Schaffter v. Creative Capital Leasing Group, LLC
| Decision Date | 11 August 2008 |
| Docket Number | No. D047364.,D047364. |
| Citation | 83 Cal. Rptr. 3d 19,166 Cal.App.4th 745 |
| Court | California Court of Appeals Court of Appeals |
| Parties | BRETT SCHAFFTER et al., Plaintiffs and Respondents, v. CREATIVE CAPITAL LEASING GROUP, LLC, Defendant and Appellant. |
David A. Kay; Smaha Law Group and Jason Barsi for Defendant and Appellant.
Law Offices of Mary A. Lehman, Mary A. Lehman; J. Daniel Holsenback for Plaintiffs and Respondents.
Neil D. Kalin for California Association of Realtors as Amicus Curiae on behalf of Plaintiffs and Respondents.
Defendant Creative Capital Leasing Group, LLC (CCLG), appeals a judgment in favor of plaintiffs Brett Schaffter and Austin McBride Corporation, doing business as Re/Max Real Estate Consultants (Re/Max), entered after a bench trial. CCLG contends the court erred by finding it defaulted under various agreements with third parties to purchase condominiums, thereby triggering its responsibility under a Buyer Broker Compensation Contract (Buyer Broker Contract) with Re/Max to pay it commissions. CCLG asserts that although it refused to close escrow on the units for a reason not allowed by the purchase agreements—because appreciation during the lengthy escrow periods would not make resales sufficiently profitable—there was no default because the developers pursued no damages against CCLG and opted to cancel the agreements.
CCLG also contends the Buyer Broker Contract with Re/Max, and an identical contract with Schaffter's assignor, broker Pickford Realty, Ltd., doing business as Prudential California Realty (Prudential), are void because they did not contain a date certain for their termination. Further, CCLG asserts Prudential's assignment of rights to commissions is void because it was made prematurely. We affirm.
Jack Winick and his two sons owned CCLG, a real estate investment company. Winick is a real estate broker and CCLG's corporate counsel. CCLG devised a strategy to purchase condominiums in downtown San Diego before they were constructed on speculation they would substantially appreciate during one- to two-year escrow periods for lucrative resales.
Schaffter is a real estate agent who specialized in the downtown market, and Winick hired him to find desirable properties for CCLG. In March 2001 CCLG entered into the California Association of Realtors' (CAR) standard form Buyer Broker Contract with Prudential, under whose broker's license Schaffter worked. Schaffter was to represent CCLG exclusively in its purchase of condominiums in the Park Place development in exchange for a 2.3 percent commission on each unit, with a reduction for the 1.5 percent commission Park Place paid referring brokers. Under the standard contract, commissions were earned when the buyer entered into a purchase agreement, and they were payable on the close of escrow or the buyer's default.
On April 11, 2002, CCLG contracted to purchase eight units at Park Place for prices ranging between the high $400,000's and the high $600,000's. Unbeknownst to Schaffter, Winick never intended to finalize the purchases if the market did not perform as he expected, or to pay commissions on units that did not close escrow.
In June 2001, before construction on Park Place was completed, Schaffter left Prudential and began working as an independent contractor for Re/Max, which was the broker for Park Place. In January 2002 CCLG entered into an exclusive Buyer Broker Contract with Re/Max for Schaffter's representation in its purchase of condominiums in the Renaissance and Pacific Terrace developments. The contract provided for a 2.3 percent commission.
In February 2002 CCLG contracted to purchase six units at Renaissance, at prices ranging from the high $500,000's to the low $700,000's. In September 2002 CCLG purchased two units at Pacific Terrace, at prices of $389,900 and $489,900. Again, Winick did not intend to perform or pay commissions on units that did not appreciate as expected.
In late December 2002 Schaffter learned from Pacific Terrace that Winick sought to cancel CCLG's purchases. Schaffter called a meeting with Winick, and he informed Schaffter he would not complete the Pacific Terrace purchases and he may not complete the Renaissance purchases because of insufficient appreciation. Winick advised Schaffter he did not intend to pay any commissions on units that did not close escrow, and he would not have signed the Buyer Broker Contracts had he understood commissions would be due even if CCLG did not close escrow on units.
CCLG did not close escrows on the Renaissance and Pacific Terrace units, and although the developers deemed the company in default and subject to liquidated damages, they ultimately allowed it to cancel the purchases to avoid litigation. With the exception of $1,000 for Pacific Terrace, the developers returned CCLG's deposits. CCLG refused to pay any commissions under the Buyer Broker Contract between it and Re/Max.
CCLG also missed the closing date on the Park Place units and the developer sent it notices of default and the intent to retain liquidated damages. After much difficulty and several months of delay, CCLG finally closed escrows. Park Place paid Prudential the 1.5 percent commission, but Winick refused to pay it the 0.8 percent balance on the 2.3 percent commission.
As required by the Buyer Broker Contracts, Schaffter attempted to mediate his commission claims. Winick, however, refused to participate. He agreed to a mediation date, but canceled it with one day's notice. The parties unsuccessfully attempted to settle the matter without a mediator.
Schaffter, as Prudential's assignee, and Re/Max sued CCLG for breach of contract.1 A bench trial was held in July 2005, and the court found in favor of Schaffter and Re/Max. It awarded Schaffter $38,400 for commissions on the Park Place units plus prejudgment interest.
As to the Renaissance and Pacific Terrace projects, the court found CCLG defaulted on the purchase agreements and owed Re/Max commissions of 2.3 percent. The court determined the sellers were ready, willing and able to sell, and CCLG unilaterally chose not to close the deals. The court explained "that the buyer negotiated favorable cancellations ... does not change the fact that the acquisition was prevented by default of the buyer." It awarded Re/Max $20,235.40 in commissions on the Pacific Terrace units and $88,397.05 in commissions on the Renaissance units plus prejudgment interest. Judgment was entered on August 23, 2005.
The court later awarded contractual attorney fees of $36,822.18 to Schaffter and $42,318.45 to Re/Max.
CCLG contends the court erred by finding any default on its part, as the cancellations of its purchase agreements for the Renaissance and Pacific Terrace condominiums were "voluntary and mutually beneficial" to CCLG and the developers. (Capitalization and boldface omitted.) CCLG asserts the "buyer and seller are not obligated ... to complete a transaction which is not beneficial to them, for the sole purpose of making sure a broker gets a commission." CCLG also asserts that even when a buyer does default on a purchase, the buyer and seller may "unwind the transaction for their mutual benefit," thereby extinguishing the buyer's obligation to pay a commission under the standard form Buyer Broker Contract.
(1) The interpretation of a contract term presents a question of law we review independently. (Penn-America Ins. Co. v. Mike's Tailoring (2005) 125 Cal.App.4th 884, 889 .) " (Ibid.)
Again, the Buyer Broker Contract provides commissions are payable on the close of escrow or "the Buyer's default." "[D]efault" necessarily refers to a default under the buyer's purchase agreement with the seller. Paragraph 2.5.7 of the six purchase agreements between Renaissance and CCLG provided: (Italics added.)
Similarly, paragraph 3.D. of the two Pacific Terrace purchase agreements provided: "Buyer shall execute all documents ... and deposit the same in escrow, together with all funds and any other information necessary to timely close the escrow as provided herein, or buyer shall be in default of this agreement." (Capitalization omitted, italics added.)
It is undisputed that CCLG entered into binding purchase agreements for Renaissance and Pacific Terrace condominiums, CCLG refused to close escrow on them solely because of insufficient appreciation, and the purchase agreements did not allow cancellation for that reason.
Undisputed evidence also shows that when CCLG...
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