Opinion
G030704.
10-9-2003
J. MARK RICHARDSON, Plaintiff, Cross-defendant and Respondent, v. MASTER JANITORIAL SERVICES, INC. et al., Defendants, Cross-complainants and Appellants.
Law Offices of Michael R. Herman and Michael R. Herman for Defendants, Cross-complainants and Appellants. Stanley R. Jones for Plaintiff, Cross-defendant and Respondent.
OPINION
THE COURT:
We affirm the award of a commission to a licensed broker who procured a ready, willing and able buyer under the terms and conditions identified by the seller. Substantial evidence supports the trial courts determinations in this bench trial regarding breach, causation and the meaning of disputed extrinsic evidence.
I
Defendant Jay Rao ("seller") and his wife Lisa owned two janitorial maintenance companies that they desired to sell. In September 2000, seller contacted plaintiff J. Mark Richardson ("broker"), who specialized in the sale of businesses. Broker gave seller a preprinted written listing agreement, indicating a sales price of $1.5 million. The agreement provided that seller would pay broker a $100,000 base commission for obtaining an offer to purchase the business upon specified terms and conditions "from a ready, willing and able prospective purchaser."
After several months, broker identified Michael Bertelli ("buyer") as a prospective purchaser, but buyer was not willing to pay the asking price. To facilitate a sale, broker modified the listing agreement on February 14, 2001 to reduce the commission to $70,000 "payable at closing."
The asset purchase agreement was signed in April 2001. Among other covenants, seller agreed to "preserve the business organization, including the present work force, of the Business intact."
On May 22, 2001, nine days before the close of escrow, seller told buyer that he and his wife had terminated the sales manager for disloyalty and "discrepancies" in his sales logs. Seller also disclosed that another key employee, the operations manager, said he would quit if the business were sold and that he would take clients with him.
Buyer was disturbed by these disclosures, telling seller that "[i]t violated the contract . . . by terminating somebody a couple days before we were supposed to close escrow. . . . I advised him I would take legal action and he got upset and started yelling and I ended up hanging up the phone."
To protect himself, seller presented a proposed release to buyer on May 24. The release acknowledged sellers disclosures regarding "certain recent personnel developments" that "could potentially have a negative effect on the business and profitability of Master Janitorial Service, Inc." The release contained a covenant by buyer to release seller "from any and all liability for diminution of the value of the subject businesses as a result of the afore-mentioned [sic] personnel developments disclosed by them. . . ." Seller told broker that buyer would have to sign the release "in order to get the deal done and to finish and close . . . ."
Buyer refused, informing both broker and seller that the release was unacceptable. "I was very clear with the Raos [seller] and with Mr. Richardson [broker] that they violated the contract and that I would try to recoup my costs in the court."
Seller insisted that buyer sign the release. On May 30, 2001, he sent buyer the following e-mail: "[W]eve been legally advised to proceed with the closing of escrow if, and only if, we are legally protected via the addendums . . . ."
On May 31, 2001, buyer informed seller of his decision to terminate the agreement and to seek damages for breach. In January 2002, an arbitrator awarded buyer $12,000, finding that "retention of key personnel was a material consideration for the sale and purchase of the business." Seller has paid the award.
The instant action involves brokers suit for his commission, and sellers cross-complaint against broker for breach of fiduciary duty. A two-day bench trial was held in March 2002. Both sides stipulated that the courts comments, when transcribed, would constitute the statement of decision.
The court collaterally estopped seller from challenging the arbitrators determination, and agreed with its substance. The court found that broker was "truthful, carried out his obligation to each side, did not interfere tortiously or otherwise in a contractual relationship between the buyer and the seller, was not at all a cause of any form or failure of this transaction to close, [and] did, in fact, disclose timely and fully appropriate information to both the buyer and the seller."
Seller unsuccessfully objected to the courts statement of decision. The court awarded broker more than $90,000 for the commission, prejudgment interest and attorney fees. Seller and the two janitorial companies have appealed.
II
Seller does not challenge on appeal the trial courts determination that broker procured a ready, willing and able buyer whose purchase was obviated because of sellers willful contract breach. (Compare Stromer v. Browning (1966) 65 Cal.2d 421, 424 [broker not entitled to commission when buyer refused to consummate transaction on new terms added by seller] with Colwell Co. v. Hubert (1967) 248 Cal.App.2d 567 [broker entitled to commission where substantial evidence supported trial courts determination that developer acted in bad faith in attempt to scuttle agreed-upon lease with tenant].) Neither does seller contest the trial courts use of collateral estoppel. We do not consider these unbriefed matters. (Garamendi v. Mission Ins. Co. (1993) 15 Cal.App.4th 1277, 1285, fn. 8.)
Seller instead raises three discrete issues. First, seller contends that broker should be denied a commission because he failed to provide seller with a statutory dual agency disclosure form, as required by Civil Code sections 2079.14 and 2079.16. But, as broker correctly points out, the disclosure form is only required in certain residential real estate transactions, not commercial transactions. (See Civ. Code, §§ 2079.1, 2079.13, subd. (j).) "[S]ection 2079 et seq. is one of those statutory schemes where the Legislature distinguishes between residential and commercial properties in order to protect unsophisticated buyers and owners of residential property from those with greater knowledge and bargaining power. [Citations.]" (Smith v. Rickard (1988) 205 Cal.App.3d 1354, 1361.)
Second, seller contends that the trial court had no discretion but to hold broker liable for breaching his fiduciary duty to disclose material facts concerning the transaction, thereby excusing the commission payment. A real estate agent is "charged with the duty of fullest disclosure of all material facts concerning the transaction that might upset the principals decision." (Gann v. Williams Brothers Realty, Inc. (1991) 231 Cal.App.3d 1698, 1705.) Seller faults broker for failing to disclose that buyer would sue rather than sign. To the contrary, seller claims that broker encouraged him to go ahead and have his attorney prepare the release.
Buyer, however, directly contradicted sellers protests about being left in the dark. To the contrary, buyer testified that he told seller on May 22 that "I would take legal action . . . ." Buyer also testified that he informed seller that the proposed release was "unacceptable."
Seller concedes that the substantial evidence test applies to this issue. We accept buyers testimony as true, notwithstanding sellers disagreement with it. We review the record in the light most favorable to the judgment, resolving all conflicts in brokers favor and giving him the benefit of every reasonable inference. (Bickel v. City of Piedmont (1997) 16 Cal.4th 1040, 1053.) Substantial evidence supports the judgment.
Third, seller asks us to interpret the February 14, 2001 modification to the standard listing agreement to make brokers commission due only if the sale was consummated. The modification reduced brokers commission from $100,000 to $70,000 "payable at closing" and stated that all other terms and conditions of the listing agreement remained in effect. The trial court heard conflicting extrinsic evidence in connection with this modification. Broker testified it only affected the amount of the commission. Seller disagreed, stating that he told broker, "well settle on the $ 70,000, but only upon the sale of the business."
We apply a de novo standard of review to determine whether a contractual provision is ambiguous or uncertain. But once such a determination is made, we apply the substantial evidence standard to the factfinders evidentiary interpretations of any contradictory extrinsic evidence. (Morey v. Vannucci (1998) 64 Cal.App.4th 904, 912-915.) "[W]hen the meaning of a contract is uncertain, and contradictory evidence is introduced to aid in the interpretation, the question of meaning is one of fact properly assigned to the fact finder and its findings should not be disturbed by the appellate tribunal." (Sunniland Fruit, Inc. v. Verni (1991) 233 Cal.App.3d 892, 898.)
In California, "unless the contract provides otherwise, the broker earns his commission upon the principals entry into a binding contract for a purchase subject to the brokerage contract regardless whether the sale is consummated. [Citations.] [& para;] As related, the parties are at liberty to vary this rule and to condition the obligation to pay a fee upon the consummation of the purchase transaction." (R.J. Kuhl Corp. v. Sullivan (1993) 13 Cal.App.4th 1589, 1600-1601.)
Does the February 14 modification alter the general rule and the provisions in the original listing agreement? It is unclear whether the term "payable at closing" was intended to refer to when the commission was to be earned (as seller contends) or simply when it was to be paid (as broker contends). Under these circumstances, the trial court properly considered extrinsic evidence, and determined that the parties intended that brokers right to a commission accrued when the contract of sale was executed. (See R.J. Kuhl Corp., supra, 13 Cal.App.4th at p. 1600.) Substantial evidence supports this determination. (Winet v. Price (1992) 4 Cal.App.4th 1159, 1165-1166.)
The judgment is affirmed. Costs on appeal are awarded to respondent. --------------- Notes: Before Aronson, Acting P. J., Fybel, J., and Ikola, J.