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Bay Area Luxury Homes/Stevick I v. Lee

Court of Appeals of California, First District, Division Three.
Nov 12, 2003
No. A098667 (Cal. Ct. App. Nov. 12, 2003)

Opinion

A098667.

11-12-2003

BAY AREA LUXURY HOMES/STEVICK I, LLC, Plaintiff and Appellant, v. WILLIAM L. LEE III, et al., Defendants and Respondents.


Bay Area Luxury Homes/Stevick I appeals from an award of attorney fees in favor of respondents William L. Lee III and Leslie K. Lee. The underlying action, in which respondents were the prevailing parties, arose from a contractual dispute over the purchase of property on Stevick Drive in Atherton (the Property) and the projected construction of a luxury residence thereon (the Construction Project). Appellant contends that in awarding respondents their attorney fees, the trial court erred in failing to take into account the alleged failure of Mrs. Lee to participate in prelitigation mediation, as required by the real estate purchase contract (the Contract) between the parties. We affirm the trial courts award of attorney fees.

At all times relevant to this appeal, appellant was in the business of purchasing and developing property for resale on the luxury home market. On January 4, 2000, respondents executed the Contract, a 6-page agreement entitled "Vacant Land Purchase Contract and Receipt for Deposit" for the purchase of the Property.

The Contract contained a standard attorneys fees provision in paragraph 22, awarding "reasonable attorneys fees and costs" to the prevailing party "[i]n any action, proceeding or arbitration between Buyer and Seller" arising out of the contract.[] Under paragraph 17 of the Contract, entitled "Mediation of Disputes," the parties agreed to mediate any dispute or claim arising between them concerning the Contract, "or any resulting transaction," before resorting to litigation. Among other things, this provision stated that "if any party commences an arbitration or court action based on a dispute or claim to which this paragraph applies without first attempting to resolve the matter through mediation, then in the discretion of the arbitrator(s) or judge, that party shall not be entitled to recover attorneys fees, even if they would otherwise be available to that party in any such arbitration or court action." (Capitalization emphasis omitted.)[]

Paragraph 22 provides: "ATTORNEYS 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 attorneys fees and costs from the non-prevailing Buyer or Seller, except as provided in paragraph 17."

Paragraph 17 provides in pertinent part: "MEDIATION OF DISPUTES: Buyer and Seller agree to mediate any dispute or claim arising between them out of this contract, or any resulting transaction, before resorting to arbitration or court action. Mediation fees, if any, shall be divided equally among the parties involved. . . . IF ANY PARTY COMMENCES AN ARBITRATION OR COURT ACTION BASED ON A DISPUTE OR CLAIM TO WHICH THIS PARAGRAPH APPLIES WITHOUT FIRST ATTEMPTING TO RESOLVE THE MATTER THROUGH MEDIATION, THEN IN THE DISCRETION OF THE ARBITRATOR(S) OR JUDGE, THAT PARTY SHALL NOT BE ENTITLED TO RECOVER ATTORNEYS FEES, EVEN IF THEY WOULD OTHERWISE BE AVAILABLE TO THAT PARTY IN ANY SUCH ARBITRATION OF COURT ACTION. This mediation provision applies whether or not the Arbitration of Disputes provision is initialed."

In February and March 2000, a dispute arose between the parties concerning respondents obligation under the contract to enter into a collateral construction agreement with appellant. On September 5, 2000, after fruitless efforts to resolve the dispute through negotiations, the parties participated in a mediation before a retired judge. Present at the mediation were three representatives of appellant, respondent Mr. William L. Lee III, and the parties attorneys. The mediation began at approximately 10:00 a.m., and concluded at approximately 8:00 p.m. Respondent Mrs. Leslie K. Lee was not physically in attendance at the mediation. However, she was available throughout the mediation session by telephone, and was in communication with Mr. Lee approximately four times during that period.[] Although the mediation was extended and the parties nearly reached a settlement, they were ultimately unable to do so. There were no further efforts at mediation before the commencement of litigation.

According to the declarations of both respondents, Mrs. Lee was unable to attend the all-day mediation session because of the demands placed upon her of caring for the couples three children, ages 6, 4 and 8 weeks, and the unavailability of the couples childcare provider. Both respondents stated in their respective declarations that Mrs. Lee gave her husband full authority to settle the dispute between the parties on her behalf; she was available throughout the entire mediation session by telephone contact; and Mr. Lee in fact contacted her approximately four times during the course of the day.

On September 25, 2000, appellant filed a complaint against respondents alleging causes of action for breach of contract, fraud, unjust enrichment and declaratory relief. On April 19, 2001, another mediation between the parties was held, as ordered by the trial court. Although both Mr. Lee and his attorney attended, Mrs. Lee was not present at the second mediation. However, Mrs. Lee was again on telephone standby throughout the entire period of the second mediation, and spoke with Mr. Lee approximately three times. The parties once again failed to reach a settlement.

A mandatory settlement conference between the parties took place on July 19, 2001. Mrs. Lee was again not present. This time, the settlement conference judge ordered her to appear. She arrived at the settlement conference after a few minutes. Once again, the parties failed to settle their disputes.

Nonjury trial commenced on July 31, 2001. On August 6, 2001, after appellant had rested its case in chief, respondents moved for judgment pursuant to Code of Civil Procedure section 631.8, subdivision (a). On August 7, 2001, after hearing argument and receiving written points and authorities from both parties, the trial court granted respondents motion as to appellants cause of action for breach of contract only. Trial proceeded on the other causes of action.

Presentation of evidence concluded on August 16, 2001. On October 5, 2001, after the submission of further post-trial briefing by the parties, the trial court issued a decision in favor of respondents on the fraud and unjust enrichment causes of action. Among other things, the trial court found that in their negotiations with appellant up until they received appellants disclosure of actual construction costs on February 14, 2000, respondents had a good faith intent to proceed with the construction of a custom home on the Property; that there was therefore no fraud; and that the declaratory relief cause of action had been disposed of by the previous ruling granting judgment for respondents on the breach of contract cause of action. On November 27, 2001, the trial court entered judgment consistent with its earlier decision, and awarded statutory costs to respondents as prevailing parties.

On December 12, 2001, respondents moved the trial court to fix the amount of attorneys fees and costs to be awarded to them as prevailing parties, pursuant to the attorneys fees provision in the Contract. Appellant opposed the motion, arguing that respondents were not entitled to attorneys fees because they had failed to participate in the prelitigation mediation required by the Contract as a prerequisite to any award of attorneys fees. In reply, respondents disputed their failure to participate in mediation, and filed declarations stating that Mrs. Lee had not been in attendance at the prelitigation mediation session because of the demands of caring for her two young children and one infant, but had been on telephone standby during the entire mediation session.

The hearing on respondents motion for attorneys fees was continued to February 20, 2002, in order to allow appellant to file supplementary opposition. On February 25, 2002, the trial court granted respondents motion in an order awarding attorneys fees in the amount of $305,213. The order stated: "The Court specifically finds that [the Lees] are not precluded from fees for any alleged failure to mediate; in fact, two mediations did occur. Mrs. Lee complied with the requirements of [the mediator] for written authorization for her husband to represent her during the mediation."

This appeal timely followed.

DISCUSSION

In their complaint, appellant sought attorneys fees and costs incurred in prosecuting their litigation. The only basis on which appellant could make such a claim of attorneys fees is the provision for such an award to the prevailing party contained in the Contract between the parties. Having since lost on every cause of action of their complaint, appellant now objects to the respondents recovery of their attorney fees under the same provision, based on the failure of respondent Mrs. Lee to attend the mediation sessions held prior to trial in this matter. Appellant contends the separate mediation provision of the Contract bars respondents from recovery of their attorneys fees, despite the fact they were the prevailing parties in this litigation and otherwise entitled to attorney fees under the terms of the Contract between the parties.

At issue is the interpretation and application to respondents of paragraph 17 of the Contract, which requires the parties to attempt mediation of any contractual dispute between them prior to initiating litigation, and gives the trial court or arbitrator discretion to deny an award of attorneys fees to any party that "commences an arbitration or court action based on a dispute or claim [arising out of the Contract] without first attempting to resolve the matter through mediation." Appellant contends that under Civil Code section 1717[]—which makes reciprocal the right to attorney fees in any action on a contract with an attorney fees provision—this contractual requirement of participation in prelitigation mediation must be applied reciprocally to respondents, even though in this case it was appellant itself which "commence[d] an arbitration or court action based on a dispute or claim" under the Contract.

Hereinafter referred to as section 1717.

Appellants contention is wholly without merit. Appellant overlooks the clear language of the contractual provision at issue, wrongly applies section 1717 where it is inapplicable, ignores the discretionary nature of the sanction it seeks to impose, and misreads the record of Mrs. Lees participation in the mediation process. Significantly, moreover, appellant disregards recent case authority that decisively rejects the precise argument raised here under similar facts.

Our interpretation of the mutual intent of the parties in entering into the Contract must be governed by the plain language thereof, giving that language its ordinary and popular meaning insofar as it is clear and explicit. (Civ. Code, §§ 1636-1639, 1644.) "We may not `create for the parties a contract which they did not make, and . . . cannot insert in the contract language which one of the parties now wishes were there. [Citation.]" (Ben-Zvi v. Edmar Co. (1995) 40 Cal.App.4th 468, 473.) On its face, paragraph 17 of the Contract bars an award of attorney fees only to the "party [that] commences" litigation based on a dispute or claim under the Contract without first attempting to resolve the dispute through mediation, "even if" that party would otherwise have been entitled to such fees as prevailing party. The plain language of this provision unambiguously limits its application to the party that commences the litigation, whether by arbitration or court action. Indeed, even this limited sanction for failing to attempt mediation is expressly subject to the discretion of the trial court. If the drafters of this contractual provision had wished it to apply to all parties to the Contract, whether or not they also commenced or initiated the litigation in which the subject attorneys fees have been incurred, they would and certainly should have drafted it accordingly.

Appellants contention that section 1717 somehow overrides the express terms of the contractual provision at issue, making it "mutual" or "reciprocal" and equally applicable to all parties whether or not they initiated the litigation, is unsupported and altogether meritless. Section 1717 simply provides that any contractual attorney fees provision must be interpreted mutually and reciprocally to insure an award of such fees to "the party prevailing on the contract, whether he or she is the party specified in the contract or not." (§ 1717.) There is nothing in the statute extending this reciprocity to express contractual limitations on the right to attorney fees. Section 1717 essentially states that where a contract grants attorney fees to one party if it prevails, it must be read as granting them to either party under those circumstances. The statute has no relevance to provisions that deny an award of attorney fees to any party based on its failure to comply with other contractual preconditions.

Mutuality or reciprocity of remedy is of no relevance to the provision at issue here. Read together, the two material paragraphs in this Contract—paragraphs 17 and 22—simply provided that in any action between appellant and respondents, the prevailing party, whichever it was, would be entitled to recover its attorney fees, unless that party commenced an action without first attempting to resolve the matter through mediation. On its face, this outcome is mutual and reciprocal, since it applies equally to all parties. Had it been respondents who initiated the action without first attempting to resolve the matter through mediation, the restrictive language of paragraph 17 would clearly have applied to them. By the same token, had appellant failed to attempt mediation prior to filing suit, and been the prevailing party in the resulting litigation, it would have forfeited its right to recover attorney fees. Having failed to prevail at trial, the fact appellant did attempt mediation prior to filing suit does not shift the sanction for not doing so to the prevailing respondents.

The provisions at issue in this case are virtually identical to those before the court in Johnson v. Siegel (2000) 84 Cal.App.4th 1087. That case persuasively holds that section 1717 does not apply under these circumstances to bar an award of attorney fees to a prevailing party who did not commence the litigation. The failure of such a party to initiate or participate in mediation is simply irrelevant to the award of attorney fees, since "[s]eeking mediation is a condition precedent to the recovery of attorney fees by the party who initiates the action" only. (Id. at p. 1101.)

In one important respect, the contractual provisions before the court in Johnson v. Siegel differed from those before us now. There, the mediation provision at issue, unlike the one before us, did not provide for any exercise of the trial courts discretion in deciding whether to deny an award of attorneys fees to the prevailing party based on its alleged failure to participate in mediation. (Johnson v. Siegel, supra, 84 Cal.App.4th at p. 1100.) In contrast, not only is the limiting language of paragraph 17 confined to the party who "commences" the litigation without first attempting mediation, but the denial of attorney fees is explicitly made subject to "the discretion of the arbitrator(s) or judge" awarding fees.

Appellant completely ignores this element of trial court discretion unambiguously included in the Contract at issue here. The standard of review for abuse of discretion is well established. An appellate court is not authorized to substitute its judgment for that of a trial judge vested with discretion to decide an issue in the absence of a clear showing of abuse resulting in injury sufficiently grave as to amount to a manifest miscarriage of justice. (Blank v. Kirwan (1985) 39 Cal.3d 311, 331; San Bernardino City Unified School Dist. v. Superior Court (1987) 190 Cal.App.3d 233, 240-241; 9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 356, pp. 404-405.) The appropriate test for abuse of discretion is whether the trial court exceeded the bounds of reason. Thus, when two or more inferences can reasonably be deduced from the facts, the reviewing court will uphold the decision of the trial court. (Walker v. Superior Court (1991) 53 Cal.3d 257, 272; Shamblin v. Brattain (1988) 44 Cal.3d 474, 478-479; Eisenberg et al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2002) ¶¶ 8:87 to 8:87.1, pp. 8-33 to 8-34.) The party complaining of abuse of discretion fails to bear its burden of establishing such abuse if it merely presents a state of facts which affords an opportunity for a difference of opinion. (Blank v. Kirwan, supra, 39 Cal.3d at p. 331; Denham v. Superior Court (1970) 2 Cal.3d 557, 566; In re Marriage of Varner (1997) 55 Cal.App.4th 128, 138.)

Appellant has made no showing of abuse of discretion in this case. On its face, paragraph 17 has no application to respondents, who did not commence the litigation in which they were the prevailing parties. There is no reason they should be punished for allegedly not having fully participated in mediation over a dispute as to which their position has been proven meritorious. Even if paragraph 17 were applicable to respondents—an interpretation we emphatically reject—there was clearly no abuse of discretion in awarding them attorney fees under the facts on this record. Respondents indisputably did participate in a ten hour pre-litigation mediation prior to appellants filing of the instant lawsuit. Even though Mrs. Lee was not physically present, she was nevertheless available at all times by telephone and in communication with respondent Mr. Lee at least four times during the course of the mediation. Based on these facts, the trial court was well within its discretion in concluding that even if paragraph 17 had been applicable in any way to respondents, they should not be deprived of their right to attorney fees under the Contract as prevailing parties.

DISPOSITION

The order awarding attorney fees to respondents is affirmed. Appellant shall pay respondents costs incurred on this appeal.

We concur: Parrilli, J., Pollak, J.


Summaries of

Bay Area Luxury Homes/Stevick I v. Lee

Court of Appeals of California, First District, Division Three.
Nov 12, 2003
No. A098667 (Cal. Ct. App. Nov. 12, 2003)
Case details for

Bay Area Luxury Homes/Stevick I v. Lee

Case Details

Full title:BAY AREA LUXURY HOMES/STEVICK I, LLC, Plaintiff and Appellant, v. WILLIAM…

Court:Court of Appeals of California, First District, Division Three.

Date published: Nov 12, 2003

Citations

No. A098667 (Cal. Ct. App. Nov. 12, 2003)