MGW, Inc. v. Fredricks Development Corp., No. G006654

CourtCalifornia Court of Appeals
Writing for the CourtWALLIN; SILLS, P.J., and SONENSHINE
Citation12 Cal.App.4th 244,6 Cal.Rptr.2d 888
PartiesPreviously published at 12 Cal.App.4th 244, 5 Cal.App.4th 92 12 Cal.App.4th 244, 5 Cal.App.4th 92 MGW, INC., Plaintiff and Appellant, v. FREDRICKS DEVELOPMENT CORPORATION, et al., Defendants and Appellants.
Decision Date02 April 1992
Docket NumberNo. G006654

Page 888

6 Cal.Rptr.2d 888
Previously published at 12 Cal.App.4th 244, 5 Cal.App.4th 92
12 Cal.App.4th 244, 5 Cal.App.4th 92
MGW, INC., Plaintiff and Appellant,
v.
FREDRICKS DEVELOPMENT CORPORATION, et al., Defendants and Appellants.
No. G006654.
Court of Appeal, Fourth District, Division 3, California.
April 2, 1992.
Review Dismissed and Cause Remanded July 15, 1993.
Review Granted July 9, 1992.
Certified for Partial Publication 1

Page 890

[12 Cal.App.4th 250] Perez, McNabb & Cook, Perez & McNabb, Richard L. Perez, Sandra J. McNabb and Jeffrey Alan Miller, Orinda, for plaintiff and appellant.

Irell & Manella, Scott D. Baskin, Andra Barmash Greene, Harry P. Weitzel, Newport Beach, Gibson, Dunn & Crutcher, John A. Arguelles, John J. Swenson, Robert F. Serio, Theodore J. Boutrous, Kimberly D. Reed, Los Angeles, Higgs, Fletcher & Mack, John M. Morris, Merville Thompson, San Diego, Woodrow D. Smith, Melvin King, Los Angeles, Drummy, Garrett, King & Harrison, Howard F. Harrison and Kathleen Carothers Paone, Costa Mesa, for defendants and appellants.

OPINION

WALLIN, Associate Justice.

Fredricks Development Corporation, Dunn Properties Corporation and Pacific Real Estate Projects, Inc. (PREP) appealed from a judgment awarding real estate broker MGW, Inc. general and punitive damages for interference with prospective economic advantage and conspiracy based upon Fredricks' refusal to pay MGW a commission pursuant to an oral broker's agreement. MGW appealed from orders of nonsuit in favor of defendants Home Capital Corporation and Humboldt Financial Services Corporation, and an order granting judgment notwithstanding the verdict and a new trial in favor of defendant Pacific Lighting Corporation. We reversed the orders granting judgment notwithstanding the verdict and a new trial as to Pacific Lighting and affirmed in all other respects. (MGW, Inc. v. Fredricks Development Corporation, 1990 WL 272149 (Apr. 30, 1990) G006654 [nonpub. opn.] ) [12 Cal.App.4th 251] The California Supreme Court denied review, but the United States Supreme Court granted certiorari and ordered this court's judgment vacated and remanded "for further consideration in light of Pacific Mutual Life Insurance Company v. Haslip, 499 U.S. 1 [111 S.Ct. 1032, 113 L.Ed.2d 1] (1991)." We affirm in part and reverse in part. 2

* * *

Page 891

Plaintiff MGW is a commercial real estate brokerage and investment firm owned and operated by Malcolm Waitt, Jr., a licensed real estate broker. Waitt is MGW's only employee.

Defendant Fredricks Development Corporation is a real estate developer involved in the construction of large-scale residential tracts. Fredricks is a wholly-owned subsidiary of Pacific Lighting Corporation.

In 1982 Fredricks made known to Waitt and other local brokers that it was interested in acquiring a large residential project along the I-15 corridor in the southern Orange County or northern San Diego County area. Waitt was told that if he brought in an opportunity Fredricks undertook and was not paid a broker's fee by the seller, Fredricks would see he was fairly compensated. This was Fredricks' standard arrangement, and on at least one previous occasion Waitt was paid for his efforts under this arrangement. Waitt had no written broker's contract with Fredricks.

On February 14, 1983, Waitt read a newspaper article saying Home Capital, which was in the business of financing developments, had bought out its partner and was looking for an experienced developer and joint venturer to help build out a 1500-acre mixed residential/commercial project known as Rancho Carmel. 3 The project was located along the I-15 corridor in northern San Diego County. Waitt, believing this was just the opportunity Fredricks was looking for, called Home Capital and told them Fredricks might be interested in the project. Home Capital told Waitt that if they struck a deal with Fredricks they would not pay a broker's fee and he would have to look to Fredricks for any commission.

Waitt showed the article to Fredricks. Fredricks told him that neither it nor Pacific Lighting was aware of the Rancho Carmel opportunity, and on being [12 Cal.App.4th 252] advised Home Capital would not pay a broker's commission, Fredricks assured Waitt that if it went ahead with the deal he would be fairly compensated. Dunn Properties Corporation, another wholly-owned subsidiary of Pacific Lighting which builds out commercial tracts, became involved because Fredricks could not handle the commercial end of the project.

On March 21, 1983, Fredricks, Home Capital and Dunn signed a letter of intent to enter into a joint venture to build the Rancho Carmel project. The purpose of the letter was to tie up the property for a period of time in order to allow Fredricks and Dunn to determine the project's feasibility. One of its provisions was: "[Dunn and Fredricks] and Home [Capital] each hereby represent to one another that no broker or finders fee will be payable as a result of D & F and Home entering into the proposed venture and each indemnifies the other against any such broker or finders fee."

Waitt frequently asked about the project and was led to believe the deal was progressing smoothly and that Fredricks intended to compensate him. He was never told he would not be paid a commission.

The joint venture interest was ultimately purchased on behalf of Fredricks and Dunn in the name of PREP, which was a wholly-owned subsidiary of Pacific Lighting. Fredricks, however, refused to pay Waitt a broker's commission, claiming the Pacific Lighting corporations knew of the opportunity before Waitt brought the newspaper clipping to them. Waitt was told that in late 1982 there had been rumors the Rancho Carmel project might soon become available, that Dunn had inquired (through a different broker) whether Home Capital would sell off just the commercial use, that Home Capital said it was unwilling to discuss sale of the project until it bought out its joint venturer, and that Home Capital was unwilling to sell off just the commercial part of the project since it viewed the entire development as an integrated plan. Dunn, however, did not pursue the commercial

Page 892

part of the project at any time after it became available and before Waitt brought Fredricks the article.

Waitt filed an action for breach of oral agreement, quantum meruit, tortious breach of the covenant of good faith and fair dealing, conspiracy and tortious interference with prospective economic advantage. The complaint named Fredricks, Dunn, Pacific Lighting, PREP, Home Capital and Humboldt as defendants.

At trial the court dismissed all of MGW's contractual claims on the ground they were unenforceable under the statute of frauds. A nonsuit was [12 Cal.App.4th 253] granted in favor of Home Capital and Humboldt, and a nonsuit was granted to PREP on the interference with prospective advantage claim. The jury returned a verdict of $558,000 in damages against Fredricks, Pacific Lighting, Dunn and PREP, and $2 million in punitive damages against all defendants but PREP. Pacific Lighting's motions for judgment notwithstanding the verdict and a new trial were granted. Fredricks, Dunn and PREP appeal from the judgment. MGW appeals from the orders of nonsuit, new trial, and judgment notwithstanding the verdict.

I-III *

IV

Pacific Mut. Life Ins. Co. v. Haslip, supra, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 held, although the common-law method of assessing punitive damages is not so "inherently unfair as to deny due process ... per se," their imposition in a particular case can violate the due process clause. (Id. at pp. ---- - ----, 111 S.Ct. at pp. 1042-1043, 113 L.Ed.2d at pp. 19-20.) In concluding the punitive damages in Haslip were constitutionally permissible, the United States Supreme Court concentrated on three facets of the Alabama procedures involved: (1) instructions pointed the jury to the purposes of deterrence and retribution and directed it to consider the character and degree of the wrong and need to prevent similar wrongs; (2) there were established trial court post-trial review procedures, requiring the court to state reasons for affirming or setting aside an award after considering the defendant's culpability, the deterrent effect on others, and impact on innocent third parties; and (3) the state Supreme Court reviewed the award, making a comparative analysis of other awards and applying a detailed substantive analysis. (Id. at pp. ---- - ----, 111 S.Ct. at pp. 1043-1045, 113 L.Ed.2d at pp. 20-22.)

The Supreme Court did not say these factors were sine qua nons of a constitutionally adequate system of punitive damages awards. The court first noted a history of nearly 150 years of affirming the propriety of punitive damages, concluding that "[i]n view of this consistent history, we cannot say that the common-law method for assessing punitive damages is so inherently unfair as to deny due process and be per se unconstitutional. ' "If a thing has been practised [sic] for two hundred years by common consent, it will need a strong case for the Fourteenth Amendment to affect it." ' [Citation.]" (Id. at p. ----, 111 S.Ct. at p. 1043, 113 L.Ed.2d at pp. 19-20.)

[12 Cal.App.4th 254] But the court acknowledged that there was a constitutional issue to be resolved: "It would be ... inappropriate to say that, because punitive damages have been recognized for so long, their imposition is never unconstitutional.... [p] One must concede that unlimited jury discretion--or unlimited judicial discretion for that matter--in the fixing of punitive damages may invite extreme results that jar one's constitutional sensibilities. [Citation.] We need not, and indeed we cannot, draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable that would fit every case. We can say, however, that general concerns of reasonableness and adequate guidance from the court when the case is...

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4 practice notes
  • Aken v. PLAINS ELEC. GENERATION & TRANS., No. 26,730.
    • United States
    • New Mexico Supreme Court of New Mexico
    • June 4, 2002
    ...cases it will be clear from the record how the trial court came to its conclusion. Id. In MGW, Inc. v. Fredricks Development Corp., 6 Cal.Rptr.2d 888, 895-96 (Ct.App.1992), the court explained why traditional post-trial procedure is adequate in the review of a punitive damages A defendant w......
  • Akins v. Sacramento Mun. Utility Dist., No. C009871
    • United States
    • California Court of Appeals
    • June 2, 1992
    ...would naturally give rise to such a duty, recovery for negligent infliction of emotional distress in the absence of physical injury or [12 Cal.App.4th 244] impact is generally denied. However, in limited circumstances a legal duty may be imposed upon a defendant with respect to a particular......
  • Khraibut v. Chahal, Case No. 15-cv-04463-CRB
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • March 26, 2021
    ...seeks lack a reasonable relationship to his actual damages. Rufo, 86 Cal. App. 4th at 623; see also MGW, Inc. v. Fredricks Dev. Corp., 6 Cal. Rptr. 2d 888, 894 (Ct. App.), review Page 39granted and opinion superseded, 832 P.2d 586 (Cal. 1992); Cal. Civ. Jury Instruction 3940. Khraibut reque......
  • MGW, Inc. v. Fredricks Development Corp.
    • United States
    • United States State Supreme Court (California)
    • July 9, 1992
    ...DEVELOPMENT CORPORATION, et al., Appellants. S015966. Supreme Court of California, In Bank. July 9, 1992. Prior report: Cal.App., 6 Cal.Rptr.2d 888. Petition for review Pursuant to rule 29.2(a) of the California Rules of Court, review is limited to the issues of: (1) whether the punitive da......
4 cases
  • Aken v. PLAINS ELEC. GENERATION & TRANS., No. 26,730.
    • United States
    • New Mexico Supreme Court of New Mexico
    • June 4, 2002
    ...cases it will be clear from the record how the trial court came to its conclusion. Id. In MGW, Inc. v. Fredricks Development Corp., 6 Cal.Rptr.2d 888, 895-96 (Ct.App.1992), the court explained why traditional post-trial procedure is adequate in the review of a punitive damages A defendant w......
  • Akins v. Sacramento Mun. Utility Dist., No. C009871
    • United States
    • California Court of Appeals
    • June 2, 1992
    ...would naturally give rise to such a duty, recovery for negligent infliction of emotional distress in the absence of physical injury or [12 Cal.App.4th 244] impact is generally denied. However, in limited circumstances a legal duty may be imposed upon a defendant with respect to a particular......
  • Khraibut v. Chahal, Case No. 15-cv-04463-CRB
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • March 26, 2021
    ...seeks lack a reasonable relationship to his actual damages. Rufo, 86 Cal. App. 4th at 623; see also MGW, Inc. v. Fredricks Dev. Corp., 6 Cal. Rptr. 2d 888, 894 (Ct. App.), review Page 39granted and opinion superseded, 832 P.2d 586 (Cal. 1992); Cal. Civ. Jury Instruction 3940. Khraibut reque......
  • MGW, Inc. v. Fredricks Development Corp.
    • United States
    • United States State Supreme Court (California)
    • July 9, 1992
    ...DEVELOPMENT CORPORATION, et al., Appellants. S015966. Supreme Court of California, In Bank. July 9, 1992. Prior report: Cal.App., 6 Cal.Rptr.2d 888. Petition for review Pursuant to rule 29.2(a) of the California Rules of Court, review is limited to the issues of: (1) whether the punitive da......

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