Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment and order of the Superior Court of Los Angeles County, No. BC392266 Jane L. Johnson, Judge.
Chakmakis & Associates and George Chakmakis; Steven W. Kerekes for Plaintiff and Appellant.
Law Offices of Saul Reiss and Saul Reiss for Defendant and Respondent.
JACKSON, J.
INTRODUCTION
Plaintiff Bialick Tabibian, M.D. (Tabibian), appeals from a judgment in favor of defendant Robert Waldman, M.D. (Waldman), and from an order awarding Waldman attorney’s fees. Tabibian contends (1) substantial evidence does not support the court’s finding that Waldman did not breach his fiduciary duty and (2) the order awarding attorney’s fees must be reversed, in that no contractual right to attorney’s fees exists in this case. We affirm the judgment but reverse the order awarding attorney’s fees.
FACTS
Doctors Resource Group LLC (DRG) is a limited liability company that was formed in June 1999. Tabibian and Waldman are members of DRG, along with Drs. Daniel Ahearn (Ahearn), Michael Shwayder (Shwayder) and Paul Friedman (Friedman), who are not parties to this appeal. DRG’s operating agreement was executed by all members and reflects that Tabibian’s and Friedman’s membership interests in DRG are 8.6 percent each, while Waldman’s, Ahearn’s and Shwayder’s interests are 27.6 percent. DRG’s operating agreement listed Ahearn as the initial manager of the company.
DRG, together with Health Resources Group, Inc. (HRG), owned Renal Services Group of Inglewood LLC (RSG). RSG owned a dialysis facility in Inglewood similarly named Renal Services Group. HRG held a 60.1 percent majority interest in RSG while DRG owned the remaining 39.9 minority interest.
RSG was not a profitable business. In June 2004, HRG was basically insolvent, and, in 2005, it declared bankruptcy.
During the pendency of HRG’s bankruptcy, Gerald Bruno (Bruno) was HRG’s president and chief executive officer. Inasmuch as it had been extremely difficult to attract any interest in RSG, Bruno developed an aggressive plan to dispose of RSG.
Bruno contacted Fresenius Medical Care (Fresenius) in an attempt to sell RSG. Although Bruno discussed in general terms what RSG was worth, Bruno was aware that “it was considered to be something of a fire sale.” After doing its “due diligence, ” Fresenius offered to purchase RSG for $1.8 million. Having tried to sell RSG “to every other chain and every other conceivable entity that might be interested and not being successful, ” HRG was not in a negotiating position and thus accepted Fresenius’s offer. Waldman had no role in negotiating the sales price.
At the time of the sale, Waldman was the acting medical director of RSG. Although DRG’s operating agreement had listed Ahearn as the initial medical director, he had been gone for a while and consequently ceased operating in that capacity. Waldman had verbal authority from Shwayder and Ahearn to act as director. Tabibian attended at least one meeting at which Waldman acted as director. Tabibian did not dispute Waldman’s authority to act in that capacity.
Fresenius’s purchase of RSG was conditioned on Waldman staying on as the facility’s medical director. Fresenius offered Waldman an eight-year employment contract and compensation of $100,000 per year, which was less than the $180,000 he had been receiving in that capacity. In addition, Fresenius agreed to advance defendant $400,000 on his employment contract. The $400,000 advance was to be structured so as to minimize Fresenius’s tax liabilities. Specifically, it was to be reflected as the cost of a noncompete covenant, even though it was acknowledged amongst the parties to the transaction that the $400,000 was actually going to be an advance payment of medical director fees.
The sale of RSG’s assets was memorialized in an Asset Purchase Agreement (APA) executed by Bio-Medical Applications of California, Inc. (Bio-Medical) as the buyer, RSG as the seller, and members of the seller and certain of their members. Therein, Bio-Medical agreed to pay RSG $2.2 million as “adjusted.” The APA further provided that “[t]he parties shall allocate the Purchase Price among the Purchased Assets and the Seller’s and the Owners’ covenants as follows:... $400,000 shall be allocated to the Seller’s and the Owners’ covenants not to compete.”
Fresenius is also known as Bio-Medical.
RSG, HRG, DRG and Waldman also entered into a Distribution Agreement which set forth the manner in which the APA purchase price was to be distributed. Paragraph 2.1 entitled “Covenants” provided that “Waldman shall receive (by direct payment by [Bio-Medical] pursuant to agreement between [Bio-Medical] and Waldman) the $400,000 of the APA Purchase Price allocated under the APA to covenants not to compete, notwithstanding that [RSG], HRG and DRG also enter into like covenants.”
The sale of RSG’s clinic was completed in June 2006 with all members of DRG signing the APA except Tabibian. The proceeds of the sale of RSG were distributed in accordance with a distribution agreement executed by RSG, HRG and DRG in June 2006.
Under the terms of the distribution agreement, Bio-Medical was authorized to withhold from the purchase price and pay directly to DRG past due and unpaid medical director fees due DRG from RSG, at the rate of $15,000 per month, for the months of July 2005 to the month of closing. Inasmuch as Waldman had been the acting medical director during that time period, he received the unpaid medical director fees. The past due medical director fees were treated just like all other accounts payable of RSG and were paid off the top of the purchase price, because Bio-Medical took over RSG debt free, as required in the APA. All members of DRG signed the APA, except Tabibian.
Tabibian acknowledged that the only reason he did not sign the APA was because, as originally presented to him, it included a covenant not to compete. He wanted an exclusion to be carved out for him, as one had been carved out for Waldman. Although Waldman suggested that Tabibian contact Fresenius and convey his concerns to the company himself, Tabibian did not do so, in that he believed it was Waldman’s responsibility to do so as the manager of DRG. In the end, the covenant not to compete contained in the APA as executed specifically provided that the covenant not to compete did not apply to any of Tabibian’s activities.
PROCEDURAL BACKGROUND
On June 9, 2008, Tabibian instituted this action against Waldman and DRG, alleging causes of action for breach of fiduciary duty, conversion and common counts. Plaintiff also requested an accounting. Tabibian did not sue for breach of contract.
A bench trial took place on July 27 and 28, 2009. During closing arguments, Tabibian’s counsel acknowledged that all Tabibian was seeking was 8.6 percent of $400,000, commensurate with his ownership interest in DRG, as well as attorney’s fees. Tabibian further asked that the $400,000 paid to Waldman go to DRG and that DRG decide what to do with the money after a membership vote. When the trial court inquired if this was a derivative action, Tabibian’s counsel conceded that it was.
Counsel then requested an opportunity to file a post-trial brief to discuss the derivative action issues. The court noted, “I’m not sure you can work your way out of this if there is a derivative action.” The court further noted that “there are certain requirements for a derivative action, preliminary requirements, which I’m not sure your client did. And if you don’t do it, I think it nails you.”
When Tabibian’s counsel voiced an interest in briefing additional issues, the court stated, “we have resolved the issue of the unanimous written consent. I think we have resolved that one. Because I think that it’s - it’s really a non-issue since it is the consent of the two entities[, namely HRG and DRG]..., not the individual members of the entities, not the individual members of the entities to the sale.” To that Tabibian’s counsel replied, “I’ll respectfully agree.”
Tabibian’s counsel then asserted that “unanimous consent was required for distribution” of the monies that went to DRG. The court disagreed, explaining that DRG did not own the clinic. Rather it owned an interest in RSG, the entity that owned the clinic. The court stated its decision was made on that issue.
The trial court’s minute order of July 28, 2006 specifies that Tabibian was granted permission to file a post-trial brief limited to a discussion of whether this is a derivative or individual action. Tabibian was to file his brief by August 12, 2009, after which the matter would stand submitted. In his brief, Tabibian did a complete turn around and argued that this was an individual, rather than a derivative, action.
On August 28, 2009, the trial court ruled as follows: “The Court has reviewed Plaintiff’s Post Trial Brief filed August 11, 2009. The argument and authorities cited therein were not sufficient to change the Court’s ruling which was based on the evidence adduced at trial. The reasons for the Court’s ruling in favor of Defendants were recited on the record at the conclusion of trial. No timely request for a statement of decision having been made, the Court affirms its ruling in favor of Defendants....” Waldman served the proposed judgment on September 3.
On September 23, 2009, the trial court entered judgment in favor of Waldman on all causes of action and ordered that Waldman recover his attorney’s fees pursuant to a motion. The same day, Tabibian filed an objection to the court’s August 28, 2009 minute order, the judgment as proposed, and he requested, albeit in untimely fashion, a statement of decision.
Waldman thereafter filed a motion for attorney’s fees pursuant to Civil Code section 1717 and Code of Civil Procedure section 1033.5, seeking $89,875 from Tabibian. Tabibian opposed Waldman’s motion. Following a hearing, the trial court granted the motion but awarded Waldman only $50,000 in attorney’s fees.
DISCUSSION
Sufficiency of the Evidence
Tabibian challenges the sufficiency of the evidence supporting the trial court’s determination that Waldman did not breach his fiduciary duty. Tabibian has forfeited this challenge.
In a bench trial, as occurred here, “unless a statement of decision has been requested and rendered, we will presume that the trial court made all the factual findings necessary to support the judgment, so long as those implied findings are supported by substantial evidence.” (In re Marriage of Starr (2010) 189 Cal.App.4th 277, 287; accord, Shaw v. County of Santa Cruz (2008) 170 Cal.App.4th 229, 267-268.) Tabibian did not request a statement of decision, and he has failed to substantiate his claim that he was precluded from doing so.
Code of Civil Procedure section 632 sets forth the requirements for requesting a statement of decision. It provides in pertinent part as follows: “In superior courts, upon the trial of a question of fact by the court, written findings of fact and conclusions of law shall not be required. The court shall issue a statement of decision explaining the factual and legal basis for its decision as to each of the principal controverted issues at trial upon the request of any party appearing at the trial. The request must be made within 10 days after the court announces a tentative decision unless the trial is concluded within one calendar day or in less than eight hours over more than one day in which event the request must be made prior to the submission of the matter for decision. The request for a statement of decision shall specify those controverted issues as to which the party is requesting a statement of decision....”
“Our review is governed by well-settled principles. As with any civil appeal, we must presume the judgment is correct, indulge every intendment and presumption in favor of its correctness, and start with the presumption that the record contains evidence sufficient to support the judgment.” (Steele v. Youthful Offender Parole Bd. (2008) 162 Cal.App.4th 1241, 1251; accord, In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133.) When challenging the sufficiency of the evidence, the appellant “must set forth all relevant evidence, not just the evidence favorable to the appellant, and show how the evidence does not support the judgment; otherwise, the contention is forfeited.” (Steele, supra, at p. 1251; accord, Grassilli v. Barr (2006) 142 Cal.App.4th 1260, 1279.)
Rather than set forth all evidence relevant to a resolution of his insufficiency of the evidence claim, Tabibian set forth only the evidence favorable to him. Tabibian thus has forfeited his evidentiary challenge. (Steele v. Youthful Offender Parole Bd., supra, 162 Cal.App.4th at p. 1251; Grassilli v. Barr, supra, 142 Cal.App.4th at p. 1279.)
Because the trial court’s findings with regard to the substantive issues remain undisturbed, we need not decide if this is a derivative action, whether Tabibian complied with the requisites for instituting such an action, and, if not, whether this provides an independent basis to uphold the judgment.
Attorney’s Fees
Tabibian contends Waldman was not entitled to any attorney’s fees in this case. We agree.
In California, the parties to a lawsuit must pay their own attorney’s fees unless a contract or statute provides otherwise. (Woodland Park Management, LLC v. City of East Palo Alto Rent Stabilization Bd. (2010) 181 Cal.App.4th 915, 919; Kangarlou v. Progressive Title Co., Inc. (2005) 128 Cal.App.4th 1174, 1178.) Whether a legal basis exists for an award of attorney’s fees is a question of law which we review de novo. (PNEC Corp. v. Meyer (2010) 190 Cal.App.4th 66, 69; Woodland Park Management, LLC, supra, at p.919.)
In this case, the trial court awarded Waldman attorney’s fees pursuant to Civil Code section 1717 (section 1717). Subdivision (a) of section 1717 in pertinent part provides that “[i]n any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs. [¶] Where a contract provides for attorney’s fees, as set forth above, that provision shall be construed as applying to the entire contract, unless each party was represented by counsel in the negotiation and execution of the contract, and the fact of that representation is specified in the contract.”
In asserting an entitlement to attorney’s fees, Waldman relied on the attorney’s fees provision in DRG’s operating agreement, to which Waldman and Tabibian were signatories. Paragraph 13.12 of DRG’s operating agreement provides that “[i]n the event of any legal action to enforce any provision of this agreement, the prevailing party shall be entitled to recovery of costs and expenses, including reasonable attorneys’ fees.”
It is undisputed that Waldman is the prevailing party in this case. The pivotal question is whether this is an action on a contract. As observed by our colleagues in Division Four, “[a]n act such as breach of fiduciary duty may be both a breach of contract and a tort. [Citation.] ‘[T]ort claims do not “enforce” a contract’ and are not considered actions on a contract for purposes of section 1717. [Citation.] [¶] ‘Whether an action is based on contract or tort depends upon the nature of the right sued upon, not the form of the pleading or relief demanded. If based on breach of promise it is contractual; if based on breach of a noncontractual duty it is tortious. [Citation.] If unclear the action will be considered based on contract rather than tort. [Citation.] [¶] In the final analysis we look to the pleading to determine the nature of plaintiff’s claim.’ [Citation.]” (Kangarlou v. Progressive Title Co., Inc., supra, 128 Cal.App.4th at pp. 1178-1179.)
Based upon our review of the operative complaint, it is readily apparent that this is not an action on a contract. Tabibian’s cause of action for breach of fiduciary duty alleged that Waldman “failed to exercise the care required by Corp[orations] Code [section ]309 and duty of loyalty, and duty to deal honestly and fairly in that defendant WALDMAN diverted monies and structured the transactions for his own best interests at the detriment of plaintiff.” At no time did Tabibian allege that Waldman violated a specific contractual provision of DRG’s operating agreement. Inasmuch as Tabibian’s breach of fiduciary claim is not premised on the breach of a promise but rather is premised on noncompliance with a statutory duty, we conclude this was not an action on a contract and that Waldman was not entitled to an award of attorney’s fees pursuant to section 1717.
DISPOSITION
The judgment is affirmed; the order awarding attorney’s fees is reversed. The parties are to bear their own costs on appeal.
We concur: WOODS, Acting P. J., ZELON, J.