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In Krikorian Premiere Theatres, LLC v. Westminster Central, LLC (2011) 193 Cal.App.4th 1075, 1077, 123 Cal.Rptr.3d 379, the Court of Appeal, Fourth District, Division Two, disagreed with Barnes and concluded an order denying a motion to tax costs on appeal, in whole or in part, is immediately appealable, as an order after judgment under section 904.1(a)(2).
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Nos. E047523, E049537.
March 24, 2011. [As modified April 8, 2011.] [CERTIFIED FOR PARTIAL PUBLICATION]
Pursuant to California Rules of Court, rules 8.1105(b) and 8.1110, this opinion is certified for publication with the exception of parts II and III and Appendix A.
Appeal from the Superior Court of Riverside County, No. RIC382415, Gary B. Tranbarger, Judge, and Paulette Durand Barkley, Temporary Judge.
Commissioner Barkley granted, in part, the motion to tax costs. Judge Tranbarger granted the motion to determine the prevailing party for purposes of attorney fees and entered the judgment.
Pursuant to California Constitution, article VI, section 21.
Paul, Hastings, Janofsky Walker, Glenn D. Dassoff, Kimberly I. Kepler, Tina M. Ashtiani and Abigail W. Lloyd for Plaintiff and Respondent and for Plaintiff and Appellant.
Steptoe Johnson, Michael F. Wright and Tamara McCrossen-Orr for Defendant and Appellant and for Defendant and Respondent.
OPINION
In a previous appeal by defendant Westminster Central, LLC (Westminster), we reversed a judgment for approximately $22 million in favor of plaintiff Krikorian Premiere Theatres, LLC (Krikorian). Although we affirmed the judgment with respect to Westminster's liability for breach of lease, we held that, under the lease's "sole remedy" clause, Krikorian's recovery was limited to the reimbursement of its architectural fees — estimated at the time as somewhere between $7,000 and $20,000. We also awarded Westminster costs on appeal.
On remand, Westminster claimed costs on appeal totaling almost $2.6 million. The trial court awarded most, but not all, of this amount; it granted Krikorian's motion to tax with respect to several claimed items (or subitems) of costs, including one for $944,263. Westminster appealed.
Meanwhile, Krikorian demanded $12,267.22 in architectural fees. Westminster promptly and happily paid, making a new trial unnecessary. The trial court entered a judgment that Krikorian "recover nothing" and that Westminster recover attorney fees. Krikorian appealed.
The only issue worthy of publication relates to the appealability of the order taxing costs. There is a split of authority with respect to whether such an order is appealable after a previous judgment has been reversed on appeal, but before a new judgment has been entered on remand. In the published portion of our opinion, we will hold that it is.
In the nonpublished portion of this opinion, we will hold that the trial court erred by taxing the $944,263 cost item. We will further hold that the trial court properly determined that Westminster was the prevailing party for purposes of attorney fees.
I APPEALABILITY
In Westminster's appeal, it is challenging the order on the motion to tax costs, which was rendered after we reversed the original judgment but before the trial court had yet entered a new final judgment. Westminster filed a timely notice of appeal from the order; however, it did not appeal from the final judgment.
Westminster's opening brief duly included a statement of appealability. (See Cal. Rules of Court, rule 8.204(a)(2)(B).) In it, Westminster asserted that the order on the motion to tax costs was appealable as an order after judgment, citing Code of Civil Procedure section 904.1, subdivision (a)(2), Monson v. Fischer (1933) 219 Cal. 290 [ 26 P.2d 6], and Markart v. Zeimer (1925) 74 Cal.App.152 [ 239 P. 856].
We discovered, however, that under Barnes v. Litton Systems, Inc. (1994) 28 Cal.App.4th 681 [ 33 Cal.Rptr.2d 562] the order would not be appealable. We asked the parties to submit supplemental briefs addressing this issue, and we have since considered them.
We believe that the only way to understand this issue is to start with a historical approach.
Code of Civil Procedure former section 963 (former section 963) was originally enacted in 1872. The relevant language was first enacted in 1880; it provided:
"An appeal may be taken . . . from a Superior Court . . . in the following cases:
"1. From a final judgment entered in an action . . . commenced in a Superior Court. . . .
"2. . . . [F]rom any special order made after final judgment. . . ." (Code Am. 1880, ch. 33, § 1, p. 14.)
This language remained unchanged (except as to capitalization and elisions) as long as the statute was in effect. (Stats. 1889, ch. 213, p. 324; Stats. 1897, ch. 151, § 1, p. 209; Stats. 1899, ch. 9, § 2, p. 8; Stats. 1901, ch. 69, § 1, p. 85; Stats. 1915, ch. 116, § 1, p. 209; Stats. 1917, ch. 505, § 1, p. 624; Stats. 1923, ch. 366, § 2, p. 750; Stats. 1931, ch. 922, § 1, p. 1924; Stats. 1933, ch. 937, § 1, p. 2472; Stats. 1945, ch. 239, § 1, p. 704; Stats. 1951, ch. 234, § 1, p. 497; Stats. 1961, ch. 1059, § 2, p. 2748.)
The first case to address specifically the appealability of an order taxing costs on appeal was In re Kling (1920) 48 Cal.App. 739 [ 192 P. 453]. There, after the original judgment was reversed on appeal, the successful appellant filed a bill of costs, including both costs at trial and costs on appeal. The trial court granted the respondent's motion to tax costs, and the appellant appealed again from that order. ( Id. at p. 740.)
The appellate court dismissed the appeal. It explained that because "no final judgment had been rendered in the case, the order is not appealable. A review thereof can be had only upon an appeal from the judgment. [Citations.]" ( In re Kling, supra, 48 Cal.App. at p. 741.) It added: "There is no merit in appellant's contention that the order of this court reversing the judgment from which the appeal was taken must be deemed a final disposition of the case without further action on the part of the trial court. By virtue of the reversal the case was remanded to the trial court for further action and disposition." ( Ibid.)
In 1925, however, the next case down the pike rejected Kling. In Markart v. Zeimer, supra, 74 Cal.App. 152, similarly, the original judgment was reversed on appeal, and the matter was remanded for a new trial. The appellants sought their costs on appeal by filing a memorandum of costs, and the trial court denied the respondent's motion to strike the memorandum of costs. ( Id. at p. 154.) The erstwhile respondent appealed.
The court held that the order was immediately appealable as an order made after final judgment within the meaning of former section 963. Contrary to Kling, it held that its own judgment was the relevant final judgment: "It is not contended that the judgment of a court of review affirming, reversing or modifying a judgment on appeal from a judgment of the superior court is not a final judgment. Indeed, no such contention or claim could logically be urged. . . ." ( Markart v. Zeimer, supra, 74 Cal.App. at p. 155.) "Section 963 does not expressly restrict its operation as to appeals from special orders after final judgments to those made after final judgments of the superior court. The language in that particular is general and reasonably applicable to any special order made after the rendition of any final judgment, and . . . a judgment by an appellate court in any case cannot be viewed as anything other than a final judgment." ( Id. at p. 158.)
It also explained: "[T]he matter of taxing costs involves a proceeding ancillary to the particular judgment in the securing of which such costs have been incurred. . . . [T]he order [would not] be reviewable upon an appeal from any judgment which might be rendered on a retrial of the case for the obvious reason that such costs would have no more relation to or connection with a judgment so obtained than they would have to a judgment rendered in an action between different parties or involving different issues. Besides, it might happen that plaintiff, on a retrial, would again obtain judgment against the defendants, and in such case, if the position of the movant were well founded, the party entitled to such costs would suffer a denial of the right to have the order reviewed at all." ( Markart v. Zeimer, supra, 74 Cal.App. at pp. 157-158.)
Finally, it noted that costs on appeal had to be claimed within 30 days after issuance of the remittitur and that, once costs were taxed (or once the time to file a motion to tax costs expired), the award of costs was immediately enforceable by execution. ( Markart v. Zeimer, supra, 74 Cal.App. at pp. 155, 158-159, citing Code Civ. Proc., former § 1034.) It concluded that "it was the legislative intent that the party dissatisfied with such costs as taxed should be entitled to a remedy for a review of the order taxing the same as provided by section 963 of the Code of Civil Procedure." ( Markart, at p. 159.)
This is still the law, except that the deadline for claiming costs is now 40 days after issuance of the remittitur. (Cal. Rules of Court, rule 8.278(c).)
In 1933, the Supreme Court seemingly settled the issue in Monson v. Fischer, supra, 219 Cal. 290. Once again, the original judgment was reversed on appeal, reopening the matter for a new trial. The appellant sought costs on appeal by filing a memorandum of costs; the trial court denied the respondents' motion to tax costs. The former respondents then appealed. ( Id. at p. 291.) The Supreme Court simply cited Markart and declared: "An order taxing costs on appeal is a special order made after final judgment within the meaning of section 963 of the Code of Civil Procedure and is appealable [citation]." ( Monson, at p. 291.)
And there the matter rested for over 60 years.
In the meantime, however, there were three relevant developments. First, in Sjoberg v. Hastorf (1948) 33 Cal.2d 116 [ 199 P.2d 668], the Supreme Court enunciated the collateral order doctrine. Previously, it had held particular collateral orders to be appealable. (E.g., Grant v. Los Angeles P. R. Co. (1897) 116 Cal. 71, 72 [ 47 P. 872] [order that receiver be paid out of fund in receiver's hands]; Sharon v. Sharon (1885) 67 Cal. 185, 195-199 [ 7 P. 456] [order for payment of alimony and attorney fees].) In Sjoberg, however, the court announced as a "general rule[]" that an otherwise interlocutory order is appealable "if the order is a final judgment against a party in a collateral proceeding growing out of the action. [Citations.]" ( Sjoberg, at p. 119.) It cautioned, however, "It is not sufficient that the order determine finally for the purposes of further proceedings in the trial court some distinct issue in the case; it must direct the payment of money by appellant or the performance of an act by or against him. [Citations.]" ( Ibid.)
Next, in 1968, the Legislature repealed former section 963 and replaced it with Code of Civil Procedure current section 904.1 (section 904.1), which, as relevant here, provides:
"An appeal . . . may be taken from any of the following:
"(1) From a judgment, except . . . an interlocutory judgment. . . .
"(2) From an order made after a judgment made appealable by paragraph (1)." (§ 904.1, subd. (a).)
Third, in Lakin v. Watkins Associated Industries (1993) 6 Cal.4th 644 [ 25 Cal.Rptr.2d 109, 863 P.2d 179], the Supreme Court held that, to be appealable as an order after judgment within the meaning of section 904.1, subdivision (a)(2), a postjudgment order must be one that "is not preliminary to future proceedings and will not become subject to appeal after a future judgment." ( Lakin, at p. 654; see also id. at pp. 652, 656.)
Which brings us to 1994 and Barnes v. Litton Systems, Inc., supra, 28 Cal.App.4th 681. There, just as in Monson and Markart, the original judgment was reversed, and the matter was remanded for a new trial. The successful appellant sought costs on appeal by filing a memorandum of costs. The trial court granted the respondent's motion to tax costs, in part, and the appellant appealed again from that order. ( Barnes, at p. 682.)
The appellate court raised the issue, sua sponte, of whether the order taxing costs was appealable as an order after a final judgment. ( Barnes v. Litton Systems, Inc., supra, 28 Cal.App.4th at p. 682.) It held that it was not, for two reasons. ( Id. at pp. 682-685.) First, the original judgment had been reversed ( id. at pp. 683-684): "The procedural posture of the case is one in which no judgment has been entered" ( id. at p. 684, fn. omitted). Second, under Lakin, the order taxing costs was "not sufficiently final. . . ." ( Barnes, at p. 685.) "[T]he case is presently awaiting trial. The order taxing costs is therefore one which is `preliminary to a later proceeding[]'. . . . After a judgment is entered, [the appellant] may appeal . . . from the interlocutory determination . . . taxing costs. [Citation.]" ( Ibid., fn. omitted.)
In a footnote, the court also held that the order taxing costs was not appealable under the collateral order doctrine: "The collateral order doctrine only applies to orders to pay money. [Citation.] The amount remaining due by defendant after the order partially taxing the sums sought in the postappeal cost memorandum is immediately collectible by plaintiff. [Citation.] Plaintiffs contention is he is entitled to more money; that is not an order to pay money which could be appealable pursuant to the collateral order doctrine." ( Barnes v. Litton Systems, Inc., supra, 28 Cal.App.4th at p. 685, fn. 4.)
Barnes did not cite or discuss either Monson or Markart; a fortiori, it did not explain why it was not following them.
Krikorian argues that Monson and Markart are outdated because they relied on former section 963, whereas Barnes relied on section 904.1. However, while the language of the two statutes is admittedly not identical, Krikorian does not explain how the change in language requires a different result. It does not appear that the Legislature intended to make any substantive change in the law. (See In re Marriage of Skelley (1976) 18 Cal.3d 365, 369 [ 134 Cal.Rptr. 197, 556 P.2d 297] ["[w]hen the Legislature enacted . . . section 904.], it utilized language virtually identical to former section 963 . . ."]; see also Sullivan v. Delta Air Lines, Inc. (1997) 15 Cal.4th 288, 304 [ 63 Cal.Rptr.2d 74, 935 P.2d 781] [a]lthough § 904.1, subd. (a)(1) omits the word "final" that was used in former § 963, subd. 1, "[t]he meaning is the same"]; City and County of San Francisco v. Shers (1995) 38 Cal.App.4th 1831, 1837, fn. 5 [ 46 Cal.Rptr.2d 57] [although § 904.1, subd. (a)(2) omits the "special order terminology" that was used in former § 963, subd. 2, this "does not substantively change the statutory scheme"].) Rather, "the apparent primary purpose of the 1968 changes was to subdivide the cumbersome language of former section 963." ( Shers, at p. 1837, fn. 5.)
It could be argued that Lakin implicitly overruled Monson. Certainly Barnes relied on Lakin. We believe, however, that in doing so, Barnes overlooked the unique nature of an award of costs on appeal. As Markart held, in this context, the relevant final judgment is the judgment of the Court of Appeal. (Markart v. Zeimer, supra, 74 Cal.App. at p. 155.) The Court of Appeal identifies the party entitled to costs. Any subsequent proceedings in the trial court to fix the amount of the fees are essentially postjudgment proceedings in the appeal.
Moreover, the award of costs is immediately enforceable. Indeed, as Witkin states: "`It is a complete judgment in itself that finds its origin in the order of an appellate or the Supreme Court affirming or reversing a judgment of a lower court. The right to such judgment comes into being when the order of the reviewing court becomes final. The judgment itself is created when the successful party files his cost bill and his costs are taxed.' [Citations.]" (9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 978, p. 1026.) It cannot be affected by any further proceedings in the trial court. And there may never be any further proceedings in the appellate court. Thus, it is not preliminary to further proceedings within the meaning of Lakin. We therefore conclude that Monson is still good law.
Separately and alternatively, however, even assuming an order taxing costs is no longer appealable as an order after judgment, we believe it is appealable under the collateral order doctrine. Even though the collateral order doctrine, as such, did not exist when Markart was decided, Markart used strikingly similar reasoning. For example, it noted that an order taxing costs on appeal is "ancillary," unrelated to the eventual judgment on the merits, and effectively final with respect to the ancillary issue. ( Markart v. Zeimer, supra, 74 Cal.App. at p. 157.) It also noted that the order is immediately enforceable. ( Id. at p. 159.) And it expressed concern that the order might escape review entirely. ( Id. at pp. 157-158.)
An order on a motion to tax costs on appeal would seem to qualify for appeal under the collateral order doctrine. The appellate court has already determined which party is entitled to costs on appeal; the trial court need only determine the appropriate amount of such costs. Both issues can be decided independently from any other issues in the action. Thus, the order is final with respect to the issue of costs on appeal. Barnes held that the collateral order doctrine does not apply because an order taxing costs is not an order for the payment of money. We respectfully disagree. There is no meaningful distinction between an order awarding costs and an order denying a motion to tax costs. The effect of an order denying a motion to tax costs, in whole or in part, is that the moving party must pay the costs allowed. Moreover, the award of costs is immediately enforceable "as a money judgment." (Cal. Rules of Court, rule 8.278(c)(3).) The Barnes court was swayed by the fact that, in the case before it, as here, the party entitled to costs was appealing on the ground that it was not awarded enough money. The particular challenge to the order that happens to be raised on appeal, however, is a different matter from the nature of the order itself.
There is a split of authority with respect to whether the collateral order doctrine actually is limited to orders that direct the payment of money or the performance of an act. (See generally Eisenberg ct al., Cal. Practice Guide: Civil Appeals and Writs (The Rutter Group 2010) H 2:76 to 2:80.1, pp. 2-44 to 2-49 (rev. # 1, 2010).) We may assume, without deciding, that it is.
We need not decide whether an order taxing all costs, and thus awarding 7xro, would be immediately appealable.
We can perceive only one possible argument to the contrary. The California Supreme Court has stated that, for a collateral order to be appealable, "it must direct the payment of money by appellant or the performance of an act by or against him. [Citations.]" ( Sjoberg v. Hastorf, supra, 33 Cal.2d at p. 119, italics added.) Here, the order on the motion to tax costs effectively directed the payment of money by Krikorian, the respondent. It did not direct Westminster to pay anything.
In Sjoberg, however, the relevant order denied a motion to compel arbitration. ( Sjoberg v. Hastorf, supra, 33 Cal.2d at p. 117.) The court held that this did not require the payment of money or the performance of an act at all. (Id. at p. 119.) Thus, the court's statement that to be appealable a collateral order must direct the payment of money by appellant was dictum.
Ordinarily, even "dicta from the Supreme Court [are] to be carefully considered." ( State of California v. Superior Court (2000) 78 Cal.App.4th 1019, 1029, fn. 13 [ 93 Cal.Rptr.2d 276] [Fourth Dist., Div. Two].) In this instance, however, the dictum in Sjoberg conflicts with the Supreme Court's actual holding in a later case, In re Marriage of Skelley, supra, 18 Cal.3d 365. There, in a dissolution of marriage proceeding, the trial court entered an interlocutory order reducing the wife's temporary spousal support from $1,000 a month to $750 a month and refusing to award the wife attorney fees. ( Id. at p. 367.) The court held that, under the collateral order doctrine, the wife could appeal. ( Id. at pp. 368-370.) It stated: "When a court renders an interlocutory order collateral to the main issue, dispositive of the rights of the parties in relation to the collateral matter, and directing payment of money or performance of an act, direct appeal may be taken. [Citations.]" ( Id. at p. 368, italics added.) Thus, it did not require that the money be paid by the appellant.
The Skelley court also relied on the fact that appeals from temporary support orders "have long been authorized." ( In re Marriage of Skelley, supra, 18 Cal.3d at p. 367.) "Historically, this court . . . has held temporary support orders directly appealable. [Citations.]" ( Id. at p. 368.) "When the Legislature enacted Code of Civil Procedure section 904.1, it utilized language virtually identical to former section 963, reflecting approval of th[is] rule." ( Id. at p. 369.) It concluded: "90 years of judicial approval and recent legislative affirmation tell us judicial economy cannot be invoked to outweigh the right of appeal for those subject to an order tantamount to a final judgment." ( Id. at p. 370.)
Here, as in Skelley, the order appealed from required respondent to pay money to appellant; appellant was aggrieved only because the order did not require the payment of as much money as appellant was seeking. Also, much as in Skelley, there is a long historical tradition, dating back to 1925, that an order taxing costs on appeal is appealable, even when the case is awaiting a new trial. If this rule resulted in piecemeal appeals or had other undesirable consequences, surely someone would have pointed that out along the way. Instead, this settled rule apparently was working so well that the issue was not raised again until 1994; even then, it was raised by the court, not by the parties, and the court did not claim that a rule of allowing an appeal would pose any practical problems.
In sum, then, we conclude that an order denying a motion to tax costs on appeal, in whole or in part, is immediately appealable, as an order after judgment and/or under the collateral order doctrine, even when there will be a new trial.
Of course, if the original judgment has been affirmed, so there will be no new trial, then an order taxing costs on appeal is appealable as an order after judgment. ( Citizens Against Rent Control v. City of Berkeley (1986) 181 Cal.App.3d 213, 223 [ 226 Cal.Rptr. 265].)
II. THE $944,263 SUBITEM OF COSTS
A. Introduction.In the previous appeal, Westminster stayed enforcement of the judgment by posting a $33.2 million cash deposit. It raised this money from investors who bought ownership interests in a corporation — newly formed for this purpose — and who were entitled to receive interest on their investment.
When Westminster managed to obtain a partial refund (some $6.6 million) of its cash deposit, it passed most of it along to the investors, as a return of principal; however, it hung onto a total of $944,263, which it used to continue to make interest payments.
On remand, Westminster claimed the interest it had paid to the investors, totaling $2.28 million, as part of its costs on appeal. The trial court reduced Westminster's claim by $944,263. It explained that Westminster had not adequately shown "why said amount was appropriately charged as a cost. . . ."
Westminster contends that the trial court erred by refusing to award it the $944,263.
B. Additional Factual and Procedural Background.
See diagrams attached as Appendix A, pages 40-41.
1. Westminster's financial position.
Westminster purchased a shopping center in Riverside called Riverside Plaza and proceeded to remodel it. Westminster agreed to build a multiplex movie theater at Riverside Plaza and to lease it to Krikorian. Before the theater was even built, however, Westminster terminated the lease. Krikorian therefore filed this action against Westminster for breach of lease.
In May 2006, the jury returned its verdict against Westminster. At the time, Westminster was in negotiations with several lenders to replace the construction financing on Riverside Plaza with permanent financing. One lender — John Hancock — had already offered a $70 million loan. After the verdict, however, John Hancock said it would lend only $54 million immediately; it would not lend the remaining $16 million unless the anticipated judgment was either overturned or stayed. On September 12, 2006, the John Hancock loan closed.
On September 21, 2006, the trial court entered judgment against Westminster for a total of about $22 million. On November 13, 2006, Westminster filed a notice of appeal. The trial court stayed enforcement of the judgment until Tuesday, December 26, 2006.
To protect its assets while the previous appeal was pending, Westminster had to either (1) post a bond or (2) deposit approximately $33.2 million into court. To obtain a bond, however, it would have had to provide cash collateral, most likely in the same amount — $33.2 million.
Westminster had "almost no available cash." Its only significant asset was Riverside Plaza itself. The appraised value of Riverside Plaza was $107 million; after John Hancock's $70 million loan, this left Westminster with $37 million in equity in Riverside Plaza. However, its loan agreement with John Hancock prohibited it from incurring any additional indebtedness secured by Riverside Plaza. In any event, the interest rate on such additional indebtedness would have been prohibitive (in excess of 15 percent).
Accordingly, Westminster decided to turn to equity rather than debt. It formed a limited liability company called Westminster Surety, LLC (Surety), and it offered ownership interests in Surety to private investors.
Westminster is wholly owned by Westminster Fund II LP (Fund II). Most of the existing investors in Fund II also became investors in Surety, but not all; for example, one major institutional investor, which owned 18 percent of Fund II, chose not to invest in Surety. Likewise, most of the investors in Surety were existing investors in Fund II, but not all.
By December 18, 2006, Surety had raised $33.5 million in equity from investors.
2. December 2006: The cash deposit.
On Thursday, December 21, 2006, Westminster deposited the necessary $33.2 million in cash with the trial court. It kept the rest of the investors' funds — a little under $300,000 — in a cash reserve.
Surety was obligated to pay its investors "posting fees" (i.e., interest) of 5 percent on the cash deposit and 10 percent on the cash reserve. The difference in interest rates was due to the fact that the court itself paid interest on the cash deposit at 4.9 percent. Surety passed the court's interest payments through to the investors. Both Westminster and Fund II guaranteed Surety's obligations.
This later declined to 3 percent.
At this point, John Hancock released the remaining $16 million of the loan. According to Westminster, it could not use any part of this $16 million to fund either the cash deposit or a bond, because the money was already committed to pay other debts and ongoing expenses.
3. June 2007: The bond replaced the cash deposit.
Meanwhile, Westminster continued to look into obtaining a bond. Ultimately, an independent surety company agreed to issue a bond for the full $33.2 million, secured by cash collateral of only $26.6 million.
In June 2007, Westminster substituted the bond for the cash deposit. This freed up $6.6 million in cash. Westminster returned $5.7 million of this to the investors in Surety. It deposited the remaining amount — $944,263 — into its cash reserve, raising the total cash reserve to about $1.2 million. It then used "the entire cash reserve" to pay posting fees to the investors in Surety.
4. May 2008: The release of the bond.
In April 2008, we issued our opinion in the previous appeal. We affirmed as to liability but reversed as to damages. We held that, under the "sole remedy" provision of the lease, Krikorian's recovery was limited to its architectural fees, the precise amount of which remained to be determined but were estimated at less than $20,000. We awarded Westminster costs on appeal.
In May 2008, by stipulation, the trial court released the bond, thus freeing up the $26.6 million in cash collateral. Westminster immediately repaid the entire $26.6 million to the investors in Surety. This was sufficient to buy out all of the remaining interests, except for a $1.4 million interest that Fund II itself held in Surety. Westminster intended to buy out this one last interest out of the award of costs on appeal.
5. The memorandum of costs and motion to tax costs.
In July 2008, Westminster filed its memorandum of costs on appeal. It sought a total of about $2.6 million. The largest single item — some $2.26 million — represented the claimed cost of making the cash deposit.
Krikorian filed a motion to tax costs. It argued that the cost of making the cash deposit "should be taxed because Westminster failed to provide back-up documentation demonstrating that this cost was incurred."
Westminster filed an opposition to the motion, including voluminous declarations and exhibits. In its opposition papers, it claimed $2.28 million as the cost of making the cash deposit, representing posting fees either paid or owed to investors.
It is unclear why this differed from the $2.26 million claimed in the memorandum of costs. It does appear that some additional posting fees accrued between June 2008, when the memorandum of costs was filed, and September 2008, when the opposition was filed. However, this amount was more than the $0.02 million difference.
Krikorian then filed a reply. It argued, among other things, that Westminster had failed to prove that it was necessary to resort to equity (i.e., investor funds) rather than cash or debt (i.e., a loan from Fund II or a loan secured by Riverside Plaza). It also argued that Westminster had failed to prove that it was necessary to pay the investors in Surety any interest (above and beyond the 4.9 percent interest that the court itself paid).
After hearing argument on the motion, the trial court granted the motion to tax costs in part and denied it in part. Out of the $2.28 million in posting fees that Westminster was seeking, it eliminated the $944,263 that Westminster had placed into the cash reserve after it managed to replace the cash deposit with a bond. The court found that it was not unreasonable for Westminster to fund the cash deposit by setting up Surety. However, it went on to state: "[T]he court does question the propriety of allowing amounts to be used to increase [Westminster]'s cash reserves by $944,263 after a bond was obtained [citation]. The court having no further information to explain why said amount was appropriately charged as a cost, the court taxes said amount."
Westminster filed a motion for new trial on the motion to tax costs, arguing that it had introduced ample evidence that the $944,263 had gone to pay posting fees.
In its opposition, Krikorian argued that a motion for new trial was not a procedurally appropriate way to challenge an order on a motion to tax costs. It also argued that Westminster had failed to prove that it was necessary "to increase Surety's cash reserves, rather than use other funds that were available to it, for the purpose of paying the [p]osting [f]ees."
After hearing argument, the trial court denied the motion for new trial. It also stated, "The court reviewed the papers as a motion for reconsideration, and denies the motion for reconsideration."
C. Analysis.
To obtain a stay of a money judgment pending appeal, the appellant must either post a bond or make a cash deposit in an amount equal to one and a half times the judgment. (Code Civ. Proc., §§ 917.1, subds. (a), (b), 995.710, subds. (a), (b).)
Costs on appeal are recoverable only if they fall within certain specified categories. (Cal. Rules of Court, rule 8.278(d)(1).) One such category is "[t]he cost to procure a surety bond. . . ." (Cal. Rules of Court, rule 8.278(d)(1)(F); see also Code Civ. Proc., § 995.250.)
Code of Civil Procedure section 995.730 provides, "A deposit given instead of a bond has the same force and effect, is treated the same, and is subject to the same conditions, liability, and statutory provisions . . . as the bond." This means that the cost of making a cash deposit in lieu of a bond is also recoverable. ( Cooper v. Westbrook Torrey Hills (2000) 81 Cal.App.4th 1294, 1298-1300.)
However, costs on appeal are recoverable only if "reasonable." (Cal. Rules of Court, rule 8.278(d)(1).) "Whether a cost item was reasonably necessary to the litigation presents a question of fact for the trial court and its decision is reviewed for abuse of discretion. [Citation.]" ( Ladas v. California State Auto. Assn. (1993) 19 Cal.App.4th 761, 774.)
In ruling on the motion to tax costs, the trial court essentially decided two separate issues. First, it determined that Westminster acted reasonably in choosing to make a cash deposit — i.e., to set up Surety — rather than to post a conventional appeal bond. Second, it determined that Westminster had failed to prove that the $944,263 item was a reasonable and proper component of the costs of setting up Surety and hence of making a cash deposit. Accordingly, we, too, analyze these issues separately.
1. Reasonableness in setting up Surety.
Krikorian argues, as it did below, that Westminster acted unreasonably in setting up Surety. In particular, it argues that it was not really necessary for Westminster to pay the investors in Surety an extra 5 percent in interest — above and beyond the 4.9 percent that the court itself was already paying — as a risk premium, and that Westminster failed to show that it could not have raised the necessary $33.2 million without paying this premium.
The trial court, however, resolved this issue in favor of Westminster and against Krikorian. It found that Westminster did act reasonably in setting up Surety. Moreover, it awarded Westminster all of the posting fees that it was asking for, minus only the $944,263. Krikorian has not cross-appealed. Therefore, it cannot ask us to take away the posting fees that the trial court did award to Westminster. If, however, the trial court abused its discretion by determining that Westminster was entitled to any posting fees at all, we could at least affirm its order taxing the $944,263 on that ground.
Thus, on this issue, it is Krikorian that bears the heavy burden of showing that the trial court abused its discretion. There was certainly evidence from which the trial court could have found that it was unreasonable to set up Surety. The question before us, however, is whether it was an abuse of discretion to find that setting up Surety was reasonable. As we will discuss, we find no such abuse of discretion.
Krikorian's arguments fall into two broad categories. First, it argues that Westminster had access to enough cash so that it could have either posted a bond or made a cash deposit without having to set up Surety at all. Westminster, however, introduced evidence that it had "almost no available cash."
Krikorian cites the trial testimony of an officer of Westminster, who stated, "[O]ur cash resources [c]ould be as much as 500 million." This, however, referred to the collective financial position of Westminster "and its affiliates," not just Westminster. Moreover, it referred to their financial position in 2002, not in 2006.
Krikorian suggests that Westminster's parent, Fund II, could have posted a bond or made a cash deposit on Westminster's behalf. The evidence, however, showed that Fund II had only about $5.2 million in cash. Admittedly, it also had other equity (excluding its interest in Westminster) totaling about $32 million. However, if it borrowed against that equity, it would have had to pay interest of 15 percent or more.
Krikorian also claims that Westminster should not have agreed to the covenant in the John Hancock loan that prohibited it from further encumbering Riverside Plaza. The trial court could reasonably infer, however, that John Hancock would not have made the loan without getting such a covenant. Moreover, once again, the evidence showed that, even if Westminster had been able to borrow against Riverside Plaza, it would have had to pay interest of 15 percent or more.
Finally, Krikorian argues that Westminster could have used the $16 million that John Hancock released in December 2006. However, this amount was manifestly insufficient to fund a $33.2 million bond or cash deposit. Moreover, John Hancock refused to release it until after the judgment had already been stayed. Krikorian's point seems to be that Westminster should have used the $16 million to repay, in part, the investors in Surety. Westminster introduced evidence, however, that the $16 million was already committed to pay other debts and expenses. The bottom line is that, even if Krikorian is correct, its point in no way undermines the trial court's finding that it was reasonable to set up Surety in the first place.
We turn, then, to Krikorian's second argument. This is that, even assuming it was reasonable to form Surety, Surety could have raised $33.2 million without paying any posting fees. Supposedly, the investors would have been adequately motivated by preserving their investment in Westminster and by receiving 4.9 percent interest from the court. Westminster introduced evidence, however, that it determined, based on "numerous discussions with the prospective investors," that "the minimum return . . . that would allow us to raise the necessary funds was approximately 10% per annum." Westminster actually ended up paying (i.e., out of pocket, not including the court's 4.9 percent) weighted annual interest of 5.2 percent. This compared favorably with the 6.32 percent that it was already paying on the John Hancock first-priority, secured loan.
Westminster explained that it was necessary to offer the posting fees, above and beyond the court's 4.9 percent, because the investment was "risky." If Westminster had lost the previous appeal, the investors would have lost most of their money. And, as Westminster pointed out, "unlike typical equity investments, there was no "upside' (i.e., [no] large bonus payment if the appeal succeeded)."
Admittedly, the investors would then have been entitled to recover against Westminster, as well as against Fund II. However, most of them were also investors in Fund II, which was the sole owner of Westminster. Thus, they could recover their lost cash only out of the value of their own existing assets. Of course, this was better than letting Krikorian enforce its judgment directly against Westminster (which probably would have forced Westminster to sell Riverside Plaza at a "fire-sale" price).
Nevertheless, the investors would still have been poorer, by the amount of Krikorian's judgment. Thus, despite Fund II's guarantee, the investment was indeed a risky one.
In addition, according to Westminster's expert witness, Fund II's major asset was Westminster; its only other assets were trailer parks worth a total of about $1.6 million and a housing development with a "liquidation value [of] virtually zero." And Westminster's major asset, in turn, was Riverside Plaza. Thus, if the investors had tried to enforce the guarantee against Fund II, the net result probably still would have been a "fire sale" of Riverside Plaza. Accordingly, even if Fund II sold off its assets to make good on the guarantee, it was "doubtful" that it could raise enough to make the investors whole. In his opinion, a risk premium of 5 percent was "a bargain." This "cost was not only reasonable, but distinctly low by market standards."
This expert witness, George G.C. Parker, had outstanding qualifications. He was the Dean Witter Distinguished Professor of Finance, Emeritus, at Stanford Business School. He had taught at Stanford Business School for 35 years, primarily in the areas of corporate finance, commercial banking and investment banking. He had also been on the board of directors of multiple public corporations.
Admittedly, Krikorian's expert witness disagreed. He pointed out that, according to the private placement memorandum given to the investors, even if Westminster lost the appeal, Fund II would still have net equity of $78 million, which would be more than sufficient to repay the investors. Once again, however, this overlooks the fact that, for most of the investors, the $78 million was essentially already their own money.
Krikorian's expert's conclusion also overlooks significant qualifying language in the very private placement memorandum that he cited, including that: "Investment in [Surety] involves a significant degree of risk." "[S]ources of repayment will be risky and illiquid." "The obligations owed to [Surety] by Westminster . . . and [Fund II] are not protected or secured by any liens, security instruments, financial covenants, or limitations upon additional indebtedness." "[R]epayment of Member investment capital . . . [is] dependent on investments in real estate. . . . Such investments are subject to various risks. . . . There can be no assurance that the . . . return of Members' invested capital . . . will be realized." In sum, to the extent that there was a "battle of the experts," the trial court was entitled to believe Westminster's expert and disbelieve Krikorian's expert.
It is also significant that not every investor in Fund II actually invested in Surety. For example, one institutional investor that owned 18 percent of Fund II did not invest in Surety at all. As Westminster argued below, "[I]f this was really a risk-free investment offering a 5 percent risk premium, everybody would have wanted in. This was free money, according to [Krikorian]. . . . [T]his 18 percent investor[,] with nearly 5 million dollars to lose[] if we don't get the stay[,] would have been right there and said, . . . [`]For zero risk, I'm going to get 5 percent.[`] Everybody in Fund [II] would have rushed to get that investment." But they did not.
Finally, as Westminster also argued below, Krikorian was asking the trial court to engage in Monday-morning quarterbacking. Westminster had a very short time in which to set a risk premium. If it set the risk premium too low, it might not have been able to raise the full $33.2 million in time to obtain a stay, which would have had disastrous consequences. It was reasonable to err (if at all) by setting the risk premium on the high side. At a minimum, it would not be an abuse of discretion for the trial court to conclude that this was reasonable.
2. Reasonableness of the $944,263 item.
As discussed, the trial court determined that it was reasonable for Westminster to set up Surety. It also evidently determined that it was reasonable for Westminster to pay the posting fees to the investors in Surety, since it awarded Westminster the full amount of those posting fees, minus only the $944,263. Westminster, however, introduced uncontradicted evidence that the entire $944,263 went to pay posting fees.
It seems that the trial court either overlooked this evidence or found it confusing. The court itself explained that it had "no further information to explain why said amount was appropriately charged as a cost. . . ." When Westminster listed its costs, however, it never said it was seeking the $944,263 as a separate item. Rather, it said it was seeking a total of $2.28 million in posting fees. This was further broken down by the quarter in which the posting fees were paid. These quarterly amounts were then amply supported by accounting records, bank statements, and copies of every single check to every single investor.
The $944,263 came up in a very different context — when Westminster was tracing the investors' $33.5 million. It explained meticulously where every dollar went. In the course of doing so, it disclosed that, once it freed up $6.6 million by replacing the cash deposit with a bond, it placed $944,263 of this into the cash reserve, then used all of the cash reserve to pay posting fees. However, Westminster never requested an award of the $944,263 as a separate item, or on any basis other than that it was included in the overall request for posting fees.
Moreover, Krikorian never opposed an award of the $944,263. In its reply memorandum and in the argument on the motion, it simply never mentioned it. Krikorian did argue that Westminster acted unreasonably by maintaining the entire cash reserve (totaling $1.2 million). It argued that Westminster should have returned this money to the investors instead. Westminster was obligated to pay posting fees on the cash reserve at a higher rate (10 percent) than on the cash deposit (5 percent). Krikorian therefore objected to awarding Westminster the posting fees it had paid on the cash reserve: "[Krikorian] is being asked to recompense Westminster for more than $100,000 it paid to investors just so that Westminster would [have] money on hand for any expenses that arose." (Fn. omitted.) This was not the same thing as an objection to an award of the underlying $944,263.
On the motion for new trial, and in this appeal, Krikorian has argued that it was proper to tax the $944,263 because Westminster failed to prove that it was necessary "to increase Surety's cash reserves, rather than use other funds that were available to it, for the purpose of paying the [p]osting [f]ees." This is a red herring. The particular source of the funds that Westminster tapped to pay the posting fees was irrelevant. Westminster was obligated to pay the posting fees; the trial court found that it was reasonable to incur the posting fees; Westminster did, in fact, pay the posting fees; hence, Westminster is entitled to recover the posting fees, including the $944,263.
III. ATTORNEY FEES
See footnote, ante, page 1075.
A. Introduction.
After the jury verdict in favor of Krikorian, the trial court awarded Krikorian $2.1 million in contractual attorney fees. In the previous appeal, Westminster did not challenge this award. On remand, however, the trial court ruled that Westminster — not Krikorian — was now the prevailing party and, as such, entitled to contractual attorney fees. It proceeded to award Westminster $3.3 million in attorney fees.
Krikorian contends that the trial court lacked jurisdiction to redetermine the prevailing party issue on remand. Krikorian also contends that the trial court erred by finding that Westminster was the prevailing party.
B. Additional Factual and Procedural Background.
On remand, Westminster deposited $20,000 with the court, representing its maximum estimate of Krikorian's architectural fees. A few months later, Krikorian accepted $12,267.22 as full payment.
Each party then filed a motion for an order that it was the prevailing party for purposes of attorney fees.
Westminster argued that it was the prevailing party because it had achieved all of its objectives in the litigation. It also argued that it was also the prevailing party under Civil Code section 1717, subdivision (b)(2) because it had alleged a tender of the architectural fees, and it had deposited the architectural fees into court.
Civil Code section 1717, subdivision (b)(2), as relevant here, provides:
"Where the defendant alleges in his or her answer that he or she tendered to the plaintiff the full amount to which he or she was entitled, and thereupon deposits in court for the plaintiff, the amount so tendered, and the allegation is found to be true, then the defendant is deemed to be a party prevailing on the contract within the meaning of this section."
Krikorian argued that it was the prevailing party because it was the only party with a net recovery, namely its architectural fees. Alternatively, however, it also argued that the original $2.1 million award of attorney fees to it had not been challenged in the previous appeal and thus had become final.
After hearing argument, the trial court ruled that Westminster was the prevailing party. It entered judgment in favor of Westminster and against Krikorian, awarding Westminster attorney fees in an amount to be determined. Eventually, it awarded Westminster $3.3 million in attorney fees.
C. The Trial Court's Authority to Redetermine the Prevailing Party.
Ordinarily, when a judgment is reversed, "the award of costs necessarily falls with the judgment. [Citations.]" ( Harris v. Wachovia Mortgage, FSB (2010) 185 Cal.App.4th 1018, 1027 [Fourth Dist., Div. Two].) This includes an award of attorney fees as costs. ( Ibid.)
This is true even if the attorney fee award is not challenged in the appeal. For example, in Schaefer Dixon Associates v. Santa Ana Watershed Project Authority (1996) 48 Cal.App.4th 524 [Fourth Dist., Div. Two], we noted: "The [appellant]'s notice of appeal stated it appealed also from the award of attorney fees in favor of the [respondent]. The [respondent] asserts that, because no argument was directed expressly to the issue of attorney fees, the [appellant] has abandoned that issue. The assertion is specious, as the [appellant]'s appeal attacks the ruling on the summary judgment motion, which was of course the predicate for any award of attorney fees. The award of fees below thus stands or falls with the judgment as a whole." ( Id. at p. 530, fn. 1.)
Krikorian argues that this language in Schaefer Dixon was dictum, because ultimately, we affirmed the judgment. (See Schaefer Dixon Associates v. Santa Ana Watershed Project Authority, supra, 48 Cal.App.4th at p. 537.) Even if so, dictum of this very court, much like dictum of the Supreme Court (see part I, ante) is persuasive.
Moreover, the reversal of a judgment may result in the automatic reversal of a fee award, even if the fee award itself is not appealed. For example, in Allen v. Smith (2002) 94 Cal.App.4th 1270, the trial court entered summary judgment for the defendants. Later, it also awarded the defendant costs, including attorney fees. The plaintiff appealed from the judgment but not from the fee award. ( Id. at pp. 1276, 1283-1284.) The appellate court reversed the judgment, holding that it was the plaintiff, rather than the defendants, who was entitled to summary judgment. ( Id. at pp. 1277-1281.)
The court then held that, even though it had no jurisdiction to review the fee award, the fee award could not stand: "An appellate court has no jurisdiction to review an award of attorney fees made after entry of the judgment, unless the order is separately appealed. [Citation.]" ( Allen v. Smith, supra, 94 Cal.App.4th at p. 1284.) "However, this does not mean that an award of attorney fees to the party prevailing stands after reversal of the judgment. "An order awarding costs falls with a reversal of the judgment on which it is based.' [Citations.] "[T]he successful party is never required to pay the costs incurred by the unsuccessful party.' [Citation.] After reversal of a judgment "the matter of trial costs [is] set at large.' [Citation.] Although we cannot reverse the order granting costs and fees, the trial court should do so on remand." ( Ibid.)
Krikorian argues that Allen is not controlling here, because there the appellate court reversed the entire judgment, whereas we affirmed as to liability and reversed only as to damages. In Gillan v. City of San Marino (2007) 147 Cal.App.4th 1033, however, the appellate court similarly affirmed with respect to the defendants' liability for false arrest, while remanding for a new trial with respect to damages. ( Id. at p. 1053.) Nevertheless, it added: "Our reversal of the judgment necessarily compels the reversal of the award of fees as costs to the prevailing party based on the judgment. [Citations.] "After reversal of a judgment, "the matter of trial costs [is] set at large." [Citation.]' [Citation.]" ( Ibid.) It reversed the fee award even though, as it noted, "the court in its discretion may award fees at the conclusion of the proceedings on remand." ( Id. at p. 1054.)
Admittedly, the court did also hold that the defendants were entitled to judgment in their favor on the plaintiff's other causes of action, for defamation and intentional infliction of emotional distress. ( Gillan v. City of San Marino, supra, 147 Cal.App.4th at pp. 1047-1051, 1053-1054.) Even so, the case is sufficient to refute Krikorian's argument that an attorney fee award is not automatically reversed unless the entire underlying judgment is reversed.
Krikorian relies on Dieckmeyer v. Redevelopment Agency of Huntington Beach (2005) 127 Cal.App.4th 248. There, the trial court issued a writ of mandate, ordering the defendant city to accept the petitioner's prepayment of a promissory note and to reconvey the trust deed securing the note. ( Id. at pp. 250.) Later, it also awarded the petitioner contractual attorney fees. ( Id. at pp. 254, 260.)
The appellate court held that the petitioner was entitled to prepay but was not entitled to reconveyance of the trust deed. ( Dieckmeyer v. Redevelopment Agency of City of Huntington Beach, supra, 127 Cal.App.4th at pp. 255-259.) Hence, it directed the trial court to issue a new writ of mandate in conformity with its opinion. ( Id. at pp. 260-261.)
The city argued that the appellate court should also reverse the fee award, because on remand, the trial court could reasonably determine that the city had become the prevailing party. ( Dieckmeyer v. Redevelopment Agency of City of Huntington Beach, supra, 127 Cal.App.4th at p. 260.) The appellate court responded: "[T]his point was raised for the first time in the City's reply brief, and that is too late. An appellant's failure to raise an argument in its opening brief waives the issue on appeal. [Citation.] There was no error in the fee award." ( Ibid.)
In Dieckmeyer, then, nominally the judgment was reversed, but actually it was modified. (See generally Snapp v. State Farm Fire Casualty Co. (1964) 60 Cal.2d 816, 820-822 [a "reversal" may be, practically and legally, a modification; the substance is controlling, not the form].) The only proceedings to be held in the trial court on remand were ministerial — the issuance of a new writ of mandate in conformity with the appellate court's directions. Under these circumstances, if the appellant really wanted to argue that the matter should be remanded with additional directions to redetermine the prevailing-party question, it could reasonably be required to raise that argument explicitly in its opening brief.
Here, by contrast, we did not limit the issues to be determined on remand (except to the extent that we affirmed with respect to liability). Our disposition left open the possibility of an entire new trial, albeit on limited issues. It even left open the possibility that Krikorian might not recover any damages at all — for example, if it failed to introduce sufficient admissible evidence of the amount of its architectural fees. Hence, our reversal of the judgment also implicitly, but necessarily, reversed the fee award.
Krikorian also relies on Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659. Paulus is not relevant, however, because there the underlying judgment was affirmed, not reversed. ( Id. at pp. 673-685, 687.) It was in that context that the court held that the appellant had forfeited any challenge to the accompanying award of attorney fees by failing to raise it in his opening brief. ( Id. at pp. 685-686.) Thus, the case has no bearing on whether a reversal of the judgment also results in the reversal of an attorney fee award.
There is a straightforward issue of fairness here. A fee award that is made on the theory that the plaintiff is the prevailing party should not stand if the judgment in favor of the plaintiff is reversed on appeal. This is true even if, in the appeal, the defendant argues only the merits and does not specifically address the fee award. It would simply be unfair to let the fee award stand — at least when there is a reasonable possibility that the defendant may be found to be the prevailing party on remand. Admittedly, if the defendant could attack the fee award on independent grounds, separate and apart from the merits of the appeal, but fails to do so, that attack has been forfeited. That, however, is not the situation here.
We therefore conclude that the trial court did not err by redetermining the prevailing-party issue.
D. The Trial Court's Prevailing Party Finding.
Civil Code section 1717, subdivision (a) provides: "In any action on a contract, where the contract specifically provides that attorney's fees and costs, which are incurred to enforce that contract, shall be awarded either to one of the parties or to the prevailing party, then the party who is determined to be the party prevailing on the contract, whether he or she is the party specified in the contract or not, shall be entitled to reasonable attorney's fees in addition to other costs." The prevailing party for this purpose is defined as "the party who recovered a greater relief in the action on the contract." (Civ. Code, § 1717, subd. (b)(1), italics added.)
For purposes of a cost award in general, "prevailing party" is defined, as relevant here, as "the party with a net monetary recovery. . . ." (Code Civ. Proc., § 1032, subd. (a)(4).) This definition, however, is not controlling for purposes of Civil Code section 1717, which contains its own definition of "prevailing party." ( Chinn v. KMR Property Management (2008) 166 Cal.App.4th 175, 190; Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1157.)
"`[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.' [Citation.]" ( Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109.)
"[I]n determining litigation success, courts should respect substance rather than form, and to this extent should be guided by "equitable considerations.' For example, a party who is denied direct relief on a claim may nonetheless be found to be a prevailing party if it is clear that the party has otherwise achieved its main litigation objective. [Citations.]" ( Hsu v. Abbara (1995) 9 Cal.4th 863, 877, italics omitted.)
"The trial court exercises a particularly `wide discretion' in determining who, if anyone, is the prevailing party for purposes of section 1717(a). [Citation.] To overturn that determination on appeal, the objecting party must demonstrate `a clear abuse of discretion.' [Citation.] However, the `determination of the legal basis for an award off attorney fees' is a `question of law' which the reviewing court will examine de novo. [Citation.]" ( Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 894.)
Here, Krikorian was seeking at least $16 million in damages. To this end, it spent over $2 million in attorney fees, it went through a 33-day trial, and it litigated a complex appeal. On remand, it recovered only $12,267.22. Krikorian quibbles with respect to whether Westminster actually "tendered" the architectural fees before trial (as opposed to simply asking how much they were). Nevertheless, it is clear that Westminster would have been delighted to pay a paltry sum like $12,267.22 at any time, if it thought that would make the litigation go away. As the trial court aptly put it, "[I]t's inconceivable to me that you folks would have gone to trial for 40 days arguing about $17,000 [ sic]. That clearly wasn't what the fight was about." In short, for purposes of an award of contractual attorney fees, a victory this Pyrrhic is not a victory at all.
Krikorian belatedly tries to recharacterize its litigation goals. It claims that all it was seeking was "a judgment that W[estminster] was liable for breach of the Lease . . . and an award of damages." Not so. Rather, it was specifically seeking damages in a multi-million dollar amount sufficient to justify spending $2 million in attorney fees.
Krikorian also argues that it recovered "`greater' . . . relief" within the meaning of Code of Civil Procedure section 1717, because it recovered $12,267.22, while Westminster recovered nothing. However, "[t]he `greater relief' obtained by a party does not necessarily mean greater monetary relief. [Citation.]" ( Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1120.)
As Westminster points out, Silver Creek, LLC v. BlackRock Realty Advisors, Inc. (2009) 173 Cal.App.4th 1533 is dispositive of this point. There, a buyer agreed to pay $29.75 million for real property and deposited about $1.13 million into escrow. The buyer was to assume the existing loans on the properties; the assumption agreements had to be satisfactory to the seller. The seller terminated the agreement, in part because (it claimed) the buyer had failed to obtain satisfactory loan agreements. ( Id. at p. 1536.)
The seller filed suit, seeking a declaratory judgment that it was entitled to retain the $1.13 million deposit. The buyer filed a cross-complaint, alleging that the seller had breached its obligation to act reasonably in approving the assumption agreements, and seeking either damages or specific performance, along with the return of its deposit. ( Silver Creek, LLC v. Blackrock Realty Advisors, Inc., supra, 173 Cal.App.4th at p. 1536.) After a bench trial, the trial court found that the seller had acted reasonably and that the buyer had not been ready to perform. However, it also found that the buyer was entitled to the return of its deposit. Accordingly, it entered judgment awarding the deposit to the buyer. ( Id. at p. 1537.)
The trial court further found that neither party was the prevailing party, and thus neither party was entitled to attorney fees. ( Silver Creek, LLC v. Blackrock Realty Advisors, Inc., supra, 173 Cal.App.4th at p. 1538.) The appellate court held that this was an abuse of discretion and that the seller was the prevailing party as a matter of law. ( Id. at pp. 1540-1541.) It explained: "The record reveals that the property issue was most important to the parties and `greater' in terms of monetary value — about $29.75 million at issue for the properties versus about $1.13 million at issue for the deposit. Thus, [the seller] achieved its main litigation objective, while [the buyer] clearly failed to accomplish its desired goal even though it obtained the return of its deposit. [Citation.]" ( Id. at p. 1540.)
Silver Creek refutes Krikorian's claim that a party that recovers something necessarily prevails over a party that recovers nothing. Here, much as in Silver Creek, the issue that was most important, and of greatest value, to the parties was whether Krikorian's remedies for Westminster's alleged breach were limited to its architectural fees. If so, then establishing that Westminster was, in fact, liable actually left Krikorian worse off than if it had never sued. In the end, Westminster achieved its main litigation goal, and Krikorian did not, even though Krikorian did establish that Westminster was liable and did obtain the token recovery of $12,267.22.
IV DISPOSITION
The order on Krikorian's motion to tax costs is modified so as to award Westminster the $944,263 amount that was previously denied. As so modified, the order is affirmed. The judgment, including the award of attorney fees, is also affirmed. In the interest of justice, each side shall bear its own costs on appeal.McKinster, Acting P. J., and Miller, J., concurred.
APPENDIX A
See footnote, ante, at page 1075.