Hansen v. Hilton & Hyland Real Estate CA2/7 ( 2021 )

Filed 10/21/21 Hansen v. Hilton & Hyland Real Estate CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
CHRISTOPHER HANSEN et al., B305592
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No. BC673414)
v.
HILTON & HYLAND REAL
ESTATE et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Daniel Murphy, Judge. Affirmed.
Law Office of Donna Kirkner and Donna E. Kirkner for
Plaintiffs and Appellants Christopher Hansen and Deanna
Hansen.
Tuchman & Associates, Aviv L. Tuchman, Loren N. Cohen,
Michael C. Dicecca; Greines, Martin, Stein & Richland, Robert A.
Olson and Eleanor S. Ruth for Defendants and Respondents
Hilton & Hyland Real Estate and Alphonso Lascano.
__________________________
Christopher and Deanna Hansen appeal the judgment
entered in their lawsuit against their real estate broker, Hilton &
Hyland Real Estate, and its associated real estate agent,
Alphonso Lascano (collectively broker defendants), for breach of
fiduciary duty and related torts. The Hansens contend the trial
court erred in granting the broker defendants’ motion for
summary judgment because triable issues of material fact exist
as to whether the broker defendants breached duties owed to
them and whether those breaches caused the Hansens’ alleged
injury—an arbitration ruling in favor of the buyers of their home
for more than $760,000. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Purchase/Sale of Real Property
In May 2016 the Hansens accepted an offer from brothers
Jee Yong Shin and Stefan J. Shinn (the Shin/Shinns) to purchase
the Hansens’ Los Angeles home for $1.8 million. The broker
defendants represented both the Hansens and the Shin/Shinns in
the transaction and obtained from each of them a signed
acknowledgment of, and agreement to, the broker defendants’
dual representation. In addition, various California Association
of Realtors (C.A.R.) documents the Hansens and the Shin/Shinns
signed in connection with the sale—the disclosure regarding the
real estate agency relationship, statewide buyer and seller
advisory and the residential purchase agreement and joint
escrow instructions—advised the broker was not responsible for
providing legal or tax advice and that the buyer/seller should
seek such advice from a licensed professional if desired.
Four days before the scheduled July 26, 2016 close of
escrow, a ceiling sprinkler pipe burst on the fourth floor of the
Hansens’ home, causing significant water damage throughout the
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residence. The parties discussed whether the sale would still go
forward. After the Hansens received confirmation from their
home insurer, State Farm Insurance Company, that the damages
to the home were covered under the Hansens’ homeowner’s
policy, on July 28, 2016 the Hansens and the Shin/Shinns agreed
to, and signed, an addendum to the purchase/sale agreement.
Neither the Shin/Shinns nor the Hansens sought the assistance
of counsel and, apart from the disclosures in the C.A.R.
documents, Lascano did not advise them to speak to a lawyer
before they agreed to the addendum. Escrow closed on July 29,
2016.
2. The Addendum to the Purchase/Sale Agreement
The addendum to the purchase/sale contract provided:
(1) The purchase price of $1.8 million would be discounted by
$22,000 (a $20,000 deduction plus the buyers would receive free
of charge outdoor furniture that the buyers had previously agreed
to buy from the Hansens for $2,000). (2) The Hansens “will place
$60,000 of the sale proceeds into an immediate escrow account.
This gives assurances that the repairs will be performed by the
contractors chosen by Buyers[ ] and paid for by State Farm (claim
# 75-8W17-665 insured by Chris and Deanna Hansen) to Buyers’
contractor. Once the repairs are complete to the satisfaction of
the buyers, $20,000 will be released from escrow to the buyers
and $40,000 will concurrently be released from escrow to the
sellers. Until the buyers are satisfied (or a new deal for the
escrow holdback monies is jointly negotiated), the full $60,000
will remain parked in escrow.” (3) The Hansens “agree to pay
Buyers’ PITI [principal, interest, taxes and insurance] from close
of escrow until completion of all restoration work.” (4) “Once
Sellers have notified Buyers that all work has been completed by
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Sellers and Buyers’ contractor, Buyers will approve all finish
work at final walk through and agree to sign off the release of
holdback funds to Sellers less $20,000 and any PITI that Sellers
may still owe to Buyers.” (5) “Buyers understand that Sellers
will be replacing like-for-like materials. If Buyers wish to
upgrade an item, Buyers will pay the cost difference for upgraded
choice.” (6) “Sellers agree that once Servpro [the mold
remediation company] has completed the demolition and has
given clearance to start finish work, Sellers will perform an
ambient test to ensure house is moist free. Company of Buyers’
choice will perform ambient test.” (7) “Sellers agree to pay all
utilities from July 21st until buyers take possession of the
property.” (8) “Buyers recognize that time is of the essence.
Delays will be costly. Buyers will act promptly to plan,
coordinate and perform work on the house. For example, finish
choices will be selected in advance and the re-build job will be
scheduled in advance so that Buyers’ contractor can proceed
immediately with the re-build once Servpro has completed the
demolition work and the ambient test has confirmed that the
house is moisture free.” (9) If State Farm “fails to pay any
replacement cost for similar construction, Sellers agree to pay to
contractor any replacement cost for similar construction.”
3. The Dispute Between the Hansens and the Shin/Shinns
Almost immediately after escrow closed the Hansens
disputed their obligations under the addendum. The Hansens
insisted they had the right to review and approve repair
estimates from any contractor the Shin/Shinns selected before
turning over any of the insurance proceeds they received from
State Farm to pay for the repairs. The Shin/Shinns disagreed
with that interpretation of the addendum, but, over the course of
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several weeks in August and September 2016, provided to
Christopher Hansen six estimates from general contracting
companies, ranging in price from $173,310 to $185,200.
Christopher Hansen rejected each one of these estimates as
inflated, lacking sufficient specificity, or both.
On August 2, 2016 Christopher Hansen told the
Shin/Shinns he would provide them with State Farm’s repair
estimates as soon as he received them. However, Hansen
changed his mind after he received State Farm’s repair estimates
and learned that State Farm would pay him directly, not the
Shin/Shinns. He told the Shin/Shinns State Farm’s repair
estimates were irrelevant to the cost of repairs and would cause
any contractor they selected to inflate its repair estimate. He
explained his thinking in greater detail in an email he sent to the
Shin/Shinns on August 15, 2016: “I will pay the cost to repair or
replace damaged items with similar construction. . . . The
obligation is mine. The risk is mine. The insurance policy is
mine. If it turns out that State Farm won’t pay enough, then I
must pay more in order to make up the difference. But, on the
other hand, if it turns out that there is some extra in the State
Farm payment(s) [than] is needed to repair or replace damaged
items with similar construction, then that extra goes in my
pocket, not yours. I have good insurance. I paid higher
premiums for better coverage. You should not reap the benefit of
my choice to pay higher insurance premiums for 13-1/2 years.”
On August 9, 2016 State Farm issued a net payment of
$160,164.47 to the Hansens to repair the damage to the home.
Citing custom cabinetry and other finishing work not
contemplated in the original estimate, Christopher Hansen
successfully sought, and obtained, additional payments from
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State Farm in September 2016 (for $19,711.04) and October 2016
($10,655.18). He also received an additional payment in June
2017 ($29,240.25) for a total replacement compensation of nearly
$220,000.
On September 26, 2016 the Hansens offered the
Shin/Shinns a global settlement of $105,200, $87,000 of which
was designated for repair costs. Christopher Hansen insisted the
amount was generous, despite knowing State Farm’s August 9,
2016 repair estimate, even before the Hansens managed to
increase the payments due, was nearly double the amount the
Hansens had offered for repairs. If the Shin/Shinn buyers did not
agree, Christopher Hansen wrote, they should provide him with a
detailed bid price, “which will almost surely be lower than today’s
settlement offer.” The Shin/Shinn buyers rejected the offer.
4. The Arbitration of the Hansens’ and the Shin/Shinns’
Dispute; the Filing of this Lawsuit
The Shin/Shinns accused the Hansens of breach of contract
and breach of the implied covenant of good faith and fair dealing.
They arbitrated their dispute in accordance with an arbitration
provision in their purchase/sale agreement.
In addition, both the Hansens and the Shin/Shinns sued
the broker defendants in Los Angeles Superior Court. Those
lawsuits (including the instant action) were ordered consolidated
and stayed pending completion of the arbitration.
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5. The Arbitrator’s Ruling in Favor of the Shin/Shinns
The arbitrator, attorney Robert L. Friedenberg of ADR
Services, Inc., ruled in favor of the Shin/Shinns on their claims of
breach of contract and breach of the implied covenant of good
faith and fair dealing and against the Hansens on their contract
claims. The arbitrator found, after consideration of all the
documentary evidence and oral testimony presented at the
arbitration, that the Hansens had breached the clear intent and
spirit of the addendum: “This could and should have been
relatively simple—Sellers place funds in escrow, work if and
when necessary with their homeowner’s carrier to fund the
repairs, then get out of the way while the Buyers’ chosen
contractor works with State Farm to complete the repair project
and gets paid by State Farm funds. Even after State Farm sent
the estimate to its own policyholder first, and then the policy
proceeds to Hansen as well, all Hansen had to do was to provide
the estimate to Shin (as originally promised) so that Shin could
have his selected contractor bid the same scope as the
homeowner’s carrier and promptly do the work. As with virtually
all insurance-paid repair projects, the contractor could work with
the claims handler to increase the funds for covered damages. No
evidence was presented that State Farm’s policy would pay for
anything in excess of what the Addendum provided—repair of
damage with like-for-like materials. In fact, no homeowner’s
policy would pay for anything extra unless there was coverage for
code upgrades, a factor not present or relevant here.
“With regard to the payment directly to the contractor,
early on, State Farm (not a party to the contract even though it
was to be the funding entity) did the normal thing and paid its
policyholder directly. The Addendum set forth a specific escrow
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account (Granite Escrow) to hold funds that could become
necessary later, but would only be released upon completion of
the work to Buyers’ satisfaction. Simply depositing the State
Farm funds into that escrow account, or a separate one, with
instructions to release funds as required during the construction
process, would have resolved that issue and kept the Sellers to
the sidelines, as the Addendum required. The job may well have
been finished in three months, by the end of 2016, as Hansen
himself believed when corresponding directly with State Farm.
But instead of a simple, clean transaction that would likely have
concluded over two years ago, we have our current situation—an
empty shell of a house, repair costs of necessity higher due to the
long span of time between September 2016 and today, and
two parties out many, many thousands of dollars litigating a
matter that should have resolved long ago.
“Hansen further breached by requiring his approval of any
bid, and withholding that approval from all bids that didn’t meet
his internal beliefs. As the evidence shows, Hansen privately
worked on State Farm to increase the amount of policy proceeds
for the job, kept all those funds for himself, while simultaneously
criticizing the scope and cost of all bids he made Shin submit to
him—six in all before the ATI bid. The bids were [according to
Christopher Hansen] either ‘skimpy’ or ‘fat’ (including the State
Farm estimate by his own admission (‘over-generous’), even
though he continued to seek more funds) and thus all fell short.
Hansen unilaterally modified the core of the contractual
arrangement—the Buyers would choose the contractor, not the
Sellers.”
The arbitrator further found Christopher Hansen
attempted from “early on” to “subvert the intent of the Addendum
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by offering an artificially low lump sum amount to Shin. This
was done despite his knowledge that the State Farm estimate
was almost double his own offer, and close in amount as all the
bids submitted by Shin. Hansen offered a total of $105,200 on
September 25 . . . after he was already paid $160,164 by State
Farm on August 9, and that offer included about $18,000 of PITI
and only $87,000 for repairs.”
According to the arbitrator, the testimony and documentary
evidence at the arbitration hearing “glaringly demonstrate[d] a
breach of the covenant of good faith and fair dealing by Sellers.”
The arbitrator awarded the Shin/Shinns $764,522.25—
$310,720.05 in “reasonable cost of repair” damages, $272,133.70
in unpaid PITI and utilities, $181,668.50 in attorney fees and
costs as the prevailing party under the contract—plus
prejudgment and postjudgment interest. The Shin/Shinns did
not petition the court to confirm the arbitration award; the
Hansens did not petition to vacate it.
6. The Hansens’ Operative First Amended Complaint
Against the Broker Defendants
In May 2019, following their payment of the arbitration
award and the superior court’s order lifting the stay of the
lawsuit, the Hansens filed a first amended complaint in the case
at bar alleging professional negligence, breach of fiduciary duty,
and unfair competition/unfair business practice under Business
and Professions Code section 17200 et seq.
As to the claims for professional negligence and breach of
fiduciary duty, the Hansens alleged the broker defendants had
breached duties owed to them by (1) continuing to jointly
represent both the Hansens and the Shin/Shinns when it had
become clear following the water damage the parties had a new
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and significant conflict of interest; (2) failing to recommend the
Hansens obtain legal advice before signing the addendum;
(3) negligently drafting the addendum by failing to ensure, in
accordance with the intent of the Hansens and the Shin/Shinns,
that State Farm would negotiate with the Shin/Shinns directly
concerning the price of repairs, failing to restrict the repair costs
to a reasonable amount, and omitting any specific timeframe for
completion of repairs while making the Hansens liable for PITI
until repairs were completed; and (4) failing to explain to the
Hansens their legal obligations under the addendum or consult
with legal counsel before preparing the addendum.
The Hansens alleged the broker defendants’ negligence
caused them to suffer an adverse arbitration award of more than
$760,000, which they paid following the arbitrator’s ruling. In
their prayer for relief for the professional negligence and breach
of fiduciary duty causes of action, the Hansens sought
compensatory damages of “not less than $1 million,” treble
damages not to exceed $10,000 (Code Civ. Proc., § 1029.8),
punitive damages (for the breach of fiduciary duty only), plus
attorney fees and costs.
As to the unfair competition claim, the Hansens alleged
Lascano, who was not an attorney, “suggested and prepared” a
legal document, the addendum, in violation of Business and
Professions Code section 6125 (practicing law without a license).
The Hansens sought restitution of $72,800 (the commission they
paid to the broker) plus treble damages pursuant to Code of Civil
Procedure section 1029.8 and reasonable attorney fees.
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7. The Broker Defendants’ Motion for Summary Judgment
On November 27, 2019 the broker defendants moved for
summary judgment or, in the alternative, summary adjudication
as to each cause of action. As to the professional negligence and
breach of fiduciary duty claims, the broker defendants asserted
there was no breach of any duty. The broker agreement and
related documents, which they provided with their motion, had
advised the Hansens of the dual representation and told them the
parties should consult with counsel if legal or tax advice was
desired. No further disclosures, they argued, were required.
In his declaration supporting the broker defendants’
motion, Lascano described his actions following the water leak.
Lascano recalled that, after the water leak, the Shin/Shinns
requested a $50,000 discount off the purchase price. Lascano
conveyed that message to the Hansens. Christopher Hansen
then responded in a July 26, 2016 email to Lascano with what
Hansen described in that email as his “best and final
counteroffer.” “We [the Hansens] will pay for the repair (together
with our insurance company), we will keep holdback money in
escrow until repairs are complete, and we will cover the buyers’
carrying costs until the house is ready for occupancy. State Farm
confirms this is a covered loss. We all heard ServPro say today
that they guarantee that the house will be dry and free of mold.
Deanna and I agree to use the buyers’ preferred contractor for the
re-build. The buyers will get a dry house with new interior
surfaces of their own choosing. And with the brand new flooring,
baseboards, walls, paint and etc., the house will be worth more
after the repair than it was when the buyers agreed to the deal
two months ago.” Hansen continued, “in addition to the
foregoing,” he and his wife would (1) reduce the purchase price by
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$22,000; and (2) deposit $50,000 of the sale proceeds into an
escrow account to assure the buyers that repairs would be
performed “by the buyers’ contractor and paid for by State Farm.”
On July 27, 2016, Lascano forwarded Christopher Hansen’s
July 26, 2016 email to Shin. According to Lascano, Hansen’s
email, and Shin’s requests in response, became the terms of the
addendum.1 Lascano stated he prepared and circulated “the
initial draft of the Addendum to Mr. Shin on July 28[,] 2016.”
After receiving the initial draft, Shin asked that Lascano add,
“Seller will pay any shortfall of the State Farm funds,” which
1 Lascano stated the “first two paragraphs of the Addendum
came from Mr. Hansen’s [July 26, 2016] email. Mr. Shin required
a $60,000.00 holdback [$10,000 more than Hansen had offered]
and the addition of [the words] [‘]to Buyer’s Contractor[’] in the
Second Sentence of paragraph 2. Plus, there was an additional
last month’s PITI of $8,552.70 to be held in escrow. Paragraph 3
was language provided by Mr. Shin addressing his concerns that
Seller will pay the princip[al], interest, taxes and insurance. I
included at Paragraph 4, Shin’s request that funds would not be
released until Buyer[s] are satisfied. This was also a deal term
agreed upon and presented by Hansen in his July 26 email,
which became paragraph 2 of the Addendum. Mr. Shin wanted
Sellers to perform an ambient test to ensure house was moisture
free. Shin’s terms regarding the moisture test was included in
Paragraph 6 of the Addendum. [¶] . . . Mr. Hansen included
language that Buyers will be replacing like for like materials and
Buyers will pay the difference for upgrades, if they wanted
upgrades. This deal term of Mr. Hansen was put in the
Addendum at Paragraph 5. Since Mr. Hansen was paying PITI
he wanted to make sure that the rebuilt job will not be delayed
which was included in Paragraph 8 of the Addendum.”
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Lascano added to paragraph 9 of the addendum. Lascano then
circulated the final draft to the Hansens and the Shin/Shinns.
Both the Hansens and the Shin/Shinns signed the addendum
without consulting counsel.
The broker defendants also provided a declaration from
Alan D. Wallace, an attorney and licensed real estate broker.
Wallace opined Lascano had acted in accordance with the
standard of care for a licensed real estate agent by providing the
appropriate dual agency disclosures and advisements that the
broker would not provide legal advice and the parties should seek
advice from legal counsel if desired. As to the preparation of the
addendum, Wallace stated that, when a property suffers damage
while in escrow, “the parties customarily enter into addendums
and agreements for continuing work to be completed after the
close of escrow with negotiated escrow holdbacks and agreements
for completion of the work.” “A broker merely puts the parties’
deal terms together to contractually bind the parties.” He opined,
based on his review of Hansen’s July 26, 2016 email, that
Lascano merely incorporated the terms Hansen requested into
the addendum, and accordingly operated within the standard of
care governing licensed real estate agents.
Responding to allegations in the first amended complaint
that Lascano failed to ensure State Farm was contractually
bound to pay the Shin/Shinns directly, Wallace stated, “It is not
within the scope of a real estate broker’s duties to get third party
contractual commitments to ensure performance in case a buyer
or seller breaches their own respective contractual
commitments.” “A real estate purchase transaction involves
third party financing, vendors providing service in the course of a
transaction, title companies and ongoing contractor repair work.
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In any of these situations it is the custom and practice of real
estate brokers to get the contractual commitment of the buyer
and seller to the transaction and not to include third parties.”
Wallace opined, “[B]ased upon my experience in the custom and
practice of a real estate broker, there was no other commitment
necessary from State Farm since Hansen agreed to pay Buyer’s
Contractor with the State Farm funds. In my experience with
the custom and practice of real estate brokers, obtaining such a
contractual commitment from an insurance company for an
agreement between a buyer and seller is outside the scope of duty
for a licensed real estate broker.”
As to the unfair competition claim, the broker defendants
argued Lascano had acted merely as a scrivener in preparing an
addendum the Hansens had negotiated with the Shin/Shinns and
therefore did not engage in the unauthorized practice of law.
As to all causes of action, the broker defendants argued
that the Hansens could not prove causation, an essential element
of each claim. Citing the arbitrator’s decision, which they
included with their motion (and to which the Hansens did not
object), as well as other evidence, the broker defendants argued it
was Christopher Hansen’s own breach of the addendum and bad
faith conduct that had caused him to suffer the injury he
claimed—the arbitration award and associated costs—and not
any negligence or breach of duty by the broker defendants in
connection with preparation of the addendum.
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8. The Hansens’ Opposition to the Broker Defendants’
Motion for Summary Judgment/Summary Adjudication
In their opposition papers the Hansens argued the broker
defendants did not carry their initial burden on summary
judgment with respect to their professional negligence action. In
particular, the Hansens asserted the broker defendants failed to
address, either through Wallace’s declaration or otherwise, the
allegation that continuing to represent both the Hansens and the
Shin/Shinns after the water damage occurred constituted a
breach of their professional duty of care.
In addition, the Hansens argued triable issues of material
fact existed as to whether the broker defendants had breached
their duty of care and fiduciary duty to the Hansens. The
Hansens provided an expert declaration from attorney
Lawrence H. Jacobson, a special prosecutor for the State Bar of
California with an expertise in “business, real estate and ethics
matters.” Jacobson opined the broker defendants “fell below the
standard of care by failing to conform to the custom and practices
of a reasonably competent real estate agent and broker, by
performing services beyond the ability and training of a real
estate licensee.” Responding to Wallace’s declaration, Jacobson
stated the broker defendants fell below the standard of care for
real estate brokers/agents by drafting the addendum. “While it is
certain that it is the custom and practice of real estate agents to
fill in the blanks in C.A.R. forms or simple addenda, custom and
practice does not extend to drafting complex documents with
significant legal issues and consequences. The events which led
to this case were not a simple price adjustment or extension of
the close of escrow. It was a major construction project, which
contained significant issues far beyond the experience,
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qualifications or expertise of a real estate agent.” Jacobson
continued, “If Lascano chose to act like a lawyer, he should be
held to the standard of one. If a lawyer had drafted the
addendum, he would clearly have committed malpractice.”
The Hansens also insisted triable issues of material fact
existed as to whether Lascano was merely a scrivener of the
Hansens’ and the Shin/Shinns’ agreement. In his declaration,
Christopher Hansen stated the notion of drafting an addendum
was Lascano’s idea, not the Hansens’ or the Shin/Shinns’.
Hansen stated he had initially thought he would take the house
off the market until it could be repaired, but Lascano assured
him Lascano could draft an addendum that would salvage the
deal. It was Lascano, Hansen asserted, who drafted an initial
addendum on July 24, 2016, a fact, Hansen noted, Lascano did
not mention in his declaration.2 In agreeing to move forward
2 The July 24, 2016 draft addendum prepared by Lascano
was different from, and simpler than, the final addendum. It
contained four paragraphs: (1) “Seller agrees to hold back in
escrow two times the amount of the cost to repair any and all
damages caused by water damage. Servpro to provide a detailed
outline of all work to be completed along with dollar amount to
restore all damaged surfaces. If Sellers do not
finish/restore/complete any of the work Servpro proposed, Buyer
will be entitled to cost to complete from holdback funds.”
(2) “Seller agrees to pay Buyer’s PITI (princip[al], interest, taxes
and insurance) from close of escrow until completion of all
restoration work. Buyer’s daily PITI is $[___]. [¶] Seller will
leave 30 days’ worth of Buyer’s PITI in escrow at close of escrow
as additional good faith, and will issue a personal check to Buyer
every 30 days until all work is completed.” (3) “Once Seller and
ServPro have notified Buyer that all work has been completed by
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with the sale, Hansen stated, “I assumed that Lascano or another
agent at Hilton & Hyland had experience with property
sustaining damage during escrow and he or they knew State
Farm would pay the Buyer’s contractor as stipulated by” the
addendum.
As to causation, the Hansens argued the addendum
provided that State Farm would pay the buyers’ contractor.
However, State Farm told the Hansens after the addendum was
signed that its policy was to work with and pay its insured, not a
third party. If the Hansens had known that State Farm would
not work with the Shin/Shinns’ contractor directly, the Hansens
asserted, they and the Shin/Shinns “would undoubtedly have
made different decisions.” The Hansens also argued that
Lascano’s negligence in drafting language that imposed no
limitations on repair costs other than mandating “like-for-like”
materials and that left them responsible for any costs State Farm
did not cover placed the Hansens “between a rock and a hard
place—don’t turn over the State Farm funds and be found to
breach the contract or turn over the State Farm funds and get
taken to the cleaners.” According to Christopher Hansen, once
State Farm “refused to negotiate” with the Shin/Shinns directly
as to the cost of repairs, “I tried to protect myself and ensure we
only paid market rates for ‘like for like’ materials in quantities
existing when the house was sold to the Buyers. I was very
Seller and Servpro, Buyer will approve all finish work at final
walk through and agrees to sign off the release of hold back funds
to Seller less any PITI that Seller may still owe to Buyer.”
(4) “Buyer understands that Seller will be replacing like-for-like
materials. If Buyer wishes to upgrade . . . Buyer will pay the cost
difference for upgraded choice.”
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concerned because the Addendum obligates my wife and me to
pay any shortfall between the monies paid by State Farm and the
cost of repair.” “In addition, I know the Buyers intended to
upgrade some of the materials, such as installing better grade
kitchen cabinets, and I wanted to ensure my wife and I did not
pay for the extra cost of those materials. Lascano told me before
the original purchase/sale agreement was signed in May 2016
that the Buyers were considering a remodel of the house.”
Hansen declared two of the contractors the Shin/Shinns proposed
had told him Shin had instructed them to inflate their bids.
The Hansens also included with their opposition papers a
declaration from Sandra Tatum, the manager of the State Farm’s
large claims division that handled the Hansens’ insurance claim.
Tatum explained State Farm’s policy was to discuss the claim
with its insured and “would not have negotiated with Mr. Shin’s
contractor to arrive at a cost of repair” or pay the Shin/Shinns
directly. Tatum told the Shin/Shinns when they asked for State
Farm’s repair estimates in August 2016 that “State Farm is not
able to assist you as a non-party to the insuring agreement.”
The Hansens also cited portions of the arbitrator’s award in
their opposition to the motion for summary judgment/summary
adjudication, arguing even the arbitrator thought the addendum
was flawed and Lascano probably bore some responsibility for the
situation.
9. The Broker Defendants’ Reply
In their reply in support of their motion for summary
judgment/summary adjudication the broker defendants argued,
among other things, the Hansens failed to raise any triable issue
of material fact as to causation.
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10. The Order Granting Summary Judgment
The court granted the broker defendants’ motion for
summary judgment. Citing the parties’ conflicting expert
declarations, the court found triable issues of material fact
existed as to whether Lascano had breached any fiduciary duty
and other duties of care by preparing a complex addendum to the
purchase agreement without consulting with counsel. However,
the court ruled summary judgment was proper because the
Hansens could not demonstrate but-for causation as required for
professional negligence cases: The undisputed evidence
established it was Christopher Hansen’s own misconduct that
caused the Hansens to suffer the injury he claimed, not any of the
alleged breaches of duty by the broker defendants. As to the
unfair competition/unfair business practice claim, the court also
found the undisputed evidence established as a matter of law
that Lascano had acted merely as a scrivener of the parties’ own
deal terms in writing the addendum.
The Hansens filed a timely notice of appeal.
DISCUSSION
1. Standard of Review
A motion for summary judgment is properly granted only
when “all the papers submitted show that there is no triable
issue as to any material fact and that the moving party is entitled
to a judgment as a matter of law.” (Code Civ. Proc., § 437c,
subd. (c).) A defendant may bring a motion on the ground the
plaintiff cannot prove one of the required elements of the case or
there is a complete defense to the action. (Code of Civ. Proc.,
§ 437c, subds. (o)(1), (2) & (p)(2); Aguilar v. Atlantic Richfield Co.
(2001) 25 Cal.4th 826, 849.)
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To carry its initial burden when the motion is directed to
the plaintiff’s case rather than an affirmative defense, the
defendant must present evidence that either negates an element
of the plaintiff’s cause of action or shows that the plaintiff does
not possess, and cannot reasonably obtain, evidence necessary to
establish at least one element of the cause of action. (Aguilar v.
Atlantic Richfield Co., supra, 25 Cal.4th at pp. 853-854.) Only
after the defendant carries that initial burden does the burden
shift to the plaintiff “to show that a triable issue of one or more
material facts exists as to the cause of action or a defense
thereto.” (Code Civ. Proc., § 437c, subd. (p)(2).)
We review a grant of summary judgment de novo (Samara
v. Matar (2018) 5 Cal.5th 322, 338) and, viewing the evidence in
the light most favorable to the nonmoving party (Regents of
University of California v. Superior Court (2018) 4 Cal.5th 607,
618), decide independently whether the facts not subject to
triable dispute warrant judgment for the moving party as a
matter of law. (Hampton v. County of San Diego (2015)
62 Cal.4th 340, 347; Schachter v. Citigroup, Inc. (2009) 47 Cal.4th
610, 618.)
2. The Hansens Failed To Demonstrate Triable Issues of
Material Fact as to Causation, an Essential Element of
Each of Their Claims
a. Governing law on professional negligence
“The elements of a cause of action for professional
negligence are (1) the existence of the duty of the professional to
use such skill, prudence, and diligence as other members of the
profession commonly possess and exercise; (2) breach of that
duty; (3) a causal connection between the negligent conduct and
the resulting injury; and (4) actual loss or damage resulting from
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the professional negligence.” (Oasis West Realty, LLC v.
Goldman (2011) 51 Cal.4th 811, 821; Wise v. DLA Piper LLP (US)
(2013) 220 Cal.App.4th 1180, 1190.)
To prove causation in a professional negligence matter, the
plaintiff must demonstrate that but for the alleged professional
negligence, the plaintiff would have obtained a more favorable
outcome. (Viner v. Sweet (2003) 30 Cal.4th 1232, 1241 (Viner);
Namikas v. Miller (2014) 225 Cal.App.4th 1574, 1581-1582.)
Speculation as to what could have occurred absent the
professional negligence is insufficient. (Viner, at p. 1241 [“[t]he
purpose of this [but for] requirement . . . is to safeguard against
speculative and conjectural claims”].) Although causation is
usually a question of fact, it may be decided as a matter of law if,
under undisputed facts, there is no room for a reasonable
difference of opinion as to the legal effect of the evidence
presented. (Knapp v. Ginsberg (2021) 67 Cal.App.5th 504, 526;
Namikas, at p. 1583; Moua v. Pittullo, Howington, Baker,
Abernathy LLP (2014) 228 Cal.App.4th 107, 113.)
b. The trial court did not err in considering the
arbitrator’s ruling
Citing language from the court’s summary judgment
ruling,3 the Hansens argue “as a threshold matter” the trial court
3 In its ruling granting summary judgment the court stated,
“According to the arbitration award, [the] Hansens breached the
Addendum’s implied covenant of good faith and fair dealing in
refusing to pay Shin/Shinn’s contractors. These findings are
binding. (CCP 1287.6 (‘An award that has not been confirmed or
vacated has the same force and effect as a contract in writing
between the parties to the arbitration’); Evid Code § 622 (‘The
facts recited in a written instrument are conclusively presumed
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erred in crediting the arbitrator’s findings as facts and
concluding, based on those findings, that the Hansens could not
establish causation in this case. The broker defendants respond
that, when, as here, the only injury alleged is an arbitration
award, the basis for that award is relevant and properly
considered by the court. They observe that the Hansens not only
failed to object to the arbitration ruling as an evidentiary matter,
but they also cited the arbitrator’s findings in their opposition
papers.
The Hansens are generally correct the arbitrator’s ruling
was not binding as a contract between the parties to this action
(see Code Civ. Proc., § 1287.6) and had no preclusive effect. (See
Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 834 [unless
the arbitral parties agreed otherwise, a private arbitration award
has no nonmutual collateral estoppel/issue preclusion effect,
whether or not the award was judicially confirmed].) But the
arbitration award was properly before the trial court and
appropriately considered by it with the other evidence submitted
by the parties. We, too, may consider it, along with all the other
evidence, as part of our de novo review. (See Yanowitz v. L’Oreal
USA, Inc. (2005) 36 Cal.4th 1028, 1037 [our de novo review
considers “‘“all the evidence set forth in the moving and opposing
papers except that to which objections were made and
sustained”’”].) To the extent the court incorrectly understood the
to be true as between the parties thereto, or their successors in
interest; but this rule does not apply to the recital of a
consideration.’). And these findings are conclusive in precluding
the Hansens from recovering for their own wrongdoing. (See also
Civ. Code § 3517 (‘No one can take advantage of his own wrong’).”
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arbitrator’s ruling as “conclusive” and “binding,” which is by no
means clear despite the language the court used, we review the
court’s ruling, not its reasoning. (AMN Healthcare, Inc. v. Aya
Healthcare Services, Inc. (2018) 28 Cal.App.5th 923, 934
[appellate court reviews trial court’s ruling, not its rationale];
Young v. Horizon West, Inc. (2013) 220 Cal.App.4th 1122, 1127
[same].)
c. The Hansens presented no nonspeculative evidence to
establish causation
In their moving papers the broker defendants presented
evidence, including Christopher Hansen’s emails to the
Shin/Shinns and his receipt of payments from State Farm, to
demonstrate the Hansens breached the addendum. They also
cited the arbitration award for the proposition that the only
injury the Hansens alleged—the adverse arbitration award—was
a result of their own conduct, not any negligence or misconduct
by the broker defendants. Taken together, this evidence shifted
the burden to the Hansens to demonstrate a triable issue of
material fact as to whether any of the negligence they alleged on
the part of the broker defendants caused their injury.
The burden having shifted to them on the issue of
causation, the Hansens contend, had Lascano done his job and
discovered State Farm would not negotiate with and pay the
Shin/Shinns’ contractor directly, the Hansens and the
Shin/Shinns would undoubtedly have agreed to a different
arrangement or the Hansens would have walked away from the
deal. However, they presented no evidence, direct or
circumstantial, a different arrangement with better terms with
the Shin/Shinns was possible (see Viner, supra, 30 Cal.4th at
pp. 1242-1243) or that abandoning the sale would have led to a
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better outcome than would have been achieved under the
addendum as drafted had they complied with its terms. (See
Viner v. Sweet (2004) 117 Cal.App.4th 1218, 1227 [causation was
not established where Viners “failed to present any evidence to
prove they would have been better off economically under this ‘no
deal’ scenario”].) A no-deal scenario would have left the Hansens
obligated to pay for repairs to the home working with their
insurance company. True, they say, but they would not have had
to pay an arbitration award of more than $760,000. That is,
according to the Hansens’ theory of the case, but for the
negligently crafted addendum that left them responsible for
repairs not covered by State Farm, with no reasonable limitations
on cost, Christopher Hansen would not have been in the
untenable position of having to negotiate with the Shin/Shinns’
contractor directly to ensure there were no hidden upgrades for
which he should not be charged. It was that conduct, made
necessary by the addendum, they assert, that led to the adverse
arbitration ruling against them.
The contention the broker defendants’ negligence created
the opportunity for Christopher Hansen to act as he did stretches
“but for” causation beyond its breaking point. To be sure, the
addendum was part of the chain of events that led to Hansen
micromanaging the construction process, withholding funds
designated for repairs while negotiating for more money for
himself. But the addendum did not contemplate, let alone
compel, that conduct. (See Viner, supra, 30 Cal.4th at p. 1241
[causation is lacking “where the client’s own misconduct or
misjudgment causes the problems”].)
Quoting from the arbitrator’s ruling, the Hansens
emphasize that even the arbitrator believed the addendum was
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flawed and that the broker defendants bore some responsibility
for the disputes that arose between the Hansens and the
Shin/Shinns. The arbitrator wrote, “The agreement has some
flaws and failed in one obvious way to account for what should
happen if State Farm would not deal directly with the Buyers or
their chosen contractor, but instead pay Hansen directly. (As an
aside, Lascano may and probably should be held responsible to
both parties for failing to help or get involved once the
circumstances with State Farm changed, but neither he nor
Hilton & Hyland was a party to this arbitration and had no
opportunity to defend this action, or more appropriately, inaction,
and disappearance after close of escrow.)” The Hansens stop
their quotation from the ruling there. Had they continued, they
would have included the arbitrator’s conclusion that, despite any
flaws in the addendum, it was the Hansens, in an effort to
maximize their gains and minimize their losses, that caused their
own harm by subverting not just the letter, but the clear intent of
the addendum.4
More significantly, whether or not the Hansens’
withholding of cost-of-repair funds was in bad faith, the Hansens’
inability as a matter of law to tie their claimed injury to the
broker defendants’ negligence is manifest. As discussed, to raise
4 Following his aside, the arbitrator stated, “Still, the intent
of the Addendum to the Purchase Agreement was abundantly
clear—payment for repairs to the property would be performed by
contractors chosen by buyers and paid for by State Farm to
Buyers’ contractor.” The arbitrator continued, the contract
“manifestly did not contemplate the Sellers holding the funds and
exerting a veto power over the choice of contractor and amount to
be paid.”
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a triable issue of fact as to causation, the Hansens were required
to provide evidence they would have obtained a better outcome
but for the negligence of the broker defendants. They cannot.
They concede they intended to pay for reasonable costs of repairs,
but claim, due to the broker defendants’ negligence, found
themselves liable for an arbitration award that far exceeded that
sum. The award, however, was comprised of (1) the reasonable
cost of repairs (as of March 2019, due to the Hansens’ delay in
payment, rather than July 2016); (2) unpaid PITI (three years’
worth due to the Hansens’ delay); (3) and interest and attorney
fees for the Hansens’ breach. None of those damages was due to
the alleged negligent acts or omissions of the broker defendants.
All were the result of the Hansens’ failure/delay in paying the
Shin/Shinns.
In sum, the broker defendants carried their initial burden
on summary judgment to demonstrate the Hansens could not
prove causation with respect to the injury alleged. Rather than
create a triable issue of fact on that question, the Hansens’
opposition papers only reinforced the broker defendants’
argument on that point.
d. The Hansens’ causes of action for breach of fiduciary
duty and unfair competition/unfair business practice
similarly fail
The elements of a cause of action for breach of fiduciary
duty are the existence of a fiduciary relationship, breach of
fiduciary duty and resulting damage. (Oasis West Realty, LLC v.
Goldman, supra, 51 Cal.4th at p. 820.) For the reasons
discussed, the Hansens cannot show the broker defendants’
alleged negligence caused their injury. Accordingly, the court did
not err in finding the Hansens had failed to demonstrate any
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reasonable trier of fact could find in their favor on this essential
element.
The “unfair competition law (Bus. & Prof. Code,
§ 17200 et seq.) authorizes civil suits for ‘unfair competition’
[citation], which it defines to ‘include any unlawful, unfair or
fraudulent business act or practice and unfair, deceptive, untrue
or misleading advertising.’ [Citation.] . . . [Citation.] ‘By defining
unfair competition to include any “unlawful . . . business act or
practice” [citation], the [unfair competition law] permits
violations of other laws to be treated as unfair competition that is
independently actionable.’” (In re Tobacco Cases II (2007)
41 Cal.4th 1257, 1266; accord, Kasky v. Nike, Inc. (2002)
27 Cal.4th 939, 949.)
Citing Jacobson’s declaration that the addendum was
beyond the expertise of a real estate agent and Christopher
Hansen’s declaration that the ideas in the addendum, including
those in his July 26, 2016 email, originated with Lascano, the
Hansens contend they raised a triable issue of material fact as to
whether Lascano was merely a scrivener and whether he violated
Business and Professions Code section 6125 when he drafted the
addendum. (See Bus. & Prof. Code, § 6125 [ “[n]o person shall
practice law in California unless the person is an active licensee
of the State Bar”]; Birbrower, Montalbano, Condon & Frank v.
Superior Court (1998) 17 Cal.4th 119, 128 [unauthorized practice
of law includes giving legal advice and preparing legal
instruments and contracts].)
For this cause of action, too, the Hansens must be able to
demonstrate at trial that their injury was caused by the alleged
unfair competition. (Bus. & Prof. Code, § 17204 [private plaintiff
has standing to proceed under unfair competition law only if he
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or she suffered injury “as a result of the unfair competition”];
Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 326
[section 17204 of the Business and Professions Code imposes an
element of causation into this cause of action].) Although the
Hansens might be able to recover the commission paid to the
broker defendants as a form of restitution if they proved their
unfair competition claim, the only injury alleged as a result of
Lascano’s purported unauthorized practice of law was the
preparation of the addendum. As discussed, that conduct did not
cause the injury identified by the Hansens. The Hansens’
inability to demonstrate causation is fatal to this claim.
DISPOSITION
The judgment is affirmed. The broker defendants are to
recover their costs on appeal.
PERLUSS, P. J.
We concur:
SEGAL, J.
FEUER, J.
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