Opinion
A100054. A100583.
11-14-2003
DAVID DeZEREGA et al., Plaintiffs and Respondents, v. CITY OF BERKELEY RENT STABILIZATION BOARD, Defendant. JASON MEGGS, Real Party in Interest and Appellant.
These consolidated appeals arise from a proceeding in which the superior court set aside a ruling by the City of Berkeley Rent Stabilization Board (Board) reducing the "rent ceiling" for an apartment occupied by appellant Jason Meggs and owned by respondents David DeZerega and Sara DeZerega. In the main appeal (No. A100054), Meggs challenges a judgment in administrative mandate setting aside the Boards decision. In the later appeal (No. A100583), he challenges an order awarding attorney fees to the DeZeregas based on a fee provision in a written lease. We find no error in the judgment, but reverse the award of fees because this is not an action to enforce the lease.
BACKGROUND
In August 2000, we affirmed a judgment for Meggs in an unlawful detainer action by which the DeZeregas had sought to evict him from a Berkeley apartment. (DeZerega v. Meggs (2000) 83 Cal.App.4th 28 (DeZerega I).) The trial court had entered summary judgment for Meggs on the ground that the DeZeregas had failed to plead or prove good cause for eviction, as generally required by the Berkeley Rent Stabilization and Eviction for Good Cause Ordinance No. 5467-N.S. (Ordinance). In affirming the resulting judgment, we rejected the DeZeregas contention that Meggs was a mere "roommate," rather than a "tenant" protected by the Ordinance, and was thus subject to eviction without further cause upon the surrender of the premises by a "tenant" named in a written lease signed by them. We held that whatever Meggss classification at common law or under the lease, he was a "tenant" as defined in the Ordinance and was thus entitled to its protections against eviction without cause.
Some four months before we rendered our decision, Meggs filed a petition with the Board to adjust the rent for the affected unit. He asserted a variety of grounds for such relief, but the only one at issue before us is his contention that, beginning on December 23, 1997, the DeZeregas had reduced the number of tenants allowed in the affected unit. He alleged that they had "refused unlawfully to recognized [sic] him as their tenant" and that the pending eviction proceeding "affected the marketability of the property to other prospective tenants who fear moving into a unit from which they may be evicted at any time." He claimed that this entitled him to a reduction in the "rent ceiling" under Board regulation 1270 (reg. 1270), which calls for increases or decreases in allowable rents based on changes in "base occupancy level."
Regulation 1270 provides for establishment of an initial "base occupancy level" based on historical occupancy patterns, after which a units "rent ceiling" may be raised according to a stated formula if the occupancy level is increased. (Reg. 1270(A).) The provision at issue here, regulation 1270(C), then goes on to provide: "Decrease in Number of Tenants Allowed. If any policies imposed by the landlord reduces [sic] the number of tenants allowed to occupy a rental unit as a principal residence to a number less than the base occupancy level for that unit, then the rent ceiling for that unit shall be decreased by an amount equal to the percentage by which the number of allowable tenants has been reduced." (Reg. 1270(C).)
On October 19, 2000—about two months after we issued our decision in DeZerega I—hearing officer Katherine Lee took evidence on the petition for adjustment. Meggs testified that upon his entry into the subject apartment in March 1997, it was occupied by himself, Michael Nnadi-Nwazurumike, and Helen Yoon. He paid what he understood to be one-third of the rent. Upon the vacation of the apartment by the other two tenants in December 1997, he became the only occupant. From that point forward he tendered rent to the DeZeregas in an amount that he understood to be the full rental value of the unit, i.e., three times his prior rent. The DeZeregas refused the rent and eventually asked, through counsel, that Meggs stop tendering it.
At least five of these checks were made out in the amount of "One thousand fifty-nine bikes [sic]." Meggs testified, "I write checks in this manner and they are cashed and deposited, so I dont consider that an invalid format."
Meggs testified on direct examination that he "wanted to take on tenants" in order to avoid being "liable for" the full rent "which would be well over half my income." However, he did not take on any new tenants during the pendency of the eviction proceeding because he "was advised by [his] attorney that would be an illegally [sic] problematic thing to do" and that he "actually couldnt do that." He acknowledged having "concerns about taking on other tenants at a time when [his] right to possession was being challenged by [his] landlords," because "there was no telling what would happen. Whether I would be evicted or what would happen with the unit. So, to ask someone else to move in would put them in a jeopardized position as well." He added that an intermediate ruling in favor of the DeZeregas by a divided panel of the appellate department had "definitely" influenced his belief that "it would really be an unwise thing to do . . . to have other roommates right now until this is finally determined." He acknowledged that the DeZeregas never advised him "directly" not to take on new tenants. However, he said that "all communications were handled through [his] attorney at that point."
Sara DeZerega testified that she had sued to evict Meggs "because [she] did not consider him to be a tenant." She then testified as follows:
"[Q:] Consistent with your belief that he was not a tenant, you also believed that he did not have the right to move other people into the unit to live with him.
". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"[A:] If I didnt believe he was a tenant, I was told by legal advisor it would be violating the appeal.
"[Q:] Thats right, so your policy then with regard to Mr. Meggs, if anybody had asked, would have been `no, you cant have any tenants . . . .
"[A:] Thats correct."
On examination by her own attorney, Sara DeZerega testified that from 1997 to the date of the hearing she never "develop[ed] any written, oral or other policy that limited or cut the number of persons that could occupy the property from three to one." Had Meggs been adjudged a tenant, or had she considered him such, he would "have had the right to have roommates." As it was, she never told him he could not have roommates or cotenants, and he never asked. She then testified as follows :
"[Q:] So, considering that was your intent, that you were attempting to remove Mr. Meggs from the unit, you would never have agreed to him having roommates while this lawsuit was going on would you.
"[A:] While the lawsuit was going on I wasnt agreeing to anything, I mean everything was up in the air.
". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"[Q:] So you understand just from your own experience that if youre attempting to remove a tenant from possession, you dont offer the tenant to allow them to move in roommates while youre trying to evict them, do you?
"[A:] No.
". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"[A:] . . . Im not an attorney. I had legal advice at that time which was that Mr. Meggs was not a tenant. It was a good faith action that I took. Everything else seems to derive from there about whether I could do this that or the other thing."
The hearing officer found in essence that the DeZeregas conduct had the effect of preventing Meggs from bringing new roommates into the premises while the eviction proceeding was pending, and that it would have been futile for Meggs to request permission to do so. She concluded, however, that regulation 1270(C) was inapplicable "where the underlying tenancy is at issue. An implied premise of the entire regulation is that the tenant or tenants in question are in lawful possession. Thus, the landlords actions are irrelevant for purposes of regulation 1270, and we [sic] cannot find that they effected a `policy within the meaning of that regulation." She concluded that while Meggs might have a defense grounded in contract law to a claim for unpaid rent, the Board was powerless to grant a remedy: "The effect of the landlords repudiation of the lease on the Petitioners ability to obtain roommates during the pendency of the litigation is beyond the jurisdiction of the Board to adjudicate."
Meggs appealed to the full Board, which reversed the hearing officers decision. The Board rejected the premise, which it considered central to the hearing officers decision, that "the landlords rental scheme and court action to evict appellant from the premises did not constitute a `policy " for purposes of the regulation. The Board ordered a reduction in the rent ceiling under regulation 1270(C).
The Dezeregas filed the instant proceeding for administrative mandate, alleging that the Boards decision constituted a prejudicial abuse of discretion in that, among other things, the decision was not supported by the findings, the findings were not supported by the evidence, and the Boards interpretation of regulation 1270 conflicted with state law. The court granted the petition and entered judgment accordingly. Meggs filed a timely notice of appeal (No. 100054). The court granted the DeZeregas motion for attorney fees, and Meggs took a timely appeal from that order as well (No. 100583).
DISCUSSION
I.
Issuance of Writ
When an aggrieved party seeks a writ of mandate to overturn a decision of a rent control board, " `the trial court must review the whole administrative record to determine whether the findings are supported by substantial evidence and whether the agency committed any errors of law. " (MHC Operating Limited Partnership v. City of San Jose (2003) 106 Cal.App.4th 204, 217 (MHC Operating Limited Partnership ), quoting Berlinghieri v. Department of Motor Vehicles (1983) 33 Cal.3d 392, 395.) On appeal from the trial courts ruling, findings of fact are effectively reviewed de novo because we ask the same question the trial court did: whether the findings are supported by substantial evidence. (MHC Operating Limited Partnership, supra, at pp. 218-219.)
The central point of controversy here is whether the DeZeregas conduct constituted a "polic[y] imposed by the landlord [which] reduce[d] the number of tenants allowed to occupy [the] rental unit." (Reg. 1270(C).) The most critical subsidiary question is the meaning to be attributed to the term "policy." We are mindful that the Boards interpretation is entitled to considerable weight. (See Brown v. Fair Political Practices Com. (2000) 84 Cal.App.4th 137, 150.) However, its interpretation is "not binding on us," because "[u]ltimately, questions of statutory and regulatory construction are the responsibility of the courts. The level of deference we accord to an agencys interpretation turns on a legally informed, common sense assessment of its merits in the context before us. We consider whether the agency has a comparative interpretive advantage over the courts, and also whether its interpretation is likely to be correct. Factors suggesting the agency is correct include indications of careful consideration by senior officials, particularly a collective decision reached after public notice and comment; evidence that the agency has consistently maintained the interpretation; and indications that the interpretation is contemporaneous with the enactment of the statute or regulation being interpreted. [Citations.]" (Ibid.; see MHC Operating Limited Partnership, supra, 106 Cal.App.4th at pp. 219-220; State Farm Mutual Automobile Ins. Co. v. Quackenbush (1999) 77 Cal.App.4th 65, 71-72, fn. 2 ["final responsibility for interpreting the law, whether statutory or regulatory, rests with the courts"].)
The Board declared that "policy," as used in regulation 1270(C), "is best defined as a course of action designed to achieve a specific goal or effect." Instead of applying that definition, however, the Board went on immediately to state that the question "therefore" raised was "whether the landlords method of renting the subject unit constituted a course of action that had the effect of limiting occupancy of the unit to a level below the base occupancy level." (Italics added.) In other words, after defining "policy" in terms of the landlords "design," the Board actually extended it to reach any conduct having the effect of "limiting occupancy."
Obviously the Boards decision cannot be sustained on the basis of a definition that it ostensibly adopted but refused to apply. Rather we must review the operative interpretation, i.e., the one actually applied. We have concluded that this interpretation, which would extend the regulation to any conduct by a landlord having the effect of reducing the number of tenants, simply cannot be reconciled with the words chosen, i.e., "polic[y] . . . [which] reduces the number of tenants allowed to occupy [the] rental unit." (Reg. 1270(C), italics added.)
The ordinary meaning of "policy" in the present context is "a definite course or method of action selected from among alternatives and in light of given conditions to guide and determine present and future decisions." (Websters Ninth New Collegiate Dict. (1987), p. 910, italics added; see Cruz v. HomeBase (2000) 83 Cal.App.4th 160, 167 [defining "corporate policy," for purpose of identifying "managing agents" whose conduct can support punitive damage award, as "the general principles which guide a corporation, or rules intended to be followed consistently over time in corporate operations"]; Pembaur v. Cincinnati (1986) 475 U.S. 469, 480-481 ["official policy" for purposes of imposing municipal liability for a sheriffs torts defined as "formal rules or understandings—often but not always committed to writing—that are intended to, and do, establish fixed plans of action to be followed under similar circumstances consistently and over time"].) A policy is thus distinguished from a mere course or series of actions by the characteristics of deliberate planning, selection, and prescription: it is purposefully adopted; it is chosen from among competing possibilities; and it is conceived as a consistent response to an ongoing, recurring, or expected problem or situation.
Although neither party has brought it to our attention, we note that the Board has amended regulation 1270(C) to include the following definition: "As used in this regulation, `policy or `policies means any rule, course of conduct, act or actions by a landlord." (http://www.ci.berkeley.ca.us/rent/OrdRegs/regs/12regs/1270.html, as of November 12, 2003.) The City of Berkeleys website reports that the amendment was effective April 1, 2002, and "is declaratory of existing law." (http://www.ci.berkeley.ca.us/rent/OrdRegs/regchan.html, as of November 12, 2003.) We express no opinion on the validity or effect of this enactment except to note that its statement as to the effect of prior law is not binding on us, and that we decline to adhere to it. (See Western Security Bank v. Superior Court (1997) 15 Cal.4th 232, 244-245.)
It is undisputed that the DeZeregas followed a consistent practice by which they sought to create two classes of occupants—the "tenants" who signed leases and to whom the DeZeregas looked for rent, and the "roommates" such as Meggs whom the DeZeregas sought to treat as strangers to the landlord-tenant relationship. In a letter explaining the return of Meggss first tender of rent, Sara DeZerega explained this practice and referred to a "policy and procedure" of requiring "roommates" to submit an application before being accepted as tenants. We assume for purposes of our analysis that the entire practice constituted a "policy" within the meaning of regulation 1270(C). But there was no evidence, and the Board did not find, that this practice operated to reduce the number of occupants allowed on the premises. Rather, Sara DeZerega and Meggs both testified that the reduction in the number of roommates stemmed from the pendency of eviction proceedings, which placed the apartment in a kind of legal limbo and led both parties to fear that any attempt to bring in additional tenants would compromise their respective positions in the lawsuit. The reduction in the number of roommates was thus a product not of the admitted "policy," but of the bringing of a lawsuit to evict Meggs. There was no evidence that the lawsuit itself was the result of any policy. It is natural that a landlord who disputes an occupants right of possession will bring an eviction proceeding, just as a homeowner whose grass needs trimming will mow the lawn. In neither case does such remedial action, without more, constitute a "policy" as that term is commonly understood.
Here there was not even evidence of a regular practice: there was no evidence of any other eviction proceedings by the DeZeregas, let alone eviction proceedings growing from the tenant-roommate dichotomy.
Furthermore, regulation 1270(C) comes into play only if the landlord employs a policy that "reduces the number of tenants allowed to occupy a rental unit." (Italics added.) The Boards analysis effectively struck the italicized words from the regulation, extending it to any policy that had the effect of reducing the number of tenants occupying the premises, regardless of how many were "allowed." The undisputed fact is that Meggs never attempted to secure replacement cotenants and never asked the DeZeregas to do so. There is no evidence that, had Meggs proposed a means of bringing in replacement roommates that would have adequately protected both parties litigation positions, the DeZeregas would not have accepted.
Meggs argues that "[i]t was the DeZeregas[] method of renting the unit, not their attempt to evict Meggs, which constituted the policy that led to the occupancy reduction. The eviction was merely the enforcement mechanism of the policy, not the policy itself." The method of renting the unit did indeed reflect a "policy," as we have acknowledged. But it was the eviction proceeding, not the policy, that "led to the occupancy reduction." And neither the policy nor the eviction, nor both in combination, reduced the number of tenants "allowed" on the premises.
The Boards decision discussed the purposes of regulation 1270(C) at some length, but failed to show how or why they have any bearing on the present case. The Board wrote in essence that the regulation is intended to deprive the landlord of any incentive to force a remaining tenant to assume the entire rent burden for premises which are designed and intended to be shared by multiple tenants. The regulation assumes that landlords would otherwise be motivated to pursue such a stratagem in order to force the remaining tenant to vacate, thus providing an occasion to sidestep Berkeleys rent controls and raise rents to market levels under the Costa-Hawkins Rental Housing Act, Civil Code section 1954.50 et seq. But there is no evidence that the DeZeregas were seeking the de facto eviction of a lawful tenant by economic duress; rather they were pursuing the de jure eviction of a person they considered a legal stranger to the premises. The inhibition on replacement cotenants was not a means to recovery of the premises but an incidental by-product of the direct and open means of lawful eviction proceedings. Accordingly, hidden incentives or disincentives appear entirely irrelevant, and the described purposes of regulation 1270(C) appear not to be implicated at all by the facts before the Board.
The Board wrote, "[I]f the base occupancy level of a rental unit is two tenants and one tenant leaves and the landlord has a policy that prohibits the remaining tenant from bringing in a replacement tenant, the rent ceiling for the unit will be reduced [under the regulation] by 50%. The purpose of this provision is to encourage maximum utilization of scarce rental housing and to protect sitting tenants from dramatic increases in their share of the rent, increases that, in many cases, may force the tenant to vacate a rental unit due to an inability to pay the full rent. The incentive to force sitting tenants to vacate a rental unit is the opportunity to raise the rent to market level that may only be done when the unit is vacant. (See Civ. Code, § 1954.53.)" (Italics added.)
This conclusion is not altered by the Boards assertion that the DeZeregas conduct was driven by the same motive that lies behind the conduct proscribed by the regulation. Regulation 1270(C) does not purport to proscribe motives; it proscribes conduct. A landlords motive is irrelevant if he or she did not adopt a policy which disallowed replacement cotenants in order to drive up the rent of a remaining tenant. The conduct here—seeking to evict a remaining tenant—is regulated by other provisions of the Ordinance and regulations, which provide remedies for wrongful eviction practices including injunctive relief, return of possession and actual damages for any claim found to be "false or in bad faith," and treble damages if the conduct was "wilful." (Ord., § 13.76.150, subds. (E), (B), (D).) Indeed a landlord may be subject to criminal penalties, including jail, for any "wilful violation" of the chapter requiring just cause for eviction. (Ord., § 13.76.190.)
"Regulation 1270 typically involves the situation where the landlord does not contest the petitioning tenants right of occupancy but refuses to allow additional tenants to share the rented premises. In the instant case, the landlords went even further and challenged [Meggss] right to occupy the subject unit. Since the regulation covers the situation where the landlord refuses to allow the petitioning tenant to share a unit with others, it must also cover the situation where the landlord challenges the petitioning tenants right to remain in the unit . . . . In both situations, the landlords apparent motive is to force the sitting tenant or tenants to vacate the unit." (Italics added.)
If the logic of the Boards decision were sound, it would seemingly extend to all eviction proceedings—even meritorious ones—against a sole remaining tenant in a multi-tenant unit. Obviously, whenever a landlord serves a notice to quit, he or she acts for the purpose of securing the tenants departure. At the same time, the institution of eviction proceedings against a sole remaining tenant will always make it difficult for either party to bring in replacement cotenants to share the rent burden. Under the Boards rationale, then, the rent ceiling for the unit will be more-or-less automatically reduced upon the institution of unlawful detainer proceedings, whether or not they ultimately prove meritorious.
The Board also asserted that its result was supported by language in DeZerega I, supra, 83 Cal.App.4th 28. The Board quoted a passage in which we summarized and rejected an argument by the DeZeregas "that [Meggs] cannot assume a right to occupy the entire estate merely because his co-occupants have left." The Board found in our account of the DeZeregas argument an "admission" by them that "the landlords rental policies reduced the number of tenants allowed to occupy the unit to a level below the base occupancy level, i.e., from 2 tenants to 1 tenant." We are unable to follow, let alone ratify, this reading of our decision. Both the DeZeregas argument and our paraphrase of it are far too vague to establish any relevant "admission" by them. If anything, their argument implied that Meggs had somehow abused his tenancy by taking over the space which rightfully should be rented to additional tenants.
As quoted in the Boards decision, we wrote: "`[landlords] assert that defendant cannot assume a right to occupy the entire estate merely because his co-occupants have left. This argument, even if meritorious in some context, is insufficient to impeach the trial courts entry of summary judgment. If it is correct, it means only that [landlords] are entitled to rent the remaining two-thirds of the apartment to others. " (DeZerega I, supra, 83 Cal.App.4th at p. 42.)
As in DeZerega I, we think it advisable to emphasize the narrowness of our holding. The question before us is not how much unpaid rent Meggs ultimately owes to the DeZeregas. We express no opinion on the question whether Meggs could defend a claim for such rent, in whole or part, based on the facts discussed here, or any other facts. The sole question before us is whether these facts furnish substantial evidence, and whether regulation 1270(C) provides a sound legal basis, for the Boards reduction of the rent ceiling. We have concluded that the answer is no. Accordingly the trial courts judgment granting the petition for writ of mandate must be affirmed.
II.
Attorney Fees
A. Background.
In No. A100583, Meggs challenges the trial courts order awarding $ 18,220 in attorney fees to the DeZeregas. Of this amount, $ 10,720 was awarded against Meggs alone, and the remaining $ 7,500 was awarded against Meggs and the Board. In seeking the award against Meggs, the DeZeregas relied on an attorney fee provision in "the written rental agreement which forms the basis of the contractual relationship between the parties." Meggs contends that he was not a party to the rental agreement or otherwise bound by its terms and that this is not an action to enforce the agreement. We agree with the latter contention and do not reach the former.
It is undisputed that when Meggs first entered the premises he did so as a "roommate" of the then-"tenant," Helen Yoon. Yoon had signed a written lease with the DeZeregas which included a provision allowing reasonable attorney fees to the prevailing party "[i]n any action or legal proceeding to enforce any part of this agreement." Upon Yoons departure, the DeZeregas signed a lease with Michael Nnadi-Nwazurumike containing an identical fee provision. Meggs was not a signatory to either lease.
In moving for fees in this matter, the DeZeregas implicitly asserted that Meggs was bound by the fee provision in the lease, citing various proceedings in the unlawful detainer proceedings, including statements by us in DeZerega I. Meggs contended that his right to possession was not derived from the lease and that none of the earlier proceedings established that he was bound by its terms.
The DeZeregas also contended that the instant matter "was clearly a `legal proceeding . . . `to enforce their right to the full rent established by the written agreement which governs their relationship with Mr. Meggs." Meggs argued that this action did not invoke any provision of the agreement, but raised only an issue concerning the application of Board regulations, and was thus beyond the reach of the fee clause.
The trial court, per Judge Kraetzer, granted the motion for fees. Citing Judge Rhines opinion awarding fees in the earlier matter, he wrote, "Regardless of whether Mr. Meggs is a subtenant and thus a third party beneficiary of the lease or is a roommate entitled to the benefit of the lease, he was entitled to fees and thus likewise petitioners are entitled to their fees incurred in reestablishing their rights under the lease that the Board at Mr. Meggs[s] request had taken away."
B. Discussion.
The existence or nonexistence of a legal basis for an award of attorney fees is a question of law, the trial courts determination of which is reviewed de novo on appeal. (Sessions Payroll Management, Inc. v. Noble Const. Co. (2000) 84 Cal.App.4th 671, 677.) The DeZeregas claim a right to fees only under Civil Code section 1717 (§ 1717), subdivision (a), which provides, "In any action on a contract, where the contract specifically provides that attorneys 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 attorneys fees in addition to other costs."
This statute expands the reach of contractual fee provisions in two respects: "It is applied where an otherwise unilateral right to recover attorney fees is not reciprocal, ensuring mutuality of remedy so that attorney fees may be awarded to whichever contracting party prevails. It is also applied where a party is sued on a contract providing for an award of attorney fees to which he is not a party. `To ensure mutuality of remedy in this situation, it has been consistently held that when a party litigant prevails in an action on a contract by establishing that the contract is invalid, inapplicable, unenforceable, or nonexistent, section 1717 permits that partys recovery of attorney fees whenever the opposing parties would have been entitled to attorney fees under the contract had they prevailed. [Citation.] (Santisas [v. Goodin (1998)] 17 Cal.4th 599, 611.)" (Topanga and Victory Partners v. Toghia (2002) 103 Cal.App.4th 775, 780, italics added.)
In other words, the statute (1) extends the benefit of a fee provision to both contracting parties, where the provision only allows fees to one; and (2) allows fees to a nonparty who defeats a contract claim on which the losing party would have been entitled to fees had he or she prevailed. Neither of these aspects applies here. The first is inapplicable because, whether or not Meggs is deemed a party to the lease, the fee provision is not unilateral, but grants a mutual right to fees to "the prevailing party." The second aspect is immaterial because, whatever Meggss status vis-à-vis the lease, the parties claiming fees (the DeZeregas) were certainly parties to the contract. It therefore appears that section 1717 is largely if not entirely irrelevant, and that the DeZeregas right to fees is governed entirely by the contract. The potentially dispositive questions thus become: (1) Is Meggs contractually bound by the fee provision? And (2) is this matter an "action or legal proceeding to enforce any part of th[e] agreement," so as to come within the terms of the fee provision in the lease? We think it is plain that the second question must be answered in the negative; this action simply cannot be characterized as one to enforce the lease, and thus does not come within the terms of the attorney fees provision. This makes it unnecessary to decide whether or on what theory Meggs might be bound by that provision.
Section 1717 appears superfluous here because its scope is coextensive with the language of the fee clause here at issue. In this respect the clause here must be contrasted to those which allow fees for claims arising from a contractual relationship. Here the clause extends by its terms only to claims sounding in contract—as does section 1717. (Cf. Moallem v. Coldwell Banker Com. Group, Inc. (1994) 25 Cal.App.4th 1827, 1830-1831 [citing and distinguishing cases].)
The gist, purpose, and effect of this proceeding were to set aside the Boards adjustment of the lawful rent ceiling under regulation 1270(C). In making that determination the Board had no occasion to interpret, apply, or ascertain the validity of the lease, and did not purport to do so. The DeZeregas petition for administrative mandate made no reference to any written lease or agreement, and while it prayed for attorney fees, that request is readily referable to Government Code section 800, which authorizes an award of fees against a public agency "[i]n any civil action to appeal or review the award, finding, or other determination of any administrative proceeding," where the determination under review is found to be the result of arbitrary or capricious action. Nowhere in the pleadings is it suggested that either party believed this to be an action on the lease.
The characterization of a matter as contractual or noncontractual depends on the gist of the claims and substantive issues presented and not the form of the proceeding. (Fragomeno v. Insurance Co. of the West (1989) 207 Cal.App.3d 822, 830, italics omitted [to determine whether unlawful detainer action sounds in contract so as to support fee award, "the gravamen of the facts giving rise to the right to recovery must be examined"], disapproved on another point in Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 841, fn. 13; see Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1342, [section 1717 applies "where the theory of the case is breach of contract"]; Santisas v. Goodin, supra, 17 Cal.4th at p. 617 [applies to claims "sounding in contract"].) However we find it significant that we have found only one case in which a challenge to an administrative ruling was held to be an action on a contract. Moreover, the reasoning of that case actually points to a contrary result here.
In Texas Commerce Bank v. Garamendi (1994) 28 Cal.App.4th 1234 (Garamendi), the beneficiaries of certain investment contracts sought declaratory relief to invalidate a ruling by the insurance commissioner that the contracts were not insurance policies and hence did not entitle the beneficiaries to priority as "policyholders" in the conservatorship of the issuing entity. After the beneficiaries prevailed, they sought attorney fees on the theory that the commissioner, as conservator, stood in the shoes of the issuer, and was thus bound by a fee clause in the contracts. The Court of Appeal adopted this theory and rejected the commissioners argument that the case actually turned on the construction and application of statutes, with the contracts merely the "backdrop" of the case. (Id. at pp. 1246-1247.) The court concluded that "the issues in the case had nothing to do with the interpretation of [the statute] and everything to do with the interpretation of the [contracts]." (Id. at p. 1247.) The court also noted that the Commissioner put the interpretation of the contracts in issue by pleading in his answer that the contracts were not life insurance policies. (Ibid.)
We need not concern ourselves with the soundness of the conclusion in Garamendi, supra, because its analytical approach compels the opposite result on the facts before us. Unlike the agency and courts in that case, the Board and trial court here were not called upon to interpret the lease or to make any determination concerning its validity, enforceability, or character. Rather the outcome here depended entirely on the interpretation of prescriptive law, specifically regulation 1270.
Nor does the judgment here adjudicate the DeZeregas right to recover unpaid rent under (or outside) the lease. Any determination of that issue would require a distinct lawsuit to enforce, or at least declare, rights and defenses which were not, and could not, be addressed by the Board. The hearing officer recognized this, opining that while the facts might afford Meggs a defense to an action for rent under "basic contract law," the Board was "without authority to order a remedy for what is essentially a breach of contract allegation that would be raised in defense of the landlords claim for full rent owed during the pendency of the litigation."
The DeZeregas repeatedly emphasize Meggss recovery of attorney fees in the unlawful detainer proceeding, asserting that it would be "unjust and inequitable" to deny them their fees here. We recognize that the application of section 1717, at least in some contexts, is informed by equitable concerns. (E.g., Hsu v. Abbara (1995) 9 Cal.4th 863, 877, emphasis in original ["in determining litigation success , courts should respect substance rather than form, and to this extent should be guided by `equitable considerations "]; Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1148 [noting legislative intent to prompt "an equitable consideration of who should fairly be regarded as the winner"; "the cases have suggested, and often presumed, an equitable application beyond mere reciprocity"]; id. at p. 1151 [equitable considerations take on primary significance in "deciding who prevailed"].) The statute does not, however, empower courts to award fees whenever they think it would be equitable to do so, merely because the controversy distantly implicates a contract with an attorney fee provision. In Santisas v. Goodin, supra, 17 Cal.4th 599 at pp. 620-621, the court repudiated the suggestion that in an earlier decision it had relied upon equitable or policy considerations to "establish[] a rule extending beyond the reach of section 1717." Rather the earlier opinion rested on a construction of the statute that had since been superseded by amendment. (Id. at p. 623, discussing International Industries, Inc. v. Olen (1978) 21 Cal.3d 218.)
Moreover, the DeZeregas equitable arguments rest on a vague equation between this and the prior action that does not withstand scrutiny. While the trial court in that matter acknowledged a variety of possible grounds for awarding fees to Meggs, it ultimately concluded that he was entitled to such an award by virtue of the reciprocity aspect of section 1717, whether or not he was actually bound by the agreement, because the DeZeregas had asserted a contract claim against him. Here neither party asserted a contract claim. Therefore, the presumptive fact that Meggs was entitled to a fee award in the previous action, which did involve such a claim, is marginally relevant at best.
The court wrote, "The result is the same regardless of defendants status. As a subtenant he would be entitled to fees as a third party beneficiary of the . . . lease . . . . As a `roommate, his presence is contemplated by the agreement and he would be directly entitled to the benefit of the agreement. As a tenant apart from the terms of the lease, he would be entitled to attorney fees because the plaintiffs attempted to evict him on the basis of the lease and were unsuccessful. [¶] Under each scenario, had the plaintiffs prevailed, they would have been entitled to recover attorney fees, as they requested in their prayer. Consequently, under the reciprocity provisions of Civil Code section 1717, Meggs is entitled to recover reasonable attorney fees."
The DeZeregas assert that Meggs "explicitly relied upon the terms of the written rental agreement," and attached copies of the pertinent leases, in his petition to the Board, which eventually gave rise to this action. However, Meggs only cited the lease as evidence that the "base occupancy level" for the subject apartment was three tenants. Ironically, the Board rejected this assertion, finding that the occupancy level was two tenants. But even if the lease had been relied upon to establish relevant terms on which the property was occupied, it would not follow that Meggs brought an action "on the contract" by filing his petition with the Board, or that the DeZeregas brought such an action by instituting this proceeding to vacate the Boards order.
The hearing officer found that the "[t]he Boards files" showed the occupancy level as two tenants. She further noted that the rent ceiling had never been adjusted upwards, as provided by regulation 1270, to reflect a higher level. She wrote that the use of the phrase "base occupancy level" in the lease was "erroneous and . . . not binding." The Board implicitly adopted this analysis when it ordered a reduction in the rent ceiling by 50 percent rather than 66-2/3 percent.
Nor are we persuaded by the DeZeregas assertion that "[t]he terms of the written rental agreement have been at the heart of every argument made by Meggs during the course of the many litigated disputes between the parties." Without attempting to gauge the general accuracy of this statement, we discern that the lease terms were not at the heart of this dispute, which would have taken substantially similar if not identical form whether or not Meggs was a party to the lease. The issue here was the meaning and effect of regulation 1270. The provisions of the lease had nothing to do with it. That the judgment here might dispose of some issues in other litigation on the contract does not convert this challenge to an administrative ruling into an action on the lease.
DISPOSITION
In No. A100054, the judgment issuing a writ of mandate is affirmed. In No. A100583, the order awarding attorney fees is reversed. Each side will bear its own costs on appeal in both matters.
We concur: Kay, P.J., Rivera, J.