Opinion
D056428 D057820
12-12-2011
TERRY L. SHELDON, Plaintiff and Respondent, v. PACIFIC BEACH DEVELOPMENT LLC et al., Defendants and Appellants.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. 37-2007-00065240-CU-CO-CTL)
CONSOLIDATED APPEALS from a judgment of the Superior Court of San Diego County, Joan M. Lewis, Randa Trapp, Charles Hayes, Judges. Judgment affirmed in part, and reversed and remanded in part.
A jury found in favor of Terry L. Sheldon in his action against Pacific Beach Development LLC (PBD) for unpaid real estate commissions. The jury found against PBD on its cross-complaint against Richard W. Frederick (Frederick) and Island Development San Diego (Island) for breach of contract related to the unpaid commissions. The trial court subsequently amended the judgment to add Michael E. Turk (Turk), PBD's manager, as a judgment debtor. (PBD and Turk are jointly referred to as appellants.) Appellants appeal asserting that: (1) Sheldon lacked standing to seek the commissions; (2) assuming Sheldon had standing, the damages awarded were impermissible and excessive; (3) the trial court improperly imposed personal liability on Turk; and (4) the trial court erroneously denied their cross-claim against Island and Frederick for implied contractual indemnity. We agree that the trial court improperly imposed personal liability on Turk, but otherwise reject appellants' contentions.
Appellants also appeal from an earlier order granting judgment on the pleadings in favor of Island and Frederick on their cross-claim for express contractual indemnity. We agree with PBD's assertion that the trial court erred in granting the motion. Accordingly, we reverse the judgment for the sole purpose of remanding the matter for further proceedings on this cause of action.
FACTUAL AND PROCEDURAL BACKGROUND
Turk is an experienced real estate developer and general contractor. He formed PBD for the purpose of acquiring certain real property in Carlsbad, California (the Property) to develop a project called La Costa Greens (the Project). The Project, as planned, included five residential lots and four common-area lots and was considered a "planned development," subject to Business and Professions Code section 11000, et seq. (the Subdivided Lands Act). (Undesignated statutory references are to the Business and Professions Code.)
Sheldon is licensed as a real estate salesperson and broker. Sheldon works with his own corporate brokerage, T. L. Sheldon & Associates, and has been affiliated with several corporate brokers, including Prudential California Realty (Prudential). Over the years Sheldon worked as a broker on a number of deals for Turk or one of his companies.
In 2002, PBD acquired the Project and procured building permits for the Property. In August 2002, PBD entered into a listing agreement (the Listing Agreement) with Sheldon, then at Prudential, to market the Project. Sheldon signed the Listing Agreement as "T.L. Sheldon @ Prudential" and was to receive a five percent sales commission on the homes. A footer in the form Listing Agreement described Sheldon's and Prudential's capacities as: "Agent: Terry Sheldon" and "Broker: Prudential California."
Sheldon testified that the Listing Agreement designated Prudential as the broker for marketing purposes, but that Prudential was not a party to the contract. Turk confirmed that when he signed the Listing Agreement he hired Sheldon as the broker. Additionally, Prudential had no record of the Project or the Listing Agreement in its files.
In January 2003, Sheldon ended his affiliation with Prudential, moved his practice to T. L. Sheldon & Associates, and informed Turk of this change. Later that year, Sheldon obtained purchase agreements for three homes in the Project (the Purchase Agreements). The Purchase Agreements listed T. L. Sheldon & Associates as the broker. Escrows were opened on the Purchase Agreements pending completion of the homes. Upon close of escrow Sheldon anticipated a grand total of $93,750 in commissions from the Purchase Agreements.
The Purchase Agreements specified that the homes would be completed within one year. In June 2005, however, construction on the Project had stopped. Around this time, Turk learned that escrow could not close on the Purchase Agreements without a public report obtained from the California Department of Real Estate (DRE) pursuant to the Subdivision Map Act.
PBD was then presented with an opportunity for a bulk sale of the Project to Frederick, one of the home purchasers. A bulk sale did not require a public report. When Sheldon learned of the potential bulk sale he spoke to Turk. He told Turk that he would not pursue his full commission on the bulk sale to help facilitate the deal, "as long as [he got] paid on the three commissions of the houses." Sheldon claimed that Turk stated he would guarantee the commissions, even if the Project was sold in bulk. In August 2005, PBD and Island, a company Frederick formed to purchase the Project, executed the original Bulk Sale Agreement (BSA1). Paragraph 13 of the BSA1 stated that Island assumed PBD's rights and obligations under the Listing Agreement and would honor Sheldon's right to commissions under the Listing Agreement.
Island later told PBD that Sheldon's continued involvement in the Project was "a deal breaker." Unbeknownst to Sheldon, a second Bulk Sales Agreement (BSA2) was drafted that removed the language in paragraph 13 pertaining to the Listing Agreement. The BSA2 provided that Island purchased the Property subject to the Purchase Agreements and agreed to pay commissions for the Purchase Agreements upon consummation of the sales. However, the BSA2 also provided that if the Purchase Agreements were not consummated "for any reason (other than a default by [PBD]), no commission shall be owed. . . ." In November 2005, the bulk sale closed under the BSA2, yielding $3.495 million to PBD. PBD paid no broker's commission on the sale. Ultimately, the escrows on the Purchase Agreements were cancelled and the sales were never consummated.
In April 2007, Sheldon filed a complaint for money damages against Frederick, PBD and Island. When Sheldon discovered the BSA2, he dismissed Island from the complaint because the BSA2 left him with no recourse against Island or Frederick. In turn, PBD sued Island and Frederick claiming, among other things, that it was entitled to be indemnified for the commission on three of the lots. Island also filed a cross-complaint against PBD regarding the commissions.
Prior to trial, the trial court denied PBD's motion for summary judgment or in the alternative, summary adjudication that had argued, among other things, that Sheldon lacked standing because he could not establish the existence of a valid contract between himself and PBD. The trial court later granted Turk a directed verdict, finding there was no basis for his individual liability arising out of any of the transactions involved in this case.
The matter proceeded to trial. The jury rendered a special verdict in favor of Sheldon finding that he was entitled to $212,500 in commissions from PBD under the Listing Agreement. The jury also concluded that Sheldon was entitled to $175,000 on his quantum meruit claim against PBD. The jury further found in favor of Island on PBD's cross-claims for breach of contract and breach of the covenant of good faith and fair dealing. The trial court denied PBD's motions for new trial and for a judgment notwithstanding the verdict (JNOV). Thereafter, the trial court granted Sheldon's motion to add Turk as a judgment debtor finding that Turk became personally liable for PBD's debts when he dissolved PBD with full knowledge of Sheldon's claims. Finally, the trial court denied PBD's motion seeking implied contractual indemnity against Island.
DISCUSSION
I. Sheldon's Standing Under the Listing Agreement
A. Legal Principles
Except as otherwise provided by statute, "[e]very action must be prosecuted in the name of the real party in interest. . . ." (Code Civ. Proc., § 367.) The real party in interest is a person who owns or holds title to the claim or property involved, as opposed to others who may be interested or benefited by the litigation. (Gantman v. United Pacific Ins. Co. (1991) 232 Cal.App.3d 1560, 1566.) "The primary purpose underlying the requirement that an action be brought in the name of the real party in interest is to protect a defendant from a multiplicity of suits and the further annoyance and vexation at the hands of other claimants to the same demand." (Vaughn v. Dame Construction Co. (1990) 223 Cal.App.3d 144, 149, italics deleted.) Real party in interest issues are often discussed in terms of plaintiff's "standing" to sue. (Charpentier v. Los Angeles Rams Football Co. (1999) 75 Cal.App.4th 301, 307 [A party who is not the real party in interest lacks standing to sue because the claim belongs to someone else.].) "Someone who is not a party to [a] contract has no standing to enforce the contract." (Hatchwell v. Blue Shield of California (1988) 198 Cal.App.3d 1027, 1034.) B. Background Facts
PBD argued in its summary judgment motion that Sheldon lacked standing to sue for breach of the Listing Agreement because he could not establish the existence of a valid contract between himself and PBD. The trial court denied the motion, finding that triable issues of material fact existed on whether Sheldon lacked standing. The matter proceeded to trial, with the parties asking the jury to decide whether Sheldon was a party to the Listing Agreement. Namely, the trial court instructed the jury that: (1) to prove the creation of a contract, Sheldon needed to prove that he "is a party to the Listing Agreement" (CACI No. 302(1)); (2) to recover damages from PBD for breach of contract Sheldon needed to prove, among other things, that he and "one or more of the Defendant [sic] entered into the Listing Agreement" (CACI No. 303(1)); and (3) "[t]he parties to a contract are the persons or entities on whose behalf the contracts were entered, not necessarily the particular individuals who may have actually negotiated or signed the contracts."
Counsel for PBD argued to the jurors that they would need to decide whether Sheldon was a party to the Listing Agreement based on the evidence and the court's instructions. Thereafter, the jury concluded that Sheldon was a party to the Listing Agreement. Thus, the jury's finding established that Sheldon had "standing" to sue for breach of the Listing Agreement. Dissatisfied with that finding, PBD argued in its motion for JNOV that the evidence did not support a conclusion that Sheldon was a party to the Listing Agreement. The trial court denied the motion on the ground conflicting evidence existed on who owned the listing. C. Summary Judgment Ruling
PBD claims that the trial court erred in denying its summary judgment motion. Sheldon asserts, and we agree, that PBD waived this argument by failing to support it with citations to the materials presented to the trial court in connection with the summary judgment motion. (F.D.I.C. v. Dintino (2008) 167 Cal.App.4th 333, 346 [appellate court examines only papers before the trial court in reviewing a summary judgment motion]; Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246 [argument will be deemed to have been waived if not supported with the necessary citations to the record].)
At oral argument, appellants argued that Sheldon's employment agreement with Prudential was dispositive of his power to enter into the Listing Agreement and prevented him from entering into the Listing Agreement on his own behalf. They assert that Sheldon's employment agreement was unambiguous as a matter of law and that the trial court erred in allowing the jury to consider any evidence regarding whether Sheldon was a party to the Listing Agreement.
Appellants, however, did not make this argument in their opening brief. Instead, they argued that Sheldon lacked standing as matter of law to enter into the Listing Agreement based on the testimony of David Cabot, Prudential's broker of record, and certain laws and regulations. Rather, for the first time in their reply brief, appellants argued that the unambiguous terms of Sheldon's employment agreement with Prudential barred him from becoming a party to the Listing Agreement, claiming that it presented this argument to the trial court in its summary judgment motion. We will not consider points raised for the first time in a reply brief in the absence of good cause because opposing counsel has not been given the opportunity to address those points. (Keyes v. Bowen (2010) 189 Cal.App.4th 647, 656.) Here, no good cause was shown.
Nonetheless, we examined the summary judgment motion and note that nowhere did appellants argue that the unambiguous terms of Sheldon's employment agreement with Prudential barred him from entering into the Listing Agreement as a matter of law. Rather, appellants argued that Cabot's declaration established that Sheldon lacked the authority to enter into the Listing Agreement and Prudential failed to ratify the Listing Agreement. Thus, to the extent appellants did raise this issue in their summary judgment motion, the trial court rejected it by finding triable issues of material fact.
Finally, a presumptively valid judgment rendered after a full trial on the merits cannot be set aside on the ground of error in denying a summary judgment motion unless the error resulted in prejudice. (Waller v. TJD, Inc. (1993) 12 Cal.App.4th 830, 833.) Having to go to trial does not constitute the requisite prejudice. (Ibid.) As one legal treatise noted "[a] decision based on less evidence (i.e., the evidence presented on the summary judgment/summary adjudication motion) should not prevail over a decision based on more evidence (i.e., the evidence presented at trial). [Citations.]" (Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2009) ¶ 8:168.10, p. 8-132.) D. Denial of JNOV
PBD next argues that the trial court erred in denying its motion for JNOV because the question whether Sheldon was a party to the Listing Agreement (i.e., his "standing" to sue for breach of the Listing Agreement), presented a question of law that should not have been presented to the jury. Specifically, it asserts that the Listing Agreement was unambiguous and under certain DRE regulations and Business and Professions Code provisions, which were incorporated into Sheldon's contract with Prudential, Sheldon could not take the Listing Agreement in his own name. Sheldon claims that the question whether he was a party to the Listing Agreement was a factual issue, or a mixed question of law and fact, that the parties properly argued and presented to the jury.
A trial court may grant a JNOV motion if there is no substantial evidence to support the verdict. (Tognazzini v. San Luis Coastal Unified School Dist. (2001) 86 Cal.App.4th 1053, 1057-1058.) In deciding whether to grant the motion, the trial court cannot weigh the evidence or assess credibility (Castro v. State of California (1981) 114 Cal.App.3d 503, 512) and must view the evidence in the light most favorable to the verdict, disregard conflicting evidence, and indulge in every legitimate inference to support the verdict. (Paykar Const., Inc. v. Spilat Const. Corp. (2001) 92 Cal.App.4th 488, 493-494.) "On appeal, we determine de novo whether there is substantial evidence to support the verdict and whether the moving party is entitled to judgment in its favor as a matter of law." (Id. at p. 494.)
As a threshold matter, we reject PBD's argument that certain DRE regulations and Business and Professions Code provisions prevented Sheldon from becoming a party to the Listing Agreement while he was associated with Prudential. PBD cites Business and Professions Code sections 10132 and 10137. Section 10132 defines a "real estate salesman" as a person "employed by a licensed real estate broker." Section 10137 states that "No real estate salesperson shall be employed by or accept compensation from any person other than the broker under whom he or she is at the time licensed." On their face, these statutes did not prevent Sheldon from becoming a party to the Listing Agreement while he was associated with Prudential. Rather, as we shall discuss, a factual issue existed whether Sheldon was acting as a real estate salesperson or a co-broker with Prudential when he executed the Listing Agreement.
PBD next cites certain provisions within title 10 of the California Code of Regulations. (References to the "Regulations" refer to title 10 of the California Code of Regulations.) First, PBD notes that real estate brokers must have a written agreement with each of their "salesmen, whether licensed as a salesman or as a broker under a broker-salesman arrangement." (Regulations, § 2726.) Additionally, "[a] real estate broker acting in the capacity of a salesman to another broker under written agreement may perform acts for which a license is required on behalf of the employing broker at any place of business at which the employing broker is currently licensed to perform acts for which a real estate license is required." (Regulations, § 2728.5) These Regulations did not prevent Sheldon from becoming a party to the Listing Agreement while he was associated with Prudential. Again, as we shall discuss, a factual issue existed whether Sheldon was acting as a real estate salesperson or a co-broker with Prudential when he executed the Listing Agreement.
Notably, PBD cited no authority that any listing Sheldon took in his own name while at Prudential was unenforceable. Thus, even assuming Sheldon violated his agreement with Prudential, or a law or regulation by executing the Listing Agreement in his own name, PBD has not shown that the Listing Agreement was unenforceable by Sheldon as a matter of law.
The trial court denied the JNOV motion noting, among other things, that the experts presented conflicting evidence regarding who owned the Listing Agreement. By its ruling the trial court impliedly rejected PBD's argument that Sheldon was acting as a real estate salesperson, not a broker, when he executed the Listing Agreement. Additionally, the trial court necessarily rejected PBD's argument that the Listing Agreement unambiguously established that Prudential was the broker. The evidence supported the court's implied findings, and the jury's ultimate finding that Sheldon, not Prudential, was a party to the Listing Agreement.
Cabot testified about Sheldon's contractual relationship with Prudential. He explained that Sheldon's employment contract with Prudential required that Sheldon submit any listing for Prudential's review and approval and that any commissions be paid directly to the listing broker (i.e., Prudential) and not the associate-broker (Sheldon) in order to comply with DRE regulations. Cabot testified that under the DRE regulations, Sheldon was not entitled to execute the Listing Agreement on his own behalf. Rather, he explained that Sheldon's contract with Prudential provided that all listings were to be taken in the name of the broker, Prudential, and that the listings belonged to Prudential, and not the associate-broker, even if the associate-broker happened also to be a licensed broker. However, Cabot admitted that Prudential had no record of the Listing Agreement in its system.
In contrast, Sheldon testified that he always took listings in his own name and that any corporate broker he was associated with at the time, such as Prudential, was a co-listing broker. Whenever he left a corporate broker he always took his listings with him. Sheldon's expert, Alan Wallace, testified that Sheldon was a party to the Listing Agreement, not Prudential. He explained that as a broker Sheldon could sign listings on his own broker's license, without the involvement of a corporate broker. Additionally, Turk testified that: (1) if Sheldon had not been at Prudential, he would not have gone to Prudential to market the property; (2) he thought PBD was hiring Sheldon as the broker; and (3) he believed that the parties to the Listing Agreement were PBD and Sheldon.
Documentary evidence also supported the jury's conclusion that Sheldon, not Prudential, was a party to the Listing Agreement, namely: (1) after Sheldon left Prudential, he and Turk agreed in writing to extend the Listing Agreement; (2) the Purchase Agreements signed by Turk and PBD provided that Sheldon or his company was the broker; and (3) the BSA1 acknowledged that Sheldon was a party to the Listing Agreement.
Accordingly, the trial court did not err when it denied PBD's JNOV motion because there was conflicting evidence on whether Sheldon was a party to the Listing Agreement with standing to sue.
II. Contract Damages Award
The Listing Agreement provided that Sheldon would obtain a five percent commission and recited the price of the Property as $4.250 million. As additional terms, the Listing Agreement broke down the $4.250 million price tag as "5 new homes, each to be priced at $850,000. . . ." The jury concluded that Sheldon was entitled to a commission during the listing period, that he did not waive his entitlement to a commission and was not estopped from recovering a commission. Based on these findings, the jury awarded Sheldon $212,500 in damages representing the agreed upon five percent commission on the $4.250 million original sales price of the Property.
Appellants assert that the damage award was excessive because Sheldon only procured three buyers, and based on the agreed upon sales prices of the three homes, he was entitled to a commission of $93,750. We disagree.
The measure of damages for a breach of contract is the amount that will compensate the aggrieved party for "all the detriment proximately caused [by the breach]." (Civ. Code, § 3300.) Generally, no person can recover a greater amount in damages for the breach of an obligation than could have been gained by the full performance of a contract by both sides. (Civ. Code, § 3358.) Here, the jury impliedly concluded that appellants' breach of the Listing Agreement prevented Sheldon from obtaining any commission on the Property and it awarded Sheldon the full commission he would have obtained on the original listing price of the property absent appellants' breach, $212,500, amounting to five percent of the $4.250 million asking price. The damages awarded by the jury were within the reasonable expectation of the parties at the time of contracting; thus, they were recoverable. (Lewis Jorge Construction Management, Inc. v. Pomona Unified School Dist. (2004) 34 Cal.4th 960, 967-968 ["The goal is to put the plaintiff 'in as good a position as he or she would have occupied' if the defendant had not breached the contract."].) Appellants provided no authority to support their contention that the jury's decision to not reduce the contractual damage amount based on what ultimately happened with the Property rendered the award excessive.
III. Quantum Meruit Damages Award
A. Facts
After closing argument, the trial court instructed the jury, among other things, on how to fill out the verdict forms and that "[i]f you make an award to any party on more than one question, you should understand that the party will obtain only the larger of the awards, not the sum of the awards. If you make an award under one question, you must still complete the verdict form for the other." Thereafter, the jury rendered a special verdict in favor of Sheldon finding that he was entitled to $212,500 in commissions from PBD under the Listing Agreement. The jury also concluded that Sheldon was entitled to $175,000 on his quantum meruit claim against PBD.
The operative third amended judgment, however, only awarded Sheldon $212,500 in commissions under the Listing Agreement, in addition to his attorney fees, costs, and prejudgment interest for a total of $521,493.86. Appellants argued in their posttrial motions that the statute of frauds barred any recovery in quantum meruit and that the contract damages award was excessive. They never argued that the damage award was duplicative, because it was not. B. Analysis
On appeal, appellants contend that any quantum meruit damages are improper as a matter of law based on failure to comply with the statute of frauds. They also assert that even assuming quantum meruit damages were permissible, the award improperly duplicated the contract damages award. We need not address the merits of these arguments because the operative judgment did not award Sheldon any quantum meruit damages.
IV. Turk's Personal Liability
A. Background Facts
In late 2006, Turk received distributions from PBD totaling $646,724.47. In April 2007, Sheldon filed a complaint for money damages against PBD and Island. The complaint included a claim against Turk to recover for the improper distribution to a member of a dissolved limited liability company under Corporations Code section 17355. The trial court later granted appellants' motion to strike this claim, ruling that the cause of action was "surplusage" because Turk was a member of PBD and potentially liable under the claims alleged against PBD.
During argument on an in limine motion seeking to preclude Sheldon from presenting any evidence regarding Turk's premature termination of PBD, Sheldon's trial counsel noted that Turk's dissolution of PBD with knowledge of Sheldon's claim was the basis for imposing personal liability under Corporations Code section 17355. Counsel for PBD agreed, representing to the trial court that "[a]s a matter of law, if you receive distributions from a limited liability company while it's got outstanding obligations, to the extent of those, you can be required to pay that, so we're agreeing to that, we're stipulating to that; I mean I told the court that."
During trial, the court entered a directed verdict in favor of Turk on the first and second causes of action for breach of the Listing Agreement and common count. In doing so, it noted that Turk could still be subject to personal liability for any judgment entered against PBD to the extent of distributions he received from the dissolution of PBD. Thereafter, counsel for PBD conceded that Turk's possible statutory liability was "part of this case," and argued that the court should address the matter in a post-verdict motion.
After the trial court entered a judgment in this matter, Sheldon moved to amend the judgment to add Turk. Sheldon noted that: (1) Turk previously admitted his personal liability for the judgment to the extent of the distributions he received from PBD; and (2) Turk's counsel represented to the court that Turk had received distributions in excess of $500,000. Sheldon argued that Turk's admissions were binding on him. Appellants opposed the motion arguing: (1) Sheldon used the wrong procedural vehicle to add Turk to the judgment; (2) Corporations Code section 17355 does not provide a basis for recovery against him because he returned the distributed assets, the funds were spent on defense costs and there are no funds remaining to pay the judgment; and (3) any claim against Turk under Corporations Code section 17355 is barred by the statute of limitations. In reply, Sheldon objected to the evidence Turk presented, arguing that Turk had not presented any admissible evidence to support his claim that he had returned the distributions.
In a tentative ruling, the trial court sustained Sheldon's evidentiary objections and stated it would hold an evidentiary hearing "on the amount of distributions paid to Turk and the amount he has returned in order to determine his liability. Judgment can then be entered against Turk in the amount distributed." The reporter's transcript of the evidentiary hearing is not part of the record on appeal. During oral argument, counsel for Sheldon represented that no hearing was held, that the trial court decided the matter based on the declarations before it, and that we had everything before us to decide the matter. Thereafter, the trial court issued a written order adding Turk to the judgment.
The order acknowledged that Turk could be added as a judgment debtor under Corporations Code section 17355 "to the extent of assets distributed to him." The court overruled Sheldon's evidentiary objections based on a supplemental declaration filed by Turk's accountant showing that Turk received $647,727.47 in distributions and that he returned this entire sum between April 2008 and April 2010. However, the trial court did not make a finding on the amount of distributions paid to Turk or the amount he returned to PBD. Rather, the trial court somewhat ambiguously stated that "[e]ven assuming that Turk has returned [the] distributions, the issue is not resolved" because Corporations Code section 17355 does not address defense costs. The trial court concluded that: (1) Sheldon's claim was timely; and (2) Turk was judicially estopped from arguing that Corporations Code section 17355 did not provide a basis for recovery against him. Thereafter, the trial court issued an amended judgment holding Turk liable with PBD for the full judgment amount of $521,493.86. B. Analysis
Subdivision (a)(1) of Corporations Code section 17355 provides that causes of action against a dissolved limited liability company, whether arising before or after the dissolution, may be enforced against the dissolved company, to the extent of its undistributed assets, or, if any of the assets of the dissolved company have been distributed to members, against those members to the extent of the assets distributed to them. Appellants argue that the trial court erroneously added Turk to the judgment under this statute because the evidence shows he had returned his distributions to PBD. Significantly, the trial court's written order on the motion did not make a finding on the seminal issue whether Turk had returned the distributions. Nonetheless, the trial court accepted appellants' evidence on this issue and Sheldon provided no evidence of his own showing that Turk did not return the distributions. Sheldon did not file a cross-appeal to challenge the propriety of the trial court's evidentiary rulings. Accordingly, the only admissible evidence before the trial court shows that Turk returned any distributions he received.
Thus, the question becomes whether the trial court properly added Turk to the judgment under Corporations Code section 17355 based on the doctrine of judicial estoppel after he returned the distributions.
The doctrine of judicial estoppel applies when: (1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position; (4) the positions are totally inconsistent; and (5) the initial position was not adopted as a result of ignorance, fraud or mistake. (Jogani v. Jogani (2006) 141 Cal.App.4th 158, 169.) Judicial estoppel "is an equitable doctrine, . . . its application, even where all necessary elements are present, is discretionary." (Id. at p. 170.) The trial court's findings of fact regarding application of the doctrine will be upheld if they are supported by substantial evidence. (Kelsey v. Waste Management of Alameda County (1999) 76 Cal.App.4th 590, 597.)
In applying judicial estoppel, the trial court relied on Turk's representations throughout this action that Corporations Code section 17355 applied and the representations of Turk's counsel at the hearing on the motion for directed verdict that Turk would be personally liable up to the amount of his distributions. To the extent appellants now claim that Corporations Code section 17355 does not apply, we agree that the trial court properly applied the doctrine of judicial estoppel. However, we conclude the evidence does not support application of the doctrine where the undisputed evidence shows that Turk returned his distributions. In this situation, Turk's claim that he is not personally liable under Corporations Code section 17355 is not inconsistent with his prior representations admitting liability up to the amount of his distributions.
The plain language of Corporations Code section 17355 allows liability "to the extent of . . . the assets distributed to" him. (Corp. Code, § 17355, subd. (a)(1)(B).) The statute does not address the instant situation where a member has returned all distributed assets. In this situation, we are persuaded by appellants' argument that PBD has been placed in the same position it would have been had those distributions never been made. Specifically, Corporations Code section 17355 is "an enforcement mechanism so that company liabilities can be recovered out of distributed assets; it 'compel[s] [a member] to return distributed assets.' " (Gottlieb v. Kest (2006) 141 Cal.App.4th 110, 154, citing Corp. Code, § 17355, subd. (a)(1)(B), 2d par.) Interpreting Corporations Code section 17355 to impose personal liability on a member despite the return of all assets would improperly make the member the insurer of the liabilities of a limited liability company. Although Sheldon asserts that Turk's return of the money is a sham, we note that the language of Corporations Code section 17355 allows this procedure.
Accordingly, we conclude the trial court erred in adding Turk to the judgment under Corporations Code section 17355 and reverse that part of the judgment.
V. Appellants' Indemnity Claims Against Island
A. Express Contractual Indemnity
In connection with executing the BSA2, PBD and Island also executed an Indemnity and Post-Closing Covenant Agreement (the Indemnity Agreement) whereby Island agreed to obtain the release of PBD from any obligations under subdivision improvement bonds for the Project. The first paragraph of the Indemnity Agreement states that Island "shall indemnify and hold harmless" PBD, "its members, principals, and agents from all cost, liability or expense arising out of any claims asserted by any mechanic's lien claimant or contract claimant in connection with the Property or any claims by purchasers of the Property." (Italics added.) Island concedes that the italicized phrase is broad enough to include an action brought by Sheldon to enforce his Listing Agreement with PBD.
In their cross-complaint against Island and Frederick, appellants sought express contractual indemnity under the Indemnity Agreement and the BSA2 for the commissions Sheldon claimed on three of the lots. The trial court later granted Island's and Frederick's motion for judgment on the pleadings on this claim. The court concluded that performance of the Indemnity Agreement was secured by a trust deed, and that a October 2006 reconveyance of the trust deed extinguished any indemnity obligations.
Appellants claim the trial court erred because: (1) reconveyance was mandatory under Civil Code section 2941; (2) the indemnity provisions in the BSA2 were not impacted by the reconveyance; (3) PBD had no liability to Sheldon or anyone else at the time of the reconveyance; thus, PBD cannot be deemed to have waived a right to indemnity that was not ripe and did not exist at that time; and (4) the ruling is contrary to long standing law in California, holding that a recital in a reconveyance which states that an obligation has been fully satisfied is not conclusive evidence of actual satisfaction of that or any other obligation (Woods Leasing Co. v. Funcheon (1933) 134 Cal.App. 111 (Woods Leasing)).
Because appellants are challenging the trial court's grant of judgment on the pleadings, we review the order under the same standard of review as for a judgment of dismissal following the sustaining of a general demurrer. (Pardee Const. Co. v. Insurance Co. of the West (2000) 77 Cal.App.4th 1340, 1361, fn. 25.) We accept as true all material facts alleged in the cross-complaint, consider matters that may be judicially noticed, and determine de novo and as a matter of law whether the complaint states a cause of action. (Ibid.; Ludgate Ins. Co. v. Lockheed Martin Corp. (2000) 82 Cal.App.4th 592, 602.)
By a grant deed PBD conveyed the Property to Island. Island also recorded a trust deed which stated that it secured, among other things, payment of a promissory note executed by Island in favor of PBD and Island's performance "of all of the terms and conditions set forth" in the Indemnity Agreement. PBD later requested that the title company fully reconvey the Property to Island. The Request for Full Reconveyance executed by PBD stated that it was the owner and holder of a promissory note "and of all other indebtedness" secured by the trust deed, that the promissory note "and of all other indebtedness" secured by the trust deed "have been fully paid and satisfied" and directed the title company to cancel the promissory note "and all other evidence of indebtedness secured" by the trust deed.
Thereafter, the title company recorded a Full Reconveyance which stated that it received from PBD as the holder of the obligations secured by the trust deed a "written [request] to reconvey" which recited that "all sums secured by said Deed of Trust have been fully paid," that the note secured by the trust deed was surrendered to the title company for cancellation and that the title company reconveys the Property to Island.
Island asserts that the statements made by PBD in the Request for Full Reconveyance and the subsequent Full Reconveyance establish, as a matter of law, that not only was the promissory note fully paid, but that all other obligations secured by the deed of trust, including any indemnity obligations, were fully satisfied. We disagree.
As a threshold issue, Island presented no authority to the trial court or in its respondent's brief to support its argument that statements made in a reconveyance are entitled to a conclusive presumption. In contrast, PBD cites Woods Leasing to support its assertion that the mere recital in a request for reconveyance that a debt has been repaid will not preclude a party from proving that the debt has not been fully paid. (Woods Leasing, supra, 134 Cal.App. at p. 118.) In Woods Leasing, a recital in an order for reconveyance stated that the note and indebtedness secured by the deed of trust had been repaid. (Id. at p. 116.) Although the trial court had evidence before it that the debt had not been fully paid, it presumably found the recital in the reconveyance to be conclusive. (Ibid.) The appellate court reversed because the evidence revealed that the note had not been fully repaid. (Id. at p. 118.) The court stated that the recital in the reconveyance was not conclusive particularly where the recital was made to a trustee "merely for the purpose of securing a reconveyance of the property described in the deed of trust and clearing its title." (Ibid.)
Conclusive presumptions are irrefutable and rare. (Evid. Code, §§ 622-624.) However, facts recited in a written instrument are conclusively presumed to be true as between the parties thereto, except as to a recital of consideration. (Evid. Code § 622.) Evidence Code section 622 codifies the common law doctrine of " 'estoppel by contract.' " (Plaza Freeway Ltd. Partnership v. First Mountain Bank (2000) 81 Cal.App.4th 616, 625-626.) The question presented is whether the conclusive presumption of Evidence Code section 622 applies to the Request for Full Reconveyance and the Full Reconveyance.
Here, PBD executed the Request for Full Reconveyance and PBD's title company executed and recorded the Full Reconveyance to establish that the sums secured by the trust deed have been repaid. Island is not a party to the Request for Full Reconveyance and PBD and Island are not parties to the Full Reconveyance. Thus, the conclusive presumption of Evidence Code section 622 does not apply to these documents. Moreover, even if PBD and Island could be considered parties to these documents, they pertain to a recital of consideration, which is not entitled to the conclusive presumption. (Evid. Code § 622.)
Because the documents established only a prima facie case, the trial court erred in giving them conclusive affect. (Kott v. Hilton (1941) 45 Cal.App.2d 548, 553-554 [it is for the trier of fact to determine an absence of consideration for all the challenged transactions under all the circumstances].) Accordingly, the trial court's order granting Island's motion for judgment on the pleadings on appellants' claim for express contractual indemnity must be reversed. Based on this conclusion, we need not address appellants' remaining arguments. We express no opinion on the ultimate merits of appellants' claim for express contractual indemnity. B. Implied Contractual Indemnity
The cross-complaint filed by appellants against Island and Frederick sought express contractual indemnity under the Indemnity Agreement and the BSA2 for the commissions Sheldon claimed on three of the lots. The cross-complaint did not contain a claim for implied indemnity. Because the trial court granted judgment on the pleadings on the express contractual indemnity claim, the cross-complaint proceeded to trial on PBD's claims against Island and Frederick for breach of contract and breach of implied covenant of good faith and fair dealing.
The trial court declined PBD's request for a special verdict form asking the jurors whether they found Island liable under its contract with PBD for PBD's damages in having to defend Sheldon's claims. Rather, the trial court indicated it would address the issue of PBD's entitlement to recover its defense costs post-judgment. The jury issued a special verdict finding that Island did not breach its contract with PBD or the covenant of good faith by participating in the cancellation of the escrows. The trial court then considered additional briefing from the parties on whether PBD was entitled to have Island and Frederick indemnify it for the cost of defending against Sheldon's claims. The trial court issued a tentative ruling finding, among other things, that because the jury determined that Island had not breached any contract with PBD, there was no basis for implied indemnity. The operative judgment included the trial court's decision denying PBD's request for indemnification.
On appeal, PBD does not challenge the jury's special verdict finding that Island did not breach its contract with PBD or the covenant of good faith by participating in the cancellation of the escrows. Rather, PBD asserts the trial court erred as a matter of law when it concluded the jury's finding that, Island's cancellation of the escrows did not contribute to a breach of contract, precluded an implied contractual indemnity claim against PBD for cancelling the escrows. We disagree.
Implied contractual indemnity is a form of equitable indemnity available where two parties in a contractual relationship are responsible for injuring a third party. (Prince v. Pacific Gas & Elec. Co. (2009) 45 Cal.4th 1151, 1157, fn. 2, 1159.) However, implied contractual indemnity is not available "in the absence of a joint legal obligation to the injured party." (Id. at pp. 1160-1161.) Accordingly, " ' "there can be no indemnity without liability." ' " (Id. at p. 1159.) Thus, indemnity is not available from an entity that has no duty to the injured third party (ibid), that is immune from liability (id. at pp. 1167-1169), or that has been found not to be responsible for the injury (Children's Hospital v. Sedgwick (1996) 45 Cal.App.4th 1780, 1787).
Here, the BSA2 contained provisions where Island acknowledged that it purchased the Property subject to the Purchase Agreements, and agreed to pay commissions upon consummation of the sales. However, the BSA2 also provided that if the Purchase Agreements were not consummated "for any reason (other than default of [PBD]), no commission shall be owed. . . ." PBD argued to the jury that Sheldon lost the commissions on the Purchase Agreements because Island cancelled the pending escrows. It contended that Island breached the BSA2 and the covenant of good faith by cancelling the escrows or participating in the cancellation of the escrows. The jury, however, rejected these arguments by finding that Island did not breach its contract with PBD or the covenant of good faith contained therein by participating in the cancellation of the escrows. PBD's claim for implied contractual indemnity is predicated on Island's breach of the BSA2. Because the jury found that Island did not breach this agreement, the trial court properly ruled that PBD was not entitled to implied contractual indemnity.
PBD argues in its reply brief that the jury's finding was not dispositive on this issue because it was entitled to indemnity under paragraph 11.5 of the BSA2 wherein Island agreed to "indemnify and hold harmless [PBD]" from "any and all liabilities to any third party for any reason arising out of the Property." We need not address this matter because it pertains to express contractual indemnity, an issue that was not before the trial court in its postjudgment ruling. This matter is more appropriately addressed to the trial court on remand of PBD's claim for express contractual indemnity.
DISPOSITION
The matter is remanded to the trial court with instructions to (1) strike Turk from the judgment and (2) enter an order denying Island and Frederick's motion for judgment on the pleadings on appellants' cross-claim for express contractual indemnity, and to hold further proceedings on this claim. In all other respects, the judgment is affirmed. Sheldon is entitled to his costs of appeal. As between appellants and Island and Frederick, these parties are to bear their own costs of appeal.
MCINTYRE, J.
WE CONCUR:
MCCONNELL, P. J.
HALLER, J.