Storage Services v. Oosterbaan

• Decision Date: 29 September 1989
• Docket Number: No. A041658,A041658
• Citation: 214 Cal.App.3d 498,262 Cal.Rptr. 689
• Court: California Court of Appeals Court of Appeals
• Parties: The PEOPLE ex rel. DEPARTMENT OF TRANSPORTATION, Plaintiff, v. GROCERS WHOLESALE COMPANY et al., Defendants, Cross-Defendants and Appellants; Storage Services, Cross-Complainant and Respondent.

Page 689

262 Cal.Rptr. 689

214 Cal.App.3d 498

The PEOPLE ex rel. DEPARTMENT OF TRANSPORTATION, Plaintiff, v. GROCERS WHOLESALE COMPANY et al., Defendants, Cross-Defendants and Appellants Storage Services, Cross-Complainant and Respondent.

No. A041658.

Court of Appeal, First District, Division 4, California.

Sept. 29, 1989.

Review Denied Dec. 14, 1989.

Tom Nagel, San Francisco, for plaintiff.

Morgan, Lewis & Bockius, Paul A. Richler, Judith K. Otamura-Kester, Jeffrey N. Brown, Los Angeles, Lee W. Cake, Oakland, for defendants, cross-defendants and appellants.

Turner & Mulcare, William J. Turner, Ronald J. Mulcare, San Mateo, Marer, Marer & Schuck, Gerald Z. Marer, Alan G. Marer, John F. Schuck, Palo Alto, for cross-complainant and respondent.

PERLEY, Associate Justice.

First Marin Realty, Inc., a real estate broker, and C.R. Oosterbaan, a real estate agent, appeal from the judgment against them on the cross-complaint of Storage Services, a partnership, for fraud in connection with a real estate transaction, and from the orders denying their motions for judgment notwithstanding the verdict on the issue of punitive damages. Appellants argue that: substantial evidence of fraud was lacking; Storage Services did not "purchase or otherwise acquire" the property for purposes of its claim for lost profits; Storage Services did not acquire the property in reliance on the fraud; Storage Services waived its right to damages for the fraud; additional amounts should have been offset against the judgment; and the punitive damages were improper and excessive. We find that the punitive damages awarded against Oosterbaan were excessive, and that the punitive damage award against First Marin must be reversed for lack of evidence of its net worth. We affirm the judgment in all other respects.

I. FACTS

A. Fraud and Reliance

Storage Services entered into a contract with Grocers Wholesale Co. in March of 1984 to purchase an undeveloped 81,000 square foot lot at Weldon and Rickard Streets, San Francisco (the subject property) for $850,000. Storage Services intended to construct a mini-storage facility on the subject property, which lay adjacent to a five acre parcel owned by the State of California where the California Department of Transportation (Caltrans) stored some equipment.

Oosterbaan acted as Grocers Wholesaler's agent for purposes of the transaction. A few days before the contract was executed, Oosterbaan met with Michael Garrity of Storage Services and Nicholas Zibyock, Storage Services' real estate agent. In response to a question from Zibyock, Oosterbaan indicated that Caltrans had no interest in the subject property. ¹ Evidence of the State's interest in the subject property, and Oosterbaan's knowledge of that interest, may be outlined as follows.

Oosterbaan had been the listing agent for the subject property since March of 1983, and he had been talking with Caltrans' personnel about the subject property two or three times a month since July of 1983. A right-of-way agent in Caltrans' acquisition section, Mr. Moon, phoned Oosterbaan in July of 1983 to inquire about the subject property. Moon indicated to Oosterbaan that Caltrans was studying relocation of a maintenance station and that "if the studies so indicated, we would most likely be interested in purchasing the property." Thereafter, through at least March of 1984, Moon was in "constant contact" with Oosterbaan regarding the status of the State's studies and its interest in acquiring the subject property. During that time Moon never informed Oosterbaan that the State was not interested in the subject property. To the contrary, Moon "indicated that the study was progressing and we were attempting to get the necessary approvals."

Oosterbaan had also spoken with Moon's supervisor, Mr. Foote, on at least two or three occasions in 1983 and early 1984. Foote indicated to Oosterbaan that "yes, we were interested in the property for expanding our maintenance facility." Foote never told Oosterbaan that the State was not interested in the subject property, and there was "no doubt" in Foote's mind that Oosterbaan was apprised of the State's interest. Indeed, only a month before his meeting with Garrity and Zibyock, Oosterbaan had written to another realtor that "Mr. Moon and Mr. Foote have expressed that you might have some interest in the [subject property] on behalf of Caltrans."

During this period Oosterbaan was associated with First Marin, where he worked under the supervision of First Marin's President, Douglas Engel. Engel met with Oosterbaan every week, and reviewed all of Oosterbaan's correspondence and contracts. Engel's duties included insuring that Oosterbaan's representations were accurate. When they first discussed the subject property, Engel had advised Oosterbaan that "the likely buyer is the State of California." Engel knew that Oosterbaan had been in contact with Caltrans' right-of-way agent, and he and Oosterbaan discussed the substance of the latter's conversation with Garrity and Zibyock.

Storage Services' witnesses testified that they would not have entered into the contract if they had known that the State was studying the subject property for possible acquisition or had any interest in acquiring it. Storage Services deposited $10,000 into escrow, paid an additional $20,000 to extend the close of escrow to September 20, 1984, and proceeded with arrangements to develop the subject property. Designs were drawn, site development work was performed and Planning Commission approval was obtained. Caltrans' interest surfaced in an August 31, 1984, letter from Moon to Grocers Wholesale, expressing the State's desire to purchase the subject property and its willingness, if necessary, to proceed by way of eminent domain. Storage Services thus learned of the State's intention to acquire the subject property prior to the scheduled close of escrow.

B. Acquisition of the Property

On September 13, 1984, the title company wrote to Grocers Wholesale and Storage Services asking them to acknowledge the State's intention to acquire the subject property, and to hold the title company harmless from any claim arising from "closing the escrow relative to any condemnation action." Storage Services would not agree to this because it "was beyond what we were required to do in our purchase agreement." Storage Services wrote to Grocers Wholesale advising that it would not close as scheduled because there was "a title problem, and ... it's the responsibility of Grocers Wholesale to deal with this title problem."

The State filed its complaint in eminent domain against Grocers Wholesale in February of 1985, deposited probable compensation (Code Civ.Proc., § 1255.010) of $850,000 in December of 1985, and took possession of the subject property in March of 1986. Grocers Wholesale cross-complained against Storage Services to quiet title and Storage Services, in turn, cross-complained against Grocers Wholesale, Oosterbaan and First Marin for fraud and negligent misrepresentation. Throughout this time, Storage Services remained willing and able to complete the 1984 purchase contract "if and when Grocers Wholesale could perform as agreed."

Storage Services and Grocers Wholesale entered into a comprehensive settlement and mutual release in 1987. The settlement was "made with a view to a total consideration of $850,000 being payable to Grocers Wholesale for the property in late 1984." Grocers Wholesale received or retained inter alia the $850,000 deposited by the State, the $10,000 deposited by Storage Services in the original escrow, the $20,000 already paid by Storage Services, and an additional $50,000 from Storage Services. Storage Services received inter alia an assignment of all of Grocers Wholesale's right, title and interest in the subject property, including Grocers Wholesale's claim for compensation for the fair market value of the subject property in excess of $850,000, ² and a $20,000 credit on account of its claim for damages. The settlement agreement recited that it was not intended to constitute a release of any of Storage Services' claims against Oosterbaan or First Marin.

Pursuant to the settlement, Grocers Wholesale executed a quitclaim deed to the subject property to Storage Services in November of 1987. Oosterbaan and First Marin received commissions on the sale.

C. The Verdict

In response to special interrogatories, the jury found that Oosterbaan had knowingly or recklessly made an untrue representation as to a past or existing material fact, with an intent to defraud Storage Services and to induce Storage Services to rely on it, and that Storage Services, unaware of the falsity, acted in justifiable reliance on the truth of the representation. The jury also found that Oosterbaan was guilty of oppression, fraud or malice, and that First Marin had authorized or ratified the oppressive, fraudulent or malicious conduct of Oosterbaan. Judgment was entered against Oosterbaan and First Marin for 1,044,250, representing $1,000,000 for lost profits, ³ plus $64,250 for expenditures, minus the $20,000 credited to Storage Services under its settlement agreement with Grocers Wholesale. The jury also awarded punitive damages of $75,000 against Oosterbaan and $150,000 against First Marin.

II. DISCUSSION

A. There was Substantial Evidence of Fraud

It is apparent from the foregoing summary of testimony supporting the judgment that there was substantial evidence of fraud. It is well-settled that we "must consider the 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 judgment." (9 Witkin, Cal. Procedure (3d ed. 1985) Appeal, § 278, p. 289; emphasis omitted.) ⁴ Since it is not our prerogative to re-weigh the evidence, we need not detail the twenty-four evidentiary points listed in appellants' opening brief. We have reviewed the evidence highlighted by...