Chiba v. Greenwald

67 Cal. Rptr. 3d 86, 156 Cal. App. 4th 71, 2007 Cal. App. LEXIS 1716

• Court: California Court of Appeal
• Decided: October 16, 2007
• Docket: B193173
• Status: Published

Opinions

Opinion

ZELON, J.

The cohabitating partner of a deceased musician sued the administrator of the decedent’s estate under an agreement alleging breach of oral contract, quantum meruit, declaratory relief and constructive trust. Because the agreement required performance of certain duties controlled by the Talent Agencies Act (Lab. Code,¹ § 1700 et seq.) (TAA), the matter was referred to the jurisdiction of the Labor Commissioner, who found the entire contract void for plaintiff’s lack of a talent agent license. In the trial de novo, the superior court declined to sever the unlawful portion of the agreement with respect to the TAA, sustained the administrator’s demurrer to the second amended complaint without leave to amend, dismissed the action, and declined to vacate dismissal. We affirm.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

During the summer of 1999, plaintiff and appellant Jennifer Chiba began a romantic relationship with singer and songwriter Elliot Smith (also known as Steven Paul Smith). On August 26, 2002, Chiba moved in with Smith. The couple lived together until Smith died intestate on October 21, 2003. The probate court appointed defendant and respondent Marta Greenwald administrator of Smith’s estate.

I. THE COMPLAINT

On July 30, 2004, Chiba sued Greenwald for breach of oral contract, quantum meruit, declaratory relief and constructive trust.

The complaint alleged that Chiba and Smith entered into an oral agreement in August 2002. Chiba and Smith allegedly agreed to “live together, cohabitate and combine their efforts and earnings,” “share equally any and all property accumulated as a result of their efforts whether individual or combined,” and “hold themselves out to the public as husband and wife.” The complaint claimed Smith promised to provide for Chiba’s “financial needs and support for the rest of her life” in exchange for her domestic services as his “homemaker, housekeeper, cook, secretary, bookkeeper and financial counselor,” “forego[ing] any independent career opportunities.”

In a separate paragraph, the complaint also alleged that Chiba had agreed to be Smith’s “manager and agent for the purposes of arranging [his] booking and scheduling [his] appearances for musical performances” and to carry out “the preparation and production of [his] album” in exchange for “15% of the proceeds earned and received.”

Chiba claimed Greenwald breached the agreement by refusing to pay her for performing her contracted services. Chiba attached to her complaint a creditor’s claim in excess of $1 million for the contracted services she rendered to Smith and for the proceeds from his compositions, performances and albums.

II. CHIBA’S DEPOSITION TESTIMONY

In her deposition of September 29, 2004, Chiba testified that her agreement with Smith provided she would be his “manager” and “agent” responsible for “booking” and “scheduling” his “appearances for musical performances.” Chiba confirmed that the agreement provided she would be “specifically entitled to 15 percent of the proceeds earned and received” on all of Smith’s “performances” and “album sales.” Chiba also stated that she actually procured venues and negotiated performance fees for Smith in New York and Los Angeles.

IH. THE FIRST AMENDED COMPLAINT

On November 1, 2004, Chiba filed her first amended complaint, in which she omitted in its entirety the paragraph detailing her role and rate of commission as Smith’s manager and agent. Instead, she added the terms “manager and agent” to the list of her duties as homemaker, housekeeper, cook, secretary, bookkeeper and financial counselor.

IV. REFERRAL TO THE LABOR COMMISSIONER

On December 3, 2004, Greenwald moved to stay the action and refer the matter to the Labor Commissioner to resolve whether the contract involved the services of a licensed talent agency with respect to the TAA. The trial court granted the motion on January 10, 2005.

On November 16, 2005, the Labor Commissioner determined that Chiba and Smith had entered into one integrated agreement that included the performance of “unlawful procurement activities ‘mixed in’ with activities for which a [talent agency] license was not required.” According to the Labor Commissioner, the fact that “Chiba ha[d] abandoned her prior claim for commissions for her procurement activities [was] essentially irrelevant to the validity and enforceability of the alleged oral agreement between her and Smith.” Because Chiba was not a licensed talent agency, the Labor Commissioner found the oral agreement was “void from its inception, in its entirety” and that Chiba had no enforceable rights.

V. TRIAL DE NOVO

On March 27, 2006, the trial court lifted the stay, granted Chiba’s request for a trial de novo from the Labor Commissioner’s ruling, and consolidated the trial de novo into the existing case.

In its minute order, the court determined that Greenwald’s demurrer to the first amended complaint would be treated as a motion for judgment on the pleadings. The court found Chiba had pled inconsistently the tasks she allegedly performed for Smith in the complaint and first amended complaint. It judicially estopped Chiba from pleading that “she acted as [Smith’s] manager and agent for the purposes of arranging the booking and scheduling appearances for musical performances,” and then “omitfting] these allegations in a subsequent complaint to avoid the legal consequences of these acts.” The court gave Chiba leave to amend to correct her inconsistent pleadings.

VI. THE SECOND AMENDED COMPLAINT

On April 28, 2006, Chiba filed her second amended complaint, the operative complaint, which divided her agreement with Smith into two separate parts; (1) the cohabitation agreement; and (2) the recording management agreement.

The cohabitation agreement consisted solely of Chiba’s promise to be Smith’s homemaker, housekeeper, cook, secretary, bookkeeper and financial counselor, forgoing any independent career opportunities. In consideration, Smith agreed to provide for all of Chiba’s financial needs and support for the rest of her life.

The recording management agreement consisted solely of Chiba’s promise to be Smith’s manager and agent for the purposes of arranging his booking and scheduling his appearances for musical performances, and to prepare and produce his albums. In consideration, Smith agreed to give Chiba 15 percent of the proceeds.

In her second amended complaint, Chiba conceded that she had not been and was not licensed as a talent agency, and was unaware that licensure was required under the TAA. She further expressly conceded that her lack of a talent agency license rendered the recording management agreement “void and unenforceable.” In addition, Chiba pled that she would not seek to enforce any of her rights under the recording management agreement. Instead, she sought to sever the recording management agreement and to pursue all her remedies only under the cohabitation agreement.

VII. DEMURRER TO THE SECOND AMENDED COMPLAINT

On June 5, 2006, the trial court sustained Greenwald’s demurrer to the second amended complaint without leave to amend.

The court found inconsistency in the pleadings of the complaint and its amended versions. Although the second amended complaint was found to be “artfully pleaded,” the court nonetheless determined the unlawful and lawful services Chiba allegedly rendered to be “inextricably intertwined.” The court held that Chiba had failed to correct the defect present in her first amended complaint and to demonstrate that the TAA should not apply to the entire contract.

The court declined to sever the unlawful from the lawful activities of the contract, “because the public policy rationale for the Talent Agencies Act must be maintained and is applicable to all causes of action in the second amended complaint.” As a result, the court found the contract void and dismissed the action.

VHI. MOTION TO VACATE DISMISSAL

On July 12, 2006, Chiba moved to vacate the dismissal based upon new case authority in Marathon Entertainment, Inc. v. Blasi holding that with respect to an unlicensed talent agency the lawful and unlawful portions of a personal management contract might be severable. (See Marathon Entertainment, Inc. v. Blasi (June 23, 2008, B179819) review granted Sept. 20, 2006, S145428 (Marathon).)2,

On August 9, 2006, the trial court declined to sever the unlawful from the lawful acts contained in the agreement, because “the activities which have been alleged would nevertheless be non-compensable because they were mixed with activities which required a license [and] because of the overriding public policy of deterring unlicensed activities.” Even so, the court observed: “One of the things that did strike me about the Marathon case . . . it’s interesting that it went into a discussion of Marvin [v. Marvin (1976) 18 Cal.3d 660 [134 Cal.Rptr. 815, 557 P.2d 106]] because we have two people that lived together and never got married.” The court found the existence of a Marvin relationship in this case to be “a complication” because, unlike other TAA cases that involved a purely commercial relationship, Chiba was “someone who has violated the Talent Agencies Act and has done this in the context of her personal relationship with the deceased.” The court ultimately found the underlying facts to be unlike Marathon, but rather like Waisbren v. Peppercorn Productions, Inc. (1995) 41 Cal.App.4th 246 [48 Cal.Rptr.2d 437] (Waisbren) and the line of cases that have made up the talent agency law.

Chiba timely appealed from the order dismissing the second amended complaint.

DISCUSSION

The issue before us is whether the TAA bars compensation for all services performed under an agreement which is in part a Marvin agreement but in which a portion of the agreement is made void by the lack of a talent agency license.

I. STANDARD OF REVIEW

On appeal from an order dismissing a complaint after the sustaining of a demurrer, we independently review the pleading to determine whether the facts alleged state a cause of action under any possible legal theory. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967 [9 Cal.Rptr.2d 92, 831 P.2d

317]; Berger v. California Ins. Guarantee Assn. (2005) 128 Cal.App.4th 989, 998 [27 Cal.Rptr.3d 583].) We give the complaint a reasonable interpretation, “treat[ing] the demurrer as admitting all material facts properly pleaded,” but do not “assume the truth of contentions, deductions or conclusions of law. [Citation.]” (Aubry, supra, 2 Cal.4th at p. 967.) We liberally construe the pleading with a view to substantial justice between the parties. (Code Civ. Proc., § 452; Kotlar v. Hartford Fire Ins. Co. (2000) 83 Cal.App.4th 1116, 1120 [100 Cal.Rptr.2d 246].)

H. THE PLEADINGS SHOW CHIBA LACKED A TALENT AGENCY LICENSE

The TAA provides that “[n]o person shall engage in or carry on the occupation of a talent agency without first procuring a license therefor from the Labor Commissioner.” (§ 1700.5.) “ ‘Talent agency’ means a person or corporation who engages in the occupation of procuring, offering, promising, or attempting to procure employment or engagements for an artist or artists, except that the activities of procuring, offering, or promising to procure recording contracts for an artist or artists shall not of itself subject a person or corporation to regulation and licensing under this chapter.” (§ 1700.4, subd. (a).)

“Unlike talent agents, personal managers are not covered by the Act. Personal managers primarily advise, counsel, direct, and coordinate the development of the artist’s career. They advise in both business and personal matters, frequently lend money to young artists, and serve as spokespersons for the artists. [Citation.]” (Park v. Deftones (1999) 71 Cal.App.4th 1465, 1469-1470 [84 Cal.Rptr.2d 616]; see Waisbren, supra, 41 Cal.App.4th at 252-253.) However, if a personal manager even incidentally performs the occupation of a talent agency by soliciting or procuring artistic employment or engagements for an artist, the personal manager must comply with the licensing requirement under the TAA. (Waisbren, supra, 41 Cal.App.4th at p. 251.) “The rationale for denying a personal manager recovery even for activities which were entirely legal is based on the public policy of the Act to deter personal managers from engaging in illegal activities. [Fn. omitted.] Knowing they will receive no help from the courts in recovering for their legal activities, managers are less likely to enter into illegal arrangements. [Fn. omitted.] In Waisbren, the court observed one reason the Legislature did not enact criminal penalties for violation of the Act was ‘because “the most effective weapon for assuring compliance with the Act is the power ... to declare any contract entered into between the parties void from the inception.” ’ [Fn. omitted.]” (Yoo v. Robi (2005) 126 Cal.App.4th 1089, 1104 [24 Cal.Rptr.3d 740].)

The Labor Commissioner has original and exclusive jurisdiction over issues arising under the TAA. (Styne v. Stevens (2001) 26 Cal.4th 42, 54-56 [109 Cal.Rptr.2d 14, 26 P.3d 343].) In cases of controversy arising under the TAA, “the parties involved shall refer the matters in dispute to the Labor Commissioner, who shall hear and determine the same, subject to an appeal within 10 days after determination, to the superior court where the same shall be heard de novo.” (§ 1700.44, subd. (a).) “ ‘A hearing de novo literally means a new hearing, or a hearing the second time. ... It is in no sense a review of the hearing previously held, but is a complete trial of the controversy, the same as if no previous hearing had ever been held. ... A hearing de novo therefore is nothing more nor less than a trial of the controverted matter by the court in which it is held. . . .’ ” (Buchwald v. Katz (1972) 8 Cal.3d 493, 501 [105 Cal.Rptr. 368, 503 P.2d 1376]; see Yoo v. Robi, supra, 126 Cal.App.4th at p. 1099.)

Here, in her second amended complaint, Chiba concedes that she was not licensed as a talent agency, that her lack of a talent agency license rendered the recording management portion of the agreement void and unenforceable, and that she would not seek compensation for services rendered that required licensure. The only issue is whether she may enforce the remainder of the agreement.

III. THE PLEADINGS SHOW THE PARTIES HAD A MARVIN AGREEMENT

“Adults who voluntarily live together and engage in sexual, relations are competent to contract respecting their earnings and property rights. Such contracts will be enforced ‘unless expressly and inseparably based upon an illicit consideration of sexual services . . . .’ (Marvin v. Marvin[, supra, 18 Cal.3d at p. 672].)” (Whorton v. Dillingham (1988) 202 Cal.App.3d 447, 451 [248 Cal.Rptr. 405].) “ ‘If a man and woman [who are not married] live together as husband and wife under an agreement to pool their earnings and share equally in their joint accumulations, equity will protect the interests of each in such property.’ ” (Marvin v. Marvin, supra, 18 Cal.3d at pp. 667-668 (Marvin), quoting Vallera v. Vallera (1943) 21 Cal.2d 681, 685 [134 P.2d 761].)

Moreover, a “promise to perform homemaking services is, of course, a lawful and adequate consideration for a contract [citation]—otherwise those engaged in domestic employment could not sue for their wages .... [Citation.]” {Marvin, supra, 18 Cal.3d at p. 670, fn. 5.) Marvin expressly rejected the argument that the partner seeking to enforce the contract must have contributed either property or services additional to ordinary homemaking services. {Ibid.)

In this case, Chiba has adequately pled a Marvin agreement between Smith and herself. They allegedly agreed to “live together, cohabitate and combine their efforts and earnings,” “share equally any and all property accumulated as a result of their efforts whether individual or combined,” and “hold themselves out to the public as husband and wife.” Further, Chiba pled that Smith promised to provide for her “financial needs and support for the rest of her life” in exchange for her domestic services as his “homemaker, housekeeper, cook, secretary, bookkeeper and financial counselor,” forgoing any independent career opportunities. The promise to perform these domestic services is lawful and adequate consideration for a contract.

Having found a Marvin agreement has been pled, we now determine whether the agreement can be severed.

IV. THE TRIAL COURT DID NOT ERR IN DECLINING TO SEVER THE AGREEMENT

“Where a contract has but a single object, and such object is unlawful, whether in whole or in part, or wholly impossible of performance, or so vaguely expressed as to be wholly unascertainable, the entire contract is void.” (Civ. Code, § 1598.) However, “[wjhere a contract has several distinct objects, of which one at least is lawful, and one at least is unlawful, in whole or in part, the contract is void as to the latter and valid as to the rest.” (Civ. Code, § 1599.) “Furthermore, although Civil Code section 1599 authorizes a court to sever the illegal object of a contract from the legal it does not require the court to do so. The decision whether to sever the illegal term of a contract is informed by equitable considerations.” (Yoo v. Robi, supra, 126 Cal.App.4th at p. 1105.)

Here, the trial court found that there is only one agreement, whose lawful and unlawful objects are inextricably intertwined. Chiba did not plead separate consideration for the lawful and unlawful portions until the second amended complaint, but that pleading was not consistent with the two previous iterations of the pleadings on that critical point.

While the dissent sets forth a number of reasons that would support severance in this case, none of those reasons requires severance.³ Applying equitable considerations and “the overriding public policy of deterring unlicensed activities,” the court below rejected severance. It reasoned that the lawful activities alleged would “nevertheless be non-compensable because they were mixed with activities which required a license . . . .” Equity does not demand acceptance of the most favorable set of multiple conflicting versions of the facts set forth by a party in her pleadings. The inconsistencies in the pleadings, specifically with respect to the issues relating to severability, create a record on which the conclusion that the primary purpose of the parties in entering the agreement was the personal relationship, and that the illegal terms were secondary and could be abandoned while all of the other terms of the agreement remained enforceable, is not mandated. On that record we cannot conclude that equity compelled severance in this case.

Accordingly, the court did not err in declining to sever the agreement.

DISPOSITION

The order is affirmed. Greenwald is awarded her costs on appeal.

Woods, J., concurred.

1 All further statutory references are to the Labor Code unless otherwise indicated.

2 On September 20, 2006, the Supreme Court granted review in Marathon. On review, Marathon presents the following issues: “(1) Are the licensing requirements of the Talent Agencies Act (Lab. Code section 1700 et seq.) applicable to personal business managers as well as talent agents? (2) Is the doctrine of severability of contracts applicable to violations of the Act, or does any act of unlicensed procurement of entertainment employment for an actor by an unlicensed personal business manager in violation of the Act void a contract for personal management services in its entirety?” (<http://appellatecases.courtinfo.ca.gov/search/case/ mainCaseScreen.cfm?dist=0&doc_id=433947&doc_no=S145428> [as of Oct. 16, 2007].)

3 This case does not present, as a result of the pleading problems, the issue of whether a Marvin agreement coupled with clearly independent duties unenforceable under the TAA can be enforced. That issue remains for a later day.