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Court of Appeal, Second District, Division 7, California.

Carl ROOKHUIZEN, Plaintiff and Respondent, v. WILSHIRE RECONVEYANCE, INC., and Aames Home Loan Company, Defendants and Appellants.


Decided: April 08, 1987

Horvitz, Levy & Amerian and Barry R. Levy and George P. Schiavelli, Encino, for defendants and appellants. Hurley, Grassini & Wrinkle and Roland Wrinkle, North Hollywood, for plaintiff and respondent.

Defendants, Wilshire Reconveyance, Inc., and Aames Home Loan Company, hereafter (Aames) appeal from a judgment after jury trial awarding Mr. Rookhuizen $200,000 in compensatory damages and $2,350,000 in punitive damages.   We affirm the judgment against Aames but reverse the judgment against Wilshire Reconveyance.


Carl Rookhuizen, a retired handyman and widower, lived in a house in North Hollywood and had owned it outright for many years.   He never encumbered the property and there were never any liens or loans against it.   In fact, Mr. Rookhuizen took pride in the fact that, during his 83 years, he had never borrowed money and had always paid cash.   In November 1981, Mr. Rookhuizen went to Montana to stay with his brother while recuperating from illness, leaving the house in the care of a neighbor.

In December 1982, a man claiming to be Carl Rookhuizen went to an office of Aames Home Loan and applied for a loan secured by the North Hollywood property.   The phony Carl Rookhuizen filled out a loan application and financial statement listing the real Mr. Rookhuizen's Social Security number but no other true information about him.   After receiving a title report and appraisal, Aames gave the phony Carl Rookhuizen $50,000 secured by the real Carl Rookhuizen's home.   Aames gave the phony borrower the money without seeing any identification or evidence of title, without verifying employment, bank accounts, assets, residence address or telephone number.   Because he had no identification with him Aames allowed the phony Carl Rookhuizen to take the loan documents elsewhere to have his signature notarized.

Naturally, no loan payments were ever made and soon Aames commenced foreclosure proceedings.   When the real Carl Rookhuizen learned of the foreclosure from a neighbor he telephoned Aames from Montana to tell Aames he had nothing to do with the loan.   Aames told Mr. Rookhuizen to go hire a lawyer.   As we detail later in this opinion, even after Mr. Rookhuizen retained counsel and presented documents and witnesses to prove the loan documents were forgeries, Aames refused to cancel the foreclosure proceedings.   Instead, Aames granted a series of postponements, each one a few days before the scheduled foreclosure sale.   Aames brought Mr. Rookhuizen to the brink of losing his home on three occasions only to grant a last minute stay of execution, all the while knowing Mr. Rookhuizen was totally innocent and the loan documents were forgeries.

Eventually Mr. Rookhuizen's attorneys were able to obtain an injunction against the foreclosure sale and his title was reconveyed to him.   This action for damages proceeded.


 The issues on appeal are whether there was sufficient evidence of oppression or malice to justify punitive damages and, if so, whether the amount of punitive damages is supported by the evidence.1


 Exemplary damages may be awarded against a defendant guilty of oppression or malice.  (Civ.Code, § 3294, subd. (a).)  Malice is defined, in part, as “conduct which is carried on by the defendant with a conscious disregard of the rights or safety of others” and oppression is defined as “subjecting a person to cruel and unjust hardship in conscious disregard of that person's rights.”  (Id.;  subd. (c)(1), 2.)

We believe the jury was justified in awarding punitive damages based on the evidence.   After Aames knew the trust deeds were forgeries, it persisted in foreclosure proceedings against Mr. Rookhuizen's home.   Aames' action cannot be justified as reasonably necessary to protect the lenders.   On August 26, 1983, Aames wrote to the title insurance company demanding payment on behalf of the lenders and enclosing copies of letters from Rookhuizen's attorneys and Rookhuizen's affidavit establishing a forgery had occurred.   An Aames official testified that as of August 26, 1983, he knew the loan documents were forgeries.   Despite this knowledge, Aames persisted with the foreclosure.   It scheduled a foreclosure sale for September 8, 1983.   Two days before the sale Aames postponed the foreclosure to November 10, 1983.   Again, Aames waited until two days before the sale then, on November 8, postponed it to December 8.   That sale too was postponed and after a contested hearing a temporary restraining order was awarded against Aames on December 22, 1983.   Aames refused to stipulate to the restraining order or cancel the foreclosure unless Mr. Rookhuizen dismissed his claim for damages against Aames.

It is abundantly clear from the record if Mr. Rookhuizen, 83 years old, sick and totally blameless, had not retained counsel to vigorously pursue his interests, Aames would have proceeded to take his home away from him under color of loan documents it knew to be forgeries.   It is hard to imagine more heartless, callous behavior than Aames figuratively holding a gun to this elderly gentleman's head for five months threatening to pull the trigger any time it felt like it.

It is this conduct, refusal to cancel the foreclosure, not failure to reconvey the property, which constituted the intentional infliction of emotional distress and justified punitive damages.   Therefore, the trial court correctly excluded evidence the lenders were responsible for any delay in reconveyance.

We conclude the jury could reasonably find from the evidence Aames acted in conscious disregard of Mr. Rookhuizen's rights and subjected him to cruel and unjust hardship in continuing to pursue foreclosure after knowing and acknowledging Mr. Rookhuizen had not mortgaged his home and the trust deed was a forgery.   When a creditor continues to pursue collection efforts after it knows it has no legal basis for its claim, punitive damages are well justified.  (Cf. Young v. Bank of America (1983) 141 Cal.App.3d 108, 190 Cal.Rptr. 122.)

 On the other hand, the facts do not support a judgment against Wilshire Reconveyance, the trustee.   A trustee under a deed of trust must comply with the terms of the trust instrument.   It has no duty to evaluate or resolve questions concerning the status of the debt or the rights of the parties.  (Carpenter v. Title Ins. & Trust Co. (1945) 71 Cal.App.2d 593, 597, 163 P.2d 73;  Fleisher v. Continental Auxiliary Co. (1963) 215 Cal.App.2d 136, 139, 30 Cal.Rptr. 137.)   In the case before us, Wilshire was authorized to reconvey the property only upon written request of the lenders.   Any attempt to do otherwise would have been void.   The outrageous conduct of Aames, the loan servicing agent, is not attributable to the trustee.   Mr. Rookhuizen's brief on appeal does not dispute this conclusion.   Therefore, we will reverse the judgment as to Wilshire Reconveyance.


Aames argues the jury based the amount of punitive damages on improper speculation about Aames' financial condition.   We disagree.

It is well settled an award of punitive damages need not be based on evidence of the defendant's wealth.  (Vossler v. Richards Manufacturing Co. (1983) 143 Cal.App.3d 952, 961–965, 192 Cal.Rptr. 219) and “[t]he burden of proof is on the wrongdoer to demonstrate ․ a particular award of punitive damages is too great a penalty because of his limited financial condition.”  (Greenfield v. Spectrum Investment Corp. (1985) 174 Cal.App.3d 111, 124, 219 Cal.Rptr. 805.)

Aames' loan adjustment manager testified that in 1983 he worked on approximately 15 to 16 percent of Aames' loans.   That percentage was higher than usual “because of the impact of the recession, severe impact.”   He testified at one time he was “working on as many as 800 [loans]” and he worked on “probably somewhere in the range of 6,500 loans in a year.”   The evidence showed Aames charged a $9,000 commission on the $50,000 loan in this case.

In his closing argument plaintiff's counsel emphasized to the jurors that punitive damages have to hurt to be effective and that the jury should base its award on Aames making between $40 and $72 million a year in commissions.   This estimate was based on an extrapolation from the figures supplied by Aames' loan adjustment officer.   On appeal, Aames contends plaintiff's attorney made a fundamental error in his argument.   His calculations treated the loan officer's testimony about the volume of loans he worked on as if all those loans were issued in a single year rather than being an inventory of loans issued over several years.

At plaintiff's request but without objection from Aames, the trial court instructed the jury, “In arriving at any award of punitive damages, you are to consider․ [t]he amount of punitive damages which will have a deterrent effect on the defendant in the light of defendant's financial condition․”   Aames contends this jury instruction and the argument invited the jury to speculate about Aames' capacity to generate income and were highly prejudicial.

Plaintiff responds the figures argued to the jury were reasonable inferences from the loan officer's testimony and, in any event, Aames was not prejudiced.   Plaintiff points out the jury has broad discretion in awarding punitive damages;  Aames chose not to introduce evidence of its financial situation; and, the amount awarded is reasonable in light of Aames' conduct and in comparison to the amount of compensatory damages.   Aames does not dispute these latter points.

 Counsel for both sides are allowed a great deal of leeway in their closing statements, especially in arguing inferences from the evidence.  (See, City of Los Angeles v. Decker (1977) 18 Cal.3d 860, 871, 135 Cal.Rptr. 647, 558 P.2d 545.)   This is not a case in which no evidence had been introduced on the subject argued to the jury.  (Cf. Love v. Wolf (1964) 226 Cal.App.2d 378, 387–388, 38 Cal.Rptr. 183.)   At worst, plaintiff's lawyer extrapolated too much from evidence which was in the record.  “There is no rule of law which requires attorneys to be absolutely logical in their arguments.”  (Miller v. Pacific Constructors, Inc. (1945) 68 Cal.App.2d 529, 551, 157 P.2d 57.)   Ordinarily the cure for a lawyer's erroneous reasoning during oral argument is argument from the other side pointing out the flaws in his logic.   But Aames lawyer chose not to do so.   Aames' counsel did not request the jury be admonished plaintiff's projections misconstrued the evidence.   Nor did he point out in his own summation that plaintiff's argument regarding Aames' financial condition was fatally flawed, although the court invited him to do so.2  Furthermore, Aames' counsel made no attempt to explain to the jury how he thought the evidence regarding Aames' loans should be interpreted.

The record shows the jury was instructed it must not consider as evidence any statement of counsel made during the trial.  (BAJI No. 1.02 (1977 rev.))   It does not show Aames objected to the jury instruction allowing consideration of its financial condition which it now challenges on appeal.   If Aames intended to preserve its contention no evidence supported plaintiff's jury argument about its financial condition—or that plaintiff had based his calculations on an erroneous interpretation of the available evidence—Aames should have objected strenuously to this instruction.   A litigant cannot lie in wait, after allowing an issue to go to the jury without objection and without having done anything to correct any misimpression the jury may have gained from errors in the logic of plaintiff's closing argument, and then expect the appellate court to reverse.   The problem, if any, was curable earlier and by means less wasteful of judicial time and resources than a reversal and retrial of the punitive damages issue.


The judgment against Wilshire Reconveyance, Inc. is reversed.   The judgment against Aames Home Loan Co. is affirmed.   Plaintiff Rookhuizen shall recover his costs on appeal from defendant Aames Home Loan Co.   Defendant Wilshire Reconveyance, Inc. shall recover its costs on appeal from plaintiff Rookhuizen.


1.   Aames also argues the trial court erred in finding Rookhuizen's settlement with the actual lenders was in good faith.   This issue is not properly before us.   A good faith determination is not appealable.  (Code Civ.Proc., § 904.1.)   Challenge to a determination of good faith settlement is by petition for writ of mandate.  (Code Civ.Proc., § 877.6, subd. (e).)  Aames has already pursued this remedy.

2.   On appeal, Aames seeks to justify this failure on grounds it would have had to introduce further “improper” argument and insert “additional error” into the proceedings.   But it would not require “improper” argument or additional evidence of any kind to contradict plaintiff's interpretation of the evidence which already was in the record and to challenge the inferences he drew from that evidence.

JOHNSON, Associate Justice.

LILLIE, P.J., and THOMPSON, J., concur.