Opinion
D073108
11-29-2018
VON BECELAERE VENTURES, LLC, Plaintiff and Respondent, v. JOSEPH ZENOVIC, JR., et al., Defendants and Appellants.
Law Office of Johanna S. Schiavoni, Johanna S. Schiavoni; Purdy & Bailey, Micah Bailey and Mark Serino for Defendants and Appellants. Niddrie Addams Fuller Singh and Rupa G. Singh for Plaintiff 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 37-2017-00011817-CU-CD-CTL) APPEAL from orders of the Superior Court of San Diego County, Ronald L. Styn, Judge. Affirmed. Law Office of Johanna S. Schiavoni, Johanna S. Schiavoni; Purdy & Bailey, Micah Bailey and Mark Serino for Defendants and Appellants. Niddrie Addams Fuller Singh and Rupa G. Singh for Plaintiff and Respondent.
INTRODUCTION
This is the second appeal arising out of a construction dispute. In the first appeal, we concluded general contractor, James Zenovic, doing business as James Zenovic Construction (James), waived his right under the construction contract to compel arbitration in an action filed by Von Becelaere Ventures, LLC (VBV) in San Diego County (San Diego action) when James filed a separate complaint against VBV in Orange County to foreclose on a mechanics lien without complying with provisions in Code of Civil Procedure section 1281.5 to preserve his arbitration rights. (Von Becelaere Ventures, LLC v. Zenovic (2018) 24 Cal.App.5th 243, 250-251 (VBV I).)
Because James and his father, Joseph Zenovic, Jr. (Joseph), are both defendants in this matter and share a common surname, we refer to them by first names for clarity. No disrespect is intended.
In this appeal, Joseph and Union Site Contracting Company (USCC) appealed both the order denying the petition to compel arbitration of the San Diego action and an order awarding attorney fees to VBV from Joseph and USCC as prevailing parties on the petition. In their reply brief, Joseph and USCC acknowledge our final decision in VBV I, supra, 24 Cal.App.5th 243 controls their challenge to the denial of the petition for arbitration. Therefore, the only issue remaining in this appeal is whether the court properly awarded VBV contractual attorney fees pursuant to Civil Code section 1717.
The California Supreme Court denied James's petition for review of VBV I on September 12, 2018. (Von Becelaere Ventures, LLC v. Zenovic, No. S249983 .)
All further statutory references are to the Civil Code unless otherwise stated.
We conclude VBV was the prevailing party on the only contractual issue to which Joseph and USCC were parties, the petition to compel arbitration. Since the contractual claim asserted by Joseph and USCC is finally concluded, the court properly awarded VBV attorney fees. We, therefore, affirm the order.
BACKGROUND
A
VBV entered into a construction contract with James to construct a single-family residence on property owned by VBV in Laguna Beach. VBV and James both maintain addresses in San Diego County. Neither Joseph nor USCC signed the construction contract.
The construction contract contained an arbitration agreement stating, "If any dispute arises concerning this Contract or the interpretation thereof, or concerning construction of the Improvements, or the Limited Warranty, customer service, defects, damages, or obligations therewith (a 'Construction Dispute'), such Construction Dispute will be settled by binding arbitration." The contract also contained a clause providing, "In the event either party hereto shall start arbitration or legal proceedings against the other to enforce the terms hereof, or to declare rights hereunder, as the result of a breach of any covenant or condition of this Contract, the prevailing party in any such proceeding shall be entitled to recover from the losing party its costs of suit, including reasonable attorneys' fees, as may be fixed by the Court or Arbitrator."
B
1
After a dispute arose, James recorded a mechanic's lien in Orange County for labor, service, equipment or material. James asserted VBV owed $449,126.96 for work furnished at the property.
2
VBV thereafter filed the San Diego action naming James as well as Joseph and USCC as defendants. VBV alleged causes of action for breach of contract and breach of the covenant of good faith and fair dealing against James only. VBV alleged James breached the construction contract by "(a) failing to properly perform and construct the Work; [¶] (b) failing to hire properly licensed and insured subcontractors; [¶] (c) failing to comply with proper license and insurance requirements; [¶] (d) failing to obtain written subcontract agreements; [¶] (e) failing to properly supervise the Work; [¶] (f) failing to maintain and provide upon request proper accounting records; [¶] (g) failing to properly manage expenses and allowing gross overages; [¶] (h) failing to comply with requirements regarding change orders, improperly billing for extra work and improperly categorizing work as extra work which should have been covered under the contract as included work; and [¶] (i) improperly filing and asserting an untimely mechanics lien and threatening to file suit to foreclose on the improper lien."
VBV alleged causes of action against all defendants (James, Joseph, and USCC) for negligence, accounting, violation of Business and Professions Code section 7000, et seq., aiding and abetting fraud, aiding and abetting breach of fiduciary duty, and violation of Penal Code section 496 for receiving or withholding stolen property.
In the cause of action for aiding and abetting fraud, VBV alleged Joseph filed for bankruptcy protection and was found liable for fraud in a previous contracting project. VBV alleged James allowed Joseph to use James's contracting license to manage projects, but neither James nor Joseph complied with requirements for California's Contractor State License Board. VBV alleged if this information had been disclosed, it would not have entered into the construction contract. VBV further alleged James, Joseph, and USCC "created a fake company to bill fund control" after VBV entered into the contract. It alleged they moved two pieces of grading equipment onto the lot, used the equipment minimally, but used the company to bill an excessive daily rate resulting in charges of more than $400,000.
3
James alone then filed a complaint in the Superior Court of Orange County (Orange County action) asserting causes of action against VBV for breach of contract, reasonable value, account stated, open book account, abuse of process, foreclosure on mechanic's lien, and breach of the covenant of good faith and fair dealing. James alleged VBV refused to pay money due under the construction contract for labor, materials, and services provided for construction of the residence. James sought to foreclose on a mechanic's lien.
James and VBV submitted a stipulation to the Orange County Superior Court agreeing to transfer the Orange County action to San Diego Superior Court and requesting the two actions be consolidated. The Orange County court ordered the Orange County action transferred to San Diego Superior Court to be related to, not consolidated with, the San Diego action.
C
James, Joseph, and USCC petitioned to compel arbitration of VBV's San Diego action pursuant to the terms of the construction contract. They contended VBV's entire complaint was arbitrable because the allegations for each cause of action qualified as a "Construction Dispute" under the terms of the contractual arbitration agreement.
The notice of motion named James as the moving party, but Joseph and USCC were identified in the pleading titles. Additionally, the points and authorities concluded with a request by all defendants for an order "compelling the arbitration of all claims pleaded in the Complaint as to all parties." Joseph and USCC also joined James in seeking an order staying discovery pending the petition to compel arbitration. The court's order denying the petition to compel arbitration denied the petition as to James, Joseph, and USCC. Based upon the documents in the court record, the court concluded Joseph and USCC were judicially estopped from arguing they were not moving parties for the petition to compel.
The court denied the petition to compel arbitration of the San Diego action finding James waived the right to compel arbitration by failing to comply with Code of Civil Procedure section 1281.5, subdivision (a), when he filed the Orange County action. Because James waived the ability to enforce the arbitration provision, the court denied the petition to compel arbitration as to Joseph and USCC finding there is a possibility of conflicting rulings on a common issue of law or fact.
VBV moved for an order awarding attorney fees only from Joseph and USCC. VBV contended it was entitled to fees pursuant to section 1717 based upon the attorney fee clause in the construction contract because Joseph and USCC unsuccessfully attempted to enforce a contractual right to arbitration. Joseph and USCC opposed the motion contending the petition to compel arbitration was brought only by James, not by Joseph or USCC, and a fee award was premature because VBV had not obtained a judgment. Joseph and USCC also challenged the amount of the fee award.
The court awarded VBV $14,805 in attorney fees from Joseph and USCC because the only contractual issue in the case between VBV, Joseph, and USCC was the petition to compel arbitration. The court concluded this was analogous to an independent petition to compel arbitration. Since VBV was the prevailing party in the only "action on the contract" it was entitled to fees against Joseph and USCC pursuant to section 1717. The court, however, reduced the requested fees.
DISCUSSION
Section 1717, subdivision (a), provides in pertinent 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."
Generally, "[t]he trial court ruling on a motion for fees under section 1717 is vested with discretion in determining which party has prevailed on the contract, or that no party has. [Citation.] 'If neither party achieves a complete victory on all the contract claims, it is within the discretion of the trial court to determine which party prevailed on the contract or whether, on balance, neither party prevailed sufficiently to justify an award of attorney fees.' [Citation.] ... [A] party who obtains an unqualified victory on a contract dispute, including a defendant who defeats recovery by the plaintiff on the plaintiff's entire contract claim, is entitled as a matter of law to be considered the prevailing party for purposes of section 1717." (DisputeSuite.com, LLC v. Scoreinc.com (2017) 2 Cal.5th 968, 973 (DisputeSuite.com).) " '[A] determination of the legal basis for an attorney fee award is a question of law to be reviewed de novo.' " (Mountain Air Enterprises, LLC v. Sundowner Towers, LLC (2017) 3 Cal.5th 744, 751.)
In this case, VBV did not assert a contract claim against Joseph or USCC in its complaint. VBV made broad agency claims in the general allegations to the complaint. However, VBV did not seek recovery against Joseph or USCC based on contract claims. VBV limited its specific causes of action for breach of contract and breach of the covenant of good faith and fair dealing only to James, who signed the contract. Although the breach of contract claim generally alleged "Defendants" received and retained benefit from money realized from the contract, the complaint alleges James alone breached the contract.
Joseph and USCC asserted a contract claim against VBV when they joined the petition to compel arbitration seeking the benefit of the contract clause signed by James and VBV. After VBV defeated the arbitration claim, VBV sought attorney fees only as to Joseph and USCC. It acknowledged its contractual claims against James are not yet final and did not seek fees related to the arbitration matter as to him.
The purpose of section 1717 is to " 'avoid the perceived unfairness of one-sided attorney fee provisions' " (Burkhalter Kessler Clement & George LLP v. Hamilton (2018) 19 Cal.App.5th 38, 43 (Burkhalter)) and it may provide a reciprocal remedy even as to nonsignatories on an action to enforce the contract. (Ibid., citing Reynolds Metals Co. v. Alperson (1979) 25 Cal.3d 124, 128.) The statute allows recovery by "a party who successfully defends an action on a contract containing an attorney's fees clause by establishing the contract's invalidity, unenforceability, or nonexistence." (Pac. Custom Pools v. Turner Constr. Co. (2000) 79 Cal.App.4th 1254, 1268.)
VBV's defeat of the petition to compel arbitration as to Joseph and USCC defeated the only contract claim asserted between those parties. That contract claim is concluded even though noncontractual causes of action remain pending against Joseph and USCC. Generally, "finality must be separately determined based on the plaintiff's claims against each defendant when there is more than one defendant." (Burkhalter, supra, 19 Cal.App.5th at p. 45.)
Joseph and USCC are not parties to the cross-complaint filed by James in which he asserts contract claims against VBV.
As the trial court observed, this case is procedurally similar to the defeat of an independent petition to compel arbitration in which courts have held a prevailing party is entitled to fees under section 1717. (Frog Creek Partners, LLC v. Vance Brown, Inc. (2012) 206 Cal.App.4th 515, 533, citing Otay River Constructors v. San Diego Expressway (2008) 158 Cal.App.4th 796, 807-808 [prevailing party entitled to fees after final resolution of discrete legal proceeding]; see DisputeSuite.com, supra, 2 Cal.5th at p. 981 ["A procedural victory that finally disposes of the parties' contractual dispute ... may merit a prevailing party award of fees under section 1717"].) The court properly awarded VBV its attorney fees pursuant to section 1717 from Joseph and USCC who sought the benefit of the contract and lost. (§ 3521 ["He who takes the benefit must bear the burden"].)
DISPOSITION
The orders denying arbitration and granting VBV its fees against Joseph and USCC are affirmed. VBV shall recover its costs on appeal, including attorney fees consistent with this opinion.
MCCONNELL, P. J. WE CONCUR: O'ROURKE, J. DATO, J.