Godfrey v. Steinpress

Decision Date22 January 1982
CourtCalifornia Court of Appeals Court of Appeals
PartiesDavid GODFREY, et al., Plaintiffs and Appellants, v. Irwin STEINPRESS, Defendant and Appellant. Civ. 4906.
OPINION

STONE, Associate Justice. *

STATEMENT OF THE CASE

On August 2, 1977, plaintiffs and appellants, David and Debra Godfrey, filed a complaint in the Superior Court of Stanislaus County, naming as defendants Joseph and Barbara Giannobile, Jack Heaton, doing business as Heaton Pest Control, Irwin Steinpress, doing business as Steinpress Realty & Development, and Great Western Savings and Loan Association. On January 25, 1979, Stanislaus Title Guaranty Company was added as an additional defendant.

The complaint alleged causes of action for fraud, negligent misrepresentation, breach of fiduciary duties and emotional distress. Specifically, the complaint alleged that defendant and appellant Irwin Steinpress, doing business as Steinpress Realty & Development, on or about November 4, 1976, fraudulently represented to both plaintiffs "that the items showing defects in the November 4, 1976 pest control report could be corrected for an expenditure of $946.00 and stated to plaintiffs that when these repairs had been made said house would be in good condition, free of termites, dry rot and other infestations, and that they should not withdraw from the sales agreement because said property was worth much more than the price of $36,500.00." The Godfreys alleged that the representations made by Steinpress were, in fact, false and that the house (that they bought) was, in fact, infested throughout with termites, fungus and dry rot. The Godfreys added causes of action for intentional and negligent infliction of emotional distress. In both the fraud and emotional distress causes of action, the Godfreys asked for punitive damages.

During the jury trial, the Godfreys dismissed all of the defendants except for appellant Steinpress. Prior to trial, the Godfreys had dismissed Great Western Savings and Loan.

At the close of trial, the court granted Godfreys' motion to amend the complaint so as to conform to proof and to set forth a cause of action for fraud by concealment.

On March 16, 1979, the jury returned a verdict and special findings. In a nine-to-three decision, the jurors found defendant Steinpress intentionally concealed a material fact with the intent to defraud, causing $1,800 in damages. The jury also found that defendant Steinpress intentionally inflicted emotional distress, causing each of the Godfreys $10,000 in damages. For the fraud and emotional distress the Godfreys received punitive damages--$30,000 each.

Irwin Steinpress appeals from the entire judgment. The Godfreys appeal from that portion of the judgment awarding $1,800 in damages.

FACTS

The factual background preceding the filing of this action and the necessary references to the pretrial and trial records are not particularly complicated but are extensive. To avoid repetition, we will give a skeleton outline of the facts and flesh in that framework when we refer to the issues on appeal.

In July 1976, Joseph and Barbara Giannobile listed their 30-year-old farm house and acreage for sale with Irwin Steinpress Realty. The price for the house and two acres was $31,950. The house was described in the listing as being in "good" condition and "Comfortable country home needs some fixing up."

Debra and David Godfrey, after a brief visit to the Giannobile property, contacted Steinpress Realty. Jannie Kenney, a salesperson for Steinpress Realty, went to the Godfrey home in response to their call. David Godfrey was shown the listing by Kenney and there was some discussion regarding the necessity of a termite report. The Godfreys made an offer of $40,000 for the house and five acres, which was eventually reduced to $36,500, the appraised value, and accepted by the Giannobiles.

The Godfreys made arrangements for financing with Great Western Savings and Loan Association. Great Western's instructions to the escrow company, Stanislaus Title Guaranty Company, included the provision, "A termite report is required. The report must be signed and acknowledged by the borrowers and delivered to us prior to funding. If the required work is over $600.00 we will also require a copy of the completion, signed and acknowledged by the borrowers, be delivered to us prior to funding." Irwin Steinpress was aware that Great Western would not allow escrow to close and disburse the funding until all required work called for in the termite report in excess of $600 had been completed.

Steinpress Realty hired Heaton Pest Control to do the termite inspection. Heaton made an inspection on November 4, 1976, and submitted a report stating there was a "faulty grade level" and fungi damage. There was no mention of termites. There was a recommendation for a further inspection. The total cost of the report and recommended repairs was $971.

Irwin Steinpress and his sales manager, Ron Eneboe, asked Jack Heaton of Heaton Pest Control to do just enough work on the house to get the estimate below $600 so Great Western would approve dispersal of the loan. Heaton refused to do this and Steinpress instructed Eneboe to obtain another report. Eneboe hired Clark Pest Control for this purpose. On November 12, 1976, Ron Fair, the manager of Clark Pest Control, inspected the property. Fair found that the house was on a concrete slab, except for the hallway and bathroom, which he believed to be wood installed over earth, causing earth contact and subterranean termites. He also found evidence of subterranean termites in the attic and that fungus and dry rot had infected and damaged portions of the structure. Fair set the cost of repairs at $1,155.

A copy of the Clark Pest Control report was sent to Steinpress and the Giannobiles. Steinpress discussed the Clark report with Mr. Giannobile and told him he was not going to use it. Neither Giannobile nor Steinpress nor any of the Steinpress employees told the Godfreys about the Clark report. Ron Eneboe discussed the Heaton report with the Godfreys on November 16. It was agreed that Steinpress Realty would pay the cost of cutting out fungi damaged wood and replacing it. Eneboe told the Godfreys that with these repairs the house would be in good shape.

Escrow closed November 24, 1976. The Godfreys moved in on November 25. After a few days, David discovered dry rot in an interior partition. He also found there was no floor in the bathroom, just carpet covering dirt. Termites were discovered in the bathroom, hallway and in front of the bathroom.

In early February 1977, Debra Godfrey moved out of the house. She could not take the dirt floor, the smell, the termite problem and was tired of not having a completed house. She had trouble sleeping until she moved out. After termites were discovered, she was upset, depressed all the time, and it seemed like she was always crying. They also argued more frequently after the termites were found. She also had headaches more often. Debra blamed her husband for their being in the house. From November to February, she described her marital relations as "cut down to nothing ... I couldn't have cared what [David] did."

While living in the house, David was very unhappy and he felt like he had been cheated. When they found out what kind of shape the house was in and after discovery of the termites, their marital life began to deteriorate. Debra was always upset and crying and blaming him for the mess. During the three months they lived there, they argued a lot and their sex life was almost "nil." As a result, David became very depressed and started drinking and they argued.

Three weeks after Debra moved out, David joined her at Debra's parents' house. He moved out because of the general condition of the house--the wiring was bad (which was visible when he first saw the house), the bathroom stank, the smell could not be covered up, the toilet was not anchored, the bathtub was sinking down and the paint flaked off.

David continued drinking almost every day after moving in with his wife. A couple of times he called "Self Help" about his "anxiety attacks," which he described as an "utter state of confusion."

MOTION FOR JUDGMENT ON THE PLEADINGS

On November 1, 1978, a pretrial conference order was filed with the court setting forth the issues as follows:

"1. Negligent misrepresentations of fact, if any, by defendants;

"2. Intentional and fraudulent misrepresentations, if any, by defendants;

"3. Justifiable reliance by plaintiffs;

"4. Intent to inflict emotional distress;

"5. Negligent infliction of emotional distress;

"6. General and special damages, if any;

"7. Reckless or malicious conduct justifying punitive damages;

"8. The amount, if any, of punitive damages to which plaintiffs are entitled;

"9. Whether plaintiffs failed to mitigate their damages; and

"10. Plaintiffs' contributory negligence (if available as a defense)."

On March 12, 1976, the first day of trial, Steinpress made a motion for judgment on the pleadings, indicating that the complaint failed to state a cause of action for misrepresentation for two reasons: (1) there was no allegation of truth; (2) the representations were not actionable. He argued that the mental distress causes of action were insufficient because of lack of physical contact or lack of sufficient outrageous conduct and made a further contention that mental distress is not actionable in actions for fraud in the sale of real property. The trial court correctly denied the motion.

Whether the pleadings were sufficient to state a cause of action is not an issue. The pretrial conference order precludes an...

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