Alhino v. Starr

• Decision Date: 17 November 1980
• Docket Number: MASON-M
• Citation: 112 Cal.App.3d 158,169 Cal.Rptr. 136
• Court: California Court of Appeals Court of Appeals
• Parties: Helen A. ALHINO, individually and as Executrix of the Will of Anthony M. Alhino, Deceased, Plaintiff and Appellant, v. Marvin D. STARR et al., Defendants and Respondents. Helen A. ALHINO, etc., Plaintiff and Appellant, v.cDUFFIE CO., a copartnership et al., Defendants and Appellants. Civ. 46801.

Page 136

169 Cal.Rptr. 136

112 Cal.App.3d 158

Helen A. ALHINO, individually and as Executrix of the Will of Anthony M. Alhino, Deceased, Plaintiff and Appellant, v. Marvin D. STARR et al., Defendants and Respondents.

Helen A. ALHINO, etc., Plaintiff and Appellant, v. MASON-McDUFFIE CO., a copartnership et al., Defendants and Appellants.

Civ. 46801.

Court of Appeal, First District, Division 2, California.

Nov. 17, 1980.

Rehearing Denied December 17, 1980.

Hearing Denied Feb. 11, 1981.

Harry Gonick, Brian McCarthy, Oakland, for Alhino.

Cresswell, Terreo, Davis & Lamborn, David Terreo, Ronald D. Echeguren, Oakland, for Starr, et al.

Wendel, Lawlor, Rosen & Black, Eugene K. Lawlor, Richard G. Logan, Oakland, for Mason-McDuffie.

Bruce A. Lieberman, Oakland, for Senjo.

TAYLOR, Presiding Justice.

In these two matters consolidated for trial, Mason-McDuffie Co. and Senjo (collectively real estate defendants), appeal from that part of a judgment entered on a jury verdict in favor of Alhino ¹ for general damages of $145,905 and punitive damages of $150,000, in the 1976 action against them for fraudulent misrepresentation as to the security and assets of Ranker, the insolvent buyer of a parcel of real property from Alhino in 1972; Alhino cross-appeals from the conditional order granting the real estate defendants a new trial on grounds of excessive damages. Alhino also appeals from the part of the judgment entered on the verdict in favor of Starr, et al. (collectively, attorney defendants), ² in a 1976 malpractice action against them for the settlement and dismissal of the 1974 Alhino action against Ranker. The major issues on appeal are: 1) whether Alhino's action against the real estate defendants was barred by waiver or collateral estoppel, as the result of the settlement and dismissal of the 1974 action against Ranker; 2) the sufficiency of the evidence as to each of the defendants; 3) the propriety of the court's instruction directing a verdict in favor of the attorney defendants if the real estate defendants were found liable; and 4) the validity of the conditional new trial order, which contained no written specification of reasons, as required by Code of Civil Procedure section 657. For the reasons set forth below, we have concluded that: 1) the void conditional new trial order must be reversed; 2) the judgment on the verdict in favor of Alhino, et al. must be reinstated and affirmed, but remanded for a redetermination of the amount of punitive damages; and 3) the judgment on the verdict in favor of the attorney defendants must also be affirmed.

Viewing the record most strongly in favor of the judgment and verdict, as we must, the following pertinent facts appear: Alhino owned two parcels of contiguous improved real property in Oakland, comprised of an apartment and commercial units. In 1971, Mason-McDuffie and its employee, Robert Senjo, in cooperation with another salesman from Mason-McDuffie, had been the real estate agents in an attempt by Alhino to sell that building. No sale took place at that time and the property was taken off the market because of Mrs. Alhino's health.

Subsequently, Senjo learned from another Mason-McDuffie salesman that the property was for sale again. Senjo contacted Alhino by telephone to verify the pertinent financial information, including rents and expenses. They discussed the price ($189,000) ³ and other terms of sale, including Alhino's willingness to carry back a loan after a $35,000 downpayment.

About a month later, Senjo contacted Dr. Ranker, an Oakland ophthalmologist, to whom he had sold other properties. After Senjo showed Ranker the Alhino property, Ranker informed Senjo that he would buy the property if Alhino agreed to carry back the loan on an unsecured promissory note. Ranker told Senjo that he wanted to acquire the Alhino property without encumbrances as: 1) he wanted to trade it for a larger parcel; and 2) he wanted to be good and late on the payments without taking a risk.

Senjo prepared a deposit receipt for the sale of the property to Ranker and presented it to Alhino who signed it after a brief discussion and two minor changes. The deposit receipt stated that the Alhinos had employed Senjo and agreed to pay the $10,000 commission. Alhino believed that Senjo was their agent. When Senjo presented the deposit receipt to Alhino, he told them that Ranker was a very wealthy man and they were better off taking an unsecured promissory note from Ranker. He indicated that with an unsecured note, they would get money in case of a default while with a secured note they would only get the property which might then be in bad shape. He also submitted Ranker's financial statement, which indicated that Ranker owned real properties with a net worth in excess of $5 million. Senjo also told Alhino that he had personal knowledge of some of the real estate holdings listed on Ranker's financial statement. Senjo then obtained Ranker's approval.

Senjo prepared the promissory note for $154,000, the balance of the purchase price, payable at the rate of $1,200 per month, including interest of 7 percent per annum. The note contained neither of the customary clauses for attorney fees and acceleration. Senjo had intentionally omitted these clauses at Ranker's direction. Alhino did not know about the omission of these customary clauses or their legal effect.

Prior to the close of escrow, Ranker informed Senjo that he wanted to borrow the amount of the commission ($10,000) from Mason-McDuffie. Senjo submitted this request to his supervisor, who approved it. Ranker then signed a promissory note in favor of Mason-McDuffie for $10,000. Ranker also told Senjo he wanted to borrow the remaining $25,000 of the downpayment. Senjo introduced Ranker to a loan officer at Wells Fargo Bank, where Mason-McDuffie was a "well known account." Wells Fargo loaned Ranker the sum of $25,000 that he needed to complete the downpayment. ⁴ Senjo did not inform Alhino of either of these loans.

The evening before the close of escrow, Senjo brought the closing papers to Alhino's home for signature. In a conversation which included Alhino's son, Senjo expounded on Ranker's wealth. Senjo stated that Ranker's financial statement conclusively demonstrated Ranker's ability to pay and that Ranker's fortune was based on possession of assets that were not listed in the financial statement, such as gold certificates. Senjo also reiterated that he had personally sold some of the properties on the list to Ranker.

Escrow closed in July of 1972. Thirty days later, Ranker mortgaged the property for $98,500. After the first few months Ranker developed a pattern of late monthly payments. Alhino, on May 1, 1973, consulted a lawyer, Marvin B. Starr, a partner in the firm of Miller, Starr & Regalia. Starr reviewed the papers and was startled when he discovered that the note failed to contain the usual attorney fees and acceleration clauses. Alhino was shocked and surprised also.

Starr called in Barry Gallagher, an attorney employed by his firm, who had handled several cases in which Ranker was a defendant, for Dr. Marshall, another client of the firm. On May 21, 1973, Starr drafted and sent a letter to Ranker, to Senjo and to Mason-McDuffie. By the time of this letter, Senjo was no longer employed by Mason-McDuffie. Starr accused all three of fraudulent and negligent conduct in connection with the sale of the Alhino property and demanded a meeting that never took place. Instead, Starr heard from Ranker's attorney, William Kenney, who said he would advise Ranker to revise the note to include the missing attorney fees and acceleration provisions.

Shortly thereafter, Starr talked to Lee Kaufthiel (a partner in Mason-McDuffie and also its counsel) and informed him that Senjo had provided the original promissory note without the attorney fees and acceleration clauses. Senjo had turned over the entire file to his supervisor, Mr. Valentine (another partner in Mason-McDuffie) and told Valentine everything he knew about the Alhino transaction.

By January of 1974, Ranker still had not provided the reformed promissory note, as promised. Accordingly, in January 1974, the attorney defendants, on behalf of Alhino, filed suit against Ranker and Does I-X in Alameda County Superior Court, action No. 444948-3 (hereafter referred to as the 1974 Alhino-Ranker action), alleging fraud and breach of oral contract by Ranker, who had induced Alhino to enter into an unsecured transaction and misrepresented his wealth. The complaint in the 1974 Alhino-Ranker action sought general and punitive damages for fraud, reformation of the note by including the missing clauses, declaratory relief and quiet title; a first amended complaint filed February 6, 1974, added a cause of action for rescission.

In March, the 1974 Alhino-Ranker action was dismissed with prejudice in exchange for a reformed promissory note including the two missing clauses. At the same time, Alhino deeded to Ranker a portion of the Fruitvale property (Harold Street), which had been inadvertently left out of the original transaction by the title company. In May 1974, Ranker sold the property.

Ranker continued to be late with his payments. In July 1974, Gallagher prepared another action against Ranker on behalf of Alhino. However, Gallagher became convinced this action was ill-advised and it was never filed.

On August 8, 1974, Mr. Alhino died suddenly of a heart attack. After his death, Ranker made no more payments on the note. By December 1974, Ranker was several months behind on the payments. On December 11, 1974, Starr wrote a letter demanding that Ranker pay the past due installments and threatened legal action. On December 18, 1974, Ranker committed suicide. After Ranker's death, the attorney defendants filed a claim against Ranker's estate on behalf of Alhino for the amount of the outstanding balance on the note. The claim was approved in full by Ranker's estate. ...