First District, Division Five Follows Blickman Turkus and Sessions Decisions.
This next case is a virtual paradigm for students of fees clauses in exclusive listing agreements involving MLS brokers who sue sellers and then lose. It deals with judicial estoppel and fee clause interpretation issues frequently seen in these types of disputes.
Menasco v. Nagel, Case No. A121570 (1st Dist., Div. 5 Mar. 9, 2009) (unpublished) involved a plaintiff real estate broker who found buyers for an interested defendant seller, even though the seller’s exclusive listing agreement was with a separate broker posting on the multiple listing service (MLS). Plaintiff sued defendant when he failed to consummate a sale of defendant’s residence to several ready, willing, and able buyers, alleging breach of contract and third party beneficiary contractual theories. Plaintiff’s complaint referenced the MLS broker-defendant listing agreement (which had a fees clause) and sought entitlement to fees under that clause. Plaintiff lost to seller, with the trial court awarding $17,387.50 in attorney’s fees based upon the fact that plaintiff had asked for fees in his complaint.
The First District, Division 5, in a 3-0 decision authored by Presiding Justice Jones, reversed the fee award.
Initially, the appellate panel addressed the judicial estoppel rationale adopted by the trial court. It noted that Jones v. Drain, 149 Cal.App.3d 484, 489-490 (1983) did support use of this estoppel rationale, but choose to follow the “better reasoned line of authority” represented by Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC, 162 Cal.App.4th 858, 899 (2008) and Leach v. Home Savings & Loan Assn., 185 Cal.App.3d 1295, 1306-1307 (1986), which rejected the conclusion that fees may be imposed against a party simply because he or she requests them.
Next, the Court of Appeal considered whether the MLS broker-seller contract, which did indeed contain a fees clause, entitled seller to fees under the language of the clause. This did not work either. The fees clause talked about fee allocation to the prevailing “Seller” or “Buyer,” but those terms were defined and losing plaintiff was neither one (with “Broker” only meaning the MLS broker).
That brought the reviewing court down to the nonsignatory plaintiff/defendant signatory decisions that in some circumstances trigger fee exposure. Not here, the panel decided. Under Real Property Services Corp. v. City of Pasadena, 25 Cal.App.4th 375, 382 (1994), the signatory defendant is only entitled to a fee in situations where the nonsignatory plaintiff would be entitled to fees had the nonsignatory prevailed. Here, that was impossible given that the fee clause language did not allow plaintiff broker any entitlement to fees in the first instance.
Last but not least, the appellate panel visited whether seller might get fees under a third party beneficiary theory. Again, no go. Sessions Payroll Management, Inc. v. Noble Construction Co., 84 Cal.App.4th 671, 680 (2000) was found on point, because the contract had language indicating that a third party beneficiary is only entitled to the benefits the contracting parties agreed to confer upon it. Like the situation in Menasco, Sessions found that the contractual language was limited—fee recovery was constricted to “either party”—and such limited wording “either” referred only to the two contracting parties. Had those parties wanted to include someone else, their contract would have had to refer to “any” party. (Id. at 681.) Because the MLS broker-seller contract only allowed fee recovery to “Seller” or “Broker,” there was no intent that seller was given the right to recover fees under this specific contractual wording.
So, even with very precise syllogistic reasoning through several analytical tiers, the Court of Appeal could not find a legal hook to support the trial court’s award of fees in seller’s favor.