RBF Associates v. Panorama Enterprises et al./ BC124735 c/w BC125156.
Published: Apr. 24, 1999 | Result Date: Jul. 15, 1998 | Filing Date: Jan. 1, 1900 |Case number: BC124735 Bench Verdict – $1,906,510
Judge
Court
L.A. Superior Central
Attorneys
Plaintiff
Bryan J. Freedman
(Freedman & Taitelman LLP)
Defendant
Experts
Plaintiff
Bruce Kaufer
(technical)
Jim Himes
(technical)
Facts
On Dec. 14 1994, RBF Associates, Inc. and Arthur Blech (the record owner of the courthouse on Third Street and Commonwealth) entered into an agreement whereby Blech would sell the largest multi story office building in Panorama City (approximately 14 stories) to RBF Associates, Inc. The closing was set on December 21. The day before the closing, the promissory note and deed of trust which secured the office building was sold to a third party who, on the same day foreclosed and became the owner of the Panorama Towers office building. Per the defendant, the building was vacant and yellow tagged as a result of the Northridge earthquake. On December 14, the same day, Glendale Federal Bank, hold the note on the property, without informing Blech, and sold the note to a third party. When asked at his deposition why he failed to inform RBF Associates, Inc. that the lender was trying to sell the note, he stated that it would have "killed the deal". Per the defendant, because it was public knowledge that Glendale Federal Bank was marketing the deal note, there was no legal duty for Blech to tell to RBF. On that basis, Judge Judith Chirlin bifurcated the damages and liability phases of the case and granted summary adjudication as to breach of contract, negligent misrepresentation and fraud in favor of RBF Associates, Inc. The trials was limited to damages, including punitive damages. During the trial, both parties used appraisers to determine the fair market value of the property as of Dec. 21, 1994, since the measure of damages was the difference between the fair market value of the property at the time of the breach less the contact purchase price of $1,415,000. Blech's expert concluded that the highest and best use of the property was not as an office building and therefore the value of the property was limited to the land value less the demolition costs which had a value of less than the $1.4 million purchase price. The expert for RBF Associates concluded that the property was worth in excess of $5 million as of the date of the breach. In closing, the plaintiff's counsel argued that there was no dispute as to the land value of the property which was approximately $2.1 million and that there was no contrary evidence to that of Bruce Kaufer, a real estate agent in charge of the property who testified that the building still generated income from antennas on the roof of the property although the property was vacant. Per the defendant, the plaintiff waived damages for fraud and negligent misrepresentation and punitive damages.
Settlement Discussions
The plaintiff made a settlement demand for $125,000. The defendant made an offer of $25,000.
Result
EXPERT TESTIMONY: James Himes, the retained appraiser called by the plaintiff, opined that the fair market value as of the date of the breach was $4,930,000. The difference between that figure and the purchase price of $1,415,000 would render a contract damage figure of $3,515,000. His calculation was based on a capitalization of income method of appraisal. Michael Shustack, the retained appraiser called by the defendants, testified that the fair market value was $1.4 million, which would result in a negative damage figure of $15,000. His appraisal was based on his opinion that the highest best use of the property is as vacant land. He estimated the value of the vacant land at $2,175,276 and the cost of demolition of the building at $775,276. William Strohmaier was a subpoenaed witness who had appraised the property for Glendale Federal, which held (and foreclosed) on Blech's promissory note. His appraisal was done six to nine months before the date of the breach. He testified that the property was worth $1,260,000. Thus, this appraised value would also result in a negative damage figure.
Other Information
At the close of testimony, the court requested that counsel address in closing argument whether the court must accept one of the fair market values given by the appraisers and render a damage award based thereupon, or the court could select some other value. Further, the court inquired if the answer to that first question was that the court could select some other value, what value would the parties suggest, and what evidence supported the suggested value. The court then recessed for lunch so that counsel consider those questions. Both sides agreed that the court was not bound by the values offered by the appraisers. The plaintiff counsel argued that Himes' valuation was appropriate, but offered two other possible calculations. The plaintiff also waived damages on the fraud cause of action. The defense counsel argued the correctness of the analysis of Shustack and Strohmaier and urged the court to find that there were no damages. Per the defendant, even though Friedman testified RBF had never before done a deal on its own without using investor money. The court found by a preponderance of the evidence that the plaintiff has sustained damages in the amount of $1,405,000. That amount is calculated by capitalizing the income that the building is actually generating (the antenna lease) and adding that capitalized figure ($720,000) to the value of the land that was essentially agreed upon by all of the appraisers ($2.1 million) which results in a fair market value of $2,820,000. Thus the difference between the fair market value and the contract price ($2,820,000 - $1,415,000) result in a contract damage award of $1,405,00 plus prejudgment interest from the date of breach. The court considered, at the urging of the defense counsel, the case of Ersa Grae Corp. v. Fluor Corp. (1991) 1 Cal. App. 4th 613. In that case, the Court of Appeal reversed a contract damage award. The court in that case reiterated the well-settled proposition that a plaintiff seeking damages for an anticipatory breach of contract, must show that it was ready and able to perform. It then reversed because the plaintiff had not been required to present evidence that it was able to perform and the defendant was precluded from presenting evidence of plaintiff's inability to perform. In the case at bar, the plaintiff presented testimony from which the court could infer the ability to perform (Friedman's testimony regarding his method of putting together these types of deals and his cash deposit into escrow shortly before the breath.) More importantly, the defense offered no evidence to the contrary. Thus, the Ersa Grae case was not applicable to this case. Judgment was to entered in favor of the plaintiff and against the defendant in the amount of $1,405,000 plus prejudgment interest from the date of breach.
Length
4½ days
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