Filed 4/16/15 Brown v. Zive CA2/5 

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS 

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

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or ordered published for purposes of rule 8.1115. 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA 

SECOND APPELLATE DISTRICT 

DIVISION FIVE 

CHERIE BROWN, 

 Plaintiff and Appellant, 

 v. 

YOUVAL ZIVE et al., 

 Defendants and Appellants. 

 B250561 

 (Los Angeles County Super. Ct. 

 No. BC440484) 

 APPEAL from a judgment and orders of the Superior Court of Los Angeles 

County, Victor E. Chavez, Judge. Affirmed in part, reversed in part, and remanded. 

 Cheong, Denove, Rowell & Bennett, John D. Rowell, for Plaintiff and Appellant. 

 Law Offices of Ilene Kurtzman, Ilene Kurtzman, Andrea Breuer, for Defendants 

and Appellants. 

________________________ 
2

 Defendants and appellants Youval Zive and VACA Partnership (VACA), of which 

Zive was a partner (collectively appellants), sold a home to plaintiff and respondent, 

Cherie Brown. Brown brought several claims against Zive and VACA, including fraud, 

negligent misrepresentation, and failure to disclose seller financing. She also brought 

claims for legal malpractice and breach of fiduciary duty, as to Zive only.1 

 Appellants contend that the trial court erred in denying their motions for nonsuit 

and judgment notwithstanding the verdict (JNOV) as to Brown’s cause of action for 

failure to disclose seller financing, and that there was insufficient evidence to support the 

jury’s verdict in favor of Brown and award of damages of $392,500 with respect to that 

claim. Appellants argue that the evidence compels the conclusion that seller financing 

was timely and properly disclosed, and that the damages award was unlawful and 

excessive. Brown cross-appeals the trial court’s grant of nonsuit as to the fraud, negligent 

misrepresentation, legal malpractice, and breach of fiduciary duty causes of action, and 

the trial court’s ruling that there was no basis for an award of punitive damages.

 We hold that substantial evidence supports a damages award of only $325,283 on 

Brown’s failure to disclose seller financing claim and reduce the award accordingly. We 

reverse the trial court’s order of nonsuit in favor of appellants on the fraud cause of 

action, as well as its related ruling that there is no basis for the jury’s consideration of an 

award of punitive damages as to the fraud cause of action. We remand for limited retrial 

on Brown’s fraud claim. In all other respects, we affirm the judgment as modified. 

FACTS2

 

1 Pacific Holdings, another partnership in which Zive was a partner, was also 

named as a defendant, but is not a party to this appeal. 

 2 In accordance with the applicable standards of review, we recite the facts in a 

light most favorable to Brown. 
3

 On July 20, 2006, Brown entered into a purchase agreement with VACA for a 

furnished home. The price was $1,207,500, including $57,000 for furniture. 

 Brown had never prequalified for a loan, owned a house, or had any dealings in 

real estate transactions. She viewed the house for the first time on July 20, 2006. VACA 

held title to the house, and the transaction was conducted by Zive. Brown had not 

previously met Zive. Zive represented to Brown that he was a lawyer and a real estate 

expert. He said that he had been involved in the sale and purchase of numerous houses, 

and would represent them both and “do all of the transaction.” Zive questioned Brown 

concerning her employment and salary, and proposed seller financing. Zive said his 

payments on his mortgage were approximately $2,700 to $2,800 per month, and that 

although the rate was variable the payments would not increase much over $200 to $300. 

Zive would obtain a wrap-around note so that Brown could take over his mortgage. 

Brown agreed, and said she could make the payments. 

 Zive handled the paperwork for the transaction. The purchase agreement provided 

for a $25,000 cash deposit, which was nonrefundable and payable directly to Zive. 

Brown paid the $25,000 the night she met Zive. Brown spent approximately 20 minutes 

with Zive prior to signing the purchase agreement. The transaction did not go through 

escrow, despite provisions for escrow in the purchase agreement. Brown’s entire down 

payment was to be $155,000, also payable directly to Zive. Zive provided Brown with a 

copy of the purchase agreement and a buyer’s inspection advisory. The purchase 

agreement stated that there would be seller financing. 

 On July 31, 2006, Zive took out a second mortgage on the house for $46,142. 

 On November 1, 2006, Zive provided Brown with a seller financing disclosure 

statement. The statement utilized a standard form that Zive had obtained from a lawyer 

he consulted. Zive filled out the form by hand. The disclosure statement showed that 

there were two mortgages on the house which would mature in 2036, with balances of 

$993,843 and $40,000, respectively. It stated that the rates were “variable,” but did not 

provide the specific interest rates or disclose any terms related to the interest rates. No 

copies of the notes or further descriptions of their terms were attached. The disclosure 
4

statement advised that the credit extended provided for deferred interest, and warned that 

if refinancing was required it might be difficult or impossible to obtain. It advised that 

the transaction involved the use of an all-inclusive (wrap-around) deed of trust providing 

that in the event of an acceleration of any senior encumbrance, Brown would be 

responsible for payment. It did not disclose the limit on the deferred interest allowed 

before a change in interest rates would occur on the first loan, or address the 

ramifications of negative amortization. Zive told Brown that the second mortgage would 

require that she pay $200 to $300 more per month. Brown signed the disclosure 

statement. 

 As of November 1, 2006, Brown had paid $125,000 toward the purchase price of 

the house, and made one payment of $3,030 on the underlying mortgage. She took 

possession of the house, but because she had not made the full down payment, transfer of 

title was delayed until the full down payment was made. 

 Title was transferred from VACA to Brown on January 3, 2007. Brown signed an 

all-inclusive purchase money promissory note dated December 30, 2006, in the amount 

of either $1,072,000 or $1,082,000, in favor of Zive.3 The note had a maturity date of 

March 1, 2008. It stated that the total principal included a March 31, 2006 promissory 

note given by Zive with an original amount of $980,000, and a July 31, 2006 promissory 

note given by Zive with an original amount of $46,142. The note had an interest rate of 

7.2 percent, which was “variable.” Beginning November 1, 2006, loan payments of 

$3,030 per month “or more” were due at the start of each month. A late fee of 6 percent 

would be assessed for payments made after the 10th of the month. The note provided for 

a principal payment of $20,000, due December 31, 2006, with a late fee of $3,000 if 

payment was more than 10 days late. An interest rate of 18 percent would be assessed 

beginning January 10, 2007. The second page of the note provided that Brown would 

pay all principal and interest installments due on the note that were due under the terms 

 

3 The note references both amounts. 
5

of the underlying mortgages. There was no additional information about the terms of the 

mortgages. 

 Per Zive’s instructions, Brown made note payment checks payable to Washington 

Mutual, which held the underlying mortgages, and delivered the checks to Zive’s office. 

Zive would then deliver the checks to Washington Mutual. 

 On January 4, 2007, Brown executed a second note secured by deed of trust in the 

amount of $11,283. A single payment of $11,283 was due by March 1, 2008. No interest 

would be charged if payment was timely. In the event of late payment the balance would 

bear interest at a rate of 16 percent. Brown timely paid the second note. 

 Brown received a letter sent from Washington Mutual to Zive dated March 22, 

2007. The letter stated that the payment on the first mortgage had been adjusted to 

$2,906.86, based on an interest rate of 7.68 percent, there was a remaining term of 468 

months, and projected principal balance of $1,015,681.13. The letter noted that the new 

payment was determined by the payment amount adjustment limitation provision in the 

promissory note. Without the limitation, the new payment would have been $6,848.38. 

The letter contained a list of prior interest rate adjustments. The new payment rate would 

take effect on May 1, 2007. A written note on the letter in Zive’s handwriting requested 

that Brown make an additional $203 payment to add to the May payment, and also 

requested that checks in the amount of $2,906 be prepared for June through August. This 

was the first communication that Brown received from Zive which informed her of the 

interest rate on the first loan. 

 On March 2, 2008, Zive and Brown executed an addendum to the all-inclusive 

purchase money promissory note, which modified the note and extended the due date to 

March 1, 2010. The addendum provided for additional payments totaling $30,000 on a 

specified monthly schedule. The addendum stated that it would be void if Brown failed 

to make timely payments or otherwise breached any of the terms of the note and/or deed 
6

of trust, and that Zive would then have the option to file a notice of default.4

 In a letter dated August 18, 2008, Washington Mutual informed Zive that it would 

recast the first mortgage loan, increasing the payment to $5,380.89 as of February 2009, 

unless the total amount of interest due was paid monthly. The previous payments made 

on the loan were for less than the total amount of interest due. All unpaid interest had 

been added to the principal, and the principal was soon to reach its limit. Only payments 

of the full interest would prevent the recast. 

 In December 2008, Zive communicated to Brown that the first loan would be 

recast to $5,380.89, although there would be no change in the payment due on the second 

loan. Brown was distraught. Zive told her not to worry about the increase, but to 

continue to make her regular payments to him. He assured her that he would attempt to 

get a loan modification so that the payments would remain at around $3,000 per month. 

Brown continued to make the payments in the amount she had previously. 

 Washington Mutual stopped accepting Brown’s checks on the underlying first 

mortgage after the recast took effect in February 2009, because the payments were less 

than the total monthly amount due. It continued to accept Brown’s payment on the 

underlying second mortgage because payment was made in full. Zive deposited the 

payments on the first mortgage into an escrow account. Brown was unaware that the 

payments were not being accepted, and continued to make payments. 

 In September 2009, Zive asked Brown to meet him for dinner, and suggested that 

she short-sell the house. An outside investor would purchase it, and the house would 

come back to Zive. He would then try to get Brown back into possession of the house. 

Brown refused. Zive instructed her to keep making payments. 

 A few days later, there was a notice of an auction sale on Brown’s door. She 

called Zive, who assured her that he would get the sale delayed. Brown was confused 

because she had not missed any payments. This was the first time she heard that her 

 

4 In her opening brief, Brown states that she executed the addendum, but the copy 

admitted into evidence bears only Zive’s signature. 
7

house was in foreclosure. Zive told Brown to contact a broker to whom he had paid 

$4,000 to work on a loan modification. When Brown contacted the broker, he wanted an 

additional $4,000.5 

 Brown stopped making payments on the promissory note and addendum in 

September 2009. Since 2006, she had made a total of $115,000 in monthly payments. 

She had also paid the full $155,000 down payment, paid $19,000 in payments per the 

2008 addendum to the all inclusive purchase money promissory note, and made 

approximately $25,000 in property tax payments to Zive. She made unspecified extra 

payments on the second underlying mortgage, security alarm payments, insurance 

payments, and payments to a gardener for an unspecified period of time. Brown 

continued to live in the house after she ceased making payments under the note and 

addendum. 

 Brown received a foreclosure notice from Zive. The house was auctioned on 

September 12, 2011. Zive took the house as the beneficiary on the note. He transferred 

ownership to Phoenix Realty Investment, LLC (PRI), in which he held 98 percent 

ownership. PRI evicted Brown, and sued her for unlawful detainer, resulting in a 

judgment against her for $11,000. 

PROCEDURAL HISTORY 

 Brown brought suit against Zive, VACA, and Pacific Holdings, on June 25, 2010. 

Relevant here, at the time of trial, the operative second amended complaint alleged fraud, 

negligent misrepresentation, and failure to disclose seller financing as to VACA and 

Zive, and legal malpractice and breach of fiduciary duty as to Zive alone. 

 After Brown concluded her case-in-chief, appellants moved for nonsuit. 

Following oral argument by the parties, the trial court granted nonsuit in favor of 

 

5 It does not appear from the record that Brown paid the $4,000. 
8

appellants on Brown’s causes of action for fraud and negligent misrepresentation, and in 

favor of Zive on Brown’s causes of action for legal malpractice and breach of fiduciary 

duty. It also ruled there was insufficient basis to support an award of punitive damages 

as to Brown’s fraud claim. The court denied the motion with respect to Brown’s cause of 

action for failure to disclose seller financing, finding that there was sufficient evidence 

for the issue to be presented to the jury. 

 Appellants were represented by counsel at trial. Brown appeared in pro per. On 

May 1, 2013, the failure to disclose seller financing cause of action, and another cause of 

action for conversion against Zive only, were submitted to the jury. Before the case was 

submitted to the jury, the trial court directed the parties to confer on jury instructions and 

special verdict forms. To the extent that there was disagreement, the trial court accepted 

the relevant jury instructions and special verdict form requested by appellants. The jury 

was instructed that Brown claimed general and special damages (CACI No. 3900), that 

monies paid by Brown and special damages were recoverable only once under the two 

remaining legal theories (CACI No. 3934), and that the economic damages Brown 

claimed included mortgage payments, down payment, deed payment, Zive’s note, and 

storage (CACI No. 3903). The special verdict form did not provide for itemization of the 

damages award, and did not require the jury to find that respondent’s failure to disclose 

seller financing, if any, was willful. The jury found in favor of Brown with respect to the 

failure to disclose seller financing cause of action, and awarded her a total of $392,500 in 

damages. It found in favor of Zive on the conversion cause of action. 

 On May 8, 2013, appellants moved for JNOV. The trial court denied the motion 

and entered judgment on June 13, 2013. Appellants made an ex parte application for 

clarification on the basis that the trial court did not include its reasoning in its minute 

order denying JNOV. The trial court took the matter under submission, and issued its 

order denying the ex parte application on June 28, 2013. 

 Appellants timely appealed, and Brown cross-appealed. 
9

DISCUSSION 

Standards of Review 

 A nonsuit is properly granted only when, disregarding conflicting evidence, giving 

plaintiff’s evidence all the value to which it is legally entitled, and indulging in every 

legitimate inference that may be drawn from the evidence, there is insufficient evidence 

to support a verdict in the plaintiff’s favor. (Carson v. Facilities Development Co. (1984) 

36 Cal.3d 830, 838-839 (Carson).) The de novo standard of review applies to an order 

granting nonsuit. (CC–California Plaza Associates v. Paller & Goldstein (1996) 51 

Cal.App.4th 1042, 1050-1051.) 

 “When considering a claim of insufficient evidence on appeal, we do not reweigh 

the evidence, but rather determine whether, after resolving all conflicts favorably to the 

prevailing party, and according the prevailing party the benefit of all reasonable 

inferences, there is substantial evidence to support the judgment.” (Scott v. Pacific Gas 

& Electric Co. (1995) 11 Cal.4th 454, 465, disapproved on other grounds in Guz v. 

Bechtal Nat. Inc. (2000) 24 Cal.4th 317, 336.) 

 A judgment notwithstanding the verdict is proper only if there is no substantial 

evidence to support the verdict and the evidence compels a judgment in favor of the 

moving party as a matter of law. (Code Civ. Proc., § 629; Sweatman v. Department of 

Veterans Affairs (2001) 25 Cal.4th 62, 68 (Sweatman).) The trial court must view the 

evidence in the light most favorable to the verdict. (Sweatman, supra, at p. 68.) On 

appeal, we must independently determine whether substantial evidence supports the 

verdict and whether the moving party is entitled to judgment in its favor as a matter of 

law. (Ibid.) 

Failure to Disclose Seller Financing 

 Appellants contend that the trial court erred in denying their motion for nonsuit 
10

with respect to Brown’s cause of action for failure to disclose seller financing, the 

evidence is insufficient to support the jury’s verdict, and the trial court erred in denying 

its motion for JNOV. These claims lack merit. 

 Civil Code section 29566 provides as follows: “In a transaction for the purchase 

of a dwelling for not more than four families in which there is an arranger of credit, 

which purchase includes an extension of credit by the vendor, a written disclosure with 

respect to that credit transaction shall be made . . . .” Section 2963 outlines specific 

disclosures that must be made, including: 

“(b) A description of the terms of the promissory note or other credit 

documents or a copy of the note or other credit documents. 

“(c) Insofar as available, the principal terms and conditions of each 

recorded encumbrance which constitutes a lien upon the property which is 

or will be senior to the financing being arranged, including the original 

balance, the current balance, the periodic payment, any balloon payment, 

the interest rate (and any provisions with respect to variations in the interest 

rate), the maturity date, and whether or not there is any current default in 

payment on that encumbrance. 

“(d) A warning that, if refinancing would be required as a result of lack of 

full amortization under the terms of any existing or proposed loans, such 

refinancing might be difficult or impossible in the conventional mortgage 

marketplace. 

“(e) If negative amortization is possible as a result of any variable or 

adjustable rate financing being arranged, a clear disclosure of this fact and 

an explanation of its potential effect.” 

 

6 All further statutory references are to the Civil Code, unless stated otherwise. 
11

Such disclosure must be made “as soon as practicable, but before execution of any note 

or security documents.” (§ 2959.) 

 Here, Brown testified that she received and signed a California Association of 

Realtors Seller Financing Disclosure Statement for the first time on November 1, 2006. 

The disclosure statement provided the amounts and maturity dates of the underlying 

loans, but disclosed only that the interest rates were “variable.” It did not contain the 

specific interest rates or disclose any related provisions. The disclosure statement 

advised that the credit extended to Brown provided for deferred interest, and warned that 

if refinancing was required it might be difficult or impossible to obtain. It did not 

disclose the limit on the deferred interest allowed before a change in interest rates would 

be triggered on the first loan, or address the ramifications of negative amortization. 

Brown testified that prior to providing her with the disclosure statement, Zive assured her 

that her payments would not increase much over $200 to $300 per month, when in fact 

they increased by over $2,000 a month. 

 Given the numerous omissions from the disclosure statement and Zive’s 

misstatement regarding the monthly payments, substantial evidence supports the 

conclusion that the disclosure was inadequate. Section 2963 requires that the loans be 

described or attached, that the interest rates be specified, that the buyer be informed of 

any provisions with respect to the interest rate, and be warned of the consequences of 

negative amortization. Brown produced substantial evidence that none of these 

disclosures were made prior to the execution of the note, and that the assurances she was 

given were inaccurate, at best. 

 Additionally, Brown signed the purchase agreement, and made a partial down 

payment of $25,000 on July 20, 2006. VACA’s expert witness testified that the 

disclosure statement should have been given to her at that time or within a reasonable 

time afterwards. Zive was making payments on the first loan when the purchase 

agreement was executed, and was aware of the terms. He took the second loan out after 

the purchase agreement was executed, and was ostensibly aware of its terms as well. 

Despite this, Zive did not make any disclosures until several months later, on November 
12

1, 2006. By that date, Brown had paid $125,000 toward the purchase price of the house, 

made one payment of $3,030 on the underlying mortgage, and taken possession of the 

house. Zive did not disclose further details of the loans until sometime after March 22, 

2007, long after “execution of any note or security documents.” There is substantial 

evidence to support the conclusion that the disclosures were not made “as soon as 

practicable,” as required under section 2959. 

Damages for Failure to Disclose Seller Financing 

 Section 2965 provides that actual damages may be awarded when a party willfully 

fails to make required seller financing disclosures under section 2963. 

 Appellants contend that Brown should not have been awarded damages for failure 

to disclose seller financing because the jury never found that they willfully failed to 

disclose the statutorily required information. Alternately, appellants argue that the award 

of $392,500 in damages was excessive. We conclude that appellants forfeited the 

argument that damages in any amount are improper, but agree that damages must be 

reduced to those supported by substantial evidence. 

 With respect to the first argument, appellants requested all instructions pertaining 

to disclosure of seller financing and the special verdict on that cause of action. If 

appellants wanted the jury to be instructed that a finding of willfulness was required to 

impose liability, they had ample opportunity to request such an instruction, but failed to 

do so. Appellants instead drafted and submitted instructions and a special verdict that 

omitted any mention of willfulness and submitted them to the trial court. Appellants 

cannot now complain about the instructions or special verdict form that they requested. 

(Transport Ins. Co. v. TIG Ins. Co. (2012) 202 Cal.App.4th 984, 1000; Stevens v. OwensCorning Fiberglas Co. (1996) 49 Cal.App.4th 1645, 1653.) 

 As to the question of the amount of damages, the testimony of a single witness, 

including the party, is ordinarily sufficient. (Jensen v. BMW of N. America, Inc. (1995) 

35 Cal.App.4th 112, 134.) As appellants concede, Brown testified that she made 
13

$115,000 in payments to Zive on the note, a $155,000 down payment, an $11,283 

additional payment to Zive, and $25,000 in property taxes to Zive, for a total of 

$306,283. Brown further testified that she made $19,000 in payments per the 2008 

addendum to the all inclusive purchase money promissory note in addition to her 

mortgage payment. She therefore provided substantial evidence of damages in the 

amount of $325,283. 

 There is no basis for reducing the amount of damages based on the rent Brown 

“should have paid” while living in the house or elsewhere, as appellants urge. The 

burden of proving facts in mitigation of damages rests upon the defendant. (Jackson v. 

Yarbray (2009) 179 Cal.App.4th 75, 97; Carnation Co. v. Olivet Egg Ranch (1986) 189 

Cal.App.3d 809, 817-818, and cases cited therein.) In this case, appellants offered no 

evidence by which the jury could estimate what Brown’s rental costs would have been, 

and did not meet their burden. 

 Nor is there any basis for concluding that there was substantial evidence of other 

expenses, as Brown argues. It does not appear from the record that Brown made more 

than $25,000 in tax payments. Additionally, Brown offered no evidence that would allow 

the jury to estimate the costs for which she gave no exact amounts or payment duration, 

including extra payments on the second underlying mortgage, security alarm payments, 

insurance payments, and payments to a gardener. 

 Finally, a plaintiff must prove a causal connection between the damages she seeks 

and the defendant’s wrongful conduct, and demonstrate that the detriment she suffered 

was a natural and probable consequence of the defendant’s conduct. (Chaparkas v. Webb

(1960) 178 Cal.App.2d 257, 260.) In this case, the unlawful detainer judgment was not a 

natural and probable consequence of the failure to disclose seller financing, it was the 

natural and probable consequence of Brown’s choice to remain in the house for two years 

after it had been foreclosed. 
14

Fraud and Negligent Misrepresentation 

 Brown contends that the trial court erred in granting appellants’ motion for nonsuit 

with respect to her claims for fraud and negligent misrepresentation. We agree. 

 Generally, “‘“[t]he elements of fraud, which give[ ] rise to the tort action for 

deceit, 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.”’ [Citation.]” (Small v. Fritz Companies, 

Inc. (2003) 30 Cal.4th 167, 173 (Small).) Additionally, to establish fraud through 

nondisclosure or concealment of facts, it is necessary to show the defendant “was under a 

legal duty to disclose them.” (Lingsch v. Savage (1963) 213 Cal.App.2d 729, 735.) 

 Claims for negligent misrepresentation deviate from this set of elements. “The 

tort of negligent misrepresentation does not require scienter or intent to defraud. 

[Citation.] It encompasses ‘[t]he assertion, as a fact, of that which is not true, by one who 

has no reasonable ground for believing it to be true’ [citation], and ‘[t]he positive 

assertion, in a manner not warranted by the information of the person making it, of that 

which is not true, though he believes it to be true’ [citations].” (Small, supra, 30 Cal.4th 

at pp. 173-174.) 

 Here, the first and last elements of fraud and negligent misrepresentation have 

been established. There is more than sufficient evidence to support the conclusion that 

appellants failed to disclose seller financing, which they were legally required to do, and 

that Brown was damaged as a result. 

 There was also sufficient evidence to support a finding of scienter. Zive was 

paying on the first mortgage at the time the parties entered into the purchase agreement, 

and took out the second mortgage soon thereafter. He had access to the loan statements, 

and thus was either aware (fraud) or should have been aware (negligent 

misrepresentation) that his statements about the first mortgage payment were untrue and 

that the information he provided was woefully incomplete. 
15

 The requirement of intent to defraud or induce reliance to establish liability for 

fraud was also supported by sufficient evidence to support a verdict in Brown’s favor. 

Brown produced evidence that Zive knew she was making payments that would not cover 

the interest on the first mortgage, and that the principal limit would be reached, causing 

the loan to be recast. Despite this, he urged her to keep making her regular payments, 

and assured her that making payment would keep the house in her possession. 

 Finally, Brown presented evidence that she justifiably relied on Zive’s 

misrepresentations. To establish reliance was justifiable, a plaintiff must show the 

“‘circumstances were such to make it reasonable for [her] to accept [the] defendant’s 

statements without an independent inquiry or investigation.’ [Citation.] The 

reasonableness of the plaintiff’s reliance is judged by reference to the plaintiff’s 

knowledge and experience. [Citation.]” (OCM Principal Opportunities Fund v. CIBC 

World Markets Corp. (2007) 157 Cal.App.4th 835, 864 (OCM).) “Generally, ‘[a] 

plaintiff will be denied recovery only if his conduct is manifestly unreasonable in the 

light of his own intelligence or information. It must appear that he put faith in 

representations that were “preposterous” or “shown by facts within his observation to be 

so patently and obviously false that he must have closed his eyes to avoid discovery of 

the truth.” [Citation.] Even in case of a mere negligent misrepresentation, a plaintiff is 

not barred unless his conduct, in the light of his own information and intelligence, is 

preposterous and irrational. [Citation.]’ [Citation.]” (Id. at p. 865; see Beckwith v. Dahl

(2012) 205 Cal.App.4th 1039, 1067 (Beckwith).) Reasonable reliance is an inherently 

factual inquiry rarely amenable to resolution as a matter of law. As the California 

Supreme Court explained in Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 

1239: “‘Except in the rare case where the undisputed facts leave no room for a 

reasonable difference of opinion, the question of whether a plaintiff’s reliance is 

reasonable is a question of fact.’ [Citations.]” 

 Brown testified to her complete lack of experience in real estate transactions, and 

in her trust in Zive. “[T]he law is clear that ‘“‘[n]o rogue should enjoy his ill-gotten 

plunder for the simple reason that his victim is by chance a fool.’”’ [Citation.] . . . . 
16

‘“‘Nor is a plaintiff held to the standard of precaution or of minimum knowledge of a 

hypothetical, reasonable man.’ [Citation.]”’” (Beckwith, supra, 205 Cal.App.4th at p. 

1067; see also Boeken v. Philip Morris, Inc. (2005) 127 Cal.App.4th 1640, 1666-1667; 

Hartong v. Partake, Inc. (1968) 266 Cal.App.2d 942, 964-965 (Hartong).) In light of 

Brown’s circumstances and inexperience, it would not be irrational for her to rely on the 

disclosure statement. Brown testified that Zive told her he was a lawyer and real estate 

expert. It would not be unreasonable for Brown to expect Zive to know what disclosures 

were necessary and to timely make all required disclosures. There is substantial evidence 

that the disclosure statement was incomplete in material respects, and a jury could 

reasonably find that, considering Brown’s naiveté, her failure to investigate would not be 

“preposterous.” (OCM, supra, 157 Cal.App.4th at p. 865.) Nothing on the face of the 

disclosure statement was “so patently and obviously false” that she must have “‘closed 

[her] eyes to avoid discovery of the truth.’” (Ibid.) Moreover, Zive’s false statements 

regarding the possible fluctuation in interest rates on the first mortgage were plausible, 

particularly in light of the other material information and warnings that were omitted 

from the disclosure statement. (Hartong, supra, at pp. 965-966 [“If the defendant makes 

a plausible explanation of fact, the plaintiff is not required to further investigate”].) 

Taking into account the highly factual nature of the inquiry, there is sufficient evidence to 

support a finding that Brown’s reliance was justifiable. 

 Because Brown provided sufficient evidence of all the elements of fraud and 

negligent misrepresentation to support a verdict in her favor, the trial court erred in 

granting nonsuit as to both causes of action. The error was harmless with respect to 

Brown’s negligent misrepresentation cause of action, however, because the jury awarded 

the maximum amount of actual damages supported by substantial evidence. (Cal. Const., 

art. VI, § 13; Code Civ. Proc., § 475 [“No judgment, decision, or decree shall be reversed 

or affected by reason of any error, ruling, instruction, or defect, unless it shall appear 

from the record that such error, ruling, instruction, or defect was prejudicial . . . and that a 

different result would have been probable if such error, ruling, instruction, or defect had 

not occurred or existed”].) A plaintiff may only recover actual damages for negligent 
17

misrepresentation. (Fragale v. Faulkner (2003) 110 Cal.App.4th 229, 236-237.) Brown 

cannot be prejudiced, because no other damages are available to her. 

 With respect to Brown’s fraud cause of action, section 3294, subdivision (a) 

allows the recovery of punitive damages “[i]n an action for the breach of an obligation 

not arising from contract, where it is proven . . . the defendant has been guilty of 

oppression, fraud, or malice . . . .” As appellants concede, Brown’s complaint requested 

punitive damages with respect to her fraud claim. We cannot conclude that the grant of 

nonsuit as to her fraud claim was harmless. Brown is entitled to present her fraud claim 

to the jury, and to recover punitive damages, if warranted by the evidence. 

Legal Malpractice and Breach of Fiduciary Duty

Brown contends that the trial court erred in granting appellants’ motion for nonsuit 

with respect to her legal malpractice and breach of fiduciary duty claims. Appellants 

argue that the claims fail as a matter of law, and that Brown failed to properly state a 

cause of action for punitive damages with respect to either claim. 

 Appellants are correct that Brown did not state a cause of action for punitive 

damages as to the legal malpractice claim in the operative complaint. Moreover, she 

failed to argue that punitive damages should adhere to the legal malpractice claim in her 

opening brief, thus waiving the issue on appeal. (People v. Baniqued (2000) 85 

Cal.App.4th 13, 29.) As we discussed above, Brown was awarded the maximum amount 

of actual damages supported by substantial evidence, which are the only damages 

available to her relating to her legal malpractice cause of action. As a consequence of 

Brown’s failure to state a cause of action for punitive damages, any error that the trial 

court might have made in granting nonsuit on the legal malpractice claim would be 

harmless, because it would not affect Brown’s recovery. (Cal. Const., art. VI, § 13; Code 

Civ. Proc., § 475.) 

 However, Brown’s contention that the trial court erred in granting nonsuit on her 

breach of fiduciary duty cause of action cannot be resolved on this basis. Brown’s 
18

complaint stated a cause of action for punitive damages with respect to her claim for 

breach of fiduciary duty, and section 3294, subdivision (a) allows for the recovery of 

punitive damages as to that cause of action, if appropriate. (Scott v. Phoenix Schools, Inc.

(2009) 175 Cal.App.4th 702, 715.) 

 As stated above, in resolving the issue of whether nonsuit was properly granted, 

we “must give . . . plaintiff’[s] evidence all the value to which it is legally entitled, . . . 

indulging every legitimate inference that may be drawn from the evidence . . . .” 

(Carson, supra, 36 Cal.3d at pp. 838-839.) “‘The rules governing the granting of a 

nonsuit, however, do not relieve the plaintiff of the burden of establishing the elements of 

his case. The plaintiff must therefore produce evidence which supports a logical 

inference in his favor and which does more than merely permit speculation or conjecture. 

[Citation.] If a plaintiff produces no substantial evidence of liability or proximate cause 

then the granting of a nonsuit is proper. [Citation.]’ (Jones v. Ortho Pharmaceutical 

Corp. (1985) 163 Cal.App.3d 396, 402.)” (Alvarez v. Jacmar Pacific Pizza Corp. (2002) 

100 Cal.App.4th 1190, 1209.) 

 “‘The elements of a cause of action for breach of fiduciary duty are the existence 

of a fiduciary relationship, its breach, and damage proximately caused by that breach. 

[Citation.]’ [Citation.]” (Knox v. Dean (2012) 205 Cal.App.4th 417, 432.) A fiduciary 

duty may arise as a consequence of either a fiduciary relationship or a confidential 

relationship. “‘“[A] fiduciary relationship is a recognized legal relationship such as 

guardian and ward, trustee and beneficiary, principal and agent, or attorney and client . . . 

whereas a ‘confidential relationship’ may be founded on a moral, social, domestic, or 

merely personal relationship as well as on a legal relationship.”’ [Citations.]” (Persson 

v. Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141, 1160.) “‘The essence of a 

fiduciary or confidential relationship is that the parties do not deal on equal terms because 

the person in whom trust and confidence is reposed and who accepts that trust and 

confidence is in a superior position to exert unique influence over the dependent party.’ 

[Citation.]” (Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 271 

(Richelle L.).) 
19

 Brown contends that she presented evidence of both a fiduciary relationship and a 

confidential relationship between herself and Zive sufficient to withstand a motion for 

nonsuit. We disagree. 

 Brown first asserts that she and Zive had a fiduciary relationship as attorney and 

client. “‘“Except for those situations where an attorney is appointed by the court, the 

attorney-client relationship is created by some form of contract, express or implied, 

formal or informal. [Citation.]” [Citations.] . . . [¶] “An implied contract is one, the 

existence and terms of which are manifested by conduct.” [Citation.] “The distinction 

between express and implied in fact contracts relates only to the manifestation of assent; 

both types are based upon the expressed or apparent intention of the parties.” [Citation.] 

[¶] . . . [¶] . . . [I]n determining whether an attorney-client relationship exists . . . primary 

attention should be given to whether the totality of the circumstances, including the 

parties’ conduct, implies an agreement by the . . . attorney not to accept other 

representations adverse to the [putative client’s] personal interests. (See Friedman, The 

Creation of the Attorney-Client Relationship: An Emerging View [(1986)] 22 Cal. 

W[estern] L.Rev. [209,] 231 suggesting that one of the most important facts involved in 

finding an attorney-client relationship is “the expectation of the client based on how the 

situation appears to a reasonable person in the client’s position.”) [¶] . . . [¶] The 

question of whether an attorney-client relationship exists is one of law. [Citation.] 

However, when the evidence is conflicting, the factual basis for the determination must 

be determined before the legal question is addressed. [Citation.]’ [Citation.]” 

(Strasbourger Pearson Tulcin Wolff Inc. v. Wiz Technology, Inc. (1999) 69 Cal.App.4th 

1399, 1404 (Strasbourger).) Because we review the grant of a motion for nonsuit, we do 

not consider conflicting evidence, but rather resolve all conflicts in favor of Brown. 

 Here, the evidence of an attorney/client relationship consisted of Brown’s 

testimony that Zive told her he was an attorney and that he would represent them both 
20

and handle the transaction.7 Even assuming the truth of Brown’s testimony, and drawing 

all inferences in her favor, the totality of the circumstances do not imply an agreement in 

which Zive would not “accept other representations adverse to [Brown’s] personal 

interests,” nor would a reasonable person believe that to be the case. (Strasbourger, 

supra, 69 Cal.App.4th at p. 1404.) It is undisputed that Brown met Zive approximately 

20 minutes before she signed the purchase agreement. They met at the residence—not a 

law office—for the sole purpose of transacting for the purchase of a house. As buyer and 

seller, their postures were clearly adverse. Zive would unquestionably benefit from 

selling the property to Brown and arranging financing, and could be expected to do so on 

terms favorable to himself. Moreover, the buyer’s inspection advisory provided to 

Brown by Zive that evening warned repeatedly that the interests of buyer and seller were 

adverse. Finally, although neither a written contract nor compensation is required to 

establish an attorney/client relationship, the absence of both militate against the 

conclusion that Zive intended to act in Brown’s best interests rather than in his own. 

Absent payment and written obligation, he had no obvious motivation to act as an 

attorney representing Brown’s best interests. The trial court did not err in determining 

that there was no attorney/client relationship as a matter of law. 

 “‘A “confidential relationship,” as that term is used in the cases, refers to an 

unequal relationship between parties in which one surrenders to the other some degree of 

control because of the trust and confidence which he reposes in the other. When a 

confidential relationship is found to exist, the one in whom confidence was reposed may 

be held to a higher standard of disclosure and fairness than in an arm’s-length 

relationship . . . .’” (Richelle L., supra, 106 Cal.App.4th at p. 272, fn. 6.) The essential 

elements of a confidential relationship are as follows: “‘1) The vulnerability of one party 

to the other which 2) results in the empowerment of the stronger party by the weaker 

which 3) empowerment has been solicited or accepted by the stronger party and 4) 

 

7 Zive testified that he was an Israeli attorney, and had registered with the 

California Bar as a foreign legal consultant. He was not barred in California. 
21

prevents the weaker party from effectively protecting itself.’ [Citation.]” (Id. at p. 272.) 

“The vulnerability that is the necessary predicate of a confidential relation, and which the 

law treats as ‘absolutely essential’ (Bogert, Trusts & Trustees (2d ed. 1978) § 482, at pp. 

288-289), usually arises from advanced age, youth, lack of education, weakness of mind, 

grief, sickness, or some other incapacity.” (Id. at p. 273.) 

 In her opening brief on cross appeal, Brown alleges that, “[b]y telling Brown he 

was an attorney and an expert in real estate finance, Zive fostered the impression that he 

was much more knowledgeable than Brown.” The crux of her argument appears to be 

that because Zive told her he had more education and experience than she did in the areas 

of law and real estate, she was necessarily vulnerable. But a mere difference in degree of 

experience or education does not create a fiduciary duty. Such differences abound. If 

having less experience or education constituted incapacity, virtually every purchase and 

sale transaction would give rise to a fiduciary duty, because people vary in their 

experience and education and “[e]very contract requires one party to repose an element of 

trust and confidence in the other to perform.” (Wolf v. Superior Court (2003) 107 

Cal.App.4th 25, 31.) Absent a showing of vulnerability, which is an essential element of 

her cause of action, Brown cannot demonstrate that she and Zive had a confidential 

relationship. The evidence is necessarily insufficient to support a verdict in Brown’s 

favor as to her breach of fiduciary duty cause of action. The trial court did not err in 

granting the motion for nonsuit as to the claim. 
22

DISPOSITION 

 The judgment is modified to reduce the damages awarded to $325,283. The order 

granting nonsuit as to the fraud cause of action and the related claim for punitive 

damages is reversed. The cause is remand for limited retrial on Brown’s cause of action 

for fraud, and if appropriate, punitive damages. In all other respects the judgment is 

affirmed. Brown is awarded costs on appeal. 

 KRIEGLER, J. 

We concur: 

 TURNER, P. J. 

 GOODMAN, J. *

 

 * Judge of the Los Angeles County Superior Court, assigned by the Chief Justice 

pursuant to article VI, section 6 of the California Constitution.