Cal Continental Capital v. 1502 Rockwood CA2/1

Opinion

Filed 8/31/26 Cal Continental Capital v. 1502 Rockwood CA2/1 NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

SECOND APPELLATE DISTRICT

DIVISION ONE

CAL CONTINENTAL CAPITAL, B331098, B334747 INC., (Los Angeles County Plaintiff, Cross-defendant Super. Ct. No. BC651574) and Appellant, v. 1502 ROCKWOOD, LLC, Defendant, Cross-complainant and Appellant.

APPEALS from a judgment of the Superior Court of Los Angeles County, Kristin S. Escalante, Judge. Affirmed. Law Offices of Michael C. Murphy, Michael C. Murphy and Michael C. Murphy, Jr., for Plaintiff, Cross-defendant and Appellant. Law Offices of A. Scott Brown and A. Scott Brown for Defendant, Cross-complainant and Appellant. In a dispute over the sale of real property, the buyer appeals from a judgment that awarded the buyer’s broker no commission. We conclude that although the original purchase agreement called for a brokerage commission, the parties entered into a modified agreement that omitted reference to the commission. In a separate appeal from the same judgment, the seller contends the trial court erroneously denied the seller’s request for attorney fees. We conclude the seller was not entitled to attorney fees. Accordingly, we affirm the judgment.

BACKGROUND A. Parties Because all parties received their rights by assignment, we will sort them out first.

1. Cal Continental Capital, Inc. (Seller) Crown Hill LLC, which owned property located at 1502-1510 Rockwood Street in Los Angeles, assigned its rights to Cal Continental Capital, Inc. (CCCI). For ease of reference, we will designate the seller simply as CCCI. Charles Jeannel owned and controlled CCCI.

2. 1502 Rockwood, LLC (Buyer) and YBM, Inc. (Broker) NMB, LLC, purchased the property from CCCI and assigned its rights to 1502 Rockwood LLC, (Rockwood). We will designate the buyer as Rockwood. Rockwood’s real estate broker was YBM, Inc. YBM assigned its rights to Rockwood as well. Yair Ben-Moshe owned and controlled both Rockwood and YBM. YBM is not a party to this action.

2 B. Purchase Agreement and Initial Escrow Instructions In June 2013, CCCI agreed to sell the property to Rockwood for $1.175 million, and to pay YBM a $75,000.00 brokerage commission.1 The purchase agreement stated that the parties would mediate any dispute arising out of the agreement or any resulting transaction before resorting to legal action. Joint escrow instructions incorporated the terms of the purchase agreement, and escrow opened in June 2013.

C. Modified Agreement and Instructions On March 12, 2014, after environmental studies revealed hydrocarbon contamination on the property, CCCI and Rockwood modified the purchase agreement. Among other financial arrangements, Rockwood agreed to pay $925,000 for the property and provide a payment stream and $100,000 bonus to CCCI if certain conditions were met. The modified purchase agreement said nothing about a broker’s commission or mediation. Regarding attorney fees, the modified purchase agreement stated: “None of the parties shall . . . recover costs [or] attorneys’ fees incurred in connection with any of the matters described herein, or in the negotiation and documentation of this agreement. . . . If any proceeding is undertaken to interpret or enforce this agreement, the prevailing party shall be entitled to reasonable attorney fees and costs incurred in such dispute.” (Capitalization omitted.)

1 Despite a typographical error indicating that YBM represented CCCI (the seller), the parties understood that it represented only Rockwood.

3 The joint escrow instructions were revised, and expressly incorporated both the original and modified purchase agreements. Despite there being no mention in the modified agreement of a brokerage commission, on March 17, 2014, Ben-Moshe sent an email to the escrow manager (and copied to Jeannel) stating, “I reserve all of my [(sic): YBM’s] rights [to a commission], but we need not hold up the closing [to] deal [with that].”

D. Complaints 1. Original Complaint and Mediation In 2016, CCCI, the seller, sued buyer Rockwood for breach of contract and fraudulent concealment, alleging Rockwood failed to pay CCCI the bonus or payment stream required by the modified purchase agreement, and made false statements that had induced CCCI to reduce the purchase price. Upon Rockwood’s demand, the parties attempted to resolve the dispute in mediation, which was unsuccessful.

2. Second Complaint In February 2017, CCCI filed a second, identical lawsuit against Rockwood. A week later, it dismissed the original lawsuit.

3. Cross-Complaint In July 2017, Rockwood, the buyer, cross-complained against seller CCCI for breach of contract, alleging CCCI failed to pay a $75,000.00 brokerage commission to broker YBM (which had assigned its rights to Rockwood). (Despite designating the cause of action as alleging breach of contract, Rockwood did not allege any agreement between YBM and any other party, not even Rockwood itself.) Rockwood’s cross-complaint also asserted causes of action for (1) fraudulent concealment, alleging CCCI misrepresented in its 4 disclosures that three oil wells on the property had been capped; and (2) conspiracy to commit fraud, alleging CCCI made intentional misstatements in its complaint against Rockwood. Rockwood dismissed these fraud claims before trial.

E. Trial CCCI’s causes of action for breach of contract and fraud and Rockwood’s cross-action for breach of contract went to bench trial. Jeannel, CCCI’s principal, testified that Ben-Moshe, YBM’s principal, agreed that after CCCI reduced the purchase price on the property, it would not owe YBM a brokerage commission. Ben-Moshe testified that CCCI owed YBM a commission despite modification of the purchase agreement. He acknowledged that Jeannel disputed this claim, but Ben-Moshe opted to wait until after escrow closed to resolve the dispute rather than risk losing Rockwood’s deposit.

F. Judgment On CCCI’s complaint, the court found that Rockwood did not breach the modified purchase agreement but it fraudulently induced CCCI to reduce the purchase price by $200,000. The judgment awarded CCCI nothing on its breach of contract claim but $200,000 plus interest on its fraud claim. No party appealed from this portion of the judgment. On Rockwood’s cross-complaint, the court found no support for a $75,000 brokerage commission owed to YBM (and by assignment to Rockwood) because the modified purchase agreement contained no reference to one and there was no evidence that YBM agreed to provide or actually provided brokerage services. The court accordingly entered judgment against Rockwood on its cross-complaint. Rockwood appeals from the judgment insofar as it rejected Rockwood’s claim for a commission.

5 G. Attorney Fees CCCI moved for attorney fees incurred in its successful defense against Rockwood’s breach of contract cross-claim, its direct fraud claim, and its defense against Rockwood’s dismissed fraud cross-claims. The court found CCCI was not entitled to attorney fees on its direct fraud claim because it failed to seek mediation before filing its lawsuit, which the original purchase agreement had required. Although the modified agreement was silent about mediation, the court found CCCI conceded that the mediation requirement from the original agreement carried over to the modified agreement. The court invited supplemental briefing for CCCI to identify which attorney fees it incurred defending specifically against Rockwood’s breach of contract cross-claim. CCCI failed to do so, but instead made a request for relief under Code of Civil Procedure section 473 and offered supplemental briefing on its entitlement to fees for its successful defense of Rockwood’s dismissed fraud cross- claims. The court rejected this request and briefing and denied CCCI any defense fees. CCCI appeals from the judgment insofar as it denied attorney fees. We consolidated Rockwood’s and CCCI’s appeals.

DISCUSSION A. Rockwood’s Appeal Rockwood, the buyer, contends that the court erred in finding no evidence supported seller CCCI’s obligation to pay YBM (and by assignment Rockwood) a brokerage commission. We disagree. CCCI contends Rockwood had no standing to sue for recovery of the commission because it was not a licensed broker. The point is 6 irrelevant because Rockwood seeks recovery of the commission not as a broker but as an assignee. A broker may assign its right to an earned commission to a third party. (Schaffter v. Creative Capital Leasing Group, LLC (2008) 166 Cal.App.4th 745, 756.) The first element of a claim for breach of contract is the existence of a contract. (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.) Rockwood did not allege and no evidence supported that YBM entered into any agreement with CCCI. (The court found there was no agreement between YBM and any party.) The only alleged contract was between CCCI and Rockwood. Although under some circumstances a nonparty to a contract may bring an action for its breach (Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817, 826–827), Rockwood identifies no such circumstance here. It has never contended, for example, that YBM was a third party beneficiary of the purchase agreement, a concept that appears nowhere in the record below or briefing on appeal. Rockwood argues that the brokerage commission “became a debt” before modification of the purchase agreement, which could not be superseded without YBM’s consent. But Rockwood cites no authority, and we know of none, holding that parties to an agreement need third party consent, even third party beneficiary consent, before modifying an agreement. Rockwood argues that in modifying the purchase agreement, the parties removed only “a method and timing of payment” of the commission, not the commission itself. We disagree. By omitting reference to the commission, the modification removed it. We conclude that substantial evidence supported the trial court’s finding that YBM was not entitled to a brokerage commission from CCCI. Rockwood’s assignment-based contractual 7 claim therefore failed. Given this result, we need not reach the parties other arguments about the commission.

B. CCCI’s Appeal CCCI, the seller, prevailed on one breach of contract claim— buyer Rockwood’s unsuccessful cross-claim for breach of contract— and three fraud claims: CCCI’s direct fraud claim and Rockwood’s two dismissed fraud cross-claims. CCCI contends it was entitled to attorney fees on each of these four claims. Unless specifically provided for by statute, an attorney fee award must be based on agreement between the parties. (Code Civ. Proc., § 1021.) We independently review the legal bases for attorney fees. (Lange v. Schilling (2008) 163 Cal.App.4th 1412, 1416.) Here, the modified purchase agreement stated that attorney fees were available only in a proceeding to “interpret or enforce” the agreement. It expressly stated that no party could recover attorney fees incurred in connection with substantive matters described in the agreement or negotiations.

1. CCCI’s Successful Defense against Rockwood’s Contract Cross-Claim CCCI would normally be entitled to attorney fees for successfully defending against Rockwood’s cross-claim for breach of contract, i.e., the commission claim, but it failed to identify which attorney fees were incurred specifically in this defense. CCCI intimated at oral argument that it requested relief from this default under Code of Civil Procedure section 473, but that request sought relief only as to the fraud cross-claims that Rockwood dismissed. Because CCCI failed to identify what fees it incurred in defending against Rockwood’s commission claim, the court acted within its discretion by denying them.

8 2. CCCI’s Fraud Claim and Rockwood’s Dismissed Fraud Cross-Claims CCCI prevailed on its direct claim that Rockwood fraudulently induced it to reduce the purchase price of the property by $200,000. Rockwood dismissed its cross-claims that CCCI made false allegations in its complaint and misrepresented in its disclosures that three oil wells on the property had been capped. CCCI sought fees for litigating these three fraud claims. CCCI identifies no statutory or contractual basis for an award of attorney fees incurred in litigating fraud claims. On the contrary, the modified purchase agreement permitted recovery of fees incurred only to interpret or enforce the agreement, and expressly prohibited recovery of fees arising out of extracontractual matters. Accordingly, the trial court properly denied attorney fees on the parties’ fraud claims. CCCI argues that a broad attorney fee provision can entitle a prevailing party to fees incurred in litigating a fraud claim. We agree in principle. (See Orozco v. WPV San Jose, LLC (2019) 36 Cal.App.5th 375, 411 [fees available on a fraud claim where agreement provided for fees arising out of or “in connection with” the agreement]; Maynard v. BTI Group, Inc. (2013) 216 Cal.App.4th 984, 989 [fees available on a fraud claim where agreement provided for fees in the litigation of “any dispute” between the parties].) But here, the attorney fee provision was narrow, authorizing attorney fees only in a proceeding to “interpret or enforce” the modified purchase agreement. CCCI’s claim for fraudulent inducement and Rockwood’s claims for affirmative misrepresentations were not commenced to interpret or enforce any agreement.

9 DISPOSITION The judgment is affirmed. Both sides shall bear their own costs on appeal. NOT TO BE PUBLISHED.

ROTHSCHILD, P. J. We concur:

BENDIX, J.

M. KIM, J.