Sabbagh v. Isak

Filed 5/2/07 Sabbagh v. Isak 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 a judgment of the Superior Court of Los Angeles County. Dan T. Oki, Judge. Affirmed.

Law Offices of Kamal Antoine Bilal and Kamal Antoine Bilal for Plaintiff and Appellant.

Law Offices of Jeanne Collachia and Jeanne Collachia for Defendant and Respondent.

* * * * * *

Plaintiff and appellant Joseph Sabbagh appeals a judgment entered against him following both a jury trial and statement of decision in his action against defendant and respondent Chukrala George Isak (Isak). The jury concluded that Isak did not breach the partnership agreement between appellant and him, and the trial court concluded that the jurys finding necessarily disposed of appellants remaining causes of action for dissolution of partnership and accounting, and required that judgment be entered in favor of Isak on his cross-complaint seeking cancellation of a note and deed of trust. Appellant asserts that the jury verdict form did not accurately reflect what the court and counsel had agreed to submit to the jury and that it erroneously and prejudicially precluded the jury from determining whether the parties entered into a separate buyout agreement constituting a novation and the terms of that agreement. He further asserts that the trial court improperly awarded attorney fees to Isak because the parties oral partnership did not include an attorney fees provision and he was not a signatory to the deed of trust which provided for an award of attorney fees.

We affirm. Appellant cannot now challenge the verdict form because he took the position below that he was not aggrieved by it and stipulated to permit the court to determine the issues remaining after the jury verdict. But even if he could challenge it, appellant was not prejudiced by the verdict form. With respect to the award of attorney fees, the trial court properly construed the partnership agreement and deed of trust together as part of a single transaction and properly applied Civil Code section 1717 to award fees to Isak as the prevailing party.

FACTUAL AND PROCEDURAL BACKGROUND

Sometime in March 2002, appellants son contacted Isak about the possibility of purchasing E & R Liquor, a store in Pomona. Appellant had been monitoring the stores operations for one or two months. Isak already owned at least one other liquor store. After Isak observed and monitored E & R Liquor for a couple of days, he and appellant orally agreed to enter into a 50/50 partnership to purchase the store. Appellant and his son would work at the store, handling the day-to-day operations, while Isak would manage and oversee the store.

They paid approximately $200,000 for the store and later invested another $60,000. Isak handled the escrow. Isak understood from appellants son that appellant did not want the store purchased in his name because he did not want to jeopardize his receipt of Medi-Cal or Medicare benefits. Thus, Isak purchased the store in his own name and gave appellant a promissory note in the amount of $107,000 secured by a deed of trust.

Isak and appellant operated the store for approximately one year. The demise of Isaks and appellants relationship began when appellant accused Isak of selling fake cigarettes to the store. After the two had a confrontation in the store about that issue, they decided to terminate their partnership and agreed that appellant would buy out Isaks share for $250,000. They further agreed that appellant would have 30 days in which to come up with either $250,000 or a buyer to supply those funds; if appellant was unable to do so, then Isak would buy out appellants interest. Appellants cousin was present during the negotiating and making of this agreement.

According to appellant, he had a buyer ready to pay the $250,000 within the 30-day deadline, but Isak refused to sell the store. Appellant did not purchase the property within the 30 days, and Isak ultimately tendered $225,000 to appellant to buy out his interest. The payment was not accompanied by any paperwork showing the partnerships assets and liabilities. Though appellant accepted the $225,000 as the purchase price for his share of the store, he did not sign a cancellation of the note or reconveyance of the deed of trust. Appellant was not satisfied with the amount.

In January 2005, appellant filed a verified complaint against Isak alleging causes of action for breach of partnership agreement, dissolution of partnership and accounting. Isak answered, and he and his wife Souad Hachicho filed a cross-complaint for quiet title, declaratory relief and damages. Appellant answered the cross-complaint.

A jury trial commenced in February 2006. At the conclusion of the testimony, outside the presence of the jury the court and counsel discussed that the special verdict form to be submitted to the jury would contain three questions. The court outlined the three questions: Number one, Did Chuk Isakand II willI will clean it up. And I will put in his full namebreach the terms of the partnership agreement? Number 2, Did the parties agree upon the terms of a buyout? Number 3, If the answer to number 2 is yes, what were the terms?

Thereafter, the trial court instructed the jury. The instructions included a summary of the parties claims: Joseph Sabbagh claims that he and Chukrala George Isak entered into theentered into a contract for formation of a partnership that would own and operate the business known as E & R Liquor in which Joseph Sabbagh and Chukrala George Isak would be equal partners, would share equally in the profits of the business, and would share equally in the value of the business upon dissolution of the partnership or sale of the business. Joseph Sabbagh claims that Chukrala George Isak breached this contract by excluding Joseph Sabbagh from the business and by failing to pay Joseph Sabbagh one-half of the profits of the business and one-half of the value of the business at the time the partnership dissolved. After instructing that Isak denied that he breached the contract, the trial court further instructed: Chukrala George Isak also claims that the partnership agreement cannot be enforced because the parties substituted a new and different contract for the original in which Chukrala George Isak would pay to Joseph Sabbagh the sum of $225,000 as in [sic] for the entire value of Joseph Sabbaghs interest in the partnership and that the new contract has been fully performed.

The jury was excused at approximately 4:00 p.m. and reached a verdict by 9:30 a.m. the following morning. It found that Isak did not breach the partnership agreement. It answered no further questions because the verdict form it received directed: If your answer to question number 1 is yes, then answer question 2. If you answered no, stop here. Answer no further questions, and have the presiding juror sign and date this form.

After excusing the jury, the trial court asked counsel to confer to see whether they could reach a stipulation concerning the remaining causes of action in light of the jury verdict. When counsel returned, they indicated that they had agreed the court could determine the issues relating to the buyout. Appellants counsel stated: The second questionits the main issue of the case which should have been answered by the jury. The jury confused probably a partnership agreement with whether there was a buyout after to resolve the partnership agreement, and they didnt answer that question. I would be happy toI didnt request a jury in the first place on this issue, and if the judge wants to make a decisionif the court wants to make a decision on whether a buyout agreement actually occurred or not, then I could stipulate to that. The parties thereafter agreed on a briefing schedule, and the court summarized that once all the briefs were filed, the remaining causes of action will be deemed submitted to the court.

Appellant submitted a posttrial brief asserting that the jury verdict necessarily implied a finding that no buyout agreement existed; specifically, he asserted that Isaks failure to secure a favorable jury verdict on the novation issue operated as res judicata, establishing the issue in appellants favor. Isak filed a brief in response. After taking the matter under submission, the trial court issued a minute order and thereafter a statement of decision ruling: The jurys finding that Defendant CHUKRALA GEORGE ISAK did not breach the terms of the partnership agreement on the first Cause of Action necessarily constitutes a finding by the jury of a novation. The terms of the novation were that CHUKRALA GEORGE ISAK would pay JOSEPH SABBAGH the sum of $225,000 as and for his entire interest in the Partnership. The Court finds that the terms of the novation were fully performed, thereby releasing CHUKRALA GEORGE ISAK from any further obligation to the Partnership or to JOSEPH SABBAGH. On the basis of these findings, the trial court ruled that appellant should take nothing on his causes of action for dissolution of partnership and accounting. On Isaks cross-complaint, it further concluded, as a matter of law, that Isak and Hachicho were entitled to a cancellation of the note and deed of trust.

On April 18, 2006, the trial court entered judgment that incorporated both the jury verdict and statement of decision. The judgment awarded Isak attorney fees and costs, but left the amount blank. In June 2006, Isak moved for an award of attorney fees and costs, relying on an attorney fees provision in the deed of trust. Appellant opposed the motion. On August 15, 2006, the trial court granted the motion and amended the judgment to add an award of $87,165.87 in attorney fees and costs to Isak.

This appeal followed.

DISCUSSION

Appellant challenges the judgment on the ground that the verdict form erroneously precluded the jury from determining a key issue on the case: whether there was a buyout agreement and, if so, what its terms were. He also challenges the attorney fees and costs award on the ground that he was not a signatory to the deed of trust which contained the attorney fees provision. We find no merit to either of these challenges.

I. Reversal Is Not Required Because the Verdict Form Differed from That to Which Appellant Agreed.

A. Appellant Conceded Below That He Was Not Aggrieved by the Verdict Form.

The verdict form directed the jury to stop if it answered no to the first question of whether Isak breached the partnership agreement. In the minute order setting forth its tentative decision on the remaining causes of action, the trial court acknowledged that there was a discrepancy between the verdict form submitted to the jury and that agreed to by the court and counsel, the latter of which required the jury to answer the second question asking whether there was a buyout agreement regardless of its answer to the first question. Nonetheless, the trial court concluded that the jurys finding of no breach necessarily constituted a further finding of a novation in which Isak paid appellant $225,000 for appellants interest in the partnership.

On appeal, appellant contends that the verdict form erroneously and prejudicially withdrew a key issue from the jurys consideration, requiring reversal of the judgment. But, appellant took precisely the opposite position below. In briefing following the jury verdict, appellant stated: Plaintiff was not adversely affected by the jurys failure or refusal to answer the second question and sought a determination on his cause of action for an accounting.

A party is bound by the stipulation or open admission of his counsel and cannot mislead the court and jury by seeming to take a position on issues and then disputing or repudiating the same on appeal. [Citations.] (People v. Pijal (1973) 33 Cal.App.3d 682, 697; accord, Brown v. Boren (1999) 74 Cal.App.4th 1303, 1316 [a litigant may not change his or her position on appeal and assert a new theory]; Fontana v. Upp (1954) 128 Cal.App.2d 205, 211 [Where parties have taken a certain position during the trial, they cannot adopt a different position on appeal by raising a new issue which the other party was not apprised of at the trial].) In the trial court, appellant not only took the position that he was not aggrieved by the verdict form but also stipulated to have the trial court determine the issues remaining after the jury verdict. It is well established that one cannot on appeal complain of rulings assented to or acquiesced in by him in the court below. [Citations.] (Cushman v. Cushman (1960) 178 Cal.App.2d 492, 498.) We conclude that [i]t would be contrary to fairness and justice to permit this appellant, in view of his conduct in the court below, to now urge [the trial courts] error in submitting the verdict form. (Id. at p. 499.)

B. Appellant Was Not Prejudiced by the Verdict Form.

Even if we were to find some basis under which we could consider appellants claim of error, we would conclude that appellant was not prejudiced by any discrepancy between the verdict form agreed to by counsel and that submitted by the court. As explained in Scott v. County of Los Angeles (1994) 27 Cal.App.4th 125, 151152, we evaluate an erroneous verdict form according to the same principles we use to review an erroneous instruction: Article VI, section 13 of the California Constitution provides that error in instructing the jury shall be grounds for reversal only when the reviewing court, after an examination of the entire cause, including the evidence, concludes that the error has resulted in a miscarriage of justice. The test of reversible error has been stated in terms of the likelihood that the improper instruction misled the jury. [Citation.] [Citations.] Thus, if a review of the entire record demonstrates that the improper instruction was so likely to have misled the jury as to become a factor in the verdict, it is prejudicial and a ground for reversal. [Citation.] While a determination that an error has been so prejudicial so as to require reversal depends on all the circumstances of the case, [a]mong the factors which are considered in assessing the prejudice of an erroneous or misleading jury instruction are (1) the degree of conflict in the evidence on critical issues, (2) whether the jury requested a rereading or clarification of the erroneous instruction, (3) the effect of other instructions in remedying the error and (4) the closeness of the jurys verdict. [Citations.] (Id. at p. 152.)

Applying these factors here, we conclude that appellant was not prejudiced by the verdict requiring the jury to answer only whether or not Isak had breached the terms of the partnership agreement. There was little, if any, conflict in the evidence concerning the asserted breach. The evidence was undisputed that appellant accepted Isaks $225,000 payment for his interest in the partnership. Appellant, however, was unhappy with the amount he received. Appellant testified that after he received the $225,000 he called Isak and told him, This is not our deal. I dontI am not satisfied. Appellants cousin similarly testified that appellant told him he sold the store for $450,000 and received his share, but that he refused to sign the note and deed of trust because the deal is too cheap.

The remaining factors likewise fail to establish prejudice. The jury did not ask any questions or seek any type of clarification. Indeed, the jury had no difficulty deciding the matter, deliberating for likely less than one hour and rapidly returning its verdict at 9:24 a.m. on the first day of deliberations. Other instructions confirmed that appellants claim of breach was limited to his allegations that Isak breached this contract by excluding Joseph Sabbagh from the business and by failing to pay Joseph Sabbagh one-half of the profits of the business and one-half of the value of the business at the time the partnership dissolved. And the 11 to one verdict was not close. (Krotin v. Porsche Cars North America, Inc. (1995) 38 Cal.App.4th 294, 305306.)

A special verdict presents to the jury each ultimate fact in the case, so that nothing shall remain to the Court but to draw from them conclusions of law. (Code Civ. Proc., 624.) By its special verdict, the jury found that Isak did not breach the partnership agreement. While the jury instructions outlined the asserted breaches of contract as Isak failing to pay appellant both one-half of the profits of the business and one-half of the value of the business upon dissolution, the evidence focused only on appellants assertion that the $225,000 payment was inadequate. During closing argument, appellants counsel clarified that appellants only claim was whether he received one-half of the value of the partnership at dissolution; he urged that all he [appellant] is asking you today to decide whether he is entitled to his fair share or not. He never denied that he received 225,000 from the defendant. And he always said, Just give me the rest. Thus, as the trial court recognized, by finding that Isak did not breach the partnership agreement, the jury necessarily found that the $225,000 payment represented appellants fair share. On the basis of this finding, the trial court could further conclude, as a matter of law, that Isak had fully performed his obligation to pay appellant $225,000 for his share of the partnership.^[1] (See Woodcock v. Fontana Scaffolding & Equip. Co. (1968) 69 Cal.2d 452, 456 [where a party does not object to an ambiguous verdict before the jury is discharged, it falls to the trial judge to interpret the verdict from its language considered in connection with the pleadings, evidence and instructions].)

This matter bears no resemblance to Falls v. Superior Court (1987) 194 Cal.App.3d 851, a case relied on heavily by appellant. There, the appellate court affirmed the trial courts refusal to enter an interlocutory order adjudicating liability in a negligence action. The jury had returned a special verdict in favor of the plaintiff on the issues of breach of duty and proximate cause, but indicated it was deadlocked on the issue of damages and did not answer any questions regarding either the plaintiffs or settling defendants comparative fault. (Id. at p. 854.) In holding that the jury did not resolve all issues necessary for a finding of liability, the Falls court explained: To award plaintiff a partial verdict based upon a special verdict form which is fatally deficient would be contrary to the requirement that the jury must resolve all the ultimate facts presented. (Id. at p. 855.) Here, in contrast, no ultimate facts were left unresolved. The jury concluded that Isak did not breach the partnership agreement. Since the only breach ultimately asserted by appellant was the inadequacy of Isaks $225,000 payment, the jury resolved the ultimate facts necessary for the trial court to conclude that Isaks payment of $225,000 to appellant constituted full payment for appellants interest in the partnership. Under these circumstances, appellant was not prejudiced by the verdict form.

II. The Trial Court Properly Awarded Attorney Fees to Isak Pursuant to Civil Code Section 1717.

The judgment expressly awarded attorney fees and costs to Isak and his wife, but left the amount blank.^[2]Following entry of judgment, Isak moved for an award of attorney fees pursuant to Civil Code section 1717, which provides in relevant part: In any action on a contract, where the contract specifically provides that attorneys 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 attorneys fees in addition to other costs. (Civ. Code,  1717, subd. (a).) Isak relied on an attorney fees provision in the deed of trust that he signed as the trustor and that identified appellant as the beneficiary. The relevant provision states: TO PROTECT THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES: [] . . . [] (3) To appear in and defend any action or proceeding purporting to affect the security hereof or affect the security hereof or the rights or powers of Beneficiary or Trustee; and to pay all costs and expenses, including costs of evidence of title and attorneys fees in a reasonable sum, in any such action or proceeding in which the Beneficiary or Trustee may appear, and in any suit brought by the Beneficiary to foreclose this Deed.

The trial court ruled that the attorney fees provision in the deed of trust would have made Isak liable to appellant for attorney fees in this action had appellant prevailed, and that Civil Code section 1717 therefore required that Isak, as the prevailing party, be awarded attorney fees. The trial court rejected appellants arguments that the deed of trust was not the operative agreement and that he could not be liable for fees as a nonsignatory to the deed of trust, reasoning that the deed of trust was sufficiently related to the oral partnership agreement alleged to have been breached and that appellants signature would not have been required for appellant to seek the recovery of attorney fees. We review de novo an award of attorney fees under a contractual provision where, as here, extrinsic evidence has not been offered to interpret the contract, and the facts are not in dispute. [Citation.] (Paul v. Schoellkopf (2005) 128 Cal.App.4th 147, 151.)

We find no error. According to appellants own testimony, appellant did not want any of the documents reflecting the stores ownership to bear his name because he feared he might adversely affect his entitlement to certain medical benefits. Thus, at the recommendation of the escrow company handling the transaction, appellants interest in the partnership was memorialized as a $107,000 loan reflected by a note and deed of trust. Accordingly, the deed of trust was an integral part of the partnership agreement. (See Monterey S.P. Partnership v. W. L. Bangham, Inc. (1989) 49 Cal.3d 454, 460 [a deed of trust is a lien on the property].) The attorney fees provision in the deed of trust broadly provided that Isak was obligated to pay all costs and expenses, including costs of evidence of title and attorneys fees in a reasonable sum, in any such action or proceeding [purporting to affect the security or rights or powers of the Beneficiary] in which the Beneficiary or Trustee may appear . . . . Appellant did not sign the deed of trust.

In Real Property Services Corp. v. City of Pasadena (1994) 25 Cal.App.4th 375, 382, the court distilled the following rule regarding the application of Civil Code section 1717 to nonsignatories of a contract containing an attorney fees provision: A party is entitled to recover its attorney fees pursuant to a contractual provision only when the party would have been liable for the fees of the opposing party if the opposing party had prevailed. Where a nonsignatory plaintiff sues a signatory defendant in an action on a contract and the signatory defendant prevails, the signatory defendant is entitled to attorney fees only if the nonsignatory plaintiff would have been entitled to its fees if the plaintiff had prevailed. Given the broad language in the deed of trusts attorney fees provision, appellant would have been entitled to recover his attorney fees had he prevailed, as he appeared in the action and it purported to affect his rights. Because appellant would have been entitled to recover his fees, the reciprocity provisions of Civil Code section 1717 require that Isak be awarded attorney fees.

Appellant is incorrect in asserting that he would not have been entitled to recover attorney feesthat therefore the reciprocity afforded by Civil Code section 1717 is inapplicablebecause he did not expressly plead entitlement to attorney fees in his complaint. Prior to 1990 it was not entirely clear what the proper method was to obtain an award of attorney fees. In particular, there was no agreement about whether such an award should be claimed as an element of damages or as an item of costs. [Citations.] To end this confusion the Legislature enacted Code of Civil Procedure section 1033.5 and declared: The Legislature finds and declares that there is great uncertainty as to the procedure to be followed in awarding attorneys fees where entitlement thereto is provided by contract to the prevailing party. It is the intent of the Legislature in enacting this act to confirm that these attorneys fees are costs which are to be awarded only upon noticed motion, except where the parties stipulate otherwise or judgment is entered by default. [Citations.] (Allstate Ins. Co. v. Loo (1996) 46 Cal.App.4th 1794, 17971798.) Because appellants complaint requested costs of suit, appellants failure to plead for attorney fees did not bar the trial court from awarding fees as costs under Civil Code section 1717.

Appellant is likewise incorrect in asserting that the trial court erred in awarding attorney fees because he sued Isak for breach of the oral partnership agreement, not the deed of trust. Appellant put the note and deed of trust at issue in his complaint, alleging that he refused to sign the note because he did not consider the $225,000 as full payment for the note. Moreover, appellants own testimony at trial established that the note and deed of trust were the documents that memorialized appellants interest in the partnership. These circumstances are akin to those in Nevin v. Salk (1975) 45 Cal.App.3d 331, where the court affirmed an attorney fees award to a defendant in an action involving the sale of a veterinary practice. The plaintiff attacked the fees award on the ground that the agreement of sale contained no attorney fees provision; only two notes and a deed of trust that were executed after the agreement of sale provided for the payment of fees. (Id. at pp. 337338.) The trial court found all documents relating to the sale should be construed together: [I]t is the general rule that several papers relating to the same subject matter and executed as parts of substantially one transaction, are to be construed together as one contract. [Citation.] Thus, a note, mortgage and agreement of sale constitute one contract where they are part of the same transaction. [Citation.] The documents need not be executed contemporaneously; it is a question of fact as to whether several writings comprise one transaction. [Citation.] [] Inasmuch as the provisions of the notes and the security instruments were incorporated in the agreement, and made a part thereof, and inasmuch as the sale involved one piece of property and veterinary practice, the trial court properly concluded all the instruments formed a single contract and the fact the agreement itself contained no provision for payment of fees in the event of a lawsuit is of no consequence. (Id. at p. 338.) Likewise, because the oral partnership agreement and deed of trust were part of a single transaction, the fact that the oral agreement did not include an attorney fees provision is of no consequence.

Pursuant to Civil Code section 1717, Isak was entitled to an award of attorney fees as the prevailing party.

DISPOSITION

The judgment is affirmed. Respondent is awarded his costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

_____________________, J.

DOI TODD

We concur:

____________________________, P. J.

BOREN

____________________________, J.

ASHMANN-GERST

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^[1] The same result is required whether we characterize the payment of the $225,000 as performance of the original agreement to share 50/50 in the partnership or as a fully performed novation of the original partnership agreement. (See, e.g., ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1268 [appellate court may affirm a trial court judgment on any [correct] basis presented by the record whether or not relied upon by the trial court, as a ruling or decision, itself correct in law, will not be disturbed on appeal merely because given for a wrong reason].) Under either theory, the $225,000 represented payment in full for appellants partnership interest and further required the determination that Isak was entitled to cancellation of the note and deed of trust.

^[2] We reject Isaks contention that we lack jurisdiction to review the attorney fees award because appellant failed to file a separate appeal from the postjudgment award of attorney fees. The notice of appeal from the judgment was sufficient. [W]hen a judgment awards costs and fees to a prevailing party and provides for the later determination of the amounts, the notice of appeal subsumes any later order setting the amounts of the award. (Grant v. List & Lathrop (1992) 2 Cal.App.4th 993, 998.)