Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of San Diego County Super. Ct. No. GIC833923, Linda B. Quinn, Judge. Affirmed.
HUFFMAN, J.
Defendants Concordia Homes of California, LLC (Concordia Homes) and LB/L Concordia Master, LLC appeal the order denying the request for attorney fees of defendant Concordia Homes after plaintiff Don Jack voluntarily dismissed it from his lawsuit. Concordia Homes asserts Civil Code section 1717, subdivision (b)(2) does not apply to it because that statute precludes an award of attorney fees to a party voluntarily dismissed from a contract action, and Jack's claims against it for declaratory relief, breach of contract and breach of fiduciary duty sound in tort. Concordia Homes instead asserts it was entitled to an award of attorney fees under Code of Civil Procedure section 1033.5, subdivision (a)(10)(A), because it was the "prevailing party" within the meaning of Code of Civil Procedure section 1032, subdivision (a)(4).
Defendant Concordia Master, LLC admits it was not the moving party in connection with the attorney fees motion, and further admits it appealed the denial of the motion for attorney fees "solely as a protective measure," inasmuch as Concordia Homes paid all of the fees incurred by defendants to defend Jack's lawsuit. In light of these admissions, we will limit our discussion to whether Concordia Homes is entitled to an award of attorney fees.
Based on our review of Jack's complaint and the nature of the rights sued on, we conclude Jack's action against Concordia Homes was premised on a promise arising from contract. As such, we conclude Civil Code section 1717, subdivision (b)(2) governs here and precludes a determination Concordia Homes was the "prevailing party" in the action. Therefore, we affirm.
FACTUAL AND PROCEDURAL BACKGROUND
In February 1999 Concordia Homes purchased an eight and a half-acre parcel of vacant land located in Carlsbad, California owned by one of Jack's companies, Pacific View Communities, LLC (Pacific View). The land consisted of 26 building lots and seven open space lots numbered 1-33, and is now known as Pacific View Estates. Excluded from the February 1999 agreement was a portion of property the parties referred to as the Remainder Parcel, which included lot 33. Jack wanted to keep lot 33 to build his own personal residence.
In 1998 Jack recorded an initial subdivision map to develop a portion of Pacific View Estates. He also recorded a declaration of covenants, conditions and restrictions (1998 CC&R's) restricting only lots 4, 5, 6 and 7.
Because a parcel map had not yet been recorded on the vacant land, Pacific View/Jack agreed in April 1999 to convey the Remainder Parcel to Concordia Homes or its assignee. Under the April 1999 agreement, which contains the attorney fees clause at issue here, Concordia Homes was to execute and deliver to escrow a deed reconveying lot 33 to Pacific View, which would be recorded after the final tract map was recorded.
Before close of escrow, Pacific View transferred its interest in the Remainder Parcel (including lot 33) to Farwest American Trust Contractual Business Organization (Farwest), an irrevocable trust created by Jack. Farwest conveyed the Remainder Parcel to LB/L Concordia Carlsbad-25, LLC (Concordia Carlsbad), the assignee of Concordia Homes. As required under the terms of the April 1999 agreement, Concordia Carlsbad reconveyed lot 33 to Farwest.
Concordia Carlsbad began to develop the vacant land by recording a landscape maintenance easement encumbering lot 33, by revoking the 1998 CC&R's and recording its own set of CC&R's (the 2000 CC&R's), and by recording a notice of annexation annexing lot 33 into the development. When Jack discovered lot 33 had been encumbered by Concordia Carlsbad, he sued Concordia Homes, Concordia Carlsbad and Concordia Master (the managing agent of Concordia Carlsbad) (together Concordia defendants) for declaratory relief, breach of contract and breach of fiduciary duty. Jack's lawsuit alleged he was the current holder of all rights previously held by Pacific View and Farwest in connection with lot 33.
On May 1, 2006─the day trial was set to begin─Jack voluntarily dismissed Concordia Master from the lawsuit. That same day, the court heard motions in limine brought by the Concordia defendants, including whether Jack had standing to bring the lawsuit and whether a fiduciary duty existed between Jack and the Concordia defendants. Because of the number and complexity of the issues presented in the motions in limine, the court continued the hearing rather than empanel a jury.
The record is silent regarding why Concordia Master was dismissed from the lawsuit.
In subsequent in limine hearings, the court ruled Jack had standing to proceed with the lawsuit based on the assignments of rights to him by Pacific View and Farwest. However, the court also ruled the assignment between Jack and Farwest was not effective as to Concordia Homes and Concordia Carlsbad until the defendants received notice of the assignment, which the court found occurred on May 1, 2006. As a result, the court concluded defendants "may invoke the defense of statute of limitations based on the date of notice" of the assignment. The court also concluded no fiduciary duty existed between Jack and the Concordia defendants because the agreement between the parties was an "arms length transaction between business entities."
During the in limine proceedings, Concordia Homes argued it also should be dismissed from the lawsuit because it assigned to Concordia Carlsbad all of its rights and obligations under the contract with Pacific View. Concordia Homes further argued Jack had agreed, during an informal hearing in chambers, to dismiss Concordia Homes because of its assignment of rights to Concordia Carlsbad.
At yet another in limine hearing, Jack alerted the court to the fact Concordia Carlsbad's corporate status had been "canceled," and thus it lacked the ability to defend itself in the lawsuit. Jack argued the court should either strike Concordia Carlsbad's answer to his complaint, or stay the action to allow that defendant to apply to a Delaware court for the appointment of a trustee or receiver to represent its interests in the lawsuit. Because Jack had dismissed Concordia Homes from the lawsuit earlier that morning, Concordia Carlsbad─the canceled entity─remained the only Concordia defendant in the lawsuit. Unaware Concordia Carlsbad's corporate status had been canceled, counsel for that defendant asked the court to stay the action, rather than strike its answer.
The court instead ordered a 15-minute recess to give each party "one more opportunity to see if you can self-direct the resolution to this case." The court noted the case had "a lot of potential fatal flaws to it," particularly since the parties were still dealing with in limine motions and a jury had not yet been empanelled:
"I would assume that since we first met a week ago, that each side has incurred considerable attorneys' fees this past week. I don't know if it's been productive, because the case came to me with a lot of potential fatal flaws to it. [¶] Now we have a situation where each side is in a situation where bringing in a jury and starting a case, and one side making a pretrial motion could, to be colloquial, put a bullet in each side's case. I appreciate you bringing me up to date what your respective positions as to the status of your respective cases [are], and we're going to break for 15 minutes . . . ."
Despite the court's urging, the parties did not settle their dispute. The court therefore continued the trial from May 8 to June 9, 2006. The court also granted Jack's oral motion to amend his complaint to add Pacific View and Farwest as plaintiffs. However, the court did not decide whether the rights of those plaintiffs related back to the commencement of the lawsuit for purposes of the statute of limitations, which the court found to be a "serious" issue for Jack.
Concordia Homes filed a memorandum of costs on May 16, 2006, seeking costs of approximately $4,500. In the memorandum of costs, Concordia Homes stated it also would be seeking an award of attorney fees "per motion." The court ordered Jack to pay costs to Concordia Homes and Concordia Master in the amount of $2,795.80.
The award of costs is not in dispute in this appeal. However, merely because Concordia Homes was the prevailing party under Code of Civil Procedure section 1032 for the award of costs does not mean it automatically qualifies as the prevailing party for an award of attorneys' fees. Instead, a court should "utilize its discretion in determining whether such defendant should be considered a prevailing party for the purpose of recovering attorney's fees as costs under [Code of Civil Procedure] sections 1032 and 1033.5," and in so doing the "court may consider the reason for the dismissal, including whether the parties have reached their litigation objectives by settlement, judgment, or other means." (Silver v. Boatwright Home Inspection, Inc. (2002) 97 Cal.App.4th 443, 452 (Silver); see also McLarand, Vasquez & Partners, Inc. v. Downey Savings & Loan Assn. (1991) 231 Cal.App.3d 1450, 1456 ["We emphatically reject the contention that the prevailing party for the award of costs under [Code of Civil Procedure] section 1032 is necessarily the prevailing party for the award of attorneys' fees"]); Heather Farms Homeowners Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1572 [the principle "that a litigant who prevails under the cost statute is necessarily the prevailing party for purposes of attorney fees, has been uniformly rejected by the courts of this state"].)
In July 2006 Concordia Homes filed a motion for attorney fees, asserting it was the "prevailing party" under Code of Civil Procedure section 1032, subdivision (a)(4), and was entitled to attorney fees under Code of Civil Procedure section 1033.5, subdivisions (a)(10)(A) and (c)(5). On July 28, 2006, the court continued to September 22, 2006, the attorney fees motion of Concordia Homes, and ordered supplemental briefing on the issue whether Concordia Homes was entitled to an award of fees under Code of Civil Procedure sections 1021, 1032, 1033.5 and 1034, as it contended, or was barred from recovering such fees under Civil Code section 1717, subdivision (b)(2), as Jack contended. The court also struck Concordia Carlsbad's answer to Jack's complaint because Concordia Carlsbad "did not exist" legally. The court ordered the parties at the September 2006 hearing to show cause why the action against Concordia Carlsbad should not be dismissed.
In his supplemental opposition to Concordia Homes's motion for attorney fees, Jack asserted Concordia Homes was not the "winning" party under the attorney fees clause in the April 1999 agreement. Jack argued he dismissed without prejudice Concordia Homes from the lawsuit only because its counsel represented to Jack and the court that all of Concordia Homes's rights and obligations under the February and April 1999 agreements had been assigned to Concordia Carlsbad. Jack argued the court had broad discretion in determining who was the prevailing party under the contract, including making the determination there was no prevailing party. Jack contended there should be no prevailing party here because he dismissed Concordia Homes for reasons other than those based on the merits.
At the hearing on September 22, 2006, the court issued a minute order summarily denying Concordia Homes's motion for attorney fees, finding the claims dismissed by Jack "arise from an action on contract" and thus Civil Code section 1717 bars the award of attorney fees. The court also dismissed Jack's case because no manager of Concordia Carlsbad had been appointed by a Delaware court. In November 2006 the court denied Jack's motion to reconsider its September 22, 2006, dismissal of his action against Concordia Carlsbad.
This court requested simultaneous letter briefs from the parties discussing whether the record on appeal provided an adequate basis to address the award of attorney fees, inasmuch as the record did not include transcripts or settled statements of the hearings of July 28, 2006, and September 22, 2006. We have considered the parties' additional briefing in connection with this appeal. Concordia Homes also filed a motion to augment the record, which this court denied on January 23, 2008.
Jack has not appealed the court's September 2006 order dismissing his case, or the November 2006 order denying reconsideration of that issue.
DISCUSSION
A. Standard of Review
"The determination of the statutory basis for an attorney fees award presents a legal issue for us to determine anew on appeal, regardless of the trial court ruling." (Akins v. Enterprise Rent-A-Car Co. of San Francisco (2000) 79 Cal.App.4th 1127, 1132-1133; Honey Baked Hams, Inc. v. Dickens (1995) 37 Cal.App.4th 421, 424, disapproved on another ground in Santisas v. Goodin (1998) 17 Cal.4th 599, 614, fn. 8 (Santisas).)
B. Basis for Award of Attorney Fees
"Recoverable litigation costs . . . include attorney fees, but only when the party entitled to costs has a legal basis, independent of the cost statutes and grounded in an agreement, statute, or other law, upon which to claim recovery of attorney fees." (Santisas, supra, 17 Cal.4th at p. 606; Code Civ. Proc., §§ 1032, subds. (a)(4) & (b), 1033.5, subd. (a)(10); Civ. Code, § 1717, subd. (a).) "If a contractual attorney fee provision is phrased broadly enough, . . . it may support an award of attorney fees to the prevailing party in an action alleging both contract and tort claims: '[P]arties may validly agree that the prevailing party will be awarded attorney fees incurred in any litigation between themselves, whether such litigation sounds in tort or in contract.' " (Santisas, supra, 17 Cal.4th at p. 608.)
Civil Code section 1717, subdivision (a) provides in part: "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."
Here, the attorney fees provision at issue is sufficiently broad to support an award of attorney fees to a prevailing or "winning" party regardless of whether the litigation concerns contract or noncontract claims, or both. It provides:
"In the event of any action or proceedings arising from or relating to this Agreement, or should any conflict ever arise, the parties agree to first, sensibly endeavor to settle any disputes with binding arbitration and rights of discovery prior to resorting to any forms of legal proceedings and should legal action or the like be necessitated by either party, the winning party shall be reimbursed by the losing party for all costs including reasonable attorney fees." (Emphasis added.)
The record is silent regarding whether the parties arbitrated their dispute. However, if a contract or one of its provisions is subject to arbitration and a party seeks a judicial resolution of a disagreement which falls within the scope of the arbitration agreement, that party waives its right to arbitrate. (Aviation Data, Inc. v. American Express Travel Related Services Co., Inc. (2007) 152 Cal.App.4th 1522, 1540.)
C. Whether Jack's Lawsuit Against Concordia Homes Arises out of Contract
We now turn to the heart of this appeal: whether Jack's voluntary dismissal of Concordia Homes prevented Concordia Homes from recovering from Jack attorney fees it incurred in the defense of his action. Concordia Homes contends the trial court erred by applying Civil Code section 1717, subdivision (b)(2) to Jack's causes of action against it for declaratory relief, breach of contract and breach of fiduciary duty because these are noncontract claims, and thus not subject to Civil Code section 1717, subdivision (b)(2).
Jack counters the trial court correctly applied Civil Code section 1717, subdivision (b)(2) because his action against Concordia Homes was grounded in contract. He further argues Concordia Homes is not entitled to an award of attorney fees because it was not the "prevailing" or "winning" party in the litigation for purposes of the attorney fees clause.
Civil Code section 1717, subdivision (b) provides:
"(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. Except as provided in paragraph (2), the 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.
"(2) Where an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section."
Under the language of Civil Code section 1717, subdivision (b)(2), there is no prevailing party when a case subject to this provision is voluntarily dismissed. (See Santisas, supra, 17 Cal.4th at p. 617.) However, subsection (b)(2) of Civil Code section 1717 applies only to dismissals of contract causes of action: "If an action asserts both contract and tort or other noncontract claims, section 1717 [subdivision (b)(2)] applies only to attorney fees incurred to litigate the contract claims." (Id. at p. 615; Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 708; Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1342.) Thus, "[w]hen a lawsuit asserts both contract and noncontract claims, or only noncontract claims, section 1717's provisions do not govern the noncontract claims because they are outside the scope of section 1717." (Silver, supra, 97 Cal.App.4th at p. 450.) In those instances, Code of Civil Procedure sections 1021 and 1033.5 govern the attorney fees award. (Santisas, supra, 17 Cal.4th at pp. 617-618, 619.)
Code of Civil Procedure section 1021 provides: "Except 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; but parties to actions or proceedings are entitled to their costs, as hereinafter provided." Code of Civil Procedure section 1033.5 provides in part: "(a) The following items are allowable as costs under section 1032: [¶] . . . [¶] (10) Attorney fees, when authorized by any of the following: [¶] (A) Contract. [¶] (B) Statute. [¶] (C) Law."
"Whether an action is based on contract or tort depends upon the nature of the right sued upon, not the form of the pleading or relief demanded. If based on breach of promise it is contractual; if based on breach of a noncontractual duty it is tortious. [Citation.] If unclear the action will be considered based on contract rather than tort. [Citation.] [¶] In the final analysis we look to the pleading to determine the nature of plaintiff's claim." (Arthur L. Sachs, Inc. v. City of Oceanside (1984) 151 Cal.App.3d 315, 322 (Sachs).)
Turning to Jack's first cause of action for declaratory relief, we conclude that claim is premised on the April 1999 agreement and is subject to subdivision (b)(2) of Civil Code section 1717. The April 1999 agreement required Pacific View to grant lot 33 to Concordia Homes so Concordia Homes could record a final tract map. Concurrent with the close of escrow, Concordia Homes was to execute in favor of Pacific View a grant deed for lot 33 "free and clear of any encumbrance and without cost or charge to Pacific View, Ltd."
Because the February 1999 agreement does not contain an attorney fees clause, it has little bearing on whether Jack's causes of action against Concordia Homes are contract or noncontract claims, or both.
Jack's complaint alleges Concordia Carlsbad breached the April 1999 agreement by recording a quitclaim landscape easement and a notice of annexation, encumbering lot 33. The notice of annexation also subjected lot 33 to the 2000 CC&R's recorded by Concordia Carlsbad. Jack's declaratory relief claim seeks a "declaration of rights and duties with respect to plaintiff's Lot 33." These allegations, and the relief sought by Jack, show Jack's declaratory relief claim is based on a breach of promise arising from the parties' April 1999 agreement, inasmuch as Concordia Carlsbad had a duty under that agreement to convey lot 33 "free and clear of any encumbrances." (See Kangarlou v. Progressive Title Co., Inc. (2005) 128 Cal.App.4th 1174, 1179.)
Turning next to Jack's second cause of action for breach of contract, we conclude the duty alleged to have been breached in that claim also arises from a promise contained in the parties' April 1999 agreement, and not from a duty imposed by law. (Sachs, supra, 151 Cal.App.3d at p. 322.) Jack specifically alleges the Concordia defendants breached the April 1999 agreement by "[r]ecording the Quitclaim Landscape Maintenance Easement to the extent it encumbers Lot 33," and by "[r]ecording the Notice of Annexation to the extent it encumbers Lot 33 by annexing Lot 33 to Pacific View Estates and subject[ing] Lot 33 to the 2000 CC&R's [recorded by defendants]." However, as already noted, the April 1999 agreement required Concordia Homes (or its assignee) to convey lot 33 "concurrent with the close of escrow" "free and clear of any encumbrance." Thus, the breach of that promise alleged by Jack in his second cause of action arises from contract, and not from a duty imposed by operation of law.
Finally, as to Jack's third cause of action for breach of fiduciary duty, we also conclude that claim is grounded in contract. The duty Jack alleges Concordia Homes breached arises from the April 1999 agreement requiring Concordia Homes to reconvey lot 33 "free and clear of any encumbrance." "A person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations. Instead, ' "[c]ourts will generally enforce the breach of a contractual promise through contract law, except when the actions that constitute the breach violate a social policy that merits the imposition of tort remedies." ' [Citations.]" (Aas v. Superior Court (2000) 24 Cal.4th 627, 643, superseded by statute on another ground as stated in Rosen v. State Farm General Ins. Co. (2003) 30 Cal.4th 1070, 1079-1080.)
Jack alleges in his complaint the Concordia defendants "stood in a fiduciary or confidential relationship with plaintiff with respect to such defendants not encumbering Lot 33 without plaintiff's written consent." Jack further alleges the Concordia defendants breached their fiduciary duty to him by, among other things, recording the revocation of the 1998 CC&R's and in their place recording the 2000 CC&R's, all without plaintiff's written consent. Regardless of the fact Jack denominated his third cause of action as one for "breach of fiduciary duty" and sought punitive damages against the Concordia defendants, the duty he alleges was breached by these defendants arose from the promises contained in the April 1999 agreement. (See Sachs, supra,151 Cal.App.3d at p. 322.)
Indeed, Jack's breach of fiduciary duty claim is nothing more than a restatement of the same rights sued upon by Jack in his declaratory relief and breach of contract claims. "A person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations." (Aas v. Superior Court, supra, 24 Cal.4th at p. 643.) Regardless of Jack's attempts to plead a tort-based breach of fiduciary duty claim, and his ill-fated efforts to convince the trial court defendants owed him a fiduciary duty, the nature of the rights sued on by Jack in his third cause of action for breach of fiduciary duty are firmly rooted in the April 1999 agreement. As such, we conclude Civil Code section 1717, subdivision (b)(2) applies and as a matter of law, Concordia Homes is not the "prevailing" or "winning" party for purposes of an attorney fees award.
Although we need not decide whether Concordia Homes was the "winning" party in light of our holding under Civil Code section 1717, subdivision (b)(2), evidence in the record suggests neither party prevailed in the litigation. For example, the trial court recognized, and our independent review suggests, both parties had "fatal flaws" in their case. In addition, Concordia Homes was dismissed from the lawsuit not as a result of a decision on the merits, but rather because it assigned to Concordia Carlsbad all of its rights and obligations under the contract with Pacific View. Under such circumstances, it would appear Concordia Homes did not actually "win" the lawsuit when Jack voluntarily dismissed it from the action. (See Santisas, supra, 17 Cal.4th at p. 613; Silver, supra, 97 Cal.App.4th at p. 452.)
DISPOSITION
The order is affirmed. The parties shall bear their own costs on appeal.
WE CONCUR BENKE, Acting P. J., McINTYRE, J.