Good v. Mehrabiani CA5

Opinion

Filed 9/18/26 Good v. Mehrabiani CA5 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or or dered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIFTH APPELLATE DISTRICT

TELEY GOOD, F088945 Plaintiff and Respondent, (Super. Ct. No. BCV-21-102059) v. HOSSEIN MEHRABIANI et al., OPINION Defendants and Appellants.

APPEAL from a judgment of the Superior Court of Kern County. Bernard C. Barmann, Judge. Ferguson Case Orr Paterson and Wendy C. Lascher; Shiv Samatani for Defendants and Appellants. Coleman & Horowitt, Daniel L. Rudnick, and Jennifer T. Poochigian for Plaintiff and Respondent. -ooOoo- Following her purchase of real estate property in California City, plaintiff Teley Good sued the defendants, Hossein Mehrabiani and Sigma Land, LLC for fraud and other breach of contract theories. After a bench trial, the court entered a judgment in favor of Good in the amount of $349,800, consisting of compensatory and punitive damages. On appeal, Mehrabiani contends: (1) the compensatory damages awarded include elements beyond those permitted for fraud in the purchase of property, and (2) the punitive damages were excessive. We affirm the trial court’s judgment. BACKGROUND Mehrabiani was a “sophisticated and experienced” licensed general contractor and real estate investor who was in the business of “flipping houses.” Mehrabiani lived in a million-dollar home on the “top of a mountain” in Temecula, California, surrounded by five acres of avocados. Mehrabiani formed a property investment company, Sigma Land, LLC (Sigma), to purchase tax defaulted properties from the Kern County tax collector and sell them for a profit. Mehrabiani purchased seven tax-defaulted properties from Kern County in a tax sale for a total of $184,404.60. The payment was in cash. Among these real estate properties was a property purchased in California City, California (the property) for $92,500. Of these properties, this property was the only property that he needed to remodel and repair. Jose Barragan, the public works director for the City of California City, was the primary inspector of the property. Mehrabiani met with Barragan and obtained copies of all previous records of the property maintained by the California City building department. The records showed the house on the property had never received a final inspection, had been abandoned for several years, and had suffered fire, smoke, and water damage. The original “Job Card” for the property stated, “septic installed in error” and contained all the septic system details. Barragan told Mehrabiani in their first meeting that he would need to connect the house to the sewer in order to pass the final inspection. Mehrabiani started remedial work on the property and reactivated the building permit. He worked on the remodeling five to six days per week for five months. Mehrabiani’s personal construction business, Green Home Builder’s Group (GHBG), supplied the materials, capital, credit, labor and project management for the renovation. Mehrabiani testified that he paid independent subcontractors $50,000 to $60,000 for the remodel of the property, which he paid with checks and sometimes in cash.

2. Written e-mails dated in the summer of 2017 showed that Mehrabiani asked the city to mark the sewer line on multiple occasions so he could connect the house to the city sewer system. The main sewer line had been marked as requested. Barragan testified that at the end of the job prior to final inspection, Mehrabiani had several items to complete including connecting the property to the sewer system and pouring concrete to finish the approach to the driveway. Mehrabiani pushed back and objected to having to connect to the sewer system because a septic system was previously approved by the city several years prior. Barragan agreed to an “in-the-field compromise” and allowed Mehrabiani not to connect the property to the city sewer so long as Mehrabiani completed the driveway approach and finished the other items on the punch list. Good was shown the property by her real estate agent in April 2018. The listing showed the property was connected to the city’s sewer service. She made an offer to purchase the property on April 13, 2018. The final buyer’s purchase price of the property (inclusive of all fees, taxes, and premiums) was $246,464. Escrow closed on June 15, 2018. In the fall of 2019, Good experienced the first of many sewage backups at the property that resulted in human waste from the septic system entering her house. The property did not have a functioning waste system for the next four years. The backups resulted in the need to replace all of the home’s flooring, which Good valued at $30,000 to $40,000. Starting on an unspecified date, Good had the septic tank pumped “every few months,” which cost $450 to $500 each time. Arnold Rodio, a licensed plumbing contractor who was in the business of construction, testified as an expert witness. Rodio testified that the reasonable cost for connecting the home to the city sewer line was between $6,500 to $9,500, which did not include the cost of abandoning the existing septic system. Rodio testified that it would be reasonable for a local licensed contractor to charge $12,900 to abandon the septic system and connect the home to the city sewer system.

3. In her trial testimony, Good stated she lost substantial use and enjoyment of the property. Good testified she had incurred extreme inconvenience and distress from the continuous sewage backup incidents from the fall of 2019 through the time of trial, including that she and her children had to intermittently vacate parts of the home. She further testified she could not do laundry at her house because it would back up the septic tank. Good went to her father’s house across town to do laundry. She testified she had to do laundry frequently because she lived on the property with her two teenage boys in addition to her other children and grandchildren who occasionally visited. None of her friends visited the property for social events because the property always smelled like sewage regardless of her use of different cleaning products. The plumbing backed up and flooded the property without notice, so Good was never at ease. Toilet paper could not be flushed down the toilet, so used toilet paper had to be collected in a separate basket for disposal. Good had various plumbing companies investigate the root cause for the backups, and the last plumber who inspected the property concluded that the home was likely not connected to the city sewer system but instead relied on a septic system with a failed leach field. Good contacted the city’s building department, and the department confirmed that the property was not connected to the city’s sewer system. Mehrabiani testified that he did not know the property was not connected to the city’s sewer system. Good filed this lawsuit in September 2021. In 2024, the court held a bench trial that lasted three days. Subsequently, Good filed a proposed judgment after trial and a proposed statement of decision. In August 2024, the court issued its statement of decision in which it found Mehrabiani and Sigma liable for fraud and specified damages totaling $349,800. The damages consisted of: the cost to abandon the septic system in place and to connect to the sewer ($12,900); replace flooring ($40,000); loss of use and enjoyment of property 4. ($122,000); and punitive or exemplary damages ($174,900). Regarding the loss of use and enjoyment of property components, the court stated:

“… although Good was not totally unable to use the [p]roperty due to the sewage backups into her home, and the threat of future backups, her use and enjoyment of the [p]roperty have obviously been significantly impaired. Good is entitled to an amount that will compensate her for this detriment caused by the defendants’ fraud.” The trial court entered judgment on August 27, 2024. Mehrabiani subsequently moved to vacate the judgment under Code of Civil Procedure section 663 or alternatively for a new trial under Code of Civil Procedure section 657. The court denied both motions on November 1, 2024. Mehrabiani filed a notice of appeal on November 18, 2024. DISCUSSION I. Forfeiture. We first address Good’s contention regarding forfeiture. Good argues that Mehrabiani forfeited his claims on appeal by failing to request a statement of decision below. We disagree. The trial court provided a statement of decision. Mehrabiani moved to vacate the judgment, and alternatively, for a new trial. In doing so, he raised the claims he now brings on appeal. These claims went to the merits of the trial court’s judgment. (See Heaps v. Heaps (2004) 124 Cal.App.4th 286, 292, fn. 4.) His arguments on appeal were not forfeited. II. Use and Enjoyment Damages. Mehrabiani contends the $122,000 award of compensatory damages must be set aside because the award included elements beyond those permitted for fraud in the purchase of property. Good contends the compensatory damage award was expressly authorized by statute (Civ. Code, § 3343) and is supported by substantial evidence. Civil Code section 3343 provides, in part:

“(a) One defrauded in the purchase, sale or exchange of property is entitled to recover the difference between the actual value of that with 5. which the defrauded person parted and the actual value of that which he received, together with any additional damage arising from the particular transaction, including any of the following:

“(1) Amounts actually and reasonably expended in reliance upon the fraud. “(2) An amount which would compensate the defrauded party for loss of use and enjoyment of the property to the extent that any such loss was proximately caused by the fraud.” (Civ. Code, § 3343, subd. (a)(1)– (2).) “California law generally limits a defrauded party to recovering out-of-pocket damages, as stated in Civil Code section 3343.” (OCM Principal Opportunities Fund, L.P. v. CIBC World Markets Corp. (2007) 157 Cal.App.4th 835, 870.) “The out-of- pocket rule ‘ “is directed to restoring the plaintiff to the financial position enjoyed by him prior to the fraudulent transaction, and thus awards the difference in actual value at the time of the transaction between what the plaintiff gave and what he received.” ’ ” (Ibid.) The statute further allows a defrauded party to recover consequential or additional damages resulting from the transaction. (See Stout v. Turney (1978) 22 Cal.3d 718, 729– 730.) “Whether a plaintiff ‘is entitled to a particular measure of damages is a question of law subject to de novo review. [Citations.] The amount of damages, on the other hand, is a fact question … [and] an award of damages will not be disturbed if it is supported by substantial evidence.’ ” (Rony v. Costa (2012) 210 Cal.App.4th 746, 753.) “ ‘The evidence is insufficient to support a damage award only when no reasonable interpretation of the record supports the figure.’ ” (Id. at p. 754.) Mehrabiani asserts that the $122,000 component of the awarded damages is based on an element not recoverable under Civil Code section 3343. According to Mehrabiani, the testimony concerning this component of the damages consisted of inconvenience, friends’ unwillingness to visit the property, anxiety, mental and emotional distress, and worries about health and welfare. Mehrabiani notes that damages for emotional distress are not recoverable under Civil Code section 3343. (O’Neil v. Spillane (1975)

6. 45 Cal.App.3d 147, 159.) Thus, he asserts this component must be set aside as it is based at least in part on an element not recoverable under statute. The record does not support the notion that this component was awarded to compensate Good for having suffered mental or emotional distress. According to the trial court’s statement of decision, this component was awarded to Good for her “[l]oss of use and enjoyment of [p]roperty.” Further, the statement found the instances of sewage backups and the threat of additional backups “significantly impaired” Good’s use and enjoyment of her property, entitling her to compensation. The court’s statements plainly pertain to Good’s loss of use of her property, for which Civil Code section 3343 expressly allows recovery. (Civ. Code, § 3343; O’Neil v. Spillane, supra, 45 Cal.App.3d at p. 159 [the right to recover “ ‘additional damages’ ” under Civ. Code, § 3343 refers to “such matters as expenses and other consequential damages stemming from the fraud”].) We therefore reject Mehrabiani’s characterization of this component of the damages. To the extent defendant additionally argues the $122,000 amount was not supported by the record, we are not persuaded. Good testified as to the ways in which she was deprived of the full use and enjoyment of her property because of Mehrabiani’s fraudulent statements concerning the property’s septic system. The property lacked a functioning waste system for over four years. There were certain activities she could not do at the property, including doing laundry or flushing toilet paper down the toilet. Good and her children had to intermittently vacate parts of the property due to the sewage backups. Further, Good testified that none of her friends came over to her property for dinner or social events because of the odor in the property. Mehrabiani highlights that Good did not provide evidence showing the difference, if any, of the fair market value of her home with a septic tank in comparison to the fair market value with sewage hookups, or the cost of renting alternative housing. However, the statute does not require such evidence be presented for this type of damages to be awarded. Instead, the statute provides that a victim of fraud is entitled to recover “any 7. additional damage arising from the particular transaction” (Civ. Code, § 3343, subd. (a)) including “[a]n amount which would compensate the defrauded party for loss of use and enjoyment of the property” (id., subd. (a)(2)). Good testified as to the ways in which she was deprived from the full use and enjoyment of her property for over four years. On this record, we cannot conclude the court’s award of $122,000 for the loss of use and enjoyment of her property was improper. III. Punitive Damages. Mehrabiani contends the punitive damages award of $174,900 was excessive as a matter of law. He asserts Good did not carry the burden of proving his ability to pay punitive damages. “When faced with a challenge to the amount of a punitive damages award, our traditional function has been to determine whether the award is excessive as a matter of law or raises a presumption that it is the product of passion or prejudice.” (Adams v. Murakami (1991) 54 Cal.3d 105, 109–110 (Adams).) “Because the quintessence of punitive damages is to deter future misconduct by the defendant, the key question before the reviewing court is whether the amount of damages ‘exceeds the level necessary to properly punish and deter.’ ” (Id. at p. 110.) “Three primary considerations govern the amount of punitive damages: (1) the reprehensibility of the defendant’s conduct; (2) the injury suffered by the victims; and (3) the wealth of the defendant.” (Rufo v. Simpson (2001) 86 Cal.App.4th 573, 620, citing Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 928–929.) Mehrabiani bases his challenge on the third prong only. “[A]n award of punitive damages cannot be sustained on appeal unless the trial record contains meaningful evidence of the defendant’s financial condition.” (Adams, supra, 54 Cal.3d at p. 109.) The burden is placed on the plaintiff to establish defendant’s financial condition. (Id. at p. 119.) “Even if an award is entirely reasonable in light of the other two factors …, the award can be so disproportionate to the defendant’s ability to pay that the award is excessive for that reason alone.” (Id. at p. 111.) Though the 8. Supreme Court declined to prescribe any particular standard for assessing a defendant’s ability to pay punitive damages (id. at p. 116, fn. 7), what is required is actual evidence of the defendant’s financial condition. (Id. at p. 119; Kelly v. Haag (2006) 145 Cal.App.4th 910, 916 (Kelly).) We review the record for substantial evidence. (Kelly, supra, 145 Cal.App.4th at p. 916.) “Substantial evidence is evidence that is ‘of ponderable legal significance,’ ‘reasonable in nature, credible, and of solid value,’ and ‘ “substantial” proof of the essentials which the law requires in a particular case.’ ” (Conservatorship of O.B. (2020) 9 Cal.5th 989, 1006.) In conducting this review, we view the record in the light most favorable to the judgment. (Kelly, at p. 916.) The record contains meaningful and substantial evidence of Mehrabiani’s financial condition. Mehrabiani testified that he was a sophisticated and experienced licensed general contractor, real estate investor, and real estate broker who specialized in flipping houses. He owned two companies, Sigma and GHBG, and had an extensive history of managing real estate transactions as a consultant and principal. Mehrabiani claimed to have never lost money on any real estate investment other than Good’s property. Further, Mehrabiani testified he lived in a million-dollar home on top of a mountain in Temecula, California, with five acres of avocado trees on his property. The evidence further shows that Mehrabiani personally funded the cash purchase of the seven tax-defaulted properties, including the Good property. Mehrabiani paid $184,404.60 in cash for these properties, of which $92,500 was for the property later sold to Good at the price of $246,464. Mehrabiani funded all remedial work he performed on the property and received no other funding for these costs and expenses. Mehrabiani also performed remodeling work on the property, which, in addition to his own labor, included outside/independent subcontractors costing $50,000 to $60,000 paid by checks and cash. The supplies and equipment used for the remodeling were provided by his personal construction business, GHBG.

9. Mehrabiani appears to argue the evidence in the record failed to show a complete picture of his financial condition. He observes that, other than the properties purchased at the tax auction, there was no evidence in the record concerning his assets, including the amount of money in his bank account. Further, there was no evidence of his expenses or his liabilities, including whether and to what extent his Temecula home was encumbered. According to Mehrabiani, these evidentiary gaps require the punitive damages to be set aside. Contrary to Mehrabiani’s claim, an award of punitive damages does not depend on this evidence. There are multiple measures to determine a defendant’s ability to pay damages. (See Adams, supra, 54 Cal.3d at p. 116, fn. 7.) But no particular measure of financial condition is necessary to prove a defendant’s ability to pay. (Ibid.; Baxter v. Peterson (2007) 150 Cal.App.4th 673, 680 [“Net worth is the most common measure, but not the exclusive measure”].) What is required is evidence of the defendant’s financial condition. (Adams, at p. 116.) Thus, a plaintiff’s offer of proof will be satisfactory if it contains substantial evidence of the defendant’s ability to pay even if it does not satisfy all measures, specifically, net worth. Here, the evidence established that Mehrabiani operated his businesses largely on a cash basis. He was a very successful businessman. In the transaction that included the acquisition of the Good property, he paid $184,404.60 in cash. He also expended a significant amount of funds ($50,000-$60,000 through cash and check payments) remodeling the property prior to its sale for $246,464 to Good. Therefore, Mehrabiani’s business interests are affirmatively proven to be cash driven at a substantial level. The evidence shows he possessed substantial wealth and meaningful cash reserves. Kenly v. Ukegawa (1993) 16 Cal.App.4th 49, relied upon by Mehrabiani, is inapposite. In Kenly, no evidence was introduced to show the net worth of the defendants, and the trial court awarded punitive damages solely based on the profit reaped by the fraudulent conduct. (Id. at p. 52.) The Kenly court reversed, holding a 10. punitive damages award could not be made solely on the basis of the amount of profit from the fraudulent conduct.1 (Id. at pp. 56–58.) Here, by contrast, there was evidence of Mehrabiani’s financial condition separate from the fraudulent transaction. We recognize that Mehrabiani’s net worth cannot be calculated on this record. We further recognize Good could have more easily satisfied her burden by soliciting additional evidence of Mehrabiani’s financial condition, including evidence of his net worth. However, evidence of net worth is not required by Adams. Instead, an award of punitive damages requires meaningful evidence of the defendant’s ability to pay it. Although somewhat close, we believe this threshold has been met under the applicable standard of review. We conclude substantial evidence supports the trial court’s award of punitive damages. DISPOSITION The judgment is affirmed. Costs on appeal are awarded to respondent.

LEVY, J. WE CONCUR:

HILL, P. J.

GUERRA, J.

1 Although Kenly recommended measuring financial condition by net worth, it recognized net worth was not always necessary to support an award of punitive damages. (Kenly v. Ukegawa, supra, 16 Cal.App.4th at p. 57, fn. 7 [“We do not hold that an award of punitive damages can never be justified solely on the profits of the fraudulent transaction (without evidence of net worth), because there may well be cases where the evidence compels the conclusion the defendant will not be crippled by the award”].)

11.