Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of San Diego County, William R. Nevitt, Jr., Judge, Super. Ct. No. GIC856024
McINTYRE, J.
Jane E. Ritzinger appeals a judgment entered in this action between her and William G. McKee, Inc. (McKee) arising out of McKee's purchase of Ritzinger's accountancy practice. Ritzinger contends that the court erred in declining to award her damages on her cross-claim against McKee for breach of the purchase contract and in failing to find that she was the prevailing party in the action for purposes of applying the contract's attorney fee provision. We find her arguments unavailing and affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
In July 2002, the parties entered into a contract whereby McKee agreed to purchase Ritzinger's accountancy practice, including furniture and equipment, tenant improvements, client files and lists, work papers, computer files and good will, for $72,000.00 (All relevant dates are in 2002 except as otherwise noted.) In accordance with the terms of the purchase contract, McKee was to pay Ritzinger $2,000 at the time of contracting, plus $34,000 at the closing of the transaction on August 1, and execute a promissory note for the remaining $36,000, payable at the rate of $1,000 in principal and $128.11 in interest per month over a 36 month period.
The contract contained a guarantee and adjustment clause pursuant to which Ritzinger guaranteed first year gross billings of $61,000 and agreed that, if through no fault of McKee's, the practice's gross billings for that period (excluding any business attributable to McKee's existing clients) were less that $61,000, the purchase price would be reduced by $1.18 for each $1.00 of the underage. The contract required McKee to notify Ritzinger by telephone, followed up by a written report, of any problems regarding the practice's performance and to notify her in writing of any claim by him for a reduction of the purchase price under the guarantee and adjustment clause. It also provided that any dispute between the parties as to an adjustment of the purchase price was to be resolved in arbitration.
McKee made ten payments under the promissory note, but stopped making payments thereafter and in August 2003 Ritzinger sent McKee a notice of default demanding that McKee cure the default within 30 days. McKee requested arbitration of the dispute and proposed an arbitrator, but Ritzinger informed it that she was electing to take back her practice rather than filing a lawsuit to recover the unpaid balance. The parties were unable to resolve their differences and in October 2005, McKee filed this action against Ritzinger for breach of contract, fraud and declaratory and injunctive relief. Ritzinger cross-complained against McKee for breach of the contract.
At a bench trial, the court granted Ritzinger's motion for a nonsuit on McKee's fraud cause of action. As to the remaining claims, the court found that (1) the accountancy practice did not perform at the guaranteed level; (2) the underperformance did not result from any action or inaction by McKee; (3) McKee was thus entitled to an adjustment of the purchase price for the practice, but breached the purchase agreement by unilaterally adjusting the price and ceasing payments on the note rather than following the procedure required under the agreement; (4) McKee's adjustment of the price was nonetheless "within the ballpark" of the adjustment to which it would have been entitled; (5) Ritzinger's claimed damages of approximately $149,000 were not supported by the evidence or the law; and (6) McKee's additional claimed damages resulted from its own failure to comply with the contractual procedure. Based on these findings, the court declined to award damages on the claims and cross-claims, "leav[ing] the parties where it found them," and found that neither side was a prevailing party in the action. Ritzinger appeals.
DISCUSSION
1. Failure to Award Damages on Ritzinger's Cross-claim for Breach of Contract
Ritzinger contends that the trial court erred in refusing to award her any damages on her cross-claim after finding that McKee breached the purchase agreement by unilaterally adjusting the purchase price rather than following the procedure specified in the contract (i.e., submission of the matter to arbitration). More specifically, she contends, as she did below, that McKee's failure to submit the matter to arbitration precluded it from having any entitlement to an adjustment of the purchase price. In refusing to find in Ritzinger's favor, the trial court implicitly rejected Ritzinger's forfeiture argument. Substantial evidence in the record supports its decision.
Although the purchase contract provided that a dispute between the parties as to McKee's entitlement to an adjustment of the purchase price "shall be resolved by arbitration," nowhere did it specify that the parties' failure to submit the matter to arbitration would eliminate that entitlement. Further, there is ample evidence in the record to substantiate a finding that Ritzinger waived her rights to enforce the arbitration provision by declining McKee's overtures to submit the matter to arbitration, declining to pick an arbitrator as contemplated by the arbitration provision of the purchase agreement despite McKee's compliance with that same provision and allowing the matter to proceed through trial without seeking to compel enforcement of the provision. (Code Civ. Proc., § 1281.2, subd. (a); Simms v. NPCK Enterprises, Inc. (2003) 109 Cal.App.4th 233, 239.)
Under these circumstances, the court did not err in finding that McKee was entitled to an adjustment of the purchase price and that, as a result, Ritzinger had no damages arising from McKee's breach of the purchase agreement.
2. Refusal to Identify Ritzinger as the Prevailing Party for Purposes of Awarding Attorney Fees pursuant to the Contract
The purchase agreement provided that in any action for the enforcement or breach thereof, "[the] party in whose favor final judgment shall be obtained" was entitled to recover attorney fees and costs. Ritzinger contends that the court erred in not designating her as the prevailing party in this action in light of its grant of a nonsuit on McKee's fraud claim against her and its finding that McKee had breached the purchase contract. However, the trial court had the discretion to determine that there was no prevailing party (Code Civ. Proc., § 1717, subd. (b)(1)) and, in light of the fact that Ritzinger prevailed on the complaint and McKee prevailed on the cross-complaint, neither party was the clear winner here and we cannot conclude that the court erred in so holding. (See Hsu v. Abbara (1995) 9 Cal.4th 863, 874-867, and cases cited therein.)
DISPOSITION
The judgment is affirmed. McKee is awarded its costs of appeal.
WE CONCUR: McCONNELL, P.J., O'ROURKE, J.