MALLANO, P. J.
Gerald Young and Corey Sylve appeal from a judgment entered after a court trial in which the trial court determined Young and Sylve had entered into a civil conspiracy to defraud Marie Maher by inducing her to enter into a financial transaction with them in which they would use her credit to purchase properties in exchange for cash. The trial court also concluded that Young and Sylve "conspired together to enter in the transaction with [Maher]" and had breached an oral agreement to pay Maher $4,000 in connection with the transaction. The trial court awarded Maher $4,000 for damages for breach of contract and $100,000 in emotional distress damages based on the fraud action against Sylve and Young, jointly and severally.
Young and Sylve contend that the evidence was insufficient to support the trial court's determination that they breached a contract with Maher; they defrauded Maher; they formed a civil conspiracy against Maher; and Maher was entitled to $100,000 in damages for "intentional infliction of emotional distress." Young and Sylve also contend Maher's complicity with Sylve in entering into the transaction in order to obtain a tax advantage should preclude her from recovering against them.
We conclude that the evidence was sufficient to show that Young and Sylve conspired to commit and did commit fraud against Maher; emotional distress damages were properly awarded in connection with the fraud; and Young and Sylve engaged in a joint venture to enter into and breach a contract with Maher.
We affirm the judgment.
In April 2006, 59-year-old Maher spoke to Sylve about real estate investment opportunities. Maher had known Sylve since 1995 when she was president and chief executive officer of South Bay Vocational Center (SBVC) and Sylve worked in SBVC's warehouse. During her tenure as president, Maher mentored Sylve and promoted him. When she left SBVC, she recommended Sylve to fill her position. At the time of trial, Sylve was president and chief executive officer of SBVC.
Sylve represented to Maher that Young, his friend who was a real estate agent, would assist them in a financial venture in which Sylve would use Maher's credit to purchase property and Maher would receive cash in return. Sylve later told Maher he had successfully engaged in such ventures in the past, but did not make any mention of risk to her. Sylve told Maher that he and Young would run her credit rating to determine if she was qualified to participate in the financial venture with them. Sylve later told Maher that her credit was good and persuaded her to purchase two properties by telling her "there's a window of time by which an individual can purchase a second house with the same approval process as the first house . . . ."
One property was on Atlantic Avenue in Long Beach and was owned by Sylve. The other property was on Linden Avenue in Long Beach and was owned by Young. Maher did not know Young and Sylve owned the properties. She did not care who owned the two properties because she "just trusted [Sylve] . . . ."
Sylve explained to Maher that if she purchased the two properties with 100 percent financing and secured by her credit, he and Young could resell them for her for a profit, which he and Young would retain. Sylve told Maher he would then be able to sell the properties in six to 12 months. In exchange, Sylve promised that "upon the signing of the loan documents," he would pay her $5,000 for the Atlantic property and $3,000 for the Linden property. Sylve promised her he would make all the mortgage payments on both properties, and she could take a mortgage interest deduction on the Linden property. He also represented Maher would receive "golden credit" and other benefits. Sylve and Maher understood Maher would not receive any profits from the sale of the two properties. Maher believed Sylve's repeated assurances that the transaction was legal. Maher had not engaged in many real estate transactions and was not aware of the risks associated with them. With respect to the loan application, she stated, "I just trusted [Sylve] and signed it."
At Sylve's direction, Maher signed escrow documents and loan applications for 100 percent financing. Subsequently, Maher never saw or received any of the loan documents. Maher relied on Young's expertise as a real estate agent and dealt with the lender referred to her by Young. Young determined the purchase prices of the properties based on the maximum loan amount for which Maher could be approved. Sylve had purchased the Atlantic property six to 12 months previously for approximately $300,000 to $320,000 and sold it to Maher for $475,000. Young had bought the Linden property for $305,000 and sold it to Maher for $350,000.
The Atlantic property's escrow documents were signed on March 23, 2006, and on March 31, 2006, Sylve paid Maher $4,000, instead of $5,000 as agreed. The Linden property's closing instructions were dated April 12, 2006, but Sylve did not pay Maher the remaining $4,000. Sylve made a profit of approximately $10,000 from the sale of the Atlantic property to Maher.
In June 2006, Sylve told Maher SBVC would buy the properties but it would be an ethical violation for Maher's and Sylve's name to be on the titles prior to the purchase by SBVC because Sylve was currently the president and Maher was past president of SBVC. Young proposed that Maher deed both properties to him. In June 2006, Maher and Sylve went to the title company and Maher transferred her title to both properties to Young while Young waited in the parking lot. Later, Young transferred title in the Atlantic property to Sylve and title in the Linden property to SBVC. RT 137)~ Subsequently, Young and Sylve were unable to sell the properties for Maher. The properties were ultimately foreclosed upon.
Meanwhile, three weeks after she had executed the loan documents and escrow had closed, Maher began receiving collection calls from lenders on both properties. The calls continued until Maher changed her phone number in November 2006. Sylve continued to assure her that he would take care of everything. Maher, who was living in Northern California at the time she signed the loan applications, moved to Southern California in November 2006 when she lost her job as a training director in the gaming industry due to a corporate reorganization. Young and Sylve told Maher that because they were using her credit they would take care of her living arrangements or help her if she needed to buy a vehicle. Sylve gave Maher a mobile phone which she used for three months. Sylve and Young provided Maher with a one-bedroom condominium adjacent to the Atlantic property. Later, Maher discovered Sylve's brother and his family lived in the Atlantic property. After Maher had been in the condominium six weeks, Sylve told Maher he and Young believed they could find a renter who would pay more than she could for the condominium, so she moved into a Travelodge motel room for five weeks. Thereafter, Young and Sylve allowed Maher to move to an apartment which was rat-infested and filled with debris, trash, and had no electricity, even though Young had promised he would clean the apartment for her. Sylve hung up on her when she called him crying and complaining about the condition of the apartment. After one week, Maher returned to the Travelodge motel. Maher paid Sylve $2,100 in "rental payments."
Maher did not claim a tax advantage for the Linden property because she never received the mortgage statements that had been sent to Sylve, and she assumed Sylve had taken the mortgage tax deduction. Sylve did not respond to inquiries she made regarding the mortgage payments. From November 2006 until September 2007, Maher was unemployed except for doing some contract work. In September 2007, she was awarded a temporary conditional license to work for the gaming industry in New Mexico and, later, in California. After the properties were foreclosed upon, Maher's credit rating dropped 200 points and she could not be licensed in the gaming industry due to her poor credit. She therefore lost her job and career in the gaming industry. Her auto insurance rates were raised, she was unable to qualify for a credit card, she could not obtain a secured credit card from her own bank, and she could not rent an apartment in senior housing because of her poor credit. Maher testified that "[i]t's been a nightmare for two years trying to find a place to rent" due to her bad credit.
On November 13, 2007, Maher filed a complaint against Young and Sylve for breach of contract and fraud. Young's demurrer was overruled by the trial court. Young and Sylve did not respond to Maher's discovery requests. The court granted Maher's motion for an order compelling Young's and Sylve's responses and deeming Maher's request for admissions admitted as to Young. After receiving no responses from Young and Sylve, Maher brought a motion to enforce the court's order. The court denied the motion because there was no proof of service of its order in the record.
Trial commenced on August 17, 2009. Maher, Young, and Sylve testified as set forth ante. In addition, Sylve testified that he had owned property with Young in the past. Sylve stated he had engaged in a similar venture with Young in which Young had found both the property and the buyer. Both Sylve and Young testified that two months before the sale to Maher, Young had listed the Atlantic property in an unsuccessful attempt to sell it. Sylve testified that he had benefited from the financial transaction with Maher because he had paid off his loan. When Young was asked why he would to sell the property to Maher for what Young characterized as "very little" profit, Young testified: "As you go in the market and you would like to buy and buy low and sell high, at some point in time I figured that that would be the peak time for that property for the next year or so. If I could free up myself that I would be able to get back out and buy at a lower, a lower [price]. It was—the market was topping out. It was time to sell." Young testified his mortgage payment on the Linden property had been $2,300 per month, and he had been receiving $1,200 or $1,300 per month in rent, before he sold it to Maher. Young testified he never discussed with Maher that Sylve was the owner and seller of the Atlantic property.
After receiving evidence and hearing testimony from Maher, Young, and Sylve, the trial court issued a judgment in Maher's favor. In its statement of decision, the court stated that both Young and Sylve "entered in a . . . civil conspiracy . . . to defraud the lenders on the two properties they purchased
The trial court awarded Maher $100,000 in emotional distress damages, jointly and severally against Young and Sylve. The trial court concluded Sylve breached the oral agreement to pay Maher $4,000 of the $8,000 agreed upon. The trial court concluded Young and Sylve "conspired together to enter in the transaction with [Maher]. Thus, both [Young and Sylve] are liable for the $4,000 although only . . . Sylve made the promise to [Maher]." The trial court awarded Maher $4,000 for breach of contract damages jointly and severally against Young and Sylve.
Young and Sylve appealed from the judgment.
"In reviewing a challenge to the sufficiency of the evidence, we are bound by the substantial evidence rule. All factual matters must be viewed in favor of the prevailing party and in support of the judgment. All conflicts in the evidence must be resolved in favor of the judgment." (Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 58.)
Young and Sylve (through his near verbatim brief) contend Young cannot be held liable as a coconspirator because there was no evidence that he participated in any wrongdoing directed toward Maher or that he had knowledge of or actually participated in the wrongful acts that caused Maher harm. Young and Sylve contend there was insufficient evidence of fraud on the part of Young because there was no evidence that he made false representations to Maher regarding the agreement between her and Sylve; he had knowledge of any false statements; he intended to induce Maher's reliance; or Maher justifiably relied on his false statements. We conclude there was sufficient evidence to support the trial court's determination that Sylve and Young conspired to commit and did commit fraud against Maher.
The elements of a civil conspiracy action are the formation and operation of the conspiracy, the wrongful acts done in furtherance of the common design, and damage from the acts. (Fibreboard Corp. v. Hartford Accident & Indemnity Co. (1993) 16 Cal.App.4th 492, 507.) "The elements of fraud are `"(a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or `scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage."' (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638 . . . .)" (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 184.)
The evidence showed Young and Sylve formed a conspiracy to defraud and did defraud Maher by inducing her to enter into a dubious financial transaction with the promise of no risk to her. First, Sylve misrepresented to Maher that she would make $8,000 and come out with "golden credit" by purchasing two properties with 100 percent financing. Sylve misrepresented to Maher that she would be able to take a mortgage deduction on the Linden property. Additionally, Sylve misrepresented that he and Young would be able to sell the properties for a profit in six to 12 months. And, Young and Sylve failed to disclose to Maher that they owned the two properties and did not describe the risks to Maher's credit. Next, it is clear that Young and Sylve knew of the falsity of their representations and intended to defraud Maher. The evidence showed Young knew that the properties might not sell at a price high enough to justify the risk to Maher. He testified that at the time he sold the property to Maher he knew "the market was topping out. It was time to sell." Also, Sylve never returned Maher's calls regarding the amount of the mortgage and the mortgage deduction, making it impossible for her to take a tax deduction. The trial court reasonably could infer that Young and Sylve made the misrepresentations to Maher in order to induce Maher into entering into the agreement and failed to disclose they were the owners of the properties in order to avoid arousing Maher's suspicions. And Maher justifiably relied on Sylve's representations because she had known and mentored him for many years and had no reason to suspect he would defraud her. She also believed that Young and Sylve were working together on the transaction and relied on Young's expertise as a realtor. Finally, it is uncontroverted that Maher was damaged. Maher's credit was damaged when the properties went into foreclosure. Because of her bad credit, she lost her job and could no longer pursue her career in the gaming industry; she could not obtain senior housing; her auto insurance rates were raised; and she could not qualify for a credit card.
Nevertheless, Young and Sylve contend there was no evidence Young participated in any wrongdoing directed to Maher or had knowledge or participated in the wrongful acts that caused Maher harm. We disagree. A plaintiff is entitled to damages from a defendant who concurred in the tortious scheme with knowledge of its unlawful purpose, which "`"`may be inferred from the nature of the acts done, the relation of the parties, the interests of the alleged conspirators, and other circumstances.'"' [Citation.]" (Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 785.) The evidence showed Young was a principal actor in the fraud perpetuated on Maher by helping to engineer the sale of the properties to Maher. Young and Sylve had a long-time working relationship, had owned properties together, and previously had engaged in a similar venture. In fact, Young had located the Atlantic and Linden properties in the first place for purchase by Young and Sylve. Both Young and Sylve determined that Maher's credit rating was good enough for her to participate in the venture. And neither Young nor Sylve ever told Maher they owned the properties. Young determined the purchase price of the properties, based on the maximum amount of a loan for which Maher could be approved, and referred Maher to a lender. Young proposed that Maher deed both properties to him to assist in the sale of the properties to SBVC. And Young as well as Sylve benefited by paying off their own loans on the properties and inducing Maher to transfer title to the properties to Young while transferring all the risk of owning the properties to Maher. The evidence showed that the rental payments Young received on the Linden property did not cover the mortgage, and he had unsuccessfully listed the Atlantic property for rent for two months before the sale to Maher. Young also received commissions and profits on the properties. Thus, he was motivated to perpetrate the fraud on Maher.
We conclude the trial court's determination holding Young liable as a coconspirator to a fraud on Maher is supported by substantial evidence.
Young and Sylve urge that the trial court erred in awarding emotional distress damages to Maher under a theory of intentional infliction of emotional distress to Maher, notwithstanding that such a cause of action was not pleaded, because she suffered economic injuries and did not suffer physical injuries. We disagree with their premise as to the theory of the award and conclude Maher was entitled to general damages as a result of the intentional fraud committed on her. Therefore, we need not address Young's and Sylve's contention that under the theory of intentional infliction of emotional distress there was no evidence that Young intentionally caused harm to Maher and any economic loss attributed to Young could not reasonably result in his liability for $100,000 to Maher.
"`A tort victim is not limited to his or her "out-of-pocket" losses; rather, he or she is entitled to compensatory damages for any actual loss . . . .'" (Diamond Woodworks, Inc. v. Argonaut Ins. Co. (2003) 109 Cal.App.4th 1020, 1048, overruled on other grounds in Simon v. San Paolo U.S. Holding Co., Inc. (2005) 35 Cal.4th 1159, 1182.) Civil Code sections 1709 and 3333 provide the appropriate measure of damages for deceit, including general damages for mental distress and suffering.
Here, Young and Sylve made intentional misrepresentations to Maher, upon which she relied, in order to use her credit and make a profit on the properties. Maher, on the other hand, was left with all the risk and suffered severe emotional distress: she was hounded by calls from the lenders; she was forced to live in a rat-infested apartment for a week because she was unable to obtain senior housing due to her poor credit; when she called to complain, Sylve hung up on her; she was unable to pursue her career in the gaming industry or obtain credit cards due to her poor credit; and she testified, "It's been a nightmare for two years trying to find a place to rent" because of her bad credit.
In a footnote, Young and Sylve cite Butler-Rupp v. Lourdeaux (2005) 134 Cal.App.4th 1220 (Butler-Rupp) in support of their argument that because "Maher suffered no physical injuries, damages for emotional distress would not be available in any event for only economic loss." But Butler-Rupp does not assist Young and Sylve. Butler-Rupp holds "a plaintiff may not recover damages for emotional distress in an action for negligent misrepresentation where the `plaintiff's direct loss resulting from the negligent conduct of the defendant was [only] economic.' (Branch v. Homefed Bank (1992) 6 Cal.App.4th 793, 801.)" (Butler-Rupp, supra, 134 Cal.App.4th at p. 1227, italics added.) In cases of intentional misrepresentation, as here, recovery for emotional distress need not be accompanied by physical injury. (Branch v. Homefed Bank, supra, 6 Cal.App.4th at p. 799.) The evidence supports the trial court's conclusion that Young and Sylve engaged in intentional misrepresentation and therefore Maher did not need to show physical injury.
In light of our conclusion, we need not address Young's and Sylve's argument that the trial court's award of damages under a theory of intentional infliction of emotional distress was not supported by sufficient evidence and any economic loss could not reasonably result in Young's liability for $100,000 to Maher.
We therefore affirm the trial court's award of damages for emotional distress.
Young and Sylve contend there is no evidence Young entered into a contractual agreement with Maher regarding the purchase of the two properties. We conclude the evidence was sufficient to show that as joint venturers, Young and Sylve entered into the contract with Maher and are therefore both liable for breach of contract. Thus, although we do not agree with the trial court's theory that Young can be held liable for breach of contract on a conspiracy theory, we affirm the court's award of $4,000 for breach of contract damages against Sylve and Young.
The trial court relied on a civil conspiracy theory to award damages for breach of contract against Young and Sylve jointly and severally. But under a civil conspiracy theory, liability is imposed on joint tortfeasors for the torts they have committed. (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510-511 ["By participation in a civil conspiracy, a coconspirator effectively adopts as his or her own the torts of other coconspirators within the ambit of the conspiracy."].) Yet, as we explain, even though Young and Sylve are not liable for breach of contract damages under a conspiracy theory, we conclude the trial court properly awarded $4,000 damages against Young and Sylve because they were engaged in a joint venture as to the contract with Maher. If the decision of the trial court is correct on any theory of law applicable to the case, the appellate court will affirm the judgment, whether the trial court's reasons were correct or not. (Pasadena Medi-Center Associates v. Superior Court (1973) 9 Cal.3d 773, 779, fn. 6, superseded by statute on other grounds as noted in Bishop v. Silva (1991) 234 Cal.App.3d 1317, 1323; Estate of Beard (1999) 71 Cal.App.4th 753, 776.)
"A joint venture is `an undertaking by two or more persons jointly to carry out a single enterprise for profit. [Citations.]' [Citation.]" (Weiner v. Fleischman (1991) 54 Cal.3d 476, 482.) "The elements necessary for its creation are: (1) [a] joint interest in a common business; (2) with an understanding to share profits and losses; and (3) a right to joint control." (April Enterprises, Inc. v. KTTV (1983) 147 Cal.App.3d 805, 819.) "[T]he mode of participation in the fruits of the undertaking may be left to the agreement of parties; and whether they create the strict relation of joint adventurers or some other relation involving cooperative effort depends on their actual intention." (Krantz v. BT Visual Images (2001) 89 Cal.App.4th 164, 178.) "A joint venture or partnership may be formed orally [citations], or `assumed to have been organized from a reasonable deduction from the acts and declarations of the parties.' [Citation.]" (Weiner v. Fleischman, supra, 54 Cal.3d at pp. 482-483.) Each joint venturer has the authority to bind the other in making contracts necessary to carry out the enterprise. (Medak v. Cox (1970) 12 Cal.App.3d 70, 76.)
The evidence shows that Young and Sylve entered into a joint venture agreement and therefore properly were held liable on the breach of contract action. Young and Sylve had a joint interest in using Maher's credit to purchase properties owned by them. Young and Sylve had an understanding that they would both benefit by having their loans paid off, by making profits on the sale of the properties to Maher, by having title to the properties transferred from Maher to Young (who in turn transferred the title on the Atlantic property to Sylve and on the Linden property to SBVC), and by incurring no risk to their credit. They both had joint control over the scheme. Sylve persuaded Maher to purchase two properties owned by Young and Sylve. Young directed Maher to a lender and also determined the sales price of the properties to Maher based on the maximum loan amount for which Maher could qualify. Young directed Maher to deed the properties to him. Later, Young transferred the Atlantic property to Sylve and the Linden property to SBVC.
Therefore, as a joint venturer, Young is liable for the breach of the contract entered into between Maher and Sylve. "A cause of action for damages for breach of contract is comprised of the following elements: (1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff." (Careau & Co. v. Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1388.) The evidence shows Sylve and Maher entered into an oral agreement for her to purchase the Atlantic and Linden properties by obtaining 100 percent financing in exchange for $8,000 from Sylve. (§ 1550 [contract requires parties capable of contracting; their consent; a lawful object; and a sufficient cause or consideration]; Marshall & Co. v. Weisel (1966) 242 Cal.App.2d 191, 196 [same].) The evidence also shows Sylve breached the contract. Sylve paid Maher $4,000 on March 31, 2006, after she signed the escrow documents for the Atlantic property on March 23, 2006. But Maher never received the remaining $4,000 after she signed the closing documents on April 12, 2006. Accordingly, the evidence supports the trial court's conclusion that Maher suffered damages of $4,000 for which Young and Sylve are liable.
We conclude that Young and Sylve are jointly liable for the award of damages for the breach of contract.
Young's and Sylve's argument that Maher's unclean hands in intending to take the tax deduction on the Linden property without intending to reside in it, should preclude her from recovery, fails.
First, a statement of decision covers only issues litigated in the case. (Colony Ins. Co. v. Crusader Ins. Co. (2010) 188 Cal.App.4th 743, 750.) Neither Young nor Sylve raised the issue of unclean hands in their pleadings or argued the issue of unclean hands before the trial court and therefore have waived the issue on appeal. (Id. at p. 751;Johnson v. Johnson (1987) 192 Cal.App.3d 551 [party's failure to raise the issue of unclean hands in trial court precludes its consideration on appeal].)
Second, even assuming the issue of unclean hands was raised below and not waived, "[T]he doctrine of unclean hands does not automatically bar equitable relief where the parties are not equally at fault." (Warren v. Merrill (2006) 143 Cal.App.4th 96, 115.) The rule that the courts will not enforce an illegal agreement or one against public policy should not be applied "`[w]here . . . the public cannot be protected because the transaction has been completed, where no serious moral turpitude is involved, where the defendant is the one guilty of the greatest moral fault, and where to apply the rule will be to permit the defendant to be unjustly enriched at the expense of the plaintiff, the rule should not be applied.'" In Johnson v. Johnson, supra, 192 Cal.App.3d 551, although the defendant veteran son failed to raise the issue of unclean hands below, the appellate court addressed his argument that the plaintiff mother was not entitled to a resulting trust because she participated in an illegal GI loan transaction. In that case, the defendant persuaded the plaintiff to use a GI loan to finance her purchase of a home, to put his name on title, to make the payments on the GI loan, and to give him an interest-free loan of the money she had saved but not used for a down payment on the home. Although the plaintiff's use of the defendant as a "straw" purchaser to obtain the loan was against public policy and illegal because the defendant did not intend to occupy the residence as required under the terms of the GI loan, the court held the defendant was guilty of the greatest moral fault by instigating the arrangement, no serious moral turpitude was involved on the part of the plaintiff, the transaction was already completed, and the defendant would be unjustly enriched if he were allowed to evict the plaintiff, maintain his name on title, and reap the benefit of appreciation in the value of the home. (Id. at p. 557.) The court therefore affirmed the trial court's declaration of a resulting trust that the plaintiff was the actual and beneficial owner of the property per the agreement entered into between defendant and plaintiff.
Here, Maher did not succeed in taking the tax deduction on the Linden property, the transaction had already occurred, any fraudulent intent on her part was minimal in comparison to the great moral fault of Young and Sylve, and Young and Sylve would be unjustly enriched if the contract agreement between Maher on the one hand and Young and Sylve on the other, were not enforced. Therefore, even if Young and Sylve had raised the issue of unclean hands below, we would refuse to preclude her recovery.
The judgment is affirmed. Maher is entitled to costs on appeal.
We concur:
ROTHSCHILD, J.
JOHNSON, J.
