Moore v. Teed

• Decision Date: 24 April 2020
• Docket Number: A153523
• Court: California Court of Appeals Court of Appeals
• Parties: Justin MOORE, Plaintiff and Respondent, v. Richard Burden TEED, Defendant and Appellant.

48 Cal.App.5th 280

261 Cal.Rptr.3d 642

Justin MOORE, Plaintiff and Respondent,

v.Richard Burden TEED, Defendant and Appellant.

A153523

Court of Appeal, First District, Division 1, California.

Filed April 24, 2020

California Appellate Law Group, Ben Feuer, Charles Kagay, Sarah K. Hofstadter, for Defendant and Appellant

Farella, Braun + Marter, Sandra A. Edwards ; Greines, Martin, Stein & Richland, Laurie J. Hepler, for Plaintiff and Respondent

Sanchez, J.

This lawsuit arises out of the purchase and botched remodel of a fixer–upper house in the Pacific Heights neighborhood of San Francisco. Plaintiff Justin Moore alleges he was fraudulently induced by his real estate agent Richard Burden Teed to purchase and renovate the property based on Teed’s assurances that he and his team of experienced contractors could deliver a set of high-end improvements for only $900,000. Moore sued after the installed foundation proved defective and the promised renovations were far more costly than what Teed had represented they would be. The jury returned a verdict in favor of Moore on his tort claims and awarded him his out-of-pocket expenses for replacing the foundation and benefit-of-the-bargain damages for the additional cost he incurred in obtaining the renovations that had been promised to him.

Conceding liability, Teed challenges the award of benefit-of-the-bargain damages and statutory attorney fees on various grounds. Courts of Appeal are divided over the question whether benefit-of-the-bargain damages may be recovered in fraud claims involving real property transactions where the fraud is perpetrated by a fiduciary. We are persuaded by those authorities which have concluded that benefit-of-the-bargain damages are available to fully compensate a plaintiff for all the detriment proximately caused by a fraudulent fiduciary’s actions. We also conclude that the jury properly awarded statutory attorney fees and costs. Accordingly, we affirm the judgment below.

FACTUAL AND PROCEDURAL BACKGROUND¹

A. Background

Moore decided to buy a house in San Francisco but found he could not afford one in the neighborhoods he preferred. In 2011, Moore met Teed, who promoted himself on the Internet as a real estate agent with "over 25 years of experience as a building contractor" with "an extensive background in historic restorations" and "a deep understanding of quality construction." Teed told Moore that he could locate a lower-priced fixer-upper home in a choice neighborhood and then renovate it in a cost-effective manner. Based on his interactions with Teed and his exposure to Teed’s promotional materials, Moore believed that Teed was a general contractor. Both Moore and Moore’s father toured several examples of homes that Teed had renovated and were impressed with Teed’s substantial knowledge of materials and design and his business affiliations. Moore retained Teed as his real estate agent.

In May 2011, following Teed’s advice, Moore bought a large fixer-upper house on Green Street for $4.8 million. The home was built in 1912 and was last updated in the 1950s. Moore borrowed significantly from his father and a bank to purchase the house. Teed received a commission from the sale.

Before the close of escrow, Teed proposed renovating the basement to create a "below-ground floor Grade A living space" with a cinema and a wine cellar. Teed said other rooms in the house could also be expanded and modernized. Moore’s father had a lengthy conversation with Teed in which they discussed on a line-by-line basis what the costs of construction would be for a specific list of improvements. Based on these conversations, Moore expected that in exchange for the $4.8 million purchase price plus $900,000 for renovations (excluding certain design fees), Teed and his team of construction professionals would deliver the Green Street home renovated to the same high-end standard as the other projects Teed had shown Moore.

Teed recommended that Moore hire architect Gregg De Meza to design the renovations. De Meza and Teed met with Moore and Moore’s father to outline the budget for various aspects of the project. The projected budget for the foundation work, for example, was $200,000. After the close of escrow, De Meza prepared a 10-page comprehensive "Creative Spec" setting forth the proposed renovations in detail.

De Meza put the project out for bidding and received contractor bids ranging from approximately $1.6 million to $2.4 million. Teed told Moore that he would work with De Meza to get the project back within the budget. Teed proposed cutting costs for some items as well as performing demolition in the upper floors and completing the foundation and basement work before seeking further bids. Moore and his father agreed to Teed’s plan of action.

Moore employed Teed’s associates for the project. He signed contracts with two engineering firms recommended by Teed. Moore did not sign a written contract with Teed himself because Teed stated he "didn’t need contracts; that this is what he did. This is how he built his reputation." Moore nevertheless believed that he had an oral agreement with Teed. Work demands prevented Moore from visiting the site regularly and he relied on progress videos sent by Teed. Teed set up a joint account funded by Moore to make payments to the contractors.

Teed was not in fact a licensed contractor. Beginning in 2011, Teed’s team of contractors gutted large parts of the house, excavated the lot, and built most of the foundation meant to house the basement-level living space. The foundation was defective, however, because it lacked any waterproofing despite the property’s high water table. After Moore became aware of the defects, he halted all work on the project and terminated De Meza. Moore’s father engaged consultants to evaluate and report on the foundation. They concluded, despite strong resistance from Teed, that the foundation had to be torn out and replaced. Teed’s structural engineer agreed that the foundation was defective and privately apologized to Moore. By then, Moore had paid about $265,000 of the $900,000 promised cost for Teed’s renovations.

B. Litigation Commences

On August 2, 2013, Moore filed a complaint against Teed and other defendants for breach of contract, intentional misrepresentation, negligent misrepresentation, negligence, breach of fiduciary duties, negligence per se, violation of Business and Professions Code ² section 17200, professional negligence, and recovery against license bonds. Moore alleged he was fraudulently induced to purchase and renovate the property based on false representations that Teed was an experienced contractor who could deliver a basic, yet quality remodel for $900,000.

Moore hired a new architect and a general contractor The defective foundation was demolished and replaced and renovations along the lines of those promised by Teed were completed at a much higher expense. Moore and his father eventually expanded the renovation well beyond what Teed had originally proposed. Moore did not seek damages for these additions at trial. By the 2017 trial, Moore had nearly completed the renovations to his home at a total cost of about $9 million.

At trial, construction cost estimator Christine Kiesling testified for Moore as an expert witness. Kiesling explained that the cost to complete Teed’s proposed renovations was much higher than promised because Teed’s estimates had been unrealistically low and because construction expenses had gone up in the additional time it took to tear out and replace the foundation. Kiesling testified about four items of damages claimed by Moore: (1) the difference in value between the actual cost of Teed’s renovations using 2011-2012 pricing rates and the promised cost of $900,000; (2) the actual cost to demolish and replace the foundation; (3) the value of the lost use of the property; and (4) the increased costs due to the delay in the renovations.

Kiesling estimated the De Meza design would have cost $4,477,249 to build in 2011-2012. The foundation alone should have been priced at $620,000, not $200,000. Kiesling’s estimate was over $1 million above the highest contractor bid De Meza received in 2011. She explained that her estimate was higher because the 2011 bids contained many significant omissions, including the cost of materials, installation, and installing a fire sprinkler system.

In closing arguments, Moore’s counsel told the jury: "The first category of damage that Mr. Moore is entitled to from Mr. Teed is the difference between the renovation’s promised cost—that’s the $900,000 for the construction—and the cost calculated to do that work in 2011-2012." Counsel asked for an award of $3,842,160 for this category of damages. She also requested $693,000 for increased costs due to the delay in the renovation work.

Teed’s counsel argued there had never been a promised $900,000 remodel and urged the jury to award nothing for the first and last categories of damages. He said the alleged damages did "not represent any loss that was actually sustained by the plaintiff in the real world. [¶] What it really is, is free money that is fabricated out of thin air, and we don’t think that you should award any."

C. Jury Verdict and Posttrial Matters

The jury found for Teed on Moore’s claim for breach of contract but found in favor of Moore on all of his remaining tort claims.³ It awarded benefit-of-the-bargain damages of $900,000 for the difference between the renovation’s promised cost and the actual cost to do the same work using 2011-2012 rates, and $104,498 in increased costs due to delay. The jury also awarded Moore out-of-pocket damages of $822,904 for the actual cost to replace the foundation, and $106,920 for lost use of the property—damages that Teed does not challenge on appeal. The damages awarded against Teed totaled $1,934,322.

The trial court granted Teed’s motion for an offset based on Moore’s settlements with other defendants, leaving the net damages against Teed at...