Opinion
B187686
4-20-2007
JAMES McMENAMIN, JR., Plaintiff and Appellant, v. TRIMARK PACIFIC HOMES, L.P., Defendant and Respondent.
Law Office of David E. Kenney, David E. Kenney; Lascher & Lasher and Wendy C. Lascher for Plaintiff and Appellant. Sheppard Mullin Richter & Hampton LLP, John D. Collins and Matthew S. McConnell for Defendant and Respondent.
NOT TO BE PUBLISHED
INTRODUCTION
During plaintiff James McMenamins (plaintiff) 21 months of employment, defendant Trimark Pacific Homes, L.P. (Trimark) changed his bonus compensation plan at least three times. Following the last change, plaintiff resigned and sued Trimark alleging contractual breaches of three separate bonus plan documents. After plaintiff rejected Trimarks offer to settle pursuant to Code of Civil Procedure section 998, the case proceeded to a jury trial. At the close of evidence, the trial court granted Trimarks motion for a directed verdict, and instructed the jury to return a verdict in favor of plaintiff in the amount of $15,000. After judgment was entered on the verdict, both plaintiff and Trimark moved for an award of attorney fees, which motions the trial court denied.
All further statutory references are to the Code of Civil Procedure unless otherwise stated.
Plaintiff appeals from the trial courts order directing a verdict in favor of Trimark on his claim for bonuses based on a percentage of the net profits on four residential developments, contending that there was a conflict in the evidence concerning his entitlement to such bonuses. Plaintiff further contends that the trial court erred by failing to include in the verdict a $6,760 bonus that Trimark allegedly awarded, but never paid him. Plaintiff also appeals from the trial courts postjudgment order denying his motion for attorney fees contending that, notwithstanding Trimarks section 998 offer of $20,000, he was the prevailing party under Labor Code section 218.5.
Trimark appeals from the trial courts postjudgment order denying its motion for postoffer attorney fees. It contends that the trial court had no discretion under section 998 to determine whether Trimark was the prevailing party for purposes of postoffer attorney fees, and therefore that the court erred when it found that Trimark was not the prevailing party. The appeals were consolidated.
We hold that the trial court did not err in directing a verdict in favor of Trimark on plaintiffs claim for bonuses based on future net profits, that plaintiff forfeited his claim for the $6,760 bonus by not asserting it in the trial court, and that the trial court did not err in denying plaintiffs motion for attorney fees.
We further hold that the trial court had no discretion under section 998 to determine whether Trimark was the prevailing party, and therefore that the court erred when it found that Trimark had not prevailed. Accordingly, we remand the issue of the reasonable amount of Trimarks postoffer attorney fees to the trial court for determination, and affirm the judgment in all other respects.
FACTUAL BACKGROUND
A. Trimarks Business
Trimark is a developer of residential housing tracts in Southern California. During the time frame relevant to the litigation, it had two lines of business. It would acquire an undeveloped or "raw" parcel of real property, "improve" it with "streets, curbs, [and] gutters," and sell the "finished lots" to other "builders to build their own homes on them." Trimark also designed and built homes on finished lots in an acquired parcel and sold them directly to the ultimate homeowners. "A typical transaction for [Trimark] would be a subdivision where [it built] 100 homes . . . over six or seven phases, [approximately] 12 to 15 [homes] at a time," with the phases beginning approximately three months apart.
B. Plaintiffs July 2002 Employment Agreement
Plaintiff testified that his "specialty" in terms of real estate experience was in the "front-end" of development projects, i.e. "acquisitions, processing to approval of the project, entitlements, and getting the governmental jurisdictions to process and approve the design of the land improvements and the construction." Prior to joining Trimark, plaintiff had worked as a project manager for Kaufman and Broad, as a project manager for "Richland Interest," as a vice president of acquisitions and forward planning for "Ryland Homes," and as regional manager at "Richland American."
Plaintiff defined his "acquisition" function as: "[N]etworking with brokers and land owners, negotiating the purchase of the property, working with the attorneys on purchase and sale agreements . . . [and] bringing the acquisition to close of escrow."
Plaintiff defined "entitlements" as: "[T]aking the land, once acquired, and processing either the mapping or subdivision; the grading and improvement plans; the final map; utility planning; the architecture and civil engineering generally; and processing it through [the various governmental agencies]; . . . ."
By a letter dated July 15, 2002, Trimark offered plaintiff employment as a "Senior Project Manager" in its San Diego division, and plaintiff accepted the offer (July 2002 Agreement). The July 2002 Agreement provided that plaintiff would receive an annual base salary of $130,000, a $20,000 "discretionary" bonus for 2002, a $15,000 bonus for "each deal which closes in the San Diego Division" (Project Acquisition Bonus), and a $20,000 "discretionary" bonus for 2003. Plaintiff commenced work for Trimark on July 29, 2002.
C. The October 2002 Amendment
In September 2002, plaintiff had a meeting with the principals of Trimark to discuss "some changes in [his] position and [his] compensation plan." According to plaintiff, the "principals were pleased with some of the work [he] had done in the feasibility analysis for the [Sherwood Ridge] project . . . so they invited [him] up [to the company headquarters in Westlake Village] for lunch and told [him] that they were interested in [him] becoming primarily responsible for the [Sherwood Ridge] development, and they wanted to incentivize [him] to [locate] new acquisitions to grow the division."
The first Trimark project on which plaintiff worked was referred to as both "Sherwood Ridge" and "Valley View." To avoid confusion, that first project will be referred to herein as Sherwood Ridge.
On October 28, 2002, Trimark presented plaintiff with an amendment to his July 2002 Agreement (October 2002 Amendment) that he executed on or about that day. Although the October 2002 Amendment was dated October 28, it specified an "effective date" of September 12, 2002. Under the October 2002 Amendment, plaintiffs base salary remained the same (i.e., $130,000), but his bonus compensation was restructured into two components: a "Company Bonus" and a "Project Profit Bonus."
The October 2002 Amendment described the Company Bonus as follows: "$20,000 bonus for year 2002. Thereafter, an annual target of $20,000. Half of the bonus amount will be discretionary (i.e. based on individual performance). The remaining half will be subject to the provisions of the companys profit share program and to achievement of companys annual profit goals."
The Project Profit Bonus was described as follows: "Additional bonus of three and one half [percent] (3.50%) of project profits on all new (closed after your initial employment date) projects outside of San Miguel Ranch. First eligible transaction is Sherwood Ridge. [¶] Project profits are net profits to [Trimark] after the payment of preferred return. The employee will be allowed to receive up to $15,000 as an advance against future `project profit bonus[es] for each new deal acquired. The advance is payable annually by December 31. The advance is non-recourse and shall be considered fully forgiven in the event employment is terminated by either party with or without `cause."
Under the October 2002 Amendment, plaintiffs $15,000 Project Acquisition Bonus was eliminated, the Project Profit Bonus was added, and his Company Bonus changed from a $20,000 discretionary (i.e. performance-based) bonus to a $10,000 discretionary bonus and a $10,000 bonus based on "the companys profit share program." Concerning his Project Profit Bonus, plaintiff testified that "the three and a half percent Project Profit Bonus was very important to [him]. It motivated [him], incentivized [him] to stay. In [his] business, [he received] a lot of offers [of employment]. [He received] a lot of interest. [He] stayed [at Trimark] because of that [Bonus]. [He] would have been absolutely furious to have that [Bonus] eliminated, and [he] would have walked the day [Trimark] tried to take it from [him]."
According to plaintiff, after the September 12, 2002, effective date of the October 2002 Amendment, he worked "to get [the Sherwood Ridge project] approved as quickly as possible so [Trimark] could begin grading the property; . . . [including] revising the approved plans on 43 lots to accommodate the size of the homes [Trimark] wanted to build; . . . completing the plan-checking and approval-process through the County of San Diego and Valley Water District for the infrastructure improvements where [Trimark] had finished lots to build on." In addition, plaintiff testified that the Project Profit Bonus "incentivized [him] to look for new acquisitions to grow the company." In his words, he "hit it hard" looking for new acquisitions based on his Project Profit Bonus.
Pursuant to the October 2002 Amendment, plaintiff received a $20,000 bonus at the end of 2002. In January 2003, plaintiff requested and received a $15,000 advance on the Sherwood Ridge project pursuant to the Project Profit Bonus provision in the October 2002 Amendment.
On or about March 2, 2003, plaintiff received a memorandum that set forth Trimarks profit goal for the year 2003. The memorandum included a separate sheet specifying plaintiffs individual "Profit Participation Plan Bonus Target for Year 2003" that showed an increase in his target Company Bonus from the $20,000 amount stated in the October 2002 Amendment to $22,500, and that one half of that target would be paid as "profit participation" and the other half as a discretionary performance bonus. Plaintiff also received and signed a document that explained, inter alia, that his profit participation bonus would be paid out over two years, with one half being paid at the end of the current year and one half, as he described it, "carried over" to the end of the following year.
D. The Disputed June 17, 2003, Amendment
Trimarks Executive Vice President, Steven Hester, testified that he assisted in the preparation of a June 17, 2003, amendment to plaintiffs compensation package (Disputed Amendment). According to Mr. Hester, he presented the Disputed Amendment to plaintiff and discussed it with him on or about that date. Trimark, however, did not have a signed version of the Disputed Amendment, and plaintiff denied ever having seen it. The Disputed Amendment eliminated plaintiffs three and one half percent Project Profit Bonus, but increased his Company Bonus to an annual target of $50,000.
According to Trimark, the Disputed Amendment is irrelevant to its motion for a directed verdict; and plaintiff does not appear to base any of his contentions on that Amendment.
E. The Acquisition of the Casa La Costa and Woods Valley Properties
In August 2003, Trimark closed escrow on a property referred to as the Casa La Costa project. In October 2003, Trimark closed escrow on a property referred to as the Woods Valley project. Plaintiff testified that he "did quite a bit of work on the Woods Valley project." Although plaintiff contended that his employment compensation in 2003 was governed by the October 2002 Amendment, and that he never saw the Disputed Amendment during his employment at Trimark, he admitted that he did not request in December 2003 a $15,000 advance under the terms of his Project Profit Bonus for either the Casa La Costa or Woods Valley projects, as he had done in January 2003 for the Sherwood Ridge project.
F. The Acquisition of The Quorum Property and the March 24, 2004, Amendment
On January 20, 2004, plaintiff took a medical leave of absence related to a knee replacement surgery. He attempted to return to work on crutches three weeks later on February 12, 2004. That day, the president of Trimarks San Diego division, Scott Sanderson, greeted him, told him he "did not look too good," and asked him how he was feeling. Mr. Sanderson then informed plaintiff that Trimark wanted to change his Project Profit Bonus. Plaintiff responded that he "was very happy with [his Project Profit Bonus], and that it was the main reason why he put in all the work [he] did to create value on the [Sherwood Ridge project] and pursue[d] new acquisitions for the company; . . . [Plaintiff told Mr. Sanderson that he] was not interested in changing [his Project Profit Bonus]." Because plaintiff was physically unable to continue work on February 12, he returned home at Mr. Sandersons suggestion.
On March 19, 2004, Trimark closed escrow on a property referred to as The Quorum project. On March 24, 2004, plaintiff returned to work and was presented with another amendment to his bonus plan (March 2004 Amendment). The March 2004 Amendment made no mention of a "Company Bonus," and instead described a "Project Acquisition Bonus" as follows: "For all future project acquisitions, a sum of $15,000 to be paid per project after the close of each escrow. In addition, up to a $10,000 per project discretionary bonus (i.e. based on individual performance) to be paid at the end of the calendar year in which the project closes escrow." It redefined plaintiffs Project Profit Bonus as follows: "In addition to the Project Acquisition Bonus, an additional bonus of two percent (2%) of the [Sherwood Ridge] project profits (less the $15,000 advance previously distributed) shall be paid at the completion of the project. This project profit bonus applies to no other current or future projects. Project profits are net profits to [Trimark] after payment of preferred return. No additional advances are eligible."
Plaintiff testified that he did not discuss the March 2004 Amendment with Mr. Sanderson prior to signing it. Although he was unsure how this new Amendment would affect his compensation under the October 2002 Amendment, he suspected that it was intended to replace it. On March 30, 2004, plaintiff met with the principals of Trimark to discuss the March 2004 Amendment. They confirmed that it was intended to replace his existing bonus structure and eliminate his right to project profits on any project, other than a two percent Project Profit Bonus to be paid at the completion of the Sherwood Ridge project. Plaintiff testified that he was "shocked" and "very disappointed" by the changes to his bonus plan. As a result, he submitted his resignation on April 2, 2004.
G. Profits from the Four Projects in Issue
The undisputed testimony at trial established that, as of September 2005 (i.e., the time of trial), there were no "project profits" — as that term is defined in the October 2002 and March 2004 Amendments — on any of the four projects in issue, i.e. Sherwood Ridge, Casa La Costa, Woods Valley, and The Quorum. The earliest acquired project, Sherwood Ridge, was in the seventh of twelve phases at the time of trial, and Trimark did not anticipate completing it until the end of 2006. Woods Valley, a development consisting of 57 single family homes, was in the fourth of six phases at the time of trial, and Trimark did not anticipate completing it until the summer or fall of 2006. Casa La Costa, a condominium development, was in the second of three phases at the time of trial, and Trimark did not anticipate completing it until the end of 2006. And Trimark had not commenced development on The Quorum, a development consisting of 106 "loft units," at the time of trial.
PROCEDURAL BACKGROUND
Plaintiff sued Trimark alleging three causes of action for breach of contract based on the July 2002 Agreement, the October 2002 Amendment, and the March 2004 Amendment. On August 3, 2005, Trimark served a section 998 offer on plaintiff proposing to settle the matter for a total payment to plaintiff of "$20,000, plus pre-offer costs of suit allowed by law which shall be determined by the Court upon application by Plaintiffs counsel." On August 4, 2005, plaintiff responded to that offer by demanding $154,000 to settle the action.
Plaintiff subsequently dismissed his first cause of action based on the July 2002 Agreement, and proceeded to trial on his second and third causes of action only.
The matter did not settle, and proceeded to a jury trial in September 2005. At the close of evidence, Trimark filed a motion for directed verdict. Trimark argued that plaintiff was not entitled to any Project Profit Bonuses, under either the October 2002 or the March 2004 Amendments, because (i) there were no project profits as of the time of trial; (ii) plaintiff had sued on the March 2004 Amendment thereby admitting that it superseded the October 2002 Amendment and eliminated any entitlement to the three and one half percent Project Profit Bonus on all other projects; and (iii) plaintiff had voluntarily resigned from his employment prior to the agreed upon calculation dates for his Project Profit Bonus.
During oral argument, the trial court observed that "I do think this case was filed prematurely," and that plaintiff should have waited until at least one of the projects "closed," i.e., had been completed, prior to filing suit for a Project Profit Bonus. At the conclusion of the lengthy oral argument, the trial court granted the motion stating, "I think the motion [for directed verdict] should be granted . . . for the reasons stated in the motion. Primarily, there is no substantial conflict of the evidence on the question of project profit bonus monies from any of the four projects on which [plaintiff is] claiming . . . ." After further argument from plaintiffs counsel, the trial court reiterated, "[C]learly there is no conflict, no substantial conflict, in the evidence as to whether there are project profits at present. I dont think there is any conflict in the evidence. Thats the basis of the courts ruling why the motion should be granted." Accordingly, the trial court granted the motion, indicating that it would "direct the jury to return the verdict" the following morning.
The trial court stated that had plaintiff sought declaratory relief, it likely would have ruled in favor of Trimark on the ground that plaintiff was not employed when net profits were fully determined. We do not deal with that issue.
After the trial court ruled, plaintiffs counsel inquired whether the courts ruling resolved the issue of the $15,000 Project Acquisition Bonus for The Quorum that plaintiff alleged was due under the March 2004 Amendment. After further discussion of the issue among the trial court and counsel, the court indicated that it would take the matter under submission.
The next day, the trial court directed the jury to return a verdict of $15,000, explaining that there was no conflict in the evidence concerning whether any project profits had been generated, and that the parties had agreed that plaintiff was entitled to the $15,000 Project Acquisition Bonus for The Quorum under the March 2004 Amendment. Based on the trial courts direction, the jury returned the following verdict: "We the jury in the above-entitled action, find the following verdict in favor of [plaintiff], and against [Trimark] and assess damages in the sum of $15,000." The trial court entered judgment on the verdict that same day.
Plaintiff thereafter filed a cost bill, but did not include any cost item for attorney fees. Trimark moved to tax plaintiffs costs on the grounds that (i) plaintiff failed to obtain a judgment more favorable than Trimarks section 998 offer, thereby precluding plaintiffs claim for postoffer costs; and (ii) because plaintiff failed to obtain a judgment in excess of the minimum jurisdiction of the trial court, the court should exercise its discretion to deny costs under section 1033, subdivision (a). Plaintiff did not oppose the motion, and the trial court granted it, taxing all of the costs claimed by plaintiff.
In response, plaintiff filed a motion for reconsideration on the grounds that Trimarks section 998 offer was invalid under Labor Code section 206.5 because Trimark had not paid wages concededly due plaintiff, and that plaintiffs cost bill had inadvertently omitted an item for attorney fees based on Labor Code section 218.5. Plaintiff also filed a separate motion for attorney fees under Labor Code section 218.5. The trial court denied both of plaintiffs motions.
Plaintiff contended that Trimark had conceded that the $15,000 Project Acquisition Bonus was due under the March 2004 Amendment, but had not paid it.
Trimark filed its own memorandum of costs, seeking to recover costs incurred after the section 998 offer, and plaintiff did not move to tax those postoffer costs. In addition, Trimark moved to recover its attorney fees incurred after the section 998 offer under Labor Code section 218.5, contending that it was the prevailing party based on its section 998 offer. The trial court denied Trimarks attorney fees motion on the grounds that the court had discretion to determine that Trimark was not the prevailing party under Labor Code section 218.5.
DISCUSSION
A. Standards of Review
Plaintiffs challenge to the trial courts order directing a verdict in favor of Trimark is governed by a substantial evidence standard of review. "It has become the established law of this state that the power of the court to direct a verdict is absolutely the same as the power of the court to grant a nonsuit. A nonsuit or directed verdict may be granted `only when, disregarding conflicting evidence and giving to plaintiffs evidence all the value to which it is legally entitled, herein indulging in every legitimate inference which may be drawn from that evidence, the result is a determination that there is no evidence of sufficient substantiality to support a verdict in favor of the plaintiff if such a verdict were given. [Citations.] Unless it can be said as a matter of law, that, when so considered, no other reasonable conclusion is legally deducible from the evidence, and that any other holding would be so lacking in evidentiary support that a reviewing court would be impelled to reverse it upon appeal, or the trial court to set it aside as a matter of law, the trial court is not justified in taking the case from the jury. [Citation.]" (Estate of Lances (1932) 216 Cal. 397, 400; Sanchez-Corea v. Bank of America (1985) 38 Cal.3d 892, 906-907.) "[In reviewing an order directing a verdict] we view the evidence in the light most favorable to plaintiffs. Conflicts in the evidence are resolved, and inferences from the evidence are drawn, in their favor. If there is substantial evidence to support plaintiffs claim, and if the state of the law also supports that claim, we must reverse the judgment." (Margolin v. Shemaria (2000) 85 Cal.App.4th 891, 895.)
The parties respective appeals from the trial courts postjudgment orders denying their motions for an award of attorney fees are reviewed under an abuse of discretion standard, unless the issue presented involves a pure question of law. "`On review of an award of attorney fees after trial, the normal standard of review is abuse of discretion. However, de novo review of such a trial court order is warranted where the determination of whether the criteria for an award of attorney fees and costs in this context have been satisfied amounts to statutory construction and a question of law. [Citations.]" (Wakefield v. Bohlin (2006) 145 Cal.App.4th 963, 978.) "[M]atters presenting pure questions of law are subject to our independent or de novo review." (Santa Barbara Pistachio Ranch v. Chowchilla Water Dist. (2001) 88 Cal.App.4th 439, 445, citing Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799.)
B. The Trial Court Properly Directed a Verdict on Plaintiffs Claim for Bonuses Based on Net Profits
1. The Trial Courts Ruling on Trimarks Motion
Trimark moved for a directed verdict on plaintiffs remaining second and third causes of action on three alternative grounds. Although the trial court initially indicated that it was inclined to grant the motion "for the reasons stated in the motion," it focused primarily on the first ground, i.e., there was no conflict in the evidence on the issue of whether any of the four projects had yielded net profits as of the time of trial. Because, as discussed below, the trial court properly granted the motion on that first ground, it is unnecessary to address or determine the issues raised by the other two alternative grounds asserted by Trimark in support of the motion.
2. There Was No Factual Dispute As to the Meaning of Project Profits
The October 2002 and March 2004 Amendments, upon which the second and third causes of action were based, define "Project Profits" the same: "Project Profits are net profits to [Trimark] after payment of preferred return." Plaintiff and Trimarks witnesses expressed a similar understanding of that definition. Plaintiff agreed that the Project Profit Bonus was focused on net profits after the construction and sale of a given project, that project profits arise only "after [Trimark pays its] construction lender [and] equity partners," and that net profits were calculated at the end of the project when all the construction and sales transaction costs could be determined.
Trimarks president, Mr. Stevenson, gave similar testimony on the issue: "`Project Profits are, when we acquire the property, we typically do it with an acquisition loan from a bank and cash from investors. We then spend money . . . to improve the land and build homes. We receive revenues when the homes start closing. Those revenues — the bulk of those revenues go to pay off the construction loan thats outstanding. When the construction loan is . . . retired, then we distribute the revenues to the cash investors. [¶] Cash investors . . . get their cash back and what we call `preferred return, which is the interest rate they want on their cash [investment] before the profits are split, that gets returned. Once the construction loan and the cash investors and [their] preferred return have been paid, we are into project profits, and project profits are then split again. The investors take anywhere from 40 to 60 percent of the profit. The rest of [the profit] comes to . . . [Trimark]." Mr. Stevenson further testified that "you cant close [a project] and know your end profit until [all the costs are known]."
Based on the foregoing testimony, the trial court properly determined that there was no conflict in the evidence concerning the meaning of Project Profits. "I dont think there is any conflict in the evidence as to what really is meant by the term `project profits. . . . [¶] [They] are net profits to [Trimark] after payment of preferred return."
3. There Was No Conflict in the Evidence As to the Lack of Project Profits on the Subject Projects at the Time of Trial
There also was no conflict in the evidence concerning whether there were Project Profits on any of the four projects in issue at the time of trial. Plaintiff admitted that there were no Project Profits available at the time he resigned, during 2004, or at the time of trial in September 2005. And, although he made it clear that he believed he was entitled to Project Profits as of the time he resigned and at the time of trial, he admitted that his bonus based on Project Profits was not yet "payable." Specifically, when asked on cross-examination whether his Project Profit Bonus was currently payable, plaintiff responded "I would not think so, not at this point in time, but perhaps soon."
In addition, Mr. Stevenson testified that at the time of trial, there were no Project Profits on Sherwood Ridge, Casa La Costa, Woods Valley, or The Quorum. And, plaintiff admitted that he had no substantial dispute with Mr. Stevensons projections as to when Sherwood Ridge, Woods Valley, or Casa La Costa would be completed.
As noted, Mr. Stevenson testified that development of The Quorum project had not commenced as of the time of trial.
Even when viewed in the light most favorable to plaintiff, the foregoing testimony establishes that there were no Project Profits at the time of trial upon which to calculate the alleged Project Profit Bonuses, and therefore there were no present damages upon which the jury could have rendered a verdict in plaintiffs favor. As the trial court correctly observed, plaintiffs claim for such bonuses was filed "prematurely," and he had not pled or pursued declaratory relief. Under these circumstances, there was substantial evidence in the record to support the trial courts order granting a directed verdict on plaintiffs claim for Project Profit bonuses on the grounds that there were no such profits at time of trial from which the alleged bonuses could be calculated.
Although plaintiff moved the trial court for leave to add a declaratory relief claim at the close of evidence, the trial court implicitly denied that motion by granting Trimarks motion for directed verdict; and plaintiff has not challenged on appeal that denial of leave to amend.
C. Plaintiff Forfeited His Claim for the $6,760 Profit Participation Bonus by Failing to Raise It in the Trial Court
Plaintiff contends that the trial court erred by failing to include in the verdict a $6,760 "Profit Participation Bonus" that he claims was "awarded" to him by Trimark at the end of 2003, but "carried over" for distribution to the end of 2004. But the record does not reflect that plaintiff ever made a claim in the trial court for damages based on that bonus. Absent a clear indication in the record that plaintiff made a specific claim in the trial court for a $6,760 Profit Participation Bonus, we must conclude that plaintiff has forfeited this claim on appeal. (See Casey v. Overhead Door Corp. (1999) 74 Cal.App.4th 112, 124 [plaintiff cannot assert a new measure of damages on appeal that was not raised in the trial court]; Kantlehner v. Bisceglia (1951) 102 Cal.App.2d 1, 6.)
This conclusion is reinforced by the parties respective arguments on the merits concerning plaintiffs eligibility for this bonus. Trimark contends that the operative plan document required that plaintiff be a full-time employee on the date the "carried over" portion of the Profit Participation Bonus was to be paid, i.e., in December 2004, and that plaintiff resigned in April 2004. Plaintiff counters that the language of the plan document excludes from its coverage employees like plaintiff who had an "individualized" bonus plan. That neither of these arguments was made to the trial court demonstrates that the issue was never adequately framed and presented to that court. Having failed to raise the issue with the trial court in a manner that would have allowed that court to resolve the issue at trial, plaintiff cannot now raise it on appeal.
D. The Trial Court Did Not Err in Denying Plaintiffs Motion for Attorney Fees
Trimark contends that plaintiff "waived" his right to challenge the validity of Trimarks section 998 offer by not opposing Trimarks motion to tax costs or appealing the trial courts order granting that motion, and by failing to challenge Trimarks memorandum of costs. But plaintiff timely raised the issue of the validity of Trimarks section 998 offer in both his motion to reconsider the trial courts ruling taxing his costs and in his own motion for attorney fees, and he timely appealed from the trial courts postjudgment order denying his motion for attorney fees.
1. Trimarks Section 998 Offer Did Not Violate Labor Code Section 206.5
Plaintiff argues that he was the prevailing party under Labor Code section 218.5, notwithstanding Trimarks $20,000 section 998 offer and the $15,000 judgment. According to plaintiff, the section 998 offer was invalid under Labor Code section 206.5 because it required a release of all wage claims, even though Trimark had not paid wages concededly due. (See Reid v. Overland Machined Products (1961) 55 Cal.2d 203, 207 ["`In a dispute over wages the employer may not withhold wages concededly due to coerce settlement of the disputed balance"] (Reid).)
Labor Code section 218.5 provides "In any action brought for the nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, the court shall award reasonable attorneys fees and costs to the prevailing party if any party to the action requests attorneys fees and costs upon the initiation of the action."
Labor Code section 206.5 provides: "No employer shall require the execution of any release of any claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of such wages has been made. Any release required or executed in violation of the provisions of this section shall be null and void as between the employer and the employee and the violation of the provisions of this section shall be a misdemeanor."
Plaintiffs argument is premised on the assumption that Trimark admitted the $15,000 Project Acquisition Bonus was due, yet failed to pay it. The record, however, does not support that assumption. The only factual basis for plaintiffs argument is the declaration testimony of Trimarks attorney that the claim for the $15,000 Project Acquisition Bonus was plaintiffs "only viable claim." But read in context, that statement falls far short of an unequivocal admission that plaintiffs entitlement to the $15,000 bonus was undisputed, or that such amount was concededly due and payable. Instead, that statement by Trimarks attorney merely constituted his opinion about the relative merits of plaintiffs various bonus claims that he provided to plaintiff as justification for a settlement offer from Trimark. In light of the policies favoring settlement negotiations, as embodied in Evidence Code section 1152, such statements during settlement discussions cannot be transformed into binding admissions, regardless of whether they were repeated in support of Trimarks motion for attorney fees.
In response to questioning during oral argument, plaintiffs counsel asserted that the directed verdict in plaintiffs favor in the amount of $15,000 established that the Project Acquisition Bonus for the closing of the escrow on The Quorum project was concededly due under the March 2004 Amendment. Trimark countered that the $15,000 verdict and judgment based thereon were the result of a compromise and settlement of a disputed claim. The record on this issue is not clear. There is no oral or written settlement agreement in the record. And, although the trial court made certain remarks after the motion for directed verdict was granted that suggested that the $15,000 verdict in plaintiffs favor was the result of a settlement, there are no express findings to that effect in the record. The issue, however, is largely irrelevant because, even assuming there was no agreement and the trial court found that plaintiff was entitled to the $15,000 Project Acquisition Bonus under the March 2004 Amendment, the proper focus is on whether that bonus was concededly due or disputed at the time Trimark made its section 998 offer.
At the time of the section 998 offer and thereafter, it was not clear that plaintiff was seeking to recover the $ 15,000 Project Acquisition Bonus in the March 2004 Amendment, even though the broad allegations of the complaint could be construed to include such a claim. At times, plaintiff appeared to take the position that the October 2002 Amendment was the operative agreement for purposes of his damage claims. Thus, it was not clear at the time of the section 998 offer that plaintiff claimed or defendant owed a $15,000 Project Acquisition Bonus.
Absent an unequivocal admission on the lack of a bona fide dispute that the $15,000 Project Acquisition Bonus was due and payable, Labor Code section 206.5 does not apply. That section prohibits offers that require a release of claims based on wages that are concededly due, but unpaid. It does not apply to offers to compromise disputed wage claims. (See Sullivan v. Del Conte Masonry Co., Inc. (1965) 238 Cal.App.2d 630, 633-634, citing Reid, supra, 55 Cal.2d 203, 208.) During oral argument, plaintiff asserted that Reid, supra, 55 Cal.2d 203 was decided under Labor Code section 206, not section 206.5, suggesting that the distinction made in Reid between wages concededly due and wage claims that are legitimately disputed by the employer has no bearing on the interpretation of section 206.5. In Sullivan v. Del Conte Masonry Co., supra, 238 Cal.App.2d 630, however, the court interpreted Labor Code section 206.5, and, in doing so, expressly relied on the distinction made in Reid between disputed and undisputed wage claims. (Id. at pp. 633-634.) As Trimark observed during oral argument, absent the Reid distinction, Labor Code section 206.5 would prevent employers from ever requesting a release in wage claim disputes.
Trimark did not concede that the $15,000 Project Acquisition Bonus was due and payable upon plaintiffs resignation. The amount was not subject to a clear claim, and Trimark denied the claims made. Plaintiff had asserted that the March 2004 Amendment did not go into effect, and could not be backdated, and he resigned immediately after he signed it. There was a clear dispute as to what agreement was in effect. The amount therefore can be viewed as subject to a bona fide dispute. As a result, Trimarks section 998 offer did not run afoul of Labor Code section 206.5. Even if Labor Code section 206.5 applies whenever wages are "due," there was no judicial finding that the $15,000 amount was in fact due. And, as noted, it is not at all clear that plaintiff claimed that amount prior to the hearing on Trimarks motion for directed verdict. If he did, it was only as an alternative to his primary claims for Project Profit Bonuses under the October 2002 Amendment. In that posture, we cannot say the $15,000 Project Acquisition Bonus was "due" as referred to in Labor Code section 206.5.
The purpose of Labor Code section 206.5 was to prevent employers from withholding wages due until the employee executes a release. Here, plaintiff took a position inconsistent with the $15,000 amount being due. Under those circumstances, Trimark should not have been expected to pay any amount in dispute.
2. Plaintiff Cannot Increase His $15,000 Recovery by the $6,760 Profit Participation Bonus
Plaintiff also argues that because the $15,000 verdict should have included the $6,760 Profit Participation Bonus, he should have recovered a total amount in excess of Trimarks $20,000 section 998 offer. As discussed above, however, plaintiff forfeited his claim for the $6,760 Profit Participation Bonus. Thus, he cannot rely on it to increase the amount of his recovery for purposes of determining whether he obtained a more favorable judgment under section 998.
3. Plaintiff Cannot Increase the Amount of His Recovery by the Amount of His Preoffer Attorney Fees
Plaintiffs final contention concerning Trimarks section 998 offer is that his preoffer attorney fees should be added to his $15,000 recovery for purposes of evaluating whether he obtained a more favorable judgment. But as discussed below, plaintiff was not entitled to recover his preoffer attorney fees because the trial court properly determined that he was not the prevailing party under Labor Code section 218.5. (See Wilson v. Safeway Stores, Inc. (1997) 52 Cal.App.4th 267, 271 ["[I]n determining the `more favorable judgment issue under section 998 `we first add to the judgment of damages those recoverable costs and attorneys fees authorized by statute and incurred before the settlement offer"].) Here, because plaintiff was not entitled to attorney fees under Labor Code section 218.5, his preoffer fees cannot be added to his $15,000 judgment for purposes of determining whether it was more favorable than Trimarks $20,000 section 998 offer.
4. The Trial Court Did Not Abuse Its Discretion in Determining That Plaintiff Was Not the Prevailing Party Under Labor Code Section 218.5
Plaintiff also appears to contend that, regardless of the validity of Trimarks section 998 offer or its entitlement to postoffer attorney fees, he is at least entitled to his preoffer attorney fees as the prevailing party under Labor Code section 218.5. The trial court disagreed, finding that "[t]here is also an issue whether [plaintiff is] the prevailing party. It is under the discretion of the court and after [considering] all the circumstances of this case, I would find that [Trimark is] the prevailing party."
In Galan v. Wolfriver Holding Corp. (2000) 80 Cal.App.4th 1124, 1128-1129, the court held that because Labor Code section 218.5 does not define "prevailing party," a trial court has broad discretion to determine "`on a practical level" which party, if any, was the prevailing party for purposes of an award of preoffer attorney fees. In so holding, the Galan court rejected the defendants contention that the definition of "prevailing party" contained in section 1032 should be imported into an attorney fees statute that does not contain a definition of that term. (Id. at p. 1128.)
Section 1032, subdivision (a)(4) defines "prevailing party" as follows: "(a) As used in this section, unless the context clearly requires otherwise: [¶] . . . [¶] `Prevailing party includes the party with the net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant."
In this case, plaintiff sought almost $400,000 at trial, but recovered only $15,000, and even that amount appeared, in effect, to be the result of a settlement of a disputed claim. Therefore, on a "practical level," it was not an abuse of discretion for the trial court to determine that plaintiff was not the prevailing party for purposes of his preoffer attorney fees.
E. The Trial Court Incorrectly Concluded That It Had the Discretion to Find That Trimark Was Not the Prevailing Party for Purposes of Its Claim for Postoffer Attorney Fees
In denying Trimarks motion for its postoffer attorney fees, the trial court indicated that it believed the issue was one of first impression because there was no case law defining the term "prevailing party" under Labor Code section 218.5. Relying on Galan v. Wolfriver Holding Corp., supra, 80 Cal.App.4th 1124, the trial court determined that it had discretion under Labor Code section 218.5 to determine whether Trimark was the prevailing party, and it found that Trimark was not the prevailing party.
On appeal, Trimark argues, as it did in the trial court, that the issue of its entitlement to postoffer attorney fees is controlled by the California Supreme Court decision in Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103 (Scott). According to Trimark, the Scott decision mandates that Trimark be considered the prevailing party by virtue of its section 998 offer for purposes of determining its entitlement to postoffer attorney fees under Labor Code section 218.5. We agree.
In Scott, supra, 20 Cal.4th 1103, the defendant made a section 998 offer prior to trial to settle for $900,000, but the plaintiff rejected the offer. (Id. at p. 1107.) At trial, plaintiff was awarded $442,054 in damages. (Ibid.) Both parties made motions for an award of attorney fees under the attorney fees provision in their contract. (Ibid.) The defendant sought under section 998 its attorney fees incurred after its offer on the grounds that the plaintiffs recovery was less than the defendants pretrial offer. (Ibid. )
On the plaintiffs motion, the trial court ruled that under section 998, the plaintiff was only entitled to its preoffer attorney fees. (Scott, supra, 20 Cal.4th at p. 1107.) On the defendants motion, the trial court ruled that the defendant was entitled to its postoffer attorney fees, as well as other costs and expert witness fees, in an amount that exceeded the total damages, attorney fees, and other costs awarded to plaintiff. (Id. at pp. 1107-1108.)
On appeal, the Court of Appeal affirmed the award to the plaintiff of preoffer attorney fees, but reversed the award to the defendant of postoffer fees. (Scott, supra, 20 Cal.4th at p. 1108.) The Supreme Court granted review, and reversed the Court of Appeals decision denying the defendant its postoffer attorney fees. (Id. at p. 1116.)
In reaching its conclusion that the defendant was entitled to its postoffer attorney fees as recoverable costs under section 998, the Supreme Court reasoned as follows: "[T]he Court of Appeals result ignores the basic structure and purpose of section 998. It is the very essence of section 998 that, to encourage both the making and acceptance of reasonable settlement offers, a losing defendant whose settlement offer exceeds the judgment is treated for purposes of postoffer costs as if it were the prevailing party. To require a defendant to show that it is a prevailing party in order for it to be entitled under section 998 to any category of costs, as the Court of Appeal did, is to misunderstand section 998. When the defendant seeks costs on the basis of the first sentence of subdivision (c) of section 998, the defendant by definition is not the prevailing party and is not entitled to any category of costs on that basis. Under section 998, the defendants entitlement to costs derives not from its status as prevailing party but from the plaintiffs failure to accept a reasonable settlement offer." (Scott, supra, 20 Cal.4th at p. 1114.) The court in Scott went on to explain that section 998 was intended to encourage settlement by providing a strong financial disincentive to a party to reject reasonable settlement offers. (Id. at p. 1116.) "It would greatly weaken the `strong financial disincentive of section 998 to deny a defendant in these circumstances its postoffer attorney fees." (Ibid.)
The first sentence of section 998, subdivision (c)(1), reads: "If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendants costs from the time of the offer."
As the Court of Appeal in Scott, supra, 20 Cal.4th 1103, the trial court here required Trimark to demonstrate that it was the prevailing party under Labor Code section 218.5, notwithstanding that Trimarks section 998 offer exceeded plaintiffs recovery. In doing so, the trial court ignored the mandate of section 998 that required the court to treat Trimark as the prevailing party for purposes of its entitlement to postoffer costs, including statutorily authorized attorney fees under Labor Code section 218.5. As Scott makes clear, Trimark was entitled to postoffer costs, not because it prevailed at trial, but because its section 998 offer exceeded plaintiffs recovery.
Plaintiff does not dispute the basic premise of Scott, supra, 20 Cal.4th 1103, concerning the right of a nonprevailing defendant to recover its postoffer costs if the amount of its section 998 offer exceeds the plaintiffs recovery. Instead, he argues that Trimarks section 998 offer was invalid, as a matter of law, under Labor Code section 206.5 and that, as a matter of fact, Trimarks offer did not exceed plaintiffs recovery. As discussed above, we do not agree with either of these contentions. Labor Code section 206.5 has no application to Trimarks section 998 offer because Trimark never conceded that the $15,000 Project Acquisition Bonus was due, but unpaid, under the Labor Code; and plaintiff is not entitled to increase the amount of his $15,000 recovery by either the $6,760 Profit Participation Bonus claimed or by his preoffer attorney fees.
Accordingly, we reverse the trial courts postjudgment order denying Trimarks motion for an award of postoffer attorney fees under section 998, and direct the trial court to enter a new order granting the motion and setting the amount of reasonable postoffer attorney fees. In determining the amount of reasonable attorney fees, the trial court is afforded wide discretion. (Padilla v. McClellan (2001) 93 Cal.App.4th 1100, 1107.)
DISPOSITION
The judgment of the trial court is affirmed, as is its postjudgment order denying plaintiffs motion for an award of attorney fees. The postjudgment order denying Trimarks motion for an award of attorney fees is reversed and remanded to the trial court with directions to enter a new order granting Trimarks motion and setting the reasonable amount of attorney fees. Trimark shall recover its costs on appeal, including reasonable attorney fees, as determined by the trial court. (Evans v. Unkow (1995) 38 Cal.App.4th 1490, 1499-1500 ["A statute authorizing an attorney fee award at the trial court level includes appellate attorney fees unless the statute specifically provides otherwise"].)
We concur:
ARMSTRONG, Acting P. J.
KRIEGLER, J.