Second District, Division 3 Finds Contractual Interpretation of Fees Clause Was Wrong By Lower Court.
Where there is no conflict in evidence (usually meaning divergent parol evidence), appellate courts will independently construe contractual provisions as a matter of law. In doing so, they may disagree with a lower court’s construction in the process. This does happen in the fee recovery area, as the next decision illustrates.
In Eshaghyan v. Krikorian Investment Services, Inc., Case No. B221888 (2d Dist., Div. 3 Mar. 10, 2011) (unpublished), a salesperson sued his brokerage agency in court, recovering $245,281.25 in damages from a jury despite the existence of an arbitration provision in the Broker-Salesperson Agreement. Salesperson then moved for an attorney’s fees award pursuant to the fees clause in the Broker-Salesperson Agreement and the Policies and Procedures Manual, seeking $155,372.50 in fees. The trial court granted the motion in part, over opposition, eventually awarding $22,500 in fees against broker. The lower court did not clearly indicate which contract underpinned the fee award. Broker appealed.
The fee award in this one was reversed.
With respect to the fees clause in the Broker-Salesperson Agreement, it only applied to fees incurred in connection with an arbitration between the parties, something that never occurred. Given the language in the surrounding sentences that only concerned “an arbitration,” the appellate court decided the fees clause did not authorize a fee award absent any arbitration.
Recognizing that a lower court’s decision can be affirmed if correct on any ground, the reviewing court then addressed the fees clause in the Policies and Procedures Manual. No basis there, either, said the Court of Appeal. Based on where the provision was set forth and the overall context of the clause in relation to other language, the appellate panel decided that the provision only applied in the event of litigation between the brokerage firm and a third party, not the firm and an agent. So, the secondary theoretical basis for a fee award was inapt.