Opinion
A147428
12-08-2017
AMERICAN LUNG ASSOCIATION et al., Plaintiffs, v. AMERICAN LUNG ASSOCIATION IN CALIFORNIA, Defendant and Respondent, BREATHE CALIFORNIA OF LOS ANGELES COUNTY, Defendant and Appellant.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. RG05228892)
Appellant Breathe California of Los Angeles County (Breathe LA) appeals from the trial court's order granting a motion to enforce a consent judgment filed by respondent American Lung Association in California (ALAC). The issue on appeal is whether the consent judgment obligates Breathe LA to share with ALAC the income from three bequests, despite language in the bequests that may restrict sharing. Because we conclude the trial court erred in interpreting the consent judgment to require sharing, we reverse and remand.
BACKGROUND
The organization currently known as Breathe LA was formed in 1903 as the Los Angeles Society for the Study and Prevention of Tuberculosis. Subsequently, the organization, which became known as the American Lung Association of Los Angeles County, became affiliated with the American Lung Association (ALA) and ALAC, ALA's statewide "Constituent Association." In 2006, through the consent judgment at issue in the present case, the American Lung Association of Los Angeles County disaffiliated from the ALA and ALAC and was renamed Breathe LA.
For convenience, this decision refers to appellant as Breathe LA, even in relation to events that occurred while it was still called the American Lung Association of Los Angeles County.
The Affiliate Agreement
Prior to disaffiliation, Breathe LA entered into annual affiliate agreements with ALAC, which entered into similar agreements with other affiliates, as well as a "Constituent Agreement" with the ALA. The parties agree the last such agreement between Breathe LA and ALAC was dated July 1, 2004 and ran through June 30, 2005 (Affiliate Agreement). In section F, the Affiliate Agreement provided for "income sharing" between the affiliate and ALAC, but specifically exempted various categories of income from sharing. Section F states, "ALAC and the Affiliate agree that in order to achieve the common purpose and program of ALAC and its affiliates, all income received by ALAC and its Affiliates shall be shared in the manner specified in Section G hereof, except for the matters excepted from income sharing by the provisions of Paragraph 13 of the Constituent Agreement, that is, funds restricted in writing by the donor, not later than the date of donation, to exclude or limit sharing, such restriction not having been invited by the donee association; income on investments, rental income, proceeds from the sale of property, donated services, donated equipment, and fees for services, membership dues of CTS, and other membership dues not raised by mass appeal, bequests and devises from donors whose death occurred prior to April 1, 1976, grants from not-for-profit health organizations, and from governmental agencies. All income to be shared pursuant to this paragraph is hereafter referred to as 'shareable income.' Upon request Lung Associations shall provide documentation for income and receipts not shared." (Italics added.) The July 2004 constituent agreement between the ALA and ALAC (Constituent Agreement) contains a description of income excluded from sharing that is identical in all relevant respects.
Section G of the Affiliate Agreement specified the terms and timing of income sharing, stating "In addition to ALA's share of shareable income as provided in the constituent agreement, ALAC's share of all shareable income received by ALAC and/or the Affiliate shall be nine and one-half percent (9.5%). ALA's, ALAC's and Affiliate's share of all shareable income shall be paid between ALAC and Affiliate and ALAC's other affiliates as follows: [specifying four payment dates and periods]. On or prior to October 1st a final report of income received for the fiscal year July 1 through June 30 shall be submitted with any payment due. A late fee of 1% shall be due for each month a payment is delinquent."
Disaffiliation and the 2006 Consent Judgment
The ALA underwent a reorganization in late 2004 and early 2005. In a declaration, the ALA's Chief Operating Officer described it as "an effort to streamline the existing three levels of lung associations down to two." Breathe LA's President and CEO averred in a declaration that the "ALA demanded that [Breathe LA] transfer its assets and relinquish control to the national organization." The affiliate refused and decided to disaffiliate. Subsequently, in summer 2005, ALA sued ALAC and its affiliates, including Breathe LA, for trademark infringement and related causes of action.
In January 2006, the parties settled the litigation when the Alameda County Superior Court granted a joint motion to approve a consent judgment (Consent Judgment). Under the Consent Judgment, certain affiliates agreed to merge into ALAC, while others (including Breathe LA) disaffiliated and agreed to change their names. The parties agreed to a process for settling their outstanding accounts, including calculation of income remaining to be shared. In the present appeal, the parties call the organizations that disaffiliated the "Breathe Entities," in reference to the names adopted by the organizations following entry of the Consent Judgment.
There were fourteen signatories to the Consent Judgment: the ALA, the ALAC, Breathe LA, and eleven other affiliates.
At issue on appeal is paragraph 4(m) of the Consent Judgment, which governs the treatment of Bequests and Planned Gifts ("Bequests"). In particular, paragraph 4(m)(ii) relates to Bequests created before or within three months after the Consent Judgment's December 31, 2005 "Financial Closing Date." The paragraph first delineates two circumstances under which such a Bequest "shall be treated as an asset of the Independent Affiliate," such as Breathe LA. First, if the Bequest "names as the beneficiary or recipient the Independent Affiliate by the name used by it while it was an affiliate of ALAC or by any other name reflecting a clear intent to designate such Independent Affiliate." Or, second, if "the donor/testator/grantor was, in the case of an individual, domiciled in, or in the case of an entity, had its primary address in, the territory in which the Independent Affiliate operated while it was an affiliate of ALAC." Accordingly, under the Consent Judgment a Bequest created during the specified timeframe shall be treated as an asset of Breathe LA if it names American Lung Association of Los Angeles County (or similar designation) or if the donor was domiciled in Breathe LA's territory prior to disaffiliation.
However, that a Bequest is to be "treated as an asset" of a former affiliate like Breathe LA does not mean the Bequest need not be shared with ALAC. The second sentence of paragraph 4(m)(ii), which is the language in dispute on appeal, provides, "Any Bequest or Planned Gift falling within the terms of this paragraph shall be subject to sharing as Shareable Income under the affiliate agreement between the Independent Affiliate and ALAC covering the period July 1, 2004 to June 30, 2005, and the governing constituent agreement between ALA and ALAC." (Italics added.) The third and final sentence of the paragraph states, "Each Party shall, within ten (10) days of receiving any information regarding any Bequest or Planned Gift subject to the provisions of this paragraph, transmit to the other Parties any and all such information." The Consent Judgment, in paragraph 1(k), defines "Shareable Income" as "those income and receipts subject to income sharing as provided in the governing constituent agreement between ALA and ALAC and the governing affiliate agreement between ALAC and each Independent Affiliate."
The 2010 Motion to Enforce the Consent Judgment
In 2010, a group of four former California affiliates, including Breathe LA, filed a motion to enforce the Consent Judgment. According to the motion, it was motivated by suspicions that ALA and ALAC had failed to inform the former affiliates of shareable bequests. The motion sought an order requiring ALA and ALAC to, among other things, treat shareable bequests as assets of the former affiliates and to disclose information about bequests that ALA or ALAC deemed non-shareable. The motion also requested, among other declarations, "a declaration that the shareable income provisions of the 2004-2005 'Affiliate Continuing Agreement' are incorporated by reference in the Consent Judgment." The former affiliates submitted a proposed order that stated, as relevant in the present appeal, "Sections C, F, G, I and J of the 2004-2005 Affiliate Agreement as they relate to bequest income are incorporated by reference into Section 4(m)(ii) of the Consent Judgment and define the rights and obligations of the parties with respect to the sharing of bequests under Section 4(m)(ii)."
Among other things, the trial court's July 2010 order on the motion ("2010 Order") required that the parties treat Bequests "as assets" of the former affiliates when they fell under paragraph 4(m)(ii) of the Consent Judgment and concluded that information need not be shared regarding Bequests outside the scope of the paragraph. The 2010 Order also stated, "The Court declines Breathe's request to incorporate by reference Section F of the referenced agreements pertaining to 'restricted gifts.' "
The 2015 Motion to Enforce the Consent Judgment
Over four years later, in January 2015, ALAC filed the motion to enforce the Consent Judgment that is the subject of the present appeal. Among other things, ALAC sought an order compelling Breathe LA to share three Bequests: the McNamara Trust, the Carsten Trust, and the Brunner Trust. All three Bequests were created but not distributed before the Consent Judgment and are described below.
First, the McNamara Bequest was created in November 2003, via a trust instrument gifting funds to the "American Lung Association of California, for use at its Los Angeles County affiliate." In January 2007, Breathe LA informed ALAC by letter of its receipt of a distribution from the McNamara Bequest. It is undisputed that Breathe LA did not share any distributions from the McNamara Bequest.
Breathe LA had actually learned of the McNamara Bequest from ALAC in September 2005, when ALAC forwarded the affiliate a notice of a December 21, 2004 hearing regarding the gift.
Second, the Carsten Bequest was created in 1997; Ms. Carsten was domiciled in Los Angeles County. The bequest provides for distribution of funds "to the American Lung Association for the purpose of establishing a perpetual fund to be known as the DON MARLIN and DR. MARY E. CARSTEN MARLIN fund. The income of this fund shall be used in the discretion of the Board of Directors of the American Lung Association, for one or more postdoctoral fellowships each year for research primarily in the area of bronchial asthma. The principal of this fund shall be held perpetually and shall be invested by the Board of Directors to the American Lung Association." The President and CEO of Breathe LA averred in a November 2015 declaration "that Breathe LA determined that the Carsten Bequest was restricted in writing by the donor to exclude or limit sharing because it specifies the creation of a single fund." As of the date of the declaration, the organization had not received funds from the Bequest.
In the copy of the Carsten Bequest in the record, this paragraph is scribbled over. The parties do not address the significance, if any, of the scribbling, and that issue is not before this court.
Third, the Brunner Bequest was created in May 1992. It provides for a distribution of funds to "The AMERICAN LUNG ASSOCIATION OF LOS ANGELES COUNTY, Los Angeles, California, to be used to establish the ERNEST BRUNNER AND IRENE BRUNNER FAMILY FUND, which fund is to be used exclusively for research relating to the causes and prevention of lung disease." The President and CEO of Breathe LA averred in his November 2015 declaration that "Breathe LA determined that the Brunner Bequest was restricted in writing by the donor to exclude or limit sharing because the donor writing specifies 'a fund for research.' " Breathe LA received $29,113.83 from the Brunner Bequest in February 2014.
To resolve ALAC's motion to enforce the Consent Judgment, the parties stipulated to the appointment of a referee under Code of Civil Procedure section 638, and the trial court appointed Judge Bonnie Sabraw (retired). In October 2015, following a hearing, the referee issued a decision (2015 Decision) compelling Breathe LA to share income from the McNamara, Carsten, and Brunner Bequests, regardless of any donors' intent to restrict sharing. The referee rejected Breathe LA's contention that the Consent Judgment was meant to continue the parties' practice as it existed before disaffiliation. The 2015 Decision directed Breathe LA to pay ALAC its share of the three Bequests by November 15, as well as attorney fees. In January 2016, the referee concluded that a 1% per month late fee specified in the Affiliate Agreement applied to the Bequests at issue. That same month, in response to a motion for reconsideration filed by Breathe LA, the referee also filed an amended statement of decision correcting a factual misstatement in the 2015 Decision, although other factual misstatements in the decision were left unchanged (see post, Part II.A.).
ALAC's brief on appeal contains numerous unsupported assertions regarding the practices or positions of other former affiliates with regard to sharing of income under the Consent Judgment. We disregard those assertions. (Mitchell v. City of Indio (1987) 196 Cal.App.3d 881, 890 [" 'In reaching a decision on appeal an appellate court is governed by the record; will not consider facts having no support in the record; and will disregard statements of such facts set forth in a brief.' "].)
DISCUSSION
Appellant contends the trial court erred in construing the Consent Judgment to require sharing of Bequests regardless of whether the Bequests reflect an intent to restrict sharing. The parties agree our review is de novo. (Brandwein v. Butler (2013) 218 Cal.App.4th 1485, 1497-1498 ["the trial court's construction of the language of the settlement agreement . . . is reviewed de novo, inasmuch as there is no conflicting extrinsic evidence as to its meaning"].)
We reject ALAC's contention that the 2015 Decision is not appealable. The proposition that "a stipulated judgment is not appealable and a postjudgment order is only appealable when the earlier judgment is itself appealable . . . is inapplicable where, as here, the stipulated judgment expressly reserved jurisdiction for the court to effectuate and enforce the terms of the" Consent Judgment. (Rancho Pauma Mutual Water Co. v. Yuima Municipal Water Dist. (2015) 239 Cal.App.4th 109, 115; see also Ruiz v. California State Automobile Assn. Inter-Insurance Bureau (2013) 222 Cal.App.4th 596, 606; Water Replenishment Dist. of Southern California v. City of Cerritos (2012) 202 Cal.App.4th 1063, 1069-1070.) In any event, even if the 2015 Decision were unappealable, we would exercise our discretion to treat Breathe LA's purported appeal as a petition for writ of mandate. (H. D. Arnaiz, Ltd. v. Cty. of San Joaquin (2002) 96 Cal.App.4th 1357, 1366-1367.)
I. The 2010 Decision Does Not Require Rejection of Breathe LA's Claim
ALAC contends the trial court properly rejected Breathe LA's claim that it need not share the three Bequests at issue, arguing the 2010 Decision "already determined the extent to which the 2004 agreements are incorporated" into the Consent Judgment. (Emphasis and capitalization omitted.) As noted previously, in the 2010 motion to enforce the Consent Judgment, the participating Breathe Entities requested, among other things, "a declaration that the shareable income provisions of the 2004-2005 'Affiliate Continuing Agreement' are incorporated by reference in the Consent Judgment." The proposed order requested a ruling that "Sections C, F, G, I and J of the 2004-2005 Affiliate Agreement as they relate to bequest income are incorporated by reference into Section 4(m)(ii) of the Consent Judgment . . . ." The trial court declined to issue the requested order, stating, "the court rejects Breathe's argument that section 4(m)(ii) incorporates by reference entire sections of the Constituent Agreement and the Affiliate Agreement covering the period from July 1, 2004 to June 30, 2005, and accepts ALA's argument that these agreements are only referred to for purposes of defining share percentages and the timing of payments. . . . The Court declines [Breathe LA's] request to incorporate by reference Section F of the referenced agreements pertaining to 'restricted gifts.' "
On its face, the 2010 Decision appears to reject the interpretation proffered by Breathe LA on appeal. However, in the 2010 proceeding no party addressed in its briefing the applicability of the restricted gift provision. The specific issue addressed in the 2010 Decision was whether ALA was required to share information about Bequests that were outside the scope of paragraph 4m(ii) of the Consent Judgment. The Breathe Entities had argued ALA was required to provide such information under the sentence in Section F of the Affiliate Agreements stating, "Upon request Lung Associations shall provide documentation for income and receipts not shared." Although the trial court did state the Affiliate Agreements were "only referred to for purposes of defining share percentages and the timing of payments" in the context of that request for information sharing, the court only "decline[d]" the request for a declaration regarding the restricted gift provision. As Breathe LA points out on appeal, it is unclear whether the trial court declined the request on the merits, or because the issue had not been briefed, or because there was no current dispute between the parties as to that provision. Notably, ALA had opposed the 2010 motion on the ground of ripeness, arguing "[Breathe LA's] Motion is fatally defective because there is no current or pending 'controversy or dispute regarding compliance.' There is simply nothing before this Court for the Court to enforce. The fact that [Breathe LA] does not and cannot cite to a single donor bequest in dispute . . . is telling of its real intent in filing this Motion: [Breathe LA] does not seek to enforce the Consent Judgment at all, but rather to have the Court rewrite it, modifying its terms." Thus, it is unclear whether the trial court actually considered any of the arguments relating to interpretation of the Consent Judgment addressed in the current case.
In any event, ALAC fails to identify any principle of law that obligates this court to accept the 2010 Decision's interpretation of the Consent Judgment. ALAC characterizes the 2010 Decision as "binding precedent", but ALAC cites no authority the trial court's decision binds this court. (Cf. Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455 ["Under the doctrine of stare decisis, all tribunals exercising inferior jurisdiction are required to follow decisions of courts exercising superior jurisdiction."].) The law of the case doctrine is inapplicable, because that doctrine "applies only to an appellate court's decision on a question of law." (People v. Barragan (2004) 32 Cal.4th 236, 246.)
The most relevant doctrine is collateral estoppel, but ALAC has not argued that doctrine applies. (See Lucido v. Superior Court (1990) 51 Cal.3d 335, 341 ["The party asserting collateral estoppel bears the burden of establishing" the threshold elements]; Rodgers v. Sargent Controls & Aerospace (2006) 136 Cal.App.4th 82, 89 ["[C]ollateral estoppel is waived if not raised in the trial court." (Italics omitted.)].) The phrase "collateral estoppel" does not appear in ALAC's brief on appeal or in its briefs below; ALAC fails to address the elements required for application of the doctrine and explain how they are satisfied in the present case. ALAC's failure to provide reasoned analysis regarding the doctrine is significant, given the lack of clarity as to the scope of the 2010 Decision, including whether the court in that decision even reached the merits of the restricted gifts issue. Accordingly, any contention that the 2010 Decision has collateral estoppel effect in the present case has been forfeited.
"The prerequisite elements for applying the [collateral estoppel] doctrine to either an entire cause of action or one or more issues are the same: (1) A claim or issue raised in the present action is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding." (Brinton v. Bankers Pension Services, Inc. (1999) 76 Cal.App.4th 550, 556; accord People v. Barragan, supra, 32 Cal.4th at pp. 252-253.)
In sum, ALAC has not shown that the 2010 Decision precludes this court from adopting Breathe LA's interpretation of the Consent Judgment.
II. The Restricted Gifts Provision is Incorporated Into the Consent Judgment
The dispute in the present appeal requires this court to interpret paragraph 4(m)(ii) of the Consent Judgment, which relates to the sharing of Bequests that are treated as assets of a former affiliate, such as Breathe LA. Bequests are treated as assets of Breathe LA if they use the organization's prior name or if the donor lived in the organization's former territory as an affiliate. ALAC contends that all Bequests treated as an asset of Breathe LA under paragraph 4(m)(ii) must be shared with ALAC according to the sharing percentages and payment terms in the Affiliate Agreement. Breathe LA contends that a Bequest treated as its asset need not be shared with ALAC if the donor restricted sharing. The trial court agreed with ALAC but, as explained below, the court's reasoning was misplaced. Based on our independent review, this court concludes Breathe LA offers the only reasonable interpretation of the Consent Agreement. Further, the parties' intent and the evidence of the parties' conduct with respect to the McNamara Bequest before the present dispute arose also support Breathe LA's position.
A. The Trial Court's Reasoning Lacks Persuasive Value
Acting through the referee, the trial court concluded the Consent Judgment did not incorporate the provision in the Affiliate Agreement relating to restricted gifts. But the court did not undertake a thorough analysis of the language of the Consent Judgment. Instead, the court in significant part relied on the 2010 Decision's conclusion that the Consent Judgment only referred to the Affiliate Agreement " 'for purposes of defining share percentages and the timing of payments.' " As explained above, the 2010 Decision did not expressly undertake any analysis regarding the interaction between the restricted gifts provision and the Consent Judgment, so the 2010 Decision is of little assistance.
In addition, the trial court's interpretation of the Consent Judgment was based on a factual error. In particular, the 2015 Decision (both originally and as amended) states, "Under the 2004 Agreements, if a donor left [a] bequest to 'American Lung Association of Los Angeles,' it was considered 'funds restricted in writing by the donor' and not shareable by the local affiliate with the state and national ALA organizations. Under the 2006 Consent Judgment, however, the same bequest would be treated as an asset of Breathe LA, but subject to sharing with ALAC and ALA. To incorporate the definition of a 'restricted gift' back into the 2006 Consent Judgment would be to create an explicit contradiction: a gift left to 'American Lung Association of Los Angeles' would be both restricted and shareable under Breathe LA's reading."
That statement is an incorrect characterization of the practice under the Affiliate Agreement, as Breathe LA pointed out in a motion for reconsideration and as ALAC conceded in responding to the motion. The trial court's order on the motion for reconsideration states that the parties agreed certain sentences in the original 2015 Decision were "factually incorrect" and the court stated it would amend its decision in accordance with the parties' "agreed upon language." In particular, the parties agreed the decision should state, "If Breathe LA received a gift to the 'American Lung Association of Los Angeles' (Breathe LA's former name) it was required to share income from the gift with ALA and ALAC, unless the bequest met the restrictions in the operative affiliate or constituent agreements." The parties also agreed the decision should state, "Under the 2004 Agreements, if a donor restricted in writing its bequest, not later than the date of donation, to exclude or limit sharing of income, and the restriction was not invited by the donee association, then the donee association was not required to share income from that bequest with other entities in the ALA network."
Despite the parties' agreement and despite the trial court's representation that it would modify the statement of decision, the final, amended version of the 2015 Decision continued to include the erroneous assertion that, under the Affiliate Agreement, a Bequest left to the "American Lung Association of Los Angeles" was considered " 'funds restricted in writing by the donor' and not shareable by the local affiliate with the state and national ALA organizations." That factual error was the underpinning of the court's conclusion that incorporating the restricted gift provision into the Consent Judgment would "create an explicit contradiction: a gift left to 'American Lung Association of Los Angeles' would be both restricted and shareable." The trial court reasoned that Bequests to the "American Lung Association of Los Angeles" were clearly within the scope of the first sentence of paragraph 4m(ii) of the Consent Judgment, so to categorically exclude such Bequests through incorporation of the restricted gift provision in the second sentence would be nonsensical. In fact, a Bequest to the "American Lung Association of Los Angeles" would only be excluded from sharing under the Affiliate Agreement if there were some separate indication of the donor's intent to restrict sharing, so the "contradiction" the trial court perceived does not exist.
In summary, because the 2015 Decision relies on a factual error and a prior decision lacking relevant reasoning, the trial court's interpretation of the Consent Judgment is of little assistance to this court.
B. The Consent Judgment is Not Ambiguous
"Settlement agreements and consent judgments are construed under the same rules that apply to any other contract. [Citations.] 'Contract interpretation presents a question of law which this court determines independently. [Citations.] [¶] A contract must be interpreted to give effect to the mutual, expressed intention of the parties. Where the parties have reduced their agreement to writing, their mutual intention is to be determined, whenever possible, from the language of the writing alone.' " (In re Tobacco Cases I (2010) 186 Cal.App.4th 42, 47 (In re Tobacco Cases I).) "The court generally may not consider extrinsic evidence of any prior agreement or contemporaneous oral agreement to vary or contradict the clear and unambiguous terms of a written, integrated contract. [Citations.] Extrinsic evidence is admissible, however, to interpret an agreement when a material term is ambiguous." (Wolf v. Walt Disney Pictures & Television (2008) 162 Cal.App.4th 1107, 1126.) "A contract is ambiguous only if it is reasonably susceptible of two or more interpretations." (In re Tobacco Cases I, at p. 48.) We determine de novo whether the Consent Judgment is ambiguous. (Fischer v. First International Bank (2003) 109 Cal.App.4th 1433, 1443.)
We conclude the Consent Judgment is not ambiguous. As the parties agree, the first sentence of paragraph 4(m)(ii) provides that a Bequest "shall be treated as an asset" of Breathe LA if it names the "American Lung Association of Los Angeles" (or uses a similar name) or if the donor resided in Breathe LA's territory while it was an affiliate. In dispute is the second sentence of paragraph 4(m)(ii), which provides that any Bequest within the scope of the first sentence "shall be subject to sharing as Shareable Income under the" 2004 Affiliate Agreement (and the Constituent Agreement, which the parties agree is identical in all relevant respects). In arguing that language requires sharing regardless of any limitations in the Affiliate Agreement, ALAC focuses on the characterization of such Bequests as "Shareable Income," which the Consent Judgment defines as "those income and receipts subject to sharing as provided in the governing constituent agreement between ALA and ALAC and the governing affiliate agreement between ALAC and each Independent Affiliate." ALAC argues any Bequest within the scope of the first sentence is to be shared with ALAC in accordance with the sharing percentages and payment timing provisions in the Affiliate Agreement. In effect, ALAC construes the second sentence of paragraph 4(m)(ii) as if it reads, "Any Bequest or Planned Gift falling within the terms of this paragraph shall be shared in accordance with the sharing percentages and payment timing provisions" of the Affiliate and Constituent Agreements.
However, as is apparent from the above, ALAC's interpretation does not align with the plain language of the Consent Judgment. It renders surplusage the "subject to sharing" phrasing and it limits the scope of the incorporation of the Affiliate Agreement without any basis in the language of the Consent Judgment. We agree with Breathe LA's suggestion that the phrase "subject to sharing" is a qualification on the shareability of Bequests within the scope of the paragraph. As Breathe LA points out, a relevant dictionary definition for "subject" when used in the phrase "subject to" is "contingent on or under the influence of some later action." (Merriam-Webster's Collegiate Dict. (10th ed. 2001) p. 1168, col. 2; see also American Heritage Dictionary (3rd ed. 1996) p. 1788, col. 2 ["Contingent or dependent"]; Burton, Legal Thesaurus (1980) p. 480 ["contingent, dependent, dependent on circumstances, depending on, incident to, incidental, provisional, relying upon"].) Thus, an affiliate may be obligated to share a Bequest coming within the scope of paragraph 4(m)(ii), unless the Affiliate Agreement precludes sharing under the restricted gift provision. Breathe LA's interpretation gives meaning to the phrase "subject to sharing" in the Consent Judgment, and it avoids limiting the scope of the incorporation of the Affiliate Agreement's sharing provisions, where the Consent Judgment itself contains no express limitations. Because there is only one reasonable interpretation of the disputed provision, the Consent Judgment is not ambiguous.
C. The Extrinsic Evidence Supports Breathe LA's Interpretation of the Consent Judgment
Although we conclude the Consent Judgment is not ambiguous, we observe that the extrinsic evidence provides further support for Breathe LA's interpretation. Where a consent judgment is ambiguous, a court may consider extrinsic evidence of the parties' intent, including the circumstances under which the parties entered into the contract and the subsequent conduct of the parties. (In re Tobacco Cases I, supra, 186 Cal.App.4th at p. 52; Cedars-Sinai Medical Center v. Shewry (2006) 137 Cal.App.4th 964, 979-980; see also Civ. Code §§ 1636, 1647; Code Civ. Proc. §§ 1856, subd. (c), 1860; but see Epic Communication, Inc. v. Richwave Technology, Inc. (2015) 237 Cal.App.4th 1342, 1355 , fn 13 [Ambiguity is not a condition precedent to admission of course of performance evidence.].)
In the present case, in support of Breathe LA's opposition to ALAC's motion to enforce the Consent Judgment, the President and CEO of Breathe LA explained in a declaration the circumstances leading up to the execution of the Consent Judgment. (See Civ. Code § 1647 ["A contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates."].) He averred that Breathe LA had been focused on raising funds through Bequests since at least the end of the 1950s and had instituted a "formal planned giving program" in the 1980s. Between fiscal years 1995-1996 and 1999-2000, Breathe LA budgeted over $1.4 million to support its Bequest programs. Based on that background, Breathe LA's President and CEO explained the organization's approach to negotiating the Consent Judgment as follows: "As described above, BLA had invested substantial amounts of time and money cultivating relationships with its donors and potential donors within our territory prior to the split with ALA. From our experiences, we knew that bequests were often designated years or even decades before the death of the designee. Accordingly, one of our primary concerns when negotiating the Consent Judgment was ensuring that bequests which we had invested significant time and money in securing prior to the split would later be properly distributed to BLA and treated as BLA's asset."
Although the declaration of Breathe LA's President and CEO does not specifically address the language of paragraph 4(m)(ii) or whether the Consent Judgment was intended to continue the sharing practices under the Affiliate Agreement, the declaration does establish the importance of Bequests to the organization. As Breathe LA points out on appeal, "If [Breathe LA], which had invested for decades in developing its bequest program, had intended to relinquish forever into the future its exclusive rights to potentially millions of dollars of Bequests that were restricted from sharing or fell under another of the exceptions in the Affiliate and Constituent Agreements, it stands to reason that it would have done so explicitly."
By contrast, ALAC does not explain why, in entering into the Consent Judgment, the parties might have intended to change the rules regarding sharing of Bequests that had been restricted by the donor. The Bequests at issue were made prior to disaffiliation, so it would have been natural to divide them according to the then-applicable rules, absent some other consideration. But ALAC identifies no reason why Breathe LA would have accepted modified sharing rules in the Consent Judgment. ALAC's primary argument why its interpretation is more logical is that, under its interpretation, the determination whether a Bequest must be shared can be made without reference to any other agreement. However, ALAC admits the Consent Judgment incorporates the Affiliate Agreement for purposes of determining sharing percentages and payment schedules. Thus, avoiding the need to refer to that agreement does not appear to have been an important motivation in the design of the Consent Judgment. Instead, it appears that continuing familiar past practices was considered more important, which supports Breathe LA's construction of the Consent Judgment.
ALAC also argues that "[d]etermining shareability solely within the four corners of [paragraph] 4(m)(ii) is also consistent with the duty of each party to transmit 'any and all' information related to bequests falling under this provision to the other party within ten days of receipt . . . . [because] [t]o accept the two-tiered analysis urged by Breathe LA would lead to transmitting information related to both shareable AND non-shareable bequests. . ." There is nothing odd about that result because, as Breathe LA points out, sharing information about all Bequests within the scope of the paragraph allows each party to form its own judgment about whether a Bequest reflects an intent to restrict sharing. Neither is it inconsistent with the 2010 Decision, which only ruled that the ALA was not required to share information about Bequests outside the scope of the paragraph.
ALAC asserts that "reasonable minds can differ as to what constitutes a 'restriction in writing' by the donor." However, absent evidence the parties had significant difficulty in determining shareability under the Affiliate Agreement, there is no basis for this court to conclude the parties intended to change their practice in entering into the Consent Judgment. In fact, the only evidence cited to this court is that there were few difficulties. In particular, Breathe LA cites a 2002 letter from an ALA Vice President to Breathe LA, stating "Occasionally, isolated cases arise when we might disagree on language interpretation. Lung Associations receive thousands of gifts annually and rarely do we disagree as to what the donor intended us to do with their donation. We believe the language of our policies and agreement is clear."
Finally, Breathe LA contends the parties' conduct following execution of the Consent Judgment demonstrates they understood it to incorporate the restricted gift provision from the Affiliate Agreement. The organization asserts in its opening brief, "in January 2007, Breathe LA informed ALAC of its receipt of the first McNamara Bequest distribution. [Citations.] Yet neither ALA nor ALAC asserted that they had a right to share the McNamara Bequest for over seven years, until ALAC raised the issue for the first time in 2014. [Citation.]" ALAC's brief on appeal does not dispute that characterization of the factual record, or dispute its relevance in interpreting the Consent Judgment. "That the actions of the parties should be used as a reliable means of interpreting an ambiguous contract is, of course, well settled in our law. Supported by many authorities this rule is summarized . . . as follows: 'The acts of the parties under the contract afford one of the most reliable means of arriving at their intention; and, while not conclusive, the construction thus given to a contract by the parties before any controversy has arisen as to its meaning will, when reasonable, be adopted and enforced by the courts.' " (Crestview Cemetery Assn. v. Dieden (1960) 54 Cal.2d 744, 752-753; see also Jacobs v. Locatelli (2017) 8 Cal.App.5th 317, 326; Employers Reinsurance Co. v. Superior Court (2008) 161 Cal.App.4th 906, 921.) ALAC's lengthy delay in asserting a claim to a share of the McNamara Bequest supports Breathe LA's interpretation of the Consent Judgment.
In sum, even if we were to conclude the contested provision is ambiguous, the parties' apparent intent in entering into the Consent Judgment and the parties' conduct following execution thereof offer further support for Breathe LA's interpretation of the Consent Judgment. Accordingly, the trial court erred in concluding that the restricted gift provision of section F of the Affiliate Agreement was not incorporated into the Consent Judgment. Our conclusion that Breathe LA's interpretation prevails does not, however, entirely resolve the present litigation, because ALAC disputes that the three Bequests at issue are restricted within the meaning of the Affiliate Agreement. Breathe LA argues that this court can make that determination as a matter of law based on the language of the Affiliate Agreement. But it has not shown there is no possibility extrinsic evidence will be relevant. Accordingly, we remand for determination of whether the three Bequests at issue are restricted within the meaning of Affiliate Agreement and any other proceedings not inconsistent with this opinion.
DISPOSITION
The trial court's order is reversed. The matter is remanded for further proceedings consistent with this opinion. Costs on appeal are awarded to appellant.
/s/_________
SIMONS, J. We concur. /s/_________
JONES, P.J. /s/_________
NEEDHAM, J.