Foggy v. Ralph F. Clark & Associates, Inc.

• Decision Date: 23 June 1987
• Court: California Court of Appeals Court of Appeals
• Parties: John S. FOGGY and Georgia M. Foggy, Plaintiffs and Appellants, v. RALPH F. CLARK & ASSOCIATES, INC. et al., Defendants and Respondents. A029555.

Page 130

238 Cal.Rptr. 130

192 Cal.App.3d 1204

John S. FOGGY and Georgia M. Foggy, Plaintiffs and Appellants, v. RALPH F. CLARK & ASSOCIATES, INC. et al., Defendants and Respondents.

A029555.

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

June 23, 1987.

Review Denied Sept. 17, 1987. ^*

Matthew F. Quint, Reuben, Quint & Valkevich, San Francisco, for defendants and respondents.

Samuel Kornhauser, Rose & Kornhauser, A Professional Corporation, San Francisco, for plaintiffs and appellants.

BENSON, Associate Justice.

John and Georgia Foggy (plaintiffs) appeal from an order granting judgment notwithstanding the verdict, an order granting in part and denying in part a motion for new trial and the judgment entered thereon in favor of defendant Ralph F. Clark & Associates, Inc.

Viewing the record in the light most favorable to plaintiffs, as we must on review from a judgment notwithstanding the verdict (Borba v. Thomas (1977) 70 Cal.App.3d 144, 152, 138 Cal.Rptr. 565), the following facts were presented at trial.

In the spring of 1981, Gilbert Marino was looking for a $200,000 loan. He approached Sherwood Wiseman, a real estate broker, about obtaining such a loan and offered the equity in his residence located at 30 Woodgate Court in Hillsborough as collateral. Wiseman went to plaintiff John Foggy to inquire whether Foggy would be interested in making such a loan.

Mr. Foggy, who had extensive real estate investments and had previously loaned money to Marino, said he might be interested in making the loan. However, Foggy required that the $200,000 loan be in second position and that there be sufficient equity in the property to cover both the first and second loans. Consequently, he wanted more information on the Marino residence, and requested an appraisal be made by an M.A.I. appraiser. Mr. Wiseman conveyed Foggy's requirements to Mr. Marino.

Thereafter, Marino retained defendant Ralph F. Clark & Associates to do the appraisal. Ralph F. Clark & Associates is a California corporation engaged in the business of real estate appraisal. Ralph Clark is an M.A.I. appraiser with 20 years of experience. Margarita Aguirre is a secretary-office manager of Ralph F. Clark & Associates. However, at the relevant time, she had made 15 appraisals. She never had appraised a home which was partially under construction.

In June of 1981, Ms. Aguirre went to the Marino residence to do the appraisal. She physically inspected the premises and measured the rooms. Mr. Marino told her that he thought the property was worth around $600,000. Her notes of the inspection indicate there were four finished bedrooms and the house contained 2363 square feet. Since Mr. Marino told her that an additional bedroom, presently under construction, would be in excess of 800 square feet, she wrote the total square footage of the house as being 3221.

After completing the inspection of the house, Ms. Aguirre prepared a final typed appraisal, which was reviewed by Ralph Clark. The document describes the subject property as having five bedrooms, three and one-half baths and totalling 3800 square feet. In addition, three skylights and three fireplaces are listed as special features. No mention is made of construction. In fact, the property had four bedrooms, one of which had been demolished by construction, and the entire residence totalled 2,800 square feet. The written appraisal values the house at $610,000 and states that Ralph Clark had physically inspected the premises. At trial, Clark admitted that he had not physically inspected the property and knew that he had not inspected it.

Relying on the appraisal from defendants, Foggy loaned Marino $200,000. Thereafter, Marino defaulted on the loan and declared bankruptcy. On June 7, 1982, Foggy foreclosed on his second deed of trust and purchased the property at the trustee's sale which was attended by 10 to 12 people.

There is a serious conflict in the evidence as to how much Mr. Foggy paid for the property at the trustee's sale. Foggy testified that the property sold for $265,000, which represented $255,000 to cover the first loan plus a $10,000 credit bid. On the other hand, a letter from the trustee to plaintiffs stated that the property was sold to them for the sum of $239,094.06. However, the trustee's deed upon sale states that the amount of unpaid debt together with costs was $239,094.06 and the actual amount paid by Foggy at the trustee's sale was $10,000.

Foggy viewed the Marino residence for the first time after the foreclosure sale. The property was in total disrepair; the shrubbery was dying, the swimming pool was dirty, there were holes in the roof due to construction, there was no covering over the construction area, the floors were warped and discolored and the new construction joists were unusable. Foggy immediately contacted Ralph Clark to discuss the appraisal of the property. Foggy was concerned because the number of bedrooms was wrong, the number of baths was wrong, the number of skylights was wrong, the number of fireplaces was wrong, there was no mention of the construction and the total square footage of the house was erroneous. Although there was some discussion that Clark would contribute to the rehabilitation of the property, the parties never reached an agreement on the matter.

Following the foreclosure sale Foggy attempted to improve the property so that it could be sold. He paid for landscaping and pool maintenance. He paid in excess of $50,000 for payments on the first loan. In addition, he paid more than $10,000 in property taxes.

On December 3, 1982, plaintiffs filed a complaint against defendants Ralph F. Clark & Associates, Inc., Ralph F. Clark and Margarita Aguirre. The complaint set forth causes of action in fraud, conspiracy, breach of fiduciary duty, negligence and breach of oral contract. In October of 1983, the house was totally destroyed by fire. An in limine motion by the plaintiff to preclude any evidence of the receipt of fire insurance proceeds was granted by the trial court relying on the collateral source rule.

During trial plaintiffs' witness, Sally Peter, a real estate salesperson, testified as to the value of the Marino residence at the time of the Clark appraisal. The court ruled that she could testify "as to value in June '81 and June '82" but did not find that she was an appraiser. The record is unclear as to the year for which Peter's evaluation was given. However, she stated that the value of the property was between $300,000 and $350,000. She based her evaluation of the property on a single comparable house, located at 555 Chateau Road, which was in a different neighborhood. Peter valued the Marino lot alone at $250,000.

In contrast, defendants' expert, Dale Farnow, a real estate broker and appraiser, opined that the value of the subject property at the time of the appraisal was $550,000. In addition, Farnow agreed that the land alone was worth $250,000.

Evidence was introduced that after the 1983 fire, Mr. Foggy had submitted to the San Mateo County Assessor's office a signed statement, under penalty of perjury, that the total value of the property before the fire was $550,000. The document estimates that Foggy incurred a loss of $300,000 for the house and $100,000 due to damage on the land.

At the conclusion of trial and before the case was submitted to the jury, defendants moved for a nonsuit as to each of plaintiffs' causes of action, except that for negligence. The court granted nonsuit on the causes of action for breach of fiduciary duty, breach of contract, and conspiracy. Thereafter, the jury returned a general verdict of $200,000 in favor of plaintiffs and against Ralph F. Clark & Associates, Inc. only.

On October 11, 1984, defendants timely noticed a motion for judgment notwithstanding the verdict and a motion for new trial. In response, on October 26, 1984, plaintiffs filed a notice of appeal and opposition to defendants' motions.

On November 5, 1984, the court filed the order and judgment from which plaintiffs appeal. The judgment recites that the court had concluded that there was no substantial evidence of damages to support the verdict: "The only evidence of fair market value of the 30 Woodgate property on the date of foreclosure that tended to show Plaintiffs suffered any damage was the opinion testimony of Sally Peter. Sally Peter is not an appraiser, but a real estate saleswoman. She testified that although she was actively involved in the sale of residential real estate on the Peninsula, she had participated in sales of only five or six houses in Hillsborough. Plaintiffs' counsel identified three appraisers who they intended to call to testify. Only one of those, Wayne Stiefvater, testified during Plaintiffs' principal case, and did not testify as to value. The second, James Tilley, never testified. The third, Francis Bland, testified he had not been asked to offer his opinion as to value until one day before he took the stand as part of Plaintiffs' rebuttal. ¹ [p] Plaintiffs instead relied only upon the opinion of Ms. Peter. She testified that the fair market value of the subject land alone was $250,000.00, yet she gave her opinion that the value of the land and the 3500 square foot residence was $300,000.00 to $350,000.00. Her testimony that the value of the residence itself was less then $15.00 to $30.00 per square foot is inherently incredible. Plaintiff himself, in his Owner's Estimate of Loss, valued the residence alone at $300,000.00 or approximately $100.00 per square foot. [p] Ms. Peter further stated that an opinion regarding the fair market value of residential real estate must be based on knowledge regarding the sale of comparable properties. However, she identified only one comparable sale at 555 Chateau, Hillsborough, California, describing it as an older, run down house. According to Plaintiffs' counsel, she did not even state the correct address of her only comparable. She was...