48 Cal.App.5th 280
Cal. Ct. App.2020Background
- Moore bought a $4.8M fixer-upper on Teed’s recommendation after Teed held himself out as an experienced contractor capable of delivering a high-end renovation for $900,000.
- Teed recommended architect Gregg De Meza; bids exceeded the $900k target, and Teed promised to bring costs down and managed the project orally (no written contract with Teed).
- Teed’s team built a defective, unwaterproofed foundation; Moore later demolished and replaced it at substantial expense and completed promised renovations at far higher cost.
- Moore sued for fraud, negligent misrepresentation, breach of fiduciary duty, and related claims; the jury awarded benefit-of-the-bargain damages ($900,000), out-of-pocket foundation replacement ($822,904), delay damages, and found a §7160 violation entitling Moore to statutory attorney fees.
- Trial court offset settlement amounts, awarded Moore attorney fees and costs under Business & Professions Code §7160; Teed appealed challenging availability/speculativeness/duplication of benefit-of-the-bargain damages and the fee award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether benefit-of-the-bargain damages are available for fraud by a fiduciary in a real property transaction | Moore: fiduciary fraud permits a broader damage measure under Civ. Code §§1709 & 3333, including benefit-of-the-bargain | Teed: property-fraud cases are limited to out-of-pocket damages; benefit-of-the-bargain is inappropriate here | Court: Affirmed benefit-of-the-bargain may be awarded for fiduciary intentional fraud in real estate to fully compensate proximate loss |
| Whether the benefit-of-the-bargain award was speculative or unsupported | Moore: expert tied a specific promised scope to 2011–12 cost estimates; damages reasonably certain | Teed: promised project was vague/never built; expert reconstruction speculative | Court: Evidence (conversations, plans, expert testimony) rendered damages sufficiently certain; not speculative |
| Whether the benefit-of-the-bargain award duplicated out-of-pocket foundation damages | Moore: jury separated items; no special verdict requested by Teed to show duplication | Teed: award double-counted foundation replacement | Court: Defendant forfeited challenge by not requesting a special verdict segregating components; no clear duplication shown |
| Whether §7160 statutory attorney fees could be awarded against Teed despite no written contract and an instruction omission of the word "solicitor" | Moore: §7160 covers one who induces another to contract (including soliciting contracts with others); Teed acted as a contractor under §7026 | Teed: jury’s finding against contract plus instruction omission made the §7160 finding inconsistent and inapplicable | Court: §7160 interpreted broadly; jury could find Teed a "contractor" (he offered/ purported to undertake work by/through others); fee award affirmed |
Key Cases Cited
- Alliance Mortgage Co. v. Rothwell, 10 Cal.4th 1226 (recognizes broader damages for fiduciary fraud under Civ. Code §§1709 and 3333)
- Lazar v. Superior Court, 12 Cal.4th 631 (fraud plaintiffs may recover out-of-pocket and, in some contexts, benefit-of-the-bargain damages)
- Simon v. San Paolo U.S. Holding Co., Inc., 35 Cal.4th 1159 (limits certain remedial theories for fraud but does not address fiduciary fraud damages scope)
- Salahutdin v. Valley of California, Inc., 24 Cal.App.4th 555 (affirms benefit-of-the-bargain damages against fiduciary in real estate fraud)
- Fragale v. Faulkner, 110 Cal.App.4th 229 (supports benefit-of-the-bargain for intentional fiduciary fraud under §§1709 and 3333)
- Pepitone v. Russo, 64 Cal.App.3d 685 (fiduciary must make good full amount of loss caused by breach of faith)
- Tavaglione v. Billings, 4 Cal.4th 1150 (duplicative recovery is prohibited; defendant must seek segregated verdict to preserve challenge)