Opinion
A147458
02-16-2018
STEVEN PINZA et al., Plaintiffs and Respondents, v. KIMO, INC., 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Francisco City and County Super. Ct. No. CGC-14-538593)
This appeal involves a dispute between KIMO, Inc. (KIMO) a licensed real estate brokerage firm that operates several real estate-related businesses, and two former agents of KIMO with the status of independent contractors: Steven Pinza, who sold real estate, and Nils Ratnathicam, who generated and closed real estate loans. The sole question presented is the meaning of "postdeparture payout" provisions in the written agreements between defendant and each plaintiff relating to commissions payable to the latter for as yet unpaid work on transactions that were unresolved or unclosed at the time plaintiffs' relationships with KIMO ended.
The related businesses include a loan brokerage firm, which has operated under the names Piedmont Capital and Piedmont Capital Funding, and a real estate brokerage, which KIMO operates under the names Kilpatrick & Company and, later, NAI Northern California.
The case largely turns upon the propriety of the trial court's interpretation of materially identical provisions pertaining to commissions set forth in the written agreements between the parties. As we agree with the court's interpretation of those provisions, we shall affirm the judgment.
FACTS AND PROCEEDINGS BELOW
The contracts here at issue are written agreements Pinza and Ratnathicam each entered into with KIMO establishing that neither were employees of KIMO but agents for the company with the status of independent contractors. Both agreements included substantially similar postdeparture payout provisions.
Ratnathicam's June 14, 2007 "Loan Agent Agreement" stated that "[a]ny commissions not paid (for unresolved or unclosed transactions) as of date of notification of termination or departure will be paid entirely at management's sole discretion. Management will take various factors into consideration, but will pay at minimum 50% of what would have been paid [if the transaction had been resolved or closed prior to termination or departure]." A subsequent provision of the loan agent agreement stated that "[w]hen this Agreement has been terminated, Agent shall be entitled to receive commissions in accordance with the termination-commission schedule above."
Similarly, Pinza's July 18, 2009 "Salesperson Agreement" incorporates by reference the following provision "for early departure or termination (mutual or unilateral) of Salesperson relationship as it related [sic] to commissions" set forth in KIMO's Policies and Procedures Manual: "Any commissions not paid (For unresolved or unclosed transactions) as of the date of notification of termination or departure will be paid entirely at management's sole discretion. Management will take various factors into consideration, but will pay at minimum 50% of what would have been paid."
Ratnathicam gave written notice of his termination of his agency relationship with KIMO on May 30, 2013, at which time he was working on 17 unclosed loan transactions that he wished to continue working on, for which he obtained KIMO's permission. Each of these transactions ultimately closed and KIMO paid Ratnathicam 50 percent of what he would have been paid prior to his resignation on each of the 17 transactions.
KIMO terminated its relationship with Pinza on June 11, 2013, at which time he was working on two unclosed transactions. Both transactions subsequently closed and KIMO paid Pinza 50 percent of what he would have been paid prior to his termination.
At the time Pinza departed he was involved in an unresolved dispute with a former client regarding KIMO's listing of a property known as Hugo Terrace. KIMO claimed it was entitled to a 50 percent share of both a forfeited $75,000 deposit and a $290,000 commission after the former client rejected a $7.25 million purchase offer on the Hugo Terrace property, which KIMO considered improper. In May 2013, shortly before Pinza's termination, the former client paid KIMO $34,500 to resolve the dispute regarding the forfeited deposit. In January 2014, well after Pinza was terminated, the dispute regarding the commission was settled by the former client's agreement to pay KIMO $105,000.
This action was commenced by Pinza on April 10, 2014. The first amended complaint, which is the operative pleading, was filed by Pinza and Ratnathicam on February 19, 2015, and alleged causes of action for breach of contract, common counts, unjust enrichment, conversion, and breach of fiduciary duty. As material, Ratnathicam alleged, among other things, that he and KIMO agreed to modify their loan agent agreement so that he would be due a full commission on each of the 17 unclosed transactions pending at the time of his departure. Pinza similarly alleged, as material, that he was entitled to a full commission on two unclosed transaction pending when he left KIMO, and that he was also entitled to a full commission on monies KIMO received from the former client regarding the Hugo Terrace settlement.
Denial of KIMO's Motion for Summary Judgment or Summary Adjudication
On July 22, 2015, KIMO moved for summary judgment claiming that Pinza's and Ratnathicam's claims for full commissions on unclosed transactions was barred by the postdeparture payout provisions of their written agreements with KIMO. Focusing on the sentence in that provision that: "Any commission not paid (for unresolved or undisclosed transactions) as of the date of notification of termination or departure will be paid entirely at management['s] sole discretion"—and emphasizing the use of the word "any" in that sentence—KIMO contended the provision was unambiguous and barred plaintiffs' claims of the "full" amount—rather than 50 percent—of their commissions on the loans that had not closed at the times plaintiffs terminated their relationships with KIMO.
The motion was also in behalf of two other defendants, James Kilpatrick and Kent Mitchell, who were later dismissed from the action. Kilpatrick is described in the first amended complaint as a shareholder, director, and manager of KIMO, Inc. According to that complaint, "Kilpatrick commingles his personal funds with KIMO's corporate funds" and "KIMO is a mere conduit for the personal affairs of Kilpatrick and Kent Mitchell," who is also a shareholder, director and manager of KIMO. Kilpatrick and Mitchell were named defendants; however, plaintiffs later conceded their claims against Mitchell lacked merit and the court found that "[KIMO], not Kilpatrick personally, was the party who had assumed the independent contractor agreements with Pinza and Ratnathicam and thus KIMO, not Kilpatrick, is liable for any contractual or quasi-contractual obligations to pay commissions to Pinza and Ratnathicam, absent imposition of alter ego liability." Accordingly, judgment was entered in favor of Kilpatrick and Mitchell on all claims alleged against them.
KIMO's motion was not just against Pinza and Ratnathicam but also Casey Wright, a former sales agent of KIMO who later settled with it and was also dismissed from this action prior to trial.
Pinza and Ratnathicam answered that the provision only pertains to the situation in which the sales or loan agent provided no continuing services after terminating his or her relationship with the broker, which was not the case here.
Relying on a declaration from Ratnathicam—who had worked in the real estate business for more than 10 years—that the custom in the loan brokerage industry is that departing agents who perform posttermination work are entitled to the full amount of the commissions—and the opinions in Wolf v. Superior Court (2004) 114 Cal.App.4th 1343 and Nein v. HostPro, Inc. (2009) 174 Cal.App.4th 833—the trial court denied the motion for summary judgment. The court concluded that "extrinsic evidence of trade custom defeats defendants' summary judgment argument that all of plaintiffs' claims are barred by the parties' written contracts." The court did grant summary adjudication for all defendants on the cause of action for breach of fiduciary duty, leaving the causes of action for breach of contract, common counts, unjust enrichment and conversion to be resolved at trial.
The Court's Judgment After Nonjury Trial
At a bench trial that commenced on November 17, 2015, 90 exhibits were either admitted into evidence or considered for demonstrative purposes, seven witnesses were sworn and testified, and counsel submitted several briefs addressing legal and factual issues.
The appellant's appendix does not include a reporter's transcript of the trial or the hearing on KIMO's motion for summary judgment or summary adjudication. --------
Judge Kahn, an experienced trial judge, explained at considerable length his award of damages to each of the plaintiffs.
First, as to Pinza, the court construed the postdeparture payout provision of the Salesperson Agreement "as not covering the situation where Pinza and [KIMO], as they did, agreed that after Pinza received notice of the termination of his independent contractor status that Pinza would continue to work on his pending transactions. Because Pinza did not have to do any further work on his pending transactions, his agreement with KIMO to do such further work created a new contract. My task is to determine what additional compensation, if any, beyond the half commissions that Pinza was already entitled to receive that the parties expressly or impliedly agreed would be paid to Pinza for his post-termination service on the pending transactions." The court found its answer "in the undisputed testimony of Pinza and James Kilpatrick, and the exchange of emails between them in the 24 hours after Kilpatrick terminated Pinza's independent contractor agreement."
The court noted that Pinza had no advance notice his salesperson agreement would be terminated and was not expecting it. "While both Pinza and Kilpatrick understood that [KIMO] had no obligation to permit Pinza to continue working on the pending transactions, they agreed Pinza would do so and that Pinza would be paid for the transactions if they closed, although the amount of the payment was not specified. Immediately after the conversation, Kilpatrick sent Pinza an email stating '[W]e of course need to pay for services rendered. . . [.] Per our conversation, we will also allow you to continue to work on the two transactions you have in contract.' " But the email "made no mention of whether Pinza would receive any additional payment beyond the 50% set forth in Pinza's independent contractor agreement. [¶] The next morning Pinza sent an email to Kilpatrick stating that 'I have two properties in contract. . . . I expect both to close soon. I will continue to work on these as you and I agreed I would be entitled to full commission on these amounts, once closed of course.' Near the end of the email which summarized other terms of his relationship with KIMO as he understood them, Pinza wrote: 'If this is not your understanding of our current situation than [sic] please let me know now, as I will deem a lack of a counter response as acceptance.' "
Kilpatrick later stated in an email to Pinza that " 'You're also asserting that I've agreed to things that I have not. Lastly, please understand that our silence on any point does not constitute an agreement, acquiescence, or waiver of any kind. We expressly reserve all rights.' " However, the court observed that subsequently, "without objection and without any explicit or implicit statement that he would not receive a full commission on the transactions if they closed, Pinza continued to work on his two pending transactions and the transactions did close and commissions were paid to KIMO." Therefore, while Kilpatrick "may have held the subjective belief that the agreement to allow Pinza to continue to work on the pending transactions did not obligate KIMO to pay any more than half commissions to Pinza in the event the transactions closed, Kilpatrick did not clearly express that belief to Pinza, but nonetheless accepted Pinza's post-termination services."
The court stated that in light of Pinza's explicit email the morning after his independent status was terminated, Kilpatrick should have explicitly said one of two things to Pinza: "1) [KIMO] will not pay full commissions on the pending transactions and/or 2) Pinza should not do any further work on those transactions unless and until an agreement is reached as to what additional compensation, if any, Pinza would be paid for the additional work he was about to undertake. Neither of these statements was made and, quite reasonably, Pinza continued to work on the transactions with the expectation that he would receive full commissions if the transactions closed."
With respect to the two pending transactions, the court found there was either an express or implied contract obliging KIMO to pay Pinza's full commissions for his work on those transactions, and rejected KIMO's unclean hands defense as to the Hathaway transaction because KIMO was not harmed by any misconduct even assuming it existed.
The court rejected KIMO's effort to avoid payment to Pinza for a share of the Hugo Terrace forfeited deposit by finding Pinza did not commit misconduct in regard to that matter, and Pinza's share of the forfeited deposit constituted a "commission" because it was money received for working on the transaction per its listing agreement with the seller and the parties all repeatedly referred to that money as a "commission." However, the court diminished the amount of the award to Pinza for a portion of the forfeited deposit because, though KIMO would not have received any amount in settlement from the seller were it not for Pinza obtaining the listing, Pinza did breach the salesperson agreement and prejudice KIMO by signing a listing agreement in behalf of KIMO that improperly included an ambiguous sentence, never approved by KIMO, that "Seller shall be able to cancel the agreement in good faith so long as property is not in contract to be purchased."
The court awarded Pinza damages totaling $79,135.27 and also prejudgment interest at the legal rate of 10 percent per year (Civ. Code, § 3289, subd. (a)), so Pinza's total award was $91,163.83.
The trial court analyzed Ratnathicam's request for additional commissions—other than overages, which the court largely denied him—the same way it analyzed Pinza's request for commissions on his pending transactions, because his Loan Agent Agreement with KIMO contained a postdeparture payout provision "nearly identical" to the provision in Pinza's Salesperson Agreement. That is, the court construed the provision that, "upon giving notice that his independent contractor status was terminated, Ratnathicam was not required to do any further work on any transactions, but was nonetheless entitled to receive 50% of his base non-overage commissions on all his transactions that were pending at the time his independent contractor status terminated if those transactions eventually closed and commissions were paid to KIMO." Judge Kahn construed the provision "as not covering the situation where Ratnathicam and KIMO, as they did, agreed that after Ratnathicam gave notice of the termination of his independent contractor status Ratnathicam would continue to work on his pending transactions. . . . [H]is agreement with KIMO to do such further work created a new contract. Just as I did with Pinza, my task is to determine what additional compensation, if any, beyond the half of the base commissions that Ratnathicam was already entitled to receive that the parties expressly or impliedly agreed would be paid Ratnathicam for his post-termination services on the pending transactions."
The court found the answer to that question in the undisputed testimony of Ratnathicam and Kilpatrick and the exchange of emails between them. Based on that evidence, the court found that "when Ratnathicam sent his termination notice to Kilpatrick, Ratnathicam wanted to and expected that he would continue to work on his transactions that were pending at the time." The court also found "that Ratnathicam wanted to be paid his full commission on these transactions, but believed that, if he raised the issue directly with Kilpatrick, the two of them might disagree, which might put both Ratnathicam's ability to work on the transactions and his desire to be paid full commissions on them in jeopardy." For that reason, the court further found that Ratnathicam tried to finesse the issue by not raising it explicitly. In the court's view, "by doing so, Ratnathicam led Kilpatrick to believe, and Kilpatrick did believe, that, while Ratnathicam would continue to work on the transactions, he would not receive any commissions for them beyond the 50% he was already entitled to receive."
However, the court stated, "[a]ll that changed on June 17, 2013, when Ratnathicam, in response to an email he received two hours earlier, told Kilpatrick that 'I am expecting my full split per our agent agreement on all transactions. . . . Please confirm my expectation is the same as yours.' Kilpatrick neither confirmed nor refuted Ratnathicam's statement—until four months later, when on October 17, 2013, after all of the transactions pending at the time Ratnathicam gave notice had closed . . . told Ratnathicam that '[y]ou seem to be suggesting certain rights are being forfeited, or that we're agreeing to a modification, but we're expressly reserving all rights.' "
The court concluded that "[b]y not responding to [the June 17] request and allowing Ratnathicam to continue to work on the pending transactions, much as he did with respect to Pinza, Kilpatrick led Ratnathicam to believe that he would be paid his full base commissions if he continued to work on those transactions, which he did." Thus, the court found that, as of June 18, 2013, there was either an explicit or implied contract obligating KIMO to pay Ratnathicam his full base commissions for all pending transactions that closed thereafter, although prior to that date no such contract existed.
The court next concluded that Ratnathicam was entitled to damages for all he sought for an override on commissions paid to Casey Wright, a former salesperson and plaintiff who settled with KIMO prior to trial, and full commission on 15 of the 17 transactions that closed after he gave notice of terminating his independent contractor agreement. However, the court construed the Loan Agent Agreement between KIMO and Ratnathicam, like that entered into by Pinza, as providing that Ratnathicam "was not required to do any further work on any transactions, but was nonetheless entitled to receive 50% of his base non-overage commissions on all of his transactions that were pending at the time his independent contractor status was terminated if those transactions eventually closed and commissions were paid to KIMO." In sum, the court awarded Ratnathicam damages against KIMO in the amount of $45,117.33. plus prejudgment interest of $6,857.83 (Civ. Code, § 3289, subd. (b)), so that his total award was $52,975.16.
DISCUSSION
The Standard of Review
"The interpretation of a contract involves 'a two-step process: "First the court provisionally receives (without actually admitting) all credible evidence concerning the parties' intentions to determine 'ambiguity,' i.e., whether the language is 'reasonably susceptible' to the interpretation urged by a party. If in light of the extrinsic evidence the court decides the language is 'reasonably susceptible' to the interpretation urged, the extrinsic evidence is then admitted to aid in the second step—interpreting the contract. [Citation.]" (Winet v. Price (1992) 4 Cal.App.4th 1159, 1165.) The trial court's determination of whether an ambiguity exists is a question of law, subject to independent review on appeal. (Ibid.) The trial court's resolution of an ambiguity is also a question of law if no parol evidence is admitted or if the parol evidence is not in conflict. However, where the parol evidence is in conflict, the trial court's resolution of that question is a question of fact and must be upheld if supported by substantial evidence. (Id. at p. 1166.) Furthermore, "[w]hen two equally plausible interpreting the language of the contract may be made . . . parol evidence is admissible to aid in interpreting the agreement, thereby presenting a question of fact which precludes summary judgment if the evidence is contradictory." (Walter E. Heller Western, Inc. v. Tecrim Corp. (1987) 196 Cal.App.3d 149, 158.)' " (Wolf v. Superior Court, supra, 114 Cal.App.4th at p. 1351.)
The Issue Presented
KIMO contends that its written agreements with Pinza and Ratnathicam are "not reasonably susceptible to the trial court's interpretation, that extrinsic evidence could not properly be admitted to interpret it, and that the court erred as a matter of law in concluding that the postdeparture payout provision does not cover plaintiff's post-termination commission claims." According to KIMO, "[t]hat provision clearly and unambiguously applies to 'any commissions' payable on transactions that were 'unclosed' or 'unresolved' at the time of termination, and grants KIMO 'sole discretion' to determine whether to pay more than the contractual minimum of 50% of the amount that would have been due prior to the termination."
As KIMO correctly points out, ambiguity is not determined in the abstract. Therefore, "when a party contends the language of a contract is ambiguous the test for the admissibility of extrinsic evidence to explain the meaning of the contract is not whether the contract appears to the court to need interpreting 'but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible.' " (Wagner v. Columbia Pictures Industries, Inc. (2007) 146 Cal.App.4th 586, 589-590 (Wagner), quoting Pacific Gas & Elec. Co. v. W. Thomas Drayage & Rigging Co. (1968) 69 Cal.2d 33, 34; accord, Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 393.)
KIMO says that Wagner, is "particularly instructive." We agree, but we receive a different message from the opinion.
In that case an actor, Robert Wagner, sued a motion picture studio claiming he and his children's trusts were contractually entitled to share in the net profits the studio earned from two motion pictures the studio produced based on a television series, Charlie's Angels. Wagner and his late wife had entered into an agreement with SGP, the company that produced Charlie's Angels, entitling the couple to 50 percent of the net profits the production company received as consideration for the right to exhibit photoplays of the series and from the exploitation of all ancillary, music, and subsidiary rights in connection with the series. The trial court found that the contract did not entitle Wagner and his children's trusts to share in the profits from the movies and granted the movie studio's motion for summary judgment. (Wagner, supra, 146 Cal.App.4th at p. 588.)
The Court of Appeal affirmed, observing that the extrinsic evidence Wagner proffered "does not explain the contract language, it contradicts it." (Wagner, supra, 146 Cal.App.4th at p. 592.) As the court explained, even if the Wagners and SGP, the producer of Charlie's Angels, "intended the Wagners would share in net profits 'from any and all sources,' they did not say so in their contract. What they said in their contract was the Wagners would share in 'all monies actually received by Producer, as consideration for the right to exhibit photoplays of the [television] series, and from the exploitation of all ancillary, music and subsidiary rights in connection therewith.' For a right to be 'subsidiary' or 'ancillary,' meaning supplementary or subordinate, there must be a primary right to which it relates. The only primary right mentioned in the contract is 'the right to exhibit photoplays of the [television] series.' Thus the Wagners were entitled to share in the profits from the exploitation of the movie rights to Charlie's Angels if those rights were exploited by Columbia as ancillary or subsidiary rights of its primary 'right to exhibit photoplays of the series' but not if those rights were acquired by Columbia independently from its right to exhibit photoplays. [¶] Thus, for example, if SGP held the motion picture rights to Charlie's Angels from the beginning or if it acquired them by exercising its right of first refusal from [others] then it could be said to have acquired those rights by exploiting its right to exhibit photoplays of the series and the Wagners would be entitled to a share of the profits." (Id. at pp. 592-593, fn. omitted.)
The situation in Wagner is easily distinguishable from that here and the opinion in that case provides no help to KIMO. Nor are Dore v. Arnold Worldwide, Inc., supra, 39 Cal.4th 384 and Skilstaf, Inc. v. CVS Caremark Corp (9th Cir. 2012) 669 F.3d 1005, the other cases KIMO relies upon useful to it because, like Wagner, they involved efforts to employ extrinsic evidence to prove a meaning to which the language of the contract was not reasonably susceptible.
The difference between the cases KIMO relies upon and this case is that the extrinsic evidence proffered by Ratnathicam and Pinza and received and relied upon by the court, was used to prove a meaning to which the language of the parties' agreements is reasonably susceptible, because those agreements do not contemplate the factual situation presented in this case. The parties' agreements are essentially contracts for the provision by plaintiffs to KIMO of certain real estate brokerage services in return for commissions upon the closing of the transactions for which the services were provided during a specified period.
For example, Pinza's Salesperson Agreement declares that Pinza "agrees to work diligently and to use his . . . best efforts to sell any and all real estate listed with Broker, to solicit additional listings and clients, and otherwise promote the business of serving the public in real estate transactions" only "[u]ntil termination of this Agreement" and either party may terminate the agreement "at any time and for any reason by giving written notice of such termination to the other party." (Italics added.) Similarly, Ratnathicam's Loan Agent Agreement provides that he "shall solicit borrowers and shall prepare and submit commercial loan applications to Broker" only "[d]uring the term of this Agreement," which also may be terminated by either party to the agreement "at any time and for any reason." (Italics added.) The flaw in KIMO's interpretation of the postdeparture payout provisions is that it is blind to the limited scope of the agreements in which the provisions appear.
The written agreements unambiguously establish that any unpaid commission for transactions that were unresolved or unclosed at the time the agreement is terminated by a party will be reimbursed "at minimum 50% of what would have been paid" if the salesperson or loan agent ceases servicing an unresolved or unclosed transaction after termination of the agreement, because the agreements explicitly relieve the salesperson or loan agent of the legal duty to provide posttermination services. However, while the agreements do not compel the salesperson or loan agent to provide posttermination real estate services, neither do they prohibit these independent contractors from providing such services on such terms as the parties to the agreement may agree upon. As Judge Kahn astutely perceived, the written agreements left the parties free to decide for themselves whether posttermination services would be provided and the terms upon which that could be done, and by their own conduct they essentially created a new contract that addressed the issue ignored in the written agreements.
Given the silence—or ambiguity—of the written agreements, the test for the admissibility of the extrinsic evidence offered by plaintiffs and received by and relied upon by the court was satisfied. That is, the proffered extrinsic evidence was relevant to prove a meaning to which the language of the written agreements was "reasonably susceptible." (Wagner, supra, 146 Cal.App.4th at pp. 589-590.)
DISPOSITION
For the foregoing reasons, the judgment is affirmed. Plaintiffs are awarded their costs on appeal.
/s/_________
Kline, P.J. We concur: /s/_________
Stewart, J. /s/_________
Miller, J.