Opinion
NOT TO BE PUBLISHED
City & County of San Francisco Super. Ct. No. 429379
Pollak, J.
This appeal represents the culmination of an eight-year battle between the buyers and sellers of a piece of residential property. Plaintiffs and buyers Donald and Michael Carmignani recovered $112,000 from sellers Kenneth Paganini and William Spencer (defendant husbands) after a jury found the two defendants liable under various theories for failing to disclose the existence of mold and dry rot in the property. This sum plus substantial attorney fees and costs was paid by defendant husbands in full by May 24, 2006. Nonetheless, the litigation has persisted, driven by a dispute between the Carmignanis and Jeanine Paganini and Claire Spencer (defendant wives) over attorney fees. Not including the fees that have been incurred in pursuing the present appeal, the record reflects that the dueling parties have incurred an aggregate of $895,555.50 in attorney fees since the beginning of the litigation, of which $440,642 was incurred after defendant husbands satisfied the judgment. Following the final disposition of the fully satisfied claims against the wives, the trial court sensibly denied the parties’ cross-motions for recovery of their attorney fees. We shall affirm its judgment.
BACKGROUND
The underlying dispute in this case began in 2002 when the Carmignanis purchased a residential property in San Francisco. The sellers of the property were Kenneth and Jeannine Paganini, William and Claire Spencer, the Paganini Exchange Trust, and the Spencer Exchange Trust. After purchasing the property, the Carmignanis discovered mold and dry rot beneath recently installed dry wall and sued the sellers for failing to disclose these problems and others. The matter was tried before a jury. After both sides had rested but before the jury retired, the court granted nonsuit in favor of defendant wives on the breach of contract cause of action, reasoning that they had not signed the contract for sale of the house. The jury found that Kenneth Paganini and William Spencer did breach this agreement; that they were negligent, and that the Carmignanis were also 20 percent negligent; that Kenneth Paganini and William Spencer violated Civil Code section 1102 et seq. by failing to disclose material facts; that they intentionally misrepresented facts materially affecting the value of the property, but that they did not act with fraud, malice or oppression; that they concealed and negligently misrepresented material facts concerning the property; and that their actions caused actual damages to the Carmignanis of $124,000. The jury was not instructed on any theory of vicarious liability and found that defendant wives were not liable on any cause of action.
Judgment was entered awarding the Carmignanis $112,000 against Kenneth Paganini and William Spencer, plus costs, and nothing against defendant wives. The Carmignanis and defendant wives filed separate cost memoranda. Defendant wives also filed a motion to strike plaintiffs’ cost memorandum as to them and to tax costs. The Carmignanis then filed a motion to vacate the judgment in favor of defendant wives and for judgment notwithstanding the verdict or in the alternative a new trial as to defendant wives. The trial court granted the motion for judgment notwithstanding the verdict and alternatively ordered a new trial. Defendant wives withdrew their request for costs because they were no longer the prevailing party, and the trial court granted in part their motion to tax costs, awarding the Carmignanis $4,211.90 in costs. The trial court also awarded the Carmignanis $203,271 in attorney fees against all defendants.
On March 28, 2006, defendant husbands paid the full amount of the initial judgment plus costs. On May 3, 2006, a second amended judgment was entered awarding the Carmignanis additional costs and the $203,271 in attorney fees. The additional amount was paid by the husbands on May 24, 2006.
All defendants appealed, but the husbands quickly dismissed their appeal and judgment became final as to them. Defendant wives continued to prosecute their appeal, challenging the entry of judgment notwithstanding the verdict against them. On September 17, 2007, we reversed the order granting judgment notwithstanding the verdict but upheld the alternative order granting a new trial against defendant wives based on vicarious liability. (Case Nos. A113547, A114389.)
On remand, a new jury trial was scheduled for January 26, 2009, and the parties pursued further discovery. Ultimately, defendant wives filed a motion for summary judgment on the ground that the action was barred by the single-satisfaction rule because the Carmignanis could not identify any damages over and above those that were included in the judgment that their husbands had already satisfied. They also moved for judgment on the pleadings on the same ground. The trial court granted these motions and entered judgment in favor of defendant wives on January 29, 2009.
The Carmignanis appealed from the judgment but subsequently abandoned the appeal and the judgment became final. Defendant wives then filed a memorandum of costs seeking costs incurred both before and after the remand. They also filed a motion for attorney fees under Civil Code section 1717, asking for a total of $401,994.50, $149,422.50 of which was incurred between the inception of the case and the jury verdict in the original trial, $53,673 of which was incurred to oppose the motion for judgment notwithstanding the verdict, $65,117 of which was incurred in the first appeal, and $133,782 of which was incurred after remand.
The Carmignanis opposed defendant wives’ motion for attorney fees and filed a motion to strike costs. They also filed a motion to recover their own attorney fees under Civil Code section 1717, asking for an additional $56,971 for fees incurred in the first appeal and $131,099 for fees incurred after remand. In support of the motion, the Carmignanis submitted evidence suggesting that they had offered to settle the case prior to the entry of the judgment notwithstanding the verdict if defendant wives would agree not to seek attorney fees as the prevailing parties, but that defendant wives had refused the offer. In defendant wives’ opposition to the motion for attorney fees, they objected to consideration of the settlement offer.
The trial court denied the Carmignanis’ motion for attorney fees, finding that they “had already received a full allocation of appropriate reimbursement of [their] fees and the subsequent fees are not reasonable and necessary. The court notes that, in its ruling, it is not considering the settlement discussions. The court did not consider the challenge[d] portion of the plaintiffs’ brief, but even if it did, the motion is denied.”
The court also denied defendant wives’ motion for attorney fees, reasoning that they “are not prevailing part[ies] as the term [is] used in the contract. It is the plaintiffs who obtained all their litigation objectives in the case and it would not be fair to shift fee cost to the plaintiffs.” The court denied defendant wives’ motion to strike the portions of the Carmignanis’ brief that refer to settlement negotiations.
The trial court granted in part and denied in part the Carmignanis’s motion to tax costs. The court struck all costs incurred prior to the remand and allowed only $1,520.70 in costs that defendant wives incurred after the remand, finding that “there is a unity of interest, which is an exception to what would otherwise be a mandatory cost award, leaving the court with discretion to award, deny or allocate cost to these defendants who ultimately obtained a dismissal without any judgment being entered against them. The court finds that it is fair to allocate in this way to this limited portion of the case where they were required to continue to defend themselves as defendants on their own after plaintiffs had already obtained full recovery.”
Both sides appeal. The Carmignanis argue that the trial court erred in denying their motion for attorney fees and in refusing to consider the evidence of settlement negotiations that they submitted in support of that motion. Defendant wives argue that the trial court erred in granting in part the Carmignanis’ motion to tax costs, in denying their request for attorney fees, and in denying their motion to strike the portions of the Carmignanis’ brief referring to settlement negotiations.
DISCUSSION
On remand the Carmignanis and defendant wives sought to recover attorney fees under Civil Code section 1717, which provides “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 party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney’s fees in addition to other costs.” Subdivision (b) of section 1717 provides, “The court, upon notice and motion by a party, shall determine who is the party prevailing on the contract for purposes of this section, whether or not the suit proceeds to final judgment. Except as provided in paragraph (2), the party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract. The court may also determine that there is no party prevailing on the contract for purposes of this section.” (Italics added.)
The principles of appellate review of a trial court’s determination of the prevailing party are well established: “A trial court has wide discretion in determining which party is the prevailing party under section 1717, and we will not disturb the trial court’s determination absent ‘a manifest abuse of discretion, a prejudicial error of law, or necessary findings not supported by substantial evidence.’ ” (Silver Creek, LLC v. Blackrock Realty Advisors, Inc. (2009) 173 Cal.App.4th 1533, 1539.)
“When a party obtains a ‘ “simple, unqualified win” ’ by completely prevailing on, or defeating, the contract claims in the action and the contract contains a provision for attorney’s fees, the successful party is entitled to attorney’s fees as a matter of right, eliminating the trial court’s discretion to deny fees under section 1717. [Citation.] ‘If neither party achieves a complete victory on all the contract claims, it is within the discretion of the trial court to determine which party prevailed on the contract or whether, on balance, neither party prevailed sufficiently to justify an award of attorney fees.’ [Citation.] ‘Because the statute allows such discretion, it must be presumed the trial court has also been empowered to identify the party obtaining “a greater relief” by examining the results of the action in relative terms: the general term “greater” includes “[l]arger in size than others of the same kind” as well as “principal” and “[s]uperior in quality.” [Citation.]’ [Citation.] [¶] When determining the prevailing party under section 1717, 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 briefs, opening statements, and similar sources.’ [Citation.] Additionally, ‘in determining litigation success, courts should respect substance rather than form, and to this extent should be guided by “equitable considerations.” For example, a party who is denied direct relief on a claim may nonetheless be found to be a prevailing party if it is clear that the party has otherwise achieved its main litigation objective.’ ” (Id. at pp. 1538-1539.)
The parties argue at length over who was the prevailing party, which in itself suggests that neither party obtained an unqualified victory. The Carmignanis’ opening brief contends that since the trial court found that they achieved their litigation objectives against defendant wives, they are the prevailing party under Civil Code section 1717 entitled to recover their attorney fees, and that the trial court erred in determining that the fees they sought were not reasonable or necessary. In finding those fees to have been incurred unnecessarily, the trial court no doubt was relying on the established rule that a defendant may not recover attorney fees under section 1717 if the plaintiff voluntarily dismisses the action. (See § 1717, subd. (b)(2) [“Where an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section”]; see also Santisas v. Goodin (1998) 17 Cal.4th 599, 617.)
The Carmignanis assert that the court found they were the prevailing party. The court expressly found that the defendant wives were not the prevailing party but made no express or implied finding that the Carmignanis prevailed for purposes of section 1717.
The Carmignanis also rely on their offer to settle the case, which they argue the trial court erred in failing to consider. The offer to which they point is described in the declaration of their attorney in support of the Carmignanis’ motion for attorney fees. The attorney stated that, “In light of the clearly established liability of defendant-husbands, with no doubt as to the collectability of a judgment, I felt that it was unnecessary to resolve the question of defendant-wives’ vicarious liability as long as defendant-wives would agree not to seek attorneys’ fees... claiming to be ‘prevailing parties’ because the court had not addressed the question of their liability.” He points to an email to defendant wives’ counsel to this effect but states that opposing counsel never replied and “later told me that the wives would claim to be prevailing parties and would seek attorneys’ fees.”
The email is not dated, although the message that precedes it in the correspondence is dated September 20, 2005. Thus, at the very least the offer was made after the jury returned its verdict on September 6, but it is unclear whether it was made before the Carmignanis moved for judgment notwithstanding the verdict on December 2, 2005, or before the trial court granted that motion on January 17, 2006.
Defendant wives argue that they are the prevailing party because the Carmignanis recovered nothing against them and judgment was entered in their favor. The trial court determined that defendant wives were not the prevailing parties because they shared a unity of interest with their husbands. “In those instances in which several defendants are united in interest or join in making the same defenses in the same answer, the prevailing defendant definition in [Code of Civil Procedure section] 1032(a)(4) does not apply and the defendant against whom the plaintiff does not recover is not entitled to costs as a matter of right. Instead the allowance or disallowance of costs to the prevailing defendant lies within the sound discretion of the court, as does the apportionment of those costs, if allowed.” (7 Witkin, Cal. Procedure (5th ed. 2008) Judgment, § 94, pp. 633, italics added.)
Defendant wives challenge the trial court’s determination that they had a unity of interest with their husbands. In concluding otherwise, the trial court correctly relied on Wakefield v. Bohlin (2006) 145 Cal.App.4th 963, 985 (overturned on other grounds by Goodman v. Lozano (2010) 47 Cal.4th 1327), “where the defendants were husband and wife, sued as a result of their joint sale of a home....” Although the defendant wife obtained a jury verdict in her favor, the court concluded that she was not a prevailing party. “Jeff Bohlin (the losing defendant) and Charlotte Bohlin (the winning defendant) were represented by the same attorney, filed a joint answer to Wakefield’s complaint, and joined in the same motions and responses. The Bohlins thus share a unity of interest. For that reason, the categorical prevailing party definition ‘does not apply’ to Charlotte Bohlin.” (Ibid.)
Here, although defendant wives did not join in all of the same motions and responses as their husbands, their defense was entirely united. The trial court did not abuse its discretion in finding that defendant wives had a unity of interest with their husbands and therefore that they were not categorically the prevailing party simply because the Carmignanis did not recover anything against them.
Nor did the trial court abuse its discretion in denying defendant wives attorney fees after making that determination. Although on remand they prevented the Carmignanis from obtaining a separate judgment against them, they did not do so on the merits of the Carmignanis’ claims. Defendant wives had originally joined in the position that the Carmignanis were entitled to no recovery and they avoided a judgment against themselves only by bringing to the court’s attention that their husbands had already satisfied the judgment that the Carmignanis had obtained. However, they did not seek to terminate the litigation on this basis until extensive further and costly discovery was conducted. Their objective in pursuing their appeal from the satisfied judgments, and in continuing to resist judgment after remand, undoubtedly was to claim that they prevailed and thus were entitled to attorney fees. Under these circumstances, the trial court acted well within its discretion in determining that they were not prevailing parties and in exercising its discretion not to reward them with an award of attorney fees.
Defendant wives assert that they were seeking to eliminate a judgment against them based on fraud, which was of particular concern to Jeanine Paganini because she is a licensed real estate agent. Even assuming that this rationale could ever justify pursuit of litigation with no monetary or other significance, insofar as defendant wives were concerned with the public record, the record following satisfaction of the judgment reflected that both wives had been absolved of fraud or other misconduct and had been held liable only vicariously. Moreover, if this truly was their concern, the record contains no indication of any attempt to resolve the claim by agreeing to waive any claim for attorney fees in exchange for a stipulation for the entry of judgment in their favor.
Viewing the substance rather than form of this litigation and taking into account equitable concerns, the trial court did not abuse its discretion in denying recovery of fees to both sides. For their part, defendant wives appealed the first judgment despite the fact that their husbands had fully satisfied the judgment and they were not at risk of incurring additional liability. The Carmignanis, while arguably justified in defending the first appeal, could have dismissed the case without fear of an adverse fee award immediately following remand of the case from this court. They continued to pursue the litigation after remand, they assert, solely to preserve their claim for attorney fees incurred in defending the appeal, although the outcome of the appeal had been a partial success for both sides and this court had ordered both sides to bear their respective costs on appeal. Under these facts, it was manifestly not an abuse of discretion for the trial court to determine that neither side was entitled to recover its fees from the other. Since the trial court specifically noted that its conclusion would be the same whether or not it considered the Carmignanis’ posttrial settlement offer, we need not address the propriety of the trial court’s denial of defendant wives’ motion to strike the references to that offer.
The same reasoning compels the conclusion that the trial court properly granted the Carmignanis’ motion to tax costs. “Unless otherwise provided by statute, a ‘prevailing party’ is entitled to recover costs in any action or proceeding ‘as a matter of right.’ ([Code Civ. Proc., ] § 1032, subd. (b); see § 1033.5, subd. (a)(10)(A)-(C) [allowable costs under § 1032 include attorney fees authorized by contract, statute, or law].) ‘Prevailing party’ for purposes of section 1032(a)(4) is defined as including: ‘[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.’ If a party recovers anything other than monetary relief and in situations not specified above, a trial court shall determine the prevailing party and use its discretion to determine the amount and allocation of costs, if any.” (Goodman v. Lozano, supra, 47 Cal.4th at p. 1333.) “One defendant who prevails may recover costs even though the plaintiff recovers against another defendant.” (7 Witkin, Cal. Procedure, supra, Judgment, § 94, p. 633.)
In determining whether defendant wives were the prevailing party, the same exception for a unity of interests applies to costs as to fees, and for that reason the trial court did not abuse its discretion in granting the motion to substantially tax defendant wives’ cost bill.
DISPOSITION
The judgment is affirmed. No party having prevailed on this appeal, the parties shall bear their respective costs, including attorney fees, on appeal.
We concur: McGuiness, P. J. Jenkins, J.