Keru Investments, Inc. v. Cube Co.

74 Cal. Rptr. 2d 744, 63 Cal. App. 4th 1412
CourtCalifornia Court of Appeal
DecidedMay 19, 1998
DocketB107871
StatusPublished

This text of 74 Cal. Rptr. 2d 744 (Keru Investments, Inc. v. Cube Co.) is published on Counsel Stack Legal Research, covering California Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Keru Investments, Inc. v. Cube Co., 74 Cal. Rptr. 2d 744, 63 Cal. App. 4th 1412 (Cal. Ct. App. 1998).

Opinion

74 Cal.Rptr.2d 744 (1998)
63 Cal.App.4th 1412

KERU INVESTMENTS, INC., et al., Plaintiffs and Respondents,
v.
CUBE COMPANY, INC., Defendant and Appellant.

No. B107871.

Court of Appeal, Second District, Division Four.

May 19, 1998.
Rehearing Denied June 18, 1998.
Review Denied August 12, 1998.

*745 Greines, Martin, Stein & Richland, Robert A. Olson, Tyna Thall Orren, Beverly Hills, Early, Maslach, Price & Baukol and Larry E. Robinson, Los Angeles, for Defendant and Appellant.

Fingal, Fahrney & Clark and Christopher R. Clark, Newport Beach, for Plaintiffs and Respondents.

CHARLES S. VOGEL, Presiding Justice.

FACTUAL AND PROCEDURAL BACKGROUND

Respondents Keru Investments, Inc., and Viljo Kaila brought suit against Sam, Lev, Julia and Elena Moross, Sam, Victor and Ala Dorodny, Lada Company, Gardena Recycling Center, Inc., GL & Associates, George Lerner, F. Nooravi and appellant "Cube Construction Company,"[1] for waste, intentional damage and destruction of property, negligent destruction of property, professional negligence, negligence, and conspiracy to commit waste. The only claims asserted against GL & Associates, George Lerner, Nooravi, and Cube Company were the two claims for professional negligence and negligence.

The principle facts leading to the lawsuit are undisputed. Respondent Kaila was the owner of a 35-unit apartment building located in Hollywood. He sold the property to the Morosses, the Dorodnys, and Lada Company (hereafter referred to as the "Moross Group") in September of 1985, taking back a deed of trust.

In 1988, while the Moross Group owned the building, they hired George Lerner of GL & Associates to engineer a seismic retrofit for the building. Thereafter, Cube Company was retained as the general contractor to perform the seismic retrofit construction work.

On January 17, 1994, the Northridge earthquake struck, and the building sustained heavy damage. It was yellow-tagged by the city.

The Moross Group conveyed the property to Keru Investments, a company wholly owned by Kaila, pursuant to an "Agreement for Acquisition of Real Property" dated October 7, 1994. As consideration, Keru Investments agreed to be subject to the first trust deed, thereby relieving the Moross Group of their obligations under the note, which at that time had an outstanding balance of $615,000.

Prior to the conveyance, the Moross Group had attempted to file a quitclaim deed in favor of Kaila, and under paragraph 1.4 of the agreement, Kaila was to record a "Notice of Non-Acceptance." The provision went on to state that "recordation of the Quitclaim Deed by Seller in favor of Kaila did not cause a merger of the [All-inclusive Deed of Trust], and that the [All-inclusive Deed of Trust] shall remain in full force and effect and a charge against the Real Property. Upon transfer of the Real Property from Seller to Buyer, Seller shall be released of any further liability or obligation under the [All-inclusive Deed of Trust] pursuant to the Assumption Agreement and Release to be recorded concurrently therewith."

Paragraph 1.3 of the October 7, 1994, agreement provided: "Buyer acknowledges and agrees that the Real Property and the structures thereon have suffered severe earthquake and vandalism damage. Buyer acknowledges and agrees that Buyer is acquiring the Real Property subject to said damages and need for repairs, and is acquiring the Real Property in an `as is, where is' condition. The Seller is not making any representations or warranties whatsoever in that regard. Buyer acknowledges that Buyer has made its own independent physical inspection of the Real Property."

Paragraph 1.6 of the agreement stated in part: "... Seller shall assign, transfer, and convey to Buyer all right, title, and interest of Seller in any engineering plans and specifications, architectural plans, warranties, causes of action, or other claims arising out of, related to, or associated with the Real *746 Property. Seller agrees to deliver to Buyer at closing any and all plans, specifications, warranties, or other documents Seller may have in Seller's possession relating to the Real Property."

Respondents came' to the conclusion that the plans and specifications drawn up by GL & Associates and George Lerner contained errors and omissions and that the construction work performed by Cube Company and its owner Nooravi failed to follow the plans and specifications or was performed in an incomplete and unworkmanlike manner. They filed the above-described complaint. By the time of trial, Cube Company and Nooravi were the only remaining defendants. The following testimony was elicited from the witnesses:

Harri Keto, the attorney who represented respondents in connection with the October 1994 agreement, testified that the transaction closed, that all documents the sellers had were transferred upon closing, and that there was no further writing contemplated to assign rights to respondents. After hearing the testimony, the court concluded that based on the terms of the agreement and the testimony of respondents' attorney, "the evidence is insufficient as a matter of law to sustain a finding that there was in fact an assignment [of the claim against Cube Company] from the seller to the buyer."

Seb John Ficcadenti, a structural engineer, testified that he found differences between the plans engineered by Lerner and the actual bracing put in place in the building by Cube Company. In his opinion as an expert, he concluded that the amount of damage sustained by the building would have been greatly reduced if the retrofitting had been done in precise accordance with the plans. However, he conceded that if the building had not been retrofitted at all there would have been even more damage. The building was originally constructed prior to 1934, a time when little consideration was given to earthquake reinforcement.

Richard Pastore, a certified public accountant, testified as to the loss of earnings suffered from the inability to rent out the building for the six months it took to repair the badly damaged building as compared to the one month which would have been necessary had the earthquake retrofit been done according to plans and the building only suffered "cosmetic" damage.[2] He concluded that earnings loss totaled at least $65,550.

Michael Waldron, a real estate appraiser, testified at trial that he evaluated the property in its condition before and after the earthquake. He concluded it was worth approximately $1 million prior to the earthquake and $320,000 afterward, which meant the earthquake damage caused a diminution in value of $680,000.

Wilmot Frederick Macklin III, a professional cost estimator, estimated that it would cost $249,232 to repair the building's structural earthquake damage and do the retrofitting necessary to stabilize it.

For the defense, John Devine, the city building inspector, testified that the work done by Cube Company complied with all the requirements of the building department and that a permit had been issued.

In closing, respondents' counsel argued that total damages, including cost of repair and loss of earnings, was $337,432. Concerning negligence, the jury was instructed: "A contractor who constructs improvements pursuant to a construction contract assumes the duty to the owner to exercise care to build the improvements in a good and workmanlike manner.

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Bluebook (online)
74 Cal. Rptr. 2d 744, 63 Cal. App. 4th 1412, Counsel Stack Legal Research, https://law.counselstack.com/opinion/keru-investments-inc-v-cube-co-calctapp-1998.