Greenwood & Co. Real Estate v. C-D Inv. Co., C-D

CourtCalifornia Court of Appeals
Writing for the CourtJOHNSON; FRED WOODS
Citation12 Cal.App.4th 1459,18 Cal.Rptr.2d 144
PartiesPreviously published at 12 Cal.App.4th 1459, 18 Cal.App.4th 261, 23 Cal.App.4th 447 12 Cal.App.4th 1459, 18 Cal.App.4th 261, 23 Cal.App.4th 447 GREENWOOD & COMPANY REAL ESTATE et al., Plaintiffs and Respondents, v.INVESTMENT CO. et al., Defendants and Appellants. Donald B. GREENWOOD et al., Plaintiffs and Appellants, v. Edwin T. McBIRNEY et al., Defendants and Appellants, Edward A. Peterson, Defendant and Respondent.
Decision Date29 January 1993
Docket NumberB049160,C-D,B049323 and B050358,B048645,Nos. B048638

Page 144

18 Cal.Rptr.2d 144
Previously published at 12 Cal.App.4th 1459, 18 Cal.App.4th 261, 23 Cal.App.4th 447
12 Cal.App.4th 1459, 18 Cal.App.4th 261, 23 Cal.App.4th 447
GREENWOOD & COMPANY REAL ESTATE et al., Plaintiffs and Respondents,
v.
C-D INVESTMENT CO. et al., Defendants and Appellants.
Donald B. GREENWOOD et al., Plaintiffs and Appellants,
v.
Edwin T. McBIRNEY et al., Defendants and Appellants,
Edward A. Peterson, Defendant and Respondent.
Nos. B048638, B048645, B049160, B049323 and B050358.
Court of Appeal, Second District, Division 7, California.
Jan. 29, 1993.
As Modified on Denial of Rehearing
March 1, 1993.
Review Granted May 20, 1993.

Page 147

[12 Cal.App.4th 454] Sidley & Austin, Charles S. Vogel, Amy Applebaum, Los Angeles, Horvitz & Levy, Ellis J. Horvitz, Frederic D. Cohen, Ari R. Kleiman, Encino, Levin, Stein & Chyten, Jerry H. Stein, Steve T. Borrelli, Los Angeles, Allan E. Wilion, Encino, Del, Rubel, Shaw, Mason & Derin, Edward G. Burg, Michael A. Rubel, Greg David Derin, Jeffer, Mangels, Butler & Marmaro, Robert E. Mangels and Kimberly Howland Meyer, Los Angeles, for defendant and appellants.

Page 148

Hillel Chodos, Los Angeles, and Michael A. Chodos, Santa Monica, for plaintiffs and appellants and for plaintiffs and respondents.

Munger, Tolles & Olson, Charles D. Siegal, Allison B. Stein and Robert N. Treiman, Los Angeles, for defendant and respondent.

JOHNSON, Associate Justice.

In this case, a real estate broker won summary judgment on a breach of contract action and a jury verdict in an action for conspiracy to interfere with prospective economic advantage, in this instance a contractual relationship. Both actions result from a single transaction in which appellants decided not to pay the broker a commission on a master lease for a [12 Cal.App.4th 455] major high-rise office building. The consolidated appeals raise a variety of issues. We affirm on some of these issues and reverse on others.

STATEMENT OF FACT AND PROCEEDINGS BELOW

This dispute arises out of what has been characterized as the largest single sale of commercial properties in Los Angeles history. A total of more than 20 buildings and lots changed hands. Yet this case involves only the denial of one real estate commission on one of those buildings. It is a testament to the size of the overall transaction and the bulk of the building whose long-term lease generated the commission that this fee is worth as much as $12 million and the lawsuit resulted in a judgment, including punitive damages, exceeding $40 million.

In summarizing the facts in this section, we adhere to the rule we construe the evidence, and the inferences therefrom, in favor of the judgment. However, in considering the issues raised in our review of the summary judgment we, of course, follow a different formula--strictly construing the evidence favoring that judgment, liberally construing the contrary evidence and resolving all disputed factual issues in favor of appellants. (Gray v. State of California (1989) 207 Cal.App.3d 151, 254 Cal.Rptr. 581; Bert G. Gianelli Distributing Co. v. Beck & Co. (1985) 172 Cal.App.3d 1020, 219 Cal.Rptr. 203; Maxwell v. Colburn (1980) 105 Cal.App.3d 180, 163 Cal.Rptr. 912. 1

The respondents are the broker whose commission was withheld, Greenwood and Company, and an employee of that firm, who along with Greenwood himself performed nearly all the services on which the commission claim is based. These respondents are referred to throughout this opinion collectively as (Greenwood).

At the time the events underlying this lawsuit began C-D Investment Co. (C-D) owned an almost new 29-story office building in downtown Los Angeles. It was called "Beaudry Center One." (Beaudry One) C-D also owned many other office buildings, hotels, and other commercial properties throughout the southern California area. C-D, in turn, was owned 50-50 by Alexander Coler and Naftali Deutsch. Deutsch's share, however, was held in [12 Cal.App.4th 456] the name of Lazben-Pico Co., a limited partnership, with Deutsch as the general partner and Overland Plumbing, Inc. (another Deutsch-owned company) as the limited partner. All of these individuals and entities are defendants and appellants in this proceeding.

Meantime, back in Texas a large financial institution, Sun Belt Savings & Loan Association (Sun Belt), had begun scouting for investments in California. Edwin T. McBirney was chairman and majority stockholder of Sun Belt. The executive vice president was William Dobrowolski. When Sun Belt eventually decided to enter

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into negotiations with C-D, it formed another Texas corporation, Sun Cal, Inc. (Sun Cal) with McBirney as its majority stockholder and Stanley Castleton as president. All of these entities and individuals likewise are defendants and appellants. A Texas lawyer, Edward Peterson, Esq., served as counsel to both Sun Belt and Sun Cal. Since the trial court granted nonsuit in his favor, Peterson although a defendant at trial is a respondent in this appeal.

Although there is conflicting evidence about its dimension, as 1984 began C-D found itself with a cash flow problem. Some of the buildings in its billion-dollar portfolio were still under construction and thus costing money. Others were completed but only partially leased, including the largest, Beaudry One, and thus not earning the expected revenues. C-D needed a large infusion of cash so it could finish construction and it needed to lease the vacant space in its completed buildings.

C-D had tried to cure the problem of unleased space through the efforts of its own in-house leasing staff and listings with several major real estate agencies. When these efforts yielded skimpy returns, C-D was receptive to an overture from George Banks, a long-time friend of a Deutsch family member, and Donald Greenwood, who had a personal and business relationship with Deutsch. In early 1984, the Greenwood firm proposed it become the exclusive leasing agency for Beaudry One, and several other buildings in the C-D portfolio.

Deutsch eventually agreed and asked his partner, Coler, to negotiate the listing contract. Based on these negotiations, the C-D legal department prepared a draft written listing agreement. After review and some changes, the C-D legal department prepared a revised agreement which was signed by Greenwood and C-D on March 21, 1984. Under the terms of the final written contract, Greenwood's commission was set at 4 percent of the "aggregate basic rental" for the first five years of any lease and 2 percent of the rental thereafter, 50 percent of the commission payable upon execution of the lease and 50 percent when the tenant took possession.

[12 Cal.App.4th 457] Attached to the contract was a list of prospective tenants which C-D or its agents had contacted previously. Greenwood was not to receive credit or a commission if someone on this list signed a lease for one of C-D's properties. Notably, Security Pacific Bank was not on this list.

Meantime, while Greenwood was scouting around for tenants for C-D's unoccupied buildings, C-D also was moving on another front. To deal with its cash flow problem, C-D sought a major investor who could become a partner in their properties. In late April 1984, Deutsch was approached by Stanley Castleton, who at that time had his own firm specializing in commercial real estate acquisitions and had not yet formally affiliated with the Sun Belt group.

During this first meeting, Castleton not only learned the details of C-D's financial condition and its properties, he learned about Greenwood's exclusive listing agreement on Beaudry One and several other C-D buildings. After the meeting, Castleton developed the idea of a joint venture between his company and Sun Belt. The joint venture would supply the needed cash to C-D, then split the profits after the buildings were leased and sold.

Castleton took this idea to McBirney, Sun Belt's chairman. McBirney flew to Los Angeles and met with Deutsch. Negotiations continued throughout the month of May.

Critical to these negotiations, however, was a development on the other front. Greenwood had procured Security Pacific's interest in a long-term lease of the bulk of C-D's largest building, Beaudry One. Indeed Security Pacific's interest had matured to the point that on May 7 the bank submitted a formal offer to lease eight floors with an option on the remaining space in the building. While C-D did not accept this offer and submitted its own counter offer, negotiations continued, with Greenwood acting as C-D's chief negotiator.

So C-D was negotiating simultaneously with Security Pacific over a long-term lease

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of most of Beaudry One and with Sun Belt over a possible major infusion of cash under some sort of partnership arrangement. Sometime in late May or early June, Deutsch informed McBirney and his associates of Security Pacific's interest in leasing Beaudry One because he thought this would make the entire package more appealing to them. And Castleton actually attended a meeting on the potential lease which was held on June 1, 1984, between C-D and Security Pacific, with Greenwood negotiating for C-D. At that meeting the parties agreed to meet again on June 12 to discuss the lease terms. Castleton reported all these developments to McBirney.

[12 Cal.App.4th 458] In the interval between the June 1 and June 12 meetings on Security Pacific's lease of Beaudry One, McBirney's group and C-D had reached an agreement in principle. Sun Belt formed Sun Cal, a wholly-owned subsidiary, with Castleton as president, to carry out its side of the C-D transaction. The principals met in Dallas, Texas, and signed a June 8, 1984, "Master Agreement" and "Management and Leasing Agreement." McBirney signed for Sun Cal and Coler and Deutsch for C-D. However, there were many conditions to be met and the final closing of the deal was not scheduled to occur until August 30, 1984.

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3 practice notes
  • Douda v. California Coastal Com'n, No. B188210.
    • United States
    • California Court of Appeals
    • February 6, 2008
    ...has been accepted as the description of environmentally sensitive habitat areas. (Sierra Club, supra, 12 Cal.App.4th at p. 611, 18 Cal. Rptr.2d 144.) Section 30107.5 provides: "`Environmentally sensitive area' means any area in which plant or animal life or their habitats are either ra......
  • Greenwood & Co. Real Estate v. C-D Inv. Co., C-D
    • United States
    • United States State Supreme Court (California)
    • July 28, 1994
    ...v. C-D INVESTMENT COMPANY et al., Appellants. No. S031596. Supreme Court of California, In Bank. July 28, 1994. Prior report: Cal.App., 18 Cal.Rptr.2d 144. Pursuant to rule 29.4(c), California Rules of Court, the above-entitled review is DISMISSED and cause is remanded to the Court of Appea......
  • Greenwood & Co. Real Estate v. C-D Inv. Co., C-D
    • United States
    • United States State Supreme Court (California)
    • May 20, 1993
    ...et al., Appellants. And Companion Case. No. S031595. Supreme Court of California, In Bank. May 20, 1993. Prior report: Cal.App., 18 Cal.Rptr.2d 144. Petitions for review Submission of additional briefing, otherwise required by Rule 29.3, California Rules of Court, is deferred pending furthe......
3 cases
  • Douda v. California Coastal Com'n, No. B188210.
    • United States
    • California Court of Appeals
    • February 6, 2008
    ...has been accepted as the description of environmentally sensitive habitat areas. (Sierra Club, supra, 12 Cal.App.4th at p. 611, 18 Cal. Rptr.2d 144.) Section 30107.5 provides: "`Environmentally sensitive area' means any area in which plant or animal life or their habitats are either rare or......
  • Greenwood & Co. Real Estate v. C-D Inv. Co., C-D
    • United States
    • United States State Supreme Court (California)
    • July 28, 1994
    ...v. C-D INVESTMENT COMPANY et al., Appellants. No. S031596. Supreme Court of California, In Bank. July 28, 1994. Prior report: Cal.App., 18 Cal.Rptr.2d 144. Pursuant to rule 29.4(c), California Rules of Court, the above-entitled review is DISMISSED and cause is remanded to the Court of Appea......
  • Greenwood & Co. Real Estate v. C-D Inv. Co., C-D
    • United States
    • United States State Supreme Court (California)
    • May 20, 1993
    ...et al., Appellants. And Companion Case. No. S031595. Supreme Court of California, In Bank. May 20, 1993. Prior report: Cal.App., 18 Cal.Rptr.2d 144. Petitions for review Submission of additional briefing, otherwise required by Rule 29.3, California Rules of Court, is deferred pending furthe......

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