MGW, Inc. v. Fredricks Development Corp., G006654
Decision Date | 02 April 1992 |
Docket Number | No. G006654,G006654 |
Citation | 12 Cal.App.4th 244,6 Cal.Rptr.2d 888 |
Court | California Court of Appeals |
Parties | 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. |
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.] ) 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
* * * 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 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 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 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 (Id. at p. ----, 111 S.Ct. at p. 1043, 113 L.Ed.2d at pp. 19-20.)
But the court acknowledged that there was a constitutional issue to be resolved: (Id. at p. ----, 111 S.Ct. at p. 1043, 113 L.Ed.2d at...
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