mediation, during which Yardley delayed litigating the dispute.
We conclude that, under the totality of the circumstances, the trial court correctly
applied the lis pendens exception to the Purchase Agreement mediation requirement, and
found that Yardley was entitled to recover attorney fees under the attorney fees clause.
60
V.
DISPOSITION
The judgment on the Complaint and Cross-complaint is affirmed. The post-
judgment award of attorney fees and costs is also affirmed. Yardley is awarded its costs
on appeal.
CERTIFIED FOR PUBLICATION
CODRINGTON
J.
I concur:
McKINSTER
Acting P. J.
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[Greif v. Sanin et al., E070283]
RAPHAEL, J., Concurring and Dissenting.
The trial court found that Earl Greif breached his December 18, 2012 contract to
sell The Yardley Protective Limited Partnership ten acres of raw land in Rancho Mirage
for $330,000. 1 As a remedy, the court awarded Yardley specific performance of that
agreement, explaining that “allowing [Greif] to keep the property—which is worth
substantially more than $1.25 million today—would give [Greif] a windfall” despite
breaching the contract. The court ordered that remedy despite recognizing that as of the
December 2018 judgment “the $330,000 purchase appears to be meaningfully below the
market value” of the property.
I agree with the majority opinion insofar as it upholds this determination, which
amply compensated Yardley in this matter. The equitable remedy of specific
performance treats the parties as if the contract was performed as agreed in 2012,
allowing Yardley to pay $330,000 for property that had appreciated to above $1.25
million; indeed, the court found that the property had been worth as little as $500,000 on
the date of the contract. The specific performance remedy enabled Yardley to receive a
huge amount of value.
1
As the majority opinion does, I will refer to the sellers as “Greif” and the buyers
as “Yardley.”
1
I respectfully disagree, however, with the majority’s decision to uphold the trial
court’s award of additional monetary damages to Yardley on a theory inconsistent with
the specific performance remedy. The trial court awarded $43,040.80 in damages to
Yardley because Greif kept the purchase money in escrow for two years before returning
it. Damages for conversion of property was a viable theory for Yardley as an alternative
to specific performance. The problem here, however, is that the specific performance
remedy treats the escrow money as having been provided to Greif in 2012 for the
property. Once the court applied specific performance as the remedy, damages for
conversion should have been unavailable. Under specific performance, it was Greif’s
money, so Yardley suffered no harm by Greif’s keeping it. Because the conversion
damages are inconsistent with specific performance, I respectfully dissent from section
III.E of the majority opinion. I join the rest of the opinion.
DISCUSSION
The trial court’s award of specific performance due to breach of the purchase
agreement, which we affirm, means that we are “‘treating the parties as if the change in
ownership had taken place’” as the contract originally intended. (Bravo v. Buelow (1985)
168 Cal.App.3d 208, 213.) Among other things, that means treating the seller, Greif, as
receiving the escrow funds soon after Yardley deposited them. (Ibid. [court order for
specific performance “‘must as nearly as possible order it to be performed according to
its terms, and one of those terms is the date fixed by it for its completion’”].) The
2
purchase agreement is being “‘enforced retrospectively’” (ibid.), and we are treating
Greif as the owner of the escrow funds.
The damage award for conversion, however, presumes the opposite: that the
escrow funds rightfully belonged to Yardley. That is why the opinion says that Greif’s
wrongful actions “resulted in tying up Yardley’s money.” (Maj. opn., ante, at p. 50.)
Conversion also presumes that the contract ultimately falls through, because only then
would the money still be Yardley’s, such that he receives an award of interest on it.
A judgment should not treat both theories as simultaneously true. If a court orders
specific performance, then it is enforcing the purchase agreement. If a court finds a seller
converted funds in escrow, then it is treating the matter as if the transaction was thwarted.
Yardley “‘cannot have it both ways, performed and broken.’” (Bravo v. Buelow, supra,
168 Cal.App.3d at p. 213.) Unless Yardley would prefer to take a damages award and
not receive the property through the equitable contract remedy of specific performance,
we should reverse the award of interest in its favor on the cause of action for conversion.
Yardley could properly take to trial causes of actions that could lead to
inconsistent remedies, and “need not elect, and cannot be compelled to elect, between
inconsistent remedies during the course of trial prior to judgment.” (Roam v. Koop
(1974) 41 Cal.App.3d 1035, 1039.) But electing a judgment based on one remedy
precludes an inconsistent one. (Vlahovich v. Cruz (1989) 213 Cal.App.3d 317, 323.)
Enforcing the contract through specific performance construes the funds not to be
Yardley’s, because he purchased the property with them. Because this way of construing
3
the facts is inconsistent with a conversion theory, the inapt way that the majority holds
that Yardley satisfied the first element of conversion—that Yardley have “ownership or
right to possession of the property” (Burlesci v. Petersen (1998) 68 Cal.App.4th 1062,
1066)—is by saying merely that Earl “acted wrongfully.” (Maj. opn., ante, at p. 49.)
Once the remedy of specific performance is chosen, however, the interest on the
money deposited in escrow is not Yardley’s. Yardley is treated as having paid that
money to Greif for the property at the time he should have purchased the land under the
contract, and is compensated with title to the land itself; that is, the entire value of the
land since that purchase. Viewed in this way, interest earned on the funds should be
retained by Greif, who should have had the money rather than the property. (See Kassir
v. Zahabi (2008) 164 Cal.App.4th 1352, 1358 [“a seller . . . must be treated as if he had
performed in a timely fashion and is entitled to receive the value of his lost use of the
purchase money during the period performance was delayed”].) The $43,040.80 interest
awarded to Yardley on the conversion cause of action was not a real amount earned, but
rather was calculated using a statutory rate for prejudgment interest awards; such an
award should not be made to either party with the specific performance ordered here. In
contrast to interest on the funds, if there were any monetary benefit from owning the land
during the escrow, that should be awarded to Yardley as part of the specific performance
remedy. (See D-K Investment Corp. v. Sutter (1971) 19 Cal.App.3d 537, 549 [seller “is
chargeable with the rents and profits received less taxes and other authorized expenses”].)
Yardley is thus properly awarded the sizeable appreciation in the land’s value.
4
The majority correctly notes that if the purchase agreement had been executed
according to its terms, Yardley’s purchase funds would have been released, rather than
tied up in escrow for two years. (Maj. opn., ante, at p. 52.) But the funds would have
been released to Greif to pay for the property, not to Yardley. Our Supreme Court in
Ellis v. Mihelis (1963) 60 Cal.2d 206 followed the correct reasoning by applying specific
performance to somewhat similar facts. It held that it was “error to award [the buyer]
interest on the $35,000 placed in escrow because . . . he would have been deprived of the
use of that money had the contract been timely performed.” (Id. at p. 222.)
It does not make sense to distinguish Ellis on the basis that Greif “wrongfully
refused to release” Yardley’s escrow deposit. (Maj. opn., ante, at p. 52.) Once Yardley
chose the specific performance remedy, it was awarded the entire value of the land as if
his escrow funds had been timely exchanged for it under the contract. Under that view,
the escrow deposit was not Yardley’s at the time that Greif kept it. It was Greif’s. The
majority thus errs in affirming both the specific performance remedy and the conversion
damages. Specific performance gives Yardley the full benefit of its 2012 bargain, and it
incidentally even had use of the purchase funds for four of the years after it was deemed
to have paid them; the damages award improperly provides it as well with a yet “greater
amount . . . than [it] could have gained by the full performance.” (Civ. Code. § 3358.)
We should not turn back the clock, enforce the sale, and then also give redress for some
event that would never have happened had the original sale occurred according to its
terms. Rather, as our Supreme Court stated (Ellis v. Mihelis, supra, at p. 221), our
5
decision should instead be in complete “harmony with the principle that the parties
should be placed in the same position as if the contract had been performed.”
RAPHAEL
J.
6