Gray v. Don Miller & Associates, Inc.

Plaintiff, the owner of a landscape contracting business, made an offer in writing in May 1978 to purchase a parcel of land on which he intended to build a residence and to expand his business by the addition of a nursery. The offer was made through Fitch, a licensed real estate salesman employed by defendant corporation, which conducts a real estate brokerage business. In June, Fitch telephoned plaintiff and told him that the offer had been accepted by the sellers and that escrow would close in 30 days if all went well, and later in the summer he told plaintiff’s wife that she could begin preparations to move to the property. From time to time during the remainder of 1978, Fitch and plaintiff discussed problems regarding the property. Fitch told plaintiff that the close of escrow would be delayed until after the first of January 1979 because the sellers might have “income tax problems’’ if the property was transferred before the end of the year. Plaintiff, in reliance on Fitch’s representations, incurred various expenditures in planning for the move. In January 1979, plaintiff was informed by Fitch that the seller had decided not to sell the property.

The following month, plaintiff filed an action against the sellers and defendant, seeking specific performance of the “contract of sale,” and damages for fraud. The trial court found Fitch had falsely represented that plaintiff’s offer had been accepted by the sellers without reasonable grounds to believe the statement to be true, that plaintiff reasonably relied on the misrepresentation, and that defendant, as Fitch’s employer, had violated its fiduciary duty by breaching its obligation to act honestly and deal fairly. The representation was found to have been negligently made. The court awarded plaintiff damages in the amounts he had expended in anticipation of completing the purchase, and compensation for the time he and his partner spent in planning use of the site;^[1] plaintiff was also afforded $14,796 in “delay damages,” representing the increase in the cost of constructing the residence and nursery buildings planned for the site during the six-month period which elapsed between Fitch’s misrepresentation and the time plaintiff learned it was false; finally, plaintiff was awarded $7,250 in attorney fees in partial reliance on the rationale of Walters v.

On this appeal from the ensuing judgment defendant argues, first, that the evidence was insufficient to justify the trial court’s finding that Fitch had represented to plaintiff that the sellers had accepted the offer. The evidence on this issue was in conflict: plaintiff testified that such a representation had been made, while Fitch testified to the contrary. In resolving this conflict in plaintiff’s favor, the trial court relied on a number of factors, including the circumstances that plaintiff had expended funds in reliance on the representation, and that Fitch had stated at one point in his testimony that he could not recall telling plaintiff either that his offer had been accepted, or that it had not. While defendant points to evidence and possible inferences therefrom which would support its claim that Fitch’s testimony should have been accepted by the trial court, we are bound by the rule that when “a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether there is any substantial evidence contradicted or uncontradicted which will support the finding of fact.” (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875 , 881 [ 92 Cal.Rptr. 162 , 479 P.2d 362 ]; Primm v. Primm (1956) 46 Cal.2d 690 , 693 [ 299 P.2d 231 ].) It certainly cannot be said here that there was no substantial evidence to support the trial court’s finding in plaintiff’s favor on this issue.

The same rule applies to defendant’s challenge to the trial court conclusion that plaintiff justifiably relied on Fitch’s representation. Whether reliance is justified is a question of fact for the determination of the trial court; the issue is whether the person who claims reliance was justified in believing the representation in the light of his own knowledge and experience. (Feckenscher v. Gamble (1938) 12 Cal.2d 482 , 496-497 [ 85 P.2d 885 ]; Winn v. McCulloch Corp. (1976) 60 Cal.App.3d 663 , 671 [ 131 Cal.Rptr. 597 ].) In the present case, although there was evidence that plain

Next, we consider the damages awarded by the trial court resulting from defendant’s misrepresentation. Plaintiff did not prove that defendant’s conduct resulted in lost profits, nor did he assert that he was entitled to damages because comparable property would have cost more than the parcel in issue. However, he did claim, and the trial court granted, $14,796 in “delay damages,” for the increased cost of construction of the buildings planned for the site during the six-month period between June 1978, when the misrepresentation was made by Fitch, and January 1979, when plaintiff learned that the sellers refused to sell the property.

We reverse the award of “delay damages” because plaintiff suffered no damages resulting from the delay. Plaintiff has so conceded on this appeal. He was entitled only to the “actual losses suffered because of the misrepresentation.” (Gagne v. Bertran (1954) 43 Cal.2d 481 , 490 [ 275 P.2d 15 ]; Civ. Code, § 3333.) His inability to begin construction on the property was not caused by Fitch’s misrepresentation, but by the sellers’ refusal to accept his offer of sale.

However, plaintiff is entitled to damages in the amounts he spent in anticipation of completing the purchase and for his own time in planning the business on the site. (See fn. 1, ante, p. 502.) Although defendant asserts that these expenditures were “imprudent” and that the county would not have approved of the establishment of a nursery business on the property, the trial court’s conclusion in plaintiff’s favor is binding on us. While conflicting inferences may be drawn from the testimony, there was substantial evidence to support the court’s determination that plaintiff had a reasonable expectation he would obtain the property and would receive permission to conduct his nursery business thereon.

We come, then, to the question whether the trial court was correct in awarding attorney fees to plaintiff. Under the American rule, as a general proposition each party must pay his own attorney fees. This concept is embodied in section 1021 of the Code of Civil Procedure,^[3] which provides that each party is to bear his own attorney fees unless a statute or the agreement of the parties provides otherwise.

The holding of Walters is not altogether clear. It can be interpreted to mean that attorney fees are recoverable for all torts under section 3333 of the Civil Code because it would always be true that the plaintiff would not have incurred attorney fees if the defendant had not committed a wrong against him. As so construed, the holding of Walters would render meaningless, in all tort actions, the provisions of section 1021 that each party is responsible for his attorney fees absent a statutory or contractual provision to the contrary. It would also be contrary to a consistent line of cases decided since 1872, when section 3333 of the Civil Code was enacted, which, with the exceptions noted above, deny attorney fees to the prevailing party in an action for tort. (See e.g., Howell v. Scoggins (1874) 48 Cal.355, 356-358; Bauguess v. Paine (1978) 22 Cal.3d 626 , 636-640 [ 150 Cal.Rptr. 461 , 586 P.2d 942 ].)

On the other hand, it is possible to interpret the language in Walters as holding that attorney fees are a proper element of damage in a tort action only when the defendant is a fiduciary who has acted fraudulently toward the plaintiff. However, we have found no cases which follow the Walters rationale as so construed.^[4]

Pederson v. Kennedy, supra, 128 Cal.App.3d 976 , is directly contrary to Walters. There, as in Walters and the present case, a real estate broker was found guilty of fraud. The trial court’s award of attorney fees to the plaintiff was reversed on the ground that section 1021 precluded the award.

The opinion in Walters expresses no rationale for creating an exception to the general American rule regarding the award of attorney fees. The exceptions discussed above were created to allocate the financial burden of litigation in an equitable manner, and the “common fund,” “substantial benefit” and “private attorney general” exceptions serve an important public policy objective by providing individuals with an incentive to initiate litigation which benefits a larger group. (Bauguess v. Paine, supra, 22

This court commented in Bauguess that we have “moved cautiously in expanding the nonstatutory bases on which awards of attorney’s fees may be predicated.” ( 22 Cal.3d 626 at p. 636.) We discern no justification for departing from the rule stated in section 1021, and decline to open a “ ‘Pandora’s Box’ of prolonged litigation” (Trails Trucking, Inc. v. Bendix-Westinghouse etc. Air Brake Co. (1973) 32 Cal.App.3d 519 , 524 [ 108 Cal.Rptr. 30 ]) by upholding the conclusion in Walters that a plaintiff is entitled to recover attorney fees as an element of damages in actions for fraud in which the defendant is a fiduciary. The portion of Walters so holding is therefore disapproved.^[5]

The next question is whether plaintiff is entitled to recover attorney fees on the basis of the “tort of another” exception to the general rule because he was required to protect his interest by bringing an action against the sellers as the result of Fitch’s wrongdoing. We can see no escape from the validity of plaintiff’s claim in this regard. If Fitch had not first falsely notified plaintiff that his offer had been accepted and several months later told him that the sellers declined to sell the property, plaintiff would not have incurred attorney fees in seeking to obtain the property in a suit for specific performance against the sellers. Thus, Fitch’s misrepresentation was the direct cause of plaintiff’s action for specific performance against the sellers.^[6]