Kim v. Lee CA2/7

Filed 5/26/21 Kim v. Lee CA2/7
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
EDWARD KIM et al., B295665, B303317
Plaintiffs and Respondents, (Los Angeles County
Super. Ct. No. BC563651)
v.
HELEN LEE et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Maureen Duffy-Lewis, Judge. Affirmed in
part; reversed in part.
Law Office of Jim P. Mahacek and Jim P. Mahacek for
Defendants and Appellants.
Law Offices of Donna Bullock and Donna C. Bullock for
Plaintiffs and Respondents.
__________________________
Helen Lee and Young Hee Kim (collectively, defendants)
appeal in case No. B295665 from a judgment entered after a jury
trial (case No. B295665) in favor of Edward Kim,1 Ginnie Cho,
Seung Kang (collectively, Kim plaintiffs), and GNE Property
Management, Inc. (GNE). Defendants also appeal the denial of
their motion for judgment notwithstanding the verdict or, in the
alternative, for a new trial.
The jury’s special verdict found defendants, through their
agent John Rhee, contracted with Kim’s company GNE to
perform remediation work on a multi-unit residential apartment
building owned by defendants, but failed to pay GNE for all of the
work performed under the contract. The jury further found
defendants, through Rhee, sold the property to Kim, Cho, and
Kang while intentionally concealing orders by the Los Angeles
County Department of Public Health (Health Department) to
remediate multiple public health code violations.
Defendants contend on appeal the trial court erred in
allowing Kim to testify at trial with the assistance of a
noncertified interpreter and in excluding testimony from the
incomplete deposition of Rhee. Defendants also argue
substantial evidence does not support the jury’s finding
defendants had knowledge of the Health Department orders, or
that defendants had a duty to disclose the orders because Kim
was reasonably able to discover the orders on his own.
Defendants further assert the damages awarded are in excess of
that proven at trial. We reduce the amount of damages but
otherwise affirm.
1 We refer to plaintiff Edward Kim as Kim and to defendant
Young Hee Kim by her first name (Young Hee) to avoid
confusion.
2
Defendants separately appeal the trial court’s award to the
Kim plaintiffs of $412,500 in attorneys’ fees (case No. B303317).
Defendants do not contest the amount awarded, instead arguing
the Kim plaintiffs were not entitled to attorneys’ fees under the
escrow agreement that consummated the sale because the Kim
plaintiffs only asserted tort claims. We conclude the broadly-
worded attorney fee provision in the escrow agreement supports
recovery of fees for the Kim plaintiffs’ fraudulent concealment
claim.
FACTUAL AND PROCEDURAL BACKGROUND
The Complaint and Cross-complaint
On November 13, 2014 the Kim plaintiffs and GNE filed
this action against Lee and Young Hee. The Kim plaintiffs
asserted causes of action for fraud and negligent
misrepresentation. GNE asserted causes of action for breach of
contract and a common count.
Defendants filed a cross-complaint against the Kim
plaintiffs, GNE, and Rhee, asserting causes of action for fraud,
concealment, conversion, common counts, and breach of contract
against Rhee; causes of action for breach of oral contract,
intentional or negligent misrepresentation, concealment, and
common counts against Kim; and causes of action for breach of
fiduciary duty, aiding and abetting breach of fiduciary duty,
negligent interference with prospective economic advantage, and
conspiracy against all cross-defendants.
3
The Evidence at Trial
1. Kim plaintiffs’ case
(a) Lee and Young Hee’s purchase of the property
Prior to March 2013 Jeanne Salamon and Advanced
Pension Programs owned a property located at 716 South
Westlake Avenue (the property). The multi-unit apartment
building on the property was distressed. At some point prior to
March 2013, the property was placed in receivership. Receiver
Thomas Coleman hired VPMI Property Management (VPMI), a
company owned by Daniel and Adrian Talamentes,2 to manage
the property.
On August 15, 2012 the Health Department issued a notice
to Salomon identifying multiple violations of the Los Angeles
County Code and state housing laws, including rodent and insect
infestations. The notice was signed by Environmental Health
Specialist Guadalupe Castruita.
On July 13, 2012 the property was referred to the Rent
Escrow Account Program (REAP) (L.A. Mun. Code, § 162.00 et
seq.) based on code violations identified by the City of Los
Angeles Housing and Community Investment Department
(Housing Department).3 On October 29, 2012 the property
2 Daniel and Adrian Talamentes both testified at trial. We
refer to Daniel and Adrian by their first names to avoid
confusion.
3 According to the Housing Department Web site, “REAP
encourages owners to make the repairs and return the property
to a safe and habitable condition. Tenants of affected units are
given a 10% to 50% rent reduction depending on the nature and
severity of the violations cited. Tenants have the option to pay
their reduced rents to the landlord or into an escrow account
4
entered REAP. When a property is placed in REAP, a portion of
all tenants’ rental payments are withheld from the owner by the
City of Los Angeles.
On March 23, 2013 Rhee4 purchased the property at a
foreclosure auction for approximately $1.3 million on behalf of
defendants. After the purchase, the receivership on the property
terminated, and VMPI ceased management of the property. Lee
and Young Hee hired Rhee to manage the property.
Rhee emailed Adrian and told her he was the agent of Lee
and Young Hee and authorized to negotiate on their behalf.
Adrian provided Rhee with past operating statements for the
property, and Rhee and Adrian discussed the possibility of Lee
and Young Hee hiring VPMI to manage the property again.
VPMI collected rents from the tenants for Rhee in April 2013.
Ultimately, VPMI opted not to manage the property.
(b) Rhee hires Kim and GNE to remediate the
property in response to the Housing Department
orders
Sometime in March 2013 Rhee approached Kim, seeking
consultation on the Housing Department orders on the property.
On March 26 Kim visited the property at Rhee’s invitation, while
the Housing Department conducted an inspection of the property.
Kim believed Rhee wanted him there to show the inspector that
managed by the Department.” (L.A. Housing & Community
Investment Dept., What is REAP? (2021)
[as of
May 12, 2021].)
4 Rhee hired real estate broker Simon Wu, who testified at
trial, to purchase the property at the auction.
5
Rhee had a contractor to address problems with the building.
Kim did not participate in the discussions between Rhee and
Housing Department inspector Erwin Larranaga, but he
“listen[ed] to some of the conversations” from the hallway.
Rhee and Kim discussed Rhee’s hiring of GNE to perform
remediation work on the property. On April 2 or 3, 2013 Kim
provided Rhee with a handwritten estimate of $200,000 for GNE
to perform the remediation work required by the Housing
Department. Rhee stated he needed to discuss the proposal with
Lee and Young Hee. On April 3 Kim and Rhee met with Young
Hee. In the presence of Kim, Young Hee told Rhee that Rhee was
“in charge of everything” regarding the property. Young Hee
authorized Rhee to hire Kim as the general contractor to work on
the property on her behalf. After this initial meeting, Young Hee
relied on Rhee to communicate with Kim. Kim and Young Hee
did not meet or speak again.
On April 16, 2013 the Housing Department issued a notice
and order to comply to both Rhee and Kim regarding violations
on the property. However, the notice addressed to Kim listed an
incorrect mailing address. The notice ordered additional work to
be performed on the property, which Kim had not accounted for
in his original estimate. Rhee asked Kim to perform the
additional work and told him Lee or Young Hee would pay him,
or Rhee would “sell the building to pay” him.
On April 18 Kim attended a hearing with Rhee regarding
the property’s inclusion in REAP. At the hearing, Kim did not
hear any mention of “pests” or an “unhealthy environment” at the
building, or of any Health Department orders. Kim received a
copy of the March 26, 2013 Housing Department notice and order
for the first time on this date.
6
Young Hee authorized Rhee to hire Kim and to discuss the
needs of the property with Kim while Rhee oversaw the
completion of all repairs. Young Hee expected Rhee to handle
any problems that arose on the property and authorized him to
receive legal notices on her behalf. On April 28 or 30, 2013 Rhee
returned to Kim a typed invoice memorializing the terms of Kim’s
written proposal for GNE to perform the remediation work. Rhee
signed the invoice on behalf of Lee and Young Hee. The signed
invoice provided GNE would be paid $200,000 for the listed work,
with an “extra charge on additional work beyond this list.” The
invoice provided the property would “[p]ass LAHD [i]nspection”
and “[p]ass LADBS [i]nspection,” in apparent reference to the
Housing Department and the Los Angeles Department of
Building and Safety. The scope of the work did not include pest
control. Relying on the signed contract, Kim and GNE began to
perform the remediation work.
On May 2, 2013 Lee visited the property. Lee told Kim the
contract price was too expensive and requested a discount, but
she did not tell him to stop work on the property. On May 6 Lee
returned to the property. She did not enter the building, but
from the outside observed work being performed. At this time,
Lee gave Kim two checks totaling $37,000 as partial payment for
the work that was underway. In total, Kim received $97,000 as a
down payment on the work.
Lee and Young Hee did not pay for utilities, including
water and electricity, during July and August 2013. Kim
testified he paid between $17,000 and $18,000 for utility bills
owed by Lee and Young Hee. According to Kim, it would have
been “impossible to continue construction” without paying the
utilities. Normal business practice for contractors included
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paying utilities due and issuing an invoice to the owner, in order
to continue work uninterrupted.
In August 2013 GNE completed all of the remediation work
under the contract and required by the Housing Department,
including that required by the April 16, 2013 notice and order.
Neither Lee or Young Hee ever told Kim and GNE to stop
working. But neither defendants nor Rhee paid GNE the
outstanding balance for the work performed. GNE introduced
business records detailing the costs of materials, labor, and other
expenses GNE incurred during defendants’ ownership of the
property to remediate the code violations identified by the
Housing Department orders, which Kim testified totaled
$197,784.78. Kim calculated the total price of $227,452.50 for the
work by applying “the standard markup . . . for [a] general
contractor” of 15 percent.
The Housing Department closed its case against the
property on August 29, 2013.
(c) The Health Department inspects the property
Carolyn Watson, an environmental health specialist
supervisor with the Health Department, testified the general
public can access the Health Department records on a particular
property by submitting a request to the Health Department. On
May 30, 2013 Watson received an email from Larranaga
informing her the property had a new owner and the Housing
Department had found continuing code violations upon a
reinspection of the property. The email identified Lee and Young
Hee as the new owners of the property. Watson sent Castruita,
8
who worked with the Health Department’s housing task force,5 to
inspect the property. The Health Department’s usual practice
was to conduct a follow up inspection within 30 days of a
property’s change in ownership and to inform the new owner of
any “outstanding inspection” or “reported investigation against
the old owner.”
Rhee accompanied Castruita during her inspection.
Castruita found “roaches” and “[mouse] droppings in the broiler
and the stove” of one of the units. Throughout the inspection,
Rhee “badgered” Castruita, arguing with her about the various
problems she identified. After the inspection, Castruita prepared
a compliance report on the property. Rhee did not tell Kim about
Castruita’s inspection.
Castruita explained the Health Department requires
elimination and exclusion of pest infestations but the Housing
Department does not. The Housing Department deals with “just
building structure.” Castruita opined the eradication and
exclusion of pests is a longer and more difficult job than
alleviating violations of the housing code. A superficial cleaning
up after pests would not be sufficient to address the concerns of
the Health Department. Castruita explained, “I’m very good at
finding the bugs. . . . I open up the cabinets. I know where they
hide. I’ll stick my head in the cabinet, and I look up where they
have a crease, and there they are . . . .” Castruita added, “I know
how to find the roaches. Pull the refrigerator. They like the back
part of the refrigerator because it’s warm, and then I take my
5 The housing task force is an interagency task force
comprised of members of the Los Angeles City Fire Department,
City Attorney’s Office, City Code Enforcement, and the Health
Department.
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flashlight and I see them . . . . It looks clean, but you haven’t
gotten rid of the vermin.” After the pests were eradicated,
structural amendments must be made, such as “seal[ing] every
crack, nook, and cranny.”
(d) The Kim plaintiffs purchase the property and
discover the Health Department orders
On August 29, 2013 the Kim plaintiffs purchased the
property from Lee and Young Hee for $1,577,000. Lee and Young
Hee relied on Rhee to negotiate the sale and set the price.
According to Kim, Rhee drafted the escrow instructions (escrow
agreement), which contained the following clause: “AS-IS AND
WHERE-IS CONDITIONS: Buyer hereby confirms that they
have completed their own and professional inspection and
investigation of the subject property and hereby further confirms
that they have removed any and all contingencies of this
sale/purchase prior to opening of escrow. Buyer also herein
acknowledges that they are purchasing the property solely in
reliance on Buyer’s own investigation, and that no
representations or warrants of any kind whatsoever, expressed or
implied have been made by Seller. Buyer herein confirms that
they are fully aware of all future, existing zoning regulations,
other governmental requirements, site, size of lot, and physical
condition and other matters affecting the use and the condition of
the property and agrees to purchase the property in its present
‘As-is’ and ‘Where-is’ conditions without seller’s warranty at
closing. [¶] The undersigned buyer hereby confirms that they
are well aware of existing Housing Authority lien and accept the
property in its present lien conditions. Buyer herein also
confirms that they have agreed to comply with any and all
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required repairs and documentation including but not limited to
the payment of any dues, if any, at buyer’s cost after closing.”
Kim did not hire a professional to inspect the property prior
to the Kim plaintiffs’ purchase of the property. Kim believed the
property was in full compliance with the Housing Department
orders. During GNE’s work, Kim had observed some evidence of
mice and cockroaches, but he believed all buildings had these
issues. Kim did not think he needed to check with the Health
Department, which he thought dealt with restaurants.
On October 3, 2013 Kim was called by the Housing
Department to attend a meeting. On that date Kim met with
representatives from the Housing Department as well as the
Health Department’s housing task force (including Castruita).
After the meeting Kim received an inspection report from the
Health Department identifying multiple code violations on the
property, including rodent and insect infestation. The report
stated it was “[r]eissue[d],” and it referenced the August 15, 2012
inspection report, which ordered Salomon (then-owner of the
property) to remediate multiple violations, including the presence
of rodents and insects. Sometime after the October 3 meeting,
Castruita inspected the property with Kim, who was much more
cooperative than Rhee had been.
Larranaga did not learn of the Health Department’s
outstanding order against the property until the October 3, 2013
meeting. Kim testified he had no knowledge of the Health
Department’s order before the meeting. Rhee previously
disclosed to Kim the Housing Department orders, but not the
Health Department orders. Rhee never mentioned to Kim before
the sale that Rhee met with Castruita during an inspection by
the Health Department.
11
Because of the violations identified by the Health
Department, the property remained in REAP for an additional
three years. Kim suffered a “humongous financial loss” from the
undisclosed Health Department issues. If Kim had known about
the Health Department issues, he would not have purchased the
property.
(e) The Kim plaintiffs’ damages
Kim testified the Kim plaintiffs experienced lost rental
income due to defendants’ concealment of the Health Department
orders. The Kim plaintiffs introduced into evidence business
records purporting to document a total loss of $272,5696 in rental
income between September 2013 and May 2016, when the
property was released from REAP. Kim explained the records
represented “[t]wo major losses. First loss is because of the
REAP violation, only 50 percent of the rent could be collect[ed].
Second loss, some of the unscrupulous tenant[s] [knew] about the
REAP and because of that . . . did not pay any rent.”
In May 2016 the property was released from REAP, and the
Kim plaintiffs started collecting the full rent from tenants.
Further, on April 11, 2017 Kim received $156,400 in back rent
held by REAP and $352 in interest. The Kim plaintiffs could not
raise tenants’ rents while the property was in REAP, and for one
year following the release from REAP. In May 2017 the Kim
plaintiffs raised the rent by 3 percent, the maximum allowed by
the Los Angeles rent stabilization ordinance. Under the
ordinance, the Kim plaintiffs could have again raised the rents in
6 Dollar amounts have been rounded to the nearest dollar.
12
May 2018, but they did not due to a tenant lawsuit regarding the
property.
The Kim plaintiffs also introduced business records
detailing the costs of materials, labor, and other expenses Kim
incurred after purchasing the property to remediate the code
violations identified by the August 15, 2012 and October 3, 2013
Health Department orders, totaling $436,164.
2. Defense case
Daniel testified he met with Kim at the property when Kim
was working as the contractor, and Daniel told Kim about the
various repairs required by the Housing Department. Daniel told
Rhee and Kim the property was in REAP and provided Rhee’s
assistant with a list of “repairs that the city was asking for.” On
cross-examination, Daniel opined the repairs necessary to
alleviate the issues identified by the Housing Department would
cost much more than $97,000. Daniel did not inform Kim of the
Health Department orders against the property.7
Real estate appraisers Benjamin Lara and Michael
Frauenthal both testified the fair market value of the property on
August 29, 2013 was $1,460,000. They did not include in their
valuations the cost of remediating the violations identified by the
Health Department as required to remove the property from
REAP. Both acknowledged that if additional repairs were
required by the Health Department, that would have affected the
valuation.
7 Kim acknowledged he had seen Daniel visit the property
and observed Daniel and Rhee speaking, but Kim explained his
“English is not sufficient to have a direct conversation with
[Daniel] and understand him.”
13
Real estate consultant Allan Snyder opined the property
remained in REAP from October 2013 to February 2016 due to
noncompliance with the Health Department’s orders. He opined
the property’s noncompliance was “particularly bad” and a
reasonable buyer in Kim’s position would have made an inquiry
with the Health Department prior to purchase.
The Special Verdict and Judgment
On November 11, 2018 the jury returned a special verdict.
As to Rhee’s agency, the jury found (1) Rhee was the agent of
defendants during their ownership of the property; (2) Rhee was
authorized by defendants to act on their behalf with regard to the
property; (3) Rhee was authorized by defendants to act on their
behalf in dealings with the Kim plaintiffs and GNE; (4) Rhee
entered into a contract with GNE for construction services in the
scope of his agency; (5) Rhee knew about the Health Department
code violation case against the property at the time defendants
sold the property to the Kim plaintiffs; (6) Rhee’s knowledge of
the Health Department code violation case was imputed to
defendants; and (7) defendants ratified the actions of Rhee
concerning the plaintiffs and relating to the property.
As to the Kim plaintiffs’ cause of action for fraud, the jury
found (1) defendants “directly or through an authorized agent”
intentionally failed to disclose facts in the sale of the property
that the Kim plaintiffs did not know or could not have reasonably
discovered; (2) defendants intended to deceive the Kim plaintiffs;
(3) the Kim plaintiffs would have behaved differently if the
omitted facts had been disclosed; and (4) the concealment was a
substantial factor in causing harm to the Kim plaintiffs. The jury
awarded the Kim plaintiffs $992,595 in damages, comprised of
14
lost earnings ($272,569), unspecified past economic damages
($436,164), future economic loss ($22,487), past noneconomic loss,
including mental suffering ($85,000), and prejudgment interest
($176,375). The jury found the Kim plaintiffs failed to prove their
claim for negligent misrepresentation.
As to GNE’s cause of action for breach of contract, the jury
found the parties agreed on the terms of the construction contract
and GNE performed the work required by the contract, but Lee
and Young Hee failed to perform (by not making payment). The
jury awarded GNE $141,028 for past economic loss and $72,911
in prejudgment interest, for total damages of $213,939. The jury
further found GNE proved its cause of action for common count
against defendants, but awarded no damages on that claim.
The jury found Lee and Young Hee failed to prove each of
their cross-claims.
On December 10, 2018 the trial court entered judgment in
favor of the Kim plaintiffs and GNE.
Defendants’ Postjudgment Motions
On December 14, 2018 defendants filed motions for
judgment notwithstanding the verdict (JNOV) and for new trial.
In their postjudgment motions, defendants argued, among other
things, plaintiffs’ use of a noncertified interpreter and the trial
court’s exclusion of the transcript of the incomplete deposition of
Rhee were error, substantial evidence did not support the fraud
verdict, and the jury’s damages award was excessive.
The trial court denied the motions on January 16, 2019. As
to the motion for new trial, the court ruled there was “[n]o
irregularity nor error in the proceedings. Damages are not
excessive. Evidence was sufficient to justify the verdict.” As to
15
the JNOV motion, the court found the “[d]ecisions made by the
jury and their resulting verdict are supported by substantial
evidence and by reasonable inferences made from that evidence.”
Defendants timely appealed.
DISCUSSION
Plaintiffs’ Use of a Noncertified Interpreter at Trial Was Not
Reversible Error
1. Proceedings below
During jury selection on October 3, 2018, plaintiffs’
attorney Donna Bullock informed the court Kim required a
Korean language interpreter for his testimony at trial. Bullock
explained she was in contact with three private translation
services regarding Kim’s needs at trial but had not yet retained
an interpreter. On October 4 Bullock informed the court the only
interpreter available for the next day was a noncertified
interpreter with some experience translating court proceedings.
The court responded, “As long as he is sworn in and as long as all
counsel agree.” The court asked defendants’ attorney Paul P. Lin
whether defendants agreed not to object to the proposed
interpreter as long as “he had a resume that was appropriate.”
Lin agreed.
The next day, Bullock proposed George Park as the Korean
language interpreter for Kim. Park informed the court he had
provided translation services in “small claim[s] court and in a
hospital and some mediations.” Asked by Lin to state his
qualifications, Park responded he had taken training courses in
translation for the legal and medical fields. At Lin’s request,
Park then engaged in an off-the-record discussion with Lin’s legal
16
assistant, who spoke Korean fluently but did not speak fluent
English. At the close of the exchange, the court stated, “I think
we’re fine,” and the clerk swore in Park as interpreter. Lin did
not object to the use of a noncertified interpreter.
Throughout the trial, Park translated the testimony of Kim
and other Korean-speaking witnesses for plaintiffs. Defendants
did not use Park to translate during their cross-examination of
Kim or the other Korean-speaking witnesses, but instead utilized
several certified Korean-language translators.
On October 10 Lin raised issues with Park’s translation
during Kim’s testimony. Defense interpreter Hyoshin Kim
stated, “I have observed there were many occasions of omissions,
additions, and explanations during the interpretation” and
explained that during a series of questions each ending with
“while Helen Lee and Young Hee Kim were the owners of the
property,” Park had failed to include this qualifying language.
Park had on one occasion translated “negotiation as consultation,
agreed as declared, ignored as denied,” and “terms and conditions
as process.” Park also once interpreted $97,000 as $9,700. After
hearing from Park, who indicated not every word could be “100
percent exactly” translated between Korean and English, the
court stated, “He’s certified from the court. He took an oath. His
English is extremely good, and as long as the plaintiff is
comfortable with the interpretation that he’s heard now.” After
confirming with Kim he had testified the figure in question was
$97,000, the court ruled, “[W]e’re going to continue on with the
plaintiffs’ interpreter, since you’re paying him, and it appears
that everything is moving along fine. There can be distinctions
but not enough for me to remove him from the case.” The court
added that the defense “may certainly use their own interpreter.”
17
In support of their postjudgment motions, defendants filed
a declaration from Julie Wagner, who served as one of
defendants’ certified interpreters at trial. Wagner averred she
“observed numerous errors” in Park’s translation of Kim’s
testimony, providing as examples: “In once instance, he
interpreted ‘received a payment’ as ‘received a partial payment’”;
“A few times, he added his personal comments addressing the
jury while at the witness stand, making the jur[o]rs laugh. At
these instances, it was unclear when he was speaking for himself
or interpreting”; and “When [Kim’s] response became long, [Park]
would trail off without completing the interpretation. He would
also leave out words.”
2. Statutory scheme
“In general, interpreters are required to take an oath and
to be certified. (Evid. Code, § 751, subd. (a); Gov. Code, § 68561,
subd. (a).)” (People v. Suarez (2020) 10 Cal.5th 116, 143 (Suarez);
accord, Correa v. Superior Court (2002) 27 Cal.4th 444, 462
[“[W]ith respect to in-court interpretation by certified
interpreters, concerns regarding the competence of the
interpreter normally will be met by statutory certification
requirements.”].) “A trial court, however, may use an interpreter
who is not certified if there is ‘good cause’ to do so. (Gov. Code,
§ 68561, subd. (a).) In that situation, the court must find, among
other things, that good cause exists and that the interpreter is
qualified to interpret the proceedings.” (Suarez, at pp. 143-144;
accord, People v. Superior Court (Almaraz) (2001) 89 Cal.App.4th
1353, 1358 [“interpreters must be certified, unless good cause is
shown for using a noncertified interpreter in a particular
instance”]; Cal. Rules of Court, rule 2.893(d)(1) [“If after a
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diligent search a certified or registered interpreter is not
available, the judge in the proceeding may either appoint a
noncertified or nonregistered interpreter who has been
provisionally qualified under (d)(3) or, in the limited
circumstances specified in (d)(4), may use a noncertified or
nonregistered interpreter who is not provisionally qualified.”].)
“‘Improper procedures in the use of an interpreter do not
rise to the level of a constitutional violation unless they result in
prejudice demonstrating defendant was denied his right to a fair
trial.’” (Suarez, supra, 10 Cal.5th at pp. 144, 148-149
[defendants’ examples of “three instances in which
interpretations were incorrect or clarified” did not demonstrate
the “errors violated his rights or prejudiced him”]; Almaraz,
supra, 89 Cal.App.4th at pp. 1359-1360 [failure to follow
procedural requirements or administer oath for an interpreter
alone does not deprive a defendant of the constitutional right to
an interpreter]; People v. Estrada (1986) 176 Cal.App.3d 410,
414, 416 [no prejudice resulted from use of a noncertified
interpreter who had served as defendant’s personal interpreter at
the preliminary hearing].)
3. Defendants have failed to demonstrate prejudice due
to Kim’s use of Park as an interpreter
Defendants contend the trial court committed reversible
error by failing to follow the procedures of Government Code
section 68561 and California Rules of Court, rule 2.893. They
argue Kim did not make a diligent search for a certified
interpreter and the trial court failed to make a finding a certified
interpreter was unavailable or there was otherwise good cause
for appointing a noncertified interpreter.
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We agree with defendants the trial court erred in failing to
follow the required procedure for appointing a noncertified
interpreter. The court made no findings with respect to the
availability of certified interpreters or whether good cause existed
for appointing Park, as required under California Rules of Court,
rule 2.893(d)(2)(B) and (C). We reject plaintiffs’ argument Park
was appropriately utilized as a noncertified “temporary
interpreter.” Under California Rules of Court, rule 2.893(b)(7),
“‘[t]emporary interpreter’ means an interpreter who is not
certified, registered, or provisionally qualified, but is used one
time, in a brief, routine matter.” A multi-week civil trial is not a
“brief, routine matter.”
However, defendants have failed to demonstrate the use of
Park to translate Kim’s testimony was prejudicial. Throughout
the trial, the defendants used their own Korean language
interpreters during their examination and cross-examination of
witnesses, including their cross-examination of Kim. The defense
interpreters were free to listen to the testimony of Kim and
Park’s translation to check the accuracy of the translation and
raise any concerns with the court during the trial, but they did
not do so after initially raising the issue on October 10. (See
Suarez, supra, 10 Cal.5th at p. 149 [defendant failed to make a
showing in trial court that interpreter had deficient skills, trial
court therefore did not err in denying request for “‘check’
interpreter”]; People v. Aranda (1986) 186 Cal.App.3d 230, 237
[“When a showing is made, at trial, that an interpreter may be
biased or his skills deficient, one solution may be appointment of
a ‘check interpreter.’”].) Although Wagner submitted a
declaration in support of defendants’ posttrial motions pointing to
some examples of incorrect translations, defendants have not
20
shown how those errors affected the outcome at trial or otherwise
prejudiced defendants. Thus, defendants have not shown they
were denied a fair trial, and any error was harmless.8 (Suarez,
supra, 10 Cal.5th at pp. 148-149.)
The Trial Court Did Not Abuse Its Discretion in Excluding
Testimony from the Incomplete Deposition of Rhee
1. Proceedings below
On October 26, 2018, near the close of the defense case, Lin
requested to read into evidence excerpts from the November 4,
2016 deposition of Rhee. The court found that Rhee, by failing to
appear at the trial after the first day, had voluntarily absented
8 In their reply brief, defendants argue the trial court
authorized Park “to make partial translations of the questions
asked and Kim’s answers.” Defendants rely on an exchange
between Park and the trial court, in which Park asked, “I’m going
to have to ask [Kim] to cut off [his answers] a little shorter. Can
I do that?” The trial court responded, “Yes. Answer even if it’s
only partial. Just interpret it, even if it’s only partial.”
Defendants did not object at trial nor did they raise this
contention in their opening brief. Thus, the issue is forfeited.
(See Orozco v. WPV San Jose, LLC (2019) 36 Cal.App.5th 375,
397 [“‘It is hornbook law that a timely and specific objection is
required to prevent the consideration of certain evidence; the
failure to object at all waives any claim of error.’”]; Aptos Council
v. County of Santa Cruz (2017) 10 Cal.App.5th 266, 296, fn. 7
[“Issues not raised in the appellant’s opening brief are deemed
waived or abandoned.”]; Altavion, Inc. v. Konica Minolta Systems
Laboratory, Inc. (2014) 226 Cal.App.4th 26, 63 [argument made
for the first time in reply brief is forfeited].) Even if defendants
had not forfeited this argument, the trial court did not err in
allowing Park to translate Kim’s partial answers.
21
himself from the trial. Bullock objected to introduction of Rhee’s
deposition testimony because plaintiffs did not have an
opportunity fully to cross-examine him.
At an in camera hearing, Lin explained, “Bullock was at
the deposition. She did have a chance to cross-examine . . . Rhee.
[¶] However, at 5:00 we broke and Ms. Bullock had more
questions to ask and John Rhee and his lawyer promised to set
up a date. Actually, we had set up . . . [a date] a week
afterwards, and they cancelled. [¶] And we didn’t have a chance
to further depose him either.” Bullock responded, “Rhee canceled
and I set his deposition date at least two other times. I got
certificates of non-appearance. Same difficulty we’re having here
at this trial. [¶] . . . [Lin is] going to read in statements from Mr.
Rhee denying knowledge about everything relating to the
transactions. Just, ‘no, no, no,’ and ‘I don’t knows.’ So we didn’t
get a chance to cross-examine.” Lin added, “And on our side, we
didn’t have a chance to further depose him either” because direct
examination was “cut off in the middle and then he wouldn’t
show up. And [Bullock] didn’t get a chance to re-examine at the
end.” The court asked Bullock whether, during the deposition,
she intended “to challenge those questions and ask specifics
about them,” to which Bullock replied, “Oh, yes.” The court
sustained Bullock’s objection, stating, “That causes the court to
rule that she’s not had a chance to cross-examine him.” After the
trial court excluded the Rhee deposition, the defense rested.
In support of their postjudgment motions, defendants filed
the excerpts of Rhee’s deposition they had intended to introduce
at trial.
22
2. Exclusion of the incomplete deposition was not an
abuse of discretion
Code of Civil Procedure section 2025.620 provides, “At the
trial or any other hearing in the action, any part or all of a
deposition may be used against any party who was present or
represented at the taking of the deposition, or who had due notice
of the deposition and did not serve a valid objection under
Section 2025.410, so far as admissible under the rules of evidence
applied as though the deponent were then present and testifying
as a witness, in accordance with the following provisions: . . . [¶]
. . . [¶] . . . (c) Any party may use for any purpose the
deposition of any person or organization, including that of any
party to the action, if the court finds any of the following: . . . [¶]
. . . (2) The deponent, without the procurement or wrongdoing of
the proponent of the deposition for the purpose of preventing
testimony in open court, is any of the following: . . . [¶] . . . [¶]
. . . (D) Absent from the trial or other hearing and the court is
unable to compel the deponent’s attendance by its process.”
“‘Generally, the admission of a deposition is a matter
within the discretion of the trial court.’” (Sprague v.
Equifax, Inc. (1985) 166 Cal.App.3d 1012, 1042 (Sprague); accord,
People ex rel. Harris v. Sarpas (2014) 225 Cal.App.4th 1539, 1555
[explaining as to admission of deposition testimony at trial, “Trial
court rulings on the admissibility of evidence, whether made in
limine or during trial, are usually reviewed under the abuse of
discretion standard.”].) “A ruling that constitutes an abuse of
discretion has been described as one that is ‘so irrational or
arbitrary that no reasonable person could agree with it.’”
(Sargon Enterprises, Inc. v. University of Southern
California (2012) 55 Cal.4th 747, 773; accord, Olive v. General
23
Nutrition Centers, Inc. (2018) 30 Cal.App.5th 804, 817 [“A ruling
will be deemed an abuse of discretion only if it is ‘“so irrational or
arbitrary that no reasonable person could agree with it.”’”].)
“Where cross-examination was not completed, the trial
court’s refusal to admit the deposition is not ordinarily an abuse
of discretion.” (Sprague, supra, 166 Cal.App.3d at p. 1042 [trial
court did not abuse its discretion in excluding deposition
testimony of witness where second day of deposition was
cancelled and plaintiff could not complete cross-examination]; cf.
George v. Double-D Foods, Inc. (1984) 155 Cal.App.3d 36, 44 [trial
court did not abuse discretion in allowing use of deposition
transcript where witness was cross-examined but corrections
were later made to the transcript].)9 “Particularly where . . . the
court has taken evidence in the form of declarations and
testimony at the hearing on admissibility of the deposition, the
court’s determination is entitled to great weight on appeal,
including substantial evidence effect as to any disputed issues of
fact.” (Sprague, at p. 1042.)
Defendants contend the trial court abused its discretion
because plaintiffs failed to move to compel Rhee to complete the
9 Pollard v. Pollard (1959) 166 Cal.App.2d 698, relied on by
defendants, is not to the contrary. There, a witness died before
his deposition could be completed, and there was no opportunity
for cross-examination. The Court of Appeal affirmed the trial
court’s exclusion of the testimony, noting a cited out-of-state
authority “specifically limits admission of a partially completed
deposition to cases where the cross-examination ‘has not in any
way been prevented’ by the party producing the witness.” (Id. at
p. 705.) The court did not address the circumstances under which
it would be an abuse of discretion to exclude testimony in the
absence of misconduct by the party producing the witness.
24
deposition and defendants were not at fault for Rhee’s failure to
appear. But it was defendants who sought to use Rhee’s
deposition testimony at trial, and nothing prevented them from
moving to compel Rhee’s attendance at his continued deposition.
And as the parties seeking to call Rhee as a witness at trial,
defendants bore the burden to exercise reasonable diligence to
procure Rhee’s attendance at trial. (Code Civ. Proc., § 2025.620,
subd. (c)(2)(E) [party may use deposition testimony at trial if
court finds the deponent is absent from trial and the “the
proponent of the deposition has exercised reasonable diligence
but has been unable to procure the deponent’s attendance by the
court’s process”].) Further, the absence of meaningful cross-
examination undermines the reliability of the Rhee’s deposition
testimony. Under these circumstances, the trial court acted
within its discretion in excluding Rhee’s deposition testimony.
Substantial Evidence Supports the Jury’s Findings on the
Kim Plaintiffs’ Claim for Fraudulent Concealment
Defendants contend substantial evidence does not support
the jury’s findings of liability for fraudulent concealment because
the Health Department orders were issued after defendants’ sale
of the property to the Kim plaintiffs; Rhee’s knowledge of the
Health Department orders cannot be imputed to defendants; the
Kim plaintiffs agreed to purchase the property “as-is”; and Kim
failed to check available public records to discover the Health
Department orders. None of these contentions has merit.
1. Applicable law and standard of review
“In evaluating the evidentiary validity of a jury’s verdict,
our task is merely to assess whether the record contains
25
‘substantial evidence, contradicted or uncontradicted, which will
support’ the verdict. [Citation.] In assessing the substantiality of
the evidence, we ‘review the record in the light most favorable to
the’ verdict, resolve all conflicts in favor of the verdict, and draw
all reasonable inferences in favor of the verdict. [Citation.]
Through this prism, we may not reweigh the evidence [citation]
and the testimony of a single witness can constitute substantial
evidence [citation].” (Flores v. Liu (2021) 60 Cal.App.5th 278,
296; accord, Shirvanyan v. Los Angeles Community College
District (2020) 59 Cal.App.5th 82, 98.)10
“The elements of a cause of action for fraudulent
concealment are: (1) concealment of a material fact; (2) by a
defendant with a duty to disclose; (3) the defendant intended to
defraud by failing to disclose; (4) plaintiff was unaware of the fact
and would not have acted as it did had it known the fact; and (5)
damages.” (Butler America, LLC v. Aviation Assurance Co., LLC
(2020) 55 Cal.App.5th 136, 144; accord, Burch v. CertainTeed
Corp., supra, 34 Cal.App.5th at p. 348.) “With respect to
concealment, ‘“[t]here are ‘four circumstances in which
nondisclosure or concealment may constitute actionable fraud:
10 We apply the same substantial evidence standard to an
appeal from the denial of a motion for JNOV or a motion for new
trial based on lack of evidence. (See Burch v. CertainTeed
Corp. (2019) 34 Cal.App.5th 341, 348 [“‘“A motion for judgment
notwithstanding the verdict may be granted only if it appears
from the evidence, viewed in the light most favorable to the party
securing the verdict, that there is no substantial evidence in
support.”’”]; Minnegren v. Nozar (2016) 4 Cal.App.5th 500, 514,
fn. 7 [“The denial of a new trial motion is reviewed for an abuse of
discretion, except that a trial court’s factual determinations are
reviewed under the substantial evidence test.”].)
26
(1) when the defendant is in a fiduciary relationship with the
plaintiff; (2) when the defendant had exclusive knowledge of
material facts not known to the plaintiff; (3) when the defendant
actively conceals a material fact from the plaintiff; and (4) when
the defendant makes partial representations but also suppresses
some material facts.’”’ [Citation.] The latter three circumstances
‘“presuppose[] the existence of some other relationship between
the plaintiff and defendant in which a duty to disclose can
arise.”’” (Burch, at pp. 349-350; accord, Hoffman v. 162 North
Wolfe LLC (2014) 228 Cal.App.4th 1178, 1186-1187.)
“Reasonable or justifiable reliance on the nondisclosure is an
element of such fraud. [Citation.] ‘“Except in the rare case where
the undisputed facts leave no room for a reasonable difference of
opinion, the question of whether a plaintiff’s reliance is
reasonable is a question of fact.”’” (Alfaro v. Community Housing
Improvement System & Planning Assn., Inc. (2009) 171
Cal.App.4th 1356, 1383 (Alfaro).)
A contract between a seller and buyer of property creates a
relationship from which a duty to disclose may arise. (Alfaro,
supra, 171 Cal.App.4th at p. 1383 [“It is fraud to suppress a fact
with intent to induce a person to enter into a contract to acquire
realty.”]; see Burch v. CertainTeed Corp., supra, 34 Cal.App.5th
at pp. 349-350 [The relationship creating a duty includes one
“between ‘“‘seller and buyer, employer and prospective employee,
doctor and patient, or parties entering into any kind of
contractual arrangement.’”’”].) “‘[W]here the seller knows of facts
materially affecting the value or desirability of the property
which are known or accessible only to him and also knows that
such facts are not known to, or within the reach of the diligent
attention and observation of the buyer, the seller is under a duty
27
to disclose them to the buyer.’” (Holmes v. Summer (2010)
188 Cal.App.4th 1510, 1518-1519; accord, Roche v. Hyde (2020)
51 Cal.App.5th 757, 821 [“[I]n ‘mere nondisclosure’ cases, the
plaintiff has the burden to show that the seller knew the
undisclosed information was ‘not known to, or within the reach of
the diligent attention and observation of the buyer.’”].)
2. The Health Department orders predate the Kim
plaintiffs’ purchase of the property
Contrary to defendants’ contention, there was substantial
evidence the Health Department orders and underlying code
violations existed before the Kim plaintiffs purchased the
property. The Health Department issued a citation against the
property in August 2012, before the Kim plaintiffs—and even Lee
and Young Hee—purchased the property. After defendants
purchased the property, Health Department inspector Castruita
toured the property with Rhee, informed him of the code
violations, and issued a new compliance report on the property.
The October 3, 2013 inspection report issued to Kim makes clear
the Health Department’s August 2012 report was “being
reissued” to the new owner.
3. The jury properly imputed Rhee’s knowledge and
conduct as an agent to Lee and Young Hee
Defendants contend Rhee’s knowledge of the Health
Department orders cannot be imputed to them as principals for
purposes of the intentional tort of fraudulent concealment. The
law is to the contrary.
An agent is “‘one who represents another . . . in dealings
with third persons.’” (RSB Vineyards, LLC v. Orsi (2017)
28
15 Cal.App.5th 1089, 1100, quoting Civ. Code, § 2295.)11
Section 2332 provides, “As against a principal, both principal and
agent are deemed to have notice of whatever either has notice of,
and ought, in good faith and the exercise of ordinary care and
diligence, to communicate to the other.” “So long as the agent
was under a duty to disclose certain information, the principal is
bound by the agent’s knowledge of that information whether or
not the agent communicated it to the principal. [Citations.] For
this purpose, there is no difference between constructive and
actual notice.” (Santillan v. Roman Catholic Bishop of
Fresno (2008) 163 Cal.App.4th 4, 10-11; accord, Herzog v.
Capital Co. (1945) 27 Cal.2d 349, 353 [knowledge of agent, who
acted within scope of his agency when he caused structural
defects in real property to be concealed from buyer, was properly
imputed to principals]; cf. RSB Vineyards, LLC v. Orsi, supra,
15 Cal.App.5th at pp. 1101-1102 [construction workers’
knowledge of structural defects not imputed to property owner
where workers were not acting as agents of owner].)
A principal’s liability extends to fraudulent conduct of the
agent. As section 2338 provides, “a principal is responsible to
third persons for the negligence of his agent in the transaction of
the business of the agency, including wrongful acts committed by
such agent in and as a part of the transaction of such business,
and for his willful omission to fulfill the obligations of the
principal.” (Italics added; see Lisa M. v. Henry Mayo Newhall
Memorial Hospital (1995) 12 Cal.4th 291, 295, fn. 2 [“[S]ection
2338, which has been termed a codification of the respondeat
11 Further undesignated statutory references are to the Civil
Code.
29
superior doctrine [citation], is not limited to employer and
employee but speaks more broadly of agent and principal; it
makes the principal liable for negligent and ‘wrongful’ acts
committed by the agent ‘in and as part of the transaction of such
[agency] business.’”].) “‘If the principal places the agent in a
position to defraud, and the third person relies upon his apparent
authority to make the representations, the principal is liable even
though the agent is acting for his own purposes.’” (Alhino v.
Starr (1980) 112 Cal.App.3d 158, 174, italics omitted; accord,
Spahn v. Guild Industries Corp. (1979) 94 Cal.App.3d 143, 156
[“[A]n agent’s liability for compensatory and punitive damages
may be imputed to even an innocent principal.”]; Eamoe v. Big
Bear Land & Water Co. (1950) 98 Cal.App.2d 370, 374 [“[W]hen
an agent on behalf of his principal performs an unauthorized act,
if the principal has put the agent in a position to mislead
innocent parties, he is responsible to the latter.”].)
Substantial evidence supports the jury’s findings Rhee
acted as an agent of defendants; he was authorized to act on
defendants’ behalf with respect to the sale of the property to the
Kim plaintiffs; he knew about the Health Department code
violations; and his knowledge should be imputed to defendants.
Lee testified she and Young Hee relied on Rhee to manage the
property, to negotiate the sale to the Kim plaintiffs, and to set the
sale price. Young Hee authorized Rhee to receive legal notices on
her behalf, told Rhee in Kim’s presence that Rhee was “in charge
of everything” regarding the property, and authorized Rhee to
hire Kim as the general contractor to remediate the property. By
relying on Rhee as their agent, defendants placed Rhee in a
position to mislead the Kim plaintiffs by his concealment of the
Health Department orders. Rhee accompanied Castruita during
30
her inspection following defendants’ purchase of the property in
which he learned of the significant pest infestation problems in
the building. During the inspection, Rhee would have observed
Castruita’s investigation of “every crack, nook, and cranny,”
making Rhee aware of the difficulty of discovering the extent of
the pest problem. But Rhee never advised Kim of the Health
Department violations at the property, instead only discussing
with Kim the Housing Department citations and negotiating an
agreement for remediation by GNE limited to the Housing
Department violations. Further, Rhee set the sale price of the
property at a level that did not reflect a reduction for the Health
Department orders, showing he was aware of Kim’s ignorance of
the Health Department violations. As defendants’ real estate
appraisal experts testified, the Health Department orders would
have negatively affected the valuation of the property at the time
of sale.
4. The “as-is” clause of the sales contract does not
preclude the Kim plaintiffs’ suit for fraud
Defendants’ contention that the “as-is” clause in the escrow
agreement bars the Kim plaintiffs’ fraudulent concealment claim
lacks merit. Section 1668 provides, “All contracts which have for
their object, directly or indirectly, to exempt anyone from
responsibility for his own fraud, or willful injury to the person or
property of another, or violation of law, whether willful or
negligent, are against the policy of the law.” “It is well
established in California that a party to a contract is precluded
under section 1668 from contracting away his or her liability for
fraud or deceit based on intentional misrepresentation.”
(Manderville v. PCG&S Group, Inc. (2007) 146 Cal.App.4th 1486,
31
1500; accord, Blankenheim v. E. F. Hutton & Co. (1990)
217 Cal.App.3d 1463, 1471 [under section 1668, “a party may not
contract away liability for fraudulent or intentional acts”]; Smith
v. Rickards (1957) 149 Cal.App.2d 648, 653-654 [provision in
purchase agreement stating “‘[b]uyer has personally examined
said property and is familiar with its location and condition and
is not relying upon any representation relating thereto’” did not
bar buyer’s claim for fraud].) “[A] sale ‘as is’ is not the equivalent
of a waiver of potential claims of misrepresentation. . . . [T]he ‘as
is’ sale simply means the buyer accepts the property in the
condition visible or observable by him.” (Loughrin v. Superior
Court (1993) 15 Cal.App.4th 1188, 1195.)
Defendants’ reliance on Driver v. Melone (1970)
11 Cal.App.3d 746 (Driver) is misplaced. There, the sellers’ real
estate broker told the plaintiff buyer, who was an experienced
real property investor with a degree in engineering, that the
property was “a dog,” in “really . . . bad shape,” and “dangerous”
with “faulty wiring.” (Id. at p. 749.) Further, the building
inspector advised the buyer to obtain an authorization letter from
the current owner to access the building records, but the buyer
did not do so. (Id. at pp. 749-750.) The buyer purchased the
property “as-is,” then sued the seller after the building was
condemned due to defective wiring. (Id. at pp. 748, 750.) The
Court of Appeal affirmed the judgment for the sellers, explaining
a purchase agreement’s inclusion of an as-is clause “does not in
itself protect the sellers or absolve them from liability for
misrepresentation or passive concealment.” (Id. at p. 752.)
Rather, “it is a factor to be considered with all other
circumstances in determining whether the buyer has been
misled.” (Ibid.) The Court of Appeal observed there was no
32
evidence the sellers had any information that was unknown or
beyond the reach of the buyer, nor was there evidence the buyer
was induced to purchase the property by the nondisclosure of
material information. (Id. at p. 753.)
By contrast, Rhee extensively discussed with Kim the
Housing Department order but never disclosed the Health
Department’s demands. According to Castruita, the pest
problems at the property were difficult to detect and required use
of a flashlight to search dark areas where pests lived. Kim did
not observe the severity of the pest problems until he
accompanied Castruita on her inspection of the property after the
Kim plaintiffs purchased the property. The jury was free to
consider the as-is clause, but it was also free to conclude it did
not bar the Kim plaintiffs’ recovery.
5. Knowledge of the Health Department public records is
not imputed to Kim
Contrary to defendants’ contention, Kim’s failure to search
the public records before purchasing the property does not, as a
matter of law, preclude the Kim plaintiffs from recovery.
“‘Negligence on the part of the plaintiff in failing to discover the
falsity of a statement is no defense when the misrepresentation
was intentional rather than negligent.’ [Citation.] ‘Nor is a
plaintiff held to the standard of precaution or of minimum
knowledge of a hypothetical, reasonable man.’” (Alliance
Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239-1240;
accord, Seeger v. Odell (1941) 18 Cal.2d 409, 414-415 [“The fact
that an investigation would have revealed the falsity of the
misrepresentation will not alone bar his recovery [citations], and
it is well established that he is not held to constructive notice of a
33
public record which would reveal the true facts.”]; Bishop Creek
Lodge v. Scira (1996) 46 Cal.App.4th 1721, 1734 [“Under a long
line of cases, the fact that the victim had constructive notice of
the truth from public records is no defense to fraud. The
existence of such public records may be relevant to whether the
victim’s reliance was justifiable, but it is not, by itself,
conclusive.”].) “‘Except in the rare case where the undisputed
facts leave no room for a reasonable difference of opinion, the
question of whether a plaintiff’s reliance is reasonable is a
question of fact.’” (Alliance, at p. 1239.)
The principle that constructive notice of a public record is
not a bar to a fraud action applies in fraudulent concealment
cases. (See Alfaro, supra, 171 Cal.App.4th at p. 1389 [purchasers
of residences were not charged with constructive notice of deed
restrictions as defense to their claims against sellers for
fraudulent concealment of the restrictions, but defendants could
present evidence of plaintiffs’ actual knowledge of documents
presented to them or inquiry notice based on those documents];
Bishop Creek Lodge v. Scira, supra, 46 Cal.App.4th at pp. 1734,
1736 [purchaser of lodge was not charged with constructive notice
of settlement by seller with owner of neighboring property under
which restrictive covenant on neighboring property was removed,
in action by purchaser for fraudulent concealment of judgment
declaring covenant unenforceable, but seller could present
evidence that lis pendens on lodge was removed as part of
settlement to show purchaser had actual knowledge].)
The cases relied on by defendants are distinguishable. In
Barnett v. Marsili (1933) 131 Cal.App. 337, the parties in the
lawsuit, unlike here, were the victims of a third party’s fraud.
The plaintiff buyer had purchased a car from a dealer but never
34
obtained the registration. (Id. at p. 338.) Four months after the
sale the dealer secured a loan against the car without the buyer’s
knowledge, and the lenders registered the car in their names.
(Ibid.) The Court of Appeal affirmed the trial court’s judgment
for possession of the car to the lenders, reasoning that the lenders
and buyer were innocent, but because the buyer was negligent in
failing to register the car in his name, he had to bear the loss
caused by the dealer’s fraud. (Id. at p. 339.) In Stevenson v.
Baum (1998) 65 Cal.App.4th 159, the buyers of property sued the
sellers for failure to disclose an easement on the property for an
oil pipeline. (Id. at pp. 162-163.) The Court of Appeal affirmed
the trial court’s grant of summary judgment for the sellers,
reasoning that the purchase contract stated the buyer took title
subject to easements of record, and thus did not conceal that
there was a recorded easement for a pipeline. (Id. at p. 166.)
Here, the escrow agreement did not mention the Health
Department orders despite expressly noting the “existing
Housing Authority lien” on the property. Thus, in contrast to
Stevenson, the agreement did not place the Kim plaintiffs on
notice of the Health Department orders.
Defendants argue Kim, as an experienced investor and
general contractor, should have been on notice there were Health
Department violations (and thus checked the public records) as a
result of his visit to the property in March 2013 during which he
would have observed the property’s condition. But there was no
evidence of Kim’s special knowledge of pests or pest control.12
Although Kim observed some evidence of pests at the property
12 Defendants assert Kim was a “pest control licensee” but do
not support this assertion with a citation to the record.
35
during GNE’s construction work, he testified he believed all
properties have some pest issues. And, as discussed, Castruita
testified pest issues were frequently not apparent. Even
Larranaga, who inspected the property for Housing Department
violations, was unaware of the Health Department violations.
Based on this evidence the jury could reasonably have concluded
Kim was not aware of and did not have reason to discover the
Health Department violations, and thus defendants had a duty to
disclose these facts to him.
Substantial Evidence Supports the Jury’s Award of
Damages to GNE for Work Performed on the Property
Defendants contend the jury’s award to GNE of
approximately $141,000 in damages plus prejudgment interest
for breach of contract was excessive. They argue GNE agreed to
perform the remediation work for $200,000 and was paid
$97,000, so the damages should not exceed $103,000. Further,
they assert the contract was never modified and defendants did
not agree to pay GNE to perform the additional work.
Defendants’ arguments are not persuasive.
In early April 2013 Kim gave Rhee a handwritten estimate
of $200,000 for GNE’s remediation. On April 16 the Housing
Department issued a notice and order to comply, which identified
violations requiring remediation work in addition to the work
included in Kim’s handwritten estimate. On April 28 or 30 Rhee
returned to Kim a typed invoice signed by Rhee memorializing
the terms of Kim’s handwritten proposal. The invoice stated
GNE would be paid $200,000 for the listed work, with an “extra
charge on additional work beyond this list.” Rhee asked Kim to
perform the additional work required by the April 16 Housing
36
Department order and told Kim he would be paid for the
additional work. As discussed, Rhee had authority to reach this
agreement on behalf of defendants. Young Hee told Rhee he was
“in charge of everything” regarding the property, and Young Hee
had authorized Rhee to hire Kim and GNE to work on the
property.
Defendants argue GNE did not submit any written change
orders, and therefore there was no agreement between GNE and
defendants for performance of the additional work. However, the
signed invoice does not require written change orders, instead
stating only that GNE would charge for “additional work beyond
this list.” As Kim testified, the work required by the April 16
Housing Department order was beyond that included in the
invoice, and the terms of the signed invoice contemplated an
extra charge for that work.
Further, Rhee’s agreement on behalf of defendants to pay
for GNE’s work to comply with the April 16 Housing Department
order was an enforceable oral modification of a written contract.
(See § 1698, subd. (b) [“A contract in writing may be modified by
an oral agreement to the extent that the oral agreement is
executed by the parties.]; Conley v. Matthes (1997)
56 Cal.App.4th 1453, 1465 [“[A] contract in writing may be
modified by an oral agreement to the extent that the oral
agreement is executed by the parties” as long as the written
contract does not by its terms require modifications to be made in
writing and the modification is supported by new consideration].)
Defendants alternatively argue any agreement between
Rhee and GNE for the additional work is unenforceable because
it failed to set a price for the work. Not so. Although Kim and
Rhee did not agree on a specific price, GNE was entitled to
37
recover for the reasonable value of the additional work
performed. As the Supreme Court explained in City Street
Improv. Co. v. Kroh (1910) 158 Cal. 308, 323, overruled in part on
other grounds by Pasadena v. Charleville (1932) 215 Cal. 384, “In
cases where extra work is caused by authorized deviations from a
building contract, and no agreement is made regarding the price
thereof, or payment therefor, the law implies an agreement by
the owner to pay the reasonable value of the extra work.”
(Accord, Benson Electric Co. v. Hale Bros. Associates, Inc. (1966)
246 Cal.App.2d 686, 697 [“[T]he authorized ‘extras’ are in effect a
separate implied contract under which appellants must pay a
reasonable price, since none was provided at the time the ‘extras’
were installed.” Italics omitted.]; C. F. Bolster Co. v. J. C.
Boespflug Constr. Co. (1959) 167 Cal.App.2d 143, 151 [“Where the
extras are of a different character from the work called for in the
contract and no price is agreed on for extra work, their
reasonable value may be recovered.”].) Defendants do not argue
GNE’s recovery is unreasonable based on the actual work
performed. Thus, substantial evidence supports the jury’s
inclusion of approximately $28,000 for additional work performed
by GNE and included in GNE’s demand for payment.
The jury’s damages award to GNE also includes
approximately $10,000 for the payment of the property’s utilities
by GNE. Kim testified he spent $17,000 or more on utilities in
order to perform the construction work required by the contract,
in accordance with normal business practices for contractors.13
Although Lee admitted during trial that defendants did not pay
13 The utility bills paid by GNE were admitted as trial
exhibits.
38
for the property’s utilities during their ownership, defendants
argue neither they nor Rhee authorized Kim or GNE to pay the
utilities on behalf of defendants. But defendants had an
obligation to pay for the utilities so GNE could perform its work
(which required electricity and running water) as part of the
covenant of good faith and fair dealing implied into every
contract. (See Chu v. Old Republic Home Protection Company,
Inc. (2021) 60 Cal.App.5th 346 [“‘The essence of the implied
covenant is that neither party to a contract will do anything to
injure the right of the other to receive the benefits of the
contract.’”]; Howard Contracting, Inc. v. G.A. MacDonald
Construction Co. (1998) 71 Cal.App.4th 38, 50-51 [“[I]n
every construction contract the law implies a covenant that the
owner will provide the contractor timely access to the project site
to facilitate performance of work.”].) GNE’s payment of the
utilities was a reasonable step taken to complete performance,
thereby mitigating damages that would have flowed from
defendants’ breach of contract had they failed to ensure the
construction site had the necessary electricity and water. (See
Agam v. Gavra (2015) 236 Cal.App.4th 91, 111 [“‘“[A] plaintiff
who suffers damage as a result of . . . a breach of contract . . . has
a duty to take reasonable steps to mitigate those damages and
will not be able to recover for any losses which could have been
thus avoided.”’”].) Therefore, substantial evidence supported the
jury’s award of damages to cover GNE’s payment of the utility
bills.
39
Substantial Evidence Supports Some but Not All of the
Jury’s Award of Damages to the Kim Plaintiffs for
Fraudulent Concealment
1. Governing law
“As a general matter, in fraud claims involving the
purchase, sale or exchange of property, the Legislature has
directed that the ‘out-of-pocket’ rather than the ‘benefit-of-the-
bargain’ measure of damages should apply.” (Moore v.
Teed (2020) 48 Cal.App.5th 280, 289; accord, Kwikset Corp. v.
Superior Court (2011) 51 Cal.4th 310, 334.) Section 3343,
subdivision (a), provides, “One defrauded in the purchase, sale or
exchange of property is entitled to recover the difference between
the actual value of that with which the defrauded person parted
and the actual value of that which he received, together with any
additional damage arising from the particular transaction,”
including enumerated damages such as lost use and enjoyment
and lost profits. Damages recoverable under section 3343 include
“expenses and other consequential damages stemming from the
fraud.” (O’Neil v. Spillane (1975) 45 Cal.App.3d 147, 159.)
“‘Damage to be subject to a proper award must be such as
follows the act complained of as a legal certainty . . . .’” (Ferguson
v. Lieff, Cabraser, Heimann & Bernstein (2003) 30 Cal.4th 1037,
1048.) Damages do not flow from a defendant’s act if there is
“‘[a] superseding cause[, that] is an act of a third person or other
force which by its intervention prevents the actor from being
liable for harm to another which his antecedent [misconduct] is a
substantial factor in bringing about.’” (Brewer v. Teano (1995)
40 Cal.App.4th 1024, 1031; accord, Persson v. Smart Inventions,
Inc. (2005) 125 Cal.App.4th 1141, 1166 [“[I]f damages do not flow
40
from the concealment, but rather from some other extrinsic
factor, the award of damages would be improper.”].)
2. Substantial evidence supports the jury’s award of
economic damages for the cost of remediation
The jury awarded the Kim plaintiffs $436,164 for “other
past economic damages.” Defendants contend this award is
improper because it duplicates the damage award for lost rental
income. However, it is clear from the record this award did not
duplicate the Kim plaintiffs’ claimed lost rental income, but
rather, was to compensate them for the expenses incurred to
remediate the code violations identified in the concealed Health
Department orders. Section 3343 authorizes recovery of damages
including “expenses . . . stemming from the fraud” (O’Neil v.
Spillane, supra, 45 Cal.App.3d at p. 159), and defendants make
no argument to the contrary.
3. Substantial evidence supports a portion of the jury’s
award of damages for lost earnings
The jury awarded the Kim plaintiffs $272,569 for lost
earnings. Defendants argue substantial evidence does not
support this part of the jury’s award because the Kim plaintiffs
received the rental income held by REAP after the property
exited the program, and the lost rent due to “unscrupulous
tenants” who elected not to pay any rent is not fairly attributable
to defendants’ concealment of the Health Department orders.
Defendants are correct as to the lost rent attributed to the
unscrupulous tenants, but not the remainder of the lost rental
income awarded by the jury.
41
The business records the Kim plaintiffs introduced at trial
to support their claim for lost rental income include for each year
from 2013 through 2016 a table with five columns labeled
“RENT,” “REAP Collect,” “Paid to Owner,” “Vacancy,” and “Rent
Loss.” In each row, representing a given month of the year, the
amounts in the REAP collect, paid to owner, and vacancy
columns are subtracted from the rent column to calculate the
number in the rent loss column. The monthly amounts of rent
loss are then added together to compute a subtotal. A second
table titled “REAP Uncollected Rent” ascribes to four or five
apartment units uncollected rent amounts, the sum of which is
added to the rent loss subtotal, to compute the purported total
lost rental income for the year.
Kim explained that the charts show “all the financial loss
due to the citation that was issued by [the] Health Department
following also with REAP.” He added as to the 2014 chart, “This
represents two major financial losses. [The] first loss because of
the REAP violations and the Health Code, I’ve lost 50 percent of
the rent. Second loss, since . . . the building was under REAP
control by then, the five units had not paid the rent, and there’s
no action I could have taken legally.” Kim testified similarly as
to the 2014 and 2015 charts, except that in 2015 and 2016 only
four units did not pay rent.
Even considered together with Kim’s testimony at trial, the
tables are difficult to understand. Kim testified the lost rental
income was attributable to a 50 percent reduction in the rent
resulting from the REAP program and tenants who withheld all
rent payments while the property was in REAP. Ostensibly, the
REAP collect column represents the amount paid to REAP
instead of to the Kim plaintiffs, although these figures are
42
consistently less than 50 percent of the total rent amount. At the
same time, the rent loss column does not reflect a loss of more
than 50 percent of the rent claimed by the Kim plaintiffs for all
apartment units. Although it is not clear exactly how each
column was calculated, defendants stipulated to admission of the
document, and Kim testified based on the document as to the
total rent losses the Kim plaintiffs suffered for each year. The
jury awarded to the Kim plaintiffs the “total” rent loss for the
years 2013 through 2016 reflected in the exhibits ($272,569).
Further, to the extent the REAP collect column represents
the amount paid into the REAP program (which the Kim
plaintiffs later recovered),14 the paid to owner column reflects
sums the tenants paid directly to the Kim plaintiffs, and the
vacancy column reflects the lost rent due to vacancies (instead of
from REAP), subtracting those sums from the total rent due for
all apartments in REAP reasonably constituted the Kim
plaintiffs’ loss from placement of the apartment units in the
program. These amounts totaled $35,520 in 2013; $88,337 in
2014;15 $83,444 in 2015; and $35,298 in 2016. Substantial
evidence therefore supports this portion of the jury’s award for
lost income, totaling $242,599.
14 Kim testified all rental income held in REAP was released
to the Kim plaintiffs in April 2017 after the property exited the
program.
15 Because defendants failed to include in the appellate record
exhibit 220 with the calculation for the REAP uncollected rent
from the five units that refused to pay rent in 2014, we include
the total amount of uncollected rent for 2014 according to Kim’s
testimony.
43
However, substantial evidence does not support the jury’s
award to the extent it reflects the unpaid rents of the
“unscrupulous tenant[s]” who failed to pay their rent to the Kim
plaintiffs or to REAP. These losses were not fairly attributable to
defendants’ concealment, but rather, resulted from the unlawful
misconduct of the tenants who refused to pay rent due under the
terms of their leases with the Kim plaintiffs.
4. Substantial evidence does not support the jury’s
award of future economic loss
Defendants contend substantial evidence does not support
the jury’s damages award of $22,487 for future economic loss.
This contention has merit. The Kim plaintiffs argue the award
was for “future lost profits from loss of yearly rental increases
which would have been allowed by the Los Angeles Rent
Stabilization Ordinance . . . if the Property had not been held up
in REAP.” But they provide no citation to the record in support
of this assertion. Kim testified the Kim plaintiffs could not raise
the rent while the property was in REAP and for one subsequent
year. When he was asked, “[D]id you lose five years’ worth of
rental increases because of REAP?,” Kim responded, “Yes.” The
challenge is that neither Kim nor another witness calculated the
lost rental income during the period the property was in REAP
(or the following year). In her closing argument, Bullock simply
asserted, “[Kim] lost the rental increases because the property
was prolonged in REAP for another three years. That means he
lost three years of rent control increases, along with all that rent
that he didn’t get.”
Even assuming the rent column on the rent loss charts
reflected the rent due on all apartments in REAP and the
44
vacancy column reflected the rent not paid due to a vacancy, the
record on appeal does not contain exhibit 220, which according to
Kim reflects rent losses during 2014. Thus, we cannot tell what
rent was charged in 2014 or the rent lost due to vacancies. And
the record is devoid of any evidentiary support for the jury’s
calculation of $22,487 (actually, the unusually precise number of
$22,486.94) for future economic loss. Therefore, defendants have
met their burden to show that substantial evidence does not
support the jury’s award of damages for future economic loss.
The burden therefore shifted to the Kim plaintiffs to provide
citations to the record and argument explaining the evidentiary
support for the jury’s calculation, which they have not done. (See
People v. Bryant, Smith and Wheeler (2014) 60 Cal.4th 335, 363
[“If a party’s briefs do not provide legal argument and citation to
authority on each point raised, ‘“the court may treat it as waived,
and pass it without consideration.”’”]; In re Marriage of Davila &
Mejia (2018) 29 Cal.App.5th 220, 227 [“‘Issues not supported by
citation to legal authority are subject to forfeiture.’”].) It is not
our task on appeal to speculate how the jury calculated the award
in the absence of any guidance from a witness, the Kim plaintiffs’
trial attorneys, or appellate counsel as to how the future rent loss
figure should have been calculated. Further, even if we were to
assume the rent and vacancy rates in 2014 were comparable to
those in 2013 and 2015, there is no evidentiary basis for the
jury’s future economic loss award, and thus substantial evidence
does not support the award.
45
5. Substantial evidence does not support the jury’s
award of noneconomic damages
Defendants contend substantial evidence does not support
the jury’s award of damages for past noneconomic loss, including
mental suffering. They argue neither Kim nor Kang testified at
trial they experienced mental suffering or other noneconomic
harm due to defendants’ fraudulent concealment and Cho did not
testify at trial.
The Kim plaintiffs make no argument to the contrary and
provide no citation to any such record evidence. Our review of
the record reveals no evidence Kim, Kang, or Cho mentally
suffered or otherwise incurred noneconomic injury because of
defendants’ conduct. Although “the testimony of a single person,
including the plaintiff, may be sufficient to support an award of
emotional distress damages” (Knutson v. Foster (2018)
25 Cal.App.5th 1075, 1096), the record here does not appear to
include such testimony.16 Thus, the jury’s award of $84,000 in
noneconomic damages is not supported by substantial evidence.17
16 At oral argument the Kim plaintiffs’ attorney pointed to
Kim’s testimony that he “lost the trust with . . . mankind” and
realized mankind was “very devious.” This testimony does not
show emotional distress suffered by Kim.
17 Because we conclude substantial evidence does not support
the jury’s award of noneconomic damages, we do not reach
defendants’ contention of instructional error regarding emotional
distress damages. We note, however, that “[s]ection 3343
delineates in detail the damages recoverable for fraud in property
transactions, and does not include a provision for recovery of
damages for emotional distress.” (Branch v. Homefed Bank
(1992) 6 Cal.App.4th 793, 798.)
46
6. The trial court must recalculate prejudgment interest
Because we reverse the jury’s award of damages on the
Kim plaintiffs’ claim of fraudulent concealment for future
economic loss, noneconomic loss, and a portion of lost earnings,
prejudgment interest must be recalculated.
The Trial Court Did Not Err in Finding the Kim Plaintiffs
Were Entitled to Attorneys’ Fees
1. Proceedings below
On February 8, 2019 the Kim plaintiffs and GNE filed a
motion for attorneys’ fees with supporting documentation. In
their motion, the Kim plaintiffs sought to recover attorneys’ fees
pursuant to Civil Code section 1717 and Code of Civil Procedure
section 1021, relying on the attorney fee provision in the escrow
agreement. The escrow agreement provided, “In any action,
proceeding, or arbitration between Buyer and Seller arising out
of this Agreement, the prevailing Buyer or Seller shall be entitled
to reasonable attorney’s fees and costs from the non-prevailing
Buyer or Seller, except as provided in paragraph 21A of the
original purchase agreement.”18 The Kim plaintiffs argued they
were the prevailing party in the action and their claims arose out
of the escrow agreement, entitling them to recover their
attorneys’ fees. The Kim plaintiffs requested $591,936 in
attorneys’ fees, plus application of a multiplier.
Defendants opposed the motion as to the Kim plaintiffs on
the ground the attorney fee provision in the escrow agreement
did not support recovery of attorneys’ fees in a tort action. As to
18 It is undisputed the parties never entered into a purchase
agreement. Rather, the terms of the sale were included in the
escrow agreement.
47
GNE, defendants argued the parties’ agreement for remediation
work (the invoice) did not contain an attorney fee provision.
Defendants also challenged the amount of the requested fees.
At a hearing on May 10, 2019, the trial court found the Kim
plaintiffs were entitled to attorneys’ fees, but not GNE. On
June 4, 2019, after supplemental briefing on the amount of the
award, the court granted the Kim plaintiffs’ motion and ordered
plaintiffs’ counsel to prepare a judgment for the court’s signature.
Although the June 4 minute order does not reflect the amount of
fees awarded, defendants’ attorney submitted a declaration on
September 26, 2019 stating the court had orally pronounced
plaintiffs had reasonably incurred $450,000 in attorneys’ fees.19
On December 11, 2019 the court signed an amended judgment
setting forth the amounts awarded by the jury to the Kim
plaintiffs and GNE, and awarding the Kim plaintiffs $412,500 in
attorneys’ fees. Defendants timely appealed the amended
judgment.
2. Governing law and standard of review
“With regard to an award of attorney fees in litigation,
California generally follows what is commonly referred to as the
‘American Rule’, which provides that each party to a lawsuit
19 According to defendants’ attorney James Mortensen,
plaintiffs had not proposed an order on their motion for attorneys’
fees as of September 24, 2019, so Mortensen submitted his
declaration and a proposed order. Although Mortensen stated in
his declaration the Kim plaintiffs’ reasonable fees were $450,000,
it appears the court ruled that $450,000 was the total amount of
reasonable fees, with $412,500 allocated to work for the Kim
plaintiffs.
48
must ordinarily pay his or her own attorney fees.” (Tract 19051
Homeowners Assn. v. Kemp (2015) 60 Cal.4th 1135, 1142; accord,
Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017)
3 Cal.5th 744, 751 (Mountain Air).) This rule is codified in Code
of Civil Procedure section 1021,20 but that section also “permits
parties to ‘“contract out” of the American rule’ by executing an
agreement that allocates attorney fees.” (Mountain Air, at p. 751;
accord, R.W.L. Enterprises v. Oldcastle, Inc. (2017)
17 Cal.App.5th 1019, 1025.) “‘“Parties may validly agree that the
prevailing party will be awarded attorney fees incurred in any
litigation between themselves, whether such litigation sounds in
tort or in contract.”’” (Mountain Air, at p. 751.) Contracting
parties may also “limit the recovery of fees only to claims arising
from certain transactions or events, or award them only on
certain types of claims.” (Brown Bark III, L.P. v. Haver (2013)
219 Cal.App.4th 809, 818 (Brown Bark).)
“‘“On review of an award of attorney fees after trial, the
normal standard of review is abuse of discretion. However, de
novo review of such a trial court order is warranted where the
determination of whether the criteria for an award of attorney
fees and costs in this context have been satisfied amounts to
statutory construction and a question of law.”’ [Citations.] In
other words, ‘it is a discretionary trial court decision on the
propriety or amount of statutory attorney fees to be awarded, but
a determination of the legal basis for an attorney fee award is a
20 Code of Civil Procedure section 1021 provides in relevant
part, “Except as attorney’s fees are specifically provided for by
statute, the measure and mode of compensation of attorneys and
counselors at law is left to the agreement, express or implied, of
the parties . . . .”
49
question of law to be reviewed de novo.’” (Mountain Air, supra,
3 Cal.5th at p. 751; accord, Orozco v. WPV San Jose, LLC (2019)
36 Cal.App.5th 375, 407; see Eden Township Healthcare Dist. v.
Eden Medical Center (2013) 220 Cal.App.4th 418, 425 [“‘On
appeal this court reviews a determination of the legal basis for an
award of attorney fees de novo as a question of law.’”].)
In deciding the scope of an attorney fee provision, we apply
traditional rules of contract interpretation. (Mountain Air,
supra, 3 Cal.5th at p. 752; accord, Orozco v. WPV San Jose, LLC,
supra, 36 Cal.App.5th at p. 407.) “Our initial inquiry is confined
to the writing alone. [Citations.] ‘“The ‘clear and explicit’
meaning of these provisions, interpreted in their ‘ordinary and
popular sense,’ unless ‘used by the parties in a technical sense or
a special meaning is given to them by usage’ [citation], controls
judicial interpretation. [Citation.] Thus, if the meaning a
layperson would ascribe to contract language is not ambiguous,
we apply that meaning. [Citations.]”’ [Citations.] At the same
time, we also recognize the ‘interpretational principle that a
contract must be understood with reference to the circumstances
under which it was made and the matter to which it relates.’”
(Mountain Air, at p. 752; accord, Xuereb v. Marcus & Millichap,
Inc. (1992) 3 Cal.App.4th 1338, 1342 (Xuereb).)
Neither party has presented extrinsic evidence to interpret
the escrow agreement. Because defendants on appeal only raise
the legal question whether the attorney fee provision in the
escrow agreement provides for recovery of fees on the Kim
50
plaintiffs’ fraudulent concealment claim,21 we apply a de novo
standard of review. (Mountain Air, supra, 3 Cal.5th at p. 751.)
3. The attorney fee provision in the escrow agreement
applies to the Kim plaintiffs’ fraudulent concealment
claim
As discussed, the attorney fee provision in the escrow
agreement provides for the prevailing party to recover reasonable
attorneys’ fees in “any action, proceeding, or arbitration between
Buyer and Seller arising out of this Agreement . . . .” Defendants
contend this provision should be read narrowly not to apply to the
Kim plaintiffs’ fraudulent concealment claim because it arose out
of a common law duty to disclose, not the escrow agreement, and
it predated the escrow agreement. We conclude otherwise.
Contrary to defendants’ position, the appellate courts have
interpreted attorney fee provisions in property purchase
agreements authorizing the recovery of fees incurred in an action
“arising out of” the agreement broadly to cover a party’s tort
claims. (See Lerner v. Ward (1993) 13 Cal.App.4th 155, 157, 160
(Lerner) [construing language in agreement for purchase of
property allowing recovery of attorneys’ fees incurred “arising out
of this agreement” broadly to apply to claim that seller
fraudulently induced plaintiffs to enter into agreement by falsely
representing that property could be subdivided]; Xuereb, supra,
3 Cal.App.4th at pp. 1340, 1343 [plaintiffs were entitled to
recover attorneys’ fees for fraud and related claims alleging sale
of defective property based on attorney fee provision in purchase
21 The same analysis would apply to the Kim plaintiffs’ claim
for negligent misrepresentation. For simplicity, we focus on the
fraudulent concealment claim.
51
agreement that provided for recovery of fees “‘[i]f this Agreement
gives rise to a lawsuit or other legal proceeding between any of
the parties’”]; see also Santisas v. Goodin (1998) 17 Cal.4th 599,
608 [provision in purchase agreement stating attorneys’ fees were
recoverable for claims “‘arising out of the execution of th[e]
agreement or the sale’” was a broad provision that supported
recovery of fees for plaintiffs’ fraud and related claims alleging
defects in home].)
The holding in Xuereb is instructive. There, the buyers of
property sued the real estate broker and agent, asserting
fraudulent concealment and other claims relating to the sale.
(Xuereb, supra, 3 Cal.App.4th at p. 1340.) The Court of Appeal
held the language in the purchase agreement providing for
recovery of attorneys’ fees by the prevailing party if the lawsuit
or other legal proceeding was one “to which ‘this Agreement gives
rise’” was “broad enough to encompass both contract actions and
actions in tort . . . .” (Id. at pp. 1342-1343.) The defendants, as
here, argued the lawsuit did not arise from the purchase
agreement because all the alleged omissions and misstatements
occurred prior to execution of the agreement. (Ibid.) The Court
of Appeal rejected this argument, explaining, “[B]ut for the
execution of the Purchase Agreement and the subsequent close of
escrow, respondents would have had no basis on which to claim
detrimental reliance or damages, as alleged in their lawsuit.”
(Id. at p. 1344.) The court concluded, “[T]he various tort causes
of action set forth against [the broker and agent] in [the buyers’]
complaint and tried before the jury must be said to have arisen
from the Purchase Agreement. None of them was ‘quite
independent of the basic contractual arrangement’; they arose
52
from the underlying transactional relationship between the
parties, as memorialized by the Purchase Agreement.” (Ibid.)
Exxess Electronixx v. Heger Realty Corp. (1998)
64 Cal.App.4th 698, relied on by defendants, is distinguishable.
There, a commercial property owner sued a tenant for breach of
the lease, and the tenant filed a cross-complaint for fraud and
breach of fiduciary duty against the property broker, alleging the
broker concealed defects in the property known before execution
of the lease. (Id. at pp. 702-703.) After the case settled, the
broker sought fees as a prevailing party pursuant to the lease
agreement, which provided for the recovery of fees by a prevailing
party in “‘an action or proceeding to enforce the terms hereof or
declare rights’” under the agreement. (Ibid.) The Court of
Appeal concluded the broker was not entitled to recover its fees
because the tenant’s claims for fraud and breach of fiduciary duty
were not claims to enforce the terms of the lease or to declare
rights under it, but instead “were premised on a duty that arose
without regard to the terms of the lease and before the lease
existed.” (Id. at p. 711.) Notably, the attorney fee provision in
Exxess Electronixx, unlike the escrow agreement, did not provide
for the recovery of fees arising out of the agreement. As the
Court of Appeal explained, “the provision before us appears to be
quite narrow.” (Id. at p. 712.) The court contrasted the fee
provision at issue there with “broader provisions to permit an
award of attorneys’ fees on a tort claim,” including the provisions
at issue in Santisas v. Goodin, supra, 17 Cal.4th at page 607 and
Xuereb, supra, 3 Cal.App.4th at page 1343 authorizing fees in
actions arising out of the agreements. (Exxess Electronixx, at
pp. 712-713.)
53
The gravamen of the Kim plaintiffs’ fraudulent
concealment claim is that defendants’ concealment of the Health
Department violations induced them to purchase the property.
The parties memorialized the purchase transaction in the escrow
agreement, and thus, as in Lerner and Xuereb, the Kim plaintiffs’
claim for fraudulent concealment was an action arising from the
escrow agreement. (See Lerner, supra, 13 Cal.App.4th at p. 160;
Xuereb, supra, 3 Cal.App.4th at p. 1344.)
DISPOSITION
The judgment in favor of the Kim plaintiffs is modified by
reducing the award of damages from $992,596 to $855,138
(reflecting a reduction of $29,970 for lost earnings ($272,569
awarded reduced to $242,599); $22,487 for future economic loss;
and $85,000 for past noneconomic loss). We remand for the trial
court to recalculate prejudgment interest. In all other respects,
we affirm the judgment, including the award of attorneys’ fees.
The parties are to bear their own costs on the appeal in case No.
B295665. The Kim plaintiffs are to recover their costs on appeal
in case No. B303317.
FEUER, J.
We concur:
PERLUSS, P. J. SEGAL, J.
54