Nosrati v. Cronen CA2/7 ( 2022 )

Filed 10/13/22 Nosrati v. Cronen CA2/7
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
M. SAEID NOSRATI et al., B315738
Plaintiffs and Appellants, (Los Angeles County
Super. Ct.
v. No. LC102860)
SHEILA CRONEN et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Virginia Keeny, Judge. Reversed with
directions.
J. Hartley Law and Jura Andrew Hartley for Plaintiffs and
Appellants.
Practus and Steven E. Young; Alon, Edward E. Alon and
Jonathan A. Alon for Defendant and Respondent Manuel
Gonzalez.
Lipeles Law Group, Kevin A. Lipeles and Thomas H.
Schelly for Defendant and Respondent Sheila Cronen.
INTRODUCTION
M. Saeid Nosrati and Nooshin Haroonian sued Manuel
Gonzalez and Sheila Cronen (also known as Sheila Gonzalez; for
simplicity, we refer to Gonzalez and Cronen as the Gonzalezes)
alleging the Gonzalezes failed to disclose defects in a home they
sold to Nosrati and Haroonian. Shortly before trial the
Gonzalezes accepted Nosrati’s demand for rescission of the
purchase agreement, and the trial court granted the Gonzalezes’
motion to rescind the agreement. Following the trial, the court
awarded Nosrati and Haroonian consequential damages and,
under Civil Code section 3287, subdivision (a), prejudgment
interest on the purchase price from the date the court ordered
rescission.1
Nosrati and Haroonian contend the trial court should have
awarded prejudgment interest from the date Nosrati served the
original complaint, which gave the Gonzalezes notice of
rescission. The Gonzalezes argue that an exception in section
3287, subdivision (a), precluded Nosrati and Haroonian from
recovering prejudgment interest prior to the date the court
ordered rescission. The Gonzalezes also ask us to dismiss Nosrati
and Haroonian’s appeal under the disentitlement doctrine. We
conclude that the trial court should have awarded prejudgment
interest from the date Nosrati served the original complaint, that
the statutory exception does not apply, and that the Gonzalezes
are not entitled to a dismissal of Nosrati and Haroonian’s appeal
under the disentitlement doctrine. Therefore, we reverse and
1 Statutory references are to the Civil Code.
2
direct the trial court to recalculate the amount of prejudgment
interest.
FACTUAL AND PROCEDURAL BACKGROUND
A. Nosrati and Haroonian File This Action Against the
Gonzalezes
In 2013 Nosrati and Haroonian purchased a residential
property in Tarzana from the Gonzalezes for approximately
$1 million. After purchasing the home, Nosrati and Haroonian
discovered defects in the property that the Gonzalezes had not
disclosed, including broken irrigation pipes and a leaking pool.
Nosrati and Haroonian claimed they spent more than $400,000
repairing and remodeling the property.
Nosrati filed this action in April 2015 against the
Gonzalezes, alleging causes of action for fraud, intentional
misrepresentation, negligent misrepresentation, breach of
contract, failure to disclose information on the real estate
disclosure statement as required by section 1102.6, and
negligence.2 Nosrati sought damages and rescission of the
purchase agreement. In September 2018 Nosrati filed the
operative, third amended complaint, adding his wife, Haroonian,
as a plaintiff.
2 Nosrati also alleged causes of action against the
Gonzalezes’ son and the real estate agents involved in the
transaction, which were later dismissed.
3
B. The Gonzalezes Agree To Rescind the Purchase
Agreement, and the Court Orders Rescission
In April 2019 Gonzalez filed a document titled “Verified
Notice of Acceptance of Plaintiffs’ Rescission of Contract,” which
stated he was “ready willing and able to restore everything of
value received under the contract (to wit: the closing
consideration of $1,005,526); subject to restoration of everything
of value Plaintiffs received under the contract (to wit: an
executed deed conveying the single family residence).” When
Nosrati and Haroonian did not respond, the Gonzalezes filed a
“motion to enforce plaintiffs’ rescission and to dismiss all other
claims as moot.” In their opposition to the motion, Nosrati and
Haroonian stated that they had demanded rescission four years
earlier, that the Gonzalezes’ delay until the “eve of trial” to agree
to rescission prejudiced Nosrati and Haroonian by forcing them to
pursue litigation for four years, and that the Gonzalezes had not
offered to reimburse Nosrati and Haroonian for the cost of repairs
or for their attorneys’ fees.
In its tentative ruling, the court stated it had “no
framework to evaluate the motion” because the Gonzalezes
provided “no procedural authority for the motion.” But after
hearing oral argument, the court granted the motion, ordered the
contract rescinded, and scheduled a court trial to determine how
to “adjust the equities between the parties” (§ 1692) to return
them to the pre-contract status quo. Neither side challenges this
ruling.
4
C. The Trial Court Awards Nosrati and Haroonian
Damages and Prejudgment Interest
The four-day court trial focused on consequential damages
and equitable adjustments due under section 1692. The parties
agreed the Gonzalezes would pay Nosrati and Haroonian the
$1,022,762 they paid for the property, plus interest on the
promissory note they signed to purchase the property, property
taxes they paid while they owned the property, homeowners’
insurance premiums they paid, and utility payments they made,
for a total of $1,355,328,60. The court found Nosrati and
Haroonian were entitled to consequential damages in the amount
of $216,943 for repairs and remodeling. The parties agreed the
Gonzalezes were entitled to an offset of $53,193 for certain
escrow and closing costs. The court awarded the Gonzalezes an
additional $293,000 in offsets for the reasonable rental value of
the property for the time Nosrati and Haroonian occupied it and
$19,000 for the amount the real estate agent defendants paid
Nosrati and Haroonian in a settlement.
The court concluded Nosrati was entitled to prejudgment
interest on the $1,022,762 purchase price. The court stated that,
although in an action for rescission interest is recoverable from
the date of rescission, an “interesting question is nonetheless
presented whether the ‘date of rescission’ was the date that the
complaint was filed seeking rescission, or the date that the court
ordered rescission several years later.” The court ruled Nosrati
and Haroonian were entitled to interest from August 6, 2019, the
date the court ordered rescission, in the amount of $170,460.
Nosrati and Haroonian timely appealed from the judgment.
5
DISCUSSION
A. Applicable Law and Standard of Review
Section 3287 provides that a party is entitled to recover
prejudgment interest on damages that are certain or capable of
being made certain by calculation if the right to recover those
damages is vested on a particular day, “except when the debtor is
prevented by law, or by the act of the creditor from paying the
debt.” (§ 3287, subd. (a); see Tenzera, Inc. v. Osterman (2012)
205 Cal.App.4th 16, 21.) Under section 3287 “prejudgment
interest is allowable where the amount due plaintiff is fixed by
the terms of a contract, or is readily ascertainable by reference to
well-established market values.” (Leaf v. Phil Rauch, Inc. (1975)
47 Cal.App.3d 371, 375.) “In an action based upon rescission of a
contract, the plaintiff’s right to repayment of moneys paid under
the contract is fixed by the rescission, and interest on the moneys
paid thus is recoverable from the date of rescission.” (Id. at
p. 376; see Lund v. Cooper (1958) 159 Cal.App.2d 349, 352.)
Service of a complaint seeking relief based on rescission is
deemed to be notice of rescission. (§ 1691; see Chapman v.
Skype Inc. (2013) 220 Cal.App.4th 217, 234.) We review
independently the interpretation of section 3287, subdivision (a).
(Flethez v. San Bernardino County Employees Retirement Assn.
(2017) 2 Cal.5th 630, 639; KGM Harvesting Co. v. Fresh Network
(1995) 36 Cal.App.4th 376, 390-391.)
B. The Date of Rescission Was the Date Nosrati Served
the Original Complaint Seeking Rescission
Nosrati and Haroonian argue the trial court erred in
awarding prejudgment interest on the purchase price from
August 6, 2019, the date the court ordered rescission, rather than
6
from April 28, 2015, the date Nosrati gave notice of rescission by
serving the original complaint. We agree with their
interpretation of the statute.
As the trial court recognized, a party who recovers damages
in an action for rescission is entitled to recover prejudgment
interest from the date of rescission. However, “because of facts
peculiar to this case,” the court questioned whether the date of
rescission was the date Nosrati filed the original complaint or the
date the court ordered rescission. The court stated: “Although
[Nosrati] requested rescission in the original complaint, [Nosrati
and Haroonian] opposed [the Gonzalezes’] acceptance of
rescission. That rescission would be ordered was not at all
certain until August 6, 2019, when this court ordered rescission.
Rescission was not certain nor the right to recover damages
‘certain’ under Section 3287 until that court order. Therefore, the
court concludes that [Nosrati and Haroonian are] entitled to
interest from the date of the rescission order, August 6, 2019.”
The trial court confused uncertain liability with uncertain
damages. Under section 3287, subdivision (a), what must be
certain (or readily ascertainable) is the amount of damages, not
the right to recover them. (See Uzyel v. Kadisha (2010)
188 Cal.App.4th 866, 919 [“A legal dispute concerning the
defendant’s liability or uncertainty concerning the measure of
damages does not render damages unascertainable”]; Shell Oil
Co. v. National Union Fire Ins. Co. (1996) 44 Cal.App.4th 1633,
1651 [“the certainty required of Civil Code section 3287,
subdivision (a), is absent when the amounts due turn on disputed
facts, but not when the dispute is confined to the rules governing
liability”]; see also Olson v. Cory (1983) 35 Cal.3d 390, 402
[uncertainty over “legal issues did not prevent the amounts due
7
from being ‘certain or capable of being made certain by
calculation’”].)
While it might have been uncertain whether the court
would order rescission, the purchase price the Gonzalezes would
have to return to Nosrati and Haroonian was never uncertain.3
“In rescission cases involving a real estate purchase, ‘the seller
must refund all payments received in connection with the sale.
[Citation.] If the buyer has taken possession of the property, the
buyer must restore possession to the seller. [Citation.] Such
recovery of the consideration exchanged is part of restitution.’”
(Wong v. Stoler (2015) 237 Cal.App.4th 1375, 1386.) The
purchase price—the only amount on which the court awarded
prejudgment interest—was certain, fixed by the purchase
contract, and undisputed. As the court stated in its statement of
decision, “The parties have agreed that [Nosrati and Haroonian]
paid $1,022,761.60 for the subject property, which must be
reimbursed if [the Gonzalezes] are to obtain possession of the
property.” Nosrati and Haroonian were entitled to prejudgment
interest on the $1,022,762 purchase price from April 28, 2015, the
3 The amount of other damages, such as the cost of repairs,
was not certain, but the court did not award prejudgment
interest on those items. Under section 3287, subdivision (a), the
court had to award prejudgment interest on the $1,022,762
purchase price because that amount of damages was certain
(liquidated). The court had discretion under section 3287,
subdivision (b), to award prejudgment interest on unliquidated
amounts of consequential damages, but the court did not. (See
A & M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473, 496
[“in contrast to the mandatory nature of subdivision (a),”
subdivision (b) grants “discretion to the trial court to allow
prejudgment interest . . . where the exact amount of damages is
in dispute”].)
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date Nosrati gave notice of rescission by serving the original
complaint.
C. The Gonzalezes Were Not Prevented by Law or by an
Act of Nosrati and Haroonian from Agreeing to
Rescission
The Gonzalezes argue Nosrati and Haroonian “are simply
not entitled under the law or equity to any additional interest
above that generously awarded by the trial court.” They rely on
an exception in section 3287, subdivision (a), that applies “when
the debtor is prevented by law, or by the act of the creditor from
paying the debt.” The Gonzalezes argue that they were
“prevented by law from accepting any request for rescission” until
September 11, 2018, when Nosrati filed the third amended
complaint that added Haroonian as a plaintiff, and that, because
Haroonian was an indispensable party, the filing of that pleading
was when “the first actionable demand for rescission occurred.”
The Gonzalezes did not argue in the trial court that
Haroonian was an indispensable party or that they were
prevented by law from accepting Nosrati’s demand for rescission
until Nosrati added Haroonian as a party. Therefore, they
forfeited these arguments.4 (See Johnson v. Greenelsh (2009)
4 Although the Gonzalezes never argued Haroonian was an
indispensable party to Nosrati’s cause of action for rescission, the
real estate agent defendants demurred to Nosrati’s causes of
action for fraud, intentional misrepresentation, and negligent
misrepresentation in the second amended complaint on the
ground Haroonian was an indispensable party. The court found
“there is a substantial risk of Defendants incurring additional
damages should Haroonian subsequently file a separate action.
In other words, Haroonian’s nonjoinder could potentially preclude
9
47 Cal.4th 598, 603; Curtis v. Superior Court (2021)
62 Cal.App.5th 453, 474, fn. 15.) Whether a party is
indispensable “is ordinarily treated as a matter where the trial
court has a large measure of discretion in weighing factors of
practical realities and other considerations.” (Kaczorowski v.
Mendocino County Bd. of Supervisors (2001) 88 Cal.App.4th 564,
568.) We cannot review the trial court’s weighing of those factors
for abuse of discretion when no one asked the trial court to weigh
them or submitted any argument on them or how to weigh them.
This is particularly true where, as here, the absent and belatedly
claimed indispensable party became a party to the case and
participated in a trial on the merits. (See Martin v. Kehl (1983)
145 Cal.App.3d 228, 242 [where “‘a case has been fully tried
without objection to the absence of parties and the claim that the
absent parties were indispensable is raised for the first time on
appeal, the rule’s underlying policy considerations of avoiding
piecemeal litigation and multiplicity of suits [citations] are of
little consequence inasmuch as the judicial and litigant resources
necessary to the litigation have already been expended’”].)
In any event, even if the Gonzalezes had not forfeited the
argument, and even assuming Haroonian was an indispensable
party, the Gonzalezes are wrong on the law.5 They cite no
this Court from rendering complete justice amongst the currently
named Defendants.” The court sustained the demurrer with
leave to amend “to allow for the proper joinder of Nooshin
Haroonian.”
5 They are also wrong on the math. Under the Gonzalezes’
theory, the exception they rely on would eliminate prejudgment
interest from April 2015 (when the original complaint was filed)
to September 2018 (when Haroonian was added as a plaintiff),
10
authority for the proposition they were “prevented by law” from
accepting Nosrati’s demand for rescission because Haroonian was
not yet a party to the lawsuit. “The ‘prevented by law’ exception
is rarely invoked.” (Tenzera, Inc. v. Osterman, supra,
205 Cal.App.4th at p. 23.) The exception applies on the rare
occasion when a judgment, order, or statute prevents a party
from paying a debt, not “merely because there is a dispute as to
liability.” (Id. at p. 24.) No judgment, order, or statute prevented
the Gonzalezes from accepting Nosrati’s demand for rescission
and refunding the purchase price. (See id. at p. 25 [defendant
was not prevented by law from paying an arbitration award
during the pendency of the plaintiff’s appeal from an order
vacating the award]; Perkins v. Benguet Consol. Mining. Co.
(1942) 55 Cal.App.2d 720, 769 [corporation was not prevented by
law from paying dividends to a shareholder because a decree by a
foreign court directing the corporation to transfer the shares to
the shareholder’s husband was void]; cf. Bank of China v. Wells
Fargo Bank & Union Trust Co. (9th Cir. 1953) 209 F.2d 467, 476
[bank was “prevented by law and by court order from paying its
obligations” because the court had ordered the bank to deposit
the disputed funds with the court].)
The Gonzalezes also argue the “act of the creditor”
exception applies because Nosrati and Haroonian objected to the
Gonzalezes’ efforts in 2019 to accept the demand for rescission.6
but not from September 2018 to August 2019 (when the court
ordered rescission).
6 The Gonzalezes do not argue Nosrati’s failure to add
Haroonian as a party in the original complaint was an “act of the
creditor” that prevented them from accepting the demand for
rescission.
11
As they did with the “prevented by law” exception, the
Gonzalezes forfeited this argument by not raising it in the trial
court. The Gonzalezes attempt to avoid forfeiture by suggesting
the trial court made an “implied finding” Nosrati and Haroonian
prevented the Gonzalezes from accepting the demand for
rescission, but nothing in the record suggests the court made
such a finding. To the contrary, had the court found Nosrati and
Haroonian’s opposition to the Gonzalezes’ attempt to accept the
demand for rescission in 2019 was sufficient to invoke the “act of
the creditor” exception to section 3287, subdivision (a), the court
would have suspended, not begun, the accrual of interest in
2019.7 (See Bank of China v. Wells Fargo Bank & Union Trust
Co., supra, 209 F.2d at p. 475 [defendant was entitled to have the
court suspend the running of prejudgment interest for the
duration of a trial continuance sought by the plaintiff].) Whether
Nosrati and Haroonian did anything to prevent the Gonzalezes
from accepting the demand for rescission for purposes of section
3287 involves factual issues the trial court was not given the
opportunity to resolve.8
7 The Gonzalezes’ math is wrong again. Under their theory,
the exception would eliminate prejudgment interest from April
2019 (when the Gonzalezes accepted rescission) to August 2019
(when the court ordered rescission), but not from April 2015
(when the original complaint was filed) to April 2019.
8 The Gonzalezes argue that Nosrati and Haroonian did not
want to rescind the contract and did not know they were seeking
rescission and that Nosrati and Haroonian alleged in a
malpractice action that their former attorneys failed to advise
them about the consequences of rescission. What Nosrati and
Haroonian wanted or knew may explain why they took certain
12
D. The Disentitlement Doctrine Does Not Justify
Dismissing Nosrati and Haroonian’s Appeal
The Gonzalezes ask us to dismiss Nosrati and Haroonian’s
appeal under the disentitlement doctrine. Under that doctrine,
“a reviewing court has inherent power to dismiss an appeal when
the appealing party has refused to comply with the orders of the
trial court.” (Ironridge Global IV, Ltd. v. ScripsAmerica, Inc.
(2015) 238 Cal.App.4th 259, 265.) The disentitlement doctrine is
“‘a discretionary tool that may be applied when the balance of the
equitable concerns make it a proper sanction.’” (Ibid.) Dismissal
under the disentitlement doctrine is not “‘“a penalty imposed as a
punishment for criminal contempt. It is an exercise of a state
court’s inherent power to use its processes to induce compliance’”
with a presumptively valid order.” (Blumberg v. Minthorne
(2015) 233 Cal.App.4th 1384, 1391 (Blumberg).)
The Gonzalezes argue the doctrine applies here because
Nosrati and Haroonian “intentionally violated the trial court’s
July 27, 2021 judgment” requiring Nosrati and Haroonian to
return the property to the Gonzalezes once the Gonzalezes paid
Nosrati and Haroonian $1,376,539. The Gonzalezes contend
Nosrati and Haroonian violated the judgment by refusing to
accept the Gonzalezes’ payment in September 2021 and by failing
to move out of the property when escrow closed on January 26,
2022. They point to a statement by the trial court at a hearing on
an order to show cause regarding contempt that “Mr. Nosrati
could be charged with two counts of criminal contempt.”
actions, but it is irrelevant to whether they did anything to
prevent the Gonzalezes from accepting the demand for recission.
13
As an initial matter, there is no need to invoke the
disentitlement doctrine to “induce compliance” (Blumberg, supra,
233 Cal.App.4th at p. 1391) with the trial court’s judgment here
because Nosrati and Haroonian complied with it (albeit
belatedly). Nosrati and Haroonian accepted the Gonzalezes’
payment when escrow closed on January 26, 2022, and they
moved out of the property on February 12, 2022.
In any event, the Gonzalezes have not shown Nosrati and
Haroonian engaged in the kind of egregious behavior that would
justify dismissing their appeal under the disentitlement doctrine.
When Nosrati and Haroonian refused to accept the Gonzalezes’
payment in September 2021, they told the Gonzalezes they were
concerned they would waive their right to appeal if they accepted
payment and moved forward with rescission. At a hearing on
Nosrati and Haroonian’s motion for an order fixing the amount of
undertaking, the trial court stated that “the court agrees with
plaintiffs that a potential waiver is not out of the
question. . . . Plaintiffs’ caution in this regard is not unusual.”
And although Nosrati and Haroonian delayed returning the
property to the Gonzalezes after escrow closed, they
communicated the reasons for the delay to counsel for the
Gonzalezes, attempted to negotiate an extension of their month-
to-month lease, and paid rent for the extra time they lived in the
property. The parties ultimately agreed to take the request for
an order to show cause off calendar, and the court never decided
whether Nosrati or Haroonian willfully violated the judgment.
These facts distinguish this case from those where courts
have invoked the disentitlement doctrine. For example, in
Blumberg, supra, 233 Cal.App.4th 1384 the court removed a
trustee and ordered her to file an accounting and reconvey
14
property to the new trustee. (Id. at p. 1389.) Rather than
complying with the court’s order, the trustee conveyed the
property to her daughter and concealed the conveyance in briefs
filed with the court. Observing that the trustee “was utterly
dishonest with the court” and calling her conduct “despicable” (id.
at pp. 1391-1392), the court in Blumberg concluded “this is one of
the rare cases where applying [the disentitlement] doctrine is
appropriate.” (Id. at p. 1386; see also Findleton v. Coyote Valley
Band of Pomo Indians (2021) 69 Cal.App.5th 736, 764
[dismissing the appeal of a tribe that “failed to pay sanctions and
other money judgments,” “engaged in a fraudulent transfer of the
casino assets that are subject to the judgments, obstructed
debtor’s exams by proffering witnesses who could not and would
not answer questions and refused to comply with an order
compelling it to produce documents pertaining to the
fraudulently transferred assets”]; Ironridge Global IV, Ltd. v.
ScripsAmerica, Inc., supra, 238 Cal.App.4th at p. 265 [dismissing
the appeal of a defendant who “repeatedly violated the trial
court’s order restraining it from transferring shares of stock to
third parties until it complied with its obligation to issue” shares
to plaintiff under a settlement agreement].)
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DISPOSITION
The judgment is reversed. The trial court is directed to
enter a new judgment that awards Nosrati and Haroonian
prejudgment interest from the date Nosrati served the original
complaint. Nosrati and Haroonian are to recover their costs on
appeal.
SEGAL, J.
We concur:
PERLUSS, P. J.
FEUER, J.
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