Opinion
A150841 A150843
08-17-2018
THE COLLINGS FOUNDATION, Cross-Complainant and Appellant, v. AUCTIONS AMERICA BY RM, INC., Cross-Defendant and Respondent. THE COLLINGS FOUNDATION, Cross-Complainant and Respondent, v. AUCTIONS AMERICA BY RM, INC., Cross-Defendant and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Mateo County Super. Ct. No. CIV530374)
This case arises out of the sale of a Panzer IV tank (Panzer IV or tank). While the tank is perhaps unique, the case before us is a basic contract dispute that arose in connection with an auction that included the tank, resulting in a dispute between the owner of the tank and the auction house. Specifically, The Collings Foundation (Collings), the owner of the tank, put it and numerous other items in a collection up for auction. Collings signed an auction agreement with Auctions America by RM, Inc. (AA), which among other things gave AA the "exclusive right and authority to sell" items for 90 days post-auction. The tank did not sell at the auction, and immediately after the auction Vulcan Warbirds, Inc. (Vulcan), a bidder at the auction, inquired of AA about the possibility of buying the tank. Negotiations led to an agreement for Vulcan to buy the tank for $2.5 million, and Vulcan sent a check in that amount in payment. Collings refused to deliver it.
A Panzer IV was described at trial as the backbone of the Wehrmacht, the German armed forces during World War II, the most "historically relevant German tank that there is." There are only 28 "reasonably complete" tanks left in the world, only five of which are in North America. This particular tank was built in 1944, and eventually was located to Syria, where it was captured by the Israeli army in the Six Day War.
Vulcan sued Collings and AA, and Collings cross-complained against AA. Following a short bench trial, the court ruled for Vulcan, holding that while AA did not have actual authority to sell the tank, it had ostensible authority to do so. The trial court also awarded Collings damages against AA of $250,000, based on the "unauthorized sale" of the tank. AA and Collings both appeal. AA contends the judgment against it is not supported, Collings that the damages award is too low and must also include its attorney fees. We agree with AA, and thus reverse the judgment against it, a reversal that necessarily disposes of Collings's appeal.
BACKGROUND
The General Setting
The Panzer IV, along with numerous other military vehicles and equipment, came to be part of an extensive collection owned by Jacques Littlefield (the Littlefield Collection or collection). At some point the Littlefield Collection came to be owned by Military Vehicle Technology Foundation (MVTF), which in 2013 transferred the collection to Collings, a nonprofit foundation. Collings did not pay MVTF for the transfer of the Littlefield Collection, but agreed it would create a museum in which the collection would be displayed. Later that year, Collings reached out to various auction houses in connection with a plan to auction some items from the Littlefield Collection, advising the auction houses that the proceeds from the auction would be used to build the museum to house the remaining portion of the collection. One of the auction houses was AA, with which Collings entered into a contract, ultimately leading to the litigation here.
The Auction Agreement
On December 23, 2013, Collings and AA entered into an "Auction Agreement" (Auction Agreement or Agreement). The Auction Agreement was eight pages long, and among other things granted to AA "the exclusive right and authority to sell the Property for a period beginning with the date of this Agreement and ending 90 days after the Auction." "Property" was defined as "any and all vehicles and memorabilia consigned to the Auction." The Agreement also provided that the parties will create an auction catalogue to include descriptions for each "item of Property" consigned to the auction, and the Panzer IV came to be included in the auction catalog, with a description approved by Collings.
The Agreement also provided for a "Buyer's Premium" on items purchased during the auction, which provision is germane to one of the issues in AA's appeal, and will be discussed in detail in connection with that issue.
A few weeks after entering into the Auction Agreement, AA and Collings entered into a three-page written "Addendum to Auction Agreement" (Addendum). The recitals in the Addendum provided that by it the parties wish to make an "addition" to the Agreement and "agree to rely" on both the Agreement and the Addendum. Section 6.3 of the Addendum provided as follows: "6.3 Upon signing of the Auction Agreement until 90 days after the final Auction date, on mutual agreement of the Parties, any private treaty that AA facilitates regarding any item in the Littlefield collection, AA will receive five percent (5%) commission on the sale price of that item." The Addendum goes on to provide that "private treaty sales will focus on the high-value items" and identifies four lots—including the Panzer IV—that "would be ideal candidates for private treaty sales."
Testimony at trial revealed that a private treaty, the term in the Addendum, is a "brokerage deal," the concept being that the item would not be put up for bid at auction, but rather offered for sale only through private agreement. As also discussed in detail below, within a few months of signing the Addendum, AA and Collings agreed that the private treaty concept was not feasible, and no private treaty sale was held with respect to any item in the Littlefield Collection.
That was the setting against which the auction of the Littlefield Collection was held.
The Auction—and Its Aftermath
AA held the auction over two days, July 11 and 12, 2014. There was a catalog listing numerous items, most of which were to be auctioned without reserve, that is, to be sold at whatever the bid. Five items—described in the catalogue as "Littlefield Select"—were listed "with reserve," that is to be sold only if the bid reached the reserve amount. One of the five items was the Panzer IV, listed with a reserve of $2.5 million, an amount that had been jointly agreed to by Collings and AA, as a mid-point between the $2.4 to $2.6 million estimated value of the tank.
One of the bidders at the auction was Vulcan, which owns numerous military artifacts it acquired at auctions. Vulcan bid on the Panzer IV, but the bid was below the $2.5 million reserve, and the tank did not sell at the auction.
Within a day—no later than July 13, the witness said—Deborah Gunn, associate director of art finance at Vulcan, contacted Megan Boyd of AA, inquiring whether the tank was available for sale. Boyd said she would check, and by email of July 15 advised that Collings would consider offers over $2.25 million, and in the following days principals at Vulcan and AA engaged in negotiations about a possible sale. At the same time, Ed Cepuran of AA and Rob Collings, a principal of Collings, were communicating via text messages regarding the sale price.
Ultimately, so that the sale could be completed, AA decided it would forego any profit on any sale and negotiated a deal that allowed Vulcan to purchase the Panzer IV for $2.5 million, with the entire $2.5 million to be paid to Collings. On July 18, Boyd sent an email to Gunn that included an offer to allow Vulcan to buy the Panzer IV for $2.5 million. And if Vulcan agreed, Boyd asked Gunn to sign an attached bill of sale "on the line below the word 'Offer,' scan and email back to me."
Gunn replied by asking if there was any flexibility in the price, perhaps near the $2.25 million number in Boyd's July 15 email. Since AA required Collings's approval for a sale below the reserve price, on July 23 Edward Cepuran of AA contacted Rob Collings and asked whether it would sell the Panzer IV for $2.25 million. Mr. Collings replied he would not, information AA relayed to Vulcan.
The next day, July 24, Gunn replied to Boyd's July 18 email, advising that Vulcan wanted to "accept [the] offer" to buy the Panzer IV for $2,500,000. Gunn attached to her email a copy of the bill of sale for the Panzer IV (along with other bills of sale), signed by Adrian Hunt on behalf of Vulcan under the word "OFFER." And in accordance with the instructions in Boyd's email, Vulcan wired to AA the money for the tank.
Immediately following the transmission of the bills of sale, Vulcan sought to assure the shipping of the items. Due to various issues relating to the places where the items were stored, there was a delay in getting Vulcan's purchased items shipped. On August 20, Hunt of Vulcan contacted Rob Collings to address the shipping delays. Mr. Collings informed Hunt that there was a misunderstanding with respect to the sale of the Panzer IV, and that Collings did not intend to sell it after all unless they could find a replacement tank, going on to tell Hunt that he would honor the $2.5 million sale price only if a replacement could be found.
Following this conversation, Vulcan wrote to AA and demanded that all items it bought, including the Panzer IV, be available for transport to Vulcan within two days. AA offered to return the $2.5 million that was wired for the purchase but Vulcan refused to accept a return of the funds. The Panzer IV was never released to Vulcan, the $2.5 million was kept in trust by AA, ultimately to be held in an account subject to disbursement upon court order. This lawsuit followed.
The Proceedings Below
In September 2014 Vulcan filed a complaint naming Collings, AA, and MVTF, controller of the Littlefield Collection. The complaint alleged causes of action for breach of contract, replevin, claim and delivery, declaratory relief, specific performance, and violation of Commercial Code section 2403. Vulcan sought damages, injunctive relief, and the Panzer IV.
As best we can tell, MVTF was never pursued.
In January 2015, Collings filed a cross-complaint, which came to be amended three times, which named as cross-defendants Vulcan, AA, and RM Auctions, Inc. (RM), a shareholder of AA. As to Vulcan, the cross-complaint sought declaratory relief. As to AA and RM, the cross-complaint alleged causes of action for declaratory relief, indemnity (equitable, implied, or other), breach of contract, breach of fiduciary duty, violation of Civil Code section 1812.608 (the auctioneer statute), and negligence. The last amended cross-complaint was filed April 22, 2016, to which AA filed its answer on July 5, just a week before trial.
The case proceeded to a court trial that lasted four court days, from July 12 through July 15. Only five witnesses testified, and most of the trial dealt with Vulcan's claim as to the Panzer IV. After the close of the evidence the parties argued the case, following which the trial court said it would "once again review your trial briefs and go over this," and the matter was submitted.
On July 26, the trial court issued its tentative decision. Both sides filed objections, and the trial court entered its final decision on September 19. This decision included "Factual Findings" the trial court later incorporated into its "Factual Findings and Judgment" entered January 12, 2017 (judgment), specifically eight short paragraphs of findings totaling 31 lines. There followed in the judgment five issues framed by the trial court as questions, the second through fourth of which are pertinent here. Those three questions were resolved as follows: (2) AA did not have actual authority to sell the tank to Vulcan; (3) AA did have apparent or ostensible authority to sell the tank; and (4) Collings suffered damages "as a result of AA's unauthorized sale of the tank."
The other two questions, the first and the fifth, are not involved in this appeal. The first question involved the liability of RM, which the court held not liable. And the fifth question involved payment for auction items other than the Panzer IV, as to which the court held AA owed Collings $346,960, a holding AA does not contest.
Based on the above, the court entered judgment in favor of Vulcan and against Collings on the primary claim in the case, granting possession of the Panzer IV to Vulcan. Judgment was entered for AA on Vulcan's complaint against it because AA had no possessory interest in the tank.
The court then addressed Collings's cross-complaint, and entered judgment in favor of Collings and against AA for contract damages: $346,960 for the sale of items other than the Panzer IV, and, as pertinent here, "$250,000 for the buyer's premium that COLLINGS would have been entitled to receive under the Auction Agreement and Addendum."
Collings and AA both appealed, and we ordered the appeals consolidated.
DISCUSSION
AA's Appeal—No. A150843
AA makes two arguments why the $250,000 judgment in favor of Collings must be reversed: (1) the evidence established that AA had actual authority to sell the Panzer IV, and (2) awarding a buyer's premium to Collings was error. We agree on both counts.
The Standard of Review
The parties disagree as to the standard of review: AA says it is de novo, Collings, substantial evidence. We agree with AA. "The interpretation of a written instrument, even though it involves what might properly be called questions of fact [citation], is essentially a judicial function to be exercised according to the generally accepted canons of interpretation so that the purposes of the instrument may be given effect. [Citations]. Extrinsic evidence is 'admissible to interpret the instrument, but not to give it a meaning to which it is not reasonably susceptible' [citations], and it is the instrument itself that must be given effect. [Citations]. It is therefore solely a judicial function to interpret a written instrument unless the interpretation turns upon the credibility of extrinsic evidence. Accordingly, 'An appellate court is not bound by a construction of the contract based solely upon the terms of the written instrument without the aid of evidence [citations], where there is no conflict in the evidence [citations], or a determination has been made upon incompetent evidence [citation].' [Citations.]" (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865-866.)
Various courts have applied this rule, expressing it in a variety of ways. Thus, for example, " 'to the extent the evidence is not in conflict, we construe the instrument, and we resolve any conflicting inferences, ourselves.' " (ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1267, quoting Appleton v. Waessil (1994) 27 Cal.App.4th 551, 556.) "In other words, we defer to the trial court's interpretation of a contract only where an ambiguity exists, parol evidence is admitted, and the parol evidence is in conflict." (In re Marriage of Nassimi (2016) 3 Cal.App.5th 667, 688, fn. 33; see generally PV Little Italy, LLC v. MetroWork Condominium Assn. (2012) 210 Cal.App.4th 132, 144 ["An appellate court reviews such instruments independently, 'unless the interpretation turns upon the credibility of extrinsic evidence.' "]; California National Bank v. Woodbridge Plaza LLC (2008) 164 Cal.App.4th 137, 143 [trial court interpretation of commercial lease reviewed de novo even though parties offered testimony of their differing interpretations of the lease].) In short, where the extrinsic evidence is not in conflict, construction of the agreement is a question of law for our independent review.
Collings's contention that substantial evidence applies is apparently based on the fact that some evidence was presented at trial outside the Agreement itself. But the evidence to which Collings points really had nothing to do with any interpretation of the Agreement—and in any event was not conflicting. So, it is de novo review. (Johnson v. Greenelsh (2009) 47 Cal.4th 598, 604; Burch v. George (1994) 7 Cal.4th 246, 254; Ruiz v. California State Automobile Assn. Inter-Insurance Bureau (2013) 222 Cal.App.4th 596, 602.)
AA Had Authority to Sell the Panzer IV, and the $250,000 Award to Collings Was Error
As quoted in part above, paragraph 13.1 of the Agreement provides as follows: "Collings grants to AA the exclusive right and authority to sell the Property for a period beginning with the date of this Agreement and ending 90 days after the Auction." Cepuran of AA testified as an expert witness in the field of auction practices and procedures, the only expert to testify on the subject. Cepuran testified that the exclusivity provision in section 13 of the Agreement was standard in any auction context. More specifically, and as pertinent here, for the items that are offered with reserve that do not sell at the auction, the auction house still has a marketing period, which may vary from 30 to 90 days, in which to sell any such item. The reason is that the auction house spends significant time and energy prior to the auction marketing the reserve items, and thus it is allowed a period of time after the auction to exclusively sell them on behalf of the seller. In fact, the evidence showed that a significant portion of an auction house's revenue is derived from such post-auction sales. Cepuran also testified that the seller's approval is generally sought only for a post-auction sale if the price is less than the reserve, and it often happens that a seller will accept post-auction an amount that is less than the reserve price.
Any post-auction sale is necessarily limited to reserve items, as items not so restricted, that is, without a reserve, will be sold at the auction at whatever the amount bid.
Cepuran's expert testimony was undisputed, and the general rule is that uncontroverted expert testimony on a matter within the knowledge of experts is conclusive and cannot be disregarded. (See Huber, Hunt & Nichols, Inc. v. Moore (1977) 67 Cal.App.3d 278, 313.)
Despite all that, the trial court found that the Auction Agreement anticipated that a number of items would be "offered as 'Star Lots' at the auction and would be auctioned with reserved values." It then found that the parties entered into the Addendum "primarily providing for the sale of certain high value lots by private treaty (private sales outside the auction between individual buyers and COLLINGS as brokered by AA)." And the court then found as follows:
"Later in 2014, COLLINGS and AA orally agreed to modify the Addendum by including the high value lots in the auction, but unlike the other scheduled items, the high value lots would be auctioned with a reserve. This suspended the private treaty concept for these reserved lots. [¶] An auction catalog was eventually prepared listing all of the agreed upon lots for sale (with the exception of the parts lots that were added at the last minute), including both non-reserved and reserved items. There was only a single auction with all items listed subject to the Auction Agreement as supplemented by the Addendum." The court also found that each party met its contractual duties prior to, and during, the auction.
Despite these findings, especially that the Auction Agreement and not just the Addendum applied to the sale of reserve items and that any private treaty sale was "suspended," the court went on to conclude that AA's authority to sell the Panzer IV post-auction was only " 'on mutual agreement of the parties.' " This ignored the exclusivity provision for post-auction sales and instead quoted language found only in the Addendum—language, as noted, specifically limited to private treaty sales. And based on that, the court concluded that AA did not have actual authority to sell the tank.
This, we conclude, was error.
To begin with, the trial court's analysis is premised on a mistake involving AA's position, the judgment referring to AA's position this way: "AA claimed that, pursuant to paragraph 2.1 of the Addendum Agreement, it had the exclusive right to sell the PANZER for a period of 90 days following the close of the auction." That was not accurate, as at no time had AA taken the position that its authority to sell the Panzer IV arose from any language in the Addendum. To the contrary, the Addendum was created for, and applied to, "private treaty sales." And such treaty sales were considered, and then rejected, never to come to be with respect to this auction.
Cepuran explained that "private treaty" was a new concept to AA, and proved to be too complicated and not workable. Specifically, AA quickly began to receive numerous calls from potential buyers who were not clear on the details of how the private bidding would work, and his staff could not explain it. And it became clear to Cepuran that it was too "convoluted," there were "too many what-ifs." Cepuran explained this to Collings, and as they both confirmed, they agreed that rather than continuing to market the "private treaty" sale idea, they would proceed with offering the Panzer IV and other high value items in a reserve portion of the auction.
Quoting only one phrase from the Addendum—and eliminating the most relevant provision making that language applicable to private treaty sales only—the trial court concluded that "AA had the exclusive right to sell the Panzer during this 90 day period 'on mutual agreement of the parties .' " The exclusivity provision in section 13.1 of the Auction Agreement grants AA "the exclusive right and authority to sell the Property for a period beginning with the date of this Agreement and ending 90 days after the Auction." There is no language in the exclusivity provision requiring mutual agreement.
Collings's respondent's brief begins with its description of the issue in its statement of the case: "II. STATEMENT OF THE CASE. [¶] A. Highlight on Key Evidentiary Facts. [¶] Before embarking on a recital of the trial record, it is important to understand how the various pieces of evidence fit into AA's issues on appeal. The first issue is whether the trial court erred in finding that AA lacked authority to unilaterally sell the Panzer IV. AA contends that the appellate court must look no further than the written Auction Agreement to conclude that AA had such authority. Collings contends that the appellate court must look no further than the Addendum to determine AA did not. The two agreements are polar opposites—one allows unilateral post-auction sales and the other forbids it (the Addendum requires 'mutual consent' before any sale). [¶] The Achilles heel in AA's argument that the Auction Agreement governs is that agreement never refers to the Panzer IV. It is not listed in the schedule of items to which the agreement relates."
Then, after introductory material, Collings goes on with its argument, including within which are eight specific subarguments why AA "did not have authority to sell" the tank. The first subargument, which Collings describes as a "Summary of AA's Argument," is that AA's authority " 'arises from paragraph 13.1 of the Auction Agreement' where Collings granted to AA 'the exclusive right and authority to sell the Property' up to 90 days after the auction. Thus, the critical premise underlying AA's entire appeal is the conclusion that the Panzer IV is 'Property.' " Collings goes on to argue that the Panzer IV was not "Property," arguing as follows: "The trial court concluded that 'the items to be listed for auction were to be listed in a certain "Schedule 1." ' This is supported by not one, but two definitions in the Auction Agreement stating that 'Property' means those items listed in Schedule 1. This is also supported by extrinsic evidence from Collings that: (a) the term 'Property' never included 'things that were not in Schedule 1'; and (b) Collings understood 'Property' the way it is defined in both the opening section and paragraph 3 of the Auction Agreement, which limits the term to those items listed in Schedule 1. In addition, there is a wealth of other facts adduced at trial and highlighted above showing that the Panzer IV was never Property subject to Section 13.1 of the Auction Agreement." The argument has no merit.
To begin with, the trial court at no point indicated it found the term "Property" ambiguous or that there was any issue whatsoever with the inclusion in the auction of many items not on schedule 1. Which is not surprising, as all uses of the term "Property" in the Auction Agreement are consistent, confirming that anything offered at auction is "Property" under the Agreement. Indeed, the recitals section of the Auction Agreement describes the agreement's purpose as "Collings wishes AA to auction a portion of the Military Memorabilia ('Property') as described in Schedule 1 on and subject to the terms and conditions of this Agreement." The Auction Agreement was signed December 23, 2013, and schedule 1 was signed January 12, 2014, six months prior to the auction. While schedule 1 identified property to be offered at the auction, the Agreement clearly contemplates that additional items may be added to the auction: after the "Whereas," the "Definitions" section defines " 'Property' " as "any and all vehicles and memorabilia consigned to the Auction." This is the only definition of "Property" in the Agreement.
While the term "Property" is used several times in the Agreement, there is never a conflict with the definition as set forth in section 1.7. Yet Collings claims that section 3.1—which provides "The Parties mutually agree on what Property will be offered for sale as per Schedule 1"—somehow is at odds with the definition of "Property." This provision confirms that at a minimum the items set forth in schedule 1 will be offered for auction—and maybe more. This makes perfect sense, as no auction house would take on the expense of marketing and putting on an auction without a minimum number of items to be offered.
Collings also argues that the definition of "Property" is boilerplate and should be ignored. First, no law supports the conclusion that any terms in a contract can be ignored, boilerplate or not. To the contrary, the law is that contracts must be interpreted "in a manner which gives force and effect to every clause rather than to one which renders clauses nugatory." (Titan Corp. v. Aetna Casualty & Surety Co. (1994) 22 Cal.App.4th 457, 473-474.) Second, the testimony of Cepuran on which Collings relies to support this argument was not that the definition of "Property" is boilerplate. Rather, Cepuran explained that the agreements AA enters into for each auction are different due to the fact that "stand-alone auctions . . . they're unique in numerous ways." And while some standard language may be used, the contracts are drafted to account for the differences in each auction including "how you're going to market it . . . what the property is and so there's going to be a few or considerable, you know, differences."
In addition to the Auction Agreement itself, other evidence of what was meant by "Property" included the auction catalog, which contained a listing of all items offered during the auction. The Panzer IV was identified in the auction catalog as auction lot 5004, with a description approved by Collings. In short, there was no provision in the Auction Agreement limiting the items for auction to those listed on schedule 1. To the contrary, Cepuran explained that it is "very typical" for the seller and auctioneer to amend the listing of auction items to end up at the ultimate lot listing.
Collings argues that because the Panzer IV was not included in schedule 1, AA violated Civil Code section 1812.608, subdivision (d)(2), which requires that an auction agreement contain an inventory of items to be sold at the auction. The trial court did not accept this argument, and denied Collings relief on its cause of action for breach of the auctioneer statutes. And properly: as expressly stated in the Auction Agreement, the final auction catalog represents the items offered for sale at auction, and the Panzer IV was included in the catalog.
Collings also asserts that its alleged communications with Vulcan are evidence of whether the Panzer IV was subject to the Auction Agreement. But any communications Collings may have had with Vulcan following the auction do not alter AA's rights under the Auction Agreement, giving it the "exclusive right" to complete a post-auction sale. In any event, the undisputed evidence was that Collings was aware of the negotiations between AA and Vulcan, and nowhere in those communications did Collings ask AA to stop its efforts to sell the Panzer IV or tell AA it had no authority to sell it. In sum, the Panzer IV is "Property" subject to the Auction Agreement, and its offer for auction and post-auction are subject to the terms of the Auction Agreement, including the exclusivity section 13.1. And AA had the exclusive right to sell it.
Indeed, and as noted above, the evidence is that Collings asked that AA continue to negotiate to try to get Vulcan to contribute more to the deal for the sale of the Panzer IV.
Collings also attempts to escape the application of the exclusivity provision by insisting that the sale of the Panzer IV was a "private treaty" sale. It was not.
As described above, the parties entered into the Addendum shortly after executing the Auction Agreement, which Addendum added the following provision: "6.3 [u]pon signing of the Auction Agreement until 90 days after the final Auction date, on mutual agreement of the Parties, any private treaty that AA facilitates regarding any item in the Littlefield collection, AA will receive five percent (5%) commission on the sale price of that item." (Italics added.) The Addendum provides that "private treaty sales will focus on the high-value items," and identifies four lots—including the Panzer IV—that "would be ideal candidates for private treaty sales." The Agreement does not require that "private treaty" sales be conducted; rather, it defines the conditions for such a sale if it happens: a requirement of mutual agreement of the parties and a 5 percent commission to AA. The Addendum was entered into prior to the decision to offer any items with a reserve in the auction, and so no reserve price served as a minimum on the "private treaty" sales. So, the mutual consent requirement served an important purpose.
The trial court found that Collings and AA "agreed to modify the Addendum by including the high value lots in the auction . . . with a reserve." The court found "[t]his suspended the private treaty concept for these reserved lots." This finding that the "private treaty" concept was suspended for the Panzer IV and other items offered at reserve auction is consistent with the testimony at trial discussed above—that the parties decided the "private treaty" concept was too complicated and convoluted, and scrapped the idea of "private treaty sales" instead moving forward with the reserve auction.
Collings essentially argues that the trial court's finding was that the "private treaty" concept was suspended, but apparently for one day, and then the "suspension" ended, with all sales of auction items thereafter were "private treaty" sales. Certainly if this was the finding, the court would have included it in the judgment. Instead "private treaty" is not mentioned again in the remaining pages of the factual findings and judgment.
Finally, we note that Collings's claim that the sale was "private treaty" is disingenuous, in light of its own argument on damages. That is, Collings argues "private treaty" when it supposedly fits its needs, but then avoids reliance on the term when it looks to calculate damages. Specifically, Collings offered an exhibit it claimed represented an accounting of proceeds at various Panzer IV pricings. In all the examples, the first number added to the sales price was the 15 percent buyer's premium in the Auction Agreement—not the 5 percent figure for "private treaty" sales. Put another way, when it came to attempting to establish a breach, Collings would look no further than the Addendum for a "private treaty" sale (which provides a 5 percent commission); however, when it came to calculate damages, Collings would look to the Auction Agreement, to include the 15 percent buyer's premium.
Beyond this, the focus on only the language in the Addendum while ignoring the exclusivity provision in the Auction Agreement, is contrary to the well settled law that it is improper to interpret a contract by considering only certain terms and ignoring others. "The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other." (Civ. Code, § 1641.) Thus, "[c]ourts must interpret contractual language in a manner which gives force and effect to every provision" (City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1998) 68 Cal.App.4th 445, 473), and avoid construction that would render any of its provisions or words "surplusage." (McCarther v. Pacific Telesis Group (2010) 48 Cal.4th 104, 110.) As we have described it, "the contract must be construed as a whole and the intention of the parties must be ascertained from the consideration of the entire contract, not some isolated portion." (County of Marin v. Assessment Appeals Bd. (1976) 64 Cal.App.3d 319, 324-325.)
All this was error, compounded by more error.
As described above, the trial court found that the value of the Panzer IV at the time of sale and judgment was $2.5 million. The judgment required that the $2.5 million, which was being held in escrow, be transferred to Collings, which it was. And the judgment found that "[b]ecause the value of the PANZER equals the price received by COLLINGS, COLLINGS suffered no recoverable loss for AA's unauthorized sale of the PANZER."
Despite that, the trial court went on to hold that "the amount payable from the sale of the PANZER is due to COLLINGS" and continued, however inexplicably, with this: "Under the terms of the Auction Agreement and the Addendum, an item sold carries a buyer's premium of 15%. Therefore, under the agreements, based upon a $2,500,000 sale, a $375,000 premium would also be due putting the effective payment at $2,875,000. Out of those funds, AA would be entitled to a 5% commission or $125,000. Therefore, COLLINGS would have received $2,750,000 from the sale of the PANZER at a price of $2,500,000. [¶] AA, therefore, owes COLLINGS $2,750,000 as a result of its unauthorized sale of the PANZER, payable $2,500,000 from the funds currently held in trust plus $250,000 in damages."
This was error for several reasons.
First, no buyer's premium was appropriate, not in the post-auction sale here. The Auction Agreement defines "Buyer's Premium" as "an additional percentage charge on the Hammer Price of the lot that must be paid by the buyer"; "Hammer Price" is defined as "the final bid accepted on a Lot offered for sale at Auction"; and "The Buyer's Premium on hammered sold lots shall be fifteen percent (15%) of the Hammer Price." The buyer's premium is tied to the "Hammer Price," which is clearly defined as the price accepted on an auction lot during the auction—literally, the price upon which the auctioneer's hammer falls. There is no provision anywhere requiring a buyer's premium on sales other than those made during auction. In short, the "buyer's premium" is only for "hammered sold lots." The Panzer IV was not such a lot: it was not sold "at Auction," not sold at "Hammer Price." A buyer's premium simply does not apply.
But even if it did—and it did not—it would not inure to the benefit of Collings. The undisputed expert testimony was that a buyer's premium is not an additional payment to the seller, but is in effect a commission paid by the buyer to the auction house. As the expert explained, the "buyer's premium" is an additional fee that a successful bidder pays over and above what the item sells on the block. Where the trial court got the idea that the buyer's premium is to be shared, to be somehow a bonus to the seller, is a mystery.
On top of all that, no buyer's premium was collected. Nor could it be. The evidence was that the amount negotiated for the sale was $2.5 million "all in," meaning there would be no separate payment of any fees. In an effort to make the deal happen, AA did not seek any fee on this sale and instead agreed that all of the sale price would be net to Collings. Simply, the "amount payable from the sale of the PANZER" was no more than the $2.5 million.
The Panzer IV was offered at auction with a $2.5 million reserve. Had it sold at auction for that amount, Collings would have received $2.5 million—and AA its 15 percent ($375,000) buyer's premium. Here the trial court concluded that Collings suffered no recoverable damages, while at the same time inexplicably requiring AA to pay Collings an additional $250,000 that was never part of the sale or the agreement. The result? Not only does AA make no profit on the sale, it loses $250,000.
Collings asserts, in a brief paragraph, that the trial court's award of a buyer's premium is supported by an "oral promise" that, for certain high value items, AA would "give two-thirds of its 15 percent commission to Collings." We easily reject the argument.
First, no oral promise claim was alleged below.
The cross-complaint filed by Collings did contain a cause of action for breach of oral contract, but the allegations related to a purported separate oral agreement to sell the Panzer IV. It had nothing to do with premiums or commissions. --------
Second, no "oral promise" argument was made below. Not in closing argument. Not in any briefs. And not in Collings's objection to the preliminary statement of decision.
Third, there was no finding or conclusion that an oral contract existed to provide a 10 percent buyer's premium to Collings. To the contrary, the judgment explicitly stated that the court reached its conclusion based on its interpretation of the written contract: "Under the terms of the Auction Agreement and the Addendum, an item sold carries a buyer's premium of 15%. Therefore, under the agreements, based upon a $2,500,000 sale, a $375,000 premium would also be due putting the effective payment at $2,875,000. Out of those funds, AA would be entitled to a 5% commission or $125,000. Therefore, COLLINGS would have received $2,750,000 from the sale of the PANZER at a price of $2,500,000." (Italics added.)
Collings suggests that Cepuran acknowledged that a buyer's premium was due on post-auction sales based on Collings's claim that Cepuran testified that "a premium was due on the Panzer IV." The testimony cited does not support this. Rather, Cepuran explained that during post-sale negotiations with the Vulcan representative, he communicated to Vulcan that the $2.5 million being discussed as the purchase price was "all in" and "would be inclusive of all fees, including buyer's premium."
Finally, Collings claims that the "Bidder's Conditions of Business" required a buyer's premium regardless of when a sale occurred. A plain reading of the document shows this is not true, as on its face this document applies to bids made during an auction, the opening sentence providing: "Please ensure that you have read and understood these terms and conditions prior to bidding at this or any other Auctions America by RM, Inc., . . . sale." The document goes on to instruct the auction bidders on the rules during auction, such as "ALL BIDS ARE FINAL," "Payment is due in full on or before 5:00 p.m. of the next banking day following the auction," and "You are responsible for all bids made with your assigned bidder number." Collings points to paragraph 6 of the document which provides "[a] buyer's premium of fifteen percent (15%) is added to the final bid." This statement, like the other terms and conditions in the document, applies to bids made during the auction. There is nothing in the document to suggest otherwise.
Collings agreed that the Panzer IV could be sold at auction if the reserve price of $2.5 million was met. The Panzer IV was put up for auction with a $2.5 million reserve, an amount agreed to by Collings. Had it sold at that, Collings would have received $2.5 million. And that would have been that. It was not, but within weeks Vulcan agreed to pay $2.5 million, which, the court found, was the value of the Panzer IV at the time of sale. The judgment requires that the $2.5 million payment from Vulcan for the Panzer IV, which was being held in escrow, be transferred to Collings. It was, thus compensating Collings for the Panzer IV. The court went on to find that "[b]ecause the value of the PANZER equals the price received by COLLINGS, COLLINGS suffered no recoverable loss for AA's unauthorized sale of the PANZER." (Italics added.) In a word—actually, two words—Collings was not damaged.
Collings's Appeal—No. A150841
Collings's appeal asserts that the $250,000 in damages awarded was too low. Specifically, Collings contends that any award had to include its attorney fees, a contention premised on various bases, including auctioneer law, the tort of another doctrine, and other theories. In Collings's words, its appeal "presents two narrow questions of law that are subject to de novo review. The issues are as follows: [¶] (1) Given the trial court's factual findings that Auctions America 'orally agreed' to put the Panzer IV in the Littlefield Auction and then sold it afterward in violation of the parties' contract requiring 'mutual agreement,' is Collings a prevailing party entitled to relief under the Auctioneer Statutes (Civil Code sections 1812.600-1812.610), . . . . [¶] (2) Having sold the Panzer IV without authority to do so, is Auctions America liable on any theory for Collings' attorneys' fees incurred in its case involving [Vulcan]? [¶] The trial court answered ' no' to both questions. However, as summarized below, the trial court's factual findings demonstrate the answers should have been 'yes.' "
Collings is wrong. There are several reasons why, the most fundamental of which is that, as discussed above, Collings was not entitled to any damages from AA. That holding disposes of Collings's appeal, and we need not address its contentions as to why it was entitled to more.
DISPOSITION
The judgment is reversed in part, and the matter remanded with instructions to prepare a judgment that Collings recover nothing from AA on the cross-complaint. In all other respects the judgment is affirmed. AA shall recover its costs on appeal.
/s/_________
Richman, Acting P.J. We concur: /s/_________
Stewart, J. /s/_________
Miller, J.