Opinion
NOT TO BE PUBLISHED
APPEAL from an order after judgment of the Superior Court of San Diego County No. GIN047945, Thomas P. Nugent, Judge.
HUFFMAN, J.
This is an appeal by defendants and appellants Toll CA IV, L.P., Toll Bros., Inc. and Toll CA GP Corp. (Toll or Toll Entities), Encinitas Ranch Community Association (the HOA), and Thomas A. and Janice E. Echols (Echolses) (collectively referred to as appellants) from the trial court's denial of their separate posttrial motions for attorney fees against plaintiffs and respondents George E. Wesbey III and Kimberly W. Wesbey (Wesbeys or respondents). The appellants had brought their respective motions for attorney fees after judgment was entered in their favor in this lengthy litigation commenced by the Wesbeys over an access easement identified as Lot 79 adjacent to the property the Wesbeys had purchased in the residential development known as Encinitas Ranch. We have recently upheld that judgment in an unpublished opinion.
The Wesbeys appear in this appeal in propria persona.
In our unpublished opinion Wesbey III v. Toll CA IV, L.P. (Jan. 26, 2010, D053476) (our prior opinion), we affirmed the judgment entered against the Wesbeys on their second amended complaint (SAC) after both a jury trial and a court trial. Appellants have designated that underlying record as part of the current record. (Cal. Rules of Court, rule 8.124.)
Appellants contend the trial court abused its discretion in summarily denying outright their respective motions for attorney fees without differentiating between the merits unique to each moving party. We agree and accordingly reverse and remand for further proceedings on the merits of each appellant's motion for attorney fees.
FACTUAL AND PROCEDURAL BACKGROUND
As set out more fully in our prior opinion, between 2001-2002, many transactions and planning events between Toll, the HOA, the city of Encinitas (the City) and the Department of Real Estate (DRE) occurred regarding access and landscaping issues in Encinitas Ranch, which is subject to a 1999 declaration of conditions, covenants and restrictions (CC&Rs) that provides for HOA ownership and maintenance of common areas in the development, including designated access easements. Because of inconsistencies in some of the documentation, the ownership by the HOA of Lot 79, a street lot in the shape of a long driveway adjacent to Lots 58, 59 and 60 in Encinitas Ranch, was uncertain.
The final map, the 2001 DRE "notice of intention" and worksheets, the DRE final report, as well as the December 2001 irrevocable escrow instructions and one 2002 supplementary declaration by Toll to the final map identified Lot 79 as a common area, along with Lot 72, in Encinitas Ranch that would be owned by the HOA and subject to the CC&Rs. An exhibit to the 2002 supplementary declaration, however, showed Lot 79 to be merely a common maintenance area not necessarily owned by the HOA.
When irrigation problems arose regarding these particular lots because Lot 79 had no water access, Toll Entities proposed "that they would transfer Lot 79 to the ultimate owners of Lot 59, who[, after Toll installed irrigation equipment and initial landscaping on Lot 79 at its own expense, ] would pay for irrigation [and maintain landscaping], while the transfer would also preserve the access rights to Lots 58 and 60. The HOA's board discussed the matter, and Toll drew up new maps outlining this plan and attached them to a document entitled 'Special Disclosure Concerning Lots 58, 59, 60 and 79' (the 2003 special disclosure)." When the Wesbeys contracted to purchase Lot 58 in November 2003, they signed the 2003 special disclosure, along with the sales contract. The Echolses had earlier signed the 2003 special disclosure when they contracted to purchase Lot 59 in October 2003, and Lot 60's owners similarly signed the disclosure when they contracted to purchase that lot in November 2003.
During Wesbeys' escrow, in March 2004, "Toll representatives prepared a special declaration of restrictions and reservation of easements regarding driveway access for Lots 58, 59, 60, and 79 (the 2004 special declaration), which incorporated the 2003 special disclosure terms regarding the street lot." Toll's representatives also "told the escrow holder to pull the common area grant deed for Lots 79 and 72, consistent with the 2003 special disclosure terms." Even though Toll began to close escrow on other residential lots in the development in May 2004, Toll "did not notify the DRE nor amend its subdivision map to show any changes about ownership or title of Lot 79."
Escrow closed on the Echolses' lot, Lot 59 in June 2004, and the Wesbeys took title to Lot 58 in August 2004. "The Lot 72 deed showing transfer to the HOA was recorded in October 2004, but the previous Lot 79 reference in that grant deed (as common area) had been whited out." Despite having signed the 2003 special disclosure and the whited out reference to Lot 79 in the recorded transfer of common areas to the HOA, the Wesbeys objected at an HOA board meeting in October 2004 about problems with driveway access and parking on Lot 79. The bottom line was that the HOA would not accept any responsibility for Lot 79 as it had not received fee simple title to that lot.
When disputes concerning Lot 57 continued, and Toll asked the Wesbeys to execute an additional grant of driveway easement similar to that executed by the Echolses and the owners of Lot 60, the Wesbeys refused because they "believed it imposed terms beyond what was called for in the 2003 special disclosure." The Wesbeys subsequently filed this lawsuit in October 2005, giving notice that the "action [was] to ensure that Toll [does] not transfer right, title or possession of Lot 79 to any person or entity other than the [HOA]." After voluminous discovery, including over 40 days of depositions, the filing of a cross-complaint by the Echolses, court-ordered mediation and settlement conferences, and several demurrers, the matter finally proceeded to bifurcated trials pursuant to stipulation of the parties.
Causes of action against Toll for fraud, concealment and negligent misrepresentation, as well as for negligence and breach of fiduciary duty against the HOA, were resolved by a jury after over six weeks of trial in Toll's and the HOA's favor. Thereafter, the trial court proceeded with a bench trial on the remaining issues which essentially consisted of the Wesbeys' seeking rescission, damages and declaratory relief against Toll based on theories that the 2003 special disclosure and related planning and transfer activities concerning Lot 79 violated the Subdivided Lands Act (Subdivided Lands Act (Bus. & Prof. Code, § 11000, et seq.; the SLA) and the Subdivision Map Act (Gov. Code, § 66410 et seq.; the SMA)). The Wesbeys' also alleged the same actions by Toll and the HOA constituted breaches of the CC&Rs provisions that required timely transfer of common areas from Toll to the HOA and that they further constituted unlawful business acts, in violation of the Unfair Competition Law (UCL; Bus. & Prof. Code, § 17200 et seq.) As for the Echolses, only their cross-complaint against the Wesbeys for intentional interference with contractual relations remained for trial as the Wesbeys' claims alleged against them for misrepresentation, fraud and concealment as well as for breaches of fiduciary duties, the CC&Rs, and the Davis-Stirling Act (DSA; Civ. Code, §§ 1350 et seq.) had been stricken on demurrer.
A cause of action based on the DSA was also sustained without leave to amend on demurrer as to the Toll Entities.
After trial on stipulated facts and admissibility of the relevant documents, the court denied all of Wesbeys' statutory and common law claims and issued declaratory relief concerning the appropriate scope and application of the 2003 special disclosure regarding Lot 79, noting "[t]he rights and obligations of the parties to the Special Disclosure are to have a recordable document prepared which implements its terms and no more." The court found against the Echolses on their cross-complaint on grounds it was based on an additional grant of driveway easement beyond that agreed upon in the 2003 special disclosure. To the extent the jury verdict had not resolved all the causes against the HOA, the court found there was "no factual and legal basis for the imposition of any civil liability [against it]." A judgment on the 12 counts and their subparts in Wesbeys' SAC was entered on May 22, 2008 in favor of Toll, the HOA and the Echolses, and also awarded them costs. Judgment and costs were also respectively entered and awarded to the Wesbeys only with respect to the Echolses' cross-complaint.
On appeal, the Wesbeys only challenged the judgment entered in favor of Toll and the HOA regarding the court's interpretation of the requirements of the SLA and SMA, in essence claiming that but for the violations, Lot 79 would have been a common area easement lot conveyed to the HOA and subject to the CC&Rs, and also alleging Toll and the HOA violated the CC&Rs and UCL by not timely transferring and accepting the transfer of Lot 79 to the HOA.
While the appeal was pending, Toll, the HOA and the Echolses brought separate motions claiming the right of attorney fees in this action. Each claimed that the "gravamen" of this action concerned violations of the CC&Rs; i.e., the Wesbeys' contended that Toll violated the CC&Rs of the HOA by failing and refusing to convey fee simple title in Lot 79 to the HOA as allegedly required under the CC&Rs; the HOA violated the CC&Rs by refusing to accept fee simple title to Lot 79; and the Echolses violated the CC&Rs by claiming a right to receive fee simple title to Lot 79 instead of the HOA. Each of the appellants pointed out in their memorandums of points and authorities in support of attorney fees, from the very beginning of this litigation, the Wesbeys sought recovery of their own attorney fees from Toll, the HOA and the Echolses based on the assertion their action was necessitated by the failure of appellants to follow the CC&Rs thereby obligating the Wesbeys to sue to enforce the provisions of the CC&Rs that mandated the conveyance of Lot 79 to the HOA. Although the SAC alleged numerous causes of action, count 5 regarding the breach of the CC&Rs in two causes of action specifically alleged, against Toll (in count 5.1) and the HOA and the Echolses (in count 5.2), the right to attorney fees as provided in Section 19.8 in Article 19 of the CC&Rs as well as in Civil Code section 1354 should the Wesbeys prevail in their action to enforce the CC&Rs. The Wesbeys also sought attorney fees for prevailing on the Echolses' cross-complaint.
The court issued a tentative ruling denying the appellants' motions for attorney fees. At the hearing on the matter, before the trial judge heard argument from appellants' counsel, he told him, "You are never going to convince me this case arises out of the CC&R[s]. There must have been 20 counts. There was every Act I have ever heard of, and some I hadn't heard of, that were alleged to have been violated and were the subject of the claims." Although counsel agreed that the complaint was diverse, he argued that that did not "necessarily mean that the [appellants] were [not] the prevailing parties on at least some causes of action that directly alleged violations of the CC&R[s]." Counsel explained that there were two separate causes of action entitled breach of CC&Rs, one against Toll and the other against the HOA and the Echolses. "We submit that at the very least the [appellants] prevailed on those causes of action, which were directly based upon a violation of the CC&R[s] which painstakingly requested attorney's fees based upon the attorney's fee provision in the CC&R[s]...."
When the court asked counsel whether he attempted to allocate out any time that was committed just to the defense of those causes of action, counsel replied that he had not, explaining he had not done so based on case authority that provided for fees without any allocation or attempt to allocate fees when the causes of action and theories are "inextricably intertwined" as in this case. Counsel further opined that a number of other causes of action, like breach of fiduciary duty and violation of the DSA, and negligence of the HOA, were based on violations of the CC&Rs even though not directly stated in the caption of the causes of action. Counsel requested an opportunity to make an allocation should the court believe that only the causes of action alleging direct violations of the CC&Rs will support an award of attorney fees.
Appellants' counsel also requested that the court address and rule on each motion separately because each "has its own idiosyncrasies." Counsel then went through each motion, noting that the simplest claim was the one submitted by the HOA, as virtually all of the causes of action against it involved alleged violations of the HOA's duties in enforcing the CC&Rs, including refusing "to accept title to and responsibility for Lot 79 [and] in acting without the appropriate authority of the membership and governmental agencies." Although counsel agreed that the Echolses' cross-complaint was not based on a violation of the CC&Rs, but rather on the alleged intentional interference with the 2003 special disclosure, counsel argued that at least three of the causes of action in the Wesbeys' SAC had alleged breaches by the Echolses of the CC&Rs and the supplemental declaration to the CC&Rs that identified Lot 79 as a common area lot. In response to questions by the court, counsel explained that Toll was also bound by the CC&Rs in this case as a property owner of the development, and that it had, like the HOA and the Echolses, been subject to the Wesbeys' allegations it had violated the CC&Rs in numerous counts.
When the court questioned whether a mere allegation by the Wesbeys of a breach of the CC&Rs was sufficient to claim a breach for entitlement to fees, opining such was not really a CC&R theory, counsel explained that the appellants nonetheless had to defend the allegations of such a breach and under case law were entitled to attorney fees incurred in defending against them even if spurious. The court took the matter under submission.
Several days later, the court issued its ruling denying the motions of the Echolses, Toll, and the HOA for attorney fees. In doing so, the trial court stated:
"The Court does not find that the gravamen of the complaint was an action to enforce the CC&R's. Rather, [the Wesbeys] were claiming in the complaint as follows: [¶] (1) Pursuant to the 12/27/01 Irrevocable Instructions to Escrow Depository, lot 79 was to be deeded to the HOA prior to the sale of all lots in the project. [¶] (2) On 2/20/02, a 'Covenant Regarding Real Property etc.' was recorded with the City... whereby a new lot was to be created on the driveway (hatched) portion of lot 59 which was to be owned and maintained by the HOA. [¶] (3) The 5/30/02 Final Report issued by the [DRE] expressly stated that lot 79 was to be conveyed to the HOA upon completion of lot 79. [¶] (4) [The Wesbeys] were forced to sign the Special Disclosure by [Toll] after the close of escrow and the Special Disclosure was never sent to the [DRE] for approval. [¶] (5) [The Wesbeys] refused to sign the Grant of Driveway Easement because it was contrary to the CC&R's, City approvals & the Final Public Report. [¶] Paragraph 40 of the [SAC] alleges: 'The conveyance of lot 72 and the lot 79 (street) was to be completed before the completion and transfer of the property, as per the Irrevocable Instructions to Escrow Depository and according to the original Grant Deed of Common Area Lots.' [¶] The only alleged violation of the CC&R's is set forth in count 5 of the [SAC] in which [the Wesbeys] allege that [Toll, the Echolses and the HOA each] violated section 8.1 of the CCR's by failing and refusing to convey easements and title over common areas to the HOA. Section 8.1 generally provides: [¶] 8.1. Ownership of Community Common Area and Common Maintenance Area. Fee title to the Community Common Area and easement rights in the Community Maintenance Area for each phase of the covered property shall be conveyed to, accepted and thereafter owned by the [HOA] on or before the first conveyance of fee title to a lot in such phase of the covered property in accordance with a phasing plan to be approved by the DRE.... [¶] Lot 79 is not mentioned in this provision."
The court also denied the Wesbeys' motion for attorney fees and granted costs to each of the appellants, as well as granting a portion of the Wesbeys' motion to tax costs.
Toll, the HOA and the Echolses have timely appealed from the order denying each of their motions for attorney fees.
DISCUSSION
Generally, orders denying an award of attorney fees are reviewed "using an abuse of discretion standard of review. [Citation.] But a 'determination of whether the criteria for an award of attorney fees and costs have been met is a question of law.' [Citation.] To the extent we determine in what circumstances attorney fees may be recovered in an action..., we review the trial court's order de novo. To the extent the trial court had discretion to deny attorney fees, we review that determination using the abuse of discretion standard." (Walker v. Countrywise Home Loans, Inc. (2002) 98 Cal.App.4th 1158, 1169.)
As relevant to this case, the applicable CC&Rs provide that "[i]n the event action is instituted to enforce any of the provisions contained in [the declaration of CC&Rs], the party prevailing in such action shall be entitled to recover from the other party thereto as part of the judgment, reasonable attorneys' fees and costs of such suit. In the event [the HOA] is a prevailing party in such action, the amount of such attorneys' fees and costs shall be an Enforcement Assessment with respect to the Lot involved in the action."
In addition, Civil Code section 1354, subdivision (c) provides a statutory basis for an award of attorney fees to the party prevailing in an action to enforce CC&Rs. That section provides: "In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney's fees and costs." (Italics added.) Because section 1354, subdivision (c) does not define the term "prevailing party, " and as such, is not subject to the definition of "prevailing party" in the general costs statute (Code Civ. Proc., § 1032) or Civil Code section 1717, subdivision (b) (see Heather Farms Homeowners Association. v. Robinson (1994) 21 Cal.App.4th 1568, 1572-1573), a trial court has discretion to determine which party "prevailed on a practical level." (Id. at p. 1574.) In determining whether a particular action fell within the scope of Civil Code section 1354 for the entitlement of fees as involving enforcement of the CC&Rs or its governing documents, it is appropriate to look at the "gist of the action, as revealed by the record." (Kaplan v. Fairway Oaks Homeowners Assn. (2002) 98 Cal.App.4th 715, 720.) If such an action is adversarial and seeks to enforce the governing documents, or to interpret the propriety of action by the HOA regarding membership rights, "[t]he legislative policy underlying an attorney fee award to a prevailing party, be it homeowner or association, applies equally to both types of enforcement actions." (Id. at p. 721.)
Code of Civil Procedure section 1032, subdivision (a)(4) provides in part that " '[p]revailing party' includes the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant."
Civil Code section 1717, subdivision (b) provides in pertinent part that: "(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. [T]he 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."
Moreover, to ensure mutuality of remedy, "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, [Civil Code] section 1717 permits that party's recovery of attorney fees whenever the opposing parties would have been entitled to attorney fees under the contract had they prevailed." (Santisas v. Goodin (1998) 17 Cal.4th 599, 611.) Because CC&Rs have been held to be contracts subject to the general rules of contract interpretation, this reciprocal remedy is triggered by the presence of an attorney fee provision in CC&Rs when a cause of action is based on the enforcement or violation of another provision in the CC&Rs. (See 14859 Moorpark Homeowner's Assn. v. VRT Corp. (1998) 63 Cal.App.4th 1396, 1410.) This is true even though the party prevailing on the claim obtains no affirmative relief. (Foothill Props. v. Lyon/Copley Corona Assoc. (1996) 46 Cal.App.4th 1542, 1555.) And, although Civil Code section 1717 provides the factfinder with discretion to determine there is no prevailing party on a contract claim, that discretion does not apply where the result of litigation on that claim is not mixed, "that is, when the decision on the litigated contract claim[] is purely good news for one party and bad news for the other.... Thus, when a defendant defeats recovery by the plaintiff on the only contract claim in the action, the defendant is the party prevailing on the contract under section 1717 as a matter of law." (Hsu v. Abbara (1995) 9 Cal.4th 863, 876 (Hsu).)
As noted above, each appellant separately requested attorney fees as the prevailing party on the causes of action allegedly based on violations of the CC&Rs or on an attempt to enforce their application regarding Lot 79. Although the court found that the appellants were the prevailing parties for purposes of costs in this lawsuit, it did not make any determination under section 1354, subdivision (c) on the causes of action concerning breaches of the CC&Rs. Nor did the court consider the applicability of Civil Code section 1717 with regard to the claimed violations of the CC&Rs by each of the appellants.
Rather, in reaching its decision to deny all requests outright, the court concluded the "gravamen of the complaint was [not] an action to enforce the CC&Rs." Although the court recognized that there had been an allegation of a breach of the CC&Rs in count 5, it concluded the alleged provision claimed to be violated in the CC&Rs did not include the Lot 79 access easement, which was the subject of the litigation. In doing so, the court in essence determined there was no cause of action with a provision that would support attorney fees based on enforcing the CC&Rs. However, as appellants correctly argued below, and again argue on appeal, even if the Wesbeys could not prove a breach of the CC&Rs, the appellants each had to defend against such allegations on demurrer and at trial, and under equitable principles would be legally entitled to attorney fees on such claims. (See Hsu, supra, 9 Cal.4th at p. 870 [attorney fees provision in a contract will be enforced even in litigation ending with a determination that the contract is not binding or nonexistent].) Certainly, had the Wesbeys prevailed on the count 5 causes of action for breach and enforcement of the CC&Rs regarding the common access easement areas, they would have legally been entitled to their attorney fees under the provision in the CC&Rs and Civil Code sections 1717 and 1354, subdivision (c).
Interestingly, the Wesbeys in their respondent's brief continue to suggest that should this court overturn the underlying judgment entered against them, which we have not, then each of the appellants would not be prevailing parties on the causes of action alleging violations of the CC&Rs entitling them to fees but rather the Wesbeys would be the prevailing parties and such would moot this appeal.
Thus, we believe the trial court committed legal error by failing to appreciate that the reciprocal remedy of Civil Code section 1717 was triggered by the Wesbeys alleging the attorney fee provision of the CC&Rs in count 5 and several other counts, despite the fact that the 2003 Special Disclosure, which was litigated in other causes of action, was eventually upheld as lawful and resulted in Lot 79 not being titled to the HOA as a common area subject to the provisions of the CC&Rs. Because the court in the first instance erroneously found no basis for entitlement to attorney fees on any count, it did not reach a determination of the prevailing party for each of the appellants' requests or address whether the requested fees should be apportioned for each particular appellant. Therefore, as a matter of policy and equity, the attorney fee matter must be reversed and remanded to the trial court to separately address the issue as to each appellant.
For guidance of the court and parties on remand, if the court determines any of the appellants is a prevailing party on the contract or alleged causes of action against them regarding the CC&Rs, it should then consider the rules this court set forth regarding apportionment of any fees in Bell v. Vista Unified School District (2000) 82 Cal.App.4th 672, 686-687:
"When a cause of action for which attorney fees are provided by statute is joined with other causes of action for which attorney fees are not permitted, the prevailing party may recover only on the statutory cause of action. However, the joinder of causes of action should not dilute the right to attorney fees. [Citation.] [A]pportionment of fees and costs similarly rests within the sound discretion of the trial court [on statutory grounds]. [Citation.] ' "A trial court's exercise of discretion is abused only when its ruling ' "exceeds the bounds of reason, all of the circumstances before it being considered." ' [Citations.]" ' Such fees need not be apportioned when incurred for representation on an issue common to both causes of action in which fees are proper and those in which they are not. [Citation.] Apportionment is not required when the claims for relief are so intertwined that it would be impracticable, if not impossible, to separate the attorney's time into compensable and noncompensable units." (Ibid.)
In this regard, the court may permit the parties to submit further declarations in support of their fees or an apportionment of fees, and should exercise its discretion with the recognition that each requesting party had a different relationship to the Wesbeys lawsuit. For example, although there were numerous causes of action in the SAC that did not refer to the CC&Rs, virtually all of the claims against the HOA stemmed out of alleged violations of or fiduciary duties under the CC&Rs. Mindful that the trial court is in the best position to understand the relationship between, and the importance of, the claims each appellant defended against, we express no opinion on how the trial court should exercise its discretion in determining the propriety of and a proper allocation of contractual attorney fees to each prevailing party, if any. Nor do we express any opinion on the appellants' general request in their opening brief on appeal for attorney fees for services rendered on appeal as that issue has not been presented to us in any detail.
DISPOSITION
The order appealed from is reversed. The matter is remanded to the trial court for further proceedings consistent with this opinion. The parties shall bear their own costs on appeal, and we express no opinion regarding any entitlement to attorney fees on appeal.
WE CONCUR: McCONNELL, P. J.AARON, J.