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Frank PEPPER and Helen Pepper, Plaintiffs and Respondents, v. Albert S. UNDERWOOD et al., Defendants and Appellants.
Frank and Helen Pepper (Pepper)1 were the purchasers of a motel which was sold to them by Albert and Kathleen Underwood (Underwood)1 and Ronnie and Conchita Combs (Combs).1 Pepper filed a complaint for damages joining the Underwoods and Combs and the realtors in the transaction—Silvio Di Loreto (Di Loreto), doing business as Sunset Company Realtors, Jack Woolsey (Woolsey) and James Dolan (Dolan). The first cause of action alleged actual fraud and the second cause of action alleged negligent misrepresentations. The third cause of action was against the realtors Di Loreto, Woolsey and Dolan, only, for constructive fraud. A jury trial resulted in a judgment in favor of Pepper in the sum of $51,205.37 for general damages, plus costs against all of the defendants. All of the defendants appeal from the judgment entered on the verdicts.2
Appellants Di Loreto, Woolsey and Dolan, as defendants, contend on appeal that:
I The court committed reversible error in instructing the jury on the burden of proof.
II The court committed reversible error in admitting into evidence the Code of Ethics of the National Association of Real Estate Boards.3
Appellants Underwood and Combs, as defendants, contend on appeal that:
I There is insufficient evidence to support a finding of either fraud or negligent misrepresentation.
II The court committed reversible error by denying Underwood's and Combs' motion for nonsuit.
III The court committed reversible error by giving misleading and confusing jury instructions.
IV The failure to instruct on the proper measure of damages constitutes reversible error.
V The court improperly denied the motion for judgment notwithstanding the verdict.
Frank Pepper had been a maintenance supervisor for a large motel in San Mateo. Pepper's only other real estate experience had been the purchase of a home and a lot. Pepper had in his mind the idea to move his family to Santa Barbara and buy a house and a business.
In January of 1971, on a visit to Santa Barbara, Pepper dropped into one of the offices of Di Loreto, doing business as Sunset Realty Company, having seen its ads in the local newspaper. There Pepper met Woolsey, a real estate salesman, and Dolan, a real estate broker. Noting Pepper's background, Woolsey informed Pepper that Dolan specialized in motels. Dolan indicated to Pepper that an effort would be made to ascertain if there were suitable motels available for purchase in the Santa Barbara area.
Underwood and Combs were the owners of the Tropicana Manor Motel. It was purchased in January, 1969, and was a family operation. Ronnie Combs was the son, and Conchita Combs was the daughter-in-law of Kathleen Underwood, and Albert Underwood was Ronnie Combs' stepfather. When contacted in March, 1971, Ronnie Combs advised Dolan that the motel was for sale and granted permission to show it.
In mid-March, 1971, Pepper traveled alone from San Mateo to Santa Barbara to look ant the Tropicana Manor Motel. Since Dolan had indicated they would be talking about figures and different things regarding the motel, Kathleen Underwood contacted the individual who prepared the motel's income tax, Mr. Brewer of H. &R. Block, and requested him to prepare a summary of income tax information.
Dolan requested Ronnie Combs to provide him with financial statements to show the performance of the motel to be used as a ‘guideline’ in determining its potential profitability for Pepper. Dolan gave Combs a few days to prepare the statements. Combs made an abstract of the operating expenses for 1970 from the checkbook. These documents were admitted at trial. Combs, who authored these documents, dropped out of school in the ninth grade and his only prior work experience was that of a liquor store clerk and a truck driver.
A comparison of the statements made by Combs and the 1970 tax returns, subsequently supplied, contained discrepancies between the two. The expenses as shown by Combs were more than $12,000 less than as stated on the tax returns. Combs stated the gross income to be more than $2,000 greater than as shown in the tax return. Thus the statements by Combs showed a net income of $24,529, while the income tax return showed net income from operations of $10,275. Only $2,500 of the difference was sought to be explained, the rest of the difference was left unexplained.
Pepper returned to Santa Barbara the next weekend and again inspected the motel. Following this second inspection, Pepper returned to the realtor's office where he was given a copy of the income and expense statement prepared by Combs. Pepper indicated at that time that he would be interested in purchasing the motel, if the realtor could arrange the terms of financing. Pepper used the Combs financial statements as his ‘bible.’
Pepper was later informed by Woolsey that the financing had been worked out. Pepper then executed a letter of intent to purchase the motel, quit his job, sold his house, and moved to Santa Barbara. Also on April 2, 1971, Woolsey accepted the summary of income tax which had been prepared by Brewer of H. & R. Block from Kathleen Underwood, and said that would suffice until the actual income tax returns were needed. Also on this date, Pepper met with Di Loreto who reviewed the statement by Combs and increased some of the expenses as a means of making sure that Pepper had a cushion. Di Loreto thought the expenses shown by Combs were obviously low.
On approximately April 8, 1971, the Peppers moved into a room at the motel. Subsequently, Pepper met with the prior owners and Di Loreto. The prior owners felt the expenses were small compared to what they spent when they operated the motel. Di Loreto adjusted the expenses which Pepper would have and the increased financing, and said that at least $12,000 would be the net income figure, and that this was a good investment. Although Pepper was at the meeting he stated to Di Loreto that he did not understand figures and was relying on him. Di Loreto denied this, but Mrs. Tillion, one of the prior owners confirmed that Pepper called them his agents in their presence.
Three or four days before the escrow was to close, Woolsey obtained a copy of the 1970 tax returns and met with Pepper at the motel. Di Loreto was out of the country but had agreed that someone would review the returns together with Pepper so they could give Pepper assurances as to profitability. Woolsey, who had an economics background made who analysis, and twice left for a time to discuss the returns with the sellers who were still managing the motel.
Woolsey told Pepper that the tax returns were in accordance with the financial statements and were all right. Woolsey admitted at trial that he did not discover the $12,000 discrepancy. He also admitted that he did not deduct the additional mortgage payments that Pepper would have to pay from the net income as shown by the tax return. Had this analysis been done, a net income of $3,700 rather than the $12,000 as calculated by Di Loreto would have been discovered.
The transaction closed April 30, 1971, and the Peppers took possession on May 1, 1971. Subsequent to taking possession Pepper began construction projects in the front of the motel, he neglected the landscaping, the tourist trade was lower, and the Peppers fell behind in their payments. The holders of various secured interests took action to foreclose, and Pepper relinquished the motel to Mrs. Tillion and Mrs. Downie on October 15, 1971.
We have concluded that reversal of this case is required because the jury was erroneously instructed on several aspects of the law. We will commence with the most simple and obvious error although chronologically it would be one of the last areas to be considered—damages. The only instruction which the court gave on the issue of damages was as follows:
‘In the event that you find any one or more of the defendants liable for fraud, that is, intentional misrepresentation, negligent misrepresentation, or violation of a fiduciary duty in this action, then the plaintiffs, Mr. and Mrs. Pepper, are entitled to an award of damages equal to the sum of the following: all amounts of the money they actually and reasonably expended in reliance upon the fraud; an amount which will compensate them for any loss of profits which were reasonably anticipated and would have been earned from the motel, had it been as profitable as represented by defendants.
‘In determining the amounts of loss of profits to be awarded, you may make the award for that period of time in the future which you determine may reasonably have been anticipated under all the facts and circumstances involved. Interest at the rate of 7 percent per annum on all amounts expended in reliance on the fraud from the date they were expended through the present, if you determine to award such interest as reasonable.'4 Although other instructions used the word ‘loss' and repeatedly used the word ‘damage'5 the jury was not given any other instruction on the measure of damages or on the meaning of the word ‘loss' or the meaning of the word ‘damage.’ Underwood and Combs requested an instruction on damages (set forth in the margin) which was refused.6
At the time this case was tried the book of approved jury instructions did not include instructions for use in actions for damages for fraud and deceit. Such instructions are now available. For purposes of comparison only, we set forth BAJI No. 12.567 an approved instruction defining damages under the commonly called ‘out of pocket’ rule in an action for fraud and deceit. The requested and rejected instruction obviously constituted a substantially accurate statement on the measure of damages under the ‘out of pocket’ rule in actions of fraud and deceit. It seems obvious that by the aforesaid instruction which the Peppers requested and the court gave, the Peppers were requesting the court to instruct the jury on the law of damages under the commonly called ‘benefit of the bargain’ rule. The correct benefit of the bargain rule is set forth in BAJI 12.57.8 It is manifest that the aforesaid instruction which the Peppers requested and the court gave is not even an accurate statement of the ‘benefit of the bargain’ rule. The Peppers' instruction would allow them to recover the down payment as monies ‘expended in reliance on the fraud'9 even though the value of the motel exceeded the purchase price. From a layman's point of view the down payment would represent money lost on the deal in view of the subsequent foreclosure, but was in no way related to the alleged fraud. The note to BAJI 12.57 indicates that the ‘benefit of bargain’ rule only applies in real estate transactions where the party guilty of the fraud stands in a fiduciary relationship to the defrauded party (Walsh v. Hooker & Fay, 212 Cal.App.2d 450, 28 Cal.Rptr. 16; Simone v. McKee, 142 Cal.App.2d 307, 298 P.2d 667). The ‘benefit of the bargain’ rule therefore would not have applied to the Underwoods and Combs in any event since they had no fiduciary relationship to the Peppers.
Even if the instruction which Underwoods and Combs requested and the court rejected was inaccurate, it was the duty of the court to instruct the jury correctly on the measure of damages (Lysick v. Walcom, 258 Cal.App.2d 136, 157, 158, 65 Cal.Rptr. 406; Trejo v. Maciel, 239 Cal.App.2d 487, 498, 48 Cal.Rptr. 765; Thomas v. Buttress & McClellan, Inc., 141 Cal.App.2d 812, 819, 297 P.2d 768), and if necessary request counsel to prepare an accurate, or more accurate instruction for that purpose.
We conclude that the court committed error in giving the jury the instruction which was given on the measure of damages and in failing to instruct the jury on the correct measure of damages.
Pepper argues that if there was a failure to correctly instruct on damages, such failure was not prejudicial because the verdict was obviously correct. Pepper argues:
‘Finally, the amount of the verdict is itself proof that no prejudice occurred in any event. The award was $51,205.37. At trial the evidence showed that Respondents invested $39,205.37 in cash in the business. There was repeated testimony that Appellant-Realtors had represented that there was at least $12,000 net spendable available to Mr. Pepper. Those two figures added together exactly total the amount of the verdict. Clearly such a verdict is reasonable, and the components are authorized by law. Civil Code Sections 3343, 3288. Moreover, Respondent's testimony was that he gave up his prior employment where he was earning in excess of $12,000 a year serves as an alternative basis for the amount of damages awarded by the jury.’
A reference to BAJI No. 12.56 and the authorities on which it is based clearly demonstrates that the argument of Peppers is unsound because the amount of the verdict does not represent an accurate measure of damages in an action for fraud and deceit. The cash down payment of $39,205.37, plus the loss of $12,000 net spendable [for one year] does not represent the difference between the actual value of that with which Peppers parted and the actual value of that which they received. The total price of the motel was apparently $489,000. If at the time of performance the property had a market value of $500,000, obviously no damage would have been sustained notwithstanding the subsequent loss of the property on foreclosure and the consequent loss of the down payment and the first year's net income. We have been unable to find any evidence in the record regarding the market value of the property at the time of purchase except the testimony of plaintiffs' expert Cargill that the ‘net spendable income’ was $3,765. Normally common sense would suggest that a piece of real property which produced a net spendable annual income of only $3,765 was probably not worth $489,000. However, a motel may not have been the highest and best use for the property and conceivably the property might have been sold immediately for $1,000,000 for use as a high rise office building. Neither we nor the jury should have been left to speculate on such a subject—evidence should have been produced and the jury correctly instructed on the issue of damages. We note that Pepper does not claim that this is an action for rescission (to recover back what was paid) presumably for the obvious reason that Pepper is no longer in a position to tender back the property which was lost on foreclosure. If tender was not required for any reason, it still could not be treated as an action for rescission because the jury's verdict, as Pepper notes, was for the down payment ($39,205.37), plus the loss of expected net income for one year ($12,000). Pepper obviously did not contribute the $12,000, and therefore had no right to receive it back on a theory of rescission.
It was the duty of the court to instruct on all material issues. (Herbert v. Lankershim, 9 Cal.2d 409, 482, 71 P.2d 220; and Jaeger v. Chapman, 95 Cal.App.2d 520, 525, 213 P.2d 404.) The court's failure to correctly instruct on damages and its refusal of the requested instruction on damages left the jury with an inaccurate yardstick. We cannot as a matter of law treat amount of the down payment plus loss one year's expected net income as the equivalent of the difference between the market value of the property and the contract price. It may or may not be. The record provides no answer. It is not true that the error was not prejudicial. Reversal is therefore required on this issue alone.
For the assistance of court and counsel on retrial we will discuss further issues raised on appeal. Di Loreto, Woolsey and Dolan contend that the court usurped the fact finding function of the jury by instructing it that Di Loreto was the broker for Pepper10 notwithstanding the fact that there was evidence from which the jury could conclude that Di Loreto was also the agent of Underwood.11 Admittedly, the great bulk of the evidence demonstrated that Di Loreto (and his employees) were agents for Pepper. Pepper argues;
‘From these uncontradicted facts, it cannot be disputed that the Appellant-Realtors were acting as agents for Peppers, and thus became bound to fulfill the fiduciary obligations set forth in the instructions. Even if there was some basis in the evidence for finding that the Realtors were also the joint or mutual agents for the Sellers, that would not eliminate their fiduciary obligations to the Peppers.’
This may be true but it makes a substantial difference to Di Loreto and Underwood whether Di Loreto was also the agent of Underwood.
It might not make any difference to Pepper whether or not Di Loreto and his employees were also agents for Underwood and Combs, but it would make a great deal of difference to Di Loreto (and his employees) since their financial exposure might be reduced. Also it would certainly make a great deal of difference to Underwood and Combs since if agency existed Underwood and Combs might be held liable jointly and severally with Di Loreto and his employees when otherwise they might not be held liable at all. In our view the question of whether Di Loreto and his employees represented Pepper or Underwood and Combs, or both, was an issue of fact to be determined by the jury after appropriate instructions on the law regarding agency. It is true as argued by Pepper that upon proof that Di Loreto was agent for Pepper the burden of proof would shift to Di Loreto to prove that he was not guilty of a breach of fiduciary duty as an agent for Pepper (Timmsen v. Forest E. Olson, Inc., 6 Cal.App.3d 860, 871, 86 Cal.Rptr. 359; Schwarting v. Artel, 40 Cal.App.2d 433, 441, 105 P.2d 380). The fact that such principle is true did not relieve the court of the duty of instructing the jury on the law of agency so that it could find precisely what agency existed where there was a factual basis from which the jury might have concluded that Di Loreto (and his employees) were not only agents of Pepper, but were also agents of Underwood and Combs.
Underwood and Combs argue that the court committed reversible error in denying their motion for a nonsuit. Underwood and Combs argue that by supplying the 1970 tax returns to Sunset Realty Company (the accuracy of which apparently are not questioned) they were thereby relieved of liability as a matter of law. We do not agree. The argument disregards the fact that an issue nevertheless remained on the matter of ‘justifiable reliance’—an issue on which the jury was not fully instructed.12 Although the court in defining the issues stated in a somewhat oblique manner that the plaintiff was required to prove that he ‘reasonably relied’ on the false representations,13 nowhere did the court define the circumstances which would have to be proven before plaintiff would be justified in relying on the alleged false representations. Likewise, although the court instructed the jury that plaintiffs were not required to make an independent investigation, nowhere did the court instruct on what the legal consequence of an independent investigation would be when evidence had been introduced from which the jury could have concluded that the defrauded party had made an independent investigation. The instruction given dealt with only one side of the coin. In our view justifiable reliance was an issue on which the jury should have been, but was not, correctly instructed on the law.
The motion of Underwood and Combs for a nonsuit and their subsequent motion for judgment notwithstanding the verdict were properly denied. Such motions were properly denied because the issue of agency (whether or not Di Loreto and his employees were agents of both buyers and sellers) and the issue of justifiable reliance were issues of fact for the jury to determine under appropriate instructions.
As a further aid to court and counsel in the retrial of this case, we express our view that upon proper proof that the Canons of Ethics adopted by the National Association of Real Estate Agents, established standards of conduct to be adhered to and which were adhered to by real estate brokers and agents in the Santa Barbara area, such canons would be admissible as rebuttable evidence of such standard of care. (Grudt v. City of Los Angeles, 2 Cal.3d 575, 588, 86 Cal.Rptr. 465, 468 P.2d 825; Salgo v. Leland Stanford Etc. Bd. Trustees, 154 Cal.App.2d 560, 576–577, 317 P.2d 170; Witkin, California Evidence (2d ed. 1966) § 358, p. 317, and § 420, p. 380; 35 Cal.Jur.2d Negligence, § 190, p. 710.) The mere fact that such code of ethics referred to matters not material to the issues in the case, such as patriotism, and others, would not require exclusion of those portions of the Canons of Ethics relating to standards of care which are relevant to the issues in this case upon establishing a proper foundation. The immaterial portions should have been excised.
Those portions of the judgment reading:
‘WHEREFORE, IT IS ORDERED AND ADJUDGED, that in the matter of Silvio Di Loreto vs. Frank and Helen Pepper, that the Plaintiff, Silvio Di Loreto take nothing by his action and that the Defendants Frank and Helen Pepper do have and recover from the Plaintiff, Silvio Di Loreto, their costs and disbursements incurred in this action, amounting to the sum of _____ Dollars.
‘WHEREFORE, IT IS ORDERED AND ADJUDGED, that in the matter of Albert and Kathleen Underwood vs. Frank and Helen Pepper, that the plaintiffs, Albert and Kathleen Underwood take nothing by their action and that the Defendants, Frank and Helen Pepper do have and recover from the Plaintiffs, Albert and Kathleen Underwood their costs and disbursements incurred in this action, amounting to the sum of _____ Dollars.’
are affirmed; the remainder of the judgment is reversed.
SUPPLEMENT TO OPINION ON DENIAL OF PETITION FOR REHEARING
On petition for rehearing Peppers earnestly argue that the opinion is in conflict with cases such as Burkhouse v. Phillips, 18 Cal.App.3d 661, 96 Cal.Rptr. 197, which allowed proof of subsequent loss of the property on foreclosure. Burkhouse applied the ‘out of pocket’ rule but nevertheless allowed proof of damages from subsequent loss on foreclosure. BAJI 12.56, subparagraph 2 a, b, c and d cited in footnote 7, is to the same effect.
1. The wives—Helen Pepper, Kathleen Underwood and Conchita Combs—do not appear to have played any major role in this controversy and we will therefore hereafter, for sake of simplicity, use the surnames of Pepper, Underwood and Combs to refer to the husbands respectively, unless otherwise noted.
2. The judgment in this case indicates that Albert and Kathleen Underwood filed a cross-complaint against the Peppers and that Di Loreto, doing business as Sunset Company Realtors also filed a cross-complaint against Peppers seeking to collect on a promissory note given for their realtors' commissions, and that the jury rendered a verdict against all cross-complainants. The clerk's transcript includes the Underwood cross-complaint which was to collect a $10,000 promissory note given as a part of the purchase price.** The Di Loreto cross-complaint was to collect on an $18,500 promissory note given in payment of the brokers' commissions, but which apparently was also deductible from the purchase price. The notices of appeal constitute an appeal from the entire judgment. However, the notices of appeal appear to be only on behalf of ‘defendants', the briefs on file herein have been filed on behalf of the various ‘defendants.’ No brief has been filed on behalf of the cross-complainants. The title of all of the briefs is solely in the name of ‘plaintiffs and respondents' and ‘defendants and appellants' with no reference to cross-complainants or cross-defendants. No arguments are advanced on behalf of any cross-complainant or cross-defendant. We therefore treat the appeal, if any, from the judgment insofar as it relates to cross-complainants as abandoned. The judgment insofar as it relates to the two cross-complainants will be affirmed on the ground that the appeal therefrom by the cross-complainants, if any, has been abandoned.** A note on an instruction indicates that the cross-complaint was non-suited; but this note was apparently in error since the judgment sets forth a judgment on the cross-complaint.
3. Di Loreto, Woolsey, and Dolan argue in the body of their opening brief (but not as an issue with a separate heading) that the court committed error in its instructions on the issue of damages.
4. This instruction is taken from an augmented reporter's transcript. This instruction was given at the request of Peppers.
5. The jury was instructed that upon certain proof plaintiff would be entitled to recover ‘the monetary loss suffered by Plaintiffs,’ ‘the other person was damaged as a result’ [of the fraud], ‘the agent is liable for all damages caused to his principal;’ if an agent breaches his fiduciary duties ‘not only is he liable for all damages caused by his fraud, but’ he cannot collect his commission, ‘[e]very person connected with a fraud is liable for the full amount of damages.’ (Italics added.)
6. The instruction read:‘If you find that the plaintiff or any of the cross-complainants were defrauded by the defendants or any of the cross-defendants in the transaction, the party defrauded is entitled to recover:‘(1) The difference between the actual value of that which the defrauded person parted and the actual value of that which he received.‘(2) Together with any additional damage arising from the transaction, including‘(a) amounts of money actually and reasonably expended in reliance upon the fraud;‘(b) an amount which would compensate the defrauded party for loss of use and enjoyment of the property to the extent that the loss was proximately caused by the fraud;‘(c) where you find the defrauded parties have been induced by reason of the fraud to sell or otherwise part with property, as have the cross-complainants Underwood, you may award damages which will compensate them for profits or other gains which they might have reasonably earned by use of the property had they retained it.‘(3) Interest at the rate of seven percent (7%) per annum on such amounts which are established to be certain by testimony or calculation as the defrauded party may have expended in reliance on the fraud.‘Civil Code, Section 3343‘Civil Code, Section 3288’
7. BAJI No. 12.56 reads as follows:‘If, under the court's instructions, you find that plaintiff is entitled to a verdict against defendant, you must then award plaintiff damages, if any, proximately caused by the fraud upon which you base your finding of liability.‘The amount of such award shall include:‘1. The difference, if any, between the actual value of that with which the plaintiff parted and the actual value of that which he received. This is sometimes referred to as the ‘out of pocket loss.’‘Actual value means market value. Market value means the highest price, in terms of money, for which real or personal property would sell on the open market; the seller having a reasonable time within which to sell, and being willing to sell but not forced to do so; the buyer being ready, willing and able to buy but not forced to do so, and having a reasonable time and full opportunity to investigate the property in question and to determine its condition, suitability for use, and all of the things about the property that would naturally and reasonably affect its market value.‘2. In addition to his ‘out of pocket loss,’ if any, plaintiff is entitled to recover any additional damage arising from the particular transaction, including any of the following:‘a. [Amounts actually and reasonably expended in reliance upon the fraud.]‘b. [An amount which would compensate the plaintiff for loss of use and enjoyment of the property to the extent that any such loss was proximately caused by the fraud.]‘c. [An amount which will compensate him for profits or other gains which might reasonably have been earned by use of the property had he retained it.]‘d. [An amount which will compensate him for any loss of profits or other gains which were reasonably anticipated and would have been earned by him from the use or sale of the property had it possessed the characteristics fraudulently attributed to it by the party committing the fraud, provided that lost profits from the use or sale of the property shall be recoverable only if and only to the extent that all of the following apply:(i) The plaintiff acquired the property for the purpose of using or reselling it for a profit.(ii) The plaintiff reasonably relied on the fraud in entering into the transaction and in anticipating profits from the subsequent use or sale of the property.(iii) Any loss of profits for which damages are sought under this paragraph have been proximately caused by the fraud and the plaintiff's reliance on it.]'
8. BAJI 12.57 reads:If, under the court's instructions, you find that plaintiff is entitled to a verdict against the defendant, you must then award plaintiff damages in an amount that will reasonably compensate him for all the loss suffered by him and proximately caused by the fraud upon which you base your finding of liability.The amount of such award shall be the difference between the actual value of that which the plaintiff received and the value which it would have had if the fraudulent representation had been true. This is sometimes referred to as the ‘benefit of the bargain.’
9. In fact Peppers seek to justify the award on the ground that it does not exceed the down payment plus one year's lost income.
10. The court instructed the jury in part:‘In the Plaintiffs' case against the Defendants Di Loreto (Sunset Company Realtors), Woolsey and Dolan, because of the fiduciary relationship between a real estate agent and his principals, the Plaintiffs do not have the burden of proving fraud or negligence, but rather these Defendants have the burden of establishing by a preponderance of the evidence all of the facts necessary to prove the following issues:‘1. That they exercised the highest good faith in representing the Plaintiffs in the motel transaction;‘2. That they made full disclosure to the Plaintiffs of all material facts relating to the financial condition of the motel which may have influenced the Plaintiffs in their decision to purchase the motel;‘3. That they exercised care, skill and reasonable diligence in ascertaining and communicating all material facts concerning the financial condition to Plaintiffs of the motel.’
11. For example, Underwood apparently paid Di Loreto's brokerage fee.
12. The newly drafted BAJI instructions include Nos. 12.51 and 12.52 which read:‘A party claiming to have been defrauded by a false representation must have relied upon the representations; that is, the representation must have been a proximate cause of his conduct in entering into the transaction and without such representation he would not have entered into such transaction.‘The fraud, if any, need not be the sole proximate cause if it appears that reliance upon the representation substantially influenced such party's action, even though other influences operated as well.‘Reliance upon a representation may be shown by direct evidence or may be inferred from the circumstances.’ (BAJI No. 12.51.)‘A party claiming to have been defrauded by a false representation must not only have acted in reliance thereon but must have been justified in such reliance, that is, the situation must have been such as to make it reasonable for him, in the light of the circumstances and his intelligence, experience and knowledge, to accept the representation without making an independent inquiry or investigation.’ (BAJI No. 12.52.)
13. The court's instructions on plaintiffs' burden of proof read in part:‘1. Whether those Defendants or any of them intentionally or negligently made false representations concerning the profits and financial condition of the Tropicana Motel, for the purpose of inducing the Plaintiffs to purchase the motel, which the Plaintiffs reasonably relied on in deciding to purchase the motel, and as a result of which Plaintiffs suffered monetary loss.’
LORING,* Associate Justice. FN* Assigned by the Chairman of the Judicial Council.
KAUS, P. J., and HASTINGS, J., concur.
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Docket No: Civ. 43393.
Decided: March 20, 1975
Court: Court of Appeal, Second District, Division 5, California.
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