Kavoukjian v. Imnaishvili CA2/8

Filed 12/10/20 Kavoukjian v. Imnaishvili CA2/8
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
ARMEN KAVOUKJIAN, B300459
Plaintiff and Respondent, (Los Angeles County
Super. Ct. No. BC596896)
v.
GIORGI IMNAISHVILI et al.,
Defendants and Appellants.
APPEAL from a judgment of the Superior Court of Los
Angeles County. Anthony J. Mohr, Judge. Affirmed.
Lyden Law Corporation and Christine C. Lyden for
Plaintiff and Respondent.
Law Office of Richard M. Foster, Richard M. Foster and
Marine Khachoyan for Defendants and Respondents.
_____________________________
Armen Kavoukjian and his company, GreenEden, LLC
(GreenEden), jointly sued Giorgi Imnaishvili, Tigran Hakobyan,
and Bagrat Ogannes (collectively, Defendants). Defendants
prevailed at trial and moved for an award of attorney fees against
both plaintiffs pursuant to a clause in a contract with
GreenEden. Although Kavoukjian was not a party to the
contract, Defendants argued he was bound by it as a third party
beneficiary. The court disagreed and awarded Defendants
attorney fees only against GreenEden. On appeal, Defendants
argue the trial court erred in denying their request for attorney
fees against Kavoukjian. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
In June 2010, GreenEden entered into a joint venture
agreement (JVA) with Agro Organics—a company affiliated with
Defendants—for the purpose of manufacturing and operating
hydroponic greenhouses. Under the terms of the JVA,
GreenEden agreed to make an initial capital investment of
$75,000, with the option to purchase additional greenhouses for
$75,000 each. Agro Organics agreed to manufacture and operate
the greenhouses. The parties would then share the net profits
derived from each greenhouse GreenEden financed. The JVA
expressly permitted GreenEden to assign to Kavoukjian its
options to purchase greenhouses and its interest in the joint
venture.
A few months later, Defendants allegedly offered
Kavoukjian a five percent interest in another business called
Earth Farm and a seat on its board of directors in exchange for a
$100,000 investment. Kavoukjian agreed and caused GreenEden
to transfer $100,000 to Defendants. Defendants issued a stock
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certificate memorializing GreenEden’s acquisition of 50 shares of
stock in Earth Farm.
According to Kavoukjian, despite Defendants’ promises,
they did not include him in board meetings or in the general
management and operation of the business. They also began
using traditional greenhouses rather than hydroponic
greenhouses.
Based on the above allegations, Kavoukjian and GreenEden
filed a complaint against Defendants and several of their
companies. Kavoukjian and GreenEden jointly asserted causes of
action for (1) rescission of securities investment, (2) fraud,
(3) money had and received, and (4) conspiracy. GreenEden
separately asserted a cause of action for breach of the JVA.
Kavoukjian and GreenEden sought compensatory and punitive
damages, but they did not seek attorney fees.
Following a multi-day bench trial, the court entered
judgment in favor of Defendants on each cause of action.
Defendants subsequently moved for an award of attorney fees
against Kavoukjian and GreenEden pursuant to an attorney fees
provision in the JVA. Defendants acknowledged that Kavoukjian
was not a signatory to the JVA, but they argued they could
enforce it against him because he claimed to be a third party
beneficiary. In support, they pointed to several instances during
the litigation when Kavoukjian implicitly or explicitly made such
a claim. Defendants also argued they could enforce the JVA
against Kavoukjian because he had sued them for allegedly
breaching the contract.
The trial court granted Defendants’ motion in part,
awarding them $430,000 in attorney fees against GreenEden.
The court denied the motion with respect to Kavoukjian, finding
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he had not asserted a claim for breach of contract and Defendants
failed to prove he was a third party beneficiary of the JVA.
Defendants timely appealed.
DISCUSSION
Defendants contend the trial court erred in denying their
request for an award of attorney fees against Kavoukjian
pursuant to the attorney fees clause in the JVA. We disagree.1
Civil Code section 1717 provides that, in any action “on a
contract” containing an attorney fees provision, the party
“prevailing on the contract” shall be entitled to reasonable
attorney fees in addition to other costs. (Civ. Code, § 1717,
subd. (a).)2 In Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d
124 (Reynolds), the California Supreme Court held that section
1717 must be “interpreted to further provide a reciprocal remedy
for a nonsignatory defendant, sued on a contract as if he were a
party to it, when a plaintiff would clearly be entitled to attorney’s
fees should he prevail in enforcing the contractual obligation
against the defendant.” (Id. at p. 128.)
Lower courts have since applied Reynolds’s reciprocity
principles to situations where a nonsignatory plaintiff sues a
signatory defendant in an action on a contract and the signatory
defendant prevails. (See Brusso v. Running Springs Country
Club, Inc. (1991) 228 Cal.App.3d 92, 111; Real Property Services
1 The determination of the legal basis for an award of
attorney fees is a question of law, which we review de novo.
(Sessions Payroll Management, Inc. v. Noble Construction Co.
(2000) 84 Cal.App.4th 671, 677; see Whiteside v. Tenet Healthcare
Corp. (2002) 101 Cal.App.4th 693, 707.)
2 All further undesignated statutory references are to the
Civil Code.
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Corp. v. City of Pasadena (1994) 25 Cal.App.4th 375, 382 (Real
Property Services); Cargill, Inc. v. Souza (2011) 201 Cal.App.4th
962, 966, 970.) Under those circumstances, the “signatory
defendant is entitled to attorney fees only if the nonsignatory
plaintiff would have been entitled to its fees if the plaintiff had
prevailed.” (Real Property Services, supra, at p. 382.)
A prevailing defendant may be entitled to contractual
attorney fees if it shows the nonsignatory plaintiff is a third party
beneficiary of the relevant contract. In Real Property Services,
supra, 25 Cal.App.4th 375, for example, the plaintiff
unsuccessfully alleged the defendant breached a lease with a
developer with whom the plaintiff had a sublease. (Id. at p. 383.)
The court held the defendant was entitled to its attorney fees
pursuant to a clause in the lease, despite the fact that the
plaintiff was not a signatory to the lease. The court reasoned
that, because the plaintiff was a third party beneficiary of the
lease, it would have been entitled to contractual attorney fees had
it prevailed on its claim. (Ibid.) Therefore, under the reciprocity
principles of section 1717, the defendant was also entitled to
contractual attorney fees against the plaintiff. (Id. at pp. 383–
384.)
Here, Defendants similarly contend they were entitled to
an award of contractual attorney fees against Kavoukjian
pursuant to the reciprocity principles of section 1717. Although
they acknowledge Kavoukjian was not a signatory to the JVA—
which is the only relevant contract containing an attorney fees
provision—they insist he was a third party beneficiary of it.
Therefore, Defendants argue, Kavoukjian would have been
entitled to contractual attorney fees had he prevailed on his
claims.
5
Although difficult to discern from their briefing,
Defendants seem to advance three distinct arguments as to why
Kavoukjian should be considered a third party beneficiary of the
JVA: (1) Kavoukjian’s claims were premised on a third party
beneficiary theory; (2) Kavoukjian repeatedly represented that he
was a third party beneficiary; and (3) the JVA itself indicates
Kavoukjian was a third party beneficiary. Each contention lacks
merit.3
Defendants first suggest Kavoukjian would have been
entitled to attorney fees if successful at trial because his claims
were premised on the theory that he was a third party
beneficiary of the JVA. Although never stated explicitly, the
implication seems to be that, had Kavoukjian prevailed, he
necessarily would have established the fact that he is a third
party beneficiary of the JVA. This finding, in turn, would have
entitled him to enforce the JVA’s attorney fees provision against
them.
We do not agree that Kavoukjian’s claims were reliant on a
third party beneficiary theory. Kavoukjian asserted “causes of
action” for rescission of securities investment, fraud, money had
3 Defendants also make repeated reference to an “alter ego”
theory. As best we can tell, they are referring to the fact that
Kavoukjian may have been able to establish they were alter egos
of Agro Organics. They do not seem to be claiming Kavoukjian is
an alter ego of GreenEden. Even if they did intend to make such
a claim, they forfeited the argument by failing to support it with
cogent analysis and citation to relevant legal authority. (See
Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784–785
[“When an appellant fails to raise a point, or asserts it but fails to
support it with reasoned argument and citations to authority, we
treat the point as waived.”]; Loranger v. Jones (2010) 184
Cal.App.4th 847, 858, fn. 9.)
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and received, and conspiracy. As far as we can tell on the limited
record before us, none of these claims required Kavoukjian prove
he was a third party beneficiary of the JVA.4
Perhaps aware of this fact, Defendants insist Kavoukjian
also asserted a claim for breach of the JVA. The complaint,
however, demonstrates otherwise. Directly under the heading
“Third Cause of Action [¶] Breach of Contract,” the complaint
states, “By Plaintiff GreenEden against Defendants.” For every
other cause of action, in contrast, the complaint indicates it is
brought by “Plaintiffs.” Further, the complaint alleges
Defendants “have failed and refused to perform the obligations
that they owe to GreenEden pursuant to the Joint Venture
Agreement.” It does not allege that Defendants breached any
contractual obligation to Kavoukjian. This clearly demonstrates
that GreenEden alone asserted a claim for breach of contract.
The fact that some of the other allegations under the cause of
action refer to “plaintiffs,” rather than simply GreenEden, does
not persuade us otherwise.
Defendants next contend Kavoukjian would have been
entitled to attorney fees had he prevailed at trial because he
repeatedly claimed, both explicitly and implicitly, to be a third
party beneficiary of the JVA. In response to their discovery
requests, for example, Kavoukjian admitted he was not a
signatory to the JVA, but insisted he “is a third party beneficiary”
of it. He also claimed to be the sole creditor of balances owed in
connection with the joint venture.
4 The record on appeal consists almost entirely of documents
filed in connection with the motion for attorney fees. As a result,
we do not know what issues and theories were actually litigated
at trial.
7
The fact that Kavoukjian claimed to be a third party
beneficiary of the JVA does not make it so. “[A] party cannot
establish third party beneficiary status unless he or she carries
the burden of proving that the contracting parties’ intended
purpose in executing their agreement was to confer a direct
benefit on the alleged third party beneficiary.” (Alling v.
Universal Manufacturing Corp. (1992) 5 Cal.App.4th 1412, 1439;
see Spinks v. Equity Residential Briarwood Apartments (2009)
171 Cal.App.4th 1004, 1022 [the contracting parties must have
intended to confer a benefit on the third party].) Accordingly,
whether Kavoukjian was a third party beneficiary of the JVA
depends on the intentions of the contracting parties, in this case
GreenEden and Agro Organics. That Kavoukjian claimed such
status long after the JVA was executed is irrelevant to the issue.
Indeed, had Kavoukjian prevailed at trial, we have no doubt the
trial court would have rejected his request for attorney fees if
based solely on his own statements claiming to be a third party
beneficiary.5
Defendants’ final argument, which they did not make in the
trial court, is that the JVA itself demonstrates Kavoukjian is a
third party beneficiary. As noted above, for a person to be a third
party beneficiary of a contract, the contracting parties must have
intended to confer a direct benefit on that person. (Alling v.
Universal Manufacturing Corp., supra, 5 Cal.App.4th at p. 1439.)
“ ‘The test for determining whether a contract was made for the
5 For the first time in their reply brief, Defendants contend
some of Kavoukjian’s discovery responses were binding
admissions pursuant to Code of Civil Procedure section 2033.410,
subdivision (a). The argument is untimely and we need not
consider it. (See Reichardt v. Hoffman (1997) 52 Cal.App.4th
754, 764–765.)
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benefit of a third person is whether an intent to benefit a third
person appears from the terms of the contract.’ ” (Prouty v. Gores
Technology Group (2004) 121 Cal.App.4th 1225, 1232; see
Sessions Payroll Management, Inc. v. Noble Construction Co.,
supra, 84 Cal.App.4th at p. 680 [whether a person is a third party
beneficiary is a question of contract interpretation].) “ ‘If the
terms of the contract necessarily require the promisor to confer a
benefit on a third person, then the contract, and hence the parties
thereto, contemplate a benefit to the third person.’ ” (Spinks v.
Equity Residential Briarwood Apartments, supra, 171
Cal.App.4th at p. 1022.) The person need not be the sole or
primary beneficiary of the contract, but an incidental or remote
benefit is not sufficient. (Service Employees Internat. Union,
Local 99 v. Options–A Child Care & Human Services Agency
(2011) 200 Cal.App.4th 869, 878.)
Here, the JVA does not manifest any intent by either
GreenEden or Agro Organics to confer a direct benefit on
Kavoukjian. Under the JVA, GreenEden agreed to provide Agro
Organics funds to finance greenhouses, and in return Agro
Organics agreed to establish and operate the greenhouses.
The parties further agreed to share the net profits derived from
the greenhouses. Kavoukjian was not entitled to any of those
profits; nor did he otherwise directly benefit from GreenEden’s or
Agro Organic’s performance of their obligations under the JVA.
Any benefit he may have received on account of his ownership of
GreenEden was incidental and did not render him a third party
beneficiary. (See CAZA Drilling (California), Inc. v. TEG Oil &
Gas U.S.A., Inc. (2006) 142 Cal.App.4th 453, 464 [suggesting a
parent company was not a third party beneficiary of its
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subsidiary’s contract, even though it derived some benefit from
profits earned by the subsidiary].)
Defendants insist the fact that GreenEden had the
unilateral right to transfer to Kavoukjian its options and
interests under the JVA shows Kavoukjian was an intended third
party beneficiary. We disagree. The general rule is that a party
may assign its interest in a contract in the absence of clear
language prohibiting the assignment. (See § 1044 [“Property of
any kind may be transferred, except as otherwise provided by
this article.”]; § 1458 [“A right arising out of an obligation is the
property of the person to whom it is due, and may be transferred
as such.”]; Farmland Irrigation Co. v. Dopplmaier (1957) 48
Cal.2d 208, 222 [California statutes “clearly manifest a policy in
favor of the free transferability of all types of property, including
rights under contracts”]; Williston on Contracts § 74:10 (4th ed.)
[“Generally, all contract rights may be assigned in the absence of
clear language expressly prohibiting the assignment”].) The
provisions of the JVA permitting GreenEden to freely assign its
interests and options to Kavoukjian, therefore, were simply a
restatement of the law; they did not confer any additional benefit
on Kavoukjian. (See Don Rose Oil Co., Inc v. Lindsley (1984) 160
Cal.App.3d 752, 756 [holding a prospective assignee of a
contracting party’s interest was not a third party beneficiary of
the contract].)
Defendants further contend the fact that Kavoukjian is
listed in the JVA as the party accepting notice on GreenEden’s
behalf indicates an intent to benefit him. Defendants, however,
fail to explain how this benefited Kavoukjian; nor can we
conceive of any way in which it would have. (See Walters v.
Calderon (1972) 25 Cal.App.3d 863, 871 [the fact that a person is
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incidentally named in a contract does not make the person a
third party beneficiary].)
Because Defendants have not shown Kavoukjian would
have been entitled to attorney fees had he prevailed on any of his
claims, they are not entitled to their attorney fees under the
reciprocity principles of section 1717. The trial court properly
denied their motion for an award of attorney fees against
Kavoukjian.6
DISPOSITION
The judgment is affirmed. Kavoukjian is awarded his costs
on appeal.
BIGELOW, P. J.
We concur:
GRIMES, J.
WILEY, J.
6 Defendants purport to advance an alternative argument
that they were entitled to attorney fees based on Kavoukjian’s
rescission of securities investment claim. We can discern no
meaningful difference between this argument and their
arguments regarding Kavoukjian’s status as a third party
beneficiary. Accordingly, we reject it for the same reasons.
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