Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, No. BC304596 James R. Dunn, Judge.
Payam Tavakoli, for Cross-Defendant and Appellant.
Dykema Gossett, LPP, Allan Gabriel and Brian C. Oh, for Cross-Complainant and Respondent.
MANELLA, J.
In the underlying action, Wall Street Network, Ltd. (WSN), as assignee of appellant Click2Boost, Inc. (C2B), asserted claims for breach of contract and misrepresentation against respondent New York Times Company (NYT), and NYT asserted a claim for breach of contract against C2B. After the trial court granted summary judgment in respondents’ favor on WSN’s complaint, it issued an award of attorney fees to respondents against WSN and C2B. We affirm the award against C2B.
FACTUAL AND PROCEDURAL HISTORY
C2B entered into an Internet marketing agreement with NYT dated May 10, 2002. Under the agreement, C2B was to solicit subscribers for home delivery of the New York Times newspaper by means of “pop up ads” at Internet websites with which C2B maintained “marketing alliances.” The agreement contained a provision entitling the prevailing party in litigation arising out of the agreement to an award of attorney fees and costs. After NYT cancelled the agreement, C2B executed an assignment of its claims arising out of the agreement to WSN.
The attorney fee provision states: “Should any litigation be commenced between the parties arising out of or relating to this Agreement[,] then the prevailing party in such litigation shall be entitled to[,] in addition to such other relief as may be granted in the litigation, a reasonable sum as and for its attorney fees in such litigation and reasonable costs.”
The assignment, dated October 17, 2003, states: “For value received, [C2B] hereby assigns to [WSN] for collection all of its right, title, and interest in and to all claims for from damages and all causes of action arising out of that certain action filed in Superior Court of the State of California, County of Los Angeles, entitled Wall Street Network, Ltd. v. New York Times Company, et al., LASC No. BC 304596.”
In October 2003, WSN, proceeding as C2B’s assignee, initiated the underlying action. On November 7, 2003, WSN filed its first amended complaint (FAC) against NYT, NETexponent, Chris Kramer, Jason Lerman, and Michael Keenan. The FAC contained a claim for breach of contract against NYT, claims for inducing breach of contract, aiding and abetting breach of contract, and conspiracy to induce breach of contract against Kramer, Lerman, and Keenan, and claims for misrepresentation against all the respondents. The FAC alleged that NYT breached the agreement by terminating it before September 30, 2003, and sought, inter alia, a contractual attorney fee award.
Michael Keenan executed the agreement on behalf of NYT. Chris Kramer and Jason Lerman are employees of respondent NETexponent, which acted as NYT’s agent regarding the agreement.
The FAC alleges that NYT is the parent company of the “New York Times,” which it names as an additional defendant with respect to the claim for breach of contract. On appeal, neither C2B nor NYT identifies the “New York Times” as a separate party to this action.
NYT filed a cross-complaint for breach of contract against C2B, alleging that at least 90 per cent of C2B’s subscription submissions “were in fact names and addresses of individuals who did not subscribe to The New York Times newspaper for home delivery and/or whose addresses proved to be addresses to which the newspaper could not be delivered.” The cross-complaint requested restitution of the approximately $1.5 million in fees NYT had paid C2B, as well as a contractual attorney fee award.
C2B sought summary judgment on NYT’s cross-complaint, and respondents filed a motion for summary judgment or adjudication on WSN’s FAC. C2B joined in WSN’s opposition to respondents’ motion. On May 23, 2006, after denying C2B’s motion and granting respondents’ motion, the trial court entered judgment in respondents’ favor on WSN’s complaint.
On or about August 22, 2006, NYT filed a motion for an attorney fee award, seeking to recover approximately $1,732,298 in fees from both WSN and C2B. The motion argued that NYT was entitled to a fee award against WSN as C2B’s assignee under Civil Code section 1717, and a fee award against C2B as signatory to the agreement and WSN’s assignor. C2B joined in WSN’s opposition to the motion. On October 4, 2006, the trial court issued an award of $1,430,754.50 in attorney fees against WSN and C2B. The trial court reasoned that WSN, as C2B’s assignee, was liable for fees incurred by NYT in connection with the litigation on the FAC, and that C2B retained responsibility for these fees as WSN’s assignor. In awarding the fees, the trial court remarked: “Of course, should there be a trial on the cross-complaint, and NYT is the prevailing party, there can be no double recovery for the items recovered here.” This appeal followed.
All further statutory citations are to the Civil Code.
At the hearing on the motion, the trial court stayed litigation on NYT’s cross-complaint, pending the resolution of WSN’s appeal from the judgment against it (B193251).
C2B’s briefs do not address the appealability of the fee award against it, in violation of California Rules of Court, rule 8.204 (a)(2)(B). For the reasons described below, we conclude that the award constitutes a final determination on an issue collateral to the litigation between NYT and C2B: the award relies on C2B’s status as WSN’s assignor, which renders C2B the guarantor of the fee award against WSN in the litigation between WSN and NYT. The award is therefore appealable as a final order on a collateral matter that directs the payment of money. (See Acosta v. Kerrigan (2007) 150 Cal.App.4th 1124, 1128, fn. 4 [contract-based fee award following successful petition to compel arbitration is appealable]; Spence v. Omnibus Industries (1975) 44 Cal.App.3d 970, 976 [same].)
DISCUSSION
C2B’s sole contention on appeal is that the trial court denied it due process in issuing a fee award against it prior to the final resolution of NYT’s cross-complaint. We disagree. As explained below, the trial court, in issuing the award against WSN, properly concluded that the assignment accorded WSN the right to seek a fee award in the litigation between WSN and NYT. By virtue of this determination, the trial court also correctly concluded that C2B, as assignor, was liable for the fees NYT incurred in its defense upon the termination of WSN’s litigation against NYT.
Following established appellate principles, “we review the trial court’s order, not its reasoning, and affirm an order if it is correct on any theory apparent from the record.” (Blue Chip Enterprises, Inc. v. Brentwood Sav. & Loan Assn. (1977) 71 Cal.App.3d 706, 712.) Accordingly, we will reverse only if the record establishes that the order rests solely on incorrect grounds. (Bergin v. Portman (1983) 141 Cal.App.3d 23, 27.)
We begin our inquiry by examining the basis of the fee award against WSN. On this matter, the trial court apparently concluded that WSN was liable for NYT’s fees under section 1717 by virtue of C2B’s assignment. We see no error in this determination. Subdivision (a) of section 1717 provides: “‘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.’” As our Supreme Court explained in PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084, 1090-1091, this provision “was originally enacted to establish mutuality of remedy when a contract makes recovery of attorney fees available only for one party and to prevent the oppressive use of one-sided attorney fees provisions.”
The courts have interpreted section 1717 to establish mutuality of remedy in some circumstances in cases involving “non signatory” plaintiffs -- that is, non parties to the contract containing the fee provision -- and “signatory” defendants. (California Wholesale Material Supply, Inc. v. Norm Wilson & Sons, Inc. (2002) 96 Cal.App.4th 598, 608 (California Wholesale). Generally, “[w]here a non signatory plaintiff sues a signatory defendant in an action on a contract and the signatory defendant prevails, the signatory defendant is entitled to attorney fees only if the non signatory plaintiff would have been entitled to its fees if the plaintiff had prevailed.” (Real Property Services Corp. v. City of Pasadena (1994) 25 Cal.App.4th 375, 380-383.)
We find guidance dispositive of WSN’s liability for NYT’s fees in California Wholesale. There, a drywall subcontractor and contractor entered into a construction contract that contained a fee provision. (California Wholesale, supra, 96 Cal.App.4th at p. 601.) The subcontractor’s contractual rights to receive funds (including a fee award) were assigned to a building materials supplier, which initiated an action against the contractor, and requested an award of attorney fees. (Id. at pp. 605-606, 608, fn. 6.) After the contractor prevailed in the action, the appellate court held that he was entitled to a fee award under section 1717 because the supplier would have received a fee award pursuant to the assignment had it been successful in the action.
Because the trial court relied on California Wholesale in issuing the fee award against WSN, it impliedly determined that the assignment accorded WSN the right to recover fees in its action against NYT. The record discloses ample support for this determination. The fee provision accorded “the prevailing party” the right to recover fees incurred in “any litigation . . . commenced between the parties arising out of or relating to th[e] Agreement” (italics added), thus encompassed fees for contract and tort claims stemming from the agreement. (Cf. Allstate Ins. Co. v. Loo (1996) 46 Cal.App.4th 1794, 1797, 1799 [prevailing parties in a tort action arising from a lease are entitled to fee award when the lease accorded fees “‘[i]n any legal action . . . to enforce the terms hereof or relating to the demised premises . . . .’”].) In similarly broad language, C2B’s assignment granted WSN “all of its right, title, and interest in and to all claims for damages and all causes of action arising out of” WSN’s action against NYT. (Italics added.) The terms of the fee provision and assignment thus establish that C2B assigned its right to obtain fees incurred in connection with the successful litigation of claims against NYT. Accordingly, the trial court did not err in issuing the fee award against WSN under California Wholesale.
We recognize that WSN asserted breach of contract and misrepresentation claims against NYT, and that section 1717 “covers only contract actions” (Xuereb v. Marcus & Millichap, Inc. (1992) 3 Cal.App.4th 1338, 1342), which ordinarily do not encompass fraud claims (Stout v. Turney (1978) 22 Cal.3d 718, 730). Nonetheless, the trial court is not required to adjust a fee award to reflect claims outside the scope of section 1717 when the issues raised under those claims are “‘“inextricably intertwined”’” with the issues arising under the covered claims. (Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1111, quoting Finalco, Inc. v. Roosevelt (1991) 235 Cal.App.3d 1301, 1308.) Here, the trial court apparently determined that no significant legal work had been performed in connection with WSN’s fraud claim beyond that devoted to WSN’s contract claim. Because C2B has not challenged the fee award against WSN, it has forfeited any contention of error regarding this determination.
Before the trial court, C2B argued that the assignment accorded WSN the right to sue only for breach of contract, and did not transfer the right to seek a fee award. This contention is belied by the broad language of the assignment and the allegations in the FAC, as well as by the conduct of C2B and WSN, which the trial court could properly consult in construing the assignment (1 Witkin, Summary of Cal. Law (10th ed. 2005) Contracts, § 749, at pp. 838-840). The FAC expressly alleged that “[NYT’s] liability to C2B for damages from breach of contract and fraud has . . . been validly assigned to and is the property of [WSN],” and it sought a fee award pursuant to the fee provision. C2B joined in WSN’s opposition to NYT’s motion for summary judgment on the FAC, and never objected to the allegations in the FAC.
We turn to C2B’s liability for NYT’s fees in the litigation between WSN and NYT. Our analysis follows established principles regarding the obligations of assignees and assignors. Generally, an assignment of rights does not impose the assignor’s contractual obligations upon the assignee absent an assumption of the obligations. (Heppler v. J.M. Peters Co. (1999) 73 Cal.App.4th 1265, 1289.) Nonetheless, in some circumstances, the assignee’s assumption of an obligation is properly implied from the assignee’s acceptance of benefits under the contract, notwithstanding the absence of an express assumption of the obligation in the assignment. (Ibid.)
The assignee’s assumption of an obligation does not, by itself, discharge the assignor’s responsibilities regarding the obligation. As Witkin has explained, “[w]here the subject matter of the assignment (e.g., a bilateral contract) involves reciprocal rights and duties, the assignor may transfer the benefits, i.e., the assignor may transfer his or her rights, but cannot escape the burden of his or her obligation by a mere assignment. The assignor still remains liable to the promisee. Even if the assignee assumes the obligation, i.e., agrees to perform it, the assignor still remains secondarily liable as a surety or guarantor, unless the promisee releases him or her or the parties execute a complete novation. [Citations].” (1 Witkin, Summary of Cal. Law, supra, Contracts, § 730, p. 815.)
California has abolished the distinction between surety and guarantor (§2787).
Instructive applications of these principles are found in Erickson v. R.E.M. Concepts, Inc. (2005) 126 Cal.App.4th 1073 (Erickson) and Cutting Packing Co. v. Packers’ Exch. (1890) 86 Cal. 574 (Cutting Packing). In Erickson, developers who were engaged in building homes executed contracts with a subcontractor containing attorney fee provisions. (Erickson, supra, 126 Cal.App.4th at pp. 1076-1077, 1086.) A homeowner sued the developers, who filed a cross-action for breach of contract and negligence against the subcontractor. (Ibid.) In settling the action with the homeowner, the developers assigned their claims against the subcontractor to the homeowner, who asserted claims against the subcontractor. (Id. at pp. 1074-1075.)
When the subcontractor prevailed at trial, the trial court ordered the homeowner to pay the fees the subcontractor had incurred in defending against the claims assigned to the homeowner by one of the developers, even though the assignment expressly stated the developer had assigned only the right to a fee award to the homeowner. (Erickson, supra, 126 Cal.App.4th at pp. 1086-1087.) The appellate court affirmed, reasoning that the homeowner had enjoyed the benefits of the assignment, and thus had assumed the obligations associated with the fee provision. (Id. at p. 1087.) On this matter, it noted that the homeowner had enjoyed complete control of the litigation following the assignment, and had been “‘primed to take the benefits of an award of attorney fees’ if he [had] won.” (Ibid., quoting Heppler v. J.M. Peters Co., supra, 73 Cal.App.4th at p. 1291.)
In Cutting Packing, the plaintiff entered into a contract that entitled it to buy a crop of apricots from a supplier, and obliged it to pay for the crop upon delivery. (Cutting Packing, supra, 86 Cal. at p. 575.) Without the supplier’s consent, the plaintiff assigned its interest in the contract to the defendant, which refused to accept or pay for the apricots when delivered. (Ibid.) The supplier then delivered the apricots to the plaintiff, which paid the contract price, and then suffered a loss in reselling them. (Ibid.) To recoup its losses, it sued the defendant and obtained a judgment in its favor. (Ibid.) In affirming, our Supreme Court concluded that the defendant, by accepting the right to buy the apricots, “assumed the burden of paying for the fruit,” pointing to section 1589, which states: “‘A voluntary acceptance of the benefit of a transaction is equivalent to a consent to all the obligations arising from it, so far as the facts are known, or ought to be known, to the person accepting.’” (Cutting Packing, supra, 86 Cal. at p. 577.) In addition, the court stated that because the supplier had neither consented to a novation of the contract nor released the plaintiff from its obligations, the plaintiff “stood in the nature of a surety for [the defendant] for the performance of the obligation.” (Id. at p. 577; see also Baer v. Associated Life Ins. Co. (1988) 202 Cal.App.3d 117, 123 [when assignee assumes assignor’s obligation, assignor must respond in the event of assignee’s default, unless there is a novation]; Walker v. Phillips (1962) 205 Cal.App.2d 26, 33 [absent novation or release, “the assignor remains secondarily liable as a surety or guarantor if the assignee is found to have assumed the obligation”].)
In view of this authority, the trial court properly determined (1) that WSN, in controlling its litigation with NYT and seeking a fee award, assumed the obligation to pay an award under the fee provision, and (2) that C2B stood as surety or guarantor for the performance of WSN’s obligation. Moreover, the trial court properly concluded that C2B’s responsibilities as guarantor were triggered at the time judgment was entered against WSN, as the outcome of the remaining litigation between NYT and C2B could not alter C2B’s responsibility for WSN’s obligation. When, as here, the principal obligation has matured and there is an unconditional guaranty, the liability of the guarantor “‘is not predicated upon the exhaustion of the creditor of his remedies against the principal debtor, or the exhaustion of other security for the debt; and it is immaterial whether the debtor can or cannot pay the debt.’” (Bank of America v. McRae (1947) 81 Cal.App.2d 1, 7, quoting 13 Cal.Jur. 110, § 22.) The creditor may elect to sue both the principal on the original obligation and the guarantor on the guaranty in the same action. (Impac Imported Parts & Accessories Corp. v. Rattray (1979) 95 Cal.App.3d 792, 797.) Accordingly, the trial court properly imposed the fee award jointly and severally on both WSN and C2B. (Cf. Niederer v. Ferreira (1987) 189 Cal.App.3d 1485, 1505-1506 [guarantor of promissory note properly ordered to pay fee award under fee provision in note in action to enforce the note].)
C2B argues that the trial court denied it due process in issuing the award prior to the end of NYT’s litigation against it because section 1717 “contemplates an action between named parties to be applicable,” and thus “[a]warding . . . fees against one of the parties to the action before that party had the opportunity to defend itself . . . is beyond the language of the statute.” However, as explained above, the award against C2B is predicated on C2B’s status as WSN’s assignor. C2B had notice that NYT sought a fee award against it on this basis, and ample opportunity to respond to NYT’s request. Moreover, as explained above, the trial court correctly determined that NYT was entitled to an immediate fee award against C2B because WSN was then obliged to pay its fee award. There was no denial of due process.
DISPOSITION
The fee award against C2B is affirmed. NYT is awarded its costs on appeal.
We concur: EPSTEIN, P. J., WILLHITE, J.
The trial court’s determination of the prevailing party under section 1717 is examined for abuse of discretion. (Sears v. Baccaglio (1998) 60 Cal.App.4th 1136, 1158. However, we review a party’s entitlement to an award of contractual attorney fees de novo, insofar as the award relies on the resolution of questions of law or contractual interpretations that do not implicate factual disputes. (Exxess Electronixx v. Heger Realty Corp. (1998) 64 Cal.App.4th 698, 705.) To the extent that the award relies on factual findings, whether express or implied, we examine the record for substantial evidence to support the findings. (Federal Home Loan Mortgage Corp. v. La Conchita Ranch Co. (1998) 68 Cal.App.4th 856, 860; Roddis v. All-Coverage Ins. Exchange (1967) 250 Cal.App.2d 304, 309.)