Pacesetter Homes, Inc. v. Brodkin, 34807

• Decision Date: 11 March 1970
• Docket Number: No. 34807,34807
• Citation: 85 Cal.Rptr. 39,5 Cal.App.3d 206
• Court: California Court of Appeals Court of Appeals
• Parties: PACESETTER HOMES, INC., a California corporation, Plaintiff and Respondent, v. Michael BRODKIN, Defendant and Appellant. Civ.

Page 39

85 Cal.Rptr. 39

5 Cal.App.3d 206

PACESETTER HOMES, INC., a California corporation, Plaintiff and Respondent, v. Michael BRODKIN, Defendant and Appellant.

Civ. No. 34807.

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

March 11, 1970.

Kling & Fredland and Frederick J. Kling, Los Angeles, for defendant and appellant.

Anderson & Crikelair and Paul B. Crikelair, Ventura, for plaintiff and respondent.

THOMPSON, Associate Justice.

Appellant, purchaser of two duplex buildings from respondent, appeals from an adverse judgment rendered on appellant's cross-complaint alleging fraud inducing the sale. We affirm the judgment.

Nature of the Case

Respondent originally sued appellant in the municipal court for rents collected by appellant after respondent had re-acquired the property involved in the lawsuit by foreclosure. Appellant filed an answer and counterclaim and also a cross-complaint claiming general and punitive damages for allegedly fraudulent conduct of respondent inducing him to buy the property. The cross-complaint alleges: (1) Appellant purchased two duplex buildings from respondent. One building contained two units of two bedrooms each and the other contained a two-bedroom and a three-bedroom unit. (2) Respondent 'falsely and fraudulently' represented that the two-bedroom units in the one building would rent for $200 and $185 per month, and that the two units in the other building would rent for $225 and $200 per month. (3) Respondent actually rented comparable units for $135, $145, and $160. (4) Respondent knew the statements were false and made them with intent to deceive appellant. (5) Damage in the sum of $17,211.60.

The matter was transferred to the superior court. The parties agreed upon the issues raised by respondent's original complaint. The issue raised by appellant's cross-complaint were tried by the judge sitting without a jury.

Facts

The case reaches us on a record consisting of a clerk's transcript and a settled statement on appeal. Viewed as it must be in the light most favorable to the judgment, that record discloses the following.

Respondent is the developer of 'Ventura Keys,' a large subdivision consisting of single family and multiple residential unit buildings in Ventura, California. Respondent had not developed other properties in the Ventura area and had made no studies and possessed no knowledge of potential rentals that might be obtained from buildings in the development. The salesmen acting for respondent were instructed to inform potential purchasers that the estimated rental obtainable from buildings containing two units of two-bedrooms each was $170 and $200 for the respective units, and that the estimated rental obtainable from a building containing a two-bedroom and a three-bedroom unit was $200 and $225.

Appellant had, in the past, purchased one single family residence for investment. On June 27, 1964, he visited the Ventura Keys development. On June 27, no duplex units had yet been constructed. Appellant was told by Messrs. Freund and Cannon, salesmen for respondent, that the units in the duplexes to be constructed consisting of two units of two-bedrooms each would rent for $170 and $200, and that the units in the duplexes containing a two-bedroom and a three-bedroom apartment would rent for $200 and $225. Appellant was also told: 'If you receive the rents as we contemplate, it will be an excellent investment and there shouldn't be any difficulty in renting them.' Appellant relied upon the statements with respect to income. He agreed to purchase six duplex buildings. The transaction between appellant and respondent as actually consummated involved only two buildings, appellant having 'allowed four * * * of (the) duplex units to back.'

Escrows were opened for the purchase of the two duplex buildings. The escrows closed on August 17, 1965. Appellant experienced difficulty in renting the properties. Ultimately, appellant ceased to make payments upon a note secured by a deed of trust given as part of the purchase price. Respondent reacquired the two duplex buildings at a foreclosure sale in July 1967. At the time of trial, rental rates for the duplexes had not reached the estimated figures.

The trial court found that 'presale statements' were made by respondent's agents to appellant concerning future rental income which might be received after completion of the duplex units but that the statements 'were only estimates or opinion as to future anticipated rental income.' The court also found that the statements: did not constitute representation of existing facts, did not constitute actionable fraud as opinions rather than as affirmations of fact, were not intentionally false or fraudulent, were not made with intent to deceive, and did not warrant appellant's reliance. Having so found, the trial court gave judgment for respondent. Appellant then perfected the appeal which brings the matter to this court.

Issues on Appeal

Appellant's brief, while not containing specific statements of the grounds of appeal, apparently asserts that the judgment must be reversed because of the following (1) the insufficiency of the evidence to support the judgment; (2) the insufficiency of the findings of fact to support the judgment; and (3) the failure of the trial court to enter findings of fact on a material issue.

Sufficiency of the Evidence

Appellant argues that the evidence presented to the trial court establishes as a matter of law all elements necessary to sustain his cause of action. We conclude that the determination of the trial court to the contrary is supported by the record.

The cause of action upon which appellant relies is framed in fraud. To establish that cause of action, appellant was required to prove that he justifiably relied upon a fraudulent misrepresentation made with intent to deceive by respondent to induce him to enter into the contract for the purchase of the two buildings. (Civ.Code, § 1572.)

Misrepresentation. Appellant asserts that the statements made by respondent's agents concerning future rentals were misrepresentations within the definition of subdivision 2 of Civil Code, section 1572 and subdivision 2 of Civil Code, section 1710. Those sections define the following as a fraudulent misrepresentation and as deceit: 'The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;' (Civ.Code, § 1572), and 'The assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true.' (Civ.Code, § 1710.)

The trial court found that the statements made by respondent's agents were neither representations of existing facts nor opinion of the type upon which actionable fraud may be founded. Those findings are supported by the record and the law. The record discloses that while respondent's agents told appellant that the units to be constructed would rent for specified amounts, they also stated to appellant that the buildings would be an excellent investment, 'If you receive the rents as we Contemplate, * * *' (Emphasis added.) The trial court was justified in construing the fair meaning of the statements made to appellant as those of opinion concerning future estimated rentals and not as an unqualified representation of what those rentals would be. That construction precludes the treatment of those statements as 'positive assertions' within the meaning of subdivision 2 of section 1572 or as an 'assertion of fact' within the meaning of subdivision 2 of section 1710 of the Civil Code unless exceptional circumstances are present. (Daniels v. Oldenburg, 100 Cal.App.2d 724, 727, 224 P.2d 472; Gleason v. McPherson, 175 Cal. 594, 597, 166 P. 332; see Rest., Torts, § 525, com. d.)

Exceptional circumstances resulting in expressions of opinion being treated as misrepresentations have been found where the one expressing the opinion does not in fact entertain it (Bank of America Nat. Trust & Savings Ass'n v. Hutchinson, 212 Cal.App.2d 142, 148, 27 Cal.Rptr. 787; Rest., Torts, § 525, com. b); where the opinion amplifies false representations of fact (Salvati v. Cusolito, 98 Cal.App.2d 582, 220 P.2d 800); where the opinion is expressed in a manner implying a factual basis which does not exist (Rest., Torts, § 525, com. f); where the opinion is expressed as a fact (Gagne v. Bertran, 43 Cal.2d 481, 489, 275 P.2d 15); and where the expression of opinion is made by a party 'possessing superior knowledge' (Bank of America etc. v. Hutchinson, Supra, 212 Cal.App.2d 142, 148, 27 Cal.Rptr. 787; Ogier v. Pacific Oil & Gas Development Corp., 132 Cal.App.2d 496, 506, 282 P.2d 574).

Appellant does not contend here that the statements with respect to future rents expressed an opinion not entertained by respondent. He does not argue that those statements were accompanied by other and false statements. The existence of a false implication of a basis in fact for respondent's opinion is neither raised by the complaint nor argued directly on appeal. Appellant's position is that the statements were made in the form of fact rather than as opinion and that in any event they were made by a party possessed of superior knowledge.

The trial court's determination that the statements were those of opinion with respect to future rentals is binding upon us. Our Supreme Court has said: (W)here there is a reasonable doubt as to whether a particular statement is an expression of opinion or the affirmation of a fact, the determination rests with the trier of the facts.' (Wilson v. Municipal Bond Company, 7 Cal.2d 144, 151, 59 P.2d 974.) The record before us discloses a very substantial doubt that the critical statements were more than opinion. The potential of financial success of the buildings was predicated upon the assumption, 'If you receive the rents as we contemplate * * *.' Such a qualification preponderates in favor of the opinion...