Marriott Hotel Services v. Nat. Vacation Resorts

Filed 7/10/08 Marriott Hotel Services v. Nat. Vacation Resorts CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

APPEAL from a judgment of the Superior Court of San Diego County, John S. Meyer, Judge. Affirmed.

Defendant and appellant National Vacation Resorts: Kosher Classics, Inc. (Classics) appeals from a judgment in favor of Marriott Hotel Services, Inc. (Marriott) following a bench trial on Marriott's complaint for breach of contract. The trial court awarded Marriott $329,478.79 in actual damages, liquidated damages and prejudgment interest on implied findings that Classics had breached two written contracts with Marriott for events in which Classics agreed to occupy a certain number of rooms at the Coronado Island Marriott Resort. On appeal, Classics contends (1) the trial court erred by ignoring the plain language of one of the contracts and undisputed testimony of Classics' principal as to certain penalties; (2) Marriott unilaterally cancelled the other contract; and (3) Marriott presented no evidence of reasonable efforts to mitigate its damages. We affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND^[1]

In April 2003, Classics and Marriott entered into two written Group Sales Agreements in which Marriott agreed to provide, and Classics agreed to use, a specified number of rooms for kosher Passover events to be held at the Coronado Island Marriott Resort in 2005 (the 2005 contract) and 2006 (the 2006 contract). In the 2005 contract, Classics agreed to a "Room Night Commitment" of 1,360 room nights over the course of several days. The 2005 contract contains a "Rooms Attrition" clause that states: "[Marriott] is relying upon [Classics'] use of 1,365 [sic] Total Room Nights. [Classics] agrees that a loss will be incurred by [Marriott] should there be a reduction greater than 15% in the Total Room Nights actually used. [] Should the room nights actually be used by [Classics] be [sic]less than 85% of the Total Room Nights, [Classics] agrees to pay, as liquidated damages and not as a penalty, the difference between 85% of the Total Room Nights and [Classics'] actual usage of rooms, multiplied by the average group room rate."

In the 2006 contract, Classics agreed to a room commitment of 1,235 rooms. That contract contains an "Advance Payment" clause requiring Classics to make a $70,000 payment in order to reserve the arrangements, to be paid by three $10,000 deposits due on July 1, 2005, August 1, 2005, and September 1, 2005, and one $40,000 deposit due on January 2, 2006. The 2006 contract contains a "Cancellation" clause setting forth Classics' obligation to pay specified amounts of liquidated damages upon Classics' decision to cancel depending on the date of its decision.^[2]

In July 2005, Marriott advised Classics by letter that it owed a balance of $207,604.19 on its 2005 contract, including an $81,030 charge for a 370-room shortfall (rooms that remained vacant and were not resold by Marriott) and $31,437.18 in vendor invoices for specialty food for the event. Based on additional $60,000 payments made to Marriott, the balance ultimately owed by Classics under the 2005 contract was $147,604.19.

Classics did not tender any of the $10,000 advance payments under the terms of the 2006 contract. At the time those payments were due, Marriott was ready, willing and able to perform the 2006 contract. Under the 2006 contract, Classics had committed to use 1,235 rooms at a contracted price of $219, for a total room revenue of $270,465; under the cancellation clause of the 2006 contract, when Classics failed to pay the first deposit, the contract specified liquidated damages in the amount of $135,232.50.

In November 2005, Marriott demanded payment from Classics for the 2006 event. It also filed a complaint asserting two causes of action for breach of written contract against Classics based on Classics' alleged breaches of the 2005 and 2006 contracts. Marriott alleged that during the 2005 event, Classics used only 748 of the 1,365 room nights it agreed to use under the contract, and as a result, Classics owed $81,030.00 in liquidated damages. Marriott further alleged that under the 2005 contract, it had provided Classics with banquet food, beverages, meeting space, and labor, obligating Classics to pay $66,574.19. It alleged that despite its repeated demands for payment, Classics refused to pay the amount due. Classics filed a cross-complaint against Marriott and others for indemnification, apportionment of fault, interference with economic advantage and fraud.^[3]

The matters proceeded to a bench trial, during which Melvin Teitelbaum, Classics' sole shareholder and attorney of record, testified on Classics' behalf. With respect to the 2006 contract, Teitelbaum testified that as a result of an October 4, 2005 letter from Marriott's general manager, he understood that Marriott was canceling the 2006 contract, which was why he did not make the July, August, and September 2005 deposit payments. Teitelbaum explained that Marriott had in the past routinely accepted late payments of the advance deposits, waiving the contract's requirement that they be paid on specified due dates. As for the 2005 contract, Teitelbaum testified he had participated in its negotiation and drafting and therefore knew the meaning of its provisions, including the Rooms Attrition clause under which Marriott sought damages. According to Teitelbaum, circumstances required as a precondition for the Rooms Attrition clause never occurred; he testified that as he understood and negotiated it, the attrition clause would only apply if Classics elected to release 25 rooms from its room block, which it did not do.

The trial court entered judgment in Marriott's favor, awarding it $329,478.79 in damages and interest, consisting of $147,609.19 in actual damages, $135,232.50 in liquidated damages, and $46,637.19 in statutory prejudgment interest. It awarded Marriott $7,012.50 in costs. Classics filed this appeal.

DISCUSSION

I. General Principles of Appellate Review

We apply established appellate standards of review for this judgment following a bench trial. We begin with the settled principle that the interpretation of a contract generally presents a question of law for this court to determine anew unless the interpretation turns on the credibility of conflicting extrinsic evidence. (Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 527; Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865; ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1266 (ASP Properties); City of El Cajon v. El Cajon Police Officers' Assn. (1996) 49 Cal.App.4th 64, 70-71.) When a contract is reasonably susceptible to different interpretations based on conflicting extrinsic evidence requiring the resolution of credibility issues, its interpretation evolves into a question of fact to which the reviewing court applies the substantial evidence standard of review. (ASP Properties, at pp. 1266- 1267.) Where the evidence is undisputed and the parties draw conflicting inferences, the reviewing court will independently draw inferences and interpret the contract. (Id. at p. 1267; City of El Cajon, at p. 71; Parsons v. Bristol Development Co., 62 Cal.2d at pp. 865-866, fn. 2.) The court endeavors to effectuate the mutual intentions of the parties as it existed at the time of contracting insofar as it is ascertainable and lawful. (Civ. Code,

1636; City of El Cajon, at p. 71.)

II. The 2005 Contract

Classics contends that in awarding Marriott its requested damages, the trial court abused its discretion by ignoring the language of the 2005 contract; that none of the damages sought by Marriott are supported by the contract's language. Specifically, Classics argues (1) the Rooms Attrition clause, under which Marriott sought $81,030 in damages for a booking shortfall, only applied to a revised room block; (2) the contract does not support $18,561.50 in damages for room rental fees because such damages would only be permitted if Classics submitted anticipated attendance figures, which it did not do; and (3) it is not obligated to pay $37,437.18 in damages for kosher food vendors because the contract provides that Marriott "shall provide all food and beverage" for the event.

A. Room Attrition Damages

As support for its first point as to the booking shortfall damages, Classics points to a "Group Room Rates" provision within the 2005 contract, which in part sets out room rates and precedes the Rooms Attrition clause, which provides for liquidated damages. The last paragraph of the Group Room Rates clause provides: "On or before December 22, 2004, [Classics] may release up to 25 rooms per night from the room block at no penalty. If [Classics] exercises this option, [Marriott] has the right to revoke the Marius Meeting Room for the purpose of booking an additional group. The following attrition clause will then apply to the revised room block." (Italics added.) Classics maintains the italicized language means that the Rooms Attrition clause will only apply if Classics releases rooms and thus revises its room block, which it asserts is consistent with the testimony of Teitelbaum, the only witness present during the contract's negotiation. Classics argues the court was required to adopt Teitelbaum's testimony on that clause's meaning.

We disagree. Under the settled contract interpretation principles summarized above, Teitelbaum's understanding of the meaning of the Group Room Rates and Rooms Attrition clauses only becomes relevant and admissible if the contractual language is reasonably susceptible to differing interpretations. (Cedars-Sinai Medical Center v. Shewry (2006) 137 Cal.App.4th 964, 980; ASP Properties, supra, 133 Cal.App.4th at p. 1267.) Further, " 'California recognizes the objective theory of contracts [citation], under which "[i]t is the objective intent, as evidenced by the words of the contract, rather than the subjective intent of one of the parties, that controls interpretation." ' [Citation.] 'The parties' undisclosed intent or understanding is irrelevant to contract interpretation.' " (Cedars-Sinai, at p. 980.)

Here, we are not convinced Teitelbaum's testimony as to application of the Rooms Attrition clause is competent extrinsic evidence, because it appears to be his subjective, undisclosed understanding of the words in the contract. In any event, because Teitelbaum alone provided evidence as to the parties' intent at the time of contract formation, there is no conflict in the extrinsic evidence. Absent any such conflict, we independently interpret the agreement as a matter of law, guided by generally accepted canons of construction. (See Civ. Code, 1635-1654; ASP Properties, supra, 133 Cal.App.4th at p. 1267.) Under these principles, "[t]he whole of a contract is to be taken together, so as to give effect to every part, if reasonably practical, each clause helping to interpret the other." (Civ. Code, 1641; see also Code Civ. Proc., 1858.) "A contract must receive such an interpretation as will make it lawful, operative, definite, reasonable and capable of being carried into effect, if it can be done without violating the intention of the parties." (Civ. Code, 1643.) We must avoid an interpretation that makes a contract extraordinary, harsh, unjust or inequitable. (ASP Properties, at p. 1269; see also Sayble v. Feiman (1978) 76 Cal.App.3d 509, 513 ["where one construction would make a contract unusual and extraordinary and another construction, equally consistent with the language employed, would make it reasonable, fair, and just, the latter construction must prevail"].)

Considering the type and nature of the contract, we conclude the 2005 contract language is not reasonably susceptible to Classics' interpretation. Rather, the plain language of the Group Room Rates clause contains no ambiguity. Classic's interpretation would require us to rewrite the parties' contract by substituting the word "only" for the word "then" in the Group Room Rates clause. " '[W]e do not rewrite any provision of any contract, . . . for any purpose.' " (Rosen v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070, 1073.) Furthermore, the purpose of these clauses, and the contract as a whole, is obvious. Under the Group Room Rates clause, Classics was given the option to reduce the number of rooms from its room block without penalty so that it could minimize the impact of an anticipated shortfall, as long as it acted to do so on or before December 12, 2004. The Rooms Attrition clause "will then apply to the revised room block," i.e., the attrition clause would apply upon Classics' option and operate to penalize Classics if there was a shortfall of more than 15 percent of the revised room block number. It would be unusual for Marriott to entirely waive its right to liquidated damages for room shortfalls in the event Classics reduced its total room obligation, and we find no language in the contract to support such an interpretation.

Finally, the contractual language does not support Classics' assertion that the Rooms Attrition clause is subject to the condition precedent of exercise of the option to reduce its room block. "[P]rovisions of a contract will not be construed as conditions precedent in the absence of language plainly requiring such construction." (Rubin v. Fuchs (1969) 1 Cal.3d 50, 53; see also Alpha Beta Food Markets v. Retail Clerks (1955) 45 Cal.2d 764, 771 ["stipulations in an agreement are not to be construed as conditions precedent unless such construction is required by clear, unambiguous language; and particularly so where a forfeiture would be involved or inequitable consequences would result"]; Frankel v. Board of Dental Examiners (1996) 46 Cal.App.4th 534, 550 ["[C]ourts shall not construe a term of the contract so as to establish a condition precedent absent plain and unambiguous contract language to that effect"].) Conditions precedent "are not favored by the law, and are to be strictly interpreted against one seeking to avail himself of them." (Antonelle v. Kennedy & Shaw Lumber Co. (1903) 140 Cal. 309, 315; Frankel, at p. 550.)

B. Damages for Room Rental and Vendor Fees

As for Classics' latter two arguments, Marriott contends Classics waived its arguments to room rental and food vendor damages for failing to challenge those damages at trial. Classics disagrees, pointing to questions asked by Teitelbaum at trial relating to the provisions under which Marriot sought the room rental damages and Teitelbaum's objection to the admission of vendor invoices reflecting the food vendor damages. The record shows that while Teitelbaum asked witnesses about those terms of the contract, he did not advance any proposed contract interpretation or other argument, or cite authorities to the trial court challenging those particular items of damage sought by Marriot. On appeal, Classics does not challenge the trial court's admission into evidence of Marriot's vendor invoices reflecting these charges. Under the circumstances, we agree Classics has forfeited its challenges to these items of damage.

" '[I]t is fundamental that a reviewing court will ordinarily not consider claims made for the first time on appeal which could have been but were not presented to the trial court.' Thus, 'we ignore arguments, authority, and facts not presented and litigated in the trial court. Generally, issues raised for the first time on appeal which were not litigated in the trial court are waived.' " (Newton v. Clemons (2003) 110 Cal.App.4th 1, 11, fns. omitted.) "Appellate courts are loath to reverse a judgment on grounds that the opposing party did not have an opportunity to argue and the trial court did not have an opportunity to consider. [Citation.] In our adversarial system, each party has the obligation to raise any issue or infirmity that might subject the ensuing judgment to attack. [Citation.] Bait and switch on appeal not only subjects the parties to avoidable expense, but also wreaks havoc on a judicial system too burdened to retry cases on theories that could have been raised earlier." (JRS Products, Inc. v. Matsushita Electric Corp. of America (2004) 115 Cal.App.4th 168, 178.)

As stated, Classics' arguments to the court at the conclusion of trial did not suggest that Marriott's claims for room rental fees or vendor fees were somehow infirm and not supported by the terms of the contract. Because Marriott was denied the opportunity to address those issues at trial, we decline to hear them on appeal. The challenges are forfeited.

III. The 2006 Contract

Rearguing the merits of the case as if it were presenting the evidence to this court anew, Classics argues it never breached the 2006 contract, but rather, Marriott "cancelled the 2006 contract twice." Specifically, Classics points to evidence that in October 2006, Marriott's general manager sent a letter to Classics insisting that if Classics did not pay the disputed amounts due under the 2005 contract, it would consider the 2006 contract cancelled.^[4] Classics argues the evidence proved anticipatory breach, and thus it cannot be deemed to have breached a contract that Marriott had cancelled.

These arguments misunderstand the relevant appellate standard of review. The trial court here found, by implication, that Classics breached the 2006 contract. The relevant question on appeal is whether this implied factual finding is supported by substantial evidence in the record. (See Porter v. Arthur Murray, Inc. (1967) 249 Cal.App.2d 410, 421 ["Whether there is a material breach of a contract is in general a question of fact"]; Assoc. Lathing etc. Co. v. Louis C. Dunn, Inc. (1955) 135 Cal.App.2d 40, 49; accord, Superior Motels, Inc. v. Rinn Motor Hotels, Inc. (1987) 195 Cal.App.3d 1032, 1051-1052.) "[W]here a trial court's factual finding is challenged on the ground there is no substantial evidence to sustain it, the power of the reviewing court begins and ends with the determination as to whether, on the whole record, there is substantial evidence, contradicted or uncontradicted, that will support the trial court's determination. [Citation.] [] The appellate court views the evidence in the light most favorable to the respondents [citation], resolves all evidentiary conflicts in favor of the prevailing party and indulges all reasonable inferences possible to uphold the trial court's findings [citation]. However, when the decisive facts are undisputed, the reviewing court is confronted with a question of law and is not bound by the findings of the trial court. [Citation.] In other words, the appellate court is not bound by a trial court's interpretation of the law based on undisputed facts, but rather is free to draw its own conclusion of law." (San Diego Metropolitan Transit Development Bd. v. Handlery Hotel, Inc., supra, 73 Cal.App.4th at p. 528.) We may not reweigh the evidence or substitute our determination of witness credibility for that of the trial court. (As You Sow v. Conbraco Industries (2005) 135 Cal.App.4th 431, 454.)

Rather than directing us to a lack of evidence in support of the trial court's implied findings, Classics recites all of the testimony that would have supported a finding in its favor, arguing it shows Marriott's anticipatory breach of the 2006 contract. But we are required to review the record for evidence supporting the trial court's implied factual finding. Here, it is undisputed the 2006 contract required Classics to make an advance $70,000 payment to "hold arrangements on a definite basis," payable in a series of specified deposits. The Cancellation Clause required Classics to give Marriott written notice of its intent to cancel or otherwise abandon its use of the rooms within five business days of its decision. Both parties presented evidence that Classics never made any of the advance deposits under the 2006 contract, and Marriott's Director of Finance, Kevin Stockford, testified that at the time they were due, Marriott was ready, willing and able to perform the 2006 contract.

The trial court was entitled to credit Marriott's evidence and conclude that Classics did not perform as the 2006 contract required. It impliedly found the advance deposit requirement was a material term of the 2006 contract, which Classics had breached by failing to make the required deposits by their specified due dates. Because our power "begins and ends" with a determination that substantial evidence supports that finding whether contradicted or uncontradicted (ASP Properties, supra, 133 Cal.App.4th at p. 1266), we need not decide whether the testimony of Classics' principal demonstrates an anticipatory breach by Marriott, because that testimony is merely evidence that could support a contrary verdict.

IV. Mitigation Evidence

Classics contends that with respect to both the 2005 and 2006 contracts, Marriott presented no evidence as to its efforts to mitigate damages. Relying on the "avoidable consequences doctrine," under which a person injured by another's conduct cannot be compensated for damages that he or she could have avoided by reasonable effort or expenditure (Strebel v. Brenlar Investments, Inc. (2006) 135 Cal.App.4th 740, 753), Classics argues the trial court erred by awarding damages in the exact amounts requested by Marriott.

The fatal flaw with this argument is that it was Classics' burden as the defendant to plead and prove the avoidable consequences defense. (State Dept. of Health Services v. Superior Court (2003) 31 Cal.4th 1026, 1044, citing Burrows v. State of California (1968) 260 Cal.App.2d 29, 33 [defendant bears the burden of pleading and proving a defense based on the avoidable consequences doctrine]; see also Millikan v. American Spectrum Real Estate Services California, Inc. (2004) 117 Cal.App.4th 1094, 1105.) "The burden of proving that losses could have been avoided by reasonable effort and expense must always be borne by the party who has broken the contract. [Citations.] Inasmuch as the law denies recovery for losses that can be avoided by reasonable effort and expense, justice requires that the risks incident to such effort should be carried by the party whose wrongful conduct makes them necessary." (Millikan, 117 Cal.App.4th at p. 1105.)

Classics did not offer evidence that Marriott's room vacancies could have been avoided, or that Marriott did not take reasonable steps to resell rooms. Indeed, the evidence on that subject was to the contrary: Marriott's Director of Room Operations testified that out of courtesy and a desire to maintain goodwill, Marriott gave Classics credit for rooms that Classics left vacant, but that were ultimately sold by the hotel, even when it was not obligated to do so under the 2005 contract. Nevertheless, any failure of proof on the issue is attributable to Classics, not Marriott.

In its reply brief, Classics argues that the contracts themselves required Marriott to reduce damages in the event of a cancellation. Classics does not provide further explanation. We need not discuss the question because Classics' argument was not made in its opening brief. Second, the argument is made without authority and or reasoned analysis For either of these independent reasons, we decline to address the point. (In re Marriage of Ackerman (2006) 146 Cal.App.4th 191, 214 [court will not consider issues raised for first time in reply brief in absence of good cause]; Wright v. City of Los Angeles (2001) 93 Cal.App.4th 683, 689 ["Generally, asserted grounds for appeal that are unsupported by any citation to authority and that merely complain of error without presenting a coherent legal argument are deemed abandoned and unworthy of discussion"].)

DISPOSITION

The judgment is affirmed.

O'ROURKE, J.

WE CONCUR:

McCONNELL, P. J.

NARES, J.

^[1] We state the facts viewing the evidence in the light most favorable to Marriott as the respondent, resolving all evidentiary conflicts in its favor as the prevailing party and indulging all reasonable inferences possible to uphold the trial court's findings. (San Diego Metropolitan Transit Development Bd. v. Handlery Hotel, Inc. (1999) 73 Cal.App.4th 517, 528.) We presume the trial court made all factual findings necessary to support the judgment for which substantial evidence exists in the record. (Slavin v. Borinstein (1994) 25 Cal.App.4th 713, 718.)

^[2] The 2006 contract's cancellation clause provides in part: "[Classics] agrees to provide [Marriott] with written notice of any decision to cancel or to otherwise essentially abandon its use of the Total Room Nights (Cancellation) within five (5) business days of such decision. [Classics] acknowledges that a Cancellation would constitute a breach of [Classics'] obligation to [Marriott] and [Marriott] would be harmed. If a cancellation occurs, the parties agree that: [] (a) It would be difficult to determine [Marriott's] actual harm. [] (b) The sooner [Marriott] receives notice of the Cancellation, the lower its actual harm is likely to be, because the probability of mitigating the harm by reselling space and functions is higher. [] (c) The higher dollar amount in the chart (the "Chart") set forth below reasonably estimates [Marriott]'s harm for a last-minute Cancellation and, through its use of a sliding scale that reduces damages for earlier Cancellations, the Chart also reasonably estimates [Marriott's] ability to lessen its harm by reselling [Classics'] space and functions. [] [Classics] therefore agrees to pay [Marriott], within thirty (30) days after any Cancellation, as liquidated damages and not as a penalty, the amount listed in the Chart below." The referenced chart indicates that a cancellation taking place from 299 to 181 days prior to the event would give rise to liquidated damages of 50 percent of the Total Rooms Revenue, defined as "the dollar amount equal to the number of Total Room Nights multiplied by [Classics'] average room rate."

^[3] The trial court granted nonsuit in favor of Marriott and other cross-defendants on Classics' cross-complaint. Classics does not challenge that ruling on appeal.

^[4] The trial court paraphrased the letter, which is not in the record, as "essentially" saying "pay the amount you owe us [Marriott] for '05, and if you don't we'll consider the '06 contract cancelled." Teitelbaum characterized this letter at trial as one by which Marriott elected to cancel the 2006 contract.