Filed 4/16/13 (opn. on rehearing)

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

TODD KURTIN, Plaintiff and Appellant,

v. BRUCE ELIEFF, Defendant and Appellant. G043999 (Super. Ct . No. 30-2007-00100307)

O P I N I O N

Appeals from a judgment and two orders of the Superior Court of Orange County, Nancy Wieben Stock, Judge. Judgme nt affirmed; one order affirmed; one order
affirmed as modified. Miller Barondness, Louis R. Miller, Daniel S. Miller; Snell & Wilmer, Richard A. Derevan, Todd E. Lundell a nd Andreea V. Micklis for Plaintiff and Appellant. Andersen Hilbert & Parker, M. Steven Andersen, Jeffrey N. Garland, Jason L. Satterly; Luce, Forward, Hamilton & Scripps; McKenna Long and Aldridge and Charles A. Bird for Defendant and Appellant.
* * *2 We affirm the trial court’s judgmen t holding defendant Bruce Elieff liable for misstating his authority to bind a group of real estate businesses known as the “Joint Entities” in the course of agreeing to buy out his former partner, pl aintiff Todd Kurtin. We affirm the trial court’s posttrial or der denying Elieff’s motion for judgment notwithstanding the verdict. A nd we affirm the trial court’s gr ant of a new trial as to the issue of the precise amount of damages which Kurtin may recover. However, as to one of Kurtin’s cause s of action – for liability under Civil Code section 2343 for lack-of-good-faith breach of an agent’s warranty of authority – the new trial order must extend to liability as we ll. (All further statutory references to sections 2343, 2342, or 3318 will be to the Ci vil Code.) The jury re turned inconsistent verdicts. Liability under section 2343 requires either (1) the lack of a good faith belief on an agent’s part that “he has au thority” to bind “his principa l,” or (2) an act by the agent that is “wrongful” in its nature. Case law has equated “wrongful” with tortious. Here, the jury found that Elieff did have a good faith belief in his authority to bind what the parties refer to as the Joint Entities when he signed the agreem ent. Furthermore, the jury specifically exonerated Elieff of all tort claims pres ented against him to the jury, including even the claim for ne gligent misrepresentation. The proper remedy for inconsistent verdicts is a new trial. (See Shaw v. Hughes Aircraft Co. (2000) 83 Cal.App.4th 1336, 1344 ( Shaw ) [“Inconsistent verdicts are ‘“‘against the law,’”’ and the proper reme dy is a new trial.”].) Accordingly, we will modify the new trial order on appeal to pr ovide for the trial of liability under section 2343, as well as damages. (Code Civ. Proc., § 906.) As modified, we affirm that new
trial order.
BACKGROUND 1. The 2005 Settlement Agreement Kurtin and Elieff had been equal partners in a series of real estate ventures in the 1990’s, doing business u nder the rubric of SunCal Companies. In 2003, growing3 disagreements between the two le d Kurtin to sue Elie ff to “separate” themselves. By that time SunCal Companies had already been “transformed” into “basically” Elieff’s

company. The litigation led to a mediation, which in turn led to a settlement agreement. The agreement, signed in Augus t 2005, provided that Elieff was to buy out Kurtin for $48.8 million in four installment payments.
As Kurtin and Elieff stru ctured their partnership, each real estate project was its “own little company.” The settlement agreement provided that of the $48.8 million, both Elieff and the Join t Entities were jointly and se verally responsible for the first installment of $21 million. However, only the Joint Entities were responsible for making the last three installments.

2. Default on the Payments Elieff made the $21 million first and on ly installment payment for which he could be held personally responsible. The Joint Entities made the $1.8 million second installment payment for which they alone were responsible. But the Joint Entities paid only about $3.5 million of the $13.1 million third installmen t payment, and nothing on
the final installmen t of $12. 9 million. Elieff had signed the settlement agreem ent both “individua lly and on behalf of the Elieff Separate Entities and the Joint En tities.” The agreement had provided that if there was a default in any of the last three payments, Kurtin would be “entitled to have judgment entered pursuant to C.C.P. Sec tion 664.6 against the Joint Entities” in an amount equal to the unpaid balance. But when Kurtin sought to enforce the agreemen t against the Joint Entities
under section 664.6 of the Code of Civil Procedure in the context of th e 2003 litigation, the trial judge denied his request. The judg e determined that the Joint Entities were not “parties” to Kurtin’s 2003 litigation.4 Elieff opposed the attempt to enforce the agreement. He argued that the trial judge had correctly determined the Join t Entities had to be added as parties to the lawsuit before any judgment coul d be entered against them. The trial judge did not address th e question of whether Elieff had the authority to bind the Joint En tities. However, in opposition to a writ petition filed in this court by Kurtin contesting the trial court’s order, Elieff pointed out that “some of the Joint Entities are majority owne d by independent thir d-parties,” and further asserted “that only his interest in the Join t Entities, if anything, is subject to legal action.” (Italics in original.) Pursuant to Evid ence Code section 452, subdivi sion (d), on our own motion we have taken judicial notice of the records in writ proceeding in this court’s docket number
G037647. Two of the Joint Entities, Moor park 150 LLC (M oorpark), and SJD Partners (SJD), appeared through their own co unsel, and argued that Elieff did not have any authority to bind their assets “to resolve his personal dispute with Kurtin.” As they asserted in opposing the writ relief sought by Kurtin, Elieff “might as well have pledged the Brooklyn Bridge to Kurtin.” Elieff further argued that Kurtin had an adequate remedy at law. Besides Kurtin’s bringing the Joint En tities into the case, Elieff to ok the position that Kurtin could either (1) demand arbitration under the arbitration clause of the settlement agreement, or (2) sue for breac h of the settlement agreement.

3. Arbitration Kurtin never tried to bring the Join t Entities into the case. Instead he sought arbitration. We will recount the rele vant facts involving the arbitration when we discuss whether the arbitration decision precludes any judgment against Elieff in more detail. For the moment, we need only note two things about the result of the arbitration. First, the arbitrator determ ined that the amount owing to Kurtin was $24,411,433.86.5 Second, the arbitrator announced a decision that only gave Kurtin the right, along the lines previously advocated by Elieff’s attorneys in the writ proceeding, to foreclose on
Elieff’s own interests in the Jo int Entities to the exte nt of that amount.

4. The Litigation a. Phase 1 accounting After the arbitration, Kurtin filed this action against Elieff and the Joint Entities, including Moorpark and SJD. A “distribution” clause in the settlement agreement prompted the trial judge to propos e a bifurcated trial. The clause provided that “Elieff shall not take any distribu tion from any of the Joint Entities if such distribution prevents satisfaction of paym ent of the Settlement Payments.” With reference to that clause, trial judge noted that Kurtin was “alleging certain causes of action concerning how the defendant handle d certain funds or a ssets of” the Joint
Entities. There was thus a “sub-issue” as to whether “distributions are measured in every entity at the very moment they emerge or whether the alleged pre-existing practice treating the joint entities as a single unified ec onomic force allows so mebody to exercise the business judgment to consider it more as a whole and utilize what might be considered net profit from one entity to help preserve the viability of another entity for the purpose allegedly of maki ng more money for everybody as to all the entities.” That is, the judge was concerned whether, if Elie ff moved money around from one entity to another for the purpose of maximizing tota l aggregate profit, such movement might constitute a violation of the agreement. Phase 1 of the bifurcated proceedi ngs consisted of a five-day trial “concerning the accounting issues arising out” of Kurtin’s claim that Elieff had breached the settlement agreement by, among other thi ngs, taking distributi ons from entities that prevented repayment of remaining payments . Kurtin had charged that some $22.4
million of “distributions” had been diverted to Elieff himself or E lieff-controlled entities.6 After hearing evidence, the court made certain, limited, findings. The “evidence received by the Court,” said the judge, “has, in fa ct, accounted for every penny of the funds that could be classified in any way as a distribution from a joint entity in the period following the August 20 05 settlement agreement.” But the “every penny” comment did not mean the trial judge was ruling that
Elieff had taken no “distributions ” in contravention of the agr eement. In fact, the trial judge did not actually define th e word with the exce ption of ruling, as a matter of law,
that the word “distribution” could not “b e interpreted as precluding any and all distributions from being utilized for the good of the whole”

b. Phase 2 jury trial The result of phase 1 was an elaborate jury instruction (Jury Instruction No. 10 in the record). The jury in struction encapsulates what happened at phase 1. In summary, the court ruled – and only ruled – that the $22.4 million in “distributions” fell into one of five categories, a nd left to the jury the task of deciding whether money falling into any given one of those categories was a “distribution” in contravention of the settlement agreement. We qu ote the relevant parts: “At an earlier trial, the Court foun d that after the Settlement Agreement between Mr. Elieff and Mr. Kurtin was signed, Mr. Elieff used distributions of money
from various of the Joint Entitie s in the total amount of $22, 384,632.22. . . . The Court found that all of this money wa s used by Mr. Elieff in the fo llowing five categories: (1) management services; (2) management expe nses; (3) management costs; (4) loan repayment or return of capital; and (5) payments to Mr. Kurtin. . . . [¶] The Court did not decide whether the taking of these dist ributions of money did or did not violate Paragraph 14 of the Settlement Agreement. The Court found that Paragraph 14 does not preclude Mr. Elieff from taking distributions from the Joint Entities, so long as the7 distributions were used to enhance, and not prevent or jeopardize, the possibility of Mr. Kurtin being paid the Settlement Payments required under the Settlement Agreement.”
Attached to the instruc tion was a chart giving the ju ry a list of 19 specific money outflows totaling $22 ,384,632.22 from various of the Joint Entities, and a recapitulation of the five categories (managem ent services, management expenses, and so on) which the judge had identifie d. Fourteen of the 19 outf lows listed told the jury only that the court had made “no specific finding s other than to conclude that the amount
distributed was used for one or more” of thos e categories. For example: Item number 4 showed that on November 6, 2006, $1.5 m illion from one entity, Serrano Heights East,
went into “one or more” of those five categories. The remaining five outflows were mo re specific. About $4 million was used (by Rancho Etiwanda 685 and Serrano Heights East) to reimburse “Elieff/SunCal” for “costs incurred on joint pr ojects.” Another outflow from Moorpark Equity Partners consisted of $1 million to repay a deposit fro m a third party, anot her $250,0 00 going to pay a third-party owner, with the balance (roug hly half a million dollars) going either to Moorpark Equity Partners its elf ($263,000) or to reimburse “Elieff/SunCal for advances made by Elieff” ($241,500). Only one item, a $1.8 million outflow from Rancho Etiwanda, was unambiguously shown to have been used to repay Kurtin. (Presumably this was the same $1.8 million referenced above as the second in stallment payment.) Even though the settleme nt agreement had not pers onally oblig ated Elieff to pay more than $21 million of the $48.8 buyout price, Kurtin sought recovery from Elieff on the theory that Elie ff had misrepresented his aut hority to obligate the Joint Entities to pay the balance. Concomitantly, Ku rtin also claimed that Elieff had breached a provision in the settlement agreement to execute the cu stomary documents “necessary to perfect this security interest” in Elieff’s in terests in the Joint Enti ties. And, as just discussed, Kurtin asserted that Elieff had ta ken distributions from th e Joint Entities that should have gone to pay off the buyout price.8 From these basic claims the followi ng six causes of action against Elieff were submitted to the jury: number 2, for br each of warranty of an agent’s authority under section 2342; number 3, for breach of warranty of an agent’s authority under section 2343; number 4, for fraud or inten tional misrepresentation in representing to
Kurtin that he had the author ity to sign for the Joint Entitie s; number 5, for negligently misrepresenting that he had the authority to si gn for the Joint Entities; number 6, for breaching the provision of the settlement agre ement that he would execute the documents necessary to perfect Kurtin’s s ecurity interests in Elieff’s share of the Joint Entities; and number 7, for breaching the provision of the settlement agreement not to take distributions which prevente d the Joint Entities from paying the balance of the buyout

amount. The jury, however, came back with an anomalous result. On the one hand, it found Elieff liable for breaching the warranty of authority under both sections 2342 and 2343, and in each case determined the amount of damage to be $24,411,433.86, which
was the exact amount the arbitrator had determ ined was owing on the unpaid balance. The jury further determined that Elieff ha d breached the provision requiring him to provide Kurtin with perfected se curity interests in Elieff’s in terests in the Joint Entities.
And it likewise determined that Elieff had breached the provisi on precluding him from taking distributions that prev ented the Joint Entities from payi ng off the balance of the $48.8 million. And, again, in each case the jury assessed Kurtin’s damages at exactly $24,411,433.86. But on the other hand the jury exone rated Elieff on both the intentional and negligent misrepresentation caus es of action. It specifically found, in answering the special verdict form, that Elie ff did not know his representation that he had authority to obligate the Joint Entities was fals e when he made it. And it sp ecifically found that Elieff did not make the representation recklessly and without regard for its truth. Further, the jury concluded that Elieff did not lack reas onable grounds to believe his representation9 was true when he made it. Likewise, the ju ry found, in answerin g the special verdict form in regard to liability unde r section 2343, that Elieff did not “lack a good faith belief” in his authority to sign on beha lf of the Joint Entities. But then again, the jury found lia bility under section 2343 because Elieff had committed an act “wrongful in its natur e” when he signed on behalf of the Joint Entities. As we discuss in more detail below, Kurtin’s counsel had ar gued to the jury that the precise acts committed by Elieff that were “wrongful in their natu re” were the alleged intentional and negligent misr epresentations, and yet the ju ry absolved Elieff of both intentional and negligen t misrepresentation.

c. Judgment, posttr ial motions and appeal Judgment was filed May 17, 2010, decreeing that Kurtin recover $24,411,433.86 from Elieff. With in 12 days Elieff gave notice of his intent to move for new trial. The notice was supported by four ju ror declarations all stating that the jury “solely” looked at the $24,411,433.86 from the ar bitration decision, and (as stated in each of the four declarations) did not discuss or “look at any other evidence to determine damages.” The new trial motion focused on the anomaly of liability under section 2343 in light of the jury’s exoneration of Elieff on the intentional and negligent misrepresentation claims. The motion further pointed out that even Kurtin’s own counsel had not asked the jury for da mages in excess of $8 million on the violation of the nodistribution clause. Elieff also filed a moti on for judgment notwith standing the verdict (JNOV). The trial judge denied the motion for JNOV, but granted the new trial motion as to damages only. The judge reas oned that the eviden ce would not support a $24,411,433.86 verdict on any of the four causes of action on which Kurtin had prevailed. The court noted that the $24,411 ,433.86 figure “exceeded the total amount of all” distributions from the Joint Entities, and even exceeded “Kurtin’s argued-for10 damages of $7,852,222.22.” The judge in par ticular rejected Kurtin’s argument that the $24,411,433.86 might be jus tified under section 2343 on the theory th at Elieff’s “‘wrongful acts’” subjected him to the “full liability of his principal.” She ruled that damages under section 2343 we re governed by section 3318 , and under section 3318, Elieff could only be liable fo r what Kurtin could have “recovered and collected” from the
Joint Entities. Elieff filed a timely notice of appeal , challenging the judgment, the order denying the JNOV motion, and the order granti ng in part and denyin g in part his motion
for new trial. Kurtin countered with a notic e of cross-appeal, also challenging the order granting in part and denying in part the new trial motion.

DISCUSSION 1. The Effect of the Arbitration
Elieff contends that the arbitration decision precludes the subsequent civil court judgment (either by way of res judicata or collateral estoppel, or both). Because the arbitration issue most clearly brings the various textual provisions of the settlement agreement into sharp relief, we now set them forth:

a. Relevant terms of the settlement agreement A number of particular features of the settlement agreement are relevant. First, the recitations at the beginning purport to tr eat Elieff and the Joint Entities as one collective entity. (“This Settle ment Agreement is entered into . . . between Todd Kurtin . . . and Bruce Elieff, the Elieff Separate Entities iden tified in Exhibit ‘A’ and the Joint Projects identified in Exhibit ‘B’ on the other hand (collectively ‘Elieff’).”) Second, the text of the agreement is clear that Elieff personally was only responsible for the initial $21 million insta llment payment, and not for the balance contemplated to come from th e Joint Entities. Th e point is made in three separate11 instances. Paragraph 2 directly says it: “Eli eff and each of the Jo int Entities are jointly and severally liable for making the first Settlement Payment in the amount of $21,000,000. The Joint Entities are liable fo r making the remainder of the Settlement Payments.” Paragraph 3 strong ly implies it, both by (a) defi ning default in terms of the particular “Elieff Party obligated to pay” (thus excluding Elieff parties, like Elieff himself, not obligated to pay) and also by (b) spec ifically separating Kurtin’s remedy for failure to pay the first in stallment from failure to pa y the other installments. Third, the text of the settlement agr eement contemplates that the assets of
the Joint Entities would secure the obligations of the Joint Entities under the agreement. It does so in paragraph 14 by both requir ing Elieff personally to “execute customary documents necessary to perfect” a security interest to be held by Kurtin and by preventing Elieff from taking distributions whic h impair that security. Rather than attempting to paraphrase the remainder of that paragraph, we now quote it in full: “Payment to Kurtin of the Se ttlement Payments shall be secu red by the interest of Elieff and the Joint Entities in the projects owned by the Joint Entities. Elieff and the Joint Entities shall execute customary documents necessary to perfect this security interest, including UCC-1 filings, provided however that Kurtin shall, within ten (10) business days of written notice execute those consents and/or subordination agreements necessary
for Elieff to refinance the Pacifi c Point project. Elieff shall not take any distribution from any of the Joint Entities if su ch distribution prevents sati sfaction of payment of the Settlement Payments.” Fourth, paragraph 15 of the settlement agreement contains an arbitration
clause. The arbitration clause reads: “The Pa rties believe that all of the material terms of their agreement are set forth herein. It is th e intent of the parties that this Settlement Agreement shall be final a nd binding and that this Settlement Agreement shall be
enforceable under C.C.P. Secti on 664.6. In the event that any Party claims that one or
more material terms have b een omitted from this Settlement Agreement, or that the12 Parties failed to reach an agreem ent as to one or more materi al terms, or that any other defect exists with respect to this Settlement Agreement that would make it unenforceable, the Parties agree to final and binding arbitrati on before Tony Piazza or, if Mr. Piazza is unable, before a mutually agreeable arbitrator. At such arbitration, the arbitrator shall imply a reasonable term that the arbitrator finds consistent with the purpose and intent of this Settlement Agreement or otherwise cure any defect in the Settlement Agreement by amending its terms. The sole act of the arbitrator shall be to issue an amendment to this Settlement Agreement implying such additional terms, curing any ambiguity or otherwise curing any defect in this Settlement Ag reement that would make this Settlement Agreement unenforceable. Th e Settlement Agreement, together with any amendment issued by the arbitrator, shall be enforceable under C.C.P. Section 664.6.” Finally, in paragraph 17, the agreemen t contains an integration clause: “This agreement contains the entire and only understanding between the Parties pertaining to the subject matter contained in it and supersedes any and all prior and/or contemporaneous oral or written negotia tions, agreements, representations and understandings. This agreement sha ll be governed by California law.”

b. The arbitration award Despite the “sole act” language in the settlement agreement, at the arbitration Kurtin sought a direct award for the balance due. His arbitration brief asserted: “Therefore, the arbitration award here should include an award against Elieff personally for the principal balance owing under the Settlement Agreement which, as explained below, is now $22,9 34,809.16 plus interest, attorn ey’s fees and costs in an amount according to proof at the hearing.” What Kurtin received, however, was in substance simply an amendment to the terms of the settlement agr eement. The arbitrator decreed that any recovery against
Elieff would be restricted to Elieff’s own interests in the Joint Entities, as distinct from13 the total assets of the Join t Entities themselves: “If paym ent of $24,411,433.86 is not made to Todd Kurtin by June 30, 2007, then Kurtin shall have the right to require Bruce Elieff to transfer to Kurtin or his designee by July 10, 2007, any and all of Elieff’s right, title and interest - held directly or indirectly - in and to any or all of the Joint Entities listed on ‘Exhibit B’ to the Settlement Agre ement of August 5, 2005 and Elieff shall promptly execute all documents necessary to effectuate such transfer.”
The narrowness of the arbitrator’s de cision (it would be a misnomer to call it an “award,” though the arbitrator himself re ferred to it as that) was emphasized by a statement which soon followed the sentence quot ed above, the essence of which was that
Kurtin could still assert furthe r rights under the settlement agre ement: “Exercise of this right [to require Elieff to give security in hi s own interests in the Joint Entities] shall not, of itself, extinguish Kurtin’s rights to paymen t under the Settlement Agreement, but shall only reduce the amount due under the Settlement Agreement by the fair market value of any Elief [ sic ] right, title or interest tr ansferred to Kurtin.” The second paragraph of the award th en bolstered the ri ght of Kurtin to
recover from Elieff’s own interests in the Joint Entities by pr ohibiting Elieff from encumbering those interests until Kurtin was “paid in full.” It also provided that Elieff
would hold “in constructive trust for Kurtin anything he received from said Joint Entities from this date [June 11 , 2007] forward.” The next two, one-sentence paragrap hs, suggested that there was no winner in the arbitration: Paragraph one read: “No attorney fees or costs are awarded.” Paragraph two read: “This award is not in tended to preclude any other remedy that Kurtin may have at law, or in equity.” The final paragraph of the award refe rred back to the arbitration paragraph of the original agreement. It self-consciousl y recognized that arbitration decision was, in fact, amending the terms of the original se ttlement agreement: “T his award shall also
constitute an amendment to the Settlement Agreement of August 15, 2005, pursuant to14 Paragraph 15 of that Agreemen t, and shall be enforceable under C.C.P. Section 664.6, as
well as enforceable as an arbitration award.”

c. Discussion Elieff argues the arbitration decision, as the result of a prior proceeding, necessarily precluded further litigation of his liability on th e unpaid balance under the settlement agreement in this civil action as a matter of re s judicata. As summarized by our Supreme Court in Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797, the doctrine of res judicata requires that the cause of action in the prior proceeding be the same as in the present cause of action, the prior proceeding result in a final judgment on the merits, and the parties be the same as in the prior proceeding. (Or in privity with parties in the prior proceeding). If applic able, the doctrine “not only precludes the relitigation of issues that were actually litigat ed, but also precludes the litigation of issues that could have been litigated in the prior proceeding.” ( Bullock v. Philip Morris USA,
Inc. (2011) 198 Cal.App.4th 543, 557.) Elieff emphasizes the “could have been” aspect of the res judicata doctrine. He argues that Kurtin asserted his “primary right” to be ma de whole in the arbitration proceeding, which is the same primary right he subsequently asserted in this civil case,
and therefore must be satisfied with the decision the arbitrator handed down. The flaw in Elieff’s logic is that he confuses what Kurtin asked for in the arbitration with the arbitrator’s power to give it in light of the scope of the arbitrator’s powers to which the parties had agreed. It is well established that the scope of an arbitrator’s powers are fixed by th e agreement to arbitrate. (E.g., Moncharsh v. Heily &
Blase (1992) 3 Cal.4th 1, 8 [the “‘“‘powers of an arbitrator are limited and circumscribed by the agreement or stipula tion of submission’”’”]; Kelly Sutherlin McLeod Architecture,
Inc. v. Schneickert (2011) 194 Cal.App.4th 519, 528 [“An arbitrator’s powers ‘derive from, and are limited by, the ag reement to arbitrate.’”].)15 Here, the settlement agreement c onferred only limited powers on the arbitrator. There is no prov ision giving the arbitrator powe r to make an award against any party for money. The arb itrator’s powers are limited to interpreting the settlement agreement and, at the most, amending it to insert intended but inadvertently omitted
material terms. And the arbitrator did just that. He interpreted and amended the agreement to insert terms which had been understood by the parties, but did not find their way into the final text. Thus, to the degree that the agreement was initia lly ambiguous as to Kurtin’s right to security involving all the assets of each Jo int Entity, the arbitrator cleared up that ambiguity by limiting Kurt in’s right to security to just Elieff’s interests in each Joint Entity. The “primary right,” then, that was adjudicated in the arbitration was not Kurtin’s “right to be made whole,” but Kur tin’s right, under the agreement, to have the mediator who midwifed the settlement agreemen t interpret, and if necessary amend, the agreement. This case thus presents the opposite of the usual could-have-been-decided situation in res judicata analysis, where a litigant seeks to litigate in a second proceeding what could have been litigated in the first place. Here, a l itigant sought to litigate more in the first proceeding than he could have possibly obta ined from it. Elieff’s argument that O’Malley v. Petroleum Maintenance Co. (1957) 48 Cal.2d 107 ( O’Malley ), University of San Francisco Facu lty Assn. v. University of San
Francisco (1983) 142 Cal.App.3d 942, 954 ( University of San Francisco ), Felner v. Meritplan Ins. Co. (1970) 6 Cal.A pp.3d 540, 544 ( Felner ), and Crofoot v. Blair Holdings Corp. (1953) 119 Cal.App.2d 156, 186-187 ( Crofoot ) compel a contrary result is unpersuasive. All these cases are distinguishable. O’Malley and University of San Francisco both involved second
agreements to specifically submit disputes to ar bitrators which clear ly encompassed the scope of what was later challenged in court. (See O’Malley, supra , 48 Cal.2d at p. 10816 [submission agreement made after initial coll ective bargaining agreement specifically included question of arbitrability by arbitrat ors] & p. 110 [holding employer bound by terms of its submission agreement]; University of San Francisco, supra , 142 Cal.App.3d at pp. 945, 953-95 4 [noting that “additional agr eement” plus “discussion at the hearing” showed that supplemental pens ion provisions “were properly a subject of arbitration,” plus “the parties stipulated” thatthe arbitrator had the power to decide issue of his own “jurisdiction’”].) Crofoot involved an agreemen t to arbitrate after a “plethora” of litigation which, by its terms, in cluded issues of law as well as fact . The court rejected, as a matter of textual interpretation of the agreement to arbitrate, one party’s argument that the terms of the agreement “necessarily” excluded issues of law. ( Crofoot, supra , 119 Cal.App.2d at pp. 164, 186.) Likewise, in Felner , the text of the agreement to arbitrate – there an uninsured motorist pr ovision in an insurance polic y – was held “broad enough” and “sufficiently comprehensiv e” to include a dispute over wh ether an uninsured motorist actually came into “physical c ontact” with the insured. ( Felner, supra , 6 Cal.App.3d at pp. 543-544.) In the case before us, unlike O’Malley and University of San Francisco , there was no second agreement specifical ly to arbitrate which encompassed the arbitrability of some issue which might have been outside some initi al agreement. And
unlike Crofoot and Felner , the actual text of this ar bitration agreement – here, the settlement agreement itself – will not support the resoluti on by the arbitrator of the question of damages. We need only note additionally that while Kurtin may have sought
more from the arbitrator than the arbitrator had the power to give, Elieff vigorously opposed Kurtin’s attempt, and Elieff was successful in that opposition.17 2. The Mediation Privilege What we have just said about the na ture of the settlement agreement bears on Elieff’s main argument agai nst the judgment, namely thatKurtin’s invocation of the mediation privilege denied Elieff a fair tria l. Elieff’s argument goe s like this: Various terms of the settlement agreement were ambi guous, particularly the clauses requiring Elieff to execute “customary” security documents. Typically, in contract litigation,
extrinsic evidence is al lowed so that the trier of fact may resolve the issue of what the parties intended when they used ambi guous terms in a contract. (E.g., Duncan v. The McCaffrey Group, Inc. (2011) 200 Cal.App.4th 346, 3 81, overruled on another point in Riverisland Cold Storage v. Fres no-Madera Production Credit Assn. (2013) 55 Cal.4th 1169, 1176, 1182 [“extrinsic evidence can be admitted to explain the ambiguity in the contract”].) But here, by asserting the “m ediation privilege” (see Evid. Code, § 1119), Kurtin effectively prevented the trier of f act from hearing eviden ce from the mediation bearing on any ambiguities in th e settlement agreement. Theref ore, just as an attorney sued by a former client for malpractice must be allowed to use otherwise confidential information received from that client (cf. McDermott, Will & Emery v. Superior Court (2000) 83 Cal.App.4th 378, 385), Kurtin’s decision to hold firm to the mediation privilege means Elieff did not get a fair trial. Elieff should either have been allowed to present evidence otherwise precluded by the mediation privilege to defend himself or Kurtin should have been requi red to drop his claims. (See Solin v. O’Melveny & Myers (2001) 89 Cal.App.4th 451 [clie nt’s invocation of attorney -client privilege vis-à-vis attorneys sued for malpractice required dism issal of malpractice action against them].) There are two flaws in the argument: One, Elieff already had a chance to clear up ambiguities in the settle ment agreement before trial in arbitration . In fact, he actually used the arbitration process to clear up, in his favor, at least one ambiguity. (Here the parties acknowledge that the initial out-of-court pr oceeding was a mediation. The later proceeding which resulted in clar ification of the settlement agreement is18 referred to by the parties as an arbitration. Mediation and arbitration are two different things, as Evidence Code secti on 1119, subdivision (a) makes cl ear. What went on at the mediation was the subject of the mediation pr ivilege. Further proceedings in arbitration would not be so privileged.) Two, even if, arguendo, Elieff did not have a chance to clear up ambiguities by way of arbitration prior to go ing to civil trial, Kurtin still did not forfeit his right to sue Elieff by asserting the mediation privilege. The California Supreme Court has clearly signaled the policy behind the mediation privilege is so st rong that California law is willing to countenance the “high price” of th e loss of relevant evidence to protect the privilege. ( Cassel v. Superior Court (2011) 51 Cal.4th 113, 138 (c onc. opn. of Chin, J.).)

a. Elieff’s chance to clea r up ambiguities before trial The first flaw in Elieff’s mediation pr ivilege argument is that he ignores the opportunity he had to resolve ambiguities in the settlement ag reement by returning to the original mediator in arbitration. Accordin gly, Elieff cannot now be heard to complain
that he was denied the chance to resolve ambiguities at tria l. The arbitration paragraph gave each party the right to go to arbitration in front of th e one person most familiar with what the parties achieved at their medi ation – the mediator himself – where any ambiguity in its terms might be resolved. As against such an opportunity, Elie ff counters with the argument that the arbitration paragraph (giving the parties the ri ght to return to the arbitrator) really is
restricted to situations absolutely necessary to make the settlement agreement enforceable. Outside of those situations, he now argues, the arbitrator did not have the power to interpret ambiguous term s in the settlement agreement. We cannot agree. The te xt of the arbitration clause is, on balance, most naturally read to set forth three sets of arbitr al powers, with only th e last of those three
tethered to the idea of some need to avoid making the agreement unenforceable.19 We begin by observing the arbitrati on clause (quoted in full on page 12, infra) consists of six sentences: The firs t two make the points that the settlement agreement consists of all material terms, and the parties want the agreement to be enforceable, while the sixth sent ence specifies the intent th at the agreement indeed be enforceable as the settlement of pending litiga tion under Code of Civil Procedure section
664.6.
It is sentences three and five on which Elieff relies to confine the arbitrator’s power to interpret or cure ambi guities only to situations where the cure was absolutely needed to preserve enforceability. For re ader convenience, we quote those two sentences again here, and include the intervening sentence four: “[Sentence 3:] In the event that any Pa rty claims that one or more material
terms have been omitted from this Settlement Agreement, or that the Parties failed to reach an agreement as to one or more material terms, or that any other defect exists with respect to this Settlement Agreement that wo uld make it unenforceable, the Parties agree to final and binding arbitration before Tony Piazza or, if Mr. Piazza is unable, before a mutually agreeable arb itrator. [Sentence 4:] At such arbitration, the arbitrator shall imply a reasonable term that the arbitrator finds consistent with the purpose and intent of this Settlement Agreement or otherwise cure any defect in the Settlement Agreement by amending its terms. [Sentence 5:] The sole act of the arb itrator shall be to issue an amendment to this Settlement Agreement im plying such additional terms, curing any ambiguity or otherwise curing any defect in this Settlement Agreement that would make this Settlement Agreement unenforceable.”
Readers will see that sentences thr ee and five are constructed in two parallel series of three clauses, each clause dealing with, in order: (1) omission of material terms; (2) curing ambiguity or disagr eement as to those mate rial terms; and (3) unspecified defects. In each sentence, onl y the last clause, c oncerning unspecified defects, is unambiguously connected to the idea of reme dying unenforceability. Thus, to20 make the unenforceability langua ge apply to either of the first two clauses, one must
relate back to the first and second clauses the unenforceability langua ge one finds in the
third clause. And that of course is how E lieff reads sentences three and five in this appeal. To be sure, Elieff’s argument is consis tent with the references to “other defect” in sentence three, and the reference to “otherwise” in sentence five. Those two references can indeed be stretched to sugg est a connection between what happens in the third clause and what has gone be fore in clauses one and two. All else being equal, however, courts prefer a more natural reading of text to a less natural one, whether that text be found in a statute (e.g., Runyon v. Board of Trustees of California State University (2010) 48 Cal.4th 760, 768; Munson v. Del Taco,
Inc. (2009) 46 Cal.4th 661, 672) or a contract ( Lapp-Gifford Co. v. Muscoy Water Co. (1913) 166 Cal. 25, 27-28 [more natural inte rpretation of letter to creditor containing check for “final payment” was that it did not refer to payment in full of the disputed debt]; Dover Village Assn. v. Jennison (2010) 191 Cal.App.4t h 123, 128-129 [more natural reading of CC&R’s was that sewer pipes were not “‘exclusive use’” items for purposes of repair responsibility].) And of cour se courts are directed by statute to read contracts as a whole, so, if reasonably practical , no part is deprived of effect. (Civ. Code, § 1641.) In this case, we conclude Elieff’s in terpretation of the arbitration provision is not the more natural reading and does not gi ve effect to the whole of the arbitration provision. First, Elieff’s reading is by no means compelled . Sentence three’s phrase “other defect,” and sentence five’s use of the word “otherwise” do not necessarily require a connection to the first two clauses. Logically , each of the three clauses can be seen as independent of the others, i.e., the arbitrator has three sets of powers: (1) omission of material terms; (2) curing ambiguity or disagr eement as to material terms; and (3) curing21 any unspecified defects which might make the agreement not enforceable. The independence of the three clauses is confirme d when one realizes th at, grammatically, in
sentence three the third clause is not even necessary to make an intelligible English
sentence. Sentence three is written so the firs t two clauses easily surv ive even if the third were completely omitted. (Thu s: “In the event that any Party claims that one or more
material terms have been omitted from this Settlement Agreement, or that the Parties failed to reach an agreement as to one or more material term s, the Parties agree to final and binding arbitration . . . .”) By the same token, sentence five, lik e sentence three, also can be read logically to set forth three independent cl auses, though the gerund-based parallel construction (“implying . . . curing . . . or otherwise curing”) makes it impossible to simply omit the third clause. Even so, the “or” separating th e third clause from the other two emphasizes the independence of each clause: Either (1), (2) “or otherwise” (3). In that sequence, whatever is at tached to (3) is not necessari ly attached to (1) or (2). Second, Elieff’s reading of the arbitr ation clause tends to reduce sentence four to a meaningless afterthought. Senten ce four begins by pegging off sentence three (“[a]t such arbitration”) but articulates two powers of the arbitrator without any qualification as to enforceability. To be su re (as shown by sentences one, two and six), the parties clearly wanted their mediated agreement to be enfor ceable. But if they wanted to confine the arbitrator’s powers solely to what was necessary to “save” that enforceability, there was no need to write sent ence four. By stating powers in sentence four without any reference to enforceability, an intention is evid enced to give the arbitrator powers to construe the contract with out a need to justify their use on a “saving” theory – an intention particularly demons trated by the structure of the preceeding sentence three, where the refe rence to enforceability (as shown above) is not even grammatically necessary.22 Third, and most importantly, the last antecedent rule strongly indicates the arbitrator’s powers are necessa rily pinned down by a requirement to only be exercised to “save” the agreement. (See ACS Systems, Inc. v. St. Paul Fire & Marine Ins. Co. (2007) 147 Cal.App.4th 137, 150 [applying last an tecedent rule, which usually applies to
statutes, to contr acts as well].)
The last antecedent rule is the co mmon sense presumption that the tail should not wag the dog in se ntence construction, i.e., qua lifiers apply to words and phrases immediately preceding them, as distinct from words and phrases more remote. (See Renee J. v. Superior Court (2001) 26 Cal.4th 735, 743.) In this regard, we note that if the parties really meant to confine the arbitrator’s power to interpret terms or cure ambiguities to only situations where it was absolutely necessary to ma ke the agreement enforceable, they could easily been much clearer than appendi ng that limitation to the last of three successive clauses. (Here’s one possibility: “In order to make sure this agreement is absolutely enforceable, the arbitrator sha ll have the power to (1) insert omitted terms, (2) cure ambiguities, or (3) re medy defects, but the arbitrator’s power to so shall be limited only to those situations where it is necessary to make sure the agreement is enforceable; otherwise the arbitr ator shall have no power at all.”) Four, a reading of the arbitrator’s po wers not dependent on a need to “save” the agreement was one Elieff himself used with ease at both the trial and appellate level in other contexts when describing the arbitrati on clause. At the trial level, in the context of opposing Kurtin’s attempt to obtain judgment under section 664.6 of the Code of Civil Procedure, Elieff’s trial counsel observed: “The Settlement Agreement provided for final and binding arbitration in front of the person who mediated the settlement, Tony Piazza, if a party claimed that a material term had been omitted or that a nother defect with the agreement existed.” The sentence lacks any qua lifier about “only if necessary to save the agreement.”23 Likewise, at the appellate level, afte r Kurtin sought writ relief in this court
because the trial court refused to grant the Code of Civil Pr ocedure section 664.6 motion, Elieff’s counsel quoted with approval Ku rtin’s counsel’s characterization of the arbitration provision that “‘if there’s anything in this agreement that prevents the express intent of the parties from being carried out , the arbitrator can fi x it basically.’” The context of that quotation, ironically, was Elieff’s point that Kurtin already had a remedy to enforce the agreemen t in arbitration. And again, no thing was said ab out enforceability qua enforceability being a prerequis ite for resort to the arbitrator. And finally, in this regard, we also fu rther note that at the arbitration that was actually held, Elieff won an important in terpretational victory independent of any need to save the contract – a victory he certainly has not repudi ated as beyond the arbitrator’s powers. Namely , he established that Kurtin ’s claims under the agreement only extended to Elieff’s own inte rests in the Joint Entities, as distinct from being directly against the Joint Entities themselves. In sum, on balance, we conclude th e better reading of the text of the
arbitration clause is that Elieff could have cleared up any ambiguities he thought necessary to his defense by going back to the me diator prior to trial. Doing so, we note,
would also have been consonant with the z ealous regard the law affords the mediation privilege, which we now address.

b. California’s Zealously G uarded Mediatio n Privilege
But even if the arbitration clause is limited to just clearing up what is minimally necessary to have an enforceable agreement, E lieff’s more basic argument –
that Kurtin forfeited his claims against Elieff by invok ing the mediation privilege (see Evid. Code, §§ 1115 -1128 and particularly § 1119) – cannot prevail. The mediation privilege carries with it different dynamics than simple attorney malpractice cases where a party can indeed be required to give up an evidentiary privilege as the price of asserting24 its claim. (E.g., Solin, supra, 89 Cal.App.4th at p. 467; McDermott, Will & Emery v. Superior Court, supra, 83 Cal.App.4th at p. 385 [corporate outside counsel entitled to judgment in shareholder derivative action wher e counsel could not make use of attorneyclient communications].) Elieff’ s theory concerning mediati on simply cannot be squared with what our Supreme Court unanimously both did and said in Cassel v. Superior Court,

supra, 51 Cal.4th 113.
In Cassel , a plaintiff in a legal malpractice action claimed his attorneys had, in a pretrial mediation, pressured, harasse d and otherwise coerced him into accepting a lower price than he wanted fo r certain licensing rights. The Supreme Court upheld a trial court order precluding the admi ssion of evidence related to the mediation , including the discussions the plaintiff had with his attorneys. ( Cassel, supra , 51 Cal.4th at pp. 121, 138.) The high court acknowledged that the exclusions “may indeed hinder the client’s ability to prove a legal malpractic e claim against the lawyers.” ( Id. at p. 122) But, as Justice Chin separately wrot e to explain why he was “rel uctantly” concurring in the judgment, the high court was w illing to pay such “a high pr ice . . . to preserve total confidentiality in the mediation process.” ( Id . at p. 138 (conc. opn. of Chin, J.).) The application of the mediation privilege in Cassel meant, under the particular circumstances of that case, the plaintiff’s ability to present a claim was hindered. Here, Elieff argues that applica tion of the mediation privilege supposedly hindered his ability as defendant to defend against a claim. And on that difference – the difference between one’s status as a plaintiff or as a defendant – Elieff hangs all attempt to distinguish Cassel

. But we cannot see any meaningful difference between plaintiffs and defendants in the mediation privilege situa tion. In fact, differentiating between them makes no sense. One need only think of the consequence of Elieff’s position to
understand it was never intended by the Legislature. Unde r Elieff’s theory, parties to a mediation would know that if they were succe ssful in achieving a mediated settlement in25 which they were the obligee, they could not enforce the se ttlement without running the risk of their adversaries claiming terms of the settlement were ambiguous, and forcing either (1) the disclosure of communications made in the course of the mediation or (2) the loss of the very benefit of that mediation, which was the mediated agreement itself. By contrast, obligors would have a natural adva ntage over obligees. Th ey could put obligees to the Hobson’s choice of giving up the benefit of the settlement or allowing the airing of privileged communications. The Le gislature obviously never inte nded such asymmetry. Due process is an underlying theme of Elieff’s argument. Somehow, he says, it was fundamentally unfair that he wa s sued under a mediat ed agreement but was not allowed to bring evidence bearing on what the parties di scussed concerning the actual terms of that agreement. But the Cassel decision itself confronted and rejected the idea that enforcing the mediation privilege statut es “in strict accord ance with their plain terms” deprives a civil litig ant of due process. ( Id . at p. 124.) Said the court: “We further emphasize that application of the me diation confidentiality statutes to legal malpractice actions does not implicate due pr ocess concerns so fu ndamental that they might warrant an exception on constitutional grou nds. Implicit in our decisions . . . is the premise that the mere loss of evidence pertinent to the prosecution of a lawsuit for civil damages does not implicate such a fundamental interest .” ( Cassel, supra , 51 Cal.4th at p. 135, italics added.) Moreover, and significantly, a page after the “mere loss of evidence” statement, the Cassel opinion again rejected the notion that somehow due process was implicated by protection of the privilege, but phrased its idea in such a way as to apply to
both sides of a dispute: “The Legislature deci ded that the encouragement of mediation to resolve disputes requires broad protecti on for the confidentiality of communications exchanged in relation to that process, even where this protecti on may sometimes result in the unavailability of valuable civil evidence .” ( Cassel, supra , 51 Cal.4th at p. 136, italics added.)26 This court followed Cassel in its recent decision in Provost v. Regents of University of California (2011) 201 Cal.App.4th 1289 ( Provost ), where we rejected the claim of a party seeking to di savow a stipulated settlement a rrived at through mediation, even though the party claime d coercion from threats of criminal prosecution by the other party if he did not enter into the agreement. (See id . at pp. 1302-1304 .) If evidence of
coercion in the achievement of a mediated agr eement itself was properly excluded by the mediation privilege in Provost , how much less compelling is Elieff’s contention that
Kurtin should forfeit his claim to repayment where the asser tion of the privilege entails only an incidental loss of evidence fro m a mediation bearing on allegedly ambiguous

contract terms. Elieff places great reliance on In re Marriage of Kieturakis (2006) 138 Cal.App.4th 56 ( Kieturakis ) for his forfeiture th eory, but the case doesn’t help him.
Kieturakis is a somewhat complicated cas e that arose from a mediated divorce settlement which lopsidedly favored th e husband, so we mustexplore it in some detail to show why does not stand fo r what Elieff claims. In fact, Kieturakis is a case which strongly u pholds the mediation privilege.
After the mediated divorce settlement in Kieturakis the wife attempted to
set it aside. Under substantiv e family law, the question th en arose as to whether the
husband had exerted undue influe nce in obtaining the settlement agreement, and, again as a matter of substantive family law, on that issue the husband bore the burden of showing
he did not exert undue influence. To ascertain whether the husband had indeed exerted undue influence, the trial court allowed in evidence from the mediati on in the interests of “‘justice’” ( Kieturakis, supra , 138 Cal.App.4th at p. 75) – something which, we now note, would clearly not be correct under Cassel or Provost . But, having made that mistake, the trial court concluded the husba nd had carried his burden of showing an
absence of undue influen ce, so the trial court did not set aside the agreement. In effect,27 the trial court’s finding the husband had inde ed carried his burden rendered harmless the earlier error of admitting eviden ce from the mediation. Accordingly, the appellate court affirm ed the order refusi ng to set aside the agreement. However, in affirming, it took th e opportunity to expl ain that because the settlement was the product of mediation, the trial court had still erred in determining the husband bore the burden of proof. ( Kieturakis, supra , 138 Cal.App.4th at p. 85.) To apply a presumption of undue influence fro m a lopsided agreement arising out of mediation would undermine the Legislat ure’s preference for mediation. ( Id . at pp. 85- 87.) It was in the process of recognizing that there was indeed a cost to be paid
for the Legislature’s value judgment placing a higher value on mediation than on the substantive family statut es involving possible undu e influence, that the Kieturakis court made a comment which Elieff now asserts requires dismissal of Kurtin’s claims. “However, if there is a price to be paid in fairness to pr eserve mediation confidentiality, the cases have required that it be paid by parties challenging, not defending, what transpired in the mediation.” ( Kieturakis, supra , 138 Cal.App.4th at p. 87.) We are not persuaded by Elieff’s argument connec ting (a) the observation made by the Kieturakis court and (b) the idea Kurtin was put to a forced choice of giving up the mediation privilege or dropping his clai ms. Elieff’s argument is a non sequitur. It does not follow from (a) Kieturakis’ proposition that a party to a mediated agreement
who later wants to get out from under the terms of that agreement cannot use evidence from the mediation to achieve her purpose if the other party asserts the mediation privilege to Elieff’s proposition that (b) a party seeking to enforc e a mediated agreement
cannot do so without simultane ously losing the right to a ssert the mediation privilege.
Kieturakis’ observation was, in context , a simple recognition that a party,
such as the wife in the cas e before it, who seeks to set aside an agreement resulting from a mediation, will have a “price” to pay in being unable to use what happened at the28 mediation to challenge the agreement. And under Cassel , that recognition is fairly unremarkable. Indeed, as applied to the case before us, the observ ation only strengthens our conclusion that the mediation pr ivilege statutes mean that it was Elieff , not Kurtin, who was required to pay the “price” of the Legislature’s policy in favor of mediation confidentiality. The whole point of the passage in Kieturakis was that the mediation statutes reflect such a strong legislative policy that it even allows “unfair agreements to stand.” ( Kieturakis, supra , 138 Cal.App.4th at p. 87.) As with Provost , if the Legislature is willing to allow even unfair mediated agreements to st and as a result of mediation confidentiality, it certainly is willing to stomach whatever incidental unfairness might result from a party’s inability to use mediation evidence to explain allegedly ambiguous terms within a mediated agreement. In sum, Kurtin did not lose this case by asserting a mediation privilege which the Legislature has chos en to zealously protect.

3

. The “Accounting” and Damages Elieff argues that cause of ac tion number 7 (for violation of the “distribution” clause in paragraph 14) is precluded from any retrial because the “accounting” which Kurtin received establishe d that Elieff took no “profits” and spent funds only for au thorized purposes. As Elieff’s tria l attorney said af ter the trial judge delivered her decision in the phase 1 trial from the bench, “I want to address the issue of whether there’s anything left to submit to a jury on the seventh cause of action.” The argument overstates what happen ed in the trial court. There was indeed much left after the phase 1 trial. Th e trial judge did not rule that Elieff took no “distributions.” She ruled, rather, that m oney which was used by Elieff to maximize the “good of the whole” would not be cove red by the distribution clause. Only one of the five destinations of the outflows identified by the trial court, payments to Kurtin, is unequivoca lly not a “distributio n” taken by Elieff to29 “prevent” repayment of the unpaid balance. (That distribution wa s the $1.8 million that was itself a payment to Kurtin.) A reasonable jury might readily conc lude that outflows within the other four categories (manag ement services, management expenses, management costs, return of capital) both (a ) did not benefit the Jo int Entities as a whole and (b) prevented repayment of the unpaid balance. And the ultimate categorization of
the various outflows was left to the jury. The trial judge granted a new trial on damages
because the numbers of available outflows di d not add up to the $24.4 million which the jury awarded on the seventh cause of action. Put another way, the “gist” or “essen ce” of Kurtin’s seventh cause of action

was not one in equity. (Cf. De Guere v. Universal City Studios (1997) 56 Cal.App.4th 482, 507- 508 [explaining when parties are, or are not, entitled to jury trial in context of contract actions involving accoun tings].) Tracing the various outflows from discrete Joint Entities was only an cillary to the true gravamen of that cause of action,
focused as it was on whether various outflows came within the category of distributions that prevented repayment. A reasonable jury might very well find that much mischief might be done under the cove r of management services, e xpenses, and costs. Even capital that was “returned” to Elieff might, if not otherwise linked to the “good of the whole,” and if that return had the effect of preventing repayment, constitute an improper
“distribution” under the distribution clause. With the exception of the “good of the whole” qualifier appended to the definition of distribution by the trial judge, the whole tenor of the settlement agreement was that Kurtin would be paid off the top from any money available for outflows from any of the Joint Entities, even if it meant that Elieff might go out of pocket. By the same token, we must reject Elieff’s argument that Kurtin did not prove any damages. While a requirement of actual collectability from the Joint Entities puts a limit on Elieff’s liability under secti on 2342 and under sec tion 2343 per section 3318 (see discussion below in part 5 of this opinion), Kurtin had no need to establish30 collectability under his cause of action for vi olation of either the “distribution,” or security-document clauses of paragraph 14. And phase 1 showed that of $22.4 million in
outflows from Joint Entities iden tified in the phase 1 trial, only $1.8 milli on was shown to have been paid to Kurtin . That leaves about $20 milli on in distributions for which Elieff might (at least in theory) be personall y liable under the distribution and security clauses of the settlement agreement alone.

4. Inconsistent Verdicts Regarding Section 2343
Kurtin’s cause of action number 3 for violation of section 2343 presents the problem of inconsistent jury verdicts. The te xt of section 2343 plainly requires either the absence of a good faith belief on the part of th e agent that he or sh e “has authority” to
enter into the contract on behalf of a principal, or acts “wrongful in their nature.” Here is
the text of section 2343: “One who assumes to act as an agent is responsible to third persons as a principal for his acts in the cour se of his agency, in any of the following cases, and in no others: [¶] 1. When, with his consent, cr edit is given to him personally in a transaction; [¶] 2. When he enters into a written contract in the name of his principal, without believing, in good faith , that he has authority to do so; or, [¶] 3. When his acts are wrongful in their nature.” The problem is the jury found that that Elieff did have a good faith belief he could obligate the Joint Entities, and the only “wrongful” act s which the jury were asked to impute to Elieff were negligent or intentiona l misrepresentation, and the jury refused to find he engaged in either of those wro ngful acts. Compounding the problem was Kurtin’s own argument to the jury at the end of trial. That argument specifically linked Kurtin’s claim of wrongful acts to the intent ional misrepresentation claim. Kurtin’s counsel rhetorically asked the jury, “Did Bruce Elie ff commit an act that was wrongful in its nature when he signed th e settlement agreement on behalf of any of” the Joint Entities, then answered his own question by referring to his intentional misrepresentation cause of31 action, emphasizing that Elieff had committed fraud: “Now, I’m going to defer on this question because in a minute we’re going to come to a verdict form on what’s called intentional misrepresentation.” Kurtin posits that any “wrongful” act that might be derived from the facts generally before the jury w ill satisfy section 2343, regardless of whether the jury specifically found that Elieff act ually committed it. In partic ular, Kurtin suggests that a “wrongful” act can be extracted from facts sh owing breach of a partnership duty. The argument, however, rests on an incorrect interpretation of section 2343. Case law explicating section 2343 shows that the “acts are wrongful in their nature” clause arises in juxtaposition to the no rmal rule that agents are not liable for the torts or breaches of contract of their principals. (See Sanchez v. Lindsey Morden Claims Services, Inc. (1999) 72 Cal.App.4th 249, 255 [ind ependent insurance adjuster retained by insurer to adjust loss not directly liable in tort for negligent claims handling].) The “wrongful in their nature” clause codi fies a corollary ru le that agents are responsible for
their own independent torts and breaches of cont ract in connection with “acts in the course of their agency.” (See Shafer v. Berger, Kahn, Shafton, Moss, Figler, Simon &
Gladstone (2003) 107 Cal.App.4th 54, 68-85 ( Shafer ) [attorney of in surance company providing coverage for defendant liable for own fraud in misrepre senting defendant’s coverage to third party claimants]; Bayuk v. Edson (1965) 236 Cal.A pp.2d 309, 319-320 ( Bayuk ) [rejecting agent’s argument he could not be liable on theory “he was acting for a disclosed principal,” because he “personally agreed” to supervise construction of house and was negligent in doing so].) Here, however, the jury never dete rmined that Elieff committed any wrongful act in the course of signing on behalf of the Joint Entities. To be sure, he breached his own personal oblig ations not to take dist ributions which prevented repayment and to provid e documents to secure his own in terests in the Joint Entities, but
those were not “acts in the course” of an assume d agency. The jury sp ecifically found, in32 regard to his signing, that he had a good faith belief in his authority, and made no misrepresentation, intentional or negligent. Because of these inconsistent verdicts, we cannot say that the jury impliedl y found a tort or a breach of contract “in the course” of an agency where th ey had not been as ked to find one. The trial court itself rejected Elieff’s motion for a new trial as to liability under section 2343 by concluding that the evid ence showed wrongful conduct in the lack of an intention to ever “expo se” the Joint Entities to liabil ity and by “act[ing] to impair” their ability to perform. The probl em with the former rationale is that the jury rejected all findings of fraud or misrepresentation on E lieff’s part. The problem with the latter rationale is that Elieff’s obligation under the distribution clause not to impair the Joint Entities’ ability to perform was a personal obligation (liability for which remains undisturbed by our deci sion today), not an act “in the course” of his assumed agency. The law is clear that the proper reme dy for inconsistent ve rdicts is “not to grant judgment as a matter of law in favor of one of the parties, but rather, to order a new trial.” ( Stillwell v. The Salvation Army (2008) 167 Cal. App.4th 360, 376; Shaw, supra , 83 Cal.App.4th at p. 1344; e.g., Oxford v. Foster Wheeler LLC (2009) 177 Cal.App.4th 700, 704 [“Because the jury rendered inconsis tent verdicts, we will reverse and remand for a new trial.”].) We have power to modi fy the new trial order on appeal to have it include a new trial on the issue of liability un der section 2343 as well as damages (Code Civ. Proc., § 906), and do so now.

5. Kurtin’s Cross-Appeal a. The Relationship Between Section 2343 and Section 3318
i. no effect on new trial order
The trial court’s formal order on mo tion for new trial agreed with Elieff’s contention that the measure of damages for th e violation of section 2343 is found in section 3318. In particular, the trial judge cited the language from section 3318 that the33 measure of damages is what “co uld have been recovered and collected from [the agent’s] principal if the warranty had been complied with ” as governing in the new trial to come. Accordingly, the judge ruled that “even as” to the cause of action fo r violation of section 2343, “Kurtin [would be ] required to prove actual damages.” The judge “left for another day” the question of how “‘r ecovered and collected’” should be interpreted and “what degree of certainty” would meet “that standard.” In his cross-appeal, Kurtin now argue s that the trial judge’s ruling that section 3318 governs his section 2343 clai m was incorrect. His main concern is the
“recovered and collected” clause of the statute. Given that the tota l value of the Joint Entities is apparently not en ough to pay off the unpaid balance of the $48.4 million buyout price (much less Elieff’s personal interests in those entities), Kurtin argues that
section 3318 does not establish the relevant measure of damages. Kurtin argues for an interpretation of section 2343 that would make Elieff personally liable for the unpaid balance exceeding more than $20 million without regard to section 3318’s “recovered and collected” language. Preliminarily, we reject Kurtin’s ar gument that any error by the trial court on the issue of the applicability of section 3318 to section 2343 requires reversal of the order granting a new trial. As we have just shown in the pr eceding part of this opinion, given the inconsistent jury ve rdicts in this case, even th e question of Elieff’s liability
under section 2343 must be considered anew by the trier of fact. Moreover, the trial judge identified several other reasons to order a new trial besides the inconsistent
verdicts. These included: the failure of th e amount of damages assessed to add up to the distributions at issue, the fact that the jury’s award “excee ded even Kurtin’s argued for” damages of about $7.8 million, and the lack of more detailed evidence in phase 2 of the trial by which the jury might be able to evaluate the “two dozen cash transactions” which the trial court itself had considered in phase 1. Even if, for sake of argument, the trial judge’s announced opinion on the appli cability of section 3318 to section 2343 were34 incorrect, under an abuse of discretion standard we can hardly say that the trial judge was unreasonable in determining to re-try the whole issue of damages. However, because the question of th e proper measure of damages under section 2343 has been fully briefed on appeal and the new trial order is being affirmed, we address the question of the applicability of section 3318 to section 2343 for the benefit of the trial court on remand. (Code Ci v. Proc., § 43.) The question is a matter of first impression in California. As we now show, the trial judge wa s correct. Section 3318 does indeed limit the damages recoverable under section 2343.

ii

. text of sections 2342, 2343 and 3318
For reader convenience we now set out the complete verbatim text of the three statutes at issue, includi ng repeating the text of secti on 3318 recited in the previous part of this opinion. Section 2342 provides: “One who a ssumes to act as an agent thereby warrants, to all who deal with him in that capacity, that he has the authority which he
assumes.” Section 2343 provides: “O ne who assumes to act as an agent is responsible to third persons as a principal for his acts in the course of his agency, in any of the following cases, and in no others: [¶] 1. When , with his consent, credit is given to him personally in a transaction; [¶] 2. When he enters into a written cont ract in the name of his principal, without believing, in good faith, that he has authority to do so; or, [¶] 3. When his acts are wrongful in their nature.” Section 3318 provides: “The detrimen t caused by the breach of a warranty of an agent’s authority, is d eemed to be the amount which co uld have been recovered and collected from his principal if the warranty had been complied with, and the reasonable35 expenses of legal proceedings taken, in good faith, to enforc e the act of the agent against his principal.”

iii. analysis of text The opening line of section 3318 sets forth a clear measure of damages for breach of an agent’s warranty of authority, and makes no differentiation as to whether that breach is in good faith (section 2342) or lacks good faith (section 2343, subdivision (2)). Damages against the agen t are limited by what could be “recovered and collected” from the agent’s purport ed principal. Any argument that section 3318 does not apply to section 2343 necessarily rests on two premises: (1) section 2343 c ontains its own, competing, measure of damages in the form of section 2343’s “respons ible . . . as a principal clause” and (2) the competing measure of damages clause set fo rth in section 2343 must prevail over the
alternative in section 3318. That is, for section 3318 to not apply to section 2343, the “responsible . . . as a principal” clause of section 2343 must necessarily trump the
“detriment . . . is deemed to be” clause of section 3318. Courts, of course, must prefer stat utory interpretations which harmonize and reconcile potentially conflicting statutory meanings. (E.g., Voices of the Wetlands v.
State Water Resources (2011) 52 Cal.4th 499, 519; DeVita v. County of Napa (1995) 9 Cal.4th 763, 778-779.) In the present ca se, the two potentially competing clauses (“responsible . . . as a principa l” and “detriment . . . is deemed to be”) may be harmonized by reading section 2343’s “responsible . . . as a principal” language to set forth the fact of liability (i.e., if a purported agent does X, Y, or Z, he or she shall be liable as a principal)
while section 3318 se ts forth the precise amount of liability (i.e., if there is liability for doing Y, then here is the way the detrimen t is calculated). Three reasons impel our
conclusion.36 First, the very structure of the Civil C ode suggests that very harmonization. Chapter and section headings may be considered in ascertaining legislative intent and are entitled to “considerable weight.” ( People v. Hull (1991) 1 Cal. 4th 266, 272; Howard Jarvis Taxpayers Association v. County of Orange (2003) 110 Cal.App.4th 1375, 1385.)
Sections 2342 and 2343 are cont ained within article 4 (obliga tions between principals and third persons) which is a subdivision of title 9 (dealing generally with agency) which is within part 4 (obligations arising from partic ular transactions) of division 3 (generally dealing with obligations) of th e Civil Code. On the other hand, the general subject of relief, including damages, is within part 1 of division 4 (general provisions). Section 3318 is found in article 1 (damages for br each of contract), which is within chapter 2 (measure of damages) which is within title 2 (compensatory relie f), which is within division 4 (dealing with general provisions ). One can, from this pattern, divine the general structure of the Civil Code on the subj ect of breaches of an agent’s warranty of authority: Spell out the obligation in division 3. Set forth the remedy in division 4. Second, textually, we are required to give effect to section 2343’s “in the course of his agency” clause” as well as its “responsible . . . as a principal” clause. When the statutory clauses are read t ogether (“responsible . . . as a principal in the course of his agency”) it is ev ident that the statute was intended to refer to the particular transaction in which the agent “assumed” to act for another. The statute was not intended to assign a liability to the purported agent beyond what was inherent in that particular transaction, i.e., beyond the course of his agency. We note that Kurtin’s proposed interpretation of section 2343 not only ignores the plain language of section 3318, but confers on Kurtin a windfall beyond the course of Elieff’s purpo rted agency, i.e., be yond the original expectations of the parties. The point may be illustra ted by examining the origin al intentions of the parties as the transaction was supposed to occur. Assume, for sake of argument, that Elieff really did have authority to bind the Joint Entities, that Elieff delivered all the37 security documents he was required to delive r, and that he took no distributions of any kind (e.g., forewent management fees othe rwise legitimately owed to his companies) from any of the Joint Entities. But further assu me (as appears indeed to have occurred in this case) that despite Elieff’s foregoing any distributions from the Joint Entities, the real estate recession put them all in to insolvency. In such a case, there would be no question
that Kurtin would be limited to what he co uld “recover and collect” from any of the Joint Entities, even if he had to go to bankruptcy court for that recovery . Section 3318 sets forth a measure of damages that indeed reflects the benefit of the bargain, together with the commercial risks inherent in that bargain , which Kurtin actually made. The third reason is that to the degree th at section 2343’s “responsible . . . as a principal” clause does indeed conflict with section 3318’s “detriment is deemed to be” clause, section 3318 must prev ail as the more specific. (S ee Code Civ. Proc. § 1859 [“a particular intent will control over a general one that is inconsiste nt with it”]; e.g., San Francisco Taxpayers Assn. v. Board of Supervisors (1992) 2 Cal.4th 571, 577 [“‘It is well settled . . . that a general provision is contro lled by one that is special, the latter being treated as an exception to th e former.’”].) The precise “r esponsibility” or liability of a principal in any given contex t may vary, depending on the circumstances. For example, in criminal law, aiders and ab ettors are “liable as a principa l” for the crime, but the exact extent of their liability is fixed by more sp ecific penalty statutes. Here, section 3318 fixes a clear measure of damages for breaches of an agent’s warranty of authority. By contrast one can puzzle all day over the degree to which “responsible . . . as a principal” implies a measure of damages, if it does at all. To the degree that case law has addr essed the question of whether section 3318 applies to section 2343, the answer is yes. (See Borton v. Barnes (1920) 48 Cal.App. 589 ( Borton ).) Borton , in fact, contains a plain statement that section 3318 provides the measure of damages in a sectio n 2343 situation where the agent lacks a good faith belief in his authority. ( Borton, supra , 48 Cal.App. at pp. 591-592; cf. Nichols38 Grain & Milling Co. v. Jersey Farm Dairy Co. (1933) 134 Cal.App. 126, 130 [following
Borton but not mentioning section 3318].) Th e brief reference to section 2343 in Jeppi v. Brockman Holding Co. (1949) 34 Cal.2d 11, 18-19 [observing that difference between
section 2342 and section 2343 is that under section 2342 th e agent is simply “held to account on a theory of breach of the implied warranty of au thority” while under section 2343 the agent is held liable “as a principal”] merely notes the general difference between
section 2342 and section 2343. The question of section 2342 remains. There is a clear overlap between section 2342 [all breaches of an agent’s warranty of authority] and section 2343, subdivision (2) [lack-o f-good-faith breaches of an agent’ s warranty of authority]. We may observe that all liability for lack-of-good-faith br each of a purported agent’s warranty of authority under se ction 2343 necessarily includes a breach of the purported agent’s warranty of authority u nder section 2342 as well. (See Borton, supra , 48 Cal.App. at p. 591 [treating section 2342 and section 2343 together].) From this overlap, the question arises as to what the practical difference between section 2342 and section 2343, subdi vision (2) might be. One might postulate, simply to avoid a construction that avoids su rplusage, that section 2342 and section 2343, subdivision (2) must have two different m easures of damages, not just one as the language of section 33 18 would lead one to believe, and, further, that the “as a principal” clause in section 2343 provid es that different measure. It does not, however, follow that se ction 2342 and section 2343 must have different measures of damages. Much of the time, in fact, the result under either statute will be exactly the same, as shown in the two cases that remain the leading case
authorities on the interaction between the two statutes and section 3318, namely, Borton , supra , 48 Cal.App. 589, and Kohlberg v. Havens (1919) 41 Cal.App. 222 ( Kohlberg ). Kohlberg was the first case to find liability under section 2342. Borton was the first case to find liability under section 2343. In each case, the plaintiff received from the39 purported agent the commission he would have received from the purpo rted principal if the purported principal had been liable on the contract. (In Kolhberg , the amount owing under the contract was not called a commission, but that’s what it plainly was – the price of obtaining a third party’s signature to a real estate agreement, see Kohlberg, supra , 41 Cal.App. at pp. 223-224.) At the very least, the “as a princi pal” clause in section 2343 makes a potential difference as to when the applicable statute of lim itations may begin to run. (E.g., Kennedy v. Stonehouse (1904) 13 N.D. 232 [where purported agent sued for lackof-good faith breach of warranty of authority, statute of limitations began running when principal repudiated contract made in her name and not when agent initially misrepresented authority, whic h was ten years earlier].) Mo reover, we may observe that the two statutes will yield different measur es of damages in cases where the purported agent’s breach of his or her implied warrant y of authority comes under one of the two other subdivisions of section 2343, namely re ceiving credit persona lly, or is combined with his or her own independent tort.

B. The Accounting Kurtin presents another point in his cross-appeal that centers on the phase 1
trial. Like Elieff in the main appeal, Kurtin claims that phase 1 decided more than it did. Specifically, he identifies three issues he now says “should have been tried to the jury”: (1) the meaning of “distribution” in para graph 14; (2) the sta ndard by which Elieff’s decisions to move any funds from one Joint Entity to anothe r should be judged; and (3) the question of whether there were payments from Joint Entities to Elieff distributions preventing repayment. We perceive that Kurtin’s cross-appe al as it relates to these questions is essentially protective, because he has not been aggrieved by the new trial order on any of
these issues. Those issues were tried to the jury by way of Kurtin’s seventh cause of40 action for breaching the provision of the settle ment agreement not to take distributions which prevented the Joint Entities from payi ng the balance of the buyout amount. And he prevailed on them. We ne ed only mention here that we do not disturb the new trial order as to Elieff’s liability on Kurtin’s seventh cause of acti on on the distribution issue.

DISPOSITION
The new trial order is modified to include a new trial on Elieff’s liability under section 2343, as well as a new trial on th e topic of damages. As modified, the new trial order is affirmed. In all respects the judgment and order denying JNOV are affirmed, but let us now spell out what exactly that means: (1) We affirm the trial court’s determ ination that Elieff is liable to Kurtin in an as-yet-to-be-determined amount, if any, on Kurtin’s causes of action for (a) breach of warranty of an agent’s authority under sect ion 2342; (b) breach of the provision of the settlement agreement that E lieff would execute the documen ts necessary to perfect Kurtin’s security interests in Elieff’s share of th e Joint Entities; and (c) for breach of the provision of the settlement agreement not to take distributions which prevented the Joint Entities from paying the bala nce of the buyout amount. (2) As we modify the trial court’ s new trial order, the issue of both Kurtin’s liability under section 2343 and, if he is found to be liable, the amount of damages for which he will be liable, will be the subject of the new trial. (3) Moreover, in the new trial on sec tion 2343, if Elieff is found liable, the amount of damages for which he will be liable will be governed by section 3318’s “collected and recovered” language.41 Because each side has prevailed on at least one point, each side will bear its own costs in this appeal.

RYLAARSDAM, ACTING P. J.

WE CONCUR:

ARONSON, J.

FYBEL, J.