Filed 9/28/18 Frazer v. Grand CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, Mary Fingal Schulte, Judge. Affirmed. Motion to augment. Granted.

Pettibone Law, Douglas J. Pettibone; John L. Dodd & Associates, John L. Dodd and Benjamin Ekenes for Defendant and Appellant.

Brownstone Law Group and Thomas Allen Moore for Plaintiff and Respondent.

* * *

Introduction

Steve Grand hired Ira Frazer as an attorney for himself and his companies. Grand verbally agreed to pay Frazer $5,500 per month, plus 25 percent of the net sale price of any business Grand sold for which Frazer had performed legal services; the parties never had a written agreement. After 19 months, Grand and Frazer parted ways in April 2008.

In June 2009, Grand sold one of his companies for which Frazer had performed legal services. Grand neither provided notice of the sale to Frazer nor paid him a portion of the net profits. Frazer filed this lawsuit for breach of contract after learning from a third party about the sale of yet another of Grand’s businesses for which Frazer had also performed legal services. The jury awarded Frazer damages for the reasonable value of his services to Grand and Grand’s businesses. Grand appealed; we affirm.

Grand argues that the lawsuit is barred by the statute of limitations. We conclude that the discovery rule applies to Frazer’s cause of action for breach of contract, and that there was substantial evidence supporting the jury’s special verdict finding that Frazer did not have notice of the breach more than two years before filing his lawsuit.

Grand also argues that the damages awarded by the jury were excessive. At trial, Grand exercised his right to declare void the oral agreement for the performance of legal services. (Bus. & Prof. Code, § 6148.) Frazer was therefore entitled to recover a reasonable fee. There was substantial evidence supporting the jury’s damages award.

Finally, Grand argues that the trial court erred by excluding evidence of a purported judgment against Frazer from an unrelated lawsuit in the state of Washington. The trial court determined the evidence had little probative value, and that its admission would necessitate an undue consumption of time and would create a substantial danger of confusing the issues or misleading the jury. We find no error.

Factual Background

Frazer worked as an attorney for Grand from September 2006 to April 2008 in exchange for $5,500 per month, plus a bonus or commission of 25 percent of the net profits realized by Grand on the sale of any business on which Frazer had worked. This agreement was never put in writing. Frazer never prepared any invoices for his work for Grand. Frazer variously estimated that he worked for Grand between 40 and 80 hours per week or between 20 and 60 hours per week. For purposes of the trial, Frazer agreed he would be comfortable accepting compensation for having worked 40 hours per week during the 19 months he worked for Grand. Frazer received $5,500 per month for the 19 months he worked for Grand—a total of $104,500.

Soon after Frazer stopped working for Grand, Grand filed a state bar complaint against Frazer. Grand also filed two malpractice lawsuits against Frazer. Frazer’s malpractice carrier appointed counsel to defend Frazer in the malpractice actions. On May 20, 2010, during Grand’s deposition in one of those lawsuits, Grand testified that he had sold one of his businesses, Medical Waste Removal (MWR); Frazer had worked on MWR for Grand. Frazer was not present at the deposition, but was represented by his appointed counsel. The appointed counsel did not tell Frazer about Grand’s testimony regarding the sale of MWR. The state bar complaint and the two malpractice lawsuits were eventually dismissed.

Frazer did not investigate whether Grand had sold any of his businesses; he believed that Grand was obligated to contact him if he sold any businesses.

On May 14, 2012, Frazer learned from a third party that Grand had sold CK Dental, a company Frazer had also worked on for Grand. Frazer was “shocked[ and] stunned”; he told the third party he did not know about the sale of the company and that Grand was supposed to tell him. After filing this lawsuit to recover 25 percent of the net profits of the sale of CK Dental, Frazer learned that Grand had sold that business at a loss. During this litigation, Frazer learned that Grand had sold MWR. Grand had purchased MWR in September 2007 for $850,000 and sold it in June 2009 for $2,215,000.

Procedural History

On May 8, 2014, Frazer filed a complaint against Grand, alleging causes of action for promissory fraud and breach of an oral contract.

Following the close of Frazer’s case, the trial court granted Grand’s motion for a nonsuit of the fraud cause of action. During the trial, Grand made an election to declare the oral contract void, pursuant to Business and Professions Code section 6148.[1]

As is relevant to this appeal, the trial court instructed the jury regarding breach of contract, the affirmative defense of the statute of limitations, and the calculation of the reasonable value of services if the contract was void.

The jury returned a verdict in Frazer’s favor, awarding Frazer $338,660 in damages. Judgment was entered.

Grand filed a motion for a new trial. The trial court denied the motion: “The grounds for the motion are stated in the Motion for a New Trial, filed on March 7, 2017. CCP section 657, 1-5: ‘irregulars’ in the proceedings; irregular orders and attorney misconduct; ‘accidents or surprises throughout the trial’; ‘errors in law’; attorney misconduct in not following court orders, among other things. . . . None of the foregoing errors, accidents, surprises, or misconduct occurred. There was no misconduct on the part of Mr. Moore [Frazer’s counsel]. He conducted himself at all times as a professional. Even if the complained of conduct constituted misconduct, it did not rise to the level of mandating a new trial. [¶] Reviewing the entire record, the Court finds that moving party has fallen short of his burden to establish that a new trial is warranted.” Grand timely filed a notice of appeal.[2]

Discussion

I.

Statute of Limitations

Grand argues the judgment must be reversed because Frazer did not file the lawsuit before the expiration of the two‑year statute of limitations. (Code Civ. Proc., § 339, subd. 1.) The trial court instructed the jury as follows regarding the statute of limitations: “Steve Grand contends that Ira Frazer’s lawsuit was not filed within the time set by law. To succeed on this defense, Steve Grand must prove that Ira Frazer’s claimed harm occurred before May 7, 2012. [¶] . . . [¶] If Steve Grand proves that Ira Frazer’s claimed harm occurred before May 7, 2012, then Ira Frazer’s lawsuit was still filed on time if Ira Frazer proves that before that date, Ira Frazer did not discover, and did not know of facts that would have caused a reasonable person to suspect, that he had suffered harm that was caused by Steve Grand’s wrongful conduct.”

In a separate verdict form, the jury was asked: “1. Did Ira Frazer’s claimed harm occur before May 7, 2012?” The jury responded “yes.” The jury was then asked: “Before May 7, 2012, did Ira Frazer know of facts that would have caused a reasonable person to suspect that he had suffered harm that was caused by Steve Grand’s wrongful conduct?” The jury responded, “no.”

Generally, the statute of limitations on a cause of action for breach of contract begins to run “upon the occurrence of the last element essential to the cause of action,” and is not tolled by the plaintiff’s lack of knowledge of that last essential element. (Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 187.) “The harshness of this rule has been ameliorated in some cases where it is manifestly unjust to deprive plaintiffs of a cause of action before they are aware that they have been injured.” (Leaf v. City of San Mateo (1980) 104 Cal.App.3d 398, 406.) Accordingly, “a cause of action under the discovery rule accrues when the plaintiff discovers or should have discovered all facts essential to his cause of action [citations], this has been interpreted under the discovery rule to be when ‘plaintiff either (1) actually discovered his injury and its negligent cause or (2) could have discovered injury and cause through the exercise of reasonable diligence.’” (Id. at p. 407, italics omitted.)

In April Enterprises, Inc. v. KTTV (1983) 147 Cal.App.3d 805 (April Enterprises), the court held “the discovery rule may be applied to breaches [of contract] which can be, and are, committed in secret and, moreover, where the harm flowing from those breaches will not be reasonably discoverable by plaintiffs until a future time.” (Id. at p. 832.) In that case, the defendants erased video tapes of a television show over which the defendants had physical control, but as to which the plaintiff owned a share of syndication revenue. (Id. at pp. 813‑814.) The defendants threatened to erase the video tapes in March 1970 (id. at pp. 814, 821‑822), and allegedly erased the tapes on an unknown date between 1970 and 1972 (id. at p. 825). The plaintiff did not learn that the tapes had been erased until 1976, shortly after which it filed suit for, inter alia, breach of contract. (Id. at pp. 814‑815.)

In April Enterprises, supra, 147 Cal.App.3d 805, the court explained its reasoning as follows: “A common thread seems to run through all the types of actions where courts have applied the discovery rule. The injury or the act causing the injury, or both, have been difficult for the plaintiff to detect. In most instances, in fact, the defendant has been in a far superior position to comprehend the act and the injury. And in many, the defendant had reason to believe the plaintiff remained ignorant he had been wronged. Thus, there is an underlying notion that plaintiffs should not suffer where circumstances prevent them from knowing they have been harmed. And often this is accompanied by the corollary notion that defendants should not be allowed to knowingly profit from their injuree’s ignorance.” (Id. at p. 831.)

The court in April Enterprises, supra, 147 Cal.App.3d 805, noted: “We also find this common thread present in the instant case even though it happens to be a breach of contract action. We note how different this case is from the typical contract breach where accrual logically begins at the time of injury.

“In the typical contract for purchase of widgets, for example, the buyer is well aware the contract has been breached when the date for delivery arrives and he has not received his widgets. Similarly, the seller knows when payment is due under the contract. If that time passes without receipt of the amount due he is easily aware that the contract has been breached.

“Here, however, respondents erased the tapes of the television show while those tapes were in their exclusive custody and control, in contravention of the covenant of good faith. To hold, as respondents suggest, that April’s action accrued on the date of erasure, would amount to an expectation that a contracting party in such situations has a duty to continually monitor whether the other party is performing some act inconsistent with one of many possible terms in a contract. Imposing such a duty to monitor is especially onerous when the breaching party can commit the offending act secretly, within the privacy of its own offices.” (April Enterprises, supra, 147 Cal.App.3d at pp. 831‑832.)

In another case where the court applied the discovery rule to a breach of contract claim, Gryczman v. 4550 Pico Partners, Ltd. (2003) 107 Cal.App.4th 1 (Gryczman), the defendant entered a written contract with Builder’s Depot, Inc., giving Builder’s Depot “the right of first refusal to purchase certain real property owned by [the defendant] on the same terms contained in any bona fide offer from a third party which [the defendant] was willing to accept.” (Id. at pp. 3‑4.) The contract required the defendant to provide written notice of any bona fide offers from third parties to Builder’s Depot. (Id. at p. 4.) Builder’s Depot assigned its rights in the contract to the plaintiff. (Ibid.) The plaintiff provided notice of the assignment to the defendant. (Id. at p. 7.)

In November 1996, the defendant entered into an option agreement to sell one of the properties to a third party. (Gryczman, supra, 107 Cal.App.4th at p. 4.) The option agreement was recorded in December 1996, and a grant deed was recorded when the property was conveyed by the defendant in February 1997. (Ibid.) In “late 2000,” the plaintiff learned of the conveyance and filed a complaint for breach of contract and declaratory relief in January 2001. (Ibid.)

The defendant conceded that it had not given the plaintiff notice and an opportunity to purchase the subject property, but nevertheless argued that the breach of contract claim was barred by the statute of limitations. (Gryczman, supra, 107 Cal.App.4th at p. 4.) The appellate court rejected the defendant’s argument:

“Here the act causing the injury would have been ‘difficult for the plaintiff to detect’ because, as previously noted, the failure to give plaintiff notice of the happening of a certain event is both the act causing the injury and the act that caused plaintiff not to discover the injury. Defendants had reason to believe ‘plaintiff remained ignorant he had been wronged’ since they concede for purposes of the summary judgment motion they never provided plaintiff with notice of the option offer.

“Defendants also argue the delayed discovery rule should not apply here because the memorandum of the option was a recorded document readily available to plaintiff at all times. Even if the recorded memorandum did not contain all the information required in the contractual notice, they argue it was sufficient to put him on inquiry as to whether [the defendant] had received an offer on the property or had conveyed the property in violation of his contractual right of first refusal.

“The fact defendants recorded the memorandum of option does not make the delayed discovery rule inapplicable as a matter of law. The rule applies when the injury or the act causing the injury is ‘difficult’ for the plaintiff to detect, not impossible. Furthermore, we cannot say as a matter of law plaintiff had a duty to continually monitor public recordings to determine whether defendant Pico had accepted an offer on the property inconsistent with the terms of the first-refusal contract especially when Pico’s duty to give plaintiff personal notice of such an offer was one of the terms bargained for in the contract.

“We conclude, therefore, the running of the statute of limitations was tolled until such time as plaintiff knew or should have known of the wrongful conduct at issue.” (Gryczman, supra, 107 Cal.App.4th at p. 6.)

Here, too, the act breaching the contract—the failure to remit money to Frazer following the sale of a property owned by Grand and on which Frazer had worked for Grand—was difficult for Frazer to detect. While the court in Gryczman concluded that the plaintiff did not have a duty to monitor publically recorded documents to determine whether the defendant had breached the contract, Frazer had even less ability to learn about Grand’s private sales of his businesses. Grand was in a superior position to comprehend the act of selling the property and the damages owed to Frazer based on the sales price. A plaintiff claiming the discovery rule applies to a breach of contract claim bears the burden of proving when and how he or she discovered the breach, and why he or she was unable to make the discovery earlier. (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808; Hobart v. Hobart Estate Co. (1945) 26 Cal.2d 412, 437; Gryczman, supra, 107 Cal.App.4th at pp. 6‑7.)

In Gryczman, the plaintiff established that he had given notice to the defendant that Builder’s Depot had assigned its right of first refusal to him. (Gryczman, supra, 107 Cal.App.4th at p. 7.) The defendant presented evidence that it had sent written notice of the option offer, addressed to Builder’s Depot at the plaintiff’s address. (Ibid.) The return address on the written notice was not the defendant’s address, but that of an attorney. (Ibid.) The plaintiff returned the envelope unopened and never saw the notice. (Ibid.) The plaintiff testified he first became aware of the possibility that the defendant had sold the property when the plaintiff drove by the property and noticed the store that had been there was closed. (Ibid.) The plaintiff immediately investigated and filed a lawsuit early in 2001. (Ibid.) Based on the foregoing, the Gryczman court determined that the issue of the plaintiff’s diligence in discovering the defendant’s breach of contract was a factual issue for the jury. (Ibid.)

In this case, both parties agree that Grand never told Frazer about the sales of CK Dental and MWR. The MWR sale was mentioned during Grand’s deposition in one of the attorney malpractice actions, but Frazer was not present at that deposition. The attorney representing Frazer at the deposition was appointed by Frazer’s malpractice insurance carrier. The parties agree that the attorney did not tell Frazer that Grand had testified about his sale of MWR.

Ultimately, the problem with Grand’s statute of limitations argument on appeal is that it was not made at trial. The argument that the statute of limitations began to run when the attorney appointed by Frazer’s malpractice insurance company was made aware of the sale of MWR (as opposed to the general argument that the two-year statute of limitations barred the claim) was raised for the first time in the motion for a new trial. Generally, raising an issue for the first time in a motion for a new trial leads to forfeiture of that issue on appeal. (See People v. Williams (1997) 16 Cal.4th 153, 254; People v. Gallego (1990) 52 Cal.3d 115, 179-180; People v. Coffman (1864) 24 Cal. 230, 234; 8 Witkin, Cal. Procedure, Attack on Judgment in Trial Court (5th ed. 2008) § 136, pp. 727-728.) This is particularly true here, given that no evidence was presented at trial regarding the scope of the malpractice attorney’s duties vis-à-vis Frazer and no argument was made regarding imputation of knowledge to Frazer. It would be inappropriate for this court to determine, in the first instance, whether the malpractice attorney actually had knowledge of the sale of MWR, and whether that knowledge could be imputed to Frazer, under the circumstances and facts of this case.

There was sufficient evidence to support the jury’s special verdict finding that “Frazer [did not] know of facts that would have caused a reasonable person to suspect that he had suffered harm that was caused by Steve Grand’s wrongful conduct” before May 7, 2012.

II.

Excessive Damages

The oral agreement between Grand and Frazer required Grand to pay Frazer $5,500 per month, plus a portion of the net profits on the sale of any businesses for which Frazer performed services. In exchange, Frazer was to work for Grand, his various businesses, and his family. Frazer was admittedly paid the $5,500 per month for the period during which he worked for Grand. Grand argues on appeal that the damages awarded by the jury were excessive and unsupported by evidence or by the law. We reject each of Grand’s arguments.

Grand argues that Frazer’s damages must be limited to the reasonable value of his services before his discharge in April 2008. It is clear, however, that the jury only awarded Frazer the reasonable amount of his services before his discharge, less the amount he actually received from Grand. Frazer worked for Grand for 19 months, between 40 and 80 hours per week. Limiting the claim to 40 hours per week, Frazer worked a total of 3,040 hours for Grand. At a rate of $150 per hour, the total owed to Frazer would be $456,000. The parties agreed that Grand paid Frazer $104,500 ($5,500 per month for 19 months). The reasonable value of Frazer’s services for which he had not already received compensation was $351,500, more than the amount the jury awarded to Frazer.

Grand next argues that Frazer’s damages must be limited to the reasonable value of his services related solely to MWR. Grand suggests that because Frazer was seeking in damages a portion of the profits on the sale of MWR, his damages must be limited to the reasonable value of his services for MWR. This argument is wholly unsupported by the facts of the case and lacks any legal support. The agreement for legal services required Grand to pay Frazer $5,500 per month, plus a portion of the net profits on the sale of any businesses on which Frazer worked, in exchange for unlimited legal services provided by Frazer for Grand, his family, and any of his businesses. When Grand elected to void the entire agreement, he elected to pay the reasonable value of all of Frazer’s services, not only for those services performed for MWR.

Grand next argues that Frazer failed to prove his services related to MWR benefitted Grand. In Palmer v. Gregg (1967) 65 Cal.2d 657, 660, the California Supreme Court held that “[t]he measure of recovery in quantum meruit is the reasonable value of the services rendered, provided they were of direct benefit to the defendant.” There was ample evidence presented at trial that Frazer provided services to Grand to act as the general counsel for all of the companies of which Grand was the sole owner. Further, as discussed ante, Grand voided the entire agreement, making the claim for recovery of reasonable services applicable to the entire agreement.

Finally, Grand argues that Frazer failed to present sufficient evidence of the factors for determining the reasonable value of his services. The jury was instructed regarding Frazer’s damages as follows: “If Plaintiff’s alleged agreement is void for failure to be in writing, the jury may consider the following factors in determining the reasonable value of Plaintiff’s services provided to Defendant. [¶] 1. The amount of the fee in proportion to the value of the services performed. [¶] 2. The novelty and difficulty of the questions involved and the skill necessary to perform the legal services properly. [¶] 3. The likelihood, that the acceptance of the particular employment will preclude other employment by the attorney. [¶] 4. The amount involved and the results obtained. [¶] 5. The time limitations imposed by the client or by the circumstances. [¶] 6. The nature and length of the professional relationship with the client. [¶] 7. The experience, reputation, and ability of the attorney performing the services. [¶] 8. The time and labor required. [¶] 9. The informed consent of the client to the fee.” (Italics added.) No single factor is conclusive, and evidence need not be presented regarding each of the factors.

Substantial evidence was presented that (1) the hourly fee sought—$150 per hour—was well below what Frazer could have earned, given his education and experience and the fees charged in the market; (2) Frazer performed services for Grand personally and for Grand’s businesses between 40 and 80 hours per week, at all hours, seven days a week; (3) Frazer was paid $5,000 by other clients to work 10 to 15 hours per month; (4) each business transaction on which Frazer worked was different, meaning that his work product was not “cookie cutter”; (5) in at least one instance, that of MWR, Frazer assisted in obtaining a positive result for Grand, as the sale price of the business increased from $850,000 to $2,215,000 in less than two years; (6) Frazer’s duties for two of Grand’s companies, Coastal Implant Technologies, Inc., and Medicine Biomedical, Inc., were “to provide legal representation in all matters, including filing legal forms, advising the company as to the legal ramifications of its possible actions, representing it in any lawsuits that might arise, featuring the company as either plaintiff or defendant, consulting on contracts and other agreements of all sorts and acting in any other necessary capacity as our general counsel as need be”; and (7) after the present litigation started, Grand called Frazer on several different occasions, leaving voicemail messages that said Frazer was one of the best attorneys he had ever known, and he wanted Frazer to come back and work with him again. The damages awarded by the jury were not excessive and were supported by the evidence.

III.

Exclusion of Fraud Judgment

Grand contends the trial court erred by excluding from evidence a fraud judgment against Frazer in a separate lawsuit. We review the trial court’s decision for abuse of discretion. (Meeks v. AutoZone, Inc. (2018) 24 Cal.App.5th 855, 867.)

Frazer testified a class action lawsuit asserting a fraud claim against him and his wife had been filed in the state of Washington, but that no judgment had been entered. Grand’s trial counsel showed Frazer what purported to be a copy of a judgment entered in the Washington state case; Frazer testified it did not refresh his recollection about a judgment being entered in that case. Grand’s counsel then asked the court to take judicial notice of the judgment, which the court refused to do. The court also refused to take judicial notice of the docket from the Washington state case:

“[Grand’s trial counsel]: The other thing is, Judge, you know, there’s a docket too, and there’s a legion of cases that say that a superior court judge can take judicial notice of a docket. It shows that Ira Frazer—

“The Court: I can; I don’t have to. Depends on . . . how relevant it is.”

The trial court further refused to admit a copy of the purported judgment into evidence. “I’m not seeing the relevance to it. I really don’t want to have a bunch of mini evidentiary hearings, but I think I made my point last week that this whole thing about this judgment I think it’s such a waste of time, a red herring. [¶] . . . [¶] . . . [T]he jury doesn’t need to see this. They can be told whatever the judgment is. You guys are just wasting time. [¶] . . . [¶] . . . I’m not trying that case. I don’t see the relevance.”

In support of his motion for a new trial, Grand submitted two purported judgments from the Washington state case, one of which had not been presented to the court at the time of trial.

“Broadly speaking, an appellate court reviews any ruling by a trial court as to the admissibility of evidence for abuse of discretion.” (People v. Alvarez (1996) 14 Cal.4th 155, 201.) “‘This standard of review applies to a trial court’s determination of the relevance of evidence, as well as to whether the evidence’s probative value is substantially outweighed by its prejudicial effect.’” (Pellegrini v. Weiss (2008) 165 Cal.App.4th 515, 530.) “The trial court’s ‘discretion is only abused where there is a clear showing [it] exceeded the bounds of reason, all of the circumstances being considered.’” (Meeks v. AutoZone, Inc., supra, 24 Cal.App.5th at p. 861.)

Here, the trial court clearly expressed that the judgment had limited, if any, probative value, and that its admission would necessitate undue consumption of time and create a substantial danger of confusing the issues or misleading the jury by requiring a trial within a trial of the Washington case’s issues. We find no abuse of discretion.

Disposition

The judgment is affirmed. Respondent to recover costs on appeal.

FYBEL, J.

WE CONCUR:

O’LEARY, P. J.

THOMPSON, J.