Opinion
B228427
11-28-2011
VENTURI & COMPANY LLC, Plaintiff and Appellant, v. PACIFIC MALIBU DEVELOPMENT CORPORATION et al., Defendants and Respondents.
Law Offices of John A. Belcher and John A. Belcher for Plaintiff and Appellant. Leonard, Dicker & Schreiber, Lee T. Dicker and Christopher L. Frost for Defendants 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. BC336772)
APPEAL from an order of the Superior Court of Los Angeles County. Malcolm Mackey, Judge. Reversed and remanded.
Law Offices of John A. Belcher and John A. Belcher for Plaintiff and Appellant.
Leonard, Dicker & Schreiber, Lee T. Dicker and Christopher L. Frost for Defendants and Respondents.
Venturi & Company LLC (Venturi) appeals from the trial court's order denying Venturi recovery of its attorney's fees. We reverse and remand for further proceedings.
FACTS AND PROCEEDINGS
In 2003, appellant Venturi and respondents Pacific Malibu Development Corporation and Hermitage Estates Limited entered into a contract involving respondents' development of a high-end resort in the Bahamas. Under the contract, respondents promised to pay Venturi a commission for Venturi's consulting and marketing advice and help in finding financing for the project. When Venturi failed to find financing after more than 18 months, respondents terminated the contract. In response, Venturi sued respondents for breach of contract and quantum meruit on the ground that the contract entitled Venturi to a commission regardless of whether it found financing. (Venturi & Company LLC v. Pacific Malibu Development Corp. (2009) 172 Cal.App.4th 1417, 1419-1420 (Venturi).)
Respondents filed a cross-complaint alleging breach of contract and tort causes of action. Respondents thereafter moved for summary judgment of Venturi's complaint. They argued Venturi, which lacked a real estate broker's license, had provided broker's services by soliciting financing for the project. According to respondents, the Business and Professions Code barred Venturi as an unlicensed broker from receiving a commission for unlicensed work. (Bus. & Prof. Code, § 10136 [only licensed real estate broker may receive compensation for real estate brokerage services].) The trial court agreed and entered summary judgment for respondents. (Venturi, supra, 172 Cal.App.4th at p. 1420.)
Having successfully (albeit only temporarily) rebuffed Venturi's complaint, respondents voluntarily dismissed their cross-complaint and sought recovery of more than $215,000 in attorney's fees under Schedule A of their contract with Venturi. Schedule A carried the title "Indemnification," but respondents claimed it was in fact an attorney's fee provision for actions arising from the contract; respondents argued to the court that the schedule "clearly provide[s] for attorney's fees and expenses of legal counsel with respect to any claim related to or arising out of any transaction or other matter contemplated by the engagement of Venturi under the contract." Respondents additionally argued that although Schedule A ostensibly awarded fees only from respondents to Venturi, Civil Code section 1717 gave respondents the right to recover their attorney's fees. (§ 1717 [makes unilateral attorney's fee provisions reciprocal].) Venturi opposed respondents' motion, arguing section 1717 did not apply to Schedule A because it was an indemnity provision solely for Venturi's benefit if it were sued for its work under the contract. (Carr Business Enterprises, Inc. v. City of Chowchilla (2008) 166 Cal.App.4th 14, 20 [§ 1717 inapplicable to indemnification clauses]; Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 971-972.) The court agreed and denied respondents' motion for fees, finding Schedule A was an indemnification clause, not an attorney's fees provision.
All further undesignated section references are to the Civil Code.
Venturi appealed from the court's entry of summary judgment and respondents cross-appealed from denial of their motion for attorney's fees. In a published opinion, we found triable issues of fact whether Venturi's services under the contract were solely broker's services. We therefore reversed and remanded for the trial court to determine if Venturi provided any nonbroker services for which Venturi did not need a broker's license to receive compensation. In reversing summary judgment, we dismissed respondents' cross-appeal as moot because respondents were no longer prevailing parties. We did not reach the merits to decide whether Schedule A was an indemnification clause or an attorney's fee provision. (Venturi, supra, 172 Cal.App.4th at p. 1424.)
In our published opinion, we described the disposition of respondents' fee motion as follows: "Claiming they were the prevailing party, respondents moved for their attorney fees after the court entered summary judgment for them. Appellant objected to respondents receiving their attorney fees because respondents were, in appellant's view, misapplying the contract's indemnification clause in seeking their fees. Concluding that the indemnification clause was not an attorney fee provision, the court agreed with appellant and denied respondents' motion for their fees. Respondents cross-appealed from the court's order. Because we have reversed summary judgment for respondent and are returning this matter to the trial court for further proceedings, respondents' cross-appeal is moot as there is no longer a prevailing party." (Venturi, supra, 172 Cal.App.4th at p. 1424.)
After remand, the court tried Venturi's cause of action for quantum meruit and awarded Venturi $94,000. (The record does not indicate whether the court tried Venturi's cause of action for breach of contract, or whether the claim was dismissed pretrial, but it is undisputed that Venturi did not recover anything under that theory.) Venturi then moved to recover its costs and, under Schedule A, for recovery of $237,150 in attorney's fees. The court awarded Venturi its costs as the prevailing party, but denied Venturi its attorney's fees because Venturi's recovery had been under quantum meruit for which the court found no entitlement to attorney's fees. This appeal followed.
STANDARD OF REVIEW
Appellate courts normally review a trial court's attorney's fee award for abuse of discretion. However, when the entitlement to fees turns on undisputed contractual language, we decide the question de novo. (Connerly v. State Personnel Bd. (2006) 37 Cal.4th 1169, 1175; Kim v. Euromotors West/The Auto Gallery (2007) 149 Cal.App.4th 170, 175-176.)
DISCUSSION
Venturi contends Schedule A, labeled "Indemnification," entitles Venturi to recover the attorney's fees it incurred in defending against respondents' cross-complaint. Applying Schedule A's plain meaning, we agree. Schedule A states: "Recognizing that transactions of the type contemplated in this engagement sometimes result in litigation and that [Venturi's] role is advisory, [respondents] agree[] to indemnify and hold harmless [Venturi] from and against any losses, claims, damages and liabilities, joint or several, related to or arising in any manner out of any transaction, proposal or any other matter (collectively, the 'Matters') contemplated by the engagement of [Venturi] hereunder, and will promptly reimburse [Venturi] for all expenses (including fees and expenses of legal counsel) as incurred in connection with the investigation of, preparation for or defense of any pending or threatened claim related to or arising in any manner out of any Matter contemplated by the engagement of [Venturi] hereunder, or any action or proceeding arising therefrom . . . ." (Italics added.)
Here, Venturi's motion for attorney's fees asserted Venturi incurred fees defending against the cross-complaint, which alleged four causes of action: breach of contract, negligence, fraud, and negligent misrepresentation. The causes of action for breach of contract and negligence alleged damages from Venturi's failure to find financing for the Bahamas development. The fraud and negligent misrepresentation causes of action alleged Venturi entered into the contract without intending to perform and without having any reasonable belief in its ability to do so. Because Venturi's motion sought fees incurred from litigation of the cross-complaint, it argued these fees had been "incurred in connection with the investigation of, preparation for or defense of any pending or threatened claim related to or arising in any manner out of any Matter contemplated by the engagement of" Venturi. It follows, says Venturi, that those attorney's fees are recoverable.
Respondents contend an indemnification clause such as Schedule A applies only to third party claims, not to direct actions by the indemnitor (respondents) against the indemnitee (Venturi). Thus, respondents conclude, Schedule A does not permit Venturi to recover the fees it incurred in defending against respondents' cross-complaint.
Respondents' belated characterization of Schedule A as an indemnification clause is a change of tune from their motion for attorney's fees after their successful (but later reversed) motion for summary judgment. When seeking their fees after summary judgment, respondents urged the trial court to ignore Schedule A's "Indemnification" label in order to deem it an attorney's fee provision, which permitted respondents to assert section 1717 made the schedule's unilateral fee provision reciprocal.
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Respondents are correct that indemnification typically applies only to third party claims. (Zalkind v. Ceradyne, Inc. (2011) 194 Cal.App.4th 1010, 1024 (Zalkind).) Nothing, however, prevents contracting parties from agreeing that their indemnification clause applies to a direct action between them. As Zalkind explained, "The terms 'indemnify' and 'indemnity' do not necessarily refer only to third party claims . . . . [T]he California Supreme Court has defined 'indemnity' as 'the obligation resting on one party to make good a loss or damage another party has incurred.' [Citation] This definition is not limited to third party claims and is broad enough to include [one contracting party's] direct breach of contract claim against [the other contracting party]. One court has concluded the definition of 'indemnity' in Civil Code section 2772 'plainly states that indemnity may apply to either direct or third party claims.' [Citation.]" (Id. at p. 1025.)
The touchstone of analysis for determining an indemnification clause's scope is the clause's language. (Zalkind, supra, 194 Cal.App.4th at pp. 1024-1025.) As our colleagues summarized in Dream Theater, Inc. v. Dream Theater (2004) 124 Cal.App.4th 547, in finding that the contractual language governs whether indemnification covers a direct action, " '[indemnification agreements ordinarily relate to third party claims.' [Citations.] But this general rule does not apply if the parties to a contract use the term 'indemnity' to include direct liability as well as third party liability. 'An indemnity agreement is to be interpreted according to the language and contents of the contract as well as the intention of the parties as indicated by the contract.' [Citation.]" (Dream Theater, Inc., at p. 555; see also Wilshire-Doheny Associates, Ltd. v. Shapiro (2000) 83 Cal.App.4th 1380, 1396 [same].)
In Zalkind, the contract stated the " 'Buyer shall indemnify, hold harmless and defend the Selling Parties . . . from and against any and all Damages that arise from or are in connection with: [¶] . . . [¶] . . . Any breach or default by the Buyer of its covenants or agreements contained in this Agreement.' " (Zalkind, supra, 194 Cal.App.4th at p. 1022.) Zalkind's contract defined "Damages" as " '(i) demands, claims, actions, suits, investigations and legal or other proceedings brought against any indemnified party . . . and (ii) all liabilities, damages, losses, . . . costs and expenses (including . . . reasonable attorneys' . . . fees . . .) incurred by any indemnified party . . . .' " (Id. at p. 1023, italics omitted.) Zalkind held the foregoing "broadly worded" language meant the buyer must indemnify the selling parties for all damages " 'that arise from or are in connection with: [¶] . . . [¶] . . . [a]ny breach or default by [the buyer] of its covenants or agreements contained' " in their contract. (Id. at p. 1027.) Likewise here, respondents' obligation to indemnify Venturi for all expenses "incurred in connection with the investigation of, preparation for or defense of any pending or threatened claim related to or arising in any manner out of any Matter contemplated by the engagement of [Venturi] hereunder" compels respondents to pay Venturi's attorney's fees connected to respondents' cross-complaint despite Venturi having incurred those fees in respondents' direct action instead of an action by a third party.
Respondents note the court found Venturi had prevailed only under quantum meruit, not breach of contract. Respondents add (although the trial court did not address) that their voluntary dismissal of their cross-complaint following summary judgment meant Venturi was not a prevailing party in defending against the cross-complaint. Putting those facts together, respondents contend Venturi was not entitled to its attorney's fees because Venturi was not a prevailing party under the contract between them. Respondents' contention is unavailing, however, because it misapplies a concept misborrowed from section 1717. Section 1717, which speaks of a "prevailing party" in an action on a contract, applies to a contractual attorney's fee provision. (See § 1717, subd. (b)(2) [no prevailing party for purposes of reciprocal fee statute if action voluntarily dismissed].) But Venturi does not seek recovery of the fees it incurred in prosecuting its complaint, and therefore it does not matter whether the theory under which it recovered damages was for breach of contract or quantum meruit. Venturi told the court during the fee hearing, "We're not seeking attorney's fees for quantum [meruit]. [¶] We're seeking attorney's fees for defeating their cross-complaint." And as for the fees Venturi incurred in defending against respondents' cross-complaint, it does not matter that respondents voluntarily dismissed their cross-complaint because Schedule A does not require that Venturi be a prevailing party nor does it purport to limit its scope to certain causes of action such as breach of contract or fraud. (See Campbell v. Scripps Bank (2000) 78 Cal.App.4th 1328, 1335-1338 [including attorney's fees as item of loss in indemnification clause does not make clause an attorney's fee provision because indemnification conceptually different from contractual attorney's fees].) Because Schedule A was not an attorney's fee provision, section 1717 and its attendant concept of prevailing party therefore do not apply. (Carr Business Enterprises, Inc. v. City of Chowchilla, supra, 166 Cal.App.4th at p. 20; Myers Building Industries, Ltd. v. Interface Technology, Inc., supra, 13 Cal.App.4th at pp. 971-972.)
Respondents also contend Venturi is judicially estopped from seeking attorney's fees because Venturi had argued against respondents' recovery of attorney's fees in the summary judgment proceeding by asserting Schedule A was not an attorney's fee clause. (The Swahn Group, Inc. v. Segal (2010) 183 Cal.App.4th 831, 841 [judicial estoppel prevents party from "playing fast and loose" with court by taking inconsistent positions in same proceeding].) Respondents' reliance on judicial estoppel is misplaced because Venturi's objection to respondents' recovery of attorney's fees does not contradict Venturi's argument in support of its entitlement to its own attorney's fees. Respondents sought their attorney's fees by arguing Schedule A was an attorney's fee clause made reciprocal by section 1717. Opposing respondents' motion for fees, Venturi argued Schedule A was a unilateral indemnity agreement from respondents to Venturi. (Respondents acknowledge indemnification provisions need not be reciprocal.) Venturi did not argue Schedule A never allowed for recovery of attorney's fees; Venturi instead argued only that Schedule A did not allow respondents to recover their fees - no inconsistent change in position there. Rather, it is respondents whose position has changed: first, they argued Schedule A was not an indemnification provision but an attorney's fees provision; on appeal, they argue the converse.
Finally, respondents contend Venturi did not "incur" attorney's fees because Venturi had a contingency fee agreement with its attorneys which obligated Venturi to pay its attorneys only if Venturi recovered a judgment against respondents. Determining whether Venturi incurred fees is a factual dispute turning on, among other things, the nature of the fee arrangement between Venturi and its counsel, the amount of those fees, and whether they were incurred in Venturi's prosecution of its complaint against respondents or in its defense against respondents' cross-complaint. These factual disputes are properly left in the first instance to the trial court's determination. By this appeal, we have decided only the threshold question of whether Schedule A's indemnification provision permits Venturi upon a proper showing to recover its attorney's fees in defending against respondents' cross-complaint, a question we answer in the affirmative.
DISPOSITION
The order denying appellant Venturi & Company LLC's motion for attorney's fees is reversed, and the matter is remanded to the trial court to determine the amount of attorney's fees, if any, Venturi is entitled to recover for defending the cross-complaint. Venturi to recover costs on appeal.
RUBIN, J.
WE CONCUR:
BIGELOW, P. J.
GRIMES, J.