U.S. Grant Hotel Ventures v. American Property Management Corp. CA4/1 (2016) · DecisionDepot
U.S. Grant Hotel Ventures v. American Property Management Corp. CA4/1
California Court of Appeal Feb 19, 2016 No. D066490Unpublished
Filed 2/19/16 U.S. Grant Hotel Ventures v. American Property Management Corp. CA4/1 NOT TO BE PUBLISHED IN OFFICIAL REPORTS California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
U.S. GRANT HOTEL VENTURES, LLC, D066490
Plaintiff and Respondent,
v. (Super. Ct. No. GIC 845130)
AMERICAN PROPERTY MANAGEMENT CORPORATION et al.,
Defendants and Appellants.
APPEAL from an order of the Superior Court of San Diego County, Joan Lewis,
Judge. Reversed.
Williams Iagmin and Jon R. Williams for Defendants and Appellants.
Procopio, Cory, Hargreaves & Savitch, Anthony J. Dain, Frederick K. Taylor and
Brian J. Kennedy, for Plaintiff and Respondent.
American Property Management Corporation (APMC), APMC San Diego Hotel
Management, LLC (Hotel Management), and Michael Gallegos appeal from an order
awarding U.S. Grant Hotel Ventures, LLC (USG) attorney's fees as the prevailing party on
its tort claims for breach of fiduciary duty and conversion arising out of a contract.
Appellants contend the trial court erred in awarding USG its attorney's fees. We agree and
"[a] limited liability company is bound by and may enforce the operating agreement."
Sycuan Investors, however, formed USG under a prior version of the Corporations
Code in effect at that time. Additionally, the amendments which added Corporations
Code section 17701.11 became effective January 1, 2014 (Corp. Code, § 17713.13), and
do not affect an action commenced, proceeding brought, or right accrued before January 1,
2014 (Corp. Code, § 17713.03). Here, USG commenced its action in 2009. Accordingly,
newly enacted Corporations Code section 17701.11 does not advance USG's argument
that it may recover attorney's fees on tort claims against a non-member on an operating
agreement to which it is not a party.
Moreover, the Operating Agreement expressly provides that the sole purpose of
USG was to own, operate and manage the hotel and all property incidental to the hotel and
USG "shall not engage in any activities or exercise any powers" beyond those enumerated
in the Operating Agreement, "regardless of whether permitted to do so under the laws of
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the State of California." This provision supports the conclusion that Sycuan Investors and
Hotel Management did not intend to give USG the right to sue under the Operating
Agreement.
Finally, Hotel Management argued in its opening brief that the attorney's fee award
in favor of USG could not be affirmed on third party beneficiary theory, noting that USG
advanced "a vague third party beneficiary theory throughout its underlying briefing." We
reviewed USG's motion and conclude that USG did not rely on a third party beneficiary
theory below. The trial court did not rely on this theory and USG cannot rely on it now.
(Perez v. Grajales (2008) 169 Cal.App.4th 580, 591-592 [arguments raised for the first
time on appeal are deemed forfeited].)
In any event, USG cited no authority allowing a nonsignatory to a contract to
enforce a contractual attorney fee provision under section 1021. Although a third party
beneficiary theory has been applied to award fees under Civil Code section 1717, a third
party beneficiary may not invoke a contractual attorney fee provision unless the
contracting parties specifically intended that provision to benefit the third party. (Sessions
Payroll Management, Inc. v. Noble Const. Co., Inc. (2000) 84 Cal.App.4th 671, 680-681;
Super 7 Motel Associates v. Wang (1993) 16 Cal.App.4th 541, 546.) USG pointed to
nothing in the Operating Agreement demonstrating Sycuan Investors and Hotel
Management intended the attorney's fee provision to benefit USG, and the Operating
Agreement expressly provided that the Operating Agreement benefited and bound only
Sycuan Investors and Hotel Management.
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Accordingly, the order awarding USG its attorney's fees under section 1021 is
reversed.
DISPOSITION
The order is reversed. Hotel Management is awarded its costs on appeal.
McINTYRE, J.
WE CONCUR:
HUFFMAN, Acting P. J.
NARES, J.
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AI Brief
AI-generated · verify before citing
Holding. The court held that a nonsignatory limited liability company could not recover attorney's fees under a contractual provision in an operating agreement to which it was not a party, as the agreement did not manifest an intent to benefit the entity.
Issues
Whether a nonsignatory limited liability company is entitled to recover attorney's fees under a contractual provision in an operating agreement pursuant to Code of Civil Procedure section 1021.
Whether Corporations Code sections 17005 or 17701.11 permit a limited liability company to enforce an attorney's fee provision in an operating agreement to which it is not a party.
Disposition. reversed
Quotations verified verbatim against the opinion
“USG is not a party to the Operating Agreement and the attorney's fee provision does not identify USG as a party entitled to the benefit of this provision.”