Court Opinion

ID: 9745928
Source: CourtListenerOpinion
Date Created: 2023-08-27 13:43:09.556163+00
Date Added: 2024-06-11T07:25:06.348118
License: Public Domain

KLINE, P. J.
J.,Concurring and Dissenting.—I concur in the modification of the judgment of the trial court increasing the amount of actual damages due the Boquilons, together with prejudgment interest, and the award of attorney fees at trial and on appeal.
I respectfully dissent from that portion of the majority opinion concluding that Beckwith did not violate subdivision (b)(3) of Civil Code Section 1695.6,1 and that the Boquilons are therefore not entitled to a mandatory award of exemplary damages. The majority’s forced finding flies in the face of the language of the Home Equity Sales Contract Act (the Act) and frustrates its purpose.
*1724I.
The purposes of the Act could not have been more clearly stated. In the first section, the Legislature finds that “financially unsophisticated" homeowners whose residences are in foreclosure “have been subjected to fraud, deception and unfair dealing by home equity purchasers . . . through the use of schemes which often involve oral and written misrepresentations, deceit, intimidation, and other unreasonable commercial practices.” (§ 1695, subd. (a).) Accordingly, and in order to advance “the express policy of the state to preserve and guard the precious asset of home equity,” the chief purposes of the Act are “to require that the sales agreement be expressed in writing; to safeguard the public against deceit and financial hardship; to insure, foster, and encourage fair dealing in the sale and purchase of homes in foreclosure; to prohibit representations that tend to mislead; to prohibit or restrict unfair contract terms; to afford homeowners a reasonable and meaningful opportunity to rescind sales to equity purchasers; and to preserve and protect home equities for the homeowners of this state.” (§ 1695, subd. (d)(1).)
In order “to effectuate this intent and to achieve these purposes," the Legislature also declared that the Act “shall be liberally construed.” (§ 1695, subd. (d)(2).)
Ignoring both this directive and the purposes it was designed to achieve, the majority creates an ambiguity that does not genuinely exist and resolves it against the sellers the Act was designed to protect and in favor of the purchasers they were to be protected against. As will be seen, the paradoxical result of the majority’s strained analysis is to bar application of the mandatory exemplary damages provision of the Act to a sophisticated equity purchaser who violates its most fundamental requirements: “that the sales agreement be expressed in writing” and that homeowners have “a reasonable and meaningful opportunity to rescind sales to equity purchasers.” (§ 1695, subd. (d)(1).)
II.
The majority’s conclusion that subdivision (b)(3) of section 1695.6 is inapplicable in this case is based on the fact that the transfer or encumbrance of a residence in foreclosure is prohibited under that statute before “the time within which the equity seller may cancel the transaction has fully elapsed . . . .” (§ 1695.6, subd. (b).) As stated by the majority, “Section 1695.6, subdivision (b)(3) applies to the situation where an equity purchaser has given the notices required by the [Home Equity Sales Contract] Act but, nevertheless, proceeds to transfer or encumber the property within the *1725statutory cancellation period.” (Maj. opn., ante, at p. 1713.) Because Beck-with’s transfer of an interest in the Boquilons’ residence to her husband did not occur within this so-called “ ‘cooling off’ period” (Segura v. McBride (1992) 5 Cal.App.4th 1028, 1035 [7 Cal.Rptr.2d 436]), the majority concludes it is not within the ambit of the statute.
The reason there was no “cooling off’ period, of course, is that Beckwith failed to provide a written sales agreement fully advising the Boquilons of their statutory cancellation rights, as required by the Act. (§§ 1695.3, subd. (g), 1695.5, subd. (b).) By holding that subdivision (b)(3) does not apply to a knowledgeable purchaser like Beckwith who never advises a seller of his or her cancellation rights, on the theory that a cancellation period that never began cannot expire, the majority enters the realm of Alice in Wonderland.
As its very title suggests, the Act was designed to protect equity sellers primarily by requiring the equity purchaser to provide a written “Home Equity Sales Contract”2 which must, among other things, grant the equity seller (in addition to any other right of rescission) the right to cancel the contract “until midnight of the fifth business following the day on which the equity seller signs any contract or until 8 a.m. on the day scheduled for the sale of the property pursuant to a power of sale conferred in a deed of trust, whichever occurs first.” (§ 1695.4, subd. (a).) The centrality to the legislative scheme of the right of cancellation is reflected by the excruciating detail in which the right is spelled out. For example, section 1695.5 provides that “[t]he contract shall contain in immediate proximity to the space reserved for the equity seller’s signature a conspicuous statement in a size equal to at least 12-point bold type, if the contract is printed or in capital letters if the contract is typed, as follows: ‘You may cancel this contract for the sale of your house without any penalty or obligation at any time before (Date and time of day).’ ”
Not only must the right of cancellation be conspicuously set forth in the contract itself, but the contract must refer to and be accompanied by a separate “notice of cancellation form” which explains the right of cancellation in still greater detail. (§ 1695.5, subds. (a) and (b).)
Subdivision (a) of section 1695.6 states that the required contract “shall be provided and completed in conformity with those sections by the equity purchaser.” In effect, the majority says that whenever an equity purchaser violates subdivision (a) he or she cannot violate any of the prohibitions of *1726subdivision (b).3 According to the majority, an equity purchaser who fails to provide the equity seller a written contract embodying the mandated right to cancel cannot transfer the residence before expiration of the cancellation period, in violation of the statute, because such period never began and therefore cannot terminate. This analysis will surely surprise the State Legislature, because it means that a sophisticated equity purchaser who transfers the residence to a third party after deliberately failing to provide the equity seller notice of the statutory right to cancel will receive more lenient treatment than an equity purchaser who has given notice of the right but transfers the residence to a third party before the right to cancel has expired. The Legislature cannot reasonably be thought to have intended to punish a purchaser who has at least provided a written contract providing notice of cancellation rights more severely than a knowing purchaser who has not done so. The sophisticated purchaser who transfers the residence to a third party without notifying the seller of his or her cancellation rights commits a more egregious violation of the Act than a purchaser who makes such a transfer after providing such notice but before expiration of the right to cancel. In the latter situation the seller is on notice of the right and still in a position to enforce it. A seller without a contract of sale is far less likely to be aware of the right and the time within which it lapses and is therefore at a much greater disadvantage. The fact that subdivision (b)(3) assumes that the purchaser has at least given the seller notice of the statutory cancellation rights provides no reason to protect a sophisticated purchaser who has not even done that from the exemplary damages that would otherwise apply.
The majority’s conclusion that it would make no sense for the Legislature to impose mandatory punitive damages on an equity purchaser who fails to provide a written contract of sale flows from its belief that this requirement is merely “technical” (maj. opn., ante, at p. 1716), and is therefore presumably less vital to the purpose of the legislative scheme than the right to notice of cancellation. As analysis of the Act reveals, the opposite is true. As Justice Anderson pointed out in Segura v. McBride, supra, 5 Cal.App.4th 1028, 1035, the requirement that the agreement be in writing is “[a]t the heart of the scheme.” It seems to me anomalous to think the Legislature intended to deny mandatory punitive damages for denial of the fundamental right to a written contract, but allow such relief for violation of a merely derivative right.
*1727III.
The majority’s conclusion that subdivision (b)(3) of section 1695.6 is inapplicable to this case rests in part on the view that Beckwith’s conduct is instead covered by subdivision (e) of that statute. Subdivision (e), which is set forth in its entirety in the margin below,4 prohibits an equity purchaser who has previously acquired a residence in foreclosure from transferring the property to a third party without the written consent of a seller who has retained an option to repurchase. I agree with my colleagues that Beckwith has violated subdivision (e), but disagree that she cannot be held to have violated both provisions and separately penalized.
Subdivisions (b)(3) and (e) of section 1695.6 address different situations. The former applies to the transfer or encumbrance by an equity purchaser of any interest in a residence in foreclosure to a third party prior to expiration of the period within which the equity seller has a right to cancel the contract of sale. Subdivision (e), on the other hand, does not implement or in any way relate to an equity seller’s statutory right to cancel, indeed it comes into play only if the seller’s right to cancel has expired. The right that subdivision (e) implements is the right of the equity seller to exercise an option to repurchase the residence in foreclosure before it is conveyed to a third party. Unlike the right to cancel, this right is not mandated by statute and comes into play only if the equity purchaser agrees to allow the equity seller a repurchase option.
A purchaser who violates subdivision (b)(3) of section 1695.6 will not necessarily be in violation of subdivision (e) and a purchaser who violates subdivision (e) will not necessarily violate subdivision (b)(3). The majority’s analysis is therefore not, as my colleagues claim, “consonant with the well-worn maxim that a more specific provision relating to a particular subject will govern in respect to that subject, as against a general provision, although the latter standing alone would be broad enough to include the subject to which the more particular provision relates. [Citations.]” (Maj. opn., ante, at p. 1714, fh. 16.) Subdivision (b)(3), which the majority posits as the more general provision, is not broad enough to invariably include the subject to which subdivision (e) relates.
While it is true that a purchaser who violates section 1695.6, subdivisions (a) and (e) will always also be in violation of subdivision (b)(3), this *1728provides no rational basis upon which to exempt such a purchaser from the more severe penalty ordinarily attendant upon violation of subdivision (b)(3). On the contrary, the violation of an equity seller’s right to cancel— either by transferring or encumbering the residence prior to expiration of the cancellation period or, as here, by depriving the seller of notice of the right to cancel—relates to the ability of an owner of a residence in foreclosure to retain the property in the first place, which the Legislature thought more significant than the repurchase right that is the subject of subdivision (e), which, as noted, is not mandated by statute and exists only at the sufferance of the equity purchaser. The Legislature apparently believed it would be unwise to impose exemplary damages on an equity purchaser who provides notice of a seller’s right to rescind an equity sales contract but infringes his or her option rights, since purchasers are not required by law to grant sellers an option to repurchase and might not do so if impairment of such a right would subject them to treble damages. While the interests of equity sellers are thus served by protecting equity purchasers against exemplary damages for infringement of their option rights, there is no such reason for leniency in the case of a sophisticated purchaser, like Beckwith, who not only infringes an equity seller’s option rights but does not even provide contractual notice of the seller’s inalienable right to rescind.
IV.
For the reasons just set forth, the overlap between subdivisions (b)(3) and (e) of section 1695.6 that occurs in the limited situation in which a knowledgeable equity purchaser violates both subdivision (a), by failing to provide the equity seller contractual notice of the right to cancel, and subdivision (e), by failing to obtain the written consent of the seller to waive his option to repurchase and permit sale of the residence to a third party, and thereby also violates subdivision (b)(3), does not create any ambiguity that needs to be resolved by a judicial selection of one violation or the other. As has been explained, the subdivisions are designed to achieve different purposes and the equity purchaser who violates both requirements should not for that reason be exempt from the more severe penalty related to the more serious of the two violations, that proscribed by subdivision (b)(3).
Even if there were an ambiguity, however, settled principles would bar this court from resolving it in favor of sophisticated equity purchasers, as the majority has done. Not only are equity sellers the persons the Act is designed to protect, but the protections it affords are as against equity purchasers. Furthermore, lest there be any question about which party is intended to receive the benefit of legitimate doubts, the Legislature inserted a requirement that the Act be “liberally construed” to effectuate the legislative intent *1729and achieve its purposes. (§ 1695, subd. (d)(2).) By creating an ambiguity that does not exist, and then resolving it against those the Legislature felt it necessary to protect, the majority unjustifiably defeats the will of a co-equal branch of state government. This should not be done.
V.
Throughout this concurring and dissenting opinion I have used the adjectives “sophisticated” or “knowledgeable” when referring to the equity purchaser against whom the Act protects an equity seller. While the Act has equal application to equity purchasers who may be unsophisticated, the evils of concern to the Legislature are much more likely to be present when the equity purchaser is wise in the ways of the real estate business and the seller is not. More importantly, the equity purchaser in this case is a licensed real estate agent vastly more knowledgeable about real estate and credit transactions than the equity sellers. The record shows that the Boquilons submitted to Beckwith’s will in large part because of her superior knowledge of the real estate business, and that Beckwith exploited this advantage in committing precisely the offensive acts—including “misrepresentations, deceit, intimidation, and other unreasonable commercial practices”—the Legislature sought to prevent. (§ 1695, subd. (a).)
The majority’s indifference to these considerations is inexplicable because it does not comport even with its own analysis of the law. The majority argues that the Legislature did not intend an expansive reading of section 1695.6, subdivision (b)(3), because that “would require an award of treble damages in every case in which an innocent and ignorant equity purchaser failed to provide a written contract or to fulfill completely the other technical requirements of the Act, and proceeded to deal with the property as the new owner by encumbering or transferring any interest in it.” (Maj. opn., ante, at p. 1715, original italics deleted, new italics added.) The majority concludes, therefore, that the Legislature intended to authorize exemplary damages only in the exceptional, not the ordinary case, and only in those cases where the violation of the Act was knowing and intentional. (Ibid.)
Reasonable minds might differ as to whether the majority’s analysis makes sense when applied to equity purchasers genuinely ignorant of the statutory requirement of a written contract providing notice of the right to cancel, but I think few would agree it makes sense when applied to a state licensed real estate professional. Because Beckwith is such a person, and must therefore be deemed knowledgeable of the statutory duty she failed to discharge, this is “the exceptional, not the ordinary case,” in which even the majority agrees exemplary damages are appropriate.
*1730Our opinion in Easton v. Strassburger (1984) 152 Cal.App.3d 90 [199 Cal.Rptr. 383, 46 A.L.R.4th 521] is instructive in this regard. We held in that case that a real estate broker representing the seller of residential property has a duty to disclose facts, including “the affirmative duty to conduct a reasonably competent and diligent inspection of the residential property listed for sale and to disclose to prospective purchasers all facts materially affecting the value or desirability of the property that such an investigation would reveal.” (Id., at p. 102, fn. omitted.) We justified imposition of a duty to disclose not only that which is known but also “that which should be known” on two grounds, neither of which were statutory:5 first, that such a duty “is a formally acknowledged professional obligation that it appears many brokers customarily impose upon themselves as an ethical matter” (152 Cal.App.3d at p. 101); and, second, because of the special role played by real estate brokers. With respect to the latter consideration we recalled the statement by “Judge Cardozo, as he then was, in a different but still relevant context: ‘The real estate broker is brought by his calling into a relationship of trust and confidence. Constant are the opportunities by concealment and collusion to extract illicit gains. We know from our judicial records that the opportunities have not been lost. . . . He is accredited by his calling in the minds of the inexperienced or the ignorant with a knowledge greater than their own.’ (Roman v. Lobe (1926) 243 N.Y. 51, 54-55 [152 N.E. 461, 462-463; 50 A.L.R. 1329, 1332] quoted in Richards Realty Co. v. Real Estate Comr. (1956) 144 Cal.App.2d 357, 362 [300 P.2d 893]; . . .)” (Id., at p. 100.)
If a duty can be imposed on a real estate professional even though it does not arise under statute and relates to a person with whom the professional is not in privity, an equally important duty should a fortiori be imposed when it does arise under statute and relates to a person with whom the professional is in privity.
The fact, which the majority underscores, that Beckwith “had never heard of the Home Equity Sales Contracts Act when the Boquilons conveyed their property to her” (maj. opn., ante, at p. 1714, fn. 17), seems to me anything but exculpatory, even if true. A state licensed real estate professional should not be permitted to use her ignorance of the basic requirement to provide a written sales contract, which is hardly an obscure duty and should be known by all real estate agents, to insulate herself from liability for its breach. The real estate broker in Easton v. Strassburger, supra, was as ignorant of the defect in the property involved in that case as Beckwith claims to be of the real estate law. There is no more reason here than there was in Easton to permit such ignorance to be used to advantage.
*1731For the foregoing reasons, I would reverse that portion of the judgment refusing to award exemplary damages to the Boquilons pursuant to section 1695.7.
A petition for a rehearing was denied November 5, 1996. Kline, P. J., was of the opinion that the petition should be granted.

 All statutory references are to the Civil Code.

 The Act defines “contract” as “any offer or any contract, agreement, or arrangement, or any term thereof, between an equity purchaser and equity seller incident to the sale of a residence in foreclosure.” (§ 1695.1, subd. (e).)

 In addition to the prohibition on the transfer or encumbrance of a residence in foreclosure set forth in section 1695.6, subdivision (b)(3), with which we are here concerned, subparagraphs (1) and (2) of subdivision (b) provide that an equity purchaser may not “[a]ccept from any equity seller an execution of, or induce any equity seller to execute, any instrument of conveyance of any interest in the residence in foreclosure” and may not “[r]ecord with the county recorder any document, including, but not limited to, any instrument of conveyance, signed by the equity seller.”

 “Whenever any equity purchaser purports to hold title as a result of any transaction in which the equity seller grants the residence in foreclosure by any instrument which purports to be an absolute conveyance and reserves or is given by the equity purchaser an option to repurchase such residence, the equity purchaser shall not cause any encumbrance or encumbrances to be placed on such property or grant any interest in such property to any other person without the written consent of the equity seller.” (§ 1695.6, subd. (e).)

 The holding of our opinion in Easton v. Strassburger, supra, was later codified by the Legislature. (§ 2079; Stats. 1985, ch. 223, § 4, p. 1222.)