Opinion
D074911
05-12-2020
U.S. CONSTRUCTION LAW, Plaintiff and Appellant, v. BETTY KINDER, Defendant and Respondent.
Law Offices of George Rikos and George D. Rikos for Plaintiff and Appellant. Law Office of Robert J. Spitz and Robert J. Spitz for Defendant 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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. 37-2016-00000227-CU-BC-CTL) APPEAL from orders of the Superior Court of San Diego County, John S. Meyer, Judge. Affirmed. Law Offices of George Rikos and George D. Rikos for Plaintiff and Appellant. Law Office of Robert J. Spitz and Robert J. Spitz for Defendant and Respondent.
I.
INTRODUCTION
Plaintiff U.S. Construction Law (USCL), a law firm, appeals from two postjudgment orders of the trial court in which the court denied USCL prevailing party attorney fees and costs. USCL sought attorney fees and costs after recovering a judgment of $7,580 from defendant Betty Kinder in this action.
USCL filed this action against Kinder as an unlimited civil action, seeking $68,103.85 in attorney fees that it claimed Kinder owed, arising from USCL's representation of Kinder in a lawsuit against the installer of an anti-fire sprinkler system in a cabin in Big Bear, California. Kinder cross-complained, alleging that USCL had breached its fiduciary duties to her and had committed professional negligence, among other things, in the handling of her case against the sprinkler system installer.
The matter proceeded to a jury trial. The jury determined that USCL was entitled to $7,580 in damages from Kinder on its breach of contract claim, but also concluded that Kinder was entitled to $5,780 from USCL for its breach of fiduciary duties. For reasons that are not entirely clear from the record, Kinder dismissed her cross-complaint before judgment was entered. As a result, judgment was entered in favor of USCL for $7,580.
In briefing, Kinder asserts that she agreed to dismiss her cross-complaint against USCL and to waive her right to appeal with respect to the cross-complaint in exchange for a payment from USCL's insurance carrier. Kinder does not cite to anything in the record to support her assertion as to the reason for her dismissal of the cross-complaint, and we have found no evidence in the record related to the reason for the dismissal.
USCL thereafter filed a motion for attorney fees as costs, as the prevailing party in the action, pursuant to a provision in the parties' retainer agreement. USCL also separately sought to recover its other costs. Relying on Code of Civil Procedure section 1033 (section 1033), the trial court issued orders denying USCL's requests for attorney fees and other costs. Section 1033 grants a trial court discretion to deny, in whole or in part, a plaintiff's recovery of litigation costs, including attorney fees, where the plaintiff brought the action as an unlimited civil case but obtains a judgment for money damages in an amount that could have been recovered in a limited civil case.
Section 1033, subdivision (a) provides in relevant part: "Costs or any portion of claimed costs shall be as determined by the court in its discretion in a case other than a limited civil case in accordance with Section 1034 where the prevailing party recovers a judgment that could have been rendered in a limited civil case."
USCL appeals from the trial court's postjudgment orders denying its requests for attorney fees and costs under section 1033, arguing that the trial court abused its discretion by failing to apply the proper legal standards with respect to the factors that are relevant under that statute. Specifically, USCL contends that the trial court failed to examine, on its own, whether USCL had a good faith belief that its claims exceeded the $25,000 limited civil jurisdictional threshold at the time the action was initiated, and instead relied on the jury's award of only $7,580 in determining that the action was not brought in good faith as an unlimited civil action. We conclude that USCL's arguments are without merit. We therefore affirm the postjudgment orders of the trial court.
USCL frames its argument on appeal as challenging whether the trial court properly applied the relevant legal criteria under section 1033—i.e., USCL argues that the court's error was one of law, not fact. Perhaps because USCL framed the issue in this way, it did not provide this court with the full trial record in this case. As we discuss further in section III, post, the failure to provide the full record prevents USCL from being able to contend that the trial court's findings with respect to facts relevant to the court's section 1033 analysis were not supported by substantial evidence. USCL's failure to provide a full record also makes it difficult for this court to provide the relevant background that led to the trial court's rulings at issue on appeal.
II.
FACTUAL AND PROCEDURAL BACKGROUND
A. The lawsuit forming the basis of USCL's claims for unpaid attorney fees against Kinder
USCL has not provided the Reporter's Transcript from the trial in this action, and, as a result, this court has an extremely limited evidentiary record from which to draw the background facts regarding the genesis of the current dispute between the parties. According to the complaint in this case, this lawsuit arose out of a dispute between USCL and Kinder regarding attorney fees USCL claimed Kinder owed it for its representation of Kinder in an underlying lawsuit in which Kinder sued Ornnell Fire Sprinkler, Inc. (Ornnell) and others.
Based on the incomplete record and the comments and findings of the trial court with respect to USCL's requests for attorney fees and costs, we glean the following: Kinder's son built a cabin in Big Bear, California, and contracted with Ornnell to install a home fire sprinkler system. Due to a hole in the foundation that was not sealed, Kinder's son had to spend approximately $7,000 to repair damage to the cabin. Kinder held title to the cabin. She retained USCL, and Sean Reynolds, USCL's sole attorney, to represent her in an action against Ornnell for damage to the cabin. According to Kinder, Reynolds convinced her that she had a viable unlimited civil action against Ornnell, and told her that she would not have to worry about paying attorney fees because the fees would be recovered from Ornnell. The complaint filed by USCL on Kinder's behalf alleged nine different causes of action and sought $75,000 in damages.
Kinder's lawsuit against Ornnell alleged that Ornnell failed to properly seal the hole. Ornnell apparently cross-complained against Kinder's son, asserting that the son was the party responsible for the failure to seal the hole.
After the trial court in the Ornnell action granted summary adjudication on all of the causes of action pursuant to which USCL could have obtained attorney fees from Ornnell in the event that Kinder were to prevail, USCL and Attorney Reynolds sought to be relieved as Kinder's counsel in the case. USCL then sought payment of $68,103.85 in attorney fees from Kinder. When Kinder did not pay, USCL filed this action to recover those attorney fees.
The parties have not discussed, and our review of the record has not disclosed, the ultimate outcome of the litigation between Kinder and Ornnell.
In its order denying USCL the attorney fees it was requesting, the trial court made the following factual findings pertaining to the history of the underlying litigation between Kinder and Ornnell:
"Although this motion is brought in the name of [USCL], Attorney Reynolds[, of USCL,] was the actor in the underlying case [against Ornnell] and a driving factor in this case. Accordingly, Attorney Reynolds' actions and motivations are the focus in this motion.
"Attorney Reynolds overreached in the underlying action [against Ornnell]. That action was based [on] damages allegedly caused by a sprinkler system. The contract for installation of the sprinkler system was entered into between Craig Kinder and Orn[n]ell Fire Sprinkler, Inc. The installation work was performed in 2008 on a cabin located in Big Bear, California. Although title to the cabin was in Mrs. Kinder's name, the cabin actually belonged to her son, Craig Kinder. Mrs. Kinder, who resides in Missouri, had no real interest in the property.
"The lawsuit [against Ornnell] wasn't filed until 2013. The overreaching is evident by the overly-pled complaint. The complaint [against Ornnell] alleged causes of action for (1) breach of contract; (2) breach of business and professions codes; (3) negligence; (4) breach of the implied covenant of good faith and fair dealing; (5) breach of express warranty; (6) breach of implied warranty; (7) breach of implied warranty of fitness; (8) violations of standards for original construction; and (9) enforcement of contractor's bond. Attorney Reynolds sought $75,000 in damages, plus attorney fees and costs. According to the Kinders, Craig Kinder spent about $7,000 to repair the damage, well below the small claims limit. Orn[n]ell cross-complained against Craig Kinder for his own negligence involved in failing to seal a hole in the foundation.B. The current action
"At the beginning of the litigation, Mrs. Kinder paid a $5,000 retainer [to Attorney Reynolds and USCL]. Banking on causes of action that allowed for an award of attorney fees, Attorney Reynolds ran up his fees and apparently did not insist on payment from Mrs. Kinder until after the summary judgment/adjudication motion, which occurred in 2015. Attorney Reynolds lost that motion, with the court granting adjudication on six contract causes of action leaving three viable causes of action including: (1) negligence; (2) violations of standards of original construction; and (3) enforcement of contractor's bond. A few months later, Attorney Reynolds sought to be relieved as counsel, claiming Mrs. Kinder defaulted on her fee obligation."
USCL filed a complaint against Kinder on January 6, 2016, alleging causes of action for breach of contract, account stated, open book account, and a common count for assumpsit, and seeking declaratory relief and $68,103.85 in damages, plus prejudgment interest at 10 percent per year, to attempt to recover the attorney fees that it claimed Kinder owed as a result of the Ornnell litigation. USCL filed the case as an unlimited civil action.
Kinder answered the complaint and filed a cross-complaint against USCL, alleging causes of action for professional negligence, breach of contract, breach of fiduciary duty, negligence, constructive fraud, intentional misrepresentation, and fraudulent concealment with respect to its representation of Kinder in the Ornnell action.
The case proceeded to trial, which began in October 2017. Kinder called an expert witness, who testified that USCL had breached its fiduciary duty to Kinder by failing to inform her about the possibility that there could have been a cross-complaint filed against her son in the Ornnell action, before asking her to sign a retainer agreement. The expert also testified that the Ornnell action raised a conflict of interest between Kinder and her son that USCL did not disclose until after it had filed the lawsuit against Ornnell, and that the failure to raise the existence of this conflict of interest prior to having Kinder sign a retainer agreement also constituted a breach of fiduciary duty. According to Kinder's expert, another breach of fiduciary duty occurred when USCL advised Kinder to file the action against Ornnell as an unlimited civil action, rather than as a small claims action, despite the fact that there was no evidence that the damage to the Big Bear cabin exceeded $10,000, the small claims jurisdictional limit. Further, USCL's own files did not demonstrate that USCL had informed Kinder of Ornnell's two offers to settle, the first for $5,000 and a later offer for $10,000, and Kinder testified that she was never informed of these offers to settle. The failure to inform Kinder of settlement offers would constitute another breach of fiduciary duty.
Kinder's expert further testified that, under an analysis of 11 criteria relevant to the question of the unconscionability of attorney fees, it was his opinion that USCL had charged Kinder an unconscionable fee under the circumstances of the case.
On November 13, the jury rendered its verdict. The jury concluded that Kinder had failed to pay USCL for its services, but found that USCL's damages resulting from Kinder's breach amounted to only $7,580. The jury further determined that USCL had breached its fiduciary duties to Kinder, and awarded Kinder $5,780 in damages for USCL's breach of fiduciary duties.
In June 2018, Kinder dismissed her cross-complaint against USCL.
The trial court entered judgment in favor of USCL in the amount of $7,580 on July 9, 2018. C. The motions for attorney fees and costs
In July 2018, USCL filed a memorandum of costs, as well as a motion for attorney fees. Kinder opposed the motion for attorney fees, and also filed a motion to tax costs.
On August 9, 2018, the trial court issued a tentative ruling denying USCL's motion for attorney fees. The following day, after hearing oral argument from the attorneys for the parties, the court confirmed its tentative ruling denying USCL's motion for attorney fees. In its ruling, the trial court concluded as follows:
"Plaintiff [USCL] could not have brought this lawsuit in good faith. The reasonable inference from the evidence at trial and the jury's verdict is that the jury determined that Attorney Reynold[s'] fees were unconscionable. The jury awarded only $7,580 on that claim for $68,000 in fees. In addition to seeking an unreasonable amount in fees, Attorney Reynolds also knew that Mrs. Kinder, as a resident of Missouri, would have a difficult time defending against this case
in California. Attorney Reynolds' efforts to intimidate Mrs. Kinder was evident from the motion for security he brought against her. Attorney Reynolds sought security in the amount of $190,810, which is what he claimed he would incur in fees in defending the cross-complaint. Notably, on that cross-complaint[,] the jury found Attorney Reynolds had breached his fiduciary duty to Mrs. Kinder.
"It is rare for a court to deny a request for attorney fees pursuant to [section] 1033[, subdivision] (a). But this is one case that should not have been filed, let alone filed as an unlimited case."
More than a month after the trial court issued its ruling denying USCL's motion for attorney fees, USCL filed its opposition to Kinder's motion to tax costs.
On September 27, 2018, the trial court issued a tentative ruling on Kinder's motion to tax costs in which the court indicated that it intended to deny all of USCL's asserted costs. After hearing oral argument on the motion to tax costs, the trial court confirmed its tentative ruling, thereby denying USCL all of its costs. The trial court specifically "incorporate[d] by reference its ruling on the motion for attorney fees dated August 10, 2018" in determining that USCL was "not entitled to recover its costs."
USCL filed a timely notice of appeal, identifying as the basis for its appeal the trial court's postjudgment orders denying USCL attorney fees and its other costs.
III.
DISCUSSION
USCL challenges the trial court's denial of its requests for attorney fees and costs, arguing that the court abused its discretion in applying section 1033 to conclude that USCL should not be awarded attorney fees or costs in this matter.
Section 1033 provides in relevant part: "Costs or any portion of claimed costs shall be as determined by the court in its discretion in a case other than a limited civil case in accordance with Section 1034 where the prevailing party recovers a judgment that could have been rendered in a limited civil case." (Id., subd. (a).) As the Supreme Court has explained, "section 1033[, subdivision] (a) applies when a plaintiff has obtained a judgment for money damages in an amount (now $25,000 or less) that could have been recovered in a limited civil case, but the plaintiff did not bring the action as a limited civil case and thus did not take advantage of the cost- and time-saving advantages of limited civil case procedures. In this situation, even though a plaintiff who obtains a money judgment would otherwise be entitled to recover litigation costs as a matter of right, section 1033[, subdivision] (a) gives the trial court discretion to deny, in whole or in part, the plaintiff's recovery of litigation costs," including attorney fees. (Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, 982-983, 986 (Chavez).)
USCL does not dispute that it recovered an amount that could have been rendered in a limited civil action, such that the provisions of section 1033, subdivision (a) apply to authorize the trial court to "determine[ ] . . . in its discretion" (ibid.) whether to award USCL its costs, a portion of its costs, or none of its costs.
The purpose of section 1033, subdivision (a) "is to encourage plaintiffs to bring their actions as limited civil actions whenever it is reasonably practicable to do so." (Chavez, supra, 47 Cal.4th at p. 988.) "This purpose . . . requires . . . a realistic appraisal of the amount of damages at issue and whether the action might fairly have been litigated using the streamlined procedures of limited civil actions." (Ibid.)
The "factors that a trial court should ordinarily consider in exercising its discretion under section 1033[, subdivision] (a)" include "the amount of damages the plaintiff reasonably and in good faith could have expected to recover and the total amount of costs that the plaintiff incurred." (Chavez, supra, 47 Cal.4th at p. 984, citing Dorman v. DWLC Corp. (1995) 35 Cal.App.4th 1808, 1816-1817 (Dorman); Valentino v. Elliott Sav-On Gas, Inc. (1988) 201 Cal.App.3d 692, 702; and Greenberg v. Pacific Tel. & Tel. Co. (1979) 97 Cal.App.3d 102, 108.)
We review a trial court's denial of costs under section 1033, subdivision (a) for abuse of discretion. (Steele v. Jensen Instrument Co. (1997) 59 Cal.App.4th 326, 331.) "Exercises of discretion must be ' "grounded in reasoned judgment and guided by legal principles and policies appropriate to the particular matter at issue." ' [Citation.] . . . The standard 'asks in substance whether the ruling in question "falls outside the bounds of reason" under the applicable law and the relevant facts.' [Citation.]" (People v. Diaz (2014) 227 Cal.App.4th 362, 377.) "The burden is on the party complaining to establish an abuse of discretion, and unless a clear case of abuse is shown and unless there has been a miscarriage of justice[,] a reviewing court will not substitute its opinion and thereby divest the trial court of its discretionary power.' " (Dorman, supra, 35 Cal.App.4th at p. 1815.)
According to USCL, the trial court did not properly focus "only on the time USCL originally filed its lawsuit" to determine whether, at the time USCL initiated the lawsuit, it had a good faith belief that the amount in controversy exceeded the limited jurisdictional threshold. USCL argues that a trial court must consider whether the plaintiff "reasonably and in good faith initiated the action believing that the ultimate recovery would exceed the jurisdictional limit" (Carter v. Cohen (2010) 188 Cal.App.4th 1038, 1053, italics added). USCL goes on to argue that the trial court in this case "never appears to have considered" that Kinder did not object to USCL's invoices, and, based on this, it contends that the court failed to properly consider whether USCL acted in good faith when it initially filed this breach of contract lawsuit seeking $68,103.85 in attorney fees from Kinder. According to USCL, the court ignored the "colorable damages of $68,000 supported by invoices attached to its original Complaint, which Kinder did not specifically dispute later at trial," and argues that "[a]t bottom, USCL acted reasonably and in good faith by filing its contract action in unlimited civil jurisdiction after exhausting all pre-suit requirements."
We conclude that USCL has not demonstrated that the trial court abused its discretion in declining to award USCL attorney fees. First, it is clear that the trial court did, in fact, consider whether USCL initiated this action against Kinder with a good faith belief that its ultimate recovery would exceed the unlimited civil action jurisdictional limit, and determined that it had not acted in good faith in pursuing more than $68,000 in attorney fees from Kinder. The trial court made a specific finding that USCL "could not have brought this lawsuit in good faith" (italics added), demonstrating that the court considered whether, at the initiation of the lawsuit, USCL had sought those damages with a reasonable and good faith belief that they were recoverable, and concluded that it had not. The fact that the trial court referenced the jury's verdict and concluded that the jury must have determined that the fees that USCL had charged Kinder were unconscionable does not mean that the court did not agree with the jury's assessment. Indeed, the court's review of what the evidence at trial demonstrated shows that the court independently determined that USCL's request for attorney fees from Kinder was unconscionable, and that the trial court believed that USCL had not acted reasonably or in good faith in filing any action against Kinder to recover those fees, let alone in filing an unlimited civil action against her. We therefore reject USCL's contention that the trial court failed to "examine whether USCL had a good faith belief at the time it initiated suit that its claim exceeded the $25,000 limited civil jurisdictional threshold."
As noted, the trial court stated in its order, "[T]his is one case that should not have been filed, let alone filed as an unlimited case." (Italics added.)
Further, to the extent that USCL is suggesting that this court should conclude, in contravention of the trial court's determination that USCL did not act reasonably and in good faith in filing this matter as an unlimited civil action, that USCL did in fact "act[ ] reasonably and in good faith by filing its contract action in unlimited civil jurisdiction after exhausting all pre-suit requirements," we reject such a suggestion. Notably, USCL has not challenged any of the trial court's factual findings underlying its conclusion that USCL did not act in good faith in filing this action as an unlimited civil action. In fact, USCL could not challenge the trial court's factual findings on appeal even if it wanted to do so because USCL has failed to provide the full record of the trial proceedings in this case. The failure to provide an adequate record on appeal prevents an appellate court from undertaking any substantial evidence review that would apply to challenges to a trial court's finding of fact. (See Oliveira v. Kiesler (2012) 206 Cal.App.4th 1349, 1362.)
Because USCL has forfeited any challenge to the trial court's factual findings regarding what occurred in the Ornnell proceeding—findings that were based on the evidence presented at the trial in this proceeding—as a result of its failure to provide an adequate record for our review, we must presume the correctness of the trial court's factual findings in this regard. (See Denham v. Superior Court (1970) 2 Cal.3d 557, 564 [" 'A judgment or order of the lower court is presumed correct. All intendments and presumptions are indulged to support it on matters as to which the record is silent, and error must be affirmatively shown"].) The trial court heard all of the evidence presented at trial with respect to USCL's claims that it was owed almost $70,000 in attorney fees for litigating the Ornnell action, as well as the evidence regarding Kinder's defenses and her cross-claims against USCL. After hearing all of the evidence, the trial court concluded that the underlying action for which USCL was seeking to recover attorney fees from Kinder itself involved significant "overreaching" with an "overly-pled complaint." The court noted that Kinder's son had spent only $7,000 to repair damage to the cabin, yet USCL, through Attorney Reynolds, had sought $75,000 from Ornnell, plus attorney fees and costs.
The trial court further determined that Attorney Reynolds "ran up his fees" in the case and did not seek payment from Kinder on his fee bills until after the determination of a summary judgment/summary adjudication motion, which did not occur until nearly two years after the action had been filed. After losing the bulk of that motion, including all causes of action that could have resulted in an award of attorney fees, Attorney Reynolds sought to be relieved as counsel, claiming that Kinder had defaulted on paying her attorney fees. As the trial court noted, it appears that Attorney Reynolds was performing a significant amount of work on what was, in fact, a case with the potential for only minimal recovery, on the hope that he would be able to recover his attorney fees through causes of action that would allow for an award of attorney fees. Attorney Reynolds's actions resulted in Kinder potentially being "on the hook" for all of the purported hours that Attorney Reynolds had devoted to litigating a case that could never have resulted in damages beyond what would have been obtainable in a small claims action.
In view of all of this, it was clearly reasonable for the trial court to conclude that USCL's initial claim of $68,000 in unpaid attorney fee damages was not brought in good faith; the fact that USCL had created invoices for $68,000 in attorney fees did not mean that its demand for payment for that amount was reasonable, given the circumstances. We therefore conclude that USCL has not demonstrated that the trial court abused its discretion in denying USCL its attorney fees in litigating this action against Kinder pursuant to the discretion granted to it under section 1033, subdivision (a).
USCL relies on the idea that because it had "invoices attached to its original Complaint," its claim for $68,000 was a "colorable" claim for damages. We reject the notion that merely attaching "invoices" to a complaint somehow renders USCL's claim for money due as being valid, reasonable or made in good faith. --------
USCL further argues that since the trial court denied USCL its costs, separate and apart from attorney fees, for the same reason that it denied USCL its attorney fees, this court "should similarly reverse the trial court's denial of USCL's claimed costs." Given our conclusion that USCL has not demonstrated that the trial court abused its discretion in denying USCL's motion for attorney fees under section 1033, subdivision (a), we similarly conclude that USCL has not demonstrated that the trial court abused its discretion in denying USCL its other costs under section 1033, subdivision (a).
IV.
DISPOSITION
The trial court's postjudgment orders denying USCL attorney fees and costs are affirmed. Kinder is entitled to costs on appeal.
AARON, J. WE CONCUR: MCCONNELL, P. J. O'ROURKE, J.