Opinion
A131575
01-31-2012
HARBISON-MAHONY-HIGGINS BUILDERS, INC., Plaintiff and Appellant, v. ARGONAUT CONSTRUCTORS, Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Sonoma County Super. Ct. No. SCV 242785)
Defendant Argonaut Constructors (Argonaut) was a subcontractor on a construction job for which plaintiff Harbison-Mahony-Higgins Builders, Inc. (HMH) served as general contractor. HMH sued Argonaut unsuccessfully in connection with a job site accident. After trial and entry of judgment for Argonaut, the trial court granted Argonaut's motion seeking attorney fees, expert witness fees, allowable costs, and other litigation expenses pursuant to a provision of the parties' contract. HMH does not contest the award of attorney fees, but it contends Argonaut should not have been awarded expert witness fees and other costs not specifically authorized by Code of Civil Procedure section 1033.5. Because Argonaut failed to plead and prove such fees and costs, we agree and remand for entry of an amended order.
I. BACKGROUND
HMH filed suit against Argonaut and another party on May 1, 2008, alleging claims for negligence, contractual indemnity, breach of contract, and equitable indemnity in connection with a November 2007 construction work site accident. HMH was the general contractor on the job, while Argonaut and the other defendant were subcontractors. The trial court divided the trial into three phases: fault and causation, "contract issues," and damages. At the conclusion of the first phase, the jury exonerated Argonaut, finding that it did not act negligently and did not cause the accident. Without taking further evidence, the trial court held HMH was not entitled to indemnity from Argonaut under the indemnity provision of the parties' contract. The trial court's indemnity ruling has been affirmed by this court in a nonpublished decision. (Harbison-Mahony-Higgins Builders, Inc. v. Argonaut Constructors (Nov. 21, 2011, A129500).)
The trial court entered a judgment for Argonaut that permitted Argonaut to recover its costs "in an amount to be determined per the California Code of Civil Procedure and Rules of Court." Argonaut thereafter filed a memorandum of costs and a motion for contractual attorney fees and other litigation expenses pursuant to two provisions in its contract with HMH. In addition to attorney fees, the motion sought reimbursement for expert witness fees and costs not specifically identified as allowable by Code of Civil Procedure section 1033.5. The first contractual provision, under the heading "INDEMNIFICATION," provided: "Contractor shall be entitled to recovery of its attorney's fees and costs associated with enforcing any indemnity contained hereinabove." The second, under the heading "CLAIMS RESOLUTION PROCEDURE," stated: "If any dispute or claim is prosecuted or defended by Contractor, Subcontractor . . . shall pay or reimburse Contractor for all expenses and costs, including reasonable attorney's fees, incurred in connection therewith to the extent of Subcontractor's interest in such claim or dispute." Although by its terms the contract granted fees and costs only to HMH, the provisions are made reciprocal as a matter of law by Civil Code section 1717, subdivision (a).
There was some uncertainty about the proper amount of Argonaut's statutory costs. Excluding attorney fees, the total stated in its memorandum of costs was $150,721. At the hearing on Argonaut's motion for fees and costs, however, its counsel conceded there were errors in its requested costs and told the court: "[The] total cost bill is around $118,000 that I would stipulate that we are entitled to." On appeal, HMH has assumed the $118,000 figure represents the true value of Argonaut's statutory costs. Argonaut has not disputed that assumption. For purposes of this decision, we assume Argonaut's statutory costs were $118,000, as stipulated by counsel.
In opposing the motion, HMH argued Argonaut was restricted to recovery of fees and costs directly related to contesting indemnity, an argument it does not repeat on appeal. In addition, HMH argued expert witness fees and costs in excess of statutory costs were not available at all under the language of the contract. The trial court rejected HMH's arguments, awarding Argonaut virtually all the fees and costs it requested.
Although the trial court's tentative ruling granted Argonaut $1,025,259.91 in fees and costs, the court's formal order, presumably prepared by Argonaut, reduced this to $1,024,989.91. The difference was due to an apparently mistaken transposition of numbers in the court's tabulation.
II. DISCUSSION
HMH concedes Argonaut's right to attorney fees and the costs allowable under Code of Civil Procedure section 1033.5, but it contends Argonaut was not entitled to reimbursement for expert witness fees and other costs that are not expressly listed in section 1033.5. Argonaut does not dispute the amount of excess fees and costs calculated by HMH, but it contends it was entitled to recover these excess fees and costs under the authority of Thrifty Payless, Inc. v. Mariners Mile Gateway, LLC (2010) 185 Cal.App.4th 1050 (Thrifty Payless).
We begin with a somewhat extended discussion of California law governing the availability of expert witness fees under contractual attorney fees provisions, since that background is necessary to understand the proper resolution of the appeal. A. Legal Background
Under American common law, parties are expected to bear their own litigation expenses, including attorney fees. (Davis v. KGO-T.V., Inc. (1998) 17 Cal.4th 436, 439.) Notwithstanding that general rule, Code of Civil Procedure section 1032, subdivision (b) allows a prevailing party in litigation to recover a limited number of costs against an unsuccessful opponent. Code of Civil Procedure section 1033.5, subdivision (a) provides an exclusive list of these "allowable costs," including attorney fees only if otherwise authorized by law or contract. (Id., subd. (a)(10)(A)-(C).) Expert witness fees are allowable only if the expert was ordered by the court. (Id., subd. (a)(8).) Subdivision (b) expressly disallows the recovery of other expert witness fees as an allowable cost, as well as many other common litigation expenses. (Id., subd. (b)(1).) Like section 1033.5, Civil Code section 1717, subdivision (a) authorizes an award of attorney fees and costs to a prevailing party if these are available under a contract.
Neither Civil Code section 1717 nor Code of Civil Procedure section 1033.5 expressly addresses the recovery of expert witness fees by a prevailing party under a contractual provision. The court in Bussey v. Affleck (1990) 225 Cal.App.3d 1162 (Bussey), took a first pass at this issue, holding a prevailing party could recover, under the guise of "attorney's fees," all the expenses ordinarily incurred by counsel and billed to the client, including expert witness fees. (Id. at p. 1166.) The court rejected the argument this was inconsistent with section 1033.5, which allows fees only for experts ordered by the court, noting that under section 1033.5, subdivision (c)(4), "items assessed upon application may be allowed or denied in the court's discretion." (Bussey, at p. 1167.)
The Bussey approach failed to find favor and has, in fact, been rejected by every subsequent published opinion to consider the issue (see Carwash of America-PO v. Windswept Ventures No. I (2002) 97 Cal.App.4th 540, 544 [citing cases]), including a decision of the court that originally decided Bussey. (Robert L. Cloud & Associates, Inc. v. Mikesell (1999) 69 Cal.App.4th 1141, 1153-1154.) Subsequent decisions have not, however, been entirely consistent regarding the availability of contractual expert witness fees. The starting point is Ripley v. Pappadopoulos (1994) 23 Cal.App.4th 1616 (Ripley), the first decision to reject Bussey. Because Code of Civil Procedure section 1033.5 permits an award of expert witness fees only if the expert has been ordered by the court, Ripley held, their recovery is unavailable under a contractual provision granting attorney fees and costs, at least when sought by an ordinary posttrial application for costs. (Id. at pp. 1625-1626.) The court concluded: "The Legislature has reserved to itself the power to determine selectively the types of actions and circumstances in which expert witness fees should be recoverable as costs and such fees may not otherwise be recovered in a cost award." (Id. at p. 1625.) Ripley did not, however, close the door entirely on the recovery of expert witness fees under a contractual provision. "[A]ssuming expert witness fees may be recovered under a contractual provision," the court held, "they must be specially pleaded and proven at trial rather than included in a memorandum of costs," since section 1033.5 authorizes only the recovery of contractual attorney fees in a posttrial cost bill. (Ripley, at p. 1627.) The court declined to rule on the availability of expert witness fees under the contractual language before it or on the type of contractual language that would be necessary to permit recovery of expert witness fees, since the party seeking the fees had not specially pleaded and proven them. (Id. at p. 1627 & fn. 18.)
Soon after came Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co. (1996) 47 Cal.App.4th 464 (Arntz), a suit by a surety for indemnity under a bond. (Id. at pp. 471-472.) Rejecting any implication in Ripley that expert witness fees are not available under contractual attorney fees provisions, Arntz held that expert witness fees were available under a clause granting " 'costs, charges and expenses, including attorneys' fees,' " so long as the expert witness fees had been specially pleaded and proven. (Id. at pp. 490, 491.) In contrast to Ripley, in Arntz the parties' "litigation expenses were pleaded and proven pursuant to a procedure stipulated by the parties." (Id. at p. 492.) Addressing Ripley, the court noted "it is reasonable to interpret a general contractual cost provision by reference to an established statutory definition of costs," but the court found no "legislative intent to prevent sophisticated parties from freely choosing a broader standard authorizing recovery of reasonable litigation charges and expenses." (Arntz, at p. 492.)
Since Arntz, most decisions have accepted Ripley's holding that expert witness fees pursuant to contract cannot be claimed through a posttrial Code of Civil Procedure section 1032 memorandum of costs, but the decisions have largely declined to rule on the theoretical availability of expert witness fees under the contractual provisions presented because the parties seeking such fees invariably failed to specially plead and prove them. (See Hsu v. Semiconductor Systems, Inc. (2005) 126 Cal.App.4th 1330, 1341-1342 (Hsu); Jones v. Union Bank of California (2005) 127 Cal.App.4th 542, 551; Carwash of America-PO v. Windswept Ventures No. I, supra, 97 Cal.App.4th at pp. 544-545; First Nationwide Bank v. Mountain Cascade, Inc. (2000) 77 Cal.App.4th 871, 876 (First Nationwide).)
Typical of these decisions is Hsu. In that decision, the parties' contract stated that a prevailing party could recover " 'all fees, costs and expenses.' " (Hsu, supra, 126 Cal.App.4th at p. 1341.) Rejecting the plaintiff's request for expert witness fees under this provision, the court held: "Plaintiff argues that the broadly worded contractual cost provision expands the scope of recoverable costs beyond those costs permitted by statute. Some courts have rejected this argument outright, holding that the Legislature's intention that Civil Code section 1717 be uniformly applied precludes litigants from adopting a definition of costs different from the statutory definition. [Citation.] Other courts have held that litigants may contractually define costs different from the statutory definition, although contractual costs provisions are presumed to adopt the statutory definition absent evidence to the contrary. . . . [¶] Plaintiff urges us to follow Arntz, and to construe the Agreement here as providing a standard of 'costs' broader than the statutory definition. But the costs award is insupportable even if we were to do as plaintiff urges. Recovery of costs provided by contract must be specially pleaded and proven at trial, and not awarded posttrial as was done here." (Ibid.)
Two decisions inconsistent with this line of authority stand out. The first, Fairchild v. Park (2001) 90 Cal.App.4th 919 (Fairchild),held expert witness fees are never available under a contractual attorney fees provision, even if the provision itself expressly grants such fees. The court reasoned Code of Civil Procedure section 1033.5 establishes an exclusive list of litigation costs recoverable by a prevailing party that cannot be altered by contract. (Fairchild, at pp. 929-931.) In reaching this conclusion, the court applied the reasoning of Santisas v. Goodin (1998) 17 Cal.4th 599, which held parties cannot alter by contract the definition of "prevailing party" in Code of Civil Procedure section 1032. (Santisas v. Goodin, at p. 617.)
The second decision, Thrifty Payless, supra, 185 Cal.App.4th 1050, held not only that expert witness fees are available under a contractual provision expressly awarding them, but also that such fees may be claimed in a posttrial memorandum of costs, without being specially pleaded and proven. (Id. at pp. 1065-1067.) Although apparently irreconcilably contrary to Fairchild, the Thrifty Payless decision failed to cite Fairchild, let alone discuss their differences. The appellate court "s[aw] no reason why [expert witness fees] should not be recoverable as costs when the parties specifically agree to such a provision in a freely negotiated contract." (Thrifty Payless, at p. 1066.)
The foregoing decisions focus on the availability of expert witness fees pursuant to a contractual attorney fees clause, without separately considering the availability of other types of common litigation expenses not listed as allowable under Code of Civil Procedure section 1033.5. The decisions' rationales, however, apply equally to such costs. This is particularly true of the requirement that expert witness fees be specially pleaded and proven. That requirement is a natural consequence of the holding that only costs specifically allowed by section 1033.5 can be recovered through a postjudgment attorney fees and costs motion. (E.g., Ripley, supra, 23 Cal.App.4th at p. 1627.) If the fees of expert witnesses not ordered by the court must be pleaded and proven because they are not allowed as postjudgment costs under section 1033.5, every other cost not specifically allowed by section 1033.5 is presumably subject to the same requirement. B. Argonaut's Expert Witness Fees and Excess Costs
Judged against this background, the trial court erred in awarding expert witness fees and costs outside Code of Civil Procedure section 1033.5. Although existing precedent may be inconsistent in its details, it holds unanimously that, if expert witness fees and other litigation costs not specifically allowed by section 1033.5 are sought under a general contractual attorney fees provision, such as the provisions in the HMH/Argonaut subcontract, those fees and costs must be specially pleaded and proven. (E.g., Hsu, supra, 126 Cal.App.4th at pp. 1341-1342; First Nationwide, supra, 77 Cal.App.4th at p. 876; Ripley, supra, 23 Cal.App.4th at pp. 1625-1627.) There is no real dispute that Argonaut did not specially plead and prove its litigation expenses. Argonaut's cross-complaint seeks "costs of suit" and "attorneys' fees," but the only costs it specifically mentions are "costs of investigation incurred in the defense of the Complaint and prosecution of this Cross-Complaint." No mention was made of expert witness fees and other costs. Nor did Argonaut provide evidence of its costs and fees to the jury. Argonaut attempts to assign responsibility for its failure to present such evidence to the tripartite approach adopted by the trial court, under which the issue of damages was to be tried separately from liability. If that were the case, however, Argonaut should have sought to present its evidence at the final stage of the proceedings. Instead, it submitted a proposed judgment immediately after the conclusion of the indemnity hearing and sought its attorney fees and other expenses through an ordinary posttrial motion for costs. The requirement to specially plead and prove anticipates a prejudgment proceeding at which both contractual interpretation and costs will be adjudicated, not the posttrial application for fees and costs filed by Argonaut. (See First Nationwide, supra, 77 Cal.App.4th at p. 879 ["the issue must be submitted to the trier of fact for resolution pursuant to a prejudgment evidentiary proceeding, not a summary postjudgment motion"]; Ripley, supra, 23 Cal.App.4th at p. 1627 & fn. 18.)
Hsu and First Nationwide featured contractual attorney fees provisions essentially identical to the two provisions in the HMH/Argonaut subcontract. (Hsu, supra, 126 Cal.App.4th at p. 1341 [" 'all fees, costs and expenses' "]; First Nationwide, supra, 77 Cal.App.4th at p. 874 [" 'all necessary expenses, including attorney's fees' "].) Both decisions denied expert witness fees because they had not been pleaded and proven.
Argonaut argues the parties stipulated to a court trial on the issue of damages. Even if this were true, Argonaut did not seek to adjudicate its attorney fees and costs through this stipulated court trial. To the extent the record reflects such a stipulation, it was not reached until after judgment was entered for Argonaut. In addition, Argonaut did not appear when the damages portion of the case was called for trial. Plainly, Argonaut never intended to try the issue of its expert witness fees and other costs to the court as part of the damages phase.
In claiming pleading and proof was unnecessary, Argonaut relies on Thrifty Payless, the only post-Bussey decision to have allowed the recovery of expert witness fees under a Code of Civil Procedure section 1032 memorandum of costs. Even if we assume the departure of Thrifty Payless from existing precedent is justified, the court permitted the recovery of expert witness fees without pleading and proof only because the contract expressly awarded expert witness fees. (Thrifty Payless, supra, 185 Cal.App.4th at p. 1066.) With respect to nonspecific costs provisions, the Thrifty court acknowledged: "Generally, when a contract provision states only that a prevailing party is entitled to „ "reasonable attorney's fees and costs," ' or similar nonspecific language, courts have held that such language must be interpreted in light of the limits set forth in Code of Civil Procedure section 1033.5." (Id. at p. 1065.) Because neither contractual provision cited by Argonaut mentioned expert witness fees, even under Thrifty Payless Argonaut was not entitled to such fees, or any other costs not mentioned in section 1033.5, subdivision (a), unless it had specially pleaded and proven them.
We find no merit in Argonaut's other arguments. Argonaut contends its failure to present the issue of its expert witness fees and other costs to the jury was the result of "invited error" because HMH urged the court to interpret the subcontract as a matter of law. HMH, however, merely contended the contractual issues it had raised, primarily dealing with the indemnity provisions of the subcontract, could be resolved as a matter of law. Because HMH did not purport to address issues raised by the attorney fees provisions, it did not invite any error relevant to Argonaut's claims. Argonaut's contention that HMH was not prejudiced by the trial court's ruling overlooks the order requiring HMH to pay nearly $400,000 more in costs than legally mandated. An excess payment of nearly $400,000 would seem to constitute prejudice.
III. DISPOSITION
The matter is remanded to the trial court for entry of an amended "Order Granting Defendant Argonaut Constructors' Motions for Attorneys Fees, Expenses and Costs," awarding to Argonaut attorney fees and costs in the total amount of $649,762.41.
This is the trial court's award of $1,024, 989.91, reduced by the amount claimed by HMH to be excess, $375,277.50.
--------
____________
Margulies, J.
We concur: _______________
Marchiano, P.J.
________________
Dondero, J.