Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County No. GC033987, Jan A. Pluim, Judge.
Law Offices of Daniel J. Doonan, Inc., Daniel J. Doonan and Lynne Rasmussen for Defendants and Appellants, Parker Restaurant Group, Inc. and Old Town Brewpub.
Law Office of David Alan Cooper and David Alan Cooper for Plaintiffs and Respondents, Steve Smolinski and Sean Rooks.
PERLUSS, P. J.
Parker Restaurant Group, Inc. and Old Town Brewpub, Ltd. appeal from the trial court’s denial of their application for costs and motion for an award of attorney fees following entry of judgment in their favor in an action for an accounting and for breach of fiduciary duty. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
Under an agreement dated May 10, 2002 a limited partnership known as Old Town Brewpub, Ltd. was formed for the purpose of establishing and operating a restaurant and bar in Pasadena, California. The agreement identified Parker Restaurant Group, Inc. as the general partner and Charles R. Parker, Robert A. Parker and Tiffany T. Parker as limited partners (collectively the Parker Group). Over the next year the Parker Group raised nearly $1 million from various investors including Thom Piskur, Sean Rooks and Steve Smolinski (the Piskur parties).
The new restaurant was a bust. By December 2003, less than six months after opening and less than one year after the Piskur parties invested as limited partners, the Parker Group convened a meeting to determine whether to close or sell the restaurant or the building in which the restaurant was housed, the partnership’s sole asset other than the restaurant. The partnership voted to sell both the building and the restaurant based on the general partner’s recommendation and implied promise investors would recover their initial investments. Soon thereafter, the Piskur parties began to demand an accounting of partnership assets but received no response other than a letter dated April 12, 2004 enclosing a Schedule K-1 federal tax form revealing the partnership had only $34,487 in its capital account at the end of 2003. In June 2004 the restaurant business was sold, and the commercial space leased.
Having been rebuffed in the quest for an accounting, Piskur filed a lawsuit in July 2004 alleging causes of action for breach of contract and fraudulent conveyance. Two months after the complaint was filed, the Parker Group provided the limited partners with an accounting for the year 2003. After the Parker Group successfully demurred to the complaints, the Piskur parties jointly filed an amended complaint seeking a full accounting and asserting a cause of action for breach of fiduciary duty.
Rooks and Smolinski each filed complaints in intervention several months after Piskur’s complaint was filed. Piskur later dismissed his own claims and is not a party on appeal, but, for simplicity, we retain the original caption.
Two weeks before trial was to begin, the Parker Group provided the limited partners an accounting for the year 2004. The accounting claim was dismissed by the court as moot, and a bench trial was held on the breach of fiduciary claim. The court ruled in favor of the Parker Group, and the Parker Group filed an application for costs as well as a motion for an order establishing it as the prevailing party and for an award of attorney fees under the limited partnership agreement. The trial court declined to award costs, finding there was no prevailing party in the litigation and denied the motion for attorney fees on the ground there was no applicable attorney fee provision in the limited partnership agreement.
CONTENTIONS
The Parker Group contends the trial court lacked discretion not to award costs of litigation and erred in denying its motion for attorney fees.
DISCUSSION
1. Standard of Review
An order granting or denying an award of costs or attorney fees is generally reviewed for an abuse of discretion. (See, e.g., Wakefield v. Bohlin (2006) 145 Cal.App.4th 963, 978; MHC Financing Limited Partnership Two v. City of Santee (2005) 125 Cal.App.4th 1372, 1397; Salawy v. Ocean Towers Housing Corp. (2004) 121 Cal.App.4th 664, 669.) Questions of statutory interpretation, however, are questions of law “subject to our independent or de novo review.” (People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 432; California Veterinary Medical Assn. v. City of West Hollywood (2007) 152 Cal.App.4th 536, 546.) In addition, we independently determine as a question of law the scope of an attorney fee provision when, as here, the interpretation does not turn on extrinsic evidence. (Kalai v. Gray (2003) 109 Cal.App.4th 768, 777; Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 705.)
2. The Trial Court Did Not Err in Denying the Parker Group’s Application for Costs
Code of Civil Procedure, section 1032, subdivision (a)(4), defines prevailing party for purposes of an award of litigation costs. “As used in this section, unless the context clearly requires otherwise: [¶] . . . [¶] (4) ‘Prevailing party’ includes the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant. When any party recovers other than monetary relief and in situations other than as specified, the ‘prevailing party’ shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed may apportion costs between the parties on the same or adverse sides pursuant to rules adopted under Section 1034.”
Statutory references are to the Code of Civil Procedure unless otherwise indicated.
The Parker Group argues the trial court lacked discretion as a matter of law to deny costs because the Piskur parties’ claim for an accounting was dismissed by the court and they obtained no relief on their cause of action for breach of fiduciary duty. That contention improperly relies on an overly literal interpretation of section 1032, subdivision (a)(4), and entirely disregards the practical realities of the Piskur parties’ lawsuit and the positive results it obtained.
First, the fact the Piskur parties’ accounting claim, but not their entire complaint, was dismissed does not entitle the Parker Group to recover its costs for the entire action. The cases authorizing the recovery of costs under that portion of section 1032, subdivision (a)(4), involve full dismissals -- involuntary or voluntary -- of the entire action. (See, e.g., Santisas v. Goodin (1998) 17 Cal.4th 599, 606 (Santisas); Crib Retaining Walls, Inc. v. NBS/Lowry, Inc. (1996) 47 Cal.App.4th 886, 889-890.)
Second, as the record makes clear, the trial court viewed the Piskur parties’ accounting claim as successful because it forced the Parker Group to account to the limited partners. (See Howard v. Howard & Smith Inc. (1943) 58 Cal.App.2d 172 [plaintiff seeking inspection of corporate records entitled to costs as prevailing party even though action dismissed as moot after defendant corporation complied with plaintiff’s demand].) That is, the dismissal was not granted in favor of the Parker Group on the merits, but was entered because the claim became moot on the eve of trial when the Parker Group, faced with an inevitable adverse judicial ruling, complied with its obligation to account to the limited partners. (See Chaparral Greens v. City of Chula Vista (1996) 50 Cal.App.4th 1134, 1152 [“a determination of prevailing party status is discretionary with the court ‘[w]hen any party recovers other than monetary relief’”]; Childers v. Edwards (1996) 48 Cal.App.4th 1544, 1549 [“‘Relief’ in this sense has been defined generally as ‘[d]eliverance from oppression, wrong, or injustice. . . . [I]t is used as a general designation of the assistance, redress, or benefit which a complainant seeks at the hands of a court’”]; cf. International Industries, Inc. v. Olen (1978) 21 Cal.3d 218, 224 [“Although a plaintiff may voluntarily dismiss before trial because he learns that his action is without merit, obviously other reasons may exist causing him to terminate the action. For example, the defendant may grant plaintiff -- short of trial -- all or substantially all relief sought, or the plaintiff may learn the defendant is insolvent, rendering any judgment hollow”].)
Thus, the trial court’s finding there was no prevailing party in this case was properly based on its conclusion none of the four separate circumstances warranting costs as a matter of right applied to the Parker Group’s application. On these facts we cannot say the trial court erred in this determination. Nor did the court plainly abuse its discretion in denying an award of costs altogether. (See Lincoln v. Schurgin (1995) 39 Cal.App.4th 100, 105-106 [trial court did not abuse its discretion in declining to award costs where defendant not entitled to costs as matter of right because of mixed result].)
On appeal of the costs determination, we apply the rule that “‘[a] judgment or order of the lower court is presumed correct. All intendments and presumptions are indulged to support it on matters as to which the record is silent, and error must be affirmatively shown.’” (Rappenecker v. Sea-Land Service, Inc. (1979) 93 Cal.App.3d 256, 266.) To the extent the Parker Group challenges those implied findings as an abuse of discretion, the record is inadequate to support its claim the timing of the accounting was uninfluenced by the litigation.
3. The Trial Court Did Not Err in Declining To Award Attorney Fees to the Parker Group Based on Its Finding There Was No Prevailing Party
Under the “American rule,” codified in section 1021, each party to a lawsuit is required to bear its own attorney fees unless recovery of those fees is authorized by contract or statute. (Santisas, supra, 17 Cal.4th at p. 607, fn. 4; City and County of San Francisco v. Sweet (1995) 12 Cal.4th 105, 115; § 1021 [“[e]xcept as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties”].) Civil Code section 1717, subdivision (a), authorizes the trial court to award reasonable attorney fees to the prevailing party in a contract action if the contract specifically provides for an award of such fees. (See also § 1033.5, subd. (a)(10)(A) [“(a) The following items are allowable as costs under Section 1032: [¶] . . . [¶] (10) Attorney fees, when authorized by any of the following: [¶] (A) Contract”].)
Civil Code section 1717, subdivision (a), states, “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.”
When parties elect to include an attorney fee provision in a contract, the applicability and scope of that provision must, like any other contractual provision, be interpreted in accordance with general rules governing contract interpretation. (Kalai v. Gray, supra, 109 Cal.App.4th at p. 777; Exxess Electronixx v. Heger Realty Corp., supra, 64 Cal.App.4th at p. 705.) The court’s goal is to give effect to the mutual objective intent of the parties as it existed at the time the contract was formed. (Civ. Code, § 1636; Palmer v. Truck Ins. Exchange (1999) 21 Cal.4th 1109, 1115.) That objective intent must be determined, whenever possible, by reference to the contract’s terms. (Civ. Code, § 1639 [“[w]hen a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible”]; Civ. Code, § 1638 [the “language of a contract is to govern its interpretation”]; see also Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18 [the “‘“clear and explicit” meaning of [the contract’s] provisions, interpreted in their “ordinary and popular sense,” unless “used by the parties in a technical sense or a special meaning is given to them by usage” [citation], controls judicial interpretation.’”].) The fee provision must be considered in context, rather than in isolation, and in light of the agreement as a whole. (Civ. Code, § 1641.)
The Parker Group claims two separate provisions of the limited partnership agreement authorize its recovery of fees in this litigation. The first provision, paragraph 10.02, requires the Partnership to “pay or reimburse the General Partner or its Affiliates” (in other words, the Parker Group) “for all expenses of the [Partnership], which may include . . . the costs or expenses of: [¶] . . . [¶] (m) any litigation [in] which the Partnership may become involved, . . . including legal . . . fees.” Although this provision plainly permits the general partner to recover attorney fees in certain situations, it does not provide for attorney fees in an action on the contract as is required to trigger operation of Civil Code section 1717. Rather, paragraph 10.02 is simply a standard clause allowing management to seek reimbursement for out-of-pocket expenses incurred on behalf of the partnership: “A provision including attorney fees as an item of loss in an indemnity clause is not a provision for attorney fees in an action to enforce the contract.” (Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 971 (Myers Building Industries).)
An “[i]ndemnity is a contract by which one engages to save another from a legal consequence of the conduct of one of the parties, or of some other person.” (Civ. Code, § 2772.)
The second provision of the limited partnership agreement relied upon by the Parker Group, paragraph 18.02.2, provides: “If the Partnership or any such persons employs counsel to enforce or interpret the provisions of this paragraph, including without limitation the commencement of any legal proceeding whatsoever (including without limitation insolvency, bankruptcy, arbitration, declaratory relief or other litigation), the prevailing party shall be entitled to recover its reasonable attorney’s fees and court cost (including without limitation the service of process fees, filing fees, court and court reporter cost, investigative fees, expert witness fees and the cost of any bonds, whether taxable or not) in addition to any other remedy it may obtain or be awarded. Any judgment [o]r final order issued in any legal proceeding shall include such reimbursement for attorney’s fees and cost. In any legal proceeding, the ‘prevailing party’ shall mean the party determined by the court to most nearly prevail and not necessarily the party in whose favor a judgment is rendered.”
The Piskur parties contend this provision does not embrace the subject matter of the litigation. Paragraph 18, which is entitled “Certain Transactions,” contains two subparagraphs, paragraph 18.01, entitled “Non-Disqualifying Business Interests,” and paragraph 18.02, entitled “Disqualifying Business Interest.” A “Disqualifying Business Interest” is defined as “any direct or indirect prohibited ownership interest in any business licensed to sell or manufacture alcoholic beverages which could result in denial, suspension or revocation of the Partnership’s alcoholic beverage licenses . . . .” Paragraph 18.02 bars any general or limited partner (and other affiliated parties) from “acquir[ing] or hold[ing] a Disqualifying Business Interest unless the [Alcoholic Beverage Control Board] has granted the Partnership an exemption . . . .” Paragraph 18.02.1 addresses the remedies available to the partnership if anyone subject to paragraph 18 violates its provisions; and paragraph 18.02.2, the paragraph relied upon by the Parker Group here, allows the partnership or other affected party to recover its attorney fees and costs for any violation of the terms of paragraph 18.
By its express, unambiguous terms, therefore, paragraph 18.02.2 does not apply to the Piskur parties’ lawsuit. Responding in its reply brief to this undeniable flaw in its argument, the Parker Group points to the second paragraph in Civil Code section 1717, subdivision (a), which provides: “Where a contract provides for attorney’s fees, as set forth above, that provision shall be construed as applying to the entire contract, unless each party was represented by counsel in the negotiation and execution of the contract, and the fact of that representation is specified in the contract.” The Parker Group contends this paragraph extends the right to recover attorney fees beyond paragraph 18.02.2’s plain limitation on such awards to encompass all litigation relating to the parties’ agreement.
Raising this issue for the first time in its reply brief, the Parker Group disclaims any intent to mislead the court by having argued in its opening brief paragraph 18.02.2 applies without discussing the context in which the provision appears or identifying its explicit limitation to litigation relating to enforcement of the partnership agreement’s restriction on ownership of disqualifying business interests. Even if true, its tactical decision to defer discussion of this material limitation on the scope of paragraph 18.02.2 is highly questionable and threatens forfeiture of the issue, as an appellant’s failure to raise an issue in the opening brief ordinarily waives the issue on appeal. (Locke v. Warner Bros., Inc. (1997) 57 Cal.App.4th 354, 368; see Varjabedian v. City of Madera (1977) 20 Cal.3d 285, 295, fn. 11 [“[o]bvious reasons of fairness militate against consideration of an issue raised initially in the reply brief of an appellant”].) Our task is further complicated by the Parker Group’s failure to make this argument to the trial court, thus invoking the well established rule barring our consideration of issues or theories not properly raised in the trial court. (Mardirossian & Associates, Inc. v. Ersoff (2007) 153 Cal.App.4th 257, 277; Jones v. Wagner (2001) 90 Cal.App.4th 466, 481.) Although we find these failings quite troubling, we hesitate to conclude the issue was forfeited in light of the express language of the statute relied on by the Parker Group.
As our colleagues in Division Four of this court explained in Paul v. Schoellkopf (2005) 128 Cal.App.4th 147 (Paul), this provision in Civil Code section 1717, added by the Legislature in 1983 “‘to provide complete mutuality of remedy where a contractual provision makes recovery of attorney fees available to one party’” (Paul, at p. 153), generally means “parties may not limit recovery of attorney fees to a particular type of claim.” (Ibid.) The rule is not absolute, however. When the parties clearly indicate their intent to restrict recovery of fees to one discrete type of dispute, rather than to authorize such a recovery on any claim arising from their on-going transactions, the court may enforce “the parties’ reasonable expectations to determine whether section 1717 creates the right for recovery of attorney fees.” (Id., at p. 154.)
We need not determine whether the general rule or the limited exception recognized in Paul applies in this case, however, in light of the trial court’s further finding that neither side prevailed in the litigation. Civil Code section 1717 authorizes a trial court to “determine that there is no party prevailing on the contract for purposes of this section.” “[I]n deciding whether there is a ‘party prevailing on the contract,’ the 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. The prevailing party determination is to be made only upon final resolution of the contract claims and only by ‘a comparison of the extent to which each party ha[s] succeeded or failed to succeed in its contentions.’” (Hsu v. Abbara (1995) 9 Cal.4th 863, 876.) Where the judgment was a “simple, unqualified win” on the only contract claim, a trial court has no discretion to deny an attorney fee award to that prevailing party under Civil Code section 1717. Thus, a party “whose litigation success is not fairly disputable” can claim attorney fees as a matter of right. (Hsu, at p. 876.) In circumstances where both parties seek relief on a contract but neither party prevails, the trial court retains discretion to determine that there is no prevailing party under Civil Code section 1717. (Hsu, at p. 875.) “If neither party achieves a complete victory on all the contract claims, it is within the discretion of the trial court to determine which party prevailed on the contract or whether, on balance, neither party prevailed sufficiently to justify an award of attorney fees.” (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109.) Typically, a determination of no prevailing party results when both parties seek relief, but neither prevails, or when the ostensibly prevailing party receives only a part of the relief sought. In other words, the judgment is “‘considered good news and bad news as to each of the parties[.]’” (Nasser v. Superior Court (1984) 156 Cal.App.3d 52, 60.)
Here, the trial court expressly found there was no prevailing party in the litigation, a determination we will disturb only when there is a clear showing of abuse of discretion. (Ajaxo Inc. v. E*Trade Group, Inc. (2005) 135 Cal.App.4th 21, 58; see McLarand, Vasquez & Partners, Inc. v. Downey Savings & Loan Assn. (1991) 231 Cal.App.3d 1450, 1456 [no abuse of discretion where trial court “apparently concluded that fairness dictated each side should pay its own attorneys’ fees”]; see also Hsu v. Abbara, supra, 9 Cal.4th at p. 877 [“We agree that in 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”]; Howard v. Howard & Smith, Inc., supra, 58 Cal.App.2d 172.) As discussed above, the record presented here is inadequate to allow us to second-guess the trial court’s finding on this point, even were we so inclined.
4. The Piskur Parties’ Request for Fees Does Not Estop Them from Opposing a Fee Award to the Parker Group
Similarly meritless is the Parker Group’s argument the Piskur parties are estopped from asserting attorney fees are not authorized in this case because they also requested attorney fees in the prayer-for-relief portion of their various complaints. The allegations of a contractual right to fees does not create an estoppel when the pleader would not actually have been entitled to recover fees had it prevailed on the merits. (Leamon v. Krajkiewcz (2003) 107 Cal.App.4th 424, 437; M. Perez Co., Inc. v. Base Camp Condominiums Assn. No. One (2003) 111 Cal.App.4th 456, 463-470; Myers Building Industries, supra, 13 Cal.App.4th at p. 962, fn. 12.)
In rejecting the Parker Group’s estoppel argument, we decline its invitation to disregard the authority cited in the preceding paragraph and follow the contrary rule enunciated in International Billing Services, Inc. v. Emigh (2000) 84 Cal.App.4th 1175, 1182, which has been soundly criticized by several appellate courts, including the Third District, the same court that decided the case. Three years after International Billing Services, the Third District held the International Billing Services rule “sweeps too broadly” and concluded “there is no sound policy or legal basis for the broad rule adopted . . . in International Billing Services. . .,” a rule that “would instead violate the very policy considerations it purports to serve.” (M. Perez Co., Inc. v. Base Camp Condominiums Assn. No. One, supra, 111 Cal.App.4th at pp. 465, 470.)
DISPOSITION
The judgment is affirmed. Respondents are to recover their costs on appeal.
We concur: WOODS, J. ZELON, J.