Holltywood Commercial Realty v. Sands

Filed 4/4/07 Holltywood Commercial Realty v. Sands CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

APPEAL from an order and judgment of the Superior Court of Los Angeles County. Elizabeth A. Grimes, Judge. Affirmed.

Altshuler & Spiro and Bruce J. Altshuler for Plaintiff and Appellant.

Leonard, Dicker & Schreiber, Lee T. Dicker and Michael R. Rogers for Defendant and Appellant.

_________________________

Hollywood Commercial Realty, Inc. (Hollywood), as assignee of Ramsey-Shilling Commercial Real Estate (R/S), brought this action for breach of contract against William Sands (Sands) after he allegedly failed to pay lease and sales commissions owed under the terms of the parties agreement. Following a bench trial, the trial court entered judgment for Hollywood, finding that Hollywoods claim for lease commissions was time-barred, but that Hollywoods claim for a sales commission was timely and due. As the prevailing party, Hollywood moved for attorney fees pursuant to Civil Code section 1717; the trial court denied Hollywoods motion.

Both Hollywood and Sands have appealed. Sands contends that the judgment should be reversed because all of Hollywoods contract claims are time-barred. Hollywood argues that the trial court erroneously denied its request for attorney fees.

We are not convinced by any of the arguments on appeal. Accordingly, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Factual Background

On August 1, 1994,[1]R/S, a broker, entered into an exclusive authorization of sale and lease (the agreement) for the sale and/or lease of Sandss commercial property located at 755 N. Lillian Way in Hollywood (the property). Sands agreed to pay R/S a commission of 6 percent of the rental or lease term and a commission of 3.5 percent for the balance of the term. Sands further agreed to pay R/S a commission of 6 percent of the sales price of the property if it were purchased by any tenant.

Following execution of the agreement, Hollywood, on behalf of R/S, procured Anytime Productions Rentals, Inc. (Anytime) as a tenant at the property. On September 26, 1996, Sands and Anytime entered into a written seven-month lease for the property with an option to extend. In April 1997, the tenants lease was extended for a two-year period. In accordance with the terms of the agreement, Sands paid R/S a commission on the original lease and the renewal.

At the end of the two-year term, on April 12, 1999, Sands and Anytime entered into a written agreement extending the tenancy for an additional five years.

In April or May 2004, at the time the five-year lease extension period expired, Sands sold the property to Anytimes principal, Raymond Shaffer (Shaffer), for $795,000. Shortly after the sale, Joseph DAmore (DAmore), R/Ss agent, contacted Sands and demanded a 6 percent commission for the five-year lease extension from 1999 through 2004 and a commission on the $795,000 purchase price Sands received from Shaffer. Sands refused, prompting the initiation of this lawsuit.

Operative Pleadings

On February 4, 2005, Hollywood, as R/Ss agent and assignee, filed its complaint against Sands, alleging a single cause of action for recovery of commissions based on breach of contract. In its complaint, Hollywood sought (1) a commission on the five-year lease, and (2) a commission on the sale of the property. Hollywood also requested attorney fees pursuant to the terms of the parties agreement.

Sands responded by filing an answer, in which he requested an award of attorney fees pursuant to Civil Code section 1717, and a cross-complaint. Concurrently, he also filed a motion to deposit $42,500 in the trial court pursuant to Civil Code section 1717, subdivision (b)(2). In his motion, Sands asserted if Hollywood did not recover more than the deposited sum, he was the prevailing party. The trial court granted Sandss motion and issued an order for the deposit of funds tendered by Sands.

Sandss Motion for Summary Judgment/Adjudication

On September 26, 2005, Sands filed a motion for summary judgment/adjudication. He argued that Hollywoods claim for lease commissions expired at least by May 1, 2003, and was therefore barred by the four-year statute of limitations. (Code Civ. Proc., 337.) Sands further theorized that because Hollywoods claim to the lease commissions was time-barred, every other obligation under the terms of the agreement was extinguished.

Hollywood opposed the motion, asserting that Sands had failed to notify his brokers of the lease extension. Thus, the doctrines of equitable estoppel and delayed discovery precluded Sands from prevailing on Hollywoods claim for a lease commission. With respect to the claim for the sales commission, Hollywood argued that it was a separate and distinct obligation from Sandss duty to pay it a commission on the lease; because the claim for a sales commission became due in May 2004 and this action was filed in February 2005, Hollywoods claim for a sales commission was timely.

After hearing oral argument, the trial court denied Sandss motion for summary judgment; however, it granted summary adjudication of Hollywoods claim for lease commissions due before February 3, 2001, finding that that claim was barred by the statute of limitations.

Trial

On January 18, 2006, the matter was tried to the court.

At the conclusion of the parties presentation of evidence, Sands argued that Hollywood could not prevail because, pursuant to Business and Professions Code section 10136,[2]it failed to present evidence that R/S was, at the time the cause of action accrued, a licensed real estate broker.

In response, Hollywood filed a posttrial brief on proof of real estate license by broker, etc. In that brief, Hollywood asked the trial court to reopen the evidence and take judicial notice of R/Ss status as a real estate broker.

Judgment

On January 23, 2006, the trial court issued its ruling. First, the trial court determined that Hollywoods claim for recovery of the lease commissions (those remaining after the order granting Sandss motion for summary adjudication) was barred by the statute of limitations. However, the trial court found that Hollywoods claim for the sales commission was timely. In its statement of decision, the trial court noted: The bar of the statute of limitations for recovery of the lease commissions does not also bar recovery of the sale commission. [Sands] sold the property in April 2004, and that is when the claim for recovery of a sale commission arose. [Sandss] breach of the obligation to pay lease commissions did not extinguish the separate contract obligation to pay a sale commission, nor did it constitute anticipatory breach of repudiation of the contractual obligation to pay a sale commission.

The trial court rejected Sandss defense that R/S was not a licensed real estate broker: There is no evidence to suggest that [R/S] is not a duly licensed broker at the time the commissions became due. To the contrary, the evidence, direct and circumstantial, establishes that [R/S] was a duly licensed broker. The purposes of Business and Professions Code section 10136 would not be served by applying it to bar [Hollywoods] recovery here.

Judgment was entered in favor of Hollywood and against Sands in the amount of $47,700 (6 percent of the $795,000 purchase price).

Hollywoods Posttrial Motion for Attorney Fees

On February 6, 2006, Hollywood filed a motion for attorney fees pursuant to Civil Code section 1717. It argued that although the agreement specified that attorney fees were recoverable in arbitration proceedings, the parties had waived arbitration by litigating this action in the trial court. Moreover, Hollywood claimed that it was entitled to attorney fees because Sands has asserted his right to attorney fees under Civil Code section 1717 in both his answer to Hollywoods complaint and in his motion to deposit funds.

Sands opposed Hollywoods motion, asserting that the provision for attorney fees applied only to arbitration proceedings. He further averred that the amount of attorney fees sought by Hollywood ($58,707.50) was not reasonable. Sandss opposition was silent regarding Hollywoods argument that it was entitled to attorney fees because Sands had requested them in his answer and in his motion to deposit funds with the trial court.

On March 13, 2006, the trial court denied Hollywoods motion on the grounds that the attorney fee provision in the agreement was limited to arbitration proceedings. It also found that Sands did not judicially admit in his answer or cross-complaint that attorney fees were recoverable.

Appeals

On March 14, 2006, Sands timely filed his notice of appeal challenging the trial courts judgment. On March 28, 2006, Hollywood filed its notice of appeal from the trial courts order denying its motion for attorney fees.

DISCUSSION

I. Sandss Appeal

A. The trial court properly determined that a sales commission was due Hollywood

In urging us to reverse the judgment against him, Sands raises two issues. First, he contends that the trial court erred in finding that a sales commission was due Hollywood. According to Sands, once the trial court determined that Hollywoods demand for a commission on the lease extension was time-barred, any and all claims that Hollywood could assert under the agreement were similarly time-barred. We consider this issue de novo. (Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co. (2004) 116 Cal.App.4th 1375, 1388 (Armstrong) [The construction of a contract, unless it turns on disputed facts, is a question of law. [Citation.] As such, it is subject to independent review on appeal. [Citation.] Similarly, where, as here, the underlying facts are not in dispute, the question when a statute of limitations begins to run is one of law, subject to independent review].)

As a general rule, a cause of action accrues and a statute of limitations begins to run when a controversy is ripethat is, when all of the elements of a cause of action have occurred and a suit may be maintained. (Armstrong, supra, 116 Cal.App.4th at p. 1388.) Thus, a cause of action for breach of contract usually accrues at the time of the breach. (3 Witkin, Cal. Procedure (4th ed. 1996) Actions, 486, p. 611.) However, [w]here a contract is divisible and, thus, breaches of its severable parts give rise to separate causes of action, the statute of limitations will generally begin to run at the time of each breach; in other words, each cause of action for breach of a divisible part may accrue at a different time for purposes of determining whether an action is timely under the applicable statute of limitations. (Armstrong, supra, at pp. 13881389.)

Whether a contract is divisible or severable depends upon the intention of the parties. (Yeng Sue Chow v. Levi Strauss & Co. (1975) 49 Cal.App.3d 315, 326.) As our Supreme Court has explained: Whether a contract is entire or separable depends upon its language and subject matter, and this question is one of construction to be determined by the court according to the intention of the parties. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 122; see also Simmons v. Cal. Institute of Technology (1949) 34 Cal.2d 264, 275.) Generally, a contract is indivisible when it appears [the parties] engagements would not have been entered into except upon the clear understanding that the full object of the contract should be performed. (Yeng Sue Chow v. Levi Strauss & Co., supra, at p. 326.) Thus, a contract is properly divisible when the consideration can be apportioned. (Simmons v. Cal. Institute of Technology, supra, at p. 275; Howell v. Courtesy Chevrolet, Inc. (1971) 16 Cal.App.3d 391, 404; 3 Williston on Contracts (4th ed. 1992) 7:49, p. 761 [In many contracts, there is more than one promise on a side. If each promise on one side is supported by a promise or performance allotted to it exclusively as its consideration, the contract is divisible]; accord IMO Development Corp. v. Dow Corning Corp. (1982) 135 Cal.App.3d 451, 459.)

To determine whether the parties here intended that their agreement be severable, we look to the language of the agreement. (Armstrong, supra, 116 Cal.App.4th at p. 1389.) The agreement provides that Sands will pay R/S a commission or commissions for the sale and/or lease(s) of the property. The agreed-upon commission payments are different: If R/S procures a tenant to lease the property, Sands agreed to pay 6 percent of the rent for a lease for 60 months and then three and one-half percent of the rent for the balance of the lease term. Additionally or alternatively, if R/S procures a purchaser of the property, then Sands agreed to pay it 6 percent of the sales price. Plainly, these obligations are distinct. The promise of R/S to locate a tenant is supported by separate consideration, allotted exclusively to it, from the promise of R/S to locate a purchaser of the property. After all, if Anytime had never purchased the property and had remained a lessee, Sands would still have been obligated to pay R/S a commission. Likewise, if R/S had simply located a purchaser for the property and had never found a tenant to lease the premises, Sands again would still have been obligated to pay R/S a sales commission. Under these circumstances, we easily conclude that the agreement was divisible, and Hollywoods separate claims for breach were subject to separate statutes of limitation.

It follows that the arguments raised by Sands in his appellate brief are unpersuasive. The trial courts judgment does not improperly split Hollywoods breach of contract cause of action. It is well-established that [a] single cause of action cannot be split, i.e., an entire claim cannot be divided and made the basis of several suits. (4 Witkin, Cal. Procedure (4th ed. 1997) Pleading,  35, p. 95) As set forth above, Hollywood has two separate causes of action: one for failure to pay the lease commissions and for failure to pay the sales commission. Because no single cause of action is being split, this rule has not been encroached.

Nor has the primary right theory been violated. California courts employ the primary rights theory to determine the scope of causes of action. (Takahashi v. Board of Education (1988) 202 Cal.App.3d 1464, 1474.) Under this theory, there is only a single cause of action for the invasion of one primary right. In determining the primary right, the significant factor is the harm suffered. (Crowley v. Katleman (1994) 8 Cal.4th 666, 681682; Agarwal v. Johnson (1979) 25 Cal.3d 932, 954, disapproved on other grounds in White v. Ultramar, Inc. (1999) 21 Cal.4th 563, 574575, fn. 4.)

Here, Hollywoods claim against Sands is based upon two different primary rights: a right to be compensated for procuring Anytime as a tenant and a right to be paid a sales commission after Shaffer purchased the property. As such, the trial courts order does not contravene the primary right doctrine.

B. The trial court properly rejected Sandss claim that R/S was not a licensed broker at the time of the transaction

Second, Sands argues that the judgment must be reversed because Hollywood neglected to present evidence at trial that R/S was a licensed broker at the time of the transaction. According to Sands, Hollywoods after-the-trial attempt to do so fails because (1) the trial court never indicated that such evidence was received into evidence, and (2) the proposed evidence was inadmissible hearsay that Sands did not have an opportunity to challenge. We find no reversible error.[3]

With respect to Sandss claim that the trial court never indicated that it had received the after-the-trial documents into evidence, we conclude that the trial court implicitly did so. An appellate court presumes that the judgment appealed from is correct. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.) We adopt all intendments and inferences to affirm the judgment unless the record expressly contradicts them. (See Brewer v. Simpson (1960) 53 Cal.2d 567, 583.) Thus, although the statement of decision is silent, we presume that the trial court did admit and consider this evidence.

In doing so, the trial court did not err. A trial court has the discretion to reopen the case for the introduction of additional evidence even after the making of a minute order directing entry of judgment. (Estate of Horman (1968) 265 Cal.App.2d 796, 806.) [R]eopening of a case for further evidence is entirely within the discretion of the trial court and [is] favor[ed] . . . at any time before final decision if the reopening will tend to promote justice by bringing all facts before the court. (Johnston v. Johnson (1954) 127 Cal.App.2d 464, 471.)

Not until after the parties had rested and not until the very end of Sandss counsels closing arguments did Sands raise the argument that Hollywood could not prevail because it neglected to present evidence that R/S was a licensed broker at the time of the transaction. On the day following the close of trial, Sands filed a posttrial brief on the issue. The next day, Hollywood immediately filed its responsive brief. In it, Hollywood requested that the trial court reopen the evidence to allow the trial court to consider evidence of R/Ss status as a licensed broker. Attached to the brief was a declaration from R/Ss president attesting to R/Ss status as a licensed broker, in good standing, since 1953. Hollywood also asked that the trial court take judicial notice of public records confirming R/Ss status as a licensed broker at all relevant times.

Given that the trial court relied upon all evidence presented, both direct and circumstantial, in awarding judgment to Hollywood, we conclude that the trial court implicitly granted Hollywoods request to reopen the evidence and either admitted the evidence of R/Ss status as a licensed broker or took judicial notice of the same. Under the circumstances presented, such a ruling was not an abuse of discretion. (Fellom v. Adams (1969) 274 Cal.App.2d 855, 864 [status of a person as a licensed broker or salesman is a matter of public record of which the court can take judicial notice].)

It follows that Hollywood established that R/S was a licensed broker at the time of the transaction, and thus Hollywood could pursue its claim for failure to pay commissions against Sands. (Bus. & Prof. Code, 10136.)

II. Hollywoods Appeal

Hollywood argues that the trial court erred in denying its motion for attorney fees pursuant to Civil Code section 1717.

A. Standard of review

The issue of Hollywoods entitlement to attorney fees, being a question of contract and statutory interpretation, is subject to de novo review on appeal. (Honey Baked Hams, Inc. v. Dickens (1995) 37 Cal.App.4th 421, 424, disapproved on other grounds in Santisas v. Goodin (1998) 17 Cal.4th 599, 614, fn. 8; Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 705.)

B. The trial court properly denied Hollywoods motion for attorney fees

When parties elect to include an attorney fee provision in a contract, the applicability and scope of that provision must, like any other contractual provision, be interpreted in accordance with general rules governing contract interpretation. (Kalai v. Gray (2003) 109 Cal.App.4th 768, 777; Exxess Electronixx v. Heger Realty Corp., supra, 64 Cal.App.4th at p. 705.) The courts goal is to give effect to the mutual objective intent of the parties as it existed at the time the contract was formed. (Civ. Code, 1636; Palmer v. Truck Ins. Exchange (1999) 21 Cal.4th 1109, 1115.) That objective intent must be determined, whenever possible, by reference to the contracts terms. (Civ. Code, 1639 [When a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible]; Civ. Code, 1638 [the language of a contract is to govern its interpretation]; see also Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18.) The fee provision must be considered in context, rather than in isolation, and in light of the agreement as a whole. (Civ. Code, 1641.)

The parties agreement provides, in relevant part: In the event a claim or controversy arises concerning any provision of this document, [Sands] and [R/S] hereby agree that such claim or controversy shall be settled by final, [b]inding arbitration in `accordance with the Commercial Arbitration Rules of the American Arbitration Association, which rules are incorporated herein by reference, provided, however, that all persons nominated to act as arbitrators of such claim or controversy shall be attorneys at law duly licensed to practice before the courts of the State where the arbitration is conducted. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. . . .  The unsuccessful party shall pay the costs of conducting the arbitration. In the event any . . . arbitration proceeding or legal action to enforce the arbitration award is commenced to recover compensation hereunder, the prevailing party shall be entitled to recover its expenses and reasonable attorneys fees incurred therein from the unsuccessful party.

This attorney fee provision is limited and, as in Kalai v. Gray, supra, 109 Cal.App.4th at page 778, not in need of interpretation. As the trial court correctly found, it only allows for the recovery of attorney fees in connection with an arbitration proceeding.[4] There is simply no merit to Hollywoods suggestion that the provision was intended to cover any litigation arising from the agreement. An agreement for the payment of attorney fees must be interpreted in accordance with its terms, and courts are not at liberty to expand the parties agreement to cover unspecified situations, such as litigation instead of arbitration. (Id. at p. 777.) The provision simply does not provide the broad coverage requested by Hollywood.

Hollywood argues that because the parties waived arbitration by litigating their dispute in the trial court, they likewise waived any contractual provision limiting the recovery of attorney fees to arbitration proceedings. We disagree.

While the parties may have waived their right to arbitrate this dispute, nothing indicates that, in so doing, the parties attempted to broaden the scope of their agreement to allow for the prevailing partys recovery of attorney fees, regardless of the forum of resolution. As set forth above, the contract provision governing the recovery of attorney fees is limited. Moreover, the parties agreement provides that all modifications must be made in writing. Thus, even if the parties intended to allow for the recovery of attorney fees in connection with this dispute, they were required to amend their contract in writing, which they failed to do. Under these circumstances, we reject Hollywoods assertion that the parties waived the express contractual limitation regarding the recovery of attorney fees.

Additionally, Hollywood contends, pursuant to Civil Code section 1717, that it is entitled to attorney fees because Sands judicially admitted in both his answer to Hollywoods complaint and in his deposit with the trial court that attorney fees were recoverable.

The mere pleading of a right to fees does not create an estoppel when the pleader would not actually have been entitled to recover fees had it prevailed on the merits. (Leamon v. Krajkiewcz (2003) 107 Cal.App.4th 424, 437; M. Perez Co., Inc. v. Base CampCondominiums Assn. No. One (2003) 111 Cal.App.4th 456, 467468.) As set forth above, by electing to litigate this dispute in the trial court and not through arbitration, the parties abandoned their contractual right to recoup attorney fees. Absent a contractual right to recover attorney fees, regardless of what the parties requested in their pleadings and papers, no successful party here is entitled to an award of attorney fees. (Damian v. Tamondong (1998) 65 Cal.App.4th 1115, 1124.)

DISPOSITION

The judgment and order of the trial court are affirmed. The parties to bear their own costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

_____________________, J.

ASHMANN-GERST

We concur:

_____________________, P. J.

BOREN

_____________________, J.

CHAVEZ

Publication courtesy of San Diego pro bono legal advice.

Analysis and review provided by Poway Property line Lawyers.

[1] Although the agreement is dated June 17, 1994, the parties agree that they actually executed it on August 1, 1994.

[2] Business and Professions Code section 10136 provides: No person engaged in the business or acting in the capacity of a real estate broker or a real estate salesman within this State shall bring or maintain any action in the courts of this State for the collection of compensation for the performance of any of the acts mentioned in this article without alleging and proving that he was a duly licensed real estate broker or real estate salesman at the time the alleged cause of action arose.

[3] Sands also avers that the trial court erred in presuppos[ing] that . . . Sands had the burden of negating R/S[s] broker[s] license. Sands bases this argument upon the trial courts finding in the statement of decision that [t]here [was] no evidence to suggest that [R/S] was not a duly licensed broker at the time the commissions became due. Sands correctly points out that Hollywood had the burden of proving that R/S was a licensed broker at the time of the transaction (Bus. & Prof. Code, 10136; Vickery v. Valdez (1931) 113 Cal.App. 135, 141), and to the extent the trial court found otherwise, it erred. However, that error was harmless. Hollywood satisfied its burden with the evidence introduced following its request to reopen the evidence.

[4] In fact, it appears that attorney fees only are recoverable in an action to recover compensation owed on an arbitration award; attorney fees arguably are not recoverable until collection efforts commence. At best, Sands, as the unsuccessful party, could be liable for Hollywoods costs, which may include attorney fees. (See, e.g., Santisas v. Goodin, supra, 17 Cal.4th at p. 606 [recoverable litigation costs do include attorney fees, but only when the party entitled to costs has a legal basis, independent of the cost statutes and grounded in an agreement, statute, or other law, upon which to claim recovery of attorney fees].) However, the parties agreement limits those costs to those associated with conducting an arbitration.