GREEN TREES ENTERPRISES INC v. PALM SPRINGS ALPINE ESTATES INC

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District Court of Appeal, Second District, Division 2, California.

GREEN TREES ENTERPRISES, INC., a Nevada Corporation, Plaintiff, Respondent and Cross–Appellant, v. PALM SPRINGS ALPINE ESTATES, INC., Defendant, Appellant and Cross–Respondent.

Civ. 28534, 29260, 29575.

Decided: September 28, 1966

Musick, Peeler & Garrett, Richard D. Dear, Bruce E. Clark, Los Angeles, Carol O. Kowol, Montrose, for appellant. Gladys Towles Root, Los Angeles, and Eugene McPherson, Canoga Park, Norman E. Stolba, Los Angeles, for respondent.

Green Trees Enterprises, Inc., a buyer of a large tract of land, sued for damages allegedly caused by the misrepresentations of Palm Springs Alpine Estates, the seller.   Although Green Trees presented four causes of action, the trial court found for Alpine on three causes and awarded judgment for Green Trees on the remaining cause of action.   The judgment sliced the purchase price of a subdivision in half, granted an injunction against foreclosure of trust deeds on the subdivision and on undeveloped property, and awarded $100,000 punitive damages to Green Trees.   Alpine appeals from the adverse judgment and from various post-judgment orders extending the injunction against foreclosure.

The disputed property consists of a three parcel subdivision containing 750 one-acre lots and of 23,000 acres of undeveloped land.   The subdivision was sold for $825,000, comprised of $50,000 cash and a note for $775,000 secured by a first trust deed on the property.   The $50,000 was paid to Alpine but no payments have ever been made on the promissory note.   The judgment enjoined Alpine from foreclosing its trust deed.   The court found that Alpine had made fraudulent misrepresentations about the subdivision which had adversely affected its value, that the actual value of the subdivision was only half the amount which Green Trees had promised to pay.   The trial court therefore reduced the amount of the trust deed obligation, $775,000, by one-half the purchase price, $412,500, leaving an outstanding trust deed obligation of $362,500.

The undeveloped acreage was sold for $1,575,000, comprised of $50,000 cash, assumption of an existing first trust deed of $1,035,000, and a note for $490,000 secured by a second trust deed.   The trial court found that no misrepresentations affected the value of the undeveloped property and therefore made no adjustments in the purchase price of this property.   Although only the original $50,000 was paid on this property, and no payments have ever been made on the promissory note or on the first trust deed, the trial court enjoined foreclosure of the second trust deed.   Thus Green Trees has defaulted on all its promissory notes, and Alpine has been denied its foreclosure remedy by temporary and permanent injunctions.

 Since Alpine contends the evidence is insufficient to support the findings, it has the burden of setting forth in its brief all material evidence on each point and demonstrating that there is no substantial evidence to support the findings.  (Binning v. Binning, 210 Cal.App.2d 693, 694, 27 Cal.Rptr. 187 quoting Rosenthal v. Rosenthal, 197 Cal.App.2d 289, 294, 17 Cal.Rptr. 186;  Bongiovanni v. Racktow, 212 Cal.App.2d 550,. 28 Cal.Rptr. 155.)   Respondent Green Trees need only direct attention to evidence raising a factual conflict, for such conflict suffices to support a trial court's findings.   Both Alpine and Green Trees have, however, included numerous factual allegations unsupported by citation to the record.   These allegations remain unproved and we have disregarded them in considering the substantive issues.  (Gantner v. Gantner, 39 Cal.2d 272, 278, 246 P.2d 923;  Toth v. Crawford, 212 Cal.App.2d 827, 830, 28 Cal.Rptr. 343.)

 Alpine contends that the findings of misrepresentation and fraud are not supported by the evidence.   One set of misrepresentations concerns the physical development of the subdivision:  water, roads, and utility connections.   The trial court found Alpine represented “that [Alpine] had water wells and water rights adequate to support the Parcel I residential and multiple-residential and commercial subdivision which water wells and water rights would pass to [Green Trees] on payment of the full purchase price for said parcels.”   The representation was found to be false because “The water available within Parcel I was and is not sufficient to support the community plan as represented to [Green Trees] by [Alpine].”  Alpine apparently concedes the representations were made, but argues there is no evidence that they were false.   To support its argument, Alpine cites the testimony of its witness, a well driller, that there was sufficient water for residential development of the three parcels in the subdivision.   Alpine then cites the testimony of Green Trees' president to the effect that he had received and read the well driller's report before the close of escrow and had not conducted any independent tests of the water supply.   In response, Green Trees cites an advertising prospectus stating that Alpine Village has water “in adequate supply for the present development * * * there are 500 acre-feet of water available at Alpine Village, but that water-use requirements for the area—until 1975—would probably not exceed 62 acre feet, leaving a surplus of 438 acre feet.”   Green Trees also cites the testimony of its vice president who testified that Alpine's president had said not to worry about the water, there was plenty for the planned development and a water distribution company was being formed which would be transferred to Green Trees.   Neither party cites any testimony suggesting that the representations of Alpine about the water supply were false, and the finding is therefore unsupported by any evidence.

 On the issue of roads, the trial court found that Alpine represented “That all roads in Parcel I, would be completed by [Alpine] and in accordance with records of survey subdivision maps on file with the Recorder of the county of Riverside” when, in fact, “Roads in Parcel I were not all completed as of June 1, 1962.  * * * No date of completion of any of the roads in Parcel I was specified in the agreement between the parties or otherwise.”   First, Alpine cites the escrow instructions providing that Alpine was to complete roads in the subdivision and then cites testimony that the roads were to be completed shortly after the close of escrow, apparently from the $775,000 which Green Trees was to pay within a month after the closing.   Since the escrow instructions specifically state that Alpine is to complete the roads in the subdivision, there could have been no misrepresentation that the roads were completed.   Alpine argues, in addition, that its performance was excused because Green Trees failed to make any payments on the promissory notes.   This issue was not decided by the trial court but the evidence fails to support the findings that false representations were made concerning the roads.

 The trial court found that Alpine represented “That [Alpine] had arranged for supplying Parcel I, with utilities, as follows:  water, electric lights and power, natural gas and telephone service” but “Utilities have not been brought to Parcel I or II by [Alpine], nor have they contracted for them with utility companies.   Defendant Samuel Pierce Sparks [Alpine's president] * * * has had no intention of contracting with utility companies, to supply Parcel I or II with water or electric lights and power or natural gas.”   Alpine cites the testimony of Green Trees' engineer as follows:  Q. Did anyone connected with Green Trees tell you that Mr. Sparks or Palm Springs Alpine Estates, Inc. was going to put in electric power distribution, fire protection, water distribution systems, sewage disposal system or street lights?   A. No.”  Green Trees' president testified that Alpine represented only that they had done all the necessary preliminary work and all Green Trees had to do was go forward from the point Alpine was at the time title was transferred.   In response, Green Trees cites the testimony of its vice president that “As for the Water main, the gas and the telephone, he was on the process of working out [sic] and having apply [sic] to the State for those facilities.”   The testimony again fails to clearly establish false representation on the part of Alpine.

 The second group of misrepresentations concerns the legal status of the property:  zoning compliance, liens, and satisfaction of other County and State requirements.   The trial court found that Alpine represented “That the Parcel I property was zoned for single and multiple residential and commercial development” but ‘'the zoning for [residential and commercial use] has not been approved by the County of Riverside.”   Alpine cites testimony that interim zoning for residential and commercial purposes was approved during July 1960, and continued for the next two years.   Alpine's president testified he fully discussed the zoning problem with Green Trees on many occasions.   Green Trees does not direct us to any testimony to the contrary.   Since interim approval had been granted, there was apparently nothing false about the statements that the zoning had been taken care of up to the time of sale.   The evidence therefore fails to support the finding of misrepresentation.

 The trail court found that Alpine represented “That there were no liens or encumbrances upon Parcel I and II, save and except those which [Green Trees] expressly assumed in the escrow agreements.”   The representation was false because “There were trust deed liens manufactured by Defendant Samuel Pierce sparks, through Defendant corporation, and with Los Angeles Trust Deed Mortgage Company, bankrupt, on Parcel I, lots at the time of defendant's representations.   Most of said liens were cleared from Parcel I property prior to the consumation [sic] of sale and the balance were cleared thereafter.   There were numerous actions pending and imminent against defendants and the recordation of lis pendens upon Parcel I, was imminent at the time of consummation of said sale.   The escrow holder withheld recordation of the transfer of title to the property to Plaintiff so as to clear title prior to furnishing of title insurance, but upon the threat of new liens being recorded against the property, defendant Samuel Pierce Sparks caused the transfer of title to be hastily recorded.   Thereafter, title reports were issued concealing certain liens and said reports conflicted one with the other.   The escrow holder was the title company over which defendant Samuel Pierce Sparks held considerable influence.”   Green Trees cites no evidence in support of these findings and the record indicates that Green Trees was protected by its title policies as a bona fide purchaser for value.   The evidence fails to support the allegations of the findings.

 The trial court found that defendant represented “That all requirements and conditions of the County of Riverside and the State of California, for sale of Parcel I subdivision lots, had been satisfied for single and multiple residential and commercial development and sales.”   This was found to be false in that “The requirements for sale, to the public and to [Green Trees] for development of the property as residential and multiple residential and commercial use of the county of Riverside and State of California, had never been satisfied by [Alpine] in that there is insufficient water to support the community contemplated and as represented to [Green Trees] and the public, the roads have not been completed, there is no water distribution system, other utilities have not been supplied to the subdivision, and the zoning for such use has not been discussed individually and this finding adds nothing new to the previous findings.   It, like the others, is unsupported by the evidence.

 The trial court found that Alpine represented that the subdivided lots were a “going business” subdivision into which Green Trees could step without disturbing the continuity of profitable sales.   Alpine concedes the statement was made, but argues that it was true.   The trial court found “Defendants [Alpine] had not ‘going business' 'to sell to plaintiff [Green Trees] after commencement of the order to show cause directed against Defendants by the State of California on and after May 11, 1962.”   The show-cause order, issued during the escrow period, directed Alpine to show cause why it should not be prohibited from selling any more lots in the subdivision, but it did not automatically suspend sales activity.   The show-cause order contained numerous allegations of misrepresentations similar to those contained in Green Trees' complaint, but the cease-and desist order, issued after the transfer of the property to Green Trees, contained no finding that misrepresentations had been made.   Instead, it merely banned the sale of property because of manipulation of certain trust deeds on individual lots.   Alpine's president testified that he had notified Green Trees of the show-cause order and had discussed it with the negotiator for Green Trees three days after the order was issued and ten days before the final amended escrow instructions were filed.   Green Trees three days after the order was issued and ten days before the final amended escrow instructions were filed.   Green Trees, in support of the finding that the show-cause order, the cease-and-desist order, and the real estate commissioner's decision.   But since the show-cause order, the cease-and-desist order, and the real estate commissioner's decision.   But since the show-cause order, and the real estate commissioner's decision.   But since the show-cause order was the only order issued before the close of escrow, and since the evidence established that Green Trees completed escrow with full knowledge of the order, it is apparent that Green Trees anticipated that Alpine's transgressions and the possible deficiencies in the subdivision could be cured by the improvements it proposed to construct on the property.   Since none of the various orders were directed at Green Trees or its officers, it does not appear how the business of Green Trees was destroyed by the orders or how Green Trees became the victim of misrepresentations in this respect.   The allegations of misrepresentations in the show-cause order remained unproved, and the order itself only had legal effect as a notice of hearing.   The evidence is insufficient to support a finding that Alpine had no business to sell after issuance of the show-cause order.

 In summary, the testimony does not support the trial court's findings.   Alpine has met its burden on appeal by presenting evidence of witnesses from both sides on each alleged misrepresentation.   Green Trees has failed, in turn, to controvert Alpine's citation of evidence by pointing to other evidence which would create a factual conflict.   Deficiencies in proof cannot be remedied by unfounded and unsupported allegations in the briefs.   The record thus appears totally inadequate to support a judgment in a suit involving property valued at millions of dollars.

 Since there is no substantial evidence of misrepresentation to support the judgment, we find it unnecessary to consider Alpine's contention that the award of damages was erroneous or its contention that there was no evidence to support a finding that the value of the property was diminished by misrepresentations.   It should be noted, however, that the total purchase price for the subdivision and acreage was $2,400,000.   Alpine directs attention to appraisals and other evidence indicating that Green Trees' appraisers valued the property at a wholesale market value, undeveloped and without improvements, at $49,000,000, six months after Green Trees brought the property.   Additionally, Green Trees carried the property on its books at a wholesale value of $49,000,000, and in June 1963, one year after it had bought the property, it attempted to sell the undeveloped acreage for $3,500,000.   In August 1963, Green Trees made a similar attempt to sell 20,000 acres of the tract for $5,000,000.   Such evidence contradicts the trial court's conclusion that the value of the subdivision to Green Trees had been adversely affected by Alpine's misrepresentation.

It is also unnecessary to consider Alpine's contention that since there were not actual damages there can be no punitive damages.   The award of punitive damages first appears in a minute order of February 18, 1964, subsequent to the findings, and no explanation for it appears in the findings or judgment.

Subsequent appeals in this case were directed against the trial court's orders extending the injunctions against foreclosure on the trust deeds for successive ninety-day periods.   We find it unnecessary to consider the issue, for the injunctions fall with the reversal of the judgment.

 Green Trees apparently filed a notice of appeal from the judgment.   Since Green Trees did not file its notice of appeal in a timely manner and did not perfect the necessary record, its appeal is hereby dismissed.

Since the case was exhaustively tried below and the facts were fully developed, the judgment in Civil No. 29575 is reversed with directions to the trial court to enter findings of fact in accordance with this opinion and a judgment in favor of Palm Springs Alpine Estates.  (5 Am.Jur.2d Appeal & Error, § 972;  5B C.J.S. Appeal and Error §§ 1924, 1925, 1927.)   The orders appealed from in Civil Nos. 29260 and 28534, are reversed, and the trial court is directed to dissolve all injunctions, preliminary and final, restraining foreclosure on the trust deeds.

FLEMING, Justice.

ROTH, P.J., and HERNDON, J., concur.

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