Opinion
B294535
05-14-2020
TRISTAR REALTY GROUP, LLC, et al., Plaintiffs, Cross-defendants and Appellants, v. KOURY ENGINEERING & TESTING, INC., Defendant, Cross-complainant and Respondent. KOURY GEOTECHNICAL SERVICES, INC., et al., Defendants and Respondents.
Law Offices of Matthew Shayefar and Matthew Shayefar for Plaintiffs, Cross-defendants and Appellants. Poliquin & DeGrave , Douglas M. DeGrave, James Steven Morse and April C. Balangue for Defendants, Cross-complainants and Respondents.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. LC104767) APPEAL from an order of the Superior Court of Los Angeles County, John J. Kralik, Judge. Affirmed. Law Offices of Matthew Shayefar and Matthew Shayefar for Plaintiffs, Cross-defendants and Appellants. Poliquin & DeGrave , Douglas M. DeGrave, James Steven Morse and April C. Balangue for Defendants, Cross-complainants and Respondents.
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Plaintiffs and cross-defendants Tristar Realty Group, LLC and 18131 Ventura Blvd., LLC (collectively Tristar) appeal from the judgment awarding defendant and cross-complainant Koury Engineering and Testing, Inc. (KET) $59,122.75 on its cross-complaint under a quantum meruit theory. Tristar was awarded $12,512.84 in damages on its breach of contract claim. After a bench trial, the trial court found KET to be the prevailing party on the basis of its net recovery of $46,609.91 and awarded KET attorney fees pursuant to the contract between the parties. Tristar claims the trial court erred in awarding KET quantum meruit recovery for a portion of its work for Tristar because the work was part of an existing contract between the parties and quantum meruit is not allowed in such a situation. In the alternative, Tristar contends there is insufficient evidence to support the court's finding that KET's work was outside the scope of the existing contract. Tristar finally contends that if the quantum meruit award was justified, the court nonetheless erred when it found KET to be the prevailing party and awarded costs. Finding no error, we affirm the judgment.
BACKGROUND
Tristar Realty Group, LLC., is a commercial real estate developer and property management company which entered into a $23 million agreement with non-party C.W. Driver, Inc. (Contractor) to build a medical office building and multi-level parking garage in Tarzana. The project was owned by 18131 Ventura Blvd LLC. The complex was to be called "The Ventana." The agreement did not require Contractor to provide locally-required testing and inspection services. In November 2014, Tristar entered into a Professional Services Agreement (PSA) with KET to provide these services. Chief Executive Officer Daniel Kashani (Daniel) signed the PSA on behalf of Tristar. Daniel's brother Robin Kashani (Robin) assisted with development at Tristar. Richard Koury, KET's Business Development Manager and majority owner, signed on behalf of KET.
Tristar intended the contract to be a "not to exceed" contract for the amount of $98,863, pursuant to which KET would provide all testing and inspections services for the construction project. The $98,863 consisted of the number of hours KET estimated would be required to provide each of its tests or inspections for the project multiplied by the cost of the particular test or service. As KET understood it, the contract provided that if the project required services in excess of KET's estimate, KET would be paid for those hours.
Paragraph 1.2 of the Scope of Services article of the PSA states that KET "shall provide Construction Inspection and Material Testing services as described in the Scope of Contract Services, attached hereto as Exhibit 'A' and incorporated herein by this reference." Paragraph 2.1 of the Compensation article states total compensation under the agreement "shall not exceed" $98,863. That paragraph also provides that "[Tristar] may request additional specified work under this Agreement exceeding the limitations in Exhibit 'A.' " The paragraph further provides that if such work is authorized in writing, KET "shall be paid for such additional services."
Exhibit A does not describe any "Construction Inspection or Material Testing services" or impose any work "limitations." Exhibit A states KET "has agreed to a not to exceed contract with" Tristar and "the contract sum is based on the number of inspection/tests indicated in [KET's] Proposal No. 14-0873." That proposal is attached to the PSA and shows specific inspections and testing services, the unit cost for each and the number of units proposed.
Exhibit A also includes a change order provision which states KET "is permitted to charge [Tristar] for change orders based" on "Additional Testing required by [Tristar] or Contractor, with prior written consent of [Tristar]."
KET began work on the project, sending Tristar monthly time and material-based invoices for the work. At some point shortly after the end of July 2015, KET sent an invoice charging Tristar an amount which brought KET's bill over the $98,863 cap in the agreement. In August 2015, Robin told KET's accounting department Tristar could not be charged more than $98,863. By this time, the project, originally scheduled set completion in December 2015, was about four months behind schedule.
KET continued to provide services to Tristar, and sent Tristar an invoice dated October 31, 2015 which showed a total invoiced amount to date of $291,128.22. Tristar had paid KET only about $54,000 by that point. In an early to mid-November phone call with Robin, KET representatives stated KET would stop performing services if its invoice was not paid in full. KET did stop performing services after that phone call, sometime between November 13, 2015 and November 19, 2015.
On November 17, 2015 Daniel wrote a letter to KET in which he stated KET was required to continue providing services for the contract price of $98,863 and its failure to do so would amount to a breach of contract. Tristar then temporarily hired another firm to do inspection work.
Shortly before Thanksgiving the Kashani brothers, on behalf of Tristar, had a meeting with David Menefee, KET's Chief Operating Officer and part owner. Menefee testified they discussed Daniel's November 17, 2015 letter and Daniel told Menefee "he believed that we had signed a contract that only entitled us to $98,000. But he wanted— he knew that we were a soft cost, so he's going to pay us." In a follow-up email, Menefee mentioned Daniel had told him at the meeting that "there were a few more weeks of work." Menefee also testified "I felt that we were at risk for working beyond $98,000 and that, during the Thanksgiving meeting, if they said that they weren't going to pay us, then we would stop all work and there was no sense in investing any more time in that." In a later email, Menefee wrote: "Remember, you both stated you had only a couple of more weeks of work at our meeting before Thanksgiving last year. You promised to pay for our service but are unwilling to actually state that in an email." Menefee did not receive a substantive response.
The Kashani brothers denied saying Tristar would pay more than $98,863. Robin testified that at the November meeting, he only agreed to try to get money to pay KET from the Contractor.
KET resumed work on the project, which lasted more than the couple of weeks estimated by the Kashani brothers; KET worked until May 2016. KET invoiced Tristar $59,122.75 for its work after Thanksgiving 2015. The trial court awarded this amount to KET on its quantum meruit claim.
In 2016, as the project began to draw to a close, Tristar requested a Final Soils Compaction Report from KET's sister company Koury Geotechnical Services (KGS). KGS provided some services for the project under the agreement. Due to unresolved payment claims, neither KET nor KGS sent the final report.
Tristar could not close out the building permits for the project without the report. Robin and Menefee discussed the report and in August 2016, they agreed Tristar would send KET a check for $10,000 and KET would then send the Final Report; this agreement is reflected in emails between the parties. Tristar sent the check, but KET returned only an unsigned draft Final Report.
Ultimately, the trial court found the parties amended the agreement to provide for a payment of an additional $10,000 for delivery of the Final Report; KET breached this amended agreement; and Tristar was entitled to the fees it paid for the temporary occupancy permit and $7,252 for premiums it paid to obtain a bond on KET's mechanics' lien, for a total award of $12,512.84.
DISCUSSION
I. The Trial Court Did Not Err In Awarding Quantum Meruit Recovery to KET For Additional Work Performed After Thanksgiving 2015.
Tristar contends the trial court erred in awarding KET $59,122.75 for its work after Thanksgiving 2015 under a quantum meruit theory while also finding there was an express binding contract between the parties. In the alternative, Tristar contends there is insufficient evidence to support a finding that KET's work was outside the scope of the original contract.
"[I]t is well settled that an action based on an implied-in-fact or quasi-contract cannot lie where there exists between the parties a valid express contract covering the same subject matter." (Lance Camper Manufacturing Corp. v. Republic Indemnity Co. (1996) 44 Cal.App.4th 194, 203.)
The trial court based its quantum meruit award on its finding that in November 2015, the parties "reached an additional, ill-defined oral agreement" concerning payment for future work.
Tristar contends the PSA required KET to "perform all the inspection and testing services for Tristar for the construction project" at The Ventana. This is a very broad claim. We understand Tristar is claiming KET was required to provide unlimited services to Tristar for the project. Under Tristar's theory, "additional" work would not be possible under the PSA. The PSA, however, does not contain such an all-encompassing scope of work. The PSA has a Scope of Services Description, defined as the work described in Exhibit A. This is a finite set of services, as the PSA itself recognizes in its references to "additional" work in Paragraph 2.1 and in the change order provision of Exhibit A. Provisions for "additional" work would not be necessary if such work was not possible.
Although the trial court did not rely on this theory to reach its findings, we note Tristar's agreement to pay for KET's post-Thanksgiving work estops it from claiming that the work was required by the PSA. (Frank T. Hickey, Inc. v. Los Angeles Jewish Community Council (1954) 128 Cal.App.2d 676, 683 (Hickey, Inc.) [when the parties to a contract "agree on additional compensation for certain work, it precludes a claim that the original contract requires the performance of such work."].) This forecloses Tristar's claim that the evidence was insufficient to support a finding that the post-Thanksgiving work was "outside" the contract.
Tristar's position can also be understood as a claim that all services performed by KET at The Ventana were governed by the terms of the PSA. This appears to have been true until November 2015. The PSA contains a provision requiring additional work on the project to be approved in writing before work was performed. The trial court upheld this written change order requirement for work before November 2015, and denied KET's claim for compensation for additional work prior to that time because KET did not obtain a change order.
The court reached a different conclusion as to work performed after November 2015, and permitted KET to recover in the absence of a change order. We do not agree with Tristar that this finding is inconsistent with the earlier finding that KET could not recover for its additional pre-Thanksgiving 2015 work.
The parties to a contract may, by their conduct or a combination of words and conduct, waive such a provision requiring written change orders for extra work. (Hickey, Inc., supra, 128 Cal.App.2d at pp. 682-683 [contractor orally ordered subcontractor to perform extra work and accepted such work]; Biren v. Equality Emergency Medical Group, Inc. (2002) 102 Cal.App.4th 125, 141.)
That is what the trial court in effect found occurred here. In November 2015, KET realized Tristar had a different understanding of the contract than it did. As Menefee testified, KET realized Tristar was not going to pay for the additional work it had performed. Upon realizing this, KET stopped work. KET stated it would only continue working if Tristar agreed to pay for the work. Menefee testified Tristar agreed. KET resumed work and Tristar accepted the work. Even after Menefee sent an email reminding Tristar it had promised to pay for KET's services, Tristar continued to accept KET's services. Thus, as to the post-Thanksgiving work, the court correctly found "Tristar directed that this work be performed outside of, and in addition to, the terms of the written contract." The parties had waived the written change order provision of the PSA.
Once the parties waived the change order provisions of the PSA, the PSA no longer governed the work performed at the Ventana project. The parties' agreement about future payment was, as the court found, "ill-defined" and the court then found quantum meruit a suitable theory of recovery.
Tristar claims that if an oral agreement about additional work was theoretically possible, no such agreement was reached in the November meeting because Menefee came out of that meeting believing KET should be paid for all its work, both before and after Thanksgiving. Menefee's continued belief about the terms of the PSA is not determinative of the existence or non-existence of a new agreement. It was Tristar's changed belief which resulted in a new agreement. Before the meeting, Tristar took the position KET was required to continue working without further payment. After the meeting, Tristar agreed to pay KET for its work going forward.
Tristar elected to promise to pay KET for future work in order to induce KET to resume work. KET resumed work in reliance on this promise. As the court found, this agreement was "ill-defined" at best and the trial court found compensation for the work under a quantum meruit theory appropriate. II. The Trial Court Properly Found KET To Be The Prevailing Party On The Action.
Tristar contends the trial court erred in finding that KET was the prevailing party for purposes of attorney fees, because "[j]udgment in every breach of contract cause of action in this case was entered in favor of" Tristar. Tristar contends that Civil Code section 1717 requires that Tristar be deemed the prevailing party. We do not agree.
"Before section 1717 comes into play, it is necessary to determine whether the parties entered an agreement for the payment of attorney fees and, if so, the scope of the attorney fee agreement." (Maynard v. BTI Group, Inc. (2013) 216 Cal.App.4th 984, 989-990 (Maynard).) Civil Code section 1021 states, " '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 . . . .' " (Maynard, at p. 989.) As the court in Maynard notes, " '[i]t is quite clear from the case law interpreting . . . section 1021 that parties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves . . . .' (Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1341 .)" (Maynard, at pp. 989-990.) Thus, "[a]s made clear in Xuereb, and in numerous cases that have followed, a contractual provision may provide that the party that prevails in litigation over noncontractual claims shall recover its attorney fees." (Maynard, at p. 990.) When the parties intend attorney fees to be awarded to "the party who prevails in a broader sense, considering the action as a whole" "neither Civil Code section 1717 nor any other provision precludes an award of attorney fees to a party prevailing on a tort claim, or authorizes an award to a party who has prevailed in defending a breach of contract cause of action but has been held liable on other related causes of action." (Maynard, at p. 990.)
Generally, in an attorney fees provision, the phrase "in connection with" the contract or agreement is broad enough to encompass both contract and noncontract claims. (Maynard, supra, 216 Cal.App.4th at pp. 992, 993, citing Cruz v. Ayromloo (2007) 155 Cal.App.4th 1270, 1277 and Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 966; see Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744, 757 (Mountain Air) ["[T]he term 'in connection with' is broad, and has been interpreted to extend to both contract and tort claims in a contractual attorney fees provision."].) When such a provision is found in a case, "in order to determine the prevailing party the contract cause of action should not be viewed in isolation from other related claims that were litigated." (Maynard, at p. 993) The party who receives the net recovery may properly be deemed the prevailing party. (Id. at p. 994.)
Here, the attorney fees provision states: "If any legal action or other proceeding, including action for declaratory relief, is brought for the enforcement of this Agreement or because of an alleged dispute, breach, default or misrepresentation in connection with this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees, experts' fees, and other costs, in addition to any other relief to which the party may be entitled." (Italics added.) As Maynard, Cruz, Myers Building and Mountain Air show, the "in connection with" language of this provision encompasses contract and noncontract claims, and so it was permissible for the trial court to deem KET the prevailing party on the basis of its net recovery.
Tristar contends that even if the attorney fee provision could encompass some noncontact claims, it does not encompass the quantum meruit claim in this case because that claim cannot be "in connection with" the PSA: quantum meruit based on an implied agreement can only exist if it is "necessarily disconnected from" and "completely separate from the [PSA] itself." Tristar is mistaken.
Any inquiry into the scope of an attorney fees provision "begins with the language of the attorney fees provision itself." (Mountain Air, supra, 3 Cal.5th at p. 760.) If a case involves "a complicated and difficult set of facts [which might] obscure whether a claim on which attorney fees are incurred is within the scope of a fees provision . . . courts 'should consider the pleaded theories of recovery, the theories asserted and the evidence produced at trial, if any, and also any additional evidence submitted on the motion in order to identify the legal basis of the prevailing party's recovery.' " (Id. at pp. 760-761.)
In Mountain Air, plaintiff sought to enforce a repurchase agreement which did not have an attorney fees provision. Defendants asserted an option agreement between the parties as an affirmative defense, claiming the option agreement superseded the repurchase agreement. The option agreement contained an attorney fees provision providing: " 'If any legal action or any other proceeding, including arbitration or an action for declaratory relief[,] is brought for the enforcement of this Agreement or because of an alleged dispute, breach, default, or misrepresentation in connection with any provision of this Agreement, the prevailing party shall be entitled to recover reasonable attorney fees, expert fees and other costs incurred in that action or proceeding, in addition to any other relief to which the prevailing party may be entitled.' " (Mountain Air, supra, 3 Cal.5th at p. 757, italics omitted.) The attorney fees provision in this case, set forth above, is very similar to the provision in Mountain Air, notably including the use of the phrase "an alleged dispute . . . in connection with."
Defendants in Mountain Air were successful in blocking enforcement of the repurchase agreement and sought attorney fees under the option agreement. The Court found plaintiff's action to enforce the repurchase agreement was not an action to enforce the option agreement. The Court, however, concluded "Mountain Air's action involved an 'alleged dispute . . . in connection with' the option agreement, as required under the attorney fees provision" and so defendants were entitled to attorney fees under the option agreement. (Mountain Air, supra, 3 Cal.5th at p. 758.)
The Court also found that the assertion of the option agreement as an affirmative defense was not an action or proceeding brought to enforce the option agreement and so not an independent basis for invoking the attorney fees provision. (Mountain Air, supra, 3 Cal.5th at p. 758.)
The Court explained plaintiff asserted the repurchase agreement required defendants to buy back some real estate, while defendants claimed the option agreement expressly superseded the repurchase agreement and did not impose a buy back requirement on them. "In short, the repurchase agreement and option agreement both concerned the transfer of the same property between the same parties, but provided alternate and conflicting versions of the parties' rights and responsibilities. As the Court of Appeal majority emphasized, '[t]here can be no doubt here that Mountain Air and defendants disputed the meaning and effect of the option agreement, including its integration clause,' and whether it extinguished defendants' obligations under the repurchase agreement." (Mountain Air, supra, 3 Cal.5th at p. 758, fn. omitted.) Thus, "the action necessarily implicated the validity of both the repurchase agreement and the option agreement. [Citation.] The parties were forced to litigate which of these competing and inconsistent agreements was, in the words of the trial court, the 'sole agreement controlling the rights of the parties.' " (Id. at pp. 758-759.) The court noted "as a practical matter, it is unclear how a court could determine the parties' obligations in this purchase transaction without construing these inherently conflicting agreements together. . . . Indeed, the very nature of defendants' defense of novation, the validity of which is not before us, required determining whether the option agreement superseded and replaced the terms and conditions of the repurchase agreement." (Id. at p. 760.)
A very similar situation exists in this case. The quantum meruit claim and the PSA both involved payment for services provided by KET to Tristar. Like the defendant in Mountain Air, Tristar asserted the PSA as a defense to KET's claims. Just as the two agreements in Mountain Air were "alternate and conflicting" and "competing and inconsistent," quantum meruit recovery is incompatible with an existing valid contract covering the same subject. Thus, the trial court could not determine the merits of KET's quantum meruit claim without determining the meaning and scope of the PSA. If the PSA applied to KET's post-Thanksgiving work, the quantum meruit claim would not be viable. Thus, under the reasoning of Mountain Air, this case involved an alleged dispute in connection with the PSA and the prevailing party is entitled to attorney fees.
(Mountain Air, supra, 3 Cal.5th at pp. 758, 759.)
Tristar also contends the trial court abused its discretion in designating KET as the prevailing party because "there was a mixed decision." Much of Tristar's argument is based on its success in defeating KET's claim for $290,000 in damages on KET's claim for beach of the PSA. Tristar has forfeited this claim by failing to support it with "meaningful argument and citation to authority." (Allen v. City of Sacramento (2015) 234 Cal.App.4th 41, 52.) "In addition, citing cases without any discussion of their application to the present case results in forfeiture." (Ibid.) We are not required "to examine undeveloped claims or to supply arguments for the litigants." (Ibid.) As an aside, Tristar does not explain why the trial court should have considered its success in defeating KET's $290,000 contract claim, but not consider KET's success in defeating Tristar's $477,000 damage claims. This is particularly interesting given that Tristar is the party which began this action, a lawsuit Tristar contends it was "forced" to bring to obtain the Final Soils Compaction Report. As it turned out, Tristar failed to obtain much more than the Report itself and costs associated with its late delivery.
Even if not forfeited, we disagree with Tristar's argument that its favorable result on the contract claims is determinative. (See Maynard, supra, 216 Cal.App.4th at p. 993 ["While prevailing on the contract is alone significant if the attorney fee provision limits fee entitlement to the party prevailing on the contract claim, it is not controlling if the provision authorizes fees to the party prevailing in the resolution of the entire controversy."].) Moreover, "neither Civil Code section 1717 nor any other provision precludes an award of attorney fees to a party prevailing on a tort claim, or authorizes an award to a party who has prevailed in defending a breach of contract cause of action but has been held liable on other related causes of action." (Maynard, at p, 990.)
Finally, Tristar argues the trial court's ruling is unjust because it would, in Tristar's words, promote injustice, reward those who demand ransoms, and punish those that comply with express contracts. Tristar claims it is being punished for not agreeing to pay "KET's absurd demand for $290,079.23" in November 2015 and it would have been better off paying the $290,000 because KET's attorney fees are more than that amount.
It is not uncommon for a losing party to realize after the fact that it would have been less expensive to settle than to litigate when an attorney fees provision is involved. In situations where the parties to the provision had relatively equal bargaining power in negotiating the provision, there is no grand injustice.
Tristar is not the victim in this case. Tristar's current position is not the result of its refusal to pay KET $290,000 at a critical time during construction; it is the result of refusing to pay KET $57,000 for KET's work after November 2015. Tristar would be the prevailing party if it had paid that lesser sum.
KET is not the villain. KET did not refuse to work at a critical time until the full amount was paid; KET agreed to resume work on the basis of Tristar's promises of future payments. KET is not being rewarded for its failed demand for $290,000. Attorney fees will go to KET's attorneys.
We do not understand Tristar's further claim that it is somehow entitled to costs. This argument appears to be based on its belief that it must be deemed the prevailing party under section 1717. Because the section 1717 claim fails, this related claim must fail as well. Tristar has forfeited any other argument challenging costs by failing to develop the claim and support it with meaningful argument. (Allen v. City of Sacramento, supra, 234 Cal.App.4th at p. 52.)
DISPOSITION
The judgment is affirmed. Respondent Koury Engineering and Testing, Inc. is awarded costs on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
STRATTON, J. We concur:
GRIMES, Acting P. J.
WILEY, J.