Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Fresno County No. 04CECG01143. Mark W. Snauffer, Judge.
Caswell, Bell & Hillison, Robert K. Hillison and Kimberly L. Mayhew for Defendant and Appellant Guarantee Real Estate.
Betts & Wright, James B. Betts and Joseph D. Rubin for Defendant and Appellant Jim William Sherrick.
No appearance for Plaintiffs and Respondents.
OPINION
Kane, J.
Plaintiff Ronald Hodge entered an agreement to buy a home in the Fig Garden area of Fresno for himself and/or his assignee, plaintiff Bridget Daley, but when he failed to provide the funds needed to close escrow by the deadline specified in the agreement, the home was quickly sold to a third party. Plaintiffs sued the real estate agent involved in the transactions, defendant Jim William Sherrick (Sherrick), along with the broker entity with whom Sherrick was affiliated, defendant Guarantee Real Estate (Guarantee), alleging negligence, breach of fiduciary duty and constructive fraud, and seeking punitive and other damages. Sherrick and Guarantee answered the complaint and served requests for admission (RFA’s) on plaintiffs, asking them to admit, among other things, that neither Sherrick nor Guarantee engaged in conduct constituting malice, oppression or fraud for purposes of the punitive damage claims. Plaintiffs denied the pertinent RFA’s. Following a lengthy trial, the jury returned defense verdicts on all causes of action. Thereafter, Sherrick and Guarantee filed motions for recovery of attorney fees as cost of proof sanctions under Code of Civil Procedure section 2033.420 based on plaintiffs’ failure to admit the RFA’s. The trial court denied the attorney fee motions even though it found that plaintiffs’ denials of the RFA’s relating to punitive damages were not supported by a reasonable good-faith belief that plaintiffs would prevail on those issues. The trial court did not award attorney fees because it “[was] unable to conclude that these denials caused any additional work … in the overall defense of the action.” In this consolidated appeal, Sherrick and Guarantee contend the trial court abused its discretion in denying their motions for attorney fees under section 2033.420. We agree and reverse the order denying attorney fees, with instructions on remand that the trial court determine the amount of fees reasonably attributable to plaintiffs’ failure to admit the RFA’s regarding punitive damages.
Unless otherwise indicated, all further statutory references are to the Code of Civil Procedure.
Sherrick and Guarantee filed separate appeals as case Nos. F056064 and F056101, raising identical issues. On November 18, 2008, we ordered the appeals consolidated.
FACTS AND PROCEDURAL HISTORY
On January 27, 2004, plaintiff Hodge and John Langford executed a real estate purchase agreement concerning the residential real property located at 4612 N. Van Ness Boulevard in Fresno. The agreement gave Hodge and/or his assignee the right to purchase the real property from John and Marsha Langford under the terms and conditions set forth therein. Hodge’s assignee to obtain title at close of escrow was his wife, plaintiff Bridget Daley. The agreement expressly provided that “[t]ime [was] of the essence” and escrow was required to close on or before April 12, 2004. Sherrick, who was employed by Guarantee, acted as a dual agent in the transaction for plaintiffs as buyers and for the Langfords as sellers.
Plaintiffs failed to close escrow by April 12, 2004, the agreed deadline set forth in the parties’ agreement. According to plaintiffs’ verified pleadings, the failure to close escrow was due to a delay in receiving the appraisal report, which in turn caused a delay in the funding of their loan to consummate the purchase. On April 13, 2004, Sherrick informed sellers that they were free to sell the property to another buyer. On April 14, 2004, Sherrick procured an alternate buyer to purchase the property for $405,000, the same price plaintiffs had agreed to pay. On April 16, 2004, the Langfords sold the property to the alternate buyer in an all cash deal.
Plaintiffs’ lawsuit was originally filed against the Langfords and the alternate buyer for alleged breach of contract and interference with contract. On July 29, 2005, Sherrick and Guarantee were named as defendants through the filing of plaintiffs’ second amended complaint. The second amended complaint alleged that on April 13, 2004, after the closing date had expired, plaintiff Hodge spoke to Langford and proposed an extension of the escrow to April 16, 2004, and in response Langford allegedly agreed to cooperate in order to allow escrow to close as soon as possible. Thereafter, on April 13 or 14, 2004, Sherrick allegedly misrepresented to Langford that plaintiffs would not be able to close escrow “for at least two more weeks.” Additionally, Sherrick allegedly told Langford that he could “‘legally’” sell the property to another buyer and was instrumental in finding the alternate buyer who purchased the property on April 16, 2004. Based on these allegations, the second amended complaint asserted causes of action against Sherrick and Guarantee for negligence, constructive fraud and breach of fiduciary duty, among other theories. Liability against Guarantee was apparently based on principles of vicarious liability as Sherrick’s employer or principal. Plaintiffs’ prayer for relief included a request for punitive damages against both Sherrick and Guarantee.
Shortly after being named as defendants, Sherrick and Guarantee separately propounded RFA’s on plaintiffs. On December 16, 2005, plaintiffs served verified responses denying the majority of the RFA’s.
The case proceeded to trial on April 14, 2008. During the course of the trial, Guarantee and Sherrick moved for nonsuit on the issue of punitive damages. Both motions were granted by the trial court. At the conclusion of the evidence, the causes of action for negligence, constructive fraud and breach of fiduciary duty were submitted to the jury. On April 24, 2008, the jury returned special verdicts finding as follows: (1) Sherrick was not negligent; (2) Sherrick did not mislead plaintiffs to their prejudice; and (3) Sherrick did not breach his fiduciary duty to plaintiffs. On April 28, 2008, judgment was entered in favor of Sherrick and Guarantee.
Sherrick and Guarantee each filed posttrial motions seeking to recover costs and attorney fees incurred in proving the truth of several facts that plaintiffs failed to admit in response to the RFA’s. On July 9, 2008, the trial court denied the motions as to the plaintiffs’ unwarranted denials of the RFA’s relating to punitive damages because “the court is unable to conclude that these denials caused any additional work to be done by either of the Defendants in the overall defense of the action, and thus, must deny monetary recovery for same.” (Fn. omitted.) As to other RFA responses, the trial court did not award attorney fees because it found such denials were based on a reasonable belief that plaintiffs would prevail on those issues.
Sherrick and Guarantee timely appealed from the trial court’s denial of their motions for attorney fees under section 2033.420.
DISCUSSION
Two primary issues are raised on appeal: (1) In view of the trial court’s express finding that plaintiffs did not have a reasonable basis for their failure to admit the RFA’s relating to punitive damages, did the trial court abuse its discretion in denying recovery of cost of proof expenses, including attorney fees, under section 2033.420?; and (2) Did the trial court abuse its discretion in finding that plaintiffs had a reasonable basis for their denials of other RFA’s? As we proceed to explain, we answer yes to the first question and no to the second.
“‘The determination of whether a party is entitled to expenses under section 2033, subdivision (o) [now section 2033.420] is within the sound discretion of the trial court.’ [Citation.]” (Stull v. Sparrow (2001) 92 Cal.App.4th 860, 864.) On appeal, the trial court’s decision will not be reversed unless the appellant demonstrates that the lower court abused its discretion. “An abuse of discretion occurs only where it is shown that the trial court exceeded the bounds of reason. [Citation.] It is a deferential standard of review that requires us to uphold the trial court’s determination, even if we disagree with it, so long as it is reasonable. [Citation.]” (Ibid.)
I. Sherrick and Guarantee Were Entitled to Recover Attorney Fees and Costs Reasonably Attributable to Plaintiffs’ Denials of RFA’s Regarding Punitive Damages
Section 2033.420 provides that if a party fails to admit the truth of any matter requested in a properly served RFA, and if the party requesting that admission thereafter proves the truth thereof, “the party requesting the admission may move the court for an order requiring the party to whom the request was directed to pay the reasonable expenses incurred in making that proof, including reasonable attorney’s fees.” (§ 2033.420, subd. (a).) The trial court “shall” award such cost of proof attorney fees and other expenses, unless it finds any of the following: “(1) An objection to the request was sustained or a response to it was waived under Section 2033.290. [¶] (2) The admission sought was of no substantial importance. [¶] (3) The party failing to make the admission had reasonable ground to believe that that party would prevail on the matter. [¶] (4) There was other good reason for the failure to admit.” (§ 2033.420, subd. (b), italics added.)
As explained in Brooks v. American Broadcasting Co. (1986) 179 Cal.App.3d 500: “The primary purpose of requests for admission is to set at rest triable issues so that they will not have to be tried; they are aimed at expediting trial. [Citation.] The basis for imposing sanctions … is directly related to that purpose. Unlike other discovery sanctions, an award of expenses pursuant to section 2034, subdivision (c) [now section 2033.420], is not a penalty. Instead, it is designed to reimburse reasonable expenses incurred by a party in proving the truth of a requested admission … [citations] such that trial would have been expedited or shortened if the request had been admitted.” (Id. at p. 509; see also Stull v. Sparrow, supra, 92 Cal.App.4th at p. 865 [same].)
Here, Sherrick served RFA’s on plaintiffs asking them to admit, concerning the punitive damage claims, that “Sherrick engaged in no malicious conduct towards you” (RFA No. 28); that “Sherrick engaged in no oppressive conduct towards you” (RFA No. 29); and that “Sherrick engaged in no fraudulent conduct towards you” (RFA No. 30). Plaintiffs denied each of these RFA’s. Guarantee served similar request on plaintiffs in their RFA Nos. 32, 33, 34 and 37, which plaintiffs likewise denied. At trial, plaintiffs were unable to offer any sufficient evidence to support their claims of malicious or oppressive conduct, or of fraudulent intent, on the part of either Sherrick or Guarantee. Accordingly, the trial court granted nonsuit motions on the issue of punitive damages in favor of both Sherrick and Guarantee. As to Guarantee’s motion, plaintiffs conceded that they could not prove facts necessary to establish punitive damages against a principal.
In ruling on the motions by Sherrick and Guarantee for recovery of attorney fees under section 2033.420, the trial court expressly found that plaintiffs lacked any basis to justify their denial of the punitive damage RFA’s:
“With respect to RFA 28, 29, and 30, regarding conduct giving rise to punitive damages, the court finds that there was no basis for a good faith belief that plaintiff would prevail on those claims against either Sherrick or Guarantee. In fact, plaintiff voluntarily dismissed those allegations against Guarantee at the close of plaintiff’s case, and the claims against Sherrick were dismissed by the court prior to the submission of the case to the jury.”
Thus, the conditions set forth in the statute for awarding cost of proof sanctions were established—that is, the RFA’s were improperly denied by plaintiffs and the contrary was proven at trial. Nevertheless, the trial court determined that it could not award attorney fees under the statute for the following reason:
“[B]ased on the evidence presented, the court is unable to conclude that these denials caused any additional work to be done by either of the Defendants in the overall defense of the action, and thus, must deny monetary recovery for same.” (Fn. omitted.)
The trial court further explained: “Here, there is no practical way to allocate expenses to the defense of the punitive claims from the defense of the overall action. Defendants have not offered any such allocation, and the court does not believe it would be possible in any event given the nature of the case.”
On the record before us, we believe the trial court’s refusal to award any attorney fees under section 2033.420 for plaintiffs’ wrongful failure to admit the above referenced punitive damage RFA’s constituted an abuse of discretion. Sherrick and Guarantee were clearly entitled to attorney fees and costs reasonably attributable to their defense of the punitive damage claims, which defense would have been unnecessary if plaintiffs had admitted the subject RFA’s. (See, e.g., § 2033.420, subd. (a) [recovery allowed “for expenses incurred in making that proof”]; Garcia v. Hyster Co. (1994) 28 Cal.App.4th 724, 736-737 [the statute authorizes expenses incurred in “proving the matters denied by the opposing party”]; Smith v. Circle P Ranch Co. (1978) 87 Cal.App.3d 267, 279 [recovery allowed of “that proportion of the amount of expenses and attorney’s fees requested which was attributable to the various matters of proof” or which “represented the reasonable costs of making proofs”].) The trial court was bound to make a determination as to the reasonableness of the amounts of claimed expenses, including the time and value of the attorney’s services. (Smith v. Circle P Ranch Co., supra, at p. 279.)
As one treatise put it, the moving party should present information relevant to allocation by showing hourly fees and time spent “to ‘prove’ the matters denied … as opposed to time spent in preparation for trial generally or in proving other matters at trial of the case generally.” (Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2009) ¶ 8:1413.1a, p. 8G-40.)
It is unnecessary to decide whether a trial court may, in an exceptional case, completely deny recovery of attorney fees under section 2033.420 where it is deemed impracticable or impossible to allocate a portion of the attorney fees incurred to the cost of proof of the particular matters denied in the RFA’s. For reasons which follow, we hold this was not such a case. First, it was readily apparent from the proceedings during trial that at least some attorney fees incurred by Sherrick and Guarantee were reasonably attributable to plaintiffs’ denials of the punitive damage RFA’s—namely, the attorney fees incurred in connection with the motions for nonsuit of the punitive damage claims. Moreover, it was reasonable to assume that, as asserted by Sherrick, “[t]hese motions did not occur in a vacuum, and required extensive research, planning and evaluation of the evidence.” Clearly, then, at least some attorney time and litigation resources were devoted to defending against punitive damages. Accordingly, the trial court erred when it determined that none of the attorney fees incurred could be reasonably allocated to defense of the punitive damage claims as distinct from the overall defense of the action.
Of course, there may be further costs and attorney fees reasonably attributable to the defense of the punitive damage claims, which we will leave to the trial court to decide on remand. For purposes of this appeal, we simply point out that the nonsuit motions concerning punitive damages were instances in the record before us of matters that were plainly attributable to a defense of the punitive damage claims in distinction from a defense of the overall action.
Second, Sherrick’s reply papers in support of its attorney fees motion expressly requested an opportunity to present further delineation of fees and costs should the trial court have any need of that information following the hearing. In view of the fact that the attorney fees motions were initially based on a broad range of RFA’s addressing liability generally, and not merely the punitive damage claims, we believe that once the trial court singled out the denials of the punitive damage RFA’s as lacking a reasonable basis, an opportunity to submit further information to identify attorney fees attributable to the punitive damage claims should have been allowed. This is particularly true in light of the fact the statute’s provision for attorney fees is phrased in mandatory language (see § 2033.420 [“The court shall make this order” for fees absent certain findings (italics added)]) and, as noted above, it is apparent that at least some attorney time was devoted by Sherrick and Guarantee to defense of punitive damage claims.
Since Guarantee was Sherrick’s principal and had an identical interest in defeating the punitive damage claims, we believe that if Sherrick’s request to provide further information had been granted by the trial court, the same opportunity would have been extended to Guarantee. In any event, because the statute mandates a fee award in this case, our remand will permit both Guarantee and Sherrick to recover attorney fees attributable to defense of the punitive damage claims, in an amount to be determined by the trial court, upon their making a further and more adequate showing on the issue of allocation of attorney fees.
Accordingly, the order denying any attorney fees under section 2033.420 is reversed. On remand, the trial court shall allow the parties to submit further papers on the issue of reasonable allocation or apportionment of attorney fees to the defense of the punitive damage claims. (See Smith v. Circle P RanchCo., supra, 87 Cal.App.3d at pp. 279-280 [remand appropriate where insufficient showing made as to allocation].) We leave the amount of such attorney fees, and the basis for making a reasonable allocation thereof, to the trial court’s sound discretion.
II. Other RFA’s
The remaining RFA’s broadly addressed an array of issues reflecting that plaintiffs were the ones who were responsible for the failure to timely close escrow in accordance with the terms and conditions of the parties’ agreement. Along these lines, Sherrick served RFA’s asking plaintiffs to admit, among other things, that plaintiffs were unable to close escrow on or before April 12, 2004 (RFA No. 4); that plaintiffs did not have the financing in place on or before April 12, 2004 (RFA No. 8); and that Sherrick was not a substantial factor in plaintiffs’ inability to close escrow by April 12, 2004 (RFA No. 19). Guarantee served RFA’s asking for similar admissions, including a request that plaintiffs admit that Hodge “did not ask John Langford to extend the date by which you could close escrow until after April 12, 2004.”
The trial court ruled as follows: “Of the ten Requests for Admission (RFA) set forth in Sherrick’s moving papers, the court finds that with respect to RFA 2, 4, 8, 13, 19, 24 and 38, plaintiff ‘held a reasonably entertained good faith belief it would prevail at trial.’ [Citation.]” The trial court made the same ruling as to Guarantee’s RFA’s Nos. 2, 4, 8, 13, 14, 15, 19, 21, 23, 28, 29 and 38.
“Awarding costs of proof is improper if the party who denied the request for admission ‘held a reasonably entertained good faith belief [it] would prevail on the issue at trial.’ [Citation.]” (Miller v. American Greetings Corp. (2008) 161 Cal.App.4th 1055, 1066; § 2033.420, subd. (b)(3).) That was precisely the trial court’s finding as to these remaining RFA’s. Based on our review of the record on appeal, we conclude that the trial court’s finding was reasonably supported. As referenced in the plaintiffs’ opposition to the attorney fees motions as well as in the transcript of the hearing of the attorney fees motions, there was testimony presented at trial that Sherrick told Hodge on or about April 12, 2004, that he had until April 16, 2004, to close escrow. Furthermore, Hodge testified that he could have timely closed escrow with a backup financing arrangement on April 12, 2004, if necessary, but he did not do so because of Sherrick’s statement. At that same time, or shortly thereafter, Sherrick was in the process of selling the property to the alternate buyer. In view of these matters referred to in the record, we are satisfied the trial court’s conclusion that plaintiffs entertained a good faith belief they would prevail on the issues embodied in the above RFA’s was a reasonable one.
Nor is our opinion changed by the fact that plaintiffs second amended complaint admitted, among other things, that escrow was unable to close on April 12, 2004, due to a delay in receiving the appraisal report, which in turn delayed funding of plaintiffs’ loan. These and other allegations in plaintiffs’ second amended complaint describing the events of April 12 through April 16, 2004, were not necessarily in direct conflict with the denials of the disputed RFA’s because the allegations in the second amended complaint did not purport to tell the complete story in every detail. There was apparently much more to it, at least from plaintiffs’ perspective, including the matters alluded to above that were presented at trial regarding Sherrick’s representation to Hodge and Hodge’s asserted ability to utilize alternate financing to close the deal on April 12, 2004, if necessary. Thus, notwithstanding the allegations of plaintiffs’ second amended complaint, the trial court’s order with respect to these RFA’s did not exceed the bounds of reason or otherwise constitute an abuse of discretion.
DISPOSITION
The trial court’s order denying the motions for attorney fees under section 2033.420 is reversed. The matter is remanded to the trial court with instructions to determine the amount of reasonable attorney fees incurred by Sherrick and Guarantee that were reasonably attributable to plaintiffs’ failure to admit the RFA’s regarding punitive damages, after first allowing all parties to submit further evidence on the question of reasonable allocation of attorney fees to those matters. Costs on appeal are awarded to Sherrick and Guarantee.
WE CONCUR: Cornell, Acting P.J., Dawson, J.