Ignorance That Contractor Had No License Can Be Inferred

Tuesday, September 26, 2017

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Court of Appeal:

Ignorance That Contractor Had No License Can Be Inferred

$4.2 Million Judgment Won’t Be Upset Based on Lack of Testimony by Property Owner That an Express Representation Was Made by Home-Builder That He Was Legally Authorized to Perform the Work—Justice Johnson

By a MetNews Staff Writer

The Court of Appeal for this district, in affirming a $4.2 million judgment for fraud in connection with a botched construction job, has rejected the contention that plaintiff GT Dave is entitled to no damages because neither he nor any other witness testified that the defendant, who acted as a general contractor, ever represented that he was licensed to perform that role.

Dave—whose full name is George Thomas Dave—has gained notoriety as the founder and CEO of the company that makes the fermented tea Kombucha, which has recently spread from health food stores to supermarkets.

Friday’s decision by Div. One affirms a judgment by Los Angeles Superior Court Judge Lisa Hart Cole, after a 10-day bench trial, against Jeffrey Baessler and two of his companies, in favor of Dave.

Baessler in 2006 arranged with Dave, a friend at that time, to oversee the construction of a new house on Dave’s property in Beverly Hills at a cost of $1 million, with the work to be completed in 10 months. Twenty months later, and after paying Baessler more than $4.4 million, Dave in July, 2008, ordered him to halt construction.

He then learned, from Baessler’s lawyer, that Baessler had no contractor’s license.

Cole awarded $2.4 million in compensatory damages, $850,000 in punitive damages, $879,000 in attorney fees, and $48,000 in costs.

—AP

Depicted above is Dave’s residence in Beverly Hills which was the subject of litigation with a contractor who was not licensed.

‘Compelling Evidence’

In her 43-page statement of decision, Cole said of Baessler that there was “compelling evidence that he committed fraud.” She pointed to the “massive scale and preposterous nature of perjury committed by Baessler during discovery, and while testifying at trial.”

Cole found that “[b]ut for Baessler’s misrepresentations that he was a qualified general contractor, Plaintiff would not have hired him and would not have incurred the repair costs for defective construction,” which she reckoned, after offsets, to amount to more than $500,000.

The judge concluded that Baessler, using phony accounting records, fraudulently overstated the cost of work by subcontractors and inflated his own fee to the extent of $1.9 million.

In setting punitive damages, Cole said that while Baessler’s “rampant fraud” was a “very significant concern,” she had to go easy in light of the defendant’s modest financial resources.

(He had declared bankruptcy in 1994, 2003, and 2011.)

Johnson’s Opinion

Authoring the opinion affirming Cole, which was not certified for publication, was Justice Jeffrey Johnson. He saw no significance in the point that Dave had failed to show Baessler overtly represented himself to be a licensed contractor.

Johnson wrote:

“Plaintiff testified plainly that Baessler told him that he was a general contractor before Plaintiff retained him for the Project and then after being retained he told Plaintiff and others at the Project’s kick-off meeting that he was a general contractor. Other witnesses testified similarly….[A]s the trial court found, ‘[t]he evidence that Baessler acted as the general contractor is overwhelming.’…

“Since it is illegal for someone not licensed as a general contractor to act as a general contractor…, Baessler’s representations to Plaintiff and to others, when combined with his actions on the Project consistent with those of a licensed general contractor, and when combined with all reasonable inferences from those facts, constitute substantial evidence of Plaintiff’s reasonable and justifiable reliance on Baessler’s purported status as a licensed general contractor.”

Attorney Fees

Johnson determined that Baessler’s implied representation that he was licensed as a general contractor sufficed for purpose of the award of attorney fees pursuant to Business and Professions Code §7160, which provides:

“Any person who is induced to contract for a work of improvement, including but not limited to a home improvement, in reliance on false or fraudulent representations or false statements knowingly made, may sue and recover from such contractor… a penalty of five hundred dollars ($500), plus reasonable attorney’s fees….”

Without directly addressing the sufficiency of an implied representation, under the statute, he said:

“[T]here was substantial evidence that Plaintiff reasonably and justifiably believed both before and after entering into his contract with Baessler that Baessler was a licensed general contractor.”

Impeachment Evidence

Johnson also said that impeachment evidence showing that Baessler lied on his website that he held a BS in business administration from the University of New Hampshire was properly admitted because it was “relevant and not unduly time-consuming or unduly prejudicial.” He remarked:

“Here, the evidence that Baessler’s website was misleading as to his educational accomplishments was unlikely to inflame the trier of fact, which in this instance happened to be a seasoned trial court judge, especially in light of Baessler’s more stunning and far more relevant subsequent admissions at trial that ‘he intentionally lied to Plaintiff by overstating the amount of invoices in order to induce Plaintiff to pay more than was due.’ ”

The case is Dave v. Baessler, B265514.

Jeffrey Spitz represented Baessler at the outset of the appeal; Baessler took over at an early point; Spitz reemerged on Sept. 20 at oral argument. Scott Dinsmore & Brett A. Stroud of Dinsmore and Sandelmann were Dave’s appellate lawyers.

Dinsmore Comments

Dinsmore yesterday termed Baessler’s contentions on appeal “frivolous.” He noted:

“We have filed a claim in the bankruptcy court to have the judgment deemed nondischargeable. Debts arising from fraud cannot be discharged in bankruptcy.”

In her decision, Cole recited that Baessler “used the fraudulently obtained funds for his personal benefit, including the construction of a luxury home in Texas, the purchase and remodeling of two condominiums in Los Angeles, the purchase of cars and boats, retirement investment accounts and the payment of personal property taxes.”

Dinsmore related that he “successfully prosecuted another claim in Texas to recover the funds from the sale of the Texas property.”

Litigation Over Kombucha

While Baessler is no stranger to court proceedings based on his alleged fraudulent conduct—and has spent time behind bars on a probation violation—Dave’s contact with the courts, aside from his action against Baessler, has been largely limited to the matter of the slight alcoholic content in Kombucha. It is about 0.5 percent.

A class action was launched against Dave’s company, Millennium Products Inc., as well as against Whole Foods Market Inc., which sells DT Kombucha. U.S. District Court Judge Philip S. Gutierrez of the Central District of California on Jan. 31 approved $8.25 million settlement in a consumers’ action that claimed mislabeling of the product, including the representation that the fermented tea is non-alcoholic.

A brouhaha over the brew arose in 2011 when the Los Angeles County Probation Department determined that actress Lindsay Lohan had violated a term of her home detention by ingesting alcohol. She claimed the positive reading was based on drinking Kombucha.

Dave commented at the time that seeking a revocation of probation was “”ridiculous” because “it’s like punishing Lindsay for taking a dose of cough syrup or a small amount of vanilla extract.”

Then-Los Angeles Superior Court Judge Stephanie Sautner, now retired, found no violation (on that occasion—though she did later, on other grounds) because the order to avoid alcohol had expired.