Court Opinion

ID: 4037199
Source: CourtListenerOpinion
Date Created: 2016-09-26 21:02:51.961218+00
Date Added: 2024-06-11T14:49:56.437938
License: Public Domain

Filed 9/26/16 Bel Vino, LLC v. Stuart CA4/1
                   NOT TO BE PUBLISHED IN OFFICIAL REPORTS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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                 COURT OF APPEAL, FOURTH APPELLATE DISTRICT

                                                 DIVISION ONE

                                         STATE OF CALIFORNIA

BEL VINO, LLC, et. al.,                                                 D069902

          Plaintiffs and Appellants,

          v.                                                            (Super. Ct. No. RIC 1204612)

MARSHALL STUART et.al.,

          Defendants and Respondents.

          APPEAL from a judgment and order of the Superior Court of Riverside

County, John W. Vineyard, Judge. Affirmed.

          Lieberg, Oberhansley & Strohmeyer and William H. Strohmeyer for

Plaintiffs and Appellants.

          Spaulding, Gomm & Brammer and J. Brady Brammer for Defendants and

Respondents.

          Plaintiffs Bel Vino, LLC (Bel Vino); Mike Janko (Janko), an individual and

as Trustee of Bel Vue Trust u/t/a dated October 17, 2011, and American Estate
and Trust, LLC (collectively plaintiffs) appeal from a judgment and posttrial order

in favor of defendants Marshall J. Stuart (Marshall), Susan E. Stuart (together the

Stuarts) and Stuart Cellars, LLC (Stuart Cellars, collectively with the Stuarts,

defendants) on claims related to their purchase of a winery from defendants.

Plaintiffs claim the trial court erred in denying their request for relief from their

waiver of a jury trial. They contend substantial evidence does not support the trial

court's findings against them on their claims for misrepresentation, concealment

and breach of contract related to the condition of the property. Plaintiffs also

assert the trial court erred in: (1) reforming the deed to reserve cell tower lease

payments to defendants; (2) amending defendants' cross-complaint at the close of

evidence; and (3) awarding defendants their expert witness fees. We affirm.

                                               I.

                   FACTUAL AND PROCEDURAL BACKGROUND

       In 1994, Marshall Stuart, a general contractor, and his then wife, Susan,

purchased real property (the property) located in Temecula. The Stuarts opened

Stuart Cellars, a winery, on the property. George Cartwright acted as the chief

operating officer for Stuart Cellars. At some point in time, cell towers were

constructed on the property. In 2007, Riverside County cited defendants for

operating an unpermitted winery. Defendants later submitted and obtained

approval for a plot plan subject to certain conditions of approval. Marshall

understood that the purpose of the plot plan was to legalize the winery. In 2011,

the Stuarts sought to sell the winery due to their divorce.

                                           2
         Danny Martin, a commercial real estate appraiser and grape farmer, learned

from Cartwright that the property was for sale. Michael Newcomb, Marshall's

attorney, introduced Martin to Janko.1 Martin conveyed to Newcomb that Janko

was a very sophisticated buyer. Janko later hired Martin to help him purchase a

winery, or land to develop into a vineyard. Martin told Janko that the Stuart

Cellars property was for sale and the men went to look at the property. Martin

drafted a letter of intent on the property for Janko, as an undisclosed principal.

The letter of intent provided for a 30-day closing period.2 After Martin signed the

letter of intent, he assigned it to Janko on August 19, 2011. Around that same

time, Marshall signed a term sheet with AP Wireless to sell the income stream

from two leases on the cell tower for $250,000. AP Wireless did not sign the term

sheet.

         On August 30, 2011, Janko and Stuart met to discuss questions Janko had

about the winery. At that meeting, Janko learned about regulatory or government

interface issues that needed to be addressed on the property, including: bringing a

1        Newcomb was later named as a defendant, but is not a party to this appeal.

2      Janko had the transaction set for a 30-day escrow period because he wanted
to move quickly. Martin considered that time period to be "light speed" for a
winery transaction. Apparently, Stuart Cellars held an annual clam bake for the
public and Janko wanted to close the deal before the annual clam bake so he could
realize the income from the event. Ultimately, the transaction closed on October
25, 2011, but was made retroactive to October 21 — 32 days after the contracts
were signed.

                                          3
fire line from the street; hooking up to a new public sewer system; and adding

ingress and egress lanes.

       On September 19, 2011, the parties executed an asset purchase agreement

(APA) to purchase the assets of the winery and a real property purchase and sale

agreement (RPPA) to purchase the property. That same day, Martin became the

manager for Bel Vino, acting on behalf of and at the direction of Janko. Section

5.4 of the APA, titled "Compliance with Law," addressed zoning and land use

matters. That section stated that the property was "subject to those requirements

under the Plot Plan Application and Conditions of Approval affecting the Real

Property."

       The RPPA stated that the "Property" being sold included defendants'

interest in "all leases and other rental arrangements for occupancy of the Real

Property . . . including without limitation all rights to collect future rents." The

RPPA provided for a "feasibility period" where defendants had five days

following the effective date of the agreement to provide plaintiffs with a list of

materials regarding the property, including "any notices of violation or default

received by any governmental authority with respect to the property." Thereafter,

plaintiffs were required to conduct a due diligence review of the property.

       Janko understood that the contracts he signed provided for a feasibility

period and a due diligence period, and that he could "back out of the contract" if

he "uncovered some serious problems."

                                           4
       After signing the contracts, Marshall provided Janko with a copy of the plot

plan. Marshall reviewed the plot plan with Janko, page by page, indicating which

items had been completed. After the cover letter, the first page of the plot plan

stated: "There is currently one open and active Code Violation case on the project

site, CV065820, for an unpermitted winery and tasting room. This application

was filed on December 13, 2007 in response to the code violation." Martin

expressed concern that this might be a "deal breaker" and that the transaction

might need to be renegotiated. At that point, Janko "took the whole file over" to

meet with Marshall's engineering firm, Hunsaker and Associates (Hunsaker), to

obtain a cost estimate for the remaining issues in the plot plan.

       After defendants closed escrow and purchased the property, Martin learned

that Janko was not happy about several aspects of the transaction, including that

the barn had no footings and had only been approved as an agricultural building.

Plaintiffs sued defendants, who later filed a cross-complaint. Plaintiffs waived

their right to a jury trial and the trial court denied them relief from their waiver of

a jury trial. The matter proceeded as a bench trial.

       After plaintiffs rested, defendants dismissed most of their cross-complaint,

leaving only their claim for cell tower related damages. Defendants also moved

for judgment under Code of Civil Procedure3 section 631.8. The trial court

granted the motion and amended defendants' cross-complaint to include a claim

3      Undesignated statutory references are to the Code of Civil Procedure.

                                           5
for reformation. The judgment ordered the deed reformed to reserve income from

the cell tower leases to the Stuarts. Plaintiffs timely appealed from the judgment.

The trial court later issued an order granting defendants their attorney fees and

costs. Plaintiffs timely appealed from that order.

                                          II.

                                    DISCUSSION

A.     Jury Waiver

       Plaintiffs contend the trial court abused its discretion in denying their

request for relief from waiver of a jury trial by failing to give sufficient weight to

the strong public policy in favor of jury trial requests and giving too much weight

to defendants' claims of prejudice. While we may have come to a different

conclusion on plaintiffs' motion, we do not find that the trial court abused its

discretion in denying the request for relief from waiver of jury trial.

       The right to a jury trial in a civil case is expressly guaranteed under our

Constitution. (Cal. Const., art. I, § 16.) However, in a civil case the right "may be

waived by the consent of the parties expressed as prescribed by statute." (Ibid.;

§ 631, subd. (f) [listing ways a party can waive trial by jury].) Payment of the jury

fee by a party on one side of the case does not relieve parties on the other side of

the case from a jury waiver. (§ 631, subd. (b).)

       Generally, once a party has waived its right to jury trial, such waiver cannot

be withdrawn except in the discretion of the trial court. (Taylor v. Union Pac. R.R.

Corp. (1976) 16 Cal.3d 893, 898.) In determining whether to grant a motion to be

                                           6
relieved of a jury waiver, the trial court may consider delay in rescheduling a jury

trial, lack of funds, timeliness of the request and prejudice to the litigants. (Gann

v. Williams Brothers Realty, Inc. (1991) 231 Cal.App.3d 1698, 1704 (Gann).) A

court does not abuse its discretion where any reasonable factors supporting denial

of relief can be found, even if a reviewing court, as a question of first impression,

might take a different view. (Ibid.)

       A writ of mandate is the proper remedy to secure a jury trial allegedly

wrongfully withheld. (Byram v. Superior Court (1977) 74 Cal.App.3d 648, 654

(Byram); Gann, supra, 231 Cal.App.3d at p. 1704 [same]; Winston v. Superior

Court (1987) 196 Cal.App.3d 600, 603 [same]; McIntosh v. Bowman (1984) 151

Cal.App.3d 357, 364 [same] (McIntosh).) In Byram, the court explained:

"Perhaps the most important, though seldom articulated reason for allowing the

determination of a trial court to stand is . . . '[d]efendants cannot play "Heads I

win, Tails you lose" with the trial court.' Reversal of the trial court's refusal to

allow a jury trial after a trial to the court would require reversal of the judgment

and a new trial. It is then reasonable to require a showing of actual prejudice on

the record to overcome the presumption that a fair trial was had and prejudice will

not be presumed from the fact that trial was to the court or to a jury." (Byram, at

p. 653.) As another court noted, "[j]ust as criminal defendants often play the game

known as ' "waive the lawyer," ' civil litigants sometimes joust by ' "waiving the

jury." ' " (McIntosh, at p. 363.)

                                           7
       The Byram and McIntosh courts required a showing of actual prejudice

from the court's denial of their motion. (Byram, supra, 74 Cal.App.3d at p. 653;

McIntosh, supra, 151 Cal.App.3d at p. 363.) On this point, we agree with the

Gann court that "it is difficult to envision precisely how one shows prejudice from

denial of a jury trial aside from that inherent in deprivation of a constitutional

right." (Gann, supra, 231 Cal.App.3d at p. 1704.)4 In any event, even without

requiring plaintiffs to demonstrate some prejudice from the court's denial of their

motion, we find no abuse of discretion.

       Here, the trial court found, and plaintiffs do not dispute, that they made a

strategic decision to waive their right to a jury trial. Plaintiffs did not seek writ

review of the trial court's denial. Instead, they waited until after the bench trial,

where they were unsuccessful, and sought appellate review and a new trial. The

sole issue presented is whether the trial court erred in denying relief. Critically,

we are reviewing the discretionary denial of relief from the waiver, not the denial

of the underlying constitutional right to a jury trial.

4       As plaintiffs note, other cases have reversed judgments on appeal following
the refusal to grant relief from a jury waiver without requiring a showing of actual
prejudice. (Boal v. Price Waterhouse & Co. (1985) 165 Cal.App.3d 806, 810-811;
Bishop v. Anderson (1980) 101 Cal.App.3d 821, 823-825; see also Massie v. AAR
Western Skyways, Inc. (1992) 4 Cal.App.4th 405, 412.) Notably, none of these
cases address the Byram line of authority requiring that parties proceed via writ of
mandate to challenge the allegedly wrongful denial of a jury trial. Additionally,
all of these cases involved an inadvertent waiver of a jury trial, not a strategically
made decision to waive a jury as presented here.

                                            8
       Defendants argued below that their trial preparation was geared toward a

judge who is more familiar with the issues. This preparation included: choosing

exhibits; how they prepared their experts; the type of technology to use; and how

to present and argue the case. These are not small matters. Moreover, as

defendants noted in their opposition to the motion, the case involved questions

regarding agency and the parole evidence that would have required extensive

pretrial evidentiary hearings, whereas if the case were tried to the court, the court

could hear all the evidence and resolve evidentiary disputes at the same time.

Plaintiffs acknowledged the need to hold evidentiary hearings if the case were

tried to a jury in pretrial correspondence with defendants. At that time, defendants

believed the entire case could be tried to the court in four or five days. However,

it took plaintiffs 16 days to present their case to the court. Had plaintiffs tried the

case to a jury, it is highly likely that the case would have taken even longer to try.

Thus, trying the matter to a jury would have prejudiced defendants by increasing

the trial length and defendants' attorney fees.

       Finally, although not addressed by the trial court, Newcomb represented

himself at trial because plaintiffs' case against him involved the simple factual

issue whether he had acted as plaintiffs' attorney. Newcomb did not hire counsel,

file motions in limine or depose plaintiffs' agency expert because the case would

be tried without a jury. Newcomb also voiced his displeasure that while respective

counsel for plaintiffs and defendants exchanged e-mail correspondence regarding

                                           9
whether the matter would be tried to a court or a jury, he was not included in these

e-mails. Thus, prejudice to Newcomb supported the trial court's ruling.

       Under these circumstances, plaintiffs have not demonstrated an abuse of the

trial court's discretion in the denial of their request for relief from their jury

waiver.

B.     Sufficiency of the Evidence

       1.      General Legal Principles

       A party may move for judgment in its favor after the opposing party has

completed the presentation of its evidence. (§ 631.8, subd. (a).) The trial court,

sitting as trier of fact, may weigh the evidence and order judgment in favor of the

moving party. (Ibid.) We review the court's order under section 631.8 for

substantial evidence. (Fink v. Shemtov (2012) 210 Cal.App.4th 599, 608.) We

draw all reasonable inferences and resolve any evidentiary conflict in support of

the trial court's decision. (Combs v. Skyriver Communications, Inc. (2008) 159

Cal.App.4th 1242, 1263.) The trial court weighs the credibility of witnesses and

evidence and may choose to believe some witnesses and not others. (Ibid.)

       " 'A party who challenges the sufficiency of the evidence to support a

particular finding must summarize the evidence on that point, favorable and

unfavorable, and show how and why it is insufficient. [Citation.]' [Citation.] . . .

'He cannot shift this burden onto respondent, nor is a reviewing court required to

undertake an independent examination of the record when appellant has shirked

                                           10
his responsibility in this respect.' " (Huong Que, Inc. v. Luu (2007) 150

Cal.App.4th 400, 409 (Huong Que).)

       2.     Misrepresentation and Contract Claims

              a.     Additional background

       When the Stuarts initially purchased the property it contained several

structures, including a pole barn that had been permitted in 1979 as an agricultural

building. A pole barn consists of poles that hold up rafters, with the poles being

the sole foundation for the building. A pole barn has no footings and the walls of

the pole barn provide shelter, but no structural support, and can come off if not

needed.

       One area of the pole barn had an open area with a dirt floor. Defendants

later replaced the dirt floor with a cement floor. Marshall did not obtain a permit

for the cement floor because the building was for agricultural use. Another area of

the pole barn had two-stories, consisting of a storage area, kitchen and bathroom

below and a living space above.

       In 2004, Marshall installed an unpermitted 15-foot-tall and approximately

126-foot-long retaining wall on the property. Marshall admitted that he should

have obtained a permit for the wall, that the unpermitted wall existed on the

property when he sold it to plaintiffs and that he did not disclose to Janko that the

wall was not permitted. Marshall, however, had spoken to John Petty, a Riverside

County commissioner, about the retaining wall. Marshall understood that the plot

plan forgave him for not having a permit because the retaining wall was listed as

                                          11
an existing structure that would be approved during the planned commission

hearing by showing how the wall had been constructed. Through his engineer,

Marshall understood that while work is done on the approved plot plan any

citations are waived, and when escrow closed there were no citations or

outstanding issues on the property.

       Plaintiffs' operative complaint contained causes of action for intentional

and negligent misrepresentation and fraudulent concealment. Among other things,

plaintiffs alleged that defendants intentionally or negligently failed to disclose or

concealed that improvements on the property were built without permits and in

violation of local building and safety ordinances. Plaintiffs also alleged that

defendants breached their warranty in the RPPA that the property was not in

violation of any law, statute or ordinance.

       In its statement of decision, the trial court noted that the RPPA provided for

a feasibility period whereby plaintiffs could conduct due diligence on the property.

The court found that, to the extent plaintiffs' complaints constituted a breach of

either the APA or the RPPA, defendants disclosed the breaches, plaintiffs

discovered the breaches, or the breaches should have been discovered through due

diligence prior to closing. By closing the transaction in the face of potential

breaches, the trial court concluded that plaintiffs failed to exercise their rights

under the agreement and waived any claim for such a breach. The trial court also

found plaintiffs failed to meet their burden of proof establishing any

                                           12
misrepresentation or concealment of a material fact, reliance, causation, intent or

damages.

               b.     Analysis

       Plaintiffs contend substantial evidence did not support the trial court's

findings against them on their claims for misrepresentation, concealment and

breach of contract related to the condition of the property. Specifically, plaintiffs

contend defendants had a duty to disclose that they had made unpermitted

improvements to the winery which were not code compliant; namely, defendants

did not obtain permits when they (1) replaced the dirt floor in the barn with

concrete without installing a foundation and (2) built a retaining wall.

       Plaintiffs concede that defendants disclosed some construction issues, but

argue they did not discover until after the transaction closed that the barn had

originally been registered as an agricultural building and would need extensive

work to bring it up to code for its current use as a winery. Plaintiffs also assert

substantial evidence does not support the trial court's findings that: (1) the plot

plan conditions of approval put them on notice regarding the foundation issues in

the barn and the retaining wall; and (2) plaintiffs did not exercise due diligence

before closing the transaction on the property.

       As a preliminary matter, plaintiffs' contentions have surface appeal because

Marshall conceded that he did not disclose the unpermitted retaining wall or that

he poured a concrete floor in a portion of the barn. Based on our review of the

entire record, however, it is clear that plaintiffs did not set forth all of the material

                                           13
evidence, both favorable and unfavorable, to their position on the disputed issues.

In this situation, we could have deemed them to have waived or forfeited their

contentions that insufficient evidence supported the trial court's findings. (Huong

Que, supra, 150 Cal.App.4th at pp. 409-410.) Nonetheless, we exercise our

discretion to consider plaintiffs' claims on their merits. As discussed below, ample

evidence supported the trial court's conclusion that the alleged unpermitted

improvements on the property, including the unpermitted retaining wall, should

have been discovered by plaintiffs had they exercised due diligence before closing

the transaction.

       Under section 4.1 of the RPPA, defendants had five days to provide

information related to the property, including "any notices of violation or default

received by any governmental authority with respect to the Property." Thereafter,

plaintiffs were required to "promptly commence, and diligently and in good faith

pursue, [their] due diligence review" of the property, including: (1) the feasibility

of any improvements planned by plaintiffs, such as the cost and availability of

building permits and other approvals necessary to construct the improvements; and

(2) compliance with applicable laws, including use restrictions, building codes and

health and safety laws. If plaintiffs were dissatisfied with the property following

due diligence, they could terminate the agreement and have their deposit refunded.

       Section 7.3 of the RPPA stated in relevant part: "[I]f either party receives

notice, before Close of Escrow, of a breach of any representation or warranty

made by the other party, and proceeds to Close of Escrow, such breach shall have

                                         14
been waived." Finally, section 5.4 of the APA expressly noted that defendants'

warranty regarding compliance with all requirements of federal, state and local

laws was "subject to those requirements under the Plot Plan Application and

Conditions of Approval affecting the Real Property."

        Turning to the barn (winery building), there is no evidence showing

defendants knew of any violations involving the barn, that defendants

misrepresented or concealed any permitting issue regarding the barn or that

plaintiffs could not have discovered the alleged problems with using the barn for a

different purpose had they done their due diligence on the property. Rather, the

evidence supports the trial court findings that plaintiffs would have discovered any

alleged problems with the building had they conducted due diligence as required

by the RPPA.

        The two-story portion of the barn, consisting of a storage area, kitchen and

bathroom below and a living space above, had an existing cement floor. When

defendants purchased the property Marshall did not know whether the two-story

portion of the barn had a footing or foundation. Marshall assumed, however, that

the portion of the barn that he used for a commercial purpose, the tasting room and

office, had a footing or foundation because when he purchased the property he saw

that the county had permitted the building. Defendants used the remainder of the

barn for barrel and case storage. Marshall testified that he had not received notice

of any violation regarding the barn that was not addressed in the approved plot

plan.

                                         15
       In 1996, when Marshall installed the cement floor in that portion of the

barn that had been used to house horses, he did so without installing a footing or

foundation for the cement floor. Marshall did not obtain a county permit for this

work because poles supported the barn and he merely poured a concrete slab.

Additionally, that portion of the barn with the new concrete floor would continue

its agricultural use as a barrel and case storage facility. After Marshall installed

the cement floor, his use of the barn never changed from an agricultural use to a

commercial use and, 99 percent of the time, defendants used the barn for barrel

and case storage. Marshall kept this wine storage area "blocked off" to the public

with a curtain and signs stating the area was for employees only. Marshall

considered the wine storage portion of the barn as an agricultural purpose. During

his negotiations with Janko and during the escrow period, Marshall never

mentioned anything to plaintiffs about the cement floor possibly needing a footing

or foundation because he was not aware that a footing was required for that

portion of the barn.

       Escrow closed on the property in October 2011. Martin testified that Janko

did not hire an inspector to look for code compliance until after escrow had closed.

Janko claims he retained Marshall's engineering firm, Hunsaker, prior to closing.

Hunsaker, however, merely reviewed the plot plan with Janko. Although the plot

plan did not specifically address building code violations, it did specify that

approval of the plot plan was conditioned on bringing the winery into

conformance with all building codes. The trial court noted that section 5.4 of the

                                          16
APA made defendants' warranty regarding compliance with all laws subject to the

requirements in the plot plan (i.e., that all buildings would need to be in

conformance with all building codes), and thus found that plaintiffs were on

inquiry notice as to whether any code violations existed.

       Janko presented no evidence that he had Hunsaker review county records

regarding permits on the property before he closed the transaction.5 Janko

retained engineering expert, Larry Markham after escrow closed on the property.

Markham reviewed the various applications that had been processed on the

property over the past 10 to 15 years, the existing plot plan and conditions of

approval for the property. Markham saw that an agricultural registration existed

for the winery and that the house was properly permitted, but no permits existed

for the winery building. He provided this information to Janko, who expressed

dismay at the amount of work that would be needed. Markham conceded that the

plot plan required that all structures needed to be made code compliant. Markham

essentially testified that if Janko had consulted him and geotechnical and structural

engineers when Janko received the plot plan and conditions of approval, he could

5       Relying on Rogers v. Warden (1942) 20 Cal.2d 286, 288, and Furla v. Jon
Douglas Co. (1998) 65 Cal.App.4th 1069, plaintiffs assert they had no duty to
examine public records or engage an expert to protect themselves from defendants'
fraud. While we have no quarrel with these statements as a general matter, these
cases do not involve contractual provisions specifically requiring a party to
(1) exercise due diligence regarding compliance with applicable laws, including
building codes, and (2) determine that the buyer's planned improvements complied
with applicable laws, including use restrictions, building codes and health and
safety laws.

                                          17
have made these determinations earlier. Markham was able to complete his work

a few hours each day over a period of a few days.

       John O'Donnell, defendants' civil engineer, testified that the tasting room in

the barn was permitted and that Riverside County was allowing use of the tasting

room and kitchen under a stipulation that upgrades would be implemented to bring

the building up to current building code standards, including adding shear walls,

structural hold downs to the foundation and tie-downs to the roof rafters.

O'Donnell stated that as long as the barn was used as an agricultural building, it

complied with the permit that had been issued. He also testified that it was

permissible to have a commercial area in a portion of a permitted agricultural

building and that adding a shear wall and a firewall would bring the building to

code. Notably, the Riverside County Code of Ordinances provides that wineries

can have sampling rooms and that a sampling room is considered an incidental

commercial use.

       After plaintiffs purchased the property, they substantially changed how the

barn had been used by defendants. Immediately after closing the transaction,

Janko removed everything from the barrel room and renovated the space to

accommodate 150 seated guests. Janko installed televisions in the barrel room, a

bar and tables for seating. Martin understood that Janko's changed use of the barn

impacted its permitted use. Markham similarly conceded that one problem was

Janko's use of an agricultural building for a commercial purpose, which triggered

additional work on the building, including bringing the building up to structural

                                         18
code standards. Appellants cited no evidence showing that the Stuarts knew how

Janko planned to use the barn after the purchase.

       This evidence supported the trial court's findings that plaintiffs failed to

meet their burden of proving that the barn was not code compliant at the time of

closing, that the plot plan placed defendants on inquiry notice regarding building

code compliance issues and, had plaintiffs conducted due diligence before closing

the transaction, they would have discovered any alleged problems with the barn

for their intended use.

       Turning to the unpermitted retaining wall, the evidence supports the trial

court's findings that the plot plan and conditions of approval placed plaintiffs on

inquiry notice regarding code compliance issues and that plaintiffs could have

discovered any issues regarding the retaining wall had they conducted due

diligence before closing the sales transaction as required by the contract.

Significantly, had plaintiffs hired Markham before closing escrow on the property

they would have discovered that the retaining wall, a readily visible improvement,

did not have a permit. O'Donnell, defendants' civil engineer, testified that section

20.18 of the conditions of approval attached to the plot plan sets forth the

requirement that the permittee's successors-in-interest (i.e., plaintiffs) obtain all

necessary permits for all existing buildings and structures on the property and this

requirement included the retaining wall and barn.

       O'Donnell explained that it is common to obtain a permit for an existing

structure. After speaking to a structural engineer for Riverside County and

                                           19
performing some calculations, O'Donnell opined that the retaining wall exceeded

building code requirements and there was "no question in [his] mind" that the

retaining wall could be permitted. If for some reason the retaining wall could not

be permitted, O'Donnell opined that the wall would not need to be removed as it

was stronger than the soil, and that backfill could be added to create a slope. Even

Keith Kulberg, plaintiffs' general contractor, admitted that a structural engineer

could determine whether the retaining wall had been built to code and that it might

be possible to obtain a permit for the retaining wall.

       In summary, plaintiffs failed to meet their burden of showing the evidence

did not support the trial court's findings that either defendants disclosed the

breaches, plaintiffs discovered the breaches, or should have discovered the

breaches, through due diligence prior to closing.6

       3.     Cell Tower Lease Revenues

              a.     Additional background

       The RPPA provided that defendants had the right to approve service

contracts that they elected to assume upon closing and that these service contracts

would be listed on exhibit D to the RPPA. Exhibit D specified that the parties

would complete the exhibit "during [the] feasibility period," which began on

September 19, 2011, and ended October 15, 2011. On the day the parties executed

6      The trial court also found plaintiffs did not meet their burden of proof
regarding damages, a finding plaintiffs did not contest in their opening brief.
Defendants pointed out this oversight in their respondents' briefing, arguing the
lack of damages supported the judgment in their favor. Based on the foregoing
discussion, we need not address this issue.

                                          20
the RPPA, Newcomb handwrote language onto exhibit D of the RPPA that

recorded and unrecorded cell tower leases would be assigned to plaintiffs, but that

all revenue from these leases was retained by the Stuarts. On the copy of the

RPPA signed by Janko, exhibit D is blank. At closing, Newcomb withdrew the

handwritten exhibit D, telling the escrow company it was no longer necessary. All

parties signed a version of exhibit D which stated: "No contracts to be assigned

after due diligence during the feasibility period."

       Plaintiffs' amended complaint sought declaratory relief, alleging a

controversy existed regarding the entitlement to cell tower lease payments for a

cell tower lease on the property. Plaintiffs contend that the lease and the right to

receive all payments under the lease transferred to them when they purchased the

property, whereas defendants contend that they have the right to continue to

receive the cell tower lease payments.

       Defendants argued that the cell tower revenues were not properly excluded

from the transaction based on a mutual mistake of the parties. The trial court

agreed, noting that before selling the property to plaintiffs, defendants had

substantially completed a separate deal to sell the revenue from the cell towers to

another party and the communications between the parties showed that all parties

understood that the cell tower leases were not part of the transaction. As support

for this finding, the trial court referenced paragraph 8(f) of the RPPA which

specifically allowed defendants to negotiate the cell tower leases while the real

property transaction was pending. The court stated: "When taken in context with

                                          21
the other communications between the parties, this provision reinforces the factual

finding that any failure to exclude the cell tower lease revenue was a mutual

mistake by the parties." Based on its findings, the trial court ordered that the deed

to the property be reformed to designate that all cell tower lease income belonged

to the Stuarts.

                  b.   Legal principles

       "When, through . . . mistake . . . , a written contract fails to express the real

intention of the parties, such intention is to be regarded, and the erroneous parts of

the writing disregarded." (Civ. Code, § 1640.) If there is "a mutual mistake of the

parties, or a mistake of one party, which the other at the time knew or suspected,"

a written contract "may be revised, on the application of a party aggrieved, so as to

express that intention, so far as it can be done without prejudice to rights acquired

by third persons, in good faith and for value." (Civ. Code, § 3399.)

       A "court may only reform the writing to conform with the mutual

understanding of the parties at the time they entered into it, if such an

understanding exists." (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 524.)

Parole evidence is "admissible to show mutual mistake even if the parties intended

the writing to be a complete statement of their agreement" "because the court must

divine the true intentions of the contracting parties and determine whether the

written agreement accurately represents those intentions." (Id. at p. 525.)

       A mistake of fact is defined, in part, as "a mistake, not caused by the

neglect of a legal duty on the part of the person making the mistake." (Civ. Code,

                                           22
§ 1577.) "[O]rdinary negligence does not constitute neglect of a legal duty within

the meaning of Civil Code section 1577." (Donovan v. RRL Corp. (2001) 26

Cal.4th 261, 283.) "In determining what conduct will amount to a neglect of duty

the courts recognize there is an element of carelessness in nearly every case of

mistake [citation] and that which does not amount to the neglect of a legal duty

will not of itself bar" equitable relief. (Reid v. Landon (1958) 166 Cal.App.2d

476, 482.) "Only where the mistake results from 'a failure to act in good faith and

in accordance with reasonable standards of fair dealing' " is equitable relief

unavailable. (Donovan, at p. 283.)

              c.     Analysis

       Plaintiffs contend the trial court's granting of the cell tower revenues to

defendants is not supported by substantial evidence. They assert no basis existed

for reformation of the deed as no mutuality of understanding existed as to the cell

tower income. We are not persuaded.

       The evidence shows the parties mutually understood that the cell tower

income was not part of the transaction. Marshall testified that there was never any

discussion of including the cell towers in the sale of the property to plaintiffs.

Rather, Marshall and Newcomb discussed with Martin that the cell towers were

not part of the transaction when Martin was still listed as the buyer. When

Marshall signed the RPPA, he instructed Newcomb to write on exhibit D that the

cell tower income was excluded. The handwritten version of exhibit D entitled

Marshall to all past and future revenue from the cell towers. Marshall directed

                                          23
Newcomb and Martin to tell Janko about exhibit D because it was important to

Marshall for Janko to know that the cell towers were not part of the purchase.

       Martin's testimony mirrored Marshall's. Martin had a conversation with

Janko that the income from the cell tower leases was excluded from the

transaction because the Stuarts wanted to keep that income or keep the leases in

their name and that the title insurance policy would exclude the leases. Martin

could not recall if he told Janko that the leases had been sold or were in the

process of being sold, but Martin believed that he informed Janko that the Stuarts

were waiting for a do not disturb agreement to construct another cell tower on the

property. Martin informed Janko that the cell tower leases were excluded from the

transaction, and used the term "stripped" to convey this to Janko.7

       Martin testified that Janko acknowledged his understanding that the cell

tower leases were excluded from the transaction. Martin had "no doubt" that the

Stuarts were supposed to receive all the income from the cell tower leases and, if

the Stuarts did not receive this income, this would have constituted a mistake

based on his understanding of the parties' agreement. Martin suggested that the

cell tower leases be included in exhibit D because this is where exclusions to the

7       Citing Ward v. Yorba (1899) 123 Cal. 447, plaintiffs assert that any shared
understanding between Martin and the Stuarts regarding the cell tower income is
irrelevant because Janko did not share this mutual understanding. This argument
ignores that Martin imparted his knowledge regarding the cell towers to Janko and
Janko expressed his understanding in an e-mail that the cell tower leases were not
part of the deal.

                                         24
transaction were to be listed. Newcomb, however, never had Janko sign the copy

of exhibit D that contained his handwritten notation.

       In e-mail correspondence between Martin and Newcomb that was copied to

Janko, Martin informed Newcomb and Janko that he had copies of the cell tower

leases from the title insurance company so that they could be excluded from the

transaction. The title insurance policy, which Martin reviewed, excluded the cell

tower leases and another unrecorded cell tower lease. Martin communicated this

information to Newcomb and Janko. This evidence amply supported the trial

court's conclusion that all parties understood that the cell tower income was not

part of the transaction.8

       Plaintiffs argue there was no mutual mistake and that reformation was

inappropriate because the parties did not share the same understanding of the

transaction. To support this contention, plaintiffs cite to a portion of Martin's

testimony where he stated that plaintiffs' cell tower income had already been

contractually obligated and those cell towers were no longer an issue.

       Plaintiffs inappropriately focus on "why," rather than "what." The evidence

supports the conclusion that the parties to the transaction understood what was

excluded from the transaction — the cell towers and their revenue. Why the cell

8       Both sides note that Janko did not attempt to renegotiate the purchase price
for the property, with defendants arguing this proved Janko knew the cell tower
income was excluded from the transaction and plaintiffs contending the fact had
no significance. Based on the foregoing discussion we decline to reconcile these
differing viewpoints on this piece of evidence.

                                          25
towers and their revenue were excluded from the transaction is not the issue.

Thus, the fact Martin believed the cell tower income was excluded from the

transaction because defendants had already sold it off is of no significance.

Plaintiffs attempt to make this fact significant by noting that the reformed deed

awarded all cell tower revenues to the Stuarts. Plaintiffs argue they did not

contemplate having "this sort of enduring commitment to the Stuarts" or that the

deed might require future revisions.

       As to the first point, plaintiffs' understanding that the cell tower revenue

would not belong to them necessarily means the revenue would be going

elsewhere. Whether the revenue went to the Stuarts or some third party does not

change the nature of plaintiffs' commitment regarding the cell towers on the

property. As to the second point, the RPPA does not support this assertion as it

included a provision that the parties would execute other instruments that may

become necessary to consummate the transaction.

       Anticipating we might conclude that substantial evidence supported the

trial court's finding of mutual mistake, plaintiffs argue that the trial court erred in

reforming the deed to reserve the cell tower payments to the Stuarts because:

(1) defendants' counsel drafted the RPPA and thus defendants' neglect caused the

error; (2) the reformation conflicts with the express language of the RPPA; and

(3) the cell tower income was not material to the transaction.9

9     We discuss the propriety of the trial court's amendment of the cross-
complaint to include a claim for reformation in part III., post.

                                           26
       It is undisputed that Newcomb wrote on exhibit D that the cell tower

income would be reserved to the Stuarts. This was not the mistake at issue as the

evidence shows all parties understood at the outset of the transaction that the cell

tower revenues were not a part of the transaction. The mistake occurred when

Janko's version of the RPPA did not contain a copy of exhibit D with the

handwritten language. Apparently, the parties are unaware how this mistake

occurred. The trial court reasonably could have concluded that defendants' failure

to notice that Janko's version of the RPPA did not contain a copy of exhibit D with

the handwritten language did not amount to the neglect of a legal duty sufficient to

bar equitable relief.

       Plaintiffs note that the RPPA transferred all leases, including the right to

collect future rents. Plaintiffs argued to the trial court that this recital is

conclusively presumed true. Again, plaintiffs focus on the wrong language. The

mistake lies not in this language, but in the fact that Janko's copy of exhibit D did

not contain the handwritten provision excluding the cell tower revenue from the

transaction. Ultimately, all parties signed a copy of exhibit D that provided no

contracts were being assigned. This version of exhibit D comports with the intent

of the parties that the cell tower leases and revenue were not part of the

transaction.

       Finally, plaintiffs cite to Roller v. California Pacific Title Ins. Co. (1949)

92 Cal.App.2d 149 for the proposition that a contract may only be reformed if the

                                            27
requested reformation is material to the transaction. Plaintiffs contend the trial

court improperly reformed the RPPA because the cell tower income was not

material to the transaction. To support this assertion, they cite to a portion of

Marshall's testimony where he purportedly testified that he would have entered

into the transaction even if the cell tower income had not been reserved to him.

Defendants do not challenge plaintiffs' assertion that reformation can only be

granted if the requested reformation is material to the transaction. Rather,

defendants claim the evidence shows the cell tower income was material to the

transaction. The evidence supports defendants' assertion.

       As defendants point out, the cell tower contracts were valued at

approximately $250,000. The purchase price for the property was $3,175,000.

Thus, the cell tower contracts accounted for just under 8 percent of the value of the

property. Moreover, that portion of Marshall's testimony relied on by plaintiffs

does not support their argument. Plaintiffs' counsel asked Marshall two confusing

hypothetical questions, namely:

       "[Q:] [I] present you with a hypothetical. For the purposes of this
       question, I want you to assume two things: One, that Mr. Janko is
       not aware that the cell tower leases would be generating future
       income, okay? Did you hear that?

       "A.    Yes.

       "Q. And two, had Mr. Janko known that those cell tower leases
       would be generating future income, assume that Mr. Janko would
       have never agreed to allow you to keep the revenue from those
       leases for those cell towers that exist on his property, okay? Now
       given those two -- one, two -- those two factors, would you still
       have entered into this contract with Mr. Janko?"

                                          28
       "[A]: Yeah, I still would have entered into the contract."

       Plaintiffs' counsel then queried Marshall as to whether he understood the

hypothetical, with Marshall responding that he did not understand what was being

asked. Plaintiffs' counsel re-read the hypothetical questions, but the trial court cut

off the line of questioning, citing Evidence Code 352 and undue consumption of

time. In light of what transpired at trial and the confusing nature of the two

hypothetical questions, the trial court reasonably could have concluded that

Marshall's testimony was not probative on the materially of the cell tower income

to the transaction.

       In summary, the evidence adequately supported the trial court's finding of

mutual mistake regarding the cell tower revenues.

C.     Amendment of Cross-complaint

       1.     Additional Background

       Defendants argued that, assuming a mutual mistake occurred in the

formation of the contract, reformation of the documents was warranted to reflect

the intent of the parties to exclude the cell tower revenues from the transfer.

Although defendants pled mutual mistake in their answer, they did not seek

reformation in their cross-complaint. During trial, the court queried whether

reformation needed to be pled as affirmative relief. After considering briefing on

the matter, the trial court reserved its ruling until after it heard the evidence

regarding mutual mistake. The trial court later granted defendants' motion to

                                           29
conform to proof and ordered that the deed to the property be reformed to

designate that all cell tower lease income shall belong to the Stuarts.

       2.     Analysis

       A trial court has discretion to allow parties to amend their pleadings "in

furtherance of justice." (§ 473, subd. (a)(1).) Leave to amend may be granted

even after the commencement of trial. (§ 576.) Amendment is proper if the

variance between the pleading and proof is not material (§ 470) and no variance is

material "unless it has actually misled the adverse party to his prejudice in

maintaining his action or defense upon the merits." (§ 469.)

       A trial court abuses its discretion in permitting an amendment if the

amendment presents new and substantially different issues that the opposing party

has no opportunity to defend, or if the rights of the opposing party were prejudiced

by the amendment. (Trafton v. Youngblood (1968) 69 Cal.2d 17, 31.) In deciding

to allow an amendment during trial, courts are guided by two general principles:

" '(1) whether facts or legal theories are being changed and (2) whether the

opposing party will be prejudiced by the proposed amendment. Frequently, each

principle represents a different side of the same coin: If new facts are being

alleged, prejudice may easily result because of the inability of the other party to

investigate the validity of the factual allegations while engaged in trial or to call

rebuttal witnesses. If the same set of facts supports merely a different theory . . .

no prejudice can result.' " (Garcia v. Roberts (2009) 173 Cal.App.4th 900, 910.)

                                          30
       Plaintiffs contend the trial court abused its discretion in amending

defendants' cross-complaint to assert a claim for reformation because defendants

inexcusably delayed in asserting the claim and the amendment prejudiced them as

they were not provided an opportunity to present experts regarding the intricacies

of transactions involving cell towers. We are not persuaded.

       Defendants alleged mutual mistake regarding the cell tower revenues from

the outset of the case. While defendants' cross-complaint did not seek

reformation, defendants alleged they were entitled to the cell tower revenues in

both their first and second amended cross-complaints. Additionally, plaintiffs'

first amended complaint contained a claim for declaratory relief regarding whether

defendants had the right to continue receiving the cell tower revenues.

       Accordingly, the amendment merely added a new remedy based on the

same factual issues. (Western Title Guaranty Co. v. Sacramento & San Joaquin

Drainage Dist. (1965) 235 Cal.App.2d 815, 823 ["[r]eformation is nothing but a

remedy to correct a mistake in a written instrument"].) Plaintiffs attempt to show

prejudice by arguing the late amendment denied them the opportunity to present

expert testimony regarding cell tower leases. Plaintiffs, however, failed to cite to

any portion of the record showing they made this argument below. Thus, we deem

it waived. (Ochoa v. Pacific Gas & Electric Co. (1998) 61 Cal.App.4th 1480,

1488, fn. 3.) On this record, the trial court did not abuse its discretion in allowing

defendants to amend their cross-complaint to conform to proof.

                                          31
D.     Expert Witness Fees

       1.     Additional Background

       Defendants sought $42,978.87 in expert witness fees. Plaintiffs moved to

tax these expenses on the ground expert witness fees were not allowable under

subdivision (b)(1) of section 1033.5. Relying on Thrifty Payless, Inc. v. Mariners

Mile Gateway, LLC (2010) 185 Cal.App.4th 1050 (Thrifty), the trial court awarded

defendants their expert witness fees based on a provision in the RPPA stating that

the prevailing party could recover costs, including "experts' fees." Plaintiffs assert

Thrifty was wrongly decided and we should follow Fairchild v. Park (2001) 90

Cal.App.4th 919 (Fairchild).

       Section 1033.5 specifies items which are allowable and not allowable as

costs under section 1032. Subdivision (b)(3) of section 1033.5 provides that

"[f]ees of experts not ordered by the court" are not allowable as costs. The Thrifty

court noted that where a contract provision entitles a prevailing party to

" ' "reasonable attorney's fees and costs," ' or similar nonspecific language," courts

have held that such language must be interpreted in light of the limits set forth in

section 1033.5. (Thrifty, supra, 185 Cal.App.4th at p. 1065.) Nonetheless, it

reasoned that when parties explicitly provide for recovery of expert witness fees in

a freely negotiated contract, such fees may be recovered by including them on a

memorandum of costs and proving them if a motion to tax costs is filed. (Id. at

p. 1066.)

                                          32
       The Thrifty court did not cite Fairchild, an earlier case that addressed a

one-way attorney fee provision requiring tenants to pay the landlord's costs,

expenses, and reasonable attorney fees. (Fairchild, supra, 90 Cal.App.4th at

p. 923.) For purposes of analysis, the Fairchild court assumed that a contractual

term allowing a prevailing party to recover " 'all costs and expenses' " included

items disallowed under section 1033.5 (such as expert fees), but concluded that

parties "cannot expand the definition of 'costs' in [Civil Code] section 1717 to

include items not permitted under section 1033.5." (Fairchild, at p. 929.)

       In reaching this conclusion, the Fairchild court applied the reasoning of

Santisas v. Goodin (1998) 17 Cal.4th 599 (Santisas), which held that the

legislative history of Civil Code section 1717 reflects the intent " 'to establish

uniform treatment of fee recoveries in actions on contracts containing attorney fee

provisions and to eliminate distinctions based on whether recovery was authorized

by statute or by contract. A holding that in contract actions there is still a separate

contractual right to recover fees that is not governed by [Civil Code] section 1717

would be contrary to this legislative intent.' " (Fairchild, supra, 90 Cal.App.4th at

p. 929.) "Just as Santisas precludes litigants from adopting a definition of

'prevailing party' that differs from Civil Code section 1717, we conclude, for the

same reasons, that litigants cannot expand the definition of 'costs' in [Civil Code]

section 1717 to include items not permitted under section 1033.5." (Id. at p. 929.)

       The analysis used by the Fairchild court makes it distinguishable from

Thrifty. The tenants in Fairchild sought to utilize the reciprocity provisions of

                                          33
Civil Code section 1717 to entitle them, as the prevailing parties, to an award of

" 'all costs and expenses.' " (Fairchild, supra, 90 Cal.App.4th at p. 929.) Here,

and in Thrifty, the parties did not rely on Civil Code section 1717, but rather on the

explicit language of a freely negotiated contract where the parties expressly agreed

the prevailing party could recover its expert fees. Put simply, the reciprocity

provision of Civil Code section 1717 is not at issue in this situation.

          Finally, Fairchild is part a line of cases addressing statutory construction

and general cost provisions where the parties did not expressly agree that the

prevailing party could recover its expert fees. As our high court recognized in

another statutory construction case, "[o]ur present analysis, which involves

statutory construction, may not be dispositive in a matter involving the effect of a

contractual agreement for shifting litigation costs, which turns on the intentions of

the contracting parties." (Davis v. KGO-T.V., Inc. (1998) 17 Cal.4th 436, 446, at

fn. 5.)

          Accordingly, we reject plaintiffs' argument that the trial court erred when it

awarded defendants their expert witness fees.

                                            34
                                DISPOSITION

      The judgment and order are affirmed.

                                                                       IRION, J.

WE CONCUR:

BENKE, Acting P. J.

PRAGER, J.*

*     Judge of the San Diego Superior Court, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.

                                       35