Opinion
G063178
10-01-2024
ALEX KOONTZ et al., Plaintiffs and Appellants, v. RAI F. BERNAL, Defendant and Respondent.
Kenny Law Group and Jeffrey S. Kenny for Plaintiffs and Appellants.
NOT TO BE PUBLISHED
Appeal from a judgment of the Superior Court of Orange County No. 30-2022-01250871, Martha K. Gooding, Judge. Affirmed in part. Reversed in part. Remanded with instructions.
Kenny Law Group and Jeffrey S. Kenny for Plaintiffs and Appellants.
No appearance for Defendant and Respondent.
OPINION
GOETHALS, J.
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Alex Koontz and Andrew Godwin (Plaintiffs) appeal from a default judgment entered in their favor in which they claim the court erred by not awarding additional damages and fees. Although we affirm that part of the judgment awarding compensatory damages and costs, we agree the court erred in not awarding attorney fees and prejudgment interest. Accordingly, we affirm in part, reverse in part, and remand to the trial court for it to reconsider an award of prejudgment interest and attorney fees in the first instance.
FACTS
Plaintiffs agreed to purchase sneakers from Defendant for more than $13,000. When Defendant delivered the sneakers, Plaintiffs determined they were counterfeit. Plaintiffs claim Defendant fraudulently represented the sneakers were authentic. To resolve their issues, the parties entered into a written settlement agreement in which Defendant agreed to pay $25,000 to Plaintiffs over a 25-month period in exchange for a release from liability. Defendant failed to pay as agreed.
Plaintiffs then filed a complaint alleging breach of the original agreement, breach of the settlement agreement, fraud, conversion, and misappropriation. Plaintiffs requested compensatory damages, general and special damages, recovery of costs, attorney fees, and punitive damages.
When Defendant did not file an answer, Plaintiffs moved to take his default. The clerk rejected the request because Plaintiffs did not notify Defendant of the amount of punitive damages they were seeking. Plaintiffs served Defendant with a "Notice of Claim for Punitive Damages Statement" in June 2022, and thereafter requested entry of default and a judgment which included damages totaling approximately $130,000 ($25,000 for breach of the settlement agreement, $100,000 in punitive damages, prejudgment interest on the $25,000, and attorney fees consistent with the fee schedule contained in Orange County Local Rule 366).
The trial court denied the request for entry of default judgment without prejudice finding the only viable cause of action was the claim for breach of the settlement agreement. The court concluded Plaintiffs were entitled to recover only the initial down payment plus any unpaid monthly payments prior to the date of the request for default judgment because the agreement did not include an acceleration clause. The court also ruled there was no attorney fees clause in the agreement, and punitive damages were not available for breach of the settlement agreement claim.
Plaintiffs filed a supplemental brief arguing Defendant's breach of the settlement agreement voided any releases, punitive damages were appropriate for the fraud cause of action, and the settlement agreement expressly provided for an attorney fee award to the prevailing party. Plaintiffs then filed another request for judgment in which they sought only the $14,600 owed to date, plus $13,000 owed for breach of the agreement to sell the sneakers. They also sought prejudgment interest, attorney fees, costs, and punitive damages.
The court granted the application for default judgment in part. It again ruled the only viable cause of action was the claim for Defendant's alleged breach of the settlement agreement. The court awarded $14,600 for breach of that agreement plus an additional $5,600, representing payments that became due while the request for default judgment was pending.
The court did not award prejudgment interest to the Plaintiffs because the settlement agreement did not have an acceleration clause. Likewise, the court did not award attorney fees, after finding the settlement agreement did not contain an attorney fees clause. The court concluded since Plaintiffs did not provide evidence of Defendant's financial condition to support their punitive damages request, it should be denied.
The court entered default judgment in the amount of $21,062.83, which included Plaintiffs' costs; this appeal followed.
DISCUSSION
Plaintiffs contend the court erred in not awarding (1) attorney fees; (2) the full $25,000 agreed to in the settlement agreement; (3) prejudgment interest; and (4) punitive damages. We discuss each contention in turn.
I.
ATTORNEY FEES
Whether a contract entitles a party to attorney fees is a question of law which we review de novo. (Carver v. Chevron U.S.A., Inc. (2002) 97 Cal.App.4th 132, 142.) The parties' settlement agreement has a clause granting the prevailing party its reasonable attorney fees and costs incurred in litigation related to the agreement. Thus, Plaintiffs are entitled to those attorney fees which stem from litigation directly related to the settlement agreement. (Civ. Code, § 1717, subd. (a); Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 129.) On remand Plaintiffs may petition the trial court for such fees.
Plaintiffs also request attorney fees incurred on appeal. Contractual authorization for recovery of attorney fees incurred in trial court proceedings includes attorney fees incurred on appeal. (Douglas E. Barnhart, Inc. v. CMC Fabricators, Inc. (2012) 211 Cal.App.4th 230, 250.) Thus, on remand, Plaintiffs may also in the first instance petition the trial court for an award for their legal fees incurred on appeal. (Huntingdon Life Sciences, Inc. v. Stop Huntingdon Animal Cruelty USA, Inc. (2005) 129 Cal.App.4th 1228, 1267, disapproved on other grounds by Cohen v. Superior Court (2024) 102 Cal.App.5th 706, 727, fn. 11.)
II.
CONTRACTUAL DAMAGES
Plaintiffs argue the court erred in not awarding the entire $25,000 referenced in the settlement agreement. We disagree. As counsel conceded during oral argument, $25,000 is not the damage award sought by Plaintiffs in the trial court. The court awarded the amount Plaintiffs requested; a party cannot appeal a favorable ruling. (Marich v. MGM/UA Telecommunications, Inc. (2003) 113 Cal.App.4th 415, 431.)
III.
PREJUDGMENT INTEREST
A party which is entitled to recover damages which are "certain, or capable of being made certain by calculation," and whose right to recover is vested on a particular day, has a right to prejudgment interest on those damages. (Civ. Code, § 3287, subd. (a).) A bilateral contract has two parties who mutually promise to perform future acts. (Juen v. Alain Pinel Realtors, Inc. (2019) 32 Cal.App.5th 972, 979-980.) A unilateral contract has one party who fully performs an act in exchange for the other party's promise to perform a future act. (Asmus v. Pacific Bell (2000) 23 Cal.4th 1, 10.) If the settlement agreement was a bilateral contract, it did not need an acceleration clause to grant Plaintiffs the right to recover the full amount due upon breach. (Mammoth Lakes Land Acquisition, LLC v. Town of Mammoth Lakes (2010) 191 Cal.App.4th 435, 463.)
Here, the settlement agreement was a bilateral contract because Plaintiffs did not agree to release Defendant from liability until he completed his payment of the $25,000 in the manner agreed to by the parties. Because Plaintiffs could seek the full amount owed upon Defendant's breach, their damages were readily ascertainable; Plaintiffs are therefore, entitled to seek prejudgment interest. (Civ. Code, § 3287, subd. (a).) On remand, the trial court shall reconsider this issue in the first instance.
IV.
PUNITIVE DAMAGES
Finally, Plaintiffs argue the trial court should have awarded them punitive damages because they served Defendant with a statement of such damages, and they were prevented from presenting evidence of Defendant's financial condition due to his default.
The service of a statement of damages is a prerequisite to an award of punitive damages. (Code Civ. Proc., § 425.115.) Plaintiffs must then also present evidence of Defendant's financial condition before such damages can be awarded. (Baxter v. Peterson (2007) 150 Cal.App.4th 673, 680.) Defendant's default does not change this requirement. (Del Junco v. Hufnagel (2007) 150 Cal.App.4th 789, 791.) Plaintiffs failed to present evidence of Defendant's financial condition. Therefore, even if Plaintiffs had a basis to recover punitive damages, the court did not err in denying their request.
DISPOSITION
We affirm the judgment in the amount of $21,062.83. We reverse the order denying Plaintiffs' request for prejudgment interest and attorney fees. On remand, we direct the trial court to reconsider these issues in the first instance. We express no opinion concerning their resolution. Plaintiffs are entitled to their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1).)
WE CONCUR: O'LEARY, P. J. MOORE, J.