Duke Gerstel v. DeMarco CA4/1 ( 2013 )

Filed 6/26/13 Duke Gerstel et al. v. DeMarco CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
DUKE GERSTEL SHEARER, LLP, D059999
Plaintiff and Appellant,
v. (Super. Ct. No. 37-2009-00102612-
CU-BC-CTL)
LAURA DEMARCO,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of San Diego County,
Richard E.L. Strauss, Judge. Affirmed.
Duke Gerstel Shearer, Alan R. Johnston, Andrew F. Lloyd and Katherine L.
Dwyer for Plaintiff and Appellant.
Procopio, Cory, Hargreaves & Savitch and Kendra J. Hall for Defendant and
Respondent.
Duke Gerstel Shearer, LLP (Duke) brought suit against Laura DeMarco for breach
of an oral agreement. Duke alleged DeMarco agreed to pay for legal representation of a
third party. DeMarco maintained she agreed to pay up to $10,000 for Duke's services,
but nevertheless, Duke billed her over $118,000. The matter proceeded to a bench trial,
and the trial court found in favor of DeMarco.
Duke appeals, contending the court erred in finding no contract existed and failing
to award it the reasonable value of its services. It also asserts that neither the statute of
frauds nor the statute of limitations bars its claim. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Facts
The Property
The Del Mar School District (the school district) owned 5.3 acres of coastal real
property (the property). The Kerckhoff Company conveyed the property to the school
district in 1946. The property is subject to a 1946 deed restriction, which provides that
the school district must use the property for school purposes, and upon any breach of the
restriction, fee ownership of the property will revert to the Kerckhoff Company.
In August 2005, the school district filed a quiet title action and in February 2006
obtained a default judgment removing the deed restriction. At a school district meeting
in May 2006, the school district announced that the deed restriction had been removed.
Around this time, the school district was claiming it had a $32 million offer from a
private entity to purchase a portion of the property.
The City of Del Mar (the City) also expressed interest in purchasing the property.
During early 2006, the City was negotiating to purchase at least a portion of the property,
2
but the negotiations reached an impasse in May 2006. On May 5, 2006, the City filed a
lawsuit against the school district to stop any private sale of the property.
The Parties and Duke's Services
DeMarco is the former chairwoman of a nonprofit volunteer fundraising
committee known as the "Campaign to Save Del Mar Shores" and the cofounder and
vice-president of an organization known as the Friends of Del Mar Parks. After learning
of the school district's quiet title action, DeMarco researched the 1946 deed restriction
and brought it to the attention of the school district at a meeting in May 2006. DeMarco
also began discussing the issue with Andrew Lloyd, an attorney with Duke, and also a
resident of Del Mar who was aware of the City's desire to purchase the property for
public use. DeMarco considered Lloyd to be a friend. She had gone to college with
Lloyd's wife and their sons were friends. Like DeMarco, Lloyd wanted to preserve the
school and fields located on the property.
Lloyd met multiple times with DeMarco and Del Mar City Council member Carl
Hilliard in June 2006. At the first meeting, Lloyd's wife, DeMarco's husband, and
Hilliard's wife were also present. During one of the meetings, Lloyd described his plan to
have the default judgment vacated. He suggested that he represent Elise Kerckhoff
(Elise) for this endeavor because she was a descendant of the Kerckhoff family that
deeded the property to the school district. Hilliard did not believe Elise had standing to
bring a motion to vacate the default judgment.
DeMarco testified that Lloyd offered to represent Elise for $10,000 to "basically
get the deed restriction that had been removed by the judge put back on" the property.
3
DeMarco, her husband, and Hilliard all testified that the $10,000 agreement included all
activities necessary to challenge the quiet title action (e.g., serve the complaint and
reinstitute the deed restrictions), not just activities associated with a motion to set aside
the default and default judgment. In contrast, Lloyd testified that his $10,000 estimate
only covered a motion to set aside the default judgment.
DeMarco later informed Lloyd that he was selected to represent Elise. DeMarco
believed that Lloyd had a passion for the cause as he had performed pro bono services1
with regard to the default judgment prior to being retained. Indeed, Lloyd agreed with
DeMarco's cause "100 percent." DeMarco also was aware that Lloyd had already looked
into the matter before he was retained, and therefore she agreed to pay $10,000, believing
that given Lloyd's knowledge of the issues, Duke's representation of Elise would be cost
effective.
DeMarco approached Elise about serving as Lloyd's client, but Elise's brother was
concerned about the school district suing Elise based on her involvement with the quiet
title action. Thus, DeMarco ultimately agreed to indemnify Elise. Lloyd prepared a fee
agreement for Elise's signature and an indemnity agreement for execution by DeMarco.
DeMarco was not a party to and was not provided a copy of the fee agreement. DeMarco
executed the indemnity agreement without being provided a copy for advance review or
being advised to obtain independent legal counsel.
1 Lloyd conducted the research regarding the default judgment and issues regarding
the property without charge.
4
Duke's fee agreement with Elise described Duke's scope of services to include:
"pursuit of your claims and interests relating to the restriction on the deed of the property
commonly known as the 'Del Mar Shores School' limiting its use 'for school purposes
only.' " It also held Elise responsible for paying Duke's fees and costs: "It is understood
and agreed that you shall pay for legal services rendered in connection with the above
representation at the hourly rates then in effect for attorneys and any paralegals assigned
to your case." Additionally, the fee agreement provided that monthly invoices would be
sent to Elise and would include a description of services rendered and any costs incurred.
The fifth paragraph of the fee agreement stated: "As you are aware, Laura DeMarco
('Non-Client') has agreed to pay your legal fees in connection with our representation of
you in this matter."
The indemnity agreement provided, in pertinent part, that in consideration of Elise
challenging the Del Mar Shores deed restriction "without fear of negative economic
impact due to actions taken by the Del Mar Union School District, or anyone claiming
under said District, Laura DeMarco agrees to indemnify and hold Elise Kerckhoff
harmless from and against, and will pay on demand, any and all claims, losses, judgment,
liabilities, damages, costs and expenses suffered or incurred by Elise Kerckhoff . . .
arising out of, resulting from, or relating to" her motion to vacate the District's default
and default judgment eliminating the Del Mar Shores deed restriction. The purpose of
the indemnity agreement was to protect Elise in the event the school district decided to
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pursue a claim against her for damages caused to the value of the property as a result of
enforcing the deed restriction.2
Ultimately, DeMarco, who had never retained the services of a lawyer before,
orally agreed with Lloyd to be responsible for guaranteeing Elise's payment of legal fees
to Duke up to a maximum of $10,000 and to indemnify Elise from any adverse economic
consequences asserted by the school district against Elise arising out of Elise's
involvement in the action. However, DeMarco and Duke did not enter into a written
contract addressing the payment of Elise's legal fees.
On July 19, 2006, Duke moved to set aside the default judgment on behalf of
Elise. The court granted the motion. Subsequently, City residents elected new school
board members, the majority of which favored selling the property to the City for public
use, and negotiations between the school board and the City resumed. Accordingly,
DeMarco believed that Duke was no longer aggressively challenging the school district's
quiet title action because the ultimate purpose of her agreement to pay $10,000 of Elise's
fees had been achieved by the election of a new school district board that had publicly
stated its intention to sell the property to the City. Instead, and unbeknownst to
DeMarco, Duke continued to bill significant fees in preparation for trial on the merits of
the quiet title action.
On February 21, 2007, Lloyd requested a meeting with DeMarco to discuss the
status of the school district's quiet title action. DeMarco testified that at the meeting, also
2 Lloyd testified that he drafted the indemnity agreement with the intent to "make
sure that there was going to be no costs, under any circumstances, to Elise Kerckhoff."
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attended by Hilliard, Lloyd presented an invoice (without time/action details) to DeMarco
in the amount of $10,294.28. DeMarco testified she had received no monthly billings up
until that time. DeMarco further testified she believed that the invoice was a final bill for
Elise's fees and that it included all legal fees incurred by Duke through February 2007.
The invoice, however, represented Duke's services only through September 2006,
excluding billings for work performed over a period of seven months. DeMarco
immediately paid Duke the agreed upon $10,000 for Elise's fees believing Duke was then
paid in full. The parties' versions of the discussions following DeMarco's payment differ
significantly.
In updating DeMarco and Hilliard regarding the status of the school district's quiet
title action, Lloyd indicated that Duke and the school district's attorneys were
contemplating new motions, and that costs of asserting Elise's interest in the 1946 deed
restriction could exceed the original $10,000 by "a bit more." DeMarco testified that she
understood that the case was not completely over and that there would be a "service
issue" that "would be a bit more," meaning a few thousand dollars.
DeMarco testified: "You know, when I hired [Lloyd], I thought I was the client. I
thought he had a duty to me. [¶] . . . But in this particular case, [Lloyd] had no duty to
me. He had no duty to send me invoices. According to this and according to his
testimony, he had no duty to even send [Elise] invoices. To him this was a blank check,
and that was not my intent." Specifically, DeMarco testified that she was never told
services would cost "tens of thousands of dollars" or that she would also be paying for the
services of another firm.
7
DeMarco also testified:
"Q: . . . As you sit here today, do you categorically say that Mr.
Lloyd never told you that [on a going-forward basis, Duke's fees
would be tens and tens of thousands of dollars] at the February 21st,
2007 meeting?
"A: Yes, he never said that. And I'm glad that [Hilliard] didn't hear
it, because I was wondering if I was in the twilight zone. Obviously
there was a major miscommunication."
Hilliard, who was also present at the meeting where DeMarco paid Duke $10,000,
testified consistently with DeMarco:
"Q: Do you ever recall attending a meeting with Ms. DeMarco and
Mr. Lloyd where Mr. Lloyd gave an indication that the going-
forward litigation fees would be tens and tens of thousands of
dollars?
"A: I would have recalled that particular comment. The answer is
no.
"Q: Why would you have recalled that particular comment?
"A: For two reasons. One, in earlier conversations, Mr. Lloyd had
indicated that the cap on his services would be $10,000. Two, tens
and tens of thousands of dollars under the existing circumstances
would just not be appropriate."
In contrast, Lloyd testified that as he and DeMarco were walking out of the
meeting, he made "kind of a final comment" that the additional costs for his services
would be "tens and tens of thousands of dollars." According to Lloyd, DeMarco
supposedly responded: "Well, just try to keep the fees down."3
3 Lloyd also claimed to have had a subsequent telephone conversation with
DeMarco wherein she authorized him to retain another firm and told him that she would
"pay him whatever it takes."
8
Lloyd admitted that even though DeMarco was "very cost conscious" he did not
tell her that when she paid the invoice for $10,294.28, Duke's actual total fees through
that February 21, 2007 meeting were actually much greater than the amount stated on the
invoice. Following the meeting where DeMarco paid Duke, Duke also did not provide
DeMarco with any update regarding fees estimated or incurred in continuing to represent
Elise in the quiet title action. And even after the trial court granted a summary judgment
motion in favor of the school district on the grounds that Elise lacked standing to
challenge the quiet title action, Duke's billing did not cease. DeMarco, however, believed
that Duke's representation of Elise ended at that point because Elise was adjudged to have
no standing.
Approximately one month after the court granted summary judgment in favor of
the school district, DeMarco was provided a second invoice dated June 4, 2007, from
Duke in the amount of $32,582.21. The invoice included $9,132.50 in costs passed
through to Elise in the form of third party legal services provided by another law firm
(Duckor Spradling Metzger & Wynne) through March 31, 2007, but did not include fees
already incurred during April and May 2007. DeMarco was unaware that the invoice was
understated by approximately $50,000, and that total fees incurred by Duke through the
date of the invoice were approximately $95,000 including the previously paid $10,000.
Because she believed the June 4, 2007 invoice in the amount of $32,582.21 was
excessive and contrary to her oral agreement with Lloyd to guarantee fees in an amount
equal to "a bit more" than the original $10,000, DeMarco did not pay it.
9
Following delivery of the June 4, 2007 invoice, Duke continued to represent Elise
even though the record is unclear what knowledge, if any, DeMarco had regarding the
services Duke was providing. Lloyd, nonetheless, testified that "it was assumed" that he
was going to be paid at the end of the case, even though he had no specific discussion
with DeMarco about the work he was doing for payment.
On or about December 15, 2008, Duke delivered a third invoice to DeMarco in the
amount of $108,205.81 (representing total legal fees of $118,205.81 including the
previously paid $10,000) covering the approximately one-year period from April 2007
through March 2008.4 DeMarco received this bill approximately 18 months after the last
invoice provided to DeMarco and showed a total of over $100,000 in new billings.
DeMarco testified that she had not talked to Lloyd about Duke's representation of Elise
for at least a year prior to receiving the invoice. DeMarco did not pay the final invoice
because the bill was "way beyond the scope of our agreement. It was outrageous . . . .
I had given what I thought were very clear instructions and clear goals. One, I did not
want to spend a lot of money. This was way beyond anything I ever imagined."
The Complaint and Trial
After DeMarco refused to pay any of the invoices beyond her payment of $10,000,
Duke filed suit against DeMarco and Elise alleging a breach of contract. After DeMarco
4 The invoice included a lump sum amount of $28,368.61 passed through to
DeMarco in the form of third party legal services provided by Duckor Spradling Metzger
& Wynne through August 31, 2007, not including a credit for a 15 percent discount
Duckor Spradling had given Duke.
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successfully demurred to the complaint based on a lack of a written contract between
Duke and her, Duke filed a first amended complaint, alleging a breach of an oral contract.
The case proceeded to a bench trial against DeMarco only (Duke did not serve
Elise). After a four-day trial, the court found in favor of DeMarco. The court
characterized the case as a "he said/she said kind of situation." It further stated that Duke
did not carry its burden of proof.
The court noted that DeMarco wanted to limit her exposure "early on to $10,000,
and then possibly a bit more[,]" but did not find it credible that she would agree, "out of
the blue," that Duke could bill her for significantly more than $10,000 without any
direction from her. The court ruled that there was not an agreement: "Mr. Lloyd thought
certain things were agreed to, and Ms. DeMarco thought different things were going on,
and you can't have a contract without a meeting of minds." The court characterized the
parties as "ships passing in the night."
The court also found that Duke's claim was barred by the statute of limitations and
the statute of frauds.
DISCUSSION
Duke contends the court erred in finding that no oral contract existed. Instead, it
asserts the agreement between Duke and DeMarco to pay Duke for further legal services
was not a disputed issue. As such, it argues the court erred in finding there was no
"meeting of the minds" because the existence of the contract was conceded. It also
maintains that neither the statute of limitations nor the statute of frauds bar its claim.
Because we agree with the trial court that Duke failed to prove the existence of an
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agreement for DeMarco to pay for Duke's additional legal services on behalf of Elise, we
do not reach Duke's statute of limitations and statute of fraud arguments.
Here, Duke's contention hinges on the premise that DeMarco conceded she had
entered into a contract to pay for the legal services Duke provided Elise. Contract
formation requires mutual consent, which cannot exist unless the parties "agree upon the
same thing in the same sense." (Civ. Code, §§ 1580, 1550, 1565.) "If there is no
evidence establishing a manifestation of assent to the 'same thing' by both parties, then
there is no mutual consent to contract and no contract formation." (Weddington
Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 811.) "Mutual assent is determined
under an objective standard applied to the outward manifestations or expressions of the
parties, i.e., the reasonable meaning of their words and acts, and not their unexpressed
intentions or understandings." (Alexander v. Codemasters Group Limited (2002) 104
Cal.App.4th 129, 141; see also Meyer v. Benko (1976) 55 Cal.App.3d 937, 942-943
[existence of mutual consent "is determined by objective rather than subjective criteria,
the test being what the outward manifestations of consent would lead a reasonable person
to believe"].)
Here, DeMarco offered evidence at trial that she believed she agreed to pay up to
$10,000 for Duke to represent Elise to restore the deed restriction and prevent the school
district from selling the property to a private entity. She does not dispute that she
subsequently agreed to pay "a bit more" than the $10,000 promised. Duke interprets
DeMarco's consent to pay "a bit more" as evidence that the parties agreed to a contract,
but did not agree regarding the amount to be paid. Thus, Duke argues the parties did not
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dispute that they entered into a contract, and the court, as the trier of fact, merely had to
determine the reasonable amount DeMarco should have paid Duke for its legal services.
We are not persuaded.
We agree that the parties entered into an oral agreement whereby DeMarco agreed
to pay up to $10,000 for Duke to represent Elise in regard to the school district's quiet
title action. Duke complied with this contract by obtaining relief from the default
judgment. DeMarco also fulfilled the terms of the contract by paying Duke $10,000 after
she received Duke's first invoice. The disagreement between the parties arises out of
DeMarco's comment that she agreed to pay "a bit more" than the previously agreed
$10,000. She testified that she believed this additional amount would be a few thousand
dollars. DeMarco testified she believed this additional amount would pay Lloyd to deal
with the standing issue, which did not appear to be in Elise's favor.
Duke presented a much different version of what DeMarco agreed to after she paid
the $10,000. Lloyd testified that he told DeMarco that the fees for Duke's continuing
services would be "tens of thousands of dollars" and DeMarco agreed to pay Duke
"whatever it takes."
Duke minimizes the parties' disagreement, and instead argues that in the context of
an attorney fee dispute, "the rule has long been that '[i]n the absence of an agreement
upon the subject, defendant must be deemed to have promised to pay the reasonable
value of the services performed in his behalf and with his consent and knowledge.'
(Batcheller v. Whittier (1909) 12 Cal.App. 262, 266-267 [Batcheller].)" Duke's argument
misses the mark. Here, we are not faced with a situation where the parties did not discuss
13
or come to an agreement on the amount of fees to be paid. DeMarco believed that she
had agreed to pay $10,000 and then "a bit more" for Duke's representation of Elise.
Duke, on the other hand, believed DeMarco would pay for tens of thousands of dollars
worth of fees. Thus, the rule Duke cites from Batcheller is not applicable here where the
parties believe they had reached an agreement, but disagree as to the agreement reached.
Put differently, the issue here is not that the parties agreed to a contract but not to the
amount DeMarco would pay. Based on the parties' respective testimony, they appeared
to have agreed to two different contracts.
For example, the parties did not agree on the scope of the services Duke would
provide. DeMarco testified that she believed Duke's representation of Elise ended after
the court ruled Elise lacked standing to challenge the school district's quiet title action.
Duke, however, continued to litigate the matter on behalf of Elise, billing additional fees.
Also , Duke did not regularly provide DeMarco with invoices for the fees incurred
although Lloyd had promised to do so. DeMarco presented evidence that Duke did not
consistently keep DeMarco abreast of (1) what was occurring in the quiet title litigation,
(2) the amount of fees it was billing to represent Elise,5 and (3) the fact Duke had hired
another law firm to assist in its representation of Elise. In addition, although DeMarco
was not Duke's client, Duke believed that DeMarco would be paying for the fees and
5 We are troubled by the fact that Duke presented DeMarco with an invoice for
$10,294.28 when it had already billed fees over $30,000 and failed to tell DeMarco of
this fact at the time it provided the first invoice.
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costs it billed Elise, but Duke did not show that it sought DeMarco's permission for
billing additional fees in its representation of Elise.
Finally, it is apparent the parties did not agree on what was to constitute "a bit
more." DeMarco testified that she was willing to pay a few thousand dollars more. She
clearly did not believe the additional amount would be more than 10 times her original
$10,000 cap. Nevertheless, at the end of the litigation, Duke presented her with an
invoice that amounted to more than $108,000. No reasonable trier of fact could find that
amount "a bit more" of $10,000. Under these circumstances, we agree with the trial court
that the contract that Duke believes existed (i.e., DeMarco essentially provided a "blank
check" to cover Elise's legal fees) was contested. Duke sued Demarco for breach of an
oral contract that is much different than what DeMarco believed she agreed to.
"Where the existence of a contract is at issue and the evidence is conflicting or
admits of more than one inference, it is for the trier of fact to determine whether the
contract actually existed." (Bustamante v. Intuit, Inc. (2006) 141 Cal.App.4th 199, 208.)
Thus, we review the record to determine whether substantial evidence, even if
contradicted, supports the court's finding there was not a contract.6 (Foreman & Clark
Corp. v. Fallon (1971) 3 Cal.3d 875, 881.)
6 Duke disagrees with this standard of review and cites Sonic Manufacturing
Technologies Inc. v. AAE Systems, Inc. (2011) 196 Cal.App.4th 456 at page 466, arguing
that the proper standard regarding the existence of an agreement is "whether the evidence
compels a finding in favor of the appellant as a matter of law." We are unaware of this
standard ever being applied to the issues presented here. Further, Duke's reliance on
Sonic Manufacturing is misplaced. That case did not involve proving the existence of a
contract and does not support the standard of review Duke urges here.
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Here, substantial evidence clearly supports the court's finding that the parties did
not enter into a contract. The parties did not agree on what constituted "a bit more," the
scope of services, or the use of an additional law firm. While Duke presented evidence to
support its version of the agreement, the court did not find the evidence credible.7
Because we find substantial evidence supports the trial court's finding that there
was no contract, we do not reach Duke's contentions regarding the statute of limitations
or the statute of frauds.
DISPOSITION
The judgment is affirmed. DeMarco is awarded her costs on appeal.
HUFFMAN, J.
WE CONCUR:
McCONNELL, P. J.
HALLER, J.
7 We also are not persuaded by Duke's argument that the trial court should have
awarded it the reasonable value of its services. Based on the record, we struggle to see
what value Duke provided beyond the initial $10,000. The dispute with the school
district resolved primarily through political means, i.e., a new school board was elected
and decided to sell the property to the City. After successfully setting aside the default,
Duke's efforts were largely ineffective.
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