Korech v. Hornwood

Opinion

Plaintiffs and appellants Erez Korech and Yehoshua Manevich, doing business as Trust Electric (hereinafter referred to as plaintiffs), appeal a posttrial order granting the motion of defendants and respondents Steven Hornwood, Roberta Hornwood, Sanford Hornwood and Rita Hornwood (the Homwoods) for attorneys fees in the amount of $28,723.43.

The court granted the Homwoods’ motion for attorneys fees on the grounds that they were the prevailing party as to the breach of contract claim. However, it did not award the full amount sought, explaining that, “Because plaintiff[s] did prevail on other claims, however, an apportionment is appropriate. The court has applied the standards of Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124 [ 158 Cal.Rptr. 1 , 599 P.2d 83 ], which provides that fees need not be apportioned when incurred for representation on an issue common to a cause of action in which fees were proper and one in which they are not allowed, and has determined that [the Homwoods are] entitled to $28,743.43 for attorneys’ fees. In determining said amount, the court finds that [the Homwoods] failed to make a sufficient showing of the attorneys’ fees charged by David Wilzig or John [Schiro]. Additionally, the court has deducted certain charges contained in Gitlen’s bill that appear would have been incurred solely on other claims as well as interest charges.”

Plaintiffs moved for reconsideration of this order, and the court’s minute order states as follows: “Even if reconsidered, the decision would be the same. . . . Plaintiff[s] made three claims in the complaint, one for breach of written contract, one for unjust enrichment and one based on [their] mechanic’s lien. During the trial, the court, after pointing out to plaintiff[s] that the breach of written contract claim was of questionable merit because [the Homwoods] weren’t a party thereto, permitted plaintiff[s] to orally amend to state a claim for breach of an oral contract. Nevertheless, the court found against plaintiff[s] on both of the contract claims and on the claim for unjust enrichment and for the plaintiff[s] only on the mechanic’s lien. In ruling on the motion for attorney’s fees, the court was not. . . unmindful of all of the claims that were denied. [U The court found against plaintiff[s] on both contractual claims including the written contract, with the attorneys’ fee provision, that was the subject of the first cause of action. This decision on the contract claim was not a mixed result for the parties. While plaintiff[s] prevailed on the statutory claim for a mechanic’s lien, plaintiff[s] lost completely on the contractual claims, both written and oral. While mindful of the consequences of the mling, the court is nevertheless without discretion

Contentions on Appeal

On appeal, plaintiffs contend that the court had no legal basis for awarding fees under either Civil Code section 1717 or Code of Civil Procedure section 1033. Citing our recent decision in Dorman v. DWLC Corp. (1995) 35 Cal.App.4th 1808 [ 42 Cal.Rptr.2d 459 ], they contend that the Homwoods are not entitled to attorneys fees because they were not the prevailing party in the underlying action. Further, they argue that the trial court misinterpreted the scope of its authority in awarding fees, and that it mistakenly concluded that it had no discretion to deny the Homwoods’ motion. Finally, they argue that the amount of fees was excessive because: (1) the court failed to properly apportion those fees incurred solely in relation to the breach of contract claim; and (2) the court should only have awarded that amount set forth in the local court rules fee schedule.

Discussion

1. Applicable legal concepts

We first begin with a discussion of the applicable statutes, Code of Civil Procedure section 1033 and Civil Code section 1717, and the primary case upon which plaintiffs rely, Dorman v. DWLC Corp., supra, 35 Cal.App.4th 1808 .

Code of Civil Procedure section 1033, subdivision (a) provides: “In the superior court, costs or any portion of claimed costs shall be as determined by the court in its discretion in accordance with Section 1034 where the prevailing party recovers a judgment that could have been rendered in a court of lesser jurisdiction.”

Here, the amount of actual damages, $24,687, was less than the jurisdictional minimum of superior court.

Civil Code section 1717 provides in pertinent part that: “(a) In any action on a contract, where the contract specifically provides that attorney’s fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the prevailing party on the contract, . . . shall be entitled to reasonable attorney’s fees in addition to other costs.”

We then considered whether the trial court properly exercised its discretion in deciding whether to allow costs and fees. We concluded that the court did not have the necessary information before it in ruling on the issue and remanded the matter for determination of the amount of attorneys fees and costs, as well as prejudgment interest.

We relied upon Greenberg v. Pacific Tel. & Tel. Co. (1979) 97 Cal.App.3d 102 [ 158 Cal.Rptr. 558 ], which explained that Code of Civil Procedure section 1032 does not provide any guidance to the trial court regarding the exercise of its discretion in determining whether all or a portion of costs should be awarded to the prevailing party. “It would seem clear that matters such as plaintiff's assessment of his chances for recovery beyond the jurisdiction of the municipal court when he filed his action—whether reasonable and in good faith—the amount of the recovery—looked at in relationship to the maximum amount of the municipal court jurisdiction—and the amount of costs incurred—are some of the factors to be considered by the trial judge in exercising his discretion under Code of Civil Procedure section 1032, subdivision (d).” (97 Cal.App.3d at p. 108.)

2. Can plaintiffs be held liable for fees pursuant to Civil Code section 1717 when it was found that no contract existed between them and the Hornwoods?

Civil Code section 1717 was enacted to establish a mutual remedy for contracts that make attorneys fees available to one party only and to prevent oppressive use of those one-sided attorneys fees provisions. (Reynolds Metal Co. v. Alperson (1979) 25 Cal.3d 124 , 128.)

In the same vein, an award of attorneys fees pursuant to Civil Code section 1717 is proper when it is determined that the party sued is not a party

The contract plaintiffs sued upon contained the following provision: “In the event any process of law is resorted to by the contractor to collect any monies due hereunder, the buyer agrees to pay all costs, interest, and attorney’s fees incurred.”

At first blush, it would appear that the Homwoods, having been found not to be parties to the contract plaintiffs sued upon, would be entitled to an award of attorneys fees based upon the contract language and Civil Code section 1717. However, our inquiry does not end there, simply because the lawsuit consisted of more than a breach of contract cause of action. The other causes of action were for foreclosure on the mechanics’ lien, which plaintiffs prevailed upon, and for unjust enrichment, upon which the Homwoods prevailed. Additionally, judgment was entered for the plaintiffs and against the Homwoods on the causes of action for negligence and deceit contained in the Homwoods’ cross-complaint.

3. Who was the prevailing party in this action?

The term “prevailing party” is defined in Code of Civil Procedure section 1032: “(a) As used in this section, unless the context clearly requires otherwise: [U . . . (4) ‘Prevailing party’ includes the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant. When any party recovers other than monetary relief and in situations other than as specified, the ‘prevailing party’ shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed may apportion costs between the parties on the same or adverse sides pursuant to mies adopted under Section 1034.”

Various cases have addressed the issue of deciding who the prevailing party is for purposes of awarding attorneys fees. Most of them address the issue of which party prevails when tort and contract claims are combined. The Supreme Court most recently held: “[I]n deciding whether there is a ‘party prevailing on the contract,’ the trial court is to compare the relief awarded on the contract claim or claims with the parties’ demands on those same claims and their litigation objectives as disclosed by the pleadings, trial

“In law it is a good policy never to plead what you need not, lest you oblige yourself to prove what you cannot.” (Abraham Lincoln, Letter to Usher F. Linder (Feb. 20, 1848) in The Quotable Lawyer (Shrager & Frost edits. 1986) ¶ 96.6, p. 241.)

A principal factor which we must consider here is that a contract claim was combined with a mechanic’s lien claim. Attorneys fees are not recoverable in actions to foreclose upon a mechanic’s lien. (Abbett Electric Corp. v. California Fed. Savings & Loan Assn. (1991) 230 Cal.App.3d 355 , 358 [ 281 Cal.Rptr. 362 ]; Wilson’s Heating & Air Conditioning v. Wells Fargo Bank (1988) 202 Cal.App.3d 1326 , 1330 [ 249 Cal.Rptr. 553 ].) If, however, there is a contract between the claimant and the owner of the property which contains an attorneys fees clause, the claimant can recover fees pursuant to the contract, but it is not the lien that creates the right to fees. (Abbett Electric Corp. v. California Fed. Savings & Loan Assn., supra, 230 Cal.App.3d at p. 358.) In Abbett, an electrical corporation (Abbett) entered into a written contract with the owner of real property to perform electrical work. The owner refused to pay Abbett and Abbett recorded a mechanic’s lien against the owner’s property. Abbett then filed a lawsuit for foreclosure on the lien and for breach of contract. Abbett prevailed at trial on both causes of action and the trial court awarded attorneys fees, including them as part of the lien amount. (Id. at p. 357.) The judgment was reversed to the extent that the attorneys fees were included in the lien amount. The appellate court explained: “Insofar as [Abbett] has a contractual claim to fees from [the owner], it has the same remedies against [the owner] and its property as any other party in an action for breach of a contract with an attorney’s fee clause. We simply conclude that it does not have the additional remedy of a mechanic’s lien for those fees.” (Id. at p. 360.)

4. Did the trial court properly exercise its discretion?

In this matter, the court’s minute orders demonstrate the trial court knew exactly what it was doing when it awarded attorneys fees to the Homwoods despite the fact that plaintiffs prevailed on their mechanic’s lien claim. It recognized that plaintiffs had persisted on a breach of contract claim for which there was no support and that they were overreaching by requesting punitive damages and attorneys fees when such amounts are never awarded in mechanics’ lien cases. It went through the bills and apparently deducted those amounts which were identified as fees for mechanics’ lien issues as well as those fees for which there was little factual support. It did not, however, base its decision on equitable considerations unrelated to litigation success. (Hsu v. Abarra, supra, 9 Cal.4th at p. 877.)

As far as plaintiffs’ claims that the trial court should have awarded only those fees which related specifically to the breach of contract claim, we find the court’s reasoning that it did not have to apportion fees was correct. The controlling case on this issue, which the trial court relied on, Reynolds Metal Co. v. Alperson, supra, 25 Cal.3d 124 , held: “Where a cause of action based on the contract providing for attorney’s fees is joined with other causes of action beyond the contract, the prevailing party may recover attorney’s fees under section 1717 only as they relate to the contract action. [Citations.] . . . [H Conversely, [a] plaintiff’s joinder of causes of action should not dilute its right to attorney’s fees. Attorney’s fees need not be apportioned when incurred for representation on an issue common to both a cause of action in which fees are proper and one in which they are not allowed. All expenses incurred with respect to the [issues common to all causes of action] qualify for award.” (Id. at pp. 129-130, italics added.) Here, the Homwoods’ counsel could not defend them from the breach of contract claim without ascertaining the facts relating to the subcontract and the work performed, issues which were common to the mechanic’s lien cause of action. While the trial court did deduct those fees which were clearly identified as having to do with the mechanic’s lien cause of action, it was not required to make an apportionment of the other fees which necessarily involved reviewing and analyzing the basic facts of the relationship between plaintiffs and the Homwoods.