Rawat v. Newton CA3 ( 2013 )

Filed 3/12/13 Rawat v. Newton CA3
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Sacramento)
----
KIRAN RAWAT, as Trustee, etc., C068071
Plaintiff and Appellant, (Super. Ct. No. 06AS03195)
v.
ROBERT NEWTON et al.,
Defendants and Respondents.
In this action for breach of contract and fraud involving a 2001 purchase of seven-
plus acres of vacant land for residential development, plaintiff the Krishna Living Trust
(the Trust) appeals from a defense verdict following a jury trial.1
1 We recognize that a trust is technically not a legal entity, but may act only through its
trustee. (O’Flaherty v. Belgum (2004) 115 Cal.App.4th 1044, 1062; Code Civ. Proc.,
§ 369, subd. (a)(2); see Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial
(The Rutter Group 2012) ¶ 2:6, p. 2-3.) When we use the term “the Trust” in this
opinion, we do so for the sake of simplicity, keeping this legal recognition in mind.
1
On appeal, the Trust contends the trial court erred (1) in refusing to instruct the
jury as to the disclosure requirements of Health and Safety Code section 25359.7;2 and
(2) in admitting evidence involving unrelated lawsuits previously filed by Raghvendra
Singh (who negotiated the purchase of the property, and who is a beneficiary of the
Trust).
We disagree with the Trust‟s contentions, and shall affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
This is the second time we have seen this case. In a prior unpublished opinion, we
reversed a summary judgment in favor of defendants; we found that the Trust had
standing to maintain this action and had met the statute of limitations, and that res
judicata (based on a prior dismissed complaint in this matter) did not apply. As a
consequence, we also reversed an order denying the Trust leave to file its first amended
complaint (which is the operative complaint before us now).3
On September 26, 2001, Raghvendra (“Ron or Raj”) Singh (hereafter Singh)
executed a written “Land Purchase Agreement” (the Agreement) with defendants Robert
Newton and Houston Tuel, the owners of defendant Coburg Properties (collectively,
defendants), to buy four parcels of real property (the Property) for $275,000. The
Property comprises seven-plus acres at the corner of 65th Expressway and Elder Creek
Road in south Sacramento. Under the Agreement, defendants were to provide “all the
reports and writings in their possession, and all information they possess related to [the]
Property at the time of closing.”
2 Undesignated statutory references are to the Health and Safety Code.
3 Appellant requested we take judicial notice of our prior opinion in case No. C059897,
which we treated as a motion to incorporate and granted. (Rawat v. Newton (Feb. 23,
2010, C059897) [nonpub. opn.].)
2
Singh and his wife, Kiran Rawat, as trustees, created the Trust on October 15,
2001.
Two weeks after the Trust was created, on October 29, 2001, the Agreement was
modified to provide, among other things, that defendants would provide “all the
disclosures including the physical boundary of the [P]roperty to Buyer [Singh].” The
Property was known to partly encompass a former landfill. As defendant Tuel explained
in his deposition, he “told [Singh] you couldn‟t build on the dump site, but the rest of the
land was buildable.” Singh intended to build a residence for himself and his wife on the
Property, and to residentially develop the remaining buildable part.
The terms of the $275,000 purchase were $100,000 down, with the balance
covered by a promissory note, due December 31, 2003, and secured by the Property. As
part of the purchase process, the Trust signed a promissory note to defendant Coburg
Properties for the balance of the purchase price; and Coburg deeded the Property to the
Trust. In 2004, defendant Coburg issued a deed of reconveyance to the Trust.
The pleadings and the trial evidence focused on the landfill‟s effect on the
Property‟s development potential, and what defendants had or had not disclosed in that
regard to Singh during the purchase process; the disclosure issues centered on the size of
the landfill, and the environmental-based development restrictions on the Property. A
series of four complaints—beginning in 2002 and culminating in 2010 with the first
amended complaint (the complaint at trial)—ultimately alleged breach of contract (fraud-
based), negligent misrepresentation, and fraud against defendants for failing to disclose
that the Property had been governmentally monitored for environmental hazards, and for
making false representations that all but a small portion of the Property was buildable.
The Trust alleged damages based on the Property‟s purchase price, and on the $230,000
penalty levied against the Trust to environmentally remediate the Property. After the
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close of evidence at trial, the trial court allowed the Trust to add a cause of action for
“Real Estate Seller‟s Nondisclosure of Material Facts.”
In a special verdict, the jury found that defendants did not breach the contract
(because they did not fail to do something that the contract required them to do); did not
commit negligent misrepresentation (because they did not make a false representation of
an important fact to Singh, the Trust‟s agent); and did not commit fraud (because they did
not actively conceal an important fact from Singh, and did not deceptively disclose some
important facts to Singh while intentionally failing to disclose others). As for the
nondisclosure cause of action added after the close of evidence, the jury found, in the
special verdict, that defendants knew that certain information had not been disclosed; that
defendants failed to disclose this information to Singh, the Trust‟s agent; but that Singh
knew, or reasonably could have discovered, this information. Based on these special
verdict findings, judgment was entered for defendants.
DISCUSSION
I. The Trial Court Did Not Err in Refusing to Instruct on the
Disclosure Requirements of Section 25359.7
On the first day of trial, the Trust sought a jury instruction based on section
25359.7. That section, as pertinent, subjects a seller of “nonresidential real property” to
liability for “actual damages” if the seller “knows, or has reasonable cause to believe, that
any release of hazardous substance has come to be located on or beneath [the] real
property [sold],” and fails to give written notice to the buyer. (§ 25359.7, subd. (a).)
Defendants objected to this instruction on two grounds: (1) the Property was
zoned residential and so was its intended use—therefore, the Property was not subject to
section 25359.7‟s disclosure requirement for nonresidential property; and (2) the
operative pleading here, the Trust‟s first amended complaint, contained no cause of
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action under the statute or any mention of the statute. The trial court declined the
instruction on ground No. (1).
“ „ “[P]arties have the „right to have the jury instructed as to the law applicable to
all their theories of the case which [are] supported by the pleadings and the evidence,
whether or not that evidence was considered persuasive by the trial court.‟ ” ‟ ” (Ayala v.
Arroyo Vista Family Health Center (2008) 160 Cal.App.4th 1350, 1358.) As we shall
explain, the Trust‟s theory of the case based on section 25359.7 was not supported by the
pleadings. Consequently, the trial court did not err in refusing to instruct on that theory.
Preliminarily, we pause to note the Trust‟s argument that section 25359.7 applies
because there is no residence on the Property and no one residing on the Property—
hence, the Property is nonresidential, and its residential zoning does not change these
“facts on the ground,” if we may colloquially characterize the Trust‟s argument. Section
25359.7 does not define the term “nonresidential real property.” But the scant case law
and legal commentary on the statute suggest the term‟s coverage includes commercial
property but not vacant land zoned for residential use. (See Sachs v. Exxon Co., U.S.A.
(1992) 9 Cal.App.4th 1491, 1497-1498 [the former similar section 25359.7 applied to
contamination from an underground storage tank at a gas station, a commercial property];
Tracy, Beyond Caveat Emptor: Disclosure to Buyers of Contaminated Land (1991)
10 Stan. Envtl. L.J. 169, 199 [“Missing from existing California [statutory] laws are
explicit disclosure requirements for vacant residential[ly] [zoned] land and residential
property with more than four dwelling units [for disclosure requirements regarding the
sale of one to four dwelling units, see Civil Code section 1102 et seq.].”) In light of these
legal inklings, section 25359.7 would not apply to the vacant, residentially zoned land at
issue here. As we shall see, however, we need not resolve any residential versus
nonresidential issue presented in this case because the Trust‟s pleadings do not support
the giving of the section 25359.7 theory in any event.
5
As noted, the Trust‟s complaints, totaling four in this litigation, trace their lineage
to 2002. These complaints have alleged only breach of contract, and the common law
disclosure causes of action (as opposed to statutory law disclosure causes of action) of
negligent misrepresentation, fraud, and nondisclosure of material facts. Over these many
years, this matter proceeded on this legal basis. (See Calemine v. Samuelson (2009)
171 Cal.App.4th 153, 161-162 [distinguishing between disclosure actions based on the
common law and those based on statute].)
It was only when the first day of trial finally arrived that the Trust saw fit to have
the trial court instruct on a new cause of action, a statutory disclosure cause of action
based on section 25359.7. The Trust maintains that the pleadings and the evidence
supported this statutory cause of action, based on nondisclosure of hazardous substance
release involving the sale of a property that partially contained a landfill. We disagree for
three reasons.
First, as noted, section 25359.7‟s disclosure requirement applies to “[a]ny owner
of nonresidential real property who knows, or has reasonable cause to believe, that any
release of hazardous substance has come to be located on or beneath th[e] real
property[.]” (§ 25359.7, subd. (a), italics added.) Putting aside the definitional issue
posed by the term “nonresidential real property,” the terms “release” and “hazardous
substance” have their own complex definitions in the law; for example, the “hazardous
substance” definition is a lengthy one that incorporates many other statutory designations,
listings and definitions. (§§ 25320, 25316; see also § 25321.) Thus, to defend against a
section 25359.7 cause of action requires its own preparation, but the Trust‟s belated
request for jury instruction on this unpleaded action did not give defendants any chance
to prepare prior to trial. (See Garcia v. Roberts (2009) 173 Cal.App.4th 900, 912-913
[reversing the grant of a motion to amend a complaint at trial to add a new cause of
action, because the defendants did not have the chance to conduct discovery or otherwise
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prepare for trial on the action].) In short, a section 25359.7 cause of action is not one that
should be sprung on someone.
Second, the Trust contends that section 25359.7 creates a cause of action for strict
liability. This standard of liability stands in marked contrast to the fault-based, common
law causes of action for negligent misrepresentation and fraud that the Trust had alleged
in its pleadings for nearly a decade prior to the first day of trial. The Trust itself
implicitly recognizes this is a “distinction with a difference” by arguing in effect that the
jury‟s special verdict finding that sank the Trust‟s common law cause of action for
nondisclosure of material facts (finding No. 4: that Singh knew, or could reasonably
have discovered, the nondisclosed information) would not have been part of a section
25359.7 cause of action for strict liability. (Judicial Council of Cal., Civ. Jury Instns.
(2013) Directions for Use to CACI No. 1910, p. 1037 [New Dec. 2009; this instruction,
which the jury was given, sets forth the common law cause of action for a real estate
seller‟s nondisclosure of material facts].)
Third, and finally, case law has drawn a legal line between real estate sales
disclosure actions based on statute and those based on the common law. (Calemine v.
Samuelson, supra, 171 Cal.App.4th at pp. 161-165.)
We conclude the trial court did not err in refusing to instruct the jury on what was
effectively a new cause of action for section 25359.7 nondisclosure.
II. The Trial Court Did Not Abuse Its Discretion in Admitting Evidence of
Unrelated Lawsuits Previously Filed by Singh
The Trust filed two motions in limine, one seeking to exclude evidence of Singh‟s
status as a vexatious litigant (based on unrelated lawsuits), and the other seeking to
exclude evidence of those unrelated lawsuits. The trial court deferred ruling on those two
motions until after Singh testified.
7
In direct examination, Singh testified that in late 2001 (i.e., when he negotiated the
purchase of the Property), he “was very new to this country” and did not “know the laws,
the rules, the regulations, anything.”
After Singh testified on direct, the trial court ruled on the Trust‟s two in limine
motions, as follows: (1) the court excluded evidence of Singh‟s status as a vexatious
litigant, finding that evidence much more prejudicial and confusing than probative; and
(2) the court ruled that Singh could be cross-examined “as to the facts associated with the
number of lawsuits that he has filed, the various names that he has used with respect to
those lawsuits, and any of the facts and circumstances surrounding those particular
actions.” The court found the probative value of this evidence “high” regarding Singh‟s
credibility.
In cross-examination, Singh confirmed that when he negotiated the purchase of the
Property at the end of 2001, he “didn‟t know [his] way around the laws and regulations of
California and, in particular, Sacramento.” Singh also denied, pursuant to the next cross-
exam question, that by this time, he had already filed several lawsuits against several
people in the Sacramento Superior Court, using aliases and acting in pro. per.; Singh
explained that he filed those lawsuits in 2002, not before.
Later, in cross-examination, Singh acknowledged that he had filed two lawsuits in
2000 (unrelated to the present matter), three more in 2001, and at least five more in 2002,
apparently all in Sacramento Superior Court, against various individuals and entities,
using variations on his name and acting in pro. per.; and that he had improperly obtained
default judgments in those lawsuits totaling several millions of dollars (apparently, the
default judgments were overturned based on lack of service). (Singh had previously
testified on direct examination that he came to this country and California in the mid-
1980‟s for graduate school; that he was a civil engineer with a Ph.D. in engineering from
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Ohio State University; and that he had purchased real estate investment properties prior
to the purchase of the Property, including at auction.)
The Trust contends the trial court abused its discretion in admitting the evidence
of the unrelated lawsuits, because this evidence should have been excluded, first, under
Evidence Code sections 1101 and 787 and, second, under Evidence Code section 352.
We find no abuse of discretion.
Taking the Trust‟s first contention first, Evidence Code sections 1101 and 787, as
pertinent here, encapsulate the following principle of evidence law: Particular wrongful
acts cannot be offered in evidence in a civil action to prove the bad character of a witness
for honesty or veracity. (See 3 Witkin, Cal. Evidence (5th ed. 2012) Presentation at
Trial, § 297, p. 418.) However, this evidentiary exclusionary rule does not apply where
the evidence is offered to show that the witness testified falsely concerning some portion
of his testimony. (See 3 Witkin, at p. 419; Leader v. State of California (1986)
182 Cal.App.3d 1079, 1091.)
That is what happened here—the exclusionary rule of Evidence Code sections
1101 and 787 did not apply because the evidence of the unrelated lawsuits was properly
admitted to impeach Singh. The evidence of Singh‟s unrelated lawsuits, particularly
those filed in 2000 and 2001, were introduced to impeach his testimony (1) that he did
not know his way around the laws and regulations of California and Sacramento at the
time he negotiated the purchase of the Property, and (2) that he had not filed several
lawsuits against several people in Sacramento Superior Court, using aliases, prior to the
purchase of the Property. The trial court did not abuse its discretion in this regard.
That brings us to the Trust‟s second contention, Evidence Code section 352, under
which evidence is to be excluded if its probative value is substantially outweighed by its
unduly prejudicial or confusing nature. Again, we see no abuse of discretion on the trial
court‟s part.
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Singh was the pivotal figure for the Trust‟s case, as he had negotiated the
Property‟s purchase, intending to develop it residentially. His credibility was key. A
substantial part of this case concerned Singh‟s sophistication and credibility involving his
ability to ascertain information from maps and from government agencies overseeing
land development and monitoring environmental conditions. For example, Singh and
defendants testified at opposite ends regarding the accuracy of a map of the landfill on
the Property and whether Singh had been given the map prior to the sale or only shown it;
regarding whether Singh ever received a 1988 report on the Property that Sacramento
County‟s Air Pollution Control District had requested from the landowners, a report
which led the County to conclude the Property could not be given an environmental
“clean bill of health”; and regarding what defendants had told Singh about governmental
actions and documentation regarding the Property‟s development potential. The
unrelated lawsuits that Singh had maintained and obtained default judgments upon, acting
in pro. per., showed a sophistication on Singh‟s part, and, as detailed above, impeached
important parts of his testimony.
The Trust counters, with a certain logic, that if the label “vexatious litigant” is
highly prejudicial, so too are all the facts and circumstances surrounding that designation.
However, the government-ordered imposition of this pejorative label—i.e., its imposition
by the judicial branch—creates a unique potential to unduly prejudice a lay juror by
creating an emotional revulsion akin to imposing a Scarlet Letter. (People v. Karis
(1988) 46 Cal.3d 612, 638 [Evidence Code section 352 applies to evidence that tends to
evoke an emotional bias against a party and which has little to offer in determining the
issues].) Furthermore, the trial court perceptively observed that allowing this label into
evidence would entail an irrelevant “mini-trial” concerning the label‟s designation
process and significance.
10
Finally, the Trust laments that “the purpose of eliciting this testimony about [the
unrelated] lawsuits, which resulted in dismissals and which were obviously not
meritorious, was to argue to the jury that this lawsuit was also not meritorious.
Apparently it worked. And this is exactly why it should have been excluded.” As we
explained above, however, Singh opened the door to the evidence of the unrelated
lawsuits through his own testimony. The trial court, prudently, deferred its in limine
evidentiary ruling regarding the unrelated lawsuits to await Singh‟s testimony. Once
Singh testified, the trial court did not abuse its discretion in allowing defendants to walk
through the credibility door that Singh had opened.
We conclude the trial court did not abuse its discretion in admitting evidence of
unrelated lawsuits previously filed by Singh.
DISPOSITION
The judgment is affirmed. Defendants are awarded their costs on appeal. (Cal.
Rules of Court, rule 8.278(a)(1), (2).)
BUTZ , J.
We concur:
NICHOLSON , Acting P. J.
ROBIE , J.
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