Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC 357508, Ruth Ann Kwan, Judge. Reversed and remanded.
Mazur & Mazur, Janice R. Mazur and William E. Mazur, Jr., for Plaintiff and Appellant.
Law Offices of Robert S. Altagen, Robert S. Altagen and Hanwei Cheng for Defendants and Respondents.
FLIER, J.
Appellant Tu My Tong (Tong) appeals from the superior court’s judgment and its postjudgment orders rendered on August 7 and September 30, 2008, including the court’s denial of her motions for new trial and for attorney fees. Respondents are U.S. Credit Bancorp, Inc. (USCB), the present holder of the promissory note and deed of trust on the real property at issue, and its officer and sole shareholder, Michel Rone (Rone). Tong contends the trial court erred in (1) granting Rone a motion for judgment on the pleadings; (2) awarding USCB attorney fees incurred in defending its security; (3) charging attorney fees to the indebtedness owed on the note; (4) precluding Tong from recovering emotional distress damages under Civil Code section 2943; (5) ruling Tong’s cause of action for violation of Business and Professions Code section 17200 et seq. (UCL) was moot; (6) denying Tong’s request for attorney fees as a prevailing party under sections 2943 and 1717; and (7) denying her motion for new trial with respect to an alleged tender offer prior to litigation.
All further statutory references are to the Civil Code unless noted otherwise. Present section 2943, subdivision (c)(1) provides in part that “[a] beneficiary, or his or her authorized agent, shall, on the written demand of an entitled person, or his or her authorized agent, prepare and deliver a payoff demand statement to the person demanding it within 21 days of the receipt of the demand.” Subdivision (d) provides in part that a payoff demand statement “may be relied upon by the entitled person or his or her authorized agent in accordance with its terms... for the purpose of establishing the amount necessary to pay the obligation in full.”
FACTS
1. Note and Deed of Trust
Duc Doan (Doan) owned an apartment building located on the 4000 block of South Figueroa Street in Los Angeles, California (the property). In August 2000, Doan entered into an adjustable rate note for $312,000 with Southern Pacific Bank that eventually was assigned to Imperial Credit Industries, Inc. (Imperial). As security for the loan, a multifamily deed of trust for the property was recorded with the county recorder’s office in September 2000. A number of outstanding payments accrued under the note, and Doan defaulted on his loan.
Between February and April 2003, Doan purported to transfer all of his interest in the property to appellant Tong through a series of deeds: a grant deed in February 2003, a grant deed in March 2003 and a quitclaim deed in April 2003.
2. Attempted Assumption by Tong
After receiving the deeds from Doan, Tong attempted to assume the loan. However, on May 19, 2003, Imperial declared the loan immediately due and payable under the note and deed of trust. Imperial served notice on Doan, informing him that he was in default under the note and deed of trust because of his improper transfer of the property to Tong, because he had defaulted on the loan, and because he had failed to maintain the property resulting in citations by the housing department.
Section 11 of the adjustable rate note provided: “If all or any part of the Property or any interest in it is sold or transferred... without Lender’s prior written consent, Lender may, at its option, require immediate payment in full of all sums secured by this Security Instrument.”
Section 7(C), “Notice of Default, ” of the note provided that if the borrower is in default, “the Note Holder may without any demand or notice: [¶] (1) Declare the entire unpaid principal amount of this Note and all accrued interest and charges to be immediately due and payable; [¶] (2) Exercise any rights that we have under any Deed of Trust and Assignment of Rents, Assignment of Deed of Trust, and/or Security Agreement securing this Note or that otherwise are given to us by law....”
On May 29, 2003, Tong entered into an agreement to sell the property to Urban Eco Housing, LLC (Urban Eco), for $575,000. Imperial did not allow Tong to pay off Doan’s note, and so the sale was never consummated.
The loan having not been paid, Imperial recorded a notice of default and election to sell the property under the deed of trust on June 20, 2003.
3. USCB’s Purchase of Note
In August 2003, USCB purchased the loan from Imperial, making USCB the new lender. Soon afterwards, on August 29, 2003, Imperial gave Tong notice that USCB had purchased the loan and that all future payments should be made to USCB. USCB wrote Tong’s attorney advising it had assumed the Imperial loan based on Tong’s representation that she owned the property and that she would pay the loan in full on November 30, 2003. USCB stated the amount currently outstanding was $313,900 bearing interest at 11.86 percent and no partial payment would be accepted.
The parties stipulated that USCB assumed the same rights, benefits and obligations of Imperial on the note and deed of trust.
Meanwhile, on June 10, 2003, Doan filed an action against Tong in state court and recorded a lis pendens on the property to prevent foreclosure.
On November 5, 2003, Tong requested a meeting with Rone, saying she intended to pay off the loan in full by November 7, 2003. Receiving no response to her letter, she failed to meet with Rone who was present at the appointed time. Tong claimed she had funds available to pay off the note through an oral understanding with Dennis Hawks, a private lender who was willing to lend her $340,667.39 at 6 percent interest.
4. Doan’s Bankruptcy and Adversary Proceedings
In August 2003, Doan filed for bankruptcy. In June 2004, Doan filed an adversary proceeding in the bankruptcy court against Tong, USCB and Rone with respect to the property. In his complaint, Doan claimed that, in exchange for his transferring title in the property to Tong, she had promised to live with him, to obtain a loan and to help him repair the property. He alleged Tong then tried to sell the property for herself and made a deal to sell the property to Urban Eco. Doan alleged that Tong had conspired with Rone and USCB to share profits from the property, of which Doan was the legal owner. Urban Eco then intervened in the adversary proceeding and filed a cross-claim against Tong, USCB and Rone. Urban Eco alleged it was a bona fide purchaser for value of the property and that USCB and Rone had conspired with Tong and had interfered with Urban Eco’s contract to purchase the property from Tong.
In July 2004, the bankruptcy court entered an order confirming Doan’s chapter 13 plan. Under the plan, Doan agreed to pursue the adversary proceeding against Tong, USCB and Rone and seek recovery of the property.
5. Tong’s Requests for Payoff Demand Statement
In early November 2003, Tong, through her then attorney, submitted her first request to USCB for a payoff demand statement pursuant to section 2943. USCB produced a statement indicating the amount due on the note as of November 7, 2003, was $341,791.20 and requested payment in full.
Due to several encumbrances placed on the property, Tong was unable to obtain a lender. However, Hawk was still willing to lend Tong money to pay off the note at 6 percent interest secured by the property if all other loans were subordinated to his lien.
It was stipulated that as of January 1, 2005, the following encumbrances were recorded against the property: (1) lis pendens by Urban Eco; (2) lis pendens by Doan; (3) deed of trust by Imperial, i.e., USCB; (4) $75,000 lien by Tong Lai; (5) $150,000 lien by Loit Nguyen; (6) $45,000 lien by Chau Lai; (7) $90,000 lien by Bao Lai. It was further stipulated that the same encumbrances remained on the property as of November 2006, except for the Doan lis pendens.
Hawk testified at trial he would have been willing to lend Tong up to $641,000.
On January 18, 2005, Tong through her then counsel requested another payoff demand statement from USCB. USCB refused to provide the statement without sufficient proof of Tong’s status as an entitled person or a beneficiary under the deed of trust. Tong did not provide the requested proof, but, on May 5, 2005, Tong’s counsel responded by offering to make “full payment” of the note and deed of trust, which he currently estimated to be $413,000, within three business days of receipt of demand.
USCB wrote Tong’s counsel on May 19, 2005, asserting that Tong was not the borrower on the note and “as such she does not have the legal standing to make a payoff demand” absent proof of Tong’s entitlement, such as Doan’s permission, which he refused to give. However, USCB noted that Tong had recently propounded discovery against USCB in the bankruptcy court, and USCB attached a copy of its response indicating that as of May 5, 2005, the outstanding principal balance of the note was $313,900, the outstanding interest was $75,677.20, the outstanding late charges were $4,490.91 and the attorney fees to date were $32,673.42, for a total of approximately $426,741.53.
Doan’s counsel had threatened to sue USCB for invasion of privacy if it provided details of the note to Tong.
Section 7(D) of the note, entitled, “Payment of Note Holder’s Costs and Expense, ” provided: “If the Note Holder has required me to pay immediately in full..., the Note Holder will have the right to be paid back by me for all of its costs and expenses in enforcing this Note to the extent not prohibited by applicable law. Those expenses include, for example, reasonable attorneys’ fees.” (Italics added.)
USCB’s counsel informed Tong’s counsel that because Doan was then in chapter 13 bankruptcy proceedings and the source of funds for repayment might constitute post-petition financing or an action outside the ordinary course of business, “before payment will be accepted by my client and credited to its account I request an order of the Bankruptcy Court approving the post-petition payment.”
On November 21, 2006, the bankruptcy court entered a final judgment in the adversary proceeding in favor of Tong and against Doan, declaring Tong to be the owner of the property. Tong’s counsel provided USCB with a copy of the bankruptcy court judgment on the same day.
USCB then provided Tong with a payoff demand statement on November 30, 2006. The statement reflected that $688,593.06 was owed on the note at that time. This amount included $153,559.44 in attorney fees incurred to protect the integrity of the note from August 12, 2003, to November 30, 2006.
Counsel who defended USCB and Rone in the bankruptcy proceedings testified his total charges, including costs, amounted to $143,726.86, of which USCB had paid $101,000. The charges were incurred for legal representation in obtaining relief from the automatic stay imposed against any action to foreclose on the property, defending USCB’s interest as a creditor in Doan’s chapter 13 case, defending USCB and Rone against Doan’s adversary proceeding and defending USCB and Rone in the cross-claim brought by Urban Eco in the adversary proceeding. Doan’s adversary proceeding was settled by a dismissal of USCB and Rone with prejudice in approximately May 2005, and the bankruptcy court dismissed Urban Eco’s cross-claim against USCB and Rone without prejudice on June 20, 2007.
Tong made no effort to pay the note after receiving the November 30, 2006 payoff demand statement. In February 2007, USCB gave notice of default of its note. However, USCB never foreclosed on the note and Tong remained the owner of the property until the date of trial.
PROCEDURAL HISTORY
1. First Amended Complaint
Tong filed the present action against USCB and Rone on November 24, 2006. In a first amended complaint, Tong alleged USCB failed to timely respond to her January 2005 and November 2006 payoff statement demands. She asserted claims for violation of section 2943, intentional interference with economic advantage, violation of the UCL, declaratory relief and equitable relief. Tong sought punitive damages with respect to her claims for violation of section 2943 and interference with economic advantage. Simultaneously with the filing of the first amended complaint, Tong sought and received a preliminary injunction restraining USCB from foreclosing on the deed of trust executed by Doan.
Tong alleged that USCB and Rone refused to allow her to pay off the loan and prevented her from obtaining new, lower rate financing. Tong claimed the failure to provide the requested payoff demand statement for over two years caused her damages, including approximately $300,000 in late fees, interest, attorney fees charged on the loan, attorney fees incurred by Tong to protect the property and other general and special damages.
The first amended complaint asserted the refusal to provide a timely statement or to permit Tong to pay off the Imperial loan were intended to eventually create such a financial burden on the property that Tong would not be able to pay off the loan allowing USCB and Rone to acquire the property by foreclosure.
2. Judgment on Pleadings
Shortly before trial, USCB and Rone moved for judgment on the pleadings, and the court granted the motion as to Rone alone. The court determined Rone was not a beneficiary of the deed of trust nor an assignee of a beneficiary subject to section 2943, subdivision (c) and therefore had no obligation to comply with section 2943.
3. Bifurcated Trial
The case proceeded to a bifurcated trial.
A. Jury Trial, Nonsuit and Special Verdict
The claims for violation of section 2943 and intentional interference with economic advantage were first tried to a jury. After the close of Tong’s case, the trial court granted USCB’s motion for nonsuit on Tong’s claims for intentional interference with economic advantage and for punitive damages.
The jury found by special verdict that Tong was an “entitled person” within the meaning of section 2943. It found that Tong made a written demand to USCB for a payoff demand statement on January 18, 2005, and that USCB willfully failed to provide her with a statement within 21 days of the demand as required. The jury determined Tong sustained actual damages of $190,473.66 as a result of that failure.
The jury further found that even though Tong also made a written demand to USCB for a payoff demand statement on November 21, 2006, USCB did not willfully fail to timely provide her a statement.
In a supplemental special verdict, the jury answered “no” to the question whether any portion of the damages it awarded was based on the attorney fees USCB requested in the payoff statement.
B. Court Trial
The trial court then proceeded to hear and determine the remaining equitable issues. The court ruled the UCL cause of action was moot because the remedies under the UCL were “very narrowly defined, ” and the jury’s damage award of $190,473.66 clearly exceeded the actual restitution amount to which Tong would be entitled. The court further limited its inquiry to determining (1) the rights and obligations of the parties under the note, i.e., “what the loan amount is, ” and (2) whether any claimed attorney fees incurred in defending the note is chargeable to the note.
On May 27, 2008, the court made a tentative ruling. After again ruling the UCL action to be moot, the court found as of April 1, 2008, the amount due on the note as claimed by USCB was $756,473.96. The court subtracted from this figure the jury’s damage award of approximately $190,000 and added an amount for reasonable attorney fees USCB incurred in defending the security in Doan’s bankruptcy and the adversary proceedings.
No party requested a statement of decision, and the court issued a final ruling. It directed USCB to prepare and submit a proposed judgment. After hearing objections that Tong filed to the proposed judgment, the court entered a judgment on August 1, 2008. The court denied a belated request for a statement of decision by Tong as untimely.
C. Judgment
The judgment as entered declared that Tong owed USCB the sum of $522,546.85 on the adjustable rate note as of April 1, 2008. The trial court also declared that (1) the amount owed on the note as of August 1, 2008, was $533,266.53, and (2) USCB has the right to not accept partial payments from Tong and to demand full payment on the note.
4. Motion for Attorney Fees and for New Trial
Following the judgment, Tong moved for an award of attorney fees, contending she was the prevailing party in the lawsuit. Tong also moved for a new trial, on grounds that (1) the court’s dismissal of the UCL cause of action during trial was an irregularity in the proceedings; (2) the award to USCB of attorney fees incurred in defending the Doan bankruptcy and the Urban Eco action was against the law and without legal justification; (3) the court used an erroneous figure in calculating the amount owing on the note because no objection was raised to Tong’s tender offer of $413,000, and (4) the court’s use of $756,473.96 as the starting point for its calculations was an irregularity in the proceedings that prevented Tong from having a fair trial.
Tong sought attorney fees of $267,950 for prosecuting this action against USCB.
Tong asserted, for the first time, that USCB had waived the right to claim the “pay-off amount” was anything more than $413,000 because it was undisputed that Tong made a “valid and binding ‘statutory’ tender offer” that USCB rejected.
The court denied both motions.
With respect to the motion for a new trial, the court stated it found the UCL cause of action to be moot because a plaintiff in a UCL action is generally limited to restitution and injunctive relief, the jury had awarded Tong more damages than she would have been entitled to in a UCL action, and the court retained its equitable power. The court noted Tong had misconstrued the nature of USCB’s claim for attorney fees in her declaratory relief claim. USCB’s claim concerned whether the attorney fees it incurred in defending the bankruptcy proceedings and the Doan and Urban Eco actions could be added to the indebtedness on the note. The court stated whether Tong made a “tender offer” in good faith and whether she was able and willing to perform were questions of fact that were never presented to the jury, and USCB was never given the opportunity to litigate the issue at trial because Tong never raised it. The court indicated the figure of $756,473.96 was provided as the amount that USCB claimed under the note, including principal, interest, late penalties and fees, as well as attorney fees incurred to defend the security, and the figure was consistent with the evidence. Tong never disputed that figure during trial and her attorney had even adopted the figure during argument before the jury.
With respect to Tong’s motion for attorney fees, the court found Tong failed to establish she was a prevailing party on a contract pursuant to section 1717 and she had offered no basis for an award of attorney fees based on her success of her section 2943 cause of action.
5. Consolidated Appeal
Tong filed timely appeals from the judgment and from postjudgment orders. This court consolidated such appeals.
USCB also purported to appeal from the judgment, but we dismissed its appeal as untimely. We previously granted Tong’s petition for writ of supersedeas, staying the trial court’s order that the injunction preventing a trustee sale shall terminate within 30 days after judgment, and ordered the stay to be in effect until the issuance of a remittitur or further order of this court.
DISCUSSION
1. Damages for Emotional Distress
Tong asserts that section 2943, which provides that a beneficiary who fails to prepare and deliver a beneficiary statement within the time allowed is “liable to the entitled person for all damages which he or she may sustain by reason of the refusal, ” entitles her to recover for “actual damages, ” including emotional distress damages caused by the failure to timely prepare and deliver such statement. Tong offers no case authority for this proposition and concedes the question of whether emotional distress damages are recoverable in an action asserting a violation of section 2943 appears to be one of first impression. We need not address this issue because the trial court properly found evidence of Tong’s emotional distress and causation to be insufficient in any case.
Section 2943, subdivision (e)(4) states in part: “If a beneficiary for a period of 21 days after receipt of the written demand willfully fails to prepare and deliver the statement, he or she is liable to the entitled person for all damages which he or she may sustain by reason of the refusal and, whether or not actual damages are sustained, he or she shall forfeit to the entitled person the sum of three hundred dollars ($300).”
Tong did not include any claim for emotional distress in her complaint. The issue of recovery for emotional distress was first raised during trial during a discussion of the special verdict form, when Tong’s counsel indicated he intended to argue that she was entitled to emotional distress damages. The following court day, the issue was raised and argued again, and the trial court denied Tong’s request to argue emotional distress damages to the jury.
The court indicated the parties had primarily a contractual relationship, and it construed section 2943 as a “quasi-contractual” cause of action. More importantly, the court indicated USCB had not received proper notice in the complaint that Tong was claiming emotional distress damages. In any case, the court indicated it found no causation and no sufficient evidence to submit emotional distress to the jury.
The court had instructed the reporters to review their notes for anything in Tong’s testimony that could possibly be construed as referring to emotional distress. The only passage the reporters identified that could be construed as referring to emotional distress was a statement Tong volunteered during her examination by USCB’s counsel. Tong’s volunteered statement was never followed up in her testimony, even on redirect examination. There was no medical evidence presented during trial regarding Tong’s emotional distress. Nor did Tong provide any evidence of special damages, such as medical expenses or expenses for medication taken for alleged distress.
The following exchange occurred during Tong’s cross-examination: “[QUESTION:] Before June 2003 you had a Mr. Davis as your lawyer? [¶] ANSWER: Yes, I did have about two weeks before that. [¶] QUESTION: Now, at the time that you were acquiring the property from Mr. Duc Doan, do you have an attorney? [¶] ANSWER: No. [¶] QUESTION: You testified, if my memory is correct, that after you got two-thirds of the property you met Mr. Hawks? [¶] ANSWER: I don’t remember. [¶] QUESTION: Do you remember what you said yesterday? [¶] ANSWER: Yesterday, I don’t remember. Really, I don’t remember five years ago. March or April. I don’t remember. Okay. I really -- it’s five years. Many things happen to me very stress and very crisis mental so I don’t remember five years ago.” (Italics added.)
The record indicates Tong had many serious concerns during this period other than payment of the Imperial note. Among other things, Tong was restoring an apartment building shut down by the city as uninhabitable; a criminal case had been filed against Doan, and the city had warned Tong about her own potential criminal liability unless the building was repaired; Tong needed to find funding to repair the building and was dealing with contractors to rehabilitate the structure; Tong also was involved in litigation both in state court and in bankruptcy court with Doan and Urban Eco; two lis pendens and a number of liens were filed against the property; and Tong was indebted on various other loans, including loans from her relatives.
Tong testified Urban Eco “cheated” her by failing to pay for the property, “[h]anging me there” by filing a lien on the property, “[c]hop my neck” in filing a lis pendens and “forgery my initial” on the purchase contract.
The trial court therefore did not err in precluding Tong from arguing emotional distress before the jury as a result of the failure to timely provide a payoff demand statement. In light of our holding, we need not address whether emotional distress damages may be recovered as damages under section 2943.
2. UCL Cause of Action
Tong contends the trial court erred in dismissing her UCL cause of action as moot prior to the court trial and in denying her motion for new trial on that basis. Tong argues that she should have been permitted to pursue her UCL remedies, “including the imposition of an injunctive relief against the defendant prohibiting similar conduct in the future, ” in addition to her claim for “restitution of any and all ‘ill-gotten gains’ obtained by the defendant by virtue of its wrongful conduct.” She asserts such “‘ill-gotten gains’” should include all interest earned on the note after February 2005, the date USCB was required to provide a payoff statement, and USCB’s attorney fees, which Tong asserts would not have been incurred if she had been allowed to pay off the note in early 2005. She asserts that any interest accruing on the note after that date further constituted “profit to the defendants gained as a result of their unfair business practices.” (Underscoring omitted.) In essence, Tong argues she should not pay any interest whatsoever on the loan as a penalty for the alleged unfair practice, nor should she pay any part of the attorney fees USCB incurred in defending its security. We disagree.
The UCL statute seeks to deter future violations and to foreclose retention by the violator of ill-gotten gains. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1267.) The Legislature intended that the equitable powers of a court be used to prevent practices that constitute unfair competition and to restore to any person in interest “any money or property acquired through unfair practices.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1147-1148 (Korea Supply).) However, Korea Supply cautions that “[w]hile the ‘prevent’ prong of [Business and Professions Code] section 17203 suggests that the Legislature considered deterrence of unfair practices to be an important goal, the fact that attorney fees and damages, including punitive damages, are not available under the UCL is clear evidence that deterrence by means of monetary penalties is not the act’s sole objective. A court cannot, under the equitable powers of section 17203, award whatever form of monetary relief it believes might deter unfair practices.” (Id. at p. 1148.) Indeed, the Supreme Court explained, “[o]ur previous cases discussing the UCL indicate our understanding that the Legislature did not intend to authorize courts to order monetary remedies other than restitution in an individual action. This court has never approved of nonrestitutionary disgorgement of profits as a remedy under the UCL.” (Ibid.)
In this case, the trial court ruled several times that the jury’s verdict rendered Tong’s cause of action for violation of the UCL moot, first at the conclusion of the jury trial, again before final argument, and lastly in denying the motion for new trial. The court specifically found that the amount of the jury’s damage award exceeded the amount of actual restitution. The first amended complaint included a cause of action for equitable relief, including an injunction against USCB from engaging in unfair and deceptive practice and from foreclosing on the property. Dismissal of the UCL claim did not deprive the court of its equitable power to grant injunctive relief, and the trial court could, and did, enjoin USCB from foreclosing on the property.
There is no dispute that the jury verdict damage award of $190,473.66 reflected a reduction in the amount USCB claimed was due on the note as of April 1, 2008, for late fees, penalties and the difference between the 11.86 percent interest rate charged and the 6 percent interest rate Tong would have paid by obtaining a new loan to pay off the note in February 2005. Because USCB rejected Tong’s partial payments on the note, there were no funds for USCB to disgorge.
In arguing “restitution” should have included such items as attorney fees expended by USCB to defend its security, Tong is seeking to revisit her claim for damages awarded by the jury. But, Tong essentially is seeking to substitute a UCL claim for a tort or breach of contract action. This, she cannot do. (Korea Supply, supra, 29 Cal.4th at p. 1151.)
Tong in any case has not shown she was prejudiced by the court’s dismissal of the UCL claim. (Code Civ. Proc., § 475; Cal. Const., art. IV, § 13.)
3. Dismissal of Rone
Tong contends the trial court erred when it granted Rone a judgment on the pleadings and dismissed him as a defendant. We disagree.
Subdivision (c)(1) of section 2943 (formerly subdivision (c)) provides that a “beneficiary” of a deed of trust or an authorized agent “shall, on the written demand of an entitled person [defined in § 2943, subd. (a)(4) to include “the trustor or mortgagor of, or his or her successor in interest in, the mortgaged or trust property or any part thereof”]... prepare and deliver a payoff demand statement to the person demanding it within 21 days of the receipt of the demand.” A “payoff demand statement” is defined as a written statement “setting forth the amounts required as of the date of preparation by the beneficiary, to fully satisfy all obligations secured by the loan that is the subject of the payoff demand statement.” (§ 2943, subd. (a)(5).) A beneficiary is defined in section 2943, subdivision (a)(1) as “a mortgagee or beneficiary of a mortgage or deed of trust, or his or her assignees.” Thus, section 2943 imposes liability solely upon a “beneficiary” for a willful failure to prepare and deliver a payoff demand statement.
In her first amended complaint, Tong alleged that Rone was at all times the “sole officer” in USCB. She alleged that “Rone through [USCB]” purchased the Imperial loan. Tong’s first two causes of action alleged a willful failure to timely provide a payoff demand statement under section 2943 in January 2005 and November 2006. The trial court ruled that Rone had no such duty to provide a payoff demand statement as he was neither the “beneficiary” of the deed of trust nor an “assignee of a beneficiary” subject to section 2943.
The first amended complaint contained boilerplate allegations on information and belief that each defendant was “the agent, servant and employee” of each other. In Black v. Sullivan (1975) 48 Cal.App.3d 557 (Black), the court held that mere allegations of an agency relationship does not impose any individual liability for failure to comply with demands for beneficiary statements as required by section 2943. (Id. at pp. 565-566.)
However, Tong argues that in Black the court reversed a summary judgment in favor of the assignees on a conspiracy cause of action finding there were triable issues of fact as to whether the assignees “‘united, participated or cooperated [with the beneficiaries] in inflicting a wrong on [plaintiffs].’” In the present case, the fact that Rone performed the acts alleged, such as in allegedly agreeing to accept monthly payments, improperly added late fees and other such allegations would not establish a “conspiracy, ” as the corporation could only act through Rone as sole officer of USCB. The first amended complaint alleged that “defendants, ” i.e., USCB and Rone, took certain acts, but nowhere was it alleged that those acts were done by Rone individually, for Rone personally or that Rone had a direct interest in the transaction.
In her reply brief, Tong asserts that the allegations against Rone go far beyond mere agency, and “move into the realm of alter ego.” But the first amended complaint contains no pleading of alter ego nor any allegations establishing there was a “unity of interest and ownership” between USCB and Rone such that (1) the separate personalities of the corporation and the individual no longer exist, and (2) if the alleged acts are treated as those of the corporation alone, an inequitable result will follow. (Judelson v. American Metal Bearing Co. (1948) 89 Cal.App.2d 256, 263-264; see 9 Witkin, Summary of Cal. Law (10th ed. 2005) Corporations, § 10, p. 787 [“it is insufficient merely to show a ‘one-man’ or ‘two-man’ corporation, or ownership of a subsidiary by the parent”].)
Tong argues that even assuming Rone could not be held personally liable under the causes of action for violation of section 2943, he could still be liable for intentional interference with economic advantage, violation of the UCL and for declaratory and equitable relief.
However, each of these causes of action is premised upon the beneficiary’s failure to provide the payoff demand statement, which Rone had no individual obligation to provide. In the claim for intentional interference with economic advantage, for example, Tong alleged that defendants “knew, or should have known that their failure to provide a payoff statement and to allow payoff of the Imperial Loan would prevent plaintiff from refinancing the Imperial Loan at a more advantageous rate.”
The trial court therefore properly granted a judgment on the pleadings to Rone.
4. Tender Offer
Tong contends the trial court erred in using the payoff amount of $756,473.96, the sum USCB claimed, instead of $413,000, the amount contained in a tender offer she allegedly made on May 5, 2005, pursuant to Code of Civil Procedure section 2074. Tong contends the court erred in denying her motion for new trial on that basis. Tong asserts the fact that the evidence of her tender and USCB’s rejection of the tender were “undisputed” at trial and therefore the issue was not raised for the first time in the motion for new trial. We disagree.
Code of Civil Procedure section 2074 provides that “[a]n offer in writing to pay a particular sum of money... is, if not accepted, equivalent to the actual production and tender of the money....”
We review the trial court’s determination of a motion for new trial for abuse of discretion. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 859; ABF Capital Corp. v. Berglass (2005) 130 Cal.App.4th 825, 832.) An abuse of discretion occurs when, in light of applicable law and considering all relevant circumstances, the court’s ruling exceeds the bounds of reason and results in a miscarriage of justice. (Shamblin v. Brattain (1988) 44 Cal.3d 474, 478-479; Denham v. Superior Court (1970) 2 Cal.3d 557, 566.) We conclude the trial court did not abuse its discretion in denying a new trial.
The record shows that prior to the new trial motion Tong never contended the payoff amount was limited to the $413,000 amount in the tender offer. Tong submitted the case to the jury on the premise that certain amounts should be subtracted from the approximately $750,000 figure. Under the doctrine of the theory of trial, a party is not permitted to change a theory on appeal that she has pursued in the trial court. (See generally 9 Witkin, Cal. Procedure (5th ed. 2008) Appeal, § 407, pp. 466-468.) Thus, it is said that “[a] party is not permitted to change his position and adopt a new and different theory on appeal. To permit him to do so would not only be unfair to the trial court, but manifestly unjust to the opposing litigant.” (Ernst v. Searle (1933) 218 Cal. 233, 240-241.) A typical application of this rule occurs is when one theory of damages was acquiesced in at the trial and the appellant seeks to shift to another theory of damages on appeal. (Kantlehner v. Bisceglia (1951) 102 Cal.App.2d 1, 6 [“Counsel may not so conduct themselves in the trial of a case as to lead the jury to proceed upon one theory and then seek to abandon that theory upon appeal and adopt another one”].)
Considerations of fairness to the parties and the trial court and preventing gamesmanship by the litigants militate against allowing Tong to argue one measure of recovery during trial and a different measure on appeal.
5. Attorney Fees in Defense of Security
Tong contends that the trial court erred when it found that attorney fees incurred by USCB in the third party actions were chargeable to the note. She argues that the jury found USCB had willfully violated section 2943 by failing to provide her with a payoff demand statement when requested in January 2005 and awarded damages of over $190,000. In the court trial that followed regarding a determination of the amount due on the note, the court found USCB was entitled to charge, in addition to principal and interest due, about $113,000 of the more than $150,000 in attorney fees it had incurred in defending the bankruptcy proceedings and the Doan and Urban Eco actions. Tong asserts the court erred as a matter of law in charging these fees to the note. We disagree.
When attorney fees are contractually provided for in a deed of trust and promissory note, the beneficiary is entitled to recover attorney fees and costs incurred to enforce and protect its secured obligation. (Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 46; see also Nevin v. Salk (1975) 45 Cal.App.3d 331, 340.) This is true whether or not the trustor is a party to the action. (Nevin, supra, at p. 339.) What constitutes a reasonable compensation is in the court’s discretion and is based upon: the nature of the litigation; its difficulty and the amount involved; the skill required and the skill employed in handling the litigation; the attention given; the success of the attorney’s efforts; the attorney’s learning, his or her age, and his or her experience in the particular type of work demanded; the intricacies and importance of the litigation; the labor and necessity for skilled legal training and ability in trying the cause; and the time consumed. (Id. at p. 343.)
The trial court properly charged USCB’s attorney fees incurred in defending the Doan and Urban Eco adversary proceedings to the amount owed on the note. In the present case, both the note and deed of trust specifically entitle USCB to recover attorney fees.
In particular, section 7(D) of the note provides that if the note holder has required the debtor to pay “immediately [and] in full, ” the note holder will “have the right to be paid back by me [i.e., the debtor] for all of its costs and expenses in enforcing” the note. Such expenses “include, for example, reasonable attorneys’ fees.” Section 12(a) of the deed of trust provides that if the borrower fails to perform any of his obligations under the note and deed of trust or “if any action or proceeding is commenced which purports to affect the Mortgaged Property, Lender’s security or Lender’s rights under this Instrument, including... insolvency, ... fraudulent conveyance or reorganizations or proceedings involving a bankrupt, ” then the lender at its option is granted the authority to make appearances, disburse sums and take actions it “reasonably deems necessary to perform such obligations” and “to protect [its] interest, ” including paying fees and out-of-pocket expenses of attorneys. Finally, section 12(b) of the deed of trust provides that any amounts disbursed “shall be added to, and become part of, the principal.”
After the property transfer, Doan immediately sued Tong in state court, filed for bankruptcy, placed a lis pendens on the property, and sued both Tong and USCB in the bankruptcy court for recovery of the property and declaratory relief. Doan alleged Tong defrauded him and charged USCB with conspiracy to share the expenses and profits of the property with Tong as co-owners and, significantly, sought a turnover of the property to the bankruptcy estate. The bankruptcy and bankruptcy adversary proceedings purported to affect the “[m]ortgaged [p]roperty, ” the “[l]ender’s security” or the “[l]ender’s rights” under the deed of trust and also included claims of “insolvency, ” “fraudulent conveyance or reorganization[] or proceedings involving a bankrupt” within the meaning of section 12 of the deed of trust.
The trial court found USCB properly appeared in those actions or proceedings and that it disbursed funds to protect its lender’s interest. The broad language of the deed of trust encompassed USCB’s actions in seeking relief from the bankruptcy court, in objecting to Doan’s chapter 13 plan, in defending against Doan’s action and ultimately in achieving its dismissal, all of which were clearly related to the defense and protection of the collateral. The court found that USCB’s defense of the Urban Eco action too was reasonably undertaken because Urban Eco had a lis pendens on the property and sought a permanent injunction against USCB from foreclosing on the property. In opposing Urban Eco’s claim, USCB logically acted to protect its collateral. The court did not abuse its discretion in scrutinizing counsel’s bills and costs and determining approximately $113,000 was a reasonable disbursement to preserve the security.
Although a nonassuming debtor such as Tong is not personally liable for paying reasonable attorney fees incurred by a beneficiary such as USCB to protect its equity in property, such fees may be added to the indebtedness secured by the deed of trust. (Saucedo v. Mercury Sav. & Loan Assn. (1980) 111 Cal.App.3d 309, 315; see generally 4 Miller & Starr, Cal. Real Estate (3d ed. 2000) § 10.191, p. 597.)
The trial court properly charged USCB’s attorney fees incurred in the Doan and Urban Eco adversary proceedings to the amount owed on the note.
6. Tong’s Motion for Attorney Fees
Tong contends that the trial court erred in denying her motion for attorney fees because (1) she is the prevailing party with a “net monetary recovery” under Code of Civil Procedure section 1032, subdivision (a)(4); (2) attorney fees are an element of costs when authorized by contract, statute or law, and Tong qualifies under all three categories as a matter of right; and (3) her claimed attorney fees are reasonable. We disagree with the first two contentions and need not address the third.
California follows the American Rule, which is that “[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....” (Code Civ. Proc., § 1021.) Absent statutory authority or contractual agreement, attorney fees are not recoverable from an opposing party. (Canal-Randolph Anaheim, Inc. v. Wilkoski (1978) 78 Cal.App.3d 477, 485.)
Tong argues that the trial court abused its discretion in refusing to find her to be the prevailing party entitled to attorney fees as costs. (Hsu v. Abbara (1995) 9 Cal.4th 863, 877 (Hsu).) She states the basis of her lawsuit was the defendants’ refusal to allow her to pay the balance due on the note, and the critical question was the amount of money due on the note. Tong asserts that because the jury awarded her damages of about $190,000, which amount the court later deducted from USCB’s figure, she plainly achieved a net monetary “gain” or “savings” and the defendants incurred a net loss. And, even if the court added attorney fees of about $113,000 to the balance, she still obtained a net gain of about $75,000, making her the “prevailing party” under Code of Civil Procedure section 1032, subdivision (a)(4).
Whether a party to litigation is entitled to recover costs is governed by Code of Civil Procedure section 1032, which provides, in subdivision (b), that “[e]xcept as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.” For such purposes, Code of Civil Procedure section 1032, subdivision (a)(4) defines “prevailing party” as including, among others, “the party with a net monetary recovery” and “a defendant as against those plaintiffs who do not recover any relief against that defendant.” However, “[w]hen any party recovers other than monetary relief..., the ‘prevailing party’ shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not....” (Code Civ. Proc., § 1032, subd. (a)(4).)
In the present case, Rone clearly was a defendant as against whom the plaintiff did not recover any relief, and Tong could not seek costs from him.
As we explain below, Tong recovers an amount of $190,473.66 and USCB would be entitled to recover the amount owing on the note secured by the deed of trust on the property. This still does not mean that Tong is the prevailing party. The court retains discretion to make the determination as to a prevailing party under Code of Civil Procedure section 1032. (Goodman v. Lozano (2010) 47 Cal.4th 1327, 1338, fn. 4 (Goodman).)
Tong asserts she is entitled to attorney fees as a “prevailing party” on USCB’s cross-complaint that was voluntarily dismissed during trial. When a cross-complaint is voluntarily dismissed, ordinarily a cross-defendant is entitled to costs as a matter of right under Code of Civil Procedure section 1032, subdivision (b). (Santisas v. Goodin (1998) 17 Cal.4th 599, 606 (Santisas); City of Long Beach v. Stevedoring Services of America (2007) 157 Cal.App.4th 672, 679.) The voluntary dismissal of USCB’s cross-complaint against Tong does not make Tong the “prevailing party.” The dismissal did not remove Tong as a party to the case, and the allegations of the cross-complaint, for “rent-skimming, ” appointment of a receiver, specific performance and injunctive relief, concerned substantially identical issues being litigated in the complaint. Such dismissal did not mandate that Tong be declared the “prevailing” party. (See Plemon v. Nelson (1983) 148 Cal.App.3d 720, 725.)
Code of Civil Procedure section 1033.5 provides, in subdivision (a)(10), that attorney fees are “allowable as costs under Section 1032” when they are “authorized by” either “Contract, ” “Statute, ” or “Law.” A party seeking attorney fees must show, independent of the costs statutes, that she is entitled to attorney fees under an agreement, statute, or other law. (Santisas, supra, 17 Cal.4th at p. 606.) The trial court determined that Tong was not the “prevailing party, ” and we find no abuse of discretion in its so finding. Civil Code section 1717 provides that “[i]n any action on a contract, ” when the contract specifically provides that attorney fees and costs incurred to enforce the contract shall be awarded either to “one of the parties or to the prevailing party, ” the party whom the court determines is the prevailing party shall be entitled to reasonable attorney fees in addition to other costs whether he or she is the party specified in the contract.
Tong did not bring an “action on a contract.” Her causes of action were for claimed violations of section 2943, intentional interference with economic advantage, violation of the UCL and declaratory and equitable relief. As the trial court noted, Tong tried her case on the theory she never assumed the note, which contained the only provision allowing for recovery of attorney fees. The note stated that the note holder “will have the right to be paid back... for all of its costs and expenses in enforcing this Note, ” such “expenses [to] include, for example, reasonable attorneys’ fees.” Because Tong never assumed the note, there was no mutuality of obligation with respect to the contractual provision for award of attorney fees under section 1717. Tong chose to bring her claim on a theory of statutory violation, not breach of contract. An action alleging a violation of statutory duty sounds in tort rather than contract. (See Pintor v. Ong (1989) 211 Cal.App.3d 837, 842 [“Where the identical act constitutes both a tort and a breach of contract, the injured plaintiff ordinarily can choose which action to pursue”]; 3 Witkin, Cal. Procedure (5th ed. 2008) Actions, § 144, pp. 221-222.) The trial court found that even if Tong’s claim were considered an action for breach of contract she was not the prevailing party, as Tong had two objectives, to recover for USCB’s failure to provide the payoff demand statement and to exclude all attorney fees from being charged to the principal, and she succeeded in only the lesser objective.
Aside from declaratory relief, the only cause of action on which Tong prevailed was for a single violation of section 2943. Section 2943 makes no provision for the recovery of attorney fees. Had the Legislature intended under section 2943 to allow attorney fees to be included as “all damages, ” it would have specifically stated such. The Legislature knows how to provide for attorney fees when it intends such to be included as “damages.” For example, in section 2941, subdivision (b)(6), which appears in the same chapter as section 2943, the Legislature has provided: “In addition to any other remedy provided by law, a title insurance company preparing or recording the release of the obligation shall be liable to any party for damages, including attorney’s fees, which any person may sustain....” (Italics added.) In contrast, section 2943, subdivision (e)(4) only provides that a beneficiary who willfully fails to timely prepare and deliver the payoff demand statement “is liable to the entitled person for all damages which he or she may sustain....” (Italics added.) The statute therefore does not authorize the award of attorney fees as Tong claims.
As to the declaratory relief claim, both sides asserted they prevailed. The trial court found that although the attorney fees to be included in the principal sum owing on the note were reduced, defendant still was the prevailing party on the declaratory relief claim. When the results are mixed, the court retains discretion to award attorney fees, and we find no abuse under these circumstances. (Hsu, supra, 9 Cal.4th at pp. 876-877.)
Tong’s reliance on Brandt v. Superior Court (1985) 37 Cal.3d 813 and White v. Western Title Ins. Co. (1985) 40 Cal.3d 870 is misplaced. In both cases, attorney fees were part of the economic loss proximately caused by an insurer’s breach of the implied covenant of good faith and fair dealing and the tortious withholding of benefits to its insured. (Brandt, supra, at p. 819; White, supra, at p. 889.) Such is not the case here.
7. Form of Judgment
We note, however, that the trial court’s judgment cannot be reconciled with the evidence at trial. The present judgment ignores the central fact that Tong had no contractual or equitable relationship with USCB.
The trial below was bifurcated. In the first phase, the jury found Tong was an “entitled person” under section 2943. The jury also found USCB willfully failed to provide Tong with a payoff demand statement in January 2005. For USCB’s violation of section 2943, the jury awarded Tong $190,473.66 in actual damages. In the second phase of the trial, the court tried the equitable issues. The court found $756,473.96 was due on the note as of April 1, 2008, an amount that included USCB’s attorney fees incurred in the bankruptcy court. From the $756,473.96 due, the court (1) subtracted Tong’s $190,473.66 in actual damages; (2) subtracted USCB’s demand of $157,180.31 in attorney fees for the Doan and Urban Eco proceedings embedded in the amount due on the note and, (3) added $113,726.86 in attorney fees from the Doan and Urban Eco proceedings that the court deemed chargeable to the note. Summing its subtractions and additions, the court purports to state in the judgment that Tong “owes” USCB $522,546.85 as of April 1, 2008, an amount the court’s judgment increased to $533,266.53 as of August 1, 2008.
In section 7(D) of Doan’s promissory note, Doan agrees to pay the note holder’s costs for enforcing the note. Such a provision is reasonably read as a promise by the debtor, or anyone who assumes the debt, to pay the costs that USCB, as the note’s holder, incurs in enforcing the note against the debtor or anyone who assumes the debt. However, Tong was not a party to the loan or deed of trust and Tong has not assumed the debt. The existing judgment offsets the amount UCSB owes to Tong by reason of the jury’s verdict against the amount the trial court found owing on the promissory note and deed of trust. It was error for the trial court to offset Tong’s recovery against the amounts due under the note and deed of trust. The judgment should have made a separate award to Tong of the $190,473.66 in actual damages awarded by the jury.
Although Tong is not personally liable to pay the sums the trial court found owing under the promissory note and deed of trust, in granting declaratory relief the trial court found USCB entitled to payment of the note, as augmented by attorney fees, in default of which the trustee of the trust deed may proceed with foreclosure. It may well be that Tong as grantee would have to pay off the USCB note, as augmented by attorney fees, to retain the property. But the judgment should have separately set forth the sums owing to USCB on the note and deed of trust, i.e., $756,473.96 due on the note as of April 1, 2008, less $157,180.31, plus $113,726.86 or the sum of $713,020.51 plus appropriate interest.
DISPOSITION
Because we find no error in the jury’s verdict on the claim for violation of section 2943 or in the trial court’s findings and determination for declaratory relief (except for the form of the judgment), the judgment is reversed and remanded for the limited purpose of permitting the trial court to separately and independently set forth (1) the damages award to Tong against USCB on the section 2943 claim; and (2) the amounts due and payable under the note and deed of trust. The parties are to bear their own costs on appeal.
We concur: BIGELOW, P. J.RUBIN, J.
Section 12(a) of the deed of trust, under the title “Protection of Lender’s Security, ” stated that “[i]f Borrower fails to perform any of its obligations under this Instrument or any other Loan Document, or if any action or proceeding is commenced which purports to affect the Mortgaged Property, Lender’s security or Lender’s rights under this Instrument, including... insolvency, ... fraudulent conveyance or reorganizations or proceedings involving a bankrupt..., then Lender at Lender’s option may make such appearances, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender’s interest, including... payment of fees and out of pocket expenses of attorneys, accountants, inspectors and consultants....”
Section 12(b) of the deed of trust further provided: “Any amounts disbursed by Lender... shall be added to, and become part of, the principal component of the Indebtedness, shall be immediately due and payable and shall bear interest from the date of disbursement until paid at the ‘Default Rate’, as defined in the Note.” (Italics added.)