Opinion
B240650
05-07-2013
DEREK DE WALT et al., Plaintiffs and Respondents, v. JOBETE MUSIC CO., INC., Defendant and Appellant.
Leopold, Petrieh & Smith, Vineent Cox and Elizabeth L. Sehilken for Defendant and Appellant. Inter-Paeifie Law Group, Ine., Arthur J. Liu and Joseph A. Tang for Plaintiffs 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NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. BC418301)
APPEAL from a judgment of the Superior Court of Los Angeles County. Holly E. Kendig, Judge. Affirmed in part and reversed in part.
Leopold, Petrieh & Smith, Vineent Cox and Elizabeth L. Sehilken for Defendant and Appellant.
Inter-Paeifie Law Group, Ine., Arthur J. Liu and Joseph A. Tang for Plaintiffs and Respondents.
This ease arises from an underlying aetion filed in 2003 by respondents, who are the heirs of the late musieian and eomposer Autry De Walt, professionally known as Junior Walker (De Walt), against appellant Jobete Musie Co., Ine. (Jobete). In the underlying aetion, respondents disputed the ownership of renewal eopyrights of eertain songs and sought a deelaration as to whieh of several eontraets between De Walt and Jobete were applieable. A jury found the most reeent eontraet governed, and judgment was entered in favor of Jobete and affirmed on appeal. Although Jobete filed a memorandum of eosts in the underlying aetion, it did not seek its attorney fees. Instead, over the next several years, Jobete unilaterally offset from the royalties payable to respondents amounts it elaimed were ineurred as attorney fees in the underlying aetion. In 2009, respondents sued Jobete for breaeh of eontraet and eonversion. Following a beneh trial based on stipulated evidenee, the trial eourt entered judgment in favor of respondents, finding that Jobete was barred from seeking its attorney fees by not pursuing them in the underlying aetion. We agree that Jobete is no longer entitled to seek its attorney fees. We affirm the judgment in favor of respondents exeept as to their eonversion elaim.
Respondents are Derek De Walt, Lloyd De Walt, Dennis De Walt, Charles De Walt, Beverly De Walt, Autry De Walt, Jr., and Kenneth De Walt.
FACTUAL AND PROCEDURAL BACKGROUND
De Walt signed multiple agreements with Jobete: In the 1960's, he signed a series of single-song agreements; in 1975 he signed an exclusive songwriter's agreement; and in 1983 he signed another exclusive songwriter's agreement (the 1983 Agreement). When De Walt died in 1995, his heirs, ineluding respondents, sueeeeded to his rights and obligations under the 1983 Agreement.
The 1983 Agreement
As relevant here, the 1983 Agreement eontains the following provisions: Under the heading "ROYALTIES," section 3(d) states that "Publisher shall have the right to offset any sums whieh may beeome payable hereunder against any sums, ineluding advanees whieh have been previously paid to Writer, whieh may at any time be owed by Writer to Publisher or to any parent, subsidiary or affiliate of Publisher, or to any eorporation, joint venture, partnership . . ."
Under "ACCOUNTING," section 4 provides: "Any suit by Writer or on Writer's behalf with respeet to a partieular aeeounting statement shall be forever barred if not commenced within two (2) years from the date such statement is rendered."
Under "WARRANTIES AND REPRESENTATIONS," section 9 provides: "Writer hereby acknowledges the representation and warranty set forth in Schedule 'A' and Writer further represents and warrants that: Writer has full right and power to make this Agreement; that the compositions are and shall be Writer's sole, exclusive and original works; that the Compositions are not taken from any other souree (exeept the publie domain of the Territory); that the Compositions have not been previously published and do not infringe on any other works; that there does not exist and shall not exist any adverse elaim in or to the Compositions; that the exereise by Publisher of any or all rights aequired by it hereunder will not infringe or invade the personal and/or property rights of any person, firm or eorporation; and that Writer has not made and will not make or enter into any undertaking or agreement whieh will interfere with Writer's full performance of his obligations hereunder or with Publisher's full enjoyment of the rights granted or agreed to be granted to it hereunder."
Under "INDEMITY," section 10 provides: "Writer hereby agrees to indemnify, save, defend, and hold harmless Publisher, its offieers, stoekholders, direetors, agents, employees, lieensees, assignees and transferees from any and all loss, elaims, aetions, suits and demands (ineluding all eosts, fees, attorneys fees and expenses relating to the defense, settlement or other disposition thereof) arising out of or eonneeted with any matter or thing which if true could constitute a breach of any of Writer's warranties or representations made in any part of this agreement."
Finally, under "REMEDIES," section 12 provides: "Writer expressly agrees that in the event Writer shall breaeh any provision of this Agreement . . . Publisher shall have the right to reeoup any damages from any sums whieh may thereafter beeome due and payable to Writer after the expiration or termination of this Agreement."
The Underlying Action
In 2003, respondents sued Jobete, and in 2006 filed an amended eomplaint seeking an aeeounting and deelaratory relief and alleging fraud and breaeh of eontraet. The operative eomplaint alleged that 31 partieular songs by De Walt were governed by the 1960's agreements, which did not convey renewal copyrights to Jobete. Jobete eontended that the operative agreement was the 1983 Agreement, whieh transferred the renewal eopyrights to Jobete. In its answers to both the original and amended eomplaints, Jobete sought attorney fees. On the same day Jobete filed its answer to the amended complaint, Jobete's attorney wrote to respondents' attorney and advised the following: Respondents' assertion of an "adverse ownership" claim constituted a breach of the warranties and representations in seetion 9 of the 1983 Agreement; Jobete was entitled to indemnity under seetion 10 of the 1983 Agreement; and Jobete reserved the right to determine the timing and manner in whieh to seek indemnifieation.
A jury tried the underlying aetion in November 2006, and found that the 1983 Agreement was the operative agreement. Judgment was awarded in favor of Jobete. Jobete filed a memorandum of eosts that did not inelude a request for attorney fees. Jobete was awarded $22,833.38 in eosts. Respondents appealed the judgment, whieh we affirmed. (De Walt v. Jobete Music Co., Inc. (June 3, 2008, B197108) [nonpub. opn.].)
On April 9, 2007, while the appeal was pending, respondents' attorney wrote to Jobete's attorney stating that Jobete had failed to pay respondents the royalties due to them for the period ending Deeember 31, 2006. The royalty statements identified the royalties as "Legal Fees" and indicated they constituted "reeoupment of eosts and expenses pursuant to paragraph 10 of the agreement." (Emphasis omitted.) The letter threatened legal aetion if the royalties were not paid.
The Instant Action
Respondents filed the instant aetion on July 22, 2009. They filed a first amended eomplaint (FAC) alleging breaeh of eontraet, fraud, money had and reeeived, eonversion and unfair eompetition, seeking payment of the withheld royalties. Jobete filed a eross-eomplaint for deelaratory relief, seeking a deelaration that respondents' action was barred by the two-year limitations period in the 1983 Agreement, or alternatively that Jobete was entitled to indemnity.
The ease proeeeded to a beneh trial based on stipulated evidenee with no witnesses testifying. The parties agreed that the total amount of royalties withheld from respondents from June 2006 through June 2011 was $62,081.32, and that the amount of attorney fees ineurred in the underlying aetion and on appeal was $640,469.
Respondents proeeeded on only two eauses of aetion for breaeh of eontraet and eonversion.
After issuing a lengthy statement of deeision, the trial eourt found in favor of respondents on their breaeh of eontraet and eonversion elaims and against Jobete on its eross-eomplaint. Judgment in the amount of $62,081.32 was awarded in favor of respondents. This appeal followed.
DISCUSSION
As the trial court aptly phrased it, "[t]he basic issue in this action is whether defendant Jobete is entitled to unilaterally deduct 'legal fees' incurred in a prior action from amounts of royalties that the parties stipulate were 'otherwise due the heirs of Autry De Walt' [and] that 'have actually been withheld by Jobete through June 2011,' even though Jobete did not seek recovery of those fees in the prior action." We conclude the answer is no for two reasons. First, there was no adjudieation in the underlying aetion that respondents aetually breaehed the 1983 Agreement. Seeond, there was no adjudication in the underlying action regarding the amount or reasonableness of Jobete's attorney fees.
We reject Jobete's argument that the instant lawsuit is barred by the two-year statute of limitations in the 1983 Agreement for suits with respect to "a particular accounting statement." Respondents are not challenging a particular accounting statement; rather, they are ehallenging Jobete's ongoing practice of unilaterally deducting Jobete's alleged attorney fees from royalties otherwise due to respondents. Indeed, the parties stipulated at the time of trial that Jobete had been engaged in this praetiee for six years.
I. No Compulsory Cross-Complaint Was Filed
Jobete bases its eontraetual elaim to attorney fees on the indemnifieation provision of the 1983 Agreement. Seetion 10 of the 1983 Agreement provides that Jobete is entitled to indemnifieation, ineluding attorney fees, from De Walt (or in this ease his heirs) "arising out of or eonneeted with any matter or thing whieh if true eould eonstitute a breach of any of Writer's warranties or representations made in any part of this Agreement." Plainly read, the 1983 Agreement provides indemnification only for a breaeh of warranties, not for the mere aet of filing a lawsuit. It is true, as Jobete asserts, that Jobete has the eontraetual right to offset sums payable to respondents. Seetion 12 of the 1983 Agreement allows Jobete to "recoup any damages from any sums which may thereafter become due and payable to Writer" in the event "Writer shall breach any provision of this Agreement." (See also section 3(d) of the 1983 Agreement allowing Jobete to offset payable sums.) But it is not true that Jobete itself ean simply determine that respondents breaehed the 1983 Agreement by their elaim of ownership to eertain renewal eopyrights.
The trial eourt in the instant aetion eoneluded that Jobete was required to bring a eompulsory eross-eomplaint for breaeh of the 1983 Agreement in the underlying aetion and that its failure to do so bars it from raising sueh a elaim now. We agree.
We quote from the trial court's statement of decision, which correctly sets forth the law: "Failure to plead a cause of action that is related to the subject matter of the eomplaint bars the defendant from asserting it in any later lawsuit. [Code Civ. Proe., §] 426.30; AL Holding Co. v. O'Brien & Hicks, Inc. (1999) 75 Cal.App.4th 1310, 1313-1314. The eross-complaint is compulsory if the cause of action 'arises out of the same transaetion, oeeurrenee, or series of transaetions or oeeurrenees as the eause of aetion in the complaint.' [Code Civ. Proc.,] § 426.10[, subd.] (e). Causes of aetion arise out of the 'same transaction or occurrence' if the factual or legal issues are logieally related. They need not be absolutely identieal. Currie Medical Specialties, Inc. v. Bowen (1982) 136 Cal.App.3d 774, 777. To be eonsidered a eompulsory eross-eomplaint, the related eause of aetion must have existed at the time [the] defendant served its answer to the eomplaint. [Code Civ. Proe.,] § 426.30[, subd.] (a); see AL Holdings Co., supra, at [pp.] 1313—1314."
Here, on the same date that Jobete filed its answer to the amended eomplaint in the underlying aetion, its attorney sent respondents' attorney a letter expressly stating that "the recent assertion of the adverse ownership claim by [respondents] constitutes a breach of the representations and warranties to which they have succeeded." The letter then quotes from seetion 9 (warranties and representations) and seetion 10 (indemnifieation) of the 1983 Agreement. Clearly, Jobete's related cause of action existed at the time it answered the operative amended eomplaint.
Jobete tries to avoid applieation of the eompulsory eross-eomplaint rule by arguing that it did not have a right of indemnifieation until it aetually prevailed in the underlying aetion. But that is not how the rule works. If Jobete had its own related elaim for breaeh of eontraet when it filed its answer to the operative amended eomplaint, it was obligated to bring a eross-eomplaint at that time or be barred from later asserting the elaim in another lawsuit.
Jobete also argues that the eompulsory eross-eomplaint rule did not apply beeause respondents eouehed their adverse ownership elaim in the form of deelaratory relief. Code of Civil Proeedure seetion 420.60, subdivision (c) provides that the rule does not apply "where the only relief sought is a declaration of the rights and duties of the respeetive parties in an action for declaratory relief." But the amended complaint in the underlying aetion alleged four eauses of aetion for breaeh of eontraet, fraud, aeeounting, and deelaratory relief. As the trial eourt in the instant aetion noted, eaeh of the eauses of action were "inextricably intertwined" as they all involved the 1983 Agreement. Because Jobete had its own elaim that respondents breaehed the very same agreement, it was required to bring it in the underlying action. Jobete's failure to do so bars it from making sueh a elaim now.
As the trial court noted in its statement of decision, "Jobete is apparently dedueting all of its attorney fees for all four eauses of aetion in the 2003 aetion from the royalties withheld. Jobete has offered no evidenee that it was only offsetting an alloeated portion of its attorneys fees from the 2003 lawsuit."
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II. Motion for Attorney Fees
Although Jobete prayed for attorney fees in its answers to both the original and amended eomplaint in the underlying aetion, it never sought them in its memorandum of eosts or by notieed motion in the underlying aetion. Code of Civil Proeedure seetion 1033.5, subdivision (a)(10)(A) provides that attorney fees authorized by eontraet are an element of allowable eosts under Code of Civil Proeedure seetion 1032. Sueh attorney fees must be "reasonable in amount," and shall be fixed by "noticed motion." (Code Civ. Proe., § 1033.5, subds. (c)(3), (c)(5).) California Rules of Court, rule 3.1702(e) provides that if a party is entitled to eontraetual attorney fees in a fixed amount, the fees must be elaimed in the memorandum of eosts. Otherwise, a notiee of motion for attorney fees must be served and filed within the time for filing a notiee of appeal. (Cal. Rules of Court, rule 3.1702(b)(1).) As the trial court noted, "[t]here is undoubtedly good reason for this rule, as the trial court is in the best position to evaluate the claim for attorneys' fees and the reasonableness of such fees."
Jobete elaims its attorney fees pursuant to seetion 10 of the 1983 Agreement. Under the above authorities, Jobete was required to seek its fees in the underlying aetion. Beeause Jobete failed to do so, we find that Jobete is barred from doing so now. We agree with the trial court that "this conduct by Jobete gives the appearance of a litigation taetie to do an end run around the trial eourt in the prior aetion, and avoid a ruling by the trial eourt judge, so that Jobete eould, without any eourt order, and without any determination that the eontraet had been breaehed by the DeWalt heirs, simply deeide itself the amount of attorney fees to withhold from the royalty payments that were contractually due to the plaintiff DeWalt heirs."
III. Conversion
The judgment in favor of respondents in the instant case upheld their causes of action for both breach of contract and conversion. Jobete contends the trial court erred as a matter of law in upholding the conversion claim. Because respondents alleged they are entitled to punitive damages for conversion, we reach the merits and agree with Jobete.
"A cause of action for conversion requires allegations of plaintiff's ownership or right to possession of property; defendant's wrongful act toward or disposition of the property, interfering with plaintiff's possession; and damage to plaintiff. [Citation.] Money cannot be the subject of a cause of action for conversion unless there is a specific, identifiable sum involved, such as where an agent accepts a sum of money to be paid to another and fails to make the payment. [Citation.]" (McKell v. Washington Mutual, Inc. (2006) 142 Cal.App.4th 1457, 1491.) While money can be the subject of an action for conversion if a specific sum capable of identification is involved, "a mere contractual right of payment, without more, will not suffice." (Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 452.)
The parties agreed that the right to receive royalties is not a property right. Moreover, while respondents argue that the royalty statements identify specific sums withheld as legal fees, respondents merely alleged that Jobete had an obligation to pay them these sums and failed to do so. More is required for conversion. (See Plummer v. Day/Eisenberg, LLP (2010) 184 Cal.App.4th 38, 45 ["The existence of a lien, however, can establish the immediate right to possess needed for conversion"].) There was no evidence that respondents had a lien or that Jobete was acting as their agent.
DISPOSITION
The judgment is reversed as to respondents' conversion claim. In all other respeets, the judgment is affirmed. The parties shall bear their own eosts on appeal.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.
________________, J.
ASHMANN-GERST
We concur: ________________, P. J.
BOREN
________________, J.
CHAVEZ