Opinion
G044808
12-19-2011
JERRY FULLER, Plaintiff and Respondent, v. MONGRAM REAL ESTATE, LLC, et al., Defendants and Appellants.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Super. Ct. No. 30-2009-00291374)
OPINION
Appeal from an order of the Superior Court of Orange County, Gregory Munoz, Judge. Reversed and remanded.
Farella Braun & Martel, Thomas B. Mayhew and Amber C. Chrystal for Defendants and Appellants.
Law Offices of Ernest Mooney and W. Ernest Mooney for Plaintiff and Respondent.
Monogram Real Estate LLC, and Quintess LLC (collectively Monogram) obtained summary judgment in its favor after being sued by Jerry Fuller for breach of contract. We affirmed the trial court's ruling in Fuller v. Monogram Real Estate (Dec. 19, 2011, G044514) [nonpub. opn.], rejecting Fuller's contention Monogram accepted Fuller's counteroffer by its statements and conduct, and thereby created a binding lease agreement. In the case before us now, Monogram challenges the court's order denying its motion for attorney fees. We conclude the order must be reversed and remanded to permit the trial court to exercise its discretion.
I
We judicially notice our concurrently filed opinion and adopt and incorporate by reference the facts from that opinion, which discuss the events leading up to Fuller filing the lawsuit against Monogram. (Evid. Code, §§ 452, 459.) Because the issues raised in this appeal relate to the scope of the attorney fee provision, we need only briefly summarize the nature of the underlying dispute as follows: Monogram submitted a proposed standard lease agreement that also contained a specifically tailored addendum (the Lease). The term of the Lease was for two years with a rental rate of $44,000 per month. The Lease addendum contained several different purchase options and included a preemptive right provision, giving Monogram the right of first refusal to buy the property. Fuller received the proposed lease and crossed out a portion of the preemptive right provision, creating a counteroffer. Monogram did not accept the counteroffer in writing, but Fuller believed it was accepted by other acts and statements. Fuller sued Monogram after it failed to take possession of the property or comply with the Lease terms. Fuller alleged his damages included the non-payment of rent ($1,078,000) for the term of the Lease as well as loss of investment money when his property went into foreclosure ($2,200,000).
Monogram prevailed on summary judgment. The court made its ruling on September 30, 2010. The notice of entry of the order was filed October 5, 2010.
A few weeks later, on October 18, 2010, Monogram filed its memorandum of costs. It did not include a request for attorney fees. On December 6, 2010, Monogram filed a motion for attorney fees requesting $108,483.50 for attorney fees, and an additional $3,543.50 for the services of paralegals. The motion was based on the following provision in the Lease: "(T.) What the landlord can do if tenant does not keep to this rental agreement: [¶] 1. Failure to Pay the Rent. If tenant does not pay the rent by the due date, landlord can give tenant written notice demanding payment. If the rent is not paid within the time specified (not fewer than five (5) business days) after receipt of that notice, landlord my terminate tenant's [r]ental [a]greement. If landlord employs an attorney or collection agency, tenant must pay for attorney's fees (not more than twenty-five (25%) of the unpaid rent) and costs, regardless of whether or not a lawsuit is filed. [¶] 2. Failure to [c]omply with the [r]ules. . . . [¶] 3. Illegal [a]ctivity . . . ." (Original capitalized text modified to lower case.) Fuller opposed the motion.
In January 2011, the court denied the motion, stating in its minute order, "First, the wording in the Lease is not broad enough to encompass the fees requested, particularly since the [c]ourt found that there was no valid lease formed. Even if there were a lease formed, the wording is limited to rent monies only and restricted to a percentage of the unpaid rent. Second, the motion seeks an award of attorney fees as costs pursuant to [Code of Civil Procedure section] 1032 (prevailing party entitled to costs) and [Civil Code section] 1717 (award of attorney fees and costs pursuant to a contractual attorney fee provision.) Attorney fees on a contract may be claimed in accordance with the rules adopted by the Judicial Council under [Code of Civil Procedure section 1033.5, subd. (10)]. However, [California Rules of Court, rule] 3.1700(a)(1) requires a notice of motion to claim attorney fees as an element of costs under [section] 1717 to be served before or at the same time as the memo[randum] of costs. Here, the memo[randum] of costs was served on [October 18, 2010]. It did not include a request for attorney fees. The notice of motion was filed a month and [one-half] later on [December 8, 2010]. Therefore, moving party has waived its right to seek attorney fees as an item of costs. Furthermore, moving party has made no showing whatsoever that the fees are reasonable. Although moving party submitted evidence as to the number of hours worked and rates claimed, there is no explanation as to the services performed for each entry." The court entered a final written judgment on March 16, 2011.
All further statutory references are to Civil Code, unless otherwise indicated.
II
A. Timeliness
Monogram asserts the court applied the incorrect time limit to its motion for attorney fees. We agree. As a general rule, the prevailing party may recover certain statutory costs incurred in the litigation up to and including entry of judgment. (Code Civ. Proc., §§ 1032, 1033.5.) "Prevailing parties who intend to claim attorney fees under an applicable statute, contract, or equitable doctrine generally also will seek statutory costs under [Code of Civil Procedure section] 1033.5. To do this, counsel generally must file separate requests for fees and costs that will proceed on parallel, but not identical, tracks; a memorandum of costs, under [California Rules of Court, rule] 3.1700 and a motion for fees under the applicable contract or statute, governed by [California Rules of Court, rule] 3.1702 and the procedures for noticed motions . . . . These may or may not be filed simultaneously." (2 Pearl, California Attorney Fee Awards (Cont. Ed. Bar 3d ed. 2011) § 11.25, p. 657).
The prevailing party may seek most costs by filing a memorandum of costs within 15 days after the entry of judgment. (Cal. Rules of Court, rule 3.1700.) "In limited circumstances, attorney fees may also be sought in the memorandum of costs." (2 Pearl, California Attorney Fee Awards, supra, § 11.27, p. 658.1.) For instance, some courts have fee schedules set for routine matters based on the amount recovered. These schedules are mainly used when a party has defaulted and the court need not determine the amount of reasonable fees. (Ibid.)However, in contested cases, such as the one before us, attorney fees based on a contract must be claimed by noticed motion. (§ 1033.5, subd. (c)(5); Cal. Rules of Court, rule 3.1702(b)(1).)
California Rules of Court, rule 3.1702 provides: "(a) Application
[1] Except as otherwise provided by statute, this rule applies in civil cases to claims for statutory attorney's fees and claims for attorney's fees provided for in a contract. Subdivisions (b) and (c) apply when the court determines entitlement to the fees, the amount of the fees, or both, whether the court makes that determination because the statute or contract refers to 'reasonable' fees, because it requires a determination of the prevailing party, or for other reasons. [¶] (b) Attorney's fees before trial court judgment [1] (1) Time for motion [¶] A notice of motion to claim attorney's fees for services up to and including the rendition of judgment in the trial court—including attorney's fees on an appeal before the rendition of judgment in the trial court—must be served and filed within the time for filing a notice of appeal under rules 8.104 and 8.108 in an unlimited civil case or under rules 8.822 and 8.823 in a limited civil case."
We note that before 1994, the rules were different and provided a motion to claim attorney fees as an element of costs must be filed "before or at the same time" as the memorandum of costs, i.e., within 15 days after entry of judgment or dismissal. (Former Cal. Rules of Court, rule 870.2.) However, under the current applicable rules a motion to claim attorney fees provided for in a contract shall be "served and filed within the time for filing a notice of appeal . . . ." (Cal. Rules of Court, rule 3.1702 (b)(1); See Cal. Rules of Court, rule 8.104 [generally time for notice of appeal is 60 days after notice of entry of judgment or 180 days after entry of judgment].)
Here, the notice of the order granting summary judgment was filed on October 5, 2010. However, the order granting summary judgment is not a judgment, and it is not an appealable order. The entry of the order did not trigger the attorney fee motion filing deadline described by California Rules of Court, rule 8.104. Thus, Monogram's motion for attorney fees filed on December 8, 2010 (three months before entry of judgment on March 16, 2011) should not have been denied as untimely. B. Statutory Background & General Legal Principles Regarding Attorney Fees
Except where a contract or statute provides otherwise, each party to a lawsuit must pay its own attorney fees. (Code Civ. Proc., § 1021.) Section 1717, subdivision (a), provides in part: "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 . . . ." This provision was enacted to "establish mutuality of remedy where a contractual provision makes recovery of attorney's fees available for only one party [citations] . . . and to prevent oppressive use of one-sided attorney's fees provisions. [Citation.]" (Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 128 (Reynolds).)
Section 1717 is "part of an overall legislative policy designed to enable consumers and others who may be in a disadvantageous contractual bargaining position to protect their rights through the judicial process by permitting recovery of attorney's fees incurred in litigation in the event they prevail. (See e.g., § 1811.1 [Installment Sales Contracts]; § 2983.4 [Conditional Sales Contracts]; [Citations].)" (Coast Bank v. Holmes (1971) 19 Cal.App.3d 581, 597, fn. 3.)
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The second paragraph of section 1717, subdivision (a), provides, "Where a contract provides for attorney's fees, as set forth above, that provision shall be construed as applying to the entire contract, unless each party was represented by counsel in the negotiation and execution of the contract, and the fact of that representation is specified in the contract." This paragraph was added by the Legislature to overturn an earlier court decision limiting the scope of an attorney fee provision in a contract. (Harbor View Hills Community Assn. v. Torley (1992) 5 Cal.App.4th 343, 348 (Torley).) Under this provision, the parties may not "limit an award of attorney fees to certain actions or specific provisions of the contract" unless the contract specifies that each party was represented in the negotiation. (Ibid.) "[S]ection 1717 has been broadened to include all contract actions which include provisions for attorney's fees." (Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1148.) As applied to the case before us now, representation was not specified in the contract, and therefore the attorney fee provision must be construed as applying "to the entire contact[.]" (§ 1717, subd. (a).)
C. Scope of the Attorney Fee Provision
The trial court ruled, "First, the wording in the lease is not broad enough to encompass the fees requested, particularly since the [c]ourt found that there was no valid lease." Under section 1717, the validity or existence of the contract alleged in the complaint is not a prerequisite to an attorney fee award. (Hsu v. Abbara (1995) 9 Cal.4th 863, 870.) "It is now settled that a party is entitled to attorney fees under section 1717 'even when the party prevails on grounds the contract is inapplicable, invalid, unenforceable or nonexistent, if the other party would have been entitled to attorney's fees had it prevailed.' [Citations.]" (Ibid.)
Here, if Fuller had prevailed in proving the Lease was enforceable, then Monogram would have been liable for any damages caused by its breach, including lost rent. (See § 1951.2.) In addition, Fuller would have been entitled to collect attorney fees incurred to enforce the Lease and collect the rent. In the Lease, the only listed condition to be satisfied before collecting fees is the retention of an attorney or a collection agency. The only other express limitation is that fees can be no more than 25 percent of the unpaid rent. There is no dispute Fuller retained counsel to enforce the Lease. That Monogram prevailed in proving the Lease was unenforceable does not preclude it from collecting attorney fees.
The second reason the court offered for denying attorney fees was as follows: "Even if there were a lease formed, the wording is limited to rent monies only and restricted to a percentage of the unpaid rent." In essence, the court ruled the right to collect attorney fees would only be reciprocal under section 1717 if the lawsuit related to a dispute about the rent. This is no longer the law. The Legislature amended section 1717 in 1983 to overturn several cases limiting recovery of attorney fees to a particular type of claim. (Torley, supra, 5 Cal.App.4th at pp. 348-349.) The Legislature amended the law "to provide complete mutuality of remedy where a contractual provision makes recovery of attorney fees available to one party." (Ibid.)As we discussed above, absent exceptions not applicable in this case, parties may not limit recovery of attorney fees to a particular type of claim, such as a rent dispute. "Where a contract provides for attorney's fees . . . that provision shall be construed as applying to the entire contract . . ." (§ 1717, subd. (a), italics added.)
The case relied on by Fuller is inapposite. In Kalai v. Gray (2003) 109 Cal.App.4th 768, the attorney fee provision allowed for an award of fees "only in favor of 'the prevailing party to [the arbitration.'" (Id. at p. 777.) Since the arbitration had not taken place, fees were not yet appropriate. However, the court noted that whoever prevailed in the final resolution of the dispute would be entitled to an attorney fee award that included the fees incurred in the trial court action. (Ibid.) This authority does not support Fuller's theory the parties could limit the scope of the attorney fee clause to resolution of a particular dispute.
C. The Question of Reasonableness
The final reason the court gave for denying attorney fees was Monogram "made no showing whatsoever that the fees [were] reasonable. Although [Monogram] . . . submitted evidence as to the number of hours worked and rates claimed, there is no explanation as to the services performed for each entry." Our standard of review is limited to an abuse of discretion. (EnPalm, LLC v. Teitler (2008) 162 Cal.App.4th 770, 774.) "The discretion invoked is that of the trial court, not the reviewing court, and the trial court's order will be overturned only if, considering all the evidence viewed most favorably in support of its order, no judge could reasonably make the order made. [Citations.]" (In re Marriage of Cueva (1978) 86 Cal.App.3d 290, 296.)
This case involved a single cause of action related to whether the Lease was accepted. Before the motion for summary judgment was heard, the parties conducted some basic discovery, took one deposition, and argued two other motions. Fuller declared his attorney charged him a total of $28,250 in litigating the case. In contrast, Monogram asserts it was billed $163,000 for legal services.
To support this large sum, Monogram submitted three declarations. Monogram's lead counsel Thomas Mayhew declared he billed at an hourly rate of $625 for 46.5 hours of legal services and $605 for 2.3 hours of services. A second year litigation associate at his firm billed at an hourly rate of $295 for 16.1 hours, and $320 in 2010 for 229 hours. The total attorney fee bill was $108,483.50. Mayhew also incurred over $3,500 for the services of several paralegals. Mayhew attached to his declaration redacted monthly billing summaries. He stated the billing summaries were prepared by his firm during the normal course of business. He stated, "Should the [c]ourt deem it necessary, [Monogram is] prepared to submit unredacted monthly billing summaries for this time period for in camera review."
Frieda C. Leonard, licensed to practice law in Colorado, served as co-counsel and charged $21,270 for her services. Leonard's declaration provided a more detailed account of all the services she performed in the case but she did not indicate the time spent on each task. Leonard also supplied copies of electronically redacted monthly billing statements for the work she performed. She offered to provide unredacted bills for in camera review if the court deemed it necessary.
Finally, Mark Murakami, licensed to practice law in Hawaii, declared he was retained to compel a deposition in Hawaii. He stated his standard billing rate was $275 per hour, he spent 1.5 hours on the case, and charged Monogram $412.50. His paralegal, billing at a rate of $140 per hour spent 13.3 hours on the case. He sought $2,274.50 plus $377.12 in court costs. He also provided redacted bills, but offered to submit unredacted billing summaries if necessary.
Fuller asserts a fee that appears "unreasonably inflated is a special circumstance permitting the trial court to reduce the award or deny one altogether." (Serrano v. Unruh (1982) 32 Cal.3d 621, 635, fn. omitted.) True, but this authority would only apply if the trial court had indeed determined the fees were inflated or unreasonably excessive. The record does not support such a conclusion. The trial court's ruling merely indicated it believed Monogram failed to make a sufficient showing its fees were reasonable due to the submission of redacted billing statements. Because the court relied on other grounds for denying the motion, it is unclear from the record if the trial court actually exercised its discretion on the issue of whether the fees requested were reasonable. For this reason, the order must be reversed and remanded.
The trial court on remand must exercise its discretion in determining if the attorney fee request was unreasonably inflated and should be denied, or alternatively, what is the appropriate amount of fees to award. On remand, Monogram may submit evidence that allows the court to consider if the case was overstaffed, if the hours were reasonably expended, and how much time was spend on particular claims. (Hensley v. Eckerhart (1983) 461 U.S. 424, 433; see also Asbestos Claims Facility v. Berry & Berry (1990) 219 Cal.App.3d 9, 24 [conclusory factual assertions insufficient], disapproved on another ground in Kowis v. Howard (1992) 3 Cal.4th 888, 896.)
Moreover, we remind Monogram it has the burden to prove the reasonableness of the fees in a contested hearing. (Code of Civil Procedure section 1033.5, subd. (c).) We recognize Monogram offered to provide more detailed billing statements in camera. However, this procedure would be improper. Fuller is entitled to review the documentation submitted in support of the fee award and to contest it.
The sole reason offered to support the in camera review was the billing statements contained privileged information. This reason appears to be untenable when applied to all the billing statements. Surely not every bill contained privileged information. On remand, Monogram can waive the privilege and produce the billing statements for the court and Fuller to review. Alternatively, it can present a more detailed declaration of counsel summarizing the required information. (Wershba v. Apple Computer, Inc. (2001) 91 Cal.App.4th 224, 254-255.) Ultimately, the trial court should rely on its own knowledge and experience. (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1096 [trial court has its own expertise on value of attorney services].)
III
The order is reversed and remanded. In the interests of justice, each party shall bear their own costs in this appeal. (Cal. Rules of Court, rule 8.278(a)(5).)
O'LEARY, ACTING P. J.
WE CONCUR:
MOORE, J.
FYBEL, J.