Filed 7/25/14 American Diversified Properties v. RE/EX Valencia CA2/8

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for 

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication 

or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

AMERICAN DIVERSIFIED 

PROPERTIES, INC.,

Plaintiff and Appellant,

v.

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

Defendants and Respondents.

 B246501

 (Los Angeles County

 Super. Ct. No. BC360128)

APPEAL from a judgment and orders of the Superior Court of Los Angeles 

County, Steven J. Kleifield, Judge. Affirmed.

Norminton, Wiita & Fuster, Thomas M. Norminton and Kathleen Dority Fuster for 

Plaintiff and Appellant.

Gaines & Stacey, Lisa A. Weinberg and Alicia B. Bartley for Defendants and 

Respondents RE/EX Valencia, Inc., and Sara Fincher-Schmidt.

Spile, Leff & Goor and Andrew L. Leff for Defendant and Respondent Valleywide 

Escrow, Inc.

June Babiracki Barlow and Neil Kalin for California Association of Realtors as 

Amicus Curiae on behalf of Defendants and Respondents.

* * * * * *
2

This action involves a commission dispute between real estate brokers, plaintiff

American Diversified Properties, Inc. (ADP), and defendants RE/EX Valencia, Inc., 

doing business as Realty Executives, Inc. (Realty Executives), and Sara Fincher-Schmidt

(Schmidt). ADP also sued the escrow holder in the transaction, Valleywide Escrow, Inc. 

(Valleywide).1 ADP appeals from the judgment in favor of the defendants and from 

attorney fees and costs orders.

2

 We affirm the judgment and orders.

FACTS AND PROCEDURE

1. ADP’s Theory of the Case

ADP’s operative second amended complaint (complaint) alleged the following 

facts. The Campbell Family Trust engaged Realty Executives as brokers to sell 

approximately 9.49 acres of vacant land in Santa Clarita, California. The seller agreed to 

pay Realty Executives a percentage of the purchase price as consideration for its broker 

services. Bradley Business Center, a general partnership comprised in part of Kerry 

Seidenglanz and Mark Seidenglanz,

3 was interested in buying the property. Bradley

Business Center engaged ADP as its broker.

On or about March 15, 2006, ADP and Realty Executives entered into a partly 

oral, partly written agreement. The brokers orally agreed to split 50-50 the commission 

 

1 We have filed two prior nonpublished opinions in this case, American Diversified 

Properties, Inc. v. Valleywide Escrow, Inc. (Sept. 3, 2008, B197816) (ADP I) and 

American Diversified Properties, Inc. v. Realty Executives, Inc. (June 7, 2011, B222560) 

(ADP II). In ADP I, we reversed an order sustaining Valleywide’s demurrer to the 

original complaint without leave to amend and held ADP could cure the defects in the 

original complaint with suitable amendments. In ADP II, we reversed the trial court’s 

grant of summary judgment in favor of Realty Executives and Schmidt, holding there 

were triable issues of material fact.

2 We consolidated ADP’s appeal from the judgment with its appeal from the 

attorney fees and costs orders.

3 For the sake of clarity, we will refer to members of the Seidenglanz family by their 

first names. We will also refer to Schmidt’s husband, Stephen Schmidt, by his first name 

for the sake of clarity. We do not intend this informality to reflect a lack of respect.
3

offered by the seller. The written portion of the brokers’ agreement was found in the 

purchase agreement for the property. Bradley Business Center and the Campbell Family 

Trust entered into the purchase agreement on or about May 19, 2006. The purchase 

agreement acknowledged ADP and Realty Executives as the respective brokers for the 

buyer and seller and made the brokers third party beneficiaries of the purchase agreement 

and escrow instructions. The purchase agreement identified Valleywide as the escrow 

holder.

The first cause of action alleged breach of oral contract against Realty Executives 

because it failed to split the commission with ADP and instead took the entire 

commission for itself. Based on these same facts, the second and third causes of action 

alleged common counts for “reasonable value of services provided” (quantum meruit)

and money had and received against Realty Executives and its agent, Schmidt. (Boldface 

and capitalization omitted.) The fourth, fifth, and 10th causes of action alleged breach of 

contract, breach of fiduciary duty, and negligence against Valleywide for disbursing the 

full commission to Realty Executives, despite having notice of the commission dispute 

between the brokers and despite receiving instructions from ADP to hold the 

commission. The sixth and seventh causes of action alleged intentional and negligent 

interference with contract against Realty Executives and Schmidt for persuading 

Valleywide to disburse the disputed commission, thereby causing Valleywide to breach 

its contractual obligations to ADP. The eighth and ninth causes of action against Schmidt 

alleged intentional and negligent interference with contract for persuading Realty 

Executives to take the entire commission in breach of the brokers’ commission-sharing 

agreement.

The parties tried the case to the court over the course of 13 days.

2. Trial Evidence

a. Buyers’ Offer and the Purchase Agreement

Schmidt is a real estate salesperson who worked at Realty Executives, a real estate 

brokerage firm. She has closed 25 to 30 deals while working with cooperating brokers. 

Schmidt represented the sellers of the subject property, the Campbell Family Trust. 
4

Daniel Campbell (Campbell), the cotrustee of the Campbell Family Trust, refused to sign 

a listing agreement with Schmidt, which would have given her the exclusive right to list 

the property. He did not want the property listed on a multiple listing service (MLS) or 

want a “For Sale” sign on it because he did not want “people knowing his business.”

Instead, Schmidt had a commission agreement with the Campbell Family Trust 

stating she would receive 7.5 percent of the selling price if she sold the property for at 

least $6.5 million. The commission agreement provided: “Broker may cooperate with 

other brokers, and divide with other brokers such compensation in any manner acceptable 

to Broker.”

ADP is another real estate brokerage firm. Kerry is the president of ADP. Kerry 

and his brothers Mark and Chris Seidenglanz are the sole shareholders of ADP. Kerry 

and Mark were also brokers with ADP in 2006. Kerry and Mark are partners in Bradley 

Business Center, a general partnership, along with two other individuals. In 2006, 

Bradley Business Center engaged ADP to act as its broker in locating and acquiring a real 

estate investment. Kerry and Mark have personally brokered hundreds of transactions in 

their careers, though more of those transactions were leases and not sales of properties. 

In all but one transaction Kerry could remember, ADP split the commissions in these 

transactions 50-50 with the cooperating brokers. The agreements with the cooperating 

brokers to split commissions were “always made verbally,” though the parties usually 

reduced these agreements to writing later on.

According to Kerry, whenever he inquires about a property, he always identifies 

himself as a broker as soon as he contacts the other side. When he saw an advertisement 

for a property brokered by Schmidt and Realty Executives, he called Schmidt to inquire 

about the property and immediately told her he was a broker with ADP. Kerry is 

absolutely certain he identified himself as a broker in that first call with Schmidt.

Schmidt does not recall Kerry identifying himself as a broker in that first call. He

introduced himself by name but did not mention a company affiliation. She asked him 

whether he was a buyer or broker. He said he was a buyer and said nothing about being a 

broker. She was certain she asked him whether he was a buyer or broker because she had 
5

different scripts she had practiced and used depending on whether the inquiry came from 

a buyer or broker. Kerry inquired about one of Schmidt’s properties, but when they 

determined it was not suitable for his purposes, Schmidt told him about the Campbell 

Family Trust property. If she had known he was a broker, she would not have given him 

all the information about the property before meeting with him and knowing more about 

him because she did not have an exclusive listing agreement with Campbell.

After that initial call, Kerry and Mark met with Schmidt at the Realty Executives 

office on or about March 14, 2006. It was at this meeting that ADP contends the parties 

reached the oral commission-sharing agreement. Kerry and Schmidt exchanged business 

cards. Kerry’s cards said ADP on them. According to Kerry, he told Schmidt he and 

Mark were partners in Bradley Business Center and also brokers with ADP. 

Additionally, he told her if ADP produced a buyer for the property, he would expect to 

split the commission 50-50. Schmidt said “she had some costs and expenses that she had 

already put into the property and she would want to recoup those.” Kerry testified that, in 

response, “Mark looked at me, and I looked at him, and Mark said, that can only be 2-, 

3-, $4,000, not a big deal. He said fine. [¶] I looked back at [Schmidt] and said fine, and 

Mark said fine.” Schmidt did not say anything or make any gestures or movements after 

they said “fine.” She went on to describe the property. Kerry interrupted her 

presentation to ask how much her commission was. She did not respond and continued 

with her presentation, and Kerry did not interrupt her again.

Schmidt recalls the meeting differently. According to her, Mark did not have a 

business card with him, and when she saw Kerry’s business card, she assumed ADP was 

his employer, but she did not know ADP was a brokerage firm, and she did not know he 

was acting as a broker or an agent of ADP. His card did not say he was a broker or have 

a real estate license number on it. Kerry and Mark did not introduce themselves as

brokers at this meeting or say they were affiliated with any company. Kerry did not say 

anything about ADP or Bradley Business Center. When she was talking to them, she 

believed they were buyers because (1) that is what Kerry told her in their initial call, and 

(2) they were asking questions about the property that, in her experience, a developer 
6

would ask. They never referred to their “clients,” and they used the pronouns “I” or 

“we.”

At some point, Kerry interrupted her presentation to ask, “what’s the commission

on this, 2, 2-1⁄2 percent[?]” The question surprised Schmidt because she believed he was 

merely the buyer, and it was unusual for a buyer to ask how much the commission was in 

a transaction. Schmidt then told them she had been working on the property for a long 

time and had costs she needed to recoup. She did not intend to convey a request to Kerry 

and Mark that they allow her to recoup costs. She did not know how to respond because 

she was taken aback by the question. Her response was essentially an attempt to deflect. 

She wanted to ignore the question about commission and move on.

If they had said anything about being brokers and expecting half of the total 

commission or any commission at all, Schmidt would have told them immediately she 

was not offering half. She would have remembered if they had asked for a commission, 

but they did not. Nor did she offer any commission. After the meeting, they asked 

Schmidt to type a letter of interest for them. This confirmed her belief they were buyers 

but not brokers because typically buyers would ask their brokers to do something like this 

for them.

Kerry and Mark met with Schmidt again to present an offer on the property. The 

offer was printed on a standard form of the American Industrial Real Estate Association.

They spent at least an hour and a half going through the offer paragraph by paragraph. 

Schmidt insisted on using Valleywide as the escrow holder. The offer identified the 

buyers as Mark, Kerry, Bradley Business Center, and/or an assignee. It identified ADP 

as the buyers’ broker and Gloria Seidenglanz at ADP. Gloria was not actually involved

in the transaction, and she and Schmidt had never spoken. Schmidt was confused by the 

inclusion of her name and asked about Gloria. Kerry said she was his mother.

An addendum to the offer disclosed that “[s]ome of the buyers are principals in 

[ADP] and hold valid California real estate licenses.” Schmidt never asked which of the 

buyers held real estate licenses.

The offer contained a paragraph relating to broker commissions. It stated:
7

“Brokerage Fee. Payment at the Closing of such brokerage fee as is 

specified in this Agreement or later written instructions to Escrow Holder 

executed by Seller and Brokers (“Brokerage Fee”). It is agreed by the 

Parties and Escrow Holder that Brokers are a third party beneficiary of this 

Agreement insofar as the Brokerage Fee is concerned, and that no change 

shall be made with respect to the payment of the Brokerage Fee specified in 

this Agreement, without the written consent of the Brokers.”

Schmidt did not say anything at the meeting about this paragraph.

Kerry and Mark presented the offer with a cover letter on ADP letterhead. The 

cover letter referred to “our Offer to Purchase” and “We, the buyers,” and it stated “we 

will be the ultimate owner.” Kerry’s and Mark’s signature lines simply stated their 

names and did not identify them as affiliated with any particular entity. They also 

presented the offer with a letter from their bank stating “[t]he Seidenglanz brothers 

maintain the financial wherewithal to close the real estate transaction under consideration 

in the amount of $6.5 million with their cash resources.” Seeing these statements in the 

cover letter and bank letter further confirmed Schmidt’s belief that Kerry and Mark were 

buyers and not brokers.

Campbell rejected the offer from Kerry and Mark. He did not feel he could sell

the property at that point because he was involved in an arbitration with Edison regarding 

an easement on the property. He rejected the offer in March 2006. Kerry called Schmidt 

in April 2006 to see if the arbitration was still pending because he remained interested in 

the property.

Schmidt set up a meeting for May 5, 2006, between Schmidt, Kerry, Mark and 

Campbell. Kerry and Mark never identified themselves as brokers at this meeting. They 

told Campbell they were interested in purchasing the property, and they proceeded to 

discuss deal points. The parties interlineated Kerry and Mark’s offer form. Campbell

requested that a clean agreement be drawn up because the offer form contained many 

markups and crossed-out sections. Kerry and Mark said they were not good typists, and 

although Schmidt was not either, she offered to draw up the new purchase agreement in 

conjunction with her assistant.
8

Schmidt’s draft was based on Kerry and Mark’s offer form and her notes from the 

meeting with Campbell. Kerry met with Schmidt and her husband Stephen at her home 

to finish the purchase agreement when it was close to being complete. The meeting 

lasted approximately four hours. Schmidt introduced Stephen and told Kerry that 

Stephen was a broker. Stephen asked Kerry what he did for a living. Kerry said, “I put 

the deals together, and my brother builds them.” He did not say he was a broker or that 

he worked for ADP. At the meeting, Schmidt and Stephen were typing portions of the 

agreement, and Kerry was reviewing the changes as they were generating them. Kerry 

made changes to the draft, but none of them related to the brokers or brokers’ 

commission. Kerry said he did not make such changes because he thought they had an 

agreement on the commission already.

Kerry and Mark signed the purchase agreement as buyers on or about May 15, 

2006. Paragraph 1.1 of the purchase agreement defined the buyers as Kerry, Mark, 

Bradley Business Center, “and/or assignee.” (Capitalization omitted.) Paragraph 5.1 

identified the brokers as follows: 

“Real Estate Brokers

“. . . The following real estate broker(s) (‘Brokers’) and brokerage 

relationships exist in this transaction and consented to [sic] by the parties: 

REALTY EXECUTIVES Stephen C. Schmidt and Sara Fincher represent 

Sellers exclusively (‘Sellers’ Broker’) AMERICAN DIVERSIFIED 

PROPERTIES, INC. Represent Buyers exclusively (‘Buyers’ Broker’) 

The Parties acknowledge that Brokers are the procuring cause of this 

Agreement.” (Sic.)

Kerry did not request that he and Mark be added to this paragraph as agents of 

ADP because he felt “[i]t wasn’t necessary. She [(Schmidt)] knew who we were.” For 

her part, Schmidt said she did not know who was acting as the agents of ADP, other than 

perhaps Gloria because she was referenced in the offer, but Schmidt had never had 

contact with Gloria. Paragraph 5.3, carried over from Kerry and Mark’s offer, stated 

some of the buyers were principals in ADP and held valid California real estate licenses.

Under the purchase agreement, Valleywide had to verify that all of the buyer’s 

contingencies had been satisfied or waived prior to closing. Paragraph 7.1 of the
9

purchase agreement stated it was setting forth the contingencies that had to be satisfied or 

waived before closing the transaction. At the same time, paragraph 6.6 stated certain 

subparagraphs of 7.1, including subparagraph (k) (paragraph 7.1(k)), were “matters of 

agreement between the Parties only and are not instructions to Valleywide Escrow.”

Paragraph 7.1(k) of the purchase agreement has been the subject of much dispute 

in this litigation. It states:

“Brokerage Fee. Payment at the Closing of such brokerage fee as is 

specified in a separate Agreement executed by Listing Broker and 

Cooperating Broker provided to Valleywide Escrow. It is agreed by the 

Parties and Valleywide Escrow Holder that Brokers are a third party 

beneficiary of this Agreement insofar as the Brokerage Fee is concerned, 

and that no change shall be made with respect to the payment of the 

Brokerage Fee specified in this Agreement, without the written consent of 

Brokers.”

While Schmidt based paragraph 7.1(k) on the similar paragraph in Mark and 

Kerry’s offer form, she changed some of the language. The provision in the offer form 

did not identify Valleywide as the escrow holder, and it referred to “brokers” but not 

“listing broker” and “cooperating broker.” Kerry believed paragraph 7.1(k) was there to 

protect the brokers and specify that there would be a separate agreement delineating how 

the commission would be split to instruct the escrow holder. Mark assumed Schmidt 

would send an instruction to the escrow holder identifying her costs and telling it to 

disburse the commission 50-50 after deducting those costs.

Kerry and Mark signed the purchase agreement under a line stating: “Buyer: 

Kerry Seidenglanz & Mark Seidenglanz, Bradley Business Center and Assignees.” 

Neither Realty Executives nor ADP was a signatory to the purchase agreement.

Kerry traveled out of the country from the beginning of June 2006 to around 

July 4, 2006. During this time, Schmidt did not communicate with him or Mark. When 

he returned in July 2006, the dispute about the commission arose.

b. Escrow and Closing of Transaction

Cynthia Moller was the Valleywide escrow officer for this transaction. The 

purchase agreement was made part of the escrow instructions. Moller understood 
10

Valleywide was required to disburse the funds from escrow in accordance with the terms 

of the purchase agreement. Moller read the agreement and understood it bound the 

escrow holder to follow applicable law and custom and practice in the industry. In 

particular, she read paragraph 7.1(k) when she received the purchase agreement. She 

understood when reading that paragraph that ADP was the “cooperating broker.” She 

was not aware of any specific deadline for the brokers to provide Valleywide with the

“separate Agreement” referenced in paragraph 7.1(k). She never received a separate 

agreement signed by both brokers regarding commission. She did, however, receive an 

irrevocable instruction from the seller in June 2006 directing Valleywide to pay a 

commission of 7.5 percent (or $487,500) to Realty Executives. Moller did not consider 

the content of paragraph 7.1(k) when she performed her duties in this transaction because 

paragraph 6.6 expressly stated paragraph 7.1(k) was a matter of agreement between the 

parties only and not instructions to Valleywide.

Schmidt expects a buyer’s broker to present a request for commission by 

submitting a cooperating broker’s agreement along with the buyer’s offer. Kerry and 

Mark never did this. It first crossed Schmidt’s mind that Kerry was a broker in July 2006

when Moller told her. Kerry had been asking Moller about the commission and indicated 

he was expecting one. Moller called Schmidt and asked if Realty Executives had offered

him a commission. Schmidt responded that she did not even know Kerry and Mark were 

brokers.

Once Schmidt realized Kerry was a broker, she was willing to share some of the 

commission with ADP. She consulted her supervisors and an attorney about the situation 

because she was unsure what to do. She was willing to offer Kerry up to 2.5 percent, but 

she decided to start with an offer of 2 percent. Two and a half percent was the same 

amount she had offered other brokers in the past on this property. Additionally, when

Kerry had asked about the commission, he had assumed 2 or 2.5 percent, so she thought 

this would be acceptable to him. She drafted a “cooperating broker compensation

agreement” providing for ADP to receive a 2 percent commission and took this 

agreement to a lunch meeting with Kerry on or about July 28, 2006. She wanted this 
11

agreement executed in writing so that they could give it to Valleywide, per paragraph 

7.1(k). She did not know before July 28 that Kerry believed he was entitled to half of her 

commission. There had been no mention of commission between Schmidt, Kerry, and 

Mark since their meeting on March 14.

At the July 28 meeting, Kerry and Schmidt completed some escrow paperwork. 

Afterward, Schmidt told Kerry she wanted to offer him 2 percent of the purchase price as 

commission and presented the cooperating broker compensation agreement. According

to Schmidt, Kerry rejected the offer and said he felt he was “entitled to” half of the total 

commission because he had fulfilled his obligations. He wanted to take the commission 

in the form of a reduction in the purchase price. He became very angry when she made 

her proposal and threw the cooperating broker agreement at her. He did not say they had 

previously agreed on a 50-50 commission split. Schmidt then offered him 2.5 percent of 

the purchase price, which he also rejected. She never intended to share half of the 7.5

percent commission with any cooperating broker. Even before she met Kerry and Mark, 

she had intended that Realty Executives would keep at least 5 percent of the purchase 

price as commission.

According to Kerry, when Schmidt offered ADP a 2 percent commission, she 

explained she felt she was entitled to more than the customary 50-50 split because she 

had been working on the property for over a year. Kerry was angry and said they had not 

agreed on an unequal split. He asked how much the commission was, and Schmidt said 5

percent. He told her he did not believe that. He asked to see the commission agreement

with the seller, and she refused.

Kerry contacted Valleywide and Realty Executives to learn how much the total 

commission was, but no one would share that information. Moller refused to give him 

that information because the seller was paying the commission, it was part of the seller’s 

side of the transaction, and she did not have the seller’s consent to disclose the 

information. Kerry eventually learned the total commission was 7.5 percent of the 

purchase price. Realty Executives again offered him a 2.5 percent commission to try to 

resolve the dispute, and Kerry rejected it.
12

He wrote a letter proposing a 50-50 split of the commission, with ADP taking its 

portion of the commission by way of a purchase price reduction. Kerry said he had 

spoken to Campbell regarding the purchase price reduction, and he had agreed to this. 

But according to Schmidt, she asked Campbell about paying ADP in the form of a price 

reduction after the lunch meeting on July 28, and Campbell unequivocally rejected that 

possibility. Campbell also testified he told Kerry “absolutely not” in response to his 

proposal. Campbell did not understand why Kerry was trying to change the deal right 

before closing, and he would not agree to change the deal.

On or about August 11, 2006, ADP sent Moller a fax stating: “As you are aware 

there is a dispute between the Brokers regarding the commissions. You are hereby 

instructed to hold all commissions until this dispute is resolved.” Kerry and Mark as 

buyers also sent a supplement to the escrow instructions. This document stated in 

pertinent part: “Buyer and seller hereby acknowledge that all contingencies to this 

transaction have been satisfied, and escrow holder is hereby instructed to proceed with 

the closing of this escrow. EXCEPT THAT Escrow Holder is to hold all commissions 

[and] compensation to be p[ai]d to any Brokers in [t]his [t]ransaction pursuant to the 

letter/instructions [f]axed to [y]ou on 8-4-06 by [ADP].” Kerry agreed to let the 

transaction close and deal with the commission dispute afterward. The transaction closed 

on or about August 14, 2006.

From March to August 2006, Kerry estimated he worked “hundreds” of hours to 

close the transaction. His work included “going through the preliminary title reports, 

going through easements, checking, meeting with the city, checking on the zoning, . . . 

finding out about negotiating about utilities, doing soils work,” and meeting with the 

seller’s attorney and Edison to bring about a settlement in the pending arbitration with 

Edison. He had ongoing communications with Schmidt about the work he was doing, 

and she encouraged it. Mark also put in “a lot of work” to get the transaction closed 

between March and August of 2006. It was the type of work he would have done as a 

broker for other clients, and he and Mark used ADP’s resources to accomplish the work.
13

c. Postclosing Commission Disbursement

Valleywide eventually disbursed the entire 7.5 percent commission to Realty 

Executives after getting instructions from Realty Executives. Realty Executives initially 

instructed Valleywide to hold 2.5 percent of the purchase price in escrow pending further 

instructions, which Valleywide did. When ADP filed this action, Valleywide was still 

holding the 2.5 percent. Schmidt agreed to defend and indemnify Realty Executives for 

any liability and pay its attorney fees in this action. In return, Realty Executives agreed 

to release to her the remaining 2.5 percent of the commission. Realty Executives thus 

instructed Valleywide to disburse the 2.5 percent commission it was holding.

d. Expert Witness Testimony

i. ADP’s Expert on Broker and Escrow Issues

ADP’s expert, Alan Wallace, opined ADP was entitled to half the commission 

offered by the seller to Realty Executives, less Realty Executives’ costs. Raw land deals 

were particularly difficult. It was custom and practice for the seller to offer a 10 percent 

commission to a broker for the sale of raw land such as this, and typically the seller’s 

broker would have to offer at least half of that commission to the buyer’s broker to entice 

the broker to bring in his client. If the seller’s broker was not going to offer the 

customary half of the commission, he or she should tell the buyer’s broker immediately. 

The purchase agreement identified ADP as the buyers’ exclusive broker and as a 

“procuring cause” of the transaction, confirming that ADP was significant to the 

transaction and did a substantial amount of work to close it. Even if there was not an 

express agreement between ADP and Realty Executives to split the commission 50-50, 

Realty Executives was still obligated to share half because of the custom and practice.

Wallace acknowledged that in a standard transaction, the seller generally dictates 

who gets paid the commission. The seller generally is the party paying the commission, 

not the buyer.

Regarding escrow issues, Wallace opined Valleywide breached its duties as an 

escrow holder when it disbursed the entire commission to Realty Executives without the 

separate agreement of both brokers referenced in paragraph 7.1(k) of the purchase 
14

agreement. He believed it also breached its duties by not holding the commission funds 

in escrow when instructed to do so by the buyer and the buyers’ broker. Paragraph 7.1(k) 

made the brokers third party beneficiaries of the agreement and told Valleywide that 

when it came to commission, it needed the consent of both brokers to change the 

commission, and both brokers could instruct Valleywide relating to commission. When 

ADP sent instructions to Valleywide to hold the commission pending resolution of the 

dispute between it and Realty Executives, Valleywide was required to follow the 

instruction. Anytime an escrow holder gets conflicting instructions, the custom and 

practice is for it to not act until a resolution can be reached or a court order directs it to 

act.

ii. Realty Executives and Schmidt’s Expert on Broker Issues

Realty Executives and Schmidt’s expert on broker issues, John Pagliassotti, opined 

that even though it is common in the commercial real estate industry to share a 

commission 50-50, it is not absolute custom, and the brokers always need to agree upon 

the split, which may be less than 50-50. None of the ethical rules and regulations 

applicable to real estate brokers requires sellers’ brokers to share their commission 50-50 

with buyers’ brokers. For example, the National Association of Realtors (NAR) Code of 

Ethics and Standards of Practice states the obligation to cooperate between brokers “does 

not include the obligation to share commissions, fees, or to otherwise compensate another 

broker.” In addition, the same code states sellers’ brokers establish the terms and 

conditions of offers to cooperate, and unless expressly indicated in the offer to cooperate, 

cooperating brokers cannot assume an offer of cooperation includes an offer of 

compensation. Cooperating brokers, moreover, shall ascertain the terms of compensation 

“before beginning efforts to accept the offer of cooperation.” The rules of the Society of 

Industry and Office Realtors (SIOR) also state these principles. 

Pagliassotti knew of many transactions when either the commission offered by the 

seller was not split 50-50 between the brokers or it was not split because the buyer 

compensated the buyer’s broker. In his own experience with similar properties, he had 

represented the buyers in five vacant land transactions, and in all of those instances, the 
15

buyer paid his commission, not the seller or the seller’s broker. Thus, the seller’s broker 

did not share its commission at all. Pagliassotti did not agree with Wallace that raw land 

deals were particularly difficult or that sellers’ brokers typically had to offer half of the 

commission to buyers’ brokers to entice them to bring in buyers.

Pagliassotti explained there is customarily an exclusive listing agreement between 

the seller and the seller’s broker, and such an agreement would require the seller to pay a 

commission to its broker. The commission agreement between Campbell and Realty 

Executives differed because it did not give Schmidt and Realty Executives the exclusive 

right to a commission if the property sold and did not protect her if a buyer’s broker went 

around her to negotiate directly with Campbell. A listing agreement would also require 

the listing broker to market the property to the public on an MLS and by other means. 

When a property is listed on an MLS, the amount of the commission being offered to a 

cooperating broker is required to be listed. Schmidt and Realty Executives did not make 

such an offer here because the property was not listed on an MLS.

Pagliassotti also opined ADP was “incompetent” in its pursuit of this commission. 

It was customary that the brokers confirm commissions in writing, particularly on a 

transaction of this size. According to relevant ethical rules, the terms of compensation 

for cooperating brokers should be in writing. Schmidt protected her right to a 

commission by having a written commission agreement with Campbell. It was 

incumbent on ADP to procure a written acknowledgement of any agreement by Realty 

Executives to share the commission. There were numerous instances when ADP could 

have procured such a writing, including the meetings with Schmidt, the meeting with 

Campbell, its original offer, and the purchase agreement.

iii. Valleywide’s Expert on Escrow Issues

Valleywide’s expert on escrow issues, Lore Hilburg, opined Moller handled the 

escrow at all times competently and consistent with the custom and practice in the 

Southern California industry. When performing her duties, Moller was not to be 

concerned with paragraph 7.1(k) of the purchase agreement because the agreement 

expressly told her elsewhere that paragraph 7.1(k) was not an instruction to Valleywide.
16

The buyer and seller are parties to the escrow, but the brokers are not. As such, 

brokers can instruct the escrow officer on behalf of their clients, but they cannot instruct 

the escrow officer on behalf of themselves. Hilburg opined that here, Valleywide did not 

receive any conflicting instructions regarding commission. It had only one instruction on 

this topic, the irrevocable instruction from the seller to pay Realty Executives a 7.5

percent commission. The commission was coming from the seller’s proceeds, not the 

buyer’s funds, and accordingly, the seller had the right to direct payment. Once 

Valleywide received the irrevocable instruction to pay Realty Executives, Valleywide 

could take instruction from Realty Executives as to how it wanted the commission 

disbursed.

The letters or purported instructions from Kerry regarding commission had no 

impact on Valleywide’s duties because only the seller had a right to direct how to pay the 

commission offered by the seller. If Valleywide received an executed agreement 

between Realty Executives and ADP showing some of Realty Executive’s commission 

should be paid to ADP, Valleywide would have paid ADP. But it did not receive any 

documentation showing Realty Executives had agreed to this.

3. Trial Court’s Statement of Decision 

The court found ADP failed to prove all causes of action in the complaint. 

Schmidt had filed a cross-complaint against ADP for intentional and negligent 

interference with contract. The court also found Schmidt did not prove the causes of 

action in her cross-complaint. Because Schmidt has not appealed the judgment on her

cross-complaint, we will not discuss those causes of action here.

a. Causes of Action Against Realty Executives and Schmidt

The court began by noting ADP alleged a partly oral, partly written agreement to 

share commission. It found there was no “meeting of the minds” with respect to the 

alleged oral portion of the agreement and ADP had not proved its version of the events by 

a preponderance of the evidence. It concluded the early encounters between Kerry, 

Mark, and Schmidt never amounted to an express agreement, and Mark’s and Kerry’s

roles as brokers versus buyers were not made clear.
17

Moreover, the court held ADP had failed to prove the existence of a written 

agreement to share commission: “There was a remarkable failure of Mark and Kerry, on 

behalf of ADP, to reduce any such ‘agreement’ to writing, notwithstanding numerous 

opportunities to do so.” The court was “not convinc[ed]” by Mark’s and Kerry’s

testimony that they did not reduce the agreement to writing because they thought they 

were protected by the purchase agreement. The court held nothing in the purchase 

agreement “protects” the buyers’ broker. The court construed paragraph 7.1(k) to mean 

that if the listing and cooperating brokers executed a written commission-sharing 

agreement and provided it to Valleywide, payment of the commission had to be made as 

stated in the agreement. The brokers were third party beneficiaries of the purchase 

agreement only to the extent that paragraph 7.1(k) protected them from modification of 

any written commission agreement without their consent. But no written commissionsharing agreement existed between ADP and Realty Executives.

The court found “utterly unconvincing” ADP’s evidence that a 50-50 commission 

split between brokers was custom and practice in the area. Further, the relevant ethical 

rules, while not binding on the parties, strongly suggested the brokers should discuss any 

commission-sharing agreement at the earliest opportunity and reduce it to writing.

Accordingly, the court found Realty Executives and Schmidt did not breach any 

contract with ADP because none existed, and since the causes of action for negligent and 

intentional interference with contract rose or fell on the existence of commission-sharing 

agreement, those causes of action failed as well. In addition, the common counts 

(quantum meruit and money had and received) failed “because California law provides 

that there is no right for a buyer’s broker to recover a portion of a seller’s broker’s 

commission in the absence of an express agreement.”

b. Causes of Action Against Valleywide

The court held Valleywide was not liable for failing to follow the instruction from 

ADP to withhold the disputed commission. It determined paragraph 7.1(k) was an 

agreement between the parties only and not an instruction to Valleywide. It rejected the 

testimony of ADP’s expert, Wallace, that paragraph 7.1(k) gave ADP the right to give 
18

instructions to Valleywide regarding the payment of commission. Valleywide was not 

obligated to investigate or decide whether a commission-sharing agreement between the 

brokers existed. Its only obligation was to follow the instructions of the seller and 

buyers, and the only instruction Valleywide received from one of them was the seller’s 

irrevocable instruction to pay 7.5 percent of the purchase price to Realty Executives. 

There were no other conflicting instructions from the other parties to the purchase 

agreement.

The court entered judgment for Realty Executives, Schmidt, and Valleywide on 

the complaint and for ADP on Schmidt’s cross-complaint.

DISCUSSION

1. Causes of Action Based on a Commission-sharing Agreement Between the Brokers

ADP argues the court “overlooked” the evidence Schmidt knew ADP expected to 

be paid half the commission and failed to tell it she would not share the commission. It 

contends her silence was consent to commission sharing. We disagree. The court found 

there was no commission-sharing agreement, whether oral or written, and there was no 

meeting of the minds on this subject. This was not error. Substantial evidence supported 

this conclusion.

Mutual consent, or agreement by the parties on the same thing in the same sense, 

is required to form a contract. (Civ. Code, § 1565; Bustamante v. Intuit, Inc. (2006) 141 

Cal.App.4th 199, 208.) The failure to reach a meeting of the minds on all material points 

of an agreement prevents the formation of a contract. (Bustamante, at p. 215.) When the 

formation of a contract is at issue and the evidence conflicts, the trier of fact must

determine whether the contract actually existed. (Id. at p. 208.) We review the court’s 

findings on disputed factual issues for substantial evidence, viewing the evidence in the 

light most favorable to the judgment, giving the benefit of every reasonable inference to 

the prevailing party, and resolving all conflicts in the prevailing party’s favor. (SFPP. v. 

Burlington Northern & Santa Fe Ry. Co. (2004) 121 Cal.App.4th 452, 462.)

While the parties’ evidence conflicted, Realty Executive and Schmidt’s evidence 

was sufficient to support the determination that the brokers never formed a commission-
19

sharing agreement. According to Pagliassotti, it was common to share commissions, but 

there was no custom and practice in the industry to split commissions 50-50, and the 

obligation of the seller’s broker to cooperate did not include the obligation to share a

commission under relevant ethical rules. Pagliassotti had done several vacant land 

transactions in which the seller’s broker did not share the commission at all, and the 

buyer compensated Pagliassotti for his broker services. A cooperating broker could not 

assume an offer to share a commission under relevant ethical rules.

According to Schmidt, Kerry and Mark did not tell her they expected to share in 

the commission before July 2006, and she never offered or agreed to a 50-50 split. When 

Kerry asked about the commission at their March 14 meeting, he did not ask how much 

she was offering to the cooperating broker. He merely asked about the amount of the 

commission (“2, 2-1⁄2 percent[?]”). She was taken aback by Kerry’s question and did not 

know how to respond because it was an unusual question for a buyer, and she did not 

want to reveal how much Campbell was paying her. She did not answer the question and

instead said that she had been working on the deal awhile and wanted to recoup her 

expenses. That was all they said about commission, and Schmidt moved on in her 

presentation.

She did not make an offer to share the commission at this point because she did 

not even realize Kerry and Mark were brokers until months later. She thought Kerry and 

Mark were merely buyers of the property because that was how they had represented 

themselves, both in written communications and orally. They never stated they were 

licensed real estate brokers. When she learned from Moller in July 2006 that they were 

brokers, she offered to share the commission with Kerry/ADP, but only up to 2.5 percent 

of the purchase price. Kerry rejected the offer. Thus, there was never any meeting of the 

minds on splitting the commission and no contract formed. ADP never accepted the only 

offer Realty Executives made.

The purchase agreement does not assist ADP in establishing a commission-sharing 

agreement. It refers to a potential separate agreement to share commission between the 
20

brokers and makes the brokers third party beneficiaries. But the purchase agreement does 

not itself set forth the terms of any commission-sharing agreement.

Without a contract, Realty Executives was not liable for breach of contract. The 

existence of a valid contract is also an essential element of tortious interference with 

contract. (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 

1126.) Accordingly, Schmidt was not liable for intentional or negligent interference with 

contract either. The court did not err in entering judgment for Realty Executives and 

Schmidt on these causes of action.

2. Cause of Action for Quantum Meruit

The court held ADP did not prove its cause of action for quantum meruit “because 

California law provides there is no right for a buyer’s broker to recover a portion of a 

seller’s broker’s commission in the absence of an express agreement.” ADP contends the 

court misstated the law because quantum meruit does not require an express agreement, 

and there is no authority barring brokers from recovering from one another in quantum 

meruit. Assuming for the sake of argument the court erred in its statement of the law, we 

decline to reverse. ADP has not demonstrated a reasonable probability it would have 

prevailed on the quantum meruit claim. Any error, therefore, was not prejudicial.

“Quantum meruit refers to the well-established principle that ‘the law implies a 

promise to pay for services performed under circumstances disclosing that they were not 

gratuitously rendered.’ [Citation.] To recover in quantum meruit, a party need not prove 

the existence of a contract [citations], but it must show the circumstances were such that 

‘the services were rendered under some understanding or expectation of both parties that 

compensation therefor was to be made.’” (Huskinson & Brown v. Wolf (2004) 32 Cal.4th 

453, 458.) The plaintiff bears the burden of showing he or she rendered services “at the 

request of the person to be charged” (Miller v. Campbell, Warburton, Fitzsimmons, 

Smith, Mendel & Pastore (2008) 162 Cal.App.4th 1331, 1344 (Miller); Earhart v. 

William Low Co. (1979) 25 Cal.3d 503, 515), and the services “were intended to and did 

benefit the defendant” (Day v. Alta Bates Medical Center (2002) 98 Cal.App.4th 243, 

248). The defendant can defeat the cause of action by proving the plaintiff rendered the 
21

services “gratuitously or without obligation” to pay on the defendant’s part. (Miller, 

supra, at p. 1344.)

We do not reverse a judgment for “any error, ruling, instruction, or defect” unless

the record demonstrates the error was “prejudicial” and a “different result would have 

been probable” absent the error. (Code Civ. Proc., § 475.) We do not presume an error is 

prejudicial. (Ibid.) The appellant must demonstrate it is reasonably probable the court 

would have reached a more favorable result in the absence of the error. (Cassim v. 

Allstate Ins. Co. (2004) 33 Cal.4th 780, 800.)

Here, it is not reasonably probable the court would have permitted ADP to recover 

in quantum meruit, had the court not committed the purported legal error. To recover in 

quantum meruit from Realty Executives and Schmidt, ADP had to show it rendered its 

broker services at their request, and moreover, that its services were intended to benefit 

them. But it is undisputed Bradley Business Center engaged ADP to act as its broker—

that is, ADP was performing broker services at its client’s request and for its client’s

benefit, not at Realty Executives and Schmidt’s request. Indeed, as the agent of its client, 

ADP owed its client a fiduciary duty of “undivided service and loyalty” and a duty to 

perform diligently, among other duties. (Field v. Century 21 Klowden-Forness Realty

(1998) 63 Cal.App.4th 18, 25; see Whitney Inv. Co. v. Westview Dev. Co. (1969) 273 

Cal.App.2d 594, 601.) While Kerry said he communicated with Schmidt about the work 

he was doing to close the deal and she “encouraged” his work, there is no indication she 

requested any of it. They were not in a principal-agent relationship such that one might 

expect her to request services of him.

Additionally, although recovery in quantum meruit does not require proof of an 

express agreement, the doctrine does require that the plaintiff render its services under 

some “understanding or expectation” on the part of both parties that compensation would 

be forthcoming. Schmidt did not know Kerry and Mark were brokers until late July

2006. She thought they were buyers, and thus there was no understanding on her part 

that Kerry was rendering broker services with an expectation of compensation from her. 
22

By the time she did expect to compensate them (an offer Kerry rejected), the deal was 

nearly done.

Further, there was substantial evidence Realty Executives had no obligation to 

compensate ADP. (Miller, supra, 162 Cal.App.4th at p. 1344.) According to 

Pagliassotti, the NAR Code of Ethics and Standards of Practice is the “bible” for real 

estate brokers. NAR is the primary national trade association for real estate 

professionals. NAR members agree to be bound by its code. (1 Baxter et al., Cal. Real 

Estate Brokers: Law and Litigation (Cont.Ed.Bar 2013) Overview of Real Estate 

Brokerage, § 1.6, pp. 1-6 to 1-7.) The NAR code applies equally to members of the 

California Association of Realtors (CAR), which is a member association of NAR. (Id.

at p. 1-6.) Schmidt was a member of both NAR and CAR in 2006. Pagliassotti opined 

any licensed real estate broker would be aware of the NAR code. The NAR code 

requires brokers to cooperate with each other, but that obligation to cooperate “does not 

include the obligation to share commissions, fees, or to otherwise compensate another 

broker.” The SIOR, a professional organization for commercial (industrial and office) 

realtors, also promulgates an ethical code. Its code states the obligation to cooperate 

with other brokers “is not an obligation to share commissions or fees or to otherwise 

compensate other real estate professionals.” Though these ethical codes are not binding 

law, courts have looked to them when circumscribing brokers’ duties. (E.g., Nguyen v. 

Scott (1988) 206 Cal.App.3d 725, 736; Easton v. Strassburger (1984) 152 Cal.App.3d 90, 

101.)

The court’s findings in the statement of decision demonstrate it accepted Realty 

Executives and Schmidt’s evidence and rejected ADP’s version of the events. Moreover, 

it found ADP’s evidence of a custom and practice to share commissions 50-50 “utterly 

unconvincing.” In light of the substantial evidence that the circumstances supporting 

quantum meruit did not exist here, and the court’s findings against ADP in the statement 

of decision, we cannot say it is probable the court would have reached a more favorable 

result, absent the asserted error.
23

3. Causes of Action Involving Valleywide’s Duties

ADP alleged breach of contract, breach of fiduciary duty, and negligence against 

Valleywide because it (1) did not wait for an executed “separate agreement” on 

commission between brokers, as referenced in paragraph 7.1(k), (2) refused to hold the 

commission pending resolution of the commission dispute, as instructed by the buyers 

and ADP, and (3) instead distributed all the disputed commission funds to Realty 

Executives. ADP argues the court erred in finding Valleywide did not receive conflicting 

instructions on commission and Valleywide did not have a duty to hold the disputed 

commission. We need not address whether the court erred in these findings. Regardless 

of whether Valleywide’s disbursal of the commission funds breached any contract or tort 

duties, Valleywide is not liable due to a lack of causation.

“An escrow holder who fails to comply with instructions may be liable to the 

injured party on a theory of breach of contract, negligence or breach of fiduciary duty.” 

(3 Miller & Starr, Cal. Real Estate (3d ed. 2010) Escrows, § 6:17, pp. 6-68 to 6-69, fns. 

omitted.) Causation of damages is an essential element of all three causes of action. 

(Gutierrez v. Girardi (2011) 194 Cal.App.4th 925, 932; Troyk v. Farmers Group, Inc.

(2009) 171 Cal.App.4th 1305, 1352; Vasquez v. Residential Investments, Inc. (2004) 118 

Cal.App.4th 269, 278, 279.) Causation of damages in contract as well as tort cases 

“‘requires that the damages be proximately caused by the defendant’s breach, and that 

their causal occurrence be at least reasonably certain.’ [Citation.] A proximate cause of 

loss or damage is something that is a substantial factor in bringing about that loss or 

damage.” (US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 909.) 

“Substantial factor” has no precise definition, but it is something more than a theoretical 

factor in producing the injury. (Ibid.) “Conduct is not a substantial factor in causing 

harm if the same harm would have occurred without that conduct.” (CACI No. 430, 

brackets omitted; see Viner v. Sweet (2003) 30 Cal.4th 1232, 1240.)

Valleywide argues if ADP failed to show it is entitled to any of the commission

funds, Valleywide’s actions could not have been the proximate cause of any damage to 

ADP. We agree. ADP alleges damages against Valleywide in an amount equal to half 
24

the commission, plus the attorney fees and costs ADP has incurred to collect from Realty 

Executives and Schmidt. In other words, ADP’s alleged damages are predicated on the 

theory that it was entitled to half the commission under an express agreement or a 

quantum meruit theory. But we hold otherwise in the foregoing parts. ADP was not

entitled to a portion of the commission funds, and ADP would not now be entitled to the 

commission funds, even had Valleywide held them and not disbursed them. What is 

more, assuming Valleywide had held the funds, ADP still would have incurred attorney

fees and costs to resolve the dispute with Realty Executives and Schmidt. Accordingly, 

any failure to act according to ADP’s instructions was not a substantial factor in causing 

ADP’s loss. The same loss would be occurring even without Valleywide’s failure to hold 

the funds.

ADP asserts we should reverse and remand regardless of whether Valleywide’s 

actions caused actual damages because ADP is entitled, at a minimum, to nominal 

damages for breach of contract. Assuming for the sake of argument Valleywide’s 

conduct constituted a breach of contract, we need not reverse for an award of nominal 

damages. A plaintiff may recover nominal damages for breach of contract, despite that 

actual damage was not inflicted, because the defendant’s failure to perform a contractual 

duty is a legal wrong fully distinct from actual damages. (Civ. Code, § 3360; Sweet v. 

Johnson (1959) 169 Cal.App.2d 630, 632.) The amount of nominal damages must be 

trivial, no more than a few cents or a dollar. (Avina v. Spurlock (1972) 28 Cal.App.3d 

1086, 1089.) Generally, when a plaintiff is entitled at most to nominal damages, the 

failure to award nominal damages is not ground for reversal. (Sweet v. Johnson, supra, at 

p. 633.)

ADP relies on two exceptions. When the award of nominal damages carries costs 

as a matter of right, or when the cause of action seeks to establish a permanent property 

right, the failure to award nominal damages may be grounds for reversal. (Sweet v. 

Johnson, supra, 169 Cal.App.2d at pp. 633-634.) Neither of these exceptions apply. 

ADP does not identify the permanent property right at issue, but assuming it is the 

asserted right to a commission, we have determined ADP did not prove any such right. 
25

As to costs, ADP would not be entitled to costs as a matter of right if awarded nominal 

damages. A “‘[p]revailing party,’” which includes the party with a net monetary 

recovery, is entitled to recover costs as a matter of right in any action “[e]xcept as 

otherwise expressly provided by statute.” (Code Civ. Proc., § 1032, subds. (a)(4), (b),

italics added.) One statutory exception to a prevailing party’s right to recover costs is set 

forth in Code of Civil Procedure section 1033. That section allows a trial court in its 

discretion to deny costs when a prevailing plaintiff recovers a judgment in an unlimited 

civil case within the $25,000 jurisdictional limit for a limited civil case, such as a 

judgment for nominal damages for breach of contract. (Code Civ. Proc., § 1033, subd. 

(a); Carter v. Cohen (2010) 188 Cal.App.4th 1038, 1052.) Because a judgment for 

nominal damages would not have carried costs as a matter of right, the general rule 

applies, and any failure to award nominal damages does not warrant reversal. (Sweet v. 

Johnson, supra, at p. 634.)

4. Attorney Fees and Costs

After judgment, the parties filed memoranda of costs, and Realty Executives and 

Schmidt filed a motion for attorney fees. The court awarded (1) Realty Executives and 

Schmidt, jointly and severally, costs in the amount of $14,911.68; (2) Realty Executives 

and Schmidt, jointly and severally, attorney fees in the amount of $520,182.25; and (3) 

Valleywide costs in the amount of $8,469.75. It also granted Schmidt’s motion to strike 

the costs of ADP because Schmidt was the prevailing party as between the two.

ADP asserts several errors with respect to the costs and fee orders. We review a 

trial court’s award of fees and costs for abuse of discretion. (Connerly v. State Personnel 

Bd. (2006) 37 Cal.4th 1169, 1175; Seever v. Copley Press, Inc. (2006) 141 Cal.App.4th 

1550, 1556.)

a. Due Process

ADP contends the fee award to Schmidt violated its due process rights because it 

did not have adequate notice of the grounds for the award. ADP asserts Schmidt’s

opening brief sought fees only under Code of Civil Procedure section 1021, yet in the 
26

reply brief she also sought fees under Civil Code section 1717. The court’s award cited

only section 1717.

ADP does not accurately characterize Realty Executives and Schmidt’s joint 

motion. Their notice of motion cited both statutes as a basis for their motion. Their 

memorandum of points of authorities cites both statutes as a basis for the fee award to 

both defendants. (E.g., “The law is clear that since they are the prevailing parties, 

Defendants are entitled to enforce the attorneys’ fees provision in Paragraph 14 of the 

Purchase Agreement, pursuant to Civil Code § 1717 and Code of Civil Procedure 

§ 1021.”) ADP had adequate notice of the grounds for Schmidt’s motion and an 

opportunity to respond in its opposition brief and at the hearing. We find no violation of 

ADP’s due process rights.

b. Fees Sought in Cross-complaint

In her cross-complaint against ADP, Schmidt sought as damages the attorney fees 

she incurred for defending and indemnifying Realty Executives in this litigation. She did 

not recover these damages because she failed to prove the causes of action in the crosscomplaint. After trial, she successfully sought her own attorney fees as allowable costs

on the ground that she was the prevailing party. ADP contends the court erred in 

awarding fees to Schmidt as the prevailing party because she did not prove them as an 

element of damages on her cross-complaint. But she was not required to do so to 

recover them as costs, and ADP cites no authority for this proposition. “When an issue is 

unsupported by pertinent or cognizable legal argument it may be deemed 

abandoned . . . .” (Landry v. Berryessa Union School Dist. (1995) 39 Cal.App.4th 691, 

699.) We decline to reverse the fee order on this ground.

c. Prevailing Party Status

ADP contends the court abused its discretion in finding Schmidt was the 

prevailing party for purposes of the attorney fees award because she did not prevail on 

her cross-complaint. We disagree.

The trial court’s order recognized Schmidt’s right to fees was complicated by the 

fact that she had prevailed on the complaint but not on her cross-complaint. The court
27

noted that when there are cross-actions and the court awards no relief in either action, it is 

not obligated to find there is no prevailing party. (Hsu v. Abbara (1995) 9 Cal.4th 863, 

875, fn. 10.) Rather, “[i]f the court concludes that the defendant’s cross-action against 

the plaintiff was essentially defensive in nature, it may properly find the defendant to be 

the party prevailing on the contract.” (Ibid.) The court went on to thoroughly analyze

whether Schmidt’s cross-complaint was essentially defensive in nature and concluded it 

was.

ADP’s argument does not address the court’s conclusion that the cross-complaint 

was essentially defensive in nature. Instead, it argues Schmidt did not fit the contractual 

definition of prevailing party under the purchase agreement. ADP asserts only a “clear 

winner”—one who prevails on all its claims and defenses—qualifies as a prevailing 

party.

The attorney fee provision in the purchase agreement states:

“If any Party or Broker brings an action or proceeding involving the 

Property whether founded in tort, contract or equity, or to declare rights 

hereunder, the Prevailing Party (as hereafter defined) in any such 

proceeding, action, or appeal thereon, shall be entitled to reasonable 

attorneys’ fees. . . . The term, ‘Prevailing Party’ shall include, without 

limitation, a Party or Broker who substantially obtains or defeats the relief 

sought, as the case may be, whether by compromise, settlement, judgment, 

or the abandonment by the other Party or Broker of its claim or defense.”

(Italics added.)

ADP maintains Schmidt would be the prevailing party under this provision only if 

she both obtained the relief sought in her cross-complaint and defeated the relief sought 

in the complaint. We do not agree with this interpretation. The language is clear that a 

prevailing party can be one who either substantially obtains or defeats the relief sought. 

Moreover, even if we were to interpret the language as ADP suggests, the definition of 

prevailing party would merely “include, without limitation,” ADP’s definition, and it thus 

could include other definitions. The court did not, therefore, abuse its discretion by 

looking to case law to help it determine the prevailing party.
28

d. Realty Executives’ Fees

ADP next contends the court erred in awarding Realty Executives its fees because

Schmidt provided its defense and it did not actually incur fees. We also reject this 

contention.

California courts have repeatedly affirmed awards of attorney fees that were not 

“actually incurred.” (Nemecek & Cole v. Horn (2012) 208 Cal.App.4th 641, 651-652.) 

For instance, in PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1094-1095, our

Supreme Court held attorney fees may be recovered under Civil Code section 1717 for 

the work of in-house counsel. The trial court was not required to use a “cost-plus 

approach”—a calculation of the actual salary, costs, and overhead of in-house counsel—

but could instead use market value to determine reasonable attorney fees. (Id. at pp. 

1096-1097.) In Lolley v. Campbell (2002) 28 Cal.4th 367, 371, our Supreme Court 

rejected the contention that the trial court could not award attorney fees to an indigent 

employee who did not incur fees because he was represented by the Labor 

Commissioner. And in International Billing Services, Inc. v. Emigh (2000) 84 

Cal.App.4th 1175, 1179, 1193, the court held the prevailing parties were entitled to an 

attorney fees award even though a third party (their employer) had paid their fees during 

litigation. The nonprevailing parties could not avoid their obligation to pay attorney fees 

based on the “‘fortuitous circumstance’” that the prevailing parties had “discovered how 

to defend the lawsuit without having to pay out of their pockets.” (Id. at p. 1193; see also 

Staples v. Hoefke (1987) 189 Cal.App.3d 1397, 1410 [“Plaintiffs were not entitled to 

avoid their contractual obligation to pay reasonable attorney fees based on the fortuitous 

circumstance that they sued a defendant who obtained insurance coverage providing a 

defense.”].)

Consistent with these authorities, we hold the court did not err in awarding fees to 

Realty Executives.
29

e. Denial of Costs to ADP

ADP asserts the court erred in denying ADP its costs against Schmidt on her 

cross-complaint because it fell within the statutory definition of “prevailing party” for 

costs purposes. We disagree.

A prevailing party is entitled as a matter of right to recover costs under Code of 

Civil Procedure section 1032. (§ 1032, subd. (b).) “‘Prevailing party’ includes [(1)] the 

party with a net monetary recovery, [(2)] a defendant in whose favor a dismissal is 

entered, [(3)] a defendant where neither plaintiff nor defendant obtains any relief, and 

[(4)] a defendant as against those plaintiffs who do not recover any relief against that 

defendant.” (Id., subd. (a)(4).) Category three applies to the situation here—when a 

plaintiff files suit and then a defendant files a cross-complaint. This is the only category 

that refers to a defendant’s attempt to obtain relief, which a defendant cannot do in an 

answer. The defendant must file a cross-complaint to affirmatively seek relief. 

(McLarand, Vasquez & Partners, Inc. v. Downey Savings & Loan Assn. (1991) 231 

Cal.App.3d 1450, 1454.)

Under Code of Civil Procedure section 1032, when a plaintiff is denied relief on 

the complaint and the defendant is denied relief on the cross-complaint, the defendant is 

the prevailing party entitled to costs. (Cussler v. Crusader Entertainment, LCC (2012) 

212 Cal.App.4th 356, 371; McLarand, Vasquez & Partners, Inc. v. Downey Savings & 

Loan Assn., supra, 231 Cal.App.3d at p. 1454.) ADP was not the defendant/crosscomplainant in this situation and thus was not the prevailing party.

f. Valleywide’s Costs

ADP lastly contends the court erred in granting Valleywide its costs because its 

memorandum of costs was untimely. We disagree.

The court entered the judgment on October 26, 2012. On the same date, the court

clerk mailed the parties a minute order entitled “Statement of Decision After Court 

Trial/Notice of Entry of Judgment and Judgment.” (Capitalization omitted.) On 

October 31, 2012, counsel for Schmidt and Realty Executives served notice of entry of 
30

judgment on all the parties. Valleywide served its memorandum of costs on 

November 15, 2012.

Under California Rules of Court, rule 3.1700(a)(1),4 a party must serve its cost 

memorandum “within 15 days after the date of mailing of the notice of entry of judgment 

or dismissal by the clerk under Code of Civil Procedure section 664.5 or the date of 

service of written notice of entry of judgment or dismissal, or within 180 days after entry 

of judgment, whichever is first.”

Here, the 15-day period for filing the memorandum of costs started running on 

October 31, 2012, when Schmidt and Realty Executives served notice of entry of 

judgment. This is because the clerk’s mailing on October 26 was not sufficient to 

constitute “notice of entry of judgment . . . by the clerk under Code of Civil Procedure 

section 664.5.” (Rule 3.1700(a)(1).) Under section 664.5, the clerk of court is required

to mail notice of entry of judgment in only two cases—when the prevailing party is not 

represented by counsel or “[u]pon order of the court.” (Code Civ. Proc., § 664.5, subds. 

(b), (d).) Otherwise, it is the duty of the party submitting the proposed judgment to serve 

notice of entry of judgment on all parties. (Id., subd. (a); Van Beurden Ins. Services, Inc. 

v. Customized Worldwide Weather Ins. Agency, Inc. (1997) 15 Cal.4th 51, 63.) Unless 

the prevailing party is in propria persona, for a clerk’s mailing to qualify as a notice of 

entry of judgment under section 664.5, the “notice must affirmatively state that it was 

given ‘upon order by the court’ or ‘under section 664.5.’” (Van Beurden Ins. Services, 

Inc., at p. 64.) The clerk’s mailing in this case did not state either of those things.

Accordingly, the clerk’s mailing did not qualify as a clerk’s notice of entry of 

judgment under Code of Civil Procedure section 664.5 and rule 3.1700, and it therefore

did not trigger the period for filing memoranda of costs. Schmidt and Realty Executives 

served the notice of entry of judgment to trigger the period on October 31. Valleywide’s 

memorandum of costs was timely from this date.

 

4 Further rule references are to the California Rules of Court.
31

DISPOSITION

The judgment and orders are affirmed. Realty Executives, Schmidt, and 

Valleywide shall recover costs on appeal.

FLIER, J.

WE CONCUR:

BIGELOW, P. J.

RUBIN, J.