High Tide Cafe v. Frenk

Filed 1/29/07 High Tide Cafe v. Frenk CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, Francis M. Devaney, Judge. Affirmed.

High Tide Caf (High Tide) entered into a listing agreement with G.R. Bill Business Brokers, Inc. (G.R. Bill) to sell its restaurant business. The listing agreement, which entitled G.R. Bill to a broker's commission in the event the sale was "accomplished," did not contain an attorney fees clause. G.R. Bill found a buyer, and High Tide and the buyer entered into a purchase contract that acknowledged G.R. Bill's right to payment of a commission in accordance with the terms of the listing agreement. The parties to the purchase contract opened an escrow, and the escrow instructions, which acknowledged G.R. Bill's right to payment of a commission "upon the close of escrow" and contained two attorney fees clauses, defined "close of escrow" as the transfer of a specified liquor license to the buyer. Although the liquor license was transferred to the buyer, and both High Tide and the buyer agreed in writing that the other contingencies were satisfied, the buyer refused to sign escrow closing instructions.

High Tide and the buyer arbitrated their dispute. After the arbitrator awarded damages in favor of High Tide, G.R. Bill brought a claim seeking to recover its $30,000 broker's commission plus attorney fees and costs from escrow funds deposited by the buyer into the escrow account and later transferred to the sheriff's department. High Tide contested the claim, asserting it did not owe G.R. Bill a commission under the listing agreement because a completed sale never occurred. Following a trial, the court entered judgment in favor of G.R. Bill and ordered High Tide to pay to G.R. Bill a commission in the amount of $30,000, attorney fees in an amount exceeding $20,000, plus costs.

High Tide appeals, contending the judgment should be reversed because (1) the phrase "in the event a sale . . . is accomplished" in the listing agreement unambiguously conditioned High Tide's payment of a commission to G.R. Bill on a completed or consummated sale; (2) the consummation of a sale means payment of the purchase price and conveyance of title, and thus the sale of High Tide's business was never completed or consummated because the buyer breached the contract; and (3) G.R. Bill was not entitled to an award of attorney fees because the listing agreement did not contain an attorney fees provision, and G.R. Bill was not an intended third party beneficiary of the purchase agreement or escrow instructions.

We conclude the court did not err in (1) finding that High Tide was contractually obligated to pay G.R. Bill's $30,000 commission because the sale was "accomplished" within the meaning of the listing agreement, and (2) awarding reasonable attorney fees to G.R. Bill as the prevailing party. Accordingly, we affirm the judgment.

FACTUAL BACKGROUND

A. Listing Agreement

High Tide listed its restaurant (the Caf) for sale through its broker, G.R. Bill, pursuant to a listing agreement executed by High Tide's president, Ronn Tompot. The listing agreement, which obligated High Tide to pay G.R. Bill a broker's commission in the event a sale was "accomplished," provided: "In the event a sale exchange, lease or management contract is accomplished or is in negotiation during listing period, or within the subsequent one year to a registered client of Broker, I agree to pay Broker on demand 10[ percent] of the total price . . . or a minimum commission of $20,000, whichever is greater." (Italics added.) The listing agreement, which did not include an attorney fees provision, contained an arbitration clause.^[1]

B. Purchase Contract

G.R. Bill located a buyer, Pacific Surfrider Enterprises, Inc. (Pacific Surfrider). Pacific Surfrider, through its majority shareholder Peter Frenk, and High Tide executed a purchase contract in which High Tide agreed to sell the Caf to Pacific Surfrider for the sum of $350,000. The purchase contract included an arbitration clause similar to the one contained in the listing agreement.^[2]

The purchase contract also included the following provision under which High Tide and Pacific Surfrider agreed to pay a commission to G.R. Bill in accordance with the terms of the listing agreement: "[We] the undersigned, hereby accept the above offer and agree . . . to pay Broker a commission of $ As per Listing Contract in accordance with the terms of the listing agreement." (Italics added.)

C. Escrow Instructions and Definition of "Close of Escrow"

High Tide and Pacific Surfrider opened an escrow with Mission Valley Escrow for the transfer to Pacific Surfrider of title to the Caf, a liquor license, and an assignment of the lease upon its payment of the purchase price.

The original set of escrow instructions contained the following provision under which High Tide and Pacific Surfrider agreed that High Tide was obligated to pay a commission to G.R. Bill, "upon the close of escrow," for services "rendered and completed": "It is mutually understood and agreed by and between the parties hereto that [High Tide] is obligated to pay a commission to broker, [G.R. Bill], for services rendered and completed as per separate instructions. Said commission is payable forthwith upon the close of escrow from funds deposited into escrow. Both [Pacific Surfrider] and [High Tide] specifically agree that the payment of said commission at that time is not contingent upon the performance of any act, condition, or instruction in this escrow." (Italics added.)

The escrow instructions contained two provisions under which High Tide and Pacific Surfrider agreed that "close of escrow" would be deemed to occur upon the issuance of the liquor license by the Alcoholic Beverage Control (ABC) Board . The first provision stated: "It is mutually understood and agreed by and between the parties hereto that the actual close of this escrow shall be upon the issuance of the permanent ABC license to [Pacific Surfrider] by the [ABC] Board." (Italics added.) The second provided: "Close of escrow shall be deemed to be the issuance of the permanent ABC license to [Pacific Surfrider] by the [ABC] Board as set forth in the Notice to Creditors of Bulk Sale. You are to proceed with the closing of this escrow PROVIDED all conditions of the escrow have been met and there is sufficient money in escrow available to pay all approved claims, agents commission, if any, prorations, your costs and charges, and the amount of required by law to be withheld for unapproved claims."^[3] (Italics added.)

1. Attorney fees clauses

The escrow instructions also set forth numerous other agreements following a statement indicating those agreements were made by the parties outside of escrow.^[4]They included two attorney fees provisions.

The first attorney fees clause, which referred to disputes "between the parties," was set forth in an arbitration clause and provided that "[a]ny attorney's fees incurred in connection with said Arbitration shall be awarded to the prevailing party." (Italics added.) The second, which was not limited to disputes "between the parties," pertained to disputes "regarding the terms of this escrow" and provided the prevailing party was entitled to reasonable attorney fees in the event "legal action or arbitration" was required to "settle a claim or controversy regarding the terms of this escrow."

D. Satisfaction of Sale Contingencies and Amended Commission Order

Pacific Surfrider deposited the purchase funds into escrow.^[5] In early November 2004, after the parties agreed in writing that all of the sale contingencies had been satisfied with the exception of the transfer of the liquor license, High Tide permitted Pacific Surfrider to take possession of the leased restaurant premises. Based on the parties' agreement to reduce the purchase price to $300,000, High Tide executed an amended commission order instructing Mission Valley Escrow to pay to G.R. Bill from the deposited escrow funds a $30,000 broker's commission "at close of escrow."

Several weeks later, on December 2, 2004, the ABC Board issued the liquor license to Pacific Surfrider and authorized the close of escrow.

Although the contingencies had been satisfied, Pacific Surfrider refused to sign escrow closing instructions or allow the release of sale proceeds to High Tide. Mission Valley Escrow suspended all further activity regarding the transaction, including any disbursement of funds, pending resolution of the dispute.

E. High Tide's Arbitration Award and Attachment of Funds

In late December 2004 High Tide submitted the dispute between High Tide and Pacific Surfrider to binding arbitration, claiming that it (High Tide) had performed all of its contractual obligations; escrow had closed when the liquor license was transferred to Pacific Surfrider; and Pacific Surfrider had refused, without legitimate excuse, to close escrow.

In June 2005, after a contested arbitration proceeding, the arbitrator ruled in High Tide's favor and awarded it the full purchase price of $300,000, an additional but unspecified sum of $14,666, attorney fees and costs in the amount of $13,976.84, plus arbitration fees, for a total award in excess of $335,000. High Tide thereafter obtained an ex parte writ of attachment from the San Diego County Superior Court pursuant to which Mission Valley Escrow transferred the sum of $319,601 from escrow to the San Diego County Sheriff's Department.

PROCEDURAL BACKGROUND

In August 2005 G.R. Bill filed in the court a "Third Party Claim of Ownership of Levied Property" seeking to recover from the $319,601 held by the sheriff's department the sum of $40,000, which included $30,000 as its 10 percent broker's commission under the listing agreement, plus $10,000 in anticipated attorney fees. In its trial brief High Tide opposed the claim, asserting that "it owe[d] no commission because a condition precedent under G.R. Bill's listing agreement for earning a broker's commission, a completed sale, never occurred" through no fault of High Tide when Pacific Surfrider breached the purchase contract and refused to complete the sale.

A. Judgment and Attorney Fees Award

Following a trial, the court entered judgment in favor of G.R. Bill based on its findings that (1) a sale was "accomplished" within the meaning of the listing agreement; (2) the purchase contract and escrow instructions authorized payment of the broker's commission to G.R. Bill upon transfer of the liquor license to Pacific Surfrider; (3) equitable considerations, including the fact that High Tide received through G.R. Bill's services and arbitration the sale price it was seeking, supported G.R. Bill's claim; and thus (4) G.R. Bill was entitled to its $30,000 broker's commission. Following a hearing on G.R. Bill's motion for attorney fees, the court granted the motion and awarded fees in the amount of $20,283.75.

The judgment ordered High Tide to pay G.R. Bill a commission in the amount of $30,000, plus attorney fees in the amount of $20,283.75 and costs in the amount of $1,260.75. The judgment ordered the sheriff's department to disburse $40,000 to G.R. Bill and provided that after the disbursement of those funds, High Tide owed G.R. Bill a remaining balance of $11,544.50. High Tide's appeal followed.

DISCUSSION

I. BROKER'S COMMISSION

High Tide contends the judgment in favor of G.R. Bill should be reversed because the court erroneously found that High Tide was obligated under the terms of the listing agreement to pay a broker's commission to G.R. Bill. Specifically, High Tide contends (1) the phrase "in the event a sale . . . is accomplished" in the listing agreement unambiguously conditioned High Tide's obligation to pay a commission to G.R. Bill on a completed or consummated sale, (2) consummation of a sale requires payment of the purchase price and conveyance of title, and thus (3) the sale of High Tide's business was never completed or consummated because the buyer (Pacific Surfrider) breached the contract. We conclude the court did not err in finding that the sale was "accomplished" within the meaning of the listing agreement and that High Tide was thus contractually obligated to pay G.R. Bill's commission.

In Cochran v. Ellsworth (1954) 126 Cal.App.2d 429, 438 (Cochran), a case on which High Tide relies, the Court of Appeal explained that, "[g]enerally speaking, a real estate broker has earned his commission when he has brought to the vendor a purchaser who is ready, willing and able to buy the property upon the terms on which the agent is authorized to sell, or when a written contract upon any terms acceptable to the seller has been entered into with a purchaser originally brought to the vendor by the agent. [Citation.] It is not necessary for the sale to be completed, under the foregoing rule, for the broker to be entitled to his commission. [Citation.]" (Italics added.) The Cochran court also stated that "[a] broker who has rendered all required services is not to be denied compensation therefor by the whims of a defaulting vendor or purchaser who arbitrarily refuses to perform under a sales contract." (Ibid.) Another court explained that "'the execution of a contract of sale by the owner of real property is conclusive proof that he was satisfied as to the qualifications of the purchaser and of his ability to perform the contract, thus rendering the owner liable for the payment of the broker's commission. [Citations.]'" (Moore v. Balboa Escrow Co. (1953) 116 Cal.App.2d Supp. 921, 923.)

Here, the plain language of the listing agreement obligated High Tide to pay G.R. Bill a broker's commission in the amount of 10 percent of the sale price or $20,000, whichever was greater, in the event the sale of the restaurant, including the transfer of a liquor license, was "accomplished." The listing agreement did not define the term "accomplished."

It is undisputed that G.R. Bill found a willing, ready and able buyer─Pacific Surfrider─and High Tide and Pacific Surfrider entered into a purchase contract that acknowledged High Tide's obligation to pay G.R. Bill "a commission . . . in accordance with the terms of the listing agreement." That High Tide considered Pacific Surfrider to be an acceptable buyer is also shown by the fact that they entered into the purchase contract and opened an escrow for the transfer to Pacific Surfrider, upon its payment of the purchase price into the escrow account, of title to the Caf property, a liquor license, and an assignment of the lease. It is also undisputed that G.R. Bill performed all required broker services, and, through no fault of G.R. Bill, Pacific Surfrider refused to allow the escrow company to disburse the sale proceeds to High Tide.

Our analysis does not end, however, with a determination that the record shows that (1) G.R. Bill brought to High Tide a "willing, ready and able" buyer within the meaning of Cochran, supra, 126 Cal.App.2d at page 438; (2) High Tide considered Pacific Surfrider to be an acceptable buyer within the meaning of Moore v. Balboa Escrow Co., supra, 116 Cal.App.2d Supp. at page 923; and (3) G.R. Bill performed all required services as High Tide's broker. We next address, and reject, High Tide's contention that the phrase "in the event a sale . . . is accomplished" in the listing agreement unambiguously conditioned High Tide's obligation to pay a commission to G.R. Bill on a completed or consummated sale.

In ASP Properties Group v. Fard, Inc. (2005) 133 Cal.App.4th 1257, this court recently discussed the principles governing contract interpretation, and explained that "'[t]he precise meaning of any contract . . . depends upon the parties' expressed intent, using an objective standard. [Citations.] When there is ambiguity in the contract language, extrinsic evidence may be considered to ascertain a meaning to which the instrument's language is reasonably susceptible. [Citation.] . . . [] We review the agreement and the extrinsic evidence de novo, even if the evidence is susceptible to multiple interpretations, unless the interpretation depends upon credibility. [Citation.] If it does, we must accept any reasonable interpretation adopted by the trial court. [Citation.]' [Citation.] '[W]here . . . the extrinsic evidence is not in conflict, construction of the agreement is a question of law for our independent review. [Citation.]' [Citations.] In contrast, '[i]f the parol evidence is in conflict, requiring the resolution of credibility issues, we would be guided by the substantial evidence test. [Citation.]' [Citation.] However, extrinsic evidence is not admissible to ascribe a meaning to an agreement to which it is not reasonably susceptible. [Citation.]" (Id. at pp. 1266-1267.)

Here, the meaning of the term "accomplished" as used in the listing agreement is reasonably susceptible to more than one interpretation on the facts of this case, and thus, under the foregoing principles of contract interpretation, we must consider not only the express terms of the listing agreement between High Tide and G.R. Bill, but also the extrinsic evidence concerning the escrow instructions and the arbitrated dispute between High Tide and Pacific Surfrider. (See ASP Properties Group v. Fard, Inc., supra, 133 Cal.App.4th at p. 1266.)

On the factual record presented in this case, we reject High Tide's claim that the parties intended the term "accomplished" in the listing agreement to mean that High Tide's obligation to pay G.R. Bill its broker's commission was conditioned on the completion or consummation of a sale through escrow. At page 2 of the escrow instructions, High Tide expressly agreed to pay a broker's commission to G.R. Bill for its "services rendered and completed as per separate instructions," and further agreed that "[s]aid commission [was] payable forthwith upon the close of escrow from funds deposited into escrow." (Italics added.) It is undisputed that the escrow instructions expressly defined the term "close of escrow" to mean the issuance of the liquor license to Pacific Surfrider, and High Tide agreed to accept this definition. Specifically, the escrow instructions provided at page 2: "It is mutually understood and agreed by and between the parties hereto that the actual close of this escrow shall be upon the issuance of the permanent ABC license to [Pacific Surfrider] by the [ABC] Board." (Italics added.) Another provision at page 5 of the escrow instructions stated that "[c]lose of escrow shall be deemed to be the issuance of the permanent ABC license to [Pacific Surfrider] by the [ABC] Board . . . ." (Italics added.)

Under Civil Code section 1559,^[6]which governs a third party beneficiary's right to enforce a contract made expressly for its benefit, G.R. Bill was a third party beneficiary of High Tide's express agreement in the escrow instructions (discussed, ante) to pay a broker's commission to G.R. Bill upon the "close of escrow," which those instructions defined as the issuance of the liquor license to Pacific Surfrider. (See also Donnellan v. Rocks (1972) 22 Cal.App.3d 925, 930 ["an agreement between a vendor and purchaser which expressly provides for the payment of a commission to a broker makes the broker a third party beneficiary"].)

G.R. Bill's status as a third party beneficiary of that agreement is also evidenced by the undisputed fact that in early November 2004 High Tide executed an amended commission order instructing Mission Valley Escrow to pay to G.R. Bill from the deposited escrow funds a $30,000 broker's commission "at close of escrow." One commentator has observed that a seller's written escrow instruction authorizing disbursement of funds to pay a broker's commission "may make the broker a third party beneficiary of the escrow, though not necessarily a party to the escrow." (Greenwald & Asimov, Cal. Practice Guide: Real Property Transactions (The Rutter Group 2006) [] 4:578, p. 4-143 (rev. #1, 2005).)

Had High Tide, in executing the listing agreement, intended to be obligated to pay the commission only upon the transfer of title and payment of the purchase price through escrow, as High Tide claims on appeal, it would not have agreed to escrow instructions obligating it to pay G.R. Bill's broker's commission upon issuance of the liquor license, nor would it have instructed Mission Valley Escrow in writing to pay that commission "at close of escrow," which the escrow instructions defined as the occurrence of that event.

Thus, the undisputed facts establish that although the listing agreement obligated High Tide to pay G.R. Bill broker's commission when the sale was "accomplished," an ambiguous term that the listing agreement did not define, High Tide subsequently agreed in the escrow instructions that it was obligated to pay the commission upon "close of escrow" defined as the issuance of the liquor license to Pacific Surfrider. Because that agreement was expressly made for G.R. Bill's benefit, G.R. Bill had standing as a third party beneficiary to enforce it. (Civ. Code,  1559.)

The court did not err in finding that G.R. Bill was entitled to its $30,000 commission on the ground the sale of High Tide's restaurant property was "accomplished" within the meaning of the listing agreement. Pacific Surfrider deposited the purchase funds into escrow. The record shows that in early November 2004, after High Tide and Pacific Surfrider agreed in writing that all of the sale contingencies had been satisfied with the exception of the transfer of the liquor license, High Tide permitted Pacific Surfrider to take possession of the leased restaurant premises. When the parties agreed to reduce the purchase price to $300,000, High Tide executed an amended commission order instructing Mission Valley Escrow to pay to G.R. Bill from the deposited escrow funds a $30,000 broker's commission "at close of escrow." It is undisputed that several weeks later, in early December 2004, the ABC Board issued the liquor license to Pacific Surfrider and authorized the close of escrow. Thus, the sale was "accomplished," and High Tide's contractual obligation under the listing agreement to pay G.R. Bill's broker's commission matured, when the condition precedent to which High Tide assented─the "close of escrow" as defined in the escrow instructions─occurred upon issuance of the liquor license.

It is true that the buyer, Pacific Surfrider, refused to allow the escrow company to disburse the sale proceeds to High Tide, and High Tide had to arbitrate the resulting dispute. However, it is undisputed that High Tide was the prevailing party in the arbitration proceeding, and the arbitrator awarded it not only damages in an amount exceeding the purchase price of $300,000, but also its attorney fees, costs, and arbitration fees.

Thus, High Tide received the benefit of the bargain and was made whole with respect to the expenses it incurred in successfully arbitrating its claim against Pacific Surfrider. In this respect, too, the sale was "accomplished" within the meaning of the listing agreement. The fact that High Tide received the benefit of the bargain through arbitration, rather than through escrow, is legally immaterial and does not demonstrate a failure of a condition precedent to High Tide's obligation to pay the commission.

High Tide relies on Cochran, supra, 126 Cal.App.2d 429, as support for its claim that the sale of its Caf property was never completed, and thus it did not owe G.R. Bill a commission because under Cochran "[t]he consummation of a sale of property means payment of the purchase price and conveyance of title." High Tide's reliance on Cochran is misplaced.

In Cochran, the plaintiff broker cooperated with the listing broker and found a buyer who was interested in purchasing the listed property. (Cochran, supra, 126 Cal.App.2d at pp. 431-432.) The plaintiff, the seller and the buyer negotiated the terms of the sale, and the seller's attorney prepared a memorandum agreement that provided for payment of the plaintiff's commission upon "consummation" of the sale. (Id. at p. 432.) Although the parties opened an escrow, escrow did not close because the buyer served a notice of rescission upon the seller, claiming fraudulent misrepresentations about the property had been made to him. (Id. at pp. 432-433.) Although the seller brought an action against the buyer for specific performance, the action was never brought to trial because the seller and buyer mutually rescinded the transaction. (Id. at p. 433.) The plaintiff broker then brought an action against the seller to collect his commission, and the trial court found that no commission was due to the plaintiff because the parties intended that the commission would be payable only if the buyer completed the purchase transaction. (Ibid.) The Court of Appeal affirmed the judgment on the grounds that (1) the trial court's interpretation of the commission agreement was conclusive because it was based on conflicting extrinsic evidence and was supported by the evidence; (2) under existing case law, the term "consummation of the sale" meant completion of the transaction through payment of the purchase price and conveyance of title, and thus "[t]he sale could have been completed only upon payment of the purchase price, delivery of deeds conveying title and close of escrow"; and (3) "[t]hose events did not transpire and therefore the sale was not consummated within the provisions of the agreement." (Id. at p. 440.) The Cochran court also explained that liability for payment of the commission did not arise because "rescission [took] place prior to consummation of the transaction, and with the broker's compensation contingent upon consummation." (Id. at p. 441.)

Cochran is factually distinguishable. Here, unlike in Cochran, the seller (High Tide) was contractually obligated to pay the broker's commission in the event the sale was "accomplished," the meaning of which was not defined by either case law or the parties in the listing agreement. Also, unlike the seller in Cochran, High Tide expressly agreed in the escrow instructions that "close of escrow" meant issuance of a liquor license, rather than payment of the purchase price and conveyance of title, demonstrating the parties' intent that the commission was payable in this case upon issuance of that license. Furthermore, unlike the seller in Cochran, High Tide received the benefit of the bargain under the purchase contract and was made whole through successful arbitration of its breach of contract claim against the buyer, such that the court could reasonably find that the sale was "accomplished" within the meaning of the listing agreement.

For the foregoing reasons, we conclude that High Tide's claim that it did not owe G.R. Bill a commission because the sale was not "accomplished" or completed for purposes of the listing agreement is unavailing. Accordingly, we affirm the portion of the judgment awarding the $30,000 broker's commission to G.R. Bill.

II. ATTORNEY FEES

High Tide also challenges the court's award of attorney fees in favor of G.R. Bill, contending G.R. Bill was not entitled to attorney fees because (1) the listing agreement did not contain an attorney fees provision, (2) G.R. Bill was not an intended third party beneficiary of the purchase agreement or escrow instructions, and (3) neither of the attorney fees provisions in the escrow instructions applied to G.R. Bill or this action. These contentions are unavailing.

A. Background

The first attorney fees clause in the escrow instructions, which referred to disputes "between the parties," and the arbitration clause that preceded it, provided: "Any controversy or claim between the parties arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration in accordance with the Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any Court having jurisdiction thereof. Any attorney's fees incurred in connection with said Arbitration shall be awarded to the prevailing party." (Italics added.)

The second attorney fees clause, which was not limited to disputes "between the parties," pertained to disputes regarding "the terms of this escrow" and provided: "In the event legal action or arbitration is required to settle a claim or controversy regarding the terms of this escrow, the prevailing party shall be entitled to reasonable attorney fees, costs and necessary disbursements in addition to any other relief to which he may be entitled." (Italics added.)

In granting G.R. Bill's motion for attorney fees, the court found that although the listing agreement did not contain an attorney fees provision, G.R. Bill was entitled to an award of attorney fees as the prevailing party because (1) the escrow instructions contained the two foregoing attorney fees provisions, the second of which (in paragraph 13 of page 4 of the instructions) pertained to a "legal action or arbitration" that was "required to settle a claim or controversy regarding the terms of this escrow," and was not limited to a claim or controversy "between the parties"; and (2) G.R. Bill was entitled to recover fees as a third party beneficiary under both attorney fees provisions, but particularly under the second provision, because it applied to persons other than the named parties, and the proceeding on G.R. Bill's motion for attorney fees involved litigation of a controversy regarding the terms of the escrow.

B. Analysis

We reject High Tide's contention that G.R. Bill was not a third party beneficiary of the purchase contract and the escrow instructions because (High Tide asserts) their terms "show these contracts were not made for the express benefit of G.R. Bill." For reasons already discussed, we have concluded that G.R. Bill was a third party beneficiary of the express agreements between High Tide and Pacific Surfrider in the escrow instructions that (1) High Tide was obligated to pay the broker (G.R. Bill) a commission "forthwith upon the close of escrow," and (2) "actual close of escrow shall be upon the issuance of the permanent ABC license to the buyer by the [ABC] Board." G.R. Bill was also a third party beneficiary of the express agreement between High Tide and Pacific Surfrider in the purchase contract to pay G.R. Bill a commission "in accordance with the terms of the listing agreement." G.R. Bill was entitled to enforce those agreements as a third party beneficiary because they were expressly made for its benefit. (Civ. Code,  1559.)

High Tide also asserts that even assuming G.R. Bill was an intended third party beneficiary, it was still not entitled to recover its attorney fees. Specifically, High Tide claims the two attorney fees provisions contained in the escrow instructions did not apply to G.R. Bill because those provisions were preceded by language (see fn. 4, ante) showing they involved fee agreements between High Tide and Pacific Surfrider only "and nobody else." High Tide also claims those provisions did not apply to this legal action because (1) the first provision was limited to attorney fees incurred in connection with an arbitration, which this case did not involve; and (2) the second provision was limited to a "legal action or arbitration . . . to settle a claim or controversy regarding the terms of this escrow," and G.R. Bill's claim to recover its commission involved not a dispute regarding the terms of the escrow, but a dispute about whether a sale had been "accomplished" within the meaning of the listing agreement. These claims are unavailing.

In its motion for attorney fees, G.R. Bill argued that, as the prevailing party in this breach of contract action to recover its commission, it was entitled to its attorney fees as a third party beneficiary of the purchase contract and escrow instructions because (1) the purchase contract was supplemented by the two attorney fees clauses in the escrow instructions, (2) the second clause relating to escrow disputes was not limited to those "between the parties" (i.e., between High Tide and Pacific Surfrider), and (3) G.R. Bill was entitled to an award of fees as a prevailing, nonsignatory third party beneficiary of those fees clauses under Civil Code section 1717,^[7]which was enacted to establish mutuality of remedy when a contract provides recovery of attorneys fees for only one party.

In its written opposition to that motion, High Tide asserted that (1) the express terms of the purchase contract and escrow instructions "show[ed] these contracts were not made for the express benefit of G.R. Bill," (2) G.R. Bill was not an intended third party beneficiary of the attorney fees clauses in the escrow instructions, and (3) those clauses did not apply to this action. In granting G.R. Bill's motion, the court rejected High Tide's assertions and resolved the issue by finding that G.R. Bill was entitled to recover fees as a third party beneficiary under both attorney fees provisions set forth in the escrow instructions.

The record thus shows that in the proceedings on G.R. Bill's claims for its commission and attorney fees, High Tide and G.R. Bill litigated a "claim or controversy regarding the terms of this escrow" within the meaning of the second attorney fees clause set forth in the escrow instructions, which did not limit its application to a claim or controversy "between the parties" (i.e., between High Tide and Pacific Surfrider's predecessor-in-interest, Peter Frenk). The second attorney fees clause was thus applicable to those claims.

The language preceding the attorney fees clauses to the effect that neither the escrow holder (Mission Valley Escrow) nor the broker (G.R. Bill) was "concerned" with those fee agreements because "performance of same is outside of escrow" (see fn. 4, ante), did not defeat G.R. Bill's right to fees as a prevailing third party beneficiary. That language served only to put Mission Valley Escrow and G.R. Bill on notice that High Tide and Pacific Surfrider (the "parties herein") had entered into certain agreements, including the agreements in the two attorney fees clauses, which did not require the participation of third parties. As already discussed, the first attorney fees agreement dealt with disputes between High Tide and Pacific Surfrider, and the second dealt with disputes between either of those party and any third party, such as G.R. Bill, regarding the terms of the escrow.

We conclude that G.R. Bill, as a prevailing third party beneficiary of the purchase contract and escrow instructions, was entitled to an award of reasonable attorney fees under Civil Code section 1717 pursuant to the attorney fees agreement contained in the second attorney fees clause (discussed, ante) set forth in the escrow instructions. The fact that G.R. Bill was not a party to that attorney fees agreement does not preclude its contractual entitlement to an award of fees. High Tide was a party to that agreement, and it would have been entitled under the mutual remedy provisions of Civil Code section 1717 to recover its reasonable attorney fees from G.R. Bill under that clause had it prevailed in this action by G.R. Bill to recover its commission under the listing agreement. We find support for this conclusion in Steve Schmidt & Co. v. Berry (1986) 183 Cal.App.3d 1299 (Berry).

In Berry, a cooperating broker successfully sued the seller of real property and his listing broker to recover a commission as a nonsignatory third party beneficiary of a listing agreement between the seller and the listing broker after the cooperating broker found a ready, willing and able buyer, and the seller refused to sell the property to that buyer. (Berry, supra, 183 Cal.App.3d at pp. 1302, 1304-1305, 1313.) The listing agreement recognized the interest of "other brokers" in any commission due under that agreement, and contained an attorney fees clause authorizing an award of reasonable attorney fees to the prevailing party in an action to enforce the provisions of the listing agreement. (Id. at pp. 1304, 1313.) Affirming the award of attorney fees in favor of the plaintiff broker, the Berry court concluded that even though the plaintiff was not a signatory to the listing agreement, it was entitled as a third party beneficiary of the listing agreement to recover its attorney fees under the attorney fees clause contained in that agreement by virtue of Code of Civil Procedure section 1717, which creates a reciprocal right to attorney fees when a contract provides the right to only one party, because the plaintiff would have been liable for fees under the listing agreement had the defendant prevailed. (Berry, supra, 183 Cal.App.4th at pp. 1315-1317.)

Similarly here, by operation of Civil Code section 1717, G.R. Bill was entitled as the prevailing third party beneficiary of the purchase contract and escrow instructions to recover its reasonable attorney fees pursuant to the second attorney fees clause in the escrow instructions because G.R. Bill's action to recover its commission and its motion for attorney fees involved claims "regarding the terms of this escrow" within the meaning of that clause, and G.R. Bill would have been liable for fees under that clause had High Tide prevailed. Accordingly, we also affirm the portion of the judgment awarding reasonable attorney fees to G.R. Bill as the prevailing party in this matter.

DISPOSITION

The judgment is affirmed. G.R. Bill shall recover its costs on appeal.

NARES, Acting P. J.

WE CONCUR:

HALLER, J.

IRION, J.

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^[1] The arbitration clause in the listing agreement provided: "Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration, in accordance with the Rules of the American Arbitration Association, and judg[ment] upon the award rendered by the Arbitrator(s) may be entered in any Court having jurisdiction thereof."

^[2] The arbitration clause in the purchase contract provided: "Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by binding arbitration, in accordance with the rules of the American Arbitration Association, and judg[ment] upon the award rendered by the Arbitrator(s) may be entered in any Court having jurisdiction thereof."

^[3] A set of amended escrow instructions dated August 20, 2004, signed by High Tide and Pacific Surfrider, provided that "[t]he closing of this escrow is contingent upon the issuance of the permanent ABC license to [Pacific Surfrider] by the [ABC] Board. Escrow holder's receipt of the ABC-226 form from the [ABC] Board . . . for a Type 47 liquor license 'authorizing the close of escrow' with no operational restrictions greater than now exist for the current restaurant and setting forth [Pacific Surfrider's] ABC license number and date of issuance will constitute satisfaction of this contingency." (Italics added.) The amended instructions expressly provided that all other terms and conditions remained the same.

^[4] "THE FOLLOWING AGREEMENTS HAVE BEEN MADE OUTSIDE OF ESCROW BY THE PARTIES HEREIN, WITH WHICH ESCROW HOLDER AND/OR BROKER ARE IN NO WAY CONCERNED AS PERFORMANCE OF SAME IS OUTSIDE OF ESCROW."

^[5] The record shows that High Tide and Pacific Surfrider agreed to eliminate certain warranties in exchange for a $50,000 reduction in the purchase price (to $300,000), and G.R. Bill agreed to a commensurate reduction in its commission.

^[6] Civil Code section 1559 provides: "A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it."

^[7] Civil Code section 1717, subdivision (a) provides in part: "In any action on a contract, where the contract specifically provides that attorney's fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to other costs."