American Diversified Properties v. RE/EX Valencia CA2/8

Filed 7/25/14 American Diversified Properties v. RE/EX Valencia CA2/8
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

AMERICAN DIVERSIFIED B246501
PROPERTIES, INC.,
(Los Angeles County
Plaintiff and Appellant, Super. Ct. No. BC360128)

v.

RE/EX VALENCIA, INC., et al.,

Defendants and Respondents.

APPEAL from a judgment and orders of the Superior Court of Los Angeles
County, Steven J. Kleifield, Judge. Affirmed.
Norminton, Wiita & Fuster, Thomas M. Norminton and Kathleen Dority Fuster for
Plaintiff and Appellant.
Gaines & Stacey, Lisa A. Weinberg and Alicia B. Bartley for Defendants and
Respondents RE/EX Valencia, Inc., and Sara Fincher-Schmidt.
Spile, Leff & Goor and Andrew L. Leff for Defendant and Respondent Valleywide
Escrow, Inc.
June Babiracki Barlow and Neil Kalin for California Association of Realtors as
Amicus Curiae on behalf of Defendants and Respondents.

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 This action involves a commission dispute between real estate brokers, plaintiff
American Diversified Properties, Inc. (ADP), and defendants RE/EX Valencia, Inc.,
doing business as Realty Executives, Inc. (Realty Executives), and Sara Fincher-Schmidt
(Schmidt). ADP also sued the escrow holder in the transaction, Valleywide Escrow, Inc.
(Valleywide).1 ADP appeals from the judgment in favor of the defendants and from
attorney fees and costs orders.2 We affirm the judgment and orders.
FACTS AND PROCEDURE
1. ADP’s Theory of the Case
ADP’s operative second amended complaint (complaint) alleged the following
facts. The Campbell Family Trust engaged Realty Executives as brokers to sell
approximately 9.49 acres of vacant land in Santa Clarita, California. The seller agreed to
pay Realty Executives a percentage of the purchase price as consideration for its broker
services. Bradley Business Center, a general partnership comprised in part of Kerry
Seidenglanz and Mark Seidenglanz,3 was interested in buying the property. Bradley
Business Center engaged ADP as its broker.
On or about March 15, 2006, ADP and Realty Executives entered into a partly
oral, partly written agreement. The brokers orally agreed to split 50-50 the commission

1 We have filed two prior nonpublished opinions in this case, American Diversified
Properties, Inc. v. Valleywide Escrow, Inc. (Sept. 3, 2008, B197816) (ADP I) and
American Diversified Properties, Inc. v. Realty Executives, Inc. (June 7, 2011, B222560)
(ADP II). In ADP I, we reversed an order sustaining Valleywide’s demurrer to the
original complaint without leave to amend and held ADP could cure the defects in the
original complaint with suitable amendments. In ADP II, we reversed the trial court’s
grant of summary judgment in favor of Realty Executives and Schmidt, holding there
were triable issues of material fact.
2 We consolidated ADP’s appeal from the judgment with its appeal from the
attorney fees and costs orders.
3 For the sake of clarity, we will refer to members of the Seidenglanz family by their
first names. We will also refer to Schmidt’s husband, Stephen Schmidt, by his first name
for the sake of clarity. We do not intend this informality to reflect a lack of respect.

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offered by the seller. The written portion of the brokers’ agreement was found in the
purchase agreement for the property. Bradley Business Center and the Campbell Family
Trust entered into the purchase agreement on or about May 19, 2006. The purchase
agreement acknowledged ADP and Realty Executives as the respective brokers for the
buyer and seller and made the brokers third party beneficiaries of the purchase agreement
and escrow instructions. The purchase agreement identified Valleywide as the escrow
holder.
The first cause of action alleged breach of oral contract against Realty Executives
because it failed to split the commission with ADP and instead took the entire
commission for itself. Based on these same facts, the second and third causes of action
alleged common counts for “reasonable value of services provided” (quantum meruit)
and money had and received against Realty Executives and its agent, Schmidt. (Boldface
and capitalization omitted.) The fourth, fifth, and 10th causes of action alleged breach of
contract, breach of fiduciary duty, and negligence against Valleywide for disbursing the
full commission to Realty Executives, despite having notice of the commission dispute
between the brokers and despite receiving instructions from ADP to hold the
commission. The sixth and seventh causes of action alleged intentional and negligent
interference with contract against Realty Executives and Schmidt for persuading
Valleywide to disburse the disputed commission, thereby causing Valleywide to breach
its contractual obligations to ADP. The eighth and ninth causes of action against Schmidt
alleged intentional and negligent interference with contract for persuading Realty
Executives to take the entire commission in breach of the brokers’ commission-sharing
agreement.
The parties tried the case to the court over the course of 13 days.
2. Trial Evidence
a. Buyers’ Offer and the Purchase Agreement
Schmidt is a real estate salesperson who worked at Realty Executives, a real estate
brokerage firm. She has closed 25 to 30 deals while working with cooperating brokers.
Schmidt represented the sellers of the subject property, the Campbell Family Trust.

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Daniel Campbell (Campbell), the cotrustee of the Campbell Family Trust, refused to sign
a listing agreement with Schmidt, which would have given her the exclusive right to list
the property. He did not want the property listed on a multiple listing service (MLS) or
want a “For Sale” sign on it because he did not want “people knowing his business.”
Instead, Schmidt had a commission agreement with the Campbell Family Trust
stating she would receive 7.5 percent of the selling price if she sold the property for at
least $6.5 million. The commission agreement provided: “Broker may cooperate with
other brokers, and divide with other brokers such compensation in any manner acceptable
to Broker.”
ADP is another real estate brokerage firm. Kerry is the president of ADP. Kerry
and his brothers Mark and Chris Seidenglanz are the sole shareholders of ADP. Kerry
and Mark were also brokers with ADP in 2006. Kerry and Mark are partners in Bradley
Business Center, a general partnership, along with two other individuals. In 2006,
Bradley Business Center engaged ADP to act as its broker in locating and acquiring a real
estate investment. Kerry and Mark have personally brokered hundreds of transactions in
their careers, though more of those transactions were leases and not sales of properties.
In all but one transaction Kerry could remember, ADP split the commissions in these
transactions 50-50 with the cooperating brokers. The agreements with the cooperating
brokers to split commissions were “always made verbally,” though the parties usually
reduced these agreements to writing later on.
According to Kerry, whenever he inquires about a property, he always identifies
himself as a broker as soon as he contacts the other side. When he saw an advertisement
for a property brokered by Schmidt and Realty Executives, he called Schmidt to inquire
about the property and immediately told her he was a broker with ADP. Kerry is
absolutely certain he identified himself as a broker in that first call with Schmidt.
Schmidt does not recall Kerry identifying himself as a broker in that first call. He
introduced himself by name but did not mention a company affiliation. She asked him
whether he was a buyer or broker. He said he was a buyer and said nothing about being a
broker. She was certain she asked him whether he was a buyer or broker because she had

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different scripts she had practiced and used depending on whether the inquiry came from
a buyer or broker. Kerry inquired about one of Schmidt’s properties, but when they
determined it was not suitable for his purposes, Schmidt told him about the Campbell
Family Trust property. If she had known he was a broker, she would not have given him
all the information about the property before meeting with him and knowing more about
him because she did not have an exclusive listing agreement with Campbell.
After that initial call, Kerry and Mark met with Schmidt at the Realty Executives
office on or about March 14, 2006. It was at this meeting that ADP contends the parties
reached the oral commission-sharing agreement. Kerry and Schmidt exchanged business
cards. Kerry’s cards said ADP on them. According to Kerry, he told Schmidt he and
Mark were partners in Bradley Business Center and also brokers with ADP.
Additionally, he told her if ADP produced a buyer for the property, he would expect to
split the commission 50-50. Schmidt said “she had some costs and expenses that she had
already put into the property and she would want to recoup those.” Kerry testified that, in
response, “Mark looked at me, and I looked at him, and Mark said, that can only be 2-,
3-, $4,000, not a big deal. He said fine. [¶] I looked back at [Schmidt] and said fine, and
Mark said fine.” Schmidt did not say anything or make any gestures or movements after
they said “fine.” She went on to describe the property. Kerry interrupted her
presentation to ask how much her commission was. She did not respond and continued
with her presentation, and Kerry did not interrupt her again.
Schmidt recalls the meeting differently. According to her, Mark did not have a
business card with him, and when she saw Kerry’s business card, she assumed ADP was
his employer, but she did not know ADP was a brokerage firm, and she did not know he
was acting as a broker or an agent of ADP. His card did not say he was a broker or have
a real estate license number on it. Kerry and Mark did not introduce themselves as
brokers at this meeting or say they were affiliated with any company. Kerry did not say
anything about ADP or Bradley Business Center. When she was talking to them, she
believed they were buyers because (1) that is what Kerry told her in their initial call, and
(2) they were asking questions about the property that, in her experience, a developer

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would ask. They never referred to their “clients,” and they used the pronouns “I” or
“we.”
At some point, Kerry interrupted her presentation to ask, “what’s the commission
on this, 2, 2-½ percent[?]” The question surprised Schmidt because she believed he was
merely the buyer, and it was unusual for a buyer to ask how much the commission was in
a transaction. Schmidt then told them she had been working on the property for a long
time and had costs she needed to recoup. She did not intend to convey a request to Kerry
and Mark that they allow her to recoup costs. She did not know how to respond because
she was taken aback by the question. Her response was essentially an attempt to deflect.
She wanted to ignore the question about commission and move on.
If they had said anything about being brokers and expecting half of the total
commission or any commission at all, Schmidt would have told them immediately she
was not offering half. She would have remembered if they had asked for a commission,
but they did not. Nor did she offer any commission. After the meeting, they asked
Schmidt to type a letter of interest for them. This confirmed her belief they were buyers
but not brokers because typically buyers would ask their brokers to do something like this
for them.
Kerry and Mark met with Schmidt again to present an offer on the property. The
offer was printed on a standard form of the American Industrial Real Estate Association.
They spent at least an hour and a half going through the offer paragraph by paragraph.
Schmidt insisted on using Valleywide as the escrow holder. The offer identified the
buyers as Mark, Kerry, Bradley Business Center, and/or an assignee. It identified ADP
as the buyers’ broker and Gloria Seidenglanz at ADP. Gloria was not actually involved
in the transaction, and she and Schmidt had never spoken. Schmidt was confused by the
inclusion of her name and asked about Gloria. Kerry said she was his mother.
An addendum to the offer disclosed that “[s]ome of the buyers are principals in
[ADP] and hold valid California real estate licenses.” Schmidt never asked which of the
buyers held real estate licenses.
The offer contained a paragraph relating to broker commissions. It stated:

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 “Brokerage Fee. Payment at the Closing of such brokerage fee as is
specified in this Agreement or later written instructions to Escrow Holder
executed by Seller and Brokers (“Brokerage Fee”). It is agreed by the
Parties and Escrow Holder that Brokers are a third party beneficiary of this
Agreement insofar as the Brokerage Fee is concerned, and that no change
shall be made with respect to the payment of the Brokerage Fee specified in
this Agreement, without the written consent of the Brokers.”
Schmidt did not say anything at the meeting about this paragraph.
Kerry and Mark presented the offer with a cover letter on ADP letterhead. The
cover letter referred to “our Offer to Purchase” and “We, the buyers,” and it stated “we
will be the ultimate owner.” Kerry’s and Mark’s signature lines simply stated their
names and did not identify them as affiliated with any particular entity. They also
presented the offer with a letter from their bank stating “[t]he Seidenglanz brothers
maintain the financial wherewithal to close the real estate transaction under consideration
in the amount of $6.5 million with their cash resources.” Seeing these statements in the
cover letter and bank letter further confirmed Schmidt’s belief that Kerry and Mark were
buyers and not brokers.
Campbell rejected the offer from Kerry and Mark. He did not feel he could sell
the property at that point because he was involved in an arbitration with Edison regarding
an easement on the property. He rejected the offer in March 2006. Kerry called Schmidt
in April 2006 to see if the arbitration was still pending because he remained interested in
the property.
Schmidt set up a meeting for May 5, 2006, between Schmidt, Kerry, Mark and
Campbell. Kerry and Mark never identified themselves as brokers at this meeting. They
told Campbell they were interested in purchasing the property, and they proceeded to
discuss deal points. The parties interlineated Kerry and Mark’s offer form. Campbell
requested that a clean agreement be drawn up because the offer form contained many
markups and crossed-out sections. Kerry and Mark said they were not good typists, and
although Schmidt was not either, she offered to draw up the new purchase agreement in
conjunction with her assistant.

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 Schmidt’s draft was based on Kerry and Mark’s offer form and her notes from the
meeting with Campbell. Kerry met with Schmidt and her husband Stephen at her home
to finish the purchase agreement when it was close to being complete. The meeting
lasted approximately four hours. Schmidt introduced Stephen and told Kerry that
Stephen was a broker. Stephen asked Kerry what he did for a living. Kerry said, “I put
the deals together, and my brother builds them.” He did not say he was a broker or that
he worked for ADP. At the meeting, Schmidt and Stephen were typing portions of the
agreement, and Kerry was reviewing the changes as they were generating them. Kerry
made changes to the draft, but none of them related to the brokers or brokers’
commission. Kerry said he did not make such changes because he thought they had an
agreement on the commission already.
Kerry and Mark signed the purchase agreement as buyers on or about May 15,
2006. Paragraph 1.1 of the purchase agreement defined the buyers as Kerry, Mark,
Bradley Business Center, “and/or assignee.” (Capitalization omitted.) Paragraph 5.1
identified the brokers as follows:
“Real Estate Brokers
“. . . The following real estate broker(s) (‘Brokers’) and brokerage
relationships exist in this transaction and consented to [sic] by the parties:
REALTY EXECUTIVES Stephen C. Schmidt and Sara Fincher represent
Sellers exclusively (‘Sellers’ Broker’) AMERICAN DIVERSIFIED
PROPERTIES, INC. Represent Buyers exclusively (‘Buyers’ Broker’)
The Parties acknowledge that Brokers are the procuring cause of this
Agreement.” (Sic.)
Kerry did not request that he and Mark be added to this paragraph as agents of
ADP because he felt “[i]t wasn’t necessary. She [(Schmidt)] knew who we were.” For
her part, Schmidt said she did not know who was acting as the agents of ADP, other than
perhaps Gloria because she was referenced in the offer, but Schmidt had never had
contact with Gloria. Paragraph 5.3, carried over from Kerry and Mark’s offer, stated
some of the buyers were principals in ADP and held valid California real estate licenses.
Under the purchase agreement, Valleywide had to verify that all of the buyer’s
contingencies had been satisfied or waived prior to closing. Paragraph 7.1 of the

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purchase agreement stated it was setting forth the contingencies that had to be satisfied or
waived before closing the transaction. At the same time, paragraph 6.6 stated certain
subparagraphs of 7.1, including subparagraph (k) (paragraph 7.1(k)), were “matters of
agreement between the Parties only and are not instructions to Valleywide Escrow.”
Paragraph 7.1(k) of the purchase agreement has been the subject of much dispute
in this litigation. It states:
“Brokerage Fee. Payment at the Closing of such brokerage fee as is
specified in a separate Agreement executed by Listing Broker and
Cooperating Broker provided to Valleywide Escrow. It is agreed by the
Parties and Valleywide Escrow Holder that Brokers are a third party
beneficiary of this Agreement insofar as the Brokerage Fee is concerned,
and that no change shall be made with respect to the payment of the
Brokerage Fee specified in this Agreement, without the written consent of
Brokers.”
While Schmidt based paragraph 7.1(k) on the similar paragraph in Mark and
Kerry’s offer form, she changed some of the language. The provision in the offer form
did not identify Valleywide as the escrow holder, and it referred to “brokers” but not
“listing broker” and “cooperating broker.” Kerry believed paragraph 7.1(k) was there to
protect the brokers and specify that there would be a separate agreement delineating how
the commission would be split to instruct the escrow holder. Mark assumed Schmidt
would send an instruction to the escrow holder identifying her costs and telling it to
disburse the commission 50-50 after deducting those costs.
Kerry and Mark signed the purchase agreement under a line stating: “Buyer:
Kerry Seidenglanz & Mark Seidenglanz, Bradley Business Center and Assignees.”
Neither Realty Executives nor ADP was a signatory to the purchase agreement.
Kerry traveled out of the country from the beginning of June 2006 to around
July 4, 2006. During this time, Schmidt did not communicate with him or Mark. When
he returned in July 2006, the dispute about the commission arose.
b. Escrow and Closing of Transaction
Cynthia Moller was the Valleywide escrow officer for this transaction. The
purchase agreement was made part of the escrow instructions. Moller understood

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Valleywide was required to disburse the funds from escrow in accordance with the terms
of the purchase agreement. Moller read the agreement and understood it bound the
escrow holder to follow applicable law and custom and practice in the industry. In
particular, she read paragraph 7.1(k) when she received the purchase agreement. She
understood when reading that paragraph that ADP was the “cooperating broker.” She
was not aware of any specific deadline for the brokers to provide Valleywide with the
“separate Agreement” referenced in paragraph 7.1(k). She never received a separate
agreement signed by both brokers regarding commission. She did, however, receive an
irrevocable instruction from the seller in June 2006 directing Valleywide to pay a
commission of 7.5 percent (or $487,500) to Realty Executives. Moller did not consider
the content of paragraph 7.1(k) when she performed her duties in this transaction because
paragraph 6.6 expressly stated paragraph 7.1(k) was a matter of agreement between the
parties only and not instructions to Valleywide.
Schmidt expects a buyer’s broker to present a request for commission by
submitting a cooperating broker’s agreement along with the buyer’s offer. Kerry and
Mark never did this. It first crossed Schmidt’s mind that Kerry was a broker in July 2006
when Moller told her. Kerry had been asking Moller about the commission and indicated
he was expecting one. Moller called Schmidt and asked if Realty Executives had offered
him a commission. Schmidt responded that she did not even know Kerry and Mark were
brokers.
Once Schmidt realized Kerry was a broker, she was willing to share some of the
commission with ADP. She consulted her supervisors and an attorney about the situation
because she was unsure what to do. She was willing to offer Kerry up to 2.5 percent, but
she decided to start with an offer of 2 percent. Two and a half percent was the same
amount she had offered other brokers in the past on this property. Additionally, when
Kerry had asked about the commission, he had assumed 2 or 2.5 percent, so she thought
this would be acceptable to him. She drafted a “cooperating broker compensation
agreement” providing for ADP to receive a 2 percent commission and took this
agreement to a lunch meeting with Kerry on or about July 28, 2006. She wanted this

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agreement executed in writing so that they could give it to Valleywide, per paragraph
7.1(k). She did not know before July 28 that Kerry believed he was entitled to half of her
commission. There had been no mention of commission between Schmidt, Kerry, and
Mark since their meeting on March 14.
At the July 28 meeting, Kerry and Schmidt completed some escrow paperwork.
Afterward, Schmidt told Kerry she wanted to offer him 2 percent of the purchase price as
commission and presented the cooperating broker compensation agreement. According
to Schmidt, Kerry rejected the offer and said he felt he was “entitled to” half of the total
commission because he had fulfilled his obligations. He wanted to take the commission
in the form of a reduction in the purchase price. He became very angry when she made
her proposal and threw the cooperating broker agreement at her. He did not say they had
previously agreed on a 50-50 commission split. Schmidt then offered him 2.5 percent of
the purchase price, which he also rejected. She never intended to share half of the 7.5
percent commission with any cooperating broker. Even before she met Kerry and Mark,
she had intended that Realty Executives would keep at least 5 percent of the purchase
price as commission.
According to Kerry, when Schmidt offered ADP a 2 percent commission, she
explained she felt she was entitled to more than the customary 50-50 split because she
had been working on the property for over a year. Kerry was angry and said they had not
agreed on an unequal split. He asked how much the commission was, and Schmidt said 5
percent. He told her he did not believe that. He asked to see the commission agreement
with the seller, and she refused.
Kerry contacted Valleywide and Realty Executives to learn how much the total
commission was, but no one would share that information. Moller refused to give him
that information because the seller was paying the commission, it was part of the seller’s
side of the transaction, and she did not have the seller’s consent to disclose the
information. Kerry eventually learned the total commission was 7.5 percent of the
purchase price. Realty Executives again offered him a 2.5 percent commission to try to
resolve the dispute, and Kerry rejected it.

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 He wrote a letter proposing a 50-50 split of the commission, with ADP taking its
portion of the commission by way of a purchase price reduction. Kerry said he had
spoken to Campbell regarding the purchase price reduction, and he had agreed to this.
But according to Schmidt, she asked Campbell about paying ADP in the form of a price
reduction after the lunch meeting on July 28, and Campbell unequivocally rejected that
possibility. Campbell also testified he told Kerry “absolutely not” in response to his
proposal. Campbell did not understand why Kerry was trying to change the deal right
before closing, and he would not agree to change the deal.
On or about August 11, 2006, ADP sent Moller a fax stating: “As you are aware
there is a dispute between the Brokers regarding the commissions. You are hereby
instructed to hold all commissions until this dispute is resolved.” Kerry and Mark as
buyers also sent a supplement to the escrow instructions. This document stated in
pertinent part: “Buyer and seller hereby acknowledge that all contingencies to this
transaction have been satisfied, and escrow holder is hereby instructed to proceed with
the closing of this escrow. EXCEPT THAT Escrow Holder is to hold all commissions
[and] compensation to be p[ai]d to any Brokers in [t]his [t]ransaction pursuant to the
letter/instructions [f]axed to [y]ou on 8-4-06 by [ADP].” Kerry agreed to let the
transaction close and deal with the commission dispute afterward. The transaction closed
on or about August 14, 2006.
From March to August 2006, Kerry estimated he worked “hundreds” of hours to
close the transaction. His work included “going through the preliminary title reports,
going through easements, checking, meeting with the city, checking on the zoning, . . .
finding out about negotiating about utilities, doing soils work,” and meeting with the
seller’s attorney and Edison to bring about a settlement in the pending arbitration with
Edison. He had ongoing communications with Schmidt about the work he was doing,
and she encouraged it. Mark also put in “a lot of work” to get the transaction closed
between March and August of 2006. It was the type of work he would have done as a
broker for other clients, and he and Mark used ADP’s resources to accomplish the work.

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c. Postclosing Commission Disbursement
Valleywide eventually disbursed the entire 7.5 percent commission to Realty
Executives after getting instructions from Realty Executives. Realty Executives initially
instructed Valleywide to hold 2.5 percent of the purchase price in escrow pending further
instructions, which Valleywide did. When ADP filed this action, Valleywide was still
holding the 2.5 percent. Schmidt agreed to defend and indemnify Realty Executives for
any liability and pay its attorney fees in this action. In return, Realty Executives agreed
to release to her the remaining 2.5 percent of the commission. Realty Executives thus
instructed Valleywide to disburse the 2.5 percent commission it was holding.
d. Expert Witness Testimony
i. ADP’s Expert on Broker and Escrow Issues
ADP’s expert, Alan Wallace, opined ADP was entitled to half the commission
offered by the seller to Realty Executives, less Realty Executives’ costs. Raw land deals
were particularly difficult. It was custom and practice for the seller to offer a 10 percent
commission to a broker for the sale of raw land such as this, and typically the seller’s
broker would have to offer at least half of that commission to the buyer’s broker to entice
the broker to bring in his client. If the seller’s broker was not going to offer the
customary half of the commission, he or she should tell the buyer’s broker immediately.
The purchase agreement identified ADP as the buyers’ exclusive broker and as a
“procuring cause” of the transaction, confirming that ADP was significant to the
transaction and did a substantial amount of work to close it. Even if there was not an
express agreement between ADP and Realty Executives to split the commission 50-50,
Realty Executives was still obligated to share half because of the custom and practice.
Wallace acknowledged that in a standard transaction, the seller generally dictates
who gets paid the commission. The seller generally is the party paying the commission,
not the buyer.
Regarding escrow issues, Wallace opined Valleywide breached its duties as an
escrow holder when it disbursed the entire commission to Realty Executives without the
separate agreement of both brokers referenced in paragraph 7.1(k) of the purchase

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agreement. He believed it also breached its duties by not holding the commission funds
in escrow when instructed to do so by the buyer and the buyers’ broker. Paragraph 7.1(k)
made the brokers third party beneficiaries of the agreement and told Valleywide that
when it came to commission, it needed the consent of both brokers to change the
commission, and both brokers could instruct Valleywide relating to commission. When
ADP sent instructions to Valleywide to hold the commission pending resolution of the
dispute between it and Realty Executives, Valleywide was required to follow the
instruction. Anytime an escrow holder gets conflicting instructions, the custom and
practice is for it to not act until a resolution can be reached or a court order directs it to
act.
ii. Realty Executives and Schmidt’s Expert on Broker Issues
Realty Executives and Schmidt’s expert on broker issues, John Pagliassotti, opined
that even though it is common in the commercial real estate industry to share a
commission 50-50, it is not absolute custom, and the brokers always need to agree upon
the split, which may be less than 50-50. None of the ethical rules and regulations
applicable to real estate brokers requires sellers’ brokers to share their commission 50-50
with buyers’ brokers. For example, the National Association of Realtors (NAR) Code of
Ethics and Standards of Practice states the obligation to cooperate between brokers “does
not include the obligation to share commissions, fees, or to otherwise compensate another
broker.” In addition, the same code states sellers’ brokers establish the terms and
conditions of offers to cooperate, and unless expressly indicated in the offer to cooperate,
cooperating brokers cannot assume an offer of cooperation includes an offer of
compensation. Cooperating brokers, moreover, shall ascertain the terms of compensation
“before beginning efforts to accept the offer of cooperation.” The rules of the Society of
Industry and Office Realtors (SIOR) also state these principles.
Pagliassotti knew of many transactions when either the commission offered by the
seller was not split 50-50 between the brokers or it was not split because the buyer
compensated the buyer’s broker. In his own experience with similar properties, he had
represented the buyers in five vacant land transactions, and in all of those instances, the

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buyer paid his commission, not the seller or the seller’s broker. Thus, the seller’s broker
did not share its commission at all. Pagliassotti did not agree with Wallace that raw land
deals were particularly difficult or that sellers’ brokers typically had to offer half of the
commission to buyers’ brokers to entice them to bring in buyers.
Pagliassotti explained there is customarily an exclusive listing agreement between
the seller and the seller’s broker, and such an agreement would require the seller to pay a
commission to its broker. The commission agreement between Campbell and Realty
Executives differed because it did not give Schmidt and Realty Executives the exclusive
right to a commission if the property sold and did not protect her if a buyer’s broker went
around her to negotiate directly with Campbell. A listing agreement would also require
the listing broker to market the property to the public on an MLS and by other means.
When a property is listed on an MLS, the amount of the commission being offered to a
cooperating broker is required to be listed. Schmidt and Realty Executives did not make
such an offer here because the property was not listed on an MLS.
Pagliassotti also opined ADP was “incompetent” in its pursuit of this commission.
It was customary that the brokers confirm commissions in writing, particularly on a
transaction of this size. According to relevant ethical rules, the terms of compensation
for cooperating brokers should be in writing. Schmidt protected her right to a
commission by having a written commission agreement with Campbell. It was
incumbent on ADP to procure a written acknowledgement of any agreement by Realty
Executives to share the commission. There were numerous instances when ADP could
have procured such a writing, including the meetings with Schmidt, the meeting with
Campbell, its original offer, and the purchase agreement.
iii. Valleywide’s Expert on Escrow Issues
Valleywide’s expert on escrow issues, Lore Hilburg, opined Moller handled the
escrow at all times competently and consistent with the custom and practice in the
Southern California industry. When performing her duties, Moller was not to be
concerned with paragraph 7.1(k) of the purchase agreement because the agreement
expressly told her elsewhere that paragraph 7.1(k) was not an instruction to Valleywide.

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 The buyer and seller are parties to the escrow, but the brokers are not. As such,
brokers can instruct the escrow officer on behalf of their clients, but they cannot instruct
the escrow officer on behalf of themselves. Hilburg opined that here, Valleywide did not
receive any conflicting instructions regarding commission. It had only one instruction on
this topic, the irrevocable instruction from the seller to pay Realty Executives a 7.5
percent commission. The commission was coming from the seller’s proceeds, not the
buyer’s funds, and accordingly, the seller had the right to direct payment. Once
Valleywide received the irrevocable instruction to pay Realty Executives, Valleywide
could take instruction from Realty Executives as to how it wanted the commission
disbursed.
The letters or purported instructions from Kerry regarding commission had no
impact on Valleywide’s duties because only the seller had a right to direct how to pay the
commission offered by the seller. If Valleywide received an executed agreement
between Realty Executives and ADP showing some of Realty Executive’s commission
should be paid to ADP, Valleywide would have paid ADP. But it did not receive any
documentation showing Realty Executives had agreed to this.
3. Trial Court’s Statement of Decision
The court found ADP failed to prove all causes of action in the complaint.
Schmidt had filed a cross-complaint against ADP for intentional and negligent
interference with contract. The court also found Schmidt did not prove the causes of
action in her cross-complaint. Because Schmidt has not appealed the judgment on her
cross-complaint, we will not discuss those causes of action here.
a. Causes of Action Against Realty Executives and Schmidt
The court began by noting ADP alleged a partly oral, partly written agreement to
share commission. It found there was no “meeting of the minds” with respect to the
alleged oral portion of the agreement and ADP had not proved its version of the events by
a preponderance of the evidence. It concluded the early encounters between Kerry,
Mark, and Schmidt never amounted to an express agreement, and Mark’s and Kerry’s
roles as brokers versus buyers were not made clear.

16
 Moreover, the court held ADP had failed to prove the existence of a written
agreement to share commission: “There was a remarkable failure of Mark and Kerry, on
behalf of ADP, to reduce any such ‘agreement’ to writing, notwithstanding numerous
opportunities to do so.” The court was “not convinc[ed]” by Mark’s and Kerry’s
testimony that they did not reduce the agreement to writing because they thought they
were protected by the purchase agreement. The court held nothing in the purchase
agreement “protects” the buyers’ broker. The court construed paragraph 7.1(k) to mean
that if the listing and cooperating brokers executed a written commission-sharing
agreement and provided it to Valleywide, payment of the commission had to be made as
stated in the agreement. The brokers were third party beneficiaries of the purchase
agreement only to the extent that paragraph 7.1(k) protected them from modification of
any written commission agreement without their consent. But no written commission-
sharing agreement existed between ADP and Realty Executives.
The court found “utterly unconvincing” ADP’s evidence that a 50-50 commission
split between brokers was custom and practice in the area. Further, the relevant ethical
rules, while not binding on the parties, strongly suggested the brokers should discuss any
commission-sharing agreement at the earliest opportunity and reduce it to writing.
Accordingly, the court found Realty Executives and Schmidt did not breach any
contract with ADP because none existed, and since the causes of action for negligent and
intentional interference with contract rose or fell on the existence of commission-sharing
agreement, those causes of action failed as well. In addition, the common counts
(quantum meruit and money had and received) failed “because California law provides
that there is no right for a buyer’s broker to recover a portion of a seller’s broker’s
commission in the absence of an express agreement.”
b. Causes of Action Against Valleywide
The court held Valleywide was not liable for failing to follow the instruction from
ADP to withhold the disputed commission. It determined paragraph 7.1(k) was an
agreement between the parties only and not an instruction to Valleywide. It rejected the
testimony of ADP’s expert, Wallace, that paragraph 7.1(k) gave ADP the right to give

17
instructions to Valleywide regarding the payment of commission. Valleywide was not
obligated to investigate or decide whether a commission-sharing agreement between the
brokers existed. Its only obligation was to follow the instructions of the seller and
buyers, and the only instruction Valleywide received from one of them was the seller’s
irrevocable instruction to pay 7.5 percent of the purchase price to Realty Executives.
There were no other conflicting instructions from the other parties to the purchase
agreement.
The court entered judgment for Realty Executives, Schmidt, and Valleywide on
the complaint and for ADP on Schmidt’s cross-complaint.
DISCUSSION
1. Causes of Action Based on a Commission-sharing Agreement Between the Brokers
ADP argues the court “overlooked” the evidence Schmidt knew ADP expected to
be paid half the commission and failed to tell it she would not share the commission. It
contends her silence was consent to commission sharing. We disagree. The court found
there was no commission-sharing agreement, whether oral or written, and there was no
meeting of the minds on this subject. This was not error. Substantial evidence supported
this conclusion.
Mutual consent, or agreement by the parties on the same thing in the same sense,
is required to form a contract. (Civ. Code, § 1565; Bustamante v. Intuit, Inc. (2006) 141
Cal.App.4th 199, 208.) The failure to reach a meeting of the minds on all material points
of an agreement prevents the formation of a contract. (Bustamante, at p. 215.) When the
formation of a contract is at issue and the evidence conflicts, the trier of fact must
determine whether the contract actually existed. (Id. at p. 208.) We review the court’s
findings on disputed factual issues for substantial evidence, viewing the evidence in the
light most favorable to the judgment, giving the benefit of every reasonable inference to
the prevailing party, and resolving all conflicts in the prevailing party’s favor. (SFPP. v.
Burlington Northern & Santa Fe Ry. Co. (2004) 121 Cal.App.4th 452, 462.)
While the parties’ evidence conflicted, Realty Executive and Schmidt’s evidence
was sufficient to support the determination that the brokers never formed a commission-

18
sharing agreement. According to Pagliassotti, it was common to share commissions, but
there was no custom and practice in the industry to split commissions 50-50, and the
obligation of the seller’s broker to cooperate did not include the obligation to share a
commission under relevant ethical rules. Pagliassotti had done several vacant land
transactions in which the seller’s broker did not share the commission at all, and the
buyer compensated Pagliassotti for his broker services. A cooperating broker could not
assume an offer to share a commission under relevant ethical rules.
According to Schmidt, Kerry and Mark did not tell her they expected to share in
the commission before July 2006, and she never offered or agreed to a 50-50 split. When
Kerry asked about the commission at their March 14 meeting, he did not ask how much
she was offering to the cooperating broker. He merely asked about the amount of the
commission (“2, 2-½ percent[?]”). She was taken aback by Kerry’s question and did not
know how to respond because it was an unusual question for a buyer, and she did not
want to reveal how much Campbell was paying her. She did not answer the question and
instead said that she had been working on the deal awhile and wanted to recoup her
expenses. That was all they said about commission, and Schmidt moved on in her
presentation.
She did not make an offer to share the commission at this point because she did
not even realize Kerry and Mark were brokers until months later. She thought Kerry and
Mark were merely buyers of the property because that was how they had represented
themselves, both in written communications and orally. They never stated they were
licensed real estate brokers. When she learned from Moller in July 2006 that they were
brokers, she offered to share the commission with Kerry/ADP, but only up to 2.5 percent
of the purchase price. Kerry rejected the offer. Thus, there was never any meeting of the
minds on splitting the commission and no contract formed. ADP never accepted the only
offer Realty Executives made.
The purchase agreement does not assist ADP in establishing a commission-sharing
agreement. It refers to a potential separate agreement to share commission between the

19
brokers and makes the brokers third party beneficiaries. But the purchase agreement does
not itself set forth the terms of any commission-sharing agreement.
Without a contract, Realty Executives was not liable for breach of contract. The
existence of a valid contract is also an essential element of tortious interference with
contract. (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118,
1126.) Accordingly, Schmidt was not liable for intentional or negligent interference with
contract either. The court did not err in entering judgment for Realty Executives and
Schmidt on these causes of action.
2. Cause of Action for Quantum Meruit
The court held ADP did not prove its cause of action for quantum meruit “because
California law provides there is no right for a buyer’s broker to recover a portion of a
seller’s broker’s commission in the absence of an express agreement.” ADP contends the
court misstated the law because quantum meruit does not require an express agreement,
and there is no authority barring brokers from recovering from one another in quantum
meruit. Assuming for the sake of argument the court erred in its statement of the law, we
decline to reverse. ADP has not demonstrated a reasonable probability it would have
prevailed on the quantum meruit claim. Any error, therefore, was not prejudicial.
“Quantum meruit refers to the well-established principle that ‘the law implies a
promise to pay for services performed under circumstances disclosing that they were not
gratuitously rendered.’ [Citation.] To recover in quantum meruit, a party need not prove
the existence of a contract [citations], but it must show the circumstances were such that
‘the services were rendered under some understanding or expectation of both parties that
compensation therefor was to be made.’” (Huskinson & Brown v. Wolf (2004) 32 Cal.4th
453, 458.) The plaintiff bears the burden of showing he or she rendered services “at the
request of the person to be charged” (Miller v. Campbell, Warburton, Fitzsimmons,
Smith, Mendel & Pastore (2008) 162 Cal.App.4th 1331, 1344 (Miller); Earhart v.
William Low Co. (1979) 25 Cal.3d 503, 515), and the services “were intended to and did
benefit the defendant” (Day v. Alta Bates Medical Center (2002) 98 Cal.App.4th 243,
248). The defendant can defeat the cause of action by proving the plaintiff rendered the

20
services “gratuitously or without obligation” to pay on the defendant’s part. (Miller,
supra, at p. 1344.)
We do not reverse a judgment for “any error, ruling, instruction, or defect” unless
the record demonstrates the error was “prejudicial” and a “different result would have
been probable” absent the error. (Code Civ. Proc., § 475.) We do not presume an error is
prejudicial. (Ibid.) The appellant must demonstrate it is reasonably probable the court
would have reached a more favorable result in the absence of the error. (Cassim v.
Allstate Ins. Co. (2004) 33 Cal.4th 780, 800.)
Here, it is not reasonably probable the court would have permitted ADP to recover
in quantum meruit, had the court not committed the purported legal error. To recover in
quantum meruit from Realty Executives and Schmidt, ADP had to show it rendered its
broker services at their request, and moreover, that its services were intended to benefit
them. But it is undisputed Bradley Business Center engaged ADP to act as its broker—
that is, ADP was performing broker services at its client’s request and for its client’s
benefit, not at Realty Executives and Schmidt’s request. Indeed, as the agent of its client,
ADP owed its client a fiduciary duty of “undivided service and loyalty” and a duty to
perform diligently, among other duties. (Field v. Century 21 Klowden-Forness Realty
(1998) 63 Cal.App.4th 18, 25; see Whitney Inv. Co. v. Westview Dev. Co. (1969) 273
Cal.App.2d 594, 601.) While Kerry said he communicated with Schmidt about the work
he was doing to close the deal and she “encouraged” his work, there is no indication she
requested any of it. They were not in a principal-agent relationship such that one might
expect her to request services of him.
Additionally, although recovery in quantum meruit does not require proof of an
express agreement, the doctrine does require that the plaintiff render its services under
some “understanding or expectation” on the part of both parties that compensation would
be forthcoming. Schmidt did not know Kerry and Mark were brokers until late July
2006. She thought they were buyers, and thus there was no understanding on her part
that Kerry was rendering broker services with an expectation of compensation from her.

21
By the time she did expect to compensate them (an offer Kerry rejected), the deal was
nearly done.
Further, there was substantial evidence Realty Executives had no obligation to
compensate ADP. (Miller, supra, 162 Cal.App.4th at p. 1344.) According to
Pagliassotti, the NAR Code of Ethics and Standards of Practice is the “bible” for real
estate brokers. NAR is the primary national trade association for real estate
professionals. NAR members agree to be bound by its code. (1 Baxter et al., Cal. Real
Estate Brokers: Law and Litigation (Cont.Ed.Bar 2013) Overview of Real Estate
Brokerage, § 1.6, pp. 1-6 to 1-7.) The NAR code applies equally to members of the
California Association of Realtors (CAR), which is a member association of NAR. (Id.
at p. 1-6.) Schmidt was a member of both NAR and CAR in 2006. Pagliassotti opined
any licensed real estate broker would be aware of the NAR code. The NAR code
requires brokers to cooperate with each other, but that obligation to cooperate “does not
include the obligation to share commissions, fees, or to otherwise compensate another
broker.” The SIOR, a professional organization for commercial (industrial and office)
realtors, also promulgates an ethical code. Its code states the obligation to cooperate
with other brokers “is not an obligation to share commissions or fees or to otherwise
compensate other real estate professionals.” Though these ethical codes are not binding
law, courts have looked to them when circumscribing brokers’ duties. (E.g., Nguyen v.
Scott (1988) 206 Cal.App.3d 725, 736; Easton v. Strassburger (1984) 152 Cal.App.3d 90,
101.)
The court’s findings in the statement of decision demonstrate it accepted Realty
Executives and Schmidt’s evidence and rejected ADP’s version of the events. Moreover,
it found ADP’s evidence of a custom and practice to share commissions 50-50 “utterly
unconvincing.” In light of the substantial evidence that the circumstances supporting
quantum meruit did not exist here, and the court’s findings against ADP in the statement
of decision, we cannot say it is probable the court would have reached a more favorable
result, absent the asserted error.

22
3. Causes of Action Involving Valleywide’s Duties
ADP alleged breach of contract, breach of fiduciary duty, and negligence against
Valleywide because it (1) did not wait for an executed “separate agreement” on
commission between brokers, as referenced in paragraph 7.1(k), (2) refused to hold the
commission pending resolution of the commission dispute, as instructed by the buyers
and ADP, and (3) instead distributed all the disputed commission funds to Realty
Executives. ADP argues the court erred in finding Valleywide did not receive conflicting
instructions on commission and Valleywide did not have a duty to hold the disputed
commission. We need not address whether the court erred in these findings. Regardless
of whether Valleywide’s disbursal of the commission funds breached any contract or tort
duties, Valleywide is not liable due to a lack of causation.
“An escrow holder who fails to comply with instructions may be liable to the
injured party on a theory of breach of contract, negligence or breach of fiduciary duty.”
(3 Miller & Starr, Cal. Real Estate (3d ed. 2010) Escrows, § 6:17, pp. 6-68 to 6-69, fns.
omitted.) Causation of damages is an essential element of all three causes of action.
(Gutierrez v. Girardi (2011) 194 Cal.App.4th 925, 932; Troyk v. Farmers Group, Inc.
(2009) 171 Cal.App.4th 1305, 1352; Vasquez v. Residential Investments, Inc. (2004) 118
Cal.App.4th 269, 278, 279.) Causation of damages in contract as well as tort cases
“‘requires that the damages be proximately caused by the defendant’s breach, and that
their causal occurrence be at least reasonably certain.’ [Citation.] A proximate cause of
loss or damage is something that is a substantial factor in bringing about that loss or
damage.” (US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 909.)
“Substantial factor” has no precise definition, but it is something more than a theoretical
factor in producing the injury. (Ibid.) “Conduct is not a substantial factor in causing
harm if the same harm would have occurred without that conduct.” (CACI No. 430,
brackets omitted; see Viner v. Sweet (2003) 30 Cal.4th 1232, 1240.)
Valleywide argues if ADP failed to show it is entitled to any of the commission
funds, Valleywide’s actions could not have been the proximate cause of any damage to
ADP. We agree. ADP alleges damages against Valleywide in an amount equal to half

23
the commission, plus the attorney fees and costs ADP has incurred to collect from Realty
Executives and Schmidt. In other words, ADP’s alleged damages are predicated on the
theory that it was entitled to half the commission under an express agreement or a
quantum meruit theory. But we hold otherwise in the foregoing parts. ADP was not
entitled to a portion of the commission funds, and ADP would not now be entitled to the
commission funds, even had Valleywide held them and not disbursed them. What is
more, assuming Valleywide had held the funds, ADP still would have incurred attorney
fees and costs to resolve the dispute with Realty Executives and Schmidt. Accordingly,
any failure to act according to ADP’s instructions was not a substantial factor in causing
ADP’s loss. The same loss would be occurring even without Valleywide’s failure to hold
the funds.
ADP asserts we should reverse and remand regardless of whether Valleywide’s
actions caused actual damages because ADP is entitled, at a minimum, to nominal
damages for breach of contract. Assuming for the sake of argument Valleywide’s
conduct constituted a breach of contract, we need not reverse for an award of nominal
damages. A plaintiff may recover nominal damages for breach of contract, despite that
actual damage was not inflicted, because the defendant’s failure to perform a contractual
duty is a legal wrong fully distinct from actual damages. (Civ. Code, § 3360; Sweet v.
Johnson (1959) 169 Cal.App.2d 630, 632.) The amount of nominal damages must be
trivial, no more than a few cents or a dollar. (Avina v. Spurlock (1972) 28 Cal.App.3d
1086, 1089.) Generally, when a plaintiff is entitled at most to nominal damages, the
failure to award nominal damages is not ground for reversal. (Sweet v. Johnson, supra, at
p. 633.)
ADP relies on two exceptions. When the award of nominal damages carries costs
as a matter of right, or when the cause of action seeks to establish a permanent property
right, the failure to award nominal damages may be grounds for reversal. (Sweet v.
Johnson, supra, 169 Cal.App.2d at pp. 633-634.) Neither of these exceptions apply.
ADP does not identify the permanent property right at issue, but assuming it is the
asserted right to a commission, we have determined ADP did not prove any such right.

24
As to costs, ADP would not be entitled to costs as a matter of right if awarded nominal
damages. A “‘[p]revailing party,’” which includes the party with a net monetary
recovery, is entitled to recover costs as a matter of right in any action “[e]xcept as
otherwise expressly provided by statute.” (Code Civ. Proc., § 1032, subds. (a)(4), (b),
italics added.) One statutory exception to a prevailing party’s right to recover costs is set
forth in Code of Civil Procedure section 1033. That section allows a trial court in its
discretion to deny costs when a prevailing plaintiff recovers a judgment in an unlimited
civil case within the $25,000 jurisdictional limit for a limited civil case, such as a
judgment for nominal damages for breach of contract. (Code Civ. Proc., § 1033, subd.
(a); Carter v. Cohen (2010) 188 Cal.App.4th 1038, 1052.) Because a judgment for
nominal damages would not have carried costs as a matter of right, the general rule
applies, and any failure to award nominal damages does not warrant reversal. (Sweet v.
Johnson, supra, at p. 634.)
4. Attorney Fees and Costs
After judgment, the parties filed memoranda of costs, and Realty Executives and
Schmidt filed a motion for attorney fees. The court awarded (1) Realty Executives and
Schmidt, jointly and severally, costs in the amount of $14,911.68; (2) Realty Executives
and Schmidt, jointly and severally, attorney fees in the amount of $520,182.25; and (3)
Valleywide costs in the amount of $8,469.75. It also granted Schmidt’s motion to strike
the costs of ADP because Schmidt was the prevailing party as between the two.
ADP asserts several errors with respect to the costs and fee orders. We review a
trial court’s award of fees and costs for abuse of discretion. (Connerly v. State Personnel
Bd. (2006) 37 Cal.4th 1169, 1175; Seever v. Copley Press, Inc. (2006) 141 Cal.App.4th
1550, 1556.)
a. Due Process
ADP contends the fee award to Schmidt violated its due process rights because it
did not have adequate notice of the grounds for the award. ADP asserts Schmidt’s
opening brief sought fees only under Code of Civil Procedure section 1021, yet in the

25
reply brief she also sought fees under Civil Code section 1717. The court’s award cited
only section 1717.
ADP does not accurately characterize Realty Executives and Schmidt’s joint
motion. Their notice of motion cited both statutes as a basis for their motion. Their
memorandum of points of authorities cites both statutes as a basis for the fee award to
both defendants. (E.g., “The law is clear that since they are the prevailing parties,
Defendants are entitled to enforce the attorneys’ fees provision in Paragraph 14 of the
Purchase Agreement, pursuant to Civil Code § 1717 and Code of Civil Procedure
§ 1021.”) ADP had adequate notice of the grounds for Schmidt’s motion and an
opportunity to respond in its opposition brief and at the hearing. We find no violation of
ADP’s due process rights.
b. Fees Sought in Cross-complaint
In her cross-complaint against ADP, Schmidt sought as damages the attorney fees
she incurred for defending and indemnifying Realty Executives in this litigation. She did
not recover these damages because she failed to prove the causes of action in the cross-
complaint. After trial, she successfully sought her own attorney fees as allowable costs
on the ground that she was the prevailing party. ADP contends the court erred in
awarding fees to Schmidt as the prevailing party because she did not prove them as an
element of damages on her cross-complaint. But she was not required to do so to
recover them as costs, and ADP cites no authority for this proposition. “When an issue is
unsupported by pertinent or cognizable legal argument it may be deemed
abandoned . . . .” (Landry v. Berryessa Union School Dist. (1995) 39 Cal.App.4th 691,
699.) We decline to reverse the fee order on this ground.
c. Prevailing Party Status
ADP contends the court abused its discretion in finding Schmidt was the
prevailing party for purposes of the attorney fees award because she did not prevail on
her cross-complaint. We disagree.
The trial court’s order recognized Schmidt’s right to fees was complicated by the
fact that she had prevailed on the complaint but not on her cross-complaint. The court

26
noted that when there are cross-actions and the court awards no relief in either action, it is
not obligated to find there is no prevailing party. (Hsu v. Abbara (1995) 9 Cal.4th 863,
875, fn. 10.) Rather, “[i]f the court concludes that the defendant’s cross-action against
the plaintiff was essentially defensive in nature, it may properly find the defendant to be
the party prevailing on the contract.” (Ibid.) The court went on to thoroughly analyze
whether Schmidt’s cross-complaint was essentially defensive in nature and concluded it
was.
ADP’s argument does not address the court’s conclusion that the cross-complaint
was essentially defensive in nature. Instead, it argues Schmidt did not fit the contractual
definition of prevailing party under the purchase agreement. ADP asserts only a “clear
winner”—one who prevails on all its claims and defenses—qualifies as a prevailing
party.
The attorney fee provision in the purchase agreement states:
“If any Party or Broker brings an action or proceeding involving the
Property whether founded in tort, contract or equity, or to declare rights
hereunder, the Prevailing Party (as hereafter defined) in any such
proceeding, action, or appeal thereon, shall be entitled to reasonable
attorneys’ fees. . . . The term, ‘Prevailing Party’ shall include, without
limitation, a Party or Broker who substantially obtains or defeats the relief
sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense.”
(Italics added.)
ADP maintains Schmidt would be the prevailing party under this provision only if
she both obtained the relief sought in her cross-complaint and defeated the relief sought
in the complaint. We do not agree with this interpretation. The language is clear that a
prevailing party can be one who either substantially obtains or defeats the relief sought.
Moreover, even if we were to interpret the language as ADP suggests, the definition of
prevailing party would merely “include, without limitation,” ADP’s definition, and it thus
could include other definitions. The court did not, therefore, abuse its discretion by
looking to case law to help it determine the prevailing party.

27
d. Realty Executives’ Fees
ADP next contends the court erred in awarding Realty Executives its fees because
Schmidt provided its defense and it did not actually incur fees. We also reject this
contention.
California courts have repeatedly affirmed awards of attorney fees that were not
“actually incurred.” (Nemecek & Cole v. Horn (2012) 208 Cal.App.4th 641, 651-652.)
For instance, in PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1094-1095, our
Supreme Court held attorney fees may be recovered under Civil Code section 1717 for
the work of in-house counsel. The trial court was not required to use a “cost-plus
approach”—a calculation of the actual salary, costs, and overhead of in-house counsel—
but could instead use market value to determine reasonable attorney fees. (Id. at pp.
1096-1097.) In Lolley v. Campbell (2002) 28 Cal.4th 367, 371, our Supreme Court
rejected the contention that the trial court could not award attorney fees to an indigent
employee who did not incur fees because he was represented by the Labor
Commissioner. And in International Billing Services, Inc. v. Emigh (2000) 84
Cal.App.4th 1175, 1179, 1193, the court held the prevailing parties were entitled to an
attorney fees award even though a third party (their employer) had paid their fees during
litigation. The nonprevailing parties could not avoid their obligation to pay attorney fees
based on the “‘fortuitous circumstance’” that the prevailing parties had “discovered how
to defend the lawsuit without having to pay out of their pockets.” (Id. at p. 1193; see also
Staples v. Hoefke (1987) 189 Cal.App.3d 1397, 1410 [“Plaintiffs were not entitled to
avoid their contractual obligation to pay reasonable attorney fees based on the fortuitous
circumstance that they sued a defendant who obtained insurance coverage providing a
defense.”].)
Consistent with these authorities, we hold the court did not err in awarding fees to
Realty Executives.

28
e. Denial of Costs to ADP
ADP asserts the court erred in denying ADP its costs against Schmidt on her
cross-complaint because it fell within the statutory definition of “prevailing party” for
costs purposes. We disagree.
A prevailing party is entitled as a matter of right to recover costs under Code of
Civil Procedure section 1032. (§ 1032, subd. (b).) “‘Prevailing party’ includes [(1)] the
party with a net monetary recovery, [(2)] a defendant in whose favor a dismissal is
entered, [(3)] a defendant where neither plaintiff nor defendant obtains any relief, and
[(4)] a defendant as against those plaintiffs who do not recover any relief against that
defendant.” (Id., subd. (a)(4).) Category three applies to the situation here—when a
plaintiff files suit and then a defendant files a cross-complaint. This is the only category
that refers to a defendant’s attempt to obtain relief, which a defendant cannot do in an
answer. The defendant must file a cross-complaint to affirmatively seek relief.
(McLarand, Vasquez & Partners, Inc. v. Downey Savings & Loan Assn. (1991) 231
Cal.App.3d 1450, 1454.)
Under Code of Civil Procedure section 1032, when a plaintiff is denied relief on
the complaint and the defendant is denied relief on the cross-complaint, the defendant is
the prevailing party entitled to costs. (Cussler v. Crusader Entertainment, LCC (2012)
212 Cal.App.4th 356, 371; McLarand, Vasquez & Partners, Inc. v. Downey Savings &
Loan Assn., supra, 231 Cal.App.3d at p. 1454.) ADP was not the defendant/cross-
complainant in this situation and thus was not the prevailing party.
f. Valleywide’s Costs
ADP lastly contends the court erred in granting Valleywide its costs because its
memorandum of costs was untimely. We disagree.
The court entered the judgment on October 26, 2012. On the same date, the court
clerk mailed the parties a minute order entitled “Statement of Decision After Court
Trial/Notice of Entry of Judgment and Judgment.” (Capitalization omitted.) On
October 31, 2012, counsel for Schmidt and Realty Executives served notice of entry of

29
judgment on all the parties. Valleywide served its memorandum of costs on
November 15, 2012.
Under California Rules of Court, rule 3.1700(a)(1),4 a party must serve its cost
memorandum “within 15 days after the date of mailing of the notice of entry of judgment
or dismissal by the clerk under Code of Civil Procedure section 664.5 or the date of
service of written notice of entry of judgment or dismissal, or within 180 days after entry
of judgment, whichever is first.”
Here, the 15-day period for filing the memorandum of costs started running on
October 31, 2012, when Schmidt and Realty Executives served notice of entry of
judgment. This is because the clerk’s mailing on October 26 was not sufficient to
constitute “notice of entry of judgment . . . by the clerk under Code of Civil Procedure
section 664.5.” (Rule 3.1700(a)(1).) Under section 664.5, the clerk of court is required
to mail notice of entry of judgment in only two cases—when the prevailing party is not
represented by counsel or “[u]pon order of the court.” (Code Civ. Proc., § 664.5, subds.
(b), (d).) Otherwise, it is the duty of the party submitting the proposed judgment to serve
notice of entry of judgment on all parties. (Id., subd. (a); Van Beurden Ins. Services, Inc.
v. Customized Worldwide Weather Ins. Agency, Inc. (1997) 15 Cal.4th 51, 63.) Unless
the prevailing party is in propria persona, for a clerk’s mailing to qualify as a notice of
entry of judgment under section 664.5, the “notice must affirmatively state that it was
given ‘upon order by the court’ or ‘under section 664.5.’” (Van Beurden Ins. Services,
Inc., at p. 64.) The clerk’s mailing in this case did not state either of those things.
Accordingly, the clerk’s mailing did not qualify as a clerk’s notice of entry of
judgment under Code of Civil Procedure section 664.5 and rule 3.1700, and it therefore
did not trigger the period for filing memoranda of costs. Schmidt and Realty Executives
served the notice of entry of judgment to trigger the period on October 31. Valleywide’s
memorandum of costs was timely from this date.

4 Further rule references are to the California Rules of Court.

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 DISPOSITION
The judgment and orders are affirmed. Realty Executives, Schmidt, and
Valleywide shall recover costs on appeal.

FLIER, J.
WE CONCUR:

BIGELOW, P. J.

RUBIN, J.

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