Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, Joseph F. De Vanon, Judge. Los Angeles County Super. Ct. No. GC 033155.
Law Offices of Addison H.S. Lau and Addison H.S. Lau for Defendant and Appellant.
Law Offices of George L. Young and Steven L. Sugars for Plaintiff and Respondent.
KITCHING, J.
INTRODUCTION
In this litigation, plaintiffs and respondents, Xiao Min Yu and Rui Fen Ding (collectively Yu), filed suit against defendant and appellant, Leung Kei Hui (Hui), to vacate a default judgment in favor of Hui in a separate case (the underlying litigation). The trial court entered judgment in favor of Yu, vacating the default judgment in the underlying litigation. The trial court found that service of a petition to confirm an arbitration award in the underlying litigation had been ineffective. The trial court awarded Yu attorney fees in the amount of $12,887.50 based upon an attorney fee provision in a written agreement. The trial court also awarded Yu costs in the amount of $975.30.
Hui appeals the post-judgment order awarding attorney fees and costs. Hui asserts that because the underlying litigation was not final, the trial court in this litigation erred by finding Yu to be the prevailing party and awarding attorney fees and costs.
We affirm. The trial court did not err by awarding attorney fees and costs in the case. In this discrete and independent equity action to vacate the judgment in the underlying litigation, Yu was the prevailing party on the only issue presented, i.e., whether Hui performed valid service of process in the underlying action. Yu was therefore entitled to an award of attorney fees and costs pursuant to a contractual attorney fee provision.
FACTUAL AND PROCEDURAL BACKGROUND
1. The Arbitration
The parties entered into a real estate purchase contract. A dispute arose followed by an arbitration in favor of Hui. The arbitrator found that Yu had agreed to arbitration and that he failed to attend the arbitration.
The real estate purchase contract contained an attorney fee provision: “In any action, proceeding, or arbitration between Buyer and Seller arising out of this Agreement, the prevailing party between Buyer and Seller shall be entitled to reasonable attorney’s fees and costs from the non-prevailing Buyer or Seller[.]”
2. The Underlying Action to Confirm the Arbitration Award
Hui initiated the underlying litigation (Super. Ct. Los Angeles County, Case No. GS004861) to confirm the arbitration award. Specifically, on December 2, 1998, Hui filed a petition to confirm the arbitration award.
On November 10, 1999, the trial court in the underlying litigation entered a default judgment against Yu and in favor of Hui based upon the arbitration award. The trial court entered a final judgment on January 10, 2001.
3. Yu Files Lawsuit to Vacate Default Judgment
On December 16, 2003, Yu filed this action to set aside the default judgment on the grounds of extrinsic fraud or mistake. He alleged improper service of process of the petition to confirm the arbitration award. He also alleged that he never agreed to arbitration and the arbitrator had no jurisdiction. Specifically, Yu asserted that he did not check the appropriate box on the real estate purchase contract to agree to the arbitration.
In his complaint, Yu requested an award of attorney fees based upon the parties’ real estate purchase contract, which contained an attorney fee provision.
Hui filed an answer denying Yu’s allegations and asserting various affirmative defenses. In his answer, Hui requested an award of attorney fees and costs.
4. Trial Court Vacates Default Judgment
Following a court trial, the trial court found that in the underlying litigation service of process (by publication) of the petition to confirm the arbitration award had been ineffective. The trial court found “that notice was not given to [Yu]. The order for publication was based upon insufficient efforts by defendants to obtain personal service on [Yu]. No evidence was received showing what efforts if any were made by the [Hui’s] process server. The declaration of ‘Hector Flores’ showed only that he went to 1820 S. Marengo Ave. but no indication as to which units if any he went to. Additionally, no evidence as to who he spoke to or what time of day service was attempted. [¶] The weight of the evidence supports that [Yu] resided at the 1820 address during the time in question in Unit 9. [Yu was] available for service had [Hui] made the effort.”
In its order, the trial court noted that it made no finding as to whether or not Yu checked off the arbitration box in the real estate purchase contract. The trial court explained, however, that because of the finding regarding ineffective service of process, the court did not have to reach the issue of whether Yu agreed to arbitration.
The trial court entered judgment in favor of Yu, vacating and setting aside the default judgment in the underlying litigation. Hui did not appeal the judgment.
5. Trial Court Awards Yu Attorney Fees and Costs
Yu filed a memorandum of costs in the amount of $975.30. Yu also filed a motion for attorney fees in the amount of $38,662.50. Yu based the request for attorney fees upon the attorney fee provision in the parties’ real estate purchase contract. Yu also asserted that he was entitled to fees based upon Hui’s conduct in refusing, without substantial justification to admit certain requests for admission in relation to what Hui knew about Yu’s whereabouts when Hui attempted to serve the petition to confirm the arbitration award.
Hui filed a motion to strike Yu’s memorandum of costs. Hui also filed an opposition to Yu’s motion for attorney fees.
The trial court awarded Yu attorney fees in the amount of $12,887.50 based upon the attorney fees provision in the underlying real estate purchase contract. The trial court did not address the issue of whether Yu was entitled to fees for the cost of proving that Hui refused to admit certain requests for admission without substantial justification.
The trial court also denied Hui’s motion to strike Yu’s memorandum of costs. Hui timely filed a notice of appeal from the post-judgment awards of attorney fees and costs.
CONTENTIONS
Hui asserts that the trial court abused its discretion by concluding that Yu was the prevailing party. Specifically, Hui asserts that the prevailing party determination was improper because there had not been a final resolution of the underlying litigation concerning the merits of the dispute arising under the real estate purchase contract. Hui also asserts that Yu was not entitled to fees as a cost of proving that Hui refused to admit certain requests for admission without substantial justification.
We note that Hui does not contest the trial court’s conclusion that the attorney fees provision in the parties’ real estate purchase contract supports an award of fees in this case. Nor does Hui contest the amount of the attorney fees or costs awarded.
Yu responds that the trial court did not abuse its discretion by concluding that he was the prevailing party and entitled to an award of attorney fees and costs. Specifically, Yu asserts that under Civil Code section 1717, the trial court was entitled to weigh the equities and find him to be the prevailing party. Yu also contends that he is entitled to attorney fees for the cost of proving that Hui refused, without substantial justification, to admit certain requests for admission. Yu also requests an award of attorney fees on appeal.
STANDARD OF REVIEW
We review for abuse of discretion the trial court’s determination of Yu as the prevailing party. (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1109 (Scott).)
DISCUSSION
The trial court did not abuse its discretion by concluding that Yu was the prevailing party in this litigation and by awarding attorney fees.
Code of Civil Procedure section 1032 “is the fundamental authority for awarding costs in civil actions.” (Scott, supra, 20 Cal.4th at p. 1108.) Section 1032, subdivision (b), sets forth the rule 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.”
Code of Civil Procedure section 1032, subdivision (a)(4), defines the term “prevailing party” as follows: “ ‘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.” (Italics added.)
Code of Civil Procedure section 1033.5 specifies the “items” which may be awarded as costs under section 1032. Section 1033.5, subdivision (a)(10)(A) identifies attorney fees which are authorized by contract as a category of costs.
Civil Code section 1717 governs awards of attorney fees based upon a contract. Section 1717 provides in pertinent part: “(a) 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. [¶] . . . [¶] (b)(1) The court, upon notice and motion by a party, shall determine who is the party prevailing on the contract for purposes of this section, whether or not the suit proceeds to final judgment. . . . [T]he party prevailing on the contract shall be the party who recovered a greater relief in the action on the contract. The court may also determine that there is no party prevailing on the contract for purposes of this section.” (Italics added.)
In determining the prevailing party, trial courts are to be guided by equitable considerations. (Hsu v. Abbara (1995) 9 Cal.4th 863, 877.) Trial courts are authorized to designate as the prevailing party the party who achieved its main litigation objective. (Ibid.) In determining whether there was a prevailing party on the contract and which party achieved its main litigation objectives, trial courts are directed to compare the relief granted with the parties’ demands and litigation objectives as disclosed by the pleadings, trial briefs, and opening statements. (Scott, supra, 20 Cal.4th at p. 1109.)
In this case, it is clear that Yu was the prevailing party. Yu achieved his main and only litigation objective--to vacate the default judgment. In addition, pursuant to Civil Code section 1717, Yu recovered greater relief than Hui in this discrete equity proceeding. The trial court therefore did not abuse its discretion by awarding Yu attorney fees and costs.
Hui responds that the determination of a prevailing party was premature because the underlying litigation on the contract had not reached a final disposition. We reject this assertion as did the courts in Marcus & Millichap Real Estate Investment Brokerage Co. v. Woodman Investment Group (2005) 129 Cal.App.4th 508 (Marcus & Millichap) and Cole v. BT & G, Inc. (1983) 141 Cal.App.3d 995 (Cole), on substantially analogous facts. These cases stand for the proposition that when a party obtains a final judgment in a discrete legal proceeding, as a matter of equity, that party may be entitled to an award of attorney fees in the discrete legal proceeding, even though the underlying litigation on the merits was not final.
In Marcus & Millichap, parties conducted an arbitration regarding the right to a real estate sales commission. The arbitrator issued an award in favor of Marcus & Millichap in the amount of $300,000, including $70,000 in attorney fees. (Marcus & Millichap, supra, 129 Cal.App.4th at pp. 510-511.) The trial court denied the motion of Marcus & Millichap to confirm the arbitration award. Instead, the trial court granted the cross-motion of the Woodman parties to vacate the arbitration award on the grounds that the arbitrator exceeded her authority. Marcus & Millichap did not appeal the order vacating the arbitration. (Id. at p. 510.) The trial court awarded the Woodman parties attorney fees and costs as the prevailing parties in the post-arbitration judicial proceedings. (Ibid.)
Sometime later, Marcus & Millichap filed a new demand for arbitration of the right to the sales commission. (Marcus & Millichap, supra, 129 Cal.App.4th at pp. 511-512.) The trial court granted the motion to compel a second arbitration. (Id. at p. 512.)
Marcus & Millichap appealed the order awarding fees and costs to the Woodman party as the prevailing party. (Marcus & Millichap, supra, 129 Cal.App.4th at p. 511.) Marcus & Millichap asserted that because the parties had not resolved the underlying merits of the arbitration, the trial court erred by determining that the Woodman party was the prevailing party with respect to the proceedings to confirm or vacate the original arbitration award. (Id. at p. 513.) The Court of Appeal rejected this assertion, explaining: “Not only did they defeat Marcus & Millichap’s effort to have the arbitration award confirmed but also they persuaded the trial court to vacate the arbitration award as to both Woodman and Sasson. As a matter of law, with respect to the postarbitration judicial proceedings, Woodman and Sasson must be considered the prevailing party within the meaning of [Code of Civil Procedure] section 1032, subdivision (a)(4) (‘ “ prevailing party” ’ includes a defendant or other party against whom a complaint has been filed ‘in whose favor a dismissal is entered,’ as well as a defendant ‘as against those plaintiffs who do not recover any relief against that defendant’).” (129 Cal.App.4th at p. 514.)
The Court of Appeal also concluded that the parties’ attorney fee provision supported the trial court’s determination of the Woodman parties as the prevailing parties and an award of attorney fees and costs. The court stated: “The listing agreement, however, authorizes the award of attorney fees ‘[i]n any litigation, arbitration or other legal proceeding which may arise between any of the parties hereto.’ This contractual language . . . requires post[-]arbitration judicial proceedings to be considered a discrete ‘legal proceeding’ for purposes of determining a party's right to an award of attorney fees.” (Marcus & Millichap, supra, 129 Cal.App.4th at p. 516.)
In Cole, the plaintiffs and defendants entered into a contract for the sale of stock. The contract was supported by a promissory note, a guarantee and a confession of judgment. When the defendants defaulted on the note, the plaintiffs filed the confession of judgment in superior court. (Cole, supra, 141 Cal.App.3d at p. 996.) The plaintiffs also obtained a writ of execution, upon which they attempted to levy. (Ibid.)
The defendants moved to vacate the judgment and to quash the writs of execution, which the trial court granted, concluding that the confession of judgment was defective. (Cole, supra, 141 Cal.App.3d at p. 996.) The defendants then filed a motion for attorney fees and costs in relation to the proceeding to invalidate the confession of judgment, which the trial court denied. (Id. at p. 997.)
The Cole court reversed, concluding that defendants were the prevailing parties and entitled to contractual attorney fees. The court rejected the plaintiffs’ assertion that because the underlying litigation on the breach of the stock sale contract was not final, the defendants could not qualify as the prevailing parties. The court explained: “The fallacy in plaintiffs’ application of the foregoing rule to the instant case is that here there are two actions: one on the confession of judgment and another on the agreement and note. A final, appealable judgment was entered on the validity of the confession of judgment, and a new and independent lawsuit was required in order to pursue defendants’ liability for the obligation under the agreement.” (Cole, supra, 141 Cal.App.3d at p. 998.)
The Cole court further explained: “Here, defendants successfully invalidated a judgment following a hearing on the merits of its validity. The judgment was a judicial, not a ministerial act. Nor does equity compel a denial of attorney’s fees in this situation. On the contrary, an award of attorney's fees might serve to discourage the practice of obtaining judgments by confession without compliance with the provisions of Code of Civil Procedure section 1133.” (Cole, supra, 141 Cal.App.3d at p. 999.)
In this case, based upon the reasoning of the Marcus & Millichap and Cole courts, we reject Hui’s assertion that the trial court erred by determining Yu to be the prevailing party because the underlying arbitration had not been completed. Like the proceedings in Marcus & Millichap and Cole, the lawsuit to vacate the judgment based upon ineffective service of process was a distinct proceeding which was litigated to final judgment.
In addition, analogous to the attorney fees provision at issue in Marcus & Millichap, the attorney fee provision in this case provides that attorney fees shall be awarded to the prevailing party “[i]n any action, proceeding, or arbitration between Buyer and Seller arising out of this Agreement.” This language is broadly written and unambiguously includes this independent, discrete and limited action to vacate the default judgment. Hui makes no assertion to the contrary.
Moreover, as in Cole, equity supports the award of fees in this case. An award of attorney fees in this case might well serve to discourage attempts to obtain judgments based upon insufficient service of process.
We also reject application of the cases cited by Hui. (See Presley of Southern California v. Whelan (1983) 146 Cal.App.3d 959 and Bank of Idaho v. Pine Avenue Associates (1982) 137 Cal.App.3d 5, disapproved in Snyder v. Marcus & Millichap (1996) 46 Cal.App.4th 1099, 1103.) In these cases, unlike the present case at bar, there was no final judgment in a discrete legal proceeding separate and apart from the underlying litigation on the merits. Thus, these cases are inapposite to the present dispute.
For example, in Presley of Southern California v. Whelan (1983) 146 Cal.App.3d 959 (Presley), a Court of Appeal reversed a summary judgment in favor of defendant Whelan on a breach of contract cause of action. Upon remand, the trial court awarded the plaintiff, Presley of Southern California, attorney fees for purposes of prosecuting the appeal. The Court of Appeal reversed the award of attorney fees for the successful appeal. The court concluded that there was no prevailing party entitled to fees because the action was ongoing and the reversal of the summary judgment was an interim state of the litigation. (Id. at p. 960.) The court explained: “[I]t is well settled a party who prevails on appeal is not entitled under a [Civil Code] section 1717 fee provision to the fees he incurs on appeal where the appellate decision does not decide who wins the lawsuit but instead contemplates further proceedings in the trial court. [Citations.] An attorney fee award under a provision such as the one involved here must wait until the lawsuit is completely and finally decided[.]” (146 Cal.App.3d at p. 961.)
As noted above, Presley is distinguishable and inapplicable because that case involved one legal proceeding. The award of fees came at an interim stage in the proceedings, following the reversal of a grant of summary judgment.
Notably, the Presley court recognized that its holding was distinguishable and inapplicable to factual patterns, such as those presented in Cole, and presented in this case. The Presley court stated: “Cole . . . is distinguishable in that attorney fees were awarded to the prevailing party, as authorized by the parties’ written contract, after a final judgment terminating a special proceeding about the validity of a confession of judgment.” (Presley, supra, 146 Cal.App.3d at p. 961, fn. 1.)
In conclusion, the present case is factually analogous to Cole and distinguishable from Presley. In the case at bar, there was a final judgment disposing of the litigation concerning the sufficiency of service of process. The trial court awarded attorney fees to Yu as the prevailing party, as authorized by the attorney fee provision, after a final judgment in an equity proceeding to contest the validity of a judgment based upon insufficient service of process. The trial court, therefore, did not abuse its discretion by awarding attorney fees even though the underlying separate action on the merits had yet to be resolved.
The last issue we address is Yu’s request for fees on appeal. This appeal qualifies as a legal proceeding pursuant to the parties’ attorney fee provision in the real estate purchase contract. Therefore, pursuant to Akins v. Enterprise Rent-A-Car Co. (2000) 79 Cal.App.4th 1127, 1134 [“Statutory authorization for the recovery of attorney fees incurred at trial necessarily includes attorney fees incurred on appeal unless the statute specifically provides otherwise”], we conclude that Yu is entitled to attorney fees for purposes of this appeal. We therefore remand the case to the trial court to determine the amount of attorney fees and costs to be awarded to Yu on appeal.
DISPOSITION
The order awarding Yu attorney fees and costs is affirmed. Yu is awarded costs on appeal. Yu is also awarded attorney fees on appeal. The matter is remanded to the trial court to determine the amount of attorney fees to be awarded Yu in relation to this appeal proceeding.
We concur: CROSKEY, Acting P. J., ALDRICH, J.