Goodman v. Neutra

























Filed 12/31/12
Goodman v. Neutra CA4/3



















>NOT TO BE PUBLISHED IN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 This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115>.





IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA



FOURTH APPELLATE DISTRICT



DIVISION THREE




>

GARY GOODMAN et al., Plaintiffs, Cross-defendants, and Appellants, v. DION NEUTRA et al., Defendants, Cross-complainants, and Respondents.

G046528 (Super. Ct. No. 30-2010-00397358) O P I N I O N

Appeal
from a judgment of the Superior Court of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Orange
County, Kirk H. Nakamura, Judge. Dismissed and remanded.

Michael
K. Hagemann for Plaintiffs and Appellants.

Emilio
Law Group; Daniel G. Emilio, Justin G. Schmidt, and Kyle J. Waldie for
Defendants and Respondents.





Gary
and Rhonda Goodman (the Goodmans) are keenly interested in

mid-century modern architecture and hired Dion Neutra (Neutra) to
design a custom home for them. Richard
Neutra (Neutra’s deceased father) is their favorite architect. The Goodmans bought a vacant lot in San Clemente and
contacted Neutra, who was continuing his father’s architectural practice. All did not proceed as planned, and the
parties ended up filing lawsuits against each other.

The
jury awarded the Goodmans $100,000 on their href="http://www.mcmillanlaw.com/">professional negligence claim but found
in favor of Neutra on the other causes of action. The jury also awarded Neutra $30,000 on his
cross-complaint for breach of contract.
The trial judge declared Neutra the prevailing party on the contract and
awarded him attorney fees. The final
judgment awarded the Goodmans $100,000 plus their costs, but this amount was
offset by the $30,000 awarded Neutra plus his attorney fees and costs. The net result was a judgment ordering Neutra
to pay the Goodmans $27,626.92, which he paid in full.

The
Goodmans, having accepted the benefits of the judgment, seek to appeal the
unfavorable portions of the jury’s verdict and court rulings. As a general rule, a party loses the right to
appeal by acceptance of the fruits of the judgment. In this case, we conclude none of the
equitable exceptions to the general rule apply, and the appeal must be dismissed. Because Neutra is entitled to attorney fees
and costs on appeal as the prevailing party, we remand the matter for the trial
court to determine the amount of such fees and costs.

I

In
January 2009, the parties entered into a written contract for architectural
services. The agreement stated Neutra
would charge $125 per hour. The parties
orally agreed the project’s budget would be between $750,000 to $1 million
dollars. Neutra told the Goodmans his
design fees could be anywhere between 15 to 30 percent of the budget.

In July
2009, Neutra provided the Goodmans with a rough rendering of the proposed
house. By this time the Goodmans had
paid Neutra a retainer ($7,500) and several bills totaling over $34,000. In August 2009, Neutra sent another bill for
$33,626 and the Goodmans notified Neutra, for the first time, that they only
had $100,000 to spend on architectural services. They requested he put all the work on hold or
complete the plans for $100,000. The
parties dispute whether Neutra affirmatively agreed to complete and sign the
plans for $100,000.

In
October 2009, the Goodmans refused to pay Neutra any more money, and they
demanded he stop working on the project.
In December, the Goodmans told Neutra to finish the design phase for the
$100,000 already paid, which included signing and stamping the plans. The Goodmans also asked Neutra to terminate
the contract and provide them with the unsigned and non-stamped plans. Neutra refused their demands and continued to
send bills to the Goodmans.

The
Goodmans sued Neutra and his company Dion Neutra, Inc. (which we will
collectively and in the singular refer to as Neutra) and alleged, inter alia,
breach of contract, professional negligence, and intentional misrepresentation. Neutra filed a

cross-complaint alleging breach of contract, a common count for open
book account, a common count for account stated, and quantum meruit. He alleged the Goodmans still owed him
$86,174, under the terms of the written agreement hiring Neutra to provide architectural
consulting work.

The
case went to trial in September 2011, and it was the Goodmans’ theory they were
entitled to the same amount of damages ($306,000) under any theory of recovery
alleged in the complaint. They presented
evidence to support their theory the written contract was orally modified to
include a $100,000 limit on architectural fees, and Neutra breached this
modified term. The Goodmans’
professional negligence claim was based on evidence Neutra violated the
California Architects Practice Act (CAPA)

(Bus. & Prof. Code, § 5500 et seq.), which required certain
information to be included in the written agreement (Bus. & Prof. Code, §
5536.22), and based on evidence Neutra designed a house that exceeded the
Goodmans’ construction budget. Finally,
the basis for the intentional misrepresentation claim was Neutra lied about how
much the plans and construction would cost.


The
jury found in favor of Neutra on the breach of contract claim and the href="http://www.fearnotlaw.com/">intentional misrepresentation action. It awarded Neutra $30,000 on his cross
complaint, finding the Goodmans breached the written contract by failing to pay
him. However, the jury found in favor of
the Goodmans on the professional negligence action, awarding them
$100,000. The net verdict was $70,000 in
favor of the Goodmans.

At the
end of October 2011, Neutra filed a motion for attorney fees as the prevailing
party on the contract and a memorandum of costs. Thereafter, the Goodmans filed their memorandum
of costs and motions for: (1) judgment
notwithstanding the verdict and new trial in the alternative on the
cross-complaint; (2) motion for attorney fees or judgment notwithstanding the
verdict or new trial on the breach of contract cause of action in the
alternative; (3) prejudgment interest; and (4) to tax and strike Neutra’s
costs. Neutra responded by filing a
motion to tax and strike the Goodmans’ motion for costs.

In
December 2011, the court denied the Goodmans’ numerous post trial motions. The following month, the court granted
Neutra’s motion for attorney fees, awarding him a reduced amount of
$47,287.50. The court explained the
reduction reflected fees incurred for only the time spent on the breach of
contract causes of action. In January
2012, the trial court granted the Goodmans’ motion to strike costs and awarded
Neutra a reduced sum of $51,066.14. In
addition, the court granted Neutra’s motion to strike costs and awarded the
Goodmans a reduced sum of $4,003.73.

At the
end of January 2012, the court entered a final judgment stating the jury
awarded the Goodmans $100,000 on the professional negligence claim. The court ruled the Goodmans were entitled to
recover post-verdict, prejudgment interest ($2,712.33) and costs and disbursements
taxed ($5,500.73). The judgment stated,
“that said money judgment is partially satisfied by the following: [¶]
[1.] The $30,000[] awarded to [Neutra] on [the] cross-complaint. [¶]
[2.] Post-verdict, prejudgment
interest on the cross-complaint in the sum of $904.39. [¶]
[3.] . . . [A]ttorney[] fees in the sum of $47,287.50. [¶]
[4.] . . . [C]osts and disbursements taxed in the sum of $3,784.64. [¶]
Said partial satisfaction resulting in a net monetary judgment in favor
of [the Goodmans], and against [Neutra] . . . in the amount of $26,236.53.”

The
Goodmans scheduled a judgment debtor’s exam and requested that Neutra pay the
amount ordered by the judgment. After
Neutra satisfied the judgment and the Goodmans accepted the money, the Goodmans
filed an appeal challenging the court’s rulings and jury verdict on the two
breach of contract claims (complaint and

cross-complaint), the attorney fee award to Neutra as the prevailing
party on the contract actions, and the intentional misrepresentation claim. Neutra did not file an appeal.

II

After
receiving the Goodmans’ opening brief, Neutra filed a motion to dismiss the
appeal asserting the Goodmans waived their right to appeal by voluntarily
accepting the benefits of the judgment, i.e., requesting and receiving
$26,236.53 from Neutra. We ordered that
the motion would be decided in conjunction with the appeal. Neutra is correct, the appeal must be
dismissed.

>A. Factual Summary of Payment

We
first include a brief summary of the facts relating to the manner in which the
Goodmans demanded payment of the judgment.
After the jury rendered its verdict, but before the court entered the
final judgment in January 2012, the Goodmans served Neutra with a notice of a judgment
debtor’s examination. The notice stated
Neutra owed the Goodmans discovery monetary sanctions ($1,100) incurred during
the lawsuit. Neutra sent a check for
this entire amount, but the Goodmans pressed forward with the scheduled
judgment debtor’s examination.

Neutra’s
counsel wrote letters and made several telephone calls, asking why the Goodmans
were continuing with the judgment debtor’s examination. The Goodmans’ attorney gave the vague
response, “there are a plethora of reasons.”
The Goodmans demanded a copy of Neutra’s financial records for the
debtors examination.

At the
scheduled December 2012 judgment debtor’s examination, the Goodmans filed a
brief stating Neutra owed $16.88 for interest on the discovery sanction. They also sought $135 in costs to conduct the
debtor’s exam. And finally, the Goodmans
stated the jury found Neutra liable for $70,000 and “[w]hile no judgment had
been entered, one should have been within 24 hours. . . . Equity regards as
done what should have been done.”

Neutra’s
counsel accused the Goodmans of harassing his client because the request for
$70,000 and financial documents was “highly improper” and “unethical
conduct.” Counsel noted there was
currently no final judgment and the Goodmans had filed many motions seeking
such relief as a new trial and to overturn the verdict. The trial court continued the judgment
debtor’s examination to a date after entry of the judgment. In the meantime, Neutra sent the Goodmans a
check for $152 to cover the alleged interest and fees associated with
collection of the discovery sanction.
Thereafter, the Goodmans refused Neutra’s requests to take the judgment
debtor’s proceedings off calendar.

Neutra
filed an ex parte application for a
protective order and temporary stay of the judgment enforcement
proceedings. Neutra explained the
Goodmans refused to take the debtor’s examination off calendar on the grounds
they wanted to get a “‘head start’ on judgment collection proceedings.” Neutra sought a protective order against continuing
the judgment debtor’s examination on the grounds he was 85 years old and his
health was declining. His counsel
asserted it would be a physical hardship to require Neutra to personally appear
for unnecessary court hearings. Counsel
explained the hearing was premature because no judgment had been entered and
the discovery sanctions had been paid.
In addition, Neutra asserted good cause existed for granting a temporary
stay of enforcement of the judgment because the Goodmans may file an appeal and
Neutra was considering an appeal. Neutra
submitted, “If the judgment is indeed entered and neither party appeals, then
[Neutra] is prepared and ready to provide payment in full for the judgment
amount.”

The
Goodmans opposed the ex parte application, stating Neutra’s request for a stay
is “based on the speculation [the Goodmans] will appeal. [Neutra has] presented no theory in which
they won’t have to pay at least the current judgment. Therefore, granting a stay would serve no
purpose.”

On
February 1, 2012, Neutra paid the Goodmans $27,828.92 in satisfaction of the
judgment. Pursuant to the Goodmans’
request, the sum was electronically wire transferred into their counsel’s
(Michael K. Hagemann’s) account.
Hagemann confirmed receipt of the funds.
On February 21, Neutra asked the Goodmans to execute and file an
acknowledgement of satisfaction of judgment under Code of Civil Procedure
section 724.030.

Hagemann
refused, explaining Neutra “paid the currently collectable portion of the
judgment,” but he may owe more if the Goodmans prevail on appeal. He stated the Goodmans had filed an appeal
and they intended “to file a bond for 1.5 [times] the judgments and orders we
are appealing from in order to stay those amounts so we can collect on the full
remaining judgment.” Hagemann stated
that to suspend collection of the remaining judgment ($81,976.53), Neutra would
have to post a bond for $122,964.80.
Hagemann opined that if Neutra posts a bond, “I don’t think the judgment
would be considered satisfied; rather, collection would be stayed.” He also opined “There is no risk to . . .
Neutra because we cannot collect on the bond unless we prevail on appeal.” Hagemann asked Neutra if he would save both
sides money and obtain only one bond for both sums of money and the Goodmans
would pay half the bond premium.

As
stated in the introduction to their opening brief, the Goodmans appeal is based
“primarily” on their contention “professionally negligent performance of a
contract is also a breach of that contract.”
This theory was not raised in the trial court. The Goodmans ask this court to “reverse the
trial court and hold that the Goodmans are the prevailing party on the
contract, and order that judgment on the breach of contract cause of action in
the cross-complaint be entered in their favor.
Neutra . . . should not have been entitled to . . . attorney’s fees,
costs, or interest, when the services rendered were defective. In addition, [this court] should remand the
action to allow the trial court to determine the reasonable attorney’s fees,
expert witness fees, and interest due the Goodmans.” In their summary of the argument on appeal,
the Goodmans further explain they “primarily seek to reverse the trial court’s
determination that Neutra . . . [was] the prevailing part[y] on the contract
claims. All other relief sought on
appeal, except for minor issues that are conditionally argued or argued in the
alternative, logically follow from the prevailing-party-on-the-contract
determination.”

Specifically,
the Goodmans raise the following 10 arguments in their briefing on appeal: (1) Neutra breached the contract as a matter
of law because his negligent performance of the contract (CAPA violations) was
also a breach of implied terms in the contract; (2) alternatively, the Goodmans
are entitled to judgment notwithstanding the verdict or a new trial on the
breach of contract action because there is substantial evidence supporting each
element of a breach of contract action; (3) the court improperly denied their
motion for new trial on the ground there was no notice or memorandum filed; (4)
the court improperly refused several jury instructions warranting a new trial;
(5) there is insufficient evidence to support any element of Neutra’s breach of
contract action raised in the cross-complaint; (6) alternatively, the court
should have granted a new trial on the cross-complaint and in the second trial
give previously rejected special jury instructions; (7) the Goodmans are
entitled to attorney fees because they prevailed on the contract; (8) Neutra is
not entitled to attorney fees and costs because he did not prevail on the
contract; (9) the Goodmans are entitled to prejudgment interest (either 10
percent or seven percent from the date of each payment to Neutra, or seven
percent from the date of filing); and finally (10) the Goodmans conditionally
requested a new trial on the intentional misrepresentation cause of action in
the event a new trial is ordered on any of the issues above.

B. Waiver – Consequence of Acceptance of
Benefits

“‘It
is the settled rule that the voluntary acceptance of the benefit of a judgment
or order is a bar to the prosecution of an appeal therefrom. [Citations.]’
[Citation.] The rule is based on
the principle that ‘the right to accept the fruits of the judgment and the
right to appeal therefrom are wholly inconsistent, and an election to take one
is a renunciation of the other.
[Citation.]’ [Citation.]” (Epstein
v. DeDomenico (1990) 224 Cal.App.3d 1243, 1246 (Epstein).) In other words,
“acceptance by the appellant of the benefits of a judgment constitutes an ‘. .
. affirmance of the validity of the judgment against him.’ [Citation.]”
(Lee v. Brown (1976) 18 Cal.3d
110, 114 (Lee).)

“Although
the acceptance must be clear, unmistakable, and unconditional [citation],
acceptance of even a part of the benefit of a judgment or order will ordinarily
preclude an appeal from the portion remaining.
[Citation.]” (>Epstein, supra,

224 Cal.App.3d at p. 1246.) “As is so often the case, however,
application of the rule has generated a number of equitable exceptions.” (Lee,
supra, 18 Cal.3d at p. 115.)

First,
“a waiver will be implied [only] where there is voluntary compliance with a judgment . . . .” (Lee,
supra, 18 Cal.3d at p. 115.) “Thus
where compliance arises under compulsion of risk or forfeiture, a waiver will
not be implied. [Citations.]” (Id.
at p. 116.) The parties agree this
exception does not apply.





Under
the second exception (and the parties dispute its applicability), “one may
appeal from a portion of a severable and independent judgment while accepting
the benefits of the unaffected remainder of the judgment. [Citations.]”
(Lee, supra,

18 Cal.3d at p. 115.) “‘The test of whether a portion of a judgment
appealed from is so interwoven with its other provisions as to preclude an
independent examination of the part challenged by the appellant is whether the
matters or issues embraced therein are the same as, or interdependent upon, the
matters or issues which have not been attacked. [Citations.] “[I]n order to be severable, and therefore
[separately] appealable, any determination of the issues so settled by the
judgment . . . must not affect the determination of the remaining issues
whether such judgment on appeal is reversed or affirmed. . . . Perhaps another way of saying it would be
that the judgment is severable when the original determination of those issues
by the trial court and reflected in the judgment or any determination which
could be made as a result of an appeal cannot affect the determination of the
remaining issues of the suit. . . .”
[Citation.]’ [Citation.]” (Gonzales
v. R.J. Novick Constr. Co. (1978) 20 Cal.3d 798, 805-806 (>Gonzales).)

In
this case, the Goodmans contend their appeal falls within the second equitable
exception because the appealed portions of the judgment are severable. They point out the appeal does not concern
the jury’s $100,000 judgment relating to their professional negligence action,
and in this appeal, they are simply seeking to recover additional damages on
unrelated causes of action. They explain
the receipt of $27,828.92, “some of which was related to a sanctions order, is
not a waiver of the right to appeal because [the Goodmans] right to this money
is not disputed in this appeal. Further,
[they] never received any money from [Neutra’s company Dion Neutra, Inc.].” href="#_ftn1" name="_ftnref1" title="">[1] In addition, the Goodmans
maintain they “are primarily appealing the award of attorney fees and costs,
issues which are clearly severable.
[They] are also appealing the denial of two motions for judgment
notwithstanding the verdict which are also severable. There are simply no issues relevant to this
appeal that would necessitate reversal of the professional negligence cause of
action.”

If
the Goodmans were proceeding on the same theories raised in the trial court we
would agree the claims were severable.
After all, as plainly stated in the Goodmans’ closing arguments at
trial, the breach of contract claim was based on two alleged breaches relating
to conduct distinct from the four
CAPA violations and misconduct allegations giving rise to the professional
negligence action. Review of one claim
would in no way effect the other.

However,
the Goodmans’ argument on appeal (and in their motions for a judgment
notwithstanding the verdict) raise a new theory of recovery, rendering the
breach of contract interdependent on the professional negligence claim. Indeed, the Goodman’s explain liability for
breach of contract should be premised
on the professional negligence verdict.
The Goodmans recognize this new theory of liability will not entitle
them to more damages, but rather will make them eligible for prevailing party
status and attorney fees (and striking the attorney fees already awarded to
Neutra on his

cross-complaint).

Specifically,
the Goodmans maintain this court must conclude, as a matter of law, Neutra’s
professional negligence (based on violations of the CAPA) must also be deemed
an ordinary breach of the written contract.
They point to the evidence establishing the professional negligence
verdict was soundly based on Neutra’s failure to include information in the
written contract (such as his license number and a description of services) and
his failure to communicate a design budget or draft plans for a house that
could be built within the construction budget.
They do not allege the plans were defectively drafted or unusable for
any other reason.

The
Goodmans’ legal argument on appeal is Neutra’s duty to act as a reasonable
professional should be an implied term of the contract, and breach of an
implied term is the same as the breach of an express term. They conclude the professional negligence
verdict should also prove Neutra breached the implied term of the contract and
he cannot be deemed the prevailing party.href="#_ftn2" name="_ftnref2" title="">[2]

Not
surprisingly, in the respondent’s brief, Neutra directly challenges the
validity of the professional negligence jury verdict. Although ordinarily a respondent cannot
challenge a final judgment unless they personally notice an appeal,
“[r]espondents can, however, request review of any matter for the limited
purpose of determining whether the appellant was prejudiced by errors asserted
as grounds for reversal or modification of the judgment from which appellant’s
appeal was taken. [(See, Code Civ.
Proc., § 906; Platypus Wear, Inc. v.
Goldberg (2008) 166 CA4th 772, 781.)]”
(Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The
Rutter Group 2012) ¶ 2:305, p. 2-158.)
Given the nature of the Goodmans’ argument on appeal that one claim is
premised on the other, we must consider Neutra’s contention the professional
negligence verdict should be overturned (rendering the Goodmans’ premise faulty
and the appeal meritless).

With
respect to the professional negligence verdict, Neutra argues the jury was
improperly instructed the CAPA violations created a presumption of
negligence. Neutra also provides case
authority to support his theory not all findings of negligence qualify as a
breach of contract. And he argues the
primary case the Goodmans rely upon for their new theory on appeal, >Tolstoy Constr. Company v. Minter (1978)
78 Cal.App.3d 665, 673, is inapt. Neutra
argues that case concerned a building contractor who could not recover payment
based on the terms of a contract due to the doctrine of substantial
performance. Neutra explains the court
determined the contractor’s inferior construction of a house led to significant
property damage and for this reason he was not entitled to payment. Neutra notes the Goodmans do not allege the
plans were defectively drafted and they fail to cite any case authority
suggesting a per se rule, i.e., any negligence qualifies as a breach of
contract.

Accordingly,
to properly evaluate whether Neutra breached the contract based on his alleged
negligent performance of duties, this court would have to evaluate the basis
for the professional negligence verdict and whether it was appropriate. If we agreed with Neutra’s arguments about
the improper jury instructions and find his case authority applicable, our
decision could result in a reversal of the professional negligence
verdict. Moreover, if Neutra is right,
we could remand the entire action for a retrial with proper jury instructions
and permit the jury to determine if Neutra’s purported negligence also amounted
to a breach of the written contract.

In
light of the above, we conclude the appeal must be dismissed. The Goodmans demanded payment of the
judgment, representing the $100,000 verdict in their favor for professional
negligence and costs, offset by Neutra’s favorable verdict on the
cross-complaint, attorney fees. and costs.
Voluntary acceptance of the benefit of the judgment precludes an appeal
of the unfavorable portions of the judgment, especially when the issues are so
interwoven and interdependent upon those not attacked on appeal.

III

The
appeal is dismissed and the motion to augment the record is denied. Respondents request reasonable attorney fees
and costs on appeal. Respondents are
entitled to its attorney fees and costs as the parties prevailing on the
appeal. (Cal. Rules of Court, rules
8.493 & 8.278.) We remand for the
limited purpose of permitting the trial court to exercise its discretion on the
amount to award Respondents for their attorney fees and costs for the appeal.







O’LEARY,
P. J.



WE CONCUR:







BEDSWORTH, J.







MOORE, J.