Blickman Turkus v. Mf Downtown Sunnyvale

• Decision Date: 30 April 2008
• Docket Number: No. H029980.,H029980.
• Citation: 162 Cal.App.4th 858,76 Cal.Rptr.3d 325
• Court: California Court of Appeals Court of Appeals
• Parties: BLICKMAN TURKUS, LP, Plaintiff, Cross-Defendant and Appellant, v. MF DOWNTOWN SUNNYVALE, LLC; et al., Defendants, Cross-Complainants and Appellants.

76 Cal.Rptr.3d 325

162 Cal.App.4th 858

BLICKMAN TURKUS, LP, Plaintiff, Cross-Defendant and Appellant, v. MF DOWNTOWN SUNNYVALE, LLC; et al., Defendants, Cross-Complainants and Appellants.

No. H029980.

Court of Appeal, Sixth District.

April 30, 2008.

Rossi, Hamerslough, Reischl & Chuck, Ronald R. Rossi, Susan R. Reischl, San Jose, for Plaintiff, Cross-Defendant and Appellant Blickman Turkus, LP.

Keker & Van Nest, Susan J. Harriman, Steven A. Hirsch, San Francisco, Wendel, Rose, Black & Dean, Charles Hansen, Oakland, Amanda Steiner, for Defendants, Cross-Complainants and Appellants MF Downtown Sunnyvale LLC, et al.

RUSHING, P.J.

The primary question in this case is whether a realtor who represented the lessee in a complex commercial lease transaction had a duty to inform the lessor, after the lease was signed but before the lessee took possession, that the lessee's ability to perform the conditions of the lease was jeopardized by its deteriorating financial condition. The trial court held that the lessor had failed to plead facts sufficient to establish any duty on the realtor's part to disclose this information. We find no error in this determination. Nor do we find any error in the trial court's refusal to award attorney fees to the lessor based upon its defeat of the realtor's claims for unpaid commissions. Since these determinations render the realtor's cross-appeal moot, we will dismiss it and affirm the judgment.

Background

Appellant MF Downtown Sunnyvale, LLC, is described in the pleadings as a limited liability company owning certain real property in Sunnyvale. At issue in this action are two buildings, known as Buildings 2 and 3, situated on that property. Appellant Mozart Development Co. is described as the agent for MF Downtown Sunnyvale, LLC, for purposes of leasing and managing the property. Both entities are apparently affiliated with John Mozart, who is not a party to this matter. We will join the parties in referring to appellants collectively as "Mozart."

Mozart alleges in its cross-complaint that in early 1999, it entered into a written commission agreement with Commercial Property Services (CPS) by which it engaged CPS and two affiliated individuals to act as its listing broker and agent in securing a lease of the premises for a specified commission. Inferentially, the buildings had "not yet been constructed or completed," but awaited execution of a lease so that they could be completed or improved to the tenant's specifications. Under the agreement, the first half of the commission would be "due and payable upon full lease execution and the second half ... upon rent commencement."

In early 2001, Mozart entered into written leases with Handspring, Inc., for buildings 2 and 3. The leases contemplated delivery of the premises in August and September, 2002, with both parties working in the interim to prepare the buildings for occupancy in accordance with Handspring's needs. Their respective rights and obligations in connection with these efforts were set forth in "[w]ork [l]etter[s]" attached to the leases. Under the work letters, Handspring was required to secure its performance by providing letters of credit in the aggregate amount of some $23 million. Additional letters of credit or security deposits may have been required to secure Handspring's obligations under the leases.

Respondent Blickman Turkus, LP, doing business as BT Commercial Real Estate (BTC), through its agent Tom Snider, represented Handspring in the lease transaction. BTC later contended that it was the "procuring agent" entitled to a commission under the commission agreement between Mozart and CPS. Mozart acknowledged this assertion in its cross-complaint, and while denying it, also adopted it hypothetically as a basis for recovery against BTC should it be sustained by the court. (See pt. I(G), post.)

Mozart alleged that from October 2001 through "at least" July 2002, Snider and BTC were "advised by Handspring that [it] was having financial difficulties," that "its projected growth was not as fast as [it] had originally thought," and that it was "considering possible exit strategies" from the leased buildings, including a negotiated termination of the leases and reducing Handspring's financial risk. Mozart alleged that it did not learn of these matters until mid-August, 2002, when another agent contacted it to negotiate a termination of the leases. Mozart alleged that as a result of the delay in its learning of these matters, it sustained damage. (See pt. I(D), post.) Mozart and Handspring eventually negotiated a termination of the leases.

This action was commenced on January 28, 2003, not by Mozart, but by BTC, which filed a complaint against Mozart and Handspring in which it alleged that as the procuring agent in the lease transaction, it was a third party beneficiary of Mozart's commission agreement with BTC and thus entitled to the commission there specified. It alleged that Mozart had paid the first half of the commission as called for in the agreement, but had refused to pay the second half. As eventually amended, the complaint asserted claims for breach of the commission agreement by Mozart, breach of the covenant of good faith and fair dealing, breach by both Mozart and Handspring of an "implied promise to complete the lease transactions," and tortious interference by Handspring with BTC's economically advantageous relationship with Mozart.

Mozart successfully attacked BTC's complaint by motions for summary adjudication and judgment on the pleadings. BTC successfully demurred to Mozart's cross-complaint, with the court ultimately dismissing the third amended cross-complaint without leave to amend. The court entered a judgment by which neither party took anything. Mozart moved to vacate the judgment and for an award of attorney fees incurred by it in opposing BTC's complaint. The court denied both motions.

Mozart filed a notice of appeal from the judgment of dismissal on its cross-complaint. BTC filed a cross-appeal from (1) the summary adjudication of its claims, and (2) an order denying sanctions under Code of Civil Procedure section 128.5. Mozart filed a separate notice of appeal from the order denying its motion to vacate the dismissal of its cross-complaint and the order denying its motion for attorney fees.

Discussion

I. Dismissal of Cross-Action

A. Standard of Review

"On appeal from a judgment of dismissal following the sustaining of a demurrer without leave to amend, the appellant 'has the burden to show either [that] the demurrer was sustained erroneously or that to sustain the demurrer without leave to amend constitutes an abuse of discretion.' [Citation.]" (Smith v. County of Kern (1993) 20 Cal.App.4th 1826, 1829-1830, 25 Cal.Rptr.2d 716 (Smith).) Because a general demurrer raises only a pure question of law—whether the facts set forth in the challenged pleading are sufficient to constitute a cause of action—a reviewing court considers it without deference to the trial court. (Leko v. Cornerstone Building Inspection Service (2001) 86 Cal.App.4th 1109, 1114, 103 Cal.Rptr.2d 858 (Leko); see Code Civ. Proc, § 430.10, subd. (e).) In doing so it examines the allegations of the challenged pleading, as supplemented by matters of which judicial notice is taken. (Leko, supra, 86 Cal. App.4th at p. 1114, 103 Cal.Rptr.2d 858.) The court must accept as true all well-pleaded allegations of material fact, "but not contentions or conclusions of fact or law." (Berry v. City of Santa Barbara (1995) 40 Cal.App.4th 1075, 1082, 47 Cal. Rptr.2d 661.)

With respect to the second question—the trial court's failure to grant leave to amend—a reviewing court must defer to the trial court's ruling unless the appellant demonstrates "a manifest abuse of discretion." (Smith, supra, 20 Cal.App.4th at p. 1830, 25 Cal.Rptr.2d 716.) "Ordinarily it is an abuse of discretion to sustain a general demurrer to a complaint without leave to amend if there is a reasonable possibility [that] the defect in the complaint can be cured by amendment." (Ibid.)

B. Duty to Disclose

The gist of Mozart's claim is that for a period of some 10 months, BTC wrongfully failed to disclose information—Handspring's precarious financial condition— knowledge of which would have enabled Mozart to avoid some of the injury it allegedly suffered when Handspring finally approached it to negotiate a termination of the leases. A central issue, as the parties seem to recognize, is whether it appears from the facts alleged in the cross-complaint that BTC was, during those 10 months, under any duty to disclose those facts to Mozart. It goes without saying that no one can be liable in tort for causing injury to another unless he, or someone whose conduct is attributed to him, was legally obligated to act differently. Liability cannot arise from silence unless the law commands the defendant to speak.

A duty to speak may arise in four ways: it may be directly imposed by statute or other prescriptive law; it may be voluntarily assumed by contractual undertaking; it may arise as an incident of a relationship between the defendant and the plaintiff; and it may arise as a result of other conduct by the defendant that makes it wrongful for him to remain silent.

Here, Mozart points to no statute obligating BTC to warn it of Handspring's weakened financial condition. As for a contractual duty to disclose, Mozart has alleged a number of evidentiary facts apparently intended to show that BTC expressly or impliedly assumed certain ongoing contractual obligations in connection with the lease transaction. However it does not allege that these obligations included any specific obligation to warn or advise Mozart. The cross-complaint may be understood to allege—if only inferentially—that BTC was under a continuing obligation of an arguably contractual nature to inform its "client" of matters relevant to a transaction.¹ But with one qualification discussed below (see pt....