Whitton v. AAAmerican Pacific Manufactured Homes

Filed 11/24/09 Whitton v. AAAmerican Pacific Manufactured Homes 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

APPEALS from a judgment and orders of the Superior Court of San Diego County, Laura W. Halgren, Judge. Affirmed in part; reversed in part with directions.

Barry Whitton appeals a judgment awarding him damages on his breach of fiduciary duty claim against AAAmerican Pacific Manufactured Homes, Inc. (Pacific) and Timothy Feeney, and postjudgment orders. Whitton contends the court erred by

(1) reducing the jury's punitive damages award against Feeney, and (2) denying him contractual attorney fees on the tort claim. Pacific and Feeney have cross-appealed, challenging the judgment and postjudgment orders. They contend the court erred by

(1) denying their motion for judgment notwithstanding the verdict (JNOV), and (2) denying them contractual attorney fees based on a directed verdict in their favor on Whitton's breach of contract claim.

Because there is insufficient evidence to support the jury's compensatory damages award of $7,500 on the breach of fiduciary duty claim, we reverse the judgment and the order denying defendants' motion for JNOV and granting their motion to reduce punitive damages. We remand with directions for the trial court to grant defendants' JNOV motion, award Whitton a total of $2,500 in compensatory damages, redetermine the amount of costs to which he is entitled, and reconsider defendants' motion for a reduction in punitive damages in light of the reduction of compensatory damages. The court properly ruled that no party is entitled to attorney fees, and thus we affirm the order on fees.

FACTUAL AND PROCEDURAL HISTORY

Feeney is a sales agent for Pacific, which sells new mobile homes and acts as an agent in the resale of mobile homes. Whitton retained Feeney to sell his 1967 mobile home, which was in poor condition. Whitton wanted to net $30,000 on the sale, but Feeney advised him he believed the property was worth between $20,000 and $22,000. Feeney was nonetheless willing to try to get a higher price.

On August 20, 2005, Whitton and Feeney signed Pacific's standard form exclusive listing agreement, which provided: "(1) . . . NET LISTING SELLER to receive $30,000 less liens set forth above. DEALER to receive all sums in excess of same as commission. [] (2) Commission disclosure. It is agreed that minimum commission is $5,000 and maximum commission is unlimited." (Boldface omitted.) The agreement also provides: "DEALER is hereby authorized to accept the offer of any purchaser which shall be in accordance with the terms herein or on such different terms as are authorized in writing by SELLER(s)." Setting aside any ambiguity, the parties interpreted the agreement to mean Feeney lacked authority to sell the property for less than $35,000 without Whitton's agreement to accept a net of less than $30,000.

Whitton's mobile home was originally listed at $39,900. Feeney's efforts to sell the property included posting a for sale sign on it, notifying the mobile home park manager, and passing out flyers to numerous other agents. Feeney received several phone inquiries, and he and other Pacific sales agents showed the property to nine or 10 potential buyers.

After nearly two months on the market, there were no offers on the mobile home. On about October 9, 2005, Whitton phoned Feeney and said he was willing to accept $22,000 for the property. Whitton asked Feeney what the new listing price would need to be, and Feeney said $27,000. Feeney crossed out the $39,900 price on the flyers and reduced the number to $27,000. Thus, at this point Feeney intended to charge a $5,000 commission in accordance with the initial listing agreement.

The following day, Mark Sjobom offered to purchase the mobile home for $30,000. Sjobom's agent, Tomas Reynoso, was also a Pacific sales agent, but he was unaware of the price reduction. Sjobom intended to remove the mobile home from the lot and replace it with a new mobile home purchased from Pacific.

Whitton accepted Sjobom's offer. Feeney told Whitton that since he had orally agreed to accept a net of $22,000, Feeney's commission would be $8,000. Whitton asked if he could get $22,500 instead, and Feeney agreed. On October 13, 2005, Whitton signed a second exclusive listing agreement Feeney had presented to him, under which Whitton was entitled to a net of $22,500, and Feeney was entitled to a $7,500 commission. After a short escrow period, the title company sent Whitton a check for $22,430, his net after certain fees. He negotiated the check in January 2006.

In January 2007 Whitton sued Feeney and Pacific for breach of contract, breach of fiduciary duty and fraud.[1] The breach of contract count alleged that before Feeney told Whitton about Sjobom's $30,000 offer, he persuaded Whitton to sign the second listing agreement; the second listing agreement was invalid because it was unsupported by any new consideration; Whitton was not paid the amount to which he was entitled under the first listing agreement; and Feeney failed to properly market the mobile home. The breach of fiduciary duty count alleged Feeney and Pacific failed to properly market the mobile home, and they gained an unfair advantage over Whitton by having him sign the second listing agreement. The fraud count was also based on the failure to properly market the mobile home.[2]

Feeney conceded at trial that as Whitton's agent he had a duty to act in his best interest. He testified he intended to be honest with Whitton and Whitton had a right to trust him. He considered himself to be Whitton's friend, and he had taken him to look at alternative housing.[3]

In an attempt to justify the second listing agreement, Feeney testified that because Sjobom intended to remove Whitton's mobile home from the lot and replace it with a new mobile home, "we had to use extra money to clean the lot, dismantle the home, and transport it out of the park and clean the space up." He added that "based on pullouts that I have done before, we associated it with about $2,500 in costs and fees to remove it out of the park." He admitted, however, that the second listing agreement does not mention pullout or cleanup costs, and in any event, as the seller Whitton was not responsible for such costs. Under questioning by his own attorney, he conceded that pullout and cleanup costs are not passed on to either the buyer or seller, and the entire $7,500 he received under the second listing agreement was a commission.

Sjobom's agent, Reynoso, testified that Feeney "had nothing to do with the pullout portion of this transaction." Sean Feeney, who owns Pacific and is Feeney's brother, testified that Pacific incurred no costs in moving the mobile home, but it did incur costs for cleaning up the site. Sean Feeney agreed, however, that Whitton had no liability for those costs. As the court noted, "the whole issue of whether . . . [Pacific] had to pay for lot costs . . . is unrelated to the issue of the commission."

Whitton's testimony was unhelpful because for the most part he could not remember the details of the transactions or his conversations with Feeney. He did say he always believed he was entitled to $30,000, but when he was asked whether Feeney breached a contract with him, he responded, "I really don't know." He conceded that no one forced or pressured him to sign the second listing agreement.

At the close of evidence, Feeney and Pacific moved for a directed verdict. The court denied the motion as to the breach of fiduciary duty claim, and as to the claim for punitive damages against Feeney. The court granted the motion as to the breach of contract and fraud claims, and as to the claim for punitive damages against Pacific. The court found that under Civil Code section 1698 the second listing agreement did not require any new consideration because it was fully executed by Whitton's close of escrow and negotiation of the $22,430 check.

The jury returned a special verdict, finding Feeney breached his fiduciary duty to Whitton, Whitton's compensatory damages were $7,500, and Feeney's conduct was malicious, fraudulent or oppressive. At a separate hearing, the jury imposed $10,000 in punitive damages against Feeney, which was added to the judgment. The verdict form stated the parties had stipulated that Pacific was responsible for any harm Feeney's breach of fiduciary duty caused. Judgment was entered on May 30, 2008.

Feeney and Pacific then moved for JNOV, arguing insufficiency of the evidence to support the jury's compensatory damages award of $7,500 on Whitton's breach of fiduciary duty claim, or punitive damages against Feeney. The court denied a JNOV, but reduced the punitive damages to $2,500. This reduction was added to the judgment.

Whitton moved for $89,772.50 in contractual attorney fees for prevailing on his tort claim, and Feeney and Pacific moved for $61,217.50 in contractual attorney fees and other costs for obtaining a directed verdict on his breach of contract claim. The court denied Whitton's motion on the ground the fee provision in the listing agreement was insufficiently broad to apply to a tort claim, and it denied defendants' motion on the ground there was no prevailing party on the breach of contract claim for purposes of attorney fees since both sides raised contract claims in the action that were unsuccessful.

DISCUSSION

I

Breach of Fiduciary Duty/Damages

"To establish a cause of action for breach of fiduciary duty, a plaintiff must demonstrate the existence of a fiduciary relationship, breach of that duty and damages." (Charnay v. Cobert (2006) 145 Cal.App.4th 170, 182.) "A fiduciary or confidential relationship can arise when confidence is reposed by persons in the integrity of others, and if the latter voluntarily accepts or assumes to accept the confidence, he or she may not act so as to take advantage of the other's interest without that person's knowledge or consent." (Pierce v. Lyman (1991) 1 Cal.App.4th 1093, 1101-1102.) " 'The basic fiduciary obligations are two-fold: undivided loyalty and confidentiality.' " (Id. at p. 1102.)

Whitton argued that Feeney breached his fiduciary duty when he "presented [Whitton] with that second contract to increase [his] commission, while giving nothing in exchange to [Whitton]." Feeney and Pacific do not dispute that he breached his fiduciary duty to Whitton. Indeed, the evidence amply supports a finding that Feeney took unfair advantage of Whitton by intentionally increasing his commission from $5,000 to $7,500, after Sjobom made the $30,000 offer on the mobile home, with no satisfactory explanation or benefit to Whitton.

Feeney and Pacific assert Whitton offered no evidence to support the jury's $7,500 compensatory damage award. The "scope of our review begins and ends with the determination whether, on the entire record, there is any substantial evidence, contradicted or uncontradicted, which will support the conclusions reached by the jury. [Citations.] In reviewing the . . . record, we must examine all factual matters in the light most favorable to the prevailing parties and resolve all conflicts in support of the judgment. [Citation.] [] 'Substantial' evidence, however, is not synonymous with 'any' evidence. To constitute sufficient substantiality to support the verdict, the evidence must be 'reasonable in nature, credible, and of solid value; it must actually be "substantial" proof of the essentials which the law requires in a particular case.' " (Kruse v. Bank of America (1988) 202 Cal.App.3d 38, 51.)

"Recovery for damages based upon breach of fiduciary duty is controlled by Civil Code section 3333, the traditional tort recovery." (Michelson v. Hamada (1994) 29 Cal.App.4th 1566, 1582.) The statute provides: "For the breach of an obligation not arising from contract, the measure of damages, except where otherwise expressly provided by this code, is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not." (Civ. Code,  3333.) " 'Whatever the proper measure of damages may be, in a given case, the recovery therefore is still subject to the fundamental rule that damages which are speculative, remote, imaginary, contingent, or merely possible cannot serve as a legal basis for recovery.' " (Goehring v. ChapmanUniversity(2004) 121 Cal.App.4th 353, 367.)

Whitton cites no evidence to support a finding that Feeney's conduct proximately caused Whitton compensatory damages in the amount of $7,500, and we have found none in our independent review of the record. During closing, his counsel argued the "most obvious element of harm" was the $2,500 increased commission under the second listing agreement. Counsel also stated the question of harm was based on "the totality of evidence," but there was no evidence to justify an award exceeding $2,500. Counsel also argued that if the jury found no actual damages, it should award $1 in nominal damages.

On appeal, Whitton concedes Feeney was entitled to a minimum $5,000 commission, and that "[a]ctually, . . . Whitton lost $2,500.00 because of fiduciary Feeney's act." Without any citation of legal authority, Whitton asserts that an award of the entire amount of commission due Feeney under the second listing agreement, $7,500, was nonetheless "appropriate." In awarding $7,500, the jury may have intended to strip Feeney of any commission. That would be for purposes of punishing Feeney, however, rather than compensating Whitton, and the court cautioned the jury that at the compensatory damage stage, "you must not include in your award any damages to punish or make an example of Pacific . . . or . . . Feeney."

There is insufficient evidence to support an award of $7,500 in compensatory damages, and undisputed evidence shows $2,500 is the correct award. Contrary to defendants' assertion, which is unsupported by any legal authority, Whitton may recover the $2,500 under a breach of fiduciary duty theory even though that amount may have also been the measure of damages under a breach of contract claim had he succeeded on that claim. Whitton pleaded alternative theories of recovery of his compensatory damages, which is, of course, permissible. (See, e.g., Banis Restaurant Design, Inc. v. Serrano (2005) 134 Cal.App.4th 1035, 1040.) "The cause of action is based on the injury to the plaintiff, and not the particular legal theory of the defendant's wrongful act." (4 Witkin, Cal. Procedure (5th ed. 2008) pleading,  36, p. 101.)

Under these circumstances, a new trial is unwarranted. Appellate courts "may affirm, reverse, or modify any judgment or order appealed from, and may direct the proper judgment or order to be entered, or direct a new trial or further proceedings to be had." (Code Civ. Proc.,  43.) "[W]here it appears from the record as a matter of law there is only one proper judgment on undisputed facts, we may direct the trial court to enter that judgment." (Conley v. Matthes (1997) 56 Cal.App.4th 1453, 1459, fn. 7.)

We reverse the judgment and remand the matter with directions to the trial court to grant defendants' JNOV motion[4], award Whitton $2,500 in compensatory damages, redetermine the amount of costs to which he is entitled, and reconsider defendants' motion for the reduction of punitive damages in light of our reduction of compensatory damages. (See McGee v. Tucoemas Federal Credit Union (2007) 153 Cal.App.4th 1351, 1361 ["While punitive damages must bear a reasonable relation to actual damages, no fixed ratio exists to determine the proper proportion."].)

Contrary to defendants' view, there is substantial evidence to support the jury's finding that Feeney acted with malice, oppression or fraud, justifying the imposition of punitive damages. As discussed, the evidence shows Feeney took unfair advantage of Whitton by intentionally increasing his commission from $5,000 to $7,500 without any satisfactory explanation or benefit to Whitton. Feeney admitted he had a legal obligation to represent Whitton's best interests and not take advantage of Whitton, and the evidence establishes he intentionally breached those obligations strictly for his own monetary gain.

II

Attorney Fees

A

Pacific and Feeney contend the court erred by denying their motion for contractual attorney fees based on the directed verdict in their favor on Whitton's breach of contract claim. The court determined that since the parties had competing breach of contract claims, both of which were unsuccessful, there was no prevailing party on the contract.

Under Civil Code section 1717, the "party who is determined to be the prevailing party on the contract" shall be entitled to reasonable attorney fees in addition to other costs. (Civ. Code,  1717, subd. (a).) The "party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract. The court may also determine that there is no prevailing party on the contract for purposes of this section." (Id.at subd. (b)(1), italics added.)

The court's determination there is no prevailing party is subject to an abuse of discretion standard of review. (Hsu v. Abbara (1995) 9 Cal.4th 863, 871.) In exercising its discretion, "the trial court is to compare the relief awarded on the contract claim or claims with the parties' demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources. The prevailing party determination is to be made only upon final resolution of the contract claims and only by 'a comparison of the extent to which each party ha[s] succeeded and failed to succeed in its contentions.' " (Id. at p. 876.)

Pacific and Feeney argue that since they succeeded on the only contract claim that was actually adjudicated, the court was required to designate them as the prevailing parties. However, they cite no legal authority that suggests the court was required to ignore the defeat on their own breach of contract claim simply because it was dismissed after trial without an adjudication on the merits since defendants presented no evidence. It remains that they lost on the claim. "[P]arties are required to include argument and citation to authority in their briefs, and the absence of these necessary elements allows this court to treat appellant's . . . issue as waived." (Interinsurance Exchange v. Collins (1994) 30 Cal.App.4th 1445, 1448.) [5]

In any event, even without waiver we would find against defendants.

" '[T]ypically, a determination of no prevailing party results when both parties seek relief, but neither prevails, or when the ostensibly prevailing party receives only a part of the relief sought.' " (Hsu v. Abbara, supra, 9 Cal.4th at p. 875.) "Discretion is abused whenever, in its exercise, the court exceeds the bounds of reason, all of the circumstances before it being considered." (Denham v. Superior Court (1970) 2 Cal.3d 557, 566.) We cannot say the court abused its discretion.

B

Whitton's breach of fiduciary duty claim sounds in tort. (Slovensky v. Friedman (2006) 142 Cal.App.4th 1518, 1535.) We reject his contention the court erred by finding the attorney fees clause in the listing agreement is insufficiently broad to cover his tort claim.

"Civil Code section 1717 does not apply to tort claims; it determines which party, if any, is entitled to attorneys' fees on a contract claim only. [Citations.] As to tort claims, the question of whether to award attorneys' fees turns on the language of the contractual attorneys' fee provision, i.e, whether the party seeking fees has 'prevailed' within the meaning of the provision and whether the type of claim is within the scope of the provision. [Citation.] This distinction between contract and tort claims flows from the fact that a tort claim is not 'on a contract' and is therefore outside the ambit of section 1717." (Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 708 (Exxess).) "If a contractual attorney fee provision is phrased broadly enough, . . . it may support an award of attorney fees to the prevailing party in an action alleging both contract and tort claims." (Stanisas v. Goodin (1998) 17 Cal.4th 599, 608.) "Because of its more limited scope, Civil Code section 1717 cannot be said to supersede or limit the broad right of parties pursuant to Code of Civil Procedure section 1021 to make attorney fees agreements." (Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1342 (Xuereb).)

The cases Whitton cites are unavailing. In Xuereb, supra, 3 Cal.App.4th 1338, a purchase agreement provided that "the prevailing party would recover its attorney fees and costs in any 'lawsuit or other legal proceeding' to which 'this [a]greement gives rise.' " (Id. at p. 1342.) The court held the provision "does not limit an award of attorney fees to actions brought on a breach of contract theory, or to actions brought to interpret or enforce a contract. . . . The language is broad enough to encompass both contract actions and actions in tort." (Id. at pp. 1342-1343.) The court added that the critical question was whether the lawsuit arose from the purchase agreement. (Id. at p. 1343.)

In Lerner v. Ward (1993) 13 Cal.App.4th 155 (Lerner), a purchase agreement similarly permitted "recovery of attorney fees to the prevailing party '[i]n any action or proceeding arising out of this agreement.' " (Id. at pp. 158-159.) Based on Xuereb, the court held the provision "was not limited merely to an action on the contract, but to any action or proceeding arising out of the agreement. This included any action for fraud arising out of that agreement." (Lerner, at p. 160.)

In Allstate Ins. Co. v. Loo (1996) 46 Cal.App.4th 1794 (Allstate), the court cited Xuereb and Lerner for the proposition that "case law makes clear, the test is not whether the cause of action sounds in tort or contract. Instead, the sole question is the intent of the parties: did they intend to authorize the prevailing party to recover its attorney fees for a tort cause of action." (Allstate, at p. 1798.) The following provision was at issue in Allstate: " 'In any legal action brought by either party to enforce the terms hereof or relating to the demised premises, the prevailing party shall be entitled to all costs incurred in connection with such action, including a reasonable attorney's fee.' " (Id. at p. 1799.) The court held "this provision encompasses any action whether in contract or in tort which relates to the leased premises." (Ibid.)

We apply the ordinary rules of contract interpretation, under which the mutual intention of the parties at the time the contract is formed governs. " 'Such intent is to be inferred, if possible, solely from the written provisions of the contract. . . . The 'clear and explicit' meaning of these provisions, interpreted in their 'ordinary and popular sense,' unless 'used by the parties in a technical sense or a special meaning is given to them by usage' . . . , controls judicial interpretation. . . . Thus, if the meaning a layperson would ascribe to contract language is not ambiguous, we apply that meaning. . . ." ' " (Exxess, supra, 64 Cal.App.4th at p. 709.)

Here, in contrast to the broad language of the attorney fee provisions in Xuereb, Lerner and Allstate, the listing agreement between defendants and Whitton states: "In the event it becomes necessary to sue to enforce or sue for breach of any of the terms of this Agreement, the prevailing part(ies) shall be entitled to reasonable attorneys fees and court costs in addition to other damages said party may suffer." This language expressly pertains only to a suit to enforce the contract or for breach of contract, and it allows the recovery of fees by the party prevailing on the contract claim. The provision does not cover any claims arising out of the agreement.

In Exxess, the court held a breach of fiduciary duty claim was not brought to enforce the terms of a lease that contained an attorney fees provision. (Exxess, supra, 64 Cal.App.4th at p. 709.) The court explained: "As our Supreme Court has indicated, where a lease authorizes an award of attorneys' fees in an action to ' " 'enforce any . . . provision . . . of this [contract],' " ' tort claims are not covered." (Ibid., quoting Stanisas v. Goodin, supra, 17 Cal.4th at pp. 622, fn. 9.)

Whitton attempts to distinguish Exxess on the ground he did not bring his fiduciary duty claim to enforce the terms of the listing agreement, and rather its purpose was to recover for a breach of a term of the agreement. His theory is that the agreement created a fiduciary duty toward him, the breach of which is subject to an award of attorney fees under the second phrase of the agreement's fee provision. He cites no supporting legal authority for this proposition, and we conclude it lacks merit. As the court pointed out, for purposes of an attorney fees award there is no material difference between an action to enforce the contract and an action for breach of contract. "The test is what did the parties agree to based on the language of the contract. Because it cannot be concluded from the narrow language of this contract that the parties contemplated inclusion of actions for breach of fiduciary duty, the court finds plaintiff may not recover fees based on his fiduciary duty claim." As a matter of law, the court ruled correctly.

DISPOSITION

We reverse the judgment and the order denying defendants' motion for JNOV and granting their motion to reduce punitive damages. We remand with directions for the trial court to grant defendants' JNOV motion, award Whitton a total of $2,500 in

compensatory damages, redetermine the amount of costs to which he is entitled, and reconsider defendants' motion for a reduction in punitive damages in light of the reduction of compensatory damages. We affirm the order on attorney fees. The parties are to bear their own costs on appeal.

McCONNELL, P. J.

WE CONCUR:

NARES, J.

McDONALD, J.

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[1] The complaint included other causes of action that were not pursued at trial.

[2] Feeney and Pacific cross-complained against Whitton for breach of contract, negligence and negligent misrepresentation. The breach of contract cause of action alleged Whitton breached the terms of the listing agreement, and an oral agreement, to vacate his mobile home in a timely manner after its sale, and as a result defendants suffered damages, including "interest fees, transportation fees and storage fees, related to the new manufactured home Mark Sjobom purchased from . . . Pacific and had been attempting to place" on Whitton's mobile home space. Defendants, however, presented no supporting evidence at trial and the judgment includes a dismissal of the cross-complaint.

[3] Whitton characterizes himself as "mentally challenged," but there was no finding he was incompetent to enter into contracts or to testify at trial. Myrna Wilhelm testified she lived at the same mobile home park as Whitton, and for many years she drove him to doctor appointments and to the grocery store, and she helped him apply for social security income. She said she acted as his caretaker, but "not all the time."

[4] " 'The trial court's power to grant a motion for JNOV . . . is the same as its power to grant a directed verdict. (Code Civ. Proc.,  629.) The court must accept as true the evidence supporting the jury's verdict, disregarding all conflicting evidence and indulging in every legitimate inference that may be drawn in support of the judgment. The court may grant the motion only if there is no substantial evidence to support the verdict.' [Citation.] On appeal, we apply the same standard and must uphold the trial court's denial of the motion unless there is no substantial evidence to support the verdict." (Kephart v. Genuity, Inc. (2006) 136 Cal.App.4th 280, 289.)

[5] Almost the entire discussion in defendants' appellate brief on attorney fees pertains to whether the fee provision in the listing agreement was broad enough to entitle Whitton to fees for prevailing on his tort claim for beach of fiduciary duty. The discussion on defendants' own entitlement to fees is limited to three paragraphs that include no legal citations regarding the court's discretion to find that no party prevailed on the contract.