Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County. William F. Highberger, Judge. Los Angeles County Super. Ct. No. BC332914
Good, Wildman, Hegness & Walley, Gary A. Dapelo; Snell & Wilmer, Richard A. Derevan and Todd E. Lundell for Plaintiffs and Appellants.
Greenberg Traurig, Scott D. Bertzyk and Karin L. Bohmholdt for Defendant and Respondent.
DOI TODD, Acting P. J.
Plaintiffs and appellants Hotels Nevada, LLC and Inns Nevada, LLC (collectively Hotels Nevada) appeal from an order awarding attorney fees to defendant and respondent L.A. Pacific Center, Inc. (L.A. Pacific) following the voluntary dismissal of Hotels Nevada’s complaint. We affirm. The operative agreement between the parties contained a broadly-phrased attorney fee clause mandating a fee award to the prevailing party in “any action.” The trial court properly construed this clause as a part of a contract under Code of Civil Procedure section 1033.5 authorizing an award of attorney fees as costs pursuant to Code of Civil Procedure section 1032.
FACTUAL AND PROCEDURAL BACKGROUND
The Transaction.
This is the third appeal in this case, following Hotels Nevada v. L.A Pacific Center, Inc. (2006) 144 Cal.App.4th 754 and Hotels Nevada et al. v. L.A. Pacific Center, Inc., case No. B198348. In our most recent decision, we summarized the facts from the prior decision. “In Hotels Nevada v. L.A. Pacific Center, Inc. (2006) 144 Cal.App.4th 754 (Hotels Nevada) we reversed an order denying appellant’s [then L.A. Pacific] petition to compel arbitration, concluding that the trial court should have held an evidentiary hearing before ruling on the petition. The dispute stemmed from the sale of two properties from Hotels Nevada to appellant—the Alexis Park Hotel and the American Inn Apartments in Las Vegas, Nevada (the property). According to Hotels Nevada’s May 2005 complaint [Complaint], in early 2004 the parties agreed on a purchase price of $75 million for the property. At appellant’s request, Louis Habash (Habash), Hotels Nevada’s principal, also agreed to a holdback provision whereby appellant would be permitted to hold back $5 million of the purchase price for a period of 12 months. The holdback provision was memorialized as section 2.06(b) of the written purchase and sale agreement (Agreement). The parties further agreed to prepare and record a memorandum of agreement (Memorandum), which would provide notice of the transaction, including appellant’s obligation to repay the $5 million holdback within 12 months. (Hotels Nevada, supra, 144 Cal.App.4th at pp. 758–759.)
“Further, according to the [Complaint], at a March 2004 meeting to sign the Agreement and Memorandum, appellant informed Habash of its desire to extend the holdback period from 12 months to 60 months. Habash declined and left the meeting without signing either the Agreement or the Memorandum. Appellant immediately relented and agreed to retain the 12-month holdback period. Habash returned to the attorneys’ offices and signed two originals of the Agreement and Memorandum after confirming that they both contained a 12-month holdback period. The next day, Hotels Nevada’s counsel received a copy of the fully executed documents which, again, contained the 12-month holdback period. (Hotels Nevada, supra, 144 Cal.App.4th at p. 759.)
“In May 2004, Hotels Nevada’s attorney received a copy of the recorded Memorandum from the escrow officer, at that point unaware it contained a 60-month holdback provision. Hotels Nevada allegedly learned of the 60-month holdback in April 2005, when it sought to enforce the 12-month obligation under the Agreement. At an April 2005 meeting, appellant presented Habash with a copy of the recorded Memorandum, which contained the 60-month holdback provision, and a document that [L.A. Pacific] represented was page 12 of the Agreement, which also contained a 60-month holdback provision. Hotels Nevada alleged it had not previously seen any version of the Agreement or Memorandum containing a 60-month holdback provision. (Hotels Nevada, supra, 144 Cal.App.4th at p. 759.)” (Hotels Nevada v. L.A. Pacific Center, Inc., case No. B198348, pp. 2–3.)
The Complaint and Other Pleadings.
On May 4, 2005, Hotels Nevada filed the Complaint against L.A. Pacific, alleging causes of action for rescission based on fraud, cancellation of written instruments based on illegality and conspiracy. Simultaneously, Hotels Nevada filed notices of lis pendens in California, identifying notices of the pending action it had recorded against the property. In January 2006, the trial court granted L.A. Pacific’s motion to expunge lis pendens but ordered it to file an undertaking in the amount of $5 million.
Three days before the expungement order, Hotels Nevada filed a verified complaint in Nevada against L.A. Pacific (Nevada complaint), alleging causes of action for quiet title, appointment of a receiver, rescission based on fraud, cancellation of written instruments based on illegality, civil conspiracy and intentional interference with prospective economic advantage. The Nevada complaint was premised on the same facts alleged in the Complaint. Hotels Nevada asserted that the purpose of this second action was to allege a real property claim—its cause of action to quiet title—in response to L.A. Pacific’s prior contention in its motion to expunge the lis pendens that the Complaint lacked a real property claim. Concurrently with the Nevada complaint, Hotels Nevada filed three notices of lis pendens in Nevada (Nevada lis pendens). In March 2006, the Nevada court denied L.A. Pacific’s motion to expunge the Nevada lis pendens and subsequently denied its motions to dismiss or stay the action on the Nevada complaint and to compel arbitration of the Nevada complaint.
In April 2006, L.A. Pacific filed a cross-complaint against Hotels Nevada alleging causes of action for abuse of process, slander of title, intentional interference with contractual obligations and indemnity (Cross-Complaint). In November 2006, we issued our decision reversing the trial court’s order denying L.A. Pacific’s petition to compel arbitration. At a December 13, 2006 hearing, L.A. Pacific sought an order from the trial court determining that the filing of the Nevada lis pendens violated California law. During that hearing, in the context of discussing the upcoming evidentiary hearing on the petition to compel arbitration, the trial court inquired of Hotels Nevada’s counsel: “Bear with me, you are the plaintiffs. Why don’t you just dismiss this case and proceed only in Nevada? You can do that.” Counsel responded that Hotels Nevada would be willing to dismiss its Complaint without prejudice if L.A. Pacific would, in turn, dismiss its Cross-Complaint without prejudice. Counsel for L.A. Pacific was not interested in the proposal, stating that he would prefer to remain in California. The parties did agree, however, that any discovery obtained could be used in either California or Nevada.
Although the first page of the reporter’s transcript lists the date of the hearing as January 13, 2006, the cover page and reporter’s certification correctly specify the December 13, 2006 date.
Thereafter, in January 2007, L.A. Pacific refiled the Cross-Complaint in response to Hotels Nevada’s contention that the matter had been automatically stayed during the pendency of the appeal. Hotels Nevada then filed a special motion to strike the Cross-Complaint pursuant to section 425.16 (motion to strike). Following a February 2007 hearing, the trial court granted the motion to strike as to the first through third causes of action and denied the motion as to the fourth cause of action for indemnity. We later affirmed the ruling in an unpublished opinion filed in June 2008, Hotels Nevada et al. v. L.A. Pacific Center, Inc., case No. B198348.
Voluntary Dismissal.
On May 3, 9 and 14, 2007, the trial court ruled on several discovery motions, including granting L.A. Pacific’s motion to compel production of documents on the ground that Hotels Nevada had waived attorney-client privilege by previously submitting declarations from transactional counsel and denying Hotels Nevada’s motion to quash subpoenas and/or for a protective order regarding limited discovery from accounting firm RBZ, Inc. With respect to the latter motion, the trial court was persuaded that Hotels Nevada’s financial condition at the time of closing was relevant to the dispute.
On May 15, 2007, Hotels Nevada voluntarily dismissed the Complaint without prejudice. The same day, Hotels Nevada’s counsel faxed a letter to a third party bank who had received a subpoena from L.A. Pacific and wrote that the bank need not respond because the case had been dismissed. Two days later, Hotels Nevada sent similar letters to other institutions who had received subpoenas from L.A. Pacific. Thereafter, L.A. Pacific moved for an order vacating the dismissal and/or a ruling that Hotels Nevada had waived any affirmative defense to arbitration through its dismissal. Following a June 2007 hearing on the motion, the trial court issued an order in July 2007 ruling that the dismissal did not moot L.A. Pacific’s pending petition to compel arbitration because the petition was an independent proceeding; the trial court also declined to find that appellant had abandoned its defenses to arbitration by reason of the dismissal.
Motion for Attorney Fees.
Section 15.05 of the Agreement, captioned “Attorney’s Fees,” provides: “In the event any action is commenced by either party against the other in connection herewith, including any bankruptcy proceeding, the prevailing party shall be entitled to recover, in addition to its costs of enforcement, its costs and expenses, including reasonable attorneys’ and consultants’ fees.”
In July 2007, L.A. Pacific filed a motion seeking a contractual award of attorney fees as the prevailing party. It contended that Hotels Nevada’s voluntary dismissal rendered it a prevailing party pursuant to Code of Civil Procedure section 1032. The motion sought a total of $438,248 in attorney fees. Appellant filed its opposition to the motion in February 2008. It asserted that Civil Code section 1717 precluded an award of attorney fees and, alternatively, that the motion was premature as L.A. Pacific had not been determined to be the prevailing party on the remaining claims pending in Nevada.
Also in February 2008, the trial court issued an order granting L.A. Pacific’s petition to compel arbitration. In discussing Hotels Nevada’s voluntary dismissal, the order provided: “On May 15, 2007, after months of discovery and just 14 days before the scheduled evidentiary hearing, Respondents dismissed their California Complaint and asserted that, through this action, they had deprived this Court of jurisdiction to hold a hearing and rule upon L.A. Pacific’s still-pending motion to compel arbitration.” The court explained it had determined otherwise, concluding that the petition to compel arbitration conferred continuing jurisdiction on the court to resolve the issue of arbitrability. On the basis of the evidence adduced during a 16-day evidentiary hearing, the trial court determined that there had been no fraud in the execution sufficient to vitiate the Agreement and its arbitration clause. Rather, the evidence suggested that although Habash signed documents containing a 12-month holdback period, an escrow officer altered the documents subsequent to their execution, substituting a page containing a 60-month holdback. Nonetheless, the court concluded that Hotels Nevada failed to meet its burden to establish fraud given there was no evidence of intent to deceive, as other closing documents circulating at the time the Agreement was signed indicated that the escrow officer’s alterations were designed to reflect the parties’ agreement to a 60-month holdback period. For example, the closing checklist identifying the party responsible for various Agreement provisions expressly stated that section 2.06(b) of the Agreement provided for a $5 million payment upon the earlier of certain financing, commencement of construction or sixty months from the closing date.
Following a March 10, 2008 hearing, the trial court granted L.A. Pacific’s motion for attorney fees and awarded it $453,247.50—an amount reflecting a 50 cent calculation error. The trial court characterized the attorney fees provision in the Agreement as “the broadest possible attorney’s fees clause.” It reasoned that upon dismissal L.A. Pacific became the prevailing party pursuant to Code of Civil Procedure section 1032 and entitled to attorney fees according to the Agreement pursuant to Code of Civil Procedure section 1033.5 Because Hotels Nevada’s Complaint alleged tort claims, the limitations of Civil Code section 1717 pertaining to contract claims did not apply. Though noting that Hotels Nevada had not challenged the amount of the fee requested, the trial court deemed the amount reasonable under the circumstances. It also awarded L.A. Pacific costs in the amount of $202,223.05—an award not challenged on appeal.
Hotels Nevada timely appealed from the attorney fee award.
DISCUSSION
Hotels Nevada challenges the attorney fee award on two grounds. It asserts that the trial court abused its discretion in determining that L.A. Pacific was the prevailing party under the Agreement. Alternatively, apart from the prevailing party determination, it argues that the trial court erred in declining to find that Civil Code section 1717 precluded the award to the extent the Complaint raised contract claims rather than tort claims.
“An order granting or denying an award of attorney fees is generally reviewed under an abuse of discretion standard of review; however, the ‘“determination of whether the criteria for an award of attorney fees and costs have been met is a question of law.”’ [Citations.]” (Salawy v. Ocean Towers Housing Corp. (2004) 121 Cal.App.4th 664, 669; accord, Wakefield v. Bohlin (2006) 145 Cal.App.4th 963, 978; Carver v. Chevron U.S.A., Inc. (2002) 97 Cal.App.4th 132, 142.) Applying this standard, we find no error.
I. Statutory Framework.
As explained in Santisas v. Goodin (1998) 17 Cal.4th 599, 606: “Whether a party to litigation is entitled to recover costs is governed by Code of Civil Procedure section 1032, which provides, in subdivision (b), that ‘[e]xcept as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.’ For the purpose of determining entitlement to recover costs, Code of Civil Procedure section 1032 defines ‘prevailing party’ as including, among others, ‘a defendant in whose favor a dismissal is entered.’ (Code Civ. Proc., § 1032, subd. (a)(4).)” (See Drybread v. Chipain Chiropractic Corp. (2007) 151 Cal.App.4th 1063, 1068 [applying section 1032 to a voluntary dismissal without prejudice].)
Unless otherwise indicated, all further statutory references are to the Code of Civil Procedure.
In turn, section 1033.5, subdivision (a)(10), provides that attorney fees are allowable as costs under section 1032 “when authorized by any of the following: (A) Contract. (B) Statute. (C) Law.” Section 1021 does not provide an independent statutory basis for the recovery of attorney fees. “Rather, consistent with subdivision (a)(10) of Code of Civil Procedure section 1033.5, Code of Civil Procedure section 1021 recognizes that attorney fees incurred in prosecuting or defending an action may be recovered as costs only when they are otherwise authorized by statute or by the parties’ agreement.” (Santisas v. Goodin, supra, 17 Cal.4th at p. 607, fn. 4.)
Section 1021 states: “Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties; but parties to actions or proceedings are entitled to their costs, as hereinafter provided.”
Because the attorney fee award in this case was premised on a contractual attorney fee provision, Civil Code section 1717 also comes into play. That statute provides in relevant part: “(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 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.” Furthermore, Civil Code section 1717, subdivision (b)(2) specifies: “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.”
In Santisas v. Goodin, supra, 17 Cal.4th 599, the court endeavored to reconcile Civil Code section 1717, subdivision (b)(2), providing there is no prevailing party following a voluntary dismissal, with sections 1032 and 1033.5, defining a defendant in whose favor a case is voluntarily dismissed as a prevailing party for purposes of an award of attorney fees as costs. Focusing on language in Civil Code section 1717, subdivision (a), requiring that the action be “on a contract,” the court reasoned that “[i]f an action asserts both contract and tort or other noncontract claims, section 1717 [subdivision (b)(2)] applies only to attorney fees incurred to litigate the contract claims.” (Santisas v. Goodin, supra, at p. 615; see also Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1342 [“By its terms, therefore, Civil Code section 1717 has a limited application. It covers only contract actions, where the theory of the case is breach of contract, and where the contract sued upon itself specifically provides for an award of attorney fees incurred to enforce that contract”].)
In Silver v. Boatwright Home Inspection, Inc. (2002) 97 Cal.App.4th 443, 452, the court summarized the analysis required by the Santisas court’s holding: “[U]nder Santisas, when a trial court is presented with a contractual claim for attorney’s fees by a defendant who has been voluntarily dismissed from a suit prior to trial, the court must deny such fees as are limited to the parties’ contract claims. Regarding the noncontract claims, the court must look to the parties’ contractual attorney’s fees provision to determine if it defines who is a prevailing party or addresses voluntary pretrial dismissals. If the contract does not provide such guidance, the court must utilize its discretion in determining whether such defendant should be considered a prevailing party for the purpose of recovering attorney’s fees as costs under sections 1032 and 1033.5. In exercising that discretion, the court may consider the reason for the dismissal, including whether the parties have reached their litigation objectives by settlement, judgment, or other means.”
II. L.A. Pacific was the Prevailing Party Entitled to an Award of Attorney Fees Under the Agreement.
Whether attorney fees incurred in defending tort or other noncontract claims are recoverable after a voluntary dismissal depends upon the terms of the contractual attorney fee provision. (Santisas v. Goodin, supra, 17 Cal.4th at p. 602.) “If a contractual attorney fee provision is phrased broadly enough,... it may support an award of attorney fees to the prevailing party in an action alleging both contract and tort claims: ‘[P]arties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves, whether such litigation sounds in tort or in contract.’ [Citation.]” (Id. at p. 608.)
Here, the Agreement included a broadly-phrased attorney fee clause which provides: “In the event any action is commenced by either party against the other in connection herewith, including any bankruptcy proceeding, the prevailing party shall be entitled to recover... its costs and expenses, including reasonable attorneys’ and consultants’ fees.” On its face, this provision encompassed all claims between the parties, whether sounding in tort or contract. (E.g., Lerner v. Ward (1993) 13 Cal.App.4th 155, 160 [contract providing for attorney fees in “any action or proceeding arising out of the agreement” encompassed fraud claim]; see also Xuereb v. Marcus & Millichap, Inc., supra, 3 Cal.App.4th at p. 1341 [“parties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves, whether such litigation sounds in tort or in contract”].)
Given that the attorney fee provision was broad enough to encompass all claims raised in the Complaint, the question thus becomes whether L.A. Pacific was the prevailing party entitled to an award of fees by reason of Hotels Nevada’s voluntary dismissal. The attorney fee clause in the Agreement provided no definition of the term “prevailing party,” nor did the parties offer any evidence that they ascribed a particular meaning to the term. (See Santisas v. Goodin, supra, 17 Cal.4th at p. 609.) Moreover, where there has been a voluntary dismissal, the term “prevailing party” has no settled statutory meaning given that section 1032, subdivision (a)(4) treats a defendant in whose favor a dismissal has been entered as a prevailing party, while Civil Code section 1717 does not. (Santisas v. Goodin, supra, at p. 609; Coltrain v. Shewalter (1998) 66 Cal.App.4th 94, 101–102.) Accordingly, we follow the practical approach taken by the court in Santisas v. Goodin, supra, at page 622: “If, as here, the contract allows the prevailing party to recover attorney fees but does not define ‘prevailing party’ or expressly either authorize or bar recovery of attorney fees in the event an action is dismissed, a court may base its attorney fees decision on a pragmatic definition of the extent to which each party has realized its litigation objectives, whether by judgment, settlement, or otherwise. [Citation.]” Amplifying this definition, the Santisas court noted that “it seems inaccurate to characterize the defendant as the ‘prevailing party’ if the plaintiff dismissed the action only after obtaining, by means of settlement or otherwise, all or most of the requested relief, or if the plaintiff dismissed for reasons, such as the defendant’s insolvency, that have nothing to do with the probability of success on the merits.” (Id. at p. 621.)
Applying this definition, the trial court properly exercised its discretion to conclude that L.A. Pacific was the prevailing party on the Complaint. (See Silver v. Boatwright Home Inspection, Inc., supra, 97 Cal.App.4th at p. 452 [application of pragmatic definition involves an exercise of discretion]; see also Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1158 [“We will not disturb the trial court’s determination of the prevailing party absent a clear abuse of discretion”].) Hotels Nevada did not dismiss the Complaint after receiving all or any of its requested relief. Rather, the effect of the dismissal was L.A. Pacific’s achieving its litigation objective of having Hotels Nevada take nothing on the Complaint. (See Coltrain v. Shewalter, supra, 66 Cal.App.4th at p. 106 [“when the plaintiff dismisses the complaint, it voluntarily cedes to the defendant all the relief the trial court could have granted if the matter had been pressed to a ruling”].)
We reject Hotels Nevada’s contention that the fee award was unwarranted because its dismissal was unrelated to its probability of success on the merits. We are unpersuaded that the dismissal was prompted solely by the trial court’s suggestion that Hotels Nevada proceed only in Nevada, given that Hotels Nevada rejected the suggestion at the time it was made and proceeded vigorously to litigate the case for almost six months following the court’s suggestion. Further, while Hotels Nevada is correct that L.A. Pacific’s success on its discovery motions did not render it a prevailing party (see Gilbert v. National Enquirer, Inc. (1997) 55 Cal.App.4th 1273, 1277–1278), Hotels Nevada’s concomitant lack of success on those motions and its immediate notice of the dismissal to subpoenaed third parties tended to indicate that the dismissal was directly related to its probability of success on the merits.
Finally, we find no merit to Hotels Nevada’s central argument that L.A. Pacific was not a prevailing party because the dismissal merely permitted the parties to litigate the same dispute in Nevada. Contrary to Hotels Nevada’s assertion, the circumstances here are not analogous to those in Estate of Drummond (2007) 149 Cal.App.4th 46 (Drummond). There, the appellate court had determined in a prior appeal that the compulsory cross-complaint rule barred an attorney’s probate petition seeking to recover fees from will contestants who were his former clients, where the clients had previously filed a civil action against the attorney for fraud. (Id. at p. 49.) In the appeal before it, the court affirmed an order denying the clients’ motion for attorney fees under Civil Code section 1717 based on the dismissal of the attorney’s probate petition. (Drummond, supra, at pp. 51–52.) The appellate court characterized the dismissal as “only an interim victory, based on [the attorney’s] having attempted to pursue his claims in the wrong forum” and reasoned that “[d]ismissal of the probate petition thus.... determined nothing except that [the attorney] had to pursue his claims against appellants in the civil case.” (Id. at pp. 51, 52; see also Otay River Constructors v. San Diego Expressway (2008) 158 Cal.App.4th 796, 807 [dismissal in Drummond “simply moved action to another forum”].)
Here, although Hotels Nevada’s voluntary dismissal facilitated the pursuit of its claims solely in Nevada, the dismissal did not have the effect of moving the same claims to a different forum. Hotels Nevada initiated its separate action in Nevada against L.A. Pacific prior to and independent of the dismissal of the Complaint. Indeed, previously Hotels Nevada maintained that the actions in Nevada and California did not allege the same claims, asserting that it filed its action in Nevada in order to raise a real property claim—a cause of action seeking to quiet title—which was lacking in the Complaint filed in California. Under these circumstances, the voluntary dismissal of the Complaint represented more than an interim victory; it represented a complete victory to L.A. Pacific. (See Winick Corp. v. Safeco Insurance Co. (1986) 187 Cal.App.3d 1502, 1508 [holding the defendant was a prevailing party on a complaint dismissed for the failure to serve a timely summons, as the “most Safeco—or any other civil defendant—ordinarily can hope to achieve is to have the plaintiff’s claim thrown out completely”].) The trial court therefore properly exercised its discretion in rejecting the contention that the pendency of the Nevada action affected the determination of who was the prevailing party as between Hotels Nevada and L.A. Pacific on the dismissed Complaint. (See Profit Concepts Management, Inc. v. Griffith (2008) 162 Cal.App.4th 950, 956 [defendant dismissed for lack of personal jurisdiction was prevailing party, notwithstanding the pendency of an action in another jurisdiction, as the court found nothing in either statutes or case law “that requires resolution in another state on the merits of a contract claim first asserted in California before a prevailing party can be determined here, when the matter has been completely resolved vis-à-vis the California courts”]; Cole v. BT & G, Inc. (1983) 141 Cal.App.3d 995, 998 [defendants held to be prevailing parties in an action on confession of judgment even though independent lawsuit was required to pursue defendants’ liability for the obligation under the contract].)
Accordingly, we find no basis to disturb the trial court’s prevailing party determination.
III. Because the Complaint Alleged Tort Claims, Civil Code Section 1717 Did Not Apply to Limit the Attorney Fee Award.
Pursuant to Civil Code section 1717, a voluntarily dismissed defendant is not a prevailing party in an action on a contract that includes an attorney fee clause where fees are “incurred ‘to enforce that contract.’” (Santisas v. Goodin, supra, 17 Cal.4th at p. 615.) Civil Code section 1717 is strictly limited to fees incurred to litigate contract claims. (Santisas v. Goodin, supra, at p. 615.) Accordingly, we likewise find that the trial court did not err in determining that the dismissal restriction in Civil Code section 1717, subdivision (b)(2) was inapplicable because Hotels Nevada’s claims sounded in tort. (Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 708 [“Civil Code section 1717 does not apply to tort claims; it determines which party, if any, is entitled to attorneys’ fees on a contract claim only”].)
Whether an action is based on contract or tort for purposes of Civil Code section 1717 depends upon the nature of the right sued upon, not upon the form of the pleading or the relief demanded. “If based on [a] breach of promise it is contractual; if based on [a] breach of a noncontractual duty it is tortious. [Citation.]” (Arthur L. Sachs, Inc. v. City of Oceanside (1984) 151 Cal.App.3d 315, 322; accord, Kangarlou v. Progressive Title Co., Inc. (2005) 128 Cal.App.4th 1174, 1178.) We focus on the pleadings to determine the nature of Hotels Nevada’s claims. (Arthur L. Sachs, Inc. v. City of Oceanside, supra, at p. 322.)
Hotels Nevada alleged three causes of action in the Complaint: Rescission based on fraud, cancellation of written instruments based on illegality and conspiracy. The same factual basis supported all three causes of action. Hotels Nevada generally alleged: “[T]o accomplish the Fraudulent Scheme, Buyer [L.A. Pacific] manipulated, fabricated, and manufactured the version of the Memorandum apparently recorded on May 26, 2004, to reflect an incorrect sixty (60) month period for the Holdback of Five Million Dollars ($5,000,000) of the Purchase Price by changing, modifying, removing, replacing and otherwise wrongfully and unlawfully altering the Memorandum, as well as the Agreement upon which it was based. Seller [Hotels Nevada] at no time agreed to such sixty (60) month Holdback period, nor did Seller ever agree to the manipulated and manufactured Memorandum, nor to the equally manipulated and manufactured Agreement upon which the recorded Memorandum is based.”
In connection with the first cause of action for rescission based on fraud, Hotels Nevada alleged the elements of fraud, including that L.A. Pacific willfully and intentionally manufactured and altered the Memorandum and Agreement, while representing that those documents were those agreed to by Hotels Nevada; L.A. Pacific knew its representations were false when made and made such representations “with the intention to deceive and defraud [Hotels Nevada] and to induce [Hotels Nevada] to act in reliance” on those representations; Hotels Nevada was unaware of the falsity of the representations and acted in reliance on them; and, as a proximate result of L.A. Pacific’s conduct, Hotels Nevada was forced and coerced to accept critical and essential terms of a transaction to which it never agreed, resulting in the wrongful and unlawful deprivation of the use and benefit of its property. Hotels Nevada further alleged that L.A. Pacific’s “conduct was despicable, malicious, oppressive, fraudulent, and engaged in with a willful and conscious disregard of [Hotels Nevada’s] rights,” entitling Hotels Nevada to an award of punitive damages.
The second cause of action for cancellation of written instruments based on illegality similarly alleged that L.A. Pacific had fraudulently altered documents and sought to avoid Hotels Nevada’s transferring property under terms and conditions to which it never agreed. Hotels Nevada alleged that the conduct supporting the second cause of action likewise supported an award of punitive damages.
Finally, the third cause of alleged that L.A. Pacific and the Doe defendants “knowingly and willfully conspired and agreed among themselves to the Fraudulent Scheme and to manufacture and materially alter the Agreement and Memorandum as herein alleged and to, thereby, wrongfully and unjustly deprive [Hotels Nevada] of [its] property, business and rights therein.” This conduct, too, allegedly supported an award of punitive damages.
Certainly, Hotels Nevada’s punitive damages allegations, alone, demonstrated that the Complaint sounded in tort and not in contract. It is well established that “punitive or exemplary damages, which are designed to punish and deter statutorily defined types of wrongful conduct, are available only in actions ‘for breach of an obligation not arising from contract.’ (Civ. Code, § 3294, subd. (a), italics added.) In the absence of an independent tort, punitive damages may not be awarded for breach of contract ‘even where the defendant’s conduct in breaching the contract was wilful, fraudulent, or malicious.’ [Citations.]” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 516.) Allegations that L.A. Pacific’s wrongful conduct supported an award of punitive damages demonstrated that Hotels Nevada sought to establish breach of an obligation not arising from the Agreement itself.
But even setting aside the punitive damages aspect of Hotels Nevada’s claims, the conduct allegedly supporting those claims did not constitute a breach of contract. Rather, Hotels Nevada alleged that L.A. Pacific engaged in a “Fraudulent Scheme” designed to deprive Hotels Nevada of its property “by virtue of intentional false and fraudulent misrepresentations, agreements and statements, fraudulently altered documents, forgeries, and other deceitful and abhorrent conduct to deceive” Hotels Nevada. That the fraud was allegedly committed in connection with the parties’ Agreement did not transform Hotels Nevada’s fraud claims into contract claims. “It... is well settled that ‘... an action for fraud seeking damages sounds in tort, and is not “on a contract” for purposes of an attorney fee award, even though the underlying transaction in which the fraud occurred involved a contract containing an attorney fee clause.’ [Citations.]” (Loube v. Loube (1998) 64 Cal.App.4th 421, 430; Stout v. Turney (1978) 22 Cal.3d 718, 730 [“A tort action for fraud arising out of a contract is not, however, an action ‘on a contract’ within the meaning of [Civil Code] section [1717]”]; see also McKenzie v. Kaiser-Aetna (1976) 55 Cal.App.3d 84, 89 [“an action for negligent misrepresentation is not an action to enforce the provisions of a contract” under Civil Code section 1717].) As recently explained in Casella v. SouthWest Dealer Services, Inc. (2007) 157 Cal.App.4th 1127, 1162: “Section 1717, subdivision (a) of the Civil Code ‘makes clear that a tort claim does not “enforce” a contract. That statute expressly refers to, and therefore governs, “attorney’s fees... which are incurred to enforce th[e] contract.” Because section 1717 does not encompass tort claims [citations], it follows that tort claims do not “enforce” a contract.’ [Citation.]” Because Hotels Nevada’s claims sounded in tort, the trial court correctly declined to apply Civil Code section 1717, subdivision (b)(2).
Finally, we reject Hotels Nevada’s argument that the trial court misapplied the law by determining that the presence of a conspiracy claim, alone, caused the Complaint to sound in tort rather than contract. Its argument is based on a comment by the trial court which, when placed in context, demonstrates that the trial court determined the entire Complaint raised tort claims. At the hearing on the motion for attorney fees, the trial court stated: “The complaint here included a claim for a conspiracy to commit fraud and the civil cover sheet indicated that the plaintiff was bringing it forward as a tort action, which is consistent with including a claim for conspiracy to commit fraud. Yes, it has a ‘but for’ factual linkage back to the contract that has kept us all fully employed, litigating the circumstances of its making or alleged making, but the claims presented by [Hotels Nevada] nevertheless also include tort claims.” To the extent the trial court may have determined that the Complaint raised contract claims as well—a sentiment it expressed at the hearing though not in the order granting the attorney fee motion—we conclude the trial court properly exercised its discretion in awarding L.A. Pacific the entirety of its fee request. (Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1582, 1604, 1605 [trial court properly exercised discretion in declining to apportion fees between contract and tort claims where “[a]ll of the causes of action in the pleading relied upon the same factual allegations”].)
DISPOSITION
The order awarding attorney fees to L.A. Pacific is affirmed. L.A. Pacific is entitled to its costs on appeal.
We concur: ASHMANN-GERST, J., CHAVEZ, J.