The opinion
Filed 11/26/13 Brown v. Modaffari 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
SCOT BROWN,
Plaintiff and Appellant, G047443
v. (Super. Ct. No. 30-2010-00378040)
JOHN A. MODAFFARI et al., OPINION
Defendants and Appellants.
Appeal from a judgment and postjudgment order of the Superior Court of
Orange County, Robert J. Moss, Judge. Affirmed in part, reversed in part, and remanded.
Law Offices of Edward A. Dzwonkowski, Edward A. Dzwonkowski and
Russ E. Boltz for Defendants and Appellants.
Alston, Alston & Diebold, Michael F. Long and Donald A Diebold for
Plaintiff and Appellant.
* * *
This action arises from an agreement for defendants and appellants John A.
Modaffari and Exclusive Property Management (Exclusive Property; collectively
Defendants) to manage two apartment buildings plaintiff and appellant Scot Brown
owned with his wife Cheryl Brown.1 Defendants assigned Jorge Rodriguez to manage
the properties on their behalf for nearly 10 years, but he failed to properly do so in many
ways. Scot discovered the mismanagement and filed this action after Rodriguez failed to
make the mortgage payments on the properties and the lenders initiated foreclosure
proceedings. Following a bench trial, the court awarded Scot approximately $186,000
for rent Rodriguez failed to collect and physical damage he caused to the properties by
failing to perform ordinary maintenance and repairs. Both Defendants and Scot appeal
from the trial court’s judgment and a postjudgment order.
Defendants contend the statute of limitations and various provisions in their
agreement with Scot either barred his claims entirely or significantly limited the damages
he could recover. Defendants also contend Scot’s claim failed because he either knew or
should have known about Rodriguez’s mismanagement and did nothing to prevent it. As
more fully explained below, we conclude Defendants’ appeal lacks merit.
On his cross-appeal, Scot contends the trial court erred by failing to award
him the full amount of damages he sought and denying his motion for attorney fees. As
more fully explained below, we conclude the trial court erred in denying Scot damages
for “[m]issing rent never deposited,” but otherwise properly determined the amount of
damages Scot suffered and properly denied Scot’s attorney fee motion.
1 We refer to Scot and his wife Cheryl by their first name to avoid confusion;
no disrespect is intended. (Martin v. PacifiCare of California (2011) 198 Cal.App.4th
1390, 1393, fn. 1.) We refer to Scot and Cheryl collectively as the Browns.
2
I
FACTS AND PROCEDURAL HISTORY2
Modaffari is a licensed real estate broker and property manager doing
business as Exclusive Property. In April 1999, the Browns entered into a “Property
Management Agreement” (Agreement) with Exclusive Property. Although only Cheryl
signed the Agreement for the Browns, it designated both Scot and Cheryl as the property
owners and Scot initialed every page of the Agreement. Rodriguez signed and initialed
the Agreement on Exclusive Property’s behalf. Rodriguez was a licensed real estate
salesperson working under Modaffari’s broker’s license.
The Agreement appointed Exclusive Property as the property manager for a
four-unit apartment building the Browns owned in Huntington Beach. Although the
Agreement did not refer to a second four-unit apartment building the Browns owned in
Costa Mesa, Exclusive Property also managed that property for the Browns under the
Agreement’s terms. In general, the Agreement required Exclusive Property to rent the
apartment units, collect rent, deposit all rent and other payments in a trust account for the
properties, make all mortgage and insurance payments on the properties, and maintain the
2 Defendants’ opening brief contains virtually no citations to the appellate
record. It cites the trial court’s decision and the contract between the parties, but does not
include a single citation to the four volume reporter’s transcript or any other evidence
from the trial. Indeed, the opening brief makes countless factual assertions regarding
what the evidence at trial purportedly showed, but fails to support those assertions with
record citations. We disregard all such assertions, which include almost all of
Defendants’ statement of facts. (Dominguez v. Financial Indemnity Co. (2010)
183 Cal.App.4th 388, 392, fn. 2; Gotschall v. Daley (2002) 96 Cal.App.4th 479, 481,
fn. 1.) As explained below, the failure to provide record citations also results in
Defendants waiving some of their challenges to the trial court’s judgment. (Lonely
Maiden Productions, LLC v. GoldenTree Asset Management, LP (2011) 201 Cal.App.4th
368, 384 (Lonely Maiden); Guthrey v. State of California (1998) 63 Cal.App.4th 1108,
1115 (Guthrey).) We acknowledge Defendants’ reply brief provides some record
citations that were not included in the opening brief, but the reply still makes numerous
factual assertions without any support.
3
properties. In return, the Agreement authorized Exclusive Property to pay itself five
percent of the gross collections.
Rodriguez managed the two properties on Exclusive Properties’ behalf
without any involvement, training, or instructions from Modaffari. In doing so,
Rodriguez dealt exclusively with Cheryl; Scot had no involvement in the properties.
Rodriguez spoke with Cheryl on the phone when an issue arose and sent her periodic
cash flow reports reflecting the properties’ income and expenses. Although she often
spoke with Rodriguez, Cheryl rarely visited the properties.
The cash flow reports Rodriguez sent Cheryl did not accurately reflect the
true income and expenses for the properties. The reports repeatedly and falsely stated
Rodriguez received and deposited all monthly rental payments for the properties. For
example, when a tenant failed to make a monthly payment, Rodriguez often would not
contact the tenant to collect the rent, but he would report he received it. Similarly, if a
tenant’s rent check was returned for insufficient funds, Rodriguez would report receiving
the payment without ever attempting to collect the rent. Thus, several tenants were
allowed to remain in units without paying rent. Rodriguez also failed to maintain the
buildings in a reasonable condition or keep records regarding the tenants, the leases, or
work performed on the properties. At trial, Rodriguez conceded he did not do his job
because he was experiencing problems in his personal life.
When Cheryl passed away from cancer in 2007, Rodriguez reported to Scot
and continued to manage the properties in the same manner, filing reports falsely
claiming he had collected the rent and performed the necessary maintenance. In late
2008, the property insurance was cancelled when Rodriguez failed to pay the insurance
premium. In January 2009, Rodriguez stopped making the mortgage payments on the
properties and the loans went into default. Scot was unaware of these events because the
insurance company and lender communicated only with Rodriguez and Exclusive
Property as Scot’s designated agents.
4
In February 2009, Defendants fired Rodriguez because Modaffari was
retiring and wanted to cancel Exclusive Property’s management contracts. Neither
Modaffari nor Rodriguez, however, notified Scot that Rodriguez had been terminated and
was no longer affiliated with Exclusive Property. After his termination, Rodriguez
retained the documents for Scot’s properties and continued to manage the properties in
the same manner.
In May 2009, Scot discovered the mortgages on the two properties were in
default when he ran his own credit report and discovered his credit score had dropped
dramatically. He immediately contacted Rodriguez to find out what had happened and
the two men met in June 2009 to discuss the properties. Rodriguez apologized for what
he had done and promised to “make it right.” He gave Scot a disorganized box of
miscellaneous property documents and a check for $11,800, but did not explain the scope
of the problems he had created.
After the meeting, Scot cured the defaults on the mortgages and hired a new
property management company. He worked with that company to audit and recreate the
records for the properties to determine how much rent Rodriguez had failed to collect.
They also inspected the two properties and discovered the properties needed substantial
repairs because Rodriguez had failed to perform regular maintenance. For example, both
properties required significant mold abatement and balconies, stairwells, and other
structural components also had to be replaced. The extent of the repairs required Scot to
relocate the tenants temporarily.
Scot sued Rodriguez and Defendants in June 2010. The operative pleading
alleges breach of contract, negligence, and negligent supervision against Defendants, and
breach of contract, fraud, and conversion against Rodriguez. Scot settled with Rodriguez
and the trial court conducted a bench trial on the claims against Defendants. At trial, Scot
sought (1) approximately $286,000 for repairs to the properties; (2) approximately
$20,000 for the arrearages on the mortgages; (3) approximately $94,000 for “[m]issing
5
rent”; and (4) approximately $25,000 for “[m]issing rent never deposited.” The total
damages sought were approximately $425,000.
In May 2012, the trial court issued its tentative decision, finding
Defendants breached the Agreement, breached the fiduciary duties they owed Scot, and
negligently supervised Rodriguez in his management of the properties. The court
awarded Scot a total of $186,495: (1) $92,601 for repairs required by Rodriguez’s failure
to perform regular maintenance on the properties; and (2) $93,894 as the difference
between the rent Rodriguez reported receiving and the amount he deposited in the trust
account Defendants established for the Browns’ properties. Both Scot and Defendants
requested the trial court issue a statement of decision explaining the factual and legal
basis for its verdict. Scot also filed objections to the court’s tentative decision.
In July 2012, the court issued its final statement of decision and entered
judgment against Defendants for $186,495. As the prevailing party, Scot sought to
recover nearly $180,000 in attorney fees based on an attorney fee provision in the
Agreement. The trial court denied that motion, finding Scot failed to meet the condition
precedent to a fee award under the Agreement because he did not seek to mediate the
dispute before filing this action. Defendants timely appealed from the trial court’s
judgment and Scot cross-appealed based on the court’s decision denying him certain
damages and his attorney fees.
II
DISCUSSION
A. Defendants’ Appeal
1. The Agreement’s Indemnity Provision Did Not Bar Scot’s Claims
Defendants contend all of Scot’s claims are barred because he agreed to
indemnify and hold Defendants harmless from all claims relating to their management or
operation of the properties. According to Defendants, the Agreement’s indemnity
6
provision provides that Scot will hold Defendants free from liability for any claims “‘by
any person . . . including Owner’” for “‘the performance or exercise of any of the duties,
powers, or authorities granted by Broker.’” (Italics omitted.) Defendants take this
language out of context and ignore the governing contract interpretation principles.
The Agreement’s indemnity provision provides, “[Scot] shall [¶] . . . [¶]
Indemnify, defend and hold harmless [Defendants], and all persons in [Defendants’] firm,
regardless of responsibility, from all costs, expenses, suits, liabilities, damages, attorney’s
fees, and claims of every type, including but not limited to those arising out of injury or
death of any person, or damage to any real or personal property of any person, including
[Scot], in any way relating to the management, rental, security deposits, or operation of
the Property by [Defendants], or any person in [Defendants’] firm, or the performance or
exercise of any of the duties, powers, or authorities granted to [Defendants].”
We construe a contractual indemnity provision under ordinary rules of
contract interpretation. (Zalkind v. Ceradyne, Inc. (2011) 194 Cal.App.4th 1010, 1025
(Zalkind).) “‘The basic goal of contract interpretation is to give effect to the parties’
mutual intent at the time of contracting. [Citations.] When a contract is reduced to
writing, the parties’ intention is determined from the writing alone, if possible.
[Citation.] “The words of a contract are to be understood in their ordinary and popular
sense.”’ [Citation.] When, as in this case, no extrinsic evidence is introduced, the
appellate court independently construes the contract. [Citation.]” (Id. at p. 1022.)
Indemnity provisions ordinarily apply to third party claims only: “‘A
clause which contains the words “indemnify” and “hold harmless” is an indemnity clause
which generally obligates the indemnitor to reimburse the indemnitee for any damages
the indemnitee becomes obligated to pay third persons. [Citation.]’” (Zalkind, supra,
194 Cal.App.4th at p. 1024.) “Although indemnity generally relates to third party claims,
‘this general rule does not apply if the parties to a contract use the term “indemnity” to
include direct liability as well as third party liability.’ [Citation.]” (Ibid.)
7
When a contracting party asserts an indemnity provision releases or
exculpates that party from liability to the other contracting party, “courts must look for
clear, unambiguous and explicit language not to hold the released party liable.” (Queen
Villas Homeowners Assn. v. TCB Property Management (2007) 149 Cal.App.4th 1, 5
(Queen Villas).) Indeed, contracting parties may use an indemnity provision to release
one contracting party from liability to the other, but the language must be clear and the
intent unmistakable because “exculpatory clauses are construed against the released
party.” (Id. at p. 6.)
In Queen Villas, a homeowners’ association sued its property management
company for breaching its professional and contractual duties to the association by
allowing an association board member to pay herself more than $100,000 for professional
services she allegedly rendered to the association. (Queen Villas, supra, 149 Cal.App.4th
at pp. 3-4.) The trial court concluded an indemnity provision in the association’s contract
with the management company barred the claims. We reversed because the indemnity
provision’s language did not reflect an intent “that would require a court to interpret the
words ‘indemnify’ or ‘hold harmless’ . . . beyond the usual context of third party
indemnification.” (Id. at pp. 6-8.)
We explained only one case—Rooz v. Kimmel (1997) 55 Cal.App.4th 573
(Rooz)—held an indemnity provision exculpated a contracting party from liability to the
other contracting party. (Queen Villas, supra, 149 Cal.App.4th at p. 6.) In Rooz, a title
company recorded a trust deed for the plaintiff as part of a related transaction it was
recording for another customer. The title company offered to record the trust deed to
accommodate the plaintiff free of charge, but the company would do so only after the
plaintiff agreed to indemnify the title company. Plaintiff sued the title company for
damages when problems with the related transaction forced the title company to delay
recording the plaintiff’s trust deed. (Queen Villas, at p. 7, quoting Rooz at p. 586.)
8
The Rooz court enforced the indemnity provision as an exculpatory clause
because “the ‘commercial reality of the accommodation recording’ showed that the
parties intended for the indemnity clause to release the defendant title company.” (Queen
Villas, supra, 149 Cal.App.4th at p. 7, quoting Rooz, supra, 55 Cal.App.4th at p. 586,
original italics.) Specifically, the indemnity provision’s language “‘made it clear’” the
recording was a “‘“favor”’” performed without charge and the title company agreed to do
so “‘only’” because the plaintiff agreed to exonerate the title company from all liability
arising out of the recording. (Queen Villas, at p. 7, quoting Rooz at p. 586.) The Rooz
court explained that failure to enforce the indemnity provision as an exculpatory clause
would deprive the title company of the benefit of its bargain. (Ibid.) In Queen Villas, we
concluded there was no comparable language or expression of intent in the indemnity
provision that removed it from the general rule that indemnity provisions only apply to
third party claims. (Queen Villas, at pp. 7-8.)
Here, we also conclude the language in the Agreement’s indemnity
provision does not reflect an intent “that would require a court to interpret the words
‘indemnify’ or ‘hold harmless’ [in the Agreement] beyond the usual context of third party
indemnification.” (See Queen Villas, supra, 149 Cal.App.4th at p. 7.) Indeed, the
Agreement’s indemnity provision is not a specially drafted provision designed to reflect
the parties’ unique intent that the provision apply outside the usual third party
indemnification context. To the contrary, the indemnity provision is part of a form
property management agreement the California Association of Realtors drafted for broad
use in a wide variety of property management situations. The commercial reality of the
transaction between Defendants and Scot shows that Defendants did not specifically
require Scot exculpate them from all liability arising out of their services. Scot hired
Defendants to perform professional services and Defendants were compensated for those
services. Defendants’ interpretation of the indemnity provision would allow them to
9
breach their contractual and professional duties with impunity. Nothing shows that was
the parties’ intent.
Defendants contend the indemnity provision applies to Scot’s claims
against them because it contains the words “including Owner” after the clause “damage
to any real or personal property of any person.” That clause, however, does not describe
whose claims are covered by the indemnity provision, but rather the type of claims that
are covered—“claims of every type, including but not limited to those arising out of
injury or death of any person, or damage to any real or personal property of any person,
including Owner.” (Italics added.) Accordingly, this language expresses the intent that
the indemnity provision applies to claims arising out of damage to anyone’s property,
including Scot’s, but it does not express the intent that the indemnity provision exculpates
Defendants from any and all liability to Scot. Indeed, this language does not remove the
Agreement’s indemnity provision from the usual context of indemnification against third
party claims.
Finally, Defendants contend the indemnity provision in Zalkind is
“functionally the same” as the Agreement’s indemnity provision and therefore we should
follow Zalkind and enforce the provision as an exculpatory clause. Defendants make no
attempt to analyze or compare the language of the provision in Zalkind to the indemnity
provision in its contract with Scot. Zalkind involved a specially drafted indemnity
provision in a $2 million asset purchase agreement that required the buyer to indemnify
and hold harmless the sellers from any damages or losses that arose from the buyer’s
breach of the asset purchase agreement. (Zalkind, supra, 194 Cal.App.4th at pp. 1018,
1023.) Accordingly, rather than exculpate any party from liability for injuries it caused,
the provision provided the buyer would indemnify the seller from any losses the buyer
caused the seller to suffer. Zalkind does not support Defendants’ position.
10
2. The Statute of Limitations Does Not Bar Scot from Recovering Damages
Defendants argued at trial that the statute of limitations barred recovery for
damages Scot suffered more than either two or four years before he filed this action
depending on the particular claim and the governing statute of limitations. As stated in
its statement of decision, the trial court rejected this argument because “Rodriguez
concealed his improper conduct by submitting false cash flow reports to the Browns.
[Scot] was not aware of the inadequate management and had no reason to be aware until
the summer of 2009 when he fortuitously learned that the property loans were in default.”
Defendants contend the trial court erred in finding the discovery rule
excused Scot’s failure to bring this action earlier because the court’s finding was
factually incorrect and did not address all the damages Scot sought. According to
Defendants, the trial court’s finding that Rodriguez’s false cash flow reports concealed
his improper conduct only addressed Scot’s claims for lost rent; it did not address Scot’s
claims for the repairs necessitated by Rodriguez’s failure to maintain the properties and
therefore Scot’s damages for those repairs are time-barred. Defendants also argue Scot
and Cheryl knew or should have known about the condition of the properties much earlier
than 2009, and therefore Scot cannot claim the benefit of the discovery rule on the repair
damages. These arguments fail for two reasons.3
First, the trial court’s finding the discovery rule applied is not limited to
Scot’s claims for lost rent. Although the trial court’s statement of decision specifically
refers to Rodriguez concealing his improper conduct by submitting false cash flow
reports, it also states Scot was unaware of Rodriguez’s malfeasance until the summer of
2009. This later finding is not limited to the lost rent damages and Defendants fail to
3 Defendants do not specifically argue the trial court’s delayed discovery
ruling was improper as to Brown’s lost rent damages and therefore Defendants waive any
claim those damages are time-barred. (Badie v. Bank of America (1998) 67 Cal.App.4th
779, 784-785 [“When an appellant fails to raise a point, or asserts it but fails to support it
with reasoned argument and citations to authority, we treat the point as waived”].)
11
point to anything in the record to show they brought any purported ambiguity in this
finding to the trial court’s attention. (Fladeboe v. American Isuzu Motors, Inc. (2007)
150 Cal.App.4th 42, 59 (Fladeboe) [“if a party fails to bring omissions or ambiguities in
the statement of decision’s factual findings to the trial court’s attention, then ‘that party
waives the right to claim on appeal that the statement was deficient in these regards,’ and
the appellate court will infer the trial court made implied factual findings to support the
judgment”].)
Second, Defendants cite no evidence in the record to support their
contention the Browns knew or should have known about the condition of the properties.
Although Defendants contend the “trial evidence” was “undisputed” that “[Cheryl] was
fully familiar with the condition of the properties, the rent rolls, leases, and every other
aspect of . . . Rodriguez’s performance, and that both [Cheryl and Scot] had inspected the
premises,” Defendants fail to cite any trial evidence to support this assertion. We
therefore treat this contention as waived. (Lonely Maiden, supra, 201 Cal.App.4th at
p. 384 [“‘It is the duty of counsel to refer the reviewing court to the portion of the record
which supports appellant’s contentions on appeal. [Citation.] If no citation “is furnished
on a particular point, the court may treat it as waived”’”]; Guthrey, supra, 63 Cal.App.4th
at p. 1115 [same].)
In the reply, Defendants for the first time cite Scot’s trial testimony to show
he never attempted to learn anything about either the rent for the properties or their
condition until the summer of 2009. The implicit argument underlying Defendants’
citation to this evidence is that Scot had a duty to check on the properties and discover
Rodriguez’s failure to properly maintain them well before he learned of Rodriguez’s
malfeasance. Defendants, however, fail to recognize the fiduciary duty they owed to Scot
excused him from any duty to check on his properties. Because of this duty, Defendants
bore the burden to prevent application of the discovery rule by showing Scot had actual
knowledge of the properties’ condition.
12
The discovery rule typically applies when a fiduciary or confidential
relationship exists between the plaintiff and the defendant. “‘The fiduciary relationship
carries a duty of full disclosure, and application of the discovery rule “prevents the
fiduciary from obtaining immunity for an initial breach of duty by a subsequent breach of
the obligation of disclosure.” [Citation.]’” (Parsons v. Tickner (1995) 31 Cal.App.4th
1513, 1526.) Consequently, “‘If the plaintiff and defendant are in a confidential
relationship there is no duty of inquiry until the relationship is repudiated. The nature of
the relationship is such as to cause the plaintiff to rely on the fiduciary, and awareness of
facts which would ordinarily call for investigation does not excite suspicion under these
special circumstances. . . . [Citation.]’ [Citation.]” (Lee v. Escrow Consultants, Inc.
(1989) 210 Cal.App.3d 915, 921 (Lee).) Defendants cite no evidence to show Scot knew
his properties needed repairs before the summer of 2009 and therefore they failed to show
the trial court erred in applying the discovery rule.
Finally, Defendants argue the discovery rule only applies to tort claims, not
breach of contract claims. Not so. Although it is most often applied to tort claims, “‘the
discovery rule may be applied to breaches [of contract] which can be, and are, committed
in secret and, moreover, where the harm flowing from those breaches will not be
reasonably discoverable by plaintiffs until a future time.’” (Gryczman v. 4550 Pico
Partners, Ltd. (2003) 107 Cal.App.4th 1, 4-5; April Enterprises, Inc. v. KTTV (1983)
147 Cal.App.3d 805, 832.) Moreover, Scot asserted both tort and contract claims and the
trial court awarded the same damages on all claims.
3. Whether Defendants Knew or Should Have Known Rodriguez Was Unfit to
Manage the Properties Does Not Affect Scot’s Recovery
Defendants contend the trial court erred in finding them liable for
negligently supervising Rodriguez and his management of the properties. According to
Defendants, Scot’s negligent supervision claim required the trial court to find Defendants
knew, or should have known, Rodriguez was unfit to manage Scot’s properties. Because
13
the trial court did not make that essential finding (and the evidence allegedly would not
support that finding), Defendants contend Scot’s negligent supervision claim failed as a
matter of law. Defendants, however, ignore the contractual and fiduciary obligations
they owed to Scot to manage the properties, and the liabilities they faced for breaching
those duties whether or not they were negligent in supervising Rodriguez.
The parties to the Agreement are the Browns as the owners and Exclusive
Property. Rodriguez signed the Agreement on Exclusive Property’s behalf, but
Modaffari testified he authorized Rodriguez to do so. Accordingly, the Agreement
imposed both contractual and fiduciary duties on Exclusive Property to competently
manage the Browns’ properties. Although Defendants were allowed to delegate those
contractual and fiduciary duties to Rodriguez as their agent (Civ. Code, § 2304),4
Defendants remained ultimately liable for any breach of those duties (§ 2330). Because
Rodriguez was acting on Exclusive Property’s behalf to perform Exclusive Property’s
contractual and fiduciary obligations, Exclusive Property is liable for any breach of those
obligations whether or not Exclusive Property knew or should have known Rodriguez
was unfit to manage the properties.
The cases Defendants cite are readily distinguishable because they involve
plaintiffs who suffered personal injuries at the hands of a defendant’s agent or employee.
In Phillips v. TLC Plumbing, Inc. (2009) 172 Cal.App.4th 1133, 1136-1137, the plaintiff
sued a plumbing company after one of its former employees killed the plaintiff’s mother.
In Mendoza v. City of Los Angeles (1998) 66 Cal.App.4th 1333, 1335-1336, the plaintiff
sued a city after one of its off-duty police officers fatally shot the plaintiff’s mother.
Finally, in Noble v. Sears, Roebuck & Co. (1973) 33 Cal.App.3d 654, 656-657, the
plaintiff sued a company after an investigator its attorney hired snuck into the plaintiff’s
hospital room to obtain information from the plaintiff about an injury she had suffered in
4 All statutory references are to the Civil Code unless otherwise stated.
14
the company’s store. As Mendoza explained, “Liability for negligent hiring and
supervision is based upon the reasoning that if an enterprise hires individuals with
characteristics which might pose a danger to customers or other employees, the enterprise
should bear the loss caused by the wrongdoing of its incompetent or unfit employees.”
(Mendoza, at p. 1339; see also Phillips, at p. 1139; Noble, at pp. 663-664.) None of these
cases involved a principal who assumed contractual and fiduciary duties to the plaintiff
and then delegated performance of those duties to an agent without supervising the agent
to ensure the principal’s duties were performed.
The outcome here would not change even if Defendants’ argument on the
negligent supervision claim had merit. Besides finding Defendants negligently
supervised Rodriguez, the trial court also found Defendants breached the Agreement and
the fiduciary duties they owed Scot. The court awarded Scot the same damages on all of
these claims and Defendants failed to challenge their direct liability under the breach of
contract claim and the breach of fiduciary duty claim.
4. The Doctrine of Imputed Knowledge Does Not Bar Scot’s Claims
Defendants contend the doctrine imputing an agent’s knowledge to his or
her principal defeats all of Scot’s claims as a matter of law. The trial court found that
Scot was unaware Rodriguez failed to collect all of the rent and properly maintain the
properties. According to Defendants, the imputed knowledge doctrine precluded the
court from making that finding because Rodriguez’s knowledge that he mismanaged the
properties should have been imputed to Scot through the agency relationships between
Scot and Defendants, and Defendants and Rodriguez. This argument fails because it
improperly seeks to apply the imputed knowledge doctrine to claims between the
principal and agent rather than to the claims of third parties.
“‘“The general rule is well settled that the knowledge of the agent in the
course of his [or her] agency is the knowledge of the principal. [Citation.] It rests on the
15
assumption that the agent will communicate to his [or her] principal all information
acquired in the course of his [or her] agency, and when the knowledge of the agent is
ascertained the constructive notice to the principal is conclusive. [Citation.]”’
[Citations.]” (In re Marriage of Cloney (2001) 91 Cal.App.4th 429, 439; see also § 2332
[“As against a principal, both principal and agent are deemed to have notice of whatever
either has notice of, and ought, in good faith and the exercise of ordinary care and
diligence, to communicate to the other”].)
“‘The fact that the knowledge acquired by the agent was not actually
communicated to the principal, . . . does not prevent operation of the rule . . . . The agent
may have been guilty of a breach of duty to his principal, yet the knowledge has the same
effect as to third persons as though his duty had been faithfully performed.’” (Powell v.
Goldsmith (1984) 152 Cal.App.3d 746, 751, italics added.)
“‘The underlying reason for [the imputed knowledge doctrine] is that an
innocent third party may properly presume the agent will perform his duty and report all
facts which affect the principal’s interest. But this general rule does not apply when the
third party knows there is no foundation for the ordinary presumption,—when he is
acquainted with circumstances plainly indicating that the agent will not advise his
principal. The rule is intended to protect those who exercise good faith, and not as a
shield for unfair dealings. [Citations.]’” (Sands v. Eagle Oil & Refining Co. (1948)
83 Cal.App.2d 312, 319-320, italics added (Sands).)
Accordingly, the doctrine prevents a principal from defeating a third party’s
claim by asserting the principal’s agent never shared the information necessary to
establish liability against the principal. The doctrine does not apply when the claim is
between the principal and the agent. “[I]t is well established that where the agent acts in
his own interest or where the interest of the agent is adverse to his principal, the
knowledge of the agent will not be imputed to the principal [citations].” (People v. Park
(1978) 87 Cal.App.3d 550, 566, original italics.) “‘As between two innocent parties,
16
notice to the agent of one is notice to the principal, but, as between the principal and the
fraudulent agent, notice of another agent should not be imputed to the principal.’”
(Sands, supra, 83 Cal.App.2d at p. 320; see Meyer v. Glenmoor Homes, Inc. (1966)
246 Cal.App.2d 242, 264 [“A corporation is not chargeable with the knowledge of an
officer who collaborates with an outsider to defraud it”].)
Here, Defendants improperly seek to apply the imputed knowledge doctrine
as between a principal (Scot) and a subagent (Rodriguez) to defeat the principal’s claims
against the intermediate agents (Defendants). They cite no authority applying the
doctrine under these circumstances and the foregoing authorities establish that it does not
apply in this context. Indeed, if the imputed knowledge doctrine applied to claims
between the principal and the agent, it would bar claims for fraud, breach of fiduciary
duty, and many others as between a principal and agent, and would allow an agent to
breach his or her duties to the principal with impunity. That is not the law and we
therefore reject Defendants’ challenge based on the imputed knowledge doctrine.
5. The Agreement Required Defendants to Repair the Properties and the Trial
Court Properly Awarded Compensation for the Damage Caused by
Defendants’ Failure to Perform Repairs
Defendants contend Scot’s claims for repair and rehabilitation costs failed
because not only did the Agreement not require Defendants to repair the properties, but it
also prohibited Defendants from performing rehabilitation or restoration work.
According to Defendants, section 3.D. of the Agreement granted Defendants the authority
and power to repair the properties, but nothing in the Agreement required Defendants to
do so. Moreover, Defendants contend section 6.B. of the Agreement expressly excluded
rehabilitation and restoration work from the duties imposed on Defendants and therefore
the trial court erred in awarding damages. Defendants again misinterpret the Agreement.
“‘The basic goal of contract interpretation is to give effect to the parties’
mutual intent at the time of contracting. [Citations.] When a contract is reduced to
17
writing, the parties’ intention is determined from the writing alone, if possible.
[Citation.]’” (Zalkind, supra, 194 Cal.App.4th at p. 1022.) “The language of a contract
is to govern its interpretation, if the language is clear and explicit, and does not involve
an absurdity.” (§ 1638.) “The whole of a contract is to be taken together, so as to give
effect to every part, if reasonably practicable, each clause helping to interpret the other.”
(§ 1641.) “When, as in this case, no extrinsic evidence is introduced, the appellate court
independently construes the contract. [Citation.]” (Zalkind, at p. 1022.)
Section 3 of the Agreement defines the authority and powers Scot granted
Defendants. The subsection addressing “Repair/Maintenance” provides, “Owner grants
Broker the authority and power, at Owner’s expense, to: [¶] . . . [¶] Make, cause to be
made, and/or supervise repairs, improvements, alterations, and decorations to the
Property; purchase and pay bills for services and supplies. Broker shall obtain prior
approval of Owner on all expenditures over $200 for any one item. Prior approval shall
not be required for monthly or recurring operating charges, or, if in Broker’s opinion,
emergency expenditures over the maximum are needed to protect the Property or other
property(ies) from damage, prevent injury to persons, avoid suspension of necessary
services, avoid penalties or fines, or suspension of services to tenants required by a lease
or rental agreement or by law. Broker shall not advance Broker’s own funds in
connection with the Property or this Agreement.”
Because this section states Broker is granted the authority and power to
make repairs and maintain the properties without stating the Broker must or has the duty
to do so, Defendants contend they had no obligation to perform any repairs and therefore
cannot be liable for any ensuing damage. This argument ignores not only the purpose of
the Agreement, but also its other terms.
18
Section 1 of the Agreement “appoints and grants Broker the exclusive right
to rent, lease, operate, and manage the property (ies)”5 and section 2 provides, “Broker
accepts the appointment and grant, and agrees to: [¶] A. Use due diligence in the
performance of this Agreement. [¶] B. Furnish the services of its organization for the
rental, leasing, operating, and management of the Property.” In addition to the authority
and power to repair and maintain the properties, section 3 of the Agreement also granted
Defendants the authority and power to “collect and give receipts for rent,” “[p]ay
expenses and costs for the Property from Owner’s funds, . . . includ[ing] . . . property
taxes . . . loan payments, and insurance premiums,” “Deposit all receipts collected for
Owner . . . in a financial institution . . . [and hold] [t]he funds . . . in a trust account
separate from the Broker’s personal accounts,” and “[m]aintain reserves in Broker’s trust
account of $300.”
Under Defendants’ interpretation of the Agreement they could perform
some or all of these tasks when and if they chose, but they had no obligation to do so.
For example, Defendants could collect rent or not collect rent; they could make loan
payments and pay property taxes on Scot’s behalf or not; they could keep the money they
collect for Scot in a separate account or they could commingle those funds with their
own. In other words, every power the Agreement granted to Defendants was optional
and therefore they could never breach the Agreement because they never had a duty to do
anything under the Agreement. Nothing suggests the parties intended that absurd result,
but that is precisely what Defendants’ interpretation requires.
To the contrary, by agreeing to use due diligence in the performance of the
Agreement and to furnish services for the rental, leasing, operating, and management of
the properties, Defendants agreed and assumed the contractual duty to perform all of the
5 The Agreement provided the appointment was exclusive for the first six
months and nonexclusive after that period.
19
powers identified in section 3, including the power to repair and maintain the properties.
As the trial court found, Defendants therefore breached the Agreement by failing to repair
and maintain the properties.
Section 6.B. of the Agreement also did not prohibit the trial court from
awarding Scot compensation for the damage Rodriguez and Defendants caused through
their approximately 10 years of mismanagement. That section provides, “This Property
Management Agreement . . . does not include . . . fire or major damage restoration, [or]
rehabilitation . . . . If Owner requests Broker to perform services not included in this
Agreement, a fee shall be agreed upon before these services are performed.” This
provision’s plain meaning simply excluded a wide variety of extraordinary services that a
property manager does not provide on a regular basis. Nothing in this provision,
however, exculpated Defendants from liability for damages they caused by failing to
perform basic maintenance services.
Finally, Defendants contend the damages the trial court awarded for
repairing the properties constituted an impermissible windfall for Scot because the
Agreement required him to pay the cost of all repairs and the trial court’s award allowed
Scot to shift those costs to Defendants. Again, Defendants are mistaken. The trial
court’s statement of decision specifically limited the repair damages it awarded Scot to
the work required to fix the damage caused by Rodriguez’s failure to repair the
properties. The trial court excluded costs for ordinary maintenance expenses not linked
to Rodriguez’s failure to repair and maintain the properties. Accordingly, the trial court
awarded only those items of damage it found Rodriguez caused and it specifically
excluded the costs Scot would have otherwise paid as part of the ordinary upkeep for the
properties.
20
6. Comparative Fault Principles Did Not Require the Trial Court to Reduce
Scot’s Recovery
Defendants contend the trial court erred because it failed to reduce damages
under the doctrine of comparative fault. In their opening brief, Defendants argued the
Browns contributed to their own damages because they had “actual knowledge . . .
regarding the management and condition of their properties” and did nothing to prevent
Rodriguez’s misconduct. (Original italics.) In their reply, Defendants change the basis
for their comparative fault argument and assert “the Browns’ failure to inspect their own
properties, to verify the monthly and annual cash flow reports, and to take legitimate
steps to protect themselves were at least a part of the cause of their damages.”
Defendants’ comparative fault challenge fails for three reasons.
First, their opening brief fails to provide any record citations to support
their contention that the Browns had actual (or any other kind of) knowledge regarding
the management and condition of the property. We therefore treat this argument as
waived. (Lonely Maiden, supra, 201 Cal.App.4th at p. 384; Guthrey, supra,
63 Cal.App.4th at p. 1115.)
Second, Defendants’ reply brief fails to provide any authority to support
their implied premise that the Browns had a duty to inspect their properties and verify
Rodriguez’s cash flow reports despite hiring Defendants as their fiduciary for that
specific purpose. We treat this argument as waived because Defendants asserted it for
the first time in their reply brief and they failed to provide any authority to support it.
(See, e.g., Habitat & Watershed Caretakers v. City of Santa Cruz (2013) 213 Cal.App.4th
1277, 1292, fn. 6 [“[a]rguments presented for the first time in an appellant’s reply brief
are considered waived”]; Salas v. Department of Transportation (2011) 198 Cal.App.4th
1058, 1074 [appellant forfeited challenge by failing to present reasoned argument and
explanation].) Moreover, as explained above, the fiduciary nature of the relationship
21
between Scot and Defendants excused Scot from any duty to inquire until the relationship
ended. (Lee, supra, 210 Cal.App.3d at p. 921.)
Third, any error in the trial court’s failure to expressly address whether the
comparative fault doctrine required the court to reduce the Scots’ damages was harmless.
The court found Defendants liable for breach of contract, breach of fiduciary duty, and
negligent supervision, and awarded Scot the same damages on all claims. Comparative
fault applies to reduce a plaintiff’s damages on tort claims only; it does not apply to
contract claims. (Kransco v. American Empire Surplus Lines Ins. Co. (2000) 23 Cal.4th
390, 406-407; Shaffer v. Debbas (1993) 17 Cal.App.4th 33, 42 [“we are persuaded that
comparative negligence is not a defense to a breach of express warranty action”].)
7. The Trial Court Properly Credited Defendants for Rodriguez’s Payment to
Scot
Defendants contend the trial court erred by failing to reduce the damages it
awarded Scot by the $11,800 payment Rodriguez made to Scot in June 2009. Defendants
are incorrect. The testimony and damages spreadsheet by Scot’s trial expert specifically
acknowledged this payment and reduced the amount of damages to account for it. The
trial court adopted the expert’s damages calculation on this point.
B. Scot’s Cross-Appeal
1. The Trial Court Did Not Err in Awarding Scot Only a Portion of the
Damages He Sought for Repairing the Properties
Scot sought nearly $295,000 to repair the damage to his properties he
contends Rodriguez caused by failing to perform ordinary repairs and maintenance
during his 10 years as property manager. In Scot’s view, these extraordinary repairs
would not have been necessary if Rodriguez had properly maintained the properties. The
trial court agreed Rodriguez’s failure to repair and maintain the properties required Scot
to perform extraordinary repairs that would not have otherwise been required, but the
22
court only awarded Scot approximately $93,000 for those repairs because it found he
failed to establish the cost for other repairs were linked to Rodriguez’s neglect.
Scot contends the uncontroverted evidence showed all of these renovations
were extraordinary repairs that would not have been necessary but for Rodriguez’s failure
to maintain the property. Scot points to the testimony of his current property manager,
Kenneth Beaulieu, who supervised all of the repairs. Beaulieu testified he prepared two
spreadsheets summarizing the cost for each repair at each property and how he
categorized each item as either “Repairs/Replacements/Expenses” required because of
Rodriguez’s neglect or “Normal Maintenance.” Because Defendants failed to present any
evidence to rebut Beaulieu’s testimony, Scot contends the trial court erred in failing to
award him the full amount. We disagree.
Scot fails to account for the trial court’s role as the fact finder in a bench
trial and our limited role in reviewing the trial court’s factual findings. Indeed, Scot’s
argument assumes the trial court was required to accept Beaulieu’s testimony because it
was “uncontroverted.” But “the general rule [is] that ‘expert testimony, like any other,
may be rejected by the trier of fact, so long as the rejection is not arbitrary.’ [Citation.]”
(Howard v. Owens Corning (1999) 72 Cal.App.4th 621, 632; Conservatorship of
McKeown (1994) 25 Cal.App.4th 502, 509.) Indeed, “‘“[p]rovided the trier of fact does
not act arbitrarily, he may reject in toto the testimony of a witness, even though the
witness is uncontradicted. [Citations.]” [Citation.] This rule is applied equally to expert
witnesses.’ [Citation.]” (Ibid., original italics.) Moreover, “where uncontradicted
testimony has been rejected by the trial court, it ‘cannot be credited on appeal unless, in
view of the whole record, it is clear, positive, and of such a nature that it cannot rationally
be disbelieved.’ [Citation.]” (Adoption of Arthur M. (2007) 149 Cal.App.4th 704, 717.)
Here, the trial court awarded Scot more than $51,000 for the Huntington
Beach property to cover the cost of “Mold restoration abatement,” “Tenant housing due
to mold,” and “Balcony replacement/Decks/stairwell decks.” It awarded Scot $41,000
23
for the Costa Mesa property to cover the cost to “replace front wall, mold and Rot, Stucco
and all fascia,” “Stairwells,” “Plans/permits (re stairwells),” “Balcony Railing,” “Balcony
Replacement,” and “Mold abatement.” The court found Scot “met [his] burden of
proving [these] items were causally connected to the defendant’s failure to keep the
property in good repair.”
In denying Scot’s other repair costs, the trial court found, “While some of
the items listed are related to the failure to keep the properties in good repair, others are
either not clearly related or represent repairs that were simply deferred. That is, repairs
that the Browns would have had to pay for anyway in order to maintain their properties.
For example, the first item on Exhibit 168 ‘Evictions—Attorney/court . . . [$]1808.00’
was not clearly related to [Defendants] keeping the premises in good repair. The eviction
of a tenant most likely occurred when rent was not paid, an item that would have been
deducted as an expense anyway. Similarly, ‘Garage door replacement . . . $3560’ may
have been incurred even if the buildings had been properly maintained. . . . [¶] . . . [¶]
There may have been some items (such as ‘Labor A, B, C, D . . . $17,576’ or ‘Interior
painting’) that were at least partially related to work done as a result of defendant’s
failure to keep the property in good repair. However, plaintiff failed his burden of
proving what portion of those expenses, if any, might have been related to the failure to
maintain the property.”
We may not second guess the trial court’s conclusion that Scot failed to
link all of the repair costs to the lack of proper maintenance because Scot has not met his
burden to show Beaulieu’s testimony was “‘clear, positive, and of such a nature that it
cannot rationally be disbelieved.’ [Citation.]” (Adoption of Arthur M., supra,
149 Cal.App.4th at p. 717.) To the contrary, Scot concedes that at least some items
Beaulieu included in his “Repairs/Replacements/Expenses” category were not
extraordinary repairs and should not have been included in that category. For example,
Scot concedes the eviction costs sought for both properties should not have been included
24
in the damages he sought for extraordinary repairs. Moreover, other items Beaulieu
included appear to reflect ordinary repairs or maintenance, such as “Furnace
Replacement” and “Water Heater Replacement,” and Scot points to nothing in the record
that required the trial court to believe the testimony that these items were required
because of Rodriguez’s failure to properly maintain the property. Accordingly, we affirm
the trial court’s decision on the amount of damages Scot suffered based on Rodriguez’s
failure to repair and maintain the properties.
2. The Trial Court Erred in Failing to Award Scot Damages for “Missing Rent
Never Deposited”
Scot sought to recover damages for two categories of rent he claimed
Rodriguez failed to collect and deposit in the trust account for the Browns’ properties:
(1) $93,894 for “[m]issing rent,” which covers tenant rent payments Rodriguez claimed
he collected, but either did not receive or received and failed to deposit in the trust
account; and (2) $25,173 for “[m]issing rent never deposited,” which covers tenant rent
checks Rodriguez collected but later were returned for insufficient funds and Rodriguez
never bothered to initiate collection procedures. The trial court awarded Scot the full
amount he sought for the first category, but nothing for the second category.
Scot contends the trial court’s failure to award him the full amount for the
missing rent was error for two reasons. First, his expert’s testimony clearly established
this missing rent as an element of damages caused by Rodriguez’s mismanagement of the
properties. Second, not only did the statement of decision fail to explain why the trial
court refused to award Scot this missing rent, but the statement also failed to even
acknowledge Scot sought this rent as an element of damages. Although Scot waived any
defect in the statement of decision by failing to object to the statement in the trial court,
we nonetheless conclude the trial court erred because the record lacks substantial
evidence to support the implied finding Scot failed to establish he was entitled to recover
the amount he sought for missing rent never deposited.
25
In a nonjury trial, a party may request the trial court issue a statement of
decision explaining the factual and legal basis for the court’s decision. (Uzyel v. Kadisha
(2010) 188 Cal.App.4th 866, 896.) Any request must identify the particular controverted
issues on which the requesting party seeks a statement of decision. (Code Civ. Proc.,
§ 632.) If a statement of decision fails to decide one of those issues or is ambiguous, a
party must object to the omission or ambiguity in the trial court or “waive[] the right to
claim on appeal that the statement was deficient in these regards, and hence the appellate
court will imply findings to support the judgment.” (In re Marriage of Arceneaux (1990)
51 Cal.3d 1130, 1133-1134 (Arceneaux).) Specifically, “If an omission is not brought to
the trial court’s attention . . . the reviewing court will resolve the omission by inferring
findings in favor of the prevailing party on that issue. [Citations.] If an ambiguity is not
brought to the trial court’s attention . . . the reviewing court will resolve the ambiguity by
inferring that the trial court decided in favor of the prevailing party on that issue.
[Citation.]” (Uzyel, at p. 896.)
“In order to avoid the application of this doctrine of implied findings, an
appellant must take two steps. First, the appellant must request a statement of decision
pursuant to Code of Civil Procedure section 632 . . . ; second, if the trial court issues a
statement of decision, ‘a party claiming omissions or ambiguities in the factual findings
must bring the omissions or ambiguities to the trial court’s attention’ pursuant to [Code of
Civil Procedure] section 634.’ [Citation.]” (Ermoian v. Desert Hospital (2007)
152 Cal.App.4th 475, 494.) Merely requesting a statement of decision on a particular
issue after the trial court issued its tentative decision is not sufficient. (Arceneaux, supra,
51 Cal.3d at p. 1134.) “[A]ny defects in the trial court’s statement of decision must be
brought to the court’s attention through specific objections to the statement itself.” (Bay
World Trading, Ltd. v. Nebraska Beef, Inc. (2002) 101 Cal.App.4th 135, 140.)
Here, the trial court issued its tentative decision and Scot responded by
requesting a statement of decision. One of the issues Scot asked the court to address was
26
Defendants’ liability for the missing rent never deposited. When the trial court later
issued its statement of decision, it neither awarded Scot any damages for missing rent
never deposited nor provided any explanation for refusing to do so. Indeed, the trial
court’s statement of decision is completely silent as to Scot’s claim for this component of
his damages. Scot, however, did not file any objections to the trial court’s statement of
decision or otherwise bring this omission to the court’s attention.
Because he failed to object in the trial court, Scot waived any objection to
the statement of decision’s failure to address his claim for missing rent never deposited
and we must presume the trial court found Scot failed to present sufficient evidence to
establish his right to recover these damages. (Arceneaux, supra, 51 Cal.3d at
pp. 1133-1134.) But that is not the end of our inquiry because we still must examine the
record to determine whether it contains substantial evidence to support that implied
finding. (Fladeboe, supra, 150 Cal.App.4th at pp. 48, 60.) Indeed, even though Scot
waived any objection to the statement of decision itself, he did not waive any challenge to
the sufficiency of the evidence supporting the trial court’s decision. (See Tahoe National
Bank v. Phillips (1971) 4 Cal.3d 11, 23, fn. 17 [whether a finding is supported by
substantial evidence is an issue of law that is never waived or forfeited on appeal];
In re Gregory A. (2005) 126 Cal.App.4th 1554, 1560-1561 [same].)
We conclude there is no substantial evidence to support the trial court’s
implied finding that Scot failed to present sufficient evidence to establish his right to
recover the damages he sought for missing rent never deposited. Defendants cite no
evidence to support this implied finding and our review of the record likewise revealed
no evidence to support this implied finding. Rather tellingly, Defendants’ brief does not
even address Scot’s claim for missing rent never deposited.
In contrast, Scot’s brief summarizes the testimony of Christopher Money, a
certified public accountant and fraud examiner, who testified regarding the damages Scot
suffered due to Rodriguez’s failure to collect all of the rent from the tenants. Money
27
testified he examined the bank statements for the trust account into which Rodriguez
deposited the rent payments, the cancelled rent checks from the tenants, and the cash flow
reports Rodriguez prepared to summarize the rent he collected. From those records,
Money determined there was $93,894 in rent Rodriguez failed to collect from the tenants
and deposit in the trust account. Money’s analysis further revealed an additional $25,173
in rent checks that Rodriguez collected and deposited in the trust account, but were not
included in the first category because those checks were later returned for insufficient
funds and Rodriguez never followed up to collect a valid payment. Money testified the
full amount of the missing rent is the sum of these two categories. Defendants
cross-examined Money regarding the first category of missing rent, but failed to ask
Money any questions regarding the second category. Defendants also did not present any
evidence to refute Money’s testimony on the amount of missing rent.
Accordingly, not only is there no substantial evidence in the record to
support the trial court’s failure to award Scot damages for missing rent never deposited,
there is no evidence to question the veracity of the evidence Scot presented to establish
this element of his damages. We therefore reverse the trial court’s judgment denying
Scot damages for missing rent never deposited and remand for the trial court to issue a
new statement of decision and enter judgment for Scot on those damages. (See State Bar
of California v. Statile (2008) 168 Cal.App.4th 650, 672-673.)
3. Scot May Not Recover His Attorney Fees Under the Agreement’s Fee
Provision Because He Failed to Mediate Before Filing This Action
After trial, Scot filed a motion seeking his attorney fees under the
Agreement’s attorney fee provision. The provision authorized the prevailing party in any
litigation seeking compensation under the Agreement to recover his or her attorney fees
“except as provided in paragraph 9A.” Paragraph 9A requires the parties to attempt to
resolve any dispute through mediation before “resorting to . . . court action.” That
paragraph further provides, “If any party commences an action based on a dispute or
28
claim to which this paragraph applies, without first attempting to resolve the matter
through mediation, then that party shall not be entitled to recover attorney’s fees, even if
they would otherwise be available to that party in any such action.” The trial court
denied Scot’s motion because he failed to mediate his dispute before filing this action.6
Scot contends the trial court erred in denying his fee motion on this ground
for three reasons, but each of them lacks merit. First, Scot contends Defendants are
estopped from asserting the Agreement’s mediation requirement because they concealed
it from him. According to Scot, Defendants were his fiduciaries with the duty to disclose
all information relevant to their management of the property, including the Agreement’s
attorney fee provision and the mediation requirement. Because Defendants did not
specifically disclose the mediation requirement to him, Scot contends Defendants may
not rely on it to prevent him from recovering his attorney fees. We reject this contention.
As the trial court found, Defendants were Scot’s fiduciaries regarding the
management of the properties, but that fiduciary relationship ended no later than
June 2009 when Rodriguez admitted his malfeasance, Scot fired him, and Scot hired a
new property manager. Any duty of disclosure Defendants owed ended when the
fiduciary relationship ended. (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC
(2008) 162 Cal.App.4th 858, 887 [“an agent’s duty of disclosure ordinarily ends upon
termination of the agency relationship” (original italics)]; Van de Kamp v. Bank of
America (1988) 204 Cal.App.3d 819, 861.) At that point in time, the relationship became
6 In its entirety, the attorney fee provision states, “In any action, proceeding,
or arbitration between Owner and Broker regarding the obligation to pay compensation
under this Agreement, the prevailing Owner or Broker shall be entitled to reasonable
attorney’s fees and costs, except as provided in paragraph 9A.” (Italics added.) Neither
side addresses whether this is an action “regarding the obligation to pay compensation
under this Agreement” which could justify a fee award if the mediation requirement had
been satisfied. We do not address this issue because we agree the mediation requirement
was not satisfied.
29
adversarial as Scot sought to recover his losses and Scot therefore had a duty to
investigate his claims against Defendants. In recognition of that fact, Scot hired an
attorney who filed this lawsuit, including its claim for breach of the Agreement,
approximately one year after the fiduciary relationship ended. At trial, Scot testified he
initialed the Agreement in 1999 and had a copy of it in his files from that point forward.
He also testified he reviewed all of his files and provided them to his attorney when this
dispute arose. Interestingly, Scot does not point to any evidence in the record showing he
was unaware of the Agreement’s mediation requirement. To claim the benefits of the
Agreement, Scot also must bear its burdens and we see no grounds to estop Defendants
from asserting the mediation requirement.
Second, Scot contends the mediation requirement does not apply because
that requirement expressly excludes “[a]ny matter which is within the jurisdiction of a
probate, small claims, or bankruptcy court.” According to Scot, this action was within
the jurisdiction of the probate court because the trial court required him to petition the
probate court to appoint a personal representative for Cheryl and her estate that could be
joined in this action. The court did so to ensure all possible parties were named as parties
in this action. Nonetheless, this action was filed, tried, and at all times remained pending
in the civil division of the Orange County Superior Court. Scot’s petition in the probate
division for appointment of a personal representative did not bring this separate civil
action within the jurisdiction of the probate division and Scot cites no authority to support
his suggestion that it did.
Finally, Scot contends he complied with the mediation requirement because
he sent Defendants a letter in August 2009 asking for an accounting and all supporting
documents relating to Defendants’ management of the properties. Because the
Agreement does not define the terms mediation or mediate, Scot contends this letter
should be treated as a request to informally resolve this dispute and he therefore satisfied
the mediation requirement. We disagree. Even in their ordinary and common use, the
30
terms mediation and mediate involve a process where a third party acts as an
intermediary between two parties to help resolve a dispute. (See, e.g., Dictionary.com at
<http://dictionary.reference.com/browse/mediate> (as of Nov. 15, 2013).) Scot’s letter
was simply a request for information; it did not request or even hint at involving a third
party to resolve a dispute.
We therefore conclude the trial court properly denied Scot’s fee motion.
(See Frei v. Davey (2004) 124 Cal.App.4th 1506, 1508 [enforcing condition precedent in
contractual attorney fee provision denying prevailing party right to recover fees if he or
she does not attempt to mediate dispute before filing lawsuit].)
III
DISPOSITION
The judgment is reversed to the extent it denies Scot damages for missing
rent never deposited and affirmed in all other respects. The postjudgment order denying
Scot’s attorney fee motion is affirmed. We remand for the trial court to issue a new
statement of decision and enter a new judgment awarding Scot damages for missing rent
never deposited. Scot shall recover his costs on appeal.
ARONSON, J.
WE CONCUR:
RYLAARSDAM, ACTING P. J.
BEDSWORTH, J.
31