Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from an order of the Superior Court of Los Angeles County No. BC255209. Rita Miller, Judge.
Monteleone & McCrory, Patrick J. Duffy, Jeffrey S. Hurst and Martha Eager for Plaintiff, Cross-Defendant and Appellant.
Booth, Mitchel & Strange, Sean T. Osborn and David L. Hughes for Defendant, Cross-Complainant and Respondent, Washington International Insurance Company.
Rockard J. Delgadillo, City Attorney, Laurie Rittenberg, Assistant City Attorney, and Todd T. Leung, Deputy City Attorney, for Defendant, Cross-Complainant and Respondent, City of Los Angeles.
WOODS, J.
D&M Construction Inc. (“D&M”) appeals from a judgment entered upon the trial court’s order granting the respondents’, City of Los Angeles (the “City”) and Washington International Insurance Company (“Washington”), motion for judgment on D&M’s complaint. Under a contract with Washington, D&M agreed to complete a construction project for the City. Disputes arose concerning the project construction. The City’s Board of Parks & Recreation Commissioners (the “Board”)—the City’s contracting agency for the project—conducted a review of the matter. As a result of the proceeding, the Board adopted findings that D&M was an “objectionable entity” under the contract documents and was in default. The Board directed Washington to remove D&M from the project. After D&M was terminated, it filed the instant lawsuit against Washington and the City for breach of contract and interference with contract, respectively. The matter proceeded to a bench trial. During the first phase of the trial, the court granted the City’s and Washington’s motions for judgment, ruling D&M failed to exhaust its administrative remedies to set aside the Board’s determinations. The court held the Board’s determinations were final and binding on D&M, and effectively created a defense to D&M’s affirmative claims. During a second phase of the case the court also ruled in favor of Washington and the City on their respective cross-claims against D&M. The court also granted Washington’s and the City’s requests for attorneys’ fees.
Before this court, D&M argues the trial court erred in ruling for the City and Washington during the first phase of the case. Specifically D&M argues it was not required to exhaust judicial remedies under either Code of Civil Procedure section 1094.5 (administrative mandamus) or section 1085 (traditional mandamus) because given the circumstances surrounding the Board’s actions neither form of mandamus would have been available. In addition, D&M asserts that the court’s conclusion in the first phase of the trial meant that the court lacked jurisdiction to rule in favor of the City and Washington on the cross-complaints. Finally, D&M argues the court erred in awarding the City attorneys’ fees. As we shall explain fully here, only D&M’s assertions concerning the attorneys’ fees have merit. We conclude the court properly granted judgment, not simply because D&M failed to exhaust judicial remedies, but instead because D&M failed to exhaust internal agency remedies available to it to challenge the Board’s findings. With respect to the attorneys’ fees issue, we conclude, however that the trial court applied the wrong statute in determining the City was the prevailing party and thus the fees award for the City cannot stand. Accordingly, we reverse and remand the order awarding the City attorneys’ fees, but affirm the judgment in all other respects.
All references to statute are to the Code of Civil Procedure unless otherwise indicated.
FACTUAL AND PROCEDURAL BACKGROUND
The Parties, The Project and the Contracts.
In 1998, the Board acting on behalf of the City entered into a construction contract (“Original Contract”) with Ed Hodges Construction (“Hodges”) to build a public works project known as the Imperial Courts Recreation Center (the “Imperial Courts Project”). Washington served as Hodges’ surety on the Imperial Courts Project.
In late 1998 and early 1999, the City found Hodges to be in default on the Imperial Courts Project and terminated its contract with Hodges. Thereafter the City demanded that Washington perform under the Original Contract pursuant to the terms of the performance bond. In February 1999, Washington and the City entered into a Takeover Agreement to complete the Imperial Courts Project, pursuant to which Washington selected D&M as the “Completion Contractor” to finish the construction. Under the Takeover Agreement the City consented to D&M serving as the Completion Contractor.
Washington and D&M entered into the Completion Contract; it expressly incorporated the terms of the Original Contract, the Takeover Agreement and all of the contract bid documents, plans and specifications; and D&M agreed to strictly comply with all of the provisions of the incorporated contract documents.
D&M’s Performance and Termination.
D&M began working on the Imperial Courts Project. In the fall of 2000 disputes arose over D&M’s performance on the Imperial Courts Project and a number of other unrelated construction projects D&M was working on under other contracts it had with the City.
On December 5, 2000, the City sent D&M a letter advising it that at a meeting scheduled for December 13, 2000, the Board would consider taking various actions against D&M as outlined in an attached Report of the General Manager. These actions included: (1) debarring D&M from current and future City projects; (2) finding D&M to be a “non-responsible bidder” on certain projects; and (3) finding D&M in breach of contract on various projects. Specifically, as to the Imperial Courts Project, the City sought findings from the Board that: (1) D&M was an “objectional entity” under the Original Contract, General Provision 28 (“Provision 28”) (and a directive to Washington to remove D&M from the Project pursuant to Provision 28); and (2) a finding the General Manager’s Report served as a “notice of default” pursuant to paragraph 5 of the Takeover Agreement between the City and Washington.
According to the Report of the General Manager of the City’s Planning and Construction Division the disputes centered on a number of matters including problems with D&M’s administration of projects, such as violations of workers’ compensation laws, criminal fraud charges against D&M personnel, threats of litigation, the use of “unskilled labor, poor work quality, lack of subcontractor coordination, lack of project supervision, improper subcontractor substitutions, unjust requests for extension of time, inconsistent and non-payment of subcontractors, submission of false invoices to the City for payment and failure to submit claim documentation in accord with contract documents.”
Provision 28 provides in pertinent part: “Only competent workmen shall be employed on the Work. Any person employed, who is, in the opinion of the General Manager, found to be incompetent, intemperate, troublesome, disorderly or otherwise objectionable, or who fails or refuses to perform his work properly and acceptably shall be immediately removed from the work by the Contractor and not reemployed on the Work.”
Paragraph 5 of the Takeover Agreement provides: “In the event a dispute arises between LA and Completion Contractor or Completion Contractor is in default under the terms of the Contract, LA shall give SURETY written notice thereof within ten (10) calendar days of such default.”
On December 8, 2000, the City also sent a letter to Washington to notify it that the Board would consider removing D&M from the Project at the December 13, 2000, Board meeting for the reasons outlined in the General Manager’s Report.
On December 7, 2000, D&M responded to the City’s letter, objecting to the timing and manner of notice of the December 13 Board meeting. D&M requested that the Board continue the matter to the Board’s next scheduled meeting so that D&M would have an “adequate opportunity to prepare and respond to the allegations” in the General Manager’s Report. D&M also requested a “full evidentiary hearing before an impartial board” into the facts underlying the allegations. Nonetheless, D&M also indicated its intent to appear and be heard at the December 13 proceeding.
In the City’s response to D&M, dated December 8, 2000, the City acknowledged D&M’s objections. The City noted that the General Manager’s Report recommended two distinct types of actions proposed to be taken by the Board: “Recommendations 1, 2, 3, and 4 pertain to a finding that D&M is a ‘nonresponsible bidder’ [on Projects collectively known as ‘Inglewood’]. By contrast recommendations 5 and 6 deal with breaches of contract on two of the Department’s projects [one known as the ‘North Hollywood Project’ and the second as the ‘Oakwood Project’] and recommendation 7 [and 8] concerns inadequate performance by D&M on a third project [Imperial Courts Project] previously taken over by a surety [Washington]. In response to your request to continue the entire matter, we propose to handle the two categories differently.” As a result the City agreed to postpone the hearing on the Inglewood “nonresponsible bidder” recommendations until January 17, 2001.
But as to the recommendations concerning Imperial Courts, North Hollywood and Oakwood Projects, the City denied the request for a continuance because of the perceived prejudice and damage resulting from “on-going disputes between the City and D&M and lack of job progress, improper substitutions of subcontractors, noncompliance inspection reports, improper documentation supporting change order requests, and labor and wage violations on those projects.” The City rejected D&M’s argument that notice of the meeting was insufficient as to those matters, indicating its view “while it is the City’s position that a hearing might not be required regarding matters of contract cancellation, one will be afforded.”
On December 13, 2000, the Board met to consider, among other items on its agenda, the recommendations of the Report of the General Manager regarding D&M’s work and performance on the Imperial Courts Project. (The Board meeting lasted approximately five hours. The meeting agenda listed more than 40 matters submitted for the Board’s consideration.) According to the minutes of the proceeding, D&M appeared at the hearing through its President, its Vice-President and its attorneys, along with its surety’s (Intercargo) counsel. During the proceedings, D&M again requested that the Board continue the matter until January 17 because all of the matters were interrelated; D&M also lodged its objections to the General Manager’s Report. The Board heard testimony, evidence and argument from the President and Vice President of D&M, D&M’ s attorneys, the Assistant General Manager, and the City Attorney’s office. The Board approved recommendations 7 & 8 of the Report of the General Manager pertaining to the Imperial Courts Project. By approving recommendation 7, the Board found that D&M was an “objectionable entity” and should be immediately removed from the Imperial Courts Project and not allowed to return. By approving recommendation 8, the Board found that the Report of the General Manager served as the notice of default under the Takeover Agreement.
The Board’s agenda for the December 13, 2000, meeting contained the following: “Finalization of Commission Actions: In accordance with City Charter Section 32.3 actions of the Board of Recreation and Park Commissioners shall become final at the expiration of the next five meeting days of the Los Angeles City Council during which the Council has convened in regular session.”
The City Charter has since been renumbered and the contents of the former section 32.3 are now found in City Charter section 245.
The City immediately directed Washington to remove D&M from the Imperial Courts Project and not have them return pursuant to Provision 28 of the Original Contract. As a result, on December 15, 2000, Washington notified D&M that it had declared D&M in default and immediately terminated D&M under the Completion Contract.
At the subsequent Board meeting on January 17, 2001, after the presentation of arguments and evidence from D&M and the City, the Board adopted the recommendations (1-4) in the General Manager’s Report. Accordingly, the Board found D&M a non-responsible bidder and debarred D&M from future contracts with the City. Neither before this court nor in the lower court, has D&M challenged the Board’s January 17, 2001, findings, or the procedures or processes employed to reach the findings that it is a “non-responsible bidder” and is “debarred” from City contracts.
The Litigation.
After D&M was terminated from the Imperial Courts Project it did not seek review or reconsideration of the Board’s action from the City Council pursuant to City Charter section 245. In addition, D&M did not seek judicial review by either a petition for a writ of administrative mandamus (§ 1094.5) or traditional mandamus (§ 1085).
Instead, D&M filed a civil action against Washington for various claims including breach of contract relating to D&M’s termination; and various breach of contract and tort claims against the City. By the time of trial only two claims remained—breach of contract against Washington and an intentional interference with contract tort claim against the City—both relating to the decisions the Board made at the December 13, 2000, Board meeting and Washington’s subsequent termination of the Completion Contract on December 15, 2000. The City and Washington each filed cross-complaints against D&M. The City alleged breach of contract and false claims, while Washington asserted claims against D&M for breach of contract and indemnity.
The City’s “false claims” action centered on allegations that D&M made a false claim as to the need to substitute a certain subcontractor and the submission of false invoices as to another subcontractor’s work.
The parties waived their rights to a jury trial and stipulated to try the case in phases with the complaint litigated in Phase 1 and the cross-complaints resolved in Phase 2. In addition, the parties decided to divide Phase 1 into several issues, agreeing that the first issue to be tried is “‘[w]hat is the legal effect, if any, of the determinations of the City’s Board of Recreation and Parks Commissioners regarding contract termination and/or debarment?’ [and further agreeing] In order to minimize costs and expedite trial, the parties wish to try this phase via written submissions rather than live testimony. The most convenient method of doing so is to follow the procedures set forth in CCP § 437c for motions for summary judgment, although this proceeding is not a motion for summary judgment and is not subject to the rules applicable to motions for summary judgment.” The court adopted the parties’ stipulation and further determined that if the first issue of Phase 1 was not dispositive then the trial would proceed to the second issue identified as: “Can City/Washington rely as a possible basis of termination on the allegations, determinations of the City regarding the conduct of D&M on other City projects.”
Phase 1: The Complaint.
Both the City and Washington filed motions for judgment on D&M’s complaint pursuant to section 631.8. The City and Washington argued that D&M was required to contest the findings the Board made on December 13, 2000, by exhausting its administrative remedies by filing a timely writ of mandamus. The City and Washington also argued that D&M’s failure to seek this review was fatal to its claims against the City and Washington, and thus, the Board’s finding D&M was an “objectionable entity” under the contract documents was binding and final and could not be re-litigated under the principles of collateral estoppel.
Washington also submitted additional arguments relating to the legal effects and consequences of the Board’s December 13, 2000, findings: (1) that the finding of D&M as an objectionable entity amounted to a material breach of the Completion Contract and that breach occurred on December 13, 2000, prior to Washington’s termination of D&M on December 15, 2000; (2) D&M was put on notice of its default under the Takeover Agreement by service of the General Manager’s Report on December 5, 2000; (3) D&M was not entitled to “cure” the default and given the Board’s findings Washington was excused from the contract requirement that it provide D&M with three notice days to cure; and (4) because Washington terminated D&M at the direction of the City, Washington was absolved and excused from any liability to D&M as a result of its termination. (Collectively referred to as “Washington’s Additional Consequences Arguments.”)
D&M opposed Washington’s and the City’s motions. D&M’s opposition focused almost exclusively on whether the Board’s December 13, 2000, finding should have been challenged by way of writ of mandamus. D&M argued that it was not required to exhaust its judicial remedies to challenge the findings because the Board did not conduct the requisite “hearing” on December 13, 2000, as that term is used under section 1094.5 and that the Board’s procedures and decision making processes could not otherwise be reviewed under traditional mandamus proceedings. Consequently, D&M claimed that it was not required to seek mandamus relief and instead was entitled to pursue its breach of contract and tort claims against Washington and the City in the current action. In its opposition, D&M did not address Washington’s Additional Consequences Arguments.
On April 8, 2005, the court heard the motions and conducted the trial on the first issue of Phase 1. Thereafter the court ruled in favor of the City and Washington, finding that D&M was required to contest the December 13, 2000, findings of the Board by filing a timely writ of mandamus and that “D&M’s failure to exhaust its administrative remedies deprives this Court of jurisdiction to hear those claims involving matters decided by the Board. Such matters cannot be litigated de novo under these circumstances, due to principles of res judicata and/or collateral estoppel.” The court also found that D&M was barred from litigating whether the City’s directive to Washington to terminate and remove D&M from the Imperial Courts Project was wrongful and from otherwise contending that City’s actions with regards to this project were wrongful. The court further concluded that as a result of D&M’s failure to exhaust its remedies, in accord with Washington’s Additional Consequences Arguments, Washington’s actions were justified and excused, and that Washington did not breach the Completion Contract. The court did not reach the second issue submitted in Phase 1 finding it was unnecessary to do so.
Phase 2: Cross-Claims .
The case then proceeded to its second phase in which the parties litigated the cross-complaints. The parties agreed to try the cross-complaints on written submissions. The court thereafter ruled in favor of Washington on its breach of contract claim and awarded it $26,263.81.
As for the City’s claims, the court rejected the false claims cause of action finding the City had not proved the elements of the claim as to the two subcontractors. Nonetheless, the court ruled in favor of the City on the breach of contract cause of action, finding: “[t]he parties agree that City was a third-party beneficiary D&M’s Contract with Washington and that third party beneficiaries may recover damages for breach of contract. City proved that D&M breached the contract. Exhibit 48, the Report of the General Manager dated December 13, 2000, makes findings (on page 2) that ‘D&M Construction, Inc. is an objectionable entity’ and is in default pursuant to Paragraph 5 of the takeover agreement between the City and Washington. The Report sets forth various bases for its findings. As was established in Phase 1 of these proceedings, the doctrine of collateral estoppel prevents D&M from contesting the validity of these findings. These findings establish breach of contract.”
The court noted that its decision in Phase 1 of the trial had not, as a matter of law, resolved the false claims allegations.
Though the City sought damages of $166,371.02 the court found the City had shown only $146,958.40 in damages and ultimately reduced the award by one-half to $73,479.20 based on the City’s failure to mitigate its damages.
Motions for Attorneys’ Fees .
Thereafter, both the City and Washington filed motions for attorneys’ fees based on Civil Code section 1717 and Code of Civil Procedure section 1032. The court granted the fees motions. Specifically with respect to the City the court found the City was the “prevailing party” and awarded fees in the amount of $187,243.50.
After judgment was entered for the City after phase 1 of the trial, the City filed a motion for attorneys’ fees and costs based on Code of Civil Procedure section 1038, but the court denied the request.
D&M appeals the judgment from Phase 1 and 2 as well as the post judgment order awarding the City attorneys’ fees.
DISCUSSION
On appeal, D&M argues the trial court erred in ruling for the City and Washington in Phase 1. Specifically D&M contends the court incorrectly concluded D&M was required to file a petition for writ of mandamus to challenge the Board’s findings of December 13, 2000. D&M further contends the court erred in ruling that because D&M’s failed to exhaust these remedies the Board’s findings were binding on D&M and fatal to its claims against the City and Washington. In addition, D&M asserts that the court’s conclusion in Phase 1 meant that the court lacked jurisdiction to rule in favor of the City and Washington in Phase 2 on the cross-complaints. Finally, D&M argues the court erred in awarding the City attorneys’ fees. We address these contentions in turn.
I. The Trial Court Did Not Err In Entering Judgment On D&M’s Complaint In Favor Of The City And Washington.
D&M argues its failure to petition for a writ of mandamus under sections 1094.5 or 1085 to set aside the Board’s December 13, 2000, findings was not fatal to its civil action against the City or binding with respect to its claims against Washington.
Before we address the merits of this contention we first resolve a preliminary matter raised by the City. In its brief the City maintains D&M’s appeal from the decision entered after Phase 1 is untimely. The City asserts that during Phase 1 the court conducted a trial on its “special defenses” under section 597 and that the court’s subsequent decision in favor of the City after that Phase 1 trial resulted in a judgment that was immediately appealable; and that D&M’s failure to file an appeal at that time is fatal to its current appeal. We do not agree.
Section 597 provides, in pertinent part:
“When the answer pleads that the action is barred by the statute of limitations, or by a prior judgment, or that another action is pending upon the same cause of action, or sets up any other defense not involving the merits of the plaintiff’s cause of action but constituting a bar or ground of abatement to the prosecution thereof, the court may, either upon its own motion or upon the motion of any party, proceed to the trial of the special defense or defenses before the trial of any other issue in the case, and if the decision of the court, or the verdict of the jury, upon any special defense so tried (other than the defense of another action pending) is in favor of the defendant pleading the same, judgment for the defendant shall thereupon be entered and no trial of other issues in the action shall be had unless that judgment shall be reversed on appeal or otherwise set aside or vacated.” (Code Civ. Proc., § 597.)
Here neither the court nor the parties viewed the trial conducted during Phase 1 as a trial on special defense under section 597. Section 597 was not referred to by the parties in their motions or in the stipulation to bifurcate the trial or by the court during the Phase 1 proceedings. At the conclusion of Phase 1, the court entered a minute order granting the motions for judgment under section 631.8 and based on D&M’s request, issued a statement of decision explaining its ruling. Subsequently, the court entered judgment after Phase 1, but later concluded that it was probably not proper to have entered the judgment at that time. Nonetheless, the court never invoked section 597 as the method to conduct the proceedings in Phase 1, and thus D&M was not required to appeal the court’s decision immediately after Phase 1 of the case.
Furthermore, as noted in People v. Rath Packing Company (1978) 85 Cal.App.3d 308, 336-337, “[o]ne practical exception to … [section 597], however, is that a separate judgment should not be entered upon a special defense which is not dispositive of the entire controversy.” Such is the case, where as here, unresolved cross-claims involving the parties remain. (Ibid.) “When ... the court proceeds to try a special defense which does not constitute a bar to the entire action before the trial of any other issue, and the decision on such special defense is in favor of the defendant, the proper procedure is to make a minute order to that effect, proceed to the trial of the remaining issues, make findings of fact and conclusions of law on all issues, and render judgment accordingly. In such a case, the decision of the court on the special defense and all rulings on it may be reviewed on appeal from the judgment.” (Id. at p. 336.)
Accordingly in light of these circumstances, we conclude that D&M’s appeal of the matters decided in Phase 1 was not untimely.
Turning to D&M’s claims on appeal concerning Phase 1, we first address the applicable standard of review. Phase 1 determinations were made after a bench trial and pursuant to a section 631.8 motion for judgment. “The standard of review of a judgment and its underlying findings entered pursuant to section 631.8 is the same as a judgment granted after a trial in which evidence was produced by both sides. The findings supporting such a judgment ‘are entitled to the same respect on appeal as are any other findings of a trial court, and are not erroneous if supported by substantial evidence.’” (Metropolitan Transit Development Board v. Handerly Hotel (1999) 73 Cal.App.4th 517, 528, citations omitted.) This court views the evidence in the light most favorable to the respondents, resolves all evidentiary conflicts in favor of the prevailing party and indulges all reasonable inferences possible to uphold the trial court’s findings. (Ibid.) However, here the decisive facts are undisputed, and we are reviewing the court’s determination on a question of law, namely the legal effect of the Board’s December 13, 2000, findings and determinations. (See Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799.) As a result, we are not bound by a trial court’s legal determination on this issue, but rather are free to draw our own conclusion of law. (See Torrey Pines Bank v. Hoffman (1991) 231 Cal.App.3d 308, 317.) With this standard in mind, we examine D&M’s claims.
We reject D&M’s characterization of this matter as a summary judgment proceeding. The parties stipulated and the court trial made clear that Phase 1 was a bench trial, and that the parties should rely on the procedure contained in the summary judgment statute to assist them in preparing their written trial submissions.
On appeal, D&M argues the trial court erred in concluding it was required to seek mandamus review in the superior court of the Board’s December 13, 2000, actions. Specifically, D&M maintains that section 1094.5 review would not have applied because the Board lacked authority to act and issue its findings, the findings were not made at a hearing required by law; and because the Board did not adjudicate any rights or obligations during the December 13, 2000, proceedings. Likewise, D&M maintains it was not required to seek traditional mandamus relief under section 1085 because ordinary mandamus does not apply to enforce contractual obligations such as those D&M was seeking to enforce in this lawsuit, and because the Board’s decisions and findings involved discretionary actions which are not subject to review under section 1085. Finally, D&M argues that it was not required to seek a mandamus remedy prior to asserting its civil claims against Washington because Washington is a private party, not a governmental entity to which mandamus remedies would apply.
Before this court Washington and the City assert that either form of mandamus relief applied and would have permitted judicial review of the Board’s December 13, 2000, findings and that D&M’s failure to exhaust these judicial remedies was fatal to its claims in this action.
In our view, however we need not decide whether D&M was required to exhaust its judicial remedies by filing a petition for mandamus nor do we decide which form of mandate could have applied because the court properly granted the motions for judgment for a different reason. (See Barnett v. Delta Lines, Inc. (1982) 137 Cal.App.3d 674, 682 [an appellate court looks to the result reached and is not limited to the correctness of the underlying rationale].) As we shall explain, the decision in Phase 1 in favor of the City and Washington was proper because D&M failed to exhaust its internal administrative remedies with the City before seeking judicial intervention.
The issue of the failure to exhaust internal administrative remedies with City Council was not raised in the original briefing submitted to this Court, nonetheless, the parties were given the opportunity after oral argument to submit letter brief on this issue.
Exhaustion of Administrative Remedies.
Exhaustion of available administrative remedies is a condition precedent to obtaining judicial relief, even though the party may have a cause of action which is properly triable in the courts. Thus, exhaustion of remedies is a prerequisite to both ordinary and administrative mandamus proceedings. (See Brockover v. Perko (1994) 28 Cal.App.4th 479, 490-491.)
The exhaustion doctrine precludes judicial review of an intermediate or interlocutory action of an administrative agency. (Alta Loma School District v. San Bernardino County Committee on School District Reorganization (1981) 124 Cal.App.3d 542, 554 (Alta Loma).) A party must proceed through the full administrative process “to a final decision on the merits.” (La Costa Beach Homeowners Assn. v. Wayne (1979) 89 Cal.App.3d 327, 330.) Each step in the administrative proceeding cannot be reviewed separately, any more than each ruling in the trial of a civil action may be separately reviewed by a separate appeal. Administrative proceedings should be completed before the issuance of a judicial writ. The rule is not a matter of discretion; compliance is a jurisdictional prerequisite to judicial review. (Alta Loma, supra, 124 Cal.App.3d at p. 554.) “‘Exhaustion’ applies where a claim is cognizable in the first instance by an administrative agency alone: judicial interference is withheld until the administrative process has run its course.” (United States v. Western Pacific Railroad Company (1956) 352 U.S. 59, 63-64, superceded by regulation on other ground in Jones Truck Lines, Inc. v. Aladdin Synergetics, Inc. (M.D.Tenn.1994) 174 B.R. 76.)
The exhaustion doctrine can be applied where the litigant is attempting to obtain judicial redress without having commenced an available administrative proceeding at all or where a litigant who is dissatisfied with an agency decision has failed to exhaust remedies to obtain relief from that decision in the administrative process. Moreover, the exhaustion doctrine applies even where the administrative remedy is couched in permissive language. (County of Los Angeles v. Farmers Insurance Exchange (1982) 132 Cal.App.3d 77, 85-87 [although the Insurance Code did not expressly direct claimants to seek administrative remedies from the insurance commissioner prior to seeking judicial intervention, the broad statutory power afforded the insurance commissioner provided the authority to grant adequate remedies and thus claimants were not permitted to bypass the entire administrative process].)
The principal purposes of exhaustion requirements include avoidance of premature interruption of administrative processes; allowing an agency to develop the necessary factual background of the case; letting the agency apply its expertise and exercise its statutory discretion; administrative efficiency and judicial economy. (McKart v. United States (1969) 395 U.S. 185, 193-194.) The exhaustion doctrine is grounded on concerns favoring administrative autonomy (i.e., courts should not interfere with an agency determination until the agency has reached a final decision) and judicial efficiency (i.e., overworked courts should decline to intervene in an administrative dispute unless absolutely necessary). (Farmers Insurance Exchange v. Superior Court (1992) 2 Cal.4th 377, 391.)
This notwithstanding, exhaustion of administrative remedies is not required where it appears the administrative board is without jurisdiction and thus the remedy is unavailable or where the remedy is inadequate. (Eight Unnamed Physicians v. Medical Executive Committee of the Medical Staff of Washington Township Hospital (2007)150 Cal.App.4th 503, 511.) Moreover, if the administrative entity lacks a procedural mechanism for the submission, evaluation and resolution of the appeal exhaustion would not be required and aggrieved party’s failure to request such an appeal is not a bar to an action for judicial review. (Rosenfeld v. Malcolm (1967) 65 Cal.2d 559, 566; Unfair Fire Tax Committee v. City of Oakland (2006) 136 Cal.App.4th 1424, 1428-1430.) Likewise In addition, exceptions to the exhaustion doctrine also exist where the administrative agency has made it clear it would be futile to pursue the administrative process to conclusion or where irreparable harm will result if judicial intervention is withheld until a final administrative decision is rendered. (Alta Loma School District v. San Bernardino County Committee on School District Reorganization, supra, 124 Cal.App.3d at p. 554.)
Here, Los Angeles City Charter section 245 provided D&M with an internal administrative remedy to seek reversal of the Board’s decisions.
Los Angeles City Charter section 245, provides, in pertinent part:
“Actions of Boards of commissioners shall become final at the expiration of the next five meeting days of the Council during which the Council has convened in regular session, unless the Council acts within that time by two-thirds vote to bring the action before it or to waive review of the action . . . .
“(a) Action by Council. If the Council timely asserts jurisdiction over the action, the Council may, by two-thirds vote, veto the action of the board within 21 calendar days of voting to bring the matter before it, or the action of the board shall become final. . . . [T]he Council may not amend, or take any other action with respect to the board’s action.
“(b) Waiver. The Council, may by ordinance, waive review of classes or categories of actions, or by resolution, waive review of an individual anticipated action of a board. The Council may also, by resolution, waive review of a board action after the board has acted. Actions for which review has been waived are final upon the waiver, or action of the board, as applicable.
“(c) Effect of Veto. An action vetoed by the Council shall be remanded to the originating board, which board shall have the authority it originally held to take action on the matter.” (LA City Charter Section 245.)
In addition, the rules governing City Council proceedings provided D&M with the appropriate procedural mechanism to bring its claim to Council’s attention. Specifically, City Council Rules, Chapter II, item 8, provides that “. . . Council [must] provide an opportunity in regular meetings for members of the public to address it on any non-agenda item generally considered to be a municipal affair and within the subject matter jurisdiction of Council.” (“Council Rule 8”) Using this mechanism, D&M could have appeared before council and consistent with Council Rule 8 requested that Council exercise jurisdiction under Los Angeles City Charter section 245 over its complaint regarding the actions of the Board. Such review from City Council of the Board’s actions, could have included an assessment of the fairness of the processes and procedures the Board used in arriving at its findings. If the City Council asserted jurisdiction over the matter the City Council could have vetoed the Board’s December 13, 2000, decision and remanded the matter back to the Board for reconsideration.
Earlier in this litigation the City filed a motion for judgment on the pleadings asserting that D&M’s action was barred because it failed to exhaust its internal remedies with the City Council. The trial court rejected this argument, based on the erroneous view that the December 13, 2000, Board action was governed by the rules that pertained to the subsequent and wholly separate non-responsible bidder and debarment proceedings that occurred on January 17, 2001. The City Administrative Code contains various procedures governing determinations of “non-responsible bidder” status. (LAC Admin. Code § 10.40.2.) Pursuant to section 10.40.2(d) “The determination of an awarding authority that the bidder is non-responsible shall be final and constitute exhaustion of the bidder’s administrative remedies.” Section 10.40.2(d) of the Los Angeles Administrative Code applied to the actions taken by the Board on January 17, 2001. But the Board actions of January 17, 2001, were not the subject of the court’s conclusion on the dispositive Issue 1 of the first phase of this trial. Thus, section 10.40.2(d) of the Los Angeles Administrative Code did not apply to effectively “waive” the requirement that D&M seek review from the City Council of the actions taken by the Board on December 13, 2000.
Prior to seeking judicial intervention, D&M was required to submit its complaints about the Board’s findings and procedures to the City Council and wait until the City Council acted (or refused to act) or the time expired to act. We interpret the City Council’s statutory authority (derived from the City Charter) to consider and review the actions of municipal boards as empowering the City Council to afford the relief D&M sought. Although Los Angeles City Charter section 245 does not automatically require the City Council to review the Board’s actions, Council Rule 8 at least provides D&M with a clear mechanism to request such a review. In our view the review procedures provided in Los Angeles City Charter section 245 and Council Rule 8 are sufficient to provide an adequate internal agency review. It is D&M’s failure to follow these procedures--to request City Council review that causes us to conclude that D&M failed to exhaust internal agency remedies.
Furthermore, it does not appear that D&M would have suffered irreparable injury by pursuing administrative action by the City Council before resorting to the courts. The City Council holds regular meetings three times a week. (LA City Charter section 242.) Thus, within a month of the Board’s actions, D&M would have obtained its remedy from the City Council and had the decision vetoed and remanded back to the Board. If, however, the City Council took no action or affirmed the Board’s decision D&M would have fully exhausted it internal remedies, thereby allowing it to pursue judicial remedies. Finally, there is no evidence that pursuit of the grievances through the City Council would have been an exercise in futility.
Consequences of the Failure to Exhaust Remedies.
The failure to exhaust internal administrative remedies has certain effects on D&M’s claims against the City and Washington. The exhaustion of internal agency remedies doctrine differs from the requirement of exhaustion of judicial remedies, in that seeking review of an administrative decision is not necessarily a prerequisite to bringing an action based on the decision. In contrast, the rule of exhaustion of judicial remedies is based on the doctrine of res judicata and the issue preclusion of collateral estoppel.
As discussed elsewhere herein, it is well established that the failure to exhaust internal administrative remedies is a bar to relief in a California court. (Sierra Club v. San Joaquin Local Agency Formation Commission (1999) 21 Cal.4th 489, 495.) When the exhaustion doctrine applies the court lacks jurisdiction to review and set aside actions of the administrative entity. A party who fails to exhaust its remedies cannot resort to the courts to litigate the substantive merits of the agency decision or the procedural processes of the agency in reaching that decision. The doctrine applies whether or not the administrative findings are erroneous, or is in violation of statutory authority, or were arrived at in a procedurally improper or unfair manner. If there is some question about the applicability of an administrative remedy, the aggrieved party must present the question to the agency so that it can decide the issue in the first instance. (See Alta Loma, supra, 124 Cal.App.3d at p. 554.)
D&M is precluded from litigating the Board’s findings and the fairness of the process used by the Board in making its findings. Hence the Board’s findings are final and binding as to D&M, not because D&M failed to exhaust judicial remedies in section 1094.5 or 1085, nor by virtue of the application of the doctrine of issue preclusion, but instead because D&M failed to seek redress from the City Council before resorting to the courts.
Because D&M did not seek redress from the City Council to have the Board’s findings set aside, the Board’s determinations became “final” as set forth under City Charter section 245—“Actions of Boards of commissioners shall become final at the expiration of the next five meeting days of the Council during which the Council has convened in regular session.” (LA City Charter section 245, emphasis added.)
D&M’s failure to seek redress from City Council thus deprived the courts of the authority to grant D&M’s relief on its interference with contract cause of action against the City and its breach of contract claim against Washington insofar as the success of D&M’s claims against the City and Washington depended upon the Board’s December 13, 2000, findings.
As to the claim against the City, there appears to be no dispute that D&M’s tort action is based entirely upon the City’s actions taken as a result of the Board’s findings on December 13, 2000. The Board’s decision created a defense to D&M’s interference with contract claim against the City.
As to D&M’s breach of contract claim against Washington, D&M argues that its failure to exhaust agency remedies does not automatically deprive the courts of jurisdiction to decide D&M’s breach of contract claim against Washington because Washington is a private entity and separate actor from the City. But the fact that Washington is a private entity is not dispositive. Instead the crucial inquiry is whether the Board’s findings establish a defense for Washington’s conduct. While D&M cannot at this point seek to have the Board’s findings set aside, D&M can litigate whether those findings excused or justified the actions Washington claims it took as a result of and in response to the Board’s findings.
Below on the motion for a judgment Washington argued that the Board’s findings had certain additional legal implications for D&M’s breach of contract claim against Washington including: (1) that the finding of D&M as an objectionable entity amounted to a material breach of the Completion Contract and that breach occurred on December 13, 2000, prior to Washington’s termination of D&M on December 15, 2000; (2) D&M was put on notice of its default under the Takeover Agreement by service of the General Manager’s Report on December 5, 2000; (3) D&M was not entitled to “cure” the default and given the Board’s findings Washington was excused from the contract requirement that it provide D&M with three notice days to cure; and (4) because Washington terminated D&M at direction of the City, Washington was absolved and excused from any liability to D&M as a result of its termination. In other words, Washington maintained the Board’s findings established a defense to D&M’s breach of contract claim.
D&M, however, did not address these matters in its briefing or at oral argument. Instead D&M argued only that it was not required to challenge the Board’s December 13, 2000, finding by way of writ of mandamus and that it was not bound by the Board’s findings based on the principles of collateral estoppel.
D&M did not address these arguments until it filed a motion for reconsideration.
On appeal, Washington argues that D&M’s failure to timely and specifically oppose the arguments concerning the implications of the Board’s findings results in a waiver of any complaints concerning these matters on appeal. We agree. As a general rule, failure to raise a point in the trial court constitutes waiver and appellant is estopped to raise that objection on appeal. (See, e.g., Kolani v. Gluska (1998) 64 Cal.App.4th 402, 412 [failure to raise issue or argument in the trial court results in waiver on appeal]; see also Munro v. Regents of University of California (1989) 215 Cal.App.3d 977, 988-989 [party may not change theory of a cause of action on appeal and raise issue not presented below].) Both in its opposition and during the hearing on the motion for judgment, D&M had an opportunity to challenge Washington’s additional arguments concerning the legal effects and implications of the Board’s findings. Washington argued that the Board’s actions provided it with various defenses to D&M’s breach of contract claim, and given the finality of the Board’s actions, D&M could not re-litigate these defenses. D&M was well aware of these arguments, but did not timely make any effort to refute them. Consequently, in our view D&M cannot now be heard to complain about the merits of these arguments.
In view of the foregoing, we conclude that court did not err in ruling in favor of the City and Washington on D&M’s claims litigated in Phase 1 of this case.
II. The Court had Jurisdiction to Consider and Rule on the Merits of the City’s and Washington’s Cross-Complaints in Phase 2 of the Litigation.
On appeal D&M argues that if in Phase 1 of the case, the trial court lacked jurisdiction to set aside the Board’s findings, then the court also lacked the jurisdiction to consider the merits of Washington’s and the City’s cross-complaints.
We do not agree. D&M misapprehends the application of the exhaustion doctrine. As discussed elsewhere here, a failure to exhaust internal agency remedies means that the courts do not have authority to review or overturn the agency’s action. It does not, however, mean that a court lacks jurisdiction in the matter. One can litigate the effects and implications of the agency’s actions, and to the extent that those actions give rise to separate claims which do not require a reassessment of the underlying merits of the actions, the courts have jurisdiction to determine those claims. Such is the case with the City’s and Washington’s cross-claims. The cross-complaints sought breach of contract and tort damages for injuries allegedly sustained as a result of D&M’s breach of the contracts governing the Imperial Courts Project. Neither Washington nor the City sought to re-litigate the merits of the December 13, 2000, findings of the Board.
III. The Order Awarding the City Attorneys’ Fees.
On appeal, D&M asserts the court did not have any legal basis to award the City attorneys’ fees after Phase 2 of the trial because the City was not a party to a contract containing a fees provision. D&M also asserts that even if the City was a party to such a contract, the court erred in (1) concluding City was a prevailing party; and (2) in apportioning the fees.
This court reviews the legal basis for an award of attorneys’ fees de novo as a question of law. (Sessions Payroll Management, Inc. v. Noble Construction Company (2000) 84 Cal.App.4th 671, 677 (Sessions).) With this standard of review in mind, we turn to the merits of D&M’s contentions.
A. Attorneys’ Fees Under Civil Code 1717 for Non-Signatory Party.
During the Phase 2 trial proceedings in which the parties litigated the City’s and Washington’s cross-complaints, the City and D&M stipulated that the City was a third-party beneficiary to the Completion Contract.
Under some circumstances the principles of Civil Code section 1717 will be applied in actions involving signatory and nonsignatory third parties. (Reynolds Metal Co. v. Alperson (1979) 25 Cal.3d 124, 128 (Reynolds Metal).) “Its purposes require [Civil Code] section 1717 be interpreted to further provide a reciprocal remedy for a nonsignatory defendant, sued on a contract as if he were a party to it, when a plaintiff would clearly be entitled to attorney's fees should he prevail in enforcing the contractual obligation against the defendant.” (Ibid.)
In Reynolds Metal plaintiff brought an action against two shareholders and directors of two bankrupt corporations, seeking to hold them personally liable for the debts owed plaintiff by the corporations. One of the claims was based on unpaid promissory notes, signed by one corporation and endorsed by the other, which provided for the recovery of collection costs and attorney fees. Defendants had not signed the promissory notes. Defendants prevailed in the action and sought attorney fees pursuant to the terms of the notes. The Supreme Court held that defendants were entitled to recover their attorney fees under the reciprocity requirement of Civil Code section 1717. The Supreme Court reasoned that since plaintiff would have been entitled to recover its fees against defendants had plaintiff prevailed, defendants were likewise entitled to their fees since they had prevailed. (Reynolds Metal Co. v. Alperson, supra, 25 Cal.3d at pp. 127-129.)
Courts have applied the rationale in Reynolds Metal in actions like this where a nonsignatory plaintiff seeks to enforce a contract against a signatory defendant. (See e.g., Brusso v. Running Springs Country Club, Inc. (1991) 228 Cal.App.3d 92, 108-111; Leach v. Home Savings & Loan Assn. (1986) 185 Cal.App.3d 1295, 1304-1307.)
The City asserts that because it was a third-party beneficiary to the Completion Contract between D&M and Washington, it was entitled to rely on the attorneys’ fees provision in that contract to seek fees under Civil Code section 1717.
D&M argues, however, that the trial stipulation did not mean that City could enforce the fees provision in the Completion Contract, pointing to language in the contract: “[i]t is agreed that this Contract is intended to be solely for the benefit of the parties hereto and shall not create a right or benefit in favor of any person not a party hereto or in any way increase the rights of third persons or increase the obligations of any party hereto to any third person” D&M also relies on Sessions, where the court concluded that a party may be a third-party beneficiary to enforce certain provisions of a contract, but not others. The court concluded that in order for a third-party to enforce an attorneys’ fees provision in a contract, the third-party must show that the signatories to the contract agreed or intended to include the third party in the fees provision. (Sessions Payroll Management, Inc. v. Noble Construction Company, supra, 84 Cal.App.4th at pp. 680-681.)
In our view, the parties manifested their intent in that regard by specifically incorporating all of the Original Contract documents and the Takeover Agreement into the Completion Contract. Real Property Services Corp. v. City of Pasadena (1994) 25 Cal.App.4th 375 is illustrative. In Real Property Services the Court of Appeal held that because a lease provision established a nexus between the defendant lessor and the plaintiff sublessee (who was not a signatory to the lease), the plaintiff sublessee was a third party beneficiary of the contract and could have recovered attorneys’ fees had it prevailed. Therefore Real Property Services affirmed a grant of attorneys’ fees to the defendant lessor as prevailing party. (Real Property Services Corp. v. City of Pasadena, supra, 25 Cal.App.4th at pp. 383-384.) Here, by virtue of the incorporation of all of the Original Contract documents and the Takeover Agreement the Completion Contract effectively recognized the City’s role and interest in the Imperial Court Project. Thus the Completion Contract created a sufficient nexus between D&M and City that would make City a third party beneficiary to the attorneys’ fees provision.
Also relying on Sessions D&M further asserts that the City could not rely on the fees provision in the Completion Contract because the fees provision is not broad enough to award fees to non-signatories. However, in Sessions, the fee provision was written in such a way as to exclude from it all but the two signatories. The fees provision in Sessions provided: “[i]n the event it becomes necessary for either party to enforce the provisions of this Agreement ....” and the Sessions Court concluded that “[E]ither” referred only to the two parties to the contract. (Sessions Payroll Management, Inc. v. Noble Construction Company, supra, 84 Cal.App.4th at p. 681.) But in this case the provision in the Completion Contract states: “In the event of litigation to enforce the terms of this Contract, the prevailing party shall be entitled to its costs, including reasonable attorneys’ fees.” It is not limited to signatories to the contract; it is broader and speaks more generally of “litigation” brought to enforce it.
Given this breadth of language in the fees provision as well as the agreement of the parties to incorporate the City into the Completion Contract, we conclude that the City was entitled to rely on the attorneys’ fees provision in the Completion contact and to seek attorneys’ fees from D&M.
B. The “prevailing party” Determination.
In its motion for attorneys’ fees, the City argued that it was “the prevailing party for the purposes of Civil Code Section 1717.” At the hearing on the motion the court stated: “The City is . . . the prevailing party even if it didn’t prevail on all of its claims. The term prevailing part includes the party with a net monetary recovery or defendant in whose favor a dismissal is entered or a defendant [where] neither plaintiff nor defendant obtains any relief and a defendant as against those plaintiffs who did not recover any relief against that defendant. Those are the provisions of CCP 1032(A)(4). Here the City qualifies as a prevailing party because it had a net monetary recovery.”
Even though the City sought contract attorneys’ fees pursuant to Civil Code section 1717, based on the record, it is clear that the court applied Code of Civil Procedure section 1032 rather than Civil Code section 1717 to determine whether the City was the prevailing party.
As D&M points out, the standards to determine prevailing party under Civil Code section 1717 and Code of Civil Procedure section 1032 are not the same. “Courts have consistently held the prevailing party for the award of costs under section 1032 is not necessarily the prevailing party for the award of attorney’s fees in contract actions under section 1717. (See McLarand, Vasquez & Partners, Inc. v. Downey Savings & Loan Assn. (1991) 231 Cal.App.3d 1450, 1456 -- ‘We emphatically reject the contention that the prevailing party for the award of costs under section 1032 is necessarily the prevailing party for the award of attorneys’ fees’; Nasser v. Superior Court (1984) 156 Cal.App.3d 52, 59-62-the party awarded costs under section 1032 is not the prevailing party under section 1717.)” (Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1142.) The Code of Civil Procedure section 1032, subdivision (a)(4) prevailing party determination focuses on whether the party seeking fees obtains a “net monetary recovery” in the action, while under Civil Code section 1717 a party prevails where he or she recovers “a greater relief in the action on the contract.” (Civ. Code, § 1717). “The definition of prevailing party under section 1717 thus differs significantly from section 1032.” (Sears v. Baccaglio, supra, 60 Cal.App.4th at p. 1143.) In addition, Civil Code 1717 endows the court with discretion to determine that no party prevailed. (Id. at p. 1157.) Thus, arguably a party could obtain a “net recovery” in the action and thus be considered a “prevailing party” under Code of Civil Procedure section 1032, and yet not have obtained a “greater relief on the contract.”
“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. (Hsu v. Abbara (1995) 9 Cal.4th 863, 877.) If neither party achieves a complete victory on all the contract claims, it is within the discretion of the trial court to determine which party prevailed on the contract or whether, on balance, neither party prevailed sufficiently to justify an award of attorney fees. ‘[I]n deciding whether there is a “party prevailing on the contract,” the trial court is to compare the relief awarded on the contract claim or claims with the parties’ demands on those same claims and their litigation objectives as disclosed by the pleadings, trial briefs, opening statements, and similar sources.’” (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109.)
The court here, however, did not engage in the prevailing party analysis required under Civil Code section 1717. The City’s appellate brief does not shed any light on why the court did not consider Civil Code section 1717. Thus, having applied the wrong statute and with no hint as to what the court would have done had it examined the matter under the proper one, the attorneys’ fee must be reversed and remanded to the trial court to determine whether the City is the prevailing party under Civil Code section 1717.
Finally because the City’s attorneys’ fees motion will be re-examined by the court, we offer some additional guidance on issues raised by D&M in this court which might arise again and which concern the proper apportionment of fees--(1) whether the City can seek attorneys’ fees for its unsuccessful false claims cause of action; and (2) whether the City can recover fees for the successful defense of the interference with contract action litigated in Phase 1 of the trial.
Fees for the False Claim Action.
In its motion for attorneys’ fees, the City sought to recover those fees generated in connection with the false claims cause of action. Below D&M argued, in passing, that the attorneys’ fees provision in the Completion Contract was not broad enough to allow for fees based on the “false claims” tort because those fees were not incurred to enforce the contract.
The joinder of a noncontractual cause of action to a contractual cause of action entitles the prevailing party to no more than the fees incurred on the contract cause of action. (Shadoan v. World Savings & Loan Assoc. (1990) 219 Cal.App.3d 97, 108.) “Where a cause of action based on the contract providing for attorney’s fees is joined with other causes of action beyond the contract, the prevailing party may recover attorney’s fees under section 1717 only as they relate to the contract action.” (Reynolds Metals Co. v. Alperson, supra, 25 Cal.3d at p. 129.) In general, in such a situation the trial court should apportion the fees. This notwithstanding, the court need not apportion fees in that instance when the fees are 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. (Erickson v. R.E.M. Concepts, Inc. (2005) 126 Cal.App.4th 1073, 1083.)
In assessing the fees motion it appears the court may have addressed the issue of apportionment only as it related to recovery of fees in defense of the tort claim litigated in the Phase 1 of the case. At the subsequent hearing the court found that “the claims and defenses were so interrelated that it is not reasonably possible to separate them and to award” fees only on some of them. Thus the record is somewhat ambiguous; it is not clear from this statement that the court considered whether the fees incurred for the false claims action should be apportioned. Based on the amount of the final award, the court did not segregate them (the false claims fees) from the contract fees; the court only eliminated those fees that had to do with a deposition City conducted but later withdrew.
In view of the foregoing, on remand, if the court finds the City is the prevailing party under Civil Code section 1717, the court should then consider whether or not to apportion the fees incurred on the false claims.
Fees incurred in connection with Phase 1.
In its fees motion the City sought to recover fees it incurred in defense of the claims litigated during Phase 1.
Before this court, D&M points out the City unsuccessfully sought an award of attorneys’ fees after Phase 1 of the trial, and thus argues City should be estopped from seeking those fees again.
After Phase 1 of the trial the City filed a motion for attorneys’ fees solely under Code of Civil Procedure section 1038, characterizing D&M’s tort action as one under the California Tort Claims Act. The trial court disagreed, concluding that at least initially D&M had pursued contract claims against the City and that D&M’s interference with contract claim was not one brought under the tort claims act. The court noted D&M had not sought express or implied indemnity or for contribution in a civil action. Thus the court ruled the City was not entitled to fees under section 1038.
The City did not seek attorneys’ fees under Civil Code section 1717 after Phase 1, but its failure to do so does not necessarily preclude an award of those fees on remand. Under the broad principles of apportionment, the City may seek attorneys’ fees for the defense of the tort action for which fees would otherwise be unavailable under Civil Code section 1717. The court can award those fees if the City demonstrates that common issues exist between the Phase 2 contract claim and the Phase 1 defenses and those issues common to the contract and tort claims are closely, if not inextricably, intertwined. Under such circumstances, the court may deem it impracticable to apportion fees and that it is not possible to segregate them. (See Erickson v. R.E.M. Concepts, Inc., supra, 126 Cal.App.4th at p. 1085.) “‘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.’” (Id. at p. 1083; see also Akins v. Enterprise Rent-A-Car Co. (2000) 79 Cal.App.4th 1127, 1133.)
On remand, if the court finds the City is the prevailing party under Civil Code section 1717, the court should then consider whether or not to apportion the fees incurred in defense of the claims asserted in Phase 1 of the trial.
DISPOSITION
The order awarding attorneys’ fees for respondent City of Los Angeles is reversed and remanded for further proceedings in accord with the opinions expressed herein. The judgment is affirmed in all other respects. Each side to bear its own costs on appeal.
We concur: PERLUSS, P.J., JACKSON, J.