Sullivan v. Dorsa

• Decision Date: 25 April 2005
• Docket Number: No. H026145.,H026145.
• Citation: 128 Cal.App.4th 947,27 Cal.Rptr.3d 547
• Court: California Court of Appeals Court of Appeals
• Parties: Richard W. SULLIVAN, as Trustee, etc., et al., Plaintiffs and Appellants, v. Dean DORSA, as Co-Trustee, etc., et al., Defendants and Appellants; Robert H. Engles, as Referee, etc., et al. Movants and Respondents.

27 Cal.Rptr.3d 547

128 Cal.App.4th 947

Richard W. SULLIVAN, as Trustee, etc., et al., Plaintiffs and Appellants, v. Dean DORSA, as Co-Trustee, etc., et al., Defendants and Appellants Robert H. Engles, as Referee, etc., et al. Movants and Respondents.

No. H026145.

Court of Appeal, Sixth District.

April 25, 2005.

Kathleen O'Reilly, David R. Sylva, San Jose, Attorneys for Plaintiffs and Appellants Richard W. Sullivan, as Trustee, etc., et al.

Kathleen O'Reilly, David R. Sylva, San Jose, Attorney for Defendant and Appellants Dean Dorsa as Co-Trustee, etc., et al.

Silicon Valley Law Group, Gregory John Charles, San Jose, Attorneys for Movants and Respondent Silicon Valley Law Group, et al.

Haight, Brown & Bonesteel, Jules Solomon Zeman, Los Angeles, Attorneys for Movants and Respondent Grubb & Ellis Company, et al.

RUSHING, P.J.

The primary question presented by this appeal is whether a court presiding over an action to partition real property has the power to award a brokerage commission on an unconsummated sale of the property. We have concluded that such an award is precluded by provisions of the Probate Code expressly made applicable to partition actions. We therefore reverse an order allowing a commission on a sale that was neither confirmed nor consummated. We affirm orders allowing fees to the erstwhile attorneys for the partition referee.

BACKGROUND

This proceeding concerns approximately 16 acres of land on Highway 101 in Morgan Hill known as the Cochran Road Ranch. Members of the Sullivan and Dorsa/Benassi families apparently purchased this property in 1967. It is now held in undivided interests by their descendants and successors, including several trustees for family trusts (the owners).

In 1997, the owners sold a nearby parcel for $10.50 per square foot. In December 1999, some but not all of the owners agreed to sell the present parcel to AG Industries for $10 per square foot. They apparently also agreed that if fewer than all owners joined in the sale, those who had agreed to do so would institute partition proceedings to bring about a judicial sale. Some of the owners indeed declined to join in the sale, apparently in the belief that the property could bring a higher price.

Accordingly, in March 2000, owners Richard Sullivan, Patricia Hastings, Joan Sullivan, Joan Lundell, and June Gould, most of whom were acting as trustees, instituted this action by filing a complaint to partition the property by sale. On July 25, 2000, all owners agreed through their attorneys that a referee should be appointed. They received applications from several candidates, including Robert Engles, who identified himself as a senior vice president of Grubb & Ellis Company (Grubb), a real estate agency. He stated in his application that he would charge nothing for his services as referee, but if engaged as listing and marketing agent for the property would charge a commission of "4 [percent] of sale price split 50/50 between listing side and selling side." Other respondents proposed commissions ranging from 3 percent to 6 percent.

In November 2000, the owners stipulated to entry of, and the court entered, an interlocutory judgment directing partition of the property by sale. The order appointed Engles as referee "with authority to sell the property at public auction to the highest bidder for cash, except as maybe [sic] otherwise provided by Sections 873.600-893.690 of the Code of Civil Procedure.... [¶] ... Each bid or offer to purchase the property shall be accompanied by a minimum of ten percent (10%) of the amount of the offer or bid ... in the form of cash, money order or certified check." The court, per Judge Gregory H. Ward, entered the stipulated judgment.

On February 13, 2001, referee Engles filed an ex parte application for approval to hire Grubb as broker in marketing the property. In the motion Engles reiterated that in the event he received a commission for the sale of the property, he would "waive his referee fees in this action." The application was accompanied by a form "Exclusive Authorization of Sale" (listing agreement) granting Grubb "the exclusive right to negotiate the sale of the real property ... for a period commencing on December 6, 2000, and ending at midnight on To be determined...."¹ It called for a sale "to the highest bidder as determined by court order," and provided that the owner would be liable for a commission if, during the listing period, (1) the property was sold (2) the broker or any other person procured a buyer "who is ready, willing and able to purchase the Property or any interest therein on the terms above stated or other terms acceptable to the owner," (3) the owner contracted to sell the property, or (4) the owner terminated the listing agreement, withdrew the property from the market, or otherwise rendered it unmarketable. The agreement bore the signatures of Engles as "Receiver" and Bryan H. Freeman on behalf of Grubb. The court granted the motion.

Also on February 13, 2001, Engles moved ex parte for authority to hire Attorney Frank Maiorana of Silicon Valley Law Group (SVLG) to draft documents in connection with the sale of the property and to represent Engles in this proceeding. The court granted the motion.

It appears that around this same time, i.e., February 2001, Engles received four offers to purchase the property, including a renewal of the AG Industries offer of $10.00 per foot. The other three offers ranged from $11.21 to $12.00 per foot. Engles reportedly accepted the AG Industries offer, but the latter apparently allowed the contract to expire according to its terms.

On September 11, 2002, Engles executed a contract, as referee, to sell the property to JP DiNapoli Companies, Inc. (DiNapoli) for $6.75 per square foot, or $4,869,136.80.² It called for DiNapoli to tender a $100,000 deposit within two days of September 11, 2002, the "Agreement Date," but allowed a 120-day "Conditions Period," commencing with court confirmation of the sale, in which DiNapoli could conduct a feasibility study and could recover the entire $100,000 deposit if it chose to terminate the agreement. If it chose not to terminate the contract by the end of that period (the Approval Date), $50,000 of the deposit would become nonrefundable—subject to certain other conditions—and DiNapoli would deposit an additional $200,000. A further $50,000 would become nonrefundable 30 days later. The transaction was to close within 30 days after the Approval Date, but that date could be extended, for purposes of obtaining certain regulatory approvals, to as late as 12 months after the contract was approved by the court. DiNapoli could extend the closing date another 60 days by depositing an additional $100,000.³ It thus appears that closing could appear as late as 15 months after the court confirmed the sale. In addition, closing was subject to certain conditions including the obtaining of regulatory approvals, and the occurrence of certain other regulatory conditions could have the effect of terminating the agreement and permitting DiNapoli to recover its entire deposit.

The agreement identified Grubb as "Broker" and provided that "[a]t Closing, and only if Closing actually occurs, Seller shall pay to the Broker a brokerage commission, the amount of which shall be as specified in a separate agreement between Seller and Broker."

On September 13, 2002, Engles filed an application to engage a member of the Law Firm of Berliner Cohen (Berliner) as special counsel to help prepare sales documents on the ground that SVLG had a conflict of interest in the matter due to an "ongoing relationship" with the proposed buyer, i.e., DiNapoli. The court granted the application.

On October 15, 2002, Engles filed a "Referee's Return and Report of Sale of Real Property by Private Sale," along with a motion to confirm the sale. The report described the sale as subject to, among other things, the payment by the owners of a 4 percent commission to Grubb, there being no other brokers involved in the transaction. The report again indicated that Engles would waive any claim for referee's fees if the brokerage commission were paid. It also indicated that compensation would be sought for the two law firms that had represented Engles.

Several owners objected to confirmation on the ground that the proposed sale failed to conform to a written (but undated) stipulation in which all owners had agreed "that the sale of the subject property shall be had . . . in accordance with" specified procedures and terms, including that "the sale shall be for all cash," and that "no offer shall be accepted or be confirmed for less than $10.00 per square foot except pursuant to the express written agreement of all the owners." In addition, three owners objected on grounds among others, that the purchase price was unacceptable, the sale was contingent on government approval of entitlements sought by the purchaser in conjunction with other property,⁴ and the agreement allowed an unacceptably lengthy delay before closing.⁵

Judge Ward heard the motion to confirm the sale on December 5, 2002. Counsel for Engles argued that the owners' opposition was simply a matter of seller's remorse, that Engles had "done what the parties . . . asked him to do," and that "[s]ubstantial time" had been expended by Engles, DiNapoli, and DiNapoli's attorneys. The court noted that Engles was "entitled to his fees as referee for the time he put in" and "m[ight] have a cause of action against the parties if they fail[ ] to pay him a commission for this transaction." Counsel for some of the owners expressed her clients' willingness to "pay their fair share of . . . whatever the Court finds the fair fees for Mr. Eng[les] and his attorney are." Possibly addressing Engles or his attorneys, the court said, "You may want to talk to counsel [i.e., for the owners] about any potential liability that their clients may have for commissions on account of this deal. ...