Spanish Inn v. Goodell CA4/1

Filed 4/29/15 Spanish Inn v. Goodell CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

SPANISH INN, INC. et al., D066966

Cross-complainants and Appellants,

v. (Super. Ct. No. INC1104681)

RALPH GOODELL et al.,

Cross-defendants and Respondents.

APPEAL from a judgment of the Superior Court of Riverside, John G. Evans,

Judge. Affirmed.

Law Offices of Nejat Kohan, Nejat Kohan; and James S. Link for Cross-

Complainants and Appellants.

Milberg & De Phillips, Russell M. De Phillips and Roy Carlson, Jr., for Cross-

defendants and Respondents.

This is one of many appeals arising from litigation over the renovation of a hotel

property in Palm Springs. This one arises from a cross-complaint filed by the developer

against its architects alleging breach of contract and professional negligence. The trial
court granted the architects' summary judgment motion, finding the developer lacked

standing because it had absolutely assigned its interests in the architects' contract to the

construction lender. The developer contends the trial court erred in its interpretation of

the assignment agreement because the assignment was conditioned on the developer's

default and no such default had yet occurred. We independently construe the assignment

agreement and conclude it absolutely assigns the developer's rights. Accordingly, we

affirm.

FACTUAL AND PROCEDURAL BACKGROUND

The appellants are Spanish Inn, Inc. (Spanish Inn) and its two shareholders,

Hormoz Ramy and Nejat Kohan (together, cross-complainants). In or about 1995, Ramy

purchased a resort complex in Palm Springs known as the Spanish Inn (Property). In

2002 Ramy and Kohan teamed up to renovate the Property. On September 26, 2005,

Spanish Inn and an architecture firm, Brittany West, entered into a work order for

architectural services, as modified, for certain architectural services in connection with

the Property (the Architect's Contract).1

On April 18, 2008, Spanish Inn and Nara Bank entered into a construction loan

agreement documenting a $6 million loan by Nara Bank to Spanish Inn (the Loan

Agreement). The same day, Spanish Inn executed an "Assignment of Architect's

Contracts" (the Assignment Agreement), under which Spanish Inn assigned its rights and

1 Brittany West's initial proposal was dated September 7, 2005. Respondent Ralph
(Skip) Goodell signed Spanish Inn's counterproposal on Brittany West's behalf on
September 26, 2005. We refer collectively to Brittany West and Goodell as cross-
defendants.
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interest in the Architect's Contract to Nara Bank. Brittany West consented to the

assignment.

Spanish Inn encountered delays in its renovation of the Property and Nara Bank

ultimately declared Spanish Inn to be in default. Nara Bank sued to foreclose on the

Property, and cross-complainants filed a cross-complaint against (among others) cross-

defendants. In their operative seventh amended cross-complaint, cross-complainants

assert causes of action against cross-defendants for breach of contract and professional

negligence.2 In their answer, cross-defendants assert as an affirmative defense that

"[cross-complainants] have assigned any and all purported claims they assert against

[cross-defendants] and that they lack standing to bring this action against [cross-

defendants]."

Cross-defendants moved for summary judgment on the theory that cross-

complainants lacked standing by virtue of their assignment of the Architect's Contract to

Nara Bank via the Assignment Agreement. Cross-complainants' three-page-long

opposition argued cross-complainants had standing because the Assignment Agreement's

assignment was not absolute, but rather, was conditioned on Spanish Inn's default under

the Loan Agreement, the occurrence of which cross-complainants asserted was a triable

2 Cross-complainants do not explain in their operative pleading or on appeal how
Ramy or Kohan had standing to assert claims arising from a contract to which they were
not parties—only Spanish Inn and Brittany West were. We need not address this issue,
and will assume, for purposes of this appeal only, that if Spanish Inn had standing, then
Ramy and Kohan did too.
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issue of fact. The trial court granted respondents' motion and entered judgment in their

favor.

Cross-complainants timely appealed.

DISCUSSION

Cross-complainants contend the trial court erred by granting summary judgment

based on an erroneous construction of the Assignment Agreement as providing for an

absolute, as opposed to conditional, assignment of the Architect's Contract. They further

contend that under their construction, there is a triable issue of fact regarding whether the

Assignment Agreement's purported triggering condition occurred.

Legal Framework

We review de novo an order granting a motion for summary judgment. (Aguilar v.

Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860 (Aguilar).) Summary judgment is

appropriate if all the papers submitted show that there is no triable issue as to any

material fact and that the moving party is entitled to judgment as a matter of law. (Code

Civ. Proc., § 437c, subd. (c).) "To demonstrate that an action has no merit, a defendant

often will seek to establish that each cause of action alleged in the complaint has no

merit, either because one or more of the elements of the cause of action cannot be

separately established or because the defendant has an affirmative defense to the cause of

action. (See [Code Civ. Proc.], subd. (o).) It is possible, however, for a defendant to

defeat an action on a motion for summary judgment without attacking each cause of

action separately, for example, by showing the action has no merit because the plaintiff

lacks standing." (Lickter v. Lickter (2010) 189 Cal.App.4th 712, 736; Scott v. Thompson

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(2010) 184 Cal.App.4th 1506, 1510 ["Lack of standing is a fatal jurisdictional defect that

requires judgment against the plaintiff."].)

Cross-defendants contend cross-complainants lacked standing to pursue the

asserted claims because Spanish Inn assigned its rights and interest in the Architect's

Contract to Nara Bank. "Once a claim has been assigned, the assignee is the owner and

has the right to sue on it. [Citations.] In fact, once the transfer has been made, the

assignor lacks standing to sue on the claim." (Johnson v. County of Fresno (2003) 111

Cal.App.4th 1087, 1096.) Thus, whether cross-complainants have standing to sue

depends on the scope of the assignment under the Assignment Agreement.

" '[I]nterpretation of a contract is subject to de novo review where the

interpretation does not turn on the credibility of extrinsic evidence.' " (People ex rel.

Lockyer v. R.J. Reynolds Tobacco Co. (2003) 107 Cal.App.4th 516, 520.) "A contract

must be so interpreted as to give effect to the mutual intention of the parties as it existed

at the time of contracting, so far as the same is ascertainable and lawful." (Civ. Code,

§ 1636; Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18.) "The language of a

contract is to govern its interpretation, if the language is clear and explicit, and does not

involve an absurdity." (Civ. Code, § 1638.) "Where contract language is clear and

explicit and does not lead to absurd results, we ascertain intent from the written terms and

go no further." (Ticor Title Ins. Co. v. Employers Ins. of Wausau (1995) 40 Cal.App.4th

1699, 1707 (Ticor).)

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 Analysis

We conclude the Assignment Agreement assigned cross-complainants' right to sue

on claims arising under that agreement and, thus, cross-complainants lacked standing.

The Assignment Agreement's "Assignment of Contracts" clause is clear and

explicit: "[Spanish Inn] hereby grants, transfers, and assigns to [Nara Bank] all of

[Spanish Inn]'s present and future rights, title and interest in and to . . . the contract

between [Spanish Inn] and BRITTANY WEST (the 'Architect') dated September 7, 2005

('Architect's Contract')." (Italics added.) The "Power of Attorney" clause reinforces that

Spanish Inn assigned its rights under the Assignment Agreement to Nara Bank:

"[Spanish Inn] irrevocably appoints [Nara Bank] as [Spanish Inn] 's attorney-in-fact with

full power of substitution, at [Nara Bank]'s option; but with no obligation to do so, to

enforce [Spanish Inn]'s rights . . . under the Contract, either in [Spanish Inn]'s name or in

[Nara Bank]'s own name." (Italics added.) Under this clear and explicit language, we

must conclude the Assignment Agreement unconditionally assigned "all of [Spanish

Inn]'s rights, title and interest in and to" the Assignment Agreement unless doing so

would "lead to absurd results." (Ticor, supra, 40 Cal.App.4th at p. 1707; Civ. Code,

§ 1638.)

Spanish Inn argues it would be absurd to interpret the Assignment Agreement as

making anything other than a conditional assignment. In support, Spanish Inn cites the

agreement's "Lender's Rights" clause, which provides, in pertinent part, as follows:

"Unless and until a default shall occur under the Loan or under any of the Loan

documents, [Nara Bank] shall not exercise any of [Spanish Inn]'s rights under the

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Architect's Contract, provided, however, that from and after the time of any such default,

[Nara Bank] immediately shall become entitled, but shall not be obligated, to exercise

any rights of [Spanish Inn] under the Architect's Contract, and [Spanish Inn] shall have

the right to use or possess the plans, specifications, drawings, and models referred to

above and at [Nara Bank]'s option, to perform [Spanish Inn]'s obligations under the

Architect's Contract, if any."

Cross-defendants counter that this clause does not limit the scope of Spanish Inn's

assignment of its rights, but rather, only limits the timing of Nara Bank's exercise of those

rights. This argument is supported by the fact that the Assignment Agreement's

"Assignment of Contracts" clause uses unqualified, absolute language, while the

conditional language cross-complainants cite appears in the "Lender's Rights" clause.

(See, e.g., Carr Business Enterprises, Inc. v. City of Chowchilla (2008) 166 Cal.App.4th

14, 21-22 [finding headings helpful in construing contract].) As respondents put it, "The

language relied on by [cross-complainants] does not mean that further action was

necessary to transfer the rights [to Nara Bank]. Rather, it simply limits the use of the

rights that have been transferred. [¶] The Assignment [Agreement] contemplated an

immediate transfer of rights so that in the event of a default nothing more was needed to

be done by Nara Bank to enforce the terms of the Architect's Contract. An absolute

assignment with an affirmative enforcement step does not change the absolute nature of

the assignment." We agree.

Cross-complainants elaborate on their absurdity theory with the following

hypothetical scenario: "Had the project been completed and the lender repaid[, cross-

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defendants] would still be claiming they were not liable for the alleged negligence and

breach of contract. [Citation] The bank, having been paid, would not have wanted to

pursue an action for which the damages only belonged to Spanish Inn. Spanish Inn

would have suffered a compensable injury for which (under [cross-defendants']

interpretation) there would be no right to pursue." Demonstrating the hypothetical nature

of this scenario, cross-defendants counter that "[Nara Bank] could assert the claim under

the power of attorney or allow [Spanish Inn] to do so," but cross-complainants never

alleged, nor sought to introduce evidence showing, that they ever "attempted to request

that [Nara Bank] assert the claims and [Nara Bank] refused to do so."

Further demonstrating the hypothetical nature of cross-complainants' absurdity

scenario is their acknowledgement that Nara Bank declared Spanish Inn to be in default.

Although cross-complainants contend that whether Spanish Inn was truly in default is a

triable issue of fact,3 we need not reach that issue because we have already concluded

Spanish Inn's assignment of the Architect's Contract to Nara Bank was unconditional.

3 Cross-complainants argue "that any failure of performance by [Spanish Inn] was
the result of breaches of the loan agreement by the lender and that [Spanish Inn] was not
legally in default." Cross-complainants' briefing states that Spanish Inn's default is at
issue in two other appeals—Spanish Inn, Inc. v. Nara Bank et al. (Mar. 6, 2015,
D066487) and Pacifica L 39 LLC v. Ramy et al. (B255803)—both of which were
resolved by Courts of Appeal against Spanish Inn after cross-complainants completed
their briefing in this appeal. Spanish Inn petitioned the Supreme Court for review of our
decision in the former, which petition is still pending. (Spanish Inn, Inc. v. Nara Bank et
al. (S225750).) The Supreme Court denied Ramy and Kohan's petition for review of the
decision in the latter. (Pacifica L 39 LLC v. Ramy et al. (S224955).)
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 DISPOSITION

The judgment is affirmed. Cross-defendants are entitled to their costs on appeal.

NARES, J.

WE CONCUR:

BENKE, Acting P. J.

McINTYRE, J.

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