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Sossi Palanjian v. Carnation Village

December 20, 2010


Appeals from a judgment of the Superior Court of Orange County, Josephine Staton Tucker, Judge. Affirmed as modified. Request for judicial notice. Denied. (Super. Ct. No.07CC04838)

The opinion of the court was delivered by: Fybel, J.

Palanjian v. Carnation Village CA4/3


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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.



Carnation Village, LLC (Carnation), constructed a condominium unit at 310 Carnation Avenue in Corona del Mar, California (the property). Carnation sold the property to Sossi Palanjian in 2006. After Palanjian moved into the property, mold was discovered, having been caused by water intrusion. Palanjian sued Carnation, Maclovio Espinoza, and Lorenzo Espinoza (collectively, defendants) for damages. (Maclovio Espinoza is the sole owner of Carnation. Lorenzo Espinoza is Maclovio Espinoza's son, who was involved in the construction and repair of the property. We will refer to Maclovio Espinoza and Lorenzo Espinoza by their first names to avoid confusion; we intend no disrespect.) A jury found Carnation, Maclovio, and Lorenzo liable for a variety of claims, and awarded damages to Palanjian. Defendants appealed.

We conclude there was substantial evidence supporting the jury's findings that Maclovio and Lorenzo were liable for negligence; that Maclovio was liable for violating the Right to Repair Act (Civ. Code, § 895 et seq.) (the Act); that Carnation and Maclovio were liable for concealment; and that Carnation was liable for negligent misrepresentation.

We further conclude there was not substantial evidence supporting some of the damages awarded to Palanjian, and modify the judgment accordingly. As modified, the judgment is affirmed.


In 2001, Carnation purchased and demolished three apartment buildings on a parcel of land in Corona del Mar, California. Carnation then constructed condominium units on the site, one of which is the property and the subject of this litigation. Palanjian purchased the property for $2.46 million in 2006.

During escrow, Carnation disclosed in a real estate transfer disclosure statement that the property showed evidence of a water leak, and advised Palanjian to have the property inspected by a qualified inspector "to satisfy [herself] as to the condition of the property including but not limited to geological conditions, physical conditions, air quality & the existence of mold and/or mildew." An inspector hired by Palanjian discovered evidence of moisture and mold in the property's kitchen area. Carnation performed repairs based on Palanjian's request for repairs. Palanjian, her agent, and Carnation's agent conducted a final inspection of the property in June 2006. Palanjian and her agent signed a buyer final inspection form after the inspection, approving the repairs performed by Carnation.

After Palanjian moved into the property, she noticed a strong odor in the kitchen, and complained to Carnation. Lorenzo and Larry Diek, a licensed contractor, discovered wet spots and black material behind the drywall in the kitchen.

Palanjian hired her own industrial hygienist to inspect the kitchen. The hygienist determined there was mold in the kitchen, and issued a report stating the steps needed to remediate the problem. Palanjian also obtained a bid for mold remediation work.

Carnation hired someone else to do the mold remediation work, based on the scope of work in Palanjian's industrial hygienist's report. A third party consultant certified the remediator's work on or about August 15, 2006. Palanjian's industrial hygienist, however, claimed the mold remediation had not been performed properly. Palanjian's attorney then instructed Carnation's mold remediator to stop all work immediately, preventing him from waterproofing the interior walls and cleaning the ducts.

In November 2006, Palanjian hired the industrial hygenist's husband to perform the mold remediation work. He completed the remediation work, and his wife certified it.


Palanjian sued Carnation and Maclovio in April 2007. Lorenzo was added as a Doe defendant in November 2007.

The third amended complaint alleged causes of action for (1) intentional fraud, (2) constructive fraud, (3) deceit, (4) negligent misrepresentation, (5) failure to disclose, (6) rescission, (7) breach of contract, (8) unfair business practices, (9) reformation, (10) violation of the Act, (11) strict liability, (12) negligence, and (13) breach of warranty. The causes of action for reformation and breach of warranty were alleged only against Carnation; all the other causes of action were alleged against all three defendants.

The jury found Carnation and Maclovio, but not Lorenzo, liable for concealment. The jury found none of defendants liable for making a false promise. The jury found Carnation, but not Maclovio or Lorenzo, liable for negligent misrepresentation. As to the fraud claims, the jury awarded Palanjian $418,000, as follows: $277,000 for the difference between the sales price and the actual value of the property as of the date of the sale; $16,000 for the amounts "actually and reasonably expended"; and $125,000 for loss of use and enjoyment of the property. The jury found Palanjian was not entitled to recover punitive damages on her fraud claims.

The jury also found that Carnation breached a contract with Palanjian; that defendants were liable for negligence; and that Carnation and Maclovio were builders of the property, and violated the Act, causing harm to Palanjian. On those claims, the jury found Palanjian suffered damages in the total amount of $309,000, as follows: $141,000 for past economic damages, including $16,000 for investigation and repair, and $125,000 for loss of use and enjoyment of the property; and $168,000 for future economic loss, including the cost of investigation, repairs, and loss of use and enjoyment of the property.

After the jury rendered its verdict, Palanjian filed a statement of equitable issues for the trial court's decision. Palanjian asked the trial court to determine that Maclovio and Lorenzo were alter egos of Carnation, and that rescission was a proper remedy. The court found the evidence at trial was insufficient to disregard the corporate entity and determine Maclovio and Lorenzo were the alter egos of Carnation. The court also found rescission was an appropriate remedy, and ordered Palanjian to file a notice of election of remedies.*fn1 Palanjian elected to withdraw her request for rescission, and proceed with the damages awarded by the jury.

Judgment was entered on February 11, 2009. Lorenzo filed a motion for judgment notwithstanding the verdict, and Maclovio and Carnation filed motions for judgment notwithstanding the verdict and for a new trial. The trial court denied all three motions. Defendants timely appealed.



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