Opinion
A155794
12-20-2019
DAVID LONICH, Plaintiff and Respondent, v. DAVID FRED BLAKEFIELD et al., 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Sonoma County Super. Ct. No. SCV-258490)
Defendants David Blakefield and Nicole Schwarz appeal from a judgment after the trial court found in favor of plaintiff David Lonich on his breach of contract claim and awarded him damages amounting to 7.5 percent of the gross proceeds from a construction job that he had referred to Blakefield. On appeal, defendants contend the trial court committed four errors that warrant reversal of the judgment. They argue that the alleged contract between Lonich and Blakefield's agent, James Franklin, exceeded Franklin's authority, was an unenforceable promise of a gift, and lacked consideration. They further contend the judgment is defective because plaintiff sued the wrong defendant. We find no merit in these arguments and affirm.
FACTUAL AND PROCEDURAL BACKGROUND
At all relevant times, Blakefield was a licensed general contractor. From 2012 to January 2015, he did business as Blakefield Enterprises & Construction (BE&C), a sole proprietorship.
Franklin began working for BE&C in 2012. Under the parties' verbal agency agreement, Franklin served as sales manager, project coordinator, and provider of general business accounting and record keeping. He was responsible for identifying potential clients, negotiating contracts, scheduling jobs, obtaining payments, paying subcontractors, and communicating with clients. He maintained the books and records for BE&C and was a signator on the checking account.
Blakefield's role was to perform the physical work required on the construction projects. Although Blakefield was the principal in this relationship, he and Franklin agreed that Blakefield would receive weekly compensation of $2,000, and Franklin would receive all remaining profits after payment of Blakefield's compensation and other business expenses.
In "[m]id to late" 2014, Lonich, a longtime business associate of Franklin, informed Franklin about a project called Greenback Terrace, which involved the renovation of a 72-unit apartment complex. Lonich told Franklin he would use his relationship with the owners of Greenback Terrace to hopefully allow BE&C to obtain the job. During these discussions, Franklin told Lonich that he was an agent of BE&C and "had complete control to bind [BE&C] to any and all projects that [he] deemed appropriate that fit within the charter of what [they] set out to do." Franklin also told Lonich that he (Franklin) could authorize payment of a referral fee, as Lonich "was wondering what his compensation would be for providing the referral."
Lonich introduced Franklin to the owners of Greenback Terrace. He also "helped negotiate the contract" between Blakefield and the owners.
On October 14, 2014, Lonich sent an email (the October 14 email) to Franklin and Michael Flynn, one of the owners of Greenback Terrace, seeking confirmation that "Blakefield Construction will loan me approximately 7.5% of the contract price paid to Blakefield for work at Greenback Terrace, and that this amount will be paid by Blakefield to [Flynn's law firm] from each draw received by Blakefield; provided, that the draw is funded in full. Similarly, if Blakefield enters into a contract for work at Spring Creek, Blakefield will make me a loan on the same basis." Flynn and Franklin confirmed the terms set forth in the October 14 email. Franklin later testified that the 7.5 percent figure "would be a loan only until the final payments were made on all the projects, because in projects of this size, type, and nature, there's a chance that the scope goes up or goes down, so we would equalize the seven and a half percent at the end."
The record discloses no separate entity by the name of "Blakefield Construction." Rather, it appears to be the name by which the parties referred to BE&C.
Spring Creek was a property adjacent to Greenback Terrace sharing the same ownership.
Franklin first told Blakefield about the Greenback Terrace project in "[l]ate 2014." Franklin asked Blakefield "to go by and take a look at it, see what's involved." He also explained that he was negotiating a contract. Blakefield did not tell Franklin to stop.
At trial, Franklin testified that "at or about the time of" the October 14 email, he discussed the terms contained in the email with Blakefield, and that Blakefield did not comment on, disagree with, or tell Franklin he was not authorized to enter into the agreement with Lonich. Blakefield, however, testified that Franklin had never discussed the October 14 email or mentioned that he had obligated BE&C to pay 7.5 percent of the Greenback Terrace job to Lonich.
In November 2014, BE&C entered into the construction contract with Greenback Terrace, L.P., and commenced work on the project. Of relevance to this appeal, paragraph 10.2 of the contract stated, "Contractor shall not assign this Agreement or any interest in it or . . . to become due under it voluntarily, involuntarily, or by operation of law without owner's prior written consent."
The contract was signed by Franklin on behalf of "Blakefield Construction, Inc." (See fn. 1, ante, p. 2.)
On January 8, 2015, as work on the Greenback Terrace project was still underway, Blakefield changed BE&C to Blakefield Construction & Enterprises, LLC (BC&E LLC) and transferred his contractor's license to the new limited liability company. Thereafter, Blakefield removed Franklin from the company checking account, and Blakefield's employee, Schwarz, sent Franklin a proposed new consulting contract that would have increased Blakefield's weekly compensation and reduced Franklin's share of the money remaining after payment of the company's expenses. The parties were unable to reach a new agreement, and Blakefield terminated Franklin's employment in March 2015.
In April 2015, Lonich emailed Blakefield requesting payment of the 7.5 percent fee. Although Blakefield and Schwarz inquired about this matter with the Greenback Terrace owners, Blakefield did not respond to Lonich's email.
In 2016, Lonich filed the instant action asserting causes of action for breach of contract (against Blakefield) and intentional interference with economic relations (against Schwarz). A bench trial was held in August 2018, after which the trial court found in favor of Lonich on his contract claim but against him on his tort claim.
On the contract claim, the trial court found that Franklin was an agent of Blakefield and had the authority to bind Blakefield to the agreement with Lonich. The court observed that Franklin "was able to and did enter into an agreement with a wide variety of people involved in these projects, whether it be owners, whether it be material suppliers, whether it be subcontractors, whether it be other people who provided services." The court also pondered why Lonich would "do this work" and put in the time and effort if he was not expecting to be paid, and noted that Franklin had "made it clear . . . he had absolutely entered into that agreement with Mr. Lonich." The court found that Lonich had performed his end of the agreement, as he was a "key component" of providing connections and bringing in the Greenback Terrace project.
The trial court awarded contract damages to Lonich as follows: $61,650.00, based on 7.5 percent of the total contract price of approximately $822,000; $45,000.00, based on 7.5 percent of approximately $600,000 earned on additional interior remodeling work; and $18,562.00, based on 7.5 percent of $247,500 earned from the separate Spring Creek project (also referred by Lonich), for a grand total of $125,212.00. Defendants appealed from the judgment.
Although both defendants appealed, we refer to Blakefield individually in our discussion, as the appeal only concerns issues pertaining to him.
DISCUSSION
Blakefield assigns four claims of error: (1) the trial court's finding that Franklin had the authority to enter into the agreement with Lonich was erroneous and unsupported by substantial evidence; (2) the trial court erred as a matter of law in its interpretation of the alleged contract; (3) the breach of contract claim fails for lack of consideration; and (4) the judgment is defective because Lonich failed to sue BC&E LLC and because Lonich cannot recover all of his contract damages from Blakefield individually. We address these contentions in order.
A. Franklin's Authority to Bind Blakefield to the Agreement with Lonich
Blakefield first argues the trial court erred as a matter of law in concluding that Franklin had the authority to bind Blakefield to the agreement to pay Lonich a portion of the Greenback Terrace profits. Relying on Howard v. Winton Co. (1926) 199 Cal. 374 (Howard), Blakefield contends that an agent must have express authority from the employer to contract away a portion of the employer's profits, and that here, he gave Franklin no express authority to do so.
In Howard, a sales manager sued his store employer for unpaid compensation based on a contract specifying that the employee would be paid a monthly salary and one percent on all retail sales. (Howard, supra, 199 Cal. at p. 375.) The contract was not signed in the employer's name but in the name of the store's general manager, and there was no evidence that the employer had given the general manager express authority to make such a contract with an employee, or that the employer had any knowledge of the existence of the asserted contract. (Id. at pp. 377, 379.) While acknowledging that the general manager had implied authority to reasonably determine the compensation of employees, the Supreme Court concluded that "the execution of a contract disposing of a portion of the profits of a business is unreasonable and not within the implied authority of the general manager of such business." (Id. at p. 377.) According to the court, the employee should have made an inquiry into the actual authority of the general manager to enter into the asserted contract, and in the absence of such inquiry or of an estoppel or ratification, the principal should not be bound by the provisions of such a contract. (Id. at p. 379.)
The instant matter is distinguishable from Howard in two important ways. First, there was evidence here that Blakefield knew about the asserted contract, as Franklin testified that he told Blakefield about the October 14 email setting forth the terms of the agreement with Lonich, and that Blakefield did not state or otherwise indicate Franklin lacked the authority to enter into it. Although Blakefield flatly disputed this portion of Franklin's testimony at trial, our function on review is to ascertain whether there is substantial evidence, contradicted or uncontradicted, that will support the trial court's factual determination. (Bowers v. Bernards (1984) 150 Cal.App.3d 870, 873-874.) Franklin's testimony, however contradicted, was sufficient to support the factual determination that Blakefield knew about the agreement with Lonich, and the evidence of Blakefield's continued retention of the benefits of Lonich's services supports a reasonable inference of Blakefield's ratification of the acts of his agent. (Civ. Code, § 2310.)
Second, the evidence at trial showed that Franklin's role in BE&C was materially different than that of the general manager in Howard. Although Blakefield was the principal in the agency relationship, he placed no limits on how Franklin obtained new work and the two agreed that Blakefield would be paid $2,000 per week, with Franklin being entitled to all remaining profits after payment of Blakefield's compensation and other expenses. Thus, unlike Howard, where the general manager attempted to contract away a portion of the employer's profits, Franklin's payment of any referral fees to third parties would have reduced his portion of the remaining profits due to him under the parties' agency agreement. In short, the unique agency relationship at issue in this case offers no parallel to the situation in Howard.
Blakefield then argues that even if Howard is not controlling as a matter of law, substantial evidence did not support the trial court's finding that Franklin had actual authority to enter into the agreement with Lonich on Blakefield's behalf. We disagree and conclude that there was substantial evidence supporting Franklin's implied authority to do so.
"Actual authority may be implied as well as express and the implied powers of a general agent or manager are very broad, embracing authority to do all acts customarily connected with the business in which he is engaged." (Hobart v. Hobart Estate (1945) 26 Cal.2d 412, 450.) "An agent has implied authority to use any means that are incidental to and reasonably proper in the performance of an assigned task. . . . An act may be incidental to an authorized act, although considered separately it is an entirely different kind of an act. To be incidental, however, it must be one which is subordinate to or pertinent to an act which the servant is employed to perform. It must be within the ultimate objective of the principal and an act which it is not unlikely that such a servant might do. The fact that a particular employer has no reason to expect the particular servant to perform the act is not conclusive.' " (Garber v. Prudential Ins. Co. (1962) 203 Cal.App.2d 693, 701-702.)
Here, the agreement to pay Lonich was within the ultimate objective of Blakefield's business. The reason or consideration underlying the agreement to pay was Lonich's referral and assistance leading to the award of the Greenback Terrace construction job to Blakefield. In the trial court's words, that job was "one of the larger projects they had ever done in terms of the total revenue, total work." Pursuing this job was entirely consistent with Franklin's role in BE&C, as the evidence showed that Franklin had broad authority to procure new jobs for BE&C and negotiate the contracts for them. Moreover, given that Lonich was a "key component" in obtaining the job, it was perfectly reasonably for Franklin to agree that Lonich would be compensated for his help. Finally, it does not appear (and Blakefield does not contend) that the agreement to pay Lonich 7.5 percent of the gross proceeds threatened or otherwise imperiled Blakefield's receipt of weekly compensation under the agency agreement between him and Franklin.
On this record, the trial court properly concluded that the agreement with Lonich was within Franklin's authority as an agent of Blakefield/BE&C.
B. The Trial Court's Interpretation of the October 14 Email
Blakefield argues the trial court erred in its interpretation of the alleged contract because the supporting document—the October 14 email—referred to extending a "loan" to Lonich, not compensating him for his services. We disagree.
The interpretation of a written instrument is essentially a judicial function to be exercised according to the generally accepted canons of interpretation so that the purposes of the instrument may be given effect, and extrinsic evidence is " 'admissible to interpret the instrument, but not to give it a meaning to which it is not reasonably susceptible.' " (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865.) "A contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates." (Civ. Code, § 1647.)
As mentioned, Franklin testified that the October 14 email referred to Lonich's 7.5 percent draw as a "loan" because the scope of the projects could have increased or decreased over time. And since the October 14 email contemplated that Lonich would be paid from each fully-funded draw received by Blakefield, it was possible that the final amount due to Lonich would have to be "equalize[d]" after the work's conclusion. The trial court could properly consider this extrinsic evidence as explaining why the October 14 email referred to Lonich's agreed compensation amount as a "loan" prior to the determination of the final contract price. And in finding that the agreement did not involve a loan in the traditional sense, the court reasonably observed that Lonich had no reason to "put in all this time and effort" without an expectation of payment, and that Franklin "made it clear" that he had entered the agreement to pay Lonich the 7.5 percent fee.
Blakefield argues the evidence was insufficient to establish his awareness that the 7.5 percent figure was a payment rather than a loan. However, indulging all reasonable inferences in favor of the trial court's findings (Barber v. Long Beach Civil Service Com. (1996) 45 Cal.App.4th 652, 659-660), we may reasonably infer from Franklin's testimony that when he discussed the terms of the October 14 email with Blakefield, he gave the same explanation for the "loan" reference that he offered at trial.
For these reasons, we conclude there was substantial evidence supporting the trial court's determination that the parties' agreement was for compensation, not a loan.
C. Lack of Consideration
Blakefield next argues the breach of contract claim fails for lack of consideration because the alleged promise of a 7.5% referral fee was not made until after Lonich had already rendered his referral services. Thus, Blakefield argues, any promise of compensation was merely a promise of a gift, not an enforceable contract.
In response, Lonich argues that Blakefield forfeited this issue by failing to plead the lack-of-consideration defense in his answer to the complaint and not presenting the issue before the trial court. (See Vikco Insurance Services, Inc. v. Ohio Indemnity Company (1999) 70 Cal.App.4th 55, 66-67 (Vikco) [issues or theories not properly raised before trial court will not be considered on appeal]; National Farm Workers Services Center, Inc. v. M. Caratan, Inc. (1983) 146 Cal.App.3d 796, 808 [finding defense of lack of consideration waived because it was not pleaded in answer].) Blakefield essentially concedes the forfeiture in his reply brief.
We decline to overlook Blakefield's failure to raise the issue below and find the issue forfeited.
In his reply brief on appeal, Blakefield raises a completely new lack-of-consideration theory, essentially contending that because all of the Greenback Terrace proceeds went to Franklin, he (Blakefield) received no benefit at all from Lonich's referral services, and that it would be inequitable to hold him responsible for Lonich's damages when it was Franklin's responsibility to pay the business expenses. We similarly find this issue forfeited. (Western Oil & Gas Assn. v. Monterey Bay Unified Air Pollution Control Dist. (1989) 49 Cal.3d 408, 427, fn. 20; REO Broadcasting Consultants v. Martin (1999) 69 Cal.App.4th 489, 500.)
D. Improper Defendant
Blakefield argues that Lonich failed to sue the proper defendant because he named Blakefield individually, without joining BC&E LLC, the entity that received most of the Greenback Terrace proceeds. According to Blakefield, the cost ledger for the Greenback Terrace project shows that prior to January 8, 2015 (the day the business became a limited liability company), Blakefield as sole proprietor received only $163,473.98, and all remaining payments after January 8, 2015, were made to the LLC, not Blakefield personally or as sole proprietor. Thus, Blakefield contends, the most Lonich was entitled to from Blakefield personally was 7.5 percent of $163,473.98—a total of $12,250.55—and he has no individual liability for the LLC's failure to honor its alleged agreement to pay Lonich 7.5 percent of the profits it received after January 8, 2015.
Lonich does not raise the issue of forfeiture, but we observe there was no mention of an improper-defendant theory in Blakefield's trial brief or in the arguments of his counsel at trial.
In any event, substantial evidence supports the judgment against Blakefield individually. The October 14 email called for payment to Lonich of 7.5 percent of the contract price "paid to Blakefield for work at Greenback Terrace." It was Blakefield, doing business under the fictitious business name BE&C, who contracted with Greenback Terrace, L.P., to work on the project. Because an individual's use of a fictitious business name does not create a separate legal entity (Meller & Snyder v. R & T Properties, Inc. (1998) 62 Cal.App.4th 1303, 1311), Blakefield was the individual to be paid for the work at Greenback Terrace within the meaning of the agreement with Lonich.
Moreover, although Blakefield formed his limited liability company during the construction, the nonassignability clause in the Greenback Terrace contract prohibited him from assigning any interest in the contract without Greenback Terrace, L.P.'s prior written consent. Blakefield cites no evidence in the record that he assigned his interest in the Greenback Terrace proceeds to the LLC with the written consent of Greenback Terrace, L.P. Thus, on this record, we conclude that Blakefield was the proper defendant with the interest in the proceeds from the Greenback Terrace contract for purposes of awarding Lonich his contract damages.
DISPOSITION
The judgment is affirmed. Lonich is entitled to his costs on appeal.
/s/_________
Fujisaki, Acting P. J. WE CONCUR: /s/_________
Petrou, J. /s/_________
Goode, J.
Retired Judge of the Superior Court of Contra Costa County, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. --------