Opinion
D072627 D072628
05-10-2018
MAJESTIC ASSET MANAGEMENT, LLC, et al., Plaintiffs, Cross-defendants, and Appellants, v. THE COLONY AT CALIFORNIA OAKS HOMEOWNERS ASSOCIATION, Defendant, Cross-complainant, and Respondent, JEN HUANG et al., Cross-defendants and Appellants.
Reid & Hellyer and Michael G. Kerbs for Plaintiffs, Cross-defendants and Appellants. Epsten Grinnell & Howell and Anne L. Rauch, Rian W. Jones, and Trinette S. Sachrison for Defendant, Cross-complainant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. RIC1213939) APPEAL from a judgment of the Superior Court of Riverside County, Sunshine S. Sykes, Judge. Affirmed. Reid & Hellyer and Michael G. Kerbs for Plaintiffs, Cross-defendants and Appellants. Epsten Grinnell & Howell and Anne L. Rauch, Rian W. Jones, and Trinette S. Sachrison for Defendant, Cross-complainant and Respondent.
Plaintiffs and cross-defendants Majestic Asset Management, LLC (Majestic), Wintech Development, Inc. (Wintech), and cross-defendants Jen Huang and Hai Huang (together Plaintiffs) appeal a judgment in favor of defendant and cross-complainant the Colony at California Oaks Homeowners Association (Association). The Colony at California Oaks (the Colony) is a gated senior community of 1,586 homes in Murrieta, which community was developed around an 18-hole golf course (Golf Course Property) in the late 1990's. The Colony is governed by the Association and is subject to an amended and restated declaration of covenants, conditions, and restrictions (CC&R's).
In 2004 and 2005, Ryland Golf Course at the Colony, Inc. (Ryland), then-owner of seven holes of the Golf Course Property, was negotiating the sale of that property to Pacific Golf Enterprises, LLC (Pacific). At the same time, Harry C. Crowell and Miraflores, Inc. (together Crowell), then owners of the other 11 holes of the Golf Course Property, were negotiating the separate, concurrent sale of their property to Pacific. In order to settle pending litigation against it, Ryland entered into a 2005 agreement with the Agul Group (Agul Agreement), which set forth certain maintenance obligations for the Golf Course Property in the event it was sold to Pacific. Shortly thereafter, Ryland and Crowell sold the Golf Course Property to Valley Golf, LLC (Valley), the assignee of Pacific's contractual rights to purchase to that property, pursuant to sale documents that included certain maintenance obligations and use restrictions for the Golf Course Property.
In 2007, Valley sold the Golf Course Property to Majestic, which agreed to assume all of Valley's obligations under the Agul Agreement and the 2005 sale documents, and sold its related business to Wintech. Hai Huang executed the purchase agreements on behalf of Majestic and Wintech. Jen Huang, Majestic's managing member and Hai Huang's wife, acted as its real estate broker.
In their operative third amended complaint, Majestic and Wintech alleged eight causes of action against the Association, including four causes of action for declaratory relief. In its operative first amended cross-complaint, the Association alleged causes of action against Plaintiffs for breach of contract and declaratory relief.
A bench trial was conducted in two phases. The first phase concerned Majestic and Wintech's third amended complaint and the second phase concerned the Association's first amended cross-complaint. At the close of their case-in-chief during the first phase, Majestic and Wintech voluntarily dismissed with prejudice their fifth through eighth causes of action. The court then issued a statement of decision in favor of the Association on the remaining causes of action. Following the second phase, the court issued a statement of decision in the Association's favor on the cross-complaint. The court denied Plaintiffs' subsequent Code of Civil Procedure section 473 motion to set aside its dismissal of the fifth through eighth causes of action of their complaint. The court entered an omnibus judgment and permanent injunction in the Association's favor on the complaint and cross-complaint.
All statutory references are to the Code of Civil Procedure unless otherwise specified.
On appeal, Plaintiffs contend: (1) the trial court erred by denying their section 473 motion to set aside the dismissal of their fifth through eighth causes of action; (2) the court erred by concluding Majestic and Wintech were bound by the Pacific purchase agreement, the Agul settlement agreement, and the 2007 performance deed of trust after June 17, 2015; (3) the court erred by finding Majestic and Wintech are alter egos of Hai Huang and Jen Huang and imposing alter ego liability on those individuals; (4) there is insufficient evidence to support the court's award of $41,024.20 in damages against Plaintiffs for breach of the CC&R's; and (5) the court abused its discretion by not apportioning its award of attorney fees to the Association between work done on the contract and noncontract causes of action. Based on our reasoning below, we affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
The Golf Course Property includes an 18-hole golf course and landscaped areas, called "fingers," that extend into the residential community and create greenbelts between the homes. Buyers of homes located adjacent to the golf course and/or its fingers generally have paid more for their homes.
Pacific PSA
In 2004, Ryland and Pacific entered into a purchase and sale agreement (Pacific PSA) pursuant to which Ryland agreed to sell seven holes of the Golf Course Property to Pacific. At about the same time, Crowell apparently entered into an agreement to concurrently sell the other 11 holes of the Golf Course Property to Pacific. In 2005, Ryland and Pacific entered into a third amendment to the Pacific PSA (Third Amendment), which amendment assigned all of Pacific's right, title, and interest in and to the Pacific PSA to Valley. The Third Amendment also deleted paragraph 22 of the Pacific PSA and replaced it with the following language:
The record on appeal does not include a copy of the Crowell agreement.
" '22. Use Restrictions. Buyer on behalf of itself and its assigns and successors (collectively, the "Purchasing Entity") agrees to preserve, maintain and operate the Golf Course Property solely for the continued use and enjoyment as a golf course of the general public and the members of the [Association] in a condition reasonably similar to well maintained, like-kind, similarly priced golf courses in the same general geographic area as the Golf Course Property and, at a minimum, in accordance with the Capital Improvements Plan (as defined in Section 23(a)) and [Pacific's] Covenant to Improve and Maintain Golf Course Property, including the management obligations, and Maintenance Standards and Budget (as defined in Section 23). The Golf Course Property may only be used as a golf course, subject to the zoning restrictions in effect at the execution of this Agreement. Buyer may improve the Golf Course Property, but only in relation to or for the benefit of its sole purpose as a golf course without consent and, at a minimum, in accordance with the Capital Improvements Plan and Buyer's Covenant to Improve and Maintain Golf Course Property (the foregoing covenants, restrictions and obligations are collectively referred to herein as the "Use Restrictions"). . . . Buyer may not subdivide, grant easements, give consents, or enter into contracts for the sale of the Golf Course Property if any such contract designates the Golf Course Property to be used for a purpose that is inconsistent with the Use Restrictions. . . .' " (Italics added.)It also deleted paragraph 23 of the Pacific PSA and replaced it with the following language in pertinent part:
" '23. Buyer's Covenant to Improve and Maintain Golf Course Property.
" 'a. Buyer's Covenant to Improve Golf Course Property. . . .
" 'b. Buyer's Covenant to Maintain Golf Course Property. Following the Close of Escrow, Buyer covenants and agrees to maintain the Golf Course Property in a professional manner in a condition reasonably similar to well maintained, like-kind, similarly priced golf courses in the same general geographic area as the Golf
Course Property and, at a minimum, subject to the maintenance standards and budget ("Maintenance Standards and Budget") to be prepared by Buyer and submitted to [Ryland] for [Ryland's] review and approval prior to the Contingency Date. . . . Buyer covenants and agrees to manage the Golf Course Property for at least ten (10) years following the Close of Escrow or obtains Seller's prior consent to any change in management. All of Buyer's obligations set forth in this Section 23(b) shall survive the Close of Escrow and shall not be merged with the Deed, shall be a material covenant and secured obligation contained in the Deed of Trust and shall be recorded as a separate document in the Official Records of the County Recorder.' " (Italics added.)
Agul Agreement
At or about the time of the Pacific PSA and amendments thereto, Ryland entered into a settlement agreement with the Agul Group (Agul Agreement), resolving an action filed by the Agul Group against Ryland and other defendants. The Agul Agreement provided that:
"4. Any purchase agreement with Pacific shall be subject to the following provisions and recitals:
"A. Pacific shall be responsible for maintaining the golf course in at least as good condition as other well maintained, like-kind, similarly priced golf courses in the same general geographic area as the [Golf Course Property]. . . .
"B. Pacific shall maintain and water the 'fingers' portion of the Golf Course [Property] in a manner acceptable to the [Association].
"C. Pacific shall operate the Golf Course [P]roperty (including the property acquired from Ryland and from Harry Crowell and his company) as an operating 18-hole golf course from the date Pacific acquires the Golf Course [P]roperty and for a period not less than ten (10) years thereafter. A default or failure by Pacific to satisfy this covenant will provide Ryland with a claim for damages and other equitable remedies and relief available under law, including a right to foreclose on Ryland's deed of trust recorded against the Golf Course [P]roperty. . . . [¶] . . . [¶]
"E. In the event that [Valley] takes actual fee title to the golf course at close of escrow, [Pacific] shall guaranty all the provisions of this paragraph 4 as part of the acquisition." (Italics added.)
Purchase by Valley
On June 16, 2005, on the close of escrow of the Pacific PSA, a grant deed was recorded with the Riverside County Recorder, pursuant to which Ryland conveyed its seven holes of the Golf Course Property to Valley, subject to "[a]ll liens, encumbrances, easements, covenants, conditions and restrictions, whether on or off record" and the following provision:
"E. [Valley] on behalf of itself and its assigns and successors (collectively, the 'Purchasing Entity') agrees to preserve, maintain and operate the Golf Course Property solely as a first-class golf course in accordance with the use restrictions and maintenance requirements of paragraphs 3.12 and 3.14 set forth in the Deed of Trust of even date recorded against the Golf Course Property for the continued use and enjoyment of the general public and the members of the [Association] pursuant to those certain Maintenance Standards and Budget attached hereto as Exhibit B. The Golf Course Property may only be used as a golf course, subject to the zoning restrictions in effect at the execution of this Agreement [sic]. The Purchasing Entity may improve the Golf Course Property, but only in relation to or for the benefit of its sole purpose as a golf course without consent. . . . Purchasing Entity may not subdivide, grant easements, give consents, or enter into contracts for the sale of the Golf Course Property if any such contract designates the Golf Course Property to be used for a purpose other than a golf course or a use that is inconsistent with the foregoing Use Restrictions. The covenants and obligations of Purchasing Entity set forth in this paragraph shall survive the Close of Escrow, shall not be merged with the Deed, shall be a material covenant continued in the Deed of Trust and shall be recorded as a separate document in the Official Records of the County Recorder." (Italics added.)On the same date, a separate grant deed was recorded pursuant to which Crowell conveyed his 11 holes of the Golf Course Property to Valley.
Also on June 16, 2005, a deed of trust, assignment of rents, security agreement and fixture filing (2005 Deed of Trust) was recorded with the Riverside County Recorder, pursuant to which Valley granted in trust for Ryland's benefit its interest in the Golf Course Property as security for those secured obligations set forth in section 2, including the following obligation: "(v) [c]omplete observance, performance and discharge of each and every obligation, covenant and agreement of [Pacific] contained in paragraphs 22 and 23 of [the Pacific PSA] between [Pacific] and [Ryland]." Section 3.12 of the 2005 Deed of Trust provided:
"3.12 Use Restriction. [Valley] agrees to preserve, maintain and operate the [Golf Course] Property solely for the continued use and enjoyment as a golf course of the members of the [Association] in a condition reasonably similar to well maintained, like-kind similarly priced golf courses in the same general geographic area as the [Golf Course] Property and, at a minimum, in accordance with the Capital Improvements Plan (attached hereto as Exhibit B) and the Maintenance Standards and Budget (attached hereto as Exhibit C). The [Golf Course] Property may only be used as a golf course, subject to the zoning restrictions in effect at the execution of the Deed of Trust. [Valley] may improve the [Golf Course] Property, but only in relation to or for the benefit of its sole purpose as a golf course without consent and, at a minimum, in accordance with the Capital Improvements Plan and the Buyer's Covenant to Improve and Maintain Golf Course Property (the foregoing covenants, restrictions and obligations are referred to herein as the 'Use Restrictions'). . . . [Valley] may not subdivide, grant easements, give consents, or enter into contracts for the sole of the [Golf Course] Property if any such contract designates the [Golf Course] Property to be used for a purpose that is inconsistent with the Use Restrictions." (Italics added.)Section 3.14 of the 2005 Deed of Trust provided:
"3.14 Maintenance Pursuant to Maintenance Standards and Budget. [Valley] covenants and agrees to maintain the [Golf Course] Property in a professional manner and, at a minimum, subject to the Maintenance Standards and Budget attached hereto as Exhibit C. Without limiting the immediately preceding sentence, [Valley] shall be responsible for maintaining the [Golf Course] Property in at least as good condition as other well maintained, like-kind, similarly priced golf courses in the same general geographic area as the [Golf Course] Property. . . . [Valley] covenants and agrees to manage the [Golf Course] Property for at least ten (10) years following the date this Deed of Trust is recorded." (Italics added.)
Purchase by Majestic and Wintech
In 2007, Valley entered into a commercial property purchase agreement and joint escrow instructions with Majestic (Majestic PSA) pursuant to which Valley agreed to sell the Golf Course Property to Majestic. Concurrently therewith, Valley also entered into a business purchase agreement and joint escrow instructions with Majestic (Business PSA) pursuant to which Valley agreed to sell the related personal property and business of the Golf Course Property to Majestic. Paragraph 36(M) of the Majestic PSA provided:
"[Majestic] shall assume all of [Valley's] obligations under the following agreements (collectively the 'Settlement Agreements'): that Purchase and Sale Agreement dated August 13, 2004[,] between [Valley] and [Ryland] and all [amendments] and riders thereto; that Settlement Agreement dated June 13, 2005[,] between Agul Group and [Ryland]; and that Agreement Regarding Cancellation of Promissory Note, dated May 30, 2007."In the joint first amendment to the Majestic PSA and Business PSA, Wintech was substituted in place of Majestic as the buyer in the Business PSA, and Majestic agreed to grant to Valley and Pacific a security interest in the Golf Course Property pursuant to a performance deed of trust to secure Majestic's performance under the Agul Agreement.
Paragraph 40(4) of the Business PSA contained similar language and incorporated therein paragraph 36(M) of the Majestic PSA.
On October 22, 2007, a grant deed was recorded with the Riverside County Recorder conveying Valley's interest in the Golf Course Property to Majestic. On the same date, a performance deed of trust with assignment of rents, security agreement and fixture filing (2007 Deed of Trust) was also recorded with the Riverside County Recorder, pursuant to which Majestic granted in trust for the benefit of Valley and Pacific its interest in the Golf Course Property as security for those secured obligations set forth in section 5, including the following obligations: "5.1 . . . [t]he performance by [Majestic] of all obligations of [Majestic], as assignee of [Valley and Pacific] who in turn was assignee of [Ryland] under [the Agul Agreement], which [Agul Agreement] and performance obligations are additionally reflected in the [Majestic PSA], as amended, between [Majestic] and [Valley]. [Majestic] hereby assumes all of [Valley's and Pacific's] rights and obligations under the [Agul Agreement]." Paragraph 6 of the 2007 Deed of Trust provided: "To protect the security of this Deed of Trust, [Majestic] agrees as follows: [¶] 6.1 . . . [Majestic] shall perform all Secured Obligations in accordance with the applicable terms of the [Agul Agreement]." In 2012, Valley and Pacific transferred and assigned all of their beneficial interest in the 2007 Deed of Trust to the Association, which assignment was recorded with the Riverside County Recorder.
After Majestic purchased the Golf Course Property in 2007, the "fingers" and slopes of the golf course grounds that had previously been grassy and green deteriorated and the turf and many trees died. Despite the Association's objections, Plaintiffs replaced the lawns of the fingers with farm rows of spiny dragon fruit, which subsequently died but were left on their vines for years. Also, on one of the fingers, Plaintiffs planted grapevines, which subsequently withered. Also, a lake on the Golf Course Property dried up and the landscaping between the lake and the entrance to the golf course deteriorated. Plaintiffs also began to host weddings, banquets, and other special events on the Golf Course Property without the Association's consent or approval. Beginning in 2010, Plaintiffs stopped paying the invoices submitted by the Association for their shared maintenance costs under the CC&R's.
Complaint
In or about early 2013, Majestic and Wintech filed a complaint against the Association. In their operative third amended complaint, they alleged the following causes of action against the Association and other defendants: (1) negligent interference with prospective economic advantage; (2) negligent misrepresentation; (3) intentional misrepresentation; (4) promissory estoppel; (5) declaratory relief regarding the 2007 Deed of Trust; (6) declaratory relief regarding the Agul Agreement; (7) declaratory relief regarding the Pacific PSA; and (8) quiet title regarding the Golf Course Property and 2007 Deed of Trust.
The clerk's transcript does not contain a copy of the original complaint filed in the instant action. However, because the Association's original cross-complaint was filed on or about June 5, 2013, we presume Majestic and Wintech filed their complaint in the months preceding that date.
In June 2013, the Association filed a cross-complaint against Majestic, Wintech, Jen Huang, and Hai Huang. In its operative first amended cross-complaint, the Association alleged the following causes of action against Majestic and Wintech: (1) breach of contract and/or covenant regarding the Agul Agreement, Pacific PSA, 2005 grant deed, Majestic PSA, Business PSA, and 2007 Deed of Trust; (2) breach of implied covenant of good faith and fair dealing regarding the same documents; (3) declaratory relief regarding the same documents; (4) breach of restrictions in the 2005 grant deed; (5) declaratory relief regarding the 2005 grant deed; (6) breach of contract regarding the golf course restaurant agreement; (7) breach of the CC&R's; (8) open book account; (9) unjust enrichment; (10) quiet title; and (11) judicial foreclosure of 2007 Deed of Trust. It further alleged that Majestic and Wintech were alter egos of Jen Huang and Hai Huang.
Trial
In July 2015, a bifurcated bench trial was held with its first phase on the third amended complaint and its second phase on the first amended cross-complaint. At the close of Plaintiffs' case-in-chief on their third amended complaint, the Association filed a motion for judgment under section 631.8 on the ground Plaintiffs did not present sufficient evidence to support their causes of action. At the hearing on the motion, Plaintiffs requested the voluntary dismissal of their fifth through eighth causes of action and the court accepted their dismissal of those causes of action with prejudice. The court then granted the Association's motion for judgment on Plaintiffs' remaining causes of action and issued a statement of decision on the third amended complaint.
After conducting the second phase of the trial, the trial court issued a statement of decision on the cross-complaint in favor of the Association, finding that, based on Plaintiffs' voluntary dismissal of their fifth through eighth causes of action, the doctrine of res judicata applied to bar them from arguing the 2007 Deed of Trust, Agul Agreement, and Pacific PSA were not binding on, or enforceable against, them. The court further found that Majestic and Wintech are alter egos of Jen Huang and Hai Huang.
Plaintiffs filed a section 473, subdivision (b), motion to set aside their voluntary dismissal of the fifth through eighth causes of action of the their third amended complaint. The trial court denied their motion. The court then entered an omnibus judgment and permanent injunction awarding the Association $41,024.20 in damages and permanent injunctive relief against Plaintiffs regarding the maintenance and use of the Golf Course Property.
The Association filed a motion for an award of $1,201,766 in attorney fees and costs as the prevailing party. The trial court awarded the Association $507,000 in reasonable attorney fees and $33,699 in costs as the prevailing party. On March 8, 2016, the court entered an amended omnibus judgment and permanent injunction reflecting its award of attorney fees and costs. Plaintiffs timely filed a notice of appeal challenging the judgment.
DISCUSSION
I
Denial of Section 473 Motion to Set Aside Voluntary Dismissal
Plaintiffs contend the trial court erred by denying their section 473, subdivision (b), motion to set aside their voluntary dismissal of the fifth through eighth causes of action of their third amended complaint. In particular, they assert the court was required to grant their motion pursuant to section 473, subdivision (b)'s provision for mandatory relief because: (1) their counsel admitted inexcusable mistake or neglect; and (2) the record does not show they consented to their counsel's dismissal of those causes of action.
A
Plaintiffs' Section 473 Motion
The fifth through eighth causes of action of Plaintiffs' third amended complaint sought declaratory relief regarding the 2007 Deed of Trust, declaratory relief regarding the Agul Agreement, declaratory relief regarding the Pacific PSA, and quiet title regarding the Golf Course Property and 2007 Deed of Trust. At the close of Plaintiffs' case-in-chief in the first phase of the trial, the Association filed a section 631.8 motion for judgment. In particular, the Association argued that Plaintiffs had not presented any evidence in support of their fifth through eighth causes of action. Plaintiffs opposed the motion, arguing that because their fifth through eighth causes of action must be decided during the second phase of the trial, the court should defer ruling on the section 631.8 motion for judgment as to those causes of action until after the second phase of the trial or, alternatively, dismiss those causes of action to ensure consistency of the court's rulings regarding the relevant documents.
On July 27, 2015, the court held a hearing on the Association's section 631.8 motion for judgment. During argument by Rian Jones, the Association's counsel, Jones represented that he had received from Plaintiffs' counsel a request for dismissal of the seventh and eighth causes of action of their third amended complaint and had received Plaintiffs' supplemental opposition to the motion asserting the court should defer its determination of the fifth through eighth causes of action. Jones sought clarification.
Responding to the court's inquiry, Joel Tamraz, Plaintiffs' counsel, stated that Plaintiffs did not intend to dismiss those causes of action and instead asked the court to defer its decision until after the second phase of the trial on the Association's first amended cross-complaint. Jones interjected, stating he had received a copy of a request for dismissal signed by Tamraz dated July 25, which dismissal Jones assumed had not yet been filed with, or entered by, the court. Tamraz confirmed that it had not been filed. Jones then addressed the lack of evidence to support Plaintiffs' fifth through eighth causes of action. In response, Tamraz again asked the court to defer ruling on those causes of action until after the second phase of the trial, but stated that if the court were to rule on those causes of action, Plaintiffs "would want to dismiss those causes of action."
The trial court stated it had sufficient evidence to rule on the fifth through eighth causes of action. Although not explicit, it appears Tamraz consulted with Robert Gentino, his co-counsel, and then stated: "[A]pparently we want to dismiss the [fifth through eighth] causes of action." When the court sought clarification from Tamraz that Plaintiffs were asking it to dismiss the fifth through eighth causes of action, Tamraz replied: "Correct." Thereafter, the court stated it "will dismiss causes of action five through eight." Jones inquired whether that dismissal would be with prejudice. The court replied in the affirmative, explaining: "The request is being made by [Plaintiffs]. It's at a time where the Court could make a judgment finding on the merits, so the Court will dismiss those with prejudice." Tamraz concurred, stating: "Very well." The minute order reflects the fifth through eighth causes of action were dismissed with prejudice.
On October 22, 2015, after the second phase of the trial, the court issued a statement of decision on the Association's first amended cross-complaint. The court found that based on Plaintiffs' dismissal with prejudice of the fifth through eighth causes of action of their third amended complaint, the doctrine of res judicata applied to bar Plaintiffs from arguing the 2007 Deed of Trust, Agul Agreement, and Pacific PSA were not binding, valid, or enforceable against them or that the 2007 Deed of Trust was void or not assignable or transferable to the Association. The court subsequently entered judgment for the Association on its first amended cross-complaint.
On November 5, 2015, more than three months after the court granted Plaintiffs' request for voluntary dismissal, Plaintiffs filed a section 473 motion to set aside the judgment dismissing the fifth through eighth causes of action of their third amended complaint, arguing that dismissal was entered as a result of surprise, inadvertence, or excusable neglect, or as a result of the inexcusable neglect, of Gentino, Tamraz's co-counsel. The motion was supported by declarations of Tamraz and Hai Huang. In his declaration, Tamraz stated in part:
Plaintiffs did not submit a declaration of Gentino.
"3. On or about July 1, 2015, I was contacted . . . and was requested to assist Robert Gentino with the trial [of the instant case].
"4. . . . I responded that I . . . would attempt to assist Mr. Robert Gentino, the lead attorney, since Mr. Gentino was obviously unprepared to try this case. . . . [¶] . . . . [¶]
"6. . . . At the time I appeared in Court on July 2, 2015, I was not totally familiar with the facts but had a rudimentary understanding of the issues in the case. Mr. Gentino had a far greater understanding of the issues in the case and had been involved in the case for a period of time . . . in excess of thirty (30) days prior to our appearance in Court. . . . I was only brought into the action because of the fact that Mr. Gentino did not desire to try the Complaint in the action but only wished to handle and present the defense of the Cross-Complaint.
"7. After several days of testimony, [I] completed the Trial of the Complaint . . . and presented evidence on the 1st, 2nd, 3rd, and 4th Causes of Action. However, with regard to the 5th, 6th, 7th, and 8th Causes of Action, at Mr. Gentino's direction, no evidence was presented. This was done at the demand of and upon the instruction of Mr. Robert Gentino as lead trial counsel in this case with the purported authority of the clients although such authority was not obtained in my presence.
"8. As directed by Mr. Gentino I filed a Dismissal of the 5th, 6th, 7th and 8th Causes of Action, although I did so with gritted teeth and under protest. Such Dismissals were filed without my input, against my advice, and without any preparation in any manner, whatsoever and against my advice and contrary to my recommendation to Mr. Gentino.
"9. I do not know whether Mr. Gentino discussed the Dismissal of the 5th, 6th, 7th and 8th Causes of Action with Hai Huang, the Chief [E]xecutive Officer of both Majestic [and] Wintech, or [their] Officers, but assumed that Mr. Gentino had done so, and that he was taking this action with Mr. Huang's knowledge, consent, and at his direction. I now have learned that such Dismissal was entered without the direction or knowledge of the clients, and, in fact, done by Mr. Gentino, on his own, pursuant to his own strategies, whatever they were. [¶] . . . [¶]
"11. . . . Mr. Gentino assured me that he took full responsibility for filing of said Dismissals and that I need not worry about the [e]ffect it would have upon the defense of the Cross-Complaint. Mr. Gentino stated he had done the research necessary to ascertain that the defense of the Cross-Complaint was enhanced by the Dismissal of those Causes of Action and that the defense of the Cross-Complaint would not in any way be affected detrimentally.
"12. I was not present during the Trial of the Cross-Complaint since Mr. Gentino and I had a falling out with regard to the filing of the Dismissal of 5th, 6th, 7th and 8th Causes of Action, and I no longer wanted to be directed by him nor participate in the defense of the Cross-Complaint with Mr. Gentino and he did not want me to even be in the courthouse when he presented that defense. I had no confidence in his competence, whatsoever, and believed that his action, which were taken as Chief Counsel in the case, were done after much legal and factual research and much discussion with the clients.
"13. I now find that the clients state that they were not aware of the Proposed Dismissal of the 5th, 6th, 7th, and 8th Causes of Action but believed that the Complaint would be tried to conclusion on all Causes of Action, as did I. Mr. Huang was shocked at the dismissal of those Causes of Action.
"14. Upon learning of the effect of the Dismissals upon the Cross-Action and the defense of the Cross-Complaint, Mr. Hai Huang as the Chief Officer of both Majestic and Wintech, was shocked, dismayed, and outraged. He was not consulted, according to said information derived from him with regard to those dismissals, and Mr. Gentino, as with many things that we did, took those actions pursuant to his own determination, coming to the conclusion that the dismissals would assist him with the defense of the Cross-Complaint."
In his declaration, Hai Huang stated:
"2. . . . I was present when Joel F. Tamraz, Esq., submitted a Dismissal with Prejudice to Causes of Action Numbers 5, 6, 7 and 8 of the Complaint in the above-entitled matter. No one had consulted with me with regard to filing this Dismissal prior to its being effected. I asked Mr. Robert Gentino about this legal tactic and Mr. Gentino, stated to me that it was the 'correct thing to do' and 'that the dismissals would assist in defending the Cross-Complaint.' I trusted Mr. Gentino, hired him as our Chief Trial Counsel and had him direct Mr. Tamraz with regard the trial of the Complaint and any other action that Mr. Tamraz took in the case.
"3. Mr. Gentino did not communicate with, or ask for my permission to file a Dismissal with Prejudice of the above-entitled
Causes of Action. Mr. Gentino, himself, took the responsibility for filing the dismissal as a legal strategy. Mr. Gentino stated that with the Dismissal of Counts 5, 6, 7, and 8 of the Complaint it would make it easier to defend the Cross-Complaint, and that the probability of success on the defense of the Cross-Complaint increased with the Dismissal of the 5th through 8th Causes of Action in the Complaint.Accordingly, both Tamraz and Hai Huang requested that the court set aside the dismissal of the fifth through eighth causes of action of Plaintiffs' third amended complaint on the grounds of inadvertence, surprise, or excusable neglect or, alternatively, the inexcusable neglect of Gentino.
"4. Mr. Gentino did not inform us of any of these facts prior to the Dismissal of the 5th, 6th, 7th, and 8th Causes of Action of the Complaint, and, in fact, we relied upon him, trusted in him, and believed he would do the right thing with regard to the handling of our case."
The Association opposed Plaintiffs' section 473 motion, arguing that the negligence of their counsel did not constitute excusable neglect for which relief could be granted. In support of its opposition, the Association submitted the declaration of Jones, its counsel, who stated in part:
"4. On July 26, 2015, Mr. Tamraz handed me a copy of a signed request for dismissal to dismiss, with prejudice, the seventh and eighth causes of action of the third amended complaint and told me that he would be filing this with the Court. This request for dismissal is dated July 25, 2015. A true and correct copy of this request for dismissal is attached hereto as Exhibit C."The Association noted that Plaintiffs' written request for dismissal was not filed with the court, but Tamraz instead orally dismissed the fifth through eighth causes of action of the third amended complaint during the hearing of their motion on July 27, 2015.
Exhibit C, as attached to Jones's declaration, is a request for dismissal form, dated July 25, 2015, and apparently signed by Tamraz, that, if filed, would have dismissed Plaintiffs' seventh and eighth causes of action of the third amended complaint.
In reply, Plaintiffs argued that section 473 relief was mandatory because of inexcusable neglect by their counsel and/or the absence of their consent to their counsel's dismissal of the fifth through eighth causes of action of the third amended complaint.
At the hearing on Plaintiffs' section 473 motion, Tamraz argued that the request for dismissal of the fifth through eighth causes of action of the third amended complaint was "done at the instruction of Mr. Gentino who is the lead counsel on the case [and] unbeknownst to me, Mr. Gentino didn't inform the clients of the fact he was doing this. I wasn't aware of anything that was going to happen. I know Mr. Gentino said he was going to handle these issues in response to the cross-complaint." Tamraz argued that Gentino committed inexcusable neglect by misinterpreting the law.
The trial court noted that it was present during the trial and that after consulting with each other, both Tamraz and Gentino requested the dismissal of the fifth through eighth causes of action. The court also noted that it was Tamraz, and not Gentino, who tried the third amended complaint. The court further explained that at the time of the request for dismissal, it appeared to the court that it was "a strategy that the parties were taking for whatever reason. It then resulted in the Court finding res judicata as to the cross-complaint, but I don't see that as any type of mistake, inadvertence, surprise or neglect. That was a strategic decision counsel chose to take, and it was taken. That's not a basis . . . for the Court to grant relief under [section] 473[, subdivision] (b)."
Regarding Plaintiffs' assertion that they did not consent to, or know about, the dismissal of those causes of action, the court stated: "[T]he declaration that you provided is very conclusory in regards to whether or not the [P]laintiffs had knowledge as well as the declaration provided by the Huangs. First[,] it was acknowledged they were present at trial. They were present sitting right in the back when all of this took place. They said they were not consulted before the dismissals were entered. However, at the same time in the declaration it says that [Hai Huang] spoke to Mr. Gentino who also said that it was necessary to defend against the cross-complaint that the dismissals were entered and that he trusted Mr. Gentino. [¶] It appears that that declaration in and of itself is contradicting itself. Ultimately, it appears, based upon my recollection of the trial, it was, in fact, a strategic decision by counsel and ended up working against them. That's not a basis [on] which the Court can grant relief pursuant to [section] 473[, subdivision] (b)." Accordingly, the court denied Plaintiffs' section 473 motion to set aside the dismissal of the fifth through eighth causes of action.
B
Mandatory Relief
Plaintiffs assert the trial court erred by denying their section 473 motion because they were entitled to mandatory relief based on their counsel's inexcusable neglect. In pertinent part, section 473, subdivision (b), provides: "The court may, upon any terms as may be just, relieve a party or his or her legal representative from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect. . . . Notwithstanding any other requirements of this section, the court shall, whenever an application for relief is made no more than six months after entry of judgment, is in proper form, and is accompanied by an attorney's sworn affidavit attesting to his or her mistake, inadvertence, surprise, or neglect, vacate any (1) resulting default entered by the clerk against his or her client, and which will result in entry of a default judgment, or (2) resulting default judgment or dismissal entered against his or her client, unless the court finds that the default or dismissal was not in fact caused by the attorney's mistake, inadvertence, surprise, or neglect." (Italics added.) Section 473, subdivision (b), provides for two types of relief—discretionary and mandatory relief. (Even Zohar Construction & Remodeling, Inc. v. Bellaire Townhouses, LLC (2015) 61 Cal.4th 830, 838-839; Gee v. Greyhound Lines, Inc. (2016) 6 Cal.App.5th 477, 484.) Under section 473, subdivision (b)'s discretionary relief provision, a court has discretion to grant relief on a showing of "mistake, inadvertence, surprise, or excusable neglect." (§ 473, subd. (b).) Under its mandatory provision, a court must vacate a default judgment or dismissal that an attorney's affidavit or declaration states is caused by his or her "mistake, inadvertence, surprise or neglect." (§ 473, subd. (b).)
"The range of attorney conduct for which relief can be granted in the mandatory provision is broader than that in the discretionary provision, and includes inexcusable neglect. But the range of adverse litigation results from which relief can be granted is narrower. Mandatory relief only extends to vacating a default which will result in the entry of a default judgment, a default judgment, or an entered dismissal." (Leader v. Health Industries of America, Inc. (2001) 89 Cal.App.4th 603, 616 (Leader).) If the requirements for mandatory relief are met, relief must be granted regardless of whether the attorney's neglect is excusable. (Lorenz v. Commercial Acceptance Ins. Co. (1995) 40 Cal.App.4th 981, 989.)
Section 473, subdivision (b), was originally enacted in 1872 and then provided for only discretionary relief. (Zamora v. Clayborn Contracting Group, Inc. (2002) 28 Cal.4th 249, 254 (Zamora).) In 1988, section 478, subdivision (b)'s mandatory relief provision was added and originally applied only to defaults. (Huens v. Tatum (1997) 52 Cal.App.4th 259, 263 (Huens).) In 1992, the mandatory relief provision was amended to extend to dismissals as well as defaults. (Ibid.) By its 1992 amendment, the Legislature intended to allow mandatory relief for only those dismissals that result from an attorney's failure to oppose a dismissal motion, which dismissals are procedurally equivalent to a default, and not for other types of dismissals, such as voluntary dismissals. (Leader, supra, 89 Cal.App.4th at p. 620, italics added.)
As one court explained: "The purpose of the [mandatory relief provision] was to alleviate the hardship on parties who lose their day in court due solely to an inexcusable failure to act on the part of their attorneys. There is no evidence the amendment [to section 473, subdivision (b)] was intended to be a catch-all remedy for every case of poor judgment on the part of counsel which results in dismissal." (Huens, supra, 52 Cal.App.4th at p. 264.) "Thus, the Legislature created a narrow exception to the discretionary relief provision for default judgments and dismissals." (Zamora, supra, 28 Cal.4th at p. 257.) "[T]he mandatory [relief] provision is inapplicable to voluntary dismissals" and "applies only to those situations in which the mistake causes a failure to oppose a dismissal motion, such as failing to appear for the hearing on the [dismissal] motion." (Gotschall v. Daley (2002) 96 Cal.App.4th 479, 483-484 (Gotschall), italics added.)
The applicability of the mandatory relief provision of section 473, subdivision (b), is a question of law subject to de novo review. (Huh v. Wang (2007) 158 Cal.App.4th 1406, 1418; Leader, supra, 89 Cal.App.4th at p. 612.) However, we review a dismissal order for substantial evidence to the extent the trial court's factual determinations affect a party's entitlement to mandatory relief. (Huh, at p. 1418; Benedict v. Danner Press (2001) 87 Cal.App.4th 923, 928.)
Applying the above principles to the record in this case, we conclude Plaintiffs were not entitled to mandatory relief under section 473, subdivision (b). In support of their section 473, subdivision (b), motion, Plaintiffs submitted Tamraz's declaration, in which he expressly asserted Gentino committed inexcusable neglect and implicitly asserted he (Tamraz) also committed inexcusable neglect by relying on Gentino's representations regarding the law and legal strategy. However, in the course of opposing the Association's section 631.8 motion for judgment following the presentation of their case-in-chief on the third amended complaint, Tamraz, on behalf of Plaintiffs, preemptively requested the voluntary dismissal of the fifth through eighth causes of action rather than allow the trial court to decide the merits of the Association's section 631.8 motion on those causes of action. The court granted his request for voluntary dismissal of those causes of action and properly ruled that dismissal would be with prejudice. (§ 581, subd. (b)(1) [action may be dismissed without prejudice only before actual commencement of trial].) Tamraz concurred that the requested voluntary dismissal would be with prejudice.
Section 473, subdivision (b), mandatory relief is not available for voluntary dismissals. (Huens, supra, 52 Cal.App.4th at p. 264; Leader, supra, 89 Cal.App.4th at p. 620; Gotschall, supra, 96 Cal.App.4th at p. 483.) By voluntarily dismissing their fifth through eighth causes of action during the first phase of the trial, Plaintiffs were not deprived of a full and fair opportunity to oppose, and be heard on, a motion to dismiss those causes of action. (Cf. Gotschall, supra, at p. 484 [§ 473, subd. (b), mandatory relief was unavailable because, by opposing motion to dismiss, plaintiff had his day in court and opportunity to present evidence]; Leader, supra, at pp. 607, 621 [same].) Rather, Plaintiffs strategically requested a voluntary dismissal after having a full and fair opportunity to present evidence on those causes of action during their case-in-chief and to oppose the Association's section 631.8 motion for judgment. Accordingly, Plaintiffs were not entitled to mandatory relief under section 473, subdivision (b), based on the purported inexcusable neglect of their counsel in requesting the voluntary dismissal of the fifth through eighth causes of action of their third amended complaint.
C
Discretionary Relief
To the extent Plaintiffs alternatively assert the trial court erred by denying their request for section 473, subdivision (b), discretionary relief, we conclude the court did not abuse its discretion by denying that request based on its finding there was insufficient evidence of any qualifying mistake, inadvertence, surprise, or excusable neglect in their counsel's voluntary dismissal of the fifth through eighth causes of action.
A trial court's decision whether to grant or deny discretionary relief under section 473, subdivision (b), should not be reversed absent a clear showing of abuse of that discretion. (Zamora, supra, 28 Cal.4th at p. 257.) "The scope of the trial court's discretion under section 473 is broad [citation] and its factual findings in the exercise of that discretion are entitled to deference [citations]." (Minick v. City of Petaluma (2016) 3 Cal.App.5th 15, 24.) On appeal, the appellant bears the burden to show the trial court abused its discretion or otherwise erred. (Ibid.)
To warrant discretionary relief, Plaintiffs were required to show the inadvertence, mistake, surprise, or neglect of their counsel was excusable because the negligence of an attorney is imputed to his or her client and may not be offered by the client as a basis for relief. (Zamora, supra, 28 Cal.4th at p. 258.) "In determining whether the attorney's mistake or inadvertence was excusable, 'the court inquires whether "a reasonably prudent person under the same or similar circumstances" might have made the same error.' " (Ibid.) Accordingly, section 473, subdivision (b), discretionary relief is available only for attorney error that is "fairly imputable to the client, i.e., mistakes anyone could have made." "Conduct falling below the professional standard of care, such as failure to timely object or to properly advance an argument, is not therefore excusable. To hold otherwise would be to eliminate the express statutory requirement of excusability and effectively eviscerate the concept of attorney malpractice." (§ 473, subd. (b); see also Garcia v. Hejmadi (1997) 58 Cal.App.4th 674, 682 [no discretionary relief for inadequate summary judgment opposition that fell below professional standard of care]; Pazderka v. Caballeros Dimas Alang, Inc. (1998) 62 Cal.App.4th 658, 672 [no discretionary relief for failure to include attorney fees and costs in offer to compromise which conduct fell below professional standard of care].) Alternatively stated, "[m]istake is not a ground for relief under section 473, subdivision (b), when 'the court finds that the "mistake" is simply the result of professional incompetence, general ignorance of the law, or unjustifiable negligence in discovering the law. . . . [Citation.]" (Hearn v. Howard (2009) 177 Cal.App.4th 1193, 1206.)
Applying the above principles to the record in this case, we conclude Plaintiffs have not carried their burden on appeal to show the trial court abused its discretion under section 473, subdivision (b), by denying their request to set aside their voluntary dismissal. First, they do not show they timely filed their section 473, subdivision (b), motion. Despite Plaintiffs' knowledge on July 27, 2015, that their counsel voluntarily dismissed with prejudice those causes of action, Plaintiffs waited until November 5, 2015, more than three months later, to file their section 473, subdivision (b), motion to set aside the judgment of dismissal. In Younessi v. Woolf (2016) 244 Cal.App.4th 1137 (Younessi), the court held, as a matter of law, that a delay of just seven weeks after plaintiffs knew of their attorney's purported excusable neglect before filing their section 473, subdivision (b), motion for relief, was not diligent or "within a reasonable time" under that statute's requirements in the circumstances of that case. (Younessi, at pp. 1144-1145; see also Mercantile Collection Bureau v. Pinheiro (1948) 84 Cal.App.2d 606, 609 [nine-week delay in filing § 473, subd. (b), motion was untimely].) In this case, Plaintiffs did not provide any explanation for their delay in seeking relief from their voluntary dismissal of the four causes of action. Absent any such explanation, Plaintiffs did not carry their burden below to show they acted diligently and within a reasonable time in filing their section 473, subdivision (b), motion, and we conclude their motion would have been properly denied by the trial court on that ground alone. (§ 473, subd. (b) [motion must "be made within a reasonable time"]; Younessi, at pp. 1144-1145; Mercantile Collection Bureau, at p. 609.)
Second, and more importantly, as shown by the declarations of Tamraz and Hai Huang, the purported inadvertence, mistake, surprise, or neglect of Plaintiffs' counsel was not of the type of excusable action or omission that a reasonably prudent person under the same or similar circumstances may have taken. (Zamora, supra, 28 Cal.4th at p. 258.) Rather, on this record the apparent belief of Plaintiffs' counsel (Tamraz and/or Gentino) that voluntary dismissal of the fifth through eighth causes of action during the first phase of the trial would not be with prejudice or would not have any res judicata or other preclusive effect during the second phase of the trial on the Association's first amended cross-complaint, was below the professional standard of care (i.e., no reasonably prudent attorney would have believed that). Accordingly, the trial court could reasonably conclude the purported mistake or neglect by Plaintiffs' counsel was a strategic decision based on a belief that no reasonably prudent attorney would have had and therefore was not an excusable mistake or neglect that would qualify for discretionary relief under section 473, subdivision (b). (Cf. Younessi, supra, 244 Cal.App.4th at pp. 1146-1147 [counsel's mistaken assumption that he had 30 days, instead of 10 days, to file amended complaint was not excusable neglect]; Wiz Technology, Inc. v. Coopers & Lybrand (2003) 106 Cal.App.4th 1, 17 [counsel's failure to provide sufficient evidence or persuasive arguments in opposing summary judgment motion was not excusable neglect]; Ambrose v. Michelin North America, Inc. (2005) 134 Cal.App.4th 1350, 1354-1355 [counsel's failure to request continuance in opposing summary judgment motion was not excusable neglect]; Martin v. Johnson (1979) 88 Cal.App.3d 595, 606-607 [counsel's error in submitting declarations not within personal knowledge of declarant was not excusable neglect].) Plaintiffs do not show their counsel's actions or omissions were excusable or that the court abused its discretion by denying them discretionary relief under section 473, subdivision (b).
D
Consent or ratification
Plaintiffs assert the trial court abused its discretion by denying their section 473, subdivision (b), motion because the record does not show they consented to their counsel's dismissal of the fifth through eighth causes of action of their third amended complaint.
It appears Plaintiffs' argument for setting aside the voluntary dismissal because of their lack of consent would more appropriately be based on section 473, subdivision (d), which states: "The court may, . . . on motion of either party after notice to the other party, set aside any void judgment or order."
" 'The attorney is authorized by virtue of his employment to bind the client in procedural matters arising during the course of the action but he may not impair the client's substantial rights or the cause of action itself.' " (Romadka v. Hoge (1991) 232 Cal.App.3d 1231, 1235.) "[A] dismissal with prejudice disposes of the client's substantive rights and therefore requires for its validity the authorization of the client." (Id. at p. 1236.) "[D]ismissal of a cause of action by an attorney acting without any authority from his client is an act beyond the scope of his authority which, on proper proof, may be vacated at any time. Obviously, such action requires strong and convincing proof, and the longer the delay in the application for relief the stronger and more convincing the factual proof should be. When nothing more than client misunderstanding or client change-of-heart is involved, the propriety of such relief is doubtful." (Whittier Union High School Dist. v. Superior Court (1977) 66 Cal.App.3d 504, 509 (Whittier).) In Whittier, the attorney entered into an unauthorized settlement, dismissed the action with prejudice, and absconded with the settlement proceeds. (Id. at p. 507-508.) Whittier upheld the trial court's order setting aside the voluntary dismissal, stating: "If [the attorney] wholly lacked power to dismiss the cause and acted beyond the scope of his authority in dismissing his clients' complaint, his action remained voidable for an indeterminate period, and his clients could vacate the unauthorized dismissal within a reasonable time after learning of it, regardless of the time limitations in section 473 . . . ." (Whittier, at pp. 507-508.) In contrast, if a client consents to a voluntary dismissal based on his or her attorney's erroneous advice on the legal effect of the dismissal, the dismissal by the attorney is not unauthorized or void and therefore relief from that dismissal should instead be sought as mistake, inadvertence, surprise, or excusable neglect under section 473, subdivision (b). (Nixon Peabody LLP v. Superior Court (2014) 230 Cal.App.4th 818, 823-824.)
Nevertheless, "unauthorized acts of an attorney may be binding upon his client through ratification." (Blanton v. Womancare, Inc. (1985) 38 Cal.3d 396, 408 (Blanton).) In Blanton, the California Supreme Court concluded the client did not ratify her attorney's unauthorized act because "[i]mmediately upon learning of the [unauthorized] arbitration agreement plaintiff fired her attorney and engaged new counsel to set it aside." (Ibid.) "It is well settled that a client may ratify the unauthorized actions of his attorney." (Navrides v. Zurich Ins. Co. (1971) 5 Cal.3d 698, 703.) "Ratification is approval of a transaction that has already taken place." (Id. at p. 704.) For example, if a client takes "no immediate action to express dissatisfaction" with his or her attorney's purported unauthorized action, that failure to promptly disaffirm that action may constitute ratification. (Norcal Mutual Ins. Co. v. Newton (2000) 84 Cal.App.4th 64, 79.) Alternatively stated, a client's failure to object to the acts of his or her attorney after knowledge of the acts may be a ratification and, in addition, may be considered a circumstance showing prior authorization of the acts. (Heck v. Heck (1944) 63 Cal.App.2d 470, 474.) Regardless of whether an attorney has his or her client's express authority to perform an act, the attorney's act "is binding on the client if [he or she] ratifies it or accepts the benefits of the attorney's act[]." (Moving Picture etc. Union v. Glasgow Theaters, Inc. (1970) 6 Cal.App.3d 395, 403.) However, "in the absence of consent, ratification or estoppel," an attorney's unauthorized dismissal of a complaint or cross-complaint may be vacated. (Bowden v. Green (1982) 128 Cal.App.3d 65, 73.)
Having reviewed the record, we are satisfied there is substantial evidence to support the trial court's finding that Tamraz did, in fact, have his clients' authorization to voluntarily dismiss with prejudice the fifth through eighth causes of action of their third amended complaint. "We defer to the trial court's determination of credibility and do not reweigh evidence or reassess the credibility of witnesses. [Citation.] If the evidence gives rise to reasonable conflicting inferences, one of which supports the trial court's determination, we will affirm the court's finding on appeal. [Citation.]" (Behm v. Clear View Technologies (2015) 241 Cal.App.4th 1, 15.) We presume the trial court's order denying relief under section 473 is correct until the appellant demonstrates otherwise. (Generale Bank Nederland v. Eyes of the Beholder Ltd. (1998) 61 Cal.App.4th 1384, 1398.)
Here, the trial court reasonably weighed the evidence and assessed the credibility of witnesses in finding that Hai Huang, on behalf of Majestic and Wintech, authorized Tamraz to voluntarily dismiss the four causes of action at the end of the first phase of the trial. Although there did not appear to be any direct evidence showing Hai Huang expressly consented to the dismissal, there is substantial circumstantial evidence to support the court's finding that he consented to the voluntary dismissal. In his declaration in support of Plaintiffs' section 473 motion, Tamraz stated that he voluntarily dismissed the four causes of action "at the demand of and upon the instruction of Mr. Robert Gentino as lead trial counsel in this case with the purported authority of the clients although such authority was not obtained in my presence." Tamraz further stated that he "assumed that Mr. Gentino had [discussed the voluntary dismissal with Hai Huang], and that he was taking this action with Mr. Huang's knowledge, consent, and at his direction." Jones, the Association's counsel, declared that on July 26, 2015, Tamraz handed him a copy of a signed request, dated July 25, 2015, for dismissal with prejudice of the seventh and eighth causes of action of the third amended complaint and stated that he would be filing it with the court. As discussed above, on July 27, 2015, Tamraz orally requested, and the trial court granted, the voluntary dismissal of the four causes of action.
At the hearing on Plaintiffs' section 473 motion, the court noted that the Huangs were present in the courtroom on July 27, 2015, when Tamraz requested the voluntary dismissal of the four causes of action. The court stated: "[The Huangs] said they were not consulted before the dismissals were entered. However, at the same time in the declaration it says that [Hai Huang] spoke to Mr. Gentino who also said that it was necessary to defend against the cross-complaint that the dismissals were entered and that he trusted Mr. Gentino. [¶] It appears that that declaration in and of itself is contradicting itself."
By denying Plaintiffs' section 473 motion, the court implicitly found that Hai Huang, on behalf of Majestic and Wintech, had authorized and consented to Tamraz's voluntary dismissal with prejudice of the fifth through eighth causes of action. The trial court could reasonably infer from the above evidence that Plaintiffs consented to the voluntary dismissal. In particular, the following evidence supports that inference: (1) Hai Huang's presence in the courtroom on July 27, 2015, when Tamraz requested the voluntary dismissal of the four causes of action; (2) Tamraz's signature on a voluntary dismissal form two days earlier (i.e., July 25, 2015), which form was given to Jones on July 26, 2015; (3) Tamraz's discussion with Gentino on July 27, 2015, regarding whether to voluntarily dismiss the causes of action and Tamraz's assumption based on that discussion that the Huangs had consented to voluntary dismissal; and (4) despite their knowledge on July 27, 2015, of the voluntary dismissal with prejudice, Plaintiffs failed to immediately object to, and waited more than three months before taking action to disaffirm, the voluntary dismissal. (Heck v. Heck, supra, 63 Cal.App.2d at p. 474 [client's failure to object after knowledge of act may show prior authorization of act].) The trial court could, and presumably did, conclude Hai Huang's declaration to the contrary was not credible.
Based on the disputed evidence in this case, we conclude there is substantial evidence to support the court's finding that Plaintiffs did, in fact, authorize Tamraz's voluntary dismissal with prejudice of the fifth through eighth causes of action of their third amended complaint. To the extent Plaintiffs argue the evidence supports a contrary finding, they misconstrue and/or misapply the substantial evidence standard of review and do not otherwise carry their burden to persuade us there is insufficient evidence to support the court's finding that Plaintiffs consented to Tamraz's voluntary dismissal with prejudice of the four causes of action.
Assuming arguendo that there is insufficient evidence to support the trial court's finding that Plaintiffs consented to, or authorized, Tamraz's voluntary dismissal with prejudice of the fifth through eighth causes of action of the third amended complaint, we nevertheless conclude there is strong evidence to support an implied finding by the court that Plaintiffs ratified that voluntary dismissal. As discussed above, the Huangs were present in the courtroom when Tamraz voluntarily dismissed with prejudice the fifth through eighth causes of action of Plaintiffs' third amended complaint. Furthermore, even if Tamraz or Gentino did not discuss that dismissal prior to its acceptance by the court, Hai Huang conceded in his declaration, as the trial court noted, that he spoke with Gentino, who told him that the dismissal was necessary to defend against the Association's first amended cross-complaint. The court could reasonably infer that discussion between Gentino and Hai Huang occurred no later than shortly after its acceptance of the voluntary dismissal and presumably later that day. Therefore, Hai Huang was aware of the voluntary dismissal with prejudice on or about July 27, 2015, the date on which the court accepted Plaintiffs' voluntary dismissal of the four causes of action.
During the second phase of the trial, the court ruled that the doctrine of res judicata applied based on Plaintiffs' voluntary dismissal with prejudice of the fifth through eighth causes of action, precluding Plaintiffs from arguing in defense of the cross-complaint that the 2007 Deed of Trust, Agul Agreement, and Pacific PSA were void, invalid, or unenforceable or not binding against them. However, Plaintiffs did not file their section 473, subdivision (b), motion to set aside the judgment dismissing their fifth through eighth causes of action until November 5, 2015, more than three months after the court granted their counsel's request to voluntarily dismiss those causes of action.
Unlike in Blanton, Plaintiffs in this case did not "[i]mmediately upon learning of the [purported unauthorized act of their counsel]" take action to disaffirm or vacate the voluntary dismissal with prejudice of the four causes of action, but instead allowed the second phase of the trial to be conducted and the trial court's decision to be made before moving to set aside the voluntary dismissal. (Cf. Blanton, supra, 38 Cal.3d at p. 408.) If a client takes "no immediate action to express dissatisfaction" with his or her attorney's purported unauthorized action, that failure to promptly disaffirm that action may constitute ratification. (Norcal Mutual Ins. Co. v. Newton, supra, 84 Cal.App.4th at p. 79.) Alternatively stated, a client's failure to object to the purported unauthorized acts of his or her attorney after knowledge of those acts may constitute ratification of those acts. (Heck v. Heck, supra, 63 Cal.App.2d at p. 474.)
Based on the record, the trial court could reasonably conclude that Plaintiffs, by not acting promptly and diligently to disaffirm or vacate Tamraz's voluntary dismissal with prejudice of the four causes of action, in fact ratified that voluntary dismissal with prejudice and are therefore bound by it even though his action may not have been authorized by them prior to or at the time the dismissal was requested and accepted by the court.
Even if Plaintiffs had shown that the trial court erred by denying Plaintiffs' section 473, subdivision (b), motion to set aside the voluntary dismissal with prejudice of the four causes of action, we nevertheless would conclude they did not carry their further burden on appeal to show that error was prejudicial (i.e., that it is reasonably probable they would have obtained a more favorable result had that error not occurred). (Cal. Const., art. VI, § 13; § 475; Cassim v. Allstate Ins. Co. (2004) 33 Cal.4th 780, 800; People v. Watson (1956) 46 Cal.2d 818, 836; Gould v. Corinthian Colleges, Inc. (2011) 192 Cal.App.4th 1176, 1181.) In particular, Plaintiffs do not show that the 2007 Deed of Trust, Agul Agreement, Pacific PSA, and other related documents or agreements were void or invalid and/or unenforceable and not binding on them and therefore they would have obtained a more favorable result.
II
The Trial Court Correctly Found That Plaintiffs Were
Bound by the Provisions of the Sale Documents After June 17, 2015
Plaintiffs contend the trial court erred by finding that they were bound by the maintenance and use provisions of the Pacific PSA, the Agul Agreement, and the 2007 Deed of Trust after June 17, 2015. In support of their contention, Plaintiffs cite a provision from the Agul Agreement that states: "Pacific shall operate the Golf Course [P]roperty . . . as an operating 18[-]hole golf course from the date Pacific acquires the Golf Course [P]roperty and for a period not less than ten (10) years thereafter." However, by so arguing, they ignore many other provisions from related sale documents that contain no such time limitation and show their obligations to maintain the Golf Course Property and operate it solely as a golf course continue as long as they own it.
A
As described above, there were many Golf Course Property sale documents that contained maintenance obligations and use restrictions that applied to the buyers of the Golf Course Property and their successors and assigns. In particular, the Agul Agreement provided that:
"4. Any purchase agreement with Pacific shall be subject to the following provisions and recitals:
"A. Pacific shall be responsible for maintaining the golf course in at least as good condition as other well maintained, like-kind, similarly priced golf courses in the same general geographic area as the [Golf Course Property]. . . .
"B. Pacific shall maintain and water the 'fingers' portion of the Golf Course [Property] in a manner acceptable to the [Association].
"C. Pacific shall operate the Golf Course [P]roperty (including the property acquired from Ryland and from Harry Crowell and his company) as an operating 18[-]hole golf course from the date Pacific acquires the Golf Course [P]roperty and for a period not less than ten (10) years thereafter. . . ." (Italics added.)
The Pacific PSA included various provisions obligating Pacific to maintain the Golf Course Property and restricting its use of that property to use only as a golf course. In particular, section 4(i) stated: "Buyer shall own, operate and maintain the Golf Course Property and shall renovate it and operate it to the standards for like golf courses in the Southern California area, as more fully set forth in Section 23b hereof." Section 4(ii) stated: "Buyer shall maintain and water the 'fingers' portion of the Golf Course Property in a manner reasonably acceptable to the Association." Section 25(n) stated: "[T]his Agreement shall be binding upon and shall inure to the benefit of the permitted successors and assigns of the parties hereto." The Third Amendment provided in pertinent part:
" '22. Use Restrictions. Buyer on behalf of itself and its assigns and successors (collectively, the "Purchasing Entity") agrees to preserve, maintain and operate the Golf Course Property solely for the continued use and enjoyment as a golf course of the general public and the members of the [Association] in a condition reasonably similar to well maintained, like-kind, similarly priced golf courses in the same general geographic area as the Golf Course Property and, at a minimum, in accordance with the Capital Improvements Plan (as defined in Section 23(a)) and [Pacific's] Covenant to Improve and Maintain Golf Course Property, including the management obligations, and Maintenance Standards and Budget (as defined in Section 23). The Golf Course Property may only be used as a golf course, subject to the zoning restrictions in effect at the execution of this Agreement. Buyer may improve the Golf Course Property, but only in relation to or for the benefit of its sole purpose as a golf course without consent and, at a minimum, in accordance with the
Capital Improvements Plan and Buyer's Covenant to Improve and Maintain Golf Course Property (the foregoing covenants, restrictions and obligations are collectively referred to herein as the "Use Restrictions"). . . . [¶] . . . [¶]
" '23. Buyer's Covenant to Improve and Maintain Golf Course Property. . . . [¶] . . . [¶]
'b. Buyer's Covenant to Maintain Golf Course Property. Following the Close of Escrow, Buyer covenants and agrees to maintain the Golf Course Property in a professional manner in a condition reasonably similar to well maintained, like-kind, similarly priced golf courses in the same general geographic area as the Golf Course Property and, at a minimum, subject to the maintenance standards and budget ("Maintenance Standards and Budget") to be prepared by Buyer and submitted to [Ryland] for [Ryland's] review and approval prior to the Contingency Date. . . . Buyer covenants and agrees to manage the Golf Course Property for at least ten (10) years following the Close of Escrow or obtain Seller's prior consent to any change in management. . . .' " (Italics added.)
Under the 2005 grant deed, Ryland conveyed the Golf Course Property to Valley, subject to "[a]ll liens, encumbrances, easements, covenants, conditions and restrictions, whether on or off record" and the following provision:
"E. [Valley] on behalf of itself and its assigns and successors (collectively, the 'Purchasing Entity') agrees to preserve, maintain and operate the Golf Course Property solely as a first-class golf course in accordance with the use restrictions and maintenance requirements of paragraphs 3.12 and 3.14 set forth in the Deed of Trust of even date recorded against the Golf Course Property for the continued use and enjoyment of the general public and the members of the [Association] pursuant to those certain Maintenance Standards and Budget attached hereto as Exhibit B. The Golf Course Property may only be used as a golf course, subject to the zoning restrictions in effect at the execution of this Agreement [sic]. The Purchasing Entity may improve the Golf Course Property, but only in relation to or for the benefit of its sole purpose as a golf course without consent." (Italics added.)
Under the 2005 Deed of Trust, Valley granted in trust for Ryland's benefit its interest in the Golf Course Property as security for those secured obligations set forth in section 2, including the following obligation: "(v) [c]omplete observance, performance and discharge of each and every obligation, covenant and agreement of [Pacific] contained in paragraphs 22 and 23 of [the Pacific PSA] between [Pacific] and [Ryland]." Section 3.12 of the 2005 Deed of Trust provided:
"3.12 Use Restriction. [Valley] agrees to preserve, maintain and operate the [Golf Course] Property solely for the continued use and enjoyment as a golf course of the members of the [Association] in a condition reasonably similar to well maintained, like-kind similarly priced golf courses in the same general geographic area as the [Golf Course] Property and, at a minimum, in accordance with the Capital Improvements Plan (attached hereto as Exhibit B) and the Maintenance Standards and Budget (attached hereto as Exhibit C). The [Golf Course] Property may only be used as a golf course, subject to the zoning restrictions in effect at the execution of the Deed of Trust. [Valley] may improve the [Golf Course] Property, but only in relation to or for the benefit of its sole purpose as a golf course without consent and, at a minimum, in accordance with the Capital Improvements Plan and the Buyer's Covenant to Improve and Maintain Golf Course Property (the foregoing covenants, restrictions and obligations are referred to herein as the 'Use Restrictions')." (Italics added.)Section 3.14 of the 2005 Deed of Trust provided:
"3.14 Maintenance Pursuant to Maintenance Standards and Budget. [Valley] covenants and agrees to maintain the [Golf Course] Property in a professional manner and, at a minimum, subject to the Maintenance Standards and Budget attached hereto as Exhibit C. Without limiting the immediately preceding sentence, [Valley] shall be responsible for maintaining the [Golf Course] Property in at least as good condition as other well maintained, like-kind, similarly priced golf courses in the same general geographic area as the [Golf Course] Property. . . . [Valley] covenants and agrees to manage the [Golf Course] Property for at least ten (10)
years following the date this Deed of Trust is recorded." (Italics added.)
In 2007, Valley sold the Golf Course Property to Majestic. Paragraph 36(M) of the Majestic PSA provided:
"[Majestic] shall assume all of [Valley's] obligations under the following agreements (collectively the 'Settlement Agreements'): that Purchase and Sale Agreement dated August 13, 2004[,] between [Valley] and [Ryland] and all [amendments] and riders thereto; that Settlement Agreement dated June 13, 2005[,] between Agul Group and [Ryland]; and that Agreement Regarding Cancellation of Promissory Note, dated May 30, 2007." (Italics added.)
The 2007 grant deed conveyed Valley's interest in the Golf Course Property to Majestic. Under the 2007 Deed of Trust, Majestic granted in trust for the benefit of Valley and Pacific its interest in the Golf Course Property as security for those secured obligations set forth in section 5, including the following obligations: "5.1 . . . [t]he performance by [Majestic] of all obligations of [Majestic], as assignee of [Valley and Pacific] who in turn was assignee of [Ryland] under [the Agul Agreement], which [Agul Agreement] and performance obligations are additionally reflected in the [Majestic PSA], as amended, between [Majestic] and [Valley]. [Majestic] hereby assumes all of [Valley's and Pacific's] rights and obligations under the [Agul Agreement]." Paragraph 6.1 of the 2007 Deed of Trust provided: "[Majestic] shall perform all Secured Obligations in accordance with the applicable terms of the [Agul Agreement]." In 2012, Valley and Pacific transferred and assigned all of their beneficial interest in the 2007 Deed of Trust to the Association.
B
Assuming arguendo, as Plaintiffs assert, that we review de novo the question of law whether the Golf Course Property maintenance and use provisions of the Agul Agreement, Pacific PSA, and 2005 Deed of Trust, which Majestic and Wintech assumed pursuant to the Majestic PSA and 2007 Deed of Trust, expired on June 17, 2015, we conclude, based on our review of all of the relevant Golf Course Property sale documents, that Plaintiffs' maintenance obligations and the Golf Course Property's use restrictions did not expire on June 17, 2015, but instead continue in effect so long as they own the Golf Course Property. Our review of the Agul Agreement, Pacific PSA, Third Amendment, 2005 grant deed, and 2005 Deed of Trust shows there are a total of eight separate provisions obligating Pacific to maintain the Golf Course Property in a professional manner in a condition reasonably similar to well maintained, like-kind, similarly priced golf courses in the same general geographic area as the Golf Course Property and, at a minimum, subject to the maintenance standards and budget established by Ryland and Pacific. None of those maintenance obligation provisions, which are italicized in the quoted language above and obligate Pacific to maintain the Golf Course Property, includes any expiration date or other time limitation. Likewise, our review of those same documents shows that there are a total of nine separate provisions restricting Pacific's use of the Golf Course Property to use solely as a golf course. None of those use restriction provisions, which are italicized in the quoted language above and restrict Pacific's use of the Golf Course Property to use solely as a golf course, includes any expiration date or other time limitation.
Citing Winet v. Price (1992) 4 Cal.App.4th 1159, Plaintiffs assert that because the parol evidence admitted at trial does not conflict with the express language of the Agul Agreement (and, presumably, the express language of the related sale documents), we must independently review the question of whether their maintenance obligations and the restrictions placed on their use of the Golf Course Property expired on June 17, 2015, which date was 10 years after the closing of the Pacific PSA. Nevertheless, to the extent the parol evidence conflicted on that question, we conclude there is substantial evidence to support the trial court's finding that Plaintiffs' maintenance obligations and the Golf Course Property's use restrictions continue in effect after June 17, 2015. (ASP Properties Group, L.P. v. Fard, Inc. (2005) 133 Cal.App.4th 1257, 1266-1267; Axis Surplus Ins. Co. v. Reinoso (2012) 208 Cal.App.4th 181, 189.)
To the extent Plaintiffs argue there was conflicting evidence on this issue that made the relevant documents ambiguous, we disagree. In particular, Jen Huang's testimony that she thought the Agul Agreement's obligations expired in 10 years was based on a cease and desist letter, dated November 19, 2008, from the Association's attorney. Although that letter states the Agul Agreement provides that the Golf Course Property shall be used as an operating 18-hole golf course for at least 10 years, it expressly notes the 2005 grant deed contains other use restrictions, without specifying those restrictions. As quoted above, the 2005 grant deed provides that Valley "agrees to preserve, maintain and operate the Golf Course Property solely as a first-class golf course in accordance with the use restrictions and maintenance requirements of paragraphs 3.12 and 3.14 set forth in the Deed of Trust of even date" and "[t]he Golf Course Property may only be used as a golf course . . . ."
Similarly, our review of paragraphs 3.12 and 3.14 of the 2005 Deed of Trust, as quoted above, clearly shows the maintenance obligations and use restrictions for the Golf Course Property do not expire after 10 years. Rather, the 2005 Deed of Trust provides only that Valley "agrees to manage the [Golf Course] Property for at least ten (10) years" after it is recorded. (Italics added.) Management of the Golf Course Property by its buyer is not the same as an obligation to maintain that property in a certain manner or a restriction regarding its use as a golf course. Also, the 2008 letter from the Association's counsel is not binding on the Association as an admission, and therefore its misstatement that the Agul Agreement contained a 10-year use restriction cannot alter or affect the intent of the contracting parties to the 2005 sale documents (i.e., Ryland, Pacific, and Valley). Therefore, Jen Huang's testimony, which was based on that letter's contents, provides no evidence on which a court could conclude the 2005 sale documents are ambiguous (i.e., reasonably susceptible of two different meanings). Furthermore, the trial court found that her testimony on that issue "to not be credible."
Similarly, testimony by George Pappas, Pacific's managing member, that the 2007 Deed of Trust was "only good for 10 years" is insufficient to create an ambiguity in that document, which provides, without any time limitation, that Majestic assumes all of the obligations of Pacific and Valley under the Agul Agreement, as "additionally reflected in the [Majestic PSA]." Because our independent review of the Agul Agreement, 2005 Pacific PSA, Third Amendment, 2005 grant deed, 2005 Deed of Trust, Majestic PSA, 2007 grant deed, and 2007 Deed of Trust clearly shows there is no 10-year time limitation on Plaintiffs' maintenance obligations or the use restrictions on the Golf Course Property, Pappas's testimony does not create any ambiguity or otherwise show such a time limitation applied to Majestic's maintenance obligations or use of the Golf Course Property as a golf course.
Also, contrary to Plaintiffs' assertion, the sole provision from the Agul Agreement on which their contention is based does not contain any time limitation on either Pacific's (or, as Pacific's successors and assigns, Majestic and Wintech's) maintenance obligations or the use restrictions for the Golf Course Property. Instead, as the related 2005 sale documents show, that provision simply sets forth an additional obligation requiring Pacific to manage the Golf Course Property for a period of at least 10 years. The Agul Agreement provided that any agreement for the sale of the Golf Course Property to Pacific shall include a provision that "Pacific shall operate the Golf Course [P]roperty . . . as an operating 18[-]hole golf course from the date Pacific acquires the Golf Course [P]roperty and for a period not less than ten (10) years thereafter." (Italics added.) When that provision in the Agul Agreement was incorporated into the actual Pacific sale documents (i.e., the Pacific PSA, Third Amendment, 2005 Grant Deed, and 2005 Deed of Trust), the verb "operate" was changed to "manage."
By so doing, the parties to the 2005 sale documents, in effect, clarified that the 10-year time limitation was intended, and thus they expressly provided for that time limitation, to apply only to Pacific's obligation to manage the Golf Course Property and not to its maintenance obligations or the use restrictions for the Golf Course Property. By omitting any time limitation on Pacific's maintenance obligations and the use restrictions for the Golf Course Property, the 2005 sale documents clearly provided that those maintenance and use provisions continue to apply to Pacific and its successors and assigns (e.g., Majestic and Wintech), as the owner of the Golf Course Property, without any 10-year or other time limitation. Accordingly, the trial court correctly concluded that the maintenance obligations and use restrictions did not expire on or after June 17, 2015.
Furthermore, the trial court correctly concluded Majestic, as Pacific's successor as the owner of the Golf Course Property, was bound by the maintenance obligations and use restrictions set forth in the 2005 sale documents. Paragraph 36(M) of the Majestic PSA, pursuant to which Majestic acquired the Golf Course Property from Valley in 2007, provided:
"[Majestic] shall assume all of [Valley's] obligations under the following agreements (collectively the 'Settlement Agreements'): that Purchase and Sale Agreement dated August 13, 2004[,] between [Valley] and [Ryland] and all [amendments] and riders thereto; that Settlement Agreement dated June 13, 2005[,] between Agul Group and [Ryland]; and that Agreement Regarding Cancellation of Promissory Note, dated May 30, 2007."Under that provision, Majestic expressly assumed all of the maintenance obligations and Golf Course Property use restrictions set forth in the 2005 sale documents.
The 2007 grant deed conveyed Valley's interest in the Golf Course Property to Majestic. Because Valley acquired title to the Golf Course pursuant to the 2005 grant deed, the provisions from that 2005 grant deed necessarily transferred and applied to Majestic, as the grantee of Valley's interest in the Golf Course Property. Therefore, Majestic's interest in the Golf Course Property is subject to the provision in the 2005 grant deed stating:
"E. [Valley] on behalf of itself and its assigns and successors (collectively, the 'Purchasing Entity') agrees to preserve, maintain and operate the Golf Course Property solely as a first-class golf course in accordance with the use restrictions and maintenance requirements of paragraphs 3.12 and 3.14 set forth in the Deed of
Trust of even date recorded against the Golf Course Property . . . . The Golf Course Property may only be used as a golf course, subject to the zoning restrictions in effect at the execution of this Agreement [sic]. The Purchasing Entity may improve the Golf Course Property, but only in relation to or for the benefit of its sole purpose as a golf course without consent. . . . The covenants and obligations of Purchasing Entity set forth in this paragraph shall survive the Close of Escrow, shall not be merged with the Deed, shall be a material covenant continued in the Deed of Trust and shall be recorded as a separate document in the Official Records of the County Recorder." (Italics added.)The maintenance obligations and Golf Course Property use restrictions set forth in the 2005 grant deed and 2005 Deed of Trust necessarily apply to Majestic's interest in the Golf Course Property pursuant to the 2007 grant deed.
Likewise, pursuant to the 2007 Deed of Trust, Majestic granted Valley and Pacific a security interest in the Golf Course Property as security for its maintenance and other obligations under the 2005 sale documents, which obligations it assumed on acquisition of the Golf Course Property in 2007. Under the 2007 Deed of Trust, Majestic also agreed to perform all of those obligations. Therefore, it is indisputable that Majestic and Wintech (as the operator of the golf course business) are subject to the maintenance obligations and Golf Course Property use restrictions set forth in the 2005 sale documents, which, as we concluded above, do not include any expiration date or other time limitation.
We reject Plaintiffs' assertion that "as of June 17, 2015, the restrictive covenant had expired and Majestic and Wintech were free to operate the [Golf Course Property] as something other than a golf course." Likewise, we reject Plaintiffs' assertion that their secured obligations under the 2007 Deed of Trust also expired on June 17, 2015, entitling them to a release of that deed of trust. Rather, the trial court correctly found that the Association, as the assignee of Valley and Pacific's interest in the 2007 Deed of Trust, could enforce the maintenance and other obligations set forth in that deed of trust.
III
Substantial Evidence to Support Trial Court's Finding of Alter Ego Liability
Plaintiffs contend the court erred by finding Majestic and Wintech are alter egos of Hai Huang and Jen Huang and imposing alter ego liability on them. We conclude there is substantial evidence to support the court's application of the alter ego doctrine in the circumstances of this case.
A
The alter ego doctrine is an equitable doctrine, which one court described as follows: "A corporate identity may be disregarded—the 'corporate veil' pierced—where an abuse of the corporate privilege justifies holding the equitable ownership of a corporation liable for the actions of the corporation. [Citation.] Under the alter ego doctrine, then, when the corporate form is used to perpetuate a fraud, circumvent a statute, or accomplish some other wrongful or inequitable purpose, the courts will ignore the corporate entity and deem the corporation's acts to be those of the persons or organizations actually controlling the corporation, in most instances the equitable owners. [Citations.] The alter ego doctrine prevents individuals or other corporations from misusing the corporate laws by the device of a sham corporate entity formed for the purpose of committing fraud or other misdeeds. [Citation.]" (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538 (Sonora Diamond Corp.) The alter ego doctrine has been applied to organizational forms other than corporations (e.g., limited partnerships). (Relentless Air Racing, LLC v. Airborne Turbine Ltd. Partnership (2013) 222 Cal.App.4th 811, 815-816, 818.)
"In California, two conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone." (Sonora Diamond Corp., supra, 83 Cal.App.4th at p. 538.) "Whether a party is liable under an alter ego theory is normally a question of fact. [Citations.] 'The conditions under which the corporate entity may be disregarded, or the corporation be regarded as the alter ego of the stockholders, necessarily vary according to the circumstances in each case inasmuch as the doctrine is essentially an equitable one and for that reason is particularly within the province of the trial court.' " (Zoran Corp. v. Chen (2010) 185 Cal.App.4th 799, 811 (Zoran).)
"The first requirement for disregarding the corporate entity under the alter ego doctrine—whether there is sufficient unity of interest and ownership that the separate personalities of the individual and the corporation no longer exist—encompasses a series of factors. Among the many factors to be considered in applying the doctrine are one individual's ownership of all stock in a corporation; use of the same office or business location; commingling of funds and other assets or the individual and the corporation; an individual holding out that he is personally liable for the debts of the corporation; identical directors and officers; failure to maintain minutes or adequate corporate records; disregard of corporate [or legal] formalities; absence of corporate assets and inadequate capitalization; and the use of the corporation as a mere shell, instrumentality or conduit for the business of an individual. [Citation.] This list of factors is not exhaustive, and these enumerated factors may be considered with others under the particular circumstances of each case. ' "No single factor is determinative, and instead a court must examine all the circumstances to determine whether to apply the doctrine." ' " (Misik v. D'Arco (2011) 197 Cal.App.4th 1065, 1073 (Misik).)
"The second requirement for application of the alter ego doctrine is a finding that the facts are such that adherence to the fiction of the separate existence of the corporation would sanction a fraud or promote injustice. [Citation.] The test for this requirement is that if the acts are treated as those of the corporation alone, it will produce an unjust or inequitable result." (Misik, supra, 197 Cal.App.4th at p. 1073.)
On appeal, in applying the substantial evidence standard of review, we review the whole record in the light most favorable to the judgment to determine whether it discloses substantial evidence—that is, evidence that is reasonable, credible, and of solid value—to support the finding of fact. (People v. Rodriguez (1999) 20 Cal.4th 1, 11.) We do not reweigh the evidence, resolve conflicts in the evidence, or reevaluate the credibility of witnesses. (People v. Cochran (2002) 103 Cal.App.4th 8, 13.)
The substantial evidence standard of review involves two steps. "First, one must resolve all explicit conflicts in the evidence in favor of the respondent and presume in favor of the judgment all reasonable inferences. [Citation.] Second, one must determine whether the evidence thus marshaled is substantial. While it is commonly stated that our 'power' begins and ends with a determination that there is substantial evidence [citation], this does not mean we must blindly seize any evidence in support of the respondent in order to affirm the judgment. . . . [Citation.] '[I]f the word "substantial" [is to mean] anything at all, it clearly implies that such evidence must be of ponderable legal significance. Obviously the word cannot be deemed synonymous with "any" evidence. It must be reasonable . . . , credible, and of solid value . . . .' [Citation.] The ultimate determination is whether a reasonable trier of fact could have found for the respondent based on the whole record." (Kuhn v. Department of General Services (1994) 22 Cal.App.4th 1627, 1632-1633, fns. omitted.)
B
Following the second phase of the trial on the Association's first amended cross-complaint, the trial court issued a statement of decision on that cross-complaint in which it found that Majestic and Wintech are alter egos of Jen Huang and Hai Huang. In that statement of decision, the court stated:
"6. The Court finds as to Majestic and Wintech that those two entities are the alter egos of Jen Huang and Hai Huang. The evidence that was submitted as to those two entities as well as both of the Huangs shows that Wintech and Majestic failed to maintain any financial records at all. The certified public accountant for both Wintech and Majestic, Mr. Tom Hwang, testified that he was only provided incomplete financial statements prepared by Wintech, without any back-up documents, for the purpose of preparing tax returns and to prepare a summary accounting statement of the Golf Course [Property] operations, again without any back-up documentation.
"7. The testimony and evidence presented shows that there are not precise officers and managers for either entity. There are no managing documents; there are no minutes of corporate or member
meetings; and there are no records of any votes by shareholders of Wintech or members of Majestic. Based upon all of the testimony and evidence, there is, in fact, a unity of interest [and] ownership between the Huangs and Wintech and Majestic.Based on that statement of decision, the trial court entered its judgment, finding: "Majestic and Wintech are the alter egos of Jen Huang and Hai Huang. Jen Huang and Hai Huang are personally liable for the liability of Majestic and Wintech herein."
"8. The Court found the testimony of Jen Huang and Hai Huang in regards to the relationship between themselves and Wintech and Majestic to be not credible and directly contradictory based upon all of the testimony and based upon documents that were received into evidence by the Court.
"9. Therefore the Court finds that Wintech and Majestic are the alter egos of Jen Huang and Hai Huang."
C
Based on our review of the record, we conclude there is substantial evidence to support the trial court's finding that Majestic and Wintech are alter egos of Hai Huang and Jen Huang and imposing alter ego liability on the Huangs based thereon. In finding there was sufficient unity of interest and ownership that the separate personalities of Jen Huang and Hai Huang and Majestic and Wintech no longer exist, the trial court made the following findings on certain alter ego factors: (1) Majestic and Wintech failed to maintain any financial records; (2) they did not have precise officers and managers; (3) there were no managing documents; (4) they did not have minutes of corporate or member meetings; and (5) there were no records of any votes by shareholders of Wintech or members of Majestic. Substantial evidence supports each of those findings. As to the first factor, Tom Hwang, the certified public accountant for both Wintech and Majestic, testified he was provided only incomplete financial statements without any supporting documentation when preparing tax returns and a summary accounting statement for the Golf Course Property's operations. More importantly, Hai Huang testified that after Plaintiffs filed their original complaint in 2013, he asked Hwang to prepare financial statements for Wintech for litigation purposes because "[t]hey requested it." The court could reasonably infer from that testimony that Wintech, and presumably Majestic, first prepared financial statements only after the instant action commenced and therefore did not maintain adequate, current financial records for each of the years during the relevant period of 2007 through the trial. Importantly, Jen Huang admitted that during pretrial discovery she signed statements declaring that Majestic and Wintech had no financial statements. She also testified that Majestic has a bank account, but little else because of its "very little activity." Based thereon, the court could conclude Majestic and Wintech had inadequate financial records. (Cf. Misik, supra, 197 Cal.App.4th at p. 1073 [alter ego factors include failure to maintain adequate corporate records and disregard of corporate formalities].)
Although Plaintiffs submitted in evidence three-page internal financial statements for Wintech (but not Majestic) for the fiscal years ending in 2008 through 2012, the court could infer those statements were created after-the-fact (i.e., after the instant action was commenced) and therefore Wintech and Majestic did not maintain current, much less adequate, financial records for the relevant periods.
As to the second and third factors, although Jen Huang testified regarding Majestic's managers and articles of organization and Plaintiffs submitted in evidence its 2006 articles of organization and annual lists of managers for the periods from July 2009 through July 2014, there is an absence of annual lists for the period from July 2007 through July 2009. Furthermore, Plaintiffs do not cite to any similar annual statements for Wintech that were admitted in evidence. Based thereon, the court could conclude that Majestic and Wintech did not have precise officers and managers or managing documents. (Cf. Misik, supra, 197 Cal.App.4th at p. 1073 [alter ego factors include failure to maintain adequate minutes or corporate records and disregard of corporate or legal formalities]; Zoran, supra, 185 Cal.App.4th at p. 811.)
As to the fourth and fifth factors, although Jen Huang testified that Wintech had weekly staff meetings and monthly board meetings, Hai Huang testified that Wintech did not hold shareholder meetings during the years 2010 through 2013. Based thereon and based on the court's finding that the testimony by Jen Huang and Hai Huang was not credible, the court could conclude Wintech and Majestic did not have minutes of corporate or member meetings and there were no records of any votes by shareholders of Wintech or members of Majestic. (Cf. Misik, supra, 197 Cal.App.4th at p. 1073 [alter ego factors include failure to maintain adequate minutes or corporate records and disregard of corporate formalities]; Zoran, supra, 185 Cal.App.4th at p. 811.)
Because there is substantial evidence to support the trial court's findings on those specific factors, there is also substantial evidence to support its general finding that there was sufficient unity of interest and ownership that the separate personalities of Jen Huang and Hai Huang and Majestic and Wintech no longer exist. The court properly considered all of the circumstances in this case and no single factor was determinative. (Misik, supra, 197 Cal.App.4th at p. 1073; Zoran, supra, 185 Cal.App.4th at p. 812.) There is substantial evidence to support its finding that the first requirement for alter ego liability was met.
There also appears to be sufficient evidence in the record to have supported findings by the trial court that: (1) Majestic and/or Wintech were owned by one individual or members of one family; and (2) they entered into contracts with the Association or others by use of a corporate entity as a shield against personal liability. (Zoran, supra, 185 Cal.App.4th at p. 811.)
By finding that Majestic and Wintech are alter egos of Jen Huang and Hai Huang, the trial court also necessarily, albeit implicitly, found that adherence to the fiction of the separate existence of Majestic and Wintech would sanction a fraud or produce an unjust or inequitable result. (Misik, supra, 197 Cal.App.4th at p. 1073.) Contrary to Plaintiffs' assertion, the Association was not required to prove fraud for the alter ego doctrine to be applied. (Engineering Service Corp. v. Longridge Inv. Co. (1957) 153 Cal.App.2d 404, 415.) Instead, "[t]he doctrine can be invoked when adherence to the fiction of the separate existence of the corporation would promote injustice [citation] or bring about inequitable results." (Misik, supra, 197 Cal.App.4th at p. 1074.) In the circumstances of this case, the court could reasonably conclude it would promote injustice or bring about an inequitable result if the alter ego doctrine was not applied and Majestic and Wintech were considered corporate entities separate from Jen Huang and Hai Huang. (Ibid.)
In particular, regarding the injunctive relief it awarded against Majestic and Wintech, the court could conclude that it would be unjust or inequitable to not also bind Jen Huang and Hai Huang, as the officers or other persons who control those corporation's actions, by the Golf Course Property sale documents and require them to perform the obligations thereunder in accordance with the judgment. Accordingly, Plaintiffs have not carried their burden on appeal to show there is insufficient evidence to support the trial court's findings or that it abused its discretion or otherwise erred by applying the alter ego doctrine to find Jen Huang and Hai Huang personally liable for the obligations of Majestic and Wintech. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564.)
To the extent Plaintiffs assert the trial court's statement of decision did not discuss, or inadequately discussed, the evidence in support of the second requirement for alter ego liability or their claim there was no evidence to support that requirement, we conclude the court's statement of decision sufficiently addressed the ultimate facts underlying its finding that alter ego liability should be applied to Jen Huang and Hai Huang. (Cf. Yield Dynamics, Inc. v. TEA Systems Corp. (2007) 154 Cal.App.4th 547, 559; Muzquiz v. City of Emeryville (2000) 79 Cal.App.4th 1106, 1125-1126 [statement of decision needs to state findings only on ultimate facts and need not specify the particular evidence that trial court considered in reaching its decision].) Therefore, the doctrine of implied findings applies to support our conclusion that, by applying the alter ego doctrine, the trial court impliedly found the second requirement for application of that doctrine was met. Ermoian v. Desert Hospital (2007) 152 Cal.App.4th 475, cited by Plaintiffs, is inapposite to this case and does not persuade us to reach a contrary conclusion. In any event, Plaintiffs have not carried their burden on appeal to show there is insufficient evidence to support the court's implied finding on the second requirement. Furthermore, assuming arguendo, as Plaintiffs assert, that we must independently review the record and decide whether that requirement was met, we would make the same finding as the trial court did in the circumstances of this case.
IV
Substantial Evidence to Support Damages Award
Plaintiffs contend there is insufficient evidence to support the trial court's award of $41,024.20 in damages against Plaintiffs for breach of the CC&R's.
A
On February 3, 2004, the operative CC&R's were recorded with the Riverside County Recorder. In pertinent part, article III, section 10(d), of the CC&R's provides:
"(d) Contribution to Entry Area Expenses. Commencing with the opening of the Golf Course [Property] for play by members of the general public, and for so long as the Golf Course [Property] is open for such public play, the operator of the Golf Course [Property] shall be obligated for one-fourth of such costs incurred by the Association in connection with:
"(i) operation, maintenance, repair and replacement of the controlled access gates and guardhouse located at the entrance to the Project at the intersection of Avenida Florita . . . and Colony Drive . . . .
"(ii) costs of operation, maintenance, repair and replacement of landscape and irrigation improvements and monument signs, if any, located and constructed on Lots 159 and 160 . . . .
"(iii) a pro rata share of the maintenance costs (including attributable reserves) for those portions of Avenida Florita and Colony Drive which provide vehicular access to the Golf Course [Property]. Such costs shall include without limitation the costs of slurry and asphalt, but shall expressly exclude any landscaping, irrigation or maintenance costs attributable to parkway or median landscape strips adjacent to such streets.
"The Association shall present an itemized invoice on a quarterly basis to the owner of the Golf Course [Property] which shall include only actual costs incurred, and shall exclude management or administrative damages [sic]." (Italics added.)
At trial, James Morgan, the Association's general manager, testified that the Association had billed Plaintiffs quarterly for their share of costs pursuant to the CC&R's. He also testified that under the CC&R's Plaintiffs were generally billed for "all of the maintenance expenses, the monthly expense for power, that type of stuff and for maintenance on the gates, barrier arms as well as landscape maintenance in the entry area as well as the reserve contribution for street maintenance." Additionally, he testified that the total past due amount owed by Plaintiffs from 2010 through the date of the trial (July 2015) was $41,024.20.
Exhibits showing the Association's quarterly invoices for that period of time were admitted in evidence. Morgan testified that the quarterly invoices set forth line items breaking out the line amounts and included supporting "back-up" documentation (e.g., electricity bills). On cross-examination, Morgan testified that Plaintiffs had never asked him for supporting documents for the quarterly invoices.
For example, the July 1, 2015, quarterly invoice set forth current charges for each of the following categories of expenses: (1) gate maintenance expenses related to the front gate "@ 25%;" (2) electricity for the guardhouse "@ 25%;" (3) monthly landscape maintenance; (4) water for irrigation "@ 25%;" (5) water for guardhouse "@ 25%;" and (6) monthly reserve for asphalt and slurry, which items totaled $1,106.24 for the current quarterly charges.
Bruce Hartwig, a former member of the Association's board of directors, testified that Majestic was billed by the Association for 25 percent of the cost of maintaining the gate and the streets leading to and from the Golf Course Property. He also testified the street leading to the Golf Course Property had "been worked on probably more than once over the time I've lived there," although he could not remember how many times work had been done over the 17-year period he had lived there. Finally, he testified that at certain board meetings he probably voiced his opinion that the gate fees were unreasonable, explaining: "We had done some studies, and . . . it appeared that the traffic from the golf course was not equivalent to what the percentage was [i.e., 25%], but the fees were spelled out in the CC&Rs. There was nothing we could do about the fees at that time."
In its statement of decision on the Association's first amended cross-complaint, the trial court found that the CC&R's "require [Plaintiffs] to pay one[-]fourth of the costs incurred for . . . the maintenance and operation of the controlled access gate located at the entrance of the development including landscaping and irrigation of the improvements and monument signs as well as a pro rata share of maintenance and reserves for the portion of the streets providing access to the golf course (gate fees)." The court further found that Plaintiffs "have failed to pay the Association the invoiced gate fees since at least 2009. The uncontroverted evidence (Exhibits 1131 and 1539) shows that [Plaintiffs] owe $41,024.20 in unpaid gate fees and the Court finds in favor of the Association on its claim for breach of the CC&Rs with regard to the unpaid gate fees in the amount of $41,024.20." The judgment included an award of $41,024.20 in damages against Plaintiffs.
B
Plaintiffs assert that there is insufficient evidence to support the court's award of $41,024.20 for breach of the CC&R's. In particular, they argue that under article III, section (d)(iii) of the CC&R's, Wintech was required to pay only a pro rata share of the maintenance costs for the streets providing vehicular access to the Golf Course Property, but the Association had instead billed it for one-fourth of those street maintenance costs. Wintech notes that the Association's invoices identified a monthly street reserve for asphalt and slurry related to the streets providing ingress and egress from and to the Golf Course Property and then billed Wintech for 25 percent of that amount, but such invoices did not provide backup documentation showing how the total reserve amount was calculated or whether that amount was a pro rata share of the maintenance costs for the shared access streets.
However, Plaintiffs incorrectly argue that under article III, section 10(d)(iii) of the CC&R's, Wintech was required to pay only its pro rata share of the maintenance costs for the shared access streets. On the contrary, that section of the CC&R's provides that Wintech must pay "one-fourth of . . . [¶] . . . a pro rata share of the maintenance costs . . . for those portions of Avenida Florita and Colony Drive which provide vehicular access to the Golf Course [Property]." Therefore, Wintech must pay 25 percent of the proportionate maintenance costs for the Golf Course Property's shared access streets. Because Plaintiffs did not dispute the amounts set forth for the total maintenance costs of the shared access streets, the trial court reasonably found those amounts were correct and that the Association properly billed Wintech for 25 percent of those amounts. To the extent Plaintiffs cite Hartwig's testimony regarding his recollection of past street maintenance or his past personal opinion that the gate fees were unreasonable, they misconstrue and/or misapply the substantial evidence standard of review and, in any event, that testimony does not show there is insufficient evidence to support the amounts the Association billed Wintech for maintenance costs pursuant to article III, section (d) of the CC&R's.
In particular, Morgan testified, without objection by Plaintiffs, that the total amount they owed for the unpaid quarterly invoices was $41,024.20. Also, Plaintiffs did not question Morgan regarding the purported lack of any backup documentation or other basis for the Association's calculations of the total reserve amounts for maintenance of the shared access streets as reflected in its invoices. Also, Plaintiffs withdrew their objection to admission of Exhibit 1131, which summarized all of the unpaid quarterly invoices prior to the current quarter's invoice, after presumably verifying that the summary accurately reflected the amounts of those prior invoices.
Plaintiffs also argue there is insufficient evidence to support the court's award of $41,024.20 in damages because that amount was based solely on the Association's invoices with their backup documentation, which evidence did not refute Plaintiffs' evidence of unreasonableness. In particular, they cite the testimony of Jen Huang, who stated that sometimes the amount the Association billed Wintech for utility costs exceeded Wintech's utility bill for the entire Golf Course Property. She also testified that she was shocked when the Association billed Wintech for 25 percent of the $150,000 cost to replace the gate area landscaping with desert landscaping in order to save water.
Her testimony did not necessarily show the Association's quarterly invoices were unreasonable and the trial court could reasonably conclude the invoices were reasonable, especially given its finding that her testimony on other matters was not credible. Furthermore, by citing her testimony and Hartwig's testimony, as described above, Plaintiffs misconstrue and/or misapply the substantial evidence of review and do not carry their burden on appeal to show there is insufficient evidence to support the court's award of $41,024.20 in damages against them. In any event, our review of the invoices, Morgan's testimony as described above, and other evidence in the record show there is substantial evidence to support the court's finding that Plaintiffs owed the Association $41,024.20 pursuant to article III, section (d) of the CC&R's.
To the extent Plaintiffs assert the trial court's statement of decision did not discuss, or inadequately discussed, the article III, section (d)(iii), pro rata issue discussed above or the question of the reasonableness of the Association's invoice amounts and of article III, section (d), of the CC&R's, we conclude the court's statement of decision sufficiently addressed the ultimate facts underlying its finding that Plaintiffs breached the CC&R's and owed the Association $41,024.20 in damages for unpaid gate fees. (Cf. Yield Dynamics, Inc. v. TEA Systems Corp., supra, 154 Cal.App.4th at p. 559; Muzquiz v. City of Emeryville, supra, 79 Cal.App.4th at pp. 1125-1126.) Therefore, the doctrine of implied findings applies to support our conclusion that the trial court impliedly found the Association properly invoiced Plaintiffs for shared costs pursuant to article III, section (d) of the CC&R's, that the amounts of those invoices were reasonable, and, more generally, that article III, section (d) of the CC&R's was reasonable as an equitable servitude.
V
Award of Contractual Attorney Fees
Plaintiffs contend the trial court abused its discretion or otherwise erred because it did not apportion its award of attorney fees to the Association between attorney work done on the contract causes of action and attorney work done on the noncontract causes of action.
A
After the trial court entered its original judgment, the Association filed a motion for a total award of $1,201,766 in attorney fees and costs as the prevailing party. It sought $1,166,377 in attorney fees under Civil Code sections 1717 and 5975, subdivision (c), for breach of the CC&R's, Pacific PSA, Majestic PSA, 2007 Deed of Trust, and related sale documents. In particular, the Association cited paragraph 33 of the Majestic PSA, which provided that the prevailing party in any action arising out of that agreement shall be entitled to reasonable attorney fees and costs. The Association also cited paragraph 11.5 of the 2007 Deed of Trust, which provided that the prevailing party in any action to enforce any obligation thereunder shall be entitled to reasonable attorney fees and costs.
Paragraph 33 of the Majestic PSA states: "ATTORNEY FEES: In any action, proceeding, or arbitration between Buyer and Seller arising out of this Agreement, the prevailing Buyer or Seller shall be entitled to reasonable attorney fees and costs from the non-prevailing Buyer or Seller." --------
Under the lodestar approach, the Association stated that 3,426.9 hours in attorney time and 978.2 hours in paralegal time were incurred since the filing of the instant action. In his supporting declaration, Jones, the Association's counsel, stated reasonable rates were $325 per hour for partners, $300 per hour for senior attorneys, and $110 per hour for paralegals. He also itemized for each attorney and paralegal and for each type of legal task the total number of hours worked by partners, senior attorneys, and paralegals.
Plaintiffs opposed the Association's motion, arguing that the number of hours worked by the Association's attorneys and their rates were unreasonable and that the Association should have apportioned its attorney fees between compensable contract causes of action and noncompensable tort causes of action. Plaintiffs requested that all fees requested by the Association should be denied or, at least, adjusted downward by 50 percent to 75 percent. In support of their opposition, Plaintiffs submitted the declaration of Attorney Mark Lester, stating his opinion that the amount of the Association's reasonable attorney fees in the instant action was between $439,349.25 and $574,990.75.
The trial court granted the Association's motion, awarding it $507,000 in reasonable attorney fees and $33,699 in costs as the prevailing party. At the hearing on the Association's motion, the court stated it relied, in part, on Lester's declaration for guidance because the total attorney fees requested "were beyond what [it] felt were reasonable." Addressing the question of whether the Association should have apportioned its request for attorney fees between contract work and noncontract work, the court stated: "In this case it would be difficult to do so because I am, of course, aware of the underlying litigation, underlying trial. Those contract and [noncontract] issues melded together, and so I wasn't going to send you back and have you detail everything you've done as far as those types of issues. So that wasn't the intent of the Court, but I think as far as the overall amount of attorneys' fees, that's what I'm looking at as far as reducing that amount to the amount that the Court found to be reasonable, not basing that upon any type of allocation of what was for contract issues and what was for [noncontract] issues because in this case I think that would be extremely difficult to so."
Plaintiffs argued that the court's tentative ruling awarding the Association $507,000 in attorney fees did not take into consideration the fact that there were substantial tort claims litigated at trial and the court should have allocated the work done on the contract claims and tort claims and awarded reasonable fees only for work done on the contract claims. They argued the Association had not provided the court with sufficient information to make an informed decision on that issue and therefore the court should either deny all attorney fees requested or reduce the attorney fee award to an amount in the range of between $250,000 and $300,000.
The Association replied that the tort and contract causes of action were so intertwined that no apportionment of the work done between the two types of claims was required. It stated: "The defenses to the tort claims were all about the contract issues in this case."
The court adopted its tentative ruling awarding the Association $507,000 in attorney fees, stating it had discretion to determine what the reasonable amount of fees was. Regarding apportionment of fees between contract and noncontract claims, the court stated: "As far as any issues regarding contract and [noncontract] claims, I've already really expressed my opinion as to those in this matter although, Mr. Kerbs [Plaintiffs' counsel], you are right that the complaint itself dealt mostly with tort claims. [¶] However, it became apparent throughout trial that those claims were so intertwined with the contract claims, I think it would be virtually impossible to be able to separate the litigation done as to the tort and . . . contract claims in this matter. Therefore, I am not requiring the moving party to provide billing records for the Court to then go back and make that determination on any type of records because I think that would be impossible to do." The court then entered an amended judgment reflecting its award to the Association of attorney fees and costs.
B
An order granting or denying an award of attorney fees is generally reviewed for abuse of discretion, although an issue of law regarding a party's entitlement to attorney fees is reviewed de novo. (Carpenter & Zuckerman, LLP v. Cohen (2011) 195 Cal.App.4th 373, 378.) "Code of Civil Procedures section 1021 provides the basic right to an award of attorney fees." (Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1341.) Section 1021 provides that, in general, "the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties."
Civil Code section 1717, subdivision (a), provides for reciprocity of contractual attorney fee provisions, stating: "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." The limited purpose of Civil Code section 1717 is to establish mutuality of remedy and is triggered when there is a unilateral contractual provision that provides attorney fees are available to only one of the contracting parties. (Hsu v. Abbara (1995) 9 Cal.4th 863, 870.) Civil Code section 1717 is not an independent statutory basis for recovering attorney fees (Chelios v. Kaye (1990) 219 Cal.App.3d 75, 79), but instead "simply transforms a unilateral contractual right into a reciprocal right." (Hambrose Reserve, Ltd. v. Faitz (1992) 9 Cal.App.4th 129, 132.)
"When a party obtains a simple, unqualified victory by completely prevailing on or defeating all contract claims in the action and the contract contains a provision for attorney fees, [Civil Code] section 1717 entitles the successful party to recover reasonable attorney fees incurred in prosecution or defense of those claims." (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109.) "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." (Xuereb v. Marcus & Millichap, Inc., supra, 3 Cal.App.4th at p. 1342.)
However, a trial court is not required to apportion attorney fees between contract claims and noncontract claims when it reasonably finds all claims in the case were inextricably intertwined. (Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1111.) "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." (Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129-130.)
Consistent with the purpose of Civil Code section 1717, a trial court "has broad authority to determine the amount of a reasonable fee." (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1095.) "The 'experienced trial judge is the best judge of the value of professional services rendered in his court, and while his judgment is of course subject to review, it will not be disturbed unless the appellate court is convinced that it is clearly wrong.' " (Serrano v. Priest (1977) 20 Cal.3d 25, 49.) Although a trial court's fee-setting inquiry ordinarily begins with the "lodestar" (i.e., the number of hours reasonably expended multiplied by the reasonable hourly rate), a trial court may base its determination on other factors. (PLCM Group, Inc., at pp. 1095-1096.) "The value of legal services performed in a case is a matter in which the trial court has its own expertise. [Citation.] The trial court may make its own determination of the value of the services contrary to, or without the necessity for, expert testimony. [Citations.] The trial court makes its determination after consideration of a number of factors, including the nature of the litigation, its difficulty, the amount involved, the skill required in its handling, the skill employed, the attention given, the success or failure, and other circumstances in the case." (Melnyk v. Robledo (1976) 64 Cal.App.3d 618, 623-624, quoted with approval in PLCM Group, Inc., at p. 1096.)
Finally, Civil Code section 5975, subdivision (c), establishes a statutory right to an award of attorney fees incurred in enforcing the CC&R's, providing: "In an action to enforce the governing documents [e.g., the CC&R's], the prevailing party shall be awarded reasonable attorney's fees and costs."
C
Plaintiffs assert the trial court abused its discretion by awarding the Association $507,000 in reasonable attorney fees without attempting to apportion those fees between work performed on contract claims and work performed on tort claims. However, the court expressly considered the apportionment issue and found that apportionment of fees would not be appropriate in this case, stating that although Plaintiffs' complaint "dealt mostly with tort claims . . . it became apparent throughout the trial that those claims were so intertwined with the contract claims, I think it would be virtually impossible to be able to separate the litigation done as to the tort and . . . contract claims in this matter." Alternatively stated, the court explained that because the contract and tort claims "melded together," it would be difficult to apportion the fees between those types of claims and therefore it would not require the Association's counsel to detail all of its work according to the type of claim it involved.
Based on our review of the record, we conclude the trial court did not abuse its discretion by not apportioning, or attempting to apportion, attorney fees between work performed on contract causes of action and work performed on tort causes of action. After presiding over the trial and posttrial proceedings in this case, the court was in an optimal position to make its determination that the contract and tort causes of action involved in this case were so intertwined that apportionment of attorney fees was not appropriate. As discussed above, a trial court is not required to apportion attorney fees between contract claims and noncontract claims when it reasonably finds all claims in the case were inextricably intertwined. (Abdallah v. United Savings Bank, supra, 43 Cal.App.4th at p. 1111.)
Here, the court reasonably found that the contract and noncontract causes of action in this case were so intertwined that apportionment was not appropriate. In defending against Plaintiffs' third amended complaint, the Association asserted that Plaintiffs were bound by the relevant Golf Course Property sale documents discussed above. Furthermore, four of Plaintiffs' eight causes of action were for declaratory relief and quiet title based on those sale documents and the Association. Therefore, the court could reasonably find, based on the nature of the parties' claims and the evidence presented at trial, that the work performed by the Association's attorneys could not be apportioned between contract and tort causes of action. "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." (Reynolds Metals Co. v. Alperson, supra, 25 Cal.3d at pp. 129-130.)
Although, as Plaintiffs assert, the court could have attempted to apportion the Association's attorney fees, it reasonably found the parties' claims were inextricably intertwined and therefore no attempt to apportion the fees was required. We reject Plaintiffs' conclusory assertion that "the issues were not so common and factually interrelated that it would have been impossible to separate the fees and costs incurred on the tort claims from fees and costs incurred on the contract claims." Likewise, we reject Plaintiffs' apparent assertion that because the court severed the trial into two phases (i.e., a first phase on their third amended complaint and a second phase on the Association's first amended cross-complaint), it could not reasonably find that the tort issues tried in the first phase were inextricably intertwined, or common, with the contract issues.
Plaintiffs have not carried their burden on appeal to show the court abused its discretion by not apportioning, or attempting to apportion, the Association's attorney fees. Accordingly, we conclude the court did not abuse its discretion by not apportioning, or attempting to apportion, the Association's attorney fees between work performed on contract claims and work performed on tort claims. (Reynolds Metals Co. v. Alperson, supra, 25 Cal.3d at pp. 129-130; Abdallah v. United Savings Bank, supra, 43 Cal.App.4th at p. 1111; Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1582, 1604 [trial court has discretion whether and/or how to apportion attorney fees among claims]; Erickson v. R.E.M. Concepts, Inc. (2005) 126 Cal.App.4th 1073, 1085-1086 [same].)
VI
Attorney Fees and Costs Incurred on Appeal
The Association asserts it is also entitled to an award of attorney fees and costs incurred on appeal pursuant to the attorney fee provisions in the relevant sale documents and Civil Code sections 1717 and 5975, subdivision (c). Based on our affirmance of the judgment in favor of the Association and its award of attorney fees to the Association, we conclude the Association is the prevailing party on appeal. Accordingly, after issuance of the remittitur in this case, the trial court should exercise its discretion to award the Association those reasonable attorney fees and costs incurred on appeal that it may request in a promptly filed motion therefor. (Harbour Landing-Dolfann, Ltd. v. Anderson (1996) 48 Cal.App.4th 260, 263-265.)
DISPOSITION
The judgment is affirmed. The Association is entitled to reasonable attorney fees and costs incurred on appeal.
HALLER, J. WE CONCUR: HUFFMAN, Acting P. J. IRION, J.