Unpublished Disposition, 845 F.2d 329 (9th Cir. 1988)

MEMORANDUM^* 

Southland appeals the district court's 1) determination that it is not entitled to consequential damages for conversion, 2) failure to award consequential damages for trespass, and 3) determination that Smith and Emerald are not liable for fraud.

* The district court awarded Southland damages for conversion in the amount of the replacement value of the equipment but determined that it is not entitled to consequential damages for conversion in the amount of lost rent.¹  Under Cal.Civ.Code Sec. 3336 (section 3336), damages caused by conversion are presumed to be the value of the property at the time of the conversion or an amount sufficient to indemnify the party for the loss which is the proximate cause of the conversion. Generally the appropriate measure of damages for conversion is the fair market value of the property, but " [w]here proof establishes an injury beyond that which would be adequately compensated by the value of the property and interest, the court may award such amounts as will indemnify for all proximate reasonable loss caused by the wrongful act." Lint v. Chisolm, 121 Cal. App. 3d 615, 624-25 (1981). The question of causation is one of fact. See Myers v. Stephens, 233 Cal. App. 2d 104, 120 (1965).

Southland argues that but for the removal of the equipment, it would have leased the station to Shell for $187,000, supporting its claim with the stipulated testimony of a Shell real estate representative. The district court interpreted the stipulated testimony as indicating that Shell was unwilling to go through with the lease even if Southland re-equipped the station and "that Shell likely had other reasons, independent from the conversion, for not renting the [station]." Excerpt of Record (E.R.) at 22. It found that neither the stipulated testimony nor any other evidence in the record proved that the conversion proximately caused Shell to fail to go through with the lease. Southland argues that the district court erred because it failed to consider the crucial paragraph of the stipulated testimony as a whole. However, the district court's interpretation of the stipulated testimony is not clearly erroneous. Southland does not point to any other evidence in the record which suggests that the removal of the equipment proximately caused Shell to back out of the lease. The district court's determination that the conversion did not proximately cause Southland to lose the Shell lease is not clearly erroneous.

Southland contends that it is entitled to consequential damages for conversion under several other theories, none of which is persuasive. First, Southland argues that it is not required to prove the exact amount of consequential damages it incurred, but this argument ignores that Southland must first prove that the conversion proximately caused injury. Second, Southland argues it does not have to show that it lost the specific lease with Shell but merely that the property lost rental value as a result of the conversion. However, Southland points to no evidence in the record which suggests that the removal of the equipment proximately caused the station to lose rental value. Third, Southland argues that if the conversion had not occurred and Shell had reneged, it would have had a legally enforceable claim against Shell. This attenuated chain of causation does not rise to the level of proximate cause. Finally, although Southland tries to circumvent the proximate cause requirement of section 3336 by arguing that it is entitled to consequential damages for Thomas and CTC's negligence, there has been no finding that CTC and Thomas were negligent.

II

After trial, the district court found Thomas and CTC liable for trespass, but awarded Southland only $1 in nominal damages. See E.R. at 8. Southland argues that the district court originally failed to award consequential damages for trespass because it erroneously concluded that CTC and Thomas were not liable for conversion. See Southland Corp. v. Emerald Oil Co., 789 F.2d 1441 (9th Cir. 1986) (reversing determination that appellees had not converted equipment). On remand, Southland asked the district court to award consequential damages for trespass in the amount of lost rent. Although the district court indicated that Southland requested additional damages for trespass on remand, it did not address the request separately from damages for conversion. E.R. at 19. We hold that the district court did not err in failing to award consequential damages for trespass. Cal.Civ.Code Sec. 3333 provides for damages to compensate for "all detriment proximately caused" by the breach of an obligation not arising from contract. Because Southland has failed to establish that the conversion was the proximate cause of lost rents, it has also failed to establish that the trespass antecedent to the conversion was the proximate cause of lost rents.

III

On remand, the district court held that Smith and Emerald are not liable for conversion because the evidence does not give rise to 1) an inference of intent to deceive by Emerald and Smith or 2) an inference that Smith did not intend to pay for the equipment when he signed the lease and the lease amendment. E.R. at 22-23. Although the second finding is supported by evidence in the record--Emerald made two $13,500 payments for the equipment--and is not clearly erroneous, the first finding is more problematic because there is some dispute over whether Smith and Emerald agreed to install equipment free of encumbrances in September, before they contracted for the equipment, or in November after they had contracted for the equipment. Despite the parties' disagreement, the district court's findings of fact, see E.R. at 2-3, and the prior panel's opinion, see Southland, 789 F.2d at 1442, clearly indicate that Southland, Smith and Emerald entered into the lease amendment regarding the installation of the equipment in November, after Smith and Emerald had contracted for the equipment. Southland argues that intent to deceive must be inferred from Smith and Emerald's representation that the equipment was installed free of all encumbrances. However, because it turns on an assessment of the credibility of Smith's testimony regarding his understanding of the meaning of the language of the lease amendment, we hold that the district court's finding that the evidence does not give rise to an inference that Smith and Emerald intended to deceive is not clearly erroneous. Because Southland has not established that Smith and Emerald intended to deceive, it has not proven all the elements of fraud and the district court did not err holding that Smith and Emerald are not liable for fraud.

The judgment of the district court is AFFIRMED.