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Date: 05-18-2020
Case Style:
Justin Moore v. Richard Burden Teed
Case Number: A153523
Judge: Sanchez, J.
Court: California Court of Appeals First Appellate District, Division One on appeal from the Superior Court, County of San Francisco
Plaintiff's Attorney: Sandra A Edwards and Laurie J. Hepler
Defendant's Attorney: Ben Feuer and Jeffry A. Miller
Description:
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This lawsuit arises out of the purchase and botched remodel of a
fixer-upper house in the Pacific Heights neighborhood of San Francisco.
Plaintiff Justin Moore alleges he was fraudulently induced by his real estate
agent Richard Burden Teed to purchase and renovate the property based on
Teed’s assurances that he and his team of experienced contractors could
deliver a set of high-end improvements for only $900,000. Moore sued after
the installed foundation proved defective and the promised renovations were
far more costly than what Teed had represented they would be. The jury
returned a verdict in favor of Moore on his tort claims and awarded him his
out-of-pocket expenses for replacing the foundation and benefit-of-thebargain damages for the additional cost he incurred in obtaining the
renovations that had been promised to him.
Conceding liability, Teed challenges the award of benefit-of-the-bargain
damages and statutory attorney fees on various grounds. Courts of Appeal
are divided over the question whether benefit-of-the-bargain damages may be
recovered in fraud claims involving real property transactions where the
2
fraud is perpetrated by a fiduciary. We are persuaded by those authorities
which have concluded that benefit-of-the-bargain damages are available to
fully compensate a plaintiff for all the detriment proximately caused by a
fraudulent fiduciary’s actions. We also conclude that the jury properly
awarded statutory attorney fees and costs. Accordingly, we affirm the
judgment below.
FACTUAL AND PROCEDURAL BACKGROUND1
A. Background
Moore decided to buy a house in San Francisco but found he could not
afford one in the neighborhoods he preferred. In 2011, Moore met Teed, who
promoted himself on the Internet as a real estate agent with “over 25 years of
experience as a building contractor” with “an extensive background in
historic restorations” and “a deep understanding of quality construction.”
Teed told Moore that he could locate a lower-priced fixer-upper home in a
choice neighborhood and then renovate it in a cost-effective manner. Based
on his interactions with Teed and his exposure to Teed’s promotional
materials, Moore believed that Teed was a general contractor. Both Moore
and Moore’s father toured several examples of homes that Teed had
renovated and were impressed with Teed’s substantial knowledge of
materials and design and his business affiliations. Moore retained Teed as
his real estate agent.
In May 2011, following Teed’s advice, Moore bought a large fixer-upper
house on Green Street for $4.8 million. The home was built in 1912 and was
last updated in the 1950s. Moore borrowed significantly from his father and
a bank to purchase the house. Teed received a commission from the sale.
1 Under established appellate principles, we recite the facts in the light
most favorable to the judgment below. (People v. Bogle (1995) 41 Cal.App.4th
770, 775.)
3
Before the close of escrow, Teed proposed renovating the basement to
create a “below-ground floor Grade A living space” with a cinema and a wine
cellar. Teed said other rooms in the house could also be expanded and
modernized. Moore’s father had a lengthy conversation with Teed in which
they discussed on a line-by-line basis what the costs of construction would be
for a specific list of improvements. Based on these conversations, Moore
expected that in exchange for the $4.8 million purchase price plus $900,000
for renovations (excluding certain design fees), Teed and his team of
construction professionals would deliver the Green Street home renovated to
the same high-end standard as the other projects Teed had shown Moore.
Teed recommended that Moore hire architect Gregg De Meza to design
the renovations. De Meza and Teed met with Moore and Moore’s father to
outline the budget for various aspects of the project. The projected budget for
the foundation work, for example, was $200,000. After the close of escrow,
De Meza prepared a 10-page comprehensive “Creative Spec” setting forth the
proposed renovations in detail.
De Meza put the project out for bidding and received contractor bids
ranging from approximately $1.6 million to $2.4 million. Teed told Moore
that he would work with De Meza to get the project back within the budget.
Teed proposed cutting costs for some items as well as performing demolition
in the upper floors and completing the foundation and basement work before
seeking further bids. Moore and his father agreed to Teed’s plan of action.
Moore employed Teed’s associates for the project. He signed contracts
with two engineering firms recommended by Teed. Moore did not sign a
written contract with Teed himself because Teed stated he “didn’t need
contracts; that this is what he did. This is how he built his reputation.”
Moore nevertheless believed that he had an oral agreement with Teed. Work
4
demands prevented Moore from visiting the site regularly and he relied on
progress videos sent by Teed. Teed set up a joint account funded by Moore to
make payments to the contractors.
Teed was not in fact a licensed contractor. Beginning in 2011, Teed’s
team of contractors gutted large parts of the house, excavated the lot, and
built most of the foundation meant to house the basement-level living space.
The foundation was defective, however, because it lacked any waterproofing
despite the property’s high water table. After Moore became aware of the
defects, he halted all work on the project and terminated De Meza. Moore’s
father engaged consultants to evaluate and report on the foundation. They
concluded, despite strong resistance from Teed, that the foundation had to be
torn out and replaced. Teed’s structural engineer agreed that the foundation
was defective and privately apologized to Moore. By then, Moore had paid
about $265,000 of the $900,000 promised cost for Teed’s renovations.
B. Litigation Commences
On August 2, 2013, Moore filed a complaint against Teed and other
defendants for breach of contract, intentional misrepresentation, negligent
misrepresentation, negligence, breach of fiduciary duties, negligence per se,
violation of Business and Professions Code2 section 17200, professional
negligence, and recovery against license bonds. Moore alleged he was
fraudulently induced to purchase and renovate the property based on false
representations that Teed was an experienced contractor who could deliver a
basic, yet quality remodel for $900,000.
Moore hired a new architect and a general contractor The defective
foundation was demolished and replaced and renovations along the lines of
2 All further statutory references are to the Business and Professions
Code except as otherwise indicated.
5
those promised by Teed were completed at a much higher expense. Moore
and his father eventually expanded the renovation well beyond what Teed
had originally proposed. Moore did not seek damages for these additions at
trial. By the 2017 trial, Moore had nearly completed the renovations to his
home at a total cost of about $9 million.
At trial, construction cost estimator Christine Kiesling testified for
Moore as an expert witness. Kiesling explained that the cost to complete
Teed’s proposed renovations was much higher than promised because Teed’s
estimates had been unrealistically low and because construction expenses
had gone up in the additional time it took to tear out and replace the
foundation. Kiesling testified about four items of damages claimed by Moore:
(1) the difference in value between the actual cost of Teed’s renovations using
2011-2012 pricing rates and the promised cost of $900,000; (2) the actual cost
to demolish and replace the foundation; (3) the value of the lost use of the
property; and (4) the increased costs due to the delay in the renovations.
Kiesling estimated the De Meza design would have cost $4,477,249 to
build in 2011-2012. The foundation alone should have been priced at
$620,000, not $200,000. Kiesling’s estimate was over $1 million above the
highest contractor bid De Meza received in 2011. She explained that her
estimate was higher because the 2011 bids contained many significant
omissions, including the cost of materials, installation, and installing a fire
sprinkler system.
In closing arguments, Moore’s counsel told the jury: “The first category
of damage that Mr. Moore is entitled to from Mr. Teed is the difference
between the renovation’s promised cost—that’s the $900,000 for the
construction—and the cost calculated to do that work in 2011-2012.” Counsel
asked for an award of $3,842,160 for this category of damages. She also
6
requested $693,000 for increased costs due to the delay in the renovation
work.
Teed’s counsel argued there had never been a promised $900,000
remodel and urged the jury to award nothing for the first and last categories
of damages. He said the alleged damages did “not represent any loss that
was actually sustained by the plaintiff in the real world. [¶] What it really
is, is free money that is fabricated out of thin air, and we don’t think that you
should award any.”
C. Jury Verdict and Posttrial Matters
The jury found for Teed on Moore’s claim for breach of contract but
found in favor of Moore on all of his remaining tort claims.3 It awarded
benefit-of-the-bargain damages of $900,000 for the difference between the
renovation’s promised cost and the actual cost to do the same work using
2011-2012 rates, and $104,498 in increased costs due to delay. The jury also
awarded Moore out-of-pocket damages of $822,904 for the actual cost to
replace the foundation, and $106,920 for lost use of the property—damages
that Teed does not challenge on appeal. The damages awarded against Teed
totaled $1,934,322.
The trial court granted Teed’s motion for an offset based on Moore’s
settlements with other defendants, leaving the net damages against Teed at
$934,322. The court also granted Moore’s motion for statutory attorney fees
and costs based on the jury’s special verdict finding that Teed had violated
section 7160 of the Contractors’ State License Law (§ 7000 et seq.). Moore
was awarded $2,114,434 in attorney fees plus $104,498 in costs under Code of
Civil Procedure section 1032. The trial court denied Teed’s motion for a new
trial and entered an amended judgment. This appeal followed.
3 The trial court later ruled against Moore on his section 17200 claim.
7
DISCUSSION
We review Teed’s claims that the trial court erroneously instructed the
jury on matters of law de novo, viewing the evidence in the light most
favorable to the claim of instructional error. (Mize-Kurzman v. Marin
Community College Dist. (2012) 202 Cal.App.4th 832, 845–846.) “In other
words, we assume the jury might have believed the evidence favorable to the
[prevailing party] and rendered a verdict in [the prevailing party’s] favor on
those issues as to which it was misdirected.” (Id. at p. 846.) Teed’s claim
that attorney fees were awarded under a misapplication of law is a legal
question we review de novo. (Employers Mutual Casualty Co. v. Philadelphia
Indemnity Ins. Co. (2008) 169 Cal.App.4th 340, 347.)
I. Damages Award
Teed challenges the damages award on several grounds. He claims
that benefit-of-the-bargain damages cannot be awarded alongside out-ofpocket damages as a matter of law, benefit-of-the-bargain damages are not a
permissible form of recovery for fraud actions involving the purchase of real
property, and the trial court erred in allowing a damages award founded on
speculative assumptions about a hypothetical project that was never built.
These errors were compounded, Teed argues, when the trial court permitted
double recovery for the cost of replacing the foundation. We find no merit to
any of these contentions.
a. The Trial Court Did Not Err in Instructing on Alternative
Forms of Recovery
The principles applicable to a damages award for fraud are well settled.
“There are two measures of damages for fraud: out-of-pocket and benefit of
the bargain. [Citation.] The ‘out-of-pocket’ measure of damages ‘is directed
to restoring the plaintiff to the financial position enjoyed by him prior to the
fraudulent transaction, and thus awards the difference in actual value at the
8
time of the transaction between what the plaintiff gave and what he received.
The ‘benefit-of-the-bargain’ measure, on the other hand, is concerned with
satisfying the expectancy interest of the defrauded plaintiff by putting him in
the position he would have enjoyed if the false representation relied upon had
been true; it awards the difference in value between what the plaintiff
actually received and what he was fraudulently led to believe he would
receive.’ ” (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1240
(Alliance Mortgage); see Lazar v. Superior Court (1996) 12 Cal.4th 631, 646
(Lazar) [“Because of the extra measure of blameworthiness inherent in fraud,
and because in fraud cases we are not concerned about the need for
‘predictability about the cost of contractual relationships’ [citation], fraud
plaintiffs may recover ‘out-of-pocket’ damages in addition to benefit-of-thebargain damages.”].)
As described above, Moore was awarded $900,000 in benefit-of-thebargain damages based on the difference between the price Teed represented
the renovations would cost and the actual cost to do the same renovations
using rates from 2011-2012. Moore was also awarded out-of-pocket damages
for costs he incurred to tear out and replace the defective foundation. We
analyze these separate items of recovery in further detail below. Here, we
address Teed’s contention that benefit-of-the-bargain and out-of-pocket
damages cannot both be awarded on a tort claim. Teed’s reliance on a
footnote in Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159,
1176, footnote 4 (Simon)) is misplaced.
In Simon, the Supreme Court concluded that a punitive damages
award was excessive under federal constitutional principles. (Simon, supra,
35 Cal.4th at p. 1167.) The plaintiff in the underlying action prevailed on a
claim of promissory fraud against the seller of a commercial office building
9
who backed out of the real estate transaction. The jury found that although
the parties had no enforceable agreement, the plaintiff was entitled to $5,000
in compensatory damages and $1.7 million in punitive damages. (Id. at
pp. 1170–1171.) In reversing the punitive damages award, the Simon court
rejected the plaintiff’s claim that the defendant’s fraudulent promises caused
him $400,000 in potential losses—the profit plaintiff might have earned had
the transaction been consummated. (Id. at pp. 1173–1175.) The Simon court
concluded that the plaintiff was not entitled to lost profits of $400,000
because the defendant’s fraud was not the cause of plaintiff’s failure to obtain
the property. (Id. at p. 1176.)
Teed contends that Simon forecloses a tort plaintiff’s right to recover
both benefit-of-the-bargain and out-of-pocket damages in cases where, “[l]ike
the Simon plaintiff, Moore prevailed on his fraud claim but not on his
contract claim.” He quotes footnote 4 of the Simon opinion, which responded
to the Simon plaintiff’s argument that under Lazar, supra, 12 Cal.4th 631, a
fraud plaintiff generally may recover both benefit-of-bargain and out-ofpocket damages. “[Plaintiff’s] reliance is misplaced: our reference in [the
Lazar] decision to benefit-of-bargain damages was to their recovery under a
contract cause of action.” Teed, however, omits the last sentence of the
footnote, which states: “On a different point, nothing we say in this case
affects the scope of damages recoverable for fraud committed by a fiduciary.”
(Simon, supra, 35 Cal.4th at p. 1176, fn. 4.)
We need not resolve whether Teed’s interpretation of Simon is correct
because it is clear that Simon does not purport to address the availability of
benefit-of-the-bargain damages when tort victims have been defrauded by
their fiduciaries—exactly the situation presented by the instant appeal. As
we explain below, Alliance Mortgage and other authorities have recognized
10
that where the defrauding party stands in a fiduciary relationship with the
victim of fraud, a “broader” measure of damages may be awarded than simply
“out-of-pocket” losses. (Alliance Mortgage, supra, 10 Cal.4th at pp. 1240–
1241.) Accordingly, the trial court committed no error in instructing the jury
on alternative forms of recovery.
b. Benefit-of-the-Bargain Damages May Be Awarded for
Fraud Committed by a Fiduciary in Real Property
Transactions
Teed next contends that benefit-of-the-bargain damages are never
recoverable for fraud claims involving real property transactions, even when
the fraud is perpetrated by a fiduciary. While there is a split of authority on
this question, we are persuaded by the majority of courts which have
concluded that benefit-of-the-bargain damages are recoverable in fraud
actions where a fiduciary induces an individual to purchase, sell, or exchange
real property to their detriment.
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.
Civil Code 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 certain
enumerated damages such as lost profits. Our high court has clarified that
“[t]his section does not apply, however, when a victim is defrauded by its
fiduciaries. In this situation, the ‘broader’ measure of damages provided by
[Civil Code] sections 1709 and 3333 applies.” (Alliance Mortgage, supra,
10 Cal.4th at p. 1241, italics added.)
11
Under Civil Code section 1709, a defendant who willfully deceives a
plaintiff with the intent to induce him to alter his position to his detriment
“is liable for any damage which he thereby suffers.” Civil Code section 3333,
the general tort damage measure, provides that the “measure of damages . . .
is the amount which will compensate for all the detriment proximately
caused thereby, whether it could have been anticipated or not.” As one
leading treatise has noted, these two statutes support imposing benefit-ofthe-bargain damages in real property transactions involving a fraudulent
fiduciary “ ‘because a fiduciary should be responsible to compensate his or her
principal for the full amount of the loss caused by his or her breach of duty.’ ”
(See Fragale v. Faulkner (2003) 110 Cal.App.4th 229, 238–239 (Fragale),
quoting 2 Miller & Starr, Cal. Real Estate (3d ed. 2000) § 3.33, pp. 190–191,
fns. omitted.)
In Salahutdin v. Valley of California, Inc. (1994) 24 Cal.App.4th 555,
our colleagues in Division Two affirmed an award of benefit-of-the-bargain
damages against a fiduciary in a real estate fraud action. The court
concluded that benefit-of-the-bargain damages was an appropriate remedy
under Civil Code sections 1709 and 3333 based on the “ ‘ “determination that
the faithless fiduciary shall make good the full amount of the loss of which his
breach of faith is a cause.” ’ ” (Salahutdin, at p. 567; see Pepitone v. Russo
(1976) 64 Cal.App.3d 685, 689 (Pepitone) [holding that “the measure of
damages provided by [Civil Code sections 1709 and 3333] is substantially the
same as that for breach of contract prescribed by [Civil Code] section 3300;
i.e., it tends to give the injured party the benefit of his bargain and insofar as
possible to place him in the same position he would have been had the
promisor performed the contract.”].)
12
Contrary to Teed’s assertion on appeal, Alliance Mortgage did not
disapprove Salahutdin. The question before the high court was whether a
real estate lender’s full credit bid at a nonjudicial foreclosure sale barred the
lender from pursuing a separate fraud action against third party fiduciaries
that induced the lender to make the loans. (Alliance Mortgage, supra,
10 Cal.4th at pp. 1241–1242.) After noting Salahutdin’s holding that
benefit-of-the-bargain damages are available in claims of fraud by a fiduciary,
the court cautioned that Salahutdin involved claims of a fiduciary’s negligent
misrepresentation, and in such circumstances “a plaintiff is only entitled to
its actual or ‘out-of-pocket’ losses suffered because of fiduciary’s negligent
misrepresentation under [Civil Code] section 3333.” (Alliance Mortgage, at
pp. 1249–1250.) As to a “fiduciary’s intentional misrepresentation” however,
the court recognized that “the measure of damages under section 3333 might
be greater” but left the issue for another day. (Id. at p. 1250.) Far from
disapproving Salahutdin, the Supreme Court reaffirmed the lower court’s
reasoning that fraudulent fiduciaries may be subject to a “broader” measure
of damages under Civil Code sections 1709 and 3333. (Alliance Mortgage, at
p. 1241.)
Alliance Mortgage left unresolved the split of authority concerning the
appropriate measure of damages for a fiduciary’s intentional fraud, and the
disagreement persists. In Fragale, the Second Appellate District concluded
that benefit-of-the-bargain damages apply in intentional fraud claims
involving a fiduciary, observing that “ ‘the remedy afforded by [Civil Code]
sections 1709 and 3333 aims at compensation for any and all the detriment
proximately caused by the breach.’ ” (Fragale, supra, 110 Cal.App.4th at
p. 238.) “The benefit-of-the-bargain measure places a defrauded plaintiff in
the position he would have enjoyed had the false representation been true,
13
awarding him the difference in value between what he actually received and
what he was fraudulently led to believe he would receive.” (Id. at p. 236.) In
Strebel v. Brenlar Investments, Inc. (2006) 135 Cal.App.4th 740, Division
Three of this court concluded that a real estate broker’s fraudulent
concealment of facts that induced his client to sell his house prematurely
allowed for an unusual damages award—the loss in appreciation of his home
caused by the premature sale. (Id. at pp. 744–745.) The court reasoned that
“ ‘[t]here is no fixed rule for the measure of tort damages under Civil Code
section 3333’ ” and “ ‘[t]he measure that most appropriately compensates the
injured party for the loss sustained should be adopted.’ ” (Strebel, at p. 749.)
Conversely, in Hensley v. McSweeney (2001) 90 Cal.App.4th 1081, the
Fifth Appellate District limited the damages available for claims of fraud by a
fiduciary in a real property transaction to out-of-pocket damages. (Id. at
p. 1086.) It adopted the reasoning of its earlier decision in Overgaard v.
Johnson (1977) 68 Cal.App.3d 821, which held that the measure of damages
for fraud by a fiduciary is out-of-pocket damages, not the benefit-of-thebargain damages normally applicable to contract causes of action.
(Overgaard, at pp. 826–828.) But Overgaard involved allegations of negligent
misrepresentation by a fiduciary, and Hensley does not explain why the same
out-of-pocket rule should apply for a fiduciary’s intentional fraud.
We are persuaded by the reasoning of Pepitone, Salahutdin, Fragale,
and related authorities and conclude that where a person has been defrauded
by their fiduciary in a real property transaction, the measure of damages
available under Civil Code sections 3333 and 1709 may include a benefit-ofthe-bargain damages award. Applying this broader measure of damages
ensures that a faithless fiduciary is held to account for the full amount of the
loss of which his breach of faith is a cause (Pepitone, supra, 64 Cal.App.3rd at
14
p. 688), and that a victim is compensated for any and all detriment
proximately caused by their fraudulent behavior. (Civ. Code, § 3333.)4
c. The Damages Award Was Not Speculative
Teed next argues that the jury could not have calculated a benefit-ofthe-bargain damages award because such damages require that both the
scope of promised work and the actual value received (i.e., the actual cost to
accomplish the renovations) be definite and concrete. Moore’s damages were
too speculative because the project that Teed said would cost $900,000 was
never built as the construction plans “were in a constant state of change” due
to extensive revisions Moore made to the plans over time. Teed also claims
the actual cost to perform the work rested on conjecture because the project
as contemplated during Teed’s involvement was never built. The
hypothetical costs due to delay must fall away for the same reasons. We are
not persuaded that the evidentiary record is too indefinite to support the
damages award or that the jury was erroneously instructed in the calculation
of such damages.
“Whatever its measure in a given case, it is fundamental that ‘damages
which are speculative, remote, imaginary, contingent, or merely possible
cannot serve as a legal basis for recovery. [Citations.]’ [Citations.] However,
recovery is allowed if claimed benefits are reasonably certain to have been
realized but for the wrongful act of the opposing party.” (Piscitelli v.
Friedenberg (2001) 87 Cal.App.4th 953, 989.)
As a preliminary matter, Teed’s argument that the scope of the
promised renovations was too indefinite to support the damages award
4 We reject Teed’s related argument that benefit-of-the-bargain
damages may not be awarded in the absence of an enforceable contract. As
discussed above, such damages are available in tort cases involving fraud
committed by a fiduciary in real property transactions.
15
stands in tension with his concession on liability. We must accept all facts in
support of his liability for fraud, including that he held himself out as an
experienced contractor and renovator of houses and that he falsely
represented to Moore that he and his team could deliver a set of specific
renovations for only $900,000. The record evinces that Teed’s conversations
with Moore and Moore’s father generated a sufficiently clear scope of work for
the promised renovations prior to the close of escrow. In one such
conversation, Teed and Moore’s father discussed on a line-by-line basis what
the cost of construction would be for a list of renovations, with the costs
totaling $900,000. That the renovation concepts were modified in follow-up
conversations with Teed and architect De Meza does not render this evidence
remote or illusory.
We must also reject Teed’s claim that there was no evidence the
promised renovations were ever completed. As the trial court found in
denying Teed’s motion for new trial: “[T]he most relevant misrepresentations
are Teed’s statements that the value of his team’s renovation—the
‘Teed/De Meza project’—would be $900,000. Eventually, Moore actually
received that renovation, but at far greater cost than the $900,000 Teed
fraudulently led Moore to believe when convincing him to buy the house and
undertake the renovation. The damage was not speculative; it was supported
by documents and by testimony from Moore, his father, Teed himself and
Christine Kiesling, a well-qualified expert on construction costs.” (Italics
added, fns. omitted.) While some plans were changed and the actual
renovation was more expansive than Teed’s proposal, it is undisputed that
Moore did not seek to recover damages for work that went beyond what Teed
had promised to deliver.
16
Teed also challenges Kiesling’s estimate of the cost to build the
Teed/De Meza renovations in 2011-2012, noting that Kiesling did not rely on
the actual cost to complete the project. That comes as no surprise, however,
because the renovations were delayed by a defective foundation that first had
to be replaced. To the extent Teed is arguing that a construction expert
cannot recreate the cost of building such a project under 2011-2012 rates, no
evidence supports it. The parties’ testimony as well as Kiesling’s testimony
established the projected costs to a reasonable certainty. Her estimate was
based on floor plans and specifications that were directly tied to Teed’s
original $900,000 proposal. Kiesling also gave specific testimony on the
increased costs associated with delaying the renovations. On this record, we
cannot say the jury’s decision to award Moore the difference between the
promised cost and the actual cost he would have spent to renovate the Green
Street home per Teed’s recommendations is entirely speculative as a matter
of law.
Teed further complains that the trial court erroneously modified the
standard CACI instruction on benefit-of-the-bargain damages. CACI
No. 1924 provides: “To determine the amount of damages, you must:
[¶] 1. Determine the fair market value that [name of plaintiff] would have
received if the representations made by [name of defendant] had been true;
and [¶] 2. Subtract the fair market value of what [he/she/it] did receive.
[¶] The resulting amount is [name of plaintiff]’s damages.” CACI No. 1924
was modified by the trial court to read: “To determine the amount of
damages, you must determine: [¶] 1. The difference between the actual cost
that Mr. Moore would have incurred in 2011 and 2012 to complete the work
promised by Mr. Teed and the amount for which Mr. Teed promised to
complete the work; [¶] And [¶] 2. Increased costs due to the delay.
17
Citing out-of-state authorities, Teed argues that benefit-of-the-bargain
damages cannot be awarded when they are based on the value of something
nonexistent and never in fact received. He quotes Barrows v. Forest
Laboratories, Inc. (2d Cir. 1984) 742 F.2d 54, 60) for the proposition that “ ‘[a]
claim for benefit-of-the-bargain damages must be based on the bargain that
was actually struck, not on a bargain whose terms must be supplied by
hypotheses about what the parties would have done if the circumstances
surrounding their transaction had been different.’ ” Teed contends that the
difference between the promised cost of his vague, original renovation
concepts and the hypothetical cost of De Meza’s later, more elaborate
design—neither of which was ever built—has no connection to any damages
that Moore actually suffered.
Teed’s jury instruction challenge is but a variation on his assertion that
the damages were speculative. For the reasons explained, the record supports
the conclusion that benefit-of-the-bargain damages here were ascertainable
with relative certainty based on expert and party testimony about a specific
set of promised renovations and the actual cost to complete those
renovations. We thus find these authorities inapt.
Even if Teed were correct that the challenged damages were improper
under a benefit-of-the-bargain theory, we conclude that the jury would have
returned the same damages award under Civil Code sections 1709 and 3333.
5
5 The jury was instructed under CACI Nos. 3900 and 1923 that the
amount of damages to reasonably compensate Moore “must include an award
for each item of harm that was caused by Mr. Teed’s wrongful conduct, even
if the particular harm could not have been anticipated,” and that Moore was
entitled to recover “amounts that he reasonably spent in reliance on
Mr. Teed’s false representations even if those amounts would not otherwise
have been spent.”
18
“Tort damages are awarded to fully compensate the victim for all the injury
suffered. [Citation.] There is no fixed rule for the measure of tort damages
under Civil Code section 3333. The measure that most appropriately
compensates the injured party for the loss sustained should be adopted.”
(Santa Barbara Pistachio Ranch v. Chowchilla Water Dist. (2001)
88 Cal.App.4th 439, 446–447; accord, Erlich v. Menezes (1999) 21 Cal.4th 543,
550.)
The jury found that the only way to fully compensate Moore for the
detriment caused by Teed’s misrepresentations that he and his team of
experienced contractors could deliver a quality remodel for only $900,000 was
to award Moore the additional cost necessary to accomplish the promised
renovations. Once Moore was induced to buy the house and hire people to
renovate it in reliance upon Teed’s false representations, he was entitled
under Civil Code section 3333 to be compensated “for all the detriment
proximately caused thereby,” including the increased expense attributable to
the delay resulting from the need to demolish and remove the defective
foundation. We will not disturb the jury’s verdict in the absence of a clear
miscarriage of justice. (Cal. Const., art. VI, § 13; Soule v. General Motors
Corp. (1994) 8 Cal.4th 548, 573–580.)
d. The Damages Award Was Not Duplicative
Teed finally asserts that the benefit-of-the-bargain damages award
was improper because it duplicates the out-of-pocket damages that the jury
awarded for the foundation replacement. While it is true that “[d]ouble or
duplicative recovery for the same items of damage amounts to
overcompensation and is therefore prohibited” (Tavaglione v. Billings (1993)
4 Cal.4th 1150, 1159), Teed is barred from claiming that the jury awarded
overlapping damages because he did not request a special verdict form
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containing separate entries for each component of damages comprising the
benefit-of-the-bargain damages award.
“To preserve for appeal a challenge to separate components of a
plaintiff’s damage award, a defendant must request a special verdict form
that segregates the elements of damages. [Citations.] The reason for this
rule is simple. Without a special verdict separating the various damage
components, ‘we have no way of determining what portion—if any’ of an
award was attributable to a particular category of damages challenged on
appeal.” (Greer v. Buzgheia (2006) 141 Cal.App.4th 1150, 1158.)
Because we cannot determine from the record whether the jury
awarded damages for the defective foundation as part of its $900,000
benefit-of-the-bargain award, Teed has forfeited his claim on appeal. As
Moore points out, the jury returned a verdict for benefit-of-the-bargain
damages that was substantially below the requested amount of $3,842,160,
and it awarded Moore the exact amount ($822,904) he had requested for the
cost of replacing the foundation. This would suggest that the jury separated
the damages award for the foundation replacement from benefit-of-thebargain damages items for completing the promised renovations. There is no
basis for inferring that the benefit-of-the-bargain damages award contains
any duplicate money for foundation replacement.
II. Attorney Fee Award
Teed challenges the trial court’s award of attorney fees under section
7160, contending the statute does not apply to him and the court’s jury
instructions were misleading and led to an inconsistent verdict. He seeks
reversal of the entire attorney fee award. We will affirm.
Section 7160, part of the Contractors’ State License Law, provides as
follows: “Any person who is induced to contract for a work of improvement,
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including but not limited to a home improvement, in reliance on false or
fraudulent representations or false statements knowingly made, may sue and
recover from such contractor or solicitor a penalty of five hundred dollars
($500), plus reasonable attorney’s fees, in addition to any damages sustained
by him by reason of such statements or representations made by the
contractor or solicitor.”
At trial, the parties agreed to an instruction that closely tracked section
7160 but, for reasons appellate counsel could not explain, omitted the word
“solicitor.” The CACI No. 418 instruction given to the jury stated in part:
“Business & Professions Code section 7160 states: ‘Any person who is
induced to contract for a work of improvement, including by [sic] not limited
to a home improvement, in reliance on false or fraudulent representations or
false statements knowingly made, may sue and recover from such
contractor.’ ” (Italics added.) In response to question 9 on the verdict form,
“Did Justin Moore prove that Richard Teed violated Business & Professions
Code § 7160 (see CACI [No.] 418)?,” the jury answered “Yes.”
While Teed concedes that a contract is not required for a person to be
deemed a “contractor” under the Contractors’ State License Law, he contends
that a contract was required here in order for the jury to have found him in
violation of section 7160 because CACI No. 418 describes a person “who is
induced to contract . . . recover[ing] from such contractor.” Because the jury
found that no contract existed between Moore and Teed when Teed prevailed
on the breach of contract claim, that finding renders the jury’s verdict on
section 7160 internally inconsistent and unsustainable. Moore counters that
we should not infer that the jury found there was no enforceable agreement
between Moore and Teed simply because it found against Moore on that
cause of action. He also argues that an attorney fee award under section
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7160 does not require a contract between Moore and Teed because Teed
induced Moore to enter into contracts with his associates. We need not
resolve whether a contract was formed between Teed and Moore because we
agree that section 7160 permits an attorney fee award against a defendant
who fraudulently induces a person to enter into home improvement contracts
with his confederates.
We begin with the observation that statutory provisions regulating
contractors are to be broadly construed. “The Contractors’ State License Law
. . . is to be given a ‘reasonable and practical construction’ ‘[i]n light of the
intent of the Legislature and the purpose behind the statutory scheme—to
protect consumers and the public from dishonest or incompetent
contractors.’ ” (ACCO Engineered Systems, Inc. v. Contractors’ State License
Bd. (2018) 30 Cal.App.5th 80, 88.) “California’s strict contractor licensing
law reflects a strong public policy in favor of protecting the public against
unscrupulous and/or incompetent contracting work.” (Vallejo Development
Co. v. Beck Development Co. (1994) 24 Cal.App.4th 929, 938; see Judicial
Council of California v. Jacobs Facilities, Inc. (2015) 239 Cal.App.4th 882,
894.)
Section 7160 does not exempt noncontracting parties from liability for
attorney fees for fraudulent inducement of a home improvement contract. As
quoted above, a person may recover damages and attorney fees against one
who “solicits” a contract under false pretenses. Teed nevertheless maintains
that because “solicitor” was omitted from the given instructions, the jury
could only apply the section 7160 attorney fee provision to one who
“contracted” with the defrauded victim. We decline to apply such a narrow
interpretation to section 7160 and conclude there is an adequate statutory
basis for affirming the jury’s attorney fee award.
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Even if we were guided by the CACI No. 418 instruction alone, we
would conclude that the instruction permitted the jury to find Teed liable for
attorney fees for fraudulently inducing Moore to contract with his team of
engineers on a home improvement contract. There is no dispute that Moore
was “induced to contract” with Moore’s recommended engineers, and that
Moore did so in reliance on Teed’s fraudulent representations. The only
question is whether Moore may recover from “such contractor”—from Teed
himself.
To assist the jury, the trial court also instructed on the definition of
“contractor” under section 7026, shortening the lengthy statute6 as follows:
“ ‘Contractor’ is synonymous with ‘builder.’ It is any person who undertakes
to or offers to undertake to, or purports to have the capacity to undertake to, or
submits a bid to, or does himself or herself or [by or] through others,
6
In full, section 7026 states: “ ‘Contractor,’ for the purposes of this
chapter, is synonymous with ‘builder’ and, within the meaning of this
chapter, a contractor is any person who undertakes to or offers to undertake
to, or purports to have the capacity to undertake to, or submits a bid to, or
does himself or herself or by or through others, construct, alter, repair, add
to, subtract from, improve, move, wreck or demolish any building, highway,
road, parking facility, railroad, excavation or other structure, project,
development or improvement, or to do any part thereof, including the erection
of scaffolding or other structures or works in connection therewith, or the
cleaning of grounds or structures in connection therewith, or the preparation
and removal of roadway construction zones, lane closures, flagging, or traffic
diversions, or the installation, repair, maintenance, or calibration of
monitoring equipment for underground storage tanks, and whether or not the
performance of work herein described involves the addition to, or fabrication
into, any structure, project, development or improvement herein described of
any material or article of merchandise. ‘Contractor’ includes subcontractor
and specialty contractor. ‘Roadway’ includes, but is not limited to, public or
city streets, highways, or any public conveyance.” The provision, while
wordy, conveys the Legislature’s intent to define a large group of actors in the
construction field as “contractors” so as to subject them to the Contractors’
State License Law.
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construct, alter, repair, add to, subtract from, improve, [move], wreck or
demolish any building, excavation or other structures or works in connection
therewith, or the cleaning of grounds and structures in connection therewith,
or whether or not the performance of the work herein described involves the
addition to, or fabrication into, any structure, project, development or
improvement herein described of any material or article of merchandise.
‘Contractor’ includes subcontractor and specialty contractor.” (Italics added.)
There was ample evidence for the jury to find that Teed was a
“contractor” within the meaning of section 7026. Teed offered to undertake,
and purported to have the capacity to undertake, renovations to the Green
Street home by or through others—his team of experienced architects,
contractors, and engineers. He led Moore to believe that with his “extensive
background” in renovations and “deep understanding of quality construction,”
he could accomplish quality, cost-effective renovations. The jury finding that
Teed was a contractor thus supported its finding that Teed was in violation of
section 7160 and liable for attorney fees. No inconsistency exists between the
jury’s finding of liability under section 7160 and its separate finding that
Moore failed to meet his burden of proving his breach of contract claim.
Teed attacks the definitional instruction of “contractor” as confusing
and incomprehensible, yet he submitted a nearly identical instruction
defining “contractor” as his Special Jury Instruction No. 1. And while he
admits he had no objection to the wording of CACI No. 418, Teed asserts the
trial court should have clarified the accompanying instruction defining
“contractor” by giving his proposed Special Jury Instruction No. 2, entitled,
“Construction managers are not required to be licensed under California
law.” The trial court did not err in rejecting Teed’s proposed definition of
“contractor.”
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“In general, ‘[i]nstructions in the language of a statute should only be
given “ ‘if the jury would have no difficulty in understanding the statute
without guidance from the court.’ ” [Citations.]’ [Citation.] Although
instructions based on code sections should follow the language of the
particular section at issue, the court should give explanatory instructions
where the statutory wording is confusing or couched in legal terms.
[Citation.] ‘It is incumbent upon the trial court to determine whether or not a
code section should be explained.’ ” (Brown v. Smith (1997) 55 Cal.App.4th
767, 784–785.)
The trial court’s instruction on the statutory definition of “contractor”
required no clarification. While section 7026 is not the most succinct example
of statutory drafting, it does not contain any unfamiliar legal or technical
terms. Moreover, the court’s instruction tailored the statute to conform to the
circumstances of this case, omitting unnecessary language that would have
distracted from the jury’s task.
In contrast, Teed’s proposed Special Jury Instruction No. 2 was
lengthier than the instruction given by the trial court, included several
numbered subparts, and contained argumentative passages. For example,
the proposed instruction stated that “even if” Teed engaged in four types of
activities, including coordinating construction workers, keeping Moore
informed of the project’s status, being the onsite “point person,” and acting as
Moore’s agent in the renovations, these activities were not enough to have
made him a contractor. The instruction also erroneously stated: “If you find
that evidence was presented establishes [sic] that [Teed] had no
responsibility or authority to perform any construction work on the project, or
to enter into any contract or subcontract for the performance of such work,
then you must find that he was not acting as a ‘contractor.’ ” This passage
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misstates the law, as it omits that one can be deemed a contractor under
California law if he or she “offers to undertake” or “purports to have the
capacity to undertake” or undertakes a renovation “by or through others.”
(§ 7026.) In sum, the trial court did not err in awarding Moore his attorney
fees under section 7160.
III. Moore’s Request for Appellate Fees
Moore asks that we direct the trial court to award attorney fees
incurred on appeal under section 7160. “A statute providing for an attorney
fee award to the prevailing party in litigation ordinarily also authorizes an
award of fees incurred on appeal even if it does not expressly so state.” ”
(Garcia v. Bellflower Unified School Dist. Governing Bd. (2013)
220 Cal.App.4th 1058, 1067.) Moore is the prevailing party on appeal, and
thus he is entitled to fees under section 7160. “Although this court has the
power to fix attorney fees on appeal, the better practice is to have the trial
court determine such fees . . . .” (Security Pacific National Bank v. Adamo
(1983) 142 Cal.App.3d 492, 498.)
Outcome: The judgment is affirmed. The matter is remanded to the trial court for its determination of an award to Moore of attorney fees on appeal. Moore is entitled to costs on appeal.
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