Hill v. Roessler

• Decision Date: 24 July 2003
• Docket Number: C041926.
• Court: California Court of Appeals Court of Appeals
• Parties: ROBERT BRUCE HILL et al., Plaintiffs and Respondents, v. R. LEE ROESSLER et al., Defendants and Appellants.

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ROBERT BRUCE HILL et al., Plaintiffs and Respondents, v. R. LEE ROESSLER et al., Defendants and Appellants.

C041926.

Court of Appeals of California, Third Appellate District.

Filed July 24, 2003.

Super. Ct. No. SCV-10230.

Reversed and remanded.

KOLKEY, J.

Plaintiffs Robert Bruce Hill and Linda Castle-Hill purchased a house near Lake Tahoe. Defendant R. Lee Roessler, a real estate broker employed by defendant LMI Real Estate, represented both plaintiffs and the seller.

Following a court trial, the judge found that Roessler had breached his fiduciary duties to plaintiffs by intentionally and negligently leading them to believe that if they bought the house, they would be able to remodel it by adding a large attached garage and a new master bedroom and bath above it. Only after escrow closed did plaintiffs learn that local land use ordinances effectively precluded them from remodeling the house to add the attached garage, as they had planned. The court accordingly awarded as damages (among other things) the additional cost associated with constructing a detached garage close to the street and a second story above the existing house.

On appeal, defendants do not challenge the trial court's finding of liability and concede that damages should be measured by the benefit-of-the-bargain rule. However, they challenge the amount of damages and contend (1) that the trial court misapplied the benefit-of-the-bargain rule; (2) that there was insufficient evidence to show the additional costs of construction; (3) that the court erred in admitting the contractor's testimony on the anticipated costs of construction; and (4) that the trial court erred in awarding other, miscellaneous costs.

We agree that the trial court's damage award was unsupported by the evidence. Accordingly, we shall reverse and remand for further proceedings on the issue of damages only.

FACTS AND PROCEDURAL BACKGROUND

"'This court must view the evidence in a light most favorable to respondents and presume in support of the judgment the existence of every fact the trier could reasonably deduce from the evidence.'" (In re Ryan N. (2001) 92 Cal.App.4th 1359, 1372.)

I. Evidence and Findings as to Liability

Defendants do not dispute the trial court's finding of liability; however, we recite the facts because they are relevant to the issue of damages:

After plaintiffs noticed a house for sale on Huckleberry Lane near Lake Tahoe, they contacted Roessler, the listing agent for the property. Plaintiffs already owned a vacant lot near Lake Tahoe and had preliminary construction plans for building a home on it. But they were attracted to the house on Huckleberry Lane because it had a much better view of the lake and a charming interior.

At their first meeting with Roessler, plaintiffs showed him their vacant lot, explained to him their needs for space, and displayed their preliminary plans for constructing a home of approximately 2,900 square feet on the lot.

When Roessler then showed plaintiffs the house on Huckleberry Lane, they saw that it was too small for their needs and told him so. They asked whether the house could be remodeled to enlarge the existing kitchen and to add a large attached garage and a master bedroom and bath. Plaintiffs told Roessler that adding an attached garage, in particular, was "a big issue" for them, as the existing house had no garage. But Roessler told plaintiffs that it "would be easy" to enlarge the existing kitchen and that an attached garage could be added to the house, with a new master bedroom and bath built on a second floor above the new garage.

In fact, ordinances enforced by the Tahoe Regional Planning Agency prohibited the proposed construction. They limited the percentage of a residential lot that could be "covered" with structures or anything else that prevented vegetation growth, such as driveways, walkways, and decks. In the case of the Huckleberry Lane house, the property was already "overcovered" — encumbered more than permitted — which could be grandfathered, and even rearranged (e.g., converting a driveway into a garage floor), but not exceeded.

But in reliance on Roessler's representations, plaintiffs purchased the Huckleberry house and sold their vacant lot. And at no time before escrow closed did Roessler tell plaintiffs about the Tahoe Regional Planning Agency or otherwise indicate that their planned remodeling might be disallowed as exceeding the permitted coverage on the property. Roessler also acted as the agent for both the sellers of the house and the plaintiffs.

After escrow closed, plaintiffs learned that the existing house, deck, and walkways exceeded the allowable coverage for the lot, thus precluding the addition of an attached garage.

Plaintiffs sued, alleging that defendants breached their fiduciary duties to plaintiffs, intentionally misrepresented that they could remodel the house as they planned, and negligently advised them concerning the coverage issues.

The matter was tried to the court. Plaintiffs testified at trial that had they known they could not remodel the Huckleberry Lane house as they had planned and described to Roessler, they would not have bought it.

The court issued a statement of decision. On the issue of liability, it found that "the evidence established well beyond a preponderance that Mr. Roessler breached his fiduciary duty to his clients, the [plaintiffs], and that his intentional and negligent misrepresentations as well as his omissions of material fact, caused damage to the [plaintiffs]."¹

II. Evidence as to Damages

Most of the trial testimony was devoted to establishing liability. Comparatively little evidence was adduced on the extent and measure of plaintiffs' damages.

Jan Brisco, a land use consultant in the Lake Tahoe area, opined that the existing coverage allowed by the Tahoe Regional Planning Agency on plaintiffs' Huckleberry Lane house would not permit the construction of an attached garage unless the existing "coverage" was removed from elsewhere on the lot; thus, a large attached garage could not be constructed unless all existing driveways and paths to the house, and most of the deck, were first removed.

An architect and engineer, Ken Wittels, ² prepared a set of remodeling plans for plaintiffs that included construction of a detached garage close to the road, demolition of the existing bedrooms, construction of a new foundation under that portion of the house where the bedrooms had formerly been located, and the addition of a second-story master bedroom and bath over that portion of the house supported by the new foundation. But Wittels did not testify.

At the time of trial, plaintiffs also had a signed agreement with a contractor, Michael Buffington, to remodel the house according to Wittels's plans. Michael Buffington, a contractor with over 20 years' experience in residential construction in the area, testified that the contract price (including all finish work for an upstairs master bedroom and bath, an expanded kitchen, and a detached garage) was $ 560,000. He estimated that the portion of the contract price attributable to building the foundation for the new detached garage and for his work "on the center portion of the house where the old bedrooms existed" was $ 245,582.³

But when Buffington testified that the existing foundation would not support the addition of a second story, defense counsel objected that such facts could not be established except through expert testimony and that Buffington had not been disclosed as an expert. Defense counsel also objected that the construction costs were not properly recoverable as damages. The trial court sustained the objection "as to [Buffington's] qualifications."

Under cross-examination, Buffington admitted that he was not an engineer and had determined neither "what had to be done to build this house" nor that the work recommended by Wittels was required "to get a house this size."

Mrs. Hill separately testified that plaintiffs could not remain in the house during the remodeling and that their rental costs would be between $ 1,500 to $ 2,000 per month for a minimum of 10 to 12 months. She also testified that they would incur storage costs of $ 6,800 during the remodeling.

III. Plaintiffs' Offer of Proof Regarding Damages

Plaintiffs' counsel sought to introduce by way of an "offer of proof" the fact that as a result of plaintiffs' inability to remodel the house as they had planned, there "was [a] significant increase in cost" to build the detached garage, rather than the attached garage that Roessler told plaintiffs was possible.

According to the offer of proof, plaintiffs had to obtain a variance to build the detached garage (for which they paid $ 866), the construction of the garage required "significant excavation, cut and fill, stepped up pony walls, [and a] big concrete retaining wall," and plaintiffs had to incur the cost of consolidating the two lots on which the existing house sat, purchase additional coverage of 109 square feet for $ 763, pay consultant and application fees of $ 1,862.35, and pay design and engineering services of $ 5,295. Had plaintiffs been able to remodel as represented by Roessler, plaintiffs' counsel asserted, they could have left "intact" that portion of the house with the existing bedrooms, instead of having to "excavate, pour new foundation, and . . . demolish" that part of the house.

Plaintiffs' counsel also represented that it would have cost plaintiffs only $ 212,000 to add an attached garage.

Defendants objected to plaintiffs' offer of proof regarding damages on the grounds, inter alia, that plaintiffs did not have the expert testimony to establish it. Later, defense counsel stated that he did not contest that plaintiffs had in fact paid the amounts represented "for the land, classification, . . . coverage verification, [and] . . . for joining the lots together," but argued that, as a matter of law, those amounts were not...