Court Opinion

ID: 3192440
Source: CourtListenerOpinion
Date Created: 2016-04-07 23:02:02.101823+00
Date Added: 2024-06-11T14:36:11.921385
License: Public Domain

Filed 4/7/16 Tan v. Chen CA1/5
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                       FIRST APPELLATE DISTRICT

                                                  DIVISION FIVE

VIVIAN TAN,
         Plaintiff , Cross-defendant and
         Appellant,                                                  A141615

v.                                                                   (Contra Costa County
LILY CHEN,                                                           Super. Ct. No. MSC10-02995)
         Defendant, Cross-complainant and
         Respondent.

         This litigation arises from a verbal agreement between appellant Vivian Tan and
respondent Lily Chen regarding the use of an album of original Chinese paintings that
was owned by Tan’s grandmother. Tan appeals from a judgment following a bench trial
in which the court found in favor of Chen on all of Tan’s claims for relief, concluded the
agreement was unenforceable due to the parties’ mistake about the value of the album,
and ordered Tan to return $70,000 paid to her by Chen under the terms of the agreement.
We affirm.

                                FACTS AND PROCEDURAL HISTORY
         Chen lived next door to Jian Jun Lu, an artist. Through her family, Chen met Tan,
who was then a law student, and Tan’s mother Felicia,1 who had a background in the
field of fine arts. In 2008, Tan, Chen and Lu entered into a verbal agreement to

         1
        We refer to Felicia by her first name to avoid confusion. Later in our opinion,
we do the same when referring to Tan’s aunt, Tammy Tan.
undertake an art project in which Lu would create oil renderings of classical Chinese
paintings. Chen did not have any expertise in art, but acted as Lu’s agent during the
project.
        To facilitate the project, Tan agreed to provide Lu with an album of 12 traditional
Chinese paintings owned by her grandmother (the Luo Han album), though she did not
disclose the identity of the album’s owner to Chen or Lu. Tan advised Chen that the
album’s owner would lend it to the project for one year for a fee of $120,000, and Chen
and Lu verbally agreed to this arrangement. At the time of the discussions, Felicia had
estimated the value of the album to be $1.2 million.
        The $120,000 fee for the use of the album (which Chen understood to be a
licensing fee) was supposed to come out of the sales proceeds of the oil paintings
produced by Lu. Tan and Felicia told Chen they needed to come up with a way to get the
money up front, and Chen borrowed $70,000 from her home equity line. The money was
wired to Tan’s aunt in Taiwan, with Tan’s grandmother to be the ultimate recipient of the
funds. Tan’s aunt delivered the album from Taiwan in October 2008 and Tan gave it to
Chen so Lu could use it for his paintings. Tan and Felicia became dissatisfied with Lu’s
work on the art project and took the album back. They gave it to Chen in November
2008.
        On June 24, 2010, Tan filed this civil action against Chen and Lu. Tan’s amended
complaint contained causes of action for civil conspiracy, fraud, deceit, promissory fraud,
conversion, breach of contract, and breach of the implied covenant of good faith and fair
dealing. Among other things, the prayer for relief sought damages in the amount of
$50,000 plus interest (representing the balance allegedly due on the $120,000 fee for use
of the album), damages attributable to economic loss occasioned by Chen’s retention of
the album, punitive damages, and an equitable order requiring Chen and Lu to return the
album to Tan. The court sustained Chen’s demurrer with leave to amend, brought on the
ground that Tan did not own the album at issue and the true owner was a necessary and
indispensible party. (See Code Civ. Proc., § 389.)

                                              2
       Tan filed a second amended complaint combining the causes of action for fraud
and deceit and adding causes of action for declaratory relief, injunction and claim and
delivery. This pleading also alleged that Tan had obtained an assignment from her
grandmother with respect to all rights and claims arising from the album. The court
overruled Chen’s demurrer to the second amended complaint, and Chen filed a cross-
complaint against Tan and Lu asserting causes of action for fraud and deceit, contractual
indemnity and rescission. The cross-complaint alleged Chen had been induced to pay a
licensing fee based on the false representation that the album was worth more than $1
million.
       Tan sought a writ of possession directing Chen to return the album. Chen filed
opposition indicating she would agree to do so if (1) Tan agreed not to transfer the album
to another party until the rightful owner (who was then still undisclosed) had been
determined; (2) a mutually agreed upon appraiser examined the album and documented
its condition before transfer to avoid future claims the album had been damaged by Chen;
and (3) Tan agreed to fully indemnify Chen for claims by third parties relating to the
album. The court denied the writ but issued an order directing Chen to return the album.
Chen complied.
       The case proceeded to a bench trial at which Tan, representing herself, testified
that Chen had asked her for help in securing the album so Lu could use it as inspiration
and source material for his oil paintings; that she (Tan) did not disclose her grandmother
was the owner of the album because her grandmother wished to keep her identity private;
that after Lu failed to perform, Chen told Tan she wanted to keep the album because the
“lease” had not expired and she wanted to find a replacement artist to do the project; and
that Chen did not return the album until she was required by a court order to do so,
despite Tan’s urging.
       Chen testified she did not know anything about art but was encouraged by Tan and
Felicia to help Lu; Tan and Felicia proposed the art project and told her the owner of the
album had to be paid a license fee of $120,000; Tan and Felicia told her they needed to
get the album quickly because the owner was in her nineties and might die, convincing

                                             3
Chen to borrow $70,000 from her home equity line; Chen considered the art project to be
over after Tan and Felicia became dissatisfied with Lu; Tan and Felicia insisted she take
the album and refused her offers to return it; and that Tan did not tell Chen she wanted
the album back until she filed this lawsuit in 2010. Chen also presented the testimony of
Arjun Gupta, an expert in Asian art, who opined the album was worth between $4,500
and $6,000.
       The trial court found in favor of Chen and Lu on each cause of action in Tan’s
second amended complaint, concluding there was no enforceable agreement between the
parties. In its statement of decision, the court explained: “There was no written contract
and the oral representations between the parties were never specific enough to constitute
an enforceable contract of any kind. Moreover, the evidence was overwhelming that the
central object of any alleged agreement, the Luo Han Album, was not the rare art object
worth more than $1,000,000 that it was represented to be by [Tan] and her mother.
Instead, the court finds, based on the persuasive testimony of Arjun Gupta that the [Luo]
Han Album is worth no more than $6,000. While insufficient evidence was presented to
prove that [Tan] knowingly or fraudulently misrepresented the value of the Album to
[Chen and Lu], it is clear that all parties were so mistaken regarding the Album’s value as
to render any possible agreement between the parties unenforceable.”
       The court found in favor of Chen on her cross-complaint and ordered Tan to return
the $70,000 fee paid by Chen. “Insufficient evidence was presented to allow this court to
conclude that Vivian Tan knowingly and fraudulently represented that the [Luo] Han
Album was worth more than $1,000,000 when it actually was worth only a few thousand
dollars. Similarly, Chen failed to meet her burden of proof to show that Vivian Tan
knowingly tricked Chen into paying the $70,000 fee to obtain the Album when the
Album itself was not even worth one tenth of that amount. At all times relevant to these
claims, Vivian Tan was a young law student with only limited knowledge of the fine art
business, and an unlikely sophisticated swindler as Chen and Lu attempted to establish.
From the evidence presented, Chen may have been able to establish such claims as
against Vivian’s mother, Felicia, but she is not a party to this litigation. The court finds

                                              4
in favor of Vivian Tan on the Fraud and Intentional Misrepresentation causes of action,
as well as the claim for punitive damages in Lily Chen’s cross-complaint. [¶] However,
as previously noted sufficient evidence was presented to establish that there was no
enforceable contract between these parties. Vivian Tan is legally obligated to return the
$70,000 payment made by Chen to secure the use of the Album under either the
Rescission or Negligent Misrepresentation causes of action. The court therefore grants
Chen’s request for rescission and awards $70,000 against Vivian Tan.”2
                                        DISCUSSION
       A party may rescind a contract if his or her consent was given by mistake. (Civ.
Code, § 1689, subd. (b)(1);3 Donovan v. RRL Corp. (2001) 26 Cal. 4th 261, 278.)
“ ‘ “Rescission for mistake . . . is a remedy by means of which a party may be relieved of
the burdens and may procure restitutionary redress respecting a contract which was
defective at its inception because consent was not freely or knowingly given.” ’ ”
(Sharabianlou v. Karp (2010) 181 Cal. App. 4th 1133, 1145.) We apply the substantial
evidence standard in reviewing a trial court’s finding that a mistake of fact was made.
(See Williams v. Puccinelli (1965) 236 Cal. App. 2d 512, 515–516.)
       Tan does not challenge the trial court’s determination that the parties were
mistaken as to the value of the album, nor does she dispute that such a mistake supports
the remedy of rescission. Rather, she claims that Chen’s rescission of the verbal
agreement was not effective because Chen did not comply with section 1691, the relevant
portions of which provide: “Subject to Section 1693, to effect a rescission a party to the
contract must, promptly upon discovering the facts which entitle him to rescind . . . :
[¶] (a) Give notice of rescission to the party as to whom he rescinds; and [¶] (b) Restore
to the other party everything of value which he has received from him under the contract
or offer to restore the same upon condition that the other party do likewise . . . .” (Italics
added.)
       2
         The court also found against Lu on his affirmative claims. We do not discuss
those claims as he is not a party to this appeal.
       3
           Further statutory references are to the Civil Code unless otherwise indicated.

                                               5
       We reject Tan’s argument that Chen’s delay in returning the album defeats her
claim for rescission. The final paragraph of section 1691 specifically states: “When
notice of rescission has not otherwise been given or an offer to restore the benefits
received under the contract has not otherwise been made, the service of a pleading in an
action or proceeding that seeks relief based on rescission shall be deemed to be such
notice or offer or both.” (Italics added.) Moreover, section 1693 provides: “When relief
based upon rescission is claimed in an action or proceeding, such relief shall not be
denied because of delay in giving notice of rescission unless such delay has been
substantially prejudicial to the other party. [¶] A party who has received benefits by
reason of a contract that is subject to rescission and who in an action or proceeding seeks
relief based upon rescission shall not be denied relief because of a delay in restoring or
in tendering restoration of such benefits before judgment unless such delay has been
substantially prejudicial to the other party; but the court may make a tender of restoration
a condition of its judgment.” (Italics added.)
       Chen’s cross-complaint supplied adequate notice of rescission under sections 1691
and 1693, which recognize that the restoration of consideration may be delayed until
judgment in the case in which rescission is sought. (See Village Northridge Homeowners
Assn. v. State Farm Fire & Casualty. Co. (2010) 50 Cal. 4th 913, 928–929.) Tan did not
establish that the delay in returning the album to her was “substantially prejudicial” under
section 1693, in that she offered no evidence the album could have been put to another
profitable use during the period that it was held by Chen. (See Wilke v. Coinway (1967)
257 Cal. App. 2d 126, 140 [no unreasonable delay in restoration of consideration where
delay not shown to be prejudicial].) To the contrary, Chen had already paid Tan $70,000,
more than ten times the value of the album as determined by the court, using money from
an equity line on her home for which she was presumably paying interest. If anyone had
been substantially prejudiced by the arrangement, it would appear to be Chen.
       Citing Citicorp Real Estate, Inc. v. Smith (9th Cir. 1998) 155 F.3d 1097, 1104,
Tan argues she was prejudiced by Chen’s delay in returning the album because she (Tan)
incurred substantial expenses in bringing her civil suit and applying for a writ of

                                             6
execution to recover the album. Tan’s lawsuit sought the $50,000 balance allegedly due
under the verbal agreement regarding the use of the album for a one-year period as well
as punitive and other damages; consequently, it cannot be said that this action and the
ensuing legal expenses would have been avoided if Chen had returned the album at an
earlier date. Moreover, the trial court could have reasonably credited Chen’s testimony
to the effect that Tan gave her the album to keep and never sought its return until she
filed her lawsuit in June 2010, and could have further concluded it was reasonable for
Chen to retain the album to forestall third party claims until such time that the court
ordered Chen to return it to Tan in May 2012.
       Tan argues she should not have been required to return the $70,000 paid by Chen
because she was not the ultimate recipient of that money. She suggests that her aunt,
Tammy Tan, should have been joined as an indispensible party to Chen’s cross-complaint
under Code of Civil Procedure section 3894 because Tammy was the person who actually
received the $70,000 in the wire transfer sent by Chen and was responsible for delivering

       4
           Code of Civil Procedure section 389 provides:
       “(a) A person who is subject to service of process and whose joinder will not
deprive the court of jurisdiction over the subject matter of the action shall be joined as a
party in the action if (1) in his absence complete relief cannot be accorded among those
already parties or (2) he claims an interest relating to the subject of the action and is so
situated that the disposition of the action in his absence may (i) as a practical matter
impair or impede his ability to protect that interest or (ii) leave any of the persons already
parties subject to a substantial risk of incurring double, multiple, or otherwise
inconsistent obligations by reason of his claimed interest. If he has not been so joined,
the court shall order that he be made a party.
       “(b) If a person as described in paragraph (1) or (2) of subdivision (a) cannot be
made a party, the court shall determine whether in equity and good conscience the action
should proceed among the parties before it, or should be dismissed without prejudice, the
absent person being thus regarded as indispensable. The factors to be considered by the
court include: (1) to what extent a judgment rendered in the person’s absence might be
prejudicial to him or those already parties; (2) the extent to which, by protective
provisions in the judgment, by the shaping of relief, or other measures, the prejudice can
be lessened or avoided; (3) whether a judgment rendered in the person's absence will be
adequate; [and] (4) whether the plaintiff or cross-complainant will have an adequate
remedy if the action is dismissed for nonjoinder. . . .”

                                              7
the money to Tan’s grandmother in Taiwan.5 Tan did not raise this argument in the trial
court and it is forfeited on appeal. (Jermstad v. McNelis (1989) 210 Cal. App. 3d 528,
538.)
        Forfeiture aside, the absence of Tammy from this litigation does not require
reversal of the judgment. “Code of Civil Procedure section 389, subdivision (a),
describes the circumstances under which the trial court may require a person to be joined
as a party (necessary party). Code of Civil Procedure section 389, subdivision (b),
provides that a trial court, in the exercise of its discretion, may additionally find that a
necessary party is also an indispensable party but cannot be joined as a party, and
therefore ‘in equity and good conscience’ the action should be dismissed without
prejudice. . . . [¶] . . . ‘. . . Courts must be careful to avoid converting a discretionary
power or rule of fairness into an arbitrary and burdensome requirement that may thwart
rather than further justice. [Citation.]’ ” (Riverwatch v. Olivenhain Mun. Water Dist.
(2009) 170 Cal. App. 4th 1186, 1216.) Two factors—the court’s ability to grant “complete
relief” and the interests of the existing parties and the absentee—govern the
determination of whether a party is “necessary” under Code of Civil Procedure section
389, subdivision (a), a prerequisite for concluding a party is “indispensable” under
section 389, subdivision (b). (Deltakeeper v. Oakdale Irrigation Dist. (2001) 94
Cal. App. 4th 1092, 1100; Countrywide Home Loans, Inc. v. Superior Court (1999)
69 Cal. App. 4th 785, 792–793 (Countrywide).)
        The absence of Tammy did not prevent the court from granting complete relief to
Chen in connection with the rescission of her verbal agreement with Tan, because the
court had the power to rescind the contract and order Tan to return the money paid by
Chen. “The ‘complete relief’ clause [of Code of Civil Procedure section 389] ‘requires
joinder [of the absentee] when nonjoinder precludes the court from effecting relief not in
some overall sense, but between extant parties. . . . Simply put, ‘the term complete relief

        5
          The trial court had previously determined that Tan’s grandmother was not a
necessary or indispensable party, based on Tan’s allegation her grandmother had assigned
her rights to Tan.

                                                8
refers only “to relief as between the persons already parties, and not as between a party
and the absent person whose joinder is sought.” ’ ” (Countrywide, supra, 69 Cal.App.4th
at pp. 793–794.)
       Turning to the second consideration under Code of Civil Procedure section 389,
subdivision (a), this lawsuit did not jeopardize Tammy’s rights as the absent party. The
evidence showed the money was wired to Tammy in Taiwan so she could give it to Tan’s
grandmother. Tammy was not a party to the verbal agreement between Tan and Chen
and had no claim on Chen’s money. Nor will Tammy be liable in any future claim by
Chen for return of the money, as Chen has been made whole by the judgment in this
litigation. (See § 1692 [relief based on rescission “shall not include duplicate or
inconsistent items of recovery”].) In short, Tammy was neither a necessary nor an
indispensable party.
       To the extent Tan is arguing she should not have been ordered to return the money
because she was not its ultimate recipient, the claim is untenable. The evidence showed
Tan attempted to enter into a verbal agreement with Chen for the lease or licensing of the
album, and that Chen paid $70,000 for this privilege at Tan’s direction. Indeed, Tan’s
lawsuit against Chen sought the balance allegedly due from Chen under the verbal
agreement, and she cannot now distance herself from the transaction by pointing to her
aunt and her grandmother as the intermediary for and ultimate recipient of the money.
Section 1692 specifically provides: “A claim for damages is not inconsistent with a
claim for relief based upon rescission. The aggrieved party shall be awarded complete
relief, including restitution of benefits, if any, conferred by him as a result of the
transaction and any consequential damages to which he is entitled . . . the court may
require the party to whom such relief is granted to make any compensation to the other
which justice may require and may otherwise in its judgment adjust the equities between
the parties.” A court has broad powers to grant equitable relief under section 1692. (See
Wong v. Stoler (2015) 237 Cal. App. 4th 1375, 1389.) It did not exceed those powers in
entering judgment against Tan for the amount paid by Chen under the rescinded
agreement.

                                               9
                                     DISPOSITION
        The judgment is affirmed. Ordinary costs on appeal are awarded to respondent
Chen.

                                           10
                   NEEDHAM, J.

We concur.

JONES, P.J.

SIMONS, J.

(A141615)

              11