Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Madera County No. MCV038952. Ernest J. LiCalsi, Judge.
Peter, Rubin & Simon, Arnold P. Peter and Rick R. Smith for Plaintiffs and Appellants.
McCormick, Barstow, Sheppard, Wayte & Carruth, David R. McNamara and Scott M. Reddie for Defendants and Respondents.
OPINION
Kane, J.
Defendants London Properties and Donna Pride were the prevailing parties in a lawsuit by plaintiffs Amy and Philip Miller relating to the purchase by plaintiffs of a salon business in Oakhurst, California known as Sakani Spa. Defendants were the broker and agent on behalf of the seller of the spa, Terri Papagni. Following entry of a defense judgment, the trial court awarded attorney fees to defendants pursuant to a contract provision that expressly allowed recovery of attorney fees to the prevailing parties, including to the broker. Plaintiffs appeal from that order on the ground that the contract containing the attorney fees provision was superseded by a subsequent independent contractor agreement between the parties. We disagree and affirm the order of the trial court.
BACKGROUND
We briefly recount the background facts that are relevant to the trial court’s award of contractual attorney fees to defendants.
In agreeing to terms regarding the purchase and sale of the business known as Sakani Spa, plaintiffs, as buyers, and Papagni, as seller, entered into a “BUSINESS PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS” (the Purchase Agreement). The plaintiffs signed the Purchase Agreement on December 16, 2006, and Papagni signed on December 18, 2006. At the same time, plaintiffs and Papagni also executed a “GENERAL CONTRACT ADDENDUM AND DISCLOSURE” (the Addendum). The Addendum expressly stated that it shall be considered part of the Purchase Agreement. Paragraph F of the Addendum provided as follows:
“ATTORNEY’S FEES: Buyer, Seller, Broker and all parties hereby agree that in any action, proceeding, or arbitration of any kind arising from ‘the contract’ or otherwise related to this transaction, including, but not limited to, those for misrepresentation, breach of Agency, negligence, fraud, breach of contract, or the failure of any party to perform, the prevailing party including Broker shall be entitled to reasonable attorney’s fees and costs as the court may allow.”
As already noted, defendants served as broker and agent for Papagni in regard to the sale of Sakani Spa, which relationship was disclosed in the provisions of the Purchase Agreement and Addendum, as well as in other documents.
After the sale of the business, Papagni was willing to stay on at Sakani Spa as a manicurist. On March 23, 2007, she signed an “INDEPENDENT CONTRACTOR AGREEMENT” (IC Agreement) that formalized her status and duties as an independent contractor who would “provide manicurist services.” In Paragraph 29 on the sixth and final page of the IC Agreement, under a boilerplate heading entitled, “CONTAINMENT OF ENTIRE AGREEMENT, ” it stated as follows: “This Agreement is an independent document and supersedes any and all other Agreements, either oral or in writing, between the parties hereto, except for any separately signed Confidentiality, Trade Secret, Non-Compete or Non-Disclosure Agreements to the extent that these terms are not in conflict with those set forth herein.”
In the litigation below, plaintiffs sued defendants based upon causes of action for, among other things, misrepresentation, negligence and breach of fiduciary duty. All of the causes of action arose out of the transaction relating to the Purchase Agreement and the Addendum in which defendants were the broker and plaintiffs were the buyers of Sakani Spa. After defendants prevailed at trial on all of the causes of action, they made a motion for recovery of attorney fees based on the provision set forth in the Addendum. In opposing the motion, plaintiffs argued that defendants were not entitled to attorney fees because the Purchase Agreement and the Addendum were allegedly superseded by the IC Agreement. The trial court disagreed and awarded to defendants the sum of $78,262.50 in attorney fees. The rationale for the trial court’s decision was that the attorney fees provision set forth in the Addendum could not be altered without defendants’ consent. Plaintiffs appeal followed.
In a separate appeal, plaintiffs challenged the merits of the trial court’s finding that defendants were not liable. We recently affirmed the judgment of the trial court. (Miller v. London Properties (Aug. 24, 2010, F058531 [nonpub. opn.].)
DISCUSSION
Plaintiffs argue the trial court erred in awarding contractual attorney fees to defendants because, allegedly, the attorney fees provision relied on by defendants had ceased to have any legal force or effect. That is, plaintiffs contend that the parties’ subsequent IC Agreement superseded or supplanted the Purchase Agreement and the Addendum and that, as a consequence thereof, those prior agreements were completely extinguished, including the attorney fees provision set forth in the Addendum. This contention requires us to determine an issue of contract interpretation, and in particular the intended scope of the language in the IC Agreement that it “supersedes any and all other Agreements, either oral or in writing, between the parties hereto.…” We consider and resolve such issue de novo. (Super 7 Motel Associates v. Wang (1993) 16 Cal.App.4th 541, 545, fn. 1.) “‘[I]n reviewing a trial court’s interpretation of a written instrument where no conflicting extrinsic evidence is received, an appellate court is not bound by the lower court’s ruling but must give the writing its own independent interpretation.’” (Siligo v. Castellucci (1994) 21 Cal.App.4th 873, 880.)
Plaintiffs’ appeal also asserts that the broker did not need to consent to the IC Agreement, which allegedly abrogated the broker’s rights under the Addendum to recover attorney fees. Since, as explained post, we conclude the IC Agreement did not supplant the Addendum, it is unnecessary to consider the issue of whether or not the broker’s consent would have been needed to do so.
We begin with a summary of some of the basic rules of contract interpretation. “The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties.” (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264.) “The language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.” (Civ. Code, § 1638.) However, “[e]ven if a contract appears unambiguous on its face, a latent ambiguity may be exposed by extrinsic evidence which reveals more than one possible meaning to which the language of the contract is yet reasonably susceptible.” (Morey v. Vannucci (1998) 64 Cal.App.4th 904, 912.) “The mutual intention to which the courts give effect is determined by objective manifestations of the parties’ intent, including the words used in the agreement, as well as extrinsic evidence of such objective matters as the surrounding circumstances under which the parties negotiated or entered into the contract; the object, nature and subject matter of the contract; and the subsequent conduct of the parties.” (Ibid.; see also Manufactured Home Communities, Inc. v. County of San Luis Obispo (2008) 167 Cal.App.4th 705, 714; & §§ 1635-1656.)
Unless otherwise indicated, all further statutory references are to the Civil Code.
A contract must receive such an interpretation as will make it reasonable, if it can be done without violating the intention of the parties. (§ 1643.) The whole of a contract is to be taken together, not merely an isolated provision thereof (§ 1641; County of Marin v. Assessment Appeals Bd. (1976) 64 Cal.App.3d 319, 325), and particular clauses are viewed in light of its general intent (§ 1650). A contract is reasonably explained and interpreted by reference to the circumstances under which it was made, and the matter or object to which it relates. (§ 1647; Code Civ. Proc., § 1860.) “However broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract.” (§ 1648.)
Generally speaking, where a contract is susceptible of two interpretations, the courts give it such a construction as will make it reasonable and avoid an interpretation that will make the contract unusual, extraordinary, harsh, unjust, inequitable, or that would result in absurdity. (Harris v. Klure (1962) 205 Cal.App.2d 574, 577-578; Howe v. American Baptist Homes of the West, Inc. (1980) 112 Cal.App.3d 622, 626-627.)
Applying these principles, we conclude the IC Agreement was not intended to supersede or supplant the Purchase Agreement and the Addendum. Looking to the whole of the IC Agreement, it is clear that the only subject matter of the IC Agreement and the sole object to which it relates was the nature of Papagni’s manicurist position at Sakani Spa. (§§ 1641, 1647). Indeed, with the exception of a few isolated boilerplate provisions at the end of the IC Agreement (including paragraph 29), all of the provisions of the IC Agreement explicitly addressed, defined or related to the nature of that independent contractor relationship. In light of the limited nature and object of the parties’ agreement, we believe that the language in paragraph 29 thereof (providing that the IC Agreement supersedes “any and all other Agreements”) was reasonably susceptible to the construction put forward by defendants that the IC Agreement merely superseded any and all other agreements relating to the subject matter of the IC Agreement (i.e., relating to Papagni’s relationship as independent contractor at Sakani Spa). In this regard, we reiterate the basic rule that “[h]owever broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract.” (§ 1648; see also Lawrence v. Walzer & Gabrielson (1989) 207 Cal.App.3d 1501, 1505-1506 [broad phrase “‘any other aspect of our attorney-client relationship’” in arbitration clause was limited by context and subject matter of entire agreement].)
Indeed, we believe that is the only reasonable construction of the IC Agreement under the circumstances. It is inconceivable that the parties would choose to relinquish their substantial contractual rights and responsibilities under the Purchase Agreement and the Addendum without ever expressly mentioning their intention to do so, or that they would choose to carry out that highly significant legal intention by means of an obscure boilerplate provision buried at the end of Papagni’s agreement to “provide manicurist services” at Sakani Spa. We avoid an interpretation that would result in an absurdity, and favor that which is reasonable. (§§ 1638, 1643; Harris v. Klure, supra, 205 Cal.App.2d at pp. 577-578.) Therefore, the trial court’s conclusion was correct that the Addendum, including the attorney fees provision set forth therein, was not superseded by the IC Agreement.
We note that although neither party described the issue in such terms, the question presented in this appeal was essentially whether the parties intended a novation. A novation is defined as “the substitution of a new obligation for an existing one.” (§ 1530.) A novation is made “[b]y the substitution of a new obligation between the same parties, with intent to extinguish the old obligation” (§ 1531). It is a matter of contract, and is subject to all the rules concerning contracts in general. (§ 1532.) “A novation thus amounts to a new contract which supplants the original agreement and ‘completely extinguishes the original obligation.…’ [Citations.]” (Wells Fargo Bank v. Bank of America (1995) 32 Cal.App.4th 424, 431.) “[I]n order for there to be a valid novation, it is necessary that the parties intend that the rights and obligations of the new contract be substituted for the terms and conditions of the old contract. Unless this is the intent of the parties, the new contract does not constitute a novation of the old contract.” (Wade v. Diamond A Cattle Co. (1975) 44 Cal.App.3d 453, 457.)
Essential to a valid novation is that it must clearly appear that the parties intended to extinguish the original agreement, rather than merely to modify it. (Wade v. Diamond A Cattle Co., supra, 44 Cal.App.3d at p. 457; Howard v. County of Amador (1990) 220 Cal.App.3d 962, 977; Alexander v. Angel (1951) 37 Cal.2d 856, 860 [such intent must be “‘clear and convincing’”].) As articulated in our discussion above, no intent to extinguish the Purchase Agreement and the Addendum was indicated in this case. Therefore, no novation was made and the Purchase Agreement and the Addendum remained in full force and effect, including the subject attorney fees provision set forth in the Addendum.
DISPOSITION
The order of the trial court is affirmed. Costs on appeal are awarded to defendants.
WE CONCUR: Levy, Acting P.J., Detjen, J.