Opinion
G052734
07-21-2017
DAVID C. KADIN, Plaintiff and Appellant, v. ABS POWER BRAKE, INC. et al., Defendants and Appellants.
Blumberg Law Corporation, John P. Blumberg and Ave Buchwald for Plaintiff and Appellant. Law Offices of Brian M. Davis, Brian Mitchell Davis and Stephen P. Farkas for Defendants and Appellants.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2014-00717117) OPINION Appeal from a judgment and a postjudgment order of the Superior Court of Orange County, Ronald L. Bauer, Judge. Affirmed. Blumberg Law Corporation, John P. Blumberg and Ave Buchwald for Plaintiff and Appellant. Law Offices of Brian M. Davis, Brian Mitchell Davis and Stephen P. Farkas for Defendants and Appellants.
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INTRODUCTION
A contingency fee provision in an attorney retainer agreement (the Retainer Agreement) provides: "Client agrees to pay to Attorney a fee of 33-1/3 percent of any recovery. If Attorney is unable to obtain money for Client in this case, then Attorney will receive no Attorney fee at all." David C. Kadin, the attorney, represented ABS Power Brake, Inc. (ABS), and Pedro Gomez, Guillermo Lopez, and Lucio Gomez (the Gomez Brothers) in a lawsuit against an insurer, its agent, and its broker. In settlement of the lawsuit, ABS and the Gomez Brothers received $1.1 million in cash, and the insurer agreed to obtain (for an undisclosed amount) a satisfaction of a $12.88 million judgment against ABS and the Gomez Brothers in a federal trademark lawsuit.
Does the word "recovery" in the Retainer Agreement include the $12.88 million judgment satisfied by the insurer? Kadin contends it does, and sued ABS and the Gomez Brothers to recover one-third of $12.88 million (about $4.3 million) in attorney fees. We agree with the trial court and conclude, based on the language of the Retainer Agreement and extrinsic evidence, that recovery under the Retainer Agreement does not include the amount of the satisfaction of judgment, but is limited to the amount of money received by ABS and the Gomez Brothers. While Kadin is entitled one-third of the $1.1 million in cash received by ABS and the Gomez Brothers, he is not entitled to an additional $4.3 million. We therefore affirm the judgment.
ABS and the Gomez Brothers have appealed from the trial court's postjudgment order denying their motion for prejudgment interest. They contend they are entitled to prejudgment interest under Civil Code section 3287, subdivision (a) (section 3287(a)) because, under the terms of the judgement, they were entitled to receive from Kadin a sum capable of being made certain. When judgment was rendered, ABS and the Gomez Brothers did not have a pleading seeking affirmative relief, and the judgment does not award them damages. Because ABS and the Gomez Brothers are not "entitled to recover damages" (§ 3287(a)), they are not entitled to prejudgment interest. Accordingly, we affirm the postjudgment order denying prejudgment interest.
FACTS
I.
The Federal Trademark Infringement Litigation
The Gomez Brothers are the founders and owners of ABS, which rebuilds and remanufactures braking components. Kadin first represented the Gomez Brothers as their attorney in 1999 when Kadin helped them incorporate ABS Power Brake. Since 1999, Kadin had represented the Gomez Brothers and ABS Power Brake in various matters, including two civil lawsuits. All of Kadin's legal work had been performed under an hourly fee agreement.
In November 2009, Robert Bosch LLC (Bosch) sued ABS and the Gomez Brothers for trademark counterfeiting and infringement and other causes of action in federal court in Michigan (the Trademark Litigation). Lucio Gomez contacted Kadin about representing the Gomez Brothers and ABS. Kadin recommended they contact their insurance broker. They did so and reported to Kadin "we don't have any insurance on this." Kadin contacted the insurance broker, who confirmed there was no coverage. Kadin thereafter agreed to represent the Gomez Brothers and ABS in the Trademark Litigation on an hourly basis of compensation.
Based on a representation by the Gomez Brothers that they had no contacts with Michigan, Kadin advised moving to dismiss the complaint in the Trademark Litigation. Kadin drafted a declaration for Pedro Gomez and drafted and filed a motion to strike based on that declaration. Pedro Gomez reviewed the declaration before signing it. He was lying when he signed the declaration.
In the Trademark Litigation, the federal court granted Bosch's request for jurisdictional discovery. After conducting jurisdictional discovery, which revealed the Gomez Brothers had some contact in Michigan, Bosch filed opposition to the Gomez Brothers' motion. Kadin reviewed the opposition and advised the Gomez Brothers to withdraw the motion and "move on to the rest of the case."
Bosch moved for sanctions against ABS and the Gomez Brothers on the ground the motion to dismiss was based on misrepresentations that prolonged the litigation and caused Bosch to incur unnecessary expenses. In an order issued in May 2011, the federal court granted Bosch's motion and directed the Gomez Brothers and ABS to obtain local counsel. Kadin also recommended that the Gomez Brothers retain a trademark attorney. They retained attorney Brian Kinder to represent them, and he entered an appearance in the Trademark Litigation in August 2011. In an order issued in August 2011, the federal court granted the motion for sanctions and imposed sanctions in the amount of $152,082.65 "based on Defendants' conduct in opposing personal jurisdiction."
II.
The State Court Insurance Litigation
Kadin reviewed insurance policies issued to ABS by Western Heritage Insurance Company (the Insurer) for the years 2004 through 2009 to determine whether there might be coverage for the Trademark Litigation. He learned that each policy provided for $1 million in coverage. The policies issued from 2004 through 2008 included coverage for personal and advertising injury coverage, which could trigger a duty to defend the Trademark Litigation, but the 2009 policy did not have this coverage. Kadin discovered that the insurance broker, Solomon and Solomon Insurance Brokers (Solomon), had issued a certificate of coverage for 2009 that did include personal and advertising injury coverage. Kadin learned too that for 2009, the Gomez Brothers had asked Solomon for the same coverage as the previous year, which would include coverage for personal and advertising injury. Kadin concluded that Solomon might be liable for not obtaining personal and advertising injury coverage in the 2009 policy.
Kadin tendered defense of the Trademark Litigation to the Insurer, which responded by claiming that Solomon was at fault for lack of coverage. Because the Insurer had denied coverage, Kadin pursued a lawsuit against Solomon in California state court (the Insurance Litigation). Kadin prepared and filed a complaint seeking damages for negligence and indemnification for any liability in the Trademark Litigation. Before filing the complaint in the Insurance Litigation, Kadin had ongoing discussions with the Gomez Brothers about the allegations in the draft complaints.
III.
The Retainer Agreement
Through discovery in the Insurance Litigation, Kadin obtained information implicating the Insurer and its agent, R.E. Chaix & Associates Insurance Brokers, Inc. (Chaix). At one point, Kadin met with the Gomez Brothers and discussed suing the Insurer for bad faith.
At this meeting, Kadin said he would handle the bad faith claim against the Insurer on a contingency fee basis. Kadin explained the contingency fee as, "[i]f I get something for you, I get a third; if I don't get anything for you, I don't get anything." Lucio Gomez testified that Kadin explained "he would go after the insurance company and the 33-1/3 percent monies on the table . . . if he didn't get any monies to the customer, cash money, that he wouldn't get paid." Lucio Gomez also testified that Kadin explained the contingency fee to mean, "[i]f I obtained the money for the client I get paid, otherwise I don't get paid." Kadin testified he told the Gomez Brothers, "if I wasn't able to get anything for them, I wouldn't get anything." According to Kadin, he did not discuss how the contingency fee would work with nonmonetary recovery because "we weren't talking in terms of anything other than money" so "[t]here was no point to discuss."
About a week after that meeting, the Gomez Brothers received by mail the Retainer Agreement from Kadin. Guillermo Gomez, Lucio Gomez, and Pedro Gomez each signed the Retainer Agreement, which was dated August 11, 2011. The Gomez Brothers did not discuss the Retainer Agreement with Kadin.
Paragraph 5 of the Retainer Agreement reads: " CONTINGENCY FEE TO ATTORNEY: Client acknowledges having been advised by Attorney that any contingency fee is negotiable and is not set by law. [¶] "Bearing such advice in mind, Client agrees to pay to Attorney a fee of 33-1/3 percent of any recovery. IF ATTORNEY IS UNABLE TO OBTAIN MONEY FOR CLIENT IN THIS CASE , THEN ATTORNEY WILL RECEIVE NO ATTORNEY FEE AT ALL. "
In October 2011, Kadin filed a first amended complaint in the Insurance Litigation adding the Insurer and Chaix as defendants.
IV.
Default Judgment in the Trademark Litigation
Meanwhile, Bosch continued to litigate the Trademark Litigation "as hard as it could." Kadin believed the Gomez Brothers' expenses in that litigation would "increase exponentially" as trial approached. As it was, the Gomez Brothers already were having difficulty paying their attorney fees. Kadin advised them to withdraw their answer in the Trademark Litigation, allow a default judgment to be entered against them, and use the amount of the judgment as damages in the Insurance Litigation for the Insurer's alleged bad faith duty to defend. Kadin discussed this strategy with the Gomez Brothers, and they agreed to it.
ABS and the Gomez Brothers withdrew their answer in the Trademark Litigation. In August 2012, a default judgment in the amount of $12,875,997.96 was entered against them. Bosch filed a notice of lien in the same amount in the Insurance Litigation.
V.
Settlement of the Insurance Litigation
Extensive discovery was conducted in the Insurance Litigation. Just before entry of the default judgment in the Trademark Litigation, Kadin obtained a settlement with Solomon and Chaix of the Insurance Litigation. Solomon and Chaix each agreed to pay ABS $300,000 (for a total of $600,000). The Gomez Brothers approved paying Kadin one-third of the recovery from Solomon and Chaix. Kadin voluntarily deferred $14,000 of his fee as an accommodation to the Gomez Brothers.
On behalf of ABS, Kadin brought a motion in the Insurance Litigation for summary adjudication of the issue of the Insurer's duty to defend the Trademark Litigation. In November 2012, the trial court granted the motion.
On November 30, 2012, the day on which the court granted the motion, Kadin sent an e-mail to the Insurer's attorney to give formal notice of Kadin's fee lien. The November 30 e-mail stated: "Whatever your client may pay, whether it is to ABS or to Bosch on behalf of ABS, constitutes a recovery that I obtained for ABS and is subject to my fee lien. I am sure you would agree, if ABS had paid the judgment and your client then reimbursed ABS, it would be entitled to a percentage of what your client paid to reimburse ABS. By the same token, if your client paid money to ABS so it could then pay the judgment, I would be entitled to a percentage of what your client paid to ABS. In fact, the only difference between the former and the latter scenarios would be the order in which payments were made. [¶] . . . For your client to pay Bosch directly, it would have to disregard my fee lien. Moreover, it would put its insured in a position of owing me a percentage of what your client paid Bosch on its behalf as that would be a benefit I obtained for my client. . . . [¶] Therefore, while you might want to get Bosch to discount its judgment, I am entitled to a fee from whatever your client may ultimately pay, whether it is through ABS or directly to Bosch."
After reading the November 30 e-mail, which had been copied to all the Gomez Brothers, Lucio Gomez called Kadin because it suggested that Kadin might have to sue ABS to recover his contingency fee. Kadin told Lucio Gomez not to worry about the e-mail as it was intended strictly for the Insurer's counsel. Gomez recalled Kadin telling him, "[i]f I don't get you guys cash money, I don't get paid." Kadin could not recall this conversation ever occurring.
The Insurer, ABS, and the Gomez Brothers agreed to settle the Insurance Litigation at a mediation conducted in May 2013. The terms of settlement were set forth in a Release and Settlement Agreement (the Settlement Agreement) signed in June 2013. Two provisions of the Settlement Agreement are significant here. First, the Insurer agreed to "obtain a full Satisfaction" of the default judgment in the Trademark Litigation. Second, the Insurer agreed to pay ABS and the Gomez Brothers $500,000. The Settlement Agreement does not disclose the amount the Insurer would pay to obtain a satisfaction of judgment.
The Insurer paid the $500,000 and obtained a satisfaction of the judgment in the Trademark Litigation. Kadin testified he did not know how much the Insurer paid to obtain the satisfaction of judgment. He deposited the $500,000 into his client trust account.
The Gomez Brothers contended they were entitled to the entire $500,000. In a telephone conversation with Kadin, Lucio Gomez demanded the entire amount. In a letter dated July 9, 2013, ABS and the Gomez Brothers asserted "[w]e have never agreed orally or in writing to any fee arrangement with you or your firm that is now in force." The letter requested that Kadin send the $500,000 in settlement money to them. In a subsequent letter, ABS and the Gomez Brothers stated that if Kadin did not turn the money over to them by midnight on July 31, 2013, "we will be forced to turn over for legal action to recover all monies due and damages incurred." Kadin sent ABS and the Gomez Brothers a notice of their right to arbitrate a fee dispute.
PROCEDURAL HISTORY
In April 2014, Kadin initiated this lawsuit by filing a complaint asserting nine causes of action against ABS and the Gomez Brothers. The first three causes of action sought recovery for representation in the Trademark Litigation and were dismissed before trial. The fourth through ninth causes of action sought recovery for representation in the Insurance Litigation based on breach of the Retainer Agreement and quantum meruit, and under theories of fraud, theft by false pretenses, and conversion. ABS and the Gomez Brothers filed a cross-complaint against Kadin.
The trial court granted Kadin's motion to bifurcate "the issue of how the term 'recovery' (as used in [the Retainer Agreement]) must be defined as a matter of law." During discovery, ABS and the Gomez Brothers acknowledged that Kadin was entitled to one-third of the $500,000 that had been paid by the Insurer and deposited into Kadin's client trust account.
A bench trial on the bifurcated issue was conducted over several days in May 2015. The court orally announced it accepted the interpretation of the word "recovery" advanced by ABS and the Gomez Brothers. The parties then stipulated that $29,293 was the amount of unpaid litigation fees and expenses owed to Kadin.
Trial proceeded on Kadin's quantum meruit cause of action. After Kadin rested, the trial court granted a motion by ABS and the Gomez Brothers for a nonsuit. ABS and the Gomez Brothers dismissed their cross-complaint with prejudice.
In a statement of decision, the trial court found that the term "recovery" in the Retainer Agreement did not include the $12.8 million judgment satisfied by the Insurer as part of the settlement of the Insurance Litigation and found, therefore, that "[Kadin] can recover no fee as a consequence of the satisfaction of the judgment in the [Trademark] [I]nfringement case." The trial court found: "No evidence in this trial placed any value on the judgment that was satisfied by [the Insurer]. All lawyers understood that the face amount of a judgment very often bears no relationship to the actual value thereof. Issues of collectability, appealability, and negotiated settlement can all come into play. No one at this trial knew how much [the Insurer] paid in order to receive a Satisfaction of Judgment. Even if we accept the plaintiff's definition of 'recovery,' this leads to the necessary question: 'One third of what?'"
In the statement of decision, the trial court explained that it granted a nonsuit on Kadin's quantum meruit cause of action because the parties had a contract covering the issue of attorney compensation and "[a] quantum meruit recovery cannot be substituted for a valid, enforceable contract that covers the same topic."
The judgment provided that Kadin was entitled to $195,666.67 from the $500,000 received from the Insurer. That amount was calculated as follows: $166,666.67 (one-third of the $500,000 paid by the Insurer) plus $29,000 (the stipulated amount of unpaid litigations costs rounded downward). The judgment stated: "It is [Kadin]'s duty to distribute the $500,000 from the [Insurer] Settlement as follows: $196,666.67 to [Kadin] and $304,333.33 to [ABS and the Gomez Brothers]."
ABS and the Gomez Brothers brought a motion for prejudgment interest and to be deemed the prevailing party entitled to costs. The trial court denied the motion for prejudgment interest and found that ABS and the Gomez Brothers were the prevailing parties and therefore entitled to recover costs of suit.
Kadin timely appealed from the judgment and the order deeming ABS and the Gomez Brothers to be the prevailing parties (Discussion Section, part I). ABS and the Gomez Brothers timely appealed from the order denying the motion for prejudgment interest (Discussion Section, part II).
DISCUSSION
I.
Kadin's Appeal From the Judgment
A. The Trial Court Correctly Interpreted the Word "Recovery" in the Retainer Agreement as Money Received by ABS and the Gomez Brothers.
At issue is the meaning of the word "recovery" in the contingency fee provision of the Retainer Agreement. That contingency fee provisions states: "Client agrees to pay to Attorney a fee of 33-1/3 percent of any recovery. If Attorney is unable to obtain money for client in this case, then Attorney will receive no Attorney fee at all."
Kadin argues the word "recovery" includes the full amount of the $12.88 million dollar judgment in the Trademark Litigation because the Insurer obtained a satisfaction of that judgment under the terms of the Settlement Agreement. For that reason, Kadin argues, as a result of the settlement, ABS and the Gomez Brothers obtained a benefit in the form of $12.88 million in debt relief and increase in net worth. The trial court agreed with ABS and the Gomez Brothers that "recovery" does not include the amount of the satisfaction of judgment but is limited to the amount of money received by the Gomez Brothers, i.e., "money in hand." Thus, the trial court concluded that Kadin was entitled to one-third of the $1.1 million received in cash from Solomon, Chaix, and the Insurer but not one-third of the amount of the $12.88 million judgment.
1. Principles of Interpreting Attorney Fee Agreements
We start by laying out the principles governing interpretation of attorney fee agreements. "Fee agreements between attorneys and their clients 'are evaluated at the time of their making [citation] and must be fair, reasonable and fully explained to the client. [Citations.] Such contracts are strictly construed against the attorney. [Citations.]' [Citations.] Client agreements are construed by the court under traditional principles of contract interpretation [citation], and 'any uncertainties [are resolved] in favor of a fair and reasonable interpretation.' [Citation.] If ambiguities are present in the engagement agreement, they are to be resolved 'in favor of the client and against the attorney. [Citation.]' [Citation]." (M'Guiness v. Johnson (2015) 243 Cal.App.4th 602, 617-618.)
Foremost among the traditional principles of contract interpretation applicable to attorney fee agreements is the basic goal of giving effect to the parties' mutual intent at the time of contracting. (Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 955 (Founding Members).) "When a contract is reduced to writing, the parties' intention is determined from the writing alone, if possible" and "'[t]he words of a contract are to be understood in their ordinary and popular sense.'" (Ibid.) We also consider the circumstances under which the contract was made and the matter to which it relates. (Civ. Code, § 1647; Lloyd's Underwriters v. Craig & Rush, Inc. (1994) 26 Cal.App.4th 1194, 1197-1198.)
"Extrinsic evidence is admissible to prove a meaning to which the contract is reasonably susceptible. [Citations.] If the trial court decides, after receiving the extrinsic evidence, the language of the contract is reasonably susceptible to the interpretation urged, the evidence is admitted to aid in interpreting the contract. [Citations.] Thus, '[t]he test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible.'" (Founding Members, supra, 109 Cal.App.4th at p. 955.)
"The threshold issue of whether to admit the extrinsic evidence—that is, whether the contract is reasonably susceptible to the interpretation urged—is a question of law subject to de novo review. [Citations.] [¶] The ultimate construction placed on the contract might call for different standards of review. When no extrinsic evidence is introduced, or when the competent extrinsic evidence is not in conflict, the appellate court independently construes the contract. [Citations.] When the competent extrinsic evidence is in conflict, and thus requires resolution of credibility issues, any reasonable construction will be upheld if it is supported by substantial evidence. [Citations.]" (Founding Members, supra, 109 Cal.App.4th at pp. 955-956.)
"California recognizes the objective theory of contracts [citation], under which '[i]t is the objective intent, as evidenced by the words of the contract, rather than the subjective intent of one of the parties, that controls interpretation' [citation]. The parties' undisclosed intent or understanding is irrelevant to contract interpretation. [Citations.]" (Founding Members, supra, 109 Cal.App.4th at p. 956.)
2. The Words of the Retainer Agreement
The words of the Retainer Agreement support the interpretation that Kadin is not entitled to receive an amount equal to a percentage of the amount the Trademark Litigation judgment. The Retainer Agreement states the client agrees to pay "a fee of 33-1/3 percent of any recovery" and "[i]f attorney is unable to obtain money for client in this case, then attorney will receive no attorney fee at all." The juxtaposition of these two passages reinforces the notion that "recovery" refers to and means money obtained for the client. If the client recovers no money, then the client pays no attorney fees. If the client recovers money, then the client pays the attorney one-third of the money recovered by the client.
Kadin argues the phrase "[i]f attorney is unable to obtain money for client" is a condition precedent to his right to attorney fees and does not affect the meaning of the word recovery. In other words, once Kadin recovered some money, he was entitled to one-third of "any recovery." Kadin obtained $1.1 million in settlement for ABS and the Gomez Brothers. Kadin argues that, having satisfied the condition, he was entitled to one-third of the recovery, which, he contends, included the $12.1 Trademark Litigation judgment satisfied by the Insurer.
Kadin at most raises an ambiguity in the meaning of the fee provision of the Retainer Agreement. We would resolve any ambiguity against Kadin and in favor of the Gomez Brothers. (M'Guiness v. Johnson, supra, 243 Cal.App.4th at pp. 617-618; Lane v. Wilkins (1964) 229 Cal.App.2d 315, 323.) Examination of the extrinsic evidence, including the circumstances under which the Retainer Agreement was made, confirms there is no ambiguity and the term "recovery" does not include the amount of the Trademark Litigation judgment.
3. Extrinsic Evidence
The circumstances under which the Retainer Agreement was made were these: (1) Kadin had offered to represent ABS and the Gomez Brothers in the lawsuit for negligence against Solomon; and (2) Kadin reviewed drafts of the complaint against Solomon with the Gomez Brothers. There is no evidence to suggest anybody was contemplating a satisfaction of judgment or some other form of nonmonetary or indirect recovery from Solomon or any potential defendant. Kadin testified he did not discuss how the contingency fee would work with nonmonetary recovery because "we weren't talking in terms of anything other than money" so "[t]here was no point to discuss. . . . We were only talking about money." Because the negligence lawsuit against Solomon sought money damages, and there was no contemplation of nonmonetary recovery, it is reasonable to infer that the parties to the Retainer Agreement intended the contingency fee to operate by applying the rate of 33 and 1/3 percent against money received by ABS and the Gomez Brothers.
When the Gomez Brothers signed the Retainer Agreement, they already owed $200,000 to various attorneys in the Trademark Litigation and were behind in the payments to Kadin. The Gomez Brothers faced spending yet more attorney fees in defending the Trademark Litigation. It is reasonable to infer that the Gomez Brothers neither wanted nor intended to enter into a fee agreement by which they might have to pay more, and potentially substantial, cash-out-of-pocket attorney fees to Kadin. Under such circumstances, it makes little sense to interpret the Retainer Agreement as requiring ABS and the Gomez Brothers to pay Kadin, in cash, some additional $4.29 million in attorney fees.
Testimony of discussions leading to the Retainer Agreement supports a finding that recovery does not include satisfaction of the Trademark Litigation judgment. Pedro Gomez testified that, in discussions, Kadin said, "if I obtain[] the money for the client I get paid, otherwise I don't get paid." Lucio Gomez testified that Kadin explained "he would go after the insurance company and the 33-1/3 percent monies on the table. . . if he didn't get any monies to the customer, cash money, that he wouldn't get paid." Lucio Gomez testified that Kadin explained the contingency fee to mean "if I obtained the money for the client I get paid, otherwise I don't get paid." Kadin testified he told the Gomez Brothers, "if I wasn't able to get anything for them, I wouldn't get anything." To the extent the testimony presented any credibility issues, the trial court resolved those issues against Kadin. (Navigators Specialty Ins. Co. v. Moorefield Construction, Inc. (2016) 6 Cal.App.5th 1258, 1276 ["As the trier of fact, the court was the ultimate judge of the weight and credibility of witness testimony"].)
The extrinsic evidence of the discussions leading to the Retainer Agreement supported the trial court's interpretation of the word "recovery" as meaning only money actually received by the Gomez Brothers in the Insurance Litigation. We uphold that interpretation because it is reasonable and supported by substantial evidence. (Founding Members, supra, 109 Cal.App.4th at p. 956.)
Kadin places emphasis on Lucio Gomez's testimony concerning the November 30 e-mail. Lucio Gomez testified that, when he contacted Kadin after reading the November 30 e-mail, Kadin assured him the e-mail was intended strictly for the Insurer's counsel. Lucio Gomez recalled Kadin telling him, "if I don't give you guys cash money, I don't get paid." Kadin contends that Lucio Gomez's testimony makes "no sense" and is "inherently improbable." We disagree. To be rejected as inherently improbable, testimony must be physically improbable or obviously false without resort to inference or deduction. (People v. Ennis (2010) 190 Cal.App.4th 721, 728.) Testimony is not inherently improbable when it is merely contradictory or inconsistent. (People v. Swanson (1962) 204 Cal.App.2d 169, 173.)
Kadin argues "it would make no sense for [me] to have performed the massive amount of legal services during the litigation including obtaining a summary adjudication, and to continue to represent [ABS and the Gomez Brothers] on a contingency basis if he was not going to receive a percentage of the damages recovered." Kadin did receive a third of the damages recovered: He received one-third of the $1.1 million in cash settlement he obtained for ABS and the Gomez Brothers from Solomon, Chaix, and the Insurer.
Kadin drafted the Retainer Agreement and could have defined "recovery" in a manner that was both broad and specific enough to encompass nonmonetary recovery such as satisfaction of judgment. Beard v. Goodrich (2003) 110 Cal.App.4th 1031, though not directly on point, illustrates that principle. In that case, the attorney drafted the contingency fee provision as 40 percent of "'" net recovery"'" and defined that term broadly to include "'the forgiveness or discharge of the debt.'" (Id. at p. 1033.) Yet, despite the broad definition, the Court of Appeal concluded the phrase "'forgiveness or discharge of the debt'" was not reasonably susceptible of a meaning that would include "'unrecovered unliquidated claims.'" (Id. at p. 1039.) Beard teaches that a contingency fee agreement must define the term "recovery" both broadly and specifically if it is intended to include particular forms of nonmonetary recovery. (Ibid.)
The Retainer Agreement did not define "recovery" to include forgiveness or satisfaction of debt, satisfaction of judgment, or any kind of nonmonetary recovery. The Retainer Agreement provided no definition of "recovery" at all. B. The Trial Court Did Not Err by Granting a Nonsuit on Kadin's Cause of Action for Quantum Meruit.
The trial court granted a nonsuit on Kadin's quantum meruit cause of action because the parties had a contract covering the issue of attorney compensation and "[a] quantum meruit recovery cannot be substituted for a valid, enforceable contract that covers the same topic." We agree with the trial court. Quantum meruit recovery is inconsistent with recovery for breach of written contract. (Hedging Concepts, Inc. v. First Alliance Mortgage Co. (1996) 41 Cal.App.4th 1410, 1419.) "A quantum meruit or quasi-contractual recovery rests upon the equitable theory that a contract to pay for services rendered is implied by law for reasons of justice. [Citation.] However, it is well settled that there is no equitable basis for an implied-in-law promise to pay reasonable value when the parties have an actual agreement covering compensation." (Ibid.)
"Quantum meruit is an equitable theory which supplies, by implication and in furtherance of equity, implicitly missing contractual terms. Contractual terms regarding a subject are not implicitly missing when the parties have agreed on express terms regarding that subject. A quantum meruit analysis cannot supply 'missing' terms that are not missing. 'The reason for the rule is simply that where the parties have freely, fairly and voluntarily bargained for certain benefits in exchange for undertaking certain obligations, it would be inequitable to imply a different liability. . . . '" (Hedging Concepts, Inc. v. First Alliance Mortgage Co., supra, 41 Cal.App.4th at p. 1419.)
When, as in this case, the parties have an express contract (the Retainer Agreement) governing the compensation at issue, quantum meruit recovery is not available because the law will not imply a promise to pay a reasonable value of services at variance with the parties' express agreement.
Kadin argues he was entitled to quantum meruit recovery because the Retainer Agreement was an "ineffective contract" as to recovery against the Insurer. When the Retainer Agreement was signed, the Insurer was not a defendant in the Insurance Litigation, and, he contends, the ensuing events—the default judgment in the Trademark Litigation, the judgment lien in the Insurance Litigation, and the settlement with the Insurer—constituted "peculiar circumstances" that were "tantamount to having" an ineffective contract.
The Retainer Agreement was a valid and binding contract governing Kadin's representing of ABS and the Gomez's Brothers in the Insurance Litigation. The Retainer Agreement, which was drafted by Kadin, had express terms regarding the subject of Kadin's fee. The Retainer Agreement was not "ineffective" considering that Kadin received a full one-third of the $1.1 million paid in settlement by Solomon, Chaix, and the Insurer. That was what Kadin agreed to. He did not ask for or obtain a modification of the Retainer Agreement, or a new agreement, when the Insurer was added as a defendant or when any of the "peculiar circumstances" arose. C. Costs
The trial court determined that ABS and the Gomez Brothers were the prevailing parties and awarded costs of suit. As we are affirming the judgment, we affirm the trial court's award of costs of suit.
II.
ABS and the Gomez Brothers' Appeal From the Order
Denying Prejudgment Interest
A. Background and Procedural History
When the Insurance Litigation was settled with Solomon (for $300,000) and with Chaix (also for $300,000), ABS and Gomez Brothers did not dispute that Kadin was entitled to one-third of the settlement as his fee. Kadin deferred payment of $14,000 of that fee and distributed the rest. The Insurance Litigation later was settled with the Insurer, which, as part of the settlement, paid $500,000 in two checks. Kadin deposited those checks into his client trust account. ABS and the Gomez Brothers claimed they were entitled to the entire $500,000 and requested that Kadin pay that amount to them. ABS and the Gomez Brothers took the position that Kadin was not entitled to any part of the $500,000 received from the Insurer because "[t]he only agreement which is in force" was the settlement agreement, and it called for payment to be made to ABS and the Gomez Brothers.
As to the Insurance Litigation, Kadin's complaint sought damages in the amount of $4,558,382.45 consisting of (1) the $14,000 deferred fee, (2) one-third of the $500,000 received from the Insurer, (3) one-third of the amount of the Trademark Litigation Judgment, and (4) unreimbursed litigation costs. Kadin's complaint also sought prejudgment interest. Before filing the complaint, Kadin had presented to ABS and the Gomez Brothers a spreadsheet listing those damages.
ABS and the Gomez Brothers denied the allegations of Kadin's complaint and filed a cross-complaint against Kadin. The cross-complaint asserted breach of contract and seven other tort, contract, and common count causes of action arising out of Kadin's representation of ABS and the Gomez Brothers in the Trademark Litigation and the Insurance Litigation. Relevant here are the sixth cause of action (conversion), seventh cause of action (money had and received), and eighth cause of action (indemnification). In the conversion causes of action, ABS and the Gomez Brothers alleged they were entitled to the entire $500,000 paid in settlement by the Insurer, which Kadin had converted. In the money had and received cause of action, ABS and the Gomez Brothers alleged that Kadin received the $500,000 and refused to return the money to them. In the indemnification cause of action, ABS and the Gomez Brothers alleged they were entitled to indemnification from Kadin for unpaid expert witness from the Trademark Litigation for which they had been sued. The cross-complaint did not seek prejudgment interest.
After the court orally announced it agreed accepted the interpretation of the word "recovery" advanced by ABS and the Gomez Brothers, the parties stipulated that $29,293 was the amount of unpaid litigation fees and expenses owed to Kadin. Once the trial court granted a nonsuit on Kadin's quantum meruit cause of action, ABS and the Gomez Brothers dismissed their cross-complaint.
The judgment stated that Kadin was entitled to $195,666.67 out of the $500,000 received from the Insurer and that "[i]t is [Kadin]'s duty to distribute the disputed $500,000 from the [Insurer] Settlement as follows: $196,666.67 to [Kadin] and $304,333.33 to [ABS and the Gomez Brothers]."
After entry of judgment, ABS and the Gomez Brothers brought their motion for prejudgment interest. The trial court denied the motion for prejudgment interest on the ground the amount of unpaid litigation costs was disputed and was not resolved until trial and, therefore, the amount owed to ABS and the Gomez Brothers out of the $500,000 paid by the Insurer was not certain. B. The Trial Did Not Err by Denying Prejudgment Interest.
ABS and the Gomez Brothers argue they are entitled to prejudgment interest under section 3287(a), which in relevant part reads: "A person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in the person upon a particular day, is entitled also to recover interest thereon from that day, except when the debtor is prevented by law, or by the act of the creditor from paying the debt."
The trial court also denied the request by ABS and the Gomez Brothers for a discretionary award of prejudgment interest under section 3287, subdivision (b). They do not challenge that decision.
An award of prejudgment interest is mandatory if the requirements of section 3287(a) are met. (Employers Mutual Casualty Co. v. Philadelphia Indemnity Co. (2008) 169 Cal.App.4th 340, 347.) Denial of prejudgment interest under section 3287(a) raises a legal question that we independently review. (Ibid.)
To recover prejudgment interest, a person must be "entitled to recover damages." (§ 3287(a).) Prejudgment interest is not a cost but is an element of those damages. (North Oakland Medical Clinic v. Rogers (1998) 65 Cal.App.4th 824, 830.) It follows that, to recover prejudgment interest, a party must plead and recover damages. The purposes of pleadings, such as cross-complaints, include serving as a formal basis for the judgment and giving notice of the parties' claims, defenses, and demands. (4 Witkin, Cal. Procedure (5th 3d. 2008) Pleading, § 1, p. 65.) A complaint or cross-complaint must contain "[a] demand for judgment for the relief to which the pleader claims to be entitled." (Code Civ. Proc., § 425.10, subd. (a)(2).)
ABS and the Gomez Brothers could not have recovered damages because they dismissed their cross-complaint before judgment. Their answer, like all answers, did not and could not include claims for affirmative relief. (Code. Civ. Proc., § 431.30, subd. (c).) Because ABS and the Gomez Brothers dismissed their cross-complaint, they had no pleading with a demand for affirmative relief that could have served as a basis for a judgment for damages and, thereby, for prejudgment interest.
The judgment places Kadin under a duty to distribute $304,333.33 to ABS and the Gomez Brothers. But the fact ABS and the Gomez Brothers might receive money does not mean they are "entitled to recover damages" within the meaning of section 3287(a). In Rodriguez v. RWA Trucking Co., Inc. (2013) 238 Cal.App.4th 1375, 1409-1410 (Rodriguez), the Court of Appeal concluded that section 3287(a) does not authorize prejudgment interest on an award of restitution under the California Unfair Competition Law, Business & Professions Code section 17200 et seq. (UCL). The court reasoned that section 3287(a) authorizes prejudgment interest only for recovery of damages. (Rodriguez, supra, 238 Cal.App.4th at p. 1412.)
The Rodriguez court cited and relied on M&F Fishing, Inc. v. Sea-Pac Ins. Managers, Inc. (2012) 202 Cal.App.4th 1509, 1537, in which the plaintiff in a UCL lawsuit was denied prejudgment interest on a $3.5 million restitution recovery. The Court of Appeal concluded the plaintiff was not entitled to prejudgment interest under section 3287(a) because it is limited to recovery of damages, while the UCL permits recovery only of injunctive relief and restitution. (M&F Fishing, Inc. v. Sea-Pac Ins. Managers, Inc., supra, 202 Cal.App.4th at p. 1538.)
The judgment itself is an oddity. It does not make an award of damages. It does not state it is "ordered, adjudged, and decreed" that any party or parties shall recover a specified amount from any other party or parties. (See 7 Witkin, supra, Judgment, § 30, p. 570.) Rather, the judgment recites that Kadin has a duty to distribute to ABS and the Gomez Brothers $304,333.33 out of the $500,000 received in settlement from the Insurer. Imposition of that duty makes the judgment sound like a decree of specific performance of the Retainer Agreement or an order of restitution. In the case of either specific performance or restitution, ABS and the Gomez Brothers are not "entitled to recover damages" within the meaning of section 3287(a).
DISPOSITION
The judgment and the postjudgment order denying the motion of ABS and the Gomez Brothers for prejudgment interest are affirmed. Because all parties prevailed in part, no party may recover costs on appeal.
FYBEL, J. WE CONCUR: O'LEARY, P. J. BEDSWORTH, J.