KS Management v. Mitelhaus

Filed 8/15/07 KS Management v. Mitelhaus CA2/5

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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 FIVE

APPEAL from a judgment of the Superior Court of Los Angeles County.

Mark V. Mooney, Judge. Affirmed.

Law Offices of H. Joseph Nourmand and H. Joseph Nourmand; Hackerbraly, Jeffrey A. Hacker and Lorene Ray Kelly-Hollister for Defendants and Appellants.

Stern & Goldberg, Alan N. Goldberg, Kien C. Tiet for Plaintiff and Respondent.

Law Offices of Jeffrey B. Bohrer and Jeffrey B. Bohrer for Defendants and Respondents.

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This appeal is from a trial court order denying appellants Robert Mitelhaus, Mark Jenkins, Nutec Enterprises and Prudential Success Realty's motions for attorney fees, after the complaint and cross-complaint against them were dismissed. We affirm, as we explain:

The complaint was filed by respondent KS Management, LLC. (Hereinafter, "Landlord.") It is alleged that in July 2004, Landlord leased a property to respondents USA Hapkido, Reza Bahador, and John Yu ("Tenants"), who intended to use it as a karate studio; that the lease was a five year lease; that the Tenants made unpermitted improvements, and that in August 2004, after the City of Los Angeles's Department of Building and Safety ordered the Tenants to correct various building code violations, they informed Landlord that they would be terminating their occupancy in October 2004. The causes of action against the Tenants were breach of contract and breach of guaranty.

The Landlord's complaint also brought a negligence cause of action against Mitelhaus and Prudential Success Realty, as the Tenants' broker.[1] The factual allegations are that under the lease, Brokers owed Landlord a duty of reasonable care which they breached by failing to learn that the property was not suitable for use as a karate studio and that the Tenants would not be able to obtain the necessary permits.

The Tenants filed a cross-complaint against the Brokers for breach of fiduciary duty, negligence, fraud, and other non-contract causes of action, contending that the Brokers failed to inform them that, due to parking restrictions, the leased property was not suitable for a karate studio. (The cross-complaint also brought causes of action against Landlord.)

On May 8, 2006, Landlord moved for leave to file an amended complaint and the Tenants moved to file an amended cross-complaint. Both also sought to continue the trial, then set for May 23. The trial court denied the motions. Landlord then dismissed its complaint and the Tenants dismissed the cross-complaint, both without prejudice.

Nutec and Jenkins moved for costs[2]and fees from both Landlord and Tenants, as did, separately, Mitelhaus. In both motions, the moving parties contended that they were entitled to fees under the attorney fees provision in the lease, which reads:

If any Party or Broker brings an action or proceeding involving the Premises whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action or appeal thereon, shall be entitled to reasonable attorneys' fees. . . . The term "Prevailing Party" shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. . . .

The Brokers were not signatories to the contract.

Landlord and Tenants opposed the motions on numerous grounds, and Landlord's opposition attached proof that it had already re-filed the complaint.

The trial court denied the fees motions, finding at oral argument that the Brokers were not prevailing parties, given that both the complaint and the cross-complaint were voluntarily dismissed without prejudice, and that the complaint, at least, had already been re-filed.

On this appeal, Brokers argue that they are entitled to fees under the fees provision of the lease, and further argue that they are prevailing parties as that term is defined in the lease. We agree with neither proposition.

On their entitlement to fees, Brokers cite Code of Civil Procedure section 1021, which provides that, "Except as attorney's fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties; . . ." Brokers correctly point out that parties to a contract may agree that in the event of litigation between themselves, the prevailing party will be awarded attorney's fees whether the litigation concerns contract or noncontract claims, or both. (Santisas v. Goodin (1998) 17 Cal.4th 599, 608.) However, Brokers did not sign the lease and were not parties to the lease, and thus cannot seek fees on this theory. (Topanga and Victory Partners v. Toghia (2002) 103 Cal.App.4th 775, 783; Super 7 Motel Associates v. Wang (1993) 16 Cal.App.4th 541, 545-546.)

They argue, however, that Pacific Preferred Properties, Inc. v. Moss (1999) 71 Cal.App.4th 1456 allows them fees. In that case, a home seller was sued by the broker and prevailed. The Court found that the broker was a party to the purchase contract, citing the fact that the contract contained provisions addressed to the commission agreement between the seller and the broker, and also citing the attorney's fees provision in the purchase contract, which referred to actions "instituted by or against the Buyer or Seller, or the Brokers named herein . . . ." (Id. at p. 1460.)

As the Brokers note, the contractual fees clause here is similar. We nonetheless cannot see that Brokers are entitled to fees. Pacific Preferred Properties, Inc. reasoned that, "When a broker supplies a contract document to the buyer and seller containing a clause of this kind, the broker manifests an intention to pay attorney's fees in ensuing litigation if the broker does not prevail. The manifestation is made so as to justify the buyer and seller in understanding that a commitment has been made. That is to say, as [the attorney fee provision] expressly provides, the broker promises to pay attorney's fees if it is not the prevailing party in litigation arising out of the real estate purchase contract. (See Rest.2d Contracts, 2.) [] When the buyer and the seller execute the document they manifest assent to the reciprocal attorney's fees right and obligation. This results in a manifestation of mutual assent on the part of two or more persons to the exchanged attorney's fees promises requisite for an agreement and a bargain. (See Rest.2d Contracts, 3; see generally, Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1342.) In these circumstances, a tripartite contract concerning the award of attorney's fees is formed between buyer, seller and broker." (Pacific Preferred Properties, Inc. v. Moss, supra, 71 Cal.App.4th at p. 1463.)

Given the provisions of this contract, we can see no similar tripartite agreement. Here, two of the three standard-form provisions relating to brokerage fees were deleted by the parties. One of those deleted clauses would have made the Brokers third-party beneficiaries of specified paragraphs of the contract, including the attorneys fees clause. This contract also provides that, "Brokers have no responsibility with respect to any default or breach thereof by either Party." Under these circumstances, neither Landlord nor Tenant (or Broker who was not a party to the contract) assented to an attorney's fees promise, benefiting Broker.

Moreover, even if Brokers were entitled to seek fees under the contract, we do not see that they could recover fees in this case. Where attorneys fees are sought on non-contract claims such as those here, "the court must look to the parties' contractual attorney's fees provision to determine if it defines who is a prevailing party or addresses voluntary pretrial dismissals." (Silver v. Boatwright Home Inspection, Inc. (2002) 97 Cal.App.4th 443, 452.) "In the construction of a statute or instrument, the office of the Judge is simply to ascertain and declare what is in terms or in substance contained therein, not to insert what has been omitted, . . ." (Code of Civ. Proc., 1858.)

This contract has a definition of "prevailing party," and under that definition, the Brokers are not prevailing parties. The fees provision provides that in order to be a prevailing party, a defendant must defeat the relief sought, by "compromise, settlement, judgment," or the other party's abandonment of its claim. The term "dismissal," let alone "dismissal without prejudice" is conspicuously absent, and we cannot add a term to the lease, which is a standard form "Industrial/Commercial Multi-Tenant Lease," prepared by the American Industrial Real Estate Association, no doubt in common use. (TRB Investments, Inc. v. Fireman's Fund Ins. Co. (2006) 40 Cal.4th 19, 27.)

With their definition of "prevailing party," the parties specified that a defendant would not recover fees unless the claims against that defendant were substantially, and finally, resolved in the defendant's favor. Notably, the definition does not refer to the complaint against the defendant, but to the claims.

Final resolution of claims is what happens by compromise, settlement, judgment, or when a claim is abandoned, because "abandonment" means "The relinquishing of a right or interest with the intention of never again claiming it." (Black's Law Dict. (8th ed. 2004) p. 2; County of Los Angeles v. Hale (1958) 165 Cal.App.2d 22,28-29 [voluntary dismissal, followed by filing of new complaint, is not abandonment justifying fees award under statutes concerning eminent domain].) A voluntary dismissal without prejudice after leave to amend is denied and a trial date nears, with intent to refile, is not a final judgment on the merits (Syufy Enterprises v. City of Oakland (2002) 104 Cal.App.4th 869, 879) and does not constitute an abandonment of claims. Indeed, this case had, at least to a certain extent, been re-filed and thus had not been abandoned.

The Brokers also argue that they are prevailing parties under Code of Civil Procedure section 1032, subdivision (a)(4), which defines that term to include "a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant. . . ." We reject the argument.

The Code of Civil Procedure section 1032 definition of "prevailing party" is relevant where the contract does not define the term. (Santisas v. Goodin, supra, 17 Cal.4th at p. 622.) This contract does define the term, rendering the statutory definition irrelevant.

Disposition

The appealed-from trial court order is affirmed. Respondents to recover costs on appeal.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

ARMSTRONG, Acting P. J.

I concur:

KRIEGLER, J.

MOSK, J., Concurring

I concur in the judgment on the sole ground that under the specific language of the attorney fees clause, the broker was not the prevailing party. (Cf. City of Whittier v. Aramian (1968) 264 Cal.App.2d 683, 688 [In the present case had Whittier promptly refiled its action, it might have avoided the legal conclusion that it abandoned the proceeding].)

MOSK, J.

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[1] The lease identified Mitelhaus and "Prudential Commercial Real Estate" as the Tenants' brokers. The parties seem to agree that "Prudential Commercial Real Estate" refers to appellant Prudential Success Realty, and that all the "Prudential" entities are dbas of appellant Nutec. Jenkins is, apparently, a Nutec broker. In its brief, Nutec informs us that Mitelhaus is a licensed real estate agent and an independent contractor working with Prudential. (He is separately represented.) Appellants are sometimes referred to collectively herein as "Brokers."

[2] Appellants were awarded costs and there is no issue on appeal concerning that order.