Simon v. San Paolo U.S. Holding Co., Inc.

Decision Date02 December 2003
Docket NumberNo. B121917.,B121917.
CourtCalifornia Court of Appeals Court of Appeals
PartiesLionel SIMON, Plaintiff and Appellant, v. SAN PAOLO U.S. HOLDING COMPANY, INC., Defendant and Appellant.

Epport & Richman, Beth Ann R. Young, Steven N. Richman and Lawrence A. Abelson, Los Angeles, for Defendant and Appellant.

Knapp, Petersen & Clarke, Andre E. Jardini, Kevin J. Stack and Mitchell B. Ludwig, Glendale, for Plaintiff and Appellant.


The United States Supreme Court, which previously remanded this case for further consideration in light of Cooper Industries, Inc. v. Leatherman Tool Group, Inc. (2001) 532 U.S. 424, 121 S.Ct. 1678, 149 L.Ed.2d 674 (Leatherman),1 has remanded a second time, this time for further consideration in light of State Farm Mut. Auto. Ins. Co. v. Campbell (2003) 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (State Farm).2 We have reconsidered the matter in light of State Farm, and we again affirm the judgment.


On June 21, 1996, cross-appellant, Lionel Simon, commenced this action against San Paolo Bank (hereinafter "the bank") and appellant, San Paolo U.S. Holding Company, Inc. ("San Paolo").3 Simon sought specific performance of an alleged contract to purchase real property, located at 816 Figueroa Street in Los Angeles. He also sought damages for breach of the contract, as well as damages for fraud, consisting of a false promise to sell the property to Simon under certain terms and conditions.

The issues of liability and punitive damages were tried separately by jury, beginning on August 1, 1997.4 By special verdict rendered on August 12, 1997, the jury found that there was no enforceable contract between the parties, but the jury found in favor of Simon on the fraud cause of action, awarding him $5000 in compensatory damages and $2,500,000 in punitive damages.

San Paolo brought motions for a new trial, a reduction in punitive damages, and judgment notwithstanding the verdict. Simon brought a motion for new trial on damages. The trial court denied Simon's motion, as well as San Paolo's motion for judgment notwithstanding the verdict. The trial court granted San Paolo's motion for new trial, subject to Simon's acceptance of a reduction in punitive damages to $250,000. Simon refused to accept the remittitur, and the issue of punitive damages was tried to a new jury, beginning March 6, 1998.

The second jury assessed punitive damages in the amount of $1,700,000, and San Paolo's motion for new trial was denied. On April 8, 1998, judgment was entered against San Paolo in the amount of $1,705,000. San Paolo filed a timely notice of appeal from the judgment, and Simon filed a timely notice of cross-appeal.

The matter was briefed and argued, and we affirmed the Superior Court's judgment after finding, among other things, that the punitive damages assessed against appellant San Paolo U.S. Holding Company, Inc. (hereinafter, "San Paolo") did not violate its right of due process under the United States Constitution.

Our original judgment was entered on August 28, 2000, and the California Supreme Court denied review. Thereafter, the United States Supreme Court announced its decision in Leatherman, supra, 532 U.S. 424, 121 S.Ct. 1678, 149 L.Ed.2d 674, which held that appellate courts must apply a de novo standard of review when passing on determinations of the constitutionality of punitive damage awards. On May 29, 2001, the Supreme Court granted San Paolo's petition for writ of certiorari, vacated our original judgment, and remanded the cause to this court for further consideration in light of Leatherman.

After further briefing and argument, we undertook a de novo review of appellant's due process claim with regard to the amount of punitive damages awarded, applying the guidelines set forth in BMW of North America v. Gore (1996) 517 U.S. 559, 568, 116 S.Ct. 1589, 134 L.Ed.2d 809 (BMW), and we independently concluded that the amount did not offend the United States Constitution. On November 7, 2001, we again affirmed the judgment, and the California Supreme Court denied review.

The United States Supreme Court again granted certiorari, and remanded for further consideration in light of State Farm, supra, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585. Upon receipt of the mandate of the Supreme Court, we issued an order permitting the parties to file supplemental briefs addressing only the application of State Farm to this matter. We now reconsider the matter again, applying a de novo review to determine whether the award of punitive damages violated the defendant's right to due process under the federal Constitution, and applying the additional factors set forth in State Farm.

I. San Paolo's Appeal
A. The First Trial

We leave our summary of the evidence adduced at the first trial to our discussion of Simon's cross-appeal because, although San Paolo contends that there was no substantial evidence to support any of the elements of fraud, it refers only to evidence presented during the second trial, which involved just the issue of punitive damages. San Paolo's opening brief and reply brief have set forth none of the evidence presented at that first trial.

It is presumed that the record contains evidence to sustain every finding of fact, and it is the appellant's burden to demonstrate the absence of substantial evidence to support a challenged finding, by setting forth all the material evidence on the point. (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881, 92 Cal.Rptr. 162, 479 P.2d 362; Cal. Rules of Court, rule 13.) Since San Paolo has failed to do so, we presume the evidence was sufficient to support the verdict, and deem the point waived. (See Foreman & Clark Corp. v. Fallon, supra, 3 Cal.3d at p. 881, 92 Cal.Rptr. 162, 479 P.2d 362.)

San Paolo also contends that there was no liability for fraud as a matter of law, because the jury found there was no contract. San Paolo's contention appears to be based entirely upon its interpretation of the special verdict finding that there was no "binding and enforceable agreement" between the parties. San Paolo infers that the jury found that no contract had been formed in the first instance. Thus, it reasons, Simon was not induced to enter into a transaction, and cannot be said to have relied upon the false promise.

San Paolo's reasoning is flawed, because the jury was not asked to determine whether a contract had been formed. Instead, it was asked to make the legal conclusion whether an enforceable contract existed. Further, the use of "and" instead of "or" to connect the words "binding" and "enforceable" indicates the jury may have found that a contract had been formed but was not enforceable, or that no contract had been formed at all. It is impossible to discern from the special verdict which conclusion the jury made.

A special verdict must determine ultimate facts, not conclusions of law. (Code Civ. Proc., § 624; see 7 Witkin, Cal. Procedure (4th ed. 1997) Trial, § 355, p. 404.) And it must state those facts directly, not by implication. (Breeze v. Doyle (1861) 19 Cal. 101, 103, 1861 WL 967.) The special verdict in this case was defective in that it called for a conclusion of law, which merely implied the facts upon which it was based. The jury's finding of fraud implies that it found that the parties did enter into a contract, but the contract was unenforceable. We cannot conclude that the jury found that no contract was formed in the first instance.

San Paolo is, in effect, inviting us to infer a contradictory finding, while rejecting a reasonable interpretation that would support the judgment. But San Paolo has waived any error in the form of the special verdict, by failing to object to it. (Brokaw v. Black-Foxe Military Institute (1951) 37 Cal.2d 274, 280, 231 P.2d 816.) We therefore decline the invitation.

A cause of action for promissory fraud requires proof of an unperformed promise, made about a material fact, without any intention of performing it, and with the intent to deceive the plaintiff or to induce entry into a transaction; and upon which the plaintiff justifiably and injuriously relies. (Muraoka v. Budget Rent-A-Car, Inc. (1984) 160 Cal.App.3d 107, 119, 206 Cal.Rptr. 476; Civ.Code, §§ 1572, subd. 4, 1709, 1710.) Liability does not depend upon whether the promise is ultimately enforceable as a contract. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377, 909 P.2d 981.) "`If it is enforceable, the [plaintiff] ... has a cause of action in tort as an alternative at least, and perhaps in some instances in addition to his cause of action on the contract.' [Citation.]" (Id. at p. 638, 49 Cal.Rptr.2d 377, 909 P.2d 981, quoting Rest.2d Torts, § 530, subd. (1), com. c, p. 65; and citing Tenzer v. Superscope, Inc. (1985) 39 Cal.3d 18, 29, 216 Cal.Rptr. 130, 702 P.2d 212.)

San Paolo relies upon Maynes v. Angeles Mesa Land Co. (1938) 10 Cal.2d 587, 589, 76 P.2d 109, and Justice Clark's dissent in Egan v. Mutual of Omaha Ins. Co. (1979) 24 Cal.3d 809, 832, 169 Cal.Rptr. 691, 620 P.2d 141. Neither case touches upon the requirement, or lack of requirement, of an enforceable contract as an element of promissory fraud.5 We therefore reject San Paolo's contention that there was no liability for fraud as a matter of law.

B. The Second Trial

We summarize the trial evidence in the light most favorable to the prevailing party, giving him the benefit of every reasonable inference, and resolving conflicts in support of the verdict. (Crawford v. Southern Pacific Co. (1935) 3 Cal.2d 427, 429, 45 P.2d 183.) Our summary differs significantly from San Paolo's, because San Paolo has chosen to draw all reasonable inferences in favor of its own position, and to disregard its obligation to set forth in its brief all the material evidence, not merely its own.

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